Bank branches aren’t going away, but new ones will be smaller, more high-tech

Rumors of the demise of brick-and-mortar bank branches are not true, say area bank and credit union leaders.

“I’ve been in credit unions for 34 years and we’ve always heard branches are going away. But it’s just not true,” said David Leusink, president and chief executive officer of 4Front Credit Union. “They remain an important component of service delivery.”

But as more financial transactions are conducted on laptop computers, tablets and smart phones, the role of physical branches is changing. They’re becoming sales centers and places where customers can get advice and solve problems.

“The way we’re looking at it is that we’re investing more resources in digital technologies, but you still need brick-and-mortar branches so customers have a place to land when they need to,” said Mike Worden, president and CEO of Honor Bank. “But new branches won’t be Taj Mahals anymore; they’ll have more technology and smaller square footage.”

Honor Bank recently opened a branch at the former site of Urban Diversions in Traverse City and closed a leased branch. It’s also planning a four-story administrative services center in downtown Traverse City  that will offer loan and some branch banking services.

Unlike some banks, Worden said Honor Bank still prefers customers to open accounts at physical branches.

4Front’s new locations are also shrinking. Leusink said the credit union will open a new branch in Cadillac that will be roughly half the size of its current offices.

“The footprint has changed,” he said. “Ten years ago, branches were 3,000 to 5,000 square feet. Our next branch in Cadillac will be 2,300 square feet.”

Physical branches are important in serving older customers who prefer personal interactions, local bank and credit union officials said. And the expansion of mobile banking is being hindered by poor cellphone service in northern Michigan, especially in rural areas. “In some ways, mobile banking is not practical because of poor cell service,” said Scot Zimmerman, northern region president at Chemical Bank. “That’s particularly true in northeast Michigan.”

Chemical Bank has 48 bank offices across northern Michigan, including five in Traverse City. Zimmerman said Chemical Bank is “actively looking” for a site for a new northern Michigan branch, but wouldn’t identify the location.

Zimmerman said despite the move to digital banking services, he thinks it’s important to offer customers a variety of ways to conduct their business, including physical branches, telephone banking and even courier services. “At Chemical, our strategy is to provide a touch point for every customer and satisfy all the ways they want to interact with us,” he said. “People who go to the branch like to go to the branch.”

The number of bank offices in Grand Traverse County has declined slightly, from 38 in 2010 to 34 in 2018, according to the latest data from the FDIC.

Marc Judge, vice president of community banking at Independent Bank, said it’s important to offer the latest in digital banking services, while maintaining physical branches. “There’s a whole generation that wants it all on their smartphones,” he said. “But as far as our corporate strategy is concerned, we’re still in the camp that there is value in having face-to-face contact. That’s what our customers want.”

Nationally, the number of credit union and bank branches per institution is rising as the number of banks and credit unions declines, according to regulatory data analyst by

There were 15 branches for every U.S. bank in 2016, up from almost 10 in 2004. Credit union branches per institution grew from 2.06 in 2004 to 3.5 in 2016.

Judge said the trend is driven largely by small community banks, which see more of a need for brick-and-mortar branches than large banks. “The smaller the bank is, the more it looks to have a physical presence in the market,” he said.

Independent Bank, which has five offices in the Traverse City area, is considering adding more branches. “We’re looking at have more of a southside presence,” Judge said. “The Grand Traverse Mall and Chums Corner areas are on our radar.”

But TBA Credit Union in Traverse City is taking the opposite approach, said President and CEO Karen Browne. The credit union has just two offices and doesn’t plan on building any more. “Our strategy is on providing electronic services,” she said. “We aren’t focused on building more brick and mortar. Our goal is to make it convenient for customers so they don’t have to come into an office.”

Traffic in TBA’s office is declining as customers are becoming more able to transfer and deposit money on their smart phones and sign loan agreements and other documents electronically. “Electronic services are increasing dramatically, while face-to-face contact is definitely going down,” Browne said.

Credit unions such as TBA  also are connected in a nationwide network of shared branches where members can transact business.

TBA  members also have access to 20,000 ATMs in the United States that don’t charge fees for transactions.

Leusink said only 24 percent of member transactions at 4Front are conducted at a physical branch. But he said those offices are still important to resolve member problems, such as a debit card that doesn’t work, and helping members navigate online services.

“I’m convinced beyond a shadow of a doubt that branches won’t go away,” he said.