No one would blame Jack Murphy if he’s feeling a little under siege lately.
As CEO and president of BankNewport, Murphy considers Aquidneck Island his bank’s home turf. It has been there since 1819, and yet several competing financial institutions have recently decided that Newport looks like a great place to set up shop in 2023.
Chase Bank is proceeding with plans to build a branch in the former Talbots clothing store at Bellevue Avenue and Memorial Boulevard. Across the street, Bank Rhode Island is remodeling a former Bank of America Corp. location and is expecting to open in December. And less than a mile away on Thames Street, Centreville Bank cut the ribbon on its first East Bay branch in June.
If Murphy is bothered by the interlopers, he’s certainly not showing it.
In fact, BankNewport is going on its own offensive, blazing new territory in the northern reaches of the state. In September, the bank opened a branch in Lincoln.
It used to be that community banks stayed largely to their own communities, small institutions where generation after generation of residents and local businesses kept their savings and repaid their loans. Not anymore. Community banks and credit unions in Rhode Island are expanding their territories in search of new depositors and borrowers.
“The lines have been erased,” Murphy said. “People are trying to grow share across the state.”
And along with that expansion comes the appearance of a banking feature that might seem passe to a younger generation: the branch location.
As some local banks enlarge their footprint, new branches are coming along with it.
But why? After all, mobile banking and other digital financial services exploded in popularity at the height of the COVID-19 pandemic, with necessity and circumstance accelerating the migration of customers away from in-person branch visits and onto digital platforms.
Yet Rhode Islanders might notice what seems like a flurry of brick-and-mortar bank construction this year. The total number of bank branches in Rhode Island is down over the last five years, but that’s because some of the biggest players such as Citizens Bank, Bank of America and Santander Bank N.A. have shuttered branches.
Into those gaps have stepped smaller banks and credit unions. And there’s also JPMorgan Chase & Co., which operates the national behemoth Chase Bank. Chase has gone from no branches in 2019 to 12 in 2023, and there are more to come.
Michael Ice, associate teaching professor at the University of Rhode Island’s College of Business, says a simple explanation for the building spree is that many baby boomers still prefer face-to-face interaction, even for basic transactions.
But Ice, who has more than 35 years of experience in the banking industry, says there are other reasons, too, particularly for banks trying to get a foothold in new neighborhoods: branches increase visibility, signaling to potential customers that the bank is involved in their community, here to stay and easily accessible.
Branches are costly to build, staff and promote, Ice says, but it’s hoped the expense will be worth it in the long run with infusions of new deposits and loans issued, the lifeblood of the banking business.
As an example, Ice points to the aggressive moves Chase Bank has made in recent years.
“I watched Chase open up a branch in Wakefield [in South Kingstown] and wondered, ‘Why are they doing this?’ ” he said. “But if you look at JPMorgan Chase, who pretty much had zero presence in Rhode Island two to three years ago, they are clearly trying to make inroads … and they’re doing it with brick and mortar.”
[caption id="attachment_449993" align="aligncenter" width="1024"]
MOVING IN: Construction worker Fabiola Roman installs drywall on what will become Bank Rhode Island’s newest branch, this one in Newport. BankRI is renovating a space that was once a Bank of America location on Bellevue Avenue. It will open in December. The only thing that remains from the old bank is the vault.
PBN PHOTO/DAVID HANSEN[/caption]
MOVING OUT
Federal Deposit Insurance Corp. data shows that the overall number of bank branches in Rhode Island has dwindled in the last five years, from 252 in 2019 to 235 in early 2023. But most of that decline can be attributed to the banks that hold the largest market share in Rhode Island.
Providence-based Citizens Bank – No. 1 in deposits in Rhode Island – has closed 21 branches in the state since 2019. Meanwhile, Bank of America – No. 2 in deposits – closed six locations in the same time period, and Santander Bank – No. 4 in deposits – closed nine branches.
As a result, competitors see an opportunity to grab business in what many consider to be a less-crowded market than in nearby Massachusetts, and at the same time differentiate themselves from burgeoning digital banks that may offer better rates but have no physical presence in the market.
