Bank Failure Rates

Bank Failure Rates

It’s been awhile since I’ve talked about failed banks. Back in the height of the financial crisis, bank failures were all the rage and the media couldn’t stop talking about it. But we don’t hear about it nearly as much anymore.

Is that because bank failures have slowed down? Or because we’ve become immune to the news? Well…

The FDIC keeps a scorecard of sorts in the form of their failed bank list.

Thus far in 2013, there have been four bank failures. Looking back…

  • In 2012, there were 51 bank failures,
  • In 2011, there were 92 bank failures,
  • In 2010, there were 157 bank failures,
  • In 2009 there were 140 bank failures,
  • In 2008 there were 25 bank failures,
  • In 2007 (start of the financial crisis), there were just three bank failures, and
  • In 2006 and 2005 there weren’t any bank failures at all.

So, yeah… There was an explosion of bank failures starting in 2008. The failure rate peaked in 2010 and has been declining since then. If I had to guess, I’d say that we’ll wind up with 10-20 failed banks for the year in 2013.

For context, there are 7, 053 FDIC-insured institutions in the United States as of this writing — so maybe 0.25% of them will fail this year. But, as long as depositors have been respecting FDIC limits, it’s all good.

If you’re wondering about the geography of bank failures, Georgia led the way from 2008-2011 with 74 failures. Florida wasn’t far behind with 58, and Illinois was in third with 47. California (38) and Minnesota/Washington (17 apiece) rounded out the top five.

Interestingly, I witnessed a bank takeover a couple of years ago. It was a Saturday morning (takeovers typically start at close on Friday) and I was taking our kids out for breakfast.

As I drove to the restaurant, we passed by a local bank. The entrances to the parking lot were blocked by large black SUVs and there were a number of people in suits milling around at the entrance. At the time, I didn’t know what was happening, but I later learned that I had just witnessed an FDIC takeover.

4 Responses to “Bank Failure Rates”

  1. Anonymous

    I wonder if there is a similar number for Credit Unions and if they suffered as much?

    I suspect beyond just the real estate bubbles being the reason there is such a high number in Georgia is Atlanta, which is a major southern financial hub. So I figure that’s where the banks main offices were. Hence, even if the problem was actually across multiple states, the state and city of record for the folding bank was likely Atlanta.

  2. Anonymous

    The reason banks have all that cash now is that they are
    NOT lending . What they are doing is buying top grade
    preferred s and choice real estate-. It looks like they
    got stung so badly in the mortgage market they are very
    leery about good money going out with nothing coming
    back. Who can blame them ?

  3. Anonymous

    I’m really surprised there weren’t more failures in Arizona. My hunch why Georgia and Florida is so high is because is because it’s directly correlated with the how big the real estate bubble was in both states – particularly Florida. My only guess is Arizona probably had more in the way of deposits from older people to help those banks stay afloat (I once heard a state [may not be valid anymore] that Arizona had some of the highest dollars per depositor rates in the country because of the number of retirees and their proportion of the population).

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