Deposits in Chattanooga's banks grew by double-digit levels for a second consecutive year during the pandemic as government stimulus measures and greater savings boosted how much Chattanoogans put in savings, checking and CDs at local banks.
Despite the economic downturn and drop in interest rates caused by the pandemic last year, total deposits in the 27 commercial banks operating in the 6-county Chattanooga metropolitan area grew by nearly $1.7 billion in the 12 months ended June 30, according to new figures released by the Federal Deposit Insurance Corp. (FDIC). The 13.7% gain in local bank deposits from 2020 to 2021 followed an even bigger 19.6% gain in total banks deposits in the Chattanooga market during the previous year.
Combined the deposit gains in the past two years at Chattanooga banks represent the fastest growth since the FDIC began tracking such figures.
"We're seeing the influx of the government's stimulus measures pumping more money into both business and individual accounts," said Colin Barrett, president of the Tennessee Bankers Association. "The American Rescue Plan is continuing to trickle down to many of our municipalities and I think we'll get another traunch coming next year. So I think that we're going to continue to see an increase in total deposits next year and I don't think this will slow down."
For all of Tennessee, bank deposits grew in the past year by 10.3% to $213.1 billion after an even bigger 20.4% jump in deposits in the previous year, according to the FDIC.
Federal stimulus measures, including Paycheck Protection Program loans and grants, expanded unemployment benefits, Restaurant Recovery funds, stimulus checks and expanded tax breaks and credits, have combined to pump more than $3 trillion into the U.S. economy and Congress is considering an even more ambitious $3.5 trillion infrastructure and pandemic recovery program.
While the government has added more money into the economy, many businesses and consumers have curtailed some spending, at least on travel, vacations and dining out, during the pandemic.
"In uncertain times, people tend to save more and with fewer activities to spend their money on both consumers and businesses have kept more money in the bank," said Jay Dale, president of First Horizon Bank, the biggest bank in the Chattanooga market with more than $3 billion of deposits.
Barrett said the pandemic has created a lot of uncertainty about the direction of the economy "and where there are a lot of unknowns companies and consumers tend to save more."
With deposits up and some economic activity not yet back to its pre-pandemic levels, banks are competing more aggressively for loans.
"It's certainly a competitive market here with 27 banks in this market, but fortunately Chattanooga's economy continues to do relatively well and overall I think the banking industry is relatively healthy and we continue to see a growth in loans," Dale said.
The growth is coming even as the number of banks and the number of bank offices continue to shrink.
From its peak in 2009 when the Chattanooga area had 179 bank branches, the number of bank branches in metro Chattanooga has dropped by nearly 20% with 35 fewer bank offices in the 6-county metro market. Bankers expect further reductions due to more online banking acceptance and consolidation in the industry.
"The pandemic showed many more people how to bank online and as electronic banking continues to grow, we're likely to continue to see fewer branches," Barrett said.
The FDIC said as of June 30, there were 176 commercial banks in Tennessee, but Barrett said since March eight acquisitions of Tennessee-based banks have been announced — the highest number of any state in the country.
With interest rates hovering near historic lows and new technologies and regulations creating scale advantages for bigger banks, industry experts expect more banks to merge or be bought out in the future.
"While mergers within the fragmented U.S. banking sector have been a multi-decade trend, we believe persistently low rates, low loan growth expectations and margin compression on fee income segments will be supportive of further consolidation," said Bain Rumohr, senior director of North American banks for Fitch Rating Services.
But amid the trend toward consolidation, Chattanooga also got a new bank in the past year. Rock Point Bank, organized by a group of veteran bankers in Chattanooga, raised more than $33 million in equity capital to charter and open in March the first new bank in Chattanooga in 15 years.
Even with another bank, the number of bank offices declined by three in the past year and others have since been shuttered in the market.
Many of Chattanooga's fastest-growing banks have been those with a limited number of branches. In the past 12 months, Bank of America which has only four branches in metro Chattanooga nearly doubled its deposits to $1.3 billion.
The three biggest banks in Chattanooga continued to be regional banks operating across the Southeast, including Tennessee's biggest bank First Horizon, Alabama's biggest bank Regions Bank and the biggest bank in the Southeast, Truist Bank, which was formed by the merger of SunTrust and BB&T.
Among the three biggest banks, First Horizon remained the biggest bank in Chattanooga with the most deposits while Regions grew at the fastest rate in the 12 months ended June 30.
Dale credited First Horizon's long history in the market and its people and products. Michael Mathis, Chattanooga market president of Regions, said the Alabama-based Regions bank remains focused on its customers in the market "with the resources and technology of a powerful brand.
"Our local bankers are devoted to helping our customers reach their short- and long-range financial goals," Mathis said.
Other local banks that helped serve customers seeking PPP loans during the pandemic also reported higher deposit growth in the past year, including the Bank of Lafayette with a 20.1% increase in deposits, Citizens Tri-County Bank with a nearly 16% growth in deposits, SmartBank with a 15.6% gain in deposits and First Volunteer Bank with a nearly 14% increase in deposits.
Chattanooga's biggest banks
Among the 27 commercial banks operating in the 6-county Chattanooga metropolitan area, the biggest banks, based upon local deposits as of June 30, 2021, are:
1. First Horizon Bank, $3.1 billion in deposits and a market share of 22.3%
2. Truist Bank, $2 billion in deposits and a 14.3% market share
3. Regions Bank, $1.7 billion in deposits and a 12.2% market share
4. Pinnacle Bank, $1.4 billion in deposits and a 9.8% market share
5. Bank of America, $1.3 billion in deposits and a 9.3% market share
6. Firstbank, $785.1 million in deposits and a 5.7% market share
7. First Volunteer Bank, $616.7 million in deposits and a 4.45% market share
8. Citizens Tri-County Bank, 497.7 million in deposits and a 3.6% market share
9. Smartbank, $466.2 million in deposits and 3.4% market share
10. The Bank of Lafayette, $308.9 million in deposits and a 2.2% market share
Source: FDIC Market Share data as of June 30, 2021.