Editor's note: This article is one in a three-part series analyzing the impact of bank branch closures in the U.S. For a piece looking at the Community Reinvestment Act, click here. For a piece looking at the impact on a small, rural community in North Carolina, click here.

➤ Majority-black neighborhoods have lost more bank branches than non-majority-black neighborhoods. Other minority communities, such as majority-Hispanic areas, have seen fewer branch closures than the national average.

➤ JPMorgan has closed a significantly higher portion of its branches in majority-black communities than in non-majority-black areas.

➤ Income does not explain the disparity. Wealthy majority-black neighborhoods lost more of their branches than low-income non-majority-black communities.

Banks are closing more of their branches in majority-black communities — including high-income ones — than in all other communities, an analysis by S&P Global Market Intelligence finds.

Fair lending advocates suggested implicit bias contributed to the trend, but bankers and industry consultants disputed that and said M&A activity and branch performance typically drive closure decisions. Whatever the cause, the consequence is that majority-black communities now have significantly fewer physical branches, which play a crucial role in supporting small businesses.

"All the other desertion that has happened in those communities compounds the impact of the branch closure. It's almost a death knell," said Stella Adams, CEO of Durham, N.C.-based SJ Adams Consulting, a firm focused on fair lending research and consulting.

Since 2010, the branch footprint in majority-black areas has shrunk 14.6%, compared to 9.7% in all other communities, with the nation’s two largest banks — JPMorgan Chase & Co. and Bank of America Corp. — playing significant roles.

JPMorgan had the largest disparity in net closure rates. From 2010 to 2018, it opened almost as many branches as it closed — except in majority-black communities. JPMorgan shrank its branch footprint in majority-black areas by 22.8% from 2010 to 2018, compared to a net decline of 0.2% in the rest of the U.S.

Bank of America has closed more of its branches in majority-black communities, but the bank has been closing more branches nationwide, resulting in a smaller disparity. Bank of America reduced the number of branches in majority-black neighborhoods by 29.1%, compared to an 18.4% decline in non-majority-black areas.

Executives at both banks said the closures are not indicative of how they serve communities, noting that despite the closures within a particular census tract, there is often a branch within a 2- or 3-mile radius. Even after the closures, Bank of America has significantly more branches in majority-black communities than the industry aggregate. JPMorgan has slightly more.

S&P Global Market Intelligence's findings highlight a racial divide in access to physical branches at a time when federal prosecutors have pulled back on fair lending enforcement and banking regulators are reconsidering the Community Reinvestment Act, a 40-year-old law that requires banks meet the credit needs of all neighborhoods in their footprint. The analysis considered branch closures from June 30, 2010, through June 30, 2018, and defined majority-black areas as census tracts with a black population of 50% or more as of 2010, according to Claritas, a data provider that uses surveys and Census reports. Majority-black communities have lost more of their branches than majority-Hispanic, majority-Asian or majority-white areas.

Income does not explain why majority-black areas have lost more branches. Wealthy majority-black areas, defined as having a median household income greater than $100,000, were just as likely to lack a branch as low-income areas. Wealthy majority-black areas were actually less likely to have a branch than low-income, non-majority-black areas.

Across the U.S., banks have been shedding branches as consumers increasingly use online and mobile options, creating some debate over the importance of retail locations. But there is evidence branches still matter. A 2018 Federal Reserve study found that banks without a local branch were much less likely to originate small-business loans in that community.

Similarly, a paper in the January 2019 issue of American Economic Journal found that branch "closings lead to a sharp and persistent decline in credit supply to local small businesses." The researcher, Hoai-Luu Nguyen, a professor at University of California-Berkeley, found a cumulative loss of $2.7 million in small-business loan originations in the six years after a branch closure.

The Federal Deposit Insurance Corp.'s most recent survey, published in October 2018, of unbanked and underbanked customers also found branches were still relevant. The survey found 14.7% of unbanked customers — defined as households where no one owns a checking or savings account — still visit branches despite not having accounts. It found 86% of banked customers visited a branch in the last 12 months. The findings suggest branches "continue to play an important role for banked households and that opportunities may exist for branch staff to inform unbanked households about products and services that can help meet their financial needs," the FDIC wrote.

Biggest banks drive the trend

Just three banks have nationwide branch footprints: JPMorgan, Bank of America and Wells Fargo & Co.

In 2010, at the start of the analysis, JPMorgan had 4.7% of its branches in majority-black areas, compared to 3.4% for the rest of the industry in its footprint. Over the next eight years, JPMorgan's net closures almost exclusively hit majority-black areas, leaving it with a 3.6% ratio of branches in majority-black areas. This ratio is still more than the rest of the banking industry, which has 3.3% of its branches in majority-black areas. The bank's portion of branches in majority-black areas has declined by 101 basis points, compared to the industry aggregate decline of 16 basis points.

