This paper identifies how financial contagion spreads through physical and virtual spaces. Using unbalanced panel data from 2000–2023 on publicly traded Bank Holding Companies, I explore systemic risk propagation via geographic and social proximity to bank failures. Results show that geographic and social proximity (measured by Facebook’s Social Connectivity Index) to bank failures significantly elevates systemic risk. Local economic conditions, especially rising unemployment rates and local sentiment, serve as critical mechanisms through which shocks propagate. Additionally, while positive social media sentiment generally reduces systemic risk, its interaction with strong social ties can exacerbate vulnerabilities due to herding behavior and overconfidence. Finally, local real estate market strength mitigates risk geographically but increases systemic fragility socially, demonstrating the complexity of the impact of housing market during crises periods.