Study finds more bank branches, but only in higher-income areas


Despite recent cutbacks, the number of U.S. bank branches is significantly higher now than six years ago — but only in more well-to-do areas.

A new study found the number of bank and thrift offices rose 8.4% since 2006 in neighborhoods whose affluent households had median incomes of $100,000 and up. By contrast, there was a 1% decline in branches in areas with median household incomes of less than $25,000.

The SNL Financial study of census data and regulatory filings provoked outraged comments from financial advocacy groups, who said it confirmed trends that they were seeing.


“We are very concerned that regular folks who may not happen to have a lot of money are being pushed methodically out of mainstream banking,” said Alan Fisher, executive director of the California Reinvestment Coalition in San Francisco.

“The regulators allowed subprime and expensive credit card lending, and now they are standing by while the financial divide widens through the methodical efforts of the big banks to serve the wealthy and exclude those who are not,” Fisher said.

Industry officials took issue with the study released Monday. Bank consultant Bert Ely of Alexandria, Va., said retail businesses of all kinds are following population trends by consolidating older stores in city centers and established suburbs while opening more in outer suburban areas.

Also, he said, big banks that made acquisitions of other retail players during the financial crisis — such as Wells Fargo & Co.’s takeover of Wachovia Corp. — resulted in many closures because the surviving bank wound up with overlapping offices.

The study said since 2009 Wells Fargo has closed 345 branches that were once owned by Wachovia or an affiliate.

Bank consultant G. Michael Moebs of Lake Bluff, Ill., said the study was skewed because its time frame started with 2006, a record year financially for many banks, and then included years of extreme stress for the industry.


“In good times branches will be built in high-, medium- and low-income markets,” he said. “In bad times, like the past three years, there will be consolidation to reduce expenses, and, yes, lower-income markets will definitely decrease.”

Moebs noted that the study excluded credit unions, which have been expanding at the expense of major banks and often cater to people with moderate income. So the shift, he said, “may be somewhat of an illusion.”

The study showed banks have cut back on branches in all categories over the last three years, but most of that pruning took place in neighborhoods where the median income was less than $50,000.

Overall, the number of branches across the nation has increased by about 2,500 since 2006, reflecting a wave of openings that began during the bubble economy as well as the recent decline. The peak came in 2009, with 98,426 branches nationwide.

“The makeup of those branches has changed as the industry shifts its focus to building branches in higher-income areas,” SNL researchers David Hayes, Tahir Ali and Tyler Hall wrote.

The shift reflects several recent trends in the banking industry, including a squeeze put on profits by record-low lending rates. Banks have also been hit by new laws and regulations in the aftermath of the financial crisis that put restrictions on fees they could charge.


In response, banks are “going where the money is,” said Frederick Cannon, director of research at Keefe, Bruyette & Woods. “It would be in line with incomes stagnating for the middle class, but growing at the high end.”

Orson Aguilar, director of the Greenlining Institute, a fair-lending advocacy group in Berkeley, said the trend was “really disturbing.”

“Prior to the crisis, most banks often touted that their most profitable branches were in low- and moderate-income areas,” Aguilar said.

“Now that overdraft fees are restricted, banks are losing interest in serving lower-income communities. We expect that this trend might accelerate, given the race to serve high-income clients.”