Mass Bank Closures in the U.S. – Bank of America and U.S. Bank Branches Shutting Down

Last week saw a continuation of the ongoing trend of bank branch closures across the United States, with fifteen more branches shutting their doors. This wave of closures was led by US Bank, which announced plans to close seven branches, followed by Bank of America with six, and Chase with two.

These closures, reported to the Office of the Comptroller of the Currency (OCC) during the week of July 1 to July 8, affected multiple states, including Illinois, New Jersey, California, and Wisconsin. Since the beginning of the year, over 400 branches have closed nationwide, reflecting a significant shift in the banking landscape.

Branch Openings

Despite the closures, it’s not all bad news for those who prefer in-person banking. In the same week, banks opened thirteen new branches, resulting in a net loss of only two branches. This trend of reducing physical branches while expanding online services is expected to persist.

The last year that saw an increase in the number of bank branches in the US was 2011, with over 85,000 branches, according to the Federal Deposit Insurance Corporation (FDIC). Since then, the number has steadily decreased to about 70,000.

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Shift to Online

Major banks like US Bank, Bank of America, and Wells Fargo have grown increasingly confident in their ability to meet customer needs through online banking. The pandemic forced these banks to upgrade their online presence and services, accelerating the shift away from traditional brick-and-mortar branches. Even considering the significant investment required to maintain cybersecurity and online services, closing physical branches still results in substantial cost savings.

Cost Savings

According to Bancography, an Alabama-based consulting firm specializing in banking, the average cost of running a standalone branch is $2.6 million per year, including all running, personnel, and location expenses.

Steven Reider, the founder and president of Bancography, mentioned in an interview with DailyMail.com that banks are willing to close a branch that isn’t overlapping any other branch, betting that customers are willing to drive a bit further. Bank of America, in particular, has embraced this strategy more than other large banks.

Urban Focus

Reider also highlighted that Bank of America’s history of mergers resulted in many branches located in rural areas. Although cheaper to run, these branches can be underused due to their remote locations, making them not worth the cost.

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The industry is experiencing a “rural to urban conversion,” with each census since 1910 showing a greater proportion of Americans living in urban areas. As the country becomes increasingly urbanized, the demand for banking services in rural markets fades away.

Urban Expansion

Banks are now focusing on consolidating their presence in key urban markets. For instance, Chase is aggressively expanding in Kansas City, Fifth Third Bank in Charlotte, and PNC in Austin. The trend of bank branch closures, which accelerated in the 2010s, was further exacerbated by the pandemic, as it kept people at home and increased reliance on digital banking services.

In 2023 alone, over 1,500 bank branches were permanently closed, with California and the Midwest being the most affected regions. This ongoing trend suggests that banks will continue to streamline their operations and enhance their online platforms to cater to a more digitally inclined customer base.

The trend of bank branch closures continues as banks prioritize digital services and cost savings. However, new branch openings in key urban markets offer some hope for those who prefer in-person banking. The shift to online services, driven by the pandemic and urbanization, is likely to persist as banks adapt to changing customer needs.

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