Branch closures hit poorer areas hardest

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The Journal Gazette (Fort Wayne, IN; CFED)
By: Frank Bass and Dakin Campbell
May 6, 2013

WASHINGTON - Banks that opened more than 15,000 branches nationwide in the decade leading into the financial crisis are retreating from lower-income neighborhoods.

Banks have shut 1,826 branches since late 2008, and 93 percent of closures were in postal codes where the household income is below the national median, according to census and federal banking data compiled by Bloomberg. The number of branches peaked at 99,540 in 2009, up 20 percent from 1998. A study released on Tuesday estimates the branch total could fall by as much as 40 percent in the next decade.

The figures show that the same neighborhoods targeted by predatory lenders before the housing-market collapse are now suffering the biggest losses in bank branches. The decline limits access to basic financial services for people who don't have bank accounts and forces them to pay fees for such activities as cashing checks and settling utility bills.

"It's very hard for people to get an economic toehold in neighborhoods without banks," said Sarah Ludwig, co-director of the Neighborhood Economic Development Advocacy Project, a New York-based community support center.

"If you don't have banks, you're not fostering small businesses. You're diminishing jobs, and you're diminishing your own tax base."

A study released in September by the Federal Deposit Insurance Corp. estimated 10 million households lack bank accounts.

Another 24 million are "underbanked," using check-cashing services and other unregulated businesses for financial transactions. The households represent 28 percent of the U.S. total.

The ranks of underserved people approach 50 percent in more than a dozen U.S. counties.

The Bronx in New York City ranks behind only Hidalgo County in Texas as the nation's most unbanked large county, with 48 percent of households either not having an account or relying on alternative financial providers. That's according to a report by the Corporation for Enterprise Development, a Washington-based advocacy organization for lower-income Americans.

More than 96 percent of the 47,300 people who live in the Longwood neighborhood of the Bronx are black or Hispanic. Median household income in the postal code is $22,458, less than the 2011 national poverty line of $22,811 for a family of four, according to the Census Bureau.

Two bank branches operated in the neighborhood in June 2012, down from five in 2008. The remaining branches, owned by Hato Rey, Puerto Rico-based Popular Inc. and New York-based JPMorgan Chase & Co., are within 300 feet of each other on a busy street. They're outnumbered 3-to-1 by pawn shops, gold-buying stores and check-cashing businesses.

http://www.journalgazette.net/article/20130506/BIZ/305069991/1031/biz

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