HISTORY OF U.S. BANK FAILURES
BANK FAILURE RATE
Latest 4 Quarters Ending Q4 2023: 0.1%
Since 1990: 0.3%
(# of failed banks as percent of total banks)
Bank Failure Rate (L4Q): |
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# of Bank Failures L12M: |
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Time Since Last Bank Failure: |
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| Characteristics of Recent Bank Failures: |
Silicon Valley Bank, Signature Bank & First Republic Bank
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Other Bank Failures
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SOURCES OF INFORMATION ON U.S. BANK FAILURES.
TIMELINE OF RECENT U.S. BANK FAILURES.
States with Bank Failures 2019 to 2023
Estimated FDIC Losses and % Losses to Total Assets in Bank Failures 2019 to 2023
Estimated FDIC Losses in Bank Failures 2019 to 2023
Estimated FDIC Losses as % Total Assets in Bank Failures 2019 to 2023
The following are Inspector General or other reports on selected recent bank failures (click on bank name to open report):
Republic First Bank dba Republic Bank (“Republic Bank”) was closed on April 26, 2024 by the Pennsylvania Department of Banking and Securities. The Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed. Fulton Bank, National Association (N.A.), Lancaster, PA, assumed substantially all deposit accounts and substantially all the assets. As of January 31, 2024, Republic Bank had approximately $6 billion in total assets and $4 billion in total deposits. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) related to the failure of Republic Bank will be $667 million.
Citizens Bank (Sac City, Iowa): Closed by the Iowa Division of Banking; Federal Deposit Insurance Corporation (FDIC) appointed as receiver and entered into a Purchase and Assumption Agreement with Iowa Trust & Savings Bank, Emmetsburg, Iowa, to assume all of the deposits of Citizens Bank and to purchase essentially all of the failed bank’s assets. The “IDOB said during a joint and ongoing examination of the bank, examiners identified significant loan losses that had not previously been identified by the bank. The bank was declared insolvent. The bank had a concentration of out-of-territory and out-of-state loans to one industry (Trucking Industry Consent Order 8/2023) and incurred heavy losses on some of those loans.” As of June 30, 2023, Citizens Bank had approximately $66 million in total assets and $59 million in total deposits. Estimated loss: $14.8 million, or 22% of total assets. FDIC Press Release 20231103; FDIC Failed Bank Review 202403.
Heartland Tri-State Bank (Elkhart, Kansas): Closed by the Kansas Office of the State Bank Commissioner; Federal Deposit Insurance Corporation (FDIC) appointed as receiver and entered into a purchase and assumption agreement with Dream First Bank, National Association, of Syracuse, Kansas, to assume all of the deposits and to purchase essentially all of the failed bank’s assets under a commercial shared-loss agreement on the loans. The Kansas State Banking Commissioner’s office stated that “Heartland Tri-State Bank became insolvent due to an isolated event”. Kansas State Bank Commissioner, David Herndon, expressed apparent relief as he disclosed the closure of Heartland Tri-State Bank due to a scam they fell victim to. “We declared the bank insolvent because of a scam that they fell victim to. I can’t speak to the particulars of that. Investigations are ongoing. But it had nothing to do with interest rate increases. Nothing to do with balance sheet asset quality. Nothing to do with the Fed,” Herndon said. (Source: Banking Dive). Bloomberg News article (9/27/2023) reports cryptocurrency scam where $12 million of bank funds wired out by CEO; FBI is investigating. As of March 31, 2023, Heartland Tri-State Bank had approximately $139 million in total assets and $130 million in total deposits. Estimated loss: $54.2 million, or 39% of total assets. FDIC Press Release 20230728. State of Kansas Press Release 20230728; FRB OIG Material Loss Report 20240207.
First Republic Bank: With reliance on larger, uninsured depositors and significant investment portfolio losses, First Republic Bank was closed by the FDIC following large scale run on deposits. Cost to the FDIC is estimated at $13 billion. Press Release 20230501. FDIC OIG Material Loss Review20231128.
