The State of Kansas had its first bank failure of the year today when state regulators closed the Heartland Bank, Leawood, Kansas. The FDIC, appointed as receiver, sold the failed bank to Metcalf Bank, Lees Summit, Missouri, which will assume all deposits of the failed bank.
The history of Heartland Bank extends over a century to when the bank was first established in 1904. According to the Heartland Bank website “our mission is to earn the trust of every customer we serve” and “help you achieve your individual or business’ financial goals.” Unfortunately, this 108 year old bank’s history came to an abrupt end today as a result of “unsafe or unsound banking practices” as detailed in a Consent Order from the FDIC dated March 14, 2011.
Mercantile Bancorp, the holding company for Heartland Bank had entered into an agreement with Cross First Bank in April 2012 to sell Heartland Bank, subject to regulatory approval, but the purchase was never consummated. Mercantile Bancorp is a multi-state bank holding company that up until today owned six different banks. Earlier in the day, regulators closed The Royal Palm Bank of Florida which was also owned by Mercantile Bancorp.
Commenting on the two bank closings, Lee R. Keith, President and CEO of Mercantile had this to say:
“Mercantile Bank continues to operate much like it has over the past 106 years and will continue to service its customers and the Quincy community with all their banking needs as it always has. Mercantile Bank is adequately capitalized and remains so after the closure of the two banks.”
Shareholders of Mercantile Bancorp do not seem to share Mr. Keith’s optimism on the future prospects of the company. Shares of Mercantile Bancorp, which had traded in the $18 range in 2008, closed at a mere 19 cents per share today.
Both branches of Heartland Bank will reopen as branches on Metcalf Bank and all depositors will continue to have full FDIC deposit insurance coverage up to the applicable limits. Depositors of the failed bank have full access to their money over the weekend thorugh the use of checks, ATM and debit cards.
At March 31, 2012, Heartland Bank had total assets of $110.0 million and total deposits of $102.6 million. Metcalf agreed to pay the FDIC a rather large premium of 1.11% on the deposits assumed from Heartland and also agreed to purchase all of the failed bank’s assets.
Metcalf Bank and the FDIC entered into a loss-share agreement covering $54.3 million of Heartland’s assets. The FDIC and Metcalf will share in the losses on the failed bank assets under the terms of the loss-share transaction. Loss-share transactions are used by the FDIC as an incentive for an acquiring bank to purchase failed bank assets. According to the FDIC, loss-share transactions ultimately minimize losses on failed bank assets by keeping them in the private sector.
This is the second acquisition of a failed bank by Metcalf Bank. In April 2009, Metcalf Bank acquired failed American Sterling Bank, Sugar Creek, MO.
The loss to the FDIC for the failure of Heartland Bank is $3.1 million. Heartland Bank is the nation’s 37 banking failure and the first in Kansas.