Banks are closing branches nationwide. But what happens when that branch is the last in town? Nyssa’s lone bank is slated to close in January. We hear more about how that affects the town and what it means as more rural communities nationwide are faced with the same problem. Jim Maret is the city manager of Nyssa. Jason Richardson is the director of research and evaluation for the National Community Reinvestment Coalition. They join us with details.
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Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. Banks are closing branches nationwide. But what happens when the one that closes was the last one in town? That’s what’s about to happen in Nyssa, in Malheur County. It’s only branch, a branch of US Bank, is slated to close in January and Nyssa is not alone. This is happening in many rural towns across the country. Jim Maret is the City Manager of Nyssa. He joins us to talk about what’s happening there. And Jason Richardson joins us for the national context. He is the Director of Research and Evaluation at the National Community Reinvestment Coalition. It’s a nonprofit whose mission is to increase the flow of private capital to traditionally underserved communities. Welcome to you both.
Jim Maret / Jason Richardson: Thank you. Thank you.
Dave Miller: Jim Maret, first. What went through your mind when you heard the news that the branch of US Bank in Nyssa was closing?
Jim Maret: The first thing that went through my mind is we have to have another institution come to town. And so I started making phone calls not only to US, but to other firms as well, trying to entice another institution to come. I think we’re actually making strides in that area as we speak because after I get through with this show, I have a meeting with a CEO and I can’t tell you what firm yet, of a bank that is looking at Nyssa. So I don’t think we’re going to be without a bank for very long.
Miller: I want to hear more about that, whatever you can tell us. But I’m curious, the sense I get from what you just said is that first you reached out to US Bank and then you reached out to others, and it seems like after this show you’ll be talking to another bank. What was your conversation with US Bank like?
Maret: Wasn’t very good. Unfortunately, once a large bank or corporation makes up their mind, it’s very very difficult to get them to change directions. I think part of it is economics. We can all talk about that forever, but it comes down to the bean counters. If the numbers don’t add up, then they pull out. Unfortunately for us, we’re a small community. I do believe that this particular bank, and even the one that did leave prior to that, were making money, but it just wasn’t enough for the large corporations. Unfortunately, because of our community, we are not the most rich community in the US by any means. And we have a somewhat older population as well. For them to get on the computer banking or to have to travel the 15-20 miles to the nearest bank, it’s really difficult. And I don’t think the corporations themselves, the larger banks, look at that maybe the way that you and I would look at it. I think they look at the numbers and go from there and that’s kind of it in a nutshell.
Miller: Jason Richardson, could you help us understand the way those numbers work? Because I imagine that for a bank, like for any business, it’s a relatively simple business decision. If you keep a store or a branch open, if you’re making enough money, close it, if it makes financial sense, when you do the numbers. Why wouldn’t any particular bank be profitable?
Jason Richardson: The branch itself is a cost for them. So the bank is going to make a decision based on a few different factors, not just profit. The bank branch network also helps to find the regulatory scope that the bank has to fulfill. So under the Community Reinvestment Act, a bank’s assessment area is designated based on where their branches are. So branches in a particular county mean that that bank has a responsibility to reinvest in that county, making loans and other credit products available to the people that they take deposits from there. When they close that branch, that obligation goes away. And there is a rule making, going on right now, talking about modernizing the CRA, the Community Reinvestment Act to eliminate this sole reliance on bank branches to define a bank’s responsibility to an area. But in the meantime this is the situation that we have, where there’s often not much of an upside in keeping a branch open. And we do know from the FDIC research and my team’s work on branch closures, that we’ve seen a dramatic increase in closures in rural areas and in low to moderate income urban areas as well over the last 20 years, since the end of the Great Recession. And we do have indications now that since the pandemic began, branch closures have dramatically increased. We are expecting to release a report in the next, probably four or five weeks, I think, that’ll look in detail at those pandemic era closures. So I’m not surprised at all at hearing that the bank is closing out the last branch in the county.
Miller: Jim Maret, my understanding was that US Bank has two other branches in the area. Are those both also in Malheur County?
Maret: There is one within 20 miles of us in the small city of Vale which is a smaller community than we are, and they still have retained three banks. So to me, US leaving our community doesn’t make any sense at all, but it’s difficult.
