In the past year, banks and thrifts have closed more than 750 branches in the U.S., with 43 states seeing more closures than openings. The methods that banks use to manage and move the accounts of their affected customers vary depending on the reason for the closure, and by bank, but even people who rarely step foot into their local branch should take notice.
"It's rare that you'll have a bank location that becomes a restaurant or a gas station," says John Hall, senior vice president of the American Banking Association. "In most cases, you'll have another bank move in, whether because they bought the lease or because they've merged with the existing bank."
If a bank merges with another, customers have the option of either keeping the existing account with the same bank, and continuing (or beginning) to use ATMs and online banking for the bulk of their needs, or changing to the new bank that will come into the existing location.
If that decision isn't made purely on the location of the branch, other factors come into play. While the days of getting a toaster when opening a new checking account are long gone, the new bank may either honor the existing rates or offer special promotional rates for customers who make the switch. So be sure to compare rates of the two banks -- everything from checking account fees to credit card interest rates to mortgages.
Great, Now What Am I Supposed to Do?
Should a branch simply close, the bank will focus heavily on the non-store services available. "While a safe deposit box may be a location-specific service," Richele Messick, a representative for Wells Fargo, says, "most banking services are not tied to the store location." She points out that customers can bank by mail, online, phone, ATM, or at another bank location.
It's an industry line. Tara Burke, a representative for Bank of America, says that the bank offers online, mobile and telephone banking, as well an app that allows for deposits via smartphone. Neil Brazil, vice president and senior manager of media relations for HSBC North America, also points to HSBC's extended telephone service hours and ATMs that can manage most routine transactions, including deposits.
But even customers who switch from in-branch to ATM banking may be in for some surprises.
The battle over branches is being fought on a smaller battlefield, as banks increasingly jockey for high-performing, low-cost locations to service their customers. Bloomberg reports that Bank of America diminished its ATM network by nearly 9% this year, by removing the machines from gas stations and malls. JPMorgan Chase expanded its network by 5%. (JPMorgan didn't not respond to requests for comment.) And should a branch close, its 24-hour, storefront ATMs will close with it.
Should You Stay or Should You Go?
Once rumors of a closure or a merger begin to spread, customers should begin to identify their options. It's always a good idea to leave a time cushion when transitioning from one bank to another, and banks vary in how much notice they'll give customers of an impending closure.
Some questions to ask:
When will this closure take effect?
Where is the closest branch?
Will any ATMs close along with the branch?
Does the nearest branch have the same hours and provide the same services?
Whom do I contact with questions?
Is there a new bank moving into this space?
Customers who have items in safe deposit boxes will be notified anywhere from 30 to 90 days, depending on the bank. Wells Fargo will move the box contents to a new location and notify the customer. HSBC will ask the customer to close the box at one location and open a new one at another location. Bank of America works on a case by case basis.
What to Do When Your Bank Branch Closes
BOK (BOKF) is the smallest bank on the list with a $3.8 billion market value and $26 billion in assets. The bank holding company is based in Tulsa, Okla., but its branches operated under several names in other states: Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas and Colorado State Bank and Trust. BOK is worth about 12.5 times earnings and is valued at 1.3 times book value. The return on equity is 11%, and it offers a 2.7% dividend yield to the common holders. Shares are trading around $56.00, and Wall Street analysts have a target above $59.00.
KeyCorp (KEY) is the one exception in our list to our rule about share prices under $10. Its other metrics more than make up for this. It has a market cap of just $7.12 billion against some $87 billion in assets. It operates in 14 states throughout the Rocky Mountain, Northwest, the Great Lakes and Northeast regions. To make its appearance on this list even more impressive, KeyCorp is headquartered is in Cleveland, where a large number of now-troubled loans were issued. The bank has a return on equity of 9.2% and pays out a 2.7% dividend yield. Shares trade around $7.50 but have a target price of $9 from Wall Street.
