Economic fallout from COVID-19 crisis forces banking industry to adapt

Financial institutions seek to identify needs and advocate for resources 

Black Mountain Savings Bank President and CEO Wendell Begley is the chair of the N.C. Bankers Association Board of Directors. Courtesy photo

Fred McCormick
The Valley Echo

No other bank president in N.C. has a longer tenure than Black Mountain Savings Bank President and CEO Wendell Begley. Throughout his nearly 50-year career at one of the oldest banks in the state, the chair of the N.C. Bankers Association has never witnessed anything like the COVID-19 global pandemic. 

“I leave here between 5:30 to 6 p.m. every evening and (State Street), between our bank and the main intersection in town, is completely empty,” he said. “It’s really unbelievable.”

As state and local governments across the country issue orders for citizens to stay home, the impact of mandatory closings of non-essential businesses throughout N.C. is already being felt in the Swannanoa Valley. 

“Something that is unique to us up here in the mountains is our tourism industry,” Begley said. “Normally, this time of year, people from Charlotte, Atlanta  and other places, would be coming up to the area for three- and four-day weekends and spending money with local businesses. I don’t remember us going through anything as dramatic as what our community is facing.”

Black Mountain Savings Bank is one of only a handful of mutual savings banks operating in the state. It focuses solely on residential mortgage lending and offers loans exclusively within the Swannanoa Valley. That relationship with the community gives the bank a unique perspective on the financial challenges area residents are facing, according to Begley. 

“The most critical need is in regards to folks who are unemployed right now, but had a job two weeks ago,” Begley said. “They have needs resulting from missed income and many small business owners are struggling, or unable, to keep employees on the payroll.”

Black Mountain Savings holds around 220 mortgages throughout the Swannanoa Valley, according to Begley. 

“Fortunately, here in Black Mountain, with the stability of the people who live here and borrow money on their homes, our bank has only had 10 foreclosures in the past 58 years,” he said. “Our asset quality, which really represents the value of mortgages, is number one in the state. Our loan-to-value ratio is around 52 percent. It’s that way in a lot of the smaller communities.”

While Black Mountain Savings Bank represents a unique subset of the industry, Begley’s role on the board of directors for the NCBA offers a statewide perspective on the challenges facing the industry. The professional trade organization, founded in 1897, represents 84 financial institutions doing business in the state, and provides leadership and guidance to a diverse mixture of members.

Charlotte’s position as one of the largest banking centers in the country underscores the state’s significance in the industry, according to Begley, who began his one-year term as the chair of NCBA’s governing board last June. “One of our main focuses, as an organization, is advocacy on the national level. We work with Congress to make sure that when programs are put in place, we have the proper tools to orchestrate that for the general public.”

One such tool, included in the Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law, May 27, is the Paycheck Protection Program. The $350 billion package, launched April 3, is designed to provide cash-flow assistance for small businesses throughout the country. As of April 7, Small Business Administration-approved lenders had processed 265,000 applications totaling $71 billion. 

“Bankers are working as fast as humanly possible to meet the overwhelming demand for Paycheck Protection Program loans,” NCBA President & CEO Peter Gwaltney said in a press release yesterday. “North Carolina banks have committed significant resources to originate these loans for small businesses in the communities that they serve. Our member banks are proud to play a role in the administration of this important economic relief program.” 

Through participating banks, the PPP allows small businesses and nonprofits with 500 or fewer employees to apply for a loan allowing them to keep employees on the payroll and cover operating expenses through the crisis. The loans are provided at a 1% fixed interest rate and do not require collateral and feature deferred payments for six months. A unique feature of the program features a promise that the loans will become grants if used to retain workers without cutting wages. 

Eligible businesses are asked to visit sba.gov for more information about the PPP before applying through their primary banks. 

“Not every N.C. financial institution is a fit to participate in the program,” the NCBA release stated. “If your bank is not a participant in the Paycheck Protection Program, small businesses should inquire with other lenders.” 

As banks scramble to accommodate the growing needs associated with the COVID-19 crisis, the NCBA anticipates additional funding for the PPP in the coming weeks. 

“N.C. banks entered this pandemic from a position of strength, thanks to record capital and liquidity levels, as well as prudent planning and risk mitigation,” the organization said in its release. “We look forward to helping small businesses across North Carolina get back to work.”