While at least six communities in the Chicago area are trying to keep new bank branches out, others are trying to get banks to notice them.
About 300 branches have opened in Cook County alone since early 2000, leading some jurisdictions to pass laws restricting branch start-ups. But the town of Country Club Hills, south of Chicago, has found no takers despite offering banks tax breaks for opening branches there.
First Midwest Bancorp of Itasca, Ill., operates the only bank branch in Country Club Hills, which has 16,000 residents. Dwight W. Welch, the town mayor, said he believes it can support at least three bank branches.
He points out that Country Club Hills' median household income - $57,701, according to the Census Bureau - is well above that of Cook County ($45,922) and the state ($46,590).
"It's not a poor community - it's the Beverly Hills of the south suburbs," Mr. Welch said.
But it is not as affluent as St. Charles, Palos Heights, and Boling Brook. Since 2000, 19 branches have opened in those communities, where the average household income is about $82,000. It is in these richer towns that the Chicago area's branching boom is largely taking place, according to a report released last month by the Woodstock Institute.
Mr. Welch, who is white, suggested that banks are ignoring Country Club Hills because 82% of its residents are black.
"I think the neighborhood has been redlined," he said.
But bankers say decisions on where to build are purely market-driven. Many of the markets cited by the Woodstock report are bad for branch start-ups because they are slow-growing and locked up by banks that are well established in those markets, these bankers say.
Woodstock tracks financial services trends in Chicago's low-income communities. Project director Geoff Smith said that while he does not believe that these communities are being redlined, "banks have failed to give a satisfactory answer as to why they are avoiding these areas."
In just the last two years the Chicago area's branch count has grown 15%, to nearly 1,400. Companies such as Bank of America Corp. and Washington Mutual Inc. are trying to establish themselves in one the nation's most densely populated and affluent markets, and local banks are trying to keep pace.
Mr. Smith said Woodstock, which is based in Chicago, did the study because of media attention paid to towns that have tried to halt branch start-ups and because Mr. Welch and other officials told the group that their communities were being shut out. Mr. Smith said he hopes the report will convince banks that these neighborhoods warrant another look.
Country Club Hills, for example, has an aggregate household income of $341 million, easily enough to support more than one branch, Mr. Smith said.
Between 2000 and 2004 the number of branches rose 27% in upper-income communities, versus 13% in low-income ZIP codes. (Upper-income ZIP codes were those with median family income 120% higher than the Chicago metropolitan statistical area's $61,182 median.)
It also concluded that at the end of 2004, predominantly minority areas had 1.11 branches per 10,000 people, compared with 3.84 per 10,000 in predominantly white areas.
Country Club Hills lost a branch when the $51 billion-asset Harris NA, a division of Bank of Montreal, closed one there in July 2001.
The branch, which Harris had bought from Household International Inc. in 1996, had weak deposit growth. It was one of 15 Harris shut down between 1999 and 2001, said Paula Labno-Hintz, its senior vice president for branch and ATM distribution.
Still, the Woodstock report said Harris' record of opening branches in low-income and minority communities is outstanding. Last year 23.8% of its branches were in low- and moderate-income areas and 28.6% were in minority neighborhoods.
Bank One, which was bought in July 2004 by the $1 trillion-asset JPMorgan Chase & Co., had 12.6% of its offices in low- and moderate-income areas and 14.6% of its branches in minority areas, the report said. The closest to Harris was Chicago's MB Financial Inc., with 15.6% in low- and moderate-income areas and 25.6% in minority areas.
Ms. Labno-Hintz said the Woodstock report did not necessarily measure the potential business in ineighborhoods in a way that banks could use. She said Harris looks less at income than at population trends.
"Branching is all about location and convenience," she said. "Where there is population turnover or new populations, people are looking for new banking relationships."
Woodstock's board includes Tommy Fitzgibbon, the chief retail banking officer for the $5.2 billion-asset MB Financial. He said the study is useful because "it points out to the banking industry that there are business opportunities that could be profitable but have been overlooked."
He added that MB is actively scouting new-branch locations in low-income and minority areas on the South Side and that it has had success marketing to Korean, Hispanic, Ukrainian, African-American, and other ethnic groups.
