US banks' net branch closings surged sequentially in the first quarter as institutions continued to rightsize their branch networks.

In the period ended March 31, the US banking industry recorded 229 net branch closings, compared with just 59 in the previous quarter, according to S&P Global Market Intelligence data.

While the first-quarter total increased quarter over quarter, it declined from 555 in the 2023 third quarter and 384 in the 2023 second quarter. US banks' branch closure pace began to slow in mid-2022 after record-breaking closures in the previous two years, when the COVID-19 pandemic sped up digital banking adoption.

"The pace of branch closings has slowed because the pandemic created uniquely difficult challenges that, in many ways, accelerated the consolidation plans of many large banks that were initially intended to be stretched out over a longer period," said Dave Martin, founder of retail banking performance company BankMechanics. "The industry continues, and will continue, to adjust branch networks as necessary."

Asked if branch closures will continue to surpass branch openings in the near future, Paul Davis, CEO of Bank Slate, an advisory firm focused on banking and fintech trends, said, "You can only close so many branches."

"At the same time, more banks have likely found a post-pandemic equilibrium between physical locations and their improved digital capabilities," Davis added. "At the same time, several large banks such as [JPMorgan Chase & Co., PNC Financial Services Group Inc. and Fifth Third Bancorp] have been adding branches to enter, or expand in, key markets."

On the subject, the BankMechanics founder said he believes "the opening-to-closing ratio of branches will continue to flatten over time" as customers still consider physical bank branches when choosing or staying with a financial institution.

"This is particularly true as larger banks have worked through addressing their most obvious service area overlaps," Martin said.

Most active banks

Wells Fargo & Co. is the most active net branch closer in the first quarter with 61 net closings, compared with 50 in the fourth quarter of 2023 and 104 in the third quarter of 2023. In the last 12 months, the company has logged 290 net closings.

Of the closed branches in the first quarter, 15 were in California and 13 were in Florida. Wells Fargo branches are increasingly becoming advice-focused as teller transactions are dropping while banker visits are rising, CFO Michael Santomassimo said.

"We are modernizing and optimizing the branch network. The number of branches declined 6% from a year ago, while at the same time, we are accelerating the refurbishment of our branch network," Santomassimo said on Wells Fargo's first-quarter earnings call. "In addition, the enhancements we are making to our mobile app continue to drive momentum in mobile adoption."

Bank of America Corp. ranked as the second-most active net closer of branches with 40 net closings. At a May 30 conference, BofA Chairman, CEO and President Brian Moynihan said branches and a digital presence are both important, considering that "half the sales are digital, which means the other half are not digital."

Citizens Financial Group Inc. landed on the No. 3 spot with 37 net branch closings, followed by Huntington Bancshares Inc. with 31 net closings.

U.S. Bancorp was among the most active net branch closers with 18 net closings. It recorded 214 net closings in the last 12 months.

The company has various ways, methods and capabilities to boost its customer base, CFO John Stern said at a May 7 conference.

The bank has "the digital capabilities to open up [certificates of deposit] and other accounts in all 50 states, and we also have partnerships, such as State Farm, that are able to acquire customer deposits as well," Stern said. The bank already has branches in more of the Midwest and West Coast, he noted on the call.

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On the other hand, JPMorgan was the most active net opener of branches with 10 net openings in the first quarter. The company reported 37 net openings in the last 12 months.

JPMorgan continues to open new branches, with a previously announced plan to add over 500 branches by 2027, but is consolidating branches "where there's logic," Chairman and CEO Jamie Dimon said at a May 29 conference.

Cullen/Frost Bankers Inc. nabbed the second spot among the most active net branch openers with four net openings, followed by Encore Bancshares Inc. and Woodforest Financial Group Inc. with three net openings.

Activity by state

In the first quarter, California recorded the most net branch closings with 36 and the most closings with 43. New York logged the second-largest number of net closings with 32, as well as the second-biggest closings with 41.

Nebraska booked the most net branch openings with five, followed by North Dakota and Wyoming with three each. Meanwhile, Texas logged the most number of branches opened with 28.