Smaller Banks Are Looking to Branch Out


Century Bank CEO Barry Sloane says branches are a branding tool for the Massachusetts lender.

Banks across the U.S. have closed nearly 9,000 branches this decade. Yet many smaller banks are in building mode, a sign that broader economic growth is taking hold and community lenders are recovering after lean post crisis years.
 More than 1,200 banks expanded their number of branches from 2012 to last year, according to data from the Federal Deposit Insurance Corp.
 Many of those are tiny — their assets averaging $1.65 billion, or less than 0.1% the size of the nation's largest bank, JPMorgan Chase & Co. Still, the number of small banks adding to branch counts is meaningful, exceeding institutions closing locations over the same period by more than 200, according to the FDIC data.
 One of the latest banks to announce branch growth, Flagstar Bancorp Inc. of Troy, Mich., said this month that it was buying 52 branches from beleaguered Wells Fargo & Co., in a deal that will bring its total to about 160 locations and help Wells Fargo with its goal of trimming more than 800 of its 5,861 branches.
 Larger banks, from Bank of America Corp. to SunTrust Banks Inc. to PNC Financial Services Group Inc., have been cutting branches in recent years as more customers rely on digital tools to complete routine banking transactions.
 While big banks battered during the financial crisis started cutting branches nearly a decade ago, midsize regional banks have accelerated closures only more recently.
 The trend brought the overall number of U.S. bank offices to about 84,000 in December, the lowest total since 2006, the FDIC said.
 Smaller banks have been adding branches both to drive growth and to accentuate their commitment to the local community. Century Bank, based outside Boston, for example, now has 27 offices across eastern Massachusetts, up from 22 in 2008.
 “Branches still have a very important role in the organic growth of the bank,” said Barry Sloane, the company's CEO. They are a branding tool and help with customers who want to sit with a banker when setting up an account, he said. Having a branch nearby also gives customers a place to go for any problems.
 Of the roughly 1,200 banks that increased their branch counts, more than 2,600 locations were added, according to the FDIC data, which went through June 30.
 Some banks have added branches by taking on other banks' locations after acquisitions. Mergers have been common in recent years as the industry continues its three decade trend of consolidation. From a peak of nearly 14,500 banks in 1984, the number of U.S. banks dipped last year below 5,000.
 One bank that has more than quadrupled its branches through acquisitions is Riverview Financial Corp., of Harrisburg, Pa. The company was created in 2008 through the merger of National Bank of Marysville and Halifax National Bank. Since then, Riverview has done three other deals, bringing its branch count to 33 from seven a decade ago. Riverview President Brett Fulk said his firm has benefited from other banks closing branches following deals. “In every instance, we have seen significant new account activity at our nearest offices,” Mr. Fulk said.
 Not all banks are expanding their branch networks. Some are spending their money on other areas such as technology or cybersecurity.
 Now, some bigger banks are looking to add branches after years of cuts.
 JPMorgan Chase CEO James Dimon said recently that the bank was looking to open as many as 400 new locations nationwide, some of which will be in Washington, D.C. The bank may also close some branches, but a spokeswoman declined to comment on the number it may shut.

 

Open and Shut

Larger banks have been more likely to close offices than community banks.*


*Data are for 2012-17 †2012-17, breakdown based on largest city in each county.
Source: FDIC

 

BY ALLISON PRANG

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