A: We're entering two new markets -- High Point and Burlington. The challenges will be adding to our staff with the experience that we need to continue the expected growth that our current and new offices expect to maintain. ... We're preparing for the growth by having the physical resources and systems in place. It's just making sure we find the right folks.

Q: What's the one thing you didn't see coming? That is, where did you miss the boat?

A: We managed as well as we could with the changes in the economy. We didn't think the rates would increase to the degree that they did. Probably the biggest surprise was deposit rates rose as fast as they did. In prior eras, when deposits had declined in pricing, they would go up slower with prime rate increases. In 2005, we saw where many banks would raise rates in anticipation of price increases while we were able to adapt to that, it was an unusual experience to live through, and now that we have done so, we are better able to monitor it going forward.

Q: What is the biggest issue facing the state?

A: The challenge other states are offering in incentives. Charlotte, for example, is losing a number of reputable companies to South Carolina. ... I think the competitive landscape of businesses has intensified and North Carolina is going to have to come up with a policy that is fair and equitable, but is also realistic in consideration as to how these other states are offering incentive packages that are luring away some of our best and brightest.

Q: North Carolina sees biotechnology and service companies as a key to its future. Is that the right path? Should we be giving incentives to attract them here?

A: I don't believe R&D is our salvation. I still believe the state's strength lies in its manufacturing sector and its employment base. If we were more successful in luring manufacturing companies to our state through our incentives plan, I think we could put a lot of those displaced employees back to work quicker, than to have to go through the expense of retraining them for other service-oriented jobs. That notwithstanding, everybody wants to recruit for biotechnology. And there's only going to be so many biotech positions that will be out there, which will run up the cost of bringing those few in. I think we should not limit our focus just on biotech and service because they bring in a few very high-paid businesses, but do not do a lot for your tax base, where manufacturing elevates your tax base. So you have to have a balanced objective, and a realistic one, as to who you're trying to recruit and what you can offer.

[With incentives] we have to be careful to not sell our soul to the devil. We don't need to repeat mistakes that have been made by other states, but I think without a doubt that we need to recognize that, no matter how distasteful we think they are, it is a realistic, fundamental part of economic development today. If we are going to be successful in growing our state economy and bringing in manufacturing jobs that we have lost to foreign competition, we have got to become more creative. We can't just use the four seasons, our highway system, our airports and our colleges as our selling point because economic decisions are real simple for these companies.

Q: What's the biggest change in business today compared to when you started 32 years ago?

A: In our profession, it has been the regulatory landscape -- Sarbanes Oxley. Patriot Act. The competitive pressures have also changed dramatically where service by a lot of the major banks is being redefined. Fundamentally, I have always recognized service coming from the interaction of two people, human to human. The major banks -- not only in North Carolina, but across the country -- are trying to redefine service as information portals whereby you can get your information electronically. You can get it 24/7. You can call a local number and talk to somebody in India. And that definition of service runs counter to my training. Is it right? Is it wrong? I don't know. But we operate our bank as person-to-person. Other banks have made tremendous economic decisions to lay off staff, go offshore with servicing. That may be the right thing for them, but for me, it takes us further and further away from the concept of service as I understand it. Having all the information portals is an aid to that service, but it does not replace that service.

[Because of The Patriot Act] we've had to require more documentation from our customers. It's added more paperwork, it's more costly to monitor. We have to pay organizations fees to cleanse our new account list to make sure we haven't opened up an account for a suspected terrorist. The cost of doing business has increased. And It has put all banks in the position of being a watchdog.

Q: Why should an investor invest in your stock today?

A: We've had consistent growth in earnings. We are well positioned in the state. We're strategically placed in the Triad. We're positioned for growth as our economy evolves.

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