Major national bank closing dozens of branches (locations revealed)

It's been a tough run for many businesses since Covid in 2020. The pandemic forced many inside and online, causing a seismic shift in consumer behavior. 

First, many businesses closed because customers were told to stay home. Then, a dramatic recovery driven by stimulus payments sparked runaway inflation, taxing budgets, and shifting spending habits.

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The one-two punch has closed many stores, including some of the company's largest department stores. 

Retailers haven't been the only ones to suffer the brunt of this change, though. 

Banks have also been hit hard, and as a result, many national and regional banks have had to make tough decisions about keeping or closing their locations.

Banks react to major changes in customer behavior

Technology had already started shifting how bank customers interact with banking services before COVID-19. However, the pandemic accelerated those changes, driving many to online banking and away from thousands of bank branches nationwide.

The ability to deposit and withdraw funds without the help of a teller and, in many cases, borrow money and pay interest on loans via bank websites and apps has led many banks to rethink their branches. 

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In the past, bank branches featured long rows of tellers, called teller lines, and long waits, especially on payday. Now, most teller stations have been removed and replaced with teller pods in lobbies staffed by only a few employees.

Additionally, banks are increasingly adopting self-service kiosks and other in-branch technology to allow access to online banking. They've also repurposed space formerly occupied by teller lines to focus more on financial consultations like money management or lending and less on transaction services.

Unsurprisingly, the need for less space has resulted in banks shifting toward smaller locations and, in some cases, decisions to close branches altogether.

Economic shifts impact banking industry

Complicating matters for banks has been significant changes in the Federal Reserve's monetary policy, which has impacted the value of assets held on their balance sheets, such as bonds.

In 2022, the Fed embarked on its most hawkish interest rate policy since Fed Chairman Paul Volcker broke the back of inflation in the early 1980s to rein in skyrocketing prices. The decision to increase interest rates to crimp inflation, which clocked in above 8% in June 2022, caused the value of Treasury bonds and other longer-term bonds to collapse, hurting bank balance sheets.

The need to mark-to-market bond portfolios at much lower valuations caused the failure of Silicon Valley Bank (SVB) on March 10, 2023, amid the largest one-day bank run in U.S. history, according to Brookings Institution.

Two days later, Signature Bank failed because of similar concerns, followed by the failure of First Republic Bank on May 1, 2023, which JP Morgan Chase acquired.

While banks have since adjusted the risks on their balance sheets, they've faced additional struggles. 

Inflation has retreated below 3%, but rising prices and higher interest rates have reduced mortgage and auto lending, and credit card delinquencies and defaults have ticked higher amid increasingly cash-strapped borrowers.

Flagstar Bank announces closure of dozens of branches

Large national banks haven't been immune to the banking industry's shifts, leading to high-profile branch closures at major players, including, most recently, Flagstar Bank.

Flagstar Financial is ranked among the top 30 biggest U.S. banks, with about $100 billion in assets. It has large exposure in the Northeast and Midwest and a presence in the Southeast and West Coast.

It was formed by the sale of Flagstar Bank to New York Community Bank (NYCB) in December 2022. Following the merger in October 2024, NYCB changed its name to Flagstar Financial (NYSE: FLG).

Since the deal's completion, the combined bank has been actively restructuring itself to establish a firmer financial foundation and return to profitability. 

For example, last fall, it sold a substantial part of its mortgage business to Mr. Cooper Group  (COOP)  for $1.3 billion. The move was designed to free up capital and bolster its finances. 

Flagstar Financial has also taken big steps to reduce costs via layoffs and closing branches. 

In January, Flagstar Financial announced it would close 60 branch locations and 20 private-client locations in 2025. The move will reduce rent, staffing, maintenance, and utility costs. 

After reporting a net loss of $845 million in 2024, the moves have the company expecting profits again later this year.

"We are on projections to be profitable now in the fourth quarter of this year," said CEO Joseph Otting on the company's fourth-quarter earnings conference call. "I think this will ultimately mark the company's turning point on its return to consistent profitability."

The bank branch closures are happening in three phases and have already begun. According to filings with the Office of the Comptroller of the Currency (OCC), 28 Flagstar locations have closed or will soon close.

Since 60 Flagstar branches are scheduled to shutter this year, more locations will be officially announced this year.

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