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Betting on Branches?

Tired of spending “over a week’s worth of work hours annually” at local bank branches, a sizable percentage of small and medium-sized businesses (SMBs) are increasingly shifting toward digital banking platforms as a time-saving solution, according to a recent report in Tearsheet. This shift to digital is nothing new, of course, and “traditional” banks have been riding that wave now for decades. 

But are bank branches dying? In a surprising turn, U.S. banks added more net new branches in 2023, breaking a decade-long trend of closures. Despite industry turmoil, banks added 94 net new branches last year, marking the first annual period of expansion since 2012. This resurgence in branch building is led by major players like JPMorgan Chase, which plans to open 500 new branches over the next three years. The shift reflects a strategic move to capture new wealth management (which often requires more personal contact) and, yes, small-business customers. 

Meanwhile, banks are ramping up branch acquisitions, as well. Amid high real estate costs and inflation concerns, nine transactions were announced in the first three months of 2024 alone—there were 13 acquisitions total in 2023. The surge in deals, including 36 branches and $1.59 billion in deposits, reflects efforts to bolster deposits amid rising funding costs and interest rates. This trend aligns with a broader industry focus on managing interest rate risk and liquidity concerns, as highlighted by recent market data—including RMA’s own Community Bank Survey, whose respondents said interest rate risk (57%) and liquidity (32%) had the most negative effect on banks’ strategic plans over the past year. 

Perhaps reports of the death of the bank branch have been grossly exaggerated. As JPMorgan CEO Jamie Dimon said earlier this year, “Even wealthy people like to visit their money.”