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Strong Income Growth, Loan Demand Enables Selective Branch Expansion

Banks have continued to shed branches across much of the country, but there are some exceptions.

Across the U.S., depositories closed a net 1,983 branches in the year ended June 30, 2017, the as-of date for recently released Summary of Deposits data from the Federal Deposit Insurance Corp.

There were some places, however, that saw a net increase in branches and other metros with strong deposit growth where banks only shuttered a few branches.

Change in active branches during the year at MSAs across the US

In the Portland-South Portland, Maine, Metropolitan Statistical Area, or MSA, depositories opened the most net branches with an increase of six active branches in one year. Total deposits in the market declined over the year, but banks have reason to be active in Maine's only metropolitan area with at least 500,000 people. The city's median income is already above the national aggregate and is forecast to rise by 9.5% over the next five years, also above the national aggregate.

The city also boasts a strong job market with an unemployment rate of just 2.5% in August, and banks report strong loan demand to justify the additional branches. With much of its branch footprint in more rural parts of Maine where job and population growth are much slower, Camden National Corp. largely attributed its asset growth to a strong sales team and increased opportunities in Portland, particularly among commercial and industrial loans. In the second quarter, the bank reported annualized loan growth of 13.8%.

"That, I think, is very much attributable to the feet on the ground that we have, especially in southern Maine, but also maintained up in our legacy markets," said CEO and President Gregory Dufour, according to a transcript of an earnings call.

MSAs with the highest increase in branches

MSAs with the highest decrease in branches

Top 10 MSAs by YOY deposit growth

A handful of other metros saw branch increases over the year, the largest being the San Jose-Sunnyvale-Santa Clara, CA., MSA, which added three net branches. Three other MSAs matched that total: Bakersfield, CA.; Roanoke, VA.; and Oklahoma City, OK.

At the other end of the spectrum, the largest declines in branch totals occurred in the largest U.S. metros. As banks shrink their branch footprints, cities with more branches have more to lose.

The New York-Newark-Jersey City, N.Y.-N.J.-Pa., MSA reported the most net branch closures at 106. But with 5,656 branches still active in the metro area, other cities such as Chicago; Washington, D.C.; and Atlanta posted larger declines as a portion of existing branches. Among the top 10 MSAs by branch closure count, the Milwaukee-Waukesha-West Allis, WI, MSA posted the largest decline as a portion of its branch network as banks shuttered 7.6% of all branches in just one year.

From a deposit growth perspective, the Durham-Chapel Hill, N.C., MSA topped all metro areas with a 19.6% year-over-year increase in deposits. The increase in deposits accompanies expected household income growth above the national aggregate and expected population growth nearly double the expectation nationally. Peter Gwaltney, president and CEO of the North Carolina Bankers Association, said the market's growing population and deposits are reflective of a dynamic economy, particularly in the Research Triangle region, an area stocked with the state's top universities and that includes Durham-Chapel Hill and the Raleigh, N.C., MSA.

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"There is so much innovation going on," Gwaltney said. "You have the traditional finance and insurance industries, but also biomedical and just a host of others."

At the same time, the deposit growth in Durham-Chapel Hill did not translate to an increase in branches. The metro area saw a net decrease of five branches in the year ended June 30, 2017. Gwaltney said the loss of branches in the face of deposit growth was not necessarily a surprise considering the customer preference and bank savings offered by online banking.

"Twenty years ago, you would probably find a direct correlation between the number of branches and the growth in deposits," Gwaltney said. "That's just not the way we do business anymore."

At S&P Global Market Intelligence, we monitor branch openings, closings, and ownership changes daily, making us your go-to source for up-to-date branch counts and market share. Request a custom report to not only analyze the most current bank branch networks, but layer in historical trends, credit union data, demographics, and even your competitor’s interest rates for a complete picture of your market.

Oct 27, 2017
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