More Branches ... Again (2007)

Despite increasing popularity of online channels and electronic payment technologies, banking institutions charged forward with branch investments in 2005 and 2006, spurred by continued growth in deposits and households in many regions of country. The FDIC's annual bank branch data reveals some unexpected--and not so unexpected--trends in branch and deposit activity. According to Summary of Deposits data published by deposits increased 8.7% between June 30, 2005 and June 30, 2006, a pace similar to that set previous year and slightly higher than average annual growth rate of 8.3% since 2000. Branch growth accelerated during year, with number of offices increasing 2.9% between 2005 and 2006 compared to an average annual increase of 1.7% since 2000. With households growing 1.4% from 2005 to 2006 and branches by nearly 3%, rate of deposit growth continues to outstrip, by far, rates of growth in both branches and households. While FDIC issues its branching report only once each year, its FDIC Quarterly Banking Profile covering third quarter of 2006, released early in 2007, reported that overall deposit growth was just 1% from second to third quarters, indicating a possible slowing trend (see Snapshot, p. 8, for a related look at loan growth trends.) FDIC also noted in Profile that overall deposit growth failed to keep pace with asset growth in third quarter. It reported that at end of September, deposits funded 64.5% of industry's assets, the lowest level in history of FDIC, which led to increased dependence on volatile funding sources. Bank of America remained record holder for most branches in United States, with more than twice number of offices as runner up, JPMorgan Chase--and that's after Chase's merger with Bank One. As of June 30, 2006, BofA had 5,789 branches, while Chase had 2,721 and U.S. Bank wasn't far behind with 2,526. BofA held its top position despite closing 125 branches during 12-month period, more than half of which were located in Florida and New Jersey. What has changed Ongoing recovery in Gulf The highest levels of deposit growth nationwide occurred in Gulf states of Louisiana, Mississippi, and Texas. In Louisiana, deposits increased by 30.8%, a rate nearly double that of second-fastest growing state, Mississippi. The growth can be attributed partially to deposits from insurance settlements and state and federal aid that have flowed into area since hurricanes Katrina and Rita hit Gulf coast in August and September of 2005. In terms of average annual growth, both Louisiana and Mississippi have seen deposits increase at rates close to national average since 2000, while Texas has seen above-average growth of 13.6%. Increasing competitive density Branch growth appears to be catching up to household population growth. Across country, number of households per branch decreased between June 30, 2005 and June 30, 2006, with large declines in Pacific, Southwest, Great Plains, and Mid-Atlantic regions, indicating increased competitive density. In fact, 38 states saw lower numbers of households per branch in 2006. Although ratio has been declining nationwide for several years due to accelerated de novo activity, decrease in 2006 far outpaced average annual change seen since 2000. What hasn't changed Strong growth in South Southern regions continue to lead country in deposit and branch growth rates. …