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Is Your Money Safe in the Bank in 2025?

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For most people, their money is safe in the bank in 2025. While two banks failed in the first half of the year, they were due to internal problems like suspected fraud, not a widespread issue. The Federal Deposit Insurance Corporation (FDIC) protects your deposits up to $250,000 per person, per bank, so most people don't need to worry. Of course, It is always wise to have a plan, just in case. Let's dive into the details to better understand the safety net in place and how to maximize your protection.

Is Your Money Safe in the Bank in 2025?

The Headlines: 2025 Bank Failures

Okay, so two banks failed. That sounds bad, right? Well, let's put it in perspective. Back in January, Pulaski Savings Bank in Chicago closed its doors, and in June, The Santa Anna National Bank in Texas did the same. Did this mean we were staring down the barrel of another 2008-style financial crisis? Thankfully, no.

Here’s a quick breakdown:

  • Pulaski Savings Bank (Chicago, IL): Failed because of suspected fraud and generally unsafe practices. Total assets were around $49.5 million, and Millennium Bank took over.
  • The Santa Anna National Bank (Santa Anna, TX): This one also went down due to suspected fraud and unsafe practices. Total assets were $63.8 million, and Coleman County State Bank stepped in.

What's important to note is that these weren't “domino effect” failures caused by a collapsing economy. Regulators shut them down due to internal problems specific to those banks. Basically, both of these banks became unsafe, and regulators decided to close them down and ensure that the depositors receive their funds!

A Little Bank Failure History: It's More Common Than You Think

Bank failures aren't exactly new. They've been happening throughout U.S. history, some bigger than others. Think about it. They have occurred during the following times:

  • The Great Depression (1930s): Thousands of banks failed, leading to the creation of the FDIC. This was a true crisis, shaking the very foundations of the economy.
  • The Savings and Loan Crisis (1980s): This was pretty disastrous as well, with hundreds of institutions collapsing.
  • The 2008 Financial Crisis: We all remember this. Big names like Washington Mutual went under, causing widespread panic.
  • 2023 Bank Failures: Silicon Valley Bank, Signature Bank, and First Republic Bank were among the largest in recent memory.

Since the start of the new millenium, over 500 banks have failed in the USA. And yet most depositiors have not had to worry at all due to the support of entities like FDIC.

The FDIC: Your Financial Bodyguard

So, what exactly is the FDIC? Think of it as a safety net for your money. It's a government agency created in 1933 during the Great Depression to restore confidence in banks. Nowadays, no depositor has ever lost any of their money that was FDIC-insured.

Here’s what you need to know:

  • Coverage Limit: The FDIC insures deposits up to $250,000 per depositor, per insured bank, for each account ownership category.
  • What's Covered?: Checking accounts, savings accounts, money market accounts, and CDs are covered. Stocks, bonds, crypto, and other investments, aren't.
  • Automatic Protection: You don't have to sign up or pay for FDIC insurance. It automatically comes with opening an account at any FDIC-insured bank.
  • Quick Action: If a bank fails, the FDIC usually transfers your insured deposits to another bank quickly, or sends you a check.

To see if your bank has FDIC insurance, check the official FDIC website, FDIC.gov.

How Healthy is the U.S. Banking System Right Now?

In general, the U.S. banking system in 2025 is considered relatively stable. Banks have solid capital and plenty of liquidity, which makes them more resilient. This means they're supposedly in good shape to handle any problems.

Keep an eye on metrics like the:

  • Common equity tier one capital ratio
  • Liquidity coverage

Essentially, these numbers show how well banks can absorb losses and meet their financial obligations.

Plus, agencies like the FDIC and the Federal Reserve keep a very close eye on banks. The quick handling of the 2025 failures shows how well this works.

Now, there are always potential risks. The commercial real estate sector, for example, is facing some challenges. Defaults are on the rise, and smaller banks with a lot of investments in this area could feel the pinch. However, it's not expected to cause a widespread crisis.

Got More Than $250,000? Here's What To Do:

If you're lucky enough to have more than $250,000 in deposits, don't panic – there are strategies to keep all of your money safe:

  • Spread It Out: Open accounts at multiple banks. Remember, the $250,000 limit is per bank.
  • Different Account Types: Accounts with varying owners (like your name alone vs. a joint account with your spouse) each get their own $250,000 coverage.
  • Consider CDARS: With the Certificate of Deposit Account Registry Service, you can deposit a huge amount of money, such as $50 million, and split it into multiple FDIC-insured banks.
    • CDARS is suitable for those who don't want the hassle of opening accounts in multiple banks but want the same coverage
  • Consider MaxSafe: MaxSafe spreads the deposits across multiple financial institutions, providing coverage up to $3.75 million

Practical Tips for Keeping Your Money Safe

Regardless of how much money you have in the bank, here are some important things to do:

  • Verify FDIC Insurance: Double-check that your bank is FDIC-insured.
  • Monitor Balances: Keep track of how much money you have in each account.
  • Stay Informed: Read the news and keep an eye on your bank's financial health.
  • Talk to a Pro: If you have a lot of money or complex accounts, consider consulting a financial advisor.

The Bottom Line

So, is your money safe in the bank in 2025? For most people, yes. The failures of Pulaski Savings Bank and The Santa Anna National Bank was unfortunate, but they weren't signs of a bigger problem. The U.S. banking system is pretty resilient, and the FDIC is there to protect your deposits. By staying informed and taking a few smart steps, you can have even more confidence in the safety of your money.

Protect Your Wealth Beyond the Bank

With growing concerns about banking stability in 2025, it's crucial to diversify into tangible, income-generating assets.

Norada connects you with turnkey rental properties that offer steady cash flow and long-term appreciation—providing security outside traditional banks.

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How Many Banks Have Failed in the US in 2025?

