The Myth of Branch Decline

By Steven Reider, Founder of Bancography

As electronic channels have gained popularity for banking transactions, many branches have seen an accompanying reduction in teller transaction demand. This has led many industry commentators to predict widespread branch closures in the near future, a prediction further fueled by declines in branch openings and in absolute branch counts in 2010 – 2012. However, a reversal in those trends in the most recent year suggests that the declines of 2010 – 2012 were more in response to the financial crisis and the accompanying large-scale mergers than of any pervasive industry conclusion that branches no longer carry value. Several statistics rom the most-recent FDIC and NCUA deposit reports confirm ongoing support for branch networks.

Reversing three years of declines, the number of bank branches in the United States increased by more than 250 units in the 2013 FDIC reporting year. Banks opened almost 3,000 branches during the past year, the highest level since 2009. Those opens were offset by more than 2,700 branch closures, a substantial level but still lower than the 3,100 closures of the preceding year.


The net number of credit union branches declined last year, but the decline was almost entirely attributable to the absorption of small, mostly single-branch credit unions by larger institutions. At the top of the industry, among credit unions with at least $500M in assets, total branch counts also increased, though only modestly.

The rebound in branching spanned a broad portion of the industry. More than 1,000 institutions increased their branch counts in the 2013 FDIC reporting year, while only 400 contracted their branch networks. For comparison, note that in the 2012 reporting year, 440 institutions added branches while 460 reduced their networks. So more institutions added branches, and fewer institutions reduced branches in 2013 than in the previous year.

As in prior years, most closures were concentrated among a few institutions that implemented sizable branch-closure efforts. Bank of America was most prominent in that effort, reporting 200 fewer branches in June 2013 than in June 2012. SunTrust reduced its network by almost 100 branches, while PNC, HSBC and Capital One each reduced their networks by 40–70 branches.

( Read More: New Branches Are Rarer, Smaller and More Expensive Than Ever )

The 400 banks that decreased their branch networks trimmed an aggregate 1,500 branches, but just 15 institutions accounted for half of that reduction. Further, in an opposing strategy, JPMorgan Chase added more than 100 branches over the past year. US Bank, Wells Fargo, and Woodforest Bank also increased their networks by 20 or more branches.

While the decline in branches has apparently stabilized and even moderately reversed, mergers and institution failures have yielded continued erosion in institution counts. The FDIC reported 6,900 banks and savings institutions as of June 2013, a decline of 400 institutions from two years prior and of more than 1,000 institutions from four years prior. The NCUA reported 6,700 credit unions as of June 2013, down 550 institutions from two years prior and more than 1,000 institutions from four years prior.

In that institution counts have declined at a much greater pace than branch counts, the average scope of branch networks, in terms of number of branches per institution, is increasing. This suggests that individual financial institutions are not reducing the scope of their networks in terms of the number of submarkets in which they offer branches to consumers. Rather it appears that branch reductions are primarily targeting the overlaps that arise from mergers and acquisitions.

The branch network represents a substantial component of a financial institution’s operating burden, both in terms of the capital investment impounded in the facilities and equipment and the salary and maintenance expenses required to operate the branches. Further, there is ample evidence that alternate channels are reducing consumers’ dependence on branches for routine paying and receiving transactions. However, the branch remains the predominant channel for account opening, which of course is the primary objective of the facility, as well as an essential means of reinforcing the institution’s convenience and availability. While many younger consumers have embraced a primarily electronic means of banking, the most profitable segments, including small businesses, affluent consumers and seniors, continue to ascribe value to nearby branch convenience.

Although the financial downturn of recent years may have rendered branch closures imperative for expense control at some institutions, the stabilization of branch counts confirms that bankers understand the value of a continued physical presence and suggests that judicious branch expansion will continue as economic circumstances allow.

This article was originally published on January 27, 2014. All content © 2018 by The Financial Brand and may not be reproduced by any means without permission.


  1. Jim Perry says:

    This article’s headline reminded me of the famous quote by Mark Twain: “There are three kinds of lies: lies, damned lies, and statistics.” Mr. Reider is certainly not lying, as the statistics are accurate. And they do point to an appreciation for the value of bricks and mortar. But we should be careful not to interpret one year’s statistics as an indicator of any kind of sustainable rebound in branching – especially if you are thinking about the branch in the traditional sense. The term “branch decline” is still very much a fact if you consider the traditional branch model. For many bankers, an analysis of branch profitability will prompt them to take steps in these next few years to transform their branch network – if not initially by number, certainly by function (staffing, design, technology, etc.).

  2. I agree with Jim. The number of branches may have had a slight increase in 2013, but this doesn’t mean that banks are (or should be) planning long-term branch growth. Mobile technology is changing consumer expectations, and these expectations are only going to grow in scope. Granted, there is still value in providing customers with face-to-face interactions with tellers, but this service is not desired by everyone. Banks need to develop an ominchannel strategy that seamlessly links their branches, ATM’s, website and mobile offerings. The outright death of branches has been exaggerated, but we will continue to see their functions change to match customer expectations.

  3. As usual, Steven’s comments are right on the mark. Much of the “branch is dead” discussion is driven by behavior and statistics from the largest institutions – those with the most branches and most room to clean house. The smaller community banks often operate with a different business model and purpose. We need to avoid a one-size-fits-all approach and take a more targeted, analytical approach for each institution as Jim suggests.

  4. I’d be interested to see the percentage of new branches opening up within retail department and grocery stores. More foot traffic, ease of access and less overhead should yield better returns I imagine.

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