Jeff Jackson

For more than a century, downtown customers of First Tennessee Bank and its predecessor, Hamilton National Bank, cashed checks, made bank deposits and transacted other financial dealings in the sprawling lobby of the bank's tower, which spanned from Market to Broad Street on the south side of Seventh Street.

But like most banks, First Tennessee is pruning the size of its downtown retail branch to better suit the market as more consumers switch to electronic and mobile bank options that limit the need to visit the local bank branch.

The bank has closed five of its former bank branches in Chattanooga over the past decade, and last year First Tennessee even sold its 16-story bank tower in Chattanooga — and similar buildings across Tennessee — to make way for more downtown apartments planned by a Memphis developer.

But First Tennessee is hardly shrinking its footprint in Chattanooga. The bank, which will retain the bottom four floors of its signature office building, remains the biggest in metro Chattanooga, growing its local deposits by 13 percent in the past year to a record high, while raising local profits by 23 percent last year.

"We've put more focus on growing deposits, which will become more valuable as interest rates rise, and we've worked hard to add around 70 new business clients in the past year," says Jeff Jackson, the market president in Chattanooga for First Tennessee over the past year. "And every one of decisions is made locally. We believe that is a real competitive advantage for us."

Deposits have also grown for most other Chattanooga banks as the local economy continues to rebound from the Great Recession. Over the past decade, overall deposits in Chattanooga banks grew 28 percent, while the number of branch offices fell by nearly 15 percent, according to the Federal Deposit Insurance Corp.

Before the 2007 financial downturn, there were 97,000 bank branches in the United States, including 175 branches among the banks operating in metropolitan Chattanooga. Today, there are fewer than 90,000 bank branches, including 150 bank offices in metro Chattanooga. A recent study by the consulting firm of JLL predicts another 20 percent of all U.S. bank offices will close over the next decade.

The severity of the 2009-2010 recession encouraged banks to tighten operating costs. At the same time, mobile banking gained favor as more consumers embraced smartphones and mobile technologies that allowed bank customers to complete many typical transactions without ever entering a branch or being tied to their computers. Bankers insist they are focusing more attention on relationship banking and, with consolidation and technology upgrades, reducing local staffing for back office operations.

"We're bullish on Chattanooga and expect the economy and banking market to continue to improve, even while many of our customers continue to move toward doing more banking online and may be less likely to come into our branch offices as frequently as they did in the past," says Jim "JV" Vaughn, the market president for SunTrust, Chattanooga's second biggest bank, which also has closed five of its branches over the past decade.

Consumer surveys indicate many people still choose their bank based upon having a nearby office or branch to their home or business. But younger consumers are also picking banks based upon the ease and convenience of their apps and ATMs.

"We have the challenge of serving both those who bank with us online and those that continue to rely upon our branches," Jackson says. "For all the technology changes, banking is still a personal and relationship business and, for many, the No. 1 determinant for which bank they choose is based upon how accessible it is to their home or work life."

Some of the most successful banks created in the past decade in the region have grown assets significantly with a limited number of branches, employing more mobile and targeted approaches to building business.

Atlantic Capital Bank grew into a $1.3 billion-asset bank from a single office in Atlanta in only eight years before acquiring the former FSG Bank in Chattanooga in 2015 for $160 million. CapitalMark Bank in Chattanooga, which also was started in 2007, grew to nearly $1 billion in assets with only four offices (one each in Chattanooga, Cleveland, Oak Ridge and Knoxville).

In 2015, CapitalMark agreed to merge with Tennessee's fastest growing bank, Pinnacle Financial Corp., in a $187 million deal that has helped make Pinnacle the state's second biggest bank. Pinnacle plans to add more local branches in Chattanooga as it tries to become one of the biggest banks in metro Chattanooga, but Atlantic Capital opted to sell its Cleveland, Tennessee, branch last year to SmartBank, which also entered the Chattanooga market in 2015 by acquiring the former Cornerstone Bank.

"Cleveland is an attractive market that fit our growth strategy in East Tennessee, and we continue to look at opportunities for new branches that might make sense," said Billy Carroll, the president and CEO of Smart Financial Corp., the Knoxville-based parent of SmartBank. "But certainly consumer banking behaviors are changing, and we need to make sure we have the right mobile and technology for today's consumers, as well as local offices to transact business."

