What Drives Bank Branch Closures?

Bank Nerd Corner welcomes Rajesh Narayanan, a professor in the Department of Finance at Louisiana State University. Rajesh recently coauthored a paper titled “The Decline of Branch Banking,” which was presented at the 2025 Community Bank Research Conference.

Kiah and Rajesh discuss how the restructuring of the U.S. bank branch network is driven primarily by deposit activity, not lending. Rajesh explains how interest rates and depositors’ comfort with digital banking increasingly factor into the value that banks derive from their deposit franchise. The paper found that banks are more likely to close branches in areas where deposits are "hot" or flighty, and where customers don't place high value on physical proximity to a branch.

Kiah and Rajesh explore whether banks’ ability to pay below-market rates on deposits will survive in an increasingly digital world. Rajesh also discusses what regional bank CEOs should consider when rationalizing their branch networks, and why deposit acquisition and retention costs should guide their strategies.

Read “The Decline of Branch Banking” here: https://www.communitybanking.org/-/media/files/communitybanking/2025-papers/rs1_p1_rajesh-narayanan_the-decline-of-branch-banking.pdf?sc_lang=en

Fintech Takes Banking is the weekly newsletter for bank execs who get it. Subscribe for the latest in regulation, tech, financials, operations and, yes, accounting, straight to your inbox: https://fintechtakes.com/banking/newsletter-subscription/

Follow Kiah:

LinkedIn: https://www.linkedin.com/in/khaslett/

Twitter: https://twitter.com/khaslett

Follow Professor Narayanan:

Linkedin: https://www.linkedin.com/in/rajesh-narayanan-a4954031