In the six years since H. McCall Wilson became the president and chief executive officer of Bank of Fayette County, his aggressive growth strategy has attracted some critics.
They question whether building expensive branches in rural areas can ever pay off for the $212 million-asset Moscow, Tenn., bank.
A distinctive branch that it opened last fall in Grand Junction cost more than $1 million and resembles an antebellum home with magnolias and a Civil War cannon out front, but fewer than 600 people live in the community.
"People said I lost my mind," said Mr. Wilson, 42.
But he shrugs off such skepticism, saying the once-sleepy, 97-year-old unit of Moscow Bancshares Inc. is positioning itself to reach $500 million of assets within four years.
He considers its success so far encouraging. In January 2002 what was then Bank of Moscow had $49 million of assets and three branches. Since then its assets have more than quadrupled, and now it has seven branches, including its first in a neighboring county.
Mr. Wilson's plan is to add "a branch a year for the foreseeable future," bulking up in Fayette County and moving eastward into other rural counties.
He conceded that the expansion would eat into the bank's profits. Last year its net income edged up 2.3% over the previous year, to $1.3 million. But Mr. Wilson said he expects this year's earnings to decline roughly 40%, because of the added expense of the new branches.
"Our mission right now is to gain market share, serve the community, and get the right people on the bus," he said. "We're building branches that will not be profitable for two or three years, maybe four years. We're hiring people that won't fully mature in their role for five or 10 years. We're taking a very long-term approach to banking."
Though Mr. Wilson comes from outside the banking industry, he had become very familiar with the privately held Bank of Fayette through his job at a Memphis accounting firm. He managed the bank's external audits for 13 years.
"I knew the good, bad, and ugly before I started," he said.
Initially he came on board as a branch manager in June 2001 — "to pay my way" — before moving into the top job.
The bank was struggling at the time. Because of a spike in nonperforming loans and chargeoffs, it lost $419,000 in 2001.
But by the end of 2002, Mr. Wilson's first year in charge, its ratio of nonperforming loans had shrunk from 1.94% to 0.79%, and it had swung to a $347,000 profit.
He also added a branch that year and increased the bank's assets 32% — its biggest annual gain in a decade.
"Our growth is limited only by our ability to attract and retain good employees and bring in new stockholders in our community," said Mr. Wilson, who is also the president of Moscow Bancshares. "I do not want shareholders that do not live in our market or do not use our services. They are usually the first ones to sell."
He aims to increase the bank's deposit share in its markets to 40% within two years.
At June 30 it had the second-largest share in Fayette County, at 33.7%.
It is just getting started in Hardeman County, but Mr. Wilson said it is growing quickly there. One of the two branches it opened last fall is in the county, and that branch had 150 customers and $4.5 million in deposits within four months.
Mr. Wilson said the branch uses the name Bank of Hardeman County, even though it is not a separate bank.
Ken Thomas, a branching consultant who operates the Web site Branchlocation.com, said using a separate name for a branch can be an effective strategy.
"It comes across as a local bank," he said. "There's nothing better than giving a community a local bank."
Even though Hardeman County is rural, it has $313 million of deposits, a "decent base" that could justify a new branch there, Mr. Thomas said.
But the decision to put a branch in Grand Junction leaves Mr. Thomas scratching his head. That community is overbanked, he said, even though it had only one branch, operated by First South Bank, before Bank of Fayette entered the market.
The First South branch, which opened in 1961, has just under $14 million of deposits, Mr. Thomas said.
"If Bank of Fayette got the entire market — took every deposit from First South and got $14 million — that might barely justify the office," he said. "But it's unlikely that they are going to get that money, because [First South] has been there a long time."
For a branch to be profitable, it generally needs to have $15 million to $25 million of deposits, depending on how much the property costs and how high loan volume is, according to Mr. Thomas.
But Hunter Simmons, the president and CEO of First South, a $401 million-asset unit of Hardeman County Investment Co. Inc. in Bolivar, said that his Grand Junction branch is profitable because of its low overhead.
He called Bank of Fayette's antebellum branch "beautiful," but he questioned its viability.
"Grand Junction is a rural community," Mr. Simmons said. "It is not on the verge of urban sprawl. There is no projected population growth down there. So the only growth that they're going to get is by getting business from us. If they get half of our business, all they'd get is $6 million. We could not make a branch profitable at that size."
Mr. Wilson said it makes sense for Bank of Fayette to have a branch there.
"For me, it's picking up a different population base, it's on a major road, and it gives us a steppingstone into the next county out," he said.
Many Grand Junction residents do their banking in Memphis or Bolivar, Mr. Wilson added.
"There's more money in that market than $14 million. It's just not in First South Bank," he said.
"If I never get a dollar from First South Bank, we'll be successful."
