Photo by Dave Flessner / SunTrust and BB&T merged last year to form Truist Bank, the second-biggest bank for deposits in Chattanooga. First Horizon Bank is the biggest among the 27 commercial banks in Chattanooga.

Even as bank consolidation reduces the number of U.S. banks, Chattanooga continues to attract the interest of regional banks eager to tap into the area's growing economy. Despite the pandemic and near record-low interest rate yields, deposits in Chattanooga's commercial banks last year swelled to a record $12.1 billion as of June 30, according to the Federal Deposit Insurance Corp.

"Chattanooga has been a reasonably healthy financial market, and I don't see any slowdown in the number of financial institutions trying to break into the market," says Jim Vaughn, market president for Truist Bank in Chattanooga, which was created in 2019 by the merger of SunTrust and BB&T. "The Chattanooga market, in general, has been very resilient. A lot of our companies are pivoting and changing their models to adapt, and in doing so, they are benefiting by some of these changes and softening the blow from this pandemic."

Chattanoogans curtailed their spending and used their share of federal stimulus funds to collectively put away more than $2 billion of additional deposits in their bank accounts last spring, boosting bank deposits in the six-county metro area by nearly 12% from a year earlier.

Across Tennessee, bank deposits grew even faster than in Chattanooga, rising by nearly 20.5% to top $193.1 billion.

Colin Barrett, president of the Tennessee Bankers Association, says the June 30, 2020, figures reflect both the influx of nearly $9 billion of Paycheck Protection Program loans from banks to small businesses last spring, plus moves by many businesses to initially preserve cash and limit spending when the pandemic hit.

"This has been a very unusual year and some of this growth is probably just a temporary thing due to the unprecedented stimulus measures from the government and the cautious attitude toward spending and many activities until we get a vaccine for this virus," Barrett says.

The forgivable federal loans provided through the Paycheck Protection Program, along with other financial restructuring and shifts made in response to the pandemic-induced slowdown in business, kept bankers busy in an otherwise sluggish economy last spring. Employment in the banking and finance sectors were the only growth areas in Tennessee's job market during the first six months after the pandemic hit in March.

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Bank on it

Bank deposits swelled with the aid of $2.2 trillion of extra federal aid granted this spring to employers, consumers and unemployed Americans from the CARES (The Coronavirus Aid, Relief, and Economic Security) Act approved by Congress in March to help offset the economic slowdown triggered by the coronavirus pandemic.

"The stimulus checks for individuals and the Paycheck Protection Program and other relief measures for small businesses and other targeted industries provided more money and liquidity for employers," says Jay Dale, market president for First Horizon Bank, the biggest bank in Tennessee and in Chattanooga. "At the same time, many individuals who are worried about the uncertainty in the economy are simply saving more money this year."

Chattanooga's unemployment rate jumped to a record high of 13.3% in April, but overall personal income has still grown due to richer jobless benefits for laid-off workers, extra stimulus checks and loans from the federal government, and near record-low interest rates pushed by the Federal Reserve Board to curb borrowing expenses for many home and car buyers.

Unemployment has since fallen nearly in half from its springtime peak as more businesses have reopened and the economy has begun to bounce back. Barrett says even with the sluggish economy, Tennessee's banks were well capitalized and faring well, for the most part, during 2020.

A new player

In fact, the biggest new bank to start up in Chattanooga in more than 13 years is scheduled to open in March. Even with 27 commercial banks already in the market, the organizers of RockPoint Bank say there is demand for another locally owned and operated bank.

"The businesses in Chattanooga and the surrounding metro area are hungry for a local bank that offers personal attention and support for growth," says Harshad Shah, the founder of Hamilton Plastics and one of the bank organizers who led the equity raising efforts for RockPoint.

The coronavirus pandemic delayed capital fundraising and pushed back the startup date, but RockPoint raised more than $33 million in equity capital from more than 340 local investors last year.

The new bank derives its name from the original meaning of the word 'Chattanooga,' which is a Creek Indian term meaning 'rock rising to a point.' The bank is expected to begin operations with 20 to 25 employees from two floors of the 401 Building at Chestnut and Fourth Street downtown, where the bank has leased about 10,000 square feet of space.

