Major Metro Areas Are Losing Bank Branches

America’s major metro areas are losing bank branches. Some are losing branches faster than others, and many are losing branches despite increases in population. With FDIC data, DepositAccounts was able to find the metro areas that lost the most (and fewest) bank branches. However, not all hope is lost for those who still value visiting a branch in person. Several cities managed to see an increase in their number of bank branches.

Below, we’ll explore which cities have been hit the hardest by bank branch closures, which cities are still safe and some reasons why banks may be closing their branches.

Key findings

• All but seven of the 100 largest U.S. metro areas lost bank branches in the period from 2008 to 2018. On a per capita basis, every single metro lost branches.

• Among the largest 100 U.S. metros, Lakeland-Winterland, Fla. lost the largest percentage of bank branches over the last decade, a decline of almost 29%. It also experienced the largest loss of branches per capita: Thanks to a 19% population increase in 2008-2018, the metro area had 40% fewer banks per 100,000 residents.
• Las Vegas saw the second greatest decline in branches per capita, down 32% in 2008-2018, thanks in large part to a 20% gain in population over the period. Las Vegas lost approximately 19% of its bank branches over the ten-year period.
• Six metros of the 100 largest U.S. metro areas gained branches over the last ten years. Additionally, one managed to hold its number of bank branches steadily over the period. Each of these metro areas still lost branches on a per-capita basis, due in part to population increases.

• El Paso, Texas saw a nearly 5% increase in total bank branches, followed by Raleigh’s 3.2% gain in branches. However, in Raleigh’s case, the growth in bank branches couldn’t match its spike in population — among the six gainers, the city saw the largest decrease in branches on a per-capita basis.
• Bakersfield, Calif. was the only city among the 100 largest metros to not lose nor gain any branches, maintaining the same number of branches in 2018 as it did in 2008. However, its 13% population increase results in a 11.5% per capita decline in branches.

Why is America losing bank branches?

After reaching a peak of almost 100,000 in 2009, the number of bank branches operated by FDIC-insured institutions began to decline in 2010 and continues to do so today, according to the FDIC. By 2017, the total had fallen to 89,847. Interestingly, banks that reported a decline in the number of branches were more likely to be larger, non-community banks.

According to the FDIC, banks report a number of reasons for closing their branches.

Office expenses

With the federal funds rate remained at an ultra-low level for much of the 2008-2018 period, key measures of U.S. banking industry profitability were under pressure for most of the decade. Shrinking cash flows sent U.S. banks on a cost-cutting binge, making the costs associated with maintaining branch offices a natural target. Branches incur big expenses: rent, salaries, even cash-transfer services. Banks that closed branches between 2012 and 2017 did end up benefiting from a smaller increase in these expenses compared with banks that increased their branch reach or made no change.

Bank mergers

The financial crisis drove banks on an epic merger spree, with industry M&A activity reaching a 17-year high in 2015. More mergers mean banks are undertaking more consolidation, and that means closing branches, especially in areas where two merged banks were already operating branches. FDIC data indicates that banks involved in a merger reduced branch numbers at higher rates than banks that weren’t involved in a merger. From 2012 to 2017, merging banks reported 2.8% fewer offices than the 1.4% rate reported by non-merging banks.

New technology

The demand for in-person banking has waned as mobile internet technology has conquered the world. According to the FDIC’s 2017 National Survey of Unbanked and Underbanked Households, 36% of respondents cited online banking as their primary method of account access, compared with only 24% interacting with bank tellers at a branch. Around 15.6% cited mobile banking as their primary method of account access. Further, the difference between these numbers have only grown over the years.

With more people banking over the internet and an ever diminishing number of customers depending on bank tellers to access their accounts, it’s no wonder banks see little need to keep the same number of branches open year over year.

Making the switch to online banks

Unfortunately for brick-and-mortar banks, online banks offer much more than convenient remote access to accounts. Online banks also tend to offer the best savings account rates, low- to no-fee accounts and great ATM access.

The average online savings account APY was 1.69% as of June 2019. This easily outcompetes the average savings rate at brick-and-mortar banks, which clocked in at 0.28% APY. Place a $5,000 deposit into an average online savings account, and you’ll have earned just over $85 in a year (if you don’t make any extra contributions). Place that same starting amount into an average brick-and-mortar savings account, and your year’s earnings drop to $14.

The best savings accounts do even better, generally earning well above 2%. If you put $5,000 into an online savings account earning a 2.50% APY, you’d earn $126 and some change in just a year. With that difference, it’s no wonder that online banking is surging in popularity.

Online banks also tend to steer clear of monthly account fees, a typical feature on many brick-and-mortar bank accounts. You’ll find plenty of free account options from the top online banks, allowing your money to grow even more efficiently without interruption. Depending on the bank, you may also be able to benefit from zero overdraft fees and free ATM access.

Speaking of ATMs, most online banks understand that you’ll still need physical access to your money. Many online banks partner with ATM networks to give you access to thousands of fee-free ATMs across the world. Of course on top of that, you’ll have 24/7 access to your accounts online and on mobile, often through the bank’s own mobile app.