Feds shut down Security Savings Bank, which has two Wichita branches

WICHITA — Federal regulators today closed Security Savings Bank, a $508 million thrift with two Wichita branches.

The federal Office of Thrift Supervision closed Olathe-based Security Savings and appointed the Federal Deposit Insurance Corp. as the receiver.

Pine Bluff, Ark.-based Simmons First National Corp., a bank holding company, has entered into a purchase and assumption agreement with the FDIC for most of Security Savings' assets and deposits. That agreement includes a loss-share arrangement between the FDIC and Simmons First on $334.2 million of Security's assets.

Security Savings branches will open at their normal operating hours Saturday as branches of Simmons First National Bank. Security Savings had branches at 8525 W. Central and 12121 E. 21st St. It also operated seven branches in Olathe, Leawood, Overland Park and Salina.

The FDIC said that tonight and over the weekend, Security Savings customers can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. The FDIC said loan customers should continue to make their payments as usual.

Security Savings customers will become customers of Simmons First National, the FDIC said.

The FDIC estimates that the cost of Security's failure will be $82.2 million to its deposit insurance fund.

Security recorded a $14 million loss in the first half of the year, wrote off $8.5 million and reported $32.8 million in non-performing loans, according to FDIC data.

Andrea Andersen Scarpelli, Security Savings' Wichita market president and chief credit officer, said Friday she couldn't comment on the closing or the acquisition by Simmons First.

In an e-mail to The Eagle last month, Scarpelli said the first-half loss was part of "restructuring and writing off millions of dollars of bad debt and related adjustments necessary to deal with the tainted business" she and the thrift's executive team had to take on two years ago.

"The bank was profitable in July and that is very encouraging, but we anticipate that we will have a loss in the third quarter related to asset quality."

Security also had been operating under a cease-and-desist order by the OTS, which was issued in August 2009.

Rick LeCompte, finance professor at Wichita State University, said it's not surprising that Security failed, given its millions of dollars of losses over multiple quarters.

"Losing money like that wipes out your Tier 1 (capital) pretty quickly," LeCompte said.

Security's Tier 1 risk-based capital ratio was 4.13 percent in the second quarter of 2010. Regulators consider an institution with a less than 6 percent Tier 1 ratio "significantly undercapitalized."

The last profitable quarter the thrift had was in the first quarter of 2008, according to FDIC records.

Simmons First is a $3.5 billion, publicly traded holding company that operates the national bank of the same name.

The bank, which has $1.5 billion in assets, operates 36 full-service branches in Arkansas and one in Missouri.

A Simmons First official said in a press release that the acquisition of Security Savings "is a natural extension of our footprint."

"In addition, we believe the Kansas market represents a good opportunity to expand our current niche of agriculture lending," said J. Thomas May, chairman and CEO of the holding company.

Security Savings is the second Kansas-based institution with Wichita branches to fail since a string of bank failures that began in 2008. First National Bank of Anthony, which had a west Wichita branch, was shut down in June 2009.

Security Savings becomes the sixth Kansas institution to fail in that period.