Market changes: 28 banks compete for business in metro Chattanooga

Banks in Chattanooga continue to operate in a relatively strong economy even as the economic expansion enters its 10th year and sets a new record this summer for the longest period of sustained growth in United States history.

But with 28 local banks competing for deposits and loans in metropolitan Chattanooga - and online financial institutions growing in number and size - savers and borrowers have plenty of banking options in the market. While banks continue to prune branches and consolidate ownership, new online, telephone and digital banking services give consumers more choices about what to do with their money.

Bank deposits in Chattanooga have been growing at a steady, if relatively tame, pace in recent years, reaching nearly $10 billion collectively in the 6-county Chattanooga metro area. But for many banks, deposit growth is not keeping pace with the rise in loan volume, pushing some banks to acquire others to gain more deposits for lending.

Collin Barrett / Photo by Donn Jones Photography

"In the past, we saw a lot of M&A (mergers and acquisitions) by banks wanting to enter new markets or gain the economies of scale with bigger size," says Collin Barrett, president of the Tennessee Bankers Association. "Now we're seeing more bank purchases to gain deposits to help with rising loan demand."

In Chattanooga, FirstBank made its second purchase of assets of another in-market competitor last year when it acquired the local offices of Atlantic Capital just three years after buying the former Northwest Georgia Bank.

Photographed in his office in downtown Chattanooga, Jim Vaughn is Chattanooga market president and leader of the commercial banking team at SunTrust.

In 2019, in one of the biggest bank mergers in more than a decade, two of the biggest banks in the Southeast - SunTrust and BB&T - plan to combine under a new name by the end of the year to create the nation's sixth biggest bank and the second biggest bank in Chattanooga.

But even as banks combine, others have entered the Chattanooga market in the past couple of years with commercial banks or lending offices, including SouthEast Bank, Reliant Bank and BancorpSouth.

Banking on economic growth

Despite concerns about potential threats from trade wars, labor shortages or unexpected shocks to the economy, bankers report borrowers are still eager for more loans. But borrowers are more cautious than a decade ago and are not displaying the same type of "irrational exuberance" Federal Reserve officials warned about before the Great Recession a decade ago when many overextended their credit and debt.

Surveys of mid-market businesses by SunTrust Bank show three of every four businesses said the economy was still strong.

A majority of the respondents in the SunTrust survey thought a recession could begin in the next year, "so there is a little more caution and people are thinking more about cash reserves than in the past," says SunTrust's East Tennessee market president, Jim Vaughn.

"But most still see the economy as strong and growing," he says. "Our business is doing very well."

Jay Dale, market president for First Tennessee Bank - the biggest bank in both Chattanooga and Tennessee as a whole - said loan demand continues to grow.

"The economy remains strong with consumer confidence still pretty high and interest rates still relatively low," Dale says.

But for all the prolonged growth in the market, bankers and their customers remain more cautious than a decade ago when the Great Recession hit and property and asset prices tumbled in many markets. Even a decade later, those lessons remain, officials say.

"Customers are very wise to the market," says Jeff Bridgman, executive vice president and commercial banking executive for First Volunteer Bank. "They are putting their time and thought into whether they want to borrow or not. Not only have banks learned from the past, customers have as well. Businesses still want to grow and take advantage of opportunities, but there is a lot more thought and analysis that goes into it than 10 or 15 years ago."

Dale said First Tennessee continues to emphasize ways to meet consumer financial needs and is investing more in technology, both for direct customer contacts and to support back-office functions.

"We want to continue to grow, but we need to do that efficiently so we're spending more on technology and making sure we respond to the market," he says.

Dale said banks need to be aware of how Amazon shook up the retail market, how Disney and Netflix have altered the way people watch television and how Uber and Lyft have reshaped the taxi market.

"People want to do banking at their convenience and we need to meet that demand," he says.

For some that remains visiting nearby brick-and-mortar offices, which is still the top reason consumers list for why they pick the bank they do for their savings or checking accounts. But many consumers today hardly ever, if at all, enter a retail branch. Commercial clients are scanning their checks and deposits and want electronic rather than paper transactions.

"Many millennials don't want to go into a branch unless their parent drag them in kicking and screaming," Dale quips. "We've got to be agile; we've got to adapt and be more efficient, and that means investing more in technology. We want to make sure we meet consumers where they want to be served, whether in branches, on the phone or online."