Kansas Heartland Tri-State Bank Closure Indicates Continued U.S. Banking Crisis

On July 28, 2023, the Kansas Office of the State Bank Commissioner closed Heartland Tri-State Bank of Elkhart, Kansas, appointing the Federal Deposit Insurance Corporation (FDIC) as receiver.

This closure marks another chapter in the ongoing banking crisis in the United States, following the recent failures of First Republic, Silicon Valley Bank, and Signature Bank.

As of March 31, 2023, Heartland Tri-State Bank had approximately $139 million in total assets and $130 million in total deposits. Dream First Bank, National Association, of Syracuse, Kansas, has agreed to assume all deposits and purchase essentially all assets of the failed bank.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $54.2 million, making the acquisition by Dream First Bank the least costly resolution for the DIF.

The four branches of Heartland Tri-State Bank will reopen as branches of Dream First Bank on July 31, 2023, under normal business hours. Customers can continue to access their money and make loan payments as usual.

The first half of 2023 has witnessed several bank closure events that have sent shockwaves through the financial industry.

The banking crisis continues to unfold, marked by significant bank collapses. The collapse of Silicon Valley Bank in March 2023 triggered days of chaos in the U.S. banking system.

First Republic Bank, the nation's second-largest bank failure ever, was acquired by JPMorgan in May 2023 after rescue efforts failed. Signature Bank's failure further added to the turmoil, shaking up the banking industry.

A few factors contribute to the ongoing banking crisis. Rising U.S. interest rates are believed to be a contributing factor. The U.S. Federal Reserve increasing its benchmark rate to 5.25% in July 2023 (the highest rate since 2007). Alongside this, systemic issues within the banking sector, compounded by inadequate risk management, have been brought to light.

These revelations have spurred lawmakers to take action, introducing new legislation aimed at safeguarding customer deposits and stabilizing the financial system.