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Figuring out how many banks have failed in the US in 2025 is a question on many people's minds, especially after the turmoil of recent years. In 2025, there have been a total of 2 bank failures in the United States, according to reports from the Federal Deposit Insurance Corporation (FDIC).

These failures are part of a broader trend that has seen 571 banks fail since January 1, 2000, averaging about 23 failures per year. The bank failures, while concerning, need to be looked at within the context of the broader banking environment to really understand what's happening. So, let's dive into the details and explore what happened, why it happened, and what it means for the rest of the year.

How Many Banks Have Failed in the US in 2025?

The Bank Failures of 2025: A Closer Look

So far in 2025, two banks have been closed. Let's break down the particulars of each:

  • Pulaski Savings Bank, Chicago, IL
    • Closed: January 2025
    • Assets: Roughly $49.5 million
    • Deposits: Roughly $42.7 million
    • Acquired By: Millennium Bank
    • Impact: This failure cost the Deposit Insurance Fund around $28.5 million.
  • The Santa Anna National Bank, Santa Anna, TX
    • Closed: June 2025
    • Assets: Approximately $63.8 million
    • Deposits: Approximately $53.8 million

It's crucial to understand the significance of these failures relative to past events. While any bank failure is a serious event, the scale of these failures is much smaller than the high-profile collapses we saw in 2023, such as Silicon Valley Bank, Signature Bank, and First Republic Bank. Those banks each had assets exceeding $100 billion. In 2024, we also saw two bank failures: Republic First Bank and The First National Bank of Lindsay.

So, what aren't we seeing right now? We are not seeing the same widespread panic that gripped the industry in early 2023. However, one must not relax yet!!

What's Behind These Bank Failures?

There are several factors at play that contributed to these failures. The banking sector is always influenced by wider economic trends like prevailing trends such as interest rate hikes, commercial real estate loan portfolio pressures, net interest margin compression and geopolitical and the regulatory climate is constantly ever-changing. Also, as an expert, I believe internal bank operations are hugely critical to their success. More on that later.

Here's the overall view:

  1. Unrealized Losses on Securities: Banks hold a significant amount of securities, like government bonds and mortgage-backed securities. When interest rates rise, the value of these securities falls. Recent estimates suggest that the sector is sitting on quite a huge amount of unrealized losses. Because banks don't have to recognize these losses until they sell the assets, this poses a huge liquidity risk if there is a depositor runs.
  2. Commercial Real Estate (CRE) loan pressure: This is a big one! Many smaller banks have a large chunk of their lending portfolio tied up in CRE, specifically office buildings. With remote work becoming more common, these properties face declining values, and banks are facing defaults and losses.
  3. Profitability Squeeze:
    • Slower Economic Growth: Economic growth has slowed down, putting pressure on bank profitability.
    • Shrinking Net Interest Margins: The difference between what banks earn on loans and what they pay out on deposits is shrinking.
    • High Deposit Costs: Banks are paying more to attract and retain deposits.
    • Geopolitical Risks and Global Trade Tension
  4. Regulatory Challenges: The FDIC is the main body responsible for supervising banks. However, with funding and and staffing hurdles, they have been under pressure to keep risk under control.

Beyond the Failures: Broader Trends in Banking

Bank failures are not the only indicator of the health of the banking sector. Here are some other key trends to consider:

  • Branch Closures: Banks are continuing to shut down branches as customers shift to online banking.
  • Digital Transformation Struggles: Banks are trying to modernize their technology, but many are struggling to keep up.
  • Cybersecurity Threats: Banks face constant cyber-attacks, resulting in huge losses each year.

Looking Back: Bank Failures in Historical Context

It is important to keep things in perspective. While this year has seen two failures already, the two failures in 2025 continue a downward trend from the 570 bank failures recorded between 2001-2025 . Here's a quick trip down memory lane:

  • 2008-2010 (Global Financial Crisis): Over 300 banks failed. It was a really bad time!
  • 1980-1994 (Savings and Loan Crisis): Around 1,600 banks and 1,300 thrift institutions failed.

Compared to those huge crises, the current situation seems manageable.

What About the Rest of 2025?

What can we expect for the rest of 2025? A few things to keep an eye on include:

  • Further interest rate hikes.
  • Continued issues with commercial real estate loans.
  • The potential for bank runs exists if depositors lose confidence.
  • The FDIC's ability to keep pace with these challenges.

I think that the banking system is on the safer side compared to a year or two ago. However, with the potential for many things to go wrong, we should be vigilant. The small size of the bank collapse this year hints that the market has stabilized in the time after the crisis of 2023.

My Thoughts

My take on all of this is, while the numbers are low, complacency would be foolish. The underlying issues in the banking system are still very much alive. Commercial real estate is a ticking time bomb, and rising interest rates could trigger more problems. The health of the banking sector is very closely tied to the overall health of the economy.

What matters to me as a contributor is transparency and awareness. Citizens and business owners should know where the weaknesses are so they can be cautious and protect their assets. Small businesses, in particular, need to carefully consider their banking relationships and diversify where they can!

A Word About Deposit Insurance (FDIC)

For consumers who have their assets in banks, the FDIC is what keeps them safe. Let's face it––without deposit insurance, depositors would panic and the banking system would go down. I suggest you check the FDIC website (fdic.gov) for the current insurance limits.

Secure Real Estate Amid Banking Sector Turbulence

Following the collapse of Santa Anna National Bank—the second bank failure of 2025—investor confidence is shaken. Real estate investments offer stability when financial markets falter.

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Second Bank Failure in 2025: What Happened to Santa Anna National Bank?

