• FDIC upgrades Old Glory Bank from significantly undercapitalized to adequately capitalized
• Oklahoma lender remains subject to extensive supervisory restrictions despite improved capital levels
• Failed merger with Digital Asset Acquisition Corp. previously raised concerns about the bank's viability
• FDIC retains oversight of capital raising, deposits, acquisitions, expansion and executive compensation
• Renewed capital deficiencies could trigger mandatory share sales or an acquisition
• Bank must submit monthly compliance reports to the FDIC
• Restrictions remain until four consecutive quarters of adequate capitalization are achieved

The Federal Deposit Insurance Corporation (FDIC) has recognized an improvement in Old Glory Bank's financial position but retained stringent regulatory restrictions, warning that renewed capital deficiencies could force the Oklahoma-based lender into a sale or merger.

The regulator amended its enforcement directive after determining that Old Glory Bank, headquartered in Elmore City, is now adequately capitalized, reversing an August assessment that classified the institution as significantly undercapitalized.

However, the revised order maintains extensive controls over the bank's capital management, deposit activities, business expansion and executive compensation.

Old Glory has operated under an FDIC consent order since May 2024 following concerns about insufficient capital. The original directive required the lender to maintain a Tier 1 leverage ratio of at least 14%, a threshold it subsequently failed to meet.

The bank had expected a proposed merger involving its holding company and special-purpose acquisition company Digital Asset Acquisition Corp. to address its capital requirements.

Announced in January, the transaction was intended to create a publicly listed Texas company trading on Nasdaq. However, the agreement collapsed before completion, leaving Old Glory facing renewed uncertainty over its financial position.

A July prospectus filed by Digital Asset Acquisition Corp. warned that the bank might need to pursue "a sale or organized wind-down" if the merger failed because it lacked sufficient capital to satisfy regulatory requirements.

Bank executives had previously expressed hopes of negotiating a lower Tier 1 leverage requirement, potentially between 7% and 9%.

Although the FDIC's amended directive acknowledges improved capitalization, it imposes continuing restrictions designed to prevent another deterioration.

Old Glory may raise additional Tier 1 capital through common stock, qualifying preferred shares or direct contributions from directors and shareholders. However, securities offerings remain subject to FDIC review.

The bank must also obtain regulatory approval before undertaking material transactions, including significant investments, business expansions, acquisitions, asset sales and certain highly leveraged credit arrangements.

Restrictions on brokered deposits remain in place, alongside limitations on employee benefit deposits where accepting them would leave the institution less than adequately capitalized.

Capital distributions that would render the bank undercapitalized are prohibited, while its holding company must secure Federal Reserve approval before making capital distributions.

The FDIC has also imposed restrictions on deposit interest rates, requiring Old Glory to remain within prevailing rates in its home region.

Additionally, the regulator can require the bank to modify, reduce or discontinue activities considered excessively risky.

Senior executive compensation remains subject to limitations, including restrictions on excessive bonuses and payments associated with the period preceding the bank's undercapitalization.

If Old Glory again becomes undercapitalized and fails to submit an acceptable capital restoration plan, the FDIC could require it to sell sufficient voting shares to restore adequate capitalization or accept an acquisition offer.

The lender must submit monthly written compliance reports to the FDIC's Dallas regional director, providing continuing oversight of its financial recovery.

The amended directive will remain effective until Old Glory has maintained adequate capitalization, on average, for four consecutive calendar quarters after September 30.

While the revised classification represents progress, the continuing restrictions demonstrate that regulators remain concerned about the bank's ability to sustain financial stability without close supervision.