Two years after the start of the pandemic drove more customers to adopt digital banking when branch lobbies closed, a recent study found that Boston has one of the highest increases in branch closings among U.S. metropolitan areas.
Studies have shown that bank branches remain important to communities, but their role is changing. Community banks say they plan to evaluate their branch networks by looking at how customers use branches, the effects of technology and the changing role branches could have in the future.
“I think we’re still confident that to actually get deep penetration in a community, you do need a physical presence,” said Julieann Thurlow, president and CEO of Reading Cooperative Bank. “But what that physical presence looks like is subject to change.”
Dramatic Increase in Closures
A January study by S&P Global Market Intelligence found that while more than 1,000 new bank branches opened in 2021, nearly 4,000 U.S. branches closed, for net closings of 2,927. The closings represented a 38 percent increase compared to 2020, which saw 2,126 net closings. The previous high in S&P Global’s seven-year analysis was 2017, which saw 1,880 U.S. branches shutter.
Massachusetts had 129 net closings in 2021, according to the analysis.
“Banks have accelerated plans to consolidate their branch footprints as the COVID-19 pandemic encouraged consumer adoption of mobile and digital channels,” S&P Global authors Zach Fox and Umer Khan said in the report. “Further, banks have faced a tough operating environment with low interest rates pressuring margins and forcing a reconsideration of expenses.”
Large and regional banks have contributed to the acceleration of branch closures, often citing consumer preferences for online and mobile banking. Citizens, Santander, TD Bank and Bank of America all closed branches in 2021.
When comparing the 20-month stretch from March 2020 to October 2021, a recent study by the National Community Reinvestment Coalition found that Greater Boston had the second-highest change in net branch closings, going from net openings of four to net closings of 55 during the pandemic.
In addition to the shift to digital banking, the NCRC identified mergers and acquisitions as a key driver in the declining number of bank branches over the years.
November 2021 alone saw 35 branches close as Eastern Bank bought Century Bank and Rockland Trust acquire East Boston Savings Bank.
Several of those locations, though, have already been acquired by community banks and credit unions, including Newburyport-based Institution for Savings and Metro Credit Union. The former purchased a former Century Bank location in Peabody Square, its first branch in Peabody.
Branches Still Have Key Roles
Community banks have also shuttered branches, but a nationwide survey of 177 community banks showed that most did not close branches in 2021. The survey by accounting and consulting firm Wipfli found that 79 percent of respondents did not close a branch over the past year and did not plan to close one this year.
“I was pleasantly surprised to see the sentiment around keeping the branches open,” said Anna Kooi, Wipfli’s national financial services leader. “Although a lot of the discussion is around digital, there’s a big push for how do they keep those branches while still being competitive, while still being viable from overhead and cost [perspective], and what can they use them for within their communities.”
Michael Jones, president and CEO of Institution for Savings, said in an email that even customers who do most of their banking online still come to branches because they appreciate the personal assistance from branch staff. Some transactions involving complicated services, like mortgages and commercial loans, benefit from personal contact, Jones said.
“We have found that many customers still prefer to open accounts in person, and we also provide hands-on guidance on using our online banking channels,” Jones said. “Customers vary in how they like to do their banking and we are there to meet those needs wherever they are, whether that is online, on the telephone or in one of our 15 offices.”
Fitchburg-based Rollstone Bank & Trust uses its branch network to give customers access to assistance while also investing in having a contact center staffed with bank employees so customers do not need to travel to a branch, Arthur J. Feehan Jr., Rollstone Bank & Trust’s executive vice president and chief operating officer, said in an email. He added that the bank expects to see its service channels evolve.
“As technology continues to advance and customers of all ages are comfortable managing their banking remotely, I do see our branch network and customer contact center continuing to evolve, becoming less transactional in nature and acting even more as help centers,” Feehan said.
Different Purposes for Different Customers
The role of the branch could differ by community, said Thurlow with Reading Cooperative Bank. She pointed to some locations that serve a number of self-employed customers who visit the branch frequently, while other branches often see customers only when they open an account.
Thurlow said Reading Cooperative Bank will use data and business intelligence to look at factors that could influence how the bank considers its branch network, including whether consumer behaviors change once the pandemic ends, how much space is needed at branches, why customers are visiting branches and the types of employees most needed to serve customers.
While national banks might continue to reduce their branch footprints, the branch remains important for community banks, said Nitin Mhatre, CEO of Berkshire Bank. Berkshire Bank went through a branch consolidation last year, and Mhatre said more branches could close not as a cost-savings measure but because of limited foot traffic.
He added that Berkshire Bank will be looking at how to evolve the role of branch staff from transactional to financial advisers and digital ambassadors, while also looking at the role branches can have in community engagement.
“What we are deeply interested in is how do we then change the role of the bankers that reside in those branches,” Mhatre said. He added: “We will have maybe smaller branches than what we’ve had historically; we’ll have slightly fewer because of foot traffic and geography density that supports it; but they will remain a very important part of who we are.”