FDIC Publishes Detailed Branch Data: Key Takeaways

The FDIC recently published detailed branch and deposit data for different geographic levels for all U.S. banks. EMI’s analysis of this data revealed the following trends:

  • There is a continued (but slowing) decline in the number of bank branches. Over the past 10 years, the total number of domestic branches for FDIC-insured institutions declined by almost 24% to fewer than 78,000 branches. This equates to an annual average decline of 2.1%. In 2Q21 and 2Q22, the y/y rate of decline exceeded 3%, but this slowed to 1.7% y/y to the end of June 2023.
  • Some of the largest banks had the strongest percentage declines in branches. Our detailed analysis of 30 leading banks (see below) found a 3.1% y/y decline in branches (from 35,039 to 33,920) at the end of 2Q23. However four banks with networks of more than 2,000 branches reported declines of more than 4%: Wells Fargo (-4.4%); PNC (-6.7%); Truist (-5.4%) and U.S. Bank (-8.1%). Santander Bank reported the largest percentage decline (-8.9%).
  • Some banks are growing their branch networks. While the overall trend has been for banks to trim their networks, some banks are maintaining or even growing their commitment to this channel. TD Bank grew its network by 11 branches, adding branches in 8 existing markets, as well as opening its first branch in The Villages, FL. Following the collapse of its planned merger with First Horizon earlier this year, TD announced plans to open 150 U.S. branches by 2027 with a focus on Southeast markets.
  • Banks are maintaining their presence in the vast majority of their markets. While banks are reducing branch density in their existing markets, few are completely leaving these markets. Seven of the 30 banks exited a market over the past year, but only one left more than one market: City National Bank closed its branches in both Reno and Carson City, NV.
  • Branch closures were spread across many existing markets. Overall, the 30 banks closed branches in 22% of their existing markets, through several had higher percentages of existing markets impacted by closures, including Santander Bank (56%), Truist (39%) and PNC (32%).
  • Banks concentrated their reductions on markets with the largest branch networks. Banks reduced branch densities in many of their main markets, enabling them to cut costs while maintaining a significant presence. Although more than a third of Wells Fargo’s branch reductions took place in just 8 markets, each of those markets continues to have more than 100 branches.
  • Some banks are opening new branches in existing markets. The 30 banks increased branch numbers in 4% of existing markets, led by TD Bank (increased branch numbers in 14% of their existing markets) and Fifth Third (13%), who are both expanding their presence in key southeastern U.S. markets. JPMorgan Chase increased branch numbers in 22 markets (10% of its existing markets), including Washington (+11 branches), Minneapolis (+9), Kansas City (+7) and St. Louis (+7).
  • J.P. Morgan Chase is leading the way in market expansion. Over the past year, the bank opened branches in 10 new markets, including Buffalo and Virginia Beach (4 new branches in each market). This is part of a longer-term strategy to grow its branch footprint: the bank reported at its 2023 Investor Day that its population coverage rose from c. 60% in 2017 to c. 80% in 2022, with the bank now aiming for 85% population coverage.

7 Communications Tips for Banks in Developing an Effective COVID-19 Response for Small Business Clients

Now that Congress and the Administration have agreed on a $310 billion deal to replenish the Paycheck Protection Program (PPP), banks are scrambling to help small businesses apply for this additional funding. At the same time, banks are providing information to small business clients on direct reliefs and channel availability, as well as tips to deal with the COVID-19 pandemic.

The enormity of the challenge facing small businesses and the economy as a whole defies description. No communication can overcome this burden. But silence is not an option and messaging matters. It’s critical to communicate effectively with small business clients during this pandemic.

Develop a multi-faceted response. The PPP is vital for many small business owners, but many banks have only been providing information on how to apply for PPP. This means they are missing other opportunities to engage with and help small business owners, many of whom are struggling with day-to-day operational issues. Consider offering additional information on supports available to small businesses, and advice on how to navigate through the pandemic.

  • Best practice: PNC has developed a range of content to help small businesses deal with the crisis, including “Four Ways Small Businesses Can Navigate During Times of Uncertainty” and “What to Do When Cash Flow Slows.”

Create a connection. Messaging on coronavirus response must be both clear and empathetic. This is particularly important in headlines and topline statements on how the bank is supporting its small business clients.

  • Best practices: Citizens Bank and KeyBank both use the theme of “We’re in this together” for their coronavirus information.

Communicate information clearly. To ensure that small business clients are directed to key information and not overwhelmed by detail, focus on strong copywriting and editing, as well as using layout and navigation tools to help readers quickly find what they need.

