While populations are on the rise in several cities across the United States, it seems bank branches are being shut down in droves.
According to a new study, a nearby city is in the top five among those which are losing branches at a high rate.
Stockton's rate of 17.9 percent is the fourth-highest in a 10-year span among 100 cities on MagnifyMoney's study, which was released Wednesday. Only Lakeland, Fla., Buffalo, N.Y., and Baltimore had higher percentages. Stockton's number comes despite the city about 45 miles south of Sacramento having a smaller number of bank locations per capita than several places listed.
"Stockton started with fewer bank branches on a per capita basis than most other big cities (18 versus an average of 30 for every 100,000 residents), but that didn’t stop them from closing their doors at a rate of 18 percent over the last 10 years," the report reads. "If the city’s guaranteed basic income experiment works out, banks may take another look at the struggling community."
Sacramento ranked 41st overall and fourth in California with a 9.5 percent loss. Fresno is 20th and Modesto is 36th.
So why are so many bank branches being shuttered? One major reason is due to mergers.
"The FDIC reports that the number of individual banking companies that conduct their business with branches dropped an astounding 25 percent between 2006 and 2016, thanks to 2,447 mergers among commercial banks and 349 among savings banks," the report reads. "The newly consolidated banks don’t need branches that cover the same areas, and they may find that the reduced competition means they don’t need to fight for customers with more storefronts."
Another big reason is online access.
"People are becoming more comfortable with accessing their money by digital means only, and they’re often getting better returns on, and cheaper access to, their money with savings account rates at online banks often much higher than those at traditional banks," the report states.
MagnifyMoney's study was compiled by using data from the U.S. Federal Reserve and populations from the U.S. Census Bureau American Community Survey.