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States experiencing the most rapid rates of growth in number of branches are not necessarily those where the volume of deposits also is expanding rapidly. Generally, with few exceptions, deposit growth is strongest in coastal areas, whereas office growth varies more widely across the country (see Map 1 and Map 2). In many cases, demographic factors, such as population, employment, and per capita income growth, correlate well with the growth in deposits and number of offices. However, state law and specific local market conditions also drive branching decisions.

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The nation’s largest banking organizations report the most rapid rate of growth in banking offices.

Consolidated banking organizations holding more than $10 billion in deposits have reported the most rapid growth in the number of offices during the past five years (see Table 2). In contrast, banking organizations holding deposits under $1 billion have reported a small decline during this period. Mid-size companies ($1 billion to $10 billion in deposits) reported a moderate increase in both the number of offices and volume of deposits. The stronger growth rate of larger companies also reflects longer-term consolidation trends.

The drive-up facility is fading in popularity as offices in retail establishments are becoming more common.

Increased use of locations in retail space, such as supermarkets and department stores, continues to be a key trend in the expansion of banking offices. Although the pace of growth slowed during the past year, more banking offices were established in retail space than in any other office type during the past five years (see Table 3). At the same time, use of limited service drive-up facilities has declined steadily. The number of standard brick and mortar banking offices continues to grow and remains the most common type of office location.

Branch networks have expanded more rapidly than the population has increased.

Nationwide, the number of FDIC-insured institution offices has expanded more rapidly than the population has increased since 2000 (see Chart 2). However, these offices continue to attract domestic deposits. Annual growth in total domestic deposits averaged 8.3 percent between 2001 and 2005, compared with 5.4 percent between 1996 and 2000. These trends may imply a more aggressive retailing strategy as banks seek to provide a greater level of service to customers.

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Endnotes

¹ This FYI reflects updates in the Summary of Deposits data as of October 16, 2006. All FDIC-insured institutions that operate branch offices beyond their home office and that are required to file a financial report with one of the Federal Financial Institutions Examination Council agencies must submit responses to SOD surveys to the FDIC or the OTS. ATMs are not considered offices for the purposes of the survey. Call Report information on unit banks (banks with a single headquarters office) have been combined with branch office data to form the SOD database which can be accessed at www.fdic.gov.

²Offices here include those in the 50 states and the District of Columbia, but not those in U.S. territories. The SOD data include domestic deposits only, and they are referred to in this report as deposits.

³ Metropolitan statistical areas are characterized by urban clusters of greater than 50,000 inhabitants. Each micropolitan statistical area has an urban cluster of between 10,000 and 50,000 inhabitants. Other areas have less population.

⁴Under the DOJ guidelines, markets with a Herfindahl-Hirschman Index (HHI) of less than 1000 are considered “unconcentrated;” those with an HHI between 1000 and 1800 are considered “moderately concentrated;” and those with an HHI greater than 1800 are considered “highly concentrated.” For more details, access the joint Federal Trade Commission (FTC) and DOJ Web site on “Horizontal Merger Guidelines” at http://www.usdoj.gov/atr/public/guidelines/horiz_book/hmg1.html.