Data shows poor communities of color in SoCal impacted most by bank closures

LOS ANGELES (KABC) -- A week after a bank branch closed in Arcadia, workers were emptying out the building, tossing signs in a trash bin.

It's a scene happening across the country. According to a report by the National Community Reinvestment Coalition, over 13,000 bank branches closed in the U.S. between 2008 and 2020, representing 14% of all branches.

Customer Susie Cronin said she understands why some branches close, but it's "bothersome if you need to go into a bank."

Locally, between 2017 and 2020, Los Angeles County lost 62 bank branches. Then in 2021, the county lost another 66, according to an ABC7 analysis of data from the Federal Deposit Insurance Corporation, the same data analyzed by the NCRC.

"It's ridiculous because people have their money in there, they need it, they need to do transactions. They don't just need to use the ATM," said another customer, Rudy, who only wished to use his first name.

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Experts say many people do their banking online, and the COVID-19 pandemic may have increased that even more. Many branches have cited the cost of the real estate isn't worth the return on the branches, but a good portion of Americans still visit a bank branch at least a few times a year.

"There are still some things that we show are huge, that branches are hugely important for, especially with relation to business activity," said Jason Richardson, the director of research for the NCRC.

Richardson said when bank branches close in a community, what follows is a decline in the availability of credit and lending for businesses in the area.

"The strong relationship between branches and small business lending is undeniable," he said. "So, you're going to see fewer businesses in places where there are fewer banks."

Data shows bank closures have a larger impact on low-income communities of color.

The NCRC's report found that in low-income, high-minority areas of Los Angeles County there was a 12% drop in bank branches between 2017 and 2020, compared to slightly less than 4% overall across the entire county.

"Branches are a conduit for capital that gets invested in low-income areas and when branches start disappearing from low-income areas we get worried," said Richardson.

ABC7 analyzed the most recent FDIC data from 2021 and found zip codes with less than 20% people of color had on average, more than five banks per 10,000 people. Zip codes with more than 80% people of color had less than two banks per 10,000 people.

There was a similar pattern with income. Zip codes with a median household income of less than $50,000 had less than 2 banks per 10,000 people, and zip codes with a median household income more than $120,000 had almost four banks per 10,000 people.

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Richardson said maps of bank branches in Los Angeles County show clusters "exactly where you'd expect."

"Where there's a lot of Black population, there aren't a whole lot of banks, and it's almost like an island in the middle of L.A. County where...there are a few banks there but not very many," he said.

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Richardson also said this makes bank closures a justice issue.

"The bank's going to make a decision that's in their interest, but the overall impact of it means that the low-income minority areas are disproportionately impacted. So...that's a constant challenge."

Richardson said the trend with likely continue as some large companies merge.

"Where it stops, I don't know," he said. "There's going to be some sort of a natural level probably that it's going to get to."