Nina Lincoff, Reporter, South Florida Business Journal
Apr 22, 2016, 6:00am EDT
The days of bank branches on every corner bustling with dozens of people are over.
The days of bank branches on every corner bustling with dozens of people are over. Cavernous vaults and lines of customers waiting to see tellers? Relics of the past.
Last year, more than 1,600 branches in the U.S. closed as banks big and small looked for ways to cut costs as more customers shift to using mobile and online banking options. Of those, 162 branches were in Florida.
Branches are an expensive line item on a bank’s balance sheet. And, as more consumers - both individuals and businesses - bank in a different way, paying rent or property taxes on underperforming real estate doesn’t make sense.
As a result, most banks continue to shutter branches, and refocus on the needs of businesses to help draw new commercial clientele – one of the most profitable segments of a bank’s client base.
“Brick-and-mortar branches are very expensive,” said Rodolfo Lleonart, executive VP and COO of Miami-based Continental National Bank, the 20th-largest South Florida-based bank out of 50, with $412 million in assets. “You have to have [high deposits] in those branches, and, of course, what makes a bank money is the lending side.”
A new branch for a new era
When Continental National Chairman Jacqueline Dascal Chariff took over in 2014, she tightened the bank’s belt, which included closing branches. In the last five years, the bank has cut 14 percent of its outposts. But after scaling back, it is time to open or revamp remaining branches.
The bank just opened a Doral branch to draw the high concentration of commercial customers in the area.
“People are not doing things so much in the branches like wire transfers, internal transfers and stop payments,” Lleonart said. “They have our online services, mobile services. You see clients doing that from their offices.”
Doral-based U.S. Century Bank is double the size of Continental National, as the 12th-largest South Florida-based bank, with $910 million in assets. But the larger financial institution also adopted a branch trimming strategy - slashing 17 percent of its branches in the last five years to cut spending.
The branches were cut before current President and CEO Luis de la Aguilera arrived in December. But just a few months into his new role, de la Aguilera has launched a strategy to turn remaining branches into commercially focused outposts. The goal is to draw business customers into centers that offer specialized service just for them.
“We are playing to our strengths by being a commercial bank. When we analyzed our portfolio, we saw the significant number of our commercial clients generate a significant amount of our deposits,” de la Aguilera said. “Our banking centers are being positioned to be fully advisory, as opposed to transactional.”
Part of U.S. Century’s strategy was the careful analysis of the types of transactions, volume of business and staffing efficiencies, which resulted in at least eight eliminated positions in March.
“The banking center model that we aspire to is going to have a smaller footprint,” de la Aguilera said. “It’s going to have an optimal staffing model.”
Atlanta-based SunTrust Bank, with $187 billion in assets, has trimmed 14 percent of its branches over the past five years. This year, the regional bank overhauled its strategy and launched three types of staffing models, based on the needs of a location’s customer mix.
“It’s a more targeted approach, and motivated by the environment and market that we are in,” said Todd Weiden, SunTrust’s executive VP and branch banking market executive. “The end goal is to make sure we have the right teammates and right talent to meet as many needs as we can.”
The power of digital
On the other end of the banking spectrum are national banks, like Charlotte, North Carolina-based Bank of America, with $1.6 trillion in assets.
Bank of America closed hundreds of financial centers in recent years in response to the growing adoption of digital products.
About 19 million Bank of America customers actively use mobile banking, and 5,500 customers join daily, the bank said.
“People used to do routine everyday transactions [at financial centers, but] our customers and clients have begun to take personal control over those things,” said Bernard Hampton, the South Florida area executive at Bank of America.
Instead of taking time away from work or family to visit a branch, customers have simply started using apps.
As a result, remaining branches are transitioning from hubs for routine daily transactions to more specialized destinations, Hampton said. Bank of America, like U.S. Century, SunTrust and others, is evolving its branches into advisory centers that help customers boost their businesses.
“For our business clients, we’ve doubled, over the last six months, the number of senior small-business managers [in South Florida] because of the demand for our business information and the demand from small-business clients,” he said.
Quality over quantity
But while mobile banking adoption is undoubtedly increasing, some customers still go to branches and use ATMs.
A recent report from the Federal Reserve looking at mobile banking and consumer habits found that consumers still value in-person interactions. However, mobile banking has been on the rise since 2011, while the use of other banking options has remained generally consistent, according to the report.
New York-based JPMorgan Chase, a peer institution to Bank of America, has about $1.9 trillion in assets. It is cutting hundreds of branches, but plans to add outposts in Florida to increase its market share in the Sunshine State.
“Over the next two, three years, we plan to open about 50 more branches,” said George Acevedo, Chase Bank’s regional director of consumer banking and wealth management in the Southeast.
But Chase’s new branches are smaller, leaner and designed to cater to the mainstream consumer. Today, the average Chase branch has shrunk from a building with a huge lobby to an efficient space of 3,000 to 4,000 square feet, Acevedo said.
The bank is piloting a program where staffers walk around with tablets, as opposed to sitting at a desk or behind a window to serve customers.
Chase’s branch push in Florida has helped grow its commercial business.
“Last year, we had over $55 million in business loans throughout the state of Florida,” Acevedo said. “This year, we’re actually looking at a growth of about 23 percent.”
A shifting strategy
Weston-based Florida Community Bank, the third-largest South Florida-based bank, with $7.2 billion in assets, constantly evaluates and shifts its branches. The bank looks at performance over a 12- to 18-month period when considering shuttering the location.
On the flip side, new branches are opened to capture a particular demographic, and the bank has more branches now than it did in 2011. A new Florida Community Bank in Coral Gables will serve a business clientele, so the staff will be largely trained in commercial banking.
“Branch usage is based on service need, not a specific customer segment or group,” said Kathi Zanella, a retail sales executive with the bank.
Customers still want an in-person experience for certain new transactions, such as opening an account or applying for a loan, she said. But for routine transactions, such as depositing a check, customers are comfortable with mobile or online products, she added.
Sometimes, it helps to be the new bank on the block. Eight-year-old Coral Gables-based Professional Bank is the 32nd-largest South Florida-based bank, with $301 million in assets. (Florida Community is just 6 years old, but was created from banks with existing branches.) As a result, it started with a clean slate, and adds branches where appropriate.
“For whatever reason, the third question out of customer’s mouth, even one that will never go to a branch, is: ‘Where is the closest branch?’” said Raul Valdes-Fauli, president and CEO of Professional Bank. “Businesses and consumers have less reasons today to head into the bank, but there is still that security blanket aspect to talk to someone.”
The financial institution has two branches. Both reflect the new style of banking center – streamlined, small and designed to fit into its target market, whether that means in a building lobby or in a freestanding site.
Valdes-Fauli had worked at small and large banks, but questioned the need for branches before coming to Professional Bank.
“But you get to a small bank and you don’t have the luxury of a branch network,” he said. “[That] still adds a lot of value. People have safe deposit boxes, people still need cash. The more tangible physical things necessitate a branch presence.”
BY THE NUMBERS
1,614: Branches closed in the U.S. in 2015
53%: Portion smartphone owners with a bank account who used mobile banking in 2015, up from years prior
94%: Portion of mobile banking activities that were checking account balances or recent transactions in 2015
58%: Portion of mobile banking activities that were transferring money between accounts in 2015
54%: Portion of mobile banking users who say mobile banking, online banking and ATM use are more important than visiting a teller at a branch
Sources: S&P Global Market Intelligence, Federal Reserve