Richardson: I want to touch on something that people a lot of times when I hear branches are closing, they think, ‘you know, I think well, who goes to the branch anymore, how many people really use the branch,’ well it turns out a lot of people do. The FDIC regularly surveys banking consumers and about a third of bank consumers still go to the branch on a regular basis. And over time they have become more comfortable with using online or internet banking or mobile banking. But it seems that consumers still like to see a branch there. However, that’s not enough to keep them open. We still see them closing quite a bit. And some of the biggest impact we found is on small business activity. So small businesses rely on branches for a variety of things. Not only do they build relationships with the branch staff that helped them with their banking or their credit needs, they also use the bank for just simple business functions like dropping off receipts or getting change so they can operate.
Miller: Jim Maret, what did you hear from local business owners in Nyssa about what not having a bank in the city itself would mean for them?
Maret: It’s going to create quite a burden upon them all. And that’s what I’m hearing right now is, it is creating a burden because they’re gonna have to run the 20 miles to the nearest branch to be able to get change, to be able to take the deposits, those types of things are what is going to hurt Nyssa. It’s gonna hurt if we can’t get another form of bank in town, it’s going to hurt our growth tremendously. We have to have somewhere for the businesses, not only that are here, but that are coming to our city to be able to do some form of banking there.
Miller: How big an issue has that been? If the ability of you to lure a prospective new business to Nyssa, if there are questions about whether or not they’ll actually be able to bank in the city itself?
Maret: It’s hard, it has not been very easy. We just recently started to grow, actually in quite a few business areas and we have a large, large, large industrial development starting. So, we have got to get a bank here of some form and we will, I really believe we will. I don’t think we’re a hard line where we’ve lost our last bank and we’re never going to retrieve another one. We will.
Miller: I wanna remind folks, we’re talking right now about the trend of banks closing branches all across the country. Right now, US Bank has said it’s going to be closing the last remaining bank in Nyssa in January. We’re talking with Jim Maret, who is a City Manager of Nyssa and Jason Richardson, Director of Research and Evaluation at the National Community Reinvestment Coalition. We reached out to US Bank to see if they could share with us a statement about this proposed closure. We got a statement from Evan Lapiska, who is a Spokesperson for the bank. He wrote this: ‘Customers’ banking preferences and behaviors are changing, including a rapid migration toward digital and mobile banking platforms and a desire for greater simplicity. As we evolve along with our customers, we’re reevaluating our physical footprint and in some instances consolidating branch locations in select markets. A number of factors go into a decision to close the branch, including demand for in person services and proximity to other locations. While we understand the closure of any branch is a disruption for our customers and our employees, we have two other locations within a 10 or 20 minute drive of the closing branch and continue to invest in rapidly enhancing our digital capabilities to complement our branch network to serve customers when and where they choose to bank.’ So Jason Richardson, I want to turn back to the question that you answered a little bit earlier of, you sometimes get the question ‘who actually goes to a bank anymore,’ and in a sense, that’s the spokesperson for US Bank is really leading with that, saying increasingly our customers don’t want to, there are all of these digital options. What’s your response?
Richardson: Well that doesn’t really help the business owner who needs to drop off the day’s receipts or pick up a stack of fives and tens, so they’re going to need to invest in vault services where an armored car would come and pick up change and drop it off, which is gonna be an additional cost that a lot of small businesses aren’t capable of dealing with. And we’ve heard them talking about the distance to the nearest branch now and I’m guessing that in the wintertime 20 miles in Oregon is a lot further than it might be in the summertime. So you’re going to have this effect of essentially being isolated, and it creates what we call a branch desert. So in our first report on branch closures, we found 80 new branch deserts had formed in rural parts of the US between 2008 and 2016. So those are 80 communities that lost their last branch during that time period. And you know, it’s great that this is going to get another, we seem confident that there will be another bank coming in there, but in the meantime there is that disruption, you do lose that connection between the bank staff from the US Bank and the business owners locally that will be severed. It will take time for that to be re-established with the new bank as well. So I’m not really surprised at hearing this. Rural areas and small communities are some of the hardest hit because there are so few branches there to begin with, that even one or two closures has an enormous impact.
