S&Ls: a dying breed - New Mexico savings and loan associations - Financial institutions: the banking blues

New Mexico Business Journal, June, 1991 by Arlene Cinelli Odenwald

New Mexico reported the highest percent of nonperforming loans in the country last year at 18.3 percent.

"Developers took over S&Ls in Texas, for example and played games," says Heyman. "I didn't see that happening at New Mexico thrift institutions.

"Many of those places suffered," Heyman says. "New Mexico's economy is also suffering."

In 1990, the Resolution Trust Corporation closed or sold eight S&Ls in New Mexico: ABQ Bank, Sandia Federal, New Mexico Federal Savings Association, and Sun Country, all in Albuquerque; and Silver Savings in Silver City.

Others were Valley Federal in Roswell; First American Federal Savings Bank in Santa Fe; and Security Federal Savings Bank headquartered in Albuquerque, but which actually did business in Carlsbad.

Federal regulators seized Security Federal Savings & Loan Association in Albuquerque in early May. It was the largest surviving S&L in the state. In conservatorship is First Federal Savings and Loan Association in Las Vegas.

Of the 14 S&Ls left in New Mexico, only three are mutuals: Gallup Federal, Tucumcari, and Alamogordo Federal.

The strongest S&Ls for the most part stayed with residential loans. The leaders attribute their strength to staying in the areas they know best.

Garry Owen, president and CEO of First Federal Savings Bank in Roswell, says residential mortgages still comprise 74 percent of their loan portfolio, although they also invest in small commercial loans, business loans, and consumer loans. First Federal earned $931,000 last year.

Century Federal in Santa Fe reported the second largest earnings - $929,000 - in 1990.

Truman Johnson, president and CEO, attributes their success to having 50 percent of their loans in single family mortgages.

They also invest in real estate-related investments, multi-family dwellings and commercial loans. Century had a better return on average assets, .86 percent compared to First Federal's .68 percent.

The S&L with the best return on average assets was Gallup Federal with 1.12 percent. The mutual, described by other industry executives as "strong as an ox," earned $403,000 last year.

Its ROA should actually be higher, except it decided to make a one-half of one percent interest payment on every account open a full year before Nov. 30, 1990. President Jerry Spurlin says their loan portfolio is 98 percent residential mortgages.

Spurlin says the mutual is issuing 30-year residential mortgages instead of the longer 30-year mortgages. "We still have some 30-year mortgages on our books," says Spurlin. The mutual requests a good down payment and actively seeks shorter term loans than the industry standard.

Charter Bank in Santa Fe showed a positive ROA of .69 percent last year. Paul McClendon, executive vice president, attributes its strength to conservative management. Ninety percent of its portfolio is single family mortgages.

Dona Ana Savings and Loan, on the other hand, had a negative return on average assets of 1.25 percent.

"The Office of Thrift Supervision made us write down a lot of things," says Executive Vice President Phil Kaltenbach. "Since the 1980s, we have been in the business of installment loans, some consumer type loans, as well as a few commercial real estate loans besides single-family home mortgages."