Signature Bank: The FDIC formed a bridge bank and transferred assets and deposits from SB with the FDIC managing the bridge bank pending sale or liquidation. In a Press Release 20230312, it was announced that all depositors - even those with balances in excess of FDIC coverage - would be made whole. There would be no cost to taxpayers as FDIC assessment fees to all other banks would cover the multi-billion dollar rescue. Press Release 20230320. FDIC report on Signature Bank Failure. GAO preliminary report on Signature Band Silicon Valley Bank failures. FDIC OIG Material Loss review20231023.
Silicon Valley Bank: The FDIC formed a bridge bank and transferred assets and deposits from SVB with the FDIC managing the bridge bank pending sale or liquidation. According to public reporting, there were a variety of actions that led to a run on the bank: announcement of bond disposition and large loss, pre-announced plans for significant capital raise, call outs on social media for depositors to withdraw immediately. In a Press Release 20230313, it was announced that all depositors - even those with balances in excess of FDIC coverage - would be mad whole. There would be no cost to taxpayers as FDIC assessment fees to all other banks would cover the multi-billion dollar rescue. Press Release 20230326. Federal Reserve report on SVB failure. GAO preliminary report on Silicon Valley Bank and Signature Bank failures.
Almena State Bank: This bank was associated with an alleged multi-billion dollar check kiting scheme, according to the DOJ District of Kansas indictment. According to the DOJ press release, the indictment alleges the defendants defrauded Almena State Bank in Almena, Kan., and six other banks. The indictment alleges investigators examined unfunded checks and wire transfers totaling more $2 billion sent by defendant as part of the scheme. That included 409 wire transfers and 7,584 checks. Estimated loss: $18.3 million, or 26% of total assets. FDIC OIG Failed Bank review20210326.
The First State Bank: This bank was associated with an employee fraud scheme as well as deficiencies in Board oversight and the bank’s risk management practices. In late 2015, the FDIC and WVDFI issued a Consent Order against the bank. Estimated loss: $47 million, or 30% of total assets. FDIC OIG Failed Bank Review20201124.
City National Bank of New Jersey: “The primary cause of City National’s failure was the board and management’s decision to undertake a new business strategy that led to dramatically increased transaction activity from an expanded base of money service business customers. The bank pursued this business strategy without implementing adequate policies, procedures, risk management commensurate with the risk of its activities , or controls to comply with the Bank Secrecy Act. The bank’s increase in money service business customer activity resulted in severe Bank Secrecy Act/Anti-Money Laundering compliance deficiencies.” Estimated loss: $2.5 million, or 2% of total assets.
Louisa Community Bank: “Based on the review of key FDIC documents, the Bank’s failure resulted from an “ineffective and dysfunctional” Board of Directors (Board) and executive management that led to poor risk management practices, operational deficiencies, weak internal controls, and inaccurate accounting and reporting that adversely impacted every facet of the Bank. The Board and executive management also failed to maintain adequate and qualified staffing in key management positions, and were unable to address the many financial, managerial, operational, and regulatory issues that examiners started to identify in 2014.” Estimated loss: $4.5 million, or 15% of total assets.
Resolute Bank: “The primary cause of Resolute Bank’s failure was the board and management’s poor planning and lack of oversight over bank operations. The board and management ventured into mortgage banking operations, focusing on the origination and sale of government insured and guaranteed loans, without a valid strategic or capital plan. Ineffective oversight of these ventures, combined withexcessive overhead expenses, resulted in operating losses and critically deficient earnings, asset quality, and capital. Corporate governance deficiencies also contributed to the bank’s failure; specifically insufficient oversight by the board and management, and weak communication between management and members of the board.” Estimated loss: $2.2 million, or 8% of total assets.
Ericson State Bank: “Based on our review of relevant FDIC documents, the failure can be attributed to a critically deficient Board of Directors (Board) and poor Management oversight. The Bank President exercised unrestrained dominance over the Bank's operations, including the lending function. Specifically, the Bank President serviced loans associated with entities owned by his son (related-entity lending); extended funds to these related entities without seeking Board-required Loan Committee approval; and did not obtain proper documentation to support the credits.” Estimated loss: $14.1 million, or 14% of total assets.
