Two U.S. Banks Fail, 2010 Total Now 127

WASHINGTON (TheStreet) -- State regulators closed two banks Friday, bringing the total number of U.S. bank failures for 2010 to 127.

Both failed banks were previously included in TheStreet's Bank Watch List of undercapitalized institutions, based on second-quarter regulatory data provided by SNL Financial.

Haven Trust Bank of Florida

State regulators shuttered Haven Trust Bank of Florida and appointed the Federal Deposit Insurance Corporation receiver. The FDIC arranged for First Southern Bank of Ponte Vedra Beach, Fla. to assume the failed institution's total assets of roughly $149 million, along with all of its deposits. Under a loss-sharing agreement, the FDIC agreed to cover 80% of Southern Bank's losses on $127.3 million of the acquired assets.

First Southern Bank is the main subsidiary of First Southern Bancorp(FSOF).

Haven Trust Bank of Florida was organized in August 2006 and never achieved a profit, quickly becoming heavily concentrated in construction loans and commercial mortgages. The total for these two loan types peaked at $122 million in June 2009, or 68% of total assets.

The bank was operating under a Jan. 27 consent order -- essentially a cease-and-desist order -- from the FDIC and the Florida Office of Financial Regulation requiring the bank's board of directors to take a more active role in managing the institution, to meet regularly following a formal agenda, to make sure that board members were properly trained and to "retain qualified management." This type of requirement implies that board oversight may have been lacking even before the credit crisis began, raising the question why this part of the order wasn't handed down years earlier.

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The order also required the bank to raise sufficient capital to increase its tier 1 capital to 8% of its total assets and its total risk-based capital ratio to 10% within 120 days. In order to be considered well-capitalized, most banks and thrifts have to maintain a tier 1 leverage ratio of at least 5% and a total risk-based capital ratio of at least 10%.

Haven Trust Bank of Florida's two branches were set to reopen during normal business hours as branches of First Southern. The FDIC estimated the cost of the bank closure to its deposit insurance fund would be $31.9 million. As of June 30, the capital ratios were 2.04% and 3.75%, respectively.

North County Bank

State regulators closed North County Bank of Arlington, Wash. The FDIC was appointed receiver and sold the failed bank's $276 million in deposits for a 2% premium to Whidbey Island Bank, Coupeville, Wash., which is held by Washington Banking Co.(WBCO).