Understanding the Severity of Recent Bank Failures: A Data-Driven Analysis

The closure of Silicon Valley Bank and Signature Bank in March 2023 stirred significant concern across the financial sector, yet to fully appreciate their impact, we must examine them within historical context. Since 2000, the United States has experienced 565 bank failures—a figure that reveals important patterns about when and where banking crises occur.

Why Two Bank Failures Sparked Widespread Panic

SVB’s collapse on March 10, 2023, marked the second-largest bank failure in U.S. history, holding $209 billion in assets as of December 2022. Signature Bank followed just 48 hours later, becoming the third-largest failure ever recorded, with $110 billion in assets. For perspective, Washington Mutual in 2008 remains the largest, having held $307 billion when it failed.

The scale matters because most bank failures involve regional institutions with minimal public awareness. Kansas-based Almena State Bank, which closed in 2020, held merely $69 million in assets. That same year, three other banks failed with assets of $136 million, $156 million, and $101 million respectively. Silicon Valley Bank was roughly 2,000 times larger than these recent closures.

Until SVB’s failure, over a decade had passed since any U.S. bank with $7 billion in assets collapsed. Even during 2010—the year 565 bank failures peaked at 157 in a single year—their combined assets totaled less than half of what SVB held alone.

The Cyclical Nature of Bank Failures

Bank failures are not random events; they follow distinct patterns tied to economic cycles. From 2001 to 2007, the nation averaged just 3.57 failures annually. This changed abruptly when the U.S. entered recession in December 2007. Between 2008 and 2012, failures surged to an average of 93 per year—a dramatic escalation driven by the housing and financial crisis.

The post-crisis period shows stabilization: from 2015 to 2020, fewer than five banks failed yearly. Most remarkably, 2021 and 2022 saw zero bank failures. Of the 565 total failures since 2000, 465—comprising 82%—occurred within just that four-year window from 2008 to 2012.

The March 2023 failures ended a 867-day period without any bank closures, the second-longest drought since 1933. The longest gap stretched from June 2004 through February 2007—nearly three years—immediately preceding the Great Recession.

Timing and Day-of-Week Patterns

A surprising detail emerges when examining when bank failures occur. Friday is overwhelmingly the day chosen for closures, accounting for 95% of all failures since 2000. This reflects regulatory strategy: the FDIC intentionally times announcements for Friday to utilize the weekend for account settlement, asset liquidation, and management transitions before Monday trading resumes, minimizing panic and preventing bank runs.

Signature Bank became an exception, failing on Sunday, March 13, 2023—the only Sunday closure in the entire dataset of 565 failures. Regulators made this unusual decision to prevent a cascade effect across the banking sector following SVB’s rapid deterioration.

Seasonally, bank failures cluster around quarter beginnings. January, April, July, and October historically show elevated failure rates, though March closures are not unusual.

Geographic Concentration of Risk

Bank failures are not uniformly distributed across the nation. Four states account for a disproportionate share: California, Florida, Georgia, and Illinois. California alone experienced 42 failures since 2000, including SVB itself. Surprisingly, New York—traditionally America’s banking capital and home to Signature Bank—saw only six failures during this period.

Georgia and Florida together represent approximately 30% of all U.S. bank failures this century. Both states’ banking sectors sustained severe damage from 2008 to 2012 due to the housing crisis and associated lending problems.

Context for Today’s Concerns

While two significant bank failures in 2023 understandably alarmed the public, this remains far below historical norms. Twenty-five failures annually represents the average since 2000, meaning 2023’s beginning was statistically mild despite media attention. Understanding that 82% of all failures clustered in a four-year recession period reminds us that current conditions, while concerning, remain manageable by historical standards. The sheer size of SVB and Signature Bank is what distinguishes them—not the frequency of failures themselves.