The Enloe State Bank: “Enloe State Bank failed because the President and the senior-level Vice President perpetrated fraud by originating and concealing a large number of fraudulent loans over many years.” According to The Dallas Morning News, “When a small-town, East Texas bank caught fire the day before state inspectors were to examine the books, few thought it was a coincidence. The May 2019 fire at Enloe State Bank in Cooper was started in the bank’s board room. Someone had stacked files on a conference table and set it ablaze, court records show. The bank’s former president pleaded guilty to conspiracy to commit bank fraud and arson.” Estimate loss: $21 million, or 57% of total assets. And finally - sentencing occurred.
U.S. BANK FAILURES - TIME ELAPSED BETWEEN FAILURES.
The longest “drought” period for bank and thrift failures lasted 952 days. It began June 25, 2004 and ended February 2, 2007. The Great Recession followed. And 527 banks would fail during that crisis.
The second longest bank failure “drought” period which started in October of 2020 ended March 10, 2023 at 868 days with the failure of Silicon Valley Bank followed soon by Signature Bank.
The third longest “drought” ran from December 15, 2017 through May 31, 2019. The “drought” ended with the failure of a $36 million Texas bank. 533 days elapsed from the last bank failure (12/15/2017).
There will be more bank failures, but more of the one off occurrence. In fact, this is now occurring. There were four (4) bank failures during all of 2019 and four (4) recently in 2020. There were no bank failures in 2021.
The Federal Deposit Insurance Corporation (FDIC) provides current and historical data and information on bank and thrift failures.
Longest Elapsed Time Between Bank Failures
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BEFORE THE FDIC: TRENDS IN BANK FAILURES AND BANK CHARTERS DURING 1920'S & 1930'S.
Banks were numerous in the 1920’s and early 1930’s - over 30,000. This time period was turbulent. There were multiple economic recessions. And not your typical one year and done variety. These recessions were multi-year. The underlying economic impact on consumers and companies was relentless and building to a dramatic finale - the Great Depression. While the DJIA collapsed 37 percent in 1929, the index fell a full 87 percent before it hit rock bottom.
And the impact on the banking industry was staggering. The number of banks declined by over 50 percent - over 16 thousand! While the records are not clear and conclusive, the data suggests that most of the decline came about because of bank failures. Prior to the establishment of the Federal Deposit Insurance Corporation in 1934, there was no federal deposit insurance. Bank runs became common. It is estimated that depositors lost more than $1.3 billion.
POST FDIC: TRENDS IN BANK FAILURES OVER THE DECADES SINCE CREATION.
The history of U.S. bank failures is marked by:
The old “normal” with years and decades of very low failure levels and and small banks.
With more recent years and decades seeing large scale industry failures and larger banks.
As we will explore on this site, the periods of numerous bank failures tend to be driven by (1) lending concentrations during periods of rapid loan portfolio growth and (2) geographic concentrations due to location of bank headquarters and markets dominated by one industry or economic sector.
TYPES OF BANK FAILURES AND ASSISTANCE TRANSACTIONS
Number by Type of Bank Failure and Assistance Transaction, including Assistance In Lieu of Failure
Total Deposits by Type of Bank Failure and Assistance Transaction, including Assistance In Lieu of Failure
TRENDS IN BANK FAILURES AND BANK FAILURE RATES SINCE 1980.
Bank Failures Since 1990.
Bank Failure Rates Since 1990.
Bank Failures and Assistance Transactions Since 1980.
Over the past four decades since 1990, the banking and thrift industry has seen several cycles of bank failures. In the early 1990s, there were several episodes in the history of bank failures. Two of these episodes - Farm Crisis and Oil Sector Crisis - were impacted by (1) commodity prices and (2) the intrastate nature of banking laws. A third episode - Savings & Loan Crisis - was impacted by deregulation and expanded lending and investment powers. And in the 2000s, there was the Great Recession and Financial Crisis. While the more typical one-off bank failure is usually caused by poor management or fraud, these episodes of multiple bank and thrift failures had unique underlying causes that resulted in more widespread failures.
The metric for measuring failures in the banking industry is the Bank Failure Rate. This metric is calculated by dividing the number of bank failures during the year by the number of banks in existence at the beginning of the year.