FirstBank, one of the biggest privately held banks in Tennessee, also acquired the former Northwest Georgia Bank, based in Ringgold, Georgia, in 2015 and has consolidated some operations and offices. At the same time, the former Community Trust & Banking Co., in Ooltewah changed its name last year to Millennium Bank to help highlight its appeal to younger Millennial customers.

The new nameplates and ownership changes come as Chattanooga's banks have recovered from the 2009-2010 downturn, which generated more loan losses for most area banks during the worst of the recession. Aided by rising employment and property values, banks have since cut their distressed loan portfolios and raised or generated extra capital to shore up their finances. A handful of banks in the Chattanooga region that operated under extra regulatory oversight because of losses during the Great Recession and its aftermath have now been removed from the extra scrutiny by the Comptroller of the Currency.

Across Tennessee, the FDIC said banks' return on assets grew by nearly 6 percent last year. Although the number of banks in Tennessee dropped from 168 to 157, overall assets grew by 8 percent, or nearly $7.7 billion.

Even with 27 commercial banks in the Chattanooga metro market, the owners of a Nashville bank are convinced there is room for another local competitor.

Reliant Bank, a Brentwood, Tennessee, bank headed by a former AmSouth market president in Chattanooga, DeVan Ard, has opened a loan production office in downtown Chattanooga and plans to open a full-service commercial bank branch in Chattanooga later in 2017 or early 2018. Reliant has hired the former market president of FSG, Terry Todd, to build the new Chattanooga franchise.

"Outside of Nashville, I think Chattanooga is one of the best banking markets in the state," Ard says.

Top banks in metro Chattanooga

In the six-county metropolitan Chattanooga region, 27 banks had nearly $9.4 billion in bank deposits as of June 30, 2016. The biggest banks in Chattanooga are:

1. First Tennessee, $2.3 billion

2. SunTrust, $1.7 billion

3. Regions, $1.2 billion

4. Pinnacle, $615.3 million

5. First Volunteer, $429.8 million

6. FirstBank, $322.7 million

7. SmartBank, $314.2 million

8. Citizens Tri-County, $309.4 million

9. Atlantic Capital, $302.7 million

10. The Bank of LaFayette, $203.9 million

11. Synovus, $154.7 million

12. Millennium, $139 million

13. BB&T, $130.6 million

14. Tower Community in Jasper, $115 million

15. Community National in Dayton, $105.9 million

Source: Federal Deposit Insurance Corp., data as of June 30, 2016

Top banks in metro Cleveland

In metropolitan Cleveland, Tennessee, which includes Bradley and Polk counties, 15 banks share nearly $1.7 billion in deposits. The biggest banks are:

1. First Tennessee, $260.4 million

2. Southern Heritage, $233.7 million

3. BB&T, $207.3 million

4. Regions, $200.6 million

5. Bank of Cleveland, $198.9 million

Source: Source: Federal Deposit Insurance Corp., data as of June 30, 2016

Top banks in metro Dalton

In metropolitan Dalton, Georgia, which includes Whitfield and Murray counties, 11 banks share $2.4 billion in deposits. The biggest banks are:

1. BB&T, $507.3 million

2. Wells Fargo, $422.1 million

3. Bank of America, $407 million

4. FirstBank, $210.4 million

5. Synovus, $205 million

Source: Source: Federal Deposit Insurance Corp., data as of June 30, 2016

Pruning branches while deposits grow

Over the past decade, deposits in Chattanooga banks grew 28 percent while the number of branch offices fell by nearly 15 percent.

* 2016, $9.38 billion in deposits at 150 branches

* 2015, $9.02 billion in deposits at 156 branches

* 2014, $8.5 billion in deposits at 161 branches

* 2013, $8.44 billion in deposits at 166 branches

* 2012, $8.66 billion in deposits at 173 branches

* 2011, $8.48 billion in deposits at 175 branches

* 2010, $8.46 billion in deposits at 178 branches

* 2009, $8.09 billion in deposits at 179 branches

* 2008, $7.64 billion in deposits at 172 branches

* 2007, $7.33 billion in deposits at 175 branches

Source: Federal Deposit Insurance Corp. data for 6-county Chattanooga metropolitan area