Dive Brief:

• The Office of the Comptroller of the Currency closed Lindsay, Oklahoma-based First National Bank of Lindsay on Friday and appointed the Federal Deposit Insurance Corp. as receiver.
• Duncan, Oklahoma-based First Bank & Trust Co. then agreed to acquire the failed bank’s insured deposits, the FDIC announced on the same day.
• The OCC stepped in after “identifying false and deceptive bank records and other information suggesting fraud that revealed depletion of the bank’s capital,” the agency said, adding that it found the Lindsay bank was in “an unsafe or unsound condition to transact business.”

Dive Insight:

The First National Bank of Lindsay reported total assets of $107.8 million and total deposits of $97.5 million. Yet roughly $7.1 million of the bank’s deposits exceeded FDIC insurance limits, the agency said, adding the amount might change as the FDIC gathers more customer information.

The FDIC said it would make 50% of uninsured funds available to depositors Monday, adding that the amount could rise as the FDIC sells the failed bank's assets.

First Bank & Trust agreed to assume the insured deposits for a 6.67% premium and will also buy about $20 million of the failed lender’s assets, the FDIC said. Federal regulators will retain "the remaining assets for later disposition,” it said. 

The First National Bank of Lindsay’s only office was set to reopen Monday as a branch of First Bank & Trust Co. The depositors of the failed bank will automatically become depositors of the acquired bank, and the insured deposits assumed by First Bank & Trust will continue to be insured by the FDIC.

All First National Bank of Lindsay customers will have access to their insured deposits, checks drawn on the bank will continue to be processed, and those making loan payments should continue doing so, the OCC said.

The FDIC estimated the failure would likely cost its Deposit Insurance Fund around $43 million, but that figure may change as the assets are sold. The agency added that “alleged fraud” caused the failure and the potential hit to the DIF.

The OCC is also referring the case to the Justice Department, “which has a wide variety of tools to hold individuals accountable for criminal acts and focuses on victims in all of its matters,” the agency said.

The First Bank of Lindsay’s issues date back to 2006 and 2007, when the OCC issued the lender three orders, including one that barred the bank's former president, E. Ray Murray, from the industry.

There may be no material losses on the customer side, but the “[b]iggest hit is reputational,” Carl Goss, a partner at law firm Hunton Andrews Kurth, told Banking Dive via email. The value of shareholders’ equity is wiped out, he said, adding that employees will likely continue to work with the bank but might be let go once the transition is complete.

“Management will almost certainly [lose] their jobs and may be held criminally or civilly liable for the failure depending on what happened,” Goss said.

The public will likely get a better picture once the FDIC’s Office of Inspector General reviews the failure and makes its findings public — a roughly six-month process, Goss said.

The FDIC last week said the reserve ratio for the DIF is projected to reach the statutory minimum level in 2026, ahead of a 2028 required deadline. 

The First National Bank of Lindsay is the second bank to fail in the U.S. this year. Philadelphia-based Republic First Bank failed in April, ending over two years of infighting that divided the lender’s board of directors amid a bitter power struggle. 

There was a total of five bank failures in 2023, including Silicon Valley Bank, Signature Bank and First Republic.