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FYI: An Update on Emerging Issues in Banking
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Highlights from the 2006 Summary of Deposits Data

October 25, 2006

The Federal Deposit Insurance Corporation (FDIC) and the Office of Thrift Supervision (OTS) survey all FDIC-insured institutions annually as of June 30 to gather information on deposits and offices in operation. The resulting Summary of Deposits (SOD) is a valuable resource for conducting analyses of local and national deposit market trends and measuring market concentrations. This issue of FYI graphically highlights preliminary conclusions from the 2006 SOD data.1

Nationwide, deposit and office growth remains strong.

Commercial banks and thrifts continue to consolidate into larger, more diverse entities. Although the number of institution charters has declined during recent years, banking organizations continue to expand deposits and branching networks. The number of FDIC-insured institution offices increased 2.9 percent during the year ending June 30, 2006 (see Chart 1).2 However, the rate of increase in deposits (8.9 percent) considerably exceeded the growth in the number of offices. During the past five years, as the number of offices has expanded at a 1.9 percent compounded rate, deposits grew at a compounded rate of 8.3 percent.

Offices and Deposits of FDIC-Insured Institutions Continue to Grow Stronglyd


The most robust office and deposit growth has occurred in areas with the greatest population density.

As has been the case in past years, the volume of deposits and number of offices continue to expand most rapidly in the nation’s larger metropolitan areas, eclipsing growth in smaller micropolitan and non-metro areas (see Table 1).3

Table 1
Most Rapid Rates of Office Growth Have Occurred in the Nation's Larger Population Centers
 
Other Areas
Micropolitan Areas
Metropolitan Areas
 
Number of Offices
Domestic Deposits
($ billions)
Number of Offices
Domestic Deposits
($ billions)
Number of Offices
Domestic Deposits
($ billions)
June 2001
9,735
238
11,561
372
64,144
3,679
June 2005
9,804
267
11,890
431
69,713
5,177
June 2006
9,853
281
12,051
443
72,187
5,662
 
 
 
 
 
 
 
1 Year Growth Rate
0.5%
5.2%
1.4%
2.7%
3.5%
9.4%
5 Year Compound Growth Rate
0.2%
3.3%
0.8%
3.5%
2.4%
9.0%
Source: FDIC/OTS Summary of Deposits Survey
Note: Metropolitan statistical areas have urban clusters of greater than 50,000 inhabitants. Each micropolitan statistical area has an urban cluster of between 10,000 and 50,000 inhabitants. Other areas have less population.
See U.S. Census Bureau definitions for greater detail.

States experiencing the most rapid rates of growth in number of branches are not necessarily those where the volume of deposits also is expanding rapidly. Generally, with few exceptions, deposit growth is strongest in coastal areas, whereas office growth varies more widely across the country (see Map 1 and Map 2). In many cases, demographic factors, such as population, employment, and per capita income growth, correlate well with the growth in deposits and number of offices. However, state law and specific local market conditions also drive branching decisions.

Growth in the Number of Banking Offices Varies Considerably Across the Countryd

The Strongest Deposit Growth Generally Has Occired in the Nation's Coastal Areasd


The nation’s largest banking organizations report the most rapid rate of growth in banking offices.

Consolidated banking organizations holding more than $10 billion in deposits have reported the most rapid growth in the number of offices during the past five years (see Table 2). In contrast, banking organizations holding deposits under $1 billion have reported a small decline during this period. Mid-size companies ($1 billion to $10 billion in deposits) reported a moderate increase in both the number of offices and volume of deposits. The stronger growth rate of larger companies also reflects longer-term consolidation trends.

Table 2
The Largest Companies Have Reported the Greatest Deposit Growth
 
Small Organizations
Mid-Size Organizations
Large Organizations
 
Number of Offices
Domestic Deposits
($ billions)
Number of Offices
Domestic Deposits
($ billions)
Number of Offices
Domestic Deposits
($ billions)
June 2001
32,377
999
16,784
804
36,279
3,679
June 2005
31,623
1,107
17,503
967
42,281
5,177
June 2006
31,644
1,135
18,135
1,040
44,312
5,662
 
 
 
 
 
 
 
1 Year Growth Rate
0.1%
2.5%
3.6%
7.5%
4.8%
10.8%
5 Year Compound Growth Rate
-0.5%
2.6%
1.6%
2.6%
4.1%
2.6%
Source: FDIC/OTS Summary of Deposits Survey. Excludes institutions in U.S. territories.
Note:
Small = organizations with consolidated deposits less than $1 billion
Medium = organizations with consolidated deposits of $1 billion to $10 billion
Large= organizations with consolidated deposits greater then $10 billion
The number of charters included in "small organizations" has dropped from 8,726 in 2001 to 7,735 in 2006; the number of "mid-size" charters declined from 721 to 744, and "large" charters dropped from 292 to 271.



