US States Most Affected by Bank Branch Closures

The number of physical bank branches across the United States has seen a steady decline since 2011, a trend that accelerated significantly during the COVID-19 pandemic. This contraction has led to the rise of banking deserts, which are defined as census tracts that lack a bank branch within a specific radius of their population center.

According to a February 2024 report from the Federal Reserve Bank of Philadelphia, the total number of bank branches in the U.S. Declined by 5.6 percent between 2019 and 2023. During this four-year period, the number of banking deserts increased by 217, and approximately 760,000 Americans began living in these underserved areas.

Regional Impact and State Losses

The loss of physical branches has not been distributed evenly across the country. California experienced the most significant impact, losing 640 bank branches. New York followed as the state with the second-highest loss, with 457 branches closed.

Other states experiencing high net losses include Pennsylvania, which lost 430 branches, and New Jersey, which saw a reduction of 342 branches. These two states were among the top five states to experience the largest net losses in bank branches during the 2019 to 2023 window.

Socioeconomic Disparities in Branch Closures

While the majority of branch closures nationwide occurred in middle- and upper-income communities, the proportional impact was higher in lower-income areas. The percentage of branches lost in low- and moderate-income areas was 5.9 percent, compared to 5.4 percent in higher-income communities.

The growth of banking deserts has been particularly acute in Majority-Black areas. These regions gained banking deserts at a rate of 10.1 percent, which is significantly faster than the national rate of change of 6.4 percent.

The Federal Reserve Bank of Philadelphia notes that while online banking is increasingly popular, certain populations—including older individuals, people with disabilities, and lower-income communities—continue to rely on in-person banking services.

Defining and Identifying Banking Deserts

The identification of a banking desert depends on the type of community and the distance from the population center to the nearest branch. The criteria are as follows:

• Urban communities: 2 miles
• Suburban communities: 5 miles
• Rural communities: 10 miles

the Federal Reserve identifies potential banking deserts. These are census tracts that would become official banking deserts if a single remaining bank branch were to close.

Financial Implications of Reduced Access

The absence of traditional bank branches can have direct economic consequences for residents. Research indicates that the presence of bank branches in lower-income communities is linked to a higher number of mortgage originations and lower interest rates for consumers.

A decline in access to these traditional services may push consumers toward alternative financial services. These include payday lenders and check-cashing services, which can increase the overall cost of banking and create barriers to saving and wealth accumulation.

Data from the Federal Reserve indicates that the trend of closing branches—affecting commercial banks, credit unions, savings banks, and savings and loan association banks—has been a consistent pattern since 2011, reversing previous growth trends.