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Regional Report Western March 2011


Asheville bank is third but won’t be last to fail 

When federal regulators closed Bank of Asheville in January and brokered its sale to Troy-based First Bancorp, 18 months had passed since North Carolina’s last bank failure. It won’t be that long, experts say, before another one bites the dust, though it probably won’t be a heavyweight.

The message from Bank of Asheville’s failure is clear, says Tony Plath, associate professor of finance at UNC Charlotte: “We have a tale of two banking industries. The big banks, except for Bank of America, are doing well. But when you get to the regionals, the industry is distressed.” Ray Grace, the state’s deputy commissioner of banks, says 15 state-chartered banks are classified as troubled. “Three years ago, we had one.” The main problems are the weakness of the commercial real-estate market and high unemployment. “Banks operate in the context of the economy they’re in. When people don’t make money, they don’t spend and businesses — including banks — don’t make money.”

He agrees that there is a divide between large and small banks, partly because the larger ones got more help from the federal government. But he also notes that the three North Carolina banks that have failed since the national financial crisis of 2008 have either been on the coast — Wilmington-based Cape Fear Bank and Wilmington-based Cooperative Bank — or in the mountains. Both are regions where real-estate values had appreciated rapidly during the housing boom, and both have been hurt by weakness in the second-home and resort markets. Bank of Asheville had other problems: Its former CEO, Buddy Greenwood, has been indicted on charges of bank fraud, stemming from a $500,000 loan he made, and money laundering.

Plath believes the problems are broader and expects more contraction of the 85 state-chartered banks this year — possibly three or four more closures. He expects the number of state-chartered banks to shrink to 50 within five years. In addition to the 15 banks officially classified as troubled are as many as 25 others that are weak. Many are operating under agreements with regulators. “All of those banks are not going to live.”

Grace doesn’t believe it will come to that, though he acknowledges there could be another failure or two this year. “We work hard to find partners and private equity groups to get through their problems.” But, he says, “it has been a long, grinding recession. The longer it grinds on, the longer equity markets remain skeptical of bank stocks and the more wear and tear there is on bank capital.”

OLD FORTPisgah Yarn & Dyeing agreed to sell its assets to Canada-based Spinrite Yarns. Terms of the deal, scheduled to close in late February, weren’t disclosed. Spinrite plans to use the company’s buildings as a distribution center, eliminating jobs for all but a handful of Pisgah’s 81 employees.

CHEROKEEHarrah’s Cherokee Casino & Hotel opened its third hotel tower, adding 454 rooms and 78 suites to the complex. That increases the total room count to 1,108. The tower is part of a three-year, $633 million expansion (cover story, October).

BREVARDThe Conservation Fund bought 786 acres near the South Carolina border for $5.5 million. It’s the first piece of an 8,000-acre tract the Arlington, Va.-based conservation group and others plan to buy from Charles Taylor, a former Republican congressman from here, for $33 mil-
lion. Environmentalists say that’s the largest undeveloped privately owned tract in the region.

FLETCHERVision Airlines plans to start twice-weekly flights April 1 between Asheville Regional Airport and Northwest Florida Regional Airport, near Fort Walton Beach and Destin. The discount carrier is based in Suwanee, Ga.

BRYSON CITY — A specialty license plate featuring a black bear against a green mountain background raised $356,000 in 2010 for Great Smoky Mountains National Park. The plate is the second-most popular in North Carolina, behind the Blue Ridge Parkway plate.

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