Bank of America is purging branches, but many of its depositors appear to be staying put.
The Charlotte, N.C., company has
But there's a catch.
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Bank of America announced Thursday that it customers can now suspend their debit cards temporarily; it is the first of several new features the bank has planned for 2016 after it tripled its digital banking budget.
January 28 -
Bank of America's long effort to become a slimmer, more profitable retail bank could be starting to pay off. In a tough quarter for revenue growth, its consumer banking division gained traction thanks to branch consolidation, investments in mobile banking and other factors.
October 14 -
TriCo Bancshares in Chico, Calif., paid a lower deposit premium for its purchase of Bank of America branches after deposit levels at those offices fell.
March 23
An increasing number B of A customers are declining to move their accounts, industry experts said. As a result, many small-town banks are gaining fewer deposits than what they originally expected to bring in.
In several recent branch sales, up to 40% of the deposits that existed at the announcement date did not go to the buyer at closing, according to company filings.
That's a higher rate than what typically occurs. While some deposits are likely fleeing to other banks, industry experts are convinced that B of A — in the midst of a
That seems to be the case with B of A's recent branch deal with TriCo Bancshares in Chico, Calif., said Tim O'Brien, an analyst at Sandler O'Neill. TriCo
Many Bank of America customers didn't feel the need to switch banks, O'Brien said.
"Client choice and taste is evolving," O'Brien said. "What happened here is a manifestation of the execution" of B of A's tech strategy.
TriCo isn't the only branch acquirer to get fewer deposits at closing.
The $2.5 billion-asset Cascade Bancorp in Bend, Ore., agreed
Cascade executives expected a 20% runoff rate, said Tim Coffey, an analyst at FIG Partners.
Several other banks also agreed to buy B of A branches in recent months, only to lose 26% to 42% of the deposits.
Deposit retention isn't new for B of A branch deals, but it has increased. Two years earlier, Washington Federal in Seattle
Representatives for B of A and Cascade declined to comment. TriCo did not immediately respond to a request for comment.
The $2.1 trillion-asset Bank of America has set
"We've optimized our delivery network, reducing our financial centers, divesting certain markets and also expending our award-winning mobile capabilities and the customer base that uses that," Brian Moynihan, Bank of America's chairman and chief executive, said during a January conference call.
Recent branch deals also reveal how a growing percentage of the population regards branches as an unnecessary part of their banking experience, industry experts said.
In the last year, several surveys have highlighted rising consumer demand for high-tech, digital products. Last year,
B of A is one of several big banks to capitalize on growing consumer demand for technology. Bigger institutions recently topped J.D. Power's consumer satisfaction survey
Citigroup, meanwhile, has also
Banking with technology is "more responsive to the way people are really going to access their bank in the future," John Gerspach, Citi's chief financial officer, said during a January conference call.
Other dynamics could also play into B of A's retention, industry experts said. In many instances, B of A likely held deposits tied to larger clients that might have been more challenging for community banks to service. Other customers could be retail clients who have yet to transfer funds to a smaller bank.
Another factor could be the fact that Bank of America still has branches in most states.
Joe Adams, chief executive of FS Bancorp in Mountlake Terrace, Wash., just outside of Seattle, said he believes some B of A customers elected to stay put because they travel to states such as Arizona and Florida during his area's rainy season. FS Bancorp lost out on 30% of the deposits at the branches it bought; management had expected a 25% drop.
"I'm guessing there might be perceived convenience" having branches elsewhere, Adams said, adding that his $678 million-asset company has a range of online banking options.
While higher retention rates could make future branch deals less appealing for smaller institutions, some industry observers said they believe physical locations will still present opportunities for community banks to gain market share. In many instances, buyers have
"For a community bank, their lifeblood is a bricks-and-mortar branch," said Jeffrey Rulis, an analyst at D.A. Davidson. Compared to buying banks or building offices, branch deals remain "a cheaper way to get access to customers."