As much of the banking industry went in the opposite direction, Sparta-based ChoiceOne Bank opened branches starting in late 2018.
New offices in Rockford and downtown Grand Rapids expanded ChoiceOne’s footprint and contributed to the market ranking as one of the top 10 metropolitan areas in the U.S. for bank branch openings from 2018 to 2019.
In fact, the Grand Rapids metro was a bit of an outlier from an ongoing national trend, according to an analysis by Magnifymoney.com, a unit of LendingTree.com, that used data from the FDIC Summary of Deposits for June 2019.
ChoiceOne Bank’s new locations and other openings in the local market from 2018 to 2019 stood in contrast to the overall trend in the U.S. banking industry that’s been reducing its brick-and-mortar locations. However, even the Grand Rapids area has fewer bank branches than it did just a few years ago.
Many of the markets that added branches last year are smaller or mid-sized metropolitan areas such as Toledo, Ohio; Springfield, Mass.; and Des Moines, Iowa, each of which ranked just above Grand Rapids on the Magnifymoney list.
Quite often, community banks opened new branches in those markets in a move to extend or protect their market turf from much-larger national competitors “who may not have as sharp of an eye on the smaller metros as the community banks,” said Chris Horymski, a senior research analyst at Magnifymoney. That’s likely because large, national banks generally are more focused on growing digital services and have shrunk or resized their sprawling branch networks over the years, Horymski said.
The trend has provided an opportunity for community banks in growing mid-sized metro markets such as Grand Rapids, he said.
“Those are the new battlegrounds for the banks remaining,” Horymski said of mid-sized metro markets around the nation.
In the Grand Rapids area, ChoiceOne Bank added the Rockford and downtown locations even as digital banking grows and foot traffic to bank branches declines, limiting how many more branches the bank may develop in the future as it grows, CEO Kelly Potes said.
“We don’t think that we have to add as many as what the regionals are shrinking, but as a smaller community bank, we do have to have some branches that are convenient for our clients and our potential clients,” he said.
As more people bank digitally, any new branches it might develop would likely incorporate technology and be much smaller than in the past, although ChoiceOne’s downtown Grand Rapids location is “fairly good size” because it serves as a regional hub, Potes said.
“I would think anything in the future that we would do, if we need to, it would be a smaller footprint and there would be more automation within the branches,” Potes said.
For instance, the downtown Grand Rapids and Rockford locations ChoiceOne opened in 2018 use interactive teller machines for their drive-up windows that are connected to the bank’s call center in Sparta. That kind of technology is indicative of the way many banks have retooled branches or developed new locations today.
Bank of America, for example, now has three so-called “advanced financial centers” in the Grand Rapids area that use video conferencing instead of teller windows to greet and assist customers.
As banks have further deployed digital services and relied less on physical branches, the top 100 markets across the U.S. lost nearly 1,300 bank offices since 2018, according to Magnifymoney’s analysis.
Among the 100 largest metropolitan markets, 79 now have fewer branches than in 2018. The number of branches grew in 15 metro areas and was unchanged in six. Despite the outliers such as Grand Rapids, the combined branch closures in the top 10 markets for losses vastly outpaced the gains in the top 10 market for new bank offices by a nine-to-one ratio.
Large cities shed the most bank branches. New York lost the most branches in 2019 with 379 fewer offices than a year ago, or about half of all losses nationally. Chicago lost 74 branches and 57 branches closed in Washington, D.C.
The trend toward fewer bank branches stems in part from demographics. A younger generation that grew up in the Digital Age simply prefers online banking or using a bank’s smartphone app.
In results from a small online survey conducted by Magnifymoney that shows just how much banking has changed, three out of four people said bank branches are becoming “a thing of the past.” It comes as no surprise that Millennials and members of Gen Z were most likely to hold that opinion. The bigger eye-opener: More than two-thirds of Baby Boomers felt the same way.
Nearly eight in 10 Baby Boomers said they did their banking digitally, while one in 10 hadn’t even been inside a bank branch in the last year.