In the first two months of the year, American banks closed some 222 branches.
Leading the charge were Bank of America, US Bank and Citizens, which together accounted for nearly half of all closures: 92 in eight weeks. If banks continue at the current pace, some 1,300 will close this year.
The closures, reported to the federal regulator, the Office of the Comptroller of the Currency (OCC) in January and February, reflect a broader trend.
Banks are increasingly relying on the capabilities of online banking, according to Steven Reider, founder and president of Bancography, an Alabama-based consulting firm that advises banks on branch planning and strategies.
That trust can lead to significant savings, as the average independent bank branch costs about $2.6 million a year. In just two months, Bank of America’s 41 closings could have saved it nearly $100 million.
In the first two months of the year, US banks closed about 222 branches. Leading the charge were Bank of America, US Bank and Citizens.
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“Banks are willing to close a branch that doesn’t actually overlap any other branches, assuming customers are willing to go a little further,” Reider said.
“I think Bank of America has leaned into that more than the other big banks,” he added.
It closed 157 branches last year but opened only 34.
Reider also noted that Bank of America’s history of mergers has meant that it ended up with branches in rural locations while the industry is undergoing “an urban-to-rural conversion.”
“Every census since 1910 has shown a higher proportion of Americans living in urban areas than the previous census, so as we become an increasingly urbanized country, demand in these legacy rural markets simply fades,” said.
Ultimately, banks are looking to consolidate the markets they are already in, and that means focusing more on dominating a handful of cities.
For example, Chase is moving strongly toward Kansas City, Fifth Third is making similar moves toward Charlotte, and PNC is targeting Austin.
Just this week, Huntington said it would be expand to Texas through Dallas.
“These are high-growth metropolitan areas that also tend to have favorable household-to-branch ratios,” Reider said.
“The location decision will mainly depend on where they can attract deposits and where they can attract those low-cost, non-interest-bearing consumers.”
Bank of America’s history of mergers also meant it ended up with more branches in rural locations, but the industry tends to consolidate around cities.
Although the number of bank branch closures began to increase during the 2010s, it was exacerbated by the pandemic, which kept people at home.
Although they have continued, they appear to be stabilizing. “We continue to shed branches as an industry, but the pace has slowed considerably,” Reider said.
A Bank of America spokesperson told DailyMail.com last year that it was indeed closing certain branches in response to decreased customer traffic, but that the rate of closures was likely to stabilize in the future.
And now, credit unions are playing a more important role than ever: offering services very similar to those of traditional banks and cornering a share of the market.
Unlike banks, their presence is expanding and they now have around 18,000 branches throughout the United States.
“Credit unions have been in a growth phase for the last 10 years, and of course banks have been in a shrinking phase,” Reider said.
“They are aggressively diversifying and entering community markets or national banks that are sitting idle,” he said.
“I think in terms of overall consumer engagement, they will continue to be an important and significant competitive force.”
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