Bank of America expands into 2 new states, even as it cuts branches elsewhere

Bank of America did something this week it hasn’t done in more than a decade: celebrated the opening of a branch in a new market.

On Wednesday, the Charlotte bank cut the ribbon on a branch in Denver, Colo., its first in that state. More branches will open in Colorado this year, the bank says.

In addition, the bank plans to open its first branch in Minnesota during the second quarter. That branch will go in Minneapolis and be followed by other branches the bank plans to open in the Minneapolis-St. Paul area during the next two years.

Bank of America says the Denver branch marks the first time the bank has ventured into a new market with a branch since 2003, when it opened one in Chicago. The move comes even as it rapidly closes branches in other U.S. markets.

The entry into Colorado and Minnesota illustrates CEO Brian Moynihan’s push for branches in major metropolitan areas where Bank of America is already serving affluent customers and businesses through its U.S. Trust and Merrill Lynch businesses and other operations.

“We’ll go to other markets largely just to complete the footprint,” Moynihan told the Observer in December. The bank says it does not have branches in three of the top 30 U.S. markets. Those markets are Pittsburgh, Cincinnati and Cleveland. “You’ve got to complete the franchise,” Moynihan said.

Looking to affluent clients

The decision comes as Moynihan, under pressure to boost the bank’s profits, is trying to get more business out of the bank’s affluent customers. Giving U.S. Trust and Merrill Lynch clients in Colorado and Minnesota access to branches can allow the bank to win checking and savings accounts from them, as well as sell them additional products and services.

Ken Thomas, a Miami-based bank consultant, said Bank of America’s entry into new markets illustrates how its financial situation has improved since the financial crisis. The new branches show Bank of America is “out of intensive care,” he said. “They’re getting back to normal.”

The addition of Colorado and Minnesota gives Bank of America branches in 34 states and Washington, D.C. – the most since its 2007 purchase of Chicago’s LaSalle Bank, the bank said.

The new branches follow other steps Bank of America has recently taken to boost its business with affluent clients. Just last year, for example, the bank rolled out a new rewards program for those customers.

Decline in brick-and-mortar

Even as it opens new branches, Bank of America has been reducing branches elsewhere. Like some other lenders, Bank of America has pared its branch network as more customers conduct routine transactions on their computers and phones.

“We’ll be opening branches where we need them. We’ll be closing branches where the customers don’t need them,” Moynihan said. “We open 60, 70, 100 branches a year.”

Through Dec. 19, Bank of America’s branch count fell last year by more than 170 locations, more than any other U.S. bank, according to data firm SNL Financial. As of the end of last year, Bank of America had 4,855 branches, a decline of more than 1,200 from the end of 2007.

Some of the bank’s recent branch sales have been in North Carolina. Last year, Asheville-based HomeTrust Bancshares acquired 10 Bank of America branches, some of which were in Eden, and the rest in Virginia.

Bank of America’s sale and closure of branches, which are expensive to operate, come as it looks to cut expenses in the wake of the financial crisis. Bank of America has paid billions of dollars to resolve litigation stemming from the crisis and its purchase of mortgage lender Countrywide Financial – costs that have been a big drag on its earnings.

In the past, Bank of America predecessor companies, such as Charlotte-based NationsBank, built a branching empire largely by gobbling up other banks.

But today, acquisitions by large banks are constricted by a federal cap that prevents banks from attaining more than 10 percent of total deposits through acquisitions. Regulators are also wary of deals that allow big banks to get even bigger, which further constricts acquisition activity by banks such as Bank of America.

‘Stamp of approval’

Thomas said the bank’s entry into new markets is a positive sign for the company, as regulators must approve the new branches.

“It’s almost kind of a stamp of approval that they’re allowed to do this,” he said. “Banks can’t just willy-nilly open branches.”

JPMorgan Chase & Co. is another bank that has been closing branches, Thomas said. But JPMorgan has also been “aggressively” opening branches in Sun Belt states, especially in Florida, he said. “They are in expansionary mode.”

Not all big banks are rushing to expand into new markets with branches, Thomas said. Wells Fargo, he said, is still focused on assimilating the assets it acquired in its 2008 purchase of Charlotte’s Wachovia. Also, Citigroup has been selling branches in some markets, such as Texas, he said.

Thomas said he thinks Bank of America will announce plans to enter even more markets, as its legal costs keep declining and its efficiencies increase.

“Remember, they’ve saved a lot of money with closing these branches,” he said.

This story was originally published January 23, 2015 at 2:23 PM with the headline "Bank of America expands into 2 new states, even as it cuts branches elsewhere."