Kansas regulators closed Lenexa-based Small Business Bank on Friday, and The Farmers State Bank of Oakley – across the state – agreed to assume all of its deposits and purchase some of its assets, according to the Federal Deposit Insurance Corp., which acted as receiver.
The Federal Reserve in June labeled Small Business Bank “significantly undercapitalized” and gave the bank 30 days to increase its equity through the sale of shares, to find a buyer or to take “other necessary measures” to right itself.
That “prompt corrective action directive” marked the Lenexa lender’s third warning from the Fed in as many years.
The regulator handed the bank a cease-and-desist order in 2023, citing deficiencies in staffing, internal controls, credit risk management, lending and credit administration, capital, IT and third-party risk management.
The following year, examiners from the Kansas City Fed and Kansas’ Office of the State Bank Commissioner found “new and continuing deficiencies” – particularly around risk management and anti-money laundering compliance.
Small Business Bank’s failure will cost roughly $5.7 million to the Deposit Insurance Fund, the FDIC estimated. That figure is expected to change as retained assets are sold, the regulator said.
Small Business Bank’s sole location is reopening Monday as a branch of The Farmers State Bank – which itself is fresh off an expansion.
The Oakley bank last week completed its conversion of customer accounts from its acquisition of Kaw Valley State Bank.
The Farmers State Bank counted $389 million in assets as of March 31, along with two branches in Oakley and Eudora.
At the time of its failure, Small Business Bank held roughly $73 million in assets and $69 million in deposits, according to the FDIC.
The Lenexa lender is the fourth U.S. bank to fail this year – and the second this month. Regulators closed Indiana-based Kentland Federal Savings and Loan Association on July 10 after finding the bank had “experienced substantial dissipation of assets and earnings due to unsafe and unsound practices.”
Community Bank & Trust - West Georgia failed in May, months after an inspection by the Atlanta Fed revealed operational deficiencies with the bank’s holding company, including “with respect to pursuit of its growth strategy, related to board oversight, capital, and compliance with the rules related to affiliate transactions.”
Chicago lender Metropolitan Capital Bank & Trust failed in January over unsafe and unsound conditions and an impaired capital position, Illinois regulators said.
With Small Business Bank’s stumble, as many banks have failed in 2026 as in the preceding two years combined: Two banks closed in 2024, followed by another two in 2025. Five banks failed in 2023, including the high-profile collapses of Signature, First Republic and Silicon Valley Bank.
