CHARLOTTESVILLE, Va.—A new study shows that since 2006 banks have closed more branches than they have opened.
The SNL study shows the difference to be 1,443.
Broken down by region, the Southwest saw the most net openings from 2006 to 2015, with most of expansion occurring in Texas. Chris Williston, president and CEO of the Independent Bankers Association of Texas, noted that aside from the state's growth in population, the numbers take into account the "explosion of loan production offices" — largely of smaller institutions from rural areas looking to diversify their loan portfolios.
Finishing in second place in branch openings is California, which has enjoyed a lot of interest from banks with at least $100 billion in assets, SNL said. A July 2015 paper on GDP by state from the Bureau of Economic Analysis shows that in 2014 Texas and California were among the states with the largest real GDP, having grown by 5.2% and 2.8% respectively. The two also grew faster than the national average in 2012 and 2013.
In Texas, finance and insurance contributed 0.11 percentage points to the GDP percent change. The corresponding figure for California was 0.07 percentage point. For comparison, New York saw 2.5% in 2014 real GDP growth, with finance and insurance contributing 0.87 percentage point.
Meanwhile, the decline in branch presence was most noticeable in the Midwest, and largely in Michigan, SNL said.
“Yet Michigan is still surpassed by Pennsylvania, which experienced the highest number of net closings in the country,” the company stated. “A February 2015 Crowe Horwath study commissioned by the Pennsylvania Bankers Association compared the bank tax regime of Pennsylvania with those of Delaware, Maryland, New Jersey, Ohio, New York, Michigan and North Carolina and found ‘that, under the various scenarios considered, substantially similar banks generally would pay more — often significantly more — state tax if headquartered in Pennsylvania than if headquartered in one of the other states.’"
Michigan grew only 1.9% in real GDP (0.01 percentage points contributed by finance and insurance); Pennsylvania grew 1.8% (0.17 percentage points).
Chris Cole, executive vice president and senior regulatory counsel of the Independent Community Bankers of America, noted that branch numbers isn't only a reflection of a state's economic health but of demographics too. The brick-and-mortar decline is often attributed to the preference among millennials for online and mobile banking, SNL said. For 2014, the Census Bureau's annual population estimates for selected age groups show that those born roughly between 1980 and 2000 (Millennials) comprise roughly 33% of Texas' population and 32% of California's.
“It may explain why the growth in Texas is focused on loan production offices, as opposed to full-service branches, and why the activity in California stands out for being big bank-driven,” SNL said.
An American Bankers Association survey shows that out of 1,000 U.S. adults, 32% prefer Internet banking over other methods.
“Branches are now the second-most preferred method — at 17%, down from the 21% a year ago,” SNL said.
ATM banking also saw a slight decline in popularity, dropping to 13% in 2015 from 14% in 2014, and mobile banking looks ready to overtake it (at 12% compared to 10% a year ago).
“The numbers far from spell the death of branch banking,” said SNL. “The figures for Internet and mobile banking still add up to less than half of the respondents. As ABA deputy chief counsel for consumer protection and payments Nessa Feddis points out, the newer methods ‘complement, but do not replace, branches.’"
Also of note, the smallest banks opened more branches than they closed throughout the covered period, while bigger banks started closing more than they opened as early as 2009 and — by and large — have yet to stop.