Economic situation marked by general economic problems, recession, insolvency, unemployment and an increasing number of bankrupt companies has greatly influenced the business of small banks in the Republic of Croatia. The paper Business Analysis of Small Banks and Their Future in the Banking System of the Republic of Croatia presents a research on the business of small banks in the Republic of Croatia. Analysis of their financial statements was conducted by means of financial indicators, using one small bank as an example, in the period between 2011 and 2014. Data from the banks website were used for analysis. In addition to this, an overall analysis was conducted on the business of all small banks in the period between 2008 and 2012, by using the data available on the website of the Croatian National Bank, in the publication Banks Bulletin. Based on the results obtained from both analyses, most of the indicators are visibly in decline. It is also noticeable that small banks are less efficient and profitable and that they assume greater risks in everyday business operations when compared to their competitors. Another problem of small banks is high percentage of bad loans, which affects the increase in provisions and, ultimately, the survival of such banks. Above-mentioned problems resulted in bankruptcy of some of the small banks. Others opted for some form of integration due to ever-increasing market changes and requirements of regulators. All that contributed to a decrease in the number of small banks, which trend is still present today. Although the trend of integration and bankruptcy of small banks is currently prevailing, it is unrealistic to expect that small banks will completely disappear in the future. In times to come, survival will be guaranteed to those small banks that will be able to recognize their competitive advantages and use them as the basis for their business strategies.