The discrepancy means millions of people who don't live near a bank have had to hand over $2, $5 or $10 at a time -- sometimes more -- in service fees to nonbank outlets to conduct basic transactions such as cashing checks or paying bills that most bank customers take for granted.
Nearly six branches were added every day, with bank offices racing to exclusive neighborhoods such as University Park in Dallas, Midtown West in Manhattan and Music Row in Nashville, Tenn., along with the fast-growing exburban communities surrounding Sacramento, Calif.; Phoenix; and Cincinnati.
"It's crazy, and they're building another one!" said Mary Morgan, pulling into a parking spot at a JPMorgan Chase branch in University Park. Up the road, Comerica just cleared a lot to build a bank. A half-mile away, a financial institution is replacing a restaurant, she said.
"It's stupid," Ms. Morgan said. "How can the market be that big?"
Meanwhile, bank growth either declined or remained stagnant across wide swaths of the nation's inner cities, with branches closing in Cleveland, Pittsburgh and elsewhere.
Data from the Federal Deposit Insurance Corp. show the nation's 99,000 banks generally followed the money. About two-thirds of all neighborhoods have a median household income higher than the national average; about two-thirds of the new bank branches were in those neighborhoods.
An Associated Press analysis, however, found that branches weren't added at a proportionate rate in minority neighborhoods. About one-third of the neighborhoods analyzed are predominantly minority, according to the Census Bureau; only about 1 in 10 new bank branches showed up in those areas.
The AP study was reviewed by the American Bankers Association and is consistent with other federal studies.
"It's like the proverbial ambulance chasers," said Charles O'Neal, a vice president at the Dallas Black Chamber of Commerce. "They're all chasing the same dollar, and they get little return. Meanwhile, on this side of town, folks are literally spending sleepless nights trying to figure out where do we go to find a financial institution that will be responsive to their needs."
Bank officials say they are following the growth of customers to continue providing services because most people choose banks based on branch locations.
Bank watchdogs, however, say less-regulated financial institutions are filling the void and expanding at the expense of vulnerable, inner-city residents. As a result, they are relying on high-cost lending businesses for services traditionally provided by bank branches.
"When you don't have banks going into poor communities, you're going to wind up with places where there are a lot of predatory products," said Kathleen Day, a spokeswoman for the Center for Responsible Lending, a Washington-based advocacy group. "It's a real problem."
Even in a digital age when banking is done online, the 99,000 bank branches are important barometers of economic health for thousands of communities. People in neighborhoods without banks are more likely to spend more of their money for basic financial transactions.
About 30 million people cash checks at businesses that aren't banks, according to MSG CPA, a New York-based accounting and consulting firm. There are more than 13,000 check-cashing outlets, handling about $80 billion annually. Customers use the businesses to cash paychecks, pay utility bills, buy money orders and take out payday loans, often at rates that exceed fees charged by banks or even credit card charges.
Under the Community Reinvestment Act, banks are encouraged to offer services in poor and minority neighborhoods. The vast majority of banks receive outstanding or satisfactory grades from regulators. The grades are important when banks apply to open new branches or acquire other banks.
James Ballantine, a senior vice president with the American Bankers Association, said banks that don't comply can be required to enter into agreements with regulators, can be fined or can even lose their charter.
Even so, small and large banks alike focused most of their efforts on wealthy and fast-growing neighborhoods as the housing boom reached its zenith. Banks now receiving billions in federal bailout loans led the charge, according to the AP's analysis. The largest banks added nearly 6,800 branches between 2004 and 2008. Fewer than 900 of those branches were in minority neighborhoods.
Nearly 18 percent of those full-service bank branches were in minority neighborhoods in 2004, according to the FDIC. By last year, that number had dipped to 16 percent as banks worked harder at pursuing customers in distant, mostly white suburbs.
Among the findings in the analysis:
- Fueled by explosive growth and its acquisition of Bank One Corp., JPMorgan Chase added 2,566 branches during the five-year period. Only 342 were in minority neighborhoods. In 2004, nearly 30 percent of Chase's branches were in minority areas. By 2008, that number had dropped to 16 percent.
Christine Holevas, a bank spokeswoman, said most of the bank branches were added by acquisitions of other banks.
Chase's most recent federal grade, issued in 2007, was "outstanding."
- Citigroup added 272 new branches between 2004 and 2008, the overwhelming majority in white neighborhoods. Only two dozen were created in minority neighborhoods, according to federal figures. The bank still has 28 percent of its banks in minority areas.
- Fifth Third Bancorp increased its presence in minority neighborhoods by more than half, expanding from 60 offices to 95 branches. Still, only 7 percent of its 1,356 branch offices are in minority areas.
LOCAL ZIP CODES THAT GAINED BRANCHES
|ZIP||CITY||BRANCHES 2004||BRANCHES 2008||MEDIAN INCOME||PERCENT MINORITY|
|CITY||BRANCHES 2004||BRANCHES 2008||MEDIAN INCOME||PERCENT MINORITY|
Source: Associated Press