Accessible Version
Size and Survival of Entrants to Retail Banking, Accessible Data
Figure 1. Growth of Deposits of New Branches in Retail Banking.
Figure 1 contains a left and right panel. The left panel, titled the "Distribution of Branch Deposits (1977-2020)," describes the dollar deposits (measured in millions of dollars) by the number of years since opening. The right panel, titled the "Percent of Branches that Attain Maximum Deposits (1977-2020)," describes the percent of branches that have attained maximum deposits by the number of years since opening. In the left panel, a black dashed line describes the median and a grey shaded region highlights the interquartile range. The left panel illustrates that dollar deposit growth is fastest in the first three years and moderates thereafter. Further, at 15 years since opening, the 25th-percentile branch attracts $26 million in deposits, the median branch attracts $50 million in deposits, and the 75th-percentile branch attains $93 million in deposits. The right panel, with a solid black line, reiterates that deposit growth, now indicated by the percent of branches that attained maximum deposits, is fastest in the first three years since opening. Thirty percent of branches reach maximum deposits by three years after opening, fifty percent reach maximum deposits by five years after opening, and 80 percent of branches reach maximum deposits by fifteen years after opening.
Figure 2. Entry Failure and the Growth Path of Ultimately Successful vs Unsuccessful Entrants.
Figure 2 contains a left and right panel. The left panel, titled "Closure Rate by Year Since Opening (1977-2020)," contains a black line representing the closure rate and a red line representing the cumulative percent of branches closed by year since opening. The black closure rate line is lower than the red cumulative percent of branches closed line. The black closure rate line, which increases slowly, demonstrates that at 1, 10, and 15 years since opening, 4, 10, and 12% of branches close each year. Likewise, the red cumulative percent closed line demonstrates that at 10 and 15 years since opening, 29 and 37% of all new retail bank branches close. The right panel, titled "Deposit Growth of Successful vs. Unsuccessful Branches (1977-2009)," contains a dashed median line and shaded interquartile range for both unsuccessful and successful branches' deposit growth (measured in millions of dollars). Unsuccessful branches are colored in red, and successful branches are colored in black. This figure highlights the divergent growth of deposits among unsuccessful and successful branches: the median unsuccessful branch garners $20 million and $24 million in deposits after 5 and 10 years since opening. Meanwhile, the median successful branch garners $32 million and $41 million in deposits after 5 and 10 years since opening.
Figure 3. Deposit growth of de novo bank branches vs new branches of existing banks.
Figure 3 contains a left and right panel. The left panel, titled "Distribution of Branch Deposits (1977-2020)," describes the dollar deposits (measured in millions of dollars) by branch status as a de novo bank's branch or an expansion branch by a pre-existing bank. The right panel, titled "Percent of Maximum Deposits Attained (1977-2020)," describes the percent of branches that attain maximum deposits by the number of years since opening. In the left panel, a red dashed line and pink shaded region denotes the median and interquartile range of de novo banks' branch growth. Similarly, a black dashed line and grey shaded region denotes the median and interquartile range of incumbent banks' branch growth. By year 3, median de novo banks' branches attain over $57 million while median incumbent banks' branches only attain $23 million. The right panel, with a black solid line for expansion branches and a red solid line for de novo bank branches, reveals that median relative deposit growth remains similar across branch types.
Figure 4. Deposit growth of county-level de novo entrants vs new branches of county-incumbents.
Figure 4 contains a left and right panel. The left panel, titled "Distribution of Branch Deposits (1977-2020)," describes the dollar deposits (measured in millions of dollars) by the within-market branch status as a bank's market expansion branch or de novo market branch. In the left panel, a red dashed line and pink shaded region denotes the median and interquartile range of de novo banks' branch growth. Similarly, a black dashed line and grey shaded region denotes the median and interquartile range of incumbent banks' branch growth. By year 3, median de novo banks' branches attain over $24 million while median incumbent banks' branches attain $23 million. The median market expansion branch grows to over $50 million in deposits by 15 years since opening, and the median de novo market branch grows to just under $50 million in deposits by 15 years since opening. The right panel, titled "Percent of Branches that Attain Maximum Deposits (1977-2020)," describes the percent of maximum deposits attained by the number of years since opening. Market expansion and de novo market branches grow similarly up to three years after opening, but thereafter, market expansion branches attain maximum deposits faster. At 15 years since opening, 80 percent of market expansion branches and 75 percent of de novo market branches attained their maximum deposits.
