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More bank branches closing

Weak economy, tighter rules prompt decision

By Todd Wallack
Globe Staff / July 5, 2011

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For the first time in 15 years, banks across the United States are closing branches faster than they are opening them, eliminating locations in Massachusetts, other parts of New England, and the rest of the country.

Bank of America, the nation’s largest bank, plans to close 1 in 10 branches nationwide by 2014, including some in Massachusetts. Webster Bank of Waterbury, Conn., plans to close a half-dozen branches, including one in Mansfield, in October. Rockland Trust and Community Bank of Brockton are each closing three branches.

Overall, banks have eliminated more than 1,400 US locations in the past two years. And almost every week, more branches go dark.

“The industry is overbranched,’’ said Bob Meara, senior analyst with Celent, a financial research firm in Boston. “Banks are doing triage with their branch networks and closing the least profitable ones.’’

The branch closings will probably affect people who have business that is difficult to conduct electronically, such as retailers trying to obtain small bills and coins, or customers who prefer giving or getting their money in person. Advocates for the poor also worry that lower-income neighborhoods will feel the brunt of branch closings, forc ing more residents to turn to payday lenders, check cashing services, and other institutions that typically charge higher fees.

“Residents of those neighborhoods will be paying much more to cash their checks, to get loans, and to do their business,’’ said Jesse Van Tol, a spokesman for the National Community Reinvestment Coalition, a Washington advocacy group. “It’s a trend that threatens to create a dual banking system in America: one for the wealthy and one for everybody else.’’

But analysts and industry executives say the country is still brimming with banks; the number of branches per capita has nearly tripled since 1970. “I don’t think it will impact any disadvantaged neighborhoods,’’ said Bruce Spitzer, spokesman for the Massachusetts Bankers Association.

Many banks are shutting branches as a slow economy, struggling housing market, and increasing regulation push them to slash expenses. New restrictions on credit card charges, debit card fees, and overdraft penalties could potentially cost them billions of dollars a year. Banks are also seeing sluggish demand for loans and recording steep losses from foreclosures.

But the trend is also a recognition that branches are not as critical as they once were. Customers increasingly do their banking through the Internet, smartphones, and ATMs. Webster Bank found that most customers only need to visit branches for complex transactions, such as setting up a new business account or applying for a home equity line of credit, said Webster spokesman Robert Guenther.

“Branch traffic is dropping,’’ Guenther said. “That’s an industrywide phenomenon.’’

Financial Management Solutions Inc., a Georgia company that sells workforce productivity software to banks and credit unions, found the average number of teller transactions has fallen nearly one-third since 2005.

Bank of America said it plans to close roughly 580 of its 5,800 branches by the end of 2014, in addition to 150 shuttered last year. The bank won’t say how many branches it plans to close in Massachusetts, but has already shut five this year, including locations in Holyoke, Springfield, Worcester, and Boston. The bank still has 270 branches in the state, more than any other bank.

Robert Aulebach, who oversees Bank of America’s branches and call centers, said the bank made this cost-cutting decision because fewer customers were using branches for routine transactions. It has also invested heavily in ATMs, online banking, and other ways to reach customers.

Still, Aulebach said, the bank has to be careful not to cut too deeply. Some customers “like to buy in person,’’ he said. “Not everybody is electronically savvy.’’

Rockland Trust, a community bank that operates south of Boston, recently decided to close branches in Plymouth, Swansea, and Whitman. Rockland spokesman Ralph Valente said the Plymouth branch had three others nearby; a recent expansion of its Seekonk branch reduced the need for a location in Swansea 3 miles away; and a branch in Whitman-Hanson Regional High School was underused.

“Like most of our competitors, we regularly monitor branch performance using a variety of metrics,’’ Valente said, “and sometimes it makes sense to close a branch.’’

Overall, banks closed 28 more branches in Massachusetts than they opened between June 2009 and June 2010, a 1 percent decline, according to the Federal Deposit Insurance Corp. Nationally, the number of branches also declined 1 percent, to about 98,500 during the same period, the first decline since 1995. Banks have since reduced that number by another 400 branches, according to SNL Financial, a research firm in Charlottesville, Va.

The recent recession and financial crisis contributed to branch closings. More than 340 banks have failed since the beginning of 2009, and many others have merged or slashed operations to stay in business.

The Community Bank of Brockton plans to close branches in Brockton, Falmouth, and Hyannis later this month as part of efforts to boost profits and improve financial performance. The company lost $1.6 million last year and $1.8 million in 2009, largely because of losses from residential construction loans.

Citizens Bank, the second largest retail bank in the state, said it plans to close 14 branches across its 12-state territory this year, including one in Middleborough, but also plans to open 11 new locations, including three in Massachusetts. Sovereign Bank, the third largest retail bank, said it doesn’t have plans to reduce its branch network.

And some banks are still expanding. JPMorgan Chase & Co., for instance, recently announced plans to build as many as 2,000 branches over the next five years, largely in California and Florida. Citibank said it would open 200 branches over the next three years in key markets, including Massachusetts. TD Bank, the state’s fourth largest retail bank, plans to add as many as 15 branches in Greater Boston by the end of 2012.

“Some of the healthier banks are pursuing growth strategies and expanding,’’ said Patrick Sims at SNL, but “you are seeing increased consolidation’’ by others.

Todd Wallack can be reached at twallack@globe.com.