First Interstate to Take Over Failed Oklahoma Bank

First Interstate Bancorp, in another step in its nationwide expansion strategy, has agreed to take over Oklahoma’s second-largest bank, which was closed Monday by federal regulators due to heavy losses from bad energy and farm loans.

The takeover of First National Bank & Trust Co. of Oklahoma City will make Oklahoma the 12th state in which Los Angeles-based First Interstate owns banks. It also has franchised banks in six additional states.

Under terms of the takeover, the Federal Deposit Insurance Corp., which was named Monday as receiver of the failed Oklahoma bank, will pay First Interstate $72 million to take over the institution. First Interstate will assume the Oklahoma bank’s $1.5 billion in deposits and $1.2 billion of its loans and other assets. The bank, to be renamed First Interstate Bank of Oklahoma City, will reopen today, officials said.

FDIC Keeps Some Bad Loans

However, First Interstate will not be required to take over the worst of the Oklahoma bank’s bad loans. The FDIC said it agreed to retain $418 million of those bad loans.

“This acquisition enables us to add another state to our territory without negatively affecting any facet of our currently strong financial condition,” First Interstate Chairman Joseph J. Pinola said in a statement.

Pinola has for some time been studying several possible bank acquisitions, including failing institutions for which regulators were seeking merger partners. Reports that the Los Angeles-based banking firm, the parent of First Interstate Bank of California, was considering a takeover of the Oklahoma bank surfaced last month.

First Interstate is the nation’s ninth-largest bank holding company.

Legislation allowing out-of-state interests to buy troubled Oklahoma banks recently was approved by the Oklahoma Legislature. First National Bancorporation, the holding company for the Oklahoma bank, has lost $176 million since the beginning of 1983.