U.S. regulators closed three small banks on Friday, bringing the number of bank failures to 40 so far this year as the recession and delinquent loans erode the health of financial institutions.

The largest of the banks closed on Friday was Cooperative Bank of Wilmington, North Carolina with $970 million in assets and $774 million in deposits, the Federal Deposit Insurance Corp said.

The failure is expected to cost the FDIC deposit insurance fund an estimated $217 million.

First Bank of Troy, North Carolina will purchase all the deposits, except about $57 million in brokered deposits. The FDIC said it will pay the brokers directly.

Cooperative Bank's 24 branches will reopen on Monday as branches of First Bank.

The FDIC also announced the failure of Southern Community Bank of Fayetteville, Georgia, which had $377 million in assets and $307 million in deposits. The failure is expected to cost the FDIC deposit insurance fund an estimated $114 million.

United Community Bank of Blairsville, Georgia, agreed to assume the insured deposits of Southern Community Bank, whose five branches will reopen on Monday as branches of United Community Bank.

In Kansas, the FDIC said regulators closed First National Bank of Anthony, with $156.9 million in assets and $142.5 million in deposits. The failure is expected to cost the FDIC deposit insurance fund an estimated $32.2 million.

Bank of Kansas in South Hutchinson, Kansas, agreed to assume the insured deposits of First National Bank of Anthony, whose six branches will reopen on Monday as branches of Bank of Kansas.

Customers can access their money over the weekend by check, teller machine or debit card, the FDIC said.

The pace of bank failures has accelerated in 2009 as the 18-month-old recession continues. There were 25 failures in all of 2008 and just three in 2007.

Seattle-based Washington Mutual became the biggest bank to fail in U.S. history when it was seized in September with $307 billion in assets. JPMorgan Chase & Co acquired the assets of Washington Mutual.

The FDIC insures up to $250,000 per account at member institutions.

The agency also has a running tally of problem banks that its examiners closely monitor. At the end of the first quarter, 305 unidentified financial institutions were on that list.

(Reporting by Roberta Rampton; Editing by Richard Chang)