The Great Consolidation of Banks and Acceleration of Branch Closures Across Oregon

Introduction

Over the last ten years, Oregon has witnessed a significant transformation in its banking landscape. The closure of bank branches has become a common occurrence, impacting both urban and rural communities. In this article, we delve into the reasons behind this trend, its effects on local economies, and potential implications for the future.

The Decline of Bank Branches

National Trends

Nationally, the consolidation of banks has been ongoing since the early 1980s. The number of banking institutions has dwindled from nearly 18,000 in 1984 to fewer than 5,000 in 2021¹. Small community banks have borne the brunt of this decline. Interestingly, while competition was robust in the mid-1990s, today, nearly half of the remaining banks hold $1.3 billion or more in deposits.

Oregon’s Experience

In Oregon, the trend is particularly pronounced in the Portland metro area. Since the start of 2017, one in five bank branches in the Portland metro area has closed². This loss of local branch capacity has implications for both consumers and businesses. Over 350 branches have closed in Oregon over the last decade.

Factors Driving Branch Closures

Several factors contribute to the closure of bank branches:

1. Mergers and Acquisitions: Many closures result from mergers and consolidations. As larger banks absorb smaller ones, redundant branches are often shut down.
2. Shift to Digital Services: Financial institutions increasingly rely on technological services. The rise of fintech companies, online banking, and automation of administrative tasks has reduced the need for physical branches.
3. Pandemic Acceleration: The COVID-19 pandemic accelerated branch closures. Between 2017 and 2021, approximately 7,500 brick-and-mortar bank locations closed in the US, with the closure rate doubling during the pandemic¹. Low- to moderate-income neighborhoods and minority communities were disproportionately affected.

Impact on Communities

Access to Financial Services

While online banking provides convenience, many individuals and small businesses still rely on in-person banking services. Branch closures can hinder access to financial services, especially in underserved areas. In Oregon, the loss of branches affects wealth-building opportunities in marginalized communities.

Community Reinvestment Act (CRA) Challenges

The acceleration of branch closures poses challenges for enforcing the Community Reinvestment Act. Modernizing CRA rules is essential to ensure that banks continue to serve all segments of the population.

Conclusion

Oregon’s banking landscape has transformed significantly over the last decade. As we move forward, striking a balance between digital innovation and maintaining accessible physical branches will be crucial. Ensuring equitable access to financial services remains a priority, even in an increasingly digital world.

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