  • Best practice: Santander Bank uses red type, spacing, headings, and bullet points to effectively organize its COVID-19 response information.
  • Best practice: TD Bank uses tabs on its website to direct small businesses to information on its own customer assistance program, SBA PPP Loans, and other relief options.

Provide guides and tools. Many banks have developed tools (such as online forms, FAQs, guides and checklists) to aid small businesses in understanding support and options available to them,and to apply for funding

  • Best practice: Huntington Bank has published a series of FAQs to address various aspects of the PPP program, including general questions, eligibility and application information.
  • Best practice: Umpqua Bank integrated a well-designed application form into its CARES Act Paycheck Protection Program information page.

Consolidate all information into a single resource center. Develop standalone portals or resource centers to retain all coronavirus-related information in a single location. This enables you to maintain a consistent tone in coronavirus messaging, avoid any client confusion, and better manage the process of providing updates.

  • Best practice: Citizens Bank operates a dedicated COVID-19 Resource Center, with links to services and resources, details on financial hardship relief assistance and a message from the bank’s CEO.

Embrace multiple communications channels. Use the numerous channels – branch, phone, website, social media – at your disposal to provide updates and directly engage with small business clients.

  • Best practice: PNC directs clients to dedicated toll-free numbers for different product categories; some numbers are operational 24×7.

Update information regularly. Many banks provided initial information on their COVID-19 response, but they have not provided regular and comprehensive updates, a critical failing in this extremely dynamic environment.

  • Best practice: Bank of the West publishes regular updates in videos featuring the bank’s CMO Ben Stuart.

Key Considerations for Effective Financial Education Programs

Banks and other financial providers have recently increased their focus on developing financial education programs, driven by a number of factors:

Numerous studies have highlighted deficiencies in financial literacy among U.S. consumers.  FINRA Foundation’s National Financial Capability Study found that only 37% of people were considered to have high financial literacy in 2015, down from 42% in 2009 and 39% in 2012.  Studies also show that consumer exposure to and engagement with financial education programs leads to smarter financial decision making.  Therefore, the onus is on a range of entities (government, educational institutions, nonprofit organizations, industry associations, and of course financial firms) to develop programs to improve financial literacy.

Many financial firms are looking to (re)position themselves as trusted providers of not just products and services, but also of information and advice that can help people better manage their finances.  To that end, financial education programs can act as a means to help banks cement relationships with their clients.

The following are some key considerations for financial firms in establishing a new financial education program—or in enhancing an existing one:

  • Conduct research to gain insights into consumers’ financial literacy levels, attitudes to financial services, preferred channels for consuming financial information, and favored sources of financial information and advice.
  • Create a dedicated and branded financial literacy program that brings together the diverse range of financial education initiatives under one umbrella.  These programs can take the form of an online portal, such as the TD Bank Learning Center, John Hancock Retirement Plan Services’ My Learning Center and MassMutual’s FutureSmart program.
  • Conduct financial education surveys.  Surveys are an effective way to raise consumer awareness and interest, highlight commitment to raising financial literacy, and gain insights that inform financial education program development and execution.  U.S. Bank recently published two financial education surveys: the Parent Financial Education Survey (July 2016, focused on the parents of college students aged 18-14) and the Student and Personal Financial Survey (September 2016).  Last month, Bank of America published the Bank of America/USA Today Better Money Habits report, which was versioned for 7 of its markets.
  • Ensure that financial education content reflects the different ways that consumers process information.  Keep content short, with easy-to-follow tips and soundbytes.  Incorporate images, infographics or video to enhance its visual appeal.
  • Distribute content through a range of channels.  These channels can include online portals (as described above), events, in-person and online courses, and social media platforms. (PNC announced in August that it would be using Pinterest to promote its financial and early childhood education initiative.)  In addition, a number of banks (e.g., First Tennessee, First National Bank and SunTrust) have partnered with Operation Hope to open HOPE Inside offices in its branches.  SunTrust recently announced an ambitious plan to expand the Operation HOPE Inside program from 7 branches today to 200 by 2020.  The number of individuals receiving financial counseling through these offices is expected to rise from 6,000 to 150,000.
  • Partner with schools and nonprofit organizations that promote financial literacy in communities.  This partnership can take the form of joint programs, funding or employee volunteer hours. Fifth Third recently introduced an initiative to deliver its Empower U financial literacy course through 60 local nonprofit organizations throughout its footprint.  And Allianz Life recently awarded $275,000 in financial literacy grants to 14 nonprofit organizations in the Twin Cities.

Well-constructed, well-delivered financial education programs improve financial literacy.  This in turn leads to smarter financial decision making, benefitting both consumers and their financial providers.