Frontier State Bank Oklahoma City v. Federal Deposit Insurance

O’BRIEN, Circuit Judge.

In 2002, Frontier State Bank began using a “leverage strategy” under which it funded long-term investments with short-term borrowing to generate profits from the difference (“spread”) between long-term and short-term interest rates. This strategy, while lucrative for the bank — at least in the short run — caused significant concern for bank examiners at the Federal Deposit Insurance Corporation (FDIC) who raised the issue with Frontier during routine examinations. After Frontier’s responses failed to quell the examiners’ concerns, the FDIC’s enforcement staff sought and…