Penn Square Bank Collapse (1982)

Founded within an Oklahoma City shopping mall, Penn Square Bank grew rapidly by selling portions of oil-and-gas loans to larger banks across the country. However, oil prices dropped in 1981, resulting in many borrowers struggling to repay their debts and the eventual closure of the bank.

At the time of its closing, Penn Square had sold more than $2 billion in loans to other financial institutions. Its collapse caused major losses at banks across the country and contributed to the failure of the Continental Illinois National Bank and Trust Company in Chicago, which became the largest bank failure in U.S. history up to that point.

The collapse led to extensive litigation in the Western District of Oklahoma, including the bankruptcy of Penn Square’s holding company, First Penn Corporation, which continued for 11 years. Bank regulators called it a “free-spending, free-lending, energy bank that hurt investors and financial institutions in at least 35 states.” The failure exposed weaknesses in bank oversight and contributed to increased in state and federal regulation.

Additional Information

Gerth, Jeff. “PENN Square’S Insider Dealing.” Nytimes, The New York Times, 14 Aug. 1982, https://www.nytimes.com/1982/08/14/business/penn-square-s-insider-dealing.html. Accessed 20 June 2026.

Lynn, Doti. “Penn Square Bank | the Encyclopedia of Oklahoma History and Culture.” Oklahoma Historical Society, 2025.