Banks go bust more often than you might think. In the five years between 2016 and 2020, 21 of them went bankrupt in the US. The most recent was Almena State Bank of Kansas, which collapsed at the end of October, 2020. The surprise is that there have been no bank failures since. We’re now tracking 749 days since the last bank in the US collapsed – the second longest streak in over 20 years.   

Banks fail for a variety of reasons. Usually it’s a slow process. Almena State Bank exhibited deteriorating asset quality for four years before it went bust. First City Bank of Florida, which failed one week earlier, had been unprofitable for 12 years before its demise. Slow failures usually happen because management makes poor investment decisions, often around credit. First City Bank of Florida had built up too high a concentration in commercial real estate, to a point where it represented 600% of the bank’s capital base just before the downturn. 

Sometimes, banks can fail very quickly, and these…