Until it closed its doors in December, the Ohio Savings Bank branch on North Moreland Boulevard was a neighborhood anchor in Cleveland, midway between the mansions of Shaker Heights and the ramshackle bungalows of the city’s east side.
Now it sits boarded up, a victim not only of Cleveland’s economic troubles but also of a broader trend of bank branch closings that is falling more heavily on low- and moderate-income neighborhoods across the country.
In 2010, for the first time in 15 years, more bank branches closed than opened across the United States.
An analysis of government data shows, however, that even as banks shut branches in poorer areas, they continued to expand in wealthier ones, despite decades of government regulations requiring financial institutions to meet the credit needs of poor and middle-class neighborhoods.
The number of bank branches fell to 98,517 in 2010, from 99,550 the previous year, a loss of nearly 1,000 locations, according to data compiled by the Federal Deposit Insurance Corporation.
Banks are expected to keep closing branches in the coming years, partly because of new technology and automation and partly because of the mortgage bust and the financial crisis of 2008.
New regulations will also cut deeply into revenue, including restrictions on fees for overdraft protection — a major moneymaker on accounts aimed at lower-income customers.
Yet the local branch remains a crucial part of the nation’s financial infrastructure, banking analysts say, even as more customers manage their accounts via the Internet and mobile phones.
“In a competitive environment, banks are cutting costs and closing branches, but there are social costs to that decision,” said Mark T.Williams, a banking expert at Boston University and a former bank examiner for the Federal Reserve. “When a branch gets pulled out of a low- or moderate-income neighborhood, it’s not as if those needs go away.”
Mr.Williams and other observers express concern that the vacuum will be filled by so-called predatory lenders, including check-cashing centers, payday loan providers and pawnshops.
The F.D.I.C. estimates that roughly 30 million American households either have no bank account or rely on these more expensive alternatives to traditional banking.
The most recent wave of closures gathered steam after the financial crisis in 2008, as banks of all sizes staggered under the weight of bad home loans.
In some cases, banks with heavy exposure to risky mortgage debt simply cut branches as part of a broader restructuring.
In other cases, banking companies merged and closed branches to consolidate.
Whatever the cause, there were sharp disparities in how the closures played out from 2008 to 2010, according to a detailed analysis by The New York Times of data from SNL Financial, an information provider for the banking industry.
Using data culled from the Federal Deposit Insurance Corporation and ESRI, a private geographic information firm, SNL matched up the location of closed branches with census data from the surrounding neighborhood.
In low-income areas, where the median household income was below $25,000, and in moderate-income areas, where the medium household income was between $25,000 and $50,000, the number of branches declined by 396 between 2008 and 2010.
In neighborhoods where household income was above $100,000, by contrast, 82 branches were added during the same period.
“You don’t have to be a statistician to see that there’s a dual financial system in America, one for essentially middle- and high-income consumers, and another one for the people that can least afford it,” said John Taylor, president of the National Community Reinvestment Coalition, a group that advocates for expanding financial services in underserved communities.
“In those neighborhoods, you won’t see bank branches,” he added.
“You’ll see buildings that used to be banks, surrounded by payday lenders and check cashers that cropped up.” Wayne A. Abernathy, an executive vice president of the American Bankers Association, disputed Mr.Taylor’s conclusion, as well as the significance of the data.
“You need to look at the context,” he said. “We’re looking at a pool of more than 95,000 branches, and we’ve had several hundred banks fail, so what would be surprising is if no branches had closed.”
The Community Reinvestment Act, signed into law more than three decades ago in an effort to combat discrimination and encourage banks to serve local communities, requires financial institutions to notify federal regulators of branch closings.
But legal experts say the federal watchdogs that are supposed to enforce the law have been timid.
“The C.R.A. has been a financial Maginot Line — weakly defended and quickly overrun,” said Raymond H.Brescia, a professor at Albany Law School.
What’s more, Mr.Brescia said, while closing branches violates the spirit of the law, if not the letter, he could not recall a single example in which a bank was cited by regulators under the C.R.A.for branch closures in recent years.