Case in point: Westerly-based The Washington Trust Co., the third-largest bank in Rhode Island by deposits.
The bank has opened branches in Cumberland and Barrington in the last year, and has plans to open two others, in Smithfield and in the Olneyville section of Providence, which would make 28 branch locations in Rhode Island.
The bank recently agreed to a $9 million settlement of redlining allegations by the federal government. That agreement included a promise to open two branches in majority Black and Hispanic neighborhoods, which would include the branch in Olneyville.
In recent years, West Warwick-based Centreville Bank has been one of the most aggressive institutions in seeking to expand its network, purchasing Connecticut-based Putnam Bank for $115.5 million in 2020 and opening branches in Smithfield and Newport, as well as loan offices in Middletown and Warren, earlier this year.
Centreville has grown from seven branches in Rhode Island in 2019 to 11 now. In that time, the bank’s Rhode Island deposits have increased from $922 million to $1.3 billion, the FDIC says.
Such a growth strategy makes sense, according to Ice.
He says consumer deposits are a bank’s “cheapest money” and can be put to work in the form of commercial loans for industries such as construction and real estate development – loans that are often relationship-driven transactions conducted with locally owned businesses at the branches.
Indeed, BankNewport’s Murphy says that while bank branches may no longer be as crucial for customers who only need to complete simple transactions, they are a vital connection point between banks and the communities they serve, and are still used by retail and business consumers who need advice and advanced expertise from bankers, especially when navigating complex financial transactions.
“We believe it’s important to have a physical presence in the communities that we do business in,” Murphy said. “Our branch personnel [doesn’t] just sit in the branch all day; they’re out in the community, they’re working with business customers, they’re working with consumer customers. They’re also supporting local charities, local nonprofits.”
[caption id="attachment_449995" align="aligncenter" width="1024"]
FRESH LOOK: BankNewport bank manager Carlos Cabral speaks with assistant manager Yvonne Peak at the bank’s branch in Lincoln, which opened in September. The new branch contains the latest technology features such as a personal teller machine that allows customers to connect by video with a banker beyond lobby hours.
PBN PHOTO/MICHAEL SALERNO[/caption]
IF AND WHERE
For banks and credit unions, deciding if it’s wise to build a branch and where exactly to put it can be a complex analysis of demographic data and competition, and will likely include top executives getting into a car and driving by potential locations.
Decisions to plant a flag in a new territory are then followed by advertising and postcards to mailing addresses in a radius around the location, offering special rates and products to entice prospective customers.
“It’s very strategic and measured,” Murphy said. “There’s a lot of research that goes into it.”
Even road traffic patterns are studied carefully.
Recently, BankRI executives thought they had found a perfect spot for a standalone branch along North Main Street in Providence, near The Miriam Hospital and the Pawtucket border. “That’s a good community to be in,” said Steven Parente, BankRI executive vice president and director of retail banking.
Soon there was a snag. The travel patterns were changed along the busy, four-lane North Main Street, making it a little more difficult to drive onto the prospective property. That was enough to kill the deal.
“[Customers] need to be comfortable getting in and out,” Parente said. “You can’t put up barriers. It needs to be easy.”
Sometimes finding potential locations is a matter of chance.
At the outset, BankRI – a subsidiary of Brookline Bancorp Inc. in Boston – wasn’t completely sold on moving into Newport. The bank was looking around at various properties, “but nothing tickled our fancy,” Parente said.
Then he fielded a call from a landlord of a shopping plaza along Bellevue Avenue. Bank of America had moved out of a 4,000-square-foot storefront. Would BankRI like to move in?
Parente studied the location and the surrounding neighborhood – plenty of small businesses and households nearby that could become customers, high car traffic and a pullback by larger banks that left some room for BankRI.
“There’s a lot of underserved low- to moderate-income areas in Newport,” he said.
Also part of the calculations: Parente says a bank branch would be considered “break even” if it can attract about $50 million in deposits and have a “normal flow” of lending within five years of opening. Even without a branch in Newport, BankRI has customers around the city, representing about $3 million to $4 million in deposits and $5 million to $6 million in loans.
