The Federal Deposit Insurance Corp. has issued a prompt corrective action directive to Elmore City, Oklahoma-based Old Glory Bank for being “significantly undercapitalized.” The bank’s latest call report showed a leverage ratio of 2.69% as of June 30, according to an FDIC order issued Aug. 28 and made public Friday. Old Glory failed to respond to regulators’ notice of intent to issue the directive, the FDIC said.
Old Glory Bank is a $279.4 million-asset lender focused on “serving the Freedom Economy” with its “pro-America online banking platform.” Co-founders include former Housing and Urban Development Secretary Dr. Ben Carson and former Trump administration press secretary Sean Spicer. The bank lost roughly $8 million over the first half of the year, according to the June call report from the Federal Financial Institutions Examination Council. The FDIC ordered Old Glory to submit an updated capital restoration plan within two weeks and directed the bank not to engage in any capital distribution or pay management fees to those in control of the bank if doing so would further harm its capital situation.
The directive carries significant operational restrictions. Old Glory cannot accept brokered deposits or employee benefit deposits until it is at least adequately capitalized. The bank must restrict the interest rate it pays on deposits, reduce or terminate activities the FDIC decides pose excessive risk, and refrain from paying bonuses or additional compensation to any senior executive without regulators’ approval. Regulators also said the bank needs to employ qualified senior executive officers. “Significantly undercapitalized” is the fourth of five capital categories, with “critically undercapitalized” being the lowest level, according to the FDIC.
What remains unknown is whether Old Glory can raise sufficient capital to satisfy regulators. A spokesperson said the bank is “doing again what we always do, which is raising capital from our great ownership group.” In August, Old Glory Holding Company and special-purpose acquisition company Digital Asset Acquisition Corp. scrapped their merger plans after the Federal Reserve did not approve the transaction. A July prospectus had warned the bank may have to pursue “a sale or organized wind-down” if the deal wasn’t consummated. Provisions remain in effect until the lender has been adequately capitalized on average for four consecutive quarters, the FDIC said.