Bank Branch Closings Take Toll On Rural Communities 

More than half of the 3,114 counties in the U.S. lost bank branches between 2012 and 2017, with rural areas feeling the brunt of the closures, according to research from the Federal Reserve released on Monday (Nov. 25). 

Rural communities with lower incomes or a higher percentage of minorities saw the most closures, losing 1,553 bank branches in 794 counties, a decline of 14 percent. Urban areas lost 9 percent of branches in 802 communities. Many of the populations hit with closures were already financially distressed.

“Some consumer segments appear to have been left without sufficient, convenient and low-cost access to the financial services they need to manage their financial lives,” the report, “Perspectives from Main Street: Bank Branch Access in Rural Communities,” indicated. 

Small businesses needing access to loans and senior citizens less inclined to adopt digital banks were affected the most by the loss of local financial services. 

“Small businesses have long preferred to utilize local banks to access financial services and may garner tangible benefits from doing so in terms of credit availability and the terms of that credit. As a result, decreases in the presence of local institutions likely reduce the financial well being of these small businesses,” according to the report.

The research shows that loan interest rates go up as the distance increases between local bank branches and businesses. Overall, closures in affected areas resulted in higher costs on top inconvenience. People in lower-income regions or with aging populations are also slower to gravitate toward online and mobile banking.

“Access to a robust suite of financial services is critical for families and businesses so they can successfully manage their financial lives and build a cushion of wealth that can provide stability and support economic opportunity and mobility over the long term,” the researchers said.

Research for the report was collected at listening sessions between July 2018 and January 2019 at regional Fed banks nationwide.

Earlier this month, the U.S. recorded its fourth bank failure this year — these four represent the first collapse of financial institutions since 2017.