BRANCH BANKING GROWS DESPITE DECLINE IN NUMBER OF INSTITUTIONS

Branch banking remains a dynamic and growing force, according to the Federal Deposit Insurance Corp. While the number of FDIC-insured commercial banks and savings institutions declined by 194 in the year ending June 30, 2004, the number of branch offices surged by 1,594 during the same period, said

At mid-year, the number of insured institutions came to 9,066, down from 9,260 a year earlier, while the number of main offices and branches rose to 89,814, up from 87,790. Commercial banks accounted for 75,773 offices, and savings institutions for 14,028, the FDIC said. The remaining 13 branches are U.S. branches of foreign banks.

Retail branches, which include offices in locations such as supermarkets or department stores, posted the highest percentage gain, to 4,728, a 12.3 percent hike. Up from 302 in 1994, the number of retail branches "reflects the ongoing evolution to bring the bank to the customer" with a wider range of services, said the FDIC in a report, Branching Continues to Thrive as the U.S. Banking System Consolidates.

One counter-trend: Institutions with $1 billion or less in assets had 669 fewer total offices, at 33,191, for the year ending on June 30, although assets grew by more than 4 percent (versus 7 percent at larger institutions).

For smaller institutions, non-interest income, interest expense and returns on equity improve with larger branch networks, the report said. "These relationships are especially evident among community banks, which are less profitable than larger institutions."