“The C.R.A leaves banks a lot of leeway,” he said, “and regulators have not wielded their power with much force.” Even as more customers turn to online banking, said Kathleen Engel, a law professor at Suffolk University in Boston, the presence of brick-and-mortar branches encourages “a culture of savings,” beginning with passbook accounts for children and visits to the local bank.
“If we lose branch banking in low- and moderate-income neighborhoods, banks stop being central to the culture in those communities,” said Ms.Engel, author of a new book, “The Subprime Virus: Reckless Credit, Regulatory Failure and Next Steps.”
Among individual financial institutions, especially those hit hard by the mortgage mess, the differences between rich and poor communities were especially marked.
Regions Financial, based in Birmingham, Ala., had 107 fewer branches serving low- and moderate-income neighborhoods in 2010 than it did in 2008.
The company, which has yet to repay $3.5 billion in federal bailout money, shuttered just one branch in a high-income neighborhood, according to SNL Financial.
At Zions Bancorporation, a Utah lender battered by losses on commercial real estate loans, branches in low- and moderate-income neighborhoods dropped by 24, compared with a decrease of just one branch in an upper-income area.
It still owes the federal government $1.4 billion in bailout money.
A spokesman for Zions said the branch closings reflected a strategic move to exit all supermarket locations as well as merger-related consolidation, rather than a withdrawal from particular neighborhoods.
A similar trend is evident at some larger institutions.
Bank of America closed 25 branches in moderate-income areas and opened 14 in the richest areas, according to the SNL data.
Citigroup , whose branch network is smaller than Bank of America’s, closed two branches in the poorest areas and opened three in the wealthiest.
The head of Citigroup’s global consumer business, Manuel Medina-Mora, made no secret of his bank’s intention to focus on the wealthy in the country, telling a Wall Street investor conference in November that “in retail banking, we will focus our growth in the emergent affluent and affluent segments in major cities — exactly in line with our global consumer banking strategy.”
Comparisons for two other giants, Wells Fargo and JPMorgan Chase , are more difficult because of the addition of thousands of branches in all categories in 2008 as they absorbed Wachovia and Washington Mutual, both of which were pushed to the brink by mortgage losses.
From 2009 to 2010, however, Wells closed 57 branches in low- and moderate-income neighborhoods, and shut 20 in upper-income census tracts.
JPMorgan Chase, which emerged from the turmoil of 2008 as the healthiest of the big banks, actually opened 11 branches in low- and moderate neighborhoods, while it closed one in the $100,000-plus communities.
A spokeswoman for Bank of America, Anne Pace, defended her company’s record, noting that more than one-third of its new branch openings in 2011 would be in low- and moderate-income communities.
Citigroup, Wells Fargo and Regions Financial disputed the statistics provided by SNL, arguing that the number of branches closed in low- and moderate-income neighborhoods was overstated.
The three banks insisted they are committed to serving all customers and communities, regardless of the income level.
In Cleveland, the closing of the Ohio Savings branch in December was one more bit of fallout from the financial crisis, according to Chris Warren, the city’s chief of regional development.
A year earlier, New York Community Bancorp took over the assets of AmTrust Bank, now operating as Ohio Savings Bank in Ohio, after it was shut by the federal Office of Thrift Supervision. The F.D.I.C.’s deposit insurance fund took a $2 billion loss as a result of the closing. The North Moreland branch was the only one of Ohio Savings’ 29 branches in the state to close.
“This was their introduction of their approach to community investment in this city,” Mr.Warren said. “They closed down the only branch Ohio Savings had in a low-to-moderate-income, African-American neighborhood.”
A spokeswoman for New York Community Bank said the branch was closed only because the bank was unable to reach a new agreement on a lease.
She said customers could choose other branches nearby, including an Ohio Savings branch 2.4 miles way.
That is little comfort to customers like Lucretia Clay, who manages a store nearby and lives within walking distance of the now-shuttered branch.
“I’ve given that bank a lot of money over the years,” she said. “So they should be here in the community. I shouldn’t have to drive forever to go find them.”