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US banks backing away from in-store branches

With few exceptions, most of the top U.S. banks by in-store deposits are streamlining their branch networks.

As of Jan. 21, there were 3,989 FDIC-insured in-store branches, according to S&P Global Market Intelligence's annual analysis. The in-store branch count has fallen 2.3% since June 30, 2019, and 6.5% since June 30, 2018.

Despite a smaller footprint, deposit growth for the year ended June 30, 2019, remained positive, albeit at the lowest level since 2014. Total in-store deposits were $84.35 billion last June, up 0.3% from the previous year. On a same-store basis, annual deposit growth was 7.2%.

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By opening more in-store branches, Woodforest Financial Group Inc. is an outlier in the banking industry. Woodforest ranks No. 1 in terms of number of in-store branches and No. 11 for in-store deposits. Since June 30, 2018, Woodforest has added a net 48 branches, bringing its in-store network to 736. All but seven of those branches are located in Walmart Inc. stores. The median deposit size of the bank's in-store branches is $2.8 million.

Huntington Bancshares Inc., the No. 7 bank by in-store deposits, is one of the industry's success stories. Its $3.41 billion of deposits in stores as of June 30, 2019, represents 14.2% annual growth and 74.2% two-year growth. But like its banking peers, Huntington is continually searching for ways to optimize its branch network.

At Goldman Sachs Group Inc.'s U.S. financial services conference held in December 2019, Huntington Chairman, President and CEO Stephen Steinour said, "We are also consolidating 30 in-store Giant Eagle branches in the first quarter of 2020. They're largely in the Northeast part of Ohio."

Approximately 38% of Huntington's in-store branches are in Giant Eagle Inc. stores in northeast Ohio, including 40 in Ohio's Cleveland-Elyria, metropolitan statistical area; 14 in Ohio's Akron MSA; 10 in Youngstown-Warren-Boardman MSA, which is in Ohio and Pennsylvania; seven in Ohio's Canton-Massillon MSA; and one each in Ohio's Ashtabula and Salem MSAs. Just over half of those 73 branches held less than $20 million in deposits as of June 30, 2019.

Huntington also is the major banking affiliate of Meijer Inc., with 96 active branches. All of those branches are in Michigan, including more than one-third in the Detroit-Warren-Dearborn MSA.

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TCF Financial Corp., which has the sixth-most in-store deposits, is another regional bank pulling back from that service option. It closed a branch in a Cash Wise store in the St. Cloud, Minn., MSA at the end of 2018 and a branch in King Soopers in the Denver-Aurora-Lakewood Colorado MSA last March. The bank's in-store branch count is down to 121, accounting for 23% of its total branches.

TCF Financial, which completed a merger of equals with Chemical Financial Corp. in August 2019, is planning to exit more stores. At the November 2019 BancAnalysts Association of Boston conference, President and CEO Craig Dahl said, "We had some branch closures that we announced. These are initiatives that are unrelated specifically to the merger, four traditional branches and 17 grocery store branches, we announced."

Wells Fargo & Co. is the bank leader in terms of in-store deposits, but its presence is diminishing. Total in-store deposits dropped 5.3% to $16.46 billion for the year ended June 30, 2019. The active in-store branch count has fallen to 294 from 358 in the last 19 months.

U.S. Bancorp also has been shedding in-store branches, with its count down by more than 100 since June 30, 2018. In contrast to Wells Fargo, U.S. Bancorp recorded positive in-store deposit growth in the year ended June 30, 2019.

Safeway Inc., the No. 2 in-store affiliate by total deposits behind The Stop & Shop Supermarket Co. LLC, houses the most branches for Wells Fargo and U.S. Bancorp. During the year ended June 30, 2019, total deposits at branches in Safeway stores decreased 4.0% to $8.68 billion. Since June 30, 2018, there have been 62 net bank branch closings at Safeway stores, mostly by U.S. Bancorp, Truist Financial Corp. and Wells Fargo.

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