Massive $262 Billion in Deposits Leaves JPMorgan, Wells Fargo, BofA, and Citi Within a Year Amidst Government's Revelation of Another US Bank's Collapse

Top US Banks Experience Customer Deposit Contraction Amid Regional Bank Closure

Heartland Tri-State Bank Failure: FDIC Transfers Customer Deposits to Dream First Bank

The Federal Deposit Insurance Corporation (FDIC) has reported the failure of Heartland Tri-State Bank in Elkhart, Kansas, on July 28th. Subsequently, all customer deposits have been smoothly transferred to Dream First Bank, National Association (N.A.), also based in Kansas.

The bank's collapse coincides with a new report revealing a staggering $262 billion loss in deposits for major US banks, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. According to Yahoo Finance, the deposit flight has affected these banks compared to the same period last year.

Despite the significant deposit decline, CFRA equity analyst Alexander Yokum notes an ironic trend wherein larger banks overpower smaller institutions. He explains that smaller banks are experiencing rising deposits because they are compelled to pay higher rates to attract customers.

Yokum's analysis finds support in JPMorgan's Q2 presentation, boasting a remarkable 67% rise in quarterly profits, reaching $14.47 billion in the quarter ending June 30th, despite the notable drop in deposits.

Regarding Heartland Tri-State Bank's situation, the FDIC opted to transfer the bank's assets to another institution, Dream First Bank, instead of relying on the FDIC's insurance fund to compensate customers. As of March 31, 2023, Heartland Tri-State Bank had approximately $139 million in total assets and $130 million in total deposits. Dream First Bank, National Association, agreed to assume all deposits and purchase virtually all assets of the failed bank.

To optimize asset recoveries and maintain them in the private sector, the FDIC and Dream First Bank, N.A., have entered into a commercial shared-loss agreement on the acquired loans. This agreement will allow both entities to share in the losses and potential recoveries, minimizing disruptions for loan customers. The strategic collaboration is projected to maximize recoveries on the assets, ensuring a seamless transition for the bank's customers.

Aug 06, 2023