U.S. BANK & THRIFT FAILURES - OVERVIEW OF KEY EPISODES AND TIME PERIODS.
Bank and thrift failures have been a "normal" element of banking but there have been several noteworthy periods that distinguish the "normal" bank or thrift failure from those associated with a banking industry crisis.
There have been several major periods of bank and thrift failures since the Great Depression:
Great Depression to World War II (WW II)
Farm Crisis of 1980’s
National Thrift / Oil Sector Banking and Thrift Crisis
Thrift Crisis (National)
Oil Sector Bank & Thrift Crisis
R.T.C. Resolution Activity
Great Recession
There have been several drivers related to these failures, including:
Commercial real estate
Residential real estate
Oil price collapse
Agriculture and farmland
There is not a direct link between bank & thrift failures and national recessions. Recessions do not cause bank & thrift failures. And bank & thrift failures do not cause recessions.
Bank Failure Historical Timeline
Bank Failures and the Economic Cycle
LARGE U.S. BANK FAILURES AND GOVERNMENT ASSISTED TRANSACTIONS.
U.S. BANK & THRIFT FAILURES - RECENT HISTORY SINCE 1976.
# of Bank and Thrift Failures by Year Since 1976
Total Deposits of Bank and Thrift Failures by Year Since 1976
Bank and Thrift Failures Pre- and Post-1976
Top 15 States by # of Bank and Thrift Failures Since 1976
U.S. BANK & THRIFT FAILURES - SELECTED CRISIS EPISODES.
EPISODE 1: "THE BIG BANG!"ROARIN' 20'S TO GREAT DEPRESSION.
Period: 1920 - 1933.
Recessions (Peak to Trough):
Q1 1920 to Q2 1921
Q2 1923 to Q2 1924
Q4 1926 to Q4 1927
Q3 1929 to Q1 1933 (Great Depression)
Bank & Thrift Failures: >9,000; Bank Holiday declared in March 1933, all banks closed, but not all banks re-opened.
Total Deposits of Failed Institutions: Not available
Key Legislative Developments:
McFadden Act (1927) established Federal Reserve as Central Bank; prohibited interstate banking; allowed hometown branching for National Banks if allowed for state banks.
Reconstruction Finance Corporation Act (1932) create RFC to lend to financial institutions and to railroads.
Federal Home Loan Bank Act (1932) created the Federal Home Loan Bank system to provide liquidity and support for the mortgage and housing markets through the members of the FHLBank system.
Banking Act - “Glass-Steagall” (1933) effectively separated commercial banking from investment banking and created the Federal Deposit Insurance Corporation, among other things.
Emergency Banking Act (1933) expanded presidential authority during a banking crisis, including authority for Bank Holiday, strengthened OCC and U.S. Treasury powers.
Major Legislative Response to Economic, Social and Banking Crisis
“The Recession Decade” - during this period there were four recessionary periods. And each recession lasted nearly one (1) year or longer.
Decline in Number of Banks Due to Failure and Merger.
Collapse of the Stock Market
EPISODE 2: "A NEW HOPE: THE RE-BIRTH OF THE INDUSTRY!"FROM GREAT DEPRESSION THROUGH WW II.
Period: 1934 - 1945.
Recessions (Peak to Trough):
Q3 1929 to Q1 1933 (Great Depression)
Q2 1937 to Q2 1938
Q1 1945 to Q4 1945
Bank & Thrift Failures: 398
Total Deposits of Failed Institutions: $510 billion
Key Legislative Developments:
Banking Act (1935): (1) restructured the Federal Reserve System to make it more independent of the Executive and Legislative Branches of the federal government while consolidating the system’s power in Washington, D.C.; created the modern form of the Federal Open Market Committee (FOMC); and (2) made the FDIC a permanent corporation.
EPISODE 3: "REMEMBER - THE GOOD TIMES DON'T LAST FOREVER!"FARM CRISIS 1980'S.
Period: 1982 - 1986.
