July 11, 2024

FDIC Shuts Down Kansas Heartland Tri-State Bank Amid Worsening Banking Crisis

Once more, the ongoing trouble with the United States banking system has hit the news. On July 29, the Kansas Office of the State Bank Commissioner shut down the Heartland Tri-State Bank in Elkhart. The Federal Deposit Insurance Corporation (FDIC) oversees the situation.

Starting on July 31, all four branches of Heartland Tri-State Bank will open their doors again, but this time as part of Dream First Bank, stated by the FDIC in an announcement. People who had their money in the closed bank will now be considered customers of Dream First Bank. Actions like taking out money, putting in cash, and managing loans will all happen through Dream First Bank. If you were with Heartland Tri-State Bank, keep using the same branch until everything changes.

Heartland Tri-State Bank has become the initial bank to face closure since the struggling First Republic Bank was taken over by JPMorgan in May, following unsuccessful attempts to save it. This situation came right after the significant downfall of Silicon Valley Bank in March, which caused a lot of confusion in the American banking system for several days.

The Heartland Tri-State Bank’s closure also signifies this week’s second bank crisis. Just a few days earlier, on July 25, PacWest and Banc of California joined forces, seemingly working to strengthen their positions in response to the ongoing turbulence in the banking industry.

The bank’s problems are thought to stem from rising U.S. interest rates and inadequate risk management by financial institutions. To combat inflation, the U.S. Federal Reserve raised its primary rate to 5.25% in July, the highest since 2007. In June, the U.S. saw a 4.1% year-over-year inflation rate.

By March, Heartland Tri-State Bank had about $139 million in total assets and $130 million in total deposits. Dream First Bank not only agreed to take over the stakes but also decided to acquire all the failed bank’s assets.

According to the FDIC, the Deposit Insurance Fund (DIF) expense is expected to be around $54.2 million. The DIF is a safety net established by Congress in 1933 and looked after by the FDIC to keep people’s deposits safe in the country’s banks. The FDIC said, “Compared to other alternatives, Dream First Bank, National Association’s, acquisition was the least costly resolution for the DIF.” 

In June, the Democrats on the House Financial Services Committee put forward a bunch of new laws. They called these the “first wave” of rules to fix big banks’ problems.

Representative Maxine Waters explained, “The failures of Silicon Valley Bank, Signature Bank, and First Republic Bank make clear that it is past time for legislation aimed at strengthening the safety and soundness of our banking system and enhancing bank executive accountability. Congress must not sit idly by.”

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