The Decline of Bank Branching

We study U.S. bank branch openings and closings from 2001 to 2023. Both are more common in areas with low deposit franchise value, a consequence of greater interest-rate sensitivity among financially sophisticated households with higher digital banking adoption. The effects are strongest for large banks. Lending plays a minimal role. Incumbents retain branches where depositors are less sensitive to rates because they can extract deposit spreads; entrants avoid such markets because sticky customers are difficult to attract. The pandemic accelerated closures by increasing digital reliance. Our findings highlight deposit franchise value as the primary driver of modern branch restructuring.