Three Midwest Banks Fail

WASHINGTON (TheStreet) -- Regulators shut down two banks in Missouri and one in Kansas Friday, bringing the total number of U.S. bank failures for 2010 to 132.

The three bank failures cost the Federal Deposit Insurance Corp.'s deposit insurance fund a combined $507.8 million.

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

Security Savings Bank, FSB

The Office of Thrift Supervision closed Security Savings Bank, FSB of Olathe, Kan. and appointed the FDIC receiver. The FDIC then sold the failed institution's $508 million in total assets and $397 million in total deposits to Simmons First National Bank of Pine Bluff, Ark.

The FDIC agreed to cover 80% of losses on $334 million of the acquired assets. The nine branches of Security Savings Bank, FSB were set to reopen during normal business hours as branches of Simmons First National Bank. The acquiring bank is a subsidiary of Simmons First National Corp.(SFNC).

After recording 2009 net losses of $21.4 million -- mainly the result of provisions for loan loss reserves -- and a first-quarter net loss of $6.5 million, Security Savings Bank, FSB slipped to undercapitalized status as of March 31, according to SNL Financial. Its Tier 1 leverage ratio was 4.18% and its total risk-based capital ratio was 5.40%, SNL Financial said.

These ratios need to be at least 5% and 10%, respectively, for most banks and thrifts to be considered well-capitalized by regulators. They need to be at least 4% and 8%, respectively, for most institutions to be considered adequately capitalized.

Security Savings Bank, FSB had a net loss of $7.5 million during the second quarter, leaving its two capital ratios at 2.98% and 5.40%, respectively, as of June 30. The institution's ratio of nonperforming assets -- including loans past due 90 days or in nonaccrual status and repossessed real estate -- made up 9.37% of total assets.

A cease-and-desist order from the OTS in August 2009 required the thrift to raise significant additional capital by the end of the third quarter of 2009. In the current environment, it is very difficult for most troubled community banks to attract outside investors or a merger partner since investors and other banks are probably better off picking up failed banks with FDIC loss-sharing guarantees.

The FDIC estimated the cost to the deposit insurance fund from Security Savings Bank, FSB's failure would be $82.2 million.

WestBridge Bank and Trust Company

State regulators in Missouri took over WestBridge Bank and Trust Company of Chesterfield. The FDIC was appointed receiver and sold the failed bank's $92 million in total assets and $73 million in total deposits to Midland States Bank of Effingham, Ill. The FDIC agreed to share in losses on $73 million of the acquired assets. The failed bank's office was scheduled to reopen as a branch of Midland States Bank on Monday. The FDIC estimated the cost of the bank failure would be $18.7 million.