Why Brick and Mortar Banking Still Matters

Large U.S. banks are accelerating investments in physical branches to capture deposits in high-growth markets, challenging the assumption that digital banking has rendered brick-and-mortar locations obsolete. Research into 12 major banks identifies 57 target markets, primarily in the Southeast and Texas, where 95% of expansion occurs in areas with superior population or deposit growth. Data from 2022 to 2025 reveals a strong correlation between branch density and market share; banks with at least a 10% branch share typically see their deposit share exceed their physical presence by 3.5 percentage points. This aggressive expansion in hubs like Nashville, Atlanta, and Miami is driving up the cost of gathering core deposits, as evidenced by higher retail CD rates in the South. Consequently, increased funding and branch-related expenses are expected to pressure bank margins and elevate structural costs through 2027.