RockPoint, the biggest new bank to start in Chattanooga since CapitalMark was organized in 2007, is one of three locally owned banks in the market along with First Volunteer Bank and Millennium Bank, both of which began operations in Chattanooga in 1999.

Market leaders

Chattanooga's biggest banks held their market-leading positions over the past year, even with the virus, and as many banks took on new names.

First Horizon Bank, formerly First Tennessee, remained the biggest bank in Chattanooga with more than 23% of the deposits in the market at its 17 offices. Truist Bank, formerly SunTrust, ranked No. 2 with nearly 16.5% of the market's deposits at its 26 local branches. Regions Bank, another regional banking powerhouse, has over 12.5% of the market's deposits at its 16 branches.

The fastest-growing bank in Chattanooga over the past year was the Nashville-based Pinnacle Bank, which grew its deposits in the Chattanooga market by more than 50% to top $1.3 billion. Pinnacle acquired the former CapitalMark Bank in Chattanooga in 2015 and has grown steadily since by using new technologies and mobile banking services with only three local offices in the Chattanooga market.

That shift to online and remote banking services was propelled in part by the pandemic, which forced most banks to close their bank lobbies last spring and continues to force some bank offices to limit public access from time to time as virus outbreaks have hit local branches.

Pruning bank branches

In the six-county Chattanooga area, the number of bank branches last year increased to 146 with more regional banks branching into Chattanooga. That was still down 33 branches from the peak reached in 2009 when the Chattanooga area had 179 bank branches, according to FDIC data.

As banks consolidate and more financial services are available online, some banks are reducing the number of brick-and-mortar offices they operate, even when they have more deposits and loans on their balance sheets. The number of bank offices is likely to drop further as more banks consolidate and adopt new technologies to serve customers online or with mobile facilities.

Biggest banks in Chattanooga

1. First Horizon, $2.8 billion in deposits at 17 local offices, 23.2% market share

2. Truist, $2 billion in deposits at 26 local offices, 16.5% market share

3. Regions, $1.5 billion in deposits at 18 local offices, 12.5% market share

4. Pinnacle, $1.3 billion in deposits at 3 local branches, 10.6% market share

5. Firstbank, $740 million in deposits at 9 local branches, 6.1% market share

6. Bank of America, $643.7 million in deposits at 4 local branches, 5.3% market share

7. First Volunteer Bank, $541.1 million in deposits at 11 local branches, 4.5% market share

8. Citizens Tri-County Bank, $429.1 million in deposits at 10 local branches, 3.5% market share

9. Smartbank, $403.1 million in deposits at 5 local branches, 3.3% market share

10. The Bank of LaFayette, $256 million in deposits at 3 local branches, 2.1% market share

Source: Federal Deposit Insurance Corp., Deposit Market Share Report for Metropolitan Chattanooga as of June 30, 2020.




Across Tennessee, the number of bank branches has dropped by more than 13.2% from the peak reached in 2008 when 2,332 bank offices operated across the Volunteer State. Even with 308 fewer offices, total bank deposits in the past 12 years have nearly doubled in Tennessee to $193.1 billion.

Like most industries, banks are increasingly able to deliver services and products online or with technologies and staff outside of brick-and-mortar branches, Barrett says.

But while consumers do more banking online or remotely, many continue to rely upon traditional branches.

"Many people still want to have a branch location close to where they live or work for when they need to have personal banking services," Dale says.

But Hamp Johnston, the president and CEO of the new RockPoint Bank, who formerly managed the JP Morgan Chase & Co. bank in Chattanooga, says the new bank is focusing on technology and staff to serve the Chattanooga market from a single bank location.

"There's no question that when the pandemic hit it created challenges for us and for our local economy, but we're going to open up with the latest in technology and online services to best meet the changing ways people are banking and we will open with a clean balance sheet and a fresh start by local managers committed to this market," Johnston says.

"Chattanooga is certainly a competitive market. But we feel like there is still a big opportunity for our target market and five to seven years from now I think we'll look back and see that we actually benefited by this time."


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