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Two bank failures in one year? Yep, that's right.  On June 27, 2025, the Santa Anna National Bank in Santa Anna, Texas, shut its doors, marking the second U.S. bank to fail that year after the closure of Pulaski Savings Bank in Chicago in January. The story isn't just about numbers; it's about a community losing a piece of its heart. Let's dive into what happened, why it matters, and what it means for the future of small-town banking.

Second Bank Failure in 2025: What Happened to Santa Anna National Bank?

A 90-Year Legacy Ends

Imagine your hometown bank, the place generations have trusted, suddenly closing. That’s what happened in Santa Anna, Texas. Santa Anna National Bank, established in 1933, was more than just a place to deposit money; it was a cornerstone of the community. For over nine decades, it supported local families, ranchers, and small businesses in Coleman and Brown counties.

As of June 18, 2025, the bank reported total assets of $63.8 million and total deposits of $53.8 million. However, approximately $2.8 million in deposits exceeded the FDIC’s insurance limit of $250,000 per depositor, per ownership category.

Here's a quick look at the bank's key stats:

Aspect Details
Bank Name Santa Anna National Bank
Location Santa Anna, Texas
Closure Date June 27, 2025
Reason for Failure Suspected fraud
Assuming Bank Coleman County State Bank, Coleman, Texas
Premium for Insured Deposits 5.16%
Estimated Cost to DIF $23.7 million
Total Assets (June 18, 2025) $63.8 million
Total Deposits (June 18, 2025) $53.8 million
Estimated Uninsured Deposits $2.8 million (subject to change)
FDIC Contact for Uninsured Deposits (1-866) 314-1744

The bank's closure isn't just a financial hit; it’s a blow to the identity of a town where community institutions hold immense value. I can imagine the shock and worry rippling through Santa Anna when the news broke. It's a reminder of how much small communities rely on their local banks.

Why Did Santa Anna National Bank Fail?

The official reason for the closure, according to the Office of the Comptroller of the Currency (OCC), was “unsafe or unsound practices,” with suspected fraud cited as the primary cause. Details are scarce, likely due to an ongoing investigation(s). This raises questions about the bank's internal controls and oversight…and it makes me personally worry about the checks and balance in place to protect these smaller, crucial banks.

The FDIC estimates the cost to the Deposit Insurance Fund (DIF) at $23.7 million, which is covered by fees paid by member banks, not taxpayer funds. While the financial impact seems relatively contained, the loss of such a long-standing institution is significant.

The Takeover: Coleman County State Bank Steps In

In the wake of the closure, Coleman County State Bank in Coleman, Texas, stepped in to assume the insured deposits of Santa Anna National Bank. This move ensured that most customers experienced minimal disruption.

Here's what that transition looked like:

  • The Santa Anna branch reopened as a Coleman County State Bank office on June 30, 2025.
  • Customers with insured deposits (up to $250,000 per depositor, per ownership category) continued to have access to their accounts without needing to do anything.
  • For those with deposits exceeding the FDIC limit, the FDIC provided a toll-free number and website for checking insurance status and filing claims.

Reave Scott, CEO of Coleman County State Bank, expressed enthusiasm about welcoming the staff of Santa Anna National Bank and continuing to serve the community. I believe that kind of continuity is crucial in preserving trust and stability.

The Ripple Effect: Impacting the Santa Anna Community

The closure of Santa Anna National Bank sends ripples throughout the small town, shaking the community that depended on it for generations.

Here's what's at stake:

  • Loss of a Local Lender: Small businesses and ranchers often rely on local banks for loans and financial advice. With Santa Anna National Bank gone, these individuals may face challenges in securing funding.
  • Community Identity: The bank was an integral part of Santa Anna's identity. Its absence leaves a void that's hard to fill.
  • Economic Confidence: A bank failure can shake confidence in the local economy. Residents might worry about the stability of other businesses and institutions.

What Does This Mean for Other Small Banks?

The failure of Santa Anna National Bank underscores the vulnerabilities of small community banks. While larger banks often have more resources and sophisticated risk management systems, smaller banks may struggle to compete and adapt to changing economic conditions.

Here are some key considerations:

  • Regulatory Scrutiny: Regulators will likely increase scrutiny of small banks to ensure they are operating safely and soundly. This could mean more frequent audits and stricter enforcement of regulations.
  • Consolidation: We may see more mergers and acquisitions of small banks as they seek to gain scale and efficiency. This could lead to fewer independent community banks.
  • Technology Adoption: Small banks need to invest in technology to remain competitive and meet the changing needs of their customers. This includes online and mobile banking platforms, as well as cybersecurity measures.

Bank Failures in the US: A Broader Perspective

While the Santa Anna National Bank failure may seem isolated, it's part of a larger trend of bank failures and economic instability. It is important to put this occurance into its broader economic picture

Here are some factors to consider:

  • Economic Downturn: Economic downturns can put pressure on banks as borrowers struggle to repay loans. This can lead to higher loan losses and bank failures.
  • Rising Interest Rates: Rapidly rising interest rates can also strain banks, especially those with large holdings of long-term assets.
  • Regulatory Changes: Changes in banking regulations can also impact the profitability and stability of banks.

Protecting Your Deposits: What You Need to Know

The Santa Anna National Bank failure serves as a reminder of the importance of understanding deposit insurance. Here are some key points to keep in mind:

  • FDIC Insurance: The FDIC insures deposits up to $250,000 per depositor, per ownership category. This means that if your bank fails, you will be protected up to that limit.
  • Understanding Ownership Categories It is important to understand different ownership categories in order to maximize your insurance coverage.
  • Review Your Coverage Regularly: Make sure you understand your deposit insurance coverage and review it periodically to ensure it meets your needs.

If you have deposits exceeding $250,000 at a single bank, consider diversifying your deposits across multiple institutions to maximize your insurance coverage.

