Association for Public Policy Analysis & Management

The Locally-Determined Distance Threshold (LDT) methodology enables the examination of variation in neighborhood access to bank branches across local areas, such as components of metropolitan areas. For each area, the methodology incorporates existing distributions of resident populations and bank branches to determine an appropriate radius for identifying bank branches within a locally-appropriate distance from population-weighted census tract centroids. As components of metropolitan areas differ with regard to the distribution of their resident populations and bank branches, so does the LDT determine different radii for assessing the degree to which individual neighborhoods within each area have access to bank branches.

This methodology is particularly useful for anyone interested in variation in neighborhood access to bank branches and the identification of areas with limited access to bank branches. The LDT methodology uses Federal Deposit Insurance Corporation (FDIC) bank branch data published annually as the Summary of Deposits (SOD) database, together with population data from the U.S. Census, organized and distributed by the Federal Financial Institutions Examination Council (FFIEC).

This paper presents the construction of the LDT and illustrates its use, using Geographic Information Systems (GIS) and a series of maps. Through applying the LDT in three metropolitan areas, in combination with socioeconomic and other data, it demonstrates how the LDT improves on previous strategies in identifying individual census tracts and groups of census tracts with relatively lower access to bank branches.

The paper also demonstrates how the methodology can be used to identify census tracts with different levels of access to bank branches with concentrations of populations identified through other FDIC research as being likely to depend on branches to access bank accounts. These include, for instance, populations in lower-income households, Hispanic households, African-American households, households headed by adults with lower educational attainment, and households headed by persons aged 65 or older. As these populations are found in different spatial distributions across different metropolitan areas, this further demonstrates the importance of incorporating local context when assessing neighborhood access to bank branches and the impact of those levels of neighborhood access to bank branches on populations likely to depend on branches.