Banking Failures Continue as FDIC Takes Control of Heartland Tri-State Bank

Heartland Tri-State Bank became the latest casualty of the nation’s string of banking failures late this week. The State Bank Commissioner of Kansas shuttered the Elkhart-based bank on Friday. The Federal Deposit Insurance Corporation (FDIC) was subsequently named as the bank’s receiver.

Banking failures in 2023

2023 has seen multiple banking failures in the United States, as interest rates have risen, and regulators have failed to provide adequate oversight. Earlier in the year, Signature Bank and Silicon Valley Bank both collapsed with little warning. Post-collapse reviews cast blame on bank executives and regulatory agencies.

More recently, First Republic became the second-largest U.S. bank to fail. Those highly publicized banking failures have inspired regulators and lawmakers to issue new proposals for stabilizing the nation’s financial system. Meanwhile, industry observers have continued to debate how the closures and financial crisis may impact the industry and economy going forward.

Dream First Bank to the rescue?

The FDIC has moved quickly to offset any impact on customers or the financial sector. In a press release, the regulators confirmed that Dream First Bank has agreed to buynearly all the failed bank’s assets. Regulators entered into a purchase and assumption agreement with Dream First:

The FDIC and Dream First Bank, National Association, are also entering into a commercial shared-loss agreement on the loans it purchased of the former Heartland Tri-State Bank. The FDIC as receiver and Dream First Bank, National Association, will share in the losses and potential recoveries on the loans covered by the shared-loss agreement, which is projected to maximize recoveries on the assets by keeping them in the private sector.

Regulators estimate that this latest in U.S. banking failures will drain another $54.2 million from the Deposit Insurance Fund. Still, they claim that the acquisition choice was the most cost-effective solution for the DIF.