For the first time in a decade, Chattanooga added more banks and bank branches despite record merger activity across Tennessee in recent years.
Bank deposits in metropolitan Chattanooga during the 12-month period ending June 30 rose a mere 0.3 percent to $9.74 billion among all banks with offices in the 6-county region, according to data compiled by the Federal Deposit Insurance Corp. That was the slowest growth for bank deposits in Chattanooga since 2012 when overall deposits in the market dropped in the wake of the Great Recession.
The sluggish growth in overall deposits came despite the entry into the Chattanooga market of two new banks. First Citizens National Bank of Dyersburg and BancorpSouth Bank of Tupelo, Mississippi, both entered the Chattanooga market during 2018.
Biggest banks in metro Chattanooga
The largest banks operating in the 6-county Chattanooga metro area, as measured by deposits as of June 30, 2018, are:
1. First Tennessee, $2.36 billion in deposits, or 24.2 percent of the market
2. SunTrust, $1.65 billion in deposits, or 16.9 percent of the market
3. Regions, $1.26 billion in deposits, or 13 percent of the market
4. Pinnacle, $686.3 million in deposits, or 7.05 percent of the market
5. Bank of America, $516.9 million in deposits, or 5.3 percent of the market
6. First Volunteer, $457.5 million in deposits, or 4.7 percent of the market
7. FirstBank, $359.3 million in deposits, or 3.7 percent of the market
8. SmartBank, $352.6 million in deposits, or 3.6 percent of the market
9. Citizens Tri-County, $34 million in deposits, or 3.5 percent of the market
10. The Bank of Lafayette, $224.4 million in deposits, or 2.3 percent of the market
Source: Federal Deposit Insurance Corp., June 30, 2018
The net effect of the acquisitions and expansions has left the Chattanooga market with 28 banks, or one more than the previous year. Collectively, those banks operated 148 branch offices in metro Chattanooga, or two more than the previous year.
"Chattanooga is a competitive market and I think our strong economy is attracting more business and more banks interested in doing business here," says Jay Dale, president of First Tennessee Bank, the biggest bank in both Chattanooga and Tennessee as a whole.
But with 189 different banks across all of Tennessee — and growing competition from online banks and financial institutions — bankers are looking to consolidate operations by buying or merging with other banks.
In the past four years, there have been a record 45 bank mergers and acquisitions in Tennessee, reducing the number of separately chartered banks to less than half of the peak levels a few decades back before interstate and cross-county banking was allowed as easily as today, according to the Tennessee Bankers Association. Nationwide, FDIC data analyzed by the American Bankers Association said 4,833 banks operated nationwide as of June 30, 2018 — or only about one-third of the 12,343 banks that operated in the United States in 1990.
Banks are still pruning their bricks-and-mortar branches as bank customers shift more transactions online or to automated teller machines, however. Since the peak in 2009, the number of bank branches in metro Chattanooga shrunk by 31, or 13.3 percent, even as total deposits grew by $1.7 billion, or 20.4 percent.
SmartBank of Knoxville, which merged with Cornerstone Bank in Chattanooga in 2015, acquired Southern Community Bank of Tullahoma, which operated a downtown Chattanooga branch, during 2018 and plans to buy Entegra Bank in North Carolina in 2019. Since 2012, SmartBank has made or announced seven acquisitions to grow its assets to over $4 billion late this year once the Entegra acquisition is completed.
"We think scale definitely matters in the banking industry for costs, efficiency and all the things you can do when you get a little bit bigger," says Miller Welborn, chairman of SmartBank.
Three years after acquiring the former Northwest Georgia Bank to become one of Chattanooga's biggest banks, FirstBank is acquiring additional branches in 2019 with the purchase of 14 bank offices from Atlantic Capital Bank. FB Financial Corp., the parent company of the Nashville-based FirstBank, said it is buying almost all of the Atlantic Capital banking and mortgage operations which Atlantic Capital previously acquired in 2015 with its 2015 purchase of the former Chattanooga-based FSG. FirstBank said it is assuming $602 million in deposits and buying about $381 million in loans with the acquisition of the Atlantic Capital operations in Chattanooga, Dalton and Knoxville.
FirstBank CEO Chris Holmes said the chance to buy the branches from Atlantic Capital Bank in the Knoxville, Morristown, Tenn., Chattanooga and Dalton offered another opportunity to expand FirstBank's presence in the market.
"When you are looking to expand, it doesn't get much more attractive that the state of Tennessee and Georgia, both of which are areas of great economic activity," Holmes says. "We just want to continue to expand in great communities and Chattanooga is an example of that. We will remain focused, as we always have, on being a community bank with bankers who know the markets where we operate."
Even in an internet, high-tech era, Holmes said "banking remains a relationship business."