In Summary

The failure of Santa Anna National Bank had a strong, real impact on a small community. My heart goes out to the citizens of Santa Anna, Texas. While most deposits were protected, the loss of a long-standing community institution is a significant blow. It is a reminder of how interconnected are community members, the crucial role small banks play, and the impact one event can have on everyday people. While the investigation unfolds, I hope community members stay strong and lean on each other to rebuild from this financial and social setback.

Secure Real Estate Amid Banking Sector Turbulence

Following the collapse of Santa Anna National Bank—the second bank failure of 2025—investor confidence is shaken. Real estate investments offer stability when financial markets falter.

Norada provides turnkey rental properties in diversified, resilient markets—perfect for protecting your portfolio during financial shocks.

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Speak with a Norada investment counselor today (No Obligation):

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Which Banks Are in Danger of Failing or Collapse (2024)

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The past year has seen a shakeup in the financial world, with several prominent bank failures raising concerns about the stability of the banking sector in 2024. There were 567 bank failures from 2001 through 2024. While predicting specific institutions in danger of collapse is difficult, we can explore the current climate and identify potential risk factors.

The collapses of Silicon Valley Bank, Signature Bank, and others in 2023 sent shockwaves through the industry. These failures were attributed to a combination of factors, including:

  • Unrealized Investment Losses: Banks hold investment securities, and significant drops in their value can erode a bank's capital base.
  • Overreliance on Uninsured Deposits: Deposits exceeding FDIC insurance limits leave banks more vulnerable if a crisis triggers a run on deposits.

The Federal Deposit Insurance Corporation (FDIC) maintains a list of failed banks [FDIC Failed Bank List], which serves as a reference point for past events.

186 Banks Are in Danger of Failing?

A report posted on the Social Science Research Network found that 186 banks in the United States are at risk of failure or collapse due to rising interest rates and a high proportion of uninsured deposits.

The report titled ‘Monetary Tightening and US Bank Fragility in 2023: Mark-to-Market Losses and Uninsured Depositor Runs?' estimated the market value loss of individual banks' assets during the Federal Reserve's rate-increasing campaign.

The study also examined the proportion of banks' funding that comes from uninsured depositors with accounts worth over $250,000. This blog post aims to explore the implications of the report and why it matters to buyers and sellers.

According to the report, if half of the uninsured depositors quickly withdrew their funds from these 186 banks, even insured depositors may face impairments as the banks would not have enough assets to make all depositors whole. This could potentially force the Federal Deposit Insurance Corporation (FDIC) to step in.

The failure of Silicon Valley Bank serves as an example of the risks posed by rising interest rates and uninsured deposits. The bank's assets lost value due to the rate increases and worried customers withdrew their uninsured deposits. As a result, the bank failed to meet its obligations to its depositors and was forced to close.

The report noted that “Even if only half of the uninsured depositors decide to withdraw, almost 190 banks are at potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk. If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk.” The economists who conducted the study warned that these 186 banks are at risk of a similar fate without government intervention or recapitalization.

Number of FDIC-Insured Institutions on the “Problem Bank” List

The number of FDIC-insured institutions on the “Problem Bank” list has continued to decline over the years. In 2012, there were 651 problem banks, which decreased to 467 in 2013, 291 in 2014, and 183 in 2015. The trend continued with 123 problem banks in 2016, 95 in 2017, and 60 in 2018. By the end of 2019, there were 51 problem banks, and the number slightly increased to 56 in 2020. However, in 2021, the number dropped to 44. Looking ahead to 2022, the number of problem banks continued to decline, reaching 39 by the end of the year. This decline in problem banks is a positive trend for the banking industry and the economy as a whole.

Month/Year  Number of Problem Banks
12/12 651
12/13 467
12/14 291
12/15 183
12/16 123
12/17 95
12/18 60
12/19 51
12/20 56
12/21 44
12/22 39

As of 2023, the latest available data on the number of FDIC-insured institutions on the “Problem Bank” list is for the year-end 2022. According to the FDIC's reports, the number of problem banks continued to decline, reaching 39 by the end of 2022. This is a positive trend for the banking industry, indicating its stability and resilience amidst various economic challenges. The banking industry will continue to face risks and uncertainties, but the decreasing trend in problem banks demonstrates the effectiveness of the regulatory framework in ensuring the safety and soundness of the financial system.

Number of FDIC-Insured Institutions on the "Problem Bank" List

Monthly List of Banks Examined for CRA Compliance – June 2024

The Monthly List of Banks Examined for CRA Compliance is a list issued by the Federal Deposit Insurance Corporation (FDIC) that provides information on state nonmember banks that have been recently evaluated for compliance with the Community Reinvestment Act (CRA). The list is issued monthly and includes the names of banks that have been examined for CRA compliance, along with the date of the examination.

The list is used by regulators, community organizations, and the public to monitor the performance of banks in meeting the credit needs of their communities. The list is also used by banks to assess their own performance and to identify areas where they need to improve. The list is available on the FDIC website and can be accessed by the public.

You can access the list here – Monthly List of Banks Examined for CRA Compliance

Banks are examined for CRA compliance every 12 to 36 months, depending on their asset size and rating. The examination frequency schedule used by the FDIC incorporates changes required by the Gramm-Leach-Bliley Act of 1999 (GLBA). Banks with assets greater than or equal to $250 million may be examined in advance of the examination mandate date since the GLBA frequency requirements do not apply to them.

Banks with assets of $250 million or less and a “Satisfactory” CRA rating are subject to a CRA examination no more than once every 48 months, while those with a “Needs to Improve” or “Substantial Noncompliance” rating are examined every 12 months. Banks with an “Outstanding” or “Satisfactory” rating of 1 or 2 are examined every 36 months, while those with a rating of 3, 4, or 5 are examined every 12 months.

The OCC conducts a CRA examination of a national bank every three years. The FDIC issues a Monthly List of Banks Examined for CRA Compliance, which includes the names of banks that have been examined for CRA compliance, along with the date of the examination.

