Bank branches vanishing with acquisitions, tech changes

Technology and bank acquisitions continue to guide the conversation in the financial world as banks decide on leasing sites.

“I think there are a number of reasons that the number of primary bank offices and branches have been declining, and perhaps one of the major reasons is that … community banks are consolidating, and as they consolidate, they have branches frequently in duplicative locations – across the street or down the block,” said Bowman Brown, a partner at Shutts and Bowen LLP who specializes in banking matters.

“Once there’s a merger of two banks, you only need one headquarters building, presumably,” he said. “Just the natural diminution of branches and head offices as a result of the consolidation of banks is, I think, a primary factor in the declining number of bank branches and head offices.”

Technology has shown its dominance across many fields and its impact on the banking world is evident.

“In my view,” said Mr. Brown, “the other principal factor is that bank customers now, with the very rapid acceleration of the application of technology to the business done by banks, withdrawal of deposits, deposits of checks, online credit applications, customers have become much more comfortable with digital banking, and the need for face-to-face communications with the teller that used to be the case has dramatically declined.”

There has been a significant change in the need for physical facilities, particularly in terms of branches, said Mr. Brown. ATM machines or other types of payment systems that banks are offering may accomplish tasks that take place in a physical branch.

Additionally, banks deciding to sell and lease head offices provides liquidity for the institutions.

“There is a strategy for selling head offices and branches and leasing those back and that provides some liquidity and financing ability to banks,” said Mr. Brown. “There is that financial engineering technique that I think has maybe played into more leasing and less owning.”

The impact of technology and consolidation in the industry have impacted the movement of banks making the decision to sell and lease head offices.

“As banks have adjusted their strategy to build in more flexibility on closing branches, and possibly consolidating if they wind up merging or consolidating with another bank,” said Mr. Brown, “it would seem to make sense to be as flexible as possible with respect to your physical branches and main office.”

This trend in the area is expected to continue impacting the field.

“I think technology continues to advance and banking becomes more and more digital and less and less dependent on geography or real estate,” said Mr. Brown. “That’s one trend that I think will continue the reduction of branches and head offices. The other, of course, is consolidation … of community banks in Dade County, and presumably that will continue.”