A year ago, COVID-19 forced many banks to temporarily shutter branch offices. Now some of those branches are closing again. This time, it’s permanent.
TD Bank, Citizens Bank, Webster Bank and Berkshire Bank have announced plans to close some branches across New England in 2021, in some cases slicing almost a fifth of their regional footprint.
The toll includes 40 Citizens branches in Stop & Shop Supermarkets in Rhode Island and Massachusetts, which will be replaced with interactive teller machines that offer more functionality than ATMs. Three local Webster Bank locations are also slated to close. None of the TD or Berkshire Bank branch closures are in Rhode Island or southeastern Massachusetts. Bank branches have been disappearing from the landscape for years, but the pace appears to be increasing.
The number of branches nationwide shrank 14% between 2008 and 2020, including a 5% drop since 2017, according to a report by the National Community Reinvestment Coalition based on Federal Insurance Deposit Corp. data as of June 30, 2020. While the first half of 2020 saw a lower rate of branch closures compared with previous years – likely due to a lack of mergers and acquisitions during the pandemic – the flurry of closing announcements that came in the fourth quarter will drive up the year-end totals, said Jason Richardson, the coalition’s director of research and evaluation.
The pandemic’s impact on how consumers and businesspeople are conducting their banking – more on laptops and cellphones rather than in person – cannot be discounted, though several bank leaders in statements said the closings had already been planned.
‘Banks are going to be in net reduction mode for a long time.’
R. SCOTT SIEFERS, Piper Sandler Cos. managing director
It’s typical for banks to routinely review whether foot traffic and deposits in branches are worth the costs of real estate, equipment and employees, said R. Scott Siefers, managing director for Piper Sandler Cos. and who covers Citizens parent company Citizens Financial Group Inc.
“But what we have seen over the course of the last year might otherwise have taken place over the course of the next five years,” Siefers said.
The sudden closure of branches early in the coronavirus crisis also tested whether the digital banking services could bring in the customers and market share that historically come from brick and mortar.
Berkshire Bank, for example, saw business increase even when branches closed, thanks to its digital offerings, said Cristina Feden, Berkshire’s senior vice president and regional president of eastern Connecticut and Rhode Island.
While Feden described Berkshire’s strategy as one that balances in-person relationships with digital and mobile banking, technology is the top investment for future growth.
“If you don’t have a good online banking platform, mobile platform, it’s hard to bring in new business,” Feden said. “That technology is increasingly critical.”
The shift to digital banking also lets banks reach beyond geographic boundaries. There may not be Citizens Bank branches in California, but a West Coast customer can deposit money just as easily through mobile banking apps, Siefers said.
Of course, Citizens won’t have the name recognition in California that it enjoys in Rhode Island, where more than 80 locations are still open. And the rise of fintech firms vying for these same customers through digital channels means competition is fierce.
The best strategy to grow in a new market is offering a better price – namely, better interest rates on deposits.
“They can lead with price to attract a new customer, make him or her sticky, then be less aggressive in the pricing,” Siefers said. “Once you have a customer in the door, it’s more about excellence in delivery of products than anything.”
Still, competitive rates require an upfront cost to the bank, which was less appealing than the investment in physical expansion for at least one community bank. The Washington Trust Co. is preparing to open its 24th branch in the spring – this one in East Greenwich – while eyeing expansion to northern Rhode Island and the East Bay.
Mark K. W. Gim, Washington Trust president and chief operating officer, said the company continues to see branches as a worthwhile investment despite a consumer shift toward digital banking.
“If you didn’t open locations, you have to think about what it takes to induce customers to come and do business with you,” Gim said.
Washington Trust by no means eschews technology. But in-person relationships have a track record, both through customer satisfaction and the hundreds of millions of dollars in deposits through brick-and-mortar branches, Gim said.
Richardson, too, said personal relationships, particularly for small-business customers, are difficult to replicate on computer screens, and he feared the en masse branch closures nationwide may hurt small-business access to capital in the future.
“Loaning money to a business is not the same as a credit card or mortgage that’s data-driven,” he said. “To try to make [small-business loans] completely algorithm-driven can be a problem if your business doesn’t have a good long history of income. Whereas if you have that relationship with a banker, and they know you, it’s easier.”
Banks that have announced closures did not say whether additional branches will close in the coming year. But Siefers anticipated more were coming for at least the next several years.
“It may not be the 5 to 10% of branches that we’re seeing now, but banks are going to be in net reduction mode for a long time,” he said.
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.
