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Bank Charters, Branches on the Decline


Tuesday, September 22, 2015
bank charters and branches
Thinkstock/KevinAlexanderGeorge

While bank charters have steadily declined since the early 1990s, bank branches had been on the rise. However, the number of branches has declined since 2009, and it’s unclear whether that trend will continue, according to the latest issue of Banking Insights.

Bank Charters

Policy Analyst Michelle Cissi examined the period 1994-2014 and found that bank charters fell from 12,589 to 6,482, as seen in the figure below.

Cissi noted several reasons for the decline, including:

  • The passage of the Riegle-Neal Act, which allowed banks to branch and merge across state lines
  • Mergers and acquisitions
  • Bank failures

Bank Branches

Bank branches, on the other hand, grew over the first part of this period. From 1994 to 2004, the number of branches increased from 63,936 to 80,937 (26.6 percent). Cissi noted that mergers and acquisitions played a role, as some former bank headquarters became branches of the acquiring parent organizations. However, the number of bank and thrift branches began declining in 2009, falling 4.1 percent through 2014.

Cissi also examined branch trends over the period 2008-2014 based on the asset size of institutions. Banks with less than $10 billion in assets were relatively stable in terms of number of branches, while banks with assets between $10 billion and $50 billion saw slight growth. Banks with more than $50 billion in assets saw their numbers of branches decline over the same period. Cissi noted: “The most significant decreases in the number of branches can be traced to the nation’s largest institutions as they restructure their branch networks after years of acquisitions.”

Cissi concluded that the trend of declining bank branches is likely to continue. She noted: “As banks continue to merge with and acquire one another, the branch locations of the newly acquired bank may be unnecessary to the purchasing bank, and they may be closed or sold. While the shift toward mobile and online banking has prompted some banks to alter their branch network, long-term consumer preferences remain uncertain.”

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