Why banks are closing in record numbers across S.F.

First, it was the March 10 failure of Silicon Valley Bank in Santa Clara, where depositors pulled their funds from what they feared was a sinking ship. Two days later, federal regulators shut down Signature Bank in New York over concerns that a panic-run was heading there next. Then Switzerland’s second largest bank, Credit Suisse, needed a government-arranged sale to avoid a similar insolvency crisis. And in May, the crisis boomeranged home: First Republic Bank in San Francisco imploded from its inability to prepare for rising interest rates.

Add in July’s dissolution of the small Heartland Tri-State Bank in Kansas, and four U.S. banks — two in the Bay Area — collapsed this year, marking the second- and third-largest bank failures in American history and jeopardizing nearly $550 billion in assets, far more than the 2008 financial crisis did.

But in the Bayview neighborhood of San Francisco, Shevron Hunter discovered a quieter kind of industry volatility: The bank branch she had been going to for five years abruptly closed.

“No notice was given at all,” Hunter said of U.S. Bank closing its Third Street branch on June 30. The Potrero Hill mother of two, who works at Bayview Hunters Point YMCAsaid she learned of the branch’s closure when she went there to deposit a check, her injured left foot encased in a black boot. “No one said anything to the community or the customers that are actually banking here.”

U.S. Bank acknowledges it closed the branch without notice, with a spokesperson citing “staffing challenges” as the reason. The Federal Deposit Insurance Corporation typically requires banks to notify customers in writing of impending branch closures at least 90 days ahead of time, and to post a conspicuous notice that a branch is closing at least 30 days before it happens. The Minnesota-based company opened a new location less than a mile away on Sept. 11 — doing so in the space of a closed bank it bought. The branch hopscotching and consolidation highlight a deepening trend:

Bank branches are vanishing across the country, and San Francisco is having a record-testing year.

Twenty branches shuttered across the city through Oct. 28, according to data from the U.S. Office of the Comptroller of the Currency. The closures — from the central Richmond District in the west to Mission Bay in the east, from Fort Mason in the north to Bayview in the south — add up to more than the previous two years combined and represent the most in a single year since at least 2000.

The 21st century record intersects with the spring banking crisis and an industry-wide tendency toward consolidation: JPMorgan Chase, which absorbed First Republic Bank in Mayfolded seven of the failed bank’s branches in September. U.S. Bank and Union Bank, which merged in Decemberclosed five branches and opened one.

All over California, 277 bank branches have closed so far this year, second only this century to 2020, when 325 branches closed. Branch openings are a much rarer occurrence: Only eight have occurred statewide this year.

“We are concerned about the closures, especially in communities of color and lower-income communities because of how that affects lending,” said Paulina Gonzalez-Brito, CEO of Rise Economy, formerly the California Reinvestment Coalitionan economic justice organization based in San Francisco. “If you’re going to get a small business loan or a home loan, you’re likely going to need to go into a branch.”

Indeed, the advent of online banking platforms and services “has yet to supplant the role of geographic proximity in facilitating the transfer of soft information” often needed to secure small business or home loans, a 2019 paper in the American Economic Journal found. The flip side is that branch closures “lead to a sharp and persistent decline in credit supply to local small businesses,” wrote the paper’s author, UC Berkeley Haas School of Business assistant Professor Hoai-Luu Q. Nguyen.

A more recent paperpublished in April on the Federal Reserve Bank of Chicago’s website by economist Jung Sang and Yale School of Management assistant finance Professor Alexander Zentefissaid branch closures disproportionately strip these opportunities from Black communities.

The authors also wrote that if many households still prefer personal interactions to mobile banking, “commercial banks themselves see physical branches as critical channels for acquiring customers, retaining them, and knowing them better.”

Which prompts the question: If both communities and banks benefit from branches, why close them? It’s a question that San Francisco City Treasurer Jose Cisneroswhose office isn’t notified or consulted about branch closures, wants posed to the banks. “I certainly don’t know what their answer’s going to be,” he said.

Spokespeople for JPMorgan Chase, U.S. Bank and Wells Fargo (which closed 13 San Francisco branches in 2020), said in statements that their companies remain committed to the city and pointed to circumstantial factors rather than systemic ones. A JPMorgan Chase spokesperson said the company’s goal “is not to have the most branches — but to have the right branches in the right communities,” while a U.S. Bank spokesperson alternately described the Bayview branch’s closure as “sudden,” “indefinite” and “temporary.”

The closure also echoed the area’s redlined pastwhen historically Black and immigrant neighborhoods were deprived of wealth-building financial services because they were deemed risks by the federal government. Arieann Harrison, a local environmental activistsaid her parents had to venture outside the neighborhood for the loan that enabled them to purchase their home in the 1970s.

“Over here in Bayview, they are quick to take our money,” she said, “but they are not quick to accommodate us.”

Today, the southeastern neighborhood has one of the city’s highest concentrations of Black residents (25%) — as well as large proportions of Latino (29%) and Asian (33%) residents — and a lower median annual income ($80,000) than the city ($122,000). Nearly a third of households struggle to pay rent and lack broadband internet, according to the San Francisco Health Improvement Partnership and the University of Wisconsin’s Population Health Institute.

In a city with 46 financial institutions and nine to 10 bank branches per ZIP code, the Bayview neighborhood and its almost 24,000 residents have just two.

“It just confirms the dismissiveness of Black people continues,” Hunter said. “The corporations and organizations don’t really see us. … We are left to make the decision to bank elsewhere, or travel across town just to visit a bank.”

That choice is more difficult for some.

Until recently, James Gaddies, 70, lived around the corner from the closed U.S. Bank branch. Similar to Hunter, he learned it closed only after the fact, when he went to cash his Social Security check. Gaddies, who uses a wheelchair, ended up taking two buses to the next-closest U.S. Bank location.

“Just let the people know, instead of just boarding it up and not saying nothing,” Gaddies complained.

Retail branches nationwide have declined sharply since the 1980s. Trump-era regulatory rollbacks made it easier for midsize banks like Silicon Valley and First Republic to expand without federal oversight and mergers have drastically outpaced new commercial banks coming online for years.

The U.S. and California — as well as Alameda, Contra Costa and Santa Clara counties — experienced branch closure inflection points in 2020, when researchers with the consumer watchdog National Community Reinvestment Coalition say banks used pandemic-era distancing requirements as cover to accelerate their consolidation plans.

After receiving feedback from clients and staff, U.S. Bank spokesperson Evan Lapiska said the company decided to open a new Bayview branch on Third Street, in the space vacated in May by Union Bank — which U.S. Bank acquired last year.

“We are proud of our history in Bayview and have remained committed to serving the community into the future throughout the process,” Lapiska said in a statement.

Nick Weiner, organizing director of the Committee for Better Banks, which works to unionize bank employees, took issue with the claim that staffing challenges forced U.S. Bank to abruptly close a branch before notifying customers.

“Are you kidding me? That’s not an excuse,” Weiner said. “Banks are creating the staffing challenges.”

Gaddies, who recently moved to Fairfield, said U.S. Bank’s new Bayview branch was little more than an ATM machine inside a kiosk. The old branch had tellers, security guards and a wheelchair ramp; the new one had none of that.

“Outside counting your money while people walk by. … I don’t do that,” he said. “But whatever, it’s your bank. You do whatever the hell you want with it. I’m not even tripping.”

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