Potential Impact of Such Bank Failures

The findings of the report highlight the importance of careful risk management and diversification of funding sources for banks to ensure their stability in the face of market fluctuations. Buyers and sellers of banking assets should carefully evaluate the risks associated with uninsured deposits and the potential impact of rising interest rates on bank assets.

The failure of Silicon Valley Bank serves as a cautionary tale for the banking industry, and it is essential to take proactive steps to mitigate the risks posed by these factors. The government may also need to step in to prevent a similar fate for the 186 banks identified in the report.

The potential impact of nearly 200 banks being at risk for the same fate as Silicon Valley Bank could be significant for the banking sector and the broader economy. If a large number of these banks were to fail, it could lead to a domino effect, causing other banks to fail as well. This could lead to a credit crunch, making it difficult for businesses and consumers to access credit and slowing economic growth.

In addition, a bank run on one of these vulnerable institutions could cause a ripple effect, causing depositors to withdraw funds from other banks as well. This could lead to a broader panic and a loss of confidence in the banking system as a whole, potentially leading to a recession or even a financial crisis. The federal government's promise to back all depositors in these banks is a step in the right direction to help prevent a wider panic.

However, this may not be enough to prevent a bank run if customers believe that the bank is insolvent. It is important for regulators and policymakers to monitor the situation closely and take action to prevent further bank failures. This could include recapitalizing vulnerable banks or providing government guarantees to support their operations. Overall, the situation highlights the importance of a stable banking system and the need for effective risk management practices in the financial sector.

ALSO READ:

Bank Failures: Why it Can’t Crash Real Estate?

Is Bank of America Safe From Collapse or Trouble?

Signature Bank Failure 2023: FDIC Plans to Sell its Housing Loans

List of Failed Banks in the United States 

Banking Crisis Explained: Causes of Bank Collapse & its Prevention

Sources:

  • https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4387676
  • https://www.fdic.gov/analysis/quarterly-banking-profile/qbp/2022dec/chartdif2.xlsx
  • https://www.businesstoday.in/industry/banks/story/186-us-banks-at-risk-of-failure-similar-to-silicon-valley-bank-says-research-heres-why-373895-2023-03-18

Recent Bank Failures in 2023 and 2024: Causes & Effects

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The banking sector in the United States has witnessed a series of bank failures from 2023 to 2024, events that have stirred discussions and concerns among investors, customers, and regulators alike. This blog post aims to provide an informational overview of the recent bank failures, their implications, and the measures taken by regulatory bodies to manage these situations.

Recent Bank Failures in 2023 and 2024

The Wave of Bank Failures in 2023

The year 2023 saw a total of five bank failures, a number that is considered low compared to historical data. However, the size and circumstances of these failures were significant. The collapse of Silicon Valley Bank (SVB) on March 10, 2023, followed by Signature Bank on March 12, and First Republic Bank on May 1, marked some of the largest bank failures in US history.

These institutions primarily served wealthy customers and startups, with a considerable portion of deposits exceeding the FDIC insurance limit of $250,000.

Following the collapse of these larger banks, two smaller regional banks also failed: Heartland Tri-State Bank in July and Citizens Bank of Sac City in November 2023. These failures highlighted the vulnerabilities of smaller institutions in a challenging economic environment. Here are the recent bank failures in 2023 as listed by FDIC.

The Lone Bank Failure of 2024

As of late April 2024, there has been only one bank failure: Republic First Bank. This suggests a relative stabilization in the banking sector, although it is important to remain vigilant as economic conditions evolve.

List of Recently Failed Banks from 2019-2024

Failed banks Date closed
Republic First Bank April 26, 2024

 

Failed banks Date closed
Citizens Bank, Sac City, IA November 3, 2023
Heartland Tri-State Bank, Elkhart, KS July 28, 2023
First Republic Bank, San Francisco, CA May 1, 2023
Signature Bank, New York, NY March 12, 2023
Silicon Valley Bank, Santa Clara, CA March 10, 2023

 

Failed banks Date closed
Almena State Bank, Almena, Kan. 10/23/2020
First City Bank of Florida, Fort Walton Beach, Fla. 10/16/2020
The First State Bank, Barboursville, W.Va. 04/03/2020
Ericson State Bank, Ericson, Neb. 02/14/2020

 

Failed banks Date closed
City National Bank of New Jersey, Newark 11/1/2019
Resolute Bank, Maumee, Ohio 10/25/2019
Louisa Community Bank, Louisa, Ky. 10/25/2019
The Enloe State Bank, Cooper, Texas 05/31/2019

Causes of Recent Bank Failures in the U.S.

The recent spate of bank failures in the United States from 2023 to 2024 has been attributed to a confluence of factors that have put considerable stress on financial institutions.

Here's an exploration of the primary causes that led to the collapse of these banks:

Commercial Real Estate Loans and Interest Rate Hikes

A significant factor contributing to the bank failures was the exposure to commercial real estate loans coupled with the impact of rising interest rates. Many banks, especially smaller ones with assets under $10 billion, faced the dual threat of potential losses from these loans and the broader economic effects of higher interest rates. These conditions created a precarious situation where the value of the banks' assets could rapidly decline, leaving them vulnerable to insolvency.

Withdrawals and Underwater Bond Portfolios

Another critical issue was the mass withdrawal of deposits by customers, particularly at regional banks like Silicon Valley Bank and Signature Bank. Many of these customers were tech or crypto businesses that needed liquidity to cover losses or found better savings rates elsewhere. This situation was exacerbated by the fact that raised interest rates had already weakened the banks' balance sheets, reducing the value of their holdings in government bonds.

