Small Banks Look to Branch Out

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, with assets averaging $1.65 billion.  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.

Larger banks from Bank of America Corp. 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 only accelerated closures more recently.  The trend pushed 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. “Branches still have a very important role in the organic growth of the bank,” said Barry Sloane, CEO of Century Bank.  Sloane adds that branches are a branding tool, help customers who want face-to-face interaction, and give 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.

Banks have been reporting strong earnings. In the first quarter of 2018, community banks saw profits rise 18% as income tax expenses declined and net interest income rose, the FDIC said.  The expanding economy leads to “more people out there spending and saving and investing,” said WSFS Financial CEO Mark Turner.

Source:  Wall Street Journal