Bankers ‘hopeful for 2025’

A year after the presidential election can be a time for growth for local businesses. Local banks are also feeling optimistic going into 2025 but there are signs of caution in the world of commercial loans and mortgages.

Bryan Robinson, senior vice president and city executive with First Bank of Franklin, said the 2025 outlook for banking is “very, very positive,” even with uncertainty at the Federal Reserve.

‘‘I have clients out of Atlanta and other areas, they’re moving up here wanting to start developments again,” Robinson said.

Greg Proffitt, president of Nantahala Bank, said while 2024 wasn’t as strong as 2023, they’re doing good in loans and asset quality, meaning their borrowers are in good financial health. The desire for more retail is there, Proffitt said, as the population grOWS, with a demand for ‘‘small business types of situations,” usually a smaller building or multitenant.

Proffitt said mortgage rates dipped to around 6% in August, were back at 7% by the end of 2024, and are now to around 6.3% to 6.4% for a 30-year fixed-rate average.

‘‘I guess I would say we’re hopeful for 2025 to see a pretty good interest in loans and loan volume in our markets, but we’re not anticipating dramatic, dramatic improvement over 2024,’ Proffitt said.

For commercial loans, Robinson said typically people get scared of the variable rate as it fluctuates. But one benefit is that people can get the property now and benefit from rates going down later, which Robinson said is becoming a good option.

“‘Consumer confidence is starting to grOW. New construction is pretty much everywhere,” Robinson said. ‘‘I mean, I know a lot of the contractors say they’re a year or two out on new homes because they’ve just got so many things going on. So, that provides confidence, at least in our local markets. And then, of course, the benefit of interest rates starting to come down and stabilize.’’ Pandemic, elections and Helene Despite the COVID-19 pandemic and the Hurricane Helene flooding being events that could have curtailed commercial development, Robinson said they’re starting strong in 2025.

‘COVID happened. The government propped [the economy] reducing rates, then they’ve started trending back upwards, and so that has had a lot to do with why loan demand shrank sO much is because folks just felt like, ‘Hey, I’m going to sit on the sidelines, it’s not worth it to borrow this money at 8% or whatever that rate was at the 999 Robinson said. ‘‘But what you’re seeing now, and if you look back in the history, generally the first year of the presidency as it kind of transitions, people are scared going into it. And then even if it’s their party or not, there is a consumer confidence in the fact of, ‘Hey, we know what we’ve got for the next four years.’”’ In the region, Proffitt said the demographics are stable, with growth still occurring.

“Usually the more demand, the higher the values. Supply is kind of at a low, particularly we’re talking about, say personal residences, and stuff like that. So that keeps values propped up as well,” Proffitt said. He noted there are some stressed areas, but those are more concentrated in urban areas with office buildings, a long-term effect of COVID and remote work ‘‘You are starting to see some defaults pick up in some other areas, but that’s usually larger multifamily properties or commercial properties. We really don’t have a lot of that type of property here in this part of western North Carolina.”

Proffitt noted that election years are “years of uncertainty” and that afterward, people slow down on getting loans or mortgages going into the holidays. With the Fed lowering short-term curve interest rates in late 2024, Proffitt and Robinson said people are hoping that loan interest rates will start to fall, but warns that isn’t necessarily the case.

‘‘The Fed started out the year saying there were going to be four interest rate decreases. Now they will be lucky to get one or two, and some people feel like they’re going to keep them the same, and then some people even feel that they’re going back up a little bit,”’ Robinson said. ‘‘But we are very optimistic about our local community, local businesses, and being a partner to them.”

Proffitt feels people have short-term memories as financial life didn’t change dramatically with a new president taking office in 2017 or 2021.

‘‘I think people have this angst that may be a little overblown and so that paralyzes them a little bit, right? So they just hold, wait and see, and they may have perceptions of, ‘OK, this is going to be really great for me personally or my business or vice versa. so-and-so comes into the office and this is really going to be bad for me personally or for my business,’” Proffitt said.

Robinson noted that First Bank branches in Asheville are still recovering from Helene, which was five months ago.

‘‘You’re starting to see some of those business centers that were displaced during the hurricane start finding new opportunities. You have new developers moving in, building new strip centers,”’ Robinson said.

Despite Helene, WNC remains a tourist hotbed, making retail the No. 1 commercial target for builders.

‘‘You are seeing a lot of younger folks in the market that are starting, whether it be landscape businesses or grading or anything like that, a lot of service-based things, whether that be general contracting, whether it be electricians, plumbers,” Robinson said. ‘‘You’re seeing a lot of young folks moving into those sectors, and I think they’ll do very well in this market.”

However, housing for service-job employees remains a problem all over far western North Carolina. It also leads to a shortage of medical providers in rural areas, despite a growing population.

‘I think limited existing structures are suited for that, so I think a lot of that would have to come probably from new builds or significant remodeling of existing structures, so that’s usually a little bit bigger project to take on for somebody that was willing to do that,” Proffitt said.

Robinson said the biggest issue in far western North Carolina (west of Asheville) is insufficient inventory to meet demand.

‘‘I think that if 50 new houses were built under the price of $400,000, I think they would probably all go under contract before they’re finished,’’ Robinson said. “‘All the realtors that I talk to in the community say they’ve got people cash in hand moving here from Florida, and they’re ready to buy.”

Signs of caution Both bankers had some warnings for the future, with Robinson saying the low interest rates are deceiving.

“Everybody likes to compare now our interest rates back to the 1980s interest rates, and what I always caution people to say is, that home that was at 18% in 1985, it may have cost $70,000. You look in today’s terms, that house is $700,000, and you couple that with an 8% interest rate, and the math just doesn’t make sense,” Robinson said, saying the higher purchase cost led to 2024’s slowdown, “Predicting rates and predicting the cost of things going down is a losing game. It’s like going to the casino and playing blackjack every day.’

Robinson said rates this low are abnormal and historically, when rates are that low, the Fed is trying to prop up the economy and “trying to keep it from going into recessionary times or even depressionary times.”

Proffitt said with the Fed raising rates in 2024 and uncertainty in rates going into 2025, deals that made sense a couple of years ago might not make sense now.

‘‘It might have worked for you cash-flow-wise back a year or two ago when rates were lower, but now I can’t make that payment anymore, it’s not affordable anymore,” Proffitt said, explaining that banks like Nantahala look at affordability, especially in commercial loans. And people might be looking for a situation where they can make money. ‘‘If it’s an ongoing operation, say for a commercial entity or rental income that you may be renting out a piece of property to various tenants, what’s the stability there? What’s the rent you’re able to charge? Is that sufficient enough to pay back the loan on top of the other expenses that you might have? And to make a profit where it makes sense for somebody to go into that venture,” Proffitt said. “So it’s like, ‘Wow, yeah, I can pay back my loan and pay these expenses, but there’s really not a whole lot left for me at the end of the day, so I’m not sure if I want to do that deal right now. 999