Miller: How do big banks talk about branch closures with their shareholders?
Richardson: They see it as a cost. So typically we’re seeing a lot of merger and acquisition activity over the past several years and that doesn’t seem to be slowing down where big banks are merging or buying up smaller banks. And typically, when they announce the merger, when they’re talking to shareholders, they will brag on the efficiency that they’re going to get from closing branches. So for them, it’s a positive step, and we’re talking about US Bank here, they are in the midst of a merger as well. So I’m not surprised that we’re seeing closures from them.
Miller: How has the pandemic affected all of this, pandemic that obviously has really changed the way so many people experience commercial life and so much more stuff has gone online, including I imagine for many people, aspects of banking that they may be used to do in person, what has that meant for banks?
Richardson: Well, I don’t have any insight into bank thinking specifically, each bank has its own strategy that it employs and relies on branches in different ways. What I can tell you is that we’re working on a new report now that I anticipate will be released in the next four or five weeks, and we’re looking at branch change activity during the pandemic compared with a period of time before the pandemic. And it does appear that broadly speaking, we’ve seen the rate of closure double or in some cases triple in many communities during that time frame, meaning that …starting about three months after the start of the pandemic, you see an enormous spike in closures and we’re not talking about temporary closures due to pandemic related issues. We mean permanent closures where the branch is gone for good, and that has dramatically increased. I can give you a little bit of a preview here, in that 10 years prior to the start of the pandemic, which we consider to be March of 2020. On average, we saw about 98 or 99 branch closures per month. Since the start of the pandemic, that has gone to just over 200 branch closures per month that are lost. So I think it’s safe to say that we’re going to see branch losses continue to increase. I don’t know what the bottom would be. But it’s gonna keep going, we would like to see a little more work from banks to help kind of transition communities or businesses or clients or consumers to other means. In other words, if a branch is closing, providing a conduit where they can introduce the business customers for that branch to the nearest branch staff as well, and help at least maintain some of those relationships. But you know, at this point, usually what we hear is what we’re hearing in Nyssa where the branch is closing and that’s it. You have to find the nearest branch to go to. It’s unfortunate.
Miller: Jim Maret, to go back to you. It’s clear the arguments you’re making about what not having a bank, how difficult that would be for residents and for business owners. But I imagine that’s different than the kinds of arguments you’d be making to a prospective new bank to lure them to Nyssa because I imagine they don’t really care. Their shareholders certainly don’t, about the well-being, necessarily, of people in Nyssa, they want to make sure that the company is making a wise business decision. So what’s your argument for why a bank should come to town?
Maret: Well there’s seven arguments why we should have a branch: One is, I’ll go back to the pandemic for one, for just a little bit. The current branch that we have here, US, their Branch office stayed closed quite a bit longer than anybody else in town when everybody was starting to open back up and let people in their building, they stayed closed. And so a lot of those folks that had to do in person banking had to go to say, Ontario, or Vale, or Parma, even to do in house stuff. And so if you want to create numbers, that’s a good way to do it. However, to entice a bank to come here, we have several factors going on. We’ve got a couple new developments, we have an RV Park, a large RV Park that has broke ground that those folks are gonna need somewhere to go and to establish some different banking preferences and we have a large industrial site that’s starting, those folks that are going to go out there are going to need, not only, I’m sure loans, but they’re going to need the support of a bank locally, and as well as some small businesses that we have coming. So I think the need is here and if you look at not only the need, but what it can create for whatever bank comes in, I think we can entice one pretty heavily. I know there are a lot of folks fairly angry at this point and I can’t tell you what the outcome for US would be on that. ‘Course, we’re a small community, so it’s just gonna be very minimal to them by any means, if even minimal, but there’s a lot of folks very unhappy that US decided to leave. Hopefully we can get by this and entice another bank to come and we’ll roll through. So that’s what we’re hoping.
Miller: Jim Maret and Jason Richardson, thanks very much.
Maret / Richardson: Thank you. Thank you.
Miller: Jim Maret is a City Manager in Nyssa, Jason Richardson is the Director of Research and Evaluation at the National Community Reinvestment Coalition.