Five Star is latest bank to shutter branches amid decline in foot traffic

Five Star Bank in Warsaw, N.Y., is making changes to its branch model as more customers flock to its digital and mobile channels.

The $4 billion-asset bank unit of Financial Institutions said Friday that it is trimming its branch network by 10% and shrinking its workforce by 6% in response to declining foot traffic in branches and a growing customer preference for remote banking. The bank plans to close six of its 53 branches and consolidate those operations into five existing offices that will now offer lending, insurance and wealth management services in one location.

“Over the years we’ve launched technology and developed unique partnerships that offer customers a more seamless, integrated experience, regardless of how they choose to bank with us,” President and CEO Martin Birmingham said in a press release. “Now, as the reliance on, and customer demand for, digital banking services rise, our branch offices must evolve once again.”

Five Star said the consolidation plan follows a nine-month review of its lines of business that identified overlapping service areas and opportunities to automate and streamline processes and operations. According to the bank, daily in-person teller transactions at its branches have declined by 6% every year since 2018 and fell at a similar rate for the first three months of 2020, even before the coronavirus pandemic accelerated the industry’s shift to digital banking.

Banks large and small are making similar choices. This week, U.S. Bancorp in Minneapolis, the fifth-largest bank in the country, with $543 billion of assets, told investors and analysts that it will reduce its branch count beyond the 10% to 15% targeted range it set in early 2019.

In recent weeks, CB Financial Services in Carmichaels, Pa.; Mercantile Bank in Grand Rapids, Mich.; and Nicolet Bankshares in Green Bay, Wis., said they too will shutter branches.

Five Star, which has embraced smaller “financial solution centers” in recent years, said it will introduce a new digital banking platform and install interactive teller machines. ITMs allow customers to use a video screen to talk in real time to live customer service representatives.

About 39 jobs will be eliminated, based on the bank's headcount total on March 31. The branch consolidation is expected to be completed in about three months.

Five Star, which has beefed up its presence in the Buffalo and Rochester metro markets since 2013, said it still plans to add two new offices in Buffalo next year.