The bank industry is moving forward, but in what way?

What’s Up with the Branch Footprint in the U.S.?

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If the general feeling of 2020 were summed up in a song, the title track from Marvin Gaye's seminal 1971 album of the same name would surely be appropriate: "What's going on?" From an unstable economy to inconsistent recommendations from the medical community amid the COVID-19 crisis, uncertainty was a general theme of the extraordinarily unusual year.

Given the growth in branch locations among some financial institutions — and a contraction for others — a similar question might be asked about the banking industry: What in the world is happening with the branch footprint in the U.S.? Is it getting smaller, or is it actually getting larger?

The mixed messages are legion. Take D.L. Evans Bank. Based in Burley, Idaho, this Northwest community bank is opening several additional locations in neighboring states, according to Independent Banker.

"Is the branch footprint getting smaller, or is it actually getting larger?"

John Evans, Jr. president and CEO of the F.I., told the publication that the company is responding to demand, as large banks are reducing the size of their footprint in and around the Mountain West.

"[Customers] want convenience and we can provide that convenience by opening new branches in those areas," Evans said.

Eclipse Bank, which is headquartered in Louisville, Kentucky, is another community bank in growth mode. It is spending upwards of $175 million on branch development in the Bluegrass State.

Eclipse Bank President and CEO Andrew Pyles told Independent Banker that his institution is likewise simply filling a void left behind by larger banks that are opting to downsize.

"What we see with larger banks is that, as trends change, many times they find themselves too concentrated with branches in certain areas, so they get involved in realignment, which may mean closing branches," Pyles explained.

He further stated that at least three locally based banks closed within the last two to three years; these closures were what created the opening.

Some of the bigs are getting even bigger
But large financial institutions are not in lockstep; others are actually expanding their footprint alongside smaller competitors. This includes Chase Bank. With assets totaling over $3 trillion — making it the single largest bank in the United States — Chase has opened dozens of branch locations since 2019, in states like the Carolinas, Kansas, Minnesota, Tennessee, Rhode Island and Missouri even while it strategically decommissions others.

"To us, this is so much more than building branches," said Thasunda Durckett, CEO of Chase Consumer Banking. "This is about new customer relationships, better access to credit and local jobs."

On balance, though, the lion's share of large FIs are in pure consolidation mode. This has mainly been due to declining foot traffic. As The Wall Street Journal reported around this time last year, Regions Financial Corporation, Fifth Third Bancorp and Citizens Financial Group — three of the nation's biggest banks by overall assets — are all actively pulling back, closing locations where customer volume has consistently dwindled.

Banks are following the leader — the customer
So, what gives? In sum, are banks building more brick-and-mortar locations, or are they doing more decommissioning? As the data indicates, there is no "either or" answer to this question. FIs are simply responding to their customers' needs which, much like the unsettled nature of 2020, tend to be highly dynamic.

"More than 17% expect to visit their branch more often than they did before the pandemic."

But at the same time, consumers are creatures of habit, and many of their banking preferences were hardened or newly formed during the pandemic. In a recent study conducted by Lightico, a customer experience optimization firm, approximately 1,000 people responded to questions relating to their banking habits in 2020 and how they expected them to unfold in the future. More than 45% said they would most likely visit their branch less often. However, more than 17% said they would actually stop by more often.

While mobile banking has clearly taken root, the fact that roughly 1 in 6 people intend to make more trips to the branch than they used to speaks to banks' need to respond to the desires of their individual customer base, rather than the overarching trends of the industry. That generalized trend is technology driven, as approximately 82% of respondents in the Lightico study said they wanted their financial institution to serve them through more remote processes moving forward, compared to 21% who desired more in-person banking.

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