Bank branch closures: canary in the coalmine?

Do bank branch closures portend a downturn in the overall economy?

Zions Bancorporation recently announced that it would slash 500 jobs from its multistate region, even as it closes some branches. The bank operates Vectra Bank Colorado, which maintains locations in Boulder and Broomfield counties.

It’s just the latest in a string of such announcements from banks large and small:

SPONSORED CONTENT

Empowering communities

Rocky Mountain Health Plans (RMHP), part of the UnitedHealthcare family, has pledged its commitment to uplift these communities through substantial investments in organizations addressing the distinct needs of our communities.

• U.S. Bank announced plans in March to close five branches in the Boulder Valley and Northern Colorado, with another half dozen closing elsewhere in the state.

• National Bank Holdings Corp. (NYSE: NBHC), based in Greenwood Village, announced that it would close four branches, including one on West Drake Road in Fort Collins.

• BOK Financial closed branches in Boulder, Fort Collins and Louisville after its acquisition of CoBiz Bank a year ago.

• Independent Bank closed four branches in Fort Collins, Greeley and Loveland after its purchase of Guaranty Bank and Trust Co.

• FirstBank is closing a branch on Table Mesa Drive in Boulder.

Those closures come on top of the earlier closure of First Citizens Bank’s Fort Collins location, and many others.

While the number of bank branches in the Boulder Valley and Northern Colorado has remained fairly constant over the years, slippage has occurred. Banks operated 286 locations in Boulder, Broomfield, Larimer and Weld counties as of June 30, 2019, compared with 294 a year ago and 310 five years ago. That’s a five-year drop of 7.7 percent.

While some banks are adding locations to expand market coverage, economic pressures — or anticipation of economic pressures — are driving the number downward.

As Paula Aven Gladych reports in this edition, lower net interest margins are prompting some banks to seek ways to cut costs. And inexorable expectations of an economic downturn — and memories of the Great Recession — have made bankers attempt to stay ahead of the curve.

“We continue to maintain disciplined underwriting standards and have even tightened standards somewhat in select areas as we continue to prepare to be a positive outlier during the next economic downturn,” Zions chief financial officer Paul Burdiss said in a recent earnings conference call.

Banking analyst firm S&P Global reported that bank branch closures reached a record high nationwide in 2018, with 1,947 closures, compared with 1,919 closures in 2017. Part of that trend is due to consolidation — ala the Independent Bank and BOKF acquisitions of Guaranty and CoBiz — but others have been due to the shift toward online or mobile banking and, yes, anticipation of a downturn.

So, as business leaders in other industries attempt to predict what the economy will do in 2020 or 2021, it might be reasonable to pay attention to the banking sector. As bankers tighten underwriting standards, reduce employee headcount and close branches, it’s just possible that the much-debated downturn might actually be around the corner.

After all, who knows better than your banker?

Christopher Wood can be reached at 303-630-1942, 970-232-3133 or cwood@bizwest.com.