Doing fine, thank you; New Mexico's ten savings and loans pay attention to their communities

New Mexico Business Journal, Sept-Oct, 1999 by Sam Collins

New Mexico's ten savings and loans pay attention to their communities

There are few scenes in the movies that resonate with the passion of George Bailey as he pleads with his community not to make a run on his Savings and Loan in It's a Wonderful Life. We all know where the story goes from there - Jimmy Stewart's character gets his spirit back.

And the same seems to be holding true for the S&L business in New Mexico. After a particularly bad spell in the 1980s, thrifts have grown to account for more than $3 billion in New Mexico's economy.

George Mitchell, president and chairman of the board at Roswell's Pioneer Savings Bank, recalls there were 32 S&Ls in business in the mid-1980s compared to today's 10. Among those that folded or were purchased were Sandia Federal, Valley Federal and State Savings Bank.

"There are a lot of reasons for the closures," Mitchell said. "It was really a combination of changing regulations, then the oil patch busted and then the real estate decline...and all of these factors hitting at one time was too much." Pioneer Savings Bank is the oldest thrift in the state, chartered in 1901. Mitchell credits its survival when so many others have failed to good old-fashioned business sense.

"It was not uncommon for the savings institutions to be paying more out than they had in their portfolios," he said, "In effect, many thrifts were paying more for the money they were using to finance loans than they were earning. During the 1980s and in difficult times, we've had enough capital or assets [to protect us]."

Most in the S&L business agree that the challenging decade offered lessons and warnings. Those surviving have had to change their practices, say sources. "The 1980s were a totally different market," said Sam Collins, president and ceo of Union Savings Bank, the only state-chartered thrift in New Mexico. "The thrifts that are left today learned a lot of lessons - hopefully we're all wiser for those who went before."

The ten thrifts doing business in New Mexico account for over $2.5 billion in total assets, with most of their business in real estate lending, the historical basis for the Fed's thrift charter option. The FDIC reports that $1.7 billion in New Mexico's S&L business is being done in real estate, with $1.4 billion of that in family residential properties.

The FDIC's data further reveal a very healthy financial industry in New Mexico thrifts. Current statistics show that only 10 percent of thrifts operating here aren't profitable - which accounts for only one institution - while in 1992 nearly 16 percent weren't making ends meet.

In 1992, thrifts were lending $704 million to New Mexicans, while 1998 FDIC data show that increased to more than $1.8 billion. The net income figures for thrifts are also demonstrative of strength - in 1992 the state's thrifts earned $9.5 million and in 1998 that number was $28 million.

Of the nine thrifts that are federally chartered, Matrix Capital leads the pack in New Mexico with assets of more than $827 million. Pioneer Savings Bank comes up second with just over $345 million and Charter Bank follows closely with $335 million in assets. The smallest thrift in the state is Tucumcari Federal Savings and Loan Association with $19 million in reported assets at the end of 1999's first quarter.

Clearly, business is good. And that was part of what attracted Robert Wertheim, Charter's chairman, to purchase the state's third largest thrift in 1986. "There were really two reasons we wanted to get into the thrift business," Wertheim said. "First, we think the thrift charter is an excellent franchise opportunity - while it specializes [in real estate], it also permits us to do all of the things a commercial bank can do.

"Second, we are mortgage bankers and have been mortgage bankers for a long time. When we were ready to diversify, we thought it would be best to do something we knew something about."

The flexibility of the thrift charter is evident in moves being made nationally. Wal-Mart has applied for a thrift charter in Oklahoma and other corporations are rumored to be eyeing the industry. In New Mexico, thrifts are owned by single business people, collections of backers and unions, all looking to do business a little differently.

"I think [operating a thrift] is an investment in New Mexico and our local communities," said Ken Huey, president of FirstBank in Clovis, operating with a healthy $127.5 million in assets. "When I was in college I had a business professor who said you have to put back into your community...and we can do that easier than other types of financial institutions."

While thrifts are fully insured and regulated, the charter allows thrift-holding companies to be engaged in business lines other than banking. That is attractive to real estate financiers who, having learned their lessons from the 1980s and early 1990s, don't want to rely solely on the real estate market to secure their business success. "The mission of [the thrift industry] has been to help make housing more affordable and accessible," said Shirley Scott, executive vice president and COO for Charter, which is Bernalillo county's single largest real estate lender, "but we have expanded to more commercial real estate. Because we are able to do smaller real estate transactions [than the major regional banks], and there's a lot of investment going on in Albuquerque right now, so there is a lot of opportunity for doing these kinds of loans."