The mayor of this struggling small town roughly 100 miles northeast of Raleigh worries that the recent closing of its one and only bank branch will have severe and long-lasting repercussions.
“What business is going to come to a town with no bank?” asked Doris “Peggy” Risper, who has been mayor of this Northampton County town of 901 residents for the past decade.
Risper has been hearing from senior citizens who don’t have an easy way to travel to the nearest bank branch, which is now about 14 miles away, and have no interest in online banking.
“I had one lady come in, a senior citizen, and ask me: ‘Would it help if we protested (the branch’s closing) with signs?’ ” Risper said. “She was about 82 years old.”
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The Oct. 21 closure of the PNC Bank branch in Rich Square is part of a larger trend. Driven by the popularity of ATMs and online and mobile banking, the rising price tag of maintaining a branch, a wave of industry consolidation, and efforts to boost profitability by cutting costs, banks across North Carolina and nationwide are closing branches.
In the past year more than 1,600 branches have closed across the country, according to S&P Global Market Intelligence. In North Carolina, the number of full-service branches has fallen by 11.7 percent since 2009 – from 2,717 to 2,400, according to the latest FDIC data. The majority of those – 195 – were in rural counties, based on the N.C. Rural Center’s definition of having an average population density of 250 people or less per square mile.
That has created an untold number of “banking deserts” in rural communities in North Carolina and nationwide, triggering anxiety that the exodus of these branches poses a significant handicap for economies that are already ailing.
A recent study by University of California at Berkeley economist H.Q. Nguyen found that after a branch closes, loans to small businesses in the vicinity are reduced by 8 percent over several years.
A recent study found that after a branch closes, loans to small businesses in the vicinity are reduced by 8 percent over several years.
“Access to banking services in the rural parts of the state is something of a concern to us,” said Peter Gwaltney, CEO of the N.C. Bankers Association, which is based in Raleigh. “But at the end of the day, shareholders expect a return and economics drive the decisions the banks make.”
To be sure, branches are being shuttered in both urban and rural communities. But rural communities are hardest hit because their residents and businesses lack the wealth of options available to their urban counterparts. FDIC data shows that, as of June 30, Wake County boasted 29 different banks with a total of 246 branches.
“Not all branch closures are equal,” said Peter Skillern, executive director of Reinvestment Partners, a consumer advocacy group based in Durham. “Where there is a consolidation of branches that are across the street from each other during a merger, there is really no damage. In fact, it’s a good allocation of resources.”
But a half-dozen North Carolina counties are home to just two bank branches and two counties, Camden and Northampton, have just a single branch each. Northampton County had five branches as recently as 2013.
“There is more than one North Carolina and I don’t think those in prosperous North Carolina really understand the impact of not being in the area that is growing and has resources and has services,” said Sallie Surface, executive director of the Choanoke Area Development Association of North Carolina, which is based in Rich Square.
The Edgecombe County town of Pinetops, home to more than 1,300 residents, also lost its sole bank branch on Oct. 21.
“Every (small) town needs a hardware store and a church and a service station, so to speak, and a bank,” said Pinetops Mayor Steve Burress.
Customers move online
Bankers and industry experts point out that branches are no longer the be-all and end-all of a banking relationship that they once were.
Bank of America, which has 47 million consumer and small business customers, reports that it has 20 million customers who use online and mobile banking. BofA spokeswoman Jennifer Darwin said the bank is adding 7,000 active mobile users ever day.
“We really have reached the end of the useful life of the traditional bank branch,” said Tony Plath, a finance professor at UNC-Charlotte. “The idea of I want to go to the bank and cash my paycheck – nobody does that anymore.”
Branches are transitioning from being transaction-oriented to focusing on advisory services, such as wealth management and retirement planning, Plath said.
“Rural markets lack sufficient traffic for these advisory services,” he said.
Jim Hansen, PNC’s regional president for the eastern Carolinas market, said that 65 percent of the consumers and 72 percent of businesses that used the Rich Square branch also used other PNC branches.
“Those clients in Rich Square are still our clients,” Hansen said. “We’re still serving them.”
A community loss
But Skillern of Reinvestment Partners said the closure of the Rich Square branch creates “a hole in that economy that can’t be replaced.”
About one-third of the households in the census tract where the Rich Square branch was located live below the poverty line. Within a two-block vicinity, there are roughly a dozen vacant storefronts and lots.
Kimberly Turner, the manager of Northampton Country, fears that without a branch in Rich Square it will be tougher for local small businesses to get loans.
The PNC bankers at the Rich Square branch were quite familiar with the local businesses “because they’re right down the street,” making it easier to assess whether they were loan worthy, she said. Bankers in other towns “don’t have that community interaction with us, that familiarity with us.”
