Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
Updated on Wednesday, February 21, 2018
Not only are banks shuttering many of their branches across America, but they’re also declining to build more branches to accommodate population growth in others.
In a new study by MagnifyMoney, we found that there were 7% fewer bank branches in 2017 than there were a decade earlier in America’s 100 biggest metros. At the same time, the population of those metros grew an average of 11%, so the number of branches per capita actually dropped an average of 16%.
For the analysis, we looked at a combination of data, including a record of active bank branches from the U.S. Federal Reserve and population data from the U.S. Census Bureau American Community Survey.
Even in some fast-growing places, we found banks are shuttering brick-and-mortar locations at a pretty good clip. It’s a lot easier to not build new branches than it is to close existing ones, so it seems likely that failure to keep pace with a growing population fits nicely into a strategy of reducing branches for a growing customer base.
There are several reasons for this trend, but here are the big ones.
Merging banks means less need to compete through branch access
The word “synergy” is a popular one for the Mergers & Acquisitions crowd, and the banking world has been pretty gung-ho about mergers over the last few years. Indeed, the FDIC reports that the number of individual banking companies that conduct their business with branches dropped an astounding 25% between 2006 and 2016, thanks to 2,447 mergers among commercial banks and 349 among savings banks. The newly consolidated banks don’t need branches that cover the same areas, and they may find that the reduced competition means they don’t need to fight for customers with more storefronts.
Branch access isn’t as important to banking customers as it used to be
A 2015 survey by the consulting firm Accenture reported that only 19% of customers say they would close their accounts if they lost their local branches, a significant drop from 2013, when 48% said they would close their accounts due to the inconvenience.
Friday afternoon teller lines to deposit paychecks and get the week’s cash have gone the way of rotary phones, but even the need for ATMs has been steadily declining thanks to easier card-over-cash use, online access and mobile banking apps that have improved exponentially over the last couple of years. Users don’t even have to set foot in a bank to deposit the occasional physical check, thanks to smartphone scans, and friends can pay each other back with independent apps.
People are becoming more comfortable with accessing their money by digital means only, and they’re often getting better returns on, and cheaper access to, their money with savings account rates at online banks often much higher than those at traditional banks.
While many people find walking into a bank and talking to a professional behind a large desk a reassuring way to deal with the uncertainty and anxiety around buying financial products and services, more and more people prefer to gather as much information as they can across multiple banks, lenders and other businesses in the financial products space.
One exception to the trend
J.P. Morgan Chase & Co. recently announced that it will use part of its recent tax-cut windfall to build new branches, but at first glance, this appears to be a push into new markets, not a revitalization of existing ones.
Places that lost the most branches
1 – Lakeland, Fla.
Banks are shutting more branches in this in central Florida community than in any of the others we reviewed — a loss of 23% over 10 years. Thanks to a healthy population increase of 19%, Lakeland-Winter Haven lost even more branches on a per capita basis: 35%. That brings them down to 17 branches per 100,000 residents, which is considerably lower than the average 25 per 100,000 residents we found for the 100 cities we reviewed. Interestingly, Winter Haven is home to CenterState Bank, which has been on a buying spree to become the state’s biggest community bank. They closed 100 of their branches between 2009 and 2017 (just under half of what they had and acquired), which they say resulted in a per-branch deposit increase of 185%. They show no sign of slowing down this approach.
2 – Buffalo, N.Y.
Buffalo lost one out of five bank branches in the last decade. This was marginally offset on per capita basis by the slight population loss (less than half a percent). This may be in part because Buffalo’s hometown bank company, M&T, has closed branches as they gobble up banks in other communities, but they’re certainly not alone. For example, KeyBank shut down several branches after purchasing local First Niagara.
3 – Baltimore
Some 19% of Baltimore’s bank branches closed their doors in the last ten years, although that still leaves them with slightly higher than average 27 branches per 100,000 people. That’s especially surprising, given that the population increased by 8%, leading to a per capita loss of 25% (16% is the average for the 100 cities we examined). Baltimore started the decade with almost 36 banks per 100,000, significantly higher than the 2007 average of 30. While many banks closed branches, Santander shuttered every one of its Maryland branches in 2015, many of which they had thanks to the 2009 acquisition of Sovereign Bank.
4 – Stockton, Calif.
Stockton started with fewer bank branches on a per capita basis than most other big cities (18 versus an average of 30 for every 100,000 residents), but that didn’t stop them from closing their doors at a rate of 18% over the last ten years. This combined with a population bump of 9% over the same period, to create a per capita loss of 28%. If the city’s guaranteed basic income experiment works out, banks may take another look at the struggling community.
5 – Melbourne, Fla.
Palm Bay and Melbourne sit due east of Winter Haven, and while CenterState doesn’t appear to have a stake in this community, plenty of other community banks are consolidating in central Florida. Melbourne has changed at a similar rate to Stockton: 18% fewer branches, 8% more people, leaving 24% fewer branches per capita, but that still leaves them with 20 branches per 100,000 people.
Places that saw an increase in branches
1 – El Paso, Texas
El Paso has 11% more branches now than it did 10 years ago, but that may be because they were so underserved to begin with. To put this in perspective, the metro of 838,000 has 90 bank branches, which comes out to just under 11 branches per 100,000 people. The average among the 100 biggest cities is 25 branches per 100,000 people, even after the drawdown. The addition of nine new branches hasn’t kept up with the population increase of 14%, leading to an overall drop in branches per person of over 2%. It looks like banks may continue to open branches, with a revitalization effort underway for Western Heritage Bank (in part, at least, through acquisition) and El Paso’s downtown. Meanwhile, El Paso’s biggest credit union, GECU, is trying a strategy of more, but smaller, branches.
2 – Raleigh, N.C.
Like other many other southern cities, Research Triangle has seen a population explosion of 32% in the last decade. The addition of 24 branches (9%) doesn’t cover the distance, which means the number of branches per capita actually dropped by a substantial 17%.
3 – Oklahoma City
Oklahoma City is something of an anomaly, in that they added more branches to their already higher than average (per capita) number (33 per 100,000 residents in 2007). That may be a function of the sheer land mass – the metropolitan statistical area comprised over 5,500 square miles. They’ve added 18 branches over the last ten years, an increase of over 5%, but in a familiar story, that increase didn’t keep up with the 17% population increase.
Because the borders of Metropolitan Statistical Areas (“MSAs”) changed at the 2010 census, sometimes dramatically, we constructed the data to the current definition of MSAs using the crosswalk provided by the Bureau of Economic Analysis. We used the county-to-MSA crosswalk because that was the smallest geographic population designation reported by the U.S. Census for the 2006 American Community Survey. In the event that a particular county was not reported for both time frames, that county was excluded from the analysis.
Loss of branches data were reported by the U.S. Federal Reserve and were matched at the constituted MSA level to 2016 (most recent available) and 2007 populations from the U.S. Census Bureau American Community Survey. The results were limited to the 100 largest constituted MSAs, by population.
Statistics regarding the number of individual institutions was derived from “Statistics At A Glance,” as of Sept. 30, 2017 table and Table CB03 from the FDIC.
For the sake of clarity, we used the first city name and state name listed in the metropolitan statistical area designation, which we understand to be the most populated component (e.g., “St. Louis” for “St. Louis-St. Charles-Farmington, MO-IL”), except where a secondary city was deemed more familiar (e.g., “Fort Myers, Fla.” for “Cape Coral-Fort Myers, FL”).