On August 21, 2026, when the Tioga-Franklin Saving Bank of Philadelphia was closed by banking regulators, it became the fifth U.S. bank to fail this year. The five failures so far in 2026 comes after only two banks closed in 2024 and in 2025, respectively. News of the most recent closure left me wondering if perhaps there was something to worry about with the recent apparent uptick in bank failures. Turns out, I am not the only one wondering about this. On August 26, 2026, Law.com ran an article considering what might be causing the recent increase in the number of bank failures. While the Law.com article concludes that the banks closed this year mostly failed due to operating problems specific to the failed institutions involved, there is still enough there to take a closer look at what is going on.

The five bank failures in 2026 YTD matches the highest number of closures since 2023 (the year that Silicon Valley Bank failed), when there were also five bank failures. Five bank failures is the highest annual number in any year since 2017 (when there were 8). Looking at the number of bank failures by year yields some interesting observations, such as, for example, that there were no bank failures at all in the years 2018, 2021, and 2022. On the other hand, 507 banks failed during the period 2008 through 2014, with the 21^st century’s highest annual number of closed banks in the year 2010 (157).

The higher numbers of failures during the global financial crisis years does make the five bank failures so far this year look pretty paltry, by comparison. But even if that is so, it is still worth asking the question, is something going on with the recent uptick in bank closures?

Reviewing the banks that have closed this year yields a few observations. First, each of the failed banks was located in a different state, suggesting that there likely is not some regional thing going on. Second, all of the five banks were relatively small banks by asset size. The largest of the banks to fail, the Community Bank and Trust of LaGrange, Georgia, had only $228 million in assets at the time of closure. The others were smaller, in some cases a lot smaller.

The failed bank review that the FDIC conducts with respect to failed bank institutions suggests (shown, for example, here) that the recurring themes behind the failures were capital erosion, poor asset quality, weak risk management, and regulatory criticisms regarding unsafe and unsound practices.

Looking at the FDIC review also suggests that the failures reflect the traditional operating challenges facing small community banks, rather than the liquidity-run or interest-rate-risk problems that were behind the high-profile large bank failures in 2023 (Silicon Valley Bank, Signature Bank, and First Republic).

The FDIC’s most recent Quarterly Banking Profile, dated August 25, 2026 (here), suggests that overall the banking industry in the U.S remains sound, with strong capital buffers, high earnings, and steady domestic deposit growth.

According to a recent report from Fitch, the largest U.S. banks “easily” passed the most recent Dodd-Frank Act Stress Test by the Federal Reserve.  Overall, there is no apparent reason to suspect that the increase in the number of bank failures so far this year represents a larger problem or presages a likely coming increase in the number of bank failures.

However, there is still the fact that at least some smaller community banks are struggling in this environment. The question for D&O underwriters to ask is whether there are others of these small banks that are struggling with the same challenges that led to the closure of the five banks so far in 2026. The bank failures suggest that at least some banks, mostly smaller community banks, may also be under stress, which is an important consideration when it comes to comparable banks.

Some readers may think that five bank closures is a really small number of bank failures to worry about. I worry because I spent the first ten years or so of my career in the 80s and early 90s working on failed financial institution insurance coverage disputes arising in the wake of the Savings and Loan Crisis. Later, in the 2008-2014 time frame, I spent years working on disputes arising out of the failures of many financial institutions during the global financial crisis. I even got caught up in the backwash from the failure of the three large banks in 2023.

If there is any steady theme across my many-decades-long career, it is that every few years the financial sector blows up and causes (or at least threatens) massive damage to the overall economy.

For that reason, in my view, it is worth paying attention when the number of bank failures starts to increase. Long-time observers know that it is worth being vigilant when it comes to the banking sector.