US banks slowed the pace of their in-store branch closures compared to the past two years amid a broader slowdown in branch consolidations.

Banks shuttered 10.7% of their in-store branches — or, typically, small stores located within a retail business, such as a grocery store — while the closure rate for all other branches was 1.4% for the year ended June 30, according to the Federal Deposit Insurance Corp.'s Summary of Deposits data.

The in-store branch closure rate declined from 11.4% in the same period in 2022 and 17.5% in the same period in 2021, when banks accelerated their move away from such branches. However, it remained well above the pre-pandemic 4.2% closure rate in 2019.

Amid the liquidity crunch that erupted in March, deposits in all types of bank branches fell as of June 30. In aggregate, the banking industry logged a 15.0% reduction in deposits at in-store branches to $61.68 billion and a 4.7% decline in deposits at all other types of branches to $17.204 trillion.

After slashing their branch footprints in 2020, 2021 and the early part of 2022, banks have been closing branches at a slower pace to strike a balance between shuttering locations and stressing digital adoption for competition.

Big banks move away from in-store

Many large lenders are on the list of banks with the most in-store deposits, led by U.S. Bancorp. The number of the Minneapolis-based company's in-store branches fell by 46 year over year to 319 in the third quarter, but its in-store branch deposits rose 1.2% to $13.47 billion in the same period.

The lender was the most active net branch closer in May as its pace of branch closings picked back up after slowing in the months before the completion of its acquisition of MUFG Union Bank NA in December 2022. The closures during May include those related to the conversion of Union Bank customers to U.S. Bancorp unit U.S. Bank NA's systems.

Citizens Financial Group Inc. logged the second-largest amount of in-store deposits, at $9.75 billion, down 13.0%, with 39 of its in-store branches closed. The Providence, RI-based bank entered the New York metro market in 2022 through the acquisition of New Jersey-based Investors Bancorp Inc. and HSBC Holdings PLC's East Coast branches. Citizens is "full steam ahead" after the conversions of the branches, Vice Chairman and CFO John Woods said during the company's second-quarter earnings call.

"We've seen strong sales in the branches as we leverage our full customer service capabilities to drive some of the highest customer acquisition and sales rates in our network," Woods said.

Wells Fargo & Co. had $7.53 billion of in-store deposits, making it the lender with the third-biggest amount of such deposits. This was a 28.6% drop, as the company shuttered 26 of its in-store branches.

"Branches continue to play an important role in the way we serve our customers, and we continue to optimize our network, but we also look at targeted expansions in markets where we see opportunities for our franchise," President and CEO Charles Scharf said during the company's third-quarter earnings call.

Among the banks on the list, PNC Financial Services Group Inc. posted the largest percentage decrease in in-store deposits and shut the most number of in-store branches. The company had $1.04 billion in such deposits at June 30, down 69.4% year over year, and had 58 in-store branches, down 88 branches.

Walmart Inc. houses 1,179 bank branches, making it the top store affiliate of the banking industry by branches.

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