It is a good time to be a bank in Bozeman, Mont.
With people continuing to flock to the city about 100 miles north of Yellowstone National Park and new businesses moving in to serve them, banks there are relishing a lengthy run of double-digit loan and deposit growth.
The city's newest bank, the two-year-old Bank of Bozeman, is exceeding its growth expectations, according to its president. In the year that ended March 31, its commercial real estate loan portfolio increased nearly tenfold, to more than $20 million.
"Bozeman has been discovered, and we're way ahead of our original projections," said Michael F. Richards, the president of the $57 million-asset bank, which, when it opened in April 2005, was the first new bank to set up shop in Bozeman in 15 years.
Bozeman is like many Western mountain towns that have prospered over the last decade as people from coastal cities like San Francisco and Seattle have moved to the more-affordable inland regions.
Bozeman's growth has also been fueled by its proximity to the Big Sky region of the Rocky Mountains, which has emerged as an enclave for the ultrawealthy.
Banks in Bozeman benefit from the high-end construction by gaining banking business from construction workers living there, as well as from the businesses that have recently opened there to serve them, said Leon Royer, the president of the $477 million-asset American Bank in Bozeman.
"Bozeman is the logical supply point for all of Big Sky construction, and as a result, the city has become the residential center of the construction industry," Mr. Royer said.
Large retailers such as Wal-Mart Stores Inc. and Home Depot Inc. are building stores in Bozeman to meet the needs of the growing population, Mr. Royer said. According to the Census Bureau, the population of Gallatin County rose 19% from 2000 to 2006, to 80,921. Bozeman is also home to the state's largest university, Montana State University.
No bank is benefitting more from Bozeman's booming economy than American Bank, the largest of the four banks based in the city.
While many banks its size are struggling just to maintain their net interest margins, American Bank reported that its first-quarter margin rose nearly 100 basis points from a year earlier, to 5.62%, thanks largely to strong loan growth.
Its first-quarter return on assets of 2.75% and return on equity of 31.17% were significantly above the industry average.
Bozeman banks' deposits are surging as well.
Deposits in Gallatin County, where Bozeman is the county seat, doubled from June 2002 to June 2006, to $1.6 billion, according to Federal Deposit Insurance Corp. data.
One reason deposits are soaring is that the region has become a hot spot for the superwealthy to build vacation homes near mountaintops, said Robert J. Rogowski, the managing director of corporate finance at McAdams Wright Ragen Inc. in Seattle.
Tim Blixseth, one of the country's wealthiest individuals, according to Forbes, reportedly built the most expensive home in the country there — worth $156 million. Mr. Blixseth has developed the Yellowstone Club, a multimillion-dollar housing development with private ski slopes directly connected to residents' yards.
Ted Turner, CNN's founder, and Tom Brokaw, a former NBC anchor, are some of Mr. Blixseth's neighbors.
Mr. Rogowski said, "This gives the wealthy a place to enjoy outdoor recreation, but without the crowds and the attendant paparazzi and all of the hoopla that is part of Aspen and Jackson Hole, because it's off the beaten path."
Other wealthy housing developments, such as Moonlight Basin, are popping up in Big Sky, particularly since Bozeman recently expanded its airport, in part to serve more vacationers.
Whether the pace of growth can continue remains to be seen.
Housing construction in and around Bozeman has tapered off over the last year as a result of the nationwide slowdown in the market, said Gary Sisson, a senior vice president of lending in Bozeman for the $4.9 billion-asset First Interstate Bank in Billings, Mont.
Even the construction of high-end vacation homes in Big Sky has slowed, as wealthy buyers are most likely waiting until prices drop further in response to the slowdown, Mr. Sisson said.
As for the banks in Bozeman, they continue to face stiffer competition from out-of-market banks that are going after loans and deposits more aggressively.
Mr. Royer said, "The pie is getting bigger, but it's being cut into more and more pieces."
Still, none of the bankers expect Bozeman's pace of growth to drop measurably in the near future.
"Bozeman has more sunshine than Houston, and is close to the best recreation spots in the country — including the finest fly-fishing in North America," Mr. Royer said. "Bozeman will remain appealing to people who currently live in very congested areas."
First Interstate's Mr. Sisson said he believes that when growth in commercial real estate and construction lending subsides and the economy matures, commercial and industrial lending will pick up at Bozeman banks.
"All of this real estate development should also bring more people with the resources to start their own businesses, so there's no question we should see a pickup in commercial loans," Mr. Sisson said.
