Though convenience draws customers, Chattanooga area banks are closing branches

Sept. 28--Jimmy Walls has relied on the same bank office in Brainerd to deposit his checks for nearly a half century.

The First Tennessee Bank office has changed owners and staff through the years. But Walls said the branch on Brainerd Road near Germantown has remained the most convenient for him to bank with throughout his life.

"I started coming here because it was the closest to where I live. You get used to coming here and knowing the people," the 75-year-old retiree said last week during his latest visit to the Brainerd office. "But I guess I can go to the Eastgate office (of First Tennessee) when this branch closes. I'm not changing my bank at this point in my life."

On Dec. 11, First Tennessee Bank will close the bank branch that was first built on Brainerd Road in 1946.

Two weeks earlier on Nov. 29, Northwest Georgia Bank will close three of its branches, including one in Fort Oglethorpe it has operated for 40 years.

Those closings follow the shut- down this spring of a SunTrust Bank office in St. Elmo and FSG Bank offices in Ringgold, Ga., and on Highway 58 in Chattanooga.

Since the peak for the number of local bank branches was reached in 2009, 20 offices have or soon will be closed by Chattanooga banks responding to changing consumer, economic and technology shifts.

"The volume of transactions being done in brick-and-mortar facilities continues to decline as more people shift to electronic or mobile banking so we continually look at how and where we should operate branches in the most efficient manner," said Keith Sanford, market president for First Tennessee in Chattanooga. "We can still serve the Brainerd market with our office near Eastgate, which we are about to remodel."

First Tennessee, Chattanooga's biggest bank with more than $2 billion in local assets, will continue to operate 20 other branches in metropolitan Chattanooga. At some of those branches, new electronic cash recyclers will soon be installed to provide tellers a faster means of counting and dispensing cash.

New technologies are encouraging more bank consumers to transact their banking business online or to use automated teller machines, rather than visiting branches with tellers. Mobile banking apps and web sites allow even more remote transactions via smartphones or computer desktops, negating the need for expensive bank edifices on every corner.

At Northwest Georgia Bank, CEO Steve Rownd said the bank determined that its customers could be served by other branches without the East Ridge, Fort Oglethorpe and LaFayette offices and shuttering the three branches would help pare expenses for the Ringgold, Ga.-based bank.

"It's not only an efficiency move, but also a recognition that the industry and traffic patterns are changing," said Rownd, who was hired earlier this year to help improve the financial standing for Northwest Georgia Bank after it lost $30 million over the past five years. "People aren't using branches like they once did with all of the technologies available today."

Rownd said smart phones allow customers to make deposits and fund transfers and advanced ATMs allow consumers to handle most transactions electronically without the need to go to a full-sized bank branch. Northwest Georgia is investing in more advanced ATMs to handle more services, Rownd said.

Northwest Georgia, FSG and many other banks cutting branches also are trying to trim expenses after incurring hefty loan losses during the Great Recession. The typical branch bank today is smaller and has fewer employees than in the past, but branch operations still require more staff and capital costs for banks to absorb.

New types of players

Traditional banks also are facing new competition from new players in the industry.

-- New banks with mobile services and targeted markets such as CapitalMark, which was started in Chattanooga in 2007, have already surpassed $700 million in assets with only four offices. For the number of branches it has, CapitalMark's size is nearly triple that of most other local banks.

-- Rate-conscious customers also are being lured by online-only banks like Ally and Flagstar, which d0n't have the operating expenses of bank offices and deliver their services on the web. Without the expenses of branches, such banks often are able to pay higher rates for deposits or offer lower rates for some loans.

-- Walmart announced last week it was teaming up with Green Dot to offer prepaid payment cards to supply checking accounts to almost anyone over 18 who passes an ID check. Wal-Mart's new accounts are intended to be low-cost alternatives to traditional bank checking accounts, with no fees for overdrafts or bounced checks and no minimum account balance.

The pruning of bank branches has been especially pronounced by America's biggest banks. Bank of America shuttered 200 of its branches in 2012 and continues to cut branches in many U.S. markets. In May, Bank of America announced it will sell 13 branches and their 88 employees in smaller towns in Middle and East Tennessee to First Tennessee Bank.

"People effectively carry a branch in their pocket," Bank of America CEO Brian Moynihan told industry analysts earlier this year. "The definition of a branch is changing from what you'd traditionally think."

Nationwide, U.S. banks closed a net 1,487 branches last year, according to SNL Financial. That's the highest number of net closures since the research firm began tracking the statistic in 2002.

The total number of bank branches peaked in 2009 at 99,544 nationwide, including 179 in metropolitan Chattanooga. By 2013, the number of bank branches had declined nationwide by about 3 percent, including the closing of of 13 in metro Chattanooga, according to June 2013 data from the Federal Deposit Insurance Corp.

"Ultimately, the country will end up with many fewer branches," said Jeff Davis, a banking analyst at Mercer Capital in Nashville. "They are not going to go away, but they will be configured differently -- smaller and staffed with fewer people who can handle more tasks."

Anthony R. Burnett, regional director for Level 5, a consulting firm for the banking industry in Atlanta, said most community banks are still keeping their branches even as they also expand their mobile banking and ATM services to handle a growing share of transactions. For all of the building, staffing and maintenance expenses of such offices, having a physical presence in a community is still vital for most banks.

"The physical, virtual and automated channels of delivery work together, but banks or credit unions find they still need branches to serve their customer base," Burnett said. "You don't want any more branches than a market warrants, but it is the physical branch that synchronizes the multi-channel delivery for community banks."

Consumers may want more mobile banking options, but surveys indicate that the No. 1 reason people select a bank is the location of the bank and convenience of service. Branch offices are key in meeting that demand, Burnett said.

"The national banks will continue to consolidate and right size, but on the community level, the local banks are heavily invested in their community and they can rarely afford to leave an area of their community unless there is a better one close by," he said.

Contact Dave Flessner at [email protected] or at 757-6340.

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