For the businesses that remain, the loss of the bank is also a matter of convenience and safety.
Horace Robinson, owner of the Upper Cutz Barber Shop in Rich Square, said that when the PNC branch was in business he would quickly run over and get change whenever he needed it.
Now, he said, “I’ll have to keep more (cash) on hand, which I don’t like doing” for security reasons.
Robinson and other Rich Square merchants also complain they now have to drive 14 miles to the Southern Bank and Trust branch in Jackson, or 16 miles to the nearest PNC branch in the Hertford County town of Murfreesboro, to deposit their cash. They say it’s not just a an inconvenience but an invitation to robbery.
In response to those concerns, PNC has pledged to install a full-service ATM in Rich Square later this month that will accept cash deposits.
After PNC announced it was closing the Rich Square branch, a coalition of local civic and business groups and leaders tried to persuade the bank to keep the branch open. Although that effort failed, after listening to the group’s concerns PNC pledged to take several steps, including installing the deposit-friendly ATM, to lessen the impact.
It also will provide classes for online and mobile banking; provide the Choanoke Area Development Association with a half-dozen computers that consumers can use for online banking; and, for the next year, offer travel vouchers for free bus service to the PNC branch in Murfreesboro.
PNC, which reports that it tried but failed to find a bank willing to buy the Rich Square branch, also said it is planning to donate the building that housed its Rich Square branch, as well as the branch building in Pinetops, to the local town governments.
“It’s not in anybody’s interest to have a vacant building,” said PNC spokeswoman Cynthia Montgomery.
Skillern of Reinvestment Partners, which has studied the issue of bank closures, said he wasn’t aware of any other bank that made concessions similar to what PNC did in Rich Square when closing a branch in North Carolina.
But, for many customers, PNC’s efforts just won’t be the same as having an actual bank branch.
“Think of all the things you do in a branch,” said Adam Rust, research director at Reinvestment Partners. “I think of the safety deposit box, filling out a mortgage application, getting a cashier’s check, opening an account ... wire transfers. There’s all kinds of services that just aren’t seamlessly done on your phone just yet.”
Neither federal nor state banking regulators have the authority to stop, or even delay, a branch closure. But Reinvestment Partners is urging regulators to become more pro-active by, among other things, coming up with a package of incentives aimed at making it financially feasible for a bank to maintain the last branch in town.
“The reason we are telling regulators to pay attention is that, once the last branch leaves town, it’s too late,” Skillern said.
News researcher David Raynor contributed to this story.
The largest banks in the state have led the parade of branch closures in both urban and rural areas, according to FDIC data. Rural counties are based on the N.C. Rural Center’s definition of a county having an average population density of 250 people or less per square mile.
▪ SunTrust closed 51 branches in North Carolina between mid-2009 and June 30 of this year, including 13 in rural counties.
▪ First Citizens pared 38 North Carolina branches between mid-2009 and June 30 of this year, including 24 rural offices. One of those rural branches was sold to another bank and, in many of the rural areas where it closed branches, it still maintains another branch, said a bank spokeswoman.
▪ Bank of America has reduced its North Carolina branch network during that seven-year span by 34 branches, including 21 in rural counties. A bank spokeswoman said 11 of those rural branches were sold to other banks and remain open.
▪ PNC, which acquired RBC Bank in 2012, closed 25 branches across the state between mid-2012 and June 30. It closed another five on Oct. 21, including the Rich Square and Pinetops branches and one on Lake Boone Trail in Raleigh. Of the total of 30 closed branches, 25 were in rural areas.
Jim Hansen, PNC’s regional president for the eastern Carolinas market, contends that it’s misleading to use the N.C. Rural Center’s definition of rural. He noted that one of the branches that the bank closed last month was in Pinehurst in Moore County, which is rural by the Rural Center’s definition. Considering that the Pinehurst branch was near a custom men’s clothing shop and “a high-end realtor selling $1.5 million homes,” he added, “you’d be hard-pressed to convince me we closed a rural branch.”
A more pertinent statistic, said Hansen, is the number of branches closed in low- and moderate-income tracts as defined by the U.S. Census Bureau. Data shows that those residents “have much more of a need for a branch,” he said. By PNC’s calculation, it has closed four branches in low- and moderate-income tracts in the past five years, including the Rich Square branch.
▪ Wells Fargo has closed 11 branches statewide since mid-2009, but only one of those branches was in a rural county.
“When other banks close their branches, it makes the market better for us,” said Jack Clayton, president of the Wells Fargo region that includes 60 counties in central and eastern North Carolina. “Our branches have been able to grow because some others have consolidated.”
Staff writer David Ranii