When Astoria Financial Corp. bought Greater New York Savings Bank in 1997, one of the things it inherited was the seller's 30,000-square-foot headquarters building in Brooklyn.
But like most banks these days, Astoria Financial, of Lake Success, N.Y., had little use for that amount of space.
Last month the $22.6 billion-asset company sold off the property, which took up an entire city block and included a circa-1920 branch, an adjoining 50-year-old building that had been used as a computer center, and a vacant lot. It leased back a 5,000-square-foot corner of one of the buildings, where it is setting up a smaller branch.
Banks have been shedding white elephants for years, but the pace has accelerated noticeably in the past few years as a result of pressure from investors who pay attention to such things as operating budgets and efficiency ratios. A number of New York-area banking companies have recently unloaded large parcels of real estate to cut costs.
"It's been going on for two or three years, but the rate has been increasing exponentially," said Albert Gottlieb, senior managing director with the bank services group at Newmark New Spectrum Retail LLC in New York, which handles real estate transactions for banks in the metropolitan area.
The increase is "partly due to the need of the banking industry to be more and more efficient, because other financial service companies have been eating bankers' lunches," Mr. Gottlieb said.
Joseph R. Ficalora, chairman, president, and chief executive of New York Community Bancorp, said stately buildings might have instilled confidence in customers at one time but are not practical now.
In January, Mr. Ficalora's company sold its 20,000-square-foot headquarters in Queens, once said to have the largest floor space of any bank outside Manhattan, and moved to the suburbs - the Westbury, N.Y., headquarters of the former Haven Bancorp, which New York Community bought in late 2000.
The branch operation that was housed in the former headquarters was moved to a 4,000-square-foot location just up the block in Queens, and Mr. Ficalora said his company will continue to evaluate the branch network to find more ways of maximizing savings by minimizing space.
A lot of banks "were built to give the appearance of strength and size," he said. "In a more modern environment, people are less impressed by stone and 25-foot ceilings and more impressed by services and an array of products."
Mr. Ficalora added that $4.6 billion-asset New York Community has no use for such an enormous building, because innovations including direct deposit, automatic teller machines, and telephone and Internet banking have fewer customers visiting branches.
"Bank buildings constructed decades ago have space beyond the needs of banks today," he said. "People don't go to the bank anymore - or go less frequently."
Some banks, including HSBC USA Inc. of Buffalo, are moving out of designated New York landmarks. The company acquired a 25,000-square-foot branch in downtown Manhattan when it bought Republic National Bank last year, but this summer it plans to move across the street to a 4,500-square-foot branch being built now.
Even banks that have not been involved in mergers are reducing the size of branches and discarding out-of-date offices, which are often difficult to modernize.
This year GreenPoint Financial Corp. in New York moved out of four branches ranging from 10,000 to 25,000 square feet and into new locations, none larger than 4,000 square feet. The $17.3 billion-asset company has made a "strategic effort to focus on reducing rental costs," said Ramesh Shah, executive vice president of consumer banking.
"New York is a very expensive marketplace," he said. "And because space is the second-largest item on our budget after staffing, we evaluate all the buildings we own and determine whether it's the right size and the right structure and then rightsize that space."
In the past three years GreenPoint has "rightsized" more than 20% of its 74 branches in the New York metropolitan area by renegotiating branch leases or moving into smaller spaces nearby, Mr. Shah said.
Though downsizing is occurring nationwide, the trend is pronounced in the Northeast, where the cities are older and many banks have been around for a long time, according to Mark Fitzgibbon, an analyst at Sandler O'Neill & Partners in New York.
Some have more teller stations than are needed; others have very high ceilings, which make a building difficult to heat and cool. Still others contain floors of safety deposit boxes, which have waned in popularity.
Mr. Fitzgibbon said convenience - not Corinthian columns - is what is most important to customers.
"Most banks have recognized that it isn't critical to have a giant museum-like structure in order to entice customers," he said. "Consequently, banks are trying to locate facilities that are easily accessible, as opposed to having the largest, most ostentatious facility on the block."
Many of the larger branches that banks are dumping are landmark buildings - inside and out - and that makes it almost impossible to alter structural or architectural elements. Still, some historic sites are being modified for other uses. For example, two former GreenPoint branches were recently sold separately to a restaurant and catering hall, and a third is to be sold to a synagogue.
Though their size is being scaled back, branches' population is rising - as the number of banks shrinks. Between 1990 and 1999 the branch count jumped 27%, to 63,684, according to Federal Deposit Insurance data. During the same period the number of banks fell to 8,581 from 12,347.
Meanwhile, several banks are experimenting with their branches' offerings. Some, such as People's Bank of Bridgeport, Conn., have reconfigured certain branches as financial supermarkets with salespeople for different business lines. Others, including Bank of America, have multiple prototypes, including plans to convert some of its traditional branches into strictly service areas with extra teller stations and automated teller machines.
Ken Thomas, a consultant with K.H. Thomas Associates in Miami, said many large banks started switching to smaller branches in the 1990s, when their 20-year leases expired. Those that stress retail and view branches simply as transaction point will continue the trend, he added.
"The branch is far from dead, and it's important to keep them efficient," Mr. Thomas said. "The branch will continue to be the primary transaction vehicle, but it must be managed in an efficient way - and that may mean downsizing and often reconfiguring the network."
Still, some things never change. All the effort banks put into branch reconfiguration can be wasted if they do not choose the right spot, Mr. Thomas said.
"One thing you can never escape," he said, "is location, location, location."
