June 21, 2024
Loans

With 29 banks competing for deposits and loans in Chattanooga, competition remains strong


Although banks continue to prune the number of branch offices they operate in Chattanooga, the number of full-service commercial banks in the local market grew last year to its highest number since 2012, and another major bank moved into the market with a loan office.

Metropolitan Chattanooga gained its 29th full-service commercial bank in 2023 when the Lebanon, Tennessee-based Wilson Bank & Trust opened a branch in downtown Chattanooga in March. John McDearman, CEO of Wilson Bank, says Chattanooga is a growing market with more people and businesses moving into the area “and we see a lot of opportunity to expand in another part of the state.”

Also last year, WesBanco, the third largest bank in West Virginia, opened a loan production office in August that quickly generated $80 million in loans during the second half of the year.

“We were able to attract some of the best bankers in town and with the relationships that they have developed over many, many years, the talent of our staff has really been the key to our success,” says Jeff Jackson, a former Chattanooga market president for First Horizon Bank who became CEO of Wesbanco last summer. “We’re looking at more of a full-service model down the road, but we’re starting with an LPO (loan production office). We see Tennessee as an expansion market for us.”

Chattanooga’s economy has been outperforming the national market in recent years with above-average population growth and below-average unemployment.

  photo  EDGE archives / Jeff Jackson, formerly market president in Chattanooga at First Horizon Bank, was named CEO in 2023 of Wesbanco Bank which expanded into Chattanooga with a loan office last year.
 
 

 

But Chattanooga banks and their customers have not been immune to the costs imposed by the rapid rise in interest rates in recent years as the Federal Reserve Board tightened monetary policy to slow inflation coming out of the pandemic. After stimulus measures pumped up savings and bank deposits during the later years of the Covid-19 pandemic, bank deposits in Chattanooga dropped by a record $475.4 million last year as many pandemic relief programs ended while business and consumer spending continued to increase.

Bankers were forced to quickly raise rates in 2023 and with fears of a recession, at least early in 2023, some loan and business activity fell off even as the influx of government pandemic aid phased out and overall deposits fell. The Federal Deposit Insurance Corp. says total deposits in the 29 commercial banks operating in metropolitan Chattanooga totaled $14.8 billion as of June 30, down by more than 3.2% from a year earlier, even with the addition of another commercial bank in the market.

But the decline in deposits for the 12 months ended June 30, following three years of deposit growth of more than 10% a year in Chattanooga during the pandemic and its aftermath, when federal stimulus measures boosted savings even as consumers spent less money. Even with the dip in Chattanooga bank deposits in the past year, total bank deposits midway through calendar 2023 in Chattanooga are still up by 45%, or more than $4.6 billion, from their pre-pandemic levels in 2019.

“We’re coming back down from unprecedented levels of government spending that boosted deposits at a time when many people were simply not spending as much,” says Colin Barrett, president and CEO of the Tennessee Bankers Association. “We’re also seeing a lot more competition among banks for deposits, including from those outside the market.”

First Horizon, formerly First Tennessee Bank, remained the biggest bank in Chattanooga despite a 13.8% drop in its deposits from June 30, 2022, to June 30, 2023. First Horizon agreed in 2022 to merge with Toronto Dominion Bank, but TD Bank called off its proposed acquisition in May, citing regulatory hurdles.

“With the TD merger in the rear view mirror, we are now able to refocus on what makes First Horizon so unique,” First Horizon Chattanooga Market President Jay Dale says. “Our team is engaged and engaging with our customers and community, and we are seeing increases in new customers and deposit momentum since the TD merger terminated.”

  photo  EDGE archives / First Horizon Market President Jay Dale heads Chattanooga’s biggest bank
 
 

In spite of the collapse of the TD Bank acquisition, bank mergers and consolidations across the country have reduced the number of banks operating in the U.S. from an all-time high of 30,456 banks in 1921 to only 4,645 commercial banks operating as of October, 2023, according to the Federal Deposit Insurance Corp.

Also over time, the number of brick-and-mortar branches has continued to shrink in the U.S., declining from 99,950 bank offices 15 years ago to under 78,000 branches today. In the same time in Chattanooga, the number of bank branches dropped from the 2009 peak of 179 bank offices to 139 branch offices as of June 30, 2023.

“The delivery of many banking products is possible now with the push of a few buttons on a smart phone,” says J.V. Vaughn, who retired at the end of 2023 after heading Truist Bank in Chattanooga. “But banking is still a people business and we’ve tried to maintain that personal service with local staff even as we provide more online services.”

  photo  Photo by Matt Hamilton / Jim Vaughn stepped down from Truist, Chattanooga’s second biggest bank, at the end of 2023.
 
 

 

Banks were challenged last year after the Federal Reserve Bank raised short-term interest rates 11 times from March 2022 to July 2023. The rapid run-up in borrowing rates was designed to slow the the pace of the economy and the overall inflation rate, making some bank loans more difficult.

“It wasn’t just an escalator, it was an elevator that happened,” Haskew says. “A speculative project that works with a 4% loan may very well may not work with a loan at 8%.”

  photo  Photo by Matt Hamilton/ Millennium Bank president Mike Haskew
 
 

 

But buoyed by its 2020 acquisition of Columbia Bank in Lake City, Florida, the Chattanooga-based Millennium Bank still grew its loan portfolio last year by 11%.

“The great thing is that we’ve managed to have continued loan demand and growth pretty much across the board,” Haskew says. “Chattanooga has never been so hot or so cold that you can’t ride out a period of uncertainty.”

Biggest banks in Chattanooga

Among the 29 commercial banks operating in metropolitan Chattanooga, the banks with the most deposits as of June 30, 2023 — and the change from a year earlier, were:

1. First Horizon, $2.8 billion in deposits, down 13.8% from a year earlier.

2. Truist Bank, $2.4 billion in deposits, down 5.8% from a year earlier.

3. Pinnacle Bank, $1.9 billion in deposits, up 8.1% from a year earlier.

4. Regions Bank, $1.7 billion in deposits, down 4.7% from a year earlier.

5. Bank of America, $895.5 million in deposits, down 17.1% from a year earlier.

6. FirstBank, $862.7 million in deposits, up 3.8% from a year earlier.

7. Builtwell Bank (formerly First Volunteer), $661.3 million in deposits, down 4.6% from a year earlier.

8. Citizens Tri-County Bank, $573.4 million in deposits, up 10.8% from a year earlier.

9. Smartbank, $403.8 million in deposits, down 21.2% from a year earlier.

10. The Bank of LaFayette, $371.8 million, down 1.4% from a year earlier.

Source: Federal Deposit Insurance Corp.

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