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Within the next couple of months, all four of Chattanooga's biggest homegrown banks should get new owners through combinations with other bank holding companies in Tennessee and Georgia.

Cornerstone Bancshares Inc., the parent company of Cornerstone Bank in Chattanooga, announced Tuesday that regulators and shareholders have approved Cornerstone's merger with the Knoxville-based SmartFinancial Inc., parent company of SmartBank. The merger is expected to take place on Aug. 31 to create the 12th-biggest bank based in Tennessee with nearly $1 billion in assets.

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Cornerstone Bank CEO Frank Hughes stands in front of the One Central Plaza building.
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Craig Holley, Chairman, President, and CEO of CapitalMark Bank & Trust
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The FSG Bank logo is seen over a a branch in the file photo.

SmartFinancial CEO Billy Carroll said shareholders overwhelmingly voted in favor of the merger and the Federal Reserve Board granted its approval last week.

"This gives us the green light to move full steam ahead in putting this partnership together," Carroll said.

Cornerstone is expected to change its name to SmartBank next year once bank operations are combined.

"We believe the 'Smart' name really fits the dynamic vision and profile of where we're going for the future," Cornerstone's Chairman Miller Welborn said in a statement Tuesday. "With SmartBank's strengths in technology and cutting edge banking solutions, combined with Cornerstone's solid foundation in the innovation district of the Gig City, this brand really works."

A month before the Cornerstone deal is completed, Pinnacle Financial Corp., the parent company of Nashville's biggest independent bank, plans to acquire CapitalMark Bank in Chattanooga. Pinnacle raised $60 million in subordinated debt through a private offering from institutional investors that will close on Thursday. On Friday, Pinnacle plans to complete its purchase of CapitalMark for more than $200 million in stock and cash, based upon current stock values.

The purchase is the biggest purchase of a Tennessee bank since Pinnacle acquired Mid-America Bancshares for $196 million in 2007. Pinnacle also is planning to buy Magna Bank in Memphis later this year.

Once both deals in Chattanooga and Memphis are completed, Pinnacle will have more than $8 billion in assets.

"Our strategy has been to grow rapidly while operating in all of Tennessee's four urban markets, so this is a significant milestone for all of us at Pinnacle," Pinnacle CEO Terry Turner said in a statement. "CapitalMark has built a very successful franchise in Chattanooga and the surrounding areas, and we are excited to continue that momentum as one firm."

Meanwhile, two other mergers of Chattanooga banks are still pending and should be completed by this fall.

FSG Bank, Chattanooga's biggest independent bank, has agreed to merge with the Atlanta-based Atlantic Capital Bancshares Inc. in a $160 million stock and cash deal to create a combined bank with $2.7 billion in assets.

FirstBank, based in Lexington, Tenn., also has agreed to buy Northwest Georgia Bank,. based in Ringgold, Ga. That deal is still awaiting approval by regulators, a company spokesman said Tuesday.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

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