Do We Just Have Too Many Bank Branches?

Bank of Shedd Is your bank usually deserted? Market Rates Insight may know why. The banking industry research company just published a new report suggesting that in some states, banks and credit unions may have built too many branches for the number of people living nearby.

The mismatch is most pronounced in Rhode Island, which saw a 15.5% increase in the number of bank branches over the last decade, even though the state’s population held basically flat. Another outlier was New York, where population grew by 3% but the number of bank and credit union branches grew by 18.8%.

“While banks and credit unions kept up with population changes in the high-growth states, they have not done so in states with no or low-change in population,” Dan Geller, head of research at Market Rates Insight, wrote in the report.

[Resource: Seven Questions to Ask Before Opening a Bank Account]

Michigan, Louisiana, West Virginia and North Dakota all saw dramatic increases in the number of bank branches, even though their total populations held steady. Only one state, Utah, saw the opposite. Utah’s population grew by almost 25% between 2000 and 2010, but the number of bank and credit union branches grew by just 8.5%, Geller found.

Of course, it’s hard to know whether this comparison makes any sense, or whether it’s just comparing apples and oranges. In a state like New York, which includes cities like Buffalo and Rochester that are declining in population, statewide population averages may mask growing demand for bank services in large and growing cities like New York City. The comparison also doesn’t take into account new banks and credit unions entering states, in which case it may still make business sense to open a branch, even if doing so divides the same population between more and more banks.

What do you think? Does this explain why your local branch is deserted?

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Image: Bruce Fingerhood, via Flickr.com