Figure 5. Deposit growth of New Branches for Small vs Large Banks.
Figure 5 contains a left and right panel. The left panel, titled "Distribution of Branch Deposits (1985-2020)," shows the divergence in branch deposits (measured in millions of dollars) between community and mid-size to large banks: the median branch controlled by community banks exhibits slower growth, reaching $23 million after 3 years since opening and $49 million in deposits after 15 years since opening. Similarly, the median branch controlled by mid-size to large banks exhibit faster growth, reaching $26 million after 3 years since opening and $64 million in deposits after 15 years since opening. At 15 years, the 25th-percentile branch operated by a mid-size to large bank is comparable in size to the median branch operated by a community bank. The right panel, titled "Percent of Branches that Attain Maximum Deposits (1985-2020)," reveals that branches of community and mid-size to large banks reach maximum deposits at similar rates. At 3 and 15 years since opening, 30% and 85% of branches from both groups attain their maximum deposits.
Appendix Figure 1. Time Series of de novo Entry.
The left panel of the appendix, titled "De Novo Bank Formation (1976-2020)," displays the number of bank openings between 1976-2020 with a solid black line. There exists steep but uneven growth from approximately 150 banks opening per year in 1976 to 325 banks opening per year in 1985. After 1985, the number of bank openings fall drastically to 25 banks per year in 1984. Bank openings peak again in 2000 and 2006 at around 275 and 175 bank openings per year. Around 10 banks open per year from 2010-2020. The right panel of the appendix, titled "Share of branch Openings by De Novo Banks (1977-2020)," illustrates the relative number of branches opened by de novo banks rather than incumbent banks with a solid black line. The pattern of the right panel is similar to the pattern of the left panel. The relative share peaks at 13 percent in 1984 and 1986, then exhibits a steep fall to 1 percent in 1994. After this time, the relative share peaks again at 7 percent in 1999 and at 5 percent in 2006. From 2010-2020, the relative share remains between 0 and 1 percent.
Source: Summary of Deposits
Appendix Figure 2. Time Series of Aggregate Branch Entry and the Deposit-Inflation Index.
The left panel of the appendix, titled "Branch Openings (1977-2020)," depicts the number of branch openings between 1977 and 2020 with a solid black line. From 1997-2007, there exist steep peaks and troughs in the number of branch openings. For example, branch openings peak at around 3,600 in 1981 but then fall to 2,400 in 1984 before returning to 3,500 in 1986. The largest peak occurs in 2007, with just over 4,000 new branches opened. However, the fastest decline then occurs, with branch openings falling to approximately 1,500 in 2010. Branch openings after 2010 remain depressed and do not exhibit the same peak-and-trough pattern. Only 750 to 1,250 new branches open each year in the 2010-2020 decade. The right panel of the appendix, titled "Index for Inflation Adjustment (Denominated in 2020 Dollars)," plots the indices used to adjust branch deposits and bank assets for inflation. In 1977, the branch deposit inflation index is nearly 6 but rapidly falls to 2.8 in 1983. The branch deposit inflation index declines with some fluctuations until 1993, where it pivots from 1.4 and climbs back up to 2.8 in 1998. After 1998, the branch deposit inflation index again falls with some fluctuations until it reaches 1 in 2020. Because of a lack of bank asset data prior to 1985, the bank asset inflation index starts at nearly 13 in 1985 but rapidly falls to approximately 5 in 1993. The bank asset inflation index fluctuates between 5 and 7 until 2003, when the index gradually falls to 1 by 2020.