KBRA Financial Intelligence

Kansas Bank Collapse Becomes Fourth Bank Failure This Year

A small community bank in Kansas failed on July 28, becoming the fourth lender this year to be taken over by regulators. Heartland Tri-State Bank, a $139 million lender based in Elkhart, Kansas, was closed by the state’s regulator with the Federal Deposit Insurance Corporation (FDIC) named as receiver. Dream First Bank of Syracuse, Kansas, agreed to assume Heartland’s deposits and to purchase essentially all its failed assets, according to the FDIC. The FDIC estimates that the cost to its Deposit Insurance Fund will be $54.2 million—more than one-third of the bank’s assets. "Heartland Tri-State Bank became insolvent due to an isolated event,’’ the Kansas state banking regulator said in a press release. "Overall, the Kansas banking industry is unaffected by this event and Kansas banks remain strong.’’ Heartland Tri-State Bank most recently had a KFI Score of C+, which signifies a lender may be susceptible to adverse changes that could affect its ability to meet credit obligations, according to KBRA Financial Intelligence (KFI). Over the last two years, the community bank has trailed its peers. The lender has reported a lower return on average assets (ROAA), net interest margin (NIM), and a weaker efficiency ratio compared to similar banks with $100 million to $300 million in assets with at least three branches outside of major cities, according to KFI, which used the peer group as defined by the Uniform Bank Performance Report.

Dream First Bank, which has $511 million in assets and five branches, has maintained a KFI Score of B, or sound financial condition, since 2021.

Heartland’s collapse follows three much larger failures this year. First Republic Bank’s $229 billion failure in May was the largest since 2008 and the second biggest in U.S. history. Signature Bank and Silicon Valley Bank failed in March in part because of a bank run and poor management, according to regulators.