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Tennessee community bank profit, credit quality outpace US

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Tennessee community bank profit, credit quality outpace US

Tennessee's community banks and thrifts had a strong second quarter, posting better results than their U.S. peers in all six banking metrics examined by S&P Global Market Intelligence.

The median return on average equity for Tennessee's community banks and thrifts under $10 billion in assets was 9.77% in the second quarter, down 94 basis points year over year but higher than the Southeast median of 9.30% and the U.S. median of 9.59%. The state's median net interest margin was 3.96%, equal to the Southeast median and 13 basis points higher than the U.S. median.

Deposits grew by a median 4.4% year over year, and loans grew by a median 5.3%, higher than the U.S. medians of 3.4% and 5.0%, respectively.

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Nashville-based FirstBank, Tennessee's largest community bank under $10 billion in assets, posted higher profitability and faster loan and deposit growth than the state median in the second quarter.

The bank has also been an active acquirer lately. On April 5, FirstBank completed the acquisition of 14 Tennessee and northwest Georgia branches from Atlantic Capital Bancshares Inc., along with $385 million in loans. FirstBank also assumed $598 million in deposits as part of the transaction. On Sept. 17, FirstBank and its parent company, FB Financial Corp., announced plans to acquire Scottsville, Ky.-based FNB Financial Corp. for $51.9 million.

Franklin-based Franklin Synergy Bank, Tennessee's second-largest community bank by assets, saw deposits decline 7.4% year over year, while loans grew by 16.8%. According to a transcript of parent Franklin Financial Network Inc.'s second-quarter earnings call, the bank has been weaning itself off brokered deposits and working to boost core deposits.

During the call, CFO Christopher Black projected the company's loan balance would drop in the third quarter due to Franklin selling off $30 million in non-relationship shared national credit loans and paydowns in the bank's healthcare and construction loan portfolios.

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The pace of Tennessee bank M&A activity has been largely unchanged year over year in 2019. Through Sept. 23, four deals with a Tennessee-based bank target had been announced, compared to four in all of 2018. In 2017, seven deals were announced.

Most recently, on Sept. 16, Brentwood-based Reliant Bancorp Inc., parent company of Reliant Bank, Tennessee's seventh-largest community bank, announced that it would acquire Ashland City-based Tennessee Community Bank Holdings Inc. for $38.4 million.

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Like much of the rest of the U.S., Tennessee is seeing more bank branch closures than openings as banking goes digital. During the second quarter, 18 branches were closed in the state, while five were opened. Over the last 12 months to June 30, 60 branches were closed and 35 opened.

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Click here for a spreadsheet containing second-quarter 2019 results for Tennessee community banks and thrifts.