Dream First Bank Assumes All of the Deposits of Heartland Tri-State Bank

Dream First Bank Assumes All of the Deposits of Heartland Tri-State Bank(fdic.gov)

29 points by gregimba 2 years ago | 28 comments

kasey_junk 2 years ago |

Worth noting this bank is an order of magnitude off of the 250th biggest bank in the US. It’s actually small enough that it’s hard to figure out where in the ~4K US banks it is, but it’s in the backend.

Also, this year is still small on the “number of failed banks” list. Banks fail fairly often and this one failing would be no news normally.

pard68 2 years ago | |

For this reason, this is actually big news. Small banks are the back bone of the US financial system. They are conservative where big ones are not. They are historically the ones that keep afloat.

Too early to call, but this might be a signal of things to come.

kasey_junk 2 years ago | | |

That’s literally the opposite of the truth.

Look at the failed bank list: https://www.fdic.gov/resources/resolutions/bank-failures/fai...

Small banks fail. Big banks don’t. If anything this year is abnormal in that big banks have failed.

AYBABTME 2 years ago | | |

Small banks are less regulated than large ones, as a result of lobby from them to loosen the rules so that they can eek out some profits using less-conservative strategies. They also tend to serve localized and correlated customers, so local events can have an outsized impact on them, versus big banks that are widely diversified.

taeric 2 years ago |

Would love to see how these numbers square up. 139 million in assets over 130 million in deposits. And costing the insurance 54 million.

Naive read is that the bank just had 54 million in withdrawals that it couldn't cover?

Guessing that isn't correct. Curious on details. Was this a surprise?

wbl 2 years ago | |

The bank that acquires does so with a haircut and a hit to the balance sheet from the overall entity having all the liabilities of the combination and the assets. So the insurer throws in some money to recapitalize. Remember everyone needs this deal to be smooth and the new entity toppling is not smooth.

landemva 2 years ago | | |

The buyer gets to sniff around and accept the offer for the accounts and balance sheet. The insurer, FDIC or sometimes NCUA, takes the difference.

taeric 2 years ago | | |

Right, but that is only needed if the assets don't cover the liabilities. Numbers given were covered.

Naive reading of that is that they were not liquid?

petarb 2 years ago |

What caused this bank to go under?

LapsangGuzzler 2 years ago | |

> 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.

Sounds like they had some bad loans on the books, smaller banks in rural communities often struggle to adequately assess loan risk because talent is hard to find.

landemva 2 years ago | | |

Rural people, whatever that means, can be smart and crafty. And there should be a risk management committee and there are services to help provide insights. I was on a rural BoD and don't recall ever seeing a crop loan.

User23 2 years ago | | |

Another problem is the cash flow that can be generated from farmland varies wildly. You might lease it out for $100 an acre, On the other hand you might be making $5,000 an acre if you're farming something specialized.

SoftTalker 2 years ago | | |

Crop loans that went bad due to storm damage? Seems possible in that part of the country. Though I'd presume those are insured?

bob1029 2 years ago | |

I'd say that asset size is small. There are a lot of things that could trip up a bank that scale. Bad IT/compliance, etc.

kikokikokiko 2 years ago | | |

I think the most obvious explanation is that this bank may be another victim of the "sudden" rise in interest rates we're seeing in the last couple of years. This time it was 300 million in assets plus deposits, and the FDIC allegedly will lose 50 million on the rescue operation. The US have thousands of banks of similar size to this one. May be down the road the number of 50 million losses will become unbearable, who knows.

hansjorg 2 years ago |

You've got to appreciate the preciness of the language, and the assuredeness it's meant to instill, in press releases like this.