Waterbury-based Webster Bank, in addition to several recent acquisitions, has opened some de novo branches recently. The banking landscape in Connecticut has echoed the national trend of a growing number of bank branches, but on a smaller scale.

Brick-and-mortar is back in style as banks across the country expand with new branches – often in creative ways, like with branches in supermarkets. But as the number of branches has grown 15 percent over the past 10 years to 67,000 at the end of 2003, the number of commercial banks has declined by 29 percent, according to a study from the Federal Deposit Insurance Corp.

The banking landscape in Connecticut has echoed that trend, but on a smaller scale. The number of banks based in the state declined sharply over the last several years. It is unclear how many institutions were based in Connecticut in 1993 because the Department of Banking lumped together the numbers of out-of-state and in-state banks. But in 1995, when the department began to differentiate the two, there were 103 Connecticut-based banks. Eight years later, in 2003, there were 70.

But the number of branches has stayed fairly consistent – with 44 more in 2003 than in 1993 – mostly because of the influx of out-of-state banks in the mid-1990s. That came at the same time as deregulation, mergers and acquisitions and bank failures diminished the number of branches run by Connecticut-based banks.

In 1993 there was a total of 1,102 branches in the state. Last year there were 1,146.

But the number of branches run by Connecticut-based banks has declined about 30 percent since 1995, the first year the Department of Banking broke the numbers down by in-state and out-of-state banks. In 1995, there were 1,029 branches run by Connecticut-based banks. Last year there were 682.

At the same time, branches run by out-of-state banks have risen dramatically. In 1995, there were five out-of-state banks doing business in Connecticut. Last year, there were 464 branches run by 17 out-of-state banks.

‘Convenience Factor’

Those changes, however, don’t mean that Connecticut-based banks are giving up on their branches. Several of the state’s larger banks have been continuing their expansion through traditional and creative branches.

“Branches are still in fashion,” said Deb Bochain, manager of New London-based Liberty Bank’s Personal Financial Services Group.

Although experts were predicting the demise of traditional branches 10 years ago, they have proven themselves as a banking cornerstone, said John Carusone, president of the Hartford-based Bank Analysis Center.

“The reality is branches have had an awful lot of staying power,” he said.

Banks have been finding that previously touted alternative delivery channels like online banking do not replace traditional branches, Bochain said. She learned at a recent conference held by Needham, Mass.-based PowerGroup that the alternative delivery channels supplement the experience customers get in branches, she said, adding that branches will remain an important piece of banking.

“I think the whole convenience factor drives the need for branching,” she said.

Nationwide, banks are recognizing the benefits – especially for smaller institutions – of expanding with new branches, according to the FDIC’s report, which summarized findings from the 2004 Summary of Deposits.

“Bank branching continues to thrive because it appears to offer clear financial advantages, at least to certain classes of banks,” according to the report. “For small institutions, non-interest income, interest expense and [return on equity] improves with larger branch networks. While similar advantages may accrue to larger institutions, their sparser population makes it difficult to determine whether their branch networks provide them with clear advantages.”

Some banks in Connecticut are experiencing those advantages with new branches.

Waterbury-based Webster Bank, in addition to several recent acquisitions, has opened some de novo branches recently. The bank opened a branch in Danbury last May and one in Norwalk last year, according to Senior Vice President of Retail Development John Spear. The bank will open four or five more branches in the state in the next few years.

Webster also is expanding beyond Connecticut’s borders. The bank is opening branches in Westchester County and recently acquired a Rhode Island bank, Spear said.

Bridgeport-based People’s Bank also has been expanding. Fairfield County has been a popular spot for expansion by both in-state and out-of-state banks, said Vince Santilli, the bank’s first vice president and growth manager. People’s is opening several branches in the next few months. One, a freestanding branch, will be in the Cos Cob section of Greenwich. The bank also is replacing one Fairfield location with another in the same town that will include a drive-through.

“We continue to reach out and expand our locations,” he said.

People’s is also taking part in creative ways of branching, as are many banks across the country.

“The manner in which banks are attempting to reach their customers continues to evolve, as the fastest-growing types of branches are those located in retail establishments,” according to the FDIC report.

People’s – which has more than 160 branches – already has a network of branches in Stop & Shop locations across the state and will be opening two more, one in Ridgefield and one in Rocky Hill, Santilli said. The supermarket branches have helped People’s add deposits, he said. The supermarket branches are often open seven days a week.

“Convenience is what the customer today – in Connecticut and elsewhere – craves,” Santilli said.

The supermarket locations are accessible to between 20,000 and 30,000 people a week, Santilli said.

“Everybody has to shop,” he said.

People’s will open a total of nine branches next year, three in Stop & Shop locations.

The bank also has expanded with more ATMs and other specialty branches, such as limited hour branches in elder facilities.

Many banks in Connecticut are exploring how to maintain their presence in the state and how to capture any deposits from mergers and acquisitions, such as Bank of America’s acquisition of FleetBoston Financial Corp., Bochain said.

“All of the state players are looking to maintain [their presence],” she said.

Liberty recently relocated two branches in Groton and East Lyme and is currently in the middle of a review process designed to reveal any possibilities for further expansion, she said.