Our last post described how bank failure rates are performing so far in 2015-2016. In this post, we go into more detail about the 8 US banks that have failed since January 1st, 2015.
The smallest of the failed banks, Washington’s Hometown National Bank, held only $3.8 million in assets before closing. The largest, Bank of Georgia, had $286 million in assets. Both of these banks (and all banks in between) qualify as community banks. Another quality in common among every bank that failed: their branches were, on average, very oversized.
Using a variety of data sources: tax parcel maps, SNL Financial, CoStar, and others, we’ve determined that the average size of the branches for the failed banks was 9,542 square feet.
The top offenders were Edgebrook Bank’s 28,000 square foot Chicago, Illinois branch, First National Bank of Crestview’s 25,933 square foot branch in Crestview, Florida, and Capitol City Bank & Trust Co.’s 24,000 square foot branch in Atlanta, Georgia. This is compared to the recent average branch size of 3,040 square feet (some banks are trying as small as 900 square feet or less).
To show how big these branches were, consider this: a typical ALDI, full to the brim with frozen, packaged, and canned goodies, is typically around 18,000 square feet (that’s counting the back storage room, too). Walgreens occupies around 12,000 to 15,000 square feet, and Dollar Tree typically fills 10,000 to 12,000 square feet of space. Of the combined failed banks’ branches, approximately 8% were an appropriate less-than-3,000 square feet. 20% were 3,000 to 4,999 square feet, 40% were 5,000 to 9,999 square feet, and 32% were a whopping 10,000+ square feet.
Every banker loves discussing the future of the branch, but whether you’re a small community bank with 3 branches, or a large community bank with 80, its important not to look over what’s happening right in front of you, in your brick and mortar locations, now. That 10,000+ square foot branch that you’re holding onto is weighing you down, and could have an impact on your bank’s sustainability.