Regulatory Challenges and Risk Management

Regulatory oversights and failures in risk management also played a role. Some banks were unable to navigate the complex regulatory environment effectively or manage the risks associated with their investment and loan portfolios. This led to a lack of preparedness for the economic shifts that occurred, resulting in their eventual collapse.

The Role of Uninsured Deposits

A high proportion of uninsured deposits also contributed to the banks' vulnerability. When banks hold a significant amount of deposits that exceed the FDIC insurance limit, they risk losing the confidence of their depositors, which can trigger bank runs and lead to failure.

Economic and Market Instability

The broader economic and market instability also cannot be overlooked. Fluctuations in the market, changes in monetary policy, and economic downturns can all create an environment where banks are more likely to fail. The banks that collapsed were, in many cases, not prepared to withstand such economic pressures.

In summary, the collapse of these banks was not due to a single cause but rather a combination of several interconnected factors that affected their stability and solvency. It serves as a reminder of the importance of prudent risk management, regulatory compliance, and economic resilience in the banking sector.

ALSO READ: Which Banks Are in Danger of Failing or Collapse?

Regulatory Actions Being Taken to Prevent Bank Failures

Regulators have been proactive in implementing a series of measures aimed at preventing future collapses and ensuring the stability of the financial system. These measures are designed to address the various factors that contributed to the failures and to strengthen the resilience of banks against potential economic shocks. Here is an overview of the regulatory actions being taken:

Enhancing Capital Requirements

One of the primary measures is the enhancement of capital requirements for banks. Capital acts as a buffer against losses, and by increasing the minimum capital requirements, regulators aim to ensure that banks have a stronger financial foundation. This move is expected to help banks absorb unexpected shocks and reduce the likelihood of failure.

Stricter Risk Management Guidelines

Regulators have also implemented stricter risk management guidelines, including stress testing and enhanced risk assessment methodologies. These guidelines require banks to identify, measure, and manage risks in a proactive and comprehensive manner. By doing so, banks can detect potential vulnerabilities early and take corrective actions before they escalate into systemic risks.

Improving Transparency and Disclosure

Improving transparency and disclosure requirements is another critical step taken by regulators. Banks are now required to disclose more detailed information about their operations and financial positions. This increased transparency allows investors, regulators, and the public to make informed decisions and assess a bank's financial health more accurately, thereby reducing the likelihood of hidden risks and failures.

Regular Assessments and Reforms

Regulators are conducting regular assessments of the regulatory measures and their impact on bank stability. These assessments help identify gaps and inform necessary reforms. By embracing a proactive approach to regulatory oversight, regulators can stay ahead of potential threats and prevent future bank failures.

Addressing the Issue of Uninsured Deposits

The issue of uninsured deposits has also been addressed, with regulators considering policy options related to deposit insurance coverage levels, excess deposit insurance, and the implications for risk-based pricing and deposit insurance fund adequacy.

Reversing Regulatory Rollbacks

There have been calls for reversing the 2018 regulatory rollbacks that lifted certain prudential requirements for midsize banks. Reinstating these requirements would help ensure that banks are better equipped to handle financial pressures and maintain stability.

Comprehensive Reviews and Investigations

The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) are conducting comprehensive reviews and investigations to understand the causes of the recent failures and to determine what actions can be taken to prevent similar occurrences in the future. These reviews are crucial for developing a deeper understanding of the crisis and for formulating effective preventive strategies.

The combination of these measures reflects a concerted effort by regulators to fortify the banking sector and protect it from future crises. While the effectiveness of these actions will be tested over time, they represent important steps toward a more robust and secure financial system.

The Impact of US Bank Failures on the Economy: Perspective

The series of bank failures in the United States during 2023 and 2024 has had a notable impact on the economy, with repercussions that extend beyond the banking sector.

Immediate Economic Repercussions

The immediate aftermath of the bank failures saw a ripple effect across financial markets. Investor confidence was shaken, leading to a drop in stock prices and an increase in market volatility. The failures of significant players like Silicon Valley Bank and Signature Bank caused particular concern due to their roles in financing tech and startup ecosystems, which are vital for innovation and economic growth.

Credit Availability and Business Operations

Credit availability tightened as a result of the bank failures. Banks became more cautious in their lending practices, which made it harder for businesses, especially small and medium-sized enterprises, to access the funds they needed to operate and expand. This credit squeeze could potentially slow down economic growth and lead to a reduction in job creation.

Consumer Confidence and Spending

Consumer confidence took a hit as news of the bank failures spread. Concerns about the safety of deposits, even though largely unfounded due to FDIC insurance, led to a more conservative approach to spending. Reduced consumer spending can have a dampening effect on economic growth since it accounts for a significant portion of economic activity.

Regulatory and Policy Implications

The bank failures prompted a swift response from regulators and policymakers. Measures to enhance the stability of the financial system were introduced, including stricter capital requirements and risk management protocols. While these measures are designed to prevent future failures, they also lead to increased compliance costs for banks, which could be passed on to consumers and businesses in the form of higher fees and interest rates.

Long-Term Economic Outlook

In the long term, the bank failures may lead to a restructuring of the banking industry, with a possible consolidation of smaller banks and a reevaluation of business models that rely heavily on specific sectors or customer bases. This consolidation could lead to a more resilient banking sector, but it also raises concerns about reduced competition and its impact on consumers.

Global Economic Considerations

The US bank failures also have global implications. As the world's largest economy, the stability of the US banking system is crucial for international financial markets. The failures could lead to a reassessment of risk by global investors and affect the flow of capital worldwide, with potential impacts on foreign exchange rates, international trade, and global economic stability.

