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Bank Branch Bulking

A Snarketing post by Ron Shevlin, Director of Research at Cornerstone Advisors

I recently tweeted:

“Pointing to bank branch closures as a signal of the death of branches is like saying that someone who’s lost weight is dying.”

Turns out that was a terrible analogy. A closer inspection of what’s going on with bank branches is that banks aren’t really slimming down — they’re bulking up.


SNL published data on branches by asset size for the top 20 banks, comparing 2012 to 2009 (see the chart below). Among the top 10 banks, total branch volume declined by 1%. The biggest losers (not a pejorative statement) were Bank of America and Regions Bank who shed 10% and 9% of their branches, respectively. BB&T and PNC were the big gainers, growing branch count 23% and 10%, respectively.

But the real story in bank branches isn’t the number of branches. It’s the change in the distribution of branch size.

Among the top 10 banks, the number of branches with less than $10m in deposits dropped by 15%. In contrast, the number of branches with more than $100m in deposits grew 7%, and the number of bank branches with $50-100m in deposits increased by 4%.  In addition to the decline in branches with less than $10m in deposits, the number of branches with $10-30m in deposits receded by 4%. 

In 2012, the top 10 banks had 663 more branches with $100m+ in deposits than they did in 2009. And they had 930 fewer branches with less than $10m.

This branch bulking was fairly consistent across the top 10 banks. Eight of the ten banks increased their percentage of branches with $100m+ in deposits, despite the variation across banks.


For example, even though Bank of America’s branch count declined by 10% between 2009 and 2012, the decline in branches with more than $100m in deposits totaled just 8 branches. As a result, the percentage of their branches with more than $100m in deposits increased from 54% to 59%.

At US Bank, which had just 17% of branches with $100m+ in 2009, grew that percentage to 25% in 2012. Wells Fargo also increased its distribution of branches to the $100m+ category to 54% in 2012, up from 48% in 2009.

The decline in the less than $10m category is striking. SunTrust closed nearly 40% of its branches in this segment, Wells Fargo closed more than a third, and Bank of America and RBS closed one in four.


While I’m not a big fan of banks investing big dollars in branches, the proclamations of the death of bank branches — that rely on total bank branch numbers — are misguided.

Branches aren’t dying. Small branches are dying. Banks are bulking up the remaining branches.


Ron ShevlinRon Shevlin is Director of Research at Cornerstone Advisors. Get a copy of his best-selling book, Smarter Bank: Why Money Management is More Important Than Money Movement. And don't forget to follow him on Twitter at @rshevlin.

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  1. I believe that this is what they refer to as driving operating efficiency through consolidation. Unfortunately, not too many Community Banks and Credit Unions have branches with more than $100MM in deposits; in fact according to a recent FIS study
    – branches with less than $10MM in deposits incur direct operating costs exceeding 100 basis points
    – branches with deposits between $10MM – $50MM average direct operating costs of 77 basis points

    Indeed, branches are not dead, but they will bleed Community Banks and Credit Unions to near death. The reality is that most Community Banks and Credit Unions simply cannot complete based on their branch network and certainly not based on the revenue & profit generation of their branches. Time to rethink strategy…

  2. I understand that the biggest bank branches got bigger from a deposit perspective, but is this a fair measure of the ‘value’ of a branch? The fact that more deposits were assigned a branch could be the result of the overall marketplace increase in deposits caused by higher saving rates but also by the consolidation of branches at the biggest banks into larger branch units (Bank of America).

    In addition, branches are not a very efficient way to generate deposits in the first place (even though they look like they are a good place to accumulate assigned deposits). Shouldn’t traffic still be the gauge used to determine if a branch is feasible?

    The more banks keep making themselves feel better because more deposits (or even customers) are assigned to the branch, the longer they will ignore the reality of how inefficient the traditional bricks and mortar unit is in today’s digital environment. I can generate deposits faster online, serve customers better online and hopefully be getting closer to opening accounts with less friction online.

    Oh yeah, and if I close 100 branches and ‘reassign’ the deposits, I will be more efficient, I will increase the size of the branches remaining (no Jenny Craig here), and I might be in a better position to compete in the digital age.

    I bet Borders was pretty proud of how big their stores were and how many books they had under one roof until the day Amazon proved they could do the same without a store.

