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LIGHTNING EXCLUSIVE: The rise and fall of Mountain 1st Bank


'An overwhelming success'

Gibson reported in May 2006 that Mountain 1st's first full year of operation, 2005, "was an overwhelming success." Whatever its performance in deposits, lending and consumer service, it was doing even better in stock performance. It raised another $23 million from more than 1,000 investors in a second stock offering. SNL Financial, which provides data on the banking industry, deemed Mountain 1st "the best new bank in America" based on stock performance. On the last day of 2005, the stock closed at $28.50 a share, 56 percent ahead of the close from one year earlier. Investors could have sold then at a gain of about $19 a share.
The bank's performance got rockier as the real estate market sputtered. There would be no quick recovery.
Mountain 1st was among hundreds of banks nationwide propped up by TARP (Troubled Assets Relief Program), under which for the first time Congress authorized the U.S. Treasury to buy equity stakes in at-risk banks.
Mountain 1st leaders depicted the relief as the shot in the arm the community bank needed.
"Despite the media attempts to call it bailout money, it is truly an investment in the bank," the company said in its summer 2009 report to shareholders.
That $16 million TARP payment, it said, would allow the bank to lend another $150 to $200 million — producing some $9 million a year in gross revenue. "Is it a good deal to the bank and shareholders? Yes. Do we want to pay it back as quickly as possible? Yes, as soon as we can replace it at a comparable capital cost."
Some of the challenges Mountain 1st faced in 2009 were detailed in joint proxy statement setting out details of a proposed Alliance Bank, a community bank in Gastonia that was similar in size. Shareholders ultimately voted down the merger.
The Hendersonville bank in the report that the tourism and second home real estate market had been "adversely affected by the general economic downturn."
"Further deterioration of economic conditions in Mountain 1st's banking markets," the prospectus added, "could further reduce its growth rate, adversely affect the ability of its customers to repay their loans, and generally affect its financial condition and operating results."