Branching decisions weigh on bankers

Editor’s Note: This is the second of three excerpts from BankBeat Publisher and President Tom Bengtson’s Analysis column in our May magazine. The first excerpt ran May 22. The third part will be posted online May 28. Industry strategists have been debating the role of the bank branch for decades. Bancography, a Birmingham, Ala., industry consulting firm, recently issued an extensive look at the banking industry, with a focus on the state of branching. While we hear about the big banks closing branches, the reality is branches are holding up pretty well..In 2024, the number of bank branches declined by about 1,100 — approximately 2,000 branches were closed while another 900 were opened. On net, that is the smallest decline in the last decade, the consultants said.For reference, the total number of bank and credit union branches is currently some 95,000, which is down about 8,300 from 2020. Most of the decline in the last five years took place in the largest metro areas. For example, Bancography notes 700 branches were closed in that time frame in New York and some 300 were closed in Los Angeles, Washington, D.C., and Chicago.Across the country, there is a bank or credit union branch for every 1,340 households, which is down from one for every 1,060 households in 2015. Branch concentration is high in the Northeast and Midwest, and lowest in the Southwest. Phoenix, for example, the subject of a feature we ran in last month’s issue, has one branch for every 2,100 households, suggesting there might be room for more branches there.The branching world is skewed to the largest institutions. “The 10 largest branch networks hold one-third of all U.S. bank branches; and concentration continues through the next tier of institutions, as the 50 largest branch networks account for 51 percent of all U.S. bank branches. Just 250 of the nation’s more than 4,000 banks own nearly 70 percent of the bank side of the industry’s total branches,” the report summarizes.How big are these bank branches? The consultant notes that median deposits at a branch after at least five years of operations is $29 million, although the top quintile is nearer to $53 million and the bottom quintile is nearer to $15 million.The report is called “Outlook 2025: Industry Trends and the Challenges Ahead.” Bancography concludes by laying out this challenge for banks: “A key challenge for 2025 will lie in channel-investment allocation decisions.” The consultant asks how bank leadership will fund new technologies while maintaining branches, which still represent such an important service delivery channel.