With that head start, the bank gave the Newport branch a green light.
Around the same time, it also gave a green light to a new standalone branch on Oaklawn Avenue in Cranston, where BankRI already had three branches and stiff competition from other banks and credit unions.
Still, the dense concentration of households and both small and midsize businesses in Cranston, Warwick and West Warwick near the Oaklawn Avenue property was too good to pass up. Also, Christy’s Liquors, a BankRI customer, is the anchor store in the shopping plaza on the same parcel. “It made it easy to open a branch,” Parente said. The location, BankRI’s 21st, opened in July.
TECH RULES
The bank branches popping up around Rhode Island are a far cry from the large, high-ceiling, marble-covered offices of decades ago.
Today’s branches are smaller and staffed with fewer employees. Glass is the dominant building material of choice, and technology abounds.
While Citizens Bank has closed some branches in Rhode Island, it has invested extensively in remodeling many of the remaining 55 locations, according to James Uehlinger, Citizens’ regional director of retail banking.
The makeovers have focused in part on adding technology that improves the experiences of both the customers and employees such as free Wi-Fi that could, for instance, allow a bank teller to walk a customer through the process of depositing a check using a mobile app.
Middletown-based People’s Credit Union, which has six locations and $702 million in assets, recently completed an extensive renovation to its flagship branch that focused on modernization to benefit its members and employees, according to CEO and President Sean Daley.
One of the key additions is a “technology bar” that allows members to access certain digital services, such as opening an account online, from within the credit union. “We still have the traditional teller line,” he said, “but we’ve added additional technologies like check imaging and cash processing that will speed up transactions.”
While branch locations once exceeded 3,000 to 4,000 square feet, bank executives say branches have gotten smaller as technology has lessened the need for a large staff and other improvements have allowed for slimmer vaults and smaller ATMs.
BankNewport’s Lincoln branch – located across Route 116 from the Lincoln Commons shopping center – is 2,600 square feet and features a PTM, a personal teller machine that allows customers to connect by video to a banker at an operations center in Newport beyond the lobby hours of the bank.
“Technology has made a big difference,” Murphy said.
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BY THE NUMBERS
While some of the largest banks in Rhode Island
have closed bank branches over four years,
others have added locations. In fact, Bank Rhode
Island and BankNewport have each opened a location since FDIC data was published in June 2023. / SOURCE: Federal Deposit Insurance Corp.[/caption]
TOO MANY BRANCHES?
Daley questions whether Rhode Island is “overbanked, with a lot of branches in a lot of markets.”
He points to downtown Providence as an example. “BankNewport built a pretty big facility down there, and you can see probably six different banks from the front door of their branch,” Daley said.
That said, he acknowledges that People’s is always assessing new markets and a larger bank pulling out of a branch might leave an opportunity for an institution such as his to step in inexpensively into the same space.
Some of what happens with new branches is dependent on the economy, too.
Parente says that once the Newport branch is complete, BankRI will pause its branch expansion and focus on renovating three or four existing locations. “We’ll be waiting for things to feel more settled,” he said.
Meanwhile, Murphy sounds almost giddy about how things have gone so far at the new Lincoln branch, which used to be the site of a Wendy’s fast-food restaurant. One of the bankers “sits where the baked potato bar used to be,” he joked.
First good sign, he says: Two people walked in off the street during the ribbon-cutting ceremony to open accounts. “I’ve never seen that happen before,” Murphy said.
And within two weeks of opening, the branch – the bank’s 19th – had collected “millions in new deposits,” he said, declining to give an exact figure.
He says the branch has more than doubled projections and he sees the Lincoln branch vying to be BankNewport’s top branch eventually.
Where does the bank go from here?
“Do I see us building 20 more branches? No, I don’t see us doing that,” Murphy said. “But to properly and effectively serve the Rhode Island community, we’re going to continue to look at opportunities to expand our branch network because people need that choice.”
His ultimate goal: “We want to be Rhode Island’s bank,” he said.
