More Kansas bank failures possible

State banking officials think the overall health of the industry has improved this year.

But they aren't betting that there won't be any more bank failures.

Last fall, Federal Deposit Insurance Corp. Chairman Sheila Bair told The Eagle that she expected bank failures to peak in 2010.

That year was the highest for bank failures in the nation, with 157 institutions closed by federal and state banking regulators.

In Kansas, three banks failed in 2010. That was the same number of failures in 2009. There were two Kansas bank failures in 2008, the year that the banking crisis began.

And while a host of indicators point to a national economic recovery and more banks are reporting profitability, the possibility of more bank failures can't ruled out.

"There may be a failure or two, just because I'm hesitant to never say never," said Chuck Marshall, manager of the financial institutions group for accounting and consulting firm Kennedy and Coe.

He is confident, however, that all of the problem banks have been identified by regulators.

"There's no undiscovered country out there right now," Marshall said.

Shawn Mitchell, CEO of the Community Bankers Association of Kansas, said that there is "probably a very small percentage that are digging out" from problems.

But he said he thinks the majority of Kansas banks are seeing improvement.

"I get a pretty good sense that most of our banks are healthy," said Shawn Mitchell, CEO of the Community Bankers Association of Kansas. "They've taken a lot of their losses... they've been healing themselves up."

Marshall said the health of Kansas banks that he works with "continues to improve."

"I think the economies that support them to continue to improve and the confidence of the business people and the consumers within those economies continues to improve," he said.

Mitchell said the biggest concern for Kansas banks' health going forward is the imposition of new regulation, primarily from the continued implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act passed last year.

"That's causing stress out there," he said.

Mitchell said the additional regulation has many of the small banks his organization represents wondering how they are going to afford to comply with the spate of additional regulation and oversight.

"My concern is that will lead to a lot of mergers," he said.