Banks branch out

Need to make a deposit? There’s bound to be a bank close by looking for your business.

The number of banks and the number of bank offices in Columbia both have increased by 50 percent in the past decade, and bank listings and their advertisements span almost four pages in the area’s Yellow Pages. The Federal Deposit Insurance Company lists 22 full-service banking institutions in Boone County.

“Columbia attracts new banks because of its strong population growth and good economy, so I [expect] this trend to continue,” said Teresa Maledy, president of Commerce Bank.

While there may not be too many banks in Columbia, there are too many bank branches, said Mary Wilkerson, vice president of marketing at Boone County National Bank. BCNB has 16 locations, 10 in Columbia.

“People are trying to get out there early with their branches and take advantage of potential growth. If that growth happens, they’ve made a good bet. If that growth doesn’t happen, then they have a really expensive branch that can’t sustain itself,” Wilkerson said. “In my mind, we have too many branches for the people we have. While this may sound like good news for consumers, smaller banks may find it harder to sustain profits in such a market.”

Typically, banks operate with about 1,500 households per branch. The Columbia market offers about 800 household per bank branch right now, with more banks on the way, Wilkerson said.

In 1994, Boone County had 14 banks with 40 branches, with an average deposit of $30.5 million per branch. In mid-2006, the county’s 22 banks had 60 branches and an average deposit of $36.4 million, according to the FDIC.
“Profitability at the branch level is determined by different factors, including occupancy costs and the length of time the bank has been open. Each banking company evaluates profitability in a little bit different way,” said Maledy.

Wilkerson said the area may see another phase of consolidation. “Consolidation is very, very cyclical. We went through a really big time of consolidation a few years ago, and then it really slowed down, but it seems to be starting to pick up again,” she said.

“Theoretically, we should see banks not making it and pulling out of the market or being consolidated or sold. Whether that will be one year or two years from now is hard to say.”

Commerce Bank acquired Boone National and added three new branches in 2006. The bank plans to open another branch in March at Range Line Street and Brown School Road, said Maledy. The bank also added offices in Ashland and Lake of the Ozarks. “At Commerce, we evaluate new branch locations based on feedback from our customers, and we plan to add more convenient locations in the coming years.”

The trend toward building more bank branch offices in the United States continues. FDIC figures indicate a jump from 84,200 branch networks in 1990 to 94,029 nationwide in September 2006.

Banks often use marketing research companies such as Bancography, based in Birmingham, Ala., to optimize branch networks. Models evaluate the demographics and competitive environment for proposed locations. Factors include population counts, growth projections, age distribution, racial composition, home values and employment counts.