The drive-up facility is fading in popularity as offices in retail establishments are becoming more common.

Increased use of locations in retail space, such as supermarkets and department stores, continues to be a key trend in the expansion of banking offices. Although the pace of growth slowed during the past year, more banking offices were established in retail space than in any other office type during the past five years (see Table 3). At the same time, use of limited service drive-up facilities has declined steadily. The number of standard brick and mortar banking offices continues to grow and remains the most common type of office location.

Table 3
The Number of Retail Banking Offices Has Risen Sharply During the Past Five Years
 
Brick and Mortar Offices
Retail Offices
Drive-Through Facilities
Other Office Types
Total
June 2001
64,033
3,510
3,172
832
71,547
June 2005
68,897
4,583
2,957
960
77,397
June 2006
71,267
4,636
2,917
1,009
79,829
 
 
 
 
 
 
1 Year Growth Rate
3.4%
1.2%
-1.4%
5.1%
3.1%
5 Year Compounded Growth Rate
2.2%
5.7%
-1.7%
3.9%
2.2%
Source: FDIC/OTS Summary of Deposits Survey
Note: Commercial banks only. Retail banking offices are full service offices located in a retail facility such as a supermarket or department store.



Branch networks have expanded more rapidly than the population has increased.

Nationwide, the number of FDIC-insured institution offices has expanded more rapidly than the population has increased since 2000 (see Chart 2). However, these offices continue to attract domestic deposits. Annual growth in total domestic deposits averaged 8.3 percent between 2001 and 2005, compared with 5.4 percent between 1996 and 2000. These trends may imply a more aggressive retailing strategy as banks seek to provide a greater level of service to customers.

Banks and Thrifts Are Using Expanding Branch  Networks the Boost Deposit Growthd


The pace of industry consolidation continues to slow.

The number of FDIC-insured commercial banks and savings institutions dropped 1 percent during the year ending June 30, 2006 (currently a total of 8,778 institutions), the slowest decline since the mid 1980s. Merger and acquisition activity is affected by general economic conditions, trends in equity markets, and national and state laws, such as the nationwide concentration limits mandated by the Riegle-Neal Act. No banking organizations, even the largest, most geographically diverse, have a presence in all 50 states (see Table 4).

Table 4
A Fifty State Banking Company Does Not Yet Exist
Name of Company Number of States with Deposit Offices Reported Number of Deposit Offices Domestic Deposits
($ billions)
BANK OF AMERICA CORPORATION
31
5,789
590.6
JPMORGAN CHASE & CO.
26
2,721
462.3
U.S. BANCORP
26
2,526
117.4
WELLS FARGO & COMPANY
23
3,216
309.0
WACHOVIA CORPORATION *
22
3,447
370.0
BNP PARIBAS
20
724
41.3
NORTHERN TRUST CORPORATION
17
91
13.4
DICKINSON FINANCIAL CORPORATION
17
169
3.1
FIRST HORIZON NATIONAL CORPORATION
16
240
21.7
WASHINGTON MUTUAL GROUP
15
2,195
210.7
REGIONS FINANCIAL CORPORATION
15
1,397
57.2
Source: FDIC/OTS Summary of Deposits Survey
*Proforma after 10/1/06 acquisition of Golden West Financial Corporation
See SOD instructions for definition of deposit offices. http://www2.fdic.gov/sod/pdf/SODINST2006.pdf


Fifteen of the top twenty-five markets are “moderately concentrated.”

Market concentration is an important competitive factor considered by bank regulatory agencies and the Department of Justice (DOJ) in the analysis of proposed mergers and acquisitions. Although the number of banking offices continues to grow in many large metropolitan areas, none of the top 25 metropolitan areas (ranked by population) meets the DOJ’s definition of “highly concentrated,” implying an active and competitive environment in the largest metropolitan areas (see Table 5).4