  3. Serge: No arguments with your points. My analysis looked at just the top banks reported by SNL, and I didn’t even look at the top 20 — just the top 10. But your points about the comm banks and CUs are probably in line w/ my points: That there’s a shift in bank composition from smaller to larger branches (even if the comm banks/CUs don’t have many, or any, branches > $100m). My purpose here was to counter the claims of the “branches are dead” crowd.

    Jim: You wrote “branches are not a very efficient way to generate deposits in the first place.” You may be right, but the prevailing thinking in the industry (supported by research that I don’t exactly agree with) suggest otherwise.

  4. Ron – completely understand and agree that Branches are not dead for all Banks… as Jim so eloquently states, they are an incredibly inefficient and ineffective channel for Community Banks and Credit Unions to acquire new customer relationships and grow wallet-share with the existing customer base.

  5. In the category of quantipulation, I would argue that the ‘bulking up’ will continue until eventually the bigger banks and most regional banks have regional feeder branches, reconfigured digital branches and many offices with ‘Space of Lease’ signs. It won’t signal that branches aren’t completely dead, but it may be a survival of the biggest.

    I just hope that banks don’t view the deposit report as validation of a strategy that is no longer as applicable.

    BTW, the additional branches for BB&T and PNC may have been caused by mergers and not the building of new units.

  6. re: mergers. That was my guess, but I saw no mention of that in the SNL analysis. And I would’ve thought that their analysis would have been adjusted for mergers, but maybe it wasn’t.

  7. Ron,

    So would you say “branches are not dead, they’re on life support,” or “branches are not dead–they’re just changing” or “branches are not dead, they’re just getting bigger?” In your opinion, should credit unions and banks invest in a branching network, move to a total online strategy or some type of hybrid “bricks and clicks” approach?


  8. Seems to me, every financial institution in the U.S. has already adopted a “bricks and clicks” strategy. Some are more effective at implementing than others. As long as banks serve non-homogenious markets, the branch channel will have (declining) importance and relevance. We are at the early-stages of a significant winnowing of branch densities, but the transition will take many years. the “branch bulking” of deposits cited in the excellent original post is a mathematical certainty as this winnowing occurs. Should it be a big surprize to see banks closing underperforming branches?

  9. “Strategy” seems such a strong word to use here. To me, there appears to be conflicting views regarding the roles of various channels. As a result, multiple channels exist, and there’s much talk about “multi-channel integration”, but I’m not sure that many FIs have a well-articulated bricks-and-clicks strategy.

    Is it a surprise that banks close underperforming branches? No, definitely not. But who said only small branches are underperforming? Is the small size due to underperformance or due to geographic or demographic factors like population density or income/affluence levels in the branch’s footprint? If it’s the latter, I’m not sure I want to have THAT discussion. 🙂

  10. Blah, blah blah.

    There are a ton of branches today and there will be a ton of branches tomorrow. Analyzing the regulatory data is a waste of time as it is not clean.

    @bmeara said it best “As long as banks serve non-homogenious markets, the branch channel will have (declining) importance and relevance. We are at the early-stages of a significant winnowing of branch densities, but the transition will take many years. the “branch bulking” of deposits cited in the excellent original post is a mathematical certainty as this winnowing occurs.”

  11. It always amazes me how certain the “anti-branch” crowd is of their own convictions. Of course, for them to be correct, one needs to assume that all the people running all the banks in every marketplace across the country are idiots. Such an assumption goes beyond mere “snark”, don’t you think?

    Branches are, in fact, quite effective at attracting customers and this is their ONLY real function. Activities within the branch are performed only to support this customer-attraction role. Transaction volume shifting to other channels has no direct bearing on branch utility or value.

    It is POSSIBLE to attract customers without branches. And branches ARE expensive. But these two facts do not combine into anything concrete about the current or future role of branches. It is possible to devise a business strategy based on limiting customer channel choice, just as it is possible to pursue a mono-line business strategy, or a micro-niche demographic strategy, and so on. But there is nothing inherently smart, or profitable, about any such strategy. After all, we’ve seen plenty of “Internet Only” banks come and go since the branch was first pronounced dead in the mid-1990’s. Consider Wingspan, for example.

