Bank Branch Closures Slow Despite Coronavirus

Banks have been steadily reducing brick-and-mortar locations over the past several years. And with the economic and social impacts of the coronavirus pandemic, banks and businesses alike are taking a hit. The question is: What will those ramifications look like as things continue to evolve?

According to the latest research from DepositAccounts, banks have slowed branch closures relative to openings, even though in 2020’s second quarter these financial institutions opened the fewest branches since early 2017. This comes on the heels of a branch-building bonanza at the end of 2019, too. Here’s what else we found.

Key findings

• Banks closed an estimated 1.8 branches for every one they opened during the second quarter of 2020. This compares to an average closure-to-opening ratio of 2.4 from the second quarter of 2017 through the fourth quarter of 2019.
• Branch openings slipped to 247 in the first quarter of 2020 and 210 in the second quarter, from 427 in the fourth quarter of 2019 — the largest number in the three-plus years we examined.
• Branch closures dropped to an estimated 376 in the second quarter of 2020, well below the per-quarter average of 631 from the second quarter of 2017 through the fourth quarter of 2019.
• Despite all the openings, the number of branches continued to decline each quarter. There were 3,889, or 4%, fewer branches in the second quarter of 2020 than the second quarter of 2017.
• Ten states and the District of Columbia had more bank branches in June 2020 than June 2019. That was only true for one state in June 2019 (relative to June 2018) and two in June 2018 (relative to June 2017). Meanwhile, every state lost bank branches between June 2017 and June 2020.
• JP Morgan Chase Bank added the most new branches (371) between 2017 and 2020. Bank of America followed with 89, while Woodforest National Bank opened 66.

Branch openings, closures drop in 2020, albeit at lower rate

The first quarter of 2020 saw an uptick in bank branch closures relative to openings, though that was the only time there was an increase in the past four quarters.

In fact, the second half of 2019 saw the lowest rate of bank branch closures per openings in the period we examined, at 1.3 in the third quarter and 1.4 in the fourth quarter. The fourth quarter also saw the largest number of openings in the period we studied.

Closure-per-opening rates in the second through fourth quarters of 2017 were much higher than in recent periods, with at least three closures per opening. And looking at the year-over-year figures, the rate in 2020’s second quarter was 33% lower than the rate in 2019’s second quarter.

Although we didn’t have full third quarter data for our study, it’s worth noting that there were 96 branches opened in July 2020,  and another 72 in August.

Gap between closures, openings has narrowed in 2020

The gap between closures and openings barely shrunk when comparing 2017 to 2018 and 2018 to 2019. However, openings had a steep increase at the end of 2019, closing that gap to about a third of what it was from the previous period. But the closing gap likely isn’t a sign of confidence or a larger economic recovery.

“The increase of branch openings in the first half of 2020 is likely due to plans that were made in 2018 and 2019, when the economy was strong and adding branches was seen as an important investment,” said Ken Tumin, founder of DepositAccounts.

These states added bank branches in the past year

If you look at the overall figures from 2017 to 2020, all states lost branches. But the number of bank branches rose in 10 states and the District of Columbia from June 2019 to June 2020:

It’s important to note that the data we used showed openings, but it didn’t specify closures. Rather, shuttered branches simply fall off the list, giving us an estimation rather than hard figures.

And while those figures may not show huge shifts, banks can — and do — gain branches through mergers and acquisitions, and vice versa. For example, 630 FDIC-insured banks opened or acquired branches in the first half of 2019, while 240 closed or sold branches.

Massachusetts, while smaller than Texas and with fewer branches, had the largest percentage change between June 2019 and 2020. This was likely aided by JPMorgan Chase’s ambitious expansion into New England, which has gone ahead, despite the coronavirus pandemic.

These banks have added the most branches since July 2016

As noted, JPMorgan Chase has been making moves to increase its physical presence with branches as part of a nationwide expansion plan. This has no doubt helped propel them to the top of this list, by a significant margin:

Bank of America, which opened the second-largest number of branches over the four-year period, also had plans to increase its expansion efforts into new and existing markets. But perhaps the difference has been that this plan also included refurbishing existing financial centers, rather than simply adding them.

Banking amid the coronavirus pandemic

The pandemic’s effects have been far-reaching, impacting almost every aspect of daily life. And although we aren’t necessarily seeing the increase in closures that would be expected from the pandemic, the trend overall has still been toward a decline in branches.

Things are continuing in that downward trajectory in recent months, according to Tumin, with an acceleration in the trend of reducing branch numbers as banks continue to add online and mobile resources for customers. Another side effect of the pandemic has been the temporary closures of bank branches, though those numbers weren’t included in our study.

These shifts can be difficult for consumers to navigate. But as the pandemic continues, it’s even more important to understand the tactics that can best serve you. Here are a few banking tips for consumers navigating the pandemic:

• Check out online banks: From both a safety and convenience perspective, online banking can be a great option. “In addition to better rates, online banks have fewer and lower fees than brick-and-mortar banks,” Tumin said. “So it can make sense to switch to an online bank even in today’s pandemic world in which interest rates are relatively low at all banks.” Start by opening an online savings account that links to your current checking account. “As you gain confidence with the online savings account, you can then consider adding an online checking account,” he added.
• Focus on saving money: The economic effects of the pandemic are still an issue that consumers need to think about over the long term — and that means ensuring there’s enough money to weather the financial storms that may ensue. Looking to reduce the costs of banking, including fees, is another approach consumers should take during this time.
• Double-check safety standards: Although it can now be safer to avoid going to the bank, there may be times when you simply can’t do so. Plus, depending on where you live, there will be different standards for in-person activities. It’s important to check the bank’s website or call ahead to ensure you adhere to your financial institution’s requirements. It’s also an opportunity to make sure those requirements are within your comfort level.

Methodology

Analysts used branch location data (provided annually, and as of Sept. 10, 2020) to calculate the number of domestic offices that were identified as “full-service brick-and-mortar” or “full-service retail” offices (“branches”) as of June 30 on a given year. Analysts calculated the number of these offices that had an establishment date within each quarter and the number of offices in each state as of June 30 in each year.

To estimate the number of quarterly branch closures, we used call reports submitted to the FDIC to calculate the percentage of domestic offices that were branches as of June 30 of each year. Because we were only able to calculate the percentage of domestic offices in the second quarter of a given year, we averaged those percentages and applied them to intervening quarters.