Bank branch counts have dwindled for more than a decade, but the pace reached a record level last year — and is expected to continue into 2023.
Banks are steadily shifting more resources toward their online platforms, where adoption has risen during COVID-19 lockdowns, experts say. As this happens, fewer branches are needed, enabling banks to prune physical footprints and reinvest the savings in digital services. But the trend isn't universal; credit unions have added new branches in the past year, even as more banks trim down.
The $8.1 billion-asset ConnectOne Bancorp, for example, closed four branches in 2020 and directed much of the costs saved to upgrades and expansions of its digital platforms.
“Banking used to be all about location; now it’s all about digital tools,” Frank Sorrentino, chairman and CEO of ConnectOne, of Englewood Cliffs, New Jersey, said in an interview. Digital services provide convenience and efficiency while extending banks’ reach to more potential customers, he said.
U.S. banks shuttered a net 2,927 branches last year — a mix of about 4,000 closures against 1,000 openings — according to S&P Global. That marked a record and an increase of 38% from 2020, the previous record year, the firm’s data shows.
Banks closed a net 165 branches in January of this year, leaving 80,739 active U.S. branches. That is down from nearly 100,000 in 2009, when the trend began.
Large national and regional banks have led the charge, mostly because they have the largest branch networks and therefore the most cutting to do. Wells Fargo, U.S. Bancorp, Truist Financial and Huntington Bancshares were at the forefront of the trend last year. All recorded more than 200 net closings.
Others have large-scale closing efforts in motion.
For example, Synovus Financial in Columbus, Georgia, said it plans to close 40 branches in 2022 — about 15% of its physical footprint.
“We're going to continue to optimize our branch network and deploy some of the capital that we're saving there into our digital world to ensure that we're continuing to improve our online account origination,” Kevin Blair, president and CEO of the $57 billion-asset Synovus, said on a conference call last month.
“Our clients tell us that they want us to be even easier to do business with. Our team members want to do business more easily,” Blair added. “So as I think about this pillar, it's about removing friction points from every part of our process, how clients interact with us. They want to interact with us on their time and at their place.”
Fewer banks, fewer branches
While the biggest banks put up the largest numbers, banks of all sizes are downsizing. Among community banks, strong merger-and-acquisition activity is a catalyst for branch reductions. When one bank buys out another and merges the two operations, it often closes branches in overlapping areas. The cost savings help boost the deal's profitability and bolster the long-term efficiency of the combined bank.
There were 208 bank M&A deals announced in 2021 compared with 111 the year before, and most involved community banks, according to data from S&P Global.
To be sure, banks are not doing away with branches altogether. Most bankers say that even their most tech-savvy customers want physical bank offices at which they can seek financial advice or manage major transactions. Bankers also say branches in high-traffic areas function as vital billboards in markets with growing populations or fast-growing economies. This explains why banks still open new branches in some areas even as they close others elsewhere.
Berkshire Hills Bancorp in Boston is closing some branches but maintaining others in key locations, according to the $11.6 billion-asset bank's president and CEO, Nitin Mhatre.
“We have consolidated some branches and probably will consolidate more … [but the bank] will still have branches in key areas. Branches will continue to play an important role," Mhatre said in an interview.
Against the tide
Credit unions are bucking the broader trend by adding branches. The industry added a net 46 branches last year by opening 310 locations and closing 264, according to S&P Global.
Some credit unions say they are filling voids created by banks’ downsizing. One of them is Tapco Credit Union in Fircrest, Washington.
The $574 million-asset credit union opened a new branch in Gig Harbor in February. That move came on the heels of the opening of new locations in Bonney Lake and Frederickson in the last couple of years and brought the company's branch total to six.
Tapco will also be building another new location in Frederickson with a target opening date of late 2023, according to Bill Peters, its chief operations officer.
While many in the industry are reducing branch counts, Tapco sees branches as a way to attract new members and to serve the underbanked population, which may not always have access to digital technology, Peters said.
"Tapco saw a need to expand our branch service network to grow our service delivery channel and attract new members," he said. "We want to ensure everyone has access to low-cost financial services."
Banks and credit unions are also remodeling the branches they keep to tailor them for smaller staffs that are focused on providing advice, not handling routine transactions.
Glenn Grau, senior vice president of sales for PWCampbell in Pittsburgh, said the pandemic has everyone rethinking branches, particularly the institutions that did not have drive-up lanes and thus had to close completely for an extended period of time.
“I don’t know of any organizations that are sticking with what they have if it is outdated or inefficient,” he said. “With the continual rise in digital transactions, the purpose of branches continues to evolve.”
