Georgia is home to 16% of America’s failed banks since the 2000s

With Silicon Valley Bank and Signature Bank collapsing one after another, followed by the very high-profile meltdown of Credit Suisse in Europe, bank failures made the headlines in the previous weeks.

But bank failures happen more often than one thinks – since 2000, the US has seen over 500. Moneyzine.com takes a dive into FDIC’s records to analyze bank failures since we entered the new millennium.

• Georgia was home to 16% of all banks that collapsed across the US.

• The total assets of Silicon Valley Bank and Signature Bank made up 86% of the total assets of the 15 banks that collapsed in 2008.

• Bank failures peaked in 2010 with 150 lenders going under.

Georgia leads the nation in bank failures

Georgia experienced a bank failure every year between 2007 and 2016 with the majority happening in 2009 following the 2008 economic crisis. But what made Georgia the hotspot for bank meltdowns?

Until 1996, Georgia had some of the most restrictive bank branching regulations in the country. The state prohibited any banks from opening branches within the county lines – and while that shielded local banks from being outcompeted by larger rivals from out of the state, it also led Georgia to home a large number of banks.

To put things in perspective, by the end of 2008, there were only five states that had more banks than Georgia. California, which had four times as many people as Georgia, had fewer banks. There were 334 banks operating in Georgia in 2008, and of those, 48 were less than three years old.

This meant that the bulk part of Georgia’s staggering banking network was significantly undercapitalized to weather the storms of 2008, and many of them couldn't. Between 2009 and 2018, the number of banks located in Georgia reporting to FDIC decreased by 53%.

2008 saw the largest bank collapses – 2023 is a close second

A total of 25 banks collapsed in 2008, including the Washington Mutual Bank which is still the largest bank collapse to this day.

SVB and Signature Bank became the second and third largest banks to collapse in the US since 2008. The total assets of the two failures amount to 87.6% of the total assets from the 25 failures that happened in 2008.

What makes SVB and Signature Bank failures different?

To begin with, both SVB and Signature Bank had a peculiar blend of customers that is different from the average Joe. SVB catered to ambitious yet small startups, and internet and software companies, while Signature Bank’s clientele was largely made up of wealthy New Yorkers.

Both banks essentially suffered from liquidity problems. SVB customers were withdrawing their funds from the bank beyond what it could pay using its cash reserves. Previously, the bank invested the majority of its reserves into US treasury bonds – which historically drop in value when the interest rates are high. This led to a perfect storm breaking out: to help meet its obligations, the bank had to sell $21 billion of its portfolio at a $1.8 billion loss. In a bid to fix its drained resources, SVB attempted to raise over $2 billion in new capital.

It didn’t work out so well. SVB customers lost confidence in the lender and rushed to withdraw their remaining cash.

This sent shockwaves to Signature Bank customers with SVB’s collapse leading to many of its clients withdrawing their cash out of similar concerns. The sheer speed of withdrawing deposits could have hurt a perfectly healthy bank, let alone banks with questionable investment decisions – similar to SVB, Signature Bank also kept the majority of its funds locked in fixed-income securities (55% of total assets, compared to the industry average of 24%). Its demise was also accelerated as it had only about 5% of its assets in cash, compared to the industry average of 13%.

In case of a failure, the deposits are covered by the Federal Deposit Insurance Corporation. It was created to inflict confidence in the banking system in the event of a crisis following the Emergency Banking Act of 1933. The problem is that FDIC only covers deposit funds for up to $250,000 – both SVB and Signature’s clients had deposited way more cash than that, hence the second-largest amount of total assets from bank failures. In fact, 93% of SVB’s and 83% of Signature’s deposits were uninsured.

Bank failures peaked in 2010

A total of 157 banks collapsed across the country in 2010, followed by 140 in 2009, and 92 in 2011. It certainly was a knockout effect of the Great Recession, but the banks affected were much smaller and had lower asset values than the banks that failed in 2008 and 2009.

The total assets that failed banks racked up stood at $96,514.0 in 2010, which is 286.9% less than in 2008, and 231% less than in 2023.