About Knoxville, Tennessee
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Banks thriving with popping economy

Banking in Knoxville has become so competitive that even a dean of local bankers can no longer identify all the current players.

In perhaps a testament to Knoxville's economy, banks are thriving. Some 30 lenders are operating branches in Knox and adjoining counties, a list that has been growing quickly in recent months.

Knoxville has been East Tennessee's hub of financial activity for decades, once dominated by locally owned institutions with names like Hamilton, Park, Bank of Knoxville, Fountain City, Tennessee Valley, Valley Fidelity, United American.

Those names have long been replaced by large regional banks, including AmSouth, Bank of America, BB&T, First Tennessee, SunTrust and Regions, that have cornered downtown. But dozens of smaller community banks have entered the market in recent years, carving out niches and locating branches in the suburbs.

More could be on the way.

"We have a number of new players in our market. It's extremely competitive," said Dale Keasling, president and CEO of Home Federal Bank. "I've been in banking in Knoxville for over 30 years, and for the first time I would not be able to name all the banks with offices in Knox County."

In the last 24 months, longtime Knoxville banker Fred Lawson has organized BankEast where the former Valley Fidelity Bank was located in the Crystal Building on Market Street.

Lawson is overseeing BankEast's branch expansion in Knox, Blount and Sevier counties.

In December, FirstBank — a Lexington, Tenn.-based lender — began leasing space in the former BB&T building downtown on Market Street at Church Avenue. As the bank launches its local branch network, it is looking for high-profile office space in West Knoxville.

And manufactured-housing mogul Jim Clayton in January "quietly" opened Clayton Bank and Trust across the street from Home Federal, BankEast and FirstBank in the One Centre Square building at Market and Church.
Jim Clayton has been active in Knoxville banking, in the 1990s having formed BankFirst, which was acquired by BB&T.

He said downtown is a logical location for his $600 million-asset bank given the area's commercial and residential renaissance.

"I like the downtown environment. I like everything that is happening downtown. We expect to be a significant player in any effort to revitalize downtown," Clayton said.

He agrees that Knoxville is chock-full of bankers elbowing for business, but Clayton Bank and Trust is catering to entrepreneurs looking for a leg up and also to nonprofits looking for financial guidance.

Home Federal will be making news this year and next as it begins construction on the $7 million addition of 40,000 square feet plus a parking garage to its Market Street headquarters and also renovates the exterior of its headquarters.

"This is the first time we've done any significant work on our downtown building. Our building is over 40 years old," Keasling said.

Home Federal's project illustrates the growth occurring with banks in Knox County and the competitive pressures to build market share.

Tens of millions of dollars have been spent in recent years to establish East Tennessee headquarters and branch locations.

AmSouth, a downtown fixture for several years, has moved into its new, $11 million area headquarters on Kingston Pike at Bearden Hill.

Also in Bearden, FSGBank has affixed its sign atop Landmark Center, where NBC bank offices were. The stretch of Kingston Pike from Bearden to Loudon County houses branches of nearly every bank doing business in Knoxville that are tapping into the lucrative West Knoxville market.
Dr. Harold Black, a University of Tennessee finance professor, isn't surprised at the level of competition in Knoxville, but he will be surprised if it persists over the next five-10 years.

He expects the banking landscape to look different after competitive forces prompt changes, such as mergers and consolidations.

"It's a national phenomenon," Black said. "But it will shake itself out."
Black noted that much of the business in local banking is driven by demographics — an influx of higher-income residents and retirees with disposable income that can generate fee income for lenders.

All the banking activity around Knoxville is an advantage to consumers, who are benefiting with competitive loan and deposit rates, Keasling said.