Bank Branches in Retreat: Here Comes the Neighborhood!

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Banks are scaling back on branch-building, which is good news for neighborhood diversity. Just when you thought that every last mom-and-pop store in your neighborhood was succumbing to yet another garish, badly designed bank branch, comes good news: the Invasion of the Bank Branches is coming to an end.

A massive expansion in bank branches during the economic boom -- some 10,000 opened between 2004 and 2005 -- is giving way to closings, cost cutting and retrenchment after many banks merged or went belly up as the real estate market collapsed. In fact, the Wall Street Journal reports, the total number of retail bank branches in the country will decline this year for the first time since 2002.

If you're worried about not finding a local branch near your home, never fear: There are still 98,913 bank branches still open and ready to make you wait in line. The good news is that your neighborhood may just regain some of the diversity and vitality that once characterized our cities and towns before the boom priced out smaller merchants.
The recession wreaked havoc on banks, with 140 failing and 170 disappearing through mergers. Their combined profits in 2009 fell to just $12.5 billion from $100 billion in 2007, the WSJ says, noting that it costs $1 million to open a bank branch and two to three years to turn a profit.

In the go-go years, banks -- and Starbucks and Duane Reade, among others -- were taking over corner stores and forcing out local merchants who couldn't afford the high rents. Many neighborhoods became overloaded with such amenities, which was good for selling real estate and convenience, but made everyplace look like a mini-mall.

Now the banks are retreating and Starbucks is too. And that's a good thing. How many banks and 'Bucks do you need, anyway? My old neighborhood in Manhattan had at least four of each in a four-block radius, but over the years it lost the local butcher and a beloved bookstore. The number of bank branches you have nearby depends on where you live, of course. The AP reports that during the boom, 6 branches opened every day in up-market city locales and fast-growing exurban communities. But of those 10,000 new branches, barely 1 in 10 were in inner-city neighborhoods.

The recession sucks, but maybe there's a silver lining. Let's say a fond bye-bye to all those bank branches and hello to iPhone banking apps -- or walking out of our way to cash a check.
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