Byline: Marilyn Nason

HICKORY, N.C. — With hosiery makers in this area getting an increasingly cold shoulder from large commercial banks, they’re finding some relief among the growing number of community bank start-ups.
That was the word from Harry Davis, North Carolina Banking Association economist and speaker at the 38th annual dinner meeting of the Carolina Hosiery Association held here earlier this month. His views were echoed by many at the event.
All this comes at a time when manufacturers are trying to be competitive in an increasingly global industry by updating machinery and production services.
Hosiery executives interviewed agreed that in the past couple of years it’s becoming more of a challenge to get loans from the bigger banks — including some they have worked with for decades — and this has forced many firms to turn to other sources for financial assistance.
“Banks have become just plain skeptical of the entire textile industry, in which they include hosiery,” said David Faunce Jr., vice president of sales and marketing for Mauney Hosiery Mills of Kings Mountain, N.C. “They’ve got such restrictive covenants and personal endorsement regulations now — it’s impossible for us to meet them. And local banking executives we’ve known for years no longer can make loan decisions.”
“We were there when these biggies first started but they’ve forgotten us now, so the new community-owned banks have found a niche with small business commercial loans that are the lifeblood of communities throughout the Southeast,” added another maker.
Community-owned banks are cropping in such cities as Asheville, Charlotte and Hickory. In fact, so many are now applying for certification that the North Carolina Banking Commission is reportedly having trouble keeping up with the demand for approval within a timely period.
Presenting an overview of the region’s banking situation, Davis described North Carolina as one of the most competitive banking states in the U.S. He classified banks in three groups — community banks with $1 billion or less in assets, mid-tier banks with $1 billion to $10 billion with branch networks and super-regionals with more than $10 billion. Davis expects the emergence of community banks to continue due largely to consolidation among commercial banks. Hosiery makers and other community businesses should help these banks to succeed.
Meanwhile, mid-tier and super-regionals will continue to develop more formal lending processes, Davis said. Personnel at local banks will serve more as a sales force taking information to be fed into a centralized credit scoring system for decisions to be made elsewhere. Many loans are sold on the secondary market, he said.
“This is hard for small borrowers. [But] community banks are hungry for small business loans,” Davis said.
Since small community banks do not sell their loans, their credit requirements can be far different — less formal than those of larger banking institutions, he pointed out.
Davis said it takes between three to five years to leverage equity in start-up community banks before stockholders see any returns.
However, if a bank is well managed, stockholders in community banks should do very well and find it very profitable, he added.
Community banks meet the need for small commercial loans, but leasing companies are also expected to continue to play a role in keeping local businesses updated and competitive.
Manufacturers may begin leasing equipment when the funding for capital improvements runs dry.
“They’re incredible competitors and that’s good,” Davis said of leasing companies.
Echoing the sentiments of other manufacturers interviewed, W.K. (Kemp) Mauney 3rd, secretary and treasurer of Mauney Hosiery, criticized centralized loan review boards that issue commercial loans for local businesses even though many are miles or states away.
“When they mandate personal endorsements of four to five times the amount of the loan in collateral, it’s time to drop banks and go elsewhere,” Kemp Mauney said. “Leasing companies are very helpful, supportive and ask for no covenants. Your equipment is your collateral, they’re quick to make decisions and their rates are reasonable.”
He also cited the community-owned banks as another funding strategy that is marginally more expensive but certainly not punitive.
“They look at our track record, understand what we need in capital investments and that’s it,” Mauney said.
Ron Brittain, president of L&R Knitting in Hickory, discussed the opposition he faced in 1995, when his firm requested a loan for computerized electronic knitting machines from the local bank it had dealt with for years.
“We’d done business with them for years and were prepared to put a third down for the new equipment. But the personal relationship had changed. They demanded personal endorsements and put us through hoops to get the money we needed,” Brittain said. “I had to have the equipment to stay in business.”
Even though the company managed to get the loan from his bank, Brittain said he was “awfully close to turning to a leasing company.”
With plans to modernize next year, including installation of seaming and boarding equipment, Brittain said he is questioning whether he should try banks or opt for leasing.

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