A: Flat yield curve presents challenges for all banks. Our strategy is to try to maintain and improve our margin by gathering retail deposits and repositioning our balance sheet a little bit with funding loan growth with maturing investments. That's done the trick so far. A lingering flat-yield curve will certainly bring additional stress to net interest margins.

Q: What's the one thing you didn't see coming?

A: We didn't have any major surprises. We didn't see the continual and sustained in interest rates coming at the level of persistent that the Fed has continued. If we had known long enough in advance, I guess the smart money would have taken down some kind of longer-term borrowing early in the cycle of upward-moving rates. But we try not to make interest rate bets, so we wouldn't have done it any differently, unless we had a crystal ball.

Q: What's the most innovative thing you've seen or heard another company doing?

A: Bank of America's program to save the change is pretty innovative and evidently has been pretty successful.

Q: How about your own company?

A: Our focus right now is gathering deposits and expanding our small business banking relationships. We have a real focus on cash management services that involves automatic clearinghouse products. We're focused on cash managements and the electronic funds services for small businesses. We've invested in some technology to advance that and we're studying more technology for what they call remote deposits where you can electronically take deposits at their site location. That's an ongoing innovative process for us.

Q: Who or what is your biggest competition? Why?

A: Other community banks, in general, are our biggest competition because of the personalized level of service that community banks deliver as opposed to a mass market approach of the national and regional banks.

Q: What is the biggest issue facing the state?

A: The education system. In order to attract business, industry -- all the things we need to grow our economy -- people are probably most interested in good education for their kids. And business here are interested in having an education work force.

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 do think that's the right path because our economy is moving more and more to a service-based economy and one of the places we can compete effectively is in the knowledge-based businesses like biotech and medical research in a broader framework because it requires skill and knowledge and expertise that can't be off-shored to low-wage environments.

[On incentives] I'd like to say no, but you've got to face reality. It's like other things. It's competitive. I'd rather not [offer incentives], but you have to. Otherwise, they're going to go somewhere else.

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

A: In 1978 manufacturing was king. Today, the service sector is king. All the changes that brings are multi-dimensional.

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

A: We are in a great market. The Charlotte region is one of the fastest growing in the region. We have experienced great credit quality and we have a transition balance sheet that has potential to create greater earnings.

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