PNC (PNC) is based in Pittsburgh and has almost $300 billion in assets, with over 2,500 branches and almost 7,000 ATMs in 14 states. It has a market cap of $31.01 billion, and its stock is valued at 10.6 times earnings and at less than 0.9 times book value. The return on equity is 8.9%, and the company pays out a 2.73% dividend. Shares are trading at under $59, but Wall Street is eyeing a price of $70.50. PNC was even strong enough financially to close its National City acquisition at the end of 2008 when there was so much fear in the financial markets. PNC also owns almost a quarter of the great asset-management firm BlackRock (BLK).
M&T Bank Corporation (MTB) is based in Buffalo, N.Y., and now has more than $79 billion in assets. Excluding any small purchases made recently, M&T had nearly 700 branches, 2,000 ATMs and a presence in eight states. The market cap is $10.12 billion, its P/E ratio is 12.7, and its price-to-book value ratio is only 1.07. M&T has a return on equity of 9.5% and pays out a dividend of 3.5% to common stockholders. The stock is trading just north of $80 a share, but analysts have set a target price of about $90. Berkshire Hathaway owns almost 5.4 million M&T Bank common shares worth more than $400 million.
U.S. Bancorp (USB) is often overlooked as a money-center bank because it is a super-regional located in Minneapolis. But it's the fifth-largest commercial bank in the United States and caters to millions of consumers. With $341 billion in assets, more than 3,000 branch locations and more than 5,000 ATMs, its operations are spread out over 25 states in America. Berkshire Hathaway owns some 69 million shares worth more than $2.1 billion. The bank's market cap is $59 billion. It is worth about 10 times earnings and 1.6 times book value. The return on equity is very high at 16%, and it offers a 2.5% dividend yield to the common holders. Shares are trading around $31.50, and Wall Street analysts have a target of about $34.25 on this great, safe bank.
Despite the media attention surrounding the JPMorgan's (JPM) multibillion-dollar trading loss, the firm is still in good shape compared to many of its peers. It has a fortress-like balance sheet with about $2.3 trillion in assets, and CEO Jamie Dimon has said the only thing that could lead to the bank's failure is a collision of the Earth and Moon. Despite a share price decline following news of the "London Whale" trading loss, the company still has a sizable market cap of $135.17 billion. Shares trade at less than 8 times earnings and only about 0.7 times book value. The return on equity is 9.8%, and the company pays a dividend yield of 3.4% on the common stock. While the bank shares are trading at just over $36, analysts value the company at $47 a share.
Wells Fargo (WFC) is the undisputed safest bank in America now that JPMorgan Chase & Co. (JPM) has come under scrutiny -- even if Chase has about $1 trillion more in assets. With some 6,200 storefront branches, more than 12,000 ATMs and an asset base of over $1.3 trillion, it has a presence in almost every state. Warren Buffett's Berkshire Hathaway owns close to $13 billion worth of the common stock, and his stake keeps rising. The market cap is a whopping $171 billion. The shares trade at less than 9 times earnings and at almost 1.2 times book value. The return on equity is just above 12%, and it offers a 2.7% dividend yield to the common holders. While shares trade at around $32.50, Wall Street analysts value the bank at almost $38 per share.
Hall says that despite the plethora of ways to bank, branches will never become completely obsolete. "While banks have added additional, convenient banking methods -- from ATMs to mobile-banking -- the branch remains a solid mainstay for accessing bank products. Different consumers have different preferences."
To customers who need regular access to a branch for additional services, whether they require small bills for a business till or help filling out a mortgage application, Hall says not to fear.
"Banking is an extremely competitive industry," he says. "There are so many options on how to bank today, that even in rural areas, there's a solution for everyone."
Motley Fool contributor Molly McCluskey doesn't own shares in any of the companies mentioned. Follow her travel and finance tweets on Twitter @MollyEMcCluskey. The Motley Fool owns shares of JPMorgan Chase and Bank of America. Motley Fool newsletter services have recommended buying shares of Wells Fargo. Motley Fool newsletter services formerly recommended JPMorgan Chase.