The Reason Behind the Failure of “Well Capitalized” The First National Bank of Davis, OK

The closing of The First National Bank of Davis, Davis, Oklahoma, leaves depositors and local residents with many unanswered questions.  The First National Bank of Davis has had a community presence for more than 100 years, having been established in 1895.

The First National Bank maintained its sole branch in Davis and had $90.2 million in total assets at the time of closing.  The Bank touted its longevity and stability on its website stating that “since 1895, First National Bank has been the cornerstone of the area’s financial institutions because of its stability, longevity and service”.

Granted, no bank is likely to say that they are not stable, but in this case, diligent depositors had little reason to suspect that The First National Bank was in trouble.  A review of publicly available data show that the Bank had a troubled asset ratio of only 25% compared to a national median of 15%.  A bank will typically fail once the troubled asset ratio approaches 100%, but in the case of The First National Bank, this indicator was not a cause for concern.

In addition, for depositors worried about the safety of The First National Bank, a review of the Bank’s financial statements showed very strong deposit growth, slightly improved financial strength over the past several quarters and most importantly, adequate capitalization.  In addition, there were no outstanding regulatory enforcement actions against the Bank.  According to the FDIC website, The First National Bank exceeded the required well-capitalized minimum ratios for Tier 1 and Total risk based capital ratios.

Residents of Davis, Oklahoma, probably suspect that the reason behind the surprise closing of a supposedly well run and adequately capitalized bank was based on a recent audit of the Bank by the Office of the Comptroller of the Currency (OCC), the Bank’s primary regulator.

In early March, shortly after the completion of a routine audit of The First National Bank by the OCC, the Bank’s president was abruptly fired.  Shocked residents of Davis were given no reason for the firing of Bank President W.A. Moore, Jr. and First National Bank officials reassured the public that the Bank was in good shape financially.  First National Bank was obviously not in good financial shape.

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The OCC’s press release on the closing of The First National Bank of Davis stated that “The OCC acted after finding that the bank had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices.  The OCC also found that the bank incurred losses that depleted its capital and there is no reasonable prospect that the bank will become adequately capitalized without Federal assistance”.

A couple of easy conclusions here – 1) the President of The First National Bank has a lot to answer for and 2) The First National Bank is probably one of the very few banks to fail that was not on the FDIC’s Problem Bank List.

After closing The First National Bank of Davis, the OCC appointed the FDIC as receiver which sold the bank to The Pauls Valley National Bank, Pauls Valley, OK.  The Pauls Bank assumed all deposits of failed First National.  Depositors of the failed bank will have full access to their money over the weekend.  Failed First National will reopen as a branch of The Pauls Bank.

The First National Bank of Davis had total assets of $90.2 million and total deposits of $68.3 million.  The Pauls Bank will pay the FDIC a large premium of 7.5% to assume the failed bank’s deposits but will purchase only $28.5 million of the failed bank’s assets, leaving the FDIC stuck with the remaining low quality loan portfolio (see FDIC’s Mountain of Failed Bank Assets Grow).

The estimated loss on the failure of The First National Bank of Davis is $26.5 million.  First National Bank is the nation’s 24th banking failure this year and the second in Oklahoma.


  1. I would agree with the author, there is probable cause to assume that fraud or some accounting impropriety was happening at this bank. There was only one other bank failure that was similar to this one it was “The La Coste National Bank” in Texas, and fraud was found to be the cause there. You can use this interactive map to analyze FNB Davis or any other bank.

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