On February 19th, the FDIC released a study showing that despite the increased use of online and mobile banking, bank & mortar banking offices continue to be a primary means through which FDIC insured institutions deliver financial services to their customers. As of June 2014, some 6,669 banks and thrifts continued to operate 94,725 brick & mortar offices. Futher the study found that more than 90 percent of total banking offices take the form of stand-alone, full-service offices. A distant second are those offices located in another retail establishment, such as grocery stores. Together, in-store offices and stand-alone office make up 96 percent of offices.
The study found that four main factors have contributed to the changes in the number and distribution of banking offices since 1935:
Population growth. The study found that office growth has outpaced the nation’s population growth over the long term and has tended to follow regional migration patterns. Between 1970 and 2014, the U.S. population grew by over 50 percent, while the number of offices more than doubled.
Banking crises. Historically, net declines in branch offices have followed periods of financial distress, such as the Great Depression, the S&L and banking crisis of the 1980s, and the most recent financial crisis. The onset of the 2008 financial crisis brought about an increase in failures, with over 100 bank failures on average each year between 2008 and 2012.
Although the study notes that banks of all sizes have closed offices since 2008, just 15 institutions have accounted for one-third of all gross office closings. These include some of the nation’s largest banks. In addition, other large institutions pared back their extensive office networks as part of their post-crisis restructuring efforts.
Legislative changes. The relaxation of branching laws in the 1980s and 1990s appears to have increased the prevalence of banking offices by removing legislative constraints on the size and geographic scope of the branch networks that each bank could operate. Also, interstate banking expanded when the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 established a uniform standard by which an institution headquartered in one state could branch into, or acquire banks in, any other state, and allowed institutions operating subsidiary charters in different states to combine them into a single interstate bank.
Technological innovation. The study found little evidence that the emergence of new electronic channels for delivering banking services has substantially diminished the need for traditional branch offices where banking relationships are built. Since 1970, banks have introduced a series of new electronic channels for delivering banking services.