Table 5
None of the Largest Cities Is Characterized as a "Highly Concentrated" Market
(Top 25 metropolitan areas by population as of June 30, 2006)
Metropolitan Area Herfindahl-Hirschman Index(1) Population Estimate (2) (millions) 5 Year Compounded Growth Rate in Offices 5 Year Compounded Growth Rate in Deposits
Dallas-Fort Worth-Arlington, TX
1,648
5.8
7.7
19.7
Cincinnati-Middletown, OH-KY-IN
1,640
2.1
1.7
0.6
Minneapolis-St. Paul-Bloomington, MN-WI
1,568
3.1
3.4
4.8
Cleveland-Elyria-Mentor, OH
1,551
2.1
1.0
4.6
Pittsburgh, PA
1,533
2.4
0.3
6.3
Phoenix-Mesa-Scottsdale, AZ
1,516
3.9
6.9
10.4
Atlanta-Sandy Springs-Marietta, GA
1,432
4.9
4.9
13.2
Detroit-Warren-Livonia, MI
1,427
4.5
2.6
5.3
San Francisco-Oakland-Fremont, CA
1,357
4.2
0.5
8.5
Portland-Vancouver-Beaverton, OR-WA
1,331
2.1
2.0
8.7
Seattle-Tacoma-Bellevue, WA
1,330
3.2
1.4
9.3
Houston-Baytown-Sugar Land, TX
1,160
5.3
6.0
6.3
Tampa-St. Petersburg-Clearwater, FL
1,139
2.6
2.4
6.7
New York-Northern New Jersey-Long Island, NY-NJ-PA
1,112
18.7
2.8
10.7
Baltimore-Towson, MD
1,030
2.7
1.1
6.6
San Diego-Carlsbad-San Marcos, CA
981
2.9
2.7
9.2
Boston-Cambridge-Quincy, MA-NH
948
4.4
1.2
5.5
Riverside-San Bernardino-Ontario, CA
916
3.9
4.1
10.9
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
860
5.8
1.3
14.1
Denver-Aurora, CO
852
2.4
4.8
8.3
Miami-Fort Lauderdale-Miami Beach, FL
833
5.4
2.1
9.8
Washington-Arlington-Alexandria, DC-VA-MD-WV
833
5.2
2.1
12.9
Los Angeles-Long Beach-Santa Ana, CA
746
12.9
2.2
8.3
St. Louis, MO-IL
649
2.8
1.4
5.0
Chicago-Naperville-Joliet, IL-IN-WI
612
9.4
5.6
5.6
Source: FDIC/OTS Summary of Deposits Survey, Moody's Economy.com
Note: (1) The Herfindahl-Hirschman Index (HHI), a commonly accepted measure of market concentration, is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. Markets in which the HHI is between 1000 and 1800 points are considered to be "moderately concentrated," and those in which the HHI is in excess of 1800 points are considered to be "highly concentrated." For more information, please refer to the joint U.S. Department of Justice and Federal Trade Commission website at http://www.usdoj.gov/atr/public/testimony/hhi.htm (2) 2005 population estimates from Moody's Economy.com.


About the Summary of Deposits Data.

The FDIC’s SOD Web site at http://www2.fdic.gov/sod/index.asp has raw SOD data available as well as various summary charts and tables. Additionally, the user can find tools to help identify and analyze information on deposits and branching activities of FDIC-insured institutions in specific markets.


Endnotes

1 This FYI reflects updates in the Summary of Deposits data as of October 16, 2006. All FDIC-insured institutions that operate branch offices beyond their home office and that are required to file a financial report with one of the Federal Financial Institutions Examination Council agencies must submit responses to SOD surveys to the FDIC or the OTS. ATMs are not considered offices for the purposes of the survey. Call Report information on unit banks (banks with a single headquarters office) have been combined with branch office data to form the SOD database which can be accessed at www.fdic.gov.

2Offices here include those in the 50 states and the District of Columbia, but not those in U.S. territories. The SOD data include domestic deposits only, and they are referred to in this report as deposits.

3 Metropolitan statistical areas are characterized by urban clusters of greater than 50,000 inhabitants. Each micropolitan statistical area has an urban cluster of between 10,000 and 50,000 inhabitants. Other areas have less population.

4Under the DOJ guidelines, markets with a Herfindahl-Hirschman Index (HHI) of less than 1000 are considered “unconcentrated;” those with an HHI between 1000 and 1800 are considered “moderately concentrated;” and those with an HHI greater than 1800 are considered “highly concentrated.” For more details, access the joint Federal Trade Commission (FTC) and DOJ Web site on “Horizontal Merger Guidelines” at http://www.usdoj.gov/atr/public/guidelines/horiz_book/hmg1.html.



About the Author
Ronald Spieker is Chief of the Regional Programs Section, Division of Insurance and Research, FDIC.

Comments and Inquiries
Send comments or questions on the FYI to Ronald Spieker rspieker@fdic.gov

Send feedback and technical questions about the FYI series to:
fyi@fdic.gov

All media inquiries should be addressed to: David Barr, FDIC Office of Public Affairs, dbarr@fdic.gov


About FYI
FYI is an electronic bulletin summarizing current information about the trends that are driving change in the banking industry, plus links to the wide array of other FDIC publications and data tools.

Disclaimer
The views expressed in FYI are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance Corporation. Some of the information used in the preparation of this publication was obtained from publicly available sources that are considered reliable. However, the use of this information does not constitute an endorsement of its accuracy by the Federal Deposit Insurance Corporation.

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Last Updated 10/25/2006 fyi@fdic.gov