Recessions (Peak to Trough):
Q3 1981 to Q4 1982
Crisis Characteristics:
Preceded by agriculture boom in 1970’s - farm exports soar as new foreign markets (China) are opened, land values rise, expansion funded by borrowings
Fed tightens monetary policy with interest rates above 15% near end of 1970s and through the early 1980s
Economy contracts into recession in early 1980s
Agricultural prices fall and land values drop
Banks located in smaller, rural markets dominated by agricultural economy
Bank & Thrift Failures: 141
Total Deposits of Failed Institutions: $2.5 billion
Small banks & thrifts
Average deposits of only $18 million per bank
Key Legislative Developments:
Food Security Act of 1985 (also known as the 1985 U.S. Farm Bill) included provisions for commodity price supports, agricultural debt relief and restructuring and expand export markets.
EPISODE 4: "IT'S WAS A WONDERFUL LIFE - BUT WAS IT TOO GOOD!"SAVINGS AND LOAN / THRIFT CRISIS.
Period: 1985 - 1993.
Recession (Peak to Trough):
Q3 1990 to Q1 1991
Crisis Characteristics:
Preceded by deregulation and expanded lending and investment authorities
Fed tightens monetary policy with interest rates above 15% near end of 1970s and through the early 1980s
Economy contracts into recession in early 1980s
Commercial real estate and land values drop
Thrift industry unprofitable in early 1980’s and severe capital shortfalls supported by net worth certificates and other regulatory actions
Bank & Thrift Failures: 912 thrifts
Total Deposits of Failed Institutions: $397 billion
Key Legislative Developments:
Depository Institutions Deregulation and Monetary Control Act (1980) imposed uniform reserve requirements; phased-out deposit interest rate ceilings; authorized of NOW accounts; and broadened permissible activities of thrift institutions.
Garn-St. Germain Act (1982) expanded deregulation of deposit rates by creating money market accounts; broadened thrift powers to make commercial, commercial real estate and consumer loans; allowed for adjustable-rate mortgages; preempted mortgage loan due-on-sale provisions; and augmented FDIC powers to assist troubled institutions through Net Worth Certificates.
Competitive Equality Banking Act (1987) included Recapitalization of the Federal Savings & Loan Insurance Company; Gave FDIC authority for open bank assistance transactions such as bridge banks.
Financial Institutions Reform, Recovery,and Enforcement (FIRREA) Act (1989) primary purpose was to restore confidence in the savings and loan industry by abolishing FSLIC and giving the responsibility of insuring thrift deposits to the FDIC; created two new agencies, the Federal Housing Finance Board and the Office of Thrift Supervision; and established the Resolution Trust Corporation to manage and dispose of the assets of failed institutions.
FDIC Improvement Act (1991) included “prompt corrective action” and “least cost resolution” provisions; limitations on the ability of under-capitalized and critically under-capitalized institutions to borrow from the Fed; the annual or eighteen-month examination cycle requirement for banks; and introduction of risk-based deposit insurance premiums.
EPISODE 5: "WHO YOU GONNA TO CALL - THRIFT-BUSTERS'!"RESOLUTION TRUST CORPORATION ACTIVITY DURING THRIFT CRISIS.
Period: 1989 - 1995.
Resolution Trust Corporation (RTC): The RTC was authorized under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). The mission of the RTC was to address troubled thrifts by arranging their sale to other institutions or shuttering them and disposing of their assets. Before the RTC was formed, the Federal Savings and Loan Insurance Corporation (FSLIC) had this responsibility and had closed several hundreds thrifts. In the mid-1990’s, the RTC was folded back into the Federal Deposit Insurance Corporation (FDIC).
Recession (Peak to Trough):
Q3 1990 to Q1 1991
Bank & Thrift Failures: 747
Total Deposits of Failed Institutions: $316 billion
Key Legislative Developments:
Depository Institutions Deregulation and Monetary Control Act (1980)
Garn-St. Germain Act (1982)
Financial Institutions Reform, Recovery,and Enforcement (FIRREA) Act (1989) - authorized Resolution Trust Corporation
FDIC Improvement Act (1991)
EPISODE 6: "BUBBLING CRUDE - BOOM TIMES GONE BUST!"OIL SECTOR BANK AND THRIFT CRISIS.