"That is not how we look at it," John McGinley, JPMorgan's head of retail real estate, said in an interview. He said the bank considers a broad range of factors when closing locations, such as how many branches are nearby and customer spending trends. McGinley said the bank strives to locate branches in convenient retail areas, and he said 71% of majority-black neighborhoods have a JPMorgan branch within a 2-mile radius. S&P Global Market Intelligence's analysis shows a similar result.

"Nobody serves those [majority-black] communities better than we do," McGinley said. "We've increased our deposit levels across the black communities and continue to appropriately serve them."

A Bank of America spokesperson said the Charlotte, N.C.-based bank is also an industry leader in serving majority-black communities.

"Bank of America is the leading bank in terms of branches in majority-minority census tracts, with about 35% of our financial centers today located in majority-minority neighborhoods," Kate Murphy wrote in response to the analysis. Bank of America noted that the vast majority of residents in majority-black communities have access to a branch within a 2-mile radius. S&P Global Market Intelligence analysis showed a similar result.

While JPMorgan and Bank of America point to the 2-mile radius as proof they are adequately serving majority-black neighborhoods, some experts think that is too far a distance. Even a distance of one mile can be an obstacle especially in low-income, urban areas where car ownership might be unaffordable and public transportation unreliable, said Thomas Curry, who served as the Comptroller of the Currency from 2012 to 2017.

"You have to take it into context. Is there public transportation available? Those two miles can be a long walk," Curry said in an interview. Curry, who is now a partner and co-head of the banking group for law firm Nutter McClennen & Fish, did not comment on any particular bank.

Federal regulators weigh a number of factors, including branch proximity, as part of the Community Reinvestment Act. CRA exams measure how well banks meet their communities’ credit needs, but there is no hard-and-fast definition of what constitutes "close" in relation to branch location.

Bank of America and JPMorgan are not the only banks that focus on a 2-mile radius to determine which banks to close. In its merger with SunTrust Banks Inc., BB&T Corp. said it would close 740 branches that were within 2 miles of each other.

Majority-black communities were more likely than non-majority-black ones to have an active branch within two miles of a closure. However, Adams of SJ Adams Consulting echoes Curry’s view that two miles is too far.

"What is that two miles? Is that two miles on a transportation corridor? Or is that two miles in a place where there's no public transportation?" Adams asked. "These communities don't have access to cars. These communities are primarily elderly and poor and disabled." Adams said she was not surprised by S&P Global Market Intelligence's findings, calling it a byproduct of the failure to include race in the CRA.

Using a smaller, 1-mile radius, majority-black communities again fare worse. Among the 894 branches closed in majority-black communities in the study period, 16.7% lack an active branch within one mile as of June 30, 2018. For non-majority-black communities, 12.7% of closed branches do not have an active branch within a mile.

Atlanta stands out

No metro area has lost more branches in majority-black communities than the Atlanta-Sandy Springs-Alpharetta MSA with 48 net closures representing a 22.6% reduction in the branch footprint during the period of the analysis. JPMorgan has nearly halved its presence in majority-black communities there.

JPMorgan's McGinley said the bank's decision to build branches in non-majority-black areas in Atlanta was driven by a desire to serve customers as conveniently as possible.

"I think Atlanta is a perfect example of how we think about an area," McGinley said in an interview. "It's been active for several years, and we've been active in conjunction with it. It continues to expand. So we'll build to serve the communities that are expanding."

So far, that branch expansion has only occurred in Atlanta's non-majority-black communities. JPMorgan decreased the number of branches in Atlanta's majority-black communities by 30% from 2010 to 2018. In the rest of the metro, the bank has grown its branch count by 71%.

"Any expansion that we do, or any new builds that we do, it's going to be a combination of serving the entire community, but also being in areas that are new residential or new retail areas. And that expansion, or that growth of a population or an area indicates that there's good opportunity in those markets," McGinley said.

Rodney Sampson, an executive at a startup incubator focused on supporting black entrepreneurs, sees new retail development in Atlanta being more concentrated in areas that are not majority-black as an issue. Sampson, the chairman and CEO of Opportunity Hub in Atlanta, said black residents often have to leave their community for shopping needs, so when banks place branches near retail, it compounds the lack of investment in majority-black communities.

"Community banking should be convenient," Sampson said in an interview. "These people have to spend extra dollars outside of their community because businesses there don't exist."

JPMorgan spokesperson Trish Wexler said Atlanta is indicative of how the bank is thinking about its future branch openings, not necessarily how its branch network has changed over the last eight years.

