Part of the problem is that a properly prepared check for a direct rollover will be explicitly made out to the receiving retirement account, not just to the receiving financial institution for the individual's benefit. In this case the check should have been made out to Capital Bank & Trust fbo Dad's IRA, even better it if includes the account number of the IRA. Making it out fbo Dad, makes it permissible to deposit the check into any account fbo Dad. Failing to reference the receiving account is a common problem with 401(k) plans issuing checks for direct rollovers. Failing to deposit the check into an IRA causes the transaction to fail to be a direct rollover.
If funds have remained in the account to which the rollover was deposited and, particularly, if your dad thought that the check was being deposited into an IRA, the rollover can probably be salvaged by applying IRS Revenue Procedure 2016-47 to self-certify that the this transaction would qualify for a waiver of the 60-day rollover deadline based on reason 3.02(2)(a) or (c), allowing the money to be deposited into an IRA as a rollover. With the money rolled over, the code-G Form 1099-R could then be entered as received. It would be up to Capital Bank & Trust to accept the self-certification and complete the rollover.
https://www.irs.gov/pub/irs-drop/rp-16-47.pdf
Just a general note: Branch office employees of banks are often the weak link in the chain when processing IRA transactions.
