The Nelson Bay branch of the Greater Bank, located in Stockton Street, will be closing its doors on April 9.
The bank's Salamander Bay and Tanilba Bay branches will remain operational.
Last March Newcastle Permanent closed its Nelson Bay branch in Magnus Street, saying its customers were banking increasingly online.
The Greater's decision to close Nelson Bay, in addition to Maitland (February 5) and Mayfield (March 5) branches, has been driven primarily by customer behaviour, while issues such as the proximity of other branches, lease tenure and costs were all contributing factors.
Greater Bank executive Craig Newham said that providing customers with over-the-counter banking through the branch network remained very important, however, the reality was that a growing number of customers were moving to mobile and online facilities to complete their banking transactions.
"The reality for all financial institutions is the need to manage changing customer behaviour, which has accelerated this year as a result of COVID-19," he said.
"During 2020, Greater Bank has seen significant increase in the use of digital channels by customers to conduct their banking. At the same time transactions at the Nelson Bay branches have dropped by 29 per cent."
The decision to close has not surprised Business Port Stephens president Leah Anderson, who had 25 years' experience working for Westpac in senior roles.
"I have a good understanding of some of the rationale behind bank closures. In particular in 2020, the banks have also had a tough year which has no doubt made an impact on the bottom line," she said.
"Banking is changing and we see less face to face interaction as technology plays a greater role with services they offer. Where previously banks would have 5-6 tellers, now they're lucky to have 1-2."
Ms Anderson said that other banking institutions in Nelson Bay could potentially follow suit.
"When there are banks within close proximity (such as Nelson Bay and Salamander Bay), I expect we will continue to see smaller branches close. Most of our local banks now use online link meetings with lender specialists based in a head office and they have smarter and more advanced automatic teller machines that can take business banking large deposits, can give out bulk change, etc."
She said that recent bank branch closures in Nelson Bay were disappointing for the elderly population, some of whom were not so technically savvy and relied on tellers.
"From the bank's point of view, they will view Salamander Bay as a better option, it is more central to the Tomaree population, most people go there to do their weekly shopping and there is more parking."
Ms Anderson said she viewed the closure as "a sign of the times in the financial world", and would not have a negative impact on business confidence in Nelson Bay.
"I believe we will continue to see Nelson Bay evolve with more retail shops, cafes and restaurants and continue to be a boutique shopping and dining destination."
The Greater Bank said it would continue to communicate with customers who frequent the Nelson Bay branch and provide them with alternative transaction options.
"The closures will not impact our employees based at these branches. All will be redeployed within the branch network or to an alternative role within the head office operations."