Despite the economic slow down, Macon Bank president and CEO Roger Plemens reported two “bright spots” in his annual report for 2009.
With the low interest rates, Macon Bank saw a great demand for refinancing in 2009, to the tune of $230 million in lending in the six counties the bank serves across the southern tier of Western North Carolina.
Another bright spot was an $80 million growth in the banks deposits.
“In 2009, most lenders couldnt make loans, so they went looking for deposits,” Plemens told a reporter recently. “People left stocks. FDIC insurance was a big factor for most people, since they were guaranteed not to lose their money.”
Even with the bright spots, it was not a good year. Macon Bank increased its loan loss reserves by $4.6 million during the year and, as a result, booked a $7.4 million loss for 2009.
“To put that in perspective, we made $30 million over the three prior years,” Plemens said. “Our capital ratios are better now than in the best of times in 2005 and 2006.”
Macon Bank was started by a lawyer, Gilbert Jones, in Franklin, N.C. in 1922. Macon opened a branch in Murphy in 1981 when the Franklin bankers noticed a lot of customers were driving over the mountain to take out loans.
The bank began expanding fairly routinely across the southern tier of Western North Carolina in 1993, opening branches in Franklin-Holly Springs, then Highlands, Hendersonville and Brevard, and then in Cashiers in 2002 and finally Columbus and Saluda in 2007.
Brian Jones, a Landrum High School graduate, and a Wachovia employee was hired to run the Columbus branch of Macon Bank and former chamber president Ethan Waldman is the branchs mortgage officer.
Angie Blackwell is in charge of the Saluda branch.
Since 2007, key areas of Macon Bankss business are down, particularly from 2008 to 2009 — way down.
Home sales in Jackson, Cherokee, Henderson and Transylvania counties were down over 20 percent. Macon County saw just a 5.2 percent decrease, and Polk a 6 percent decrease.
However, the number of building permits issued in Macon Banks service area was down an average of 41 percent from 2008 to 2009. Polk saw a 42.9% decrease in building permits issued.
But Ryan Scaggs, Macon Bank chief financial officer, said for several years now, Macon Bank has been focused on growing capital through earnings, rather than growing assets such as new branches and loan portfolio.
The banks total equity capital, as of Dec. 2008, was $102.5 million, and at the end of 2009, had dropped nearly 7 percent to $95.4 million.
“We knew a slowdown eventually had to come and we were prepared,” said Plemens. “We saved for a rainy day. Although we have had to increase loan loss reserves just like all banks during these times, we remain strong. And we did it without taking bailout funds.”
Plemens reported that the bank officers felt it was best to go ahead and book in 2009 the brunt of the financial hit the bank suffered in the downturn to get it out of the way.
“Slow times come,” he said. “But no one predicted a total slow down. By taking an aggressive approach in 2009 we feel we can show significant gains and improvement in 2010.”
The loan losses for Macon Bank largely came in the areas of development and land loans. Plemens said many of those were, for example, folks who lost jobs in Florida, “and the lot they were going to build on in Western North Carolina is no longer a priority.
The far Western North Carolina counties are very dependent on Florida and Atlanta, Plemens said, and until there is economic improvement in those areas, he said the far western mountain economy will still be slow.
There are pockets of good and bad, mixed signals coming out of Florida today, he said. As for Atlanta, Plemens said there is a lot of housing still for sale.
“(Recovery) will probably will take a couple years,”he said.
Still, in 2010, Plemens said he has talked to building suppliers and there are signs out there that construction is picking up in Western North Carolina. Houses are holding their value. Away from the high end residential properties in Highlands, Plemens said houses in the $150,000 to $300,000 range are moving quickly. As for land, there is interest in large acreage.
“We put a 145-acre track for sale in the fall and it is under contract,” he said. Macon Bank has also had some success in selling lots, eight in just in the last month or two.
The banking business in Western North Carolina is going to look different going forward, Plemens said. He expects Macon Bank will be lending for primary or secondary homes, and there will be less speculative investing. Construction lending will be for individuals and the bank will also see more small business lending.
“We are going to see more diversity,” he said. “There are lots of lessons learned in this recession. We are traditional bankers. We make loans in the community, not investments or derivatives. We are taking deposits and lending in our markets.”
Long term, Plemens sees a strong Western North Carolina economy returning due to the desirability of Southern Appalachian real estate.
“People definitely have the desire to be here,” he said. “As soon as people have the confidence, the real estate market here will be back.”
As for the national economy and the banking industry in general, Scaggs and Plemens said they are relieved to see the progress made so far.
“If you look back to 2008 and all the potential land mines, the economy and the financial system have come a long way,” Scaggs said.
“In 2008, there was no confidence in the financial system,” Plemens said. “The confidence is back.”
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