Stress in the U.S. regional banking sector has surfaced again. Heartland Tri-State Bank was closed Friday by the Kansas Office of the State Bank Commissioner, which then appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The move marks another bank failure in the U.S. this year and renews attention on the health of smaller regional lenders.
FDIC Moves to Protect Depositors
According to the FDIC, Dream First Bank, National Association, based in Syracuse, Kansas, entered into a purchase and assumption agreement to protect depositors. Under the deal, Dream First Bank will assume all deposits of Heartland Tri-State Bank and has also agreed to purchase essentially all of the failed bank’s assets.
As of March 31, Heartland Tri-State Bank held about $139 million in total assets and $130 million in total deposits. The FDIC also said the bank’s four branches are scheduled to reopen Monday as branches of Dream First Bank under normal business hours.
Bank Failures Add to 2023 Industry Turmoil
The collapse adds to a string of U.S. bank failures this year. Silicon Valley Bank was shut down on March 10 by California regulators, Signature Bank followed on March 12 in New York, and First Republic Bank was closed on May 1. Silvergate Bank also announced a voluntary liquidation.
Market observers have linked ongoing pressure on regional banks to the Federal Reserve’s rate-hiking cycle. This week, the Fed raised interest rates by 25 basis points. Some commentators, including Robert Kiyosaki and Peter Schiff, have warned that more regional bank failures could emerge as higher rates continue to strain balance sheets. Still, whether additional failures occur will depend on how banks manage funding, asset quality, and liquidity in a prolonged high-rate environment.