    Measurable customer preferences and observable enacted customer behavior make it readily apparent that branch presence still exerts a powerful influence on customer decision-making. Bankers, and those who would advise them, must recognize this fact as they consider options for moving forward.

    Of course branch networks are expensive, and there are opportunities to have them perform their customer-acquisition role at lower cost. But to speak intelligently about efficiency, you need a valid understanding of benefit as well as cost. A workable strategy is not going to come about by pretending that branches don’t matter, simply because it is POSSIBLE to do without them.

  12. Tim – I could write a book in reply to your post, but … Let me just state that it isn’t the fact that the “anti-branch” crowd appeared all of the sudden with the sole goal of eliminating branches. Instead, forces including competitive position, financial performance, technological progress and consumer preferences, have all “conspired” against the branch. The “anti-branch” crowd is simply pointing this out … because this change has occurred in just the past 5 years or so with the wide adoption of online banking and most recently mobile. And as you point out, many (though not all) Community Bankers have not fully internalized the massive shift (not to mention that there are vendors and advisors who continue to promise the return of ‘high tides’ and the promise of ‘all boats being lifted’).

    For your information there are many small and large Banks that are branchless… and many of them are doing just fine. Indeed, many of them are outperforming competition and the fact that they they are Branchless is not hurting… perhaps only helping!?

    You may also find it surprising that <a href=""<most revenue generating activity is quickly shifting online (to the extent that Bankers enable online channels to serve in a sales capacity) with the Branch largely ignored by both retail and small business customer. The reality is that most Bank customers do not savor the opportunity of visiting their local Bank Branch… most would just prefer to complete their business When, Where and How they chose.

    The reasoning of the Bank Branch failure for most Community Banks is not a “belief”… rather it is based on financial analysis, evolution of consumer preferences, and competitive strength analysis.

    I personally believe that the Branch strategy can be helpful for mega- and super-regional banks; however, most Community Banks simply cannot compete effectively and win using a Branch in a traditional way.

    I welcome the opportunity to debate the subject with you, and I am sure that others in both the “branch-lovers” and “anti-branch” camp will welcome the opportunity as well.

  13. Serge,

    Whatever you want to believe is fine with me, really. As I stated, I am awed by the enthusiasm many bring to this crusade.

    To be clear, I never said the “anti-branch” position “appeared all of the sudden”. In fact, as I indicated, this argument has been around for nearly 20 years now. Perhaps you have only come upon it, or come to believe it, recently; but much of the rhetoric—and much of the misapplied logic—is literally decades old.

    Now, I will stipulate that past failed predictions do not invalidate identical current predictions—-that is, it all could be true THIS time. But you might convince more people if you took the trouble to illustrate how things are different now than in previous bouts of anti-branch mania. But don’t talk a lot about transaction volume changes.

    IF branches were created for the purpose of performing transactions, then the shift in customer transaction behavior might be a key indicator of the branch’s current and future value. But, of course, branches do NOT exist for that purpose. Branches exist for the purpose of attracting customers to the FI.
    Branch presence greatly increases the likelihood of customers choosing your bank or credit union. This is not theoretical; it is apparent in the actual customer distribution of nearly every bank in the land, and in the observable behavior of bank customers every day. In order for branches to fulfill this role, they have had to perform a wide variety of tasks, including routine transaction processing. But be clear: branches are about attracting customers, not delivering anything.

    If new patterns of customer transaction behavior reduce their reliance of the branch for this, that simply means I need to have fewer tellers (or none.) But it is an error to assume that reduced demand for in-person transaction processing translates into increased willingness of consumers to SELECT an institution with no branch presence.

    A new pattern of customer behavior in institution-selection might cause the sort of “massive shift” you foretell. To date I have seen no evidence of any such change; perhaps you could tell me what you see.

    One more quick clarification. I know that ‘branchless’ institutions exist. Hooray for them. There are plenty of business models out there for people to try. Just as the success of a few monoline banks did not suggest that Wells Fargo was doomed, I cannot accept the proposition that the existence of some (or even “many”) banks that pursue a branchless strategy is evidence that the rest of the industry can, or should, follow that path.

    I find it hard to understand how someone can say: “….most would just prefer to complete their business When, Where and How they chose” —and then argue that success will come from limiting customer access to one channel or another. Look at how customers do, in fact, choose their institutions, before prescribing a branch-ectomy to cure all the industry’s ills.

