OKLAHOMA CITY -- Hundreds of anxious depositors lined up Tuesday to withdraw their money from the defunct Penn Square Bank, the third institution in U.S. banking history to be taken over by the government.
A federal banking official said about $50 million in bad loans mostly to the drilling industry led to the collapse of the bank, which had total deposits of about $465 million from about 28,000 accounts.
Despite assurances that accounts up to $100,000 were insured, anxious depositors began lining up outside the bank as early as 6:30 a.m. to withdraw their money.
'We're going to pray a lot and take it to another bank,' said one woman standing in line with her husband.
Bank personnel handed out forms to those waiting in line to expedite their withdrawals.
'We're all right,' said another woman with her husband. 'We're not hurt like maybe some of these people who are going to lose 25 percent of what they've got.'
Among the gathering of worried patrons was Lester Terry, of Edmond, Okla., who said he stands to lose $78,000.
'It's kind of like you're still alive but you're dead,' he said, recalling his feelings when he read about the bank's collapse. 'Sure I'm bitter.'
He said he banked at Penn Square because it paid the highest interest.
'Penn Square was known for its high-rolling attitude,' he said.
Still retaining his sense of humor, Terry said he thought something was unusual when a bank clerk 'went into shock' as he renewed a large certificate of deposit Friday.
'This is how you spell 'Edmond' when you're in shock,' he said, showing a CD on which the clerk printed 'Wsmons' as Terry's hometown.
Officials said corporate accounts and personal deposits above $100,000 are to be considered claims against the failed bank.
State Treasurer Leo Winters said although $12.4 million in state funds was on deposit in the bank, taxpayers would not lose because the funds were secured by $14.8 million in Treasury bills and notes.
William M. Isaac, chairman of the Federal Deposit Insurance Corp., estimated about $190 million in deposits were not insured. Normally the procedure is for officials to try to merge a floundering bank with another institution, he said.
'That was not possible in this case because of the large volume of known and unknown potential claims against the bank,' he said.
A receiver was appointed Monday and the bank was reopened early Tuesday under a new name -- Deposit Insurance National Bank of Oklahoma City. The only purpose of the new bank will be to close out Penn Square accounts.
Isaac told reporters the bank had some $40 million to $50 million in uncollectable loans. He said the problems with the bank were uncovered in a routine audit by federal banking officials several months ago.
A run on the bank that contributed to its demise started Saturday after Oklahoma City newspapers reported the bank might be in trouble.
The FDIC takeover is only the third time in history that a new bank has had to be created after the failure of a bank, Isaac said. The closing -- the 21st bank failure in the U.S. this year -- was 'not one of our larger failures, but it is a comparatively large failure,' he said.
C.T. Conover, U.S. comptroller of the currency, said Monday night the bank dealt heavily in loans for the oil and gas industry.
'Losses centered on these energy-related loans, together with funding difficulties, resulted in the bank's insolvency,' Conover said.