New Mexico banks, S&Ls, credit unions - savings and loan associations

New Mexico Business Journal, July, 1990 by Kathleen Young

New Mexico Banks, S&Ls, Credit Unions

Banking in New Mexico

Athough 1989 was the worst year for the savings and loan industry across the nation, it was a good year by comparison for the banking industry in New Mexico and most other states.

Nationwide, banks had overall earnings last year of $15.8 billion. In New Mexico, total income for the state's banks was $82 million, up from $63.8 million in 1988.

Only eight of the 93 banks in the state reported losses for the year. Among those were three banks that made the news when they were seized by federal regulators this year.

The Bank of Ruidoso and Red River Bank were declared insolvent by the feds in February and closed. Red River Bank lost $704,000 in 1989, and the Bank of Ruidoso reported year-end losses of $990,000. The Ruidoso's bank president, Ralph F. Petty Jr., blamed the city's economy for the failure; but Ken Carson, director of the state's Financial Institutions Division blamed the failures on "management problems."

Southwest National Bank of Albuquerque became the first solvent commercial bank to be placed in federal conservatorship since 1972, according to the Comptroller's Office. The bank had about $3 million in capital and $55.2 million in assets when it was seized in April. Regulators cited "lack of management and capital adequacy/liquidity concerns" as the reason for the takeover. The bank reported losses of $1.1 million in 1989. Bank owners are suing the Comptroller of the Currency in an attempt to overturn the conservatorship.

Also headlining the news earlier this year was the sale of three First Interstate banks. Los Angeles-based First Interstate Bancorp agreed in March to sell First Interstate Bank of Albuquerque, First Interstate Bank of Roswell and First Interstate Bank of Lea County in Hobbs to United New Mexico Financial Corp., the state's second largest bank holding company.

Although the purchase of the three banks remains subject to approval of the Federal Reserve Board, under the terms of the agreement United New Mexico will pay a total of $52 million for them.

The three banks, which were profitable last year with total earnings of about $2 million, will add nearly $800 million in assets to United New Mexico's present $1 billion in total assets.

United New Mexico banks had a total net income of $5.6 million last year, up 38% over a 1988 income of about $4.1 million.

Not included in the purchase were First Interstate of Santa Fe and First Interstate of Farmington. The bank in Santa Fe showed a 1989 profit of almost $2 million, while the Farmington bank lost almost $1.3 million last year.

The Bank of the Rio Grande was also purchased recently from the Ruidoso Bank Corp. by a group of Las Cruces businessman. The bank has tripled in size since its beginnings in 1985 to a present $34.9 million in assets. It earned $268,000 last year.

In December, The Bank of Albuquerque became The Bank of New Mexico. The name change was made to conform with the two other banks in the Bank of New Mexico holding company. The new name is the third for the bank, which earned $523,000 last year. Overall, The Bank of New Mexico Holding Company earned $837,133 in 1989.

Sunwest Financial Services Inc., the state's largest bank holding company, did well last year with reported year-end earnings of $20.1 million. However, the holding company suffered a $2.6 million loss in April of this year as a result of a "write down in value of real estate held by the company and an addition to loan loss reserves," according to a statement from Sunwest's chairman George S. Jenks. The loss left Sunwest Financial with a total profit of $2.1 million for the four months ended April 30.

The bank's chairman reported that "the adjustments to earnings are in concurrence with a current examination by regulatory authorities" and that "additional adjustments are expected." Bing Grady, president of Sunwest Bank in Albuquerque, declined to comment on what those adjustments might be because of the ongoing examination. He did explain, however, that the problems are related to the real estate market, particularly in Albuquerque.

"Albuquerque has pretty commonly gone through real estate cycles in which we overbuilt," he says. "I think that's where we are today -- we are overbuilt in the commercial department and in multi-family housing. In long-term perspective, I think this will be viewed as one more valley in a series of cycles."

Heavy real estate development lending among Texas and Arizona banks has caused them to suffer the worst losses from the Southwest's depressed real estate market. Combined, their losses totalled more than $1 billion in 1989. This type of heavy real estate lending has also contributed to losses among the Southwest's savings and loans, as well.

What's saved New Mexico's banks, according to Sharon Janecka, president of the New Mexico Banker's Association, is loan diversification. "The state's banks used to be heavy into real estate development loans, but they are more diversified now," she says. Because of that, she adds, the banks haven't been affected as profoundly as the state's savings and loans.