Person exchanges cash with a teller inside a bank.

Bank branch closures double during the pandemic, hurting poor and rural Americans

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New research shows that bank branch closures accelerated during the COVID-19 pandemic, hitting poor and minority communities especially hard.

Related research also shows that bank closures in rural areas have left “banking deserts” across the heartland; meaning these areas are cut off from financial services. With many of the poorest places in America found in rural counties, losing bank access hurts small businesses and low-income families alike.

Pandemic prompts more bank mergers

The National Community Reinvestment Corporation (NCRC) released a report this year looking at bank consolidation and bank branch closures. NCRC found that bank mergers greatly increased during the pandemic. In addition, bank branches were closed at twice the rate of the last 10 years.

NCRC found that two-thirds of the country’s banking institutions have disappeared since the early 1980s. The number of banks dropped from 18,000 in 1984; to less than 5,000 in 2021.

Small banks suffered the greatest decline. In the mid-1990s, 84% of banks were small, with less than $350 million in deposits. Today, the banking industry is dominated by a few very large banks. Now, nearly half of the banks that remain have over $1.3 billion in deposits.

Mergers play a big part of local branch closures

Bank mergers and acquisitions drive most local branch closures, although the growth in online banking is a factor as well. The COVID-19 pandemic has made things worse, accelerating the loss of local bank branches.

From 2017 to 2021, the U.S. lost 9% of all branch locations. This means that about 7,500 local branches were closed down. However, more than 4,000 of these branches were closed since the beginning of the pandemic in March, 2020.

During the pandemic, the branch closure rate doubled. In the 10 years before the pandemic, an average of 99 bank branches closed per month. During the pandemic, an average of 201 branches have closed each month.

Low-income and minority neighborhoods are hit the hardest

Local branch closures were not spread evenly throughout the country. Neighborhoods with large low-income or minority populations saw the most bank branches close.

From 2017 to 2022, one-third of all branches closed were in low- to moderate-income and/or majority minority neighborhoods. These areas already had fewer bank branches to start, so low-income residents have been left with few options for financial services.

Many rural places are already banking deserts

Many rural areas are among the poorest places in the country, and faced with generations of poverty. Bank branch closures have created banking deserts, and a large portion of these areas are rural.

The Consumer Financial Protection Bureau released a report on the growth of banking deserts and the financial challenges facing rural communities. It consolidates reports and data from a number of federal agencies, including the Federal Reserve.

Banking deserts are census tracts where there are no bank branches within a 10 mile radius of the center of the tract. The Federal Reserve has identified 2,100 existing and potential banking deserts in the U.S. More than 1,500 of these banking deserts are located in rural areas. 

Although rural communities make up more than 71% of all the places lacking financial services, only 14% of the nation’s population lives in nonmetropolitan counties. Rural census tracts are 10 times more likely to be in a banking desert than urban tracts.


Rural census tracts are 10 times more likely to be in a banking desert than urban tracts.


Banking deserts hurt small businesses and low-income residents

Small businesses are a bigger part of rural economies than in urban places. They also provide a lot more of the jobs in rural communities than in larger cities. 

Small businesses in rural areas depend more on in-person banking services. It is also more common for rural areas to lack broadband internet service compared with urban places. Many rural residents, especially low-income households, do not have access to a smartphone.

Only 68% of the country’s rural population has internet access, and only 76% has access to a smartphone. On the other hand, 80% of the urban people and 85% of the suburban population have internet access. In urban areas, 86% of people have access to smartphones, while 88% in the suburbs have smartphone access.

Is there hope for low-income residents stuck in banking deserts?

NCRC suggests that the Community Reinvestment Act (CRA) should be updated to reflect a world of bank consolidation and neighborhoods facing branch closures. CRA requires banks to make financial services accessible to all groups within their service areas. This includes making sure that small businesses have access to credit and low-income residents can do their banking.

One limitation of the CRA is that it defines a bank’s service area by where its physical branches are located. With the growth of internet and mobile banking, NCRC argues that banks should be held accountable for actions across a wider service area. This change to CRA will require action by Congress.

In the short term, there are new federal resources to connect communities and link low-income households to broadband service. The bipartisan infrastructure package signed into law last November included $65 billion to extend broadband internet service to all corners of the nation.

The broadband funding includes money to extend fiber optic and cell phone networks to underserved urban and rural communities. It also includes $30 monthly subsidies to help low-income households pay for high speed internet through the Affordable Connectivity Program. Low-income households can apply for this assistance now.

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