MountainBank in Hendersonville, N.C., refuses to act its age.

Four years old next month, MountainBank cracked the $300 million-asset barrier in the first quarter and had net income of $505,000 in the three months, up 111% from the year-earlier period. By comparison, assets at other banks that opened in 1997 average about $88 million and their quarterly earnings around $52,000, according to the Federal Deposit Insurance Corp. MountainBank has no plans to slow down, either: Its goal is to have assets of $1 billion within the next three to five years. To that end it formed a financial holding company, MountainBank Financial Corp., in April, struck a deal to buy PremierMortgage in Greenwood, S.C., in the same month, and in June is opening three branches to add to its seven in western North Carolina.

“I am just following my vision, which seems to be much more far-reaching than your typically one-branch community bank,” said J.W. Davis, chief executive officer and president.

A few other start-ups have had similar asset-size growth. Mercantile Bank of Western Michigan in Grand Rapids, for example, has accumulated $510 million of assets in just over three years and Texas Capital Bank in Dallas $910 million in three and a half years, though it started out with nearly $90 million of capital.

Few start-up banks, however, have captured the market share that MountainBank has in such a short time: It had 0.1% of the Henderson County market when it opened and 11.6% of it by June 2000, according to the FDIC’s most recent market-share data. When the 2001 figures come out they should show a still bigger share for MountainBank, whose first-quarter deposits rose 78% from the year-earlier period, to $254 million, and whose loans more than doubled, to $245 million.

“Clearly this is one of the fastest-growing start-ups in the last 10 years in North Carolina,” said Harry Davis, an economist with the North Carolina Bankers Association (he is not related to MountainBank’s CEO). He and other observers attribute MountainBank’s success to good timing, location, and service.

Many of its deposits come from retirees, who make up about 25% of Henderson County’s population. They are drawn to the area’s mild climate, high-quality retirement facilities, small-town flavor, and natural beauty, said Scott Hamilton, vice president of economic development for the Greater Hendersonville Chamber of Commerce. Last year Modern Maturity magazine rated Asheville, Hendersonville’s much larger neighbor, the best small town for retirement.

To cater to this over-65 crowd, the bank offers a variety of trust services and recently opened its first retirement community “lending service facility.” It is open two days a week and is so popular, Mr. Davis said, that he plans to open others in the near future.

He agreed that timing was instrumental to MountainBank’s quick rise. It set up shop just as some of the big banks were getting bigger and shortly before other big ones closed up shop. “There are core stable businesses here and the huge retirement influence, but coincidentally it is also the region of the Southeast that big banks are abandoning.”

Since 1998, First Union Corp. of Charlotte has consolidated four of its area branches, and Bank of America Corp., which merged with NationsBank, has closed one of its two branches in Hendersonville. And NationsBank closed down all of its “lending service facilities” long before the merger, Mr. Davis said.

The result: Of the seven banks with the most market share in Henderson County, only MountainBank’s has risen since June 1997.

“Ninety-five percent of the market growth has slipped through the cracks of the big banks, and from 1997 to 2000 we have captured it through bread-and-butter banking,” said Mr. Davis, a 30-year banking executive who spent most of his career at NationsBank and its predecessor, NCNB Corp.

Though Mr. Davis is set on spreading his franchise throughout the Appalachian region of the South, he said he has no plans to enter the bigger southern cities.

But he expects consolidation to send even more customers MountainBank’s way. Once the Wachovia/First Union merger is completed, he said, the combined company could lose considerable market share in closing branches in the western Carolinas.

“I think the way I do things will not work in St. Louis or Baltimore,” Mr. Davis said. “But what the big banks are doing hasn’t and still won’t work in my backyard.”


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