PUB 21 ISSUE 4 PUBLISHED BY NEW MEXICO BANKERS ASSOCIATION, FOUNDED IN 1906 NMBA Legislative Road Trip By Kyle Beasley Page 4 Credit Unions Buying Banks A Closer Look By John W. Anderson Page 6 Complex Solutions for Basic Problems By Mark Anderson Page 12 PHOTO BY: JIM RENFROW
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OVER A CENTURY: BUILDING BETTER BANKS — HELPING NEW MEXICO REALIZE DREAMS The mission of the New Mexico Bankers Association (NMBA) is to serve member bank needs by acting as New Mexico banking’s representative to government, the public and the industry; providing resources, education and information to enhance the opportunities for success in banking; promoting unity within the industry on common issues; and seeking to improve the regulatory climate to the end that banks can profitably compete in the providing of financial and related products and services. ©2025 New Mexico Bankers Association (NMBA) | The newsLINK Group LLC. All rights reserved. New Mexico Bankers Digest is published four times per year by The newsLINK Group LLC for NMBA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of NMBA, its board of directors or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. New Mexico Bankers Digest is a collective work, and as such, some articles are submitted by authors who are independent of NMBA. While a first-print policy is encouraged, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. PRESIDENT’S MESSAGE 4 NMBA Legislative Road Trip By Kyle Beasley, President, New Mexico Bankers Association EXECUTIVE VICE PRESIDENT’S MESSAGE 6 Credit Unions Buying Banks A Closer Look With Mark Anderson, Legal and Legislative Assistant, New Mexico Bankers Association 8 Meet the 2024-25 NMBA Officers and Board Members WASHINGTON UPDATE 10 It’s Time to Stop Punting on Credit Union Accountability 12 Complex Solutions for Basic Problems By Mark Anderson, Legal and Legislative Assistant, NMBA 16 Top Predictions for Community Banks in 2025 By Michael A. Johnson, SVP & Southwest Regional Manager, PCBB 18 Housing New Mexico: Providing Homeownership Opportunities for Decades By Kristie Garcia, Housing New Mexico 22 Bank News 24 In Memoriam 26 The Blunt Truths of Banking MRBs By Carol Ann Warren, JD, MBA, Assistant Vice President and Associate General Counsel, Compliance Alliance Our Mission CONTENTS 2024-25 NMBA Board of Directors President Kyle Beasley Bank of Albuquerque 100 Sun Ave. NE, Ste. 500 Albuquerque, NM 87109 President-Elect Max Myers Century Bank 100 S. Federal Pl. Santa Fe, NM 87501 Secretary-Treasurer Elizabeth Earls Capra Bank 400 Tijeras Ave. NW Albuquerque, NM 87102 Immediate Past President Mark Horn Pinnacle Bank 107 E. Aztec Ave. Gallup, NM 87103 Executive Vice President John Anderson NM Bankers Association 316 Osuna Rd. NW, Ste. 502 Albuquerque, NM 87107 TERMS EXPIRING 2025 Scott Czarniak First National 1870 7300 Jefferson St. NW Albuquerque, NM 87109 Aaron Emmert Pioneer Bank 3000 N. Main St. Roswell, NM 88201 Howie Herbert U.S. Bank 7900 Jefferson St. NE Albuquerque, NM 87109 TERMS EXPIRING 2026 Renanah Taylor Bank of Montreal 303 Roma St. NW, Ste. 100 Albuquerque, NM 87102 J. Chesley Steel Southwest Capital Bank 1410 Central Ave. SW Albuquerque, NM 87104 Sheila Matthews Four Corners Community Bank 500 W. Main St., Ste. 101 Farmington, NM 87401 TERMS EXPIRING 2027 Nicole Noto Wells Fargo Bank N.A. 200 Lomas Blvd. NW, 12th Fl. Albuquerque, NM 87102 Jay Jenkins CNB Bank PO Box 1359 Carlsbad, NM 88220 Jason Wyatt Western Commerce Bank 212 N. Canal St. Carlsbad, NM 88220 3
PRESIDENT’S MESSAGE KYLE BEASLEY President New Mexico Bankers Association NMBA LEGISLATIVE ROAD TRIP One of the real honors of my career is serving as the 2024-25 president of the New Mexico Banker’s Association. Perks include traveling to the annual ABA convention and the annual legislative road trip to the corners of New Mexico with the inimitable John Anderson. The ABA convention in late October was incredible. I’m not the biggest fan of NYC, but the weather was perfect, and the agenda was extraordinary. In addition to having ABA dignitaries ring the opening bell for the NASDAQ, speakers included General Mark Milley, Jamie Dimon, Brent Beardall (the CEO of WaFed with his life-changing story of surviving a plane crash) and Janet Yellen. CNB Bank’s CEO (and two-time past NMBA president) Jay Jenkins hosted a fantastic dinner, his joy
YOUR FAMILY COMES FIRST. HTRUST.COM ∙ 575.758.7700 ∙ NEW MEXICO Offices in Taos, Santa Fe & Albuquerque We are a state-chartered, locally-owned, independent trust company, devoted to families & their advisors. punctuated by the tear rolling down his cheek when the bill arrived. NMBA was well represented at the convention by Mark Horn, Liz Earls, Jay Jenkins, Ken Clayton, Max Myers, John Anderson, myself and our spouses. Also, the state of New Mexico is extremely well represented within ABA this year with the induction of former FNB Santa Fe CEO John Asbury as the new ABA board chair and the appointment of Western Bank Artesia’s CEO Ken Clayton as the new chair of ABA’s Government Relations Council. What a great thing for our state to have those guys in those positions! Prior to the legislative road trip in November and December, I was advised to do the driving myself. I took that to heart, but I treasured the time on the road with John. We shared lots of great stories and laughs. Seeing his interactions with bankers and legislators and the respect and affinity that he receives reinforced for me the asset that he is for the association. The trip was entertaining and informative, and it was well attended by bankers and legislators who care about solving the issues in their communities and the state. Lunch and dinner meetings were held in Carlsbad, Roswell, Clovis, Farmington, Santa Fe and Albuquerque. Issues affecting our banks and maintaining and growing businesses within