Bank Failures on the Horizon: Powell Warns of Risks in Real Estate

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Powell Warns of Bank Failures

The stability of the banking sector is a critical component of the global financial system, and recent statements from the Federal Reserve (Fed) have highlighted concerns about potential bank failures. Federal Reserve Chair Jerome Powell, in his remarks to the Senate Banking Committee, indicated that some U.S. banks might fail in the coming months due to declining values and defaults in their commercial real estate loan portfolios.

Factors Contributing to Expectations of Bank Failures

This expectation stems from several factors that have put pressure on the banking industry. One significant issue is the high concentration of commercial real estate loans, particularly in office and retail spaces, which have been heavily impacted by the shift to remote work and the post-pandemic economic landscape. The Fed has identified banks with high concentrations in these areas as being at risk.

Another contributing factor is the increase in interest rates, which has made it more challenging to refinance commercial real estate debt. This situation is exacerbated by the higher vacancy rates and lower valuations for office buildings in major cities. The Fed's concern is primarily with small and midsized banks, as the exposure of the largest banks to these risks is relatively low.

Recent History and Response

The recent history of bank failures, such as those of First Republic Bank, Silicon Valley Bank, and Signature Bank, has shown that smaller banks are moving away from commercial real estate lending. This shift is a response to the failures and the changing economic conditions that have made such investments riskier.

The Federal Deposit Insurance Corp. (FDIC) reports that banks hold a substantial amount of residential mortgage debt, with community banks accounting for a significant portion of this debt. These banks are vital to the residential mortgage sector, and their stability is crucial for the overall health of the financial system.

Cautionary Note and Proactive Measures

The Fed's statements serve as a cautionary note for the banking sector and highlight the need for vigilance and proactive measures to mitigate these risks. It is a reminder that the banking industry is still navigating the challenges posed by the evolving economic environment and the long-term effects of the pandemic.

As the situation develops, it will be important to monitor the actions of bank regulators and the banking industry's response to these challenges. The Fed's expectations are not just predictions; they are a reflection of the current state of the banking sector and the need for continued attention to ensure its stability and resilience.

Bank Failures This Week: Is Banking Industry in Trouble?

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bank failures this week

The banking industry is a cornerstone of the global economy, facilitating the flow of capital and supporting businesses and individuals with their financial needs. However, the industry is not immune to challenges, and bank failures can cause significant disruptions in financial markets. In recent times, there have been reports of bank failures and acquisitions, raising concerns about the stability of the banking industry.

Let us explore the recent bank failures, the reasons behind them, and the impact they may have on the banking industry and the wider economy. Although not widespread, there are many banks that have made poor decisions with how they have invested their funds. The deposits they receive from their bank customers are the funds being invested, and many banks have invested in longer-term investments, such as treasuries. In the past year, the Federal Reserve has aggressively raised rates, causing the value of the treasuries held by banks to reduce.

Which Bank Failures Happened This Week?

Citizens Bank, Sac City, Iowa, has made headlines this week as it was closed by the Iowa Division of Banking. In response to this, the Federal Deposit Insurance Corporation (FDIC) was appointed as the receiver. Let's delve into the details of this recent bank closure.

To safeguard the interests of depositors, the FDIC entered into a Purchase and Assumption Agreement with Iowa Trust & Savings Bank, Emmetsburg, Iowa. This agreement involves Iowa Trust & Savings Bank assuming all of the deposits previously held by Citizens Bank. Furthermore, the two branches of Citizens Bank will reopen as branches of Iowa Trust & Savings Bank, ensuring that customers can access their accounts seamlessly.

READ: List of Failed Banks in the United States

During the transition period, depositors of Citizens Bank can access their money through various means, including writing checks or using ATM and debit cards. Checks drawn on the bank will continue to be processed, and loan customers are encouraged to make their payments as usual.

One key piece of information for depositors is that they will automatically become depositors of Iowa Trust & Savings Bank. This means that customers do not need to change their banking relationship to maintain their deposit insurance coverage.

As of September 30, 2023, Citizens Bank had approximately $66 million in total assets and $59 million in total deposits. Additionally, Iowa Trust & Savings Bank has agreed to purchase essentially all of the failed bank's assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $14.8 million as a result of this bank closure. It's worth noting that this fund, established by Congress in 1933 and managed by the FDIC, is designed to protect the deposits at the nation's banks.

Citizens Bank's closure marks the fifth bank failure in the nation this year. Notably, the last bank failure in Iowa occurred on November 18, 2011, with the closure of Polk County Bank in Johnston, Iowa.

The closure of Citizens Bank and its subsequent acquisition by Iowa Trust & Savings Bank highlights the dynamic nature of the banking industry. Customers of Citizens Bank can expect a smooth transition without needing to change their banking relationship. The FDIC, through its diligent efforts, ensures the protection of depositors and the stability of the banking system. It's also a reminder of the vital role the Deposit Insurance Fund plays in safeguarding the nation's bank deposits.

Potential Reasons for the Banking Failures in 2023

Although not widespread, there are many banks that have made poor decisions with how they have invested their funds. The deposits they receive from their bank customers are the funds being invested, and many banks have invested in longer-term investments, such as treasuries. In the past year, the Federal Reserve has aggressively raised rates, causing the value of the treasuries held by banks to reduce.

Several reasons have been identified for the banking turmoil:

  • Large Deposits: Many of the banks under pressure have a large number of deposits that are too big to be insured by the Federal Deposit Insurance Corporation (FDIC). This makes them vulnerable to a run, where customers scramble for their money back, and a bank would be unable to deal with that demand.
  • Investments in Government Bonds: Investments made by investment banks in government bonds have lost value as the Federal Reserve has raised interest rates aggressively. This has led to a significant reduction in the value of these investments.
  • Exposure to Commercial Mortgages: Many lenders are exposed to commercial mortgages, which are becoming increasingly risky as the economy slows down. These mortgages are often made to businesses that are unable to repay their loans in a timely manner, resulting in higher levels of defaults and foreclosures.

