Brick-and-Mortar Bank

A brick-and-mortar bank is a depository institution that serves customers through staffed physical offices, as distinct from one that operates entirely through a website and an app. The phrase is descriptive industry usage rather than a term issued by any agency, though regulators use it in the same descriptive way. Treasury's own analysis of the FDIC's Summary of Deposits counts "full-service brick and mortar" branches, and Treasury has written of financial services evolving "from brick and mortar locations to include digital access."

Underneath the informal phrase sit two terms that are statutory. An "insured depository institution" is a defined category under the Federal Deposit Insurance Act, and a "branch" of one is the thing the law attaches obligations to. That is what makes the branch worth a page of its own rather than a paragraph in a comparison: it carries a small set of consumer rights that an app does not, quite apart from anything about service or convenience.

The comparison people usually want, why online banks pay more on deposits, is covered on the high-yield savings account page and is not repeated here.

The one legal right attached to a branch is the right to advance notice before it closes, and it is set out at 12 USC 1831r-1. The section imposes three separate duties, and the clocks are different.

To the regulator. An insured depository institution proposing to close a branch "shall submit a notice of the proposed closing to the appropriate Federal banking agency not later than the first day of the 90-day period ending on the date proposed for the closing." The notice must include "a detailed statement of the reasons for the decision to close the branch" and "statistical or other information in support of such reasons," so the institution has to say why, in writing, to its supervisor.

Posted at the branch. Notice must be posted "in a conspicuous manner on the premises of the branch proposed to be closed during not less than the 30-day period ending on the date proposed for that closing."

To customers in writing. Notice must be included in "at least one of any regular account statements mailed to customers of the branch" or in a separate mailing, "by not later than the beginning of the 90-day period ending on the date proposed for that closing." So the written notice and the regulator's notice run on the same 90-day clock, and only the sign in the window runs on the shorter one.

The institution must also "adopt policies for closings of branches," which makes the decision a governed process rather than an ad hoc one.

Low- and moderate-income areas get a hearing, and expressly not a veto. Where an interstate bank proposes to close a branch in a low- or moderate-income area, the customer notice must carry the banking agency's mailing address and a statement that comments on the closing may be mailed there. If a person from that area submits a written request with "a statement of specific reasons for the request, including a discussion of the adverse effect of such closing on the availability of banking services in the area," and the agency concludes the request is not frivolous, the agency "shall consult with community leaders in the affected area and convene a meeting" with its own representatives, other regulators, community leaders and other institutions, "to explore the feasibility of obtaining adequate alternative facilities and services." The statute defines a low- or moderate-income area as a census tract whose median family income is less than 80 percent of the median for its metropolitan statistical area, or for the state where the tract is outside one.

Then comes the sentence that decides what the process is worth. Subsection (d)(3) provides that no action by the agency under that paragraph "shall affect the authority of an interstate bank to close a branch (including the timing of such closing)" where the notice requirements have been met. The right is to be consulted, not to keep the branch.

Three exclusions the section carves out, which is where a reader who believes they are owed notice most often finds they are not. It does not apply to an automated teller machine. It does not apply to "the relocation of a branch or consolidation of one or more branches into another branch" where that "occurs within the immediate neighborhood" and "does not substantially affect the nature of the business or customers served." And it does not apply to a branch closed in connection with an emergency acquisition or with assistance provided by the FDIC. So a branch that moves down the street, or is merged into a nearby one, can go without the 90-day process.

What a branch does that an app cannot, stated without nostalgia. Physical currency and coin have to be handed to somebody. Safe deposit boxes are physical. Many banks provide notarization and, where they offer it, a medallion signature guarantee, which some securities transfers require and which cannot be obtained remotely. And identity problems, a mismatched name, a disputed signature, an estate matter, are resolved faster in person than through a support queue. None of that is an argument that branches are better; it is a list of the transactions for which a branch is the only channel.

The direction of travel, dated. The Treasury's November 2022 report on new entrant non-bank firms traces the arc from FDIC data: the number of branches "consistently increased from 3,000 in 1934 to almost 70,000 at the end of the century," continued "to approximately 85,000 by 2009," and then, "coinciding with the digitalization of banking services, branch growth in the aggregate has halted, and the number of branches has started to decline, with the number of branches now fewer than 73,000." Those figures are as of that report and should be treated as of it; the current count is published by the FDIC rather than here.

A bank decides to close a branch and sets a proposed closing date. Three notices then have to be produced, on two clocks measured backward from that date. The regulator receives its notice with the institution's reasons; the customers receive a written notice; and a sign goes up at the branch. Where the branch is in a low- or moderate-income area and the bank operates in more than one state, the customer notice also tells residents where to send comments.

A hypothetical example of the arithmetic, because the two clocks are easy to merge. A bank proposes to close a branch on 30 September 2026.

The 90-day clock. The 90-day period ending on 30 September begins on 3 July 2026 (July 3 to 31 is 29 days, August is 31, September is 30, and 29 + 31 + 30 = 90). The notice to the appropriate federal banking agency is due no later than that first day, and the written customer notice is due by the beginning of the same period.

The 30-day clock. The 30-day period ending on 30 September begins on 1 September 2026, so the posted notice must be up on the premises from that date through the closing.

What a customer can do with the notice. If the branch is in a low- or moderate-income area and the bank is an interstate bank, the notice carries the agency's address and a resident may write with specific reasons and a discussion of the adverse effect on the availability of banking services. If the agency finds the request is not frivolous it must consult community leaders and convene a meeting about alternative facilities. The statute is equally clear that none of this affects the bank's authority to close the branch or its timing.

When none of it applies. If the bank is instead consolidating this branch into another one a few blocks away, without substantially changing the business or the customers served, the section does not reach the move at all.

Pros

• Cash, coin, safe deposit boxes and in-person identity resolution have no remote equivalent, and a branch is the only channel for them.
• A branch closing carries statutory advance notice to customers, which no app feature does.
• Residents of a low- or moderate-income area can require a regulator to consult community leaders about a closing in an interstate bank's network.
• A long-standing relationship at a staffed office can resolve unusual situations, estates and disputed transactions among them, faster than a support channel.

Cons

• The branch network is expensive, and that cost shows up in what the institution pays on deposits, which the high-yield savings account page covers.
• The notice right is procedural. The statute expressly preserves the bank's authority to close the branch and to choose the timing.
• The exceptions are wide. An ATM is outside the section entirely, and so is a consolidation into a nearby branch that does not substantially change the business or the customers served.
• Branch counts have been falling since around 2009, so the availability the model depends on is shrinking rather than stable.
• Physical access is unevenly distributed, and the areas losing branches are not the areas with the most alternatives.