Originally published in American Banker on July 2, 1982.

Reports were circulating in Oklahoma City Thursday that the Federal Deposit Insurance Corp. is dispatching examiners to review the financial condition of Penn Square Bank NA there. The bank has been criticized in some circles for its highly aggressive energy-lending practices.

The Comptroller of the Currency has been examining the $400 million-asset Penn Square Bank for possibly as long as three months. Although the exact reason for the FDIC's involvement is not known at this time, it is considered unusual for the deposit-insuring agency, which is not the primary regulator for federally chartered institutions, to participate in a review of a national bank. FDIC chairman William Isaac declined to comment on the reports Thursday. Repeated phone calls to senior officers of the bank were not returned.

One informed source said that a possible reorganization or change in management and ownership could be forthcoming.

As reported in Thursday's American Banker, Penn Square has also terminated the lending authority of Bill G. Patterson, its senior executive vice president in charge of the oil and gas division. Penn Square chairman Bill P. Jennings has said Mr. Patterson will be "spending more time with loan syndications and supervision."

With 80% of its $300 million portfolio in oil and gas credits, Penn Square Bank is known to be highly vulnerable to the recent downturn in the energy business. In addition, the bank has more than $2 billion in outstanding participations, most of which have been sold to Continental Illinois, Chase Manhattan, Seattle First National Bank, and Northern Trust.

These institutions are believed likely to be affected by any loan chargeoffs or classifications mandated by the bank regulators. However, late Thursday afternoon a Seafirst spokesman said, "We are not under any orders from the Comptroller regarding loans related to Penn Square Bank." He added, "We have been in contact with the Comptroller on Penn Square."

Mr. Jennings last week confirmed reports that his institution was seeking to bolster its capital base by soliciting additional stock purchases from shareholders. This action was reportedly taken in anticipation of what may be sizable loan chargeoffs in the second quarter. At yearend 1981, shareholders' equity totaled $30.4 million, yielding an equity-to-assets ratio of 7.7%. According to a major stockholder, "about $27 million" in new capital has so far been pledged.

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