Period: 1985 - 1993.
Recession (Peak to Trough):
Q3 1990 to Q1 1991
Crisis Characteristics:
Preceded by oil and energy boom in mid- to late-1970’s
Fed tightens monetary policy with interest rates above 15% near end of 1970s and through the early 1980s.
Economy contracts into recession
Oil and energy prices fall by 60%; oil rigs in service drop by 50%
Banks located in states and markets dominated by oil and energy economy
Bank & Thrift Failures: 929
Total Deposits of Failed Institutions: $148 billion
Key Legislative Developments:
EPISODE 7: "HOUSE OF CARDS - OR HOUSE OF DEBT!"THE GREAT RECESSION AND FINANCIAL CRISIS.
Period: 2007 - 2017.
Recession (Peak to Trough):
Q4 2007 to Q2 2009
Crisis Characteristics:
Preceded by solid, steady economic growth
Moderate interest rate environment following Fed easing in beginning of the decade
Housing industry boom; homeownership rate peaks; increase in mortgage debt; mortgage underwriting diverge from standards; MBS securities outstanding jump; home prices rise
Eventually home price bubble breaks; mortgage delinquency rates rise; economy starts to contract
With mortgages as growth business, large banks and thrifts and non-banks have uniquely dominant impact on this financial crisis
Bank & Thrift Failures: 527
Total Deposits of Failed Institutions: $489 billion
Key Legislative Developments:
Gramm-Leach-Bliley Act (1999) removed barriers to commercial bank, investment bank and insurance company mergers and other relationships.
Reigle-Neal Interstate Banking Act (1994) laid framework for nation-wide banking.
Emergency Economic Stabilization Act (2008) sought to restore liquidity to credit markets through the purchase of up to $700 billion in MBS and other troubled assets, as well as any other financial instrument deemed necessary to promote financial market stability; provisions to minimize foreclosures on federally owned mortgages and to recover possible future losses on the government’s mortgage investments.
The Housing and Economic Recovery Act (2008) covers a wide range of areas related to housing finance and government sponsored enterprises (“GSEs”), including establishment of a new regulatory agency, the Federal Housing Finance Agency, to supervise the FHLBanks, Freddie Mac and Fannie Mae (Division A); new provisions governing these entities; assistance for homeowners; licensing requirements for mortgage loan originators; and improvements to the FHA.
Federal Housing Finance Regulatory Reform Act (2008) enacted as Division A of HERA to provide new regulatory framework over Fannie Mae, Freddie Mac and FHLBanks.
Residential Investment soared prior to Great Recession
Residential Mortgage Loans and MBS skyrocketed
Home Prices also soared prior to Great Recession
Prior to Great Recession, mortgage credit quality stellar
MBS securities outstanding surge
EPISODE 8: "DEPOSITORS ON THE RUN!"BANK LIQUIDITY CRISIS OF 2023.
Period: 2023.
Recession (Peak to Trough):
Q1 to Q2 2020
Crisis Characteristics:
Preceded by COVID recession and subsequent economic recovery
Sustained period of near zero interest rates, followed by Fed raising rates by 500 bps in a year.
As yield curve rises and inverts, bank investment portfolios fall underwater
Banks with heavy dependence on uninsured deposits and monoline business strategy (VC clients, crypto) suffer significant deposit losses
Bank & Thrift Failures: 3
Total Deposits of Failed Institutions: $354 billion
Key Legislative Developments:
Economic Growth, Regulatory Relief, and Consumer Protection Act (2018) eased financial regulations imposed by Dodd–Frank Wall Street Reform and Consumer Protection Act, including raising the threshold from $50 billion to $250 billion under which banks are are subject to various liquidity and capital stress testing.
Fed funds rate changes
Bank investment portfolio unrealized losses
Heavy reliance on uninsured depositors.
Failed banks had much higher dependence on uninsured deposits with larger average balances than the largest U.S. banks
Bank Failures
Deposits of Failed Banks
Geographic Locations of failed Banks
Treasury yield curve rise.
Only three (3) bank failures ……..
…… but much larger banks.