Despite an increasingly virtual banking world, the prevalence of thousands of brick-and-mortar offices offers sufficient testimony to the enduring value of physical access to banking services, according to an FDIC report.

FDIC in its latest quarterly report titled: “Brick-and-Mortar Banking Remains Prevalent in an increasingly Virtual World” notes office growth has outpaced the nation’s population growth over the long term.

Prevalence of brick-and-mortar banking

The FDIC report points out that as of June 2014, about 6,669 banks and thrifts continued to operate 94,725 brick-and-mortar offices, signifying their importance as a vital banking channel. The report chronicles long-term trends in the banking offices operated by federally insured banks and thrift institutions from 1935 to 2014.

Focusing on the long-term growth of offices in the U.S. since 1987, the report notes the total number of offices declined nearly every year between 1989 and 1995, and again between 2009 and 2014. However, these two periods of decline bracketed a period of significant expansion between 1995 and 2009, when the number of offices increased each year.

The FDIC report highlights that four factors contributed to changes in the distribution of offices since 1987 viz.: (a) Growing population and geographic shifts in population, (b) Banking crises, (c) Federal and state legislative changes that relaxed branching laws, and (d) Technological innovation and the rise of electronic banking.

As depicted in the following graph, the number of offices in the U.S. has increased over the long term.

brick-and-mortar banking Growth in offices

The report highlights that office growth has outpaced the nation’s population growth over the long term and has tended to follow regional migration patterns. For instance, between 1970 and 2014, while the U.S. population grew by over 50%, the number of offices more than doubled.

As can be deduced from the following table, domestic migration since 1991 has tended to be from states in the Northeast and Midwest to those in the South and West. The FDIC report highlights that the patterns of office changes observed in the Northeast and South indicate that migration can exert a strong influence on where banks locate offices.

brick-and-mortar banking Domestic migration

Moreover, expansion and contraction of offices varied geographically across the U.S. As set forth in the following graph, the pattern of office growth has not been uniform across the country.

brick-and-mortar banking Pattern of office growth


Legislative changes as important driver of office growth

Of note, one of the most important legislative changes impacting the geography of banking since the 1980s has been the relaxation of state unit banking laws. The report notes by 1991, thanks to removal of branching restrictions by 12 states, including Colorado, Illinois and Kansas, several states witnessed large increases in total banking offices. Moreover, of the ten states that gained the most banking offices between 1987 and 2014, five were former unit banking states and five were states that had imposed other types of geographic restrictions on branching as of 1979.

The FDIC report discussed the notion of “office density” in terms of the number of offices per 10,000 people.  The following chart captures the density of banking offices between 1935 and 2014:

brick-and-mortar banking Office density over the years

The report highlights the per capita density of offices increased by about one-third during a period when a number important banking technologies were being introduced. Much like the total number of banking offices, the density of banking offices follows cyclical patterns.

The FDIC report notes despite several new technologies expanding the number of ways that customers can interact with their bank, surveys reveal that visiting a teller continues to be the most common way for households to access their accounts.

In conclusion, despite new technologies creating convenient new ways for bank customers to conduct businesses, there is not much evidence that these new channels have done much to replace the traditional brick-and-mortar banking where relationships are built.