Banks across America shuttered more branches last year than in any other year since 2002, but the number of branches in Massachusetts has remained relatively flat. Maybe it’s something in the water.
According to SNL Financial, U.S. banks closed 2,267 branches last year and opened just 1,149, resulting in a net loss of 1,118 branches nationwide – the greatest decline since SNL began tracking this data in 2002.
“All banks are bottom-line oriented, and over the past several years, margins have compressed. Operating expenses have become an issue, in addition to salaries. Within each branch, there are a lot of employees, and if you’re trying to control costs, reduce costs, that’s a pretty easy target,” said Richard L. Rowe Jr., the president and chief executive officer of Scituate Federal Savings Bank.
Closer to home, the numbers tell a slightly different story.
Last year, the Office of the Comptroller of the Currency approved almost 40 branch closures in the state, while it approved just nine new branch establishments. Data from the Division of Banks flips the picture a little bit: Massachusetts-chartered banks were approved for 20 new branch establishments last year and just 11 branch closures.
Overall, the number of branches in Massachusetts has remained relatively flat since 2002. Around the middle of 2013, the Bay State boasted 2,210 bank branches. Compare that with 12 years ago, when the commonwealth was home to 2,044 bank branches, according to the Massachusetts Bankers Association.
Take an even longer look back at Bay State branches, and the story gets a little more interesting. In 1994, Massachusetts had 1,968 branches. That means a net increase of about 340 branches over 20 years, says David E. Floreen, executive vice president and chief operating officer at the Massachusetts Bankers Association.
‘It’s About Stealing Market Share’
For Hal Tovin, executive vice president and chief operating officer at Belmont Savings Bank, the story is pretty clear: For big banks with branches across many states, it’s about numbers and efficiency, while community banks are establishing presence and scooping up market share.
Big banks that built themselves up through multiple acquisitions, for example, might be closing branches that overlap in certain markets.
“You have big banks focusing on efficiencies and small banks focusing on service and presence. It’s about stealing share,” Tovin said.
Last year, Belmont Savings Bank was approved by the Division of Banks to open two branches and close one. The $1 billion community bank as of late has focused on putting smaller branches into local supermarkets with an aim toward creating what Tovin called “top of mind awareness” among people who don’t bank at Belmont Savings – so when a potential customer is fed up with their big bank, he or she will have Belmont Savings on the mind when he or she is ready to make the jump.
The Evolution Of The Branch
The trend toward fewer branches also ties neatly into a perennial issue: The evolution of the branch.
Once upon a time, Joe Average visited his local bank branch at least weekly to deposit his paycheck, withdraw cash and catch up on local gossip. But the advent of ATMs, direct deposit, online banking and other innovations in financial technology have moved every day, basic transactions out of the branch, and consequently decreased foot traffic into physical branches.
“The functionality and purpose of the branch is changing. People still like to drive down the street and say, ‘My bank is there,’ but you may not need the large, big branch with lots of people to do transactions that can [now] be done online or remotely,” Floreen said.
Of course, Joe Average will probably still want to see an actual person when he’s ready to apply for a mortgage, prepare for retirement or take out a small business loan.
Toward that end, expect to see more banks adopting a model that resembles less of the traditional branch and more of the “financial center” style of location that South Shore Bank rolled out in Hingham late last year. Such branches sometimes feature video tellers who can help customers during extended hours, and cross-trained staff members who can counsel customers about everything from checking accounts to lines of credit.
Meanwhile, Tovin thinks more banks may follow Belmont’s partnership model, pairing small branches with businesses that typically get a high volume of foot traffic, like supermarkets, pharmacies and coffee shops.
He compares it to the advent of the ATM, which was predicted by some to be the beginning of the branch’s demise.
“Nobody wants just online, nobody wants just remote banking or ATMs. People want to choose how they interact with their bank, and so banks will continue to have to provide all those different access points,” Tovin said. “But nobody’s going to build those big main branches anymore. It doesn’t make economic sense.”
Email: lalix@thewarrengroup.com
