The very idea of a bank branch seems anachronistic. It’s easy to see why retailers that sell physical goods still have a brick-and-mortar presence.
Yes, you can buy clothes online, but most people want to try them on or at least see them. The same goes for things like furniture.
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It almost seems ridiculous to buy a couch or a mattress from a website. Software may allow you to see what the piece looks like in your room, but it can’t tell you what it feels like to sleep on it.
And while technically, most furniture and mattresses purchased online can be returned, that’s a giant hassle. It’s sort of a pain to return a sweatshirt, let alone something that requires multiple people to move it.
There’s very little a bank does that should require an actual visit. You can transfer money, deposit checks, and send a wire transfer online or through the bank’s app in most cases.
Visiting a physical branch feels like something you would do if you want to collect $2 bills to be a clever tipper or to cash in the change jar you inherited when your grandparents died.
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Banks do offer notary services and other things that require an in-person visit, but it seems like there’s very little reason to visit a physical building.
Despite that, it appears that about one in every four new businesses being opened is a bank branch. Clearly, many banks believe that physical locations are a very important part of their business.
One regional banking chain, however, has decided to rethink its physical banking footprint.
ATMs do not require a full bank branch.
Image source: Shutterstock
Key bank brand closing dozens of branches
Flagstar may not be a household name as a banking brand, but it’s a deceptively large one.
“Our parent company, Flagstar Financial, Inc., is based in Hicksville, NY, and has $100.2 billion in assets, $69.2 billion in loans, $75.9 billion in deposits, and $8.2 billion in total stockholder equity. We are a leading regional bank with over 300 retail banking branches, including a significant presence in the Northeast and Midwest and locations in high-growth markets in the Southeast and West Coast, and approximately 80 private client banking teams,” the company shared on its website.
CEO Joseph Otting, who has only been with the company since last March, set the stage for modest expectations during his remarks in Flagstar’s fourth-quarter earnings call.
“As I look back on 2024, I think we’ve accomplished a lot of things in a very short period of time. While last year was a transitional year for the organization, We really made significant progress on all of our strategic priorities, setting the stage for profitable growth going forward,” he shared.
That’s a very nice way to say, “We’re not profitable and won’t be anytime soon.” He did, however, share a turnaround timetable.
“We are on projections to be profitable now in the fourth quarter of this year, and I think this will ultimately mark the company’s turning point on its return to consistent profitability,” he added.
Flagstar closing dozens of branches, operations centers
CFO Lee Smith made it clear that the company has some closures coming, which include more than just branches.
“So, as we talk about real estate impairments, it actually relates to several of our locations. There are a couple of operating centers that we are looking to consolidate that we own and move out of those into smaller facilities. There were about 20 private client retail locations that we are looking to consolidate,” he added.
Smith does not think those cuts will hurt service.
“They are in close proximity to other locations. So we feel we can be more efficient and not lose anything from a customer service point of view,” he shared.
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The cuts on the brick-and-mortar bank branch will run deep as well, with the company closing 20% of its physical locations nationwide.
“And then there are approximately 60 retail branches, most of which we lease, that we are looking to consolidate. Again, these are close to other locations. And so we do not feel there’ll be any disruption to the customer experience,” he added.
Shutting down some branches has already begun.
“And we’re phasing the closure of those branches in three different phases, one of which is already underway, and then a further two phases that will occur later this year,” he said.
