Community banks are often reluctant to close branches, but rising costs are encouraging management teams to take a hard look at cutting back.
Noninterest expenses at banks with
Up-to-date statistics on branch closings at community banks are scarce, but recent announcements suggest that community banks are finally paring back branch networks. Such closings are an overdue recognition that branch density may no longer be worth the cost, industry observers say.
"It is broadly recognized now that it isn't the 1990s anymore and that things need to change," says
Other banks that are planning closures include
Closings are also a natural way to slim down after acquisitions.
Despite the latest closings, many industry observers believe that community banks lag larger rivals in the area of branch consolidation.
"More community banks may be cutting branches, but not enough and not quickly enough," says
Smaller banks have frustrated analysts with their reluctance to close branches. Partly as a result of consolidation, the average number of branches per community bank has been rising, peaking at 5.6 branches in the
Many larger banks began pruning far earlier and have become active consolidators. A number of those banks greatly expanded over the last decade and now have more fat to trim than smaller rivals, industry experts say.
"Big banks are going to be doing the bulk of the closing because [they] were responsible for the branch boom," Meara says.
Smaller banks expanded their networks more cautiously than big banks during the early 2000s. Total U.S. branch count rose 24% from 2001 to 2011, to 83,128, according to the
Big banks are scaling back. Total U.S. branches fell 2% last year, according to SNL Financial.
Webster remains an exception among community banks.
"Small banks have been able to grow earnings, which has caused them to turn a blind eye" to branches," Gilbert says. "But you just can't have these expansive branch structures if branch traffic keeps falling."
Mounting expense pressure will change attitudes, industry observers say. But a reluctance to cut, along with the time it takes to secure regulatory approval, end leases or sell properties, means that large-scale branch consolidation at smaller banks "is still several years away, if it happens at all," says
"I don't expect to see any dramatic decline in the near term," Smith says. "Almost every metric would suggest we are saturated with branches in lots and lots of marketplaces, yet community banks are still loath to close branches."
|Copyright:||(c) 2014 Financial Planning. All rights Reserved.|
|Source:||Source Media, Inc.|