  14. Ron – please accept my apologies for hijacking your blog, but I believe this is a much needed debate…

    Tim –

    Thanks for the reply. The enthusiasm you feel from the anti-branch crowed is born from the understanding that branches are uneconomical and no longer serve their intended function for many banks and credit unions.

    Your key points can be summarized as follows:
    1. Branches do not exist to perform transactions, therefore the sharp decline in transaction volumes is not relevant. Branches exist for the purpose of attracting customers
    2. Branches are about increasing customer options in how they choose to transact with the Bank

    Let’s take these one at a time:

    1. Branches do not exist to perform transactions, therefore the sharp decline in transaction volumes is not relevant. Branches exist for the purpose of attracting customers

    This is an interesting spin since transaction processing is and has been the main activity in Bank Branches using virtually any metric be it type of personnel, transaction type, or time spent on different activities.

    However, if indeed, transaction processing is not the reason Bank Branches exist, then it would stand to reason that Branches are a sales focused channel, as you suggest. In theory, I agree 100% that this should be the case, but unfortunately, we know this not to be true in practice.

    The production attributed to an average Branch is dismal. Cornerstone Advisors’ study on productivity of retail banks shows than a median Branch generates:

    Retail Checking Accounts Opened 16.9
    Business Checking Accounts Opened 3.2
    Direct Consumer Loans Originated 4.2
    Small Business Loans Originated 0.6

    Worse, the production trends are dismal, showing double digit declines for plain vanilla products such as Retail Checking and Business Checking accounts.

    Even worse, much of this production, while attributed to a Branch, is unlikely to have been driven by the Branch itself. Indeed, most small business accounts are traditionally generated in the field, with the Branch getting the credit simply because there is nowhere else to credit the new business.

    2. Branches are about increasing customer options in how they choose to transact with the Bank

    I agree with you providing more options to customers is always a good idea. However, it has to be reasonable. Just as a Kia and its dealers provide a different class of service as compared to Mercedes Benz, so too should Banks. Providing white glove service in return for zero revenue is not only counter-intuitive but also dangerous and counter to fiduciary obligations of a Bank’s management team to their staff and shareholders.

    Service must be aligned with product’s value to the consumer and the Bank. Most consumers understand that there is a difference in experience and value when shopping at a 99c store vs shopping at Saks Fifth Avenue. A shopper at 99c store expects low prices and no frills. A shopper at Saks Fifth Avenue understands the implicit exchange of luxury service, attention, quality of product, and brand value for a (relatively) high price.

    Most surveys on customer preferences – as most of us understand – are flawed in that that most consumers are unable to imagine a different way of doing things until they are presented with the option. Branchless Banks have conclusively proven that consumers are very comfortable with virtual banking. It is for everyone? Probably Not. Does that mean that Banks should destroy their viability to please everybody? Absolutely not.

    Plenty of retailers have learned the hard way that a physical presence is no longer required to compete… Bookstores, Record/CD Stores, Electronic Goods Stores, Shoe Stores (think Zappos, etc.), Travel Agents, etc..

    “We have always done it this way” is a crutch that will kill many Community Banks.

  15. Serge,

    Distinguishing between “purpose” and “activity” is a fundamental requirement for understanding; it is not “spin”. Your response continues to conflate what goes on in a branch with why a bank creates it in the first place. You also seem to confuse “expensive” with “uneconomical”. To know whether something delivers financial benefit, you have to look at the value created, not just the price. And this takes us back to the central question of the “purpose” of branches.

    But, as you point out, this exchange has probably gone on too long already. I have little interest—and obviously no chance—of convincing you that your view is wrong. I only wanted to suggest that there continues to be very sound reasoning behind the idea of branches Treating the topic in a simplistic “right versus wrong” dichotomy obscures, rather than clarifying, the reality facing decision makers.

  16. And by posting all this correct here you expect to get what exactly? If a contractor is not meeting the requirements as outlined in their contract then you go to the COR. If shady stuff is going on with the Chain of Command you go to the IG. You can write your congress members asking them to investigate. As a last resort there’s the media, and you know they would be all over a story that paints the military in a bad light. There are channels you go to in order to right wrongs. . . Yahoo answers is not one of those channels.

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