"If we can fast forward to the way customers interact with us three to five years down the road, it will be built perfectly well to serve the entire community," McGinley said in an April 15 interview.

While closing branches, the bank has provided funding and support for minority-owned businesses in Atlanta as part of its Ascend 2020 program. The bank also has a program called Advancing Black Pathways that provides capital and business training to minority entrepreneurs. On May 31, the bank announced plans to add 30 branches in Atlanta over the next three years and that at least six of those would be in majority-black census tracts.

Drivers of branch closures

Bankers and consultants said they do not think banks are intentionally closing more of their branches in majority-black areas.

Mergers are one of the most common drivers of branch closures. The banking industry has steadily consolidated in recent years, and deals involving significant branch overlap are particularly attractive.

"The most favorable acquisitions are in-market because you get a whole lot more cost saves. When you have a lot more branches, you're going to be closing more branches," said Randy Dennis, president of DD&F Consulting Group, a deal adviser and consultant.

Banks are also pruning their networks because the decline in branch traffic has made physical locations less profitable. Consultants said banks typically target communities served by multiple branches and will close weaker performers. But banks will also exit some markets entirely, pulling out due to anemic local economies bereft of the small businesses that represent a core profitability plan for community banks, Dennis said.

"When we close centers, it is typically because traffic is down, and consumers are voting with their feet," said Matt Card, a spokesman for Bank of America.

As the rise of digital banking forces a reconsideration of branch networks, lenders are paying attention to where customers spend their time and money. JPMorgan's McGinley said the bank is focused on having locations where their customers "live and work and play."

Cell phone towers allow mobile providers to track phone users’ movements, and that data is then sold to third parties, including to banks such as CenterState Bank Corp. The bank’s chief strategy officer, Chris Nichols, said CenterState uses the data to see where individuals are starting and stopping their daily journeys.

"We might have a lot of traffic by our branch, but they're always going to and from work and won't stop in," he said in an interview. "Whenever I can get a branch at the destination, that's pretty good."

Local real estate developments can also play a role in branch closures. Corporate retail bankruptcies have spiked, gutting thousands of shopping centers across the U.S. as the rise of digital commerce has crippled some retailers.

"If you're on an outparcel in front of Albertsons and Albertsons closes, you lose the main traffic attraction. It snowballs, and you find yourself in a decrepit site," said Steve Reider, president of Bancography, a consultant focused on branch strategy.

A persistent difference

Majority-black communities have lost a larger portion of their branches than any other demographic. While low-income communities have lost more of their branches — and majority-black communities are more likely to be low-income — income does not explain why majority-black areas have lost more of their branches.

S&P Global Market Intelligence examined branch closures on a bank-by-bank basis using FDIC data, which is as of June 30, 2018. The analysis examined five race categories: white, black, Hispanic, Asian and majority-minority, an indication that more than 50% of the population in a census tract is minority. The analysis also examined five economic categories: low-income, moderate-income, population growth, remote rural and middle-income but underserved communities. The demographics were either designations set by federal regulators or identified using demographic data provided by Claritas, a data company.

Disproportionate branch loss in majority-black communities persisted across every category in the analysis. For example, most communities that regulators classify as remote rural are not majority-black. But the few that are have lost 20% of their branches, compared to 8.3% branch loss in non-black remote rural communities. The same pattern exists for areas with declining population, low-income areas and middle-income but underserved areas.

Segmenting the analysis by income and population growth — measured by total households — produced stark findings: Majority-black communities with positive economic trends lost more of their branches than non-black communities with negative trends. Majority-black communities with a growing population lost 13.0% of their branches, while majority-black areas with declining population saw 17.7% branch loss. In comparison, non-majority-black areas with growing population lost 9.6%, and non-majority-black areas with declining population lost 12.4% of their branches.

The disparity is even greater when focusing on income. Upper-income, majority-black areas lost 15.5% of their branches. Low-income, non-majority-black areas lost 9.3% of their branches.

"I think it's implicit bias. It's the branches you know versus the ones you don't frequent," said Adams of SJ Adams Consulting.

Ron Busby Sr., president and CEO of U.S. Black Chambers, an advocacy group for black-owned businesses, said he thinks the branch loss has been driven in part by a decline in the number of black-owned banks, which has dwindled to 22 from 48 in 2001, according to data from the FDIC.

"Twenty to 30 years ago, there were community banks. There were minority-owned banks. There were banks who worked and worshiped in the same community they operated in," Busby said. "You no longer have that today. You have fewer, larger banks, and they're focused on profitability and not the sustainability of the community they serve."