The internet didn’t kill bank branches. Bank mergers did.

The number of bank branches increased through the 2000s, even as financial institutions consolidated. (FDIC)
The number of bank branches increased through the 2000s, even as financial institutions consolidated. (FDIC)

Bank branches have long been a trusty space-filler for commercial landlords. They'll pay whatever rent you charge, pretty much. Though nobody's particularly excited about a new bank branch in their neighborhood, residents usually won't resist them, either.

And weirdly, despite the seeming ubiquity of ATMs and online banking, bank branches haven't gone the way of the travel agency or even the real estate office. They're still all over major cities, taking up prime corners, to the point where New York City's Upper West Side passed a zoning overlay to limit their growth (although of course, there are still plenty of poor neighborhoods that don't even have a single one).

In 2007, the Federal Deposit Insurance Corporation found that having a convenient bank branch was still the most important factor consumers looked at when deciding where to put their money, and having more branches tended to correlate with higher profits. As federal and state laws regulating the number of branches a bank could have were liberalized, the number of branches grew by 27 percent from 1994 to 2006. At the same time, though, the branches were getting leaner--the average bank outpost had 20 employees in 1988, but only 14 in 2004.


Banks started decreasing their branch networks overall in 2010. (Bancography)

Branch networks finally started to shrink in 2010, when banks shed 1,100 locations, according to research firm Bancography. The decline has continued over the past couple of years, led by the troubled Bank of America, which shuttered 193 branches in 2012. Meanwhile, the number of transactions per branch declined too, from 10,200 per month in 2007 to 7,600 per month in 2012.

It's not because people aren't depositing cash. Consumers who are less willing to spend money in a shaky economy are more likely to sock it away in a bank account (especially in Washington D.C., which leads the nation's large cities in deposit growth). And it's not entirely because people are banking online. Rather, it's because a number of large banks in the same markets have merged--like Wachovia and Wells Fargo, or BB&T and Colonial--and decided to save on real estate costs by closing down branches.


Percentage growth in bank deposits, 2008-2012. (Bancography)

The Wall Street Journal recently parsed the branch closing phenomenon, focusing on the small towns that lose an important institution when a bank closes its doors. And the Atlanta Journal-Constitution points out that even if people do their day-to-day money management online, they still like a branch nearby to open an account and conduct significant transactions, like taking out a loan. So bank branches will likely never disappear completely--they're just a less reliable option for landlords looking to rent a storefront.

Lydia DePillis is a reporter focusing on labor, business, and housing. She previously worked at The New Republic and the Washington City Paper. She's from Seattle.
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