This morning, I attended a Federal Reserve Community Bank Research Conference and spent half the day listening to academics and bankers discuss the deposit franchise value. It was fascinating—especially because it echoed a conversation I had with my Strategic Ops team earlier this week during our retreat.
I was grateful just to sit there—to sit with myself in a room full of other people sitting with themselves—taking in the nuance of how researchers think about banking. Nothing in the findings truly surprised me, but one consistent theme stood out: bank branch closures.
Some researchers suggested that banks might close branches in more affluent areas, where deposit franchise value is lower because wealthier customers are more price-sensitive. But the prevailing sentiment in the room was that this doesn’t match the reality on Main Street. In practice, banks tend to close branches in less profitable or unprofitable neighborhoods—often rural or low-income areas.
That’s the conundrum. It’s a real challenge.
I thought back to my presentation at last year’s conference, where I said we have to think about banks not only as part of a social contract but also as businesses. Community banks face intense cost and competitive pressures—not just from other community banks, but from large national players, fintechs, and non-depository institutions who move into communities to extract deposits.
So, like any business, we have to do two things well: increase revenue and manage costs. And we must do that while staying faithful to our mission of serving all people.
That’s why so many of us are pushing into the digital space and experimenting with smaller branch formats. But even that’s not simple. Large banks can open smaller retail locations that primarily gather deposits, while community banks are doing much more—delivering full-service relationships, not just transactions.
The truth is, we must rethink the community bank model. At our bank, we’ve been in the thick of that work for the past five years. It’s not an easy conversation to have with other bankers, but it’s a necessary one. Because it’s the only way I see us continuing to create value in the future.