Banks in Louisiana are closing branches at the fastest rate in decades, in line with a dramatic shift in the U.S. financial sector toward digital offerings and away from traditional physical locations.
FDIC-insured commercial banks in 2017 had the fewest number of branches in Louisiana since 2005, according to data from the Federal Deposit Insurance Corp., and had declined for five of the previous six years.
That trend does not appear to be abating. Bank executives say consumers are increasingly demanding easier ways to do business — often by phone or machine — and several banks have closed branches this year. Other forces, like the unrelenting consolidation of financial institutions in Louisiana, also are driving the trend.
“I don’t think we’ve hit the inflection point,” said Ben Marmande, president of IberiaBank’s Baton Rouge market. “And when we do, it’s going to be pretty radical.”
Iberia, the largest bank headquartered in Louisiana, announced in May it would close 22 locations regionally, including seven in Louisiana, citing a long-term strategy of becoming more efficient and more digital. Regions Bank, which has a significant presence in Louisiana, was cutting branches as fast as any bank in the country in 2017, according to Alabama.com. Capital One has closed several branches in the state in recent months. Hancock Whitney last year closed or consolidated more than two dozen branches as a result of its takeover of the failed First NBC Bank in New Orleans.
To be sure, some of those bank executives note they are adding branches in newer markets, even if they are consolidating physical branches in mature markets. Because IberiaBank has acquired other banks at such a strong clip, Marmande said it has actually added branches on net.
And the trend likely won’t spell the end of the physical bank branch in the long term, officials say.
Instead, bank branches will become increasingly equipped with video-tellers and high-tech ATMs. Mobile apps will offer more and more services. The traditional teller line will give way to a more agile — and probably smaller — staff that can handle a range of customer requests.
The result is a banking industry that will look much different to the average customer in the coming years. Industry leaders say it will ultimately be more attuned to what those consumers want.
“While we are seeing branches looking different and banks not expanding in brick and mortar as much as they may once have, we don’t really see the branch itself going away totally,” said Ginger Laurent, chief operating officer of the Louisiana Bankers Association. “We still have clients who want to come into a physical location when they want to.”
Laurent said the continued consolidation of banks explains branch closures more than anything else. When one bank acquires another, it typically closes or consolidates locations that are close to existing branches. And since 2010, Laurent said Louisiana has 39 fewer banks, and only one new bank has opened.
Hancock Whitney, the Gulfport, Mississippi-based bank, is focusing its efforts on creating a “robust” digital and mobile presence, said COO Shane Loper. And Hancock Whitney branches are going to be smaller, more technology-oriented locations where customers may not come regularly for transactions, but instead for expert advice on more intricate financial matters.
“We believe the smartphone is going to be the center of consumer banking in the future,” Loper said.
After the 2016 flooding in the Baton Rouge region, which inundated a Regions Bank branch in Denham Springs, the bank rebuilt the location to fit a new branch model, which includes a drive-through video banking ATM.
Newer Regions branches are a departure from the traditional teller line, said spokesman Jeremy King. Instead, staff at the branches, which King likened to Apple’s retail stores, greet customers as they come in the door and can handle a variety of needs.
The bank also launched a “virtual concierge service,” a digital tool customers can use to ask detailed financial questions of bankers.
“There are fewer locations from a net perspective, but we’re working to provide more meaningful services,” King said.
Baton Rouge-based Investar Bank recently launched a new “video banking” app for mobile users, where customers can connect with bankers remotely to open new accounts and ask about loans, among other things.
While Investar doubled its branch footprint in 2017 from 10 to 20, CEO John D’Angelo said the bank is not building as many branches in markets and will “dramatically reduce the size and number of future branches in new markets.” That move is coming in conjunction with the bank’s digital strategy.
With that shift toward technology will likely come a continued decline in the number of people employed in the banking sector.
Nearly 42,000 bank tellers are expected to lose their jobs nationally from 2016 to 2026, according to the U.S. Bureau of Labor Statistics. A 2016 Citigroup report found soaring capital investment in FinTech (financial technology) companies and forecast a dramatic reduction in the industry’s workforce over the next few years.
“The shift to online banking will reduce the need for customer service positions such as bank tellers or loan officers, which should lead to a decline in employment in the banking industry,” said Kabir Hassan, finance professor at the University of New Orleans.
Hassan said changing consumer habits, bank consolidation and competition from online banks is driving the decline in branches. The digital banking phenomenon, though, is the “larger trend that will persist into the long term.”
Marmande, of IberiaBank, said it is not only the front-line employees like tellers who will be affected by the digital transformation. Back-of-the-line work is also subject to automation as companies seek to cut costs.
“That’s going to have a bigger impact on jobs than the slow elimination of the human teller,” he said.