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A branch is generally the smallest organized congregation of the Church (normally fewer than two hundred members). At first, local Latter-day Saint congregations were known as "churches". Soon these units were more commonly called "branches", reflecting the manner in which they were formed--members sharing the gospel and creating new congregations in neighboring communities.
As the Church has grown, stakes, composed of several large congregations known as wards, are formed in centers of strength. In mission areas, districts are composed of smaller congregations known as branches. Branches may also be found in stakes, typically in outlying communities where a smaller number of Church members can support only a less complete organization. In recent years a new kind of branch has emerged. In large urban centers an increasing number of ethnic minorities, isolated from the majority because of language and too small as a group to form a ward, have been organized as a branch. Furthermore, the Church has outlined programs that may be followed by isolated families or groups that are too small to form even a branch.
A branch is headed by a branch president, whereas a ward is presided over by a bishop. Unlike the bishop, who must hold the office of high priest, the branch president need not be a high priest, but must be an elder in the Melchizedek Priesthood. The branch president and his two counselors have responsibilities similar to, and function like, a bishopric.
Source: Ludlow, Daniel H, ed. The Encyclopedia of Mormonism. Vol. 1. BRANCH, BRANCH PRESIDENT. New York: Macmillan Publishing, 1992.