The Federal Deposit Insurance Corp. announced Friday that it entered the enforcement action with Old Glory Bank on May 1, calling for the Oklahoma bank to increase its capital, update its business strategy projections and implement technology audit policies.
Mike Ring, the bank's president and CEO, said on Monday that Old Glory is in "a very good spot" on making progress to address the regulator's concerns.
Old Glory launched last year, after Ring and a group of investors bought a small community bank in Elmore City, Oklahoma, with the hope of creating a niche offering for folks who believe that banks are shutting out consumers based on their political beliefs. The company pitched itself as ardently "pro-America," vowing to stand against alleged intrusions from the government into consumers' financial information.
"If a government official requests that we punish or cancel you for lawfully attending a protest, we will not comply," Old Glory's website says in a frequently asked questions section.
"If there is a request to punish or cancel you for conducting lawful business, that request will be unlawful, and we will not comply. If other banks (and tech companies) want to stand with their elite friends in government and media to punish and cancel Americans for fossil fuels, the meat industry, firearms, or speaking truth to power, that's on them."
The bank initially expected the majority of its revenue to come from interchange fees as users swiped their debit cards — a strategy less common for traditional banks and more in line with the business plans of some fintech firms.
Bank consultant Bert Ely said the company's business model isn't very "bank-like," nor is it viable for the long term, especially as Old Glory sheds money. The company posted a loss of $2.9 million in the first quarter of this year, per public documents.
Aaron Klein, a senior fellow at the Brookings Institution, said that while some banks have been adept at growing a large base of heavy debit-card users to generate interchange revenue, that vision doesn't seem to have panned out at Old Glory.
"As a result, the bank struggled," Klein said. "This is a pretty sweeping consent order that indicates the bank is in some material level of distress."
Ring took issue with the word "sweeping," arguing that the FDIC order boils down to two main challenges: raising the bank's common equity tier 1 capital ratio to 14%, and laying out tested policies and procedures.
He said that on the latter issue, the $123 million-asset bank's work is mostly done, but that Old Glory still has "a ways to go" on raising capital. The bank had a CET1 ratio of 9.2% as of March 31, according to public filings. Old Glory has added more than $100 million of deposits in its 14 months of operations, but it has only $10 million of loans. Ring said the bank needs to bring in more money to keep up with its deposit and account growth.
Old Glory has a fundraising plan to open up opportunities for more investors, according to Ring, who declined to provide details.
"We have a plan," Ring said. "We are definitely not out of the woods yet on raising that money. An alternative would be to shrink the bank. Failure is not an option. We are going to figure this out."
Old Glory is also tweaking its business plan as it seeks to comply with the consent order, Ring said. To account for lower-than-expected interchange revenue, the bank is "slowly and responsibly" rolling out more lending programs, and will rely more on net interest income and traditional fee income, Ring said.
If its plan plays out, Old Glory should be "barely profitable" in 2025 and steadily profitable in 2026, Ring said. In its first three years of operations, the bank is expected to post under $30 million of losses, he added.
"No one wants to lose money," Ring said. "But I believe what we've done, especially when you consider on the technology side, going from zero to 50 states, servicing thousands of customer transactions every day, it's amazing how little we've actually spent when you compare us to other banks."
Ring co-founded the bank with conservative political figures such as former Secretary of Housing and Urban Development Ben Carson and media personality Larry Elder, both of whom also serve on the board of the bank's holding company.
Serving on the bank's board is Mary Fallin Christensen, a former Republican governor of Oklahoma. Bill Shine, a former White House deputy chief of staff in the Trump administration and former co-president of Fox News, serves as executive chairman, but isn't on the board.
As Old Glory works to comply with the FDIC's requirements, it is also sparring with a failed fintech that was once a potential rival over the circumstances of the bank's genesis.
Old Glory Bank has filed a motion to be dismissed from the suit, denying any connection to GloriFi or its investors. The bank created its trademark first, bought its website first and didn't interact with GloriFi as it launched, according to Ring.
"To think that somehow someone was accusing us of being a pawn or a shill for someone at GloriFi is insulting, especially since every public document shows that we were first," Ring said.
GloriFi, which declined to comment on Monday, announced that it was shutting down in November 2022, two months after launching its app.