Duration Problem with Balance Sheet Assets

The bank can hold these securities to maturity and receive the invested funds back. The problem comes up if the bank is short on covering customer deposits and must sell these investments. In doing so, the bank may take significant losses on these investments. Therefore, banks have a duration problem with their balance sheet on how they hold assets.

Banks that have been better managing their assets will be in a solid position, which may be the case when it comes to smaller community banks. These banks may be more invested in their local communities, which may be more sustainable. However, unfounded fears have led bank customers to move their deposits to the few megabanks, believing that they are safer as they are too big to fail. This reaction could have some negative consequences in smaller communities.

Tightening Credit and Economic Slowdown

The bank failures also create additional credit-tightening consequences. As the Federal Reserve continues to tighten, they create more strain on the banking sector. Perhaps it may be time for the Fed to pause on its aggressive tightening with its rate increases as it is beginning to impact many segments of the economy.

This past Wednesday, the Fed increased its overnight lending rates by another .25%. With the latest bank failure, this may be a strong signal that the Fed should pause on any future increases. The cumulative effect of the rate hikes over the past year will continue to slow the economy, bringing the current inflation rate lower.

No Further Contagion Amongst Regional Banks

These bank failures have little in common with what happened in the 2008 housing crisis. With these recent bank events, the hope is that there is no further contagion amongst regional banks. Fed Chairman Jerome Powell did state that the banking sector remains strong. However, new signs of banking turmoil have emerged following the failure of First Republic Bank.

The third bank failure in 2023 has raised concerns about the stability of other regional banks. Shares of several regional banks, including California-based PacWest and Western Alliance, have been hit hard, fueling fears of more bank failures. The situation has been worsened by Wall Street investors who are betting on a further decline in regional bank shares.

The current situation in the banking industry is uncertain, and the future remains unclear. While some regional banks may struggle in the short term, others are expected to remain stable. Smaller community banks, in particular, may be better positioned to weather the storm, as they are more invested in their local communities and have a more personal relationship with their customers.

In conclusion, the banking industry is currently facing a period of turmoil, with several bank failures and increasing concerns about the stability of the industry. However, it is important to note that not all banks are created equal, and some may be better positioned to weather the storm than others. Additionally, there are steps that can be taken to improve the stability of the industry, such as reducing the reliance on large deposits and investing in less risky assets.

Sources:

  • https://www.fdic.gov/news/press-releases/2023/pr23034.html
  • https://www.eptrail.com/2023/05/04/business-another-bank-failure-this-week/

New Senate Bill Targets Executive Compensation Amid Bank Failures

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The Senate Banking Committee recently achieved a significant milestone in response to this year's banking turmoil by approving a bipartisan bill in a 21-2 vote. The legislation, negotiated by Senate Banking Chair Sherrod Brown, Senator Tim Scott, and Senator Elizabeth Warren, aims to increase penalties for failed lenders' executives, enhance oversight of the Federal Reserve, and restrict megabank takeovers.

New Senate Bill Targets Executive Compensation Amid Bank Failures

A Reasonable Compromise

Despite recent tensions between Senator Brown and Senator Warren, the final bill represents a “reasonable compromise” according to Warren. The legislation received widespread support from progressives, conservatives, and moderates on the committee, making it the most viable option for revamping the banking system. Notably, only two Republicans, Senators Thom Tillis and Bill Hagerty, voted against the bill.

Senator Brown emphasized the bill's significance for consumers, the banking system, honest bankers, and the entire country. The compromise achieved by Brown and Scott focuses on executive mismanagement and regulatory supervision failures, aligning with President Joe Biden's call for strengthened executive accountability.

Gaining Traction in the House

While House Republicans have not pursued similar legislation, the bill's provisions related to oversight of the Federal Reserve have caught their attention. Representative Andy Barr introduced a similar bill in the House, and House Financial Services Chair Patrick McHenry has expressed a willingness to review the Senate bill. With the level of support garnered in the Senate, it becomes challenging for House Republicans to ignore the need for reform.

Empowering Regulators and Holding Executives Accountable

The bill negotiated by Senators Scott and Brown aims to empower regulators to hold executives of failed banks accountable. It introduces measures to claw back compensation, increase civil penalties, and enforce bans on executives working in the industry. The compromise bill builds upon Senator Warren's proposal, which had garnered substantial support from the Banking Committee. Republican Senator J.D. Vance played a crucial role in building GOP support for Warren's proposal.

The compromise bill features a less-stringent clawback approach than Warren's original plan, covering a period of two years rather than three. Additionally, the clawback is an option for regulators rather than a requirement. The bill's scope expanded further with bipartisan amendments that broaden the types of compensation subject to clawbacks, require public reporting on bank supervision practices, and establish new hurdles for the acquisition of failed banks by large institutions.

Industry Concerns and Future Challenges

The banking industry's response to the bill remains uncertain. Major trade associations have refrained from taking a public position, but the Bank Policy Institute, representing large U.S. lenders, expressed concerns about potential actions against executives who were not significantly involved in their banks' failures. The institute also highlighted potential challenges in talent recruitment for banks.

Despite industry concerns, Senator Brown assured that most bankers he had spoken to acknowledged the need for accountability in light of recent banking scandals. He emphasized that the bill's purpose is to hold executives accountable for their greed and incompetence, rather than tarnishing the entire banking industry.

Senator Tillis, one of the two Republicans who voted against the bill, voiced his concerns about the legislation being too expansive and potentially stifling innovation. As the bill progresses through the legislative process, it is likely to undergo further refinement and face additional challenges.

Sources:

  • https://www.politico.com/news/2023/06/21/senate-advances-post-svb-bank-crackdown-00102855
  • https://www.cbsnews.com/news/senate-bill-bank-ceos-svb-collapse/

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