Bank Failure Alert - Small Business Bank

Fourth bank failure for 2026 and the second in two weeks…
 
On 7/17/26, Small Business Bank in Lenexa, Kansas (FDIC 25744; total assets $73M; total deposits $69M), was closed by the Kansas Office of the State Bank Commissioner, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.  The Farmers State Bank of Oakley, Kansas (FDIC 1867; total assets $389M), to assume substantially all deposits and purchase certain assets of Small Business Bank.
 

• The FDIC preliminarily estimates that the failure will cost the Deposit Insurance Fund approximately $5.7 million.
• Sources - The Farmers State Bank of Oakley, Kansas Assumes All Deposits of Small Business Bank, Lenexa, Kansas | FDIC.gov and Kansas Office of the State Bank Commissioner Closes Small Business Bank, Lenexa, Kansas, Appoints Federal Deposit Insurance Corporation (FDIC) as Receiver – Kansas Office of the State Bank Commissioner

 
 
Additional FedFis insights as of the 3/31/26 call report:

• Small Business Bank had a FedFis Rating© of 4.48 as of March 2026 placing them in the lowest possible percentile of all US banks. The bank had incurred continued losses since 2022.
• The bank was primarily an agricultural lender with Agricultural and Farm Loans representing $32.6M (52.85%) of the $61.7M loan portfolio.  Commercial Real Estate Loans also made up a material $17.3M (28.05%) of the total loan portfolio.  The bank had equity capital of $3.5M as of the March 2026 call report, but the trailing twelve-month (TTM) losses of ($4.5M) and asset quality issues placed the bank in a precarious position.
  • ROAA was a negative (4.29%), ROAE was negative (79.52%) and Efficiency Ratio of 246.72%.
  • Nonperforming Loans / Total Loans of 4.81% and 30-89 Past Due / Total Loans of 11.15% with an Adjusted Texas Ratio of 45.01%.
    • Allowance for Loan and Lease Losses of only $1.8M is not sufficient to cover nonaccrual loans of $3M (schedule RC-N).
• Small Business Bank was owned by Gardner Bancshares, Inc. (FR 1067617), a non-public insolvent bank holding company with negative equity capital of ($7M) per the Dec 2025 PCO filing.
• Per the Kansas Office of the State Bank Commissioner, “Small Business Bank has operated with financial difficulties for the past several years and has been subject to strict supervisory oversight.  Ongoing operating losses resulted in the bank’s capital becoming critically undercapitalized under federal and state law.”

 
 
Sean Mayo
Sr. VP, US Financial Institutions Group
[email protected]