FDIC Asked First National Bank to Buy Ailing ONB
Newsok.com October 7, 1982
First National Bank & Trust Co. Sunday agreed to buy the financially troubled Oklahoma National Bank, a south Oklahoma City financial institution that reportedly was on the verge of being closed by federal banking authorities.
The bank will open today as usual, but with a new owner.
Oklahoma National Bank was the second financial institution in Oklahoma City to experience financial problems in the past 90 days. The other bank, Penn Square Bank, was closed by federal banking authorities July 5.
J.R. Claborn, executive vice president and director of First National, said, "Oklahoma National Bank had an unusually large amount of loan losses which jeopardized the continued operation of the bank.
"It was determined during the week last week that the comptroller was concerned about the stability of the bank due to the troubled loans and asked for our assistance and we were pleased to be able to come to the bank's aid."
Claborn would not say whether the troubled loans were oil and gas related. Penn Square had loaned millions of dollars to the oil and gas industry before its demise.
Oklahoma National had a poor performance record, as indicated by its rating of a 4 on a 1 to 5 scale, with 1 as the best rating. Penn Square Bank had a 3 rating just before it was closed. The ratings are done by the comptroller of the currency.
Oklahoma National, 2701 S Harvey, ranked in assets among the top 20 banks in the Oklahoma City area, which has about 60 banks.
The bank had assests of about $134 million and deposits of about $121 million, with loans outstanding of $86 million as of Dec. 31, 1981, according to the Oklahoma Bankers Association.
The agreement to sell Oklahoma National was made by telephone with the compliance of the U.S. comptroller of the currency and the Federal Deposit Insurance Corporation, according to Ted Shaw, president of First National.
National bank examiners from the comptroller's office and the FDIC had been at Oklahoma National for the past several days, a bank official said.
Shaw said late Sunday that following daylong negotiations, the large downtown bank had "agreed in principle" to purchase the assets of the 53-year-old Oklahoma National. The agreement was reached about 9:30 p.m., he said.
Shaw said officials of the Federal Deposit Insurance Corp. and the comptroller's office had approved the purchase earlier in the evening.
"All that's left is to sign the papers," he said, adding that bank employees would be working through the night to prepare the necessary documents.
"The financial strength of our bank is behind Oklahoma National Bank," Shaw said about 11:40 p.m. during a curbside press conference outside the southside bank. "All the deposits are safe."
Shaw said FDIC officials had contacted officers of First National late last week to ask them to intercede and help the troubled smaller bank.
He declined to discuss what kind of financial difficulties prompted the sale of the bank or how much money was involved in the purchase of its assets.
"I don't know," he said. "We've been aware of the situation only recently the last few days."
Charles Nelson, president of First Oklahoma Bancorporation, which owns First National Bank, and Shaw returned late Saturday from a business trip to Europe.
R.Y. Empie, commissioner of the state banking board, said he was aware of an examination of the troubled bank for the past 10 days by federal bank officials.
"I know of no reason why this should result in any loss to any depositors," he said.
No changes in management or personnel are expected at Oklahoma National, Shaw said.
A score of bank employees, officers and directors could be seen inside the bank as late as 11 p.m., when they slowly and silently started filing out. Most of them declined comment.
Charles A Vose Sr., chairman of the board of First National Bank, said, "The deal has been made with FDIC and the comptroller of the currency.
"It's all right to assure everybody that everything's all right and all the depositors will be taken care of," said Vose.
Joe A. Dodson, a director of Oklahoma National Bank & Trust Company, would not respond to questions about the financial stability of his bank.
When asked if the bank had been experiencing financial problems, Dodson replied, "All I know and all I can tell you is that First National has acquired Oklahoma National. We will be open for business tomorrow. So, there are no problems here."
Joe A. Dodson, a director of Okahoma National, also confirmed that the deposits are safe. But he would not respond to questions concerning the financial stability of the bank.
Wendell Dockum, a director of Oklahoma National, said negotiations for a possible sale had been going on for at least a week.
Oklahoma National Bank was founded in 1929 as Capitol Hill Bank by Leon G. Vorhees and John C. Campbell.
In 1971 it became only the second Oklahoma City bank outside the downtown Oklahoma City area to have a capital stock of $1 million or more.
In 1976, the controlling interest of the bank was acquired by Roy Pool, Vernon D. Ayers and Marvin E. Pigg. On Feb. 1, 1977, Ayers, already president of the bank, was named chairman.
Later that year, the institution began construction on the $2 million building of its present site, SW 26th and Harvey.
Pigg died after a short illness in April 1979.
On Sept. 13, 1981, Ayers drowned in a fishing accident near Dillingham, Alaska. Pool was then elevated to Ayers position of president and chief executive officer of the bank. Paul H. Doughty was promoted to Pool's position as executive vice president.
Later that same month, ONB was named by the Small Business Administration as one of six state banks to be certified lenders.
In the case of Penn Square Bank's closing, the FDIC had two options.
It could have paid off the bank's insured depositors or have taken over its operation.
It elected to serve as receiver for the bank and has been operating it as the Deposit Insurance Corp. Bank since Penn Bank was declared insolvent and closed by the comptroller of the currency July 5.
When the bank failed, deposits totaled $465 million; $250 million was uninsured.
By operating as a receiver, the FDIC would save a newly formed bank from spending large sums to attract depositors and would provide the bank with instant funds for loan-making.
Since its closing, numerous problems have been cited as leading to the bank's collapse.
Empie put the responsibility for the failure on bank directors. Most other experts agreed, including several people who testified before a U.S. House Banking Committee in Washington.
Clifton Poole, regional comptroller of the currency, has said that large lending increases and bad loans quickly made the bank insolvent.
When federal banking officials closed the bank, they said $40 million to $50 million in uncollectable loans most of them to energy-related companies were the primary reasons for the bank's insolvency.
Scores of lawsuits claiming double-dealing, fraud and negligence on the part of bank directors have been filed since the closing.
The FDIC for several months has been liquidating assets, including automobiles sold at auctions and real estate owned by Penn Bank.
Reporters Paul Scott Malone, Denise Melinsky, Marjorie Miller, Susan Bunney and Anthony Thornton contributed to this story.
Archive ID: 87212