After operating out of the same office in downtown Kentland, Ind., for more than a century, the smallest bank in the U.S. shuttered on Friday after federal regulators said it had become "critically undercapitalized."
The Office of the Comptroller of the Currency said Kentland Federal Savings and Loan Association, which opened in 1920 and had some $3.7 million in assets as of March, "had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices."
The regulator found that "there is no reasonable prospect that the bank will become adequately capitalized." The Federal Deposit Insurance Corp. said nearby Kentland Bank -- no relation -- agreed to take over Kentland Federal Savings and Loan, whose sole location will close.
The closure marks the third U.S. bank failure of 2026. Regulators closed two small community banks in Georgia and Illinois earlier this year. Two banks failed in both 2025 and 2024, according to the FDIC.
John Sammons, the president of Kentland Federal Savings and Loan, didn't respond to a request for comment on Saturday. An employee who answered the phone at the bank said she couldn't respond to questions.
The bank was the Sammons family business. John's brother, James Sammons, was the prior president. Their great-grandfather, Hume Sammons, was the founder.
Kentland Federal Savings and Loan's website shows "deposit campaigns" to drum up business. One was named after It's a Wonderful Life, the 1946 film featuring fictional local banker George Bailey, and another was labeled a "Rural Banking Deposit Campaign" in reference to the bank's rural legacy.
"When I am finished -- whether it's [regulators] pressuring us to be absorbed or me walking away -- we will have to be acquired," James said in Bloomberg News profile in 2023, adding that the bank had recently gone through an exam, and the "powers that be are concerned about our capital growth -- they deem us 'too small to survive.'"
The bank was uniquely tiny. The Federal Reserve defines community banks as those with up to $10 billion in assets, a vast group that includes those like Kentland Federal Savings and Loan all the way up to publicly traded lenders with locations across several states. That definition is now subject of intense debate among regulatory agencies, Barron's reported last month.
Kentland has a population of some 1,600 people. Bloomberg reported in 2023 that the Sammons family's bank didn't charge fees, and that there were "only 40 or so mortgages outstanding, and as customers pass away, the stock is not being replenished with loans to younger generations, who have no particular affinity for in-person banking."
Regulators detailed the bank's precarious position in a report last year.
Its "high interest expense and a declining net interest margin have reduced the bank's earnings and ability to retain capital," the Office of the Comptroller of the Currency said in a March 2025 report on the bank's compliance with the Community Reinvestment Act.
"Do you know George Bailey? Essentially, that's me," James Sammons said in an article on Kentland's community website when he still ran the bank. "You call up, and you get me on the phone. You don't get automation, you don't get anything like that. I deal with third and fourth-generation families. It's local money, serving local people."
Write to Rebecca Ungarino at rebecca.ungarino@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 11, 2026 14:49 ET (18:49 GMT)
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