Kansas Community Bank Shut Down by Regulators

A Kansas-based community bank has become the latest bank to collapse in 2023 after the state regulator stepped in over the weekend.

Heartland Tri-State Bank was shut down on Friday by the Kansas Office of the State Bank Commissioner after an investigation by commissioner David Herndon ascertained that the company was insolvent.

The State Bank Commissioner of Kansas stated that the insolvency was “due to an isolated event” but did not provide further information. “Overall, the Kansas banking industry is unaffected by this event and Kansas banks remain strong,” the regulator added.

According to statements from the Kansas regulator and the Federal Deposit Insurance Corporation (FDIC), the latter took over the bank immediately and facilitated the sale to Dream First Bank, headquartered in Syracuse, Kansas.

Dream First has assumed all of the deposits of Heartland Tri-State Bank — approximately $130 million as of March 31, 2023 — and “essentially all” of its assets, according to the FDIC. Heartland’s four branches opened as Dream First branches on July 31.

Dream First and the FDIC have also entered into a shared loss agreement for Heartland’s loan book with the aim of minimizing disruptions for loan customers.

The FDIC’s initial estimate is that the Heartland collapse would cost the Deposit Insurance Fund $54.2 million. This is on top of the estimated $15.8 billion loss the fund suffered as a result of the collapses of Silicon Valley Bank and Signature Bank in March.

The sale to Dream First Bank “was the least costly resolution”, the FDIC said.

Rating agency KBRA Analytics said Heartland had “trailed its peers” over the past two years on metrics such as return on average assets and net interest margin. It had rated the bank C+, meaning it “may be susceptible to adverse changes that could affect its ability to meet credit olbligations”.

In a statement, Dream First Bank’s president and CEO Chris Floyd said: “At Dream First bank, we understand this is unexpected news for Heartland Tri-State Bank customers. Most importantly, I want to confirm that the Heartland Tri-State Bank employee jobs, deposits and banking relationships are not affected by today’s news. Dream First staff will continue to provide exceptional customer service and be available to answer questions that employees and customers may have.”

As well as Silicon Valley Bank, Signature Bank and now Heartland Tri-State Bank, Silvergate Capital is winding itself down after significant withdrawals from its technology-focused business earlier this year. First Republic was bought by JPMorgan Chase in early May after billions of dollars of deposits were withdrawn in a relatively short space of time.

CORRECTION: In an earlier version of this article we mistakenly said that First Horizon was bought by JPMorgan Chase in early May, this was wrong, it was First Republic that was bought by JPMorgan Chase. We regret the error.