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In-store branches remain niche deposit-gathering force despite closures

The number of in-store branches in the U.S. has declined, but bank branches inside stores gained deposits at a rate that outperformed the industry.

In-store bank branches make up 5% of active FDIC-insured bank branches in the U.S. and tend to hold less deposits than a typical stand-alone branch, averaging $18.5 million per branch as of June 30, 2017, compared to an average of $131.7 million per branch among all bank branches.

Though small in size, in-store bank offices continue to generate deposits for their owners. Deposits at in-store branches grew at a median of 9.7% between June 30, 2016, and June 30, 2017, compared to median growth of 5.8% at all bank branches.

Despite the performance, the largest banks ranked by in-store deposits have been pulling away from their store branch networks in recent years. A little more than 10% of Wells Fargo's branch closings since June 30, 2016, have been branches inside stores, but only 6% of their existing branches as of June 30, 2016, were inside stores.

The overall number of active in-store branches declined at a steeper rate than the industry's branches, falling 8.0% compared to a 3.0% decline among all bank branches. Some of the decline was driven by the failure of Milwaukee, Wis.-based Guaranty Bank (MHC) in May 2017. Guaranty Bank owned 107 branches in retail outlets among a variety of stores including Wal-Mart, Kroger and Pick N' Save. Raleigh, N.C.-based First Citizens BancShares Inc. assumed all the deposits but did not reopen Guaranty's in-store branches.

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Wal-Mart Stores Inc. has by far most in-store bank branches, housing 1,316 bank offices with $6.22 billion of deposits as of June 30, 2017, divided among 120 banks. Most of the branches inside Wal-Mart stores belong to Woodforest Financial Group Inc., based in The Woodlands, Texas. Woodforest had $1.70 billion of deposits in 687 Wal-Mart branches.

On a total deposit basis, the largest in-store bank branch presence is in Stop & Shop Supermarket Stores, a Northeast grocery store chain that partners with People's United Financial Inc. and Citizens Financial Group Inc., among other banks. The 326 branches inside Stop & Shops held $9.36 billion in deposits as of June 30, 2017.

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Some of the fastest growing in-store branch networks are in Southern California supermarkets. Deposits at branches inside Ralphs Grocery Co. grew 50% between June 30, 2016, and June 30, 2017, driven by a Wells Fargo & Co. branch in Orange, Calif., that grew from $23.8 million at June 30, 2016, to $807.9 million in deposits as of June 30, 2017. The zip code for the branch is estimated to be 51% of Hispanic origin, according to S&P Global Market Intelligence. U.S. Bancorp, Mitsubishi UFJ Financial Group Inc., CIT Group Inc. and Popular Inc. all have at least one branch inside of a Ralphs.

In S&P Global Market Intelligence's 2016 in-store branch rankings, the highest branch growth was seen at Asian grocery store chain 99 Ranch Market, which has a presence in Southern California, as well as in other Asian-American communities around the country.

A BBVA Compass Bancshares branch inside Superior Grocers, another SoCal grocery store chain, grew deposits to $86.0 million as of June 30, 2017, from $33.2 million at June 30, 2016. The zip code of the store in Ontario, Calif., has 73% residents estimated to report as Hispanic, according to S&P Market Intelligence's demographics data. The branch advertises its Spanish-speaking staff on its website. While new branch openings across the nation are becoming more rare, Wells Fargo in 2016 opened a branch inside of a Superior Grocers store in a Long Beach, Calif., zip code that is 59% Hispanic.

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The data in this article was gathered using the bank branch database, which can be accessed using the Data Wizard in the Excel add-in. You can also use the MI website to analyze branches using U.S. Branch Analytics located in the Apps tab in the header bar.