Rural Depopulation: What Does It Mean for the Future Economic Health of Rural Areas and the Community Banks that Support Them?
By Jeffrey Walser and John Anderlik
The United States is currently in the midst of a major demographic event: the depopulation of a significant portion of its rural counties. Importantly, there are significant differences across rural counties in terms of population growth and future economic viability. While the population in many rural counties grew after World War II, a large number of counties exhibit a persistent pattern of decline. This paper identifies the areas where depopulation is occurring, quantifies the extent of depopulation, explains the causes, and examines the implications of this trend. Specifically, this paper examines differences between rural depopulation in four major areas of the United States – the Great Plains, the Corn Belt, the Delta-South, and Appalachia-East – and demonstrates that while populations have declined for many decades in each region, the potential for continued economic viability differs considerably. Our research concludes that the continued economic viability of the rural counties of the Great Plains is the most vulnerable, and therefore, we focus our analysis in this geographic area.
More than 1,400 insured financial institutions with total assets of more than $128 billion are based in counties with declining populations. Therefore, rural depopulation has significant implications for the U.S. banking industry, especially with regard to the long-term health of rural community banks. Declining populations will challenge many banks on both sides of the balance sheet, as funding becomes increasingly difficult and the demand for loans continues to wane. As such, this paper also compares the performance of banks located in rural counties with growing populations with those located in depopulating counties. And finally, this paper attempts to identify strategies that some banks in depopulating areas have used to remain successful.
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Read the next story in this series: "The Impact on U.S. Banking of Payment-System Changes"
