George Mason Bank has picked through the leftovers of the banking bust and assembled a banquet.

The community bank in northern Virginia has pursued a vigorous growth strategy, expanding into areas abandoned by other institutions as they have failed or consolidated.

The contrarian approach is expected to increase assets to about $280 million by yearend, from $156 million in 1988 and $243 million at yearend 1991.

Benefited from Thrift Crisis

"The 1980s were good to us," said Marshall H. Groom, 53, chairman of the bank and its holding company. "We've been a beneficiary of the demise of the savings and loans and the decisions that have been made at the big banks."

Twice in the last few years, the bank has bought nearby branches of failed institutions -- first a vacant remnant of Madison Bank of Virginia in Vienna, and recently an office of United Savings Bank in McLean.

The purchases allowed George Mason to spread out at a very low cost from a single office in Fairfax, Va., into a six-branch system throughout Fairfax County.

The growth spurt, which began in the late 1980s, got an extra push in 1990 with the hiring of Bernard Clineburg, 43, from Citizens Bank of Virginia.

He was brought in as executive vice president of the holding company and president and chief operating officer of the bank because Mr. Groom decided he needed an extra pair of arms to manage the expanding company. His board had reached the same conclusion.

Upgrading the Staff

Mr. Clineburg immediately put his stamp on the bank. The job market was awash with talent in the wake of some big mergers, and the new operations chief replaced about 80% of George Mason's loan officers.

"We looked at what we had and we looked at opportunities to upgrade our staff for the future," said Mr. Groom.

With the new employees on board, George Mason also was able to pick up small to midsize loan customers who had become alienated after some of the same mergers resulted in their small banks' being gobbled up by larger ones.

George Mason's rapid growth has not come without indigestion: expenses are up and earnings, although still very respectable have dipped.

A Surge in Expenses

George Mason's 1991 earnings totaled $2.4 million, against $2.7 million in 1990 and $2.8 million in 1989. Operating expenses were $18 million in 1991, up from $15 million in 1990 and $13.6 million in 1989.

Bank executives point to an increase in the provision for loan losses to $1.5 million in 1991 from $950,000 in 1990, a loss of interest from nonearning assets, and branch expansions as reasons for the drop in earnings.

In addition, higher FDIC premiums, which rose last year from $180,000 to $500,000, added to expenses.

Even so, return on assets was an impressive 1.12% and return on equity was 10.57%. And this spring the bank paid its 19th consecutive quarterly dividend."

The performance earned George Mason a "blue-ribbon bank" designation from the Veribanc Inc. rating service for the seventh consecutive time. The bank also made Money magazine's list of safe banks.

Loans Available

"They're quickly becoming the biggest little bank south of the [Potomac] river," said banking analyst Arnold Danielson, president of Danielson Associates in Maryland. "They keep making money."

In contrast to other banks, George Mason has continued to offer loans for building on owner-occupied lots and in small subdivisions.

"We've taken a contrarian view and increased in construction," Mr. Groom said.

And to protect itself from problem loans in the wake of the real estate fallout of the past few years, the bank has increased the loan-loss reserve to $2.4 million last year, up from $1.5 million in 1990.

The bank's directors say they hope to increase it even further -- to $3 million -- by the end of the year.

George Mason has already rebounded in 1992. In the first six months of the year, assets grew to $268 million and total deposits grew to $234 million, loans grew 21% to $132 million, and earnings reached $1.7 million.

"They've had astute management," according to James Newsome, who runs rival Horizon Bank in Fairfax. "Groom is a fine banker. There's just no substitute for experience."

First Home Was a Trailer

Many of the its founding directors defected from Potomac Bank and Trust in 1979, after it was bought by Dominion Bank. The larger bank centralized management too dramatically, these directors felt, and was losing touch with its Fairfax clientele.

"You had a foundation of people who had been in the community and knew what the community offered and ... needed," Mr. Groom recalled as he leafed through the thick photo albums of the bank's opening days.

The new bank operated out of a trailer for the first year and a half, waiting for the completion of the two-story colonial building that still serves as its headquarters.

Mr. Groom, who had also worked at Potomac Bank and Trust, was hired as George Mason's first president, and he ran it like a one-man show.

"Mr. Groom is a very detailed, very hands-on kind of person. Marshall approved all the loans. For the first eight or nine years, it almost seemed as though Marshall could control everything that went on," said Chuck Pollow, former loan officer at the bank.

Mr. Pollow recalled that loan review in the bank's early years consisted of Mr. Groom's perusing the mail each morning, monitoring the loan payments.

"We were the only bank that I had ever seen that didn't have a loan review program," he said.

Loan officers waited around for Mr. Groom to bring customers to them, he said.

A Need for More Muscle

Mr. Pollow said that when the bank got close to $200 million in assets, it was too much for Mr. Groom to handle.

"The board was very concerned. They wanted the bank to grow and to be more in the public eye," he remembered.

"I like unit banking," Mr. Groom said. "I sat downstairs at the front door for eight years. I could be perfectly happy in one branch." That's one reason the board brought in Mr. Clineberg.

To Mr. Groom, the growth spurt was like sliding along on roller skates, when you would rather be walking on solid ground.

"But we're taking off the skates now," he said.

Well, not exactly. The bank's goal is to reach $500 million in assets, which is seen as big enough to compete against the big boys but small enough to maintain its personality. A merger is a possibility.

George Mason flirted with another well-capitalized community bank, Hallmark Bank and Trust Co. of Springfield, Va. But a preliminary agreement on the merger, reached in mid-1991, fell through last November.

With a shaky economy, the two banks couldn't agree on the true worth of each of their institutions, industry observers say.

Some speculate that the idea may some day be resurrected. In the meantime, they're looking for more troubled banks to buy.

"We want to be a player tomorrow," Mr. Groom said. "The opportunity is there. You can't sit back and say, 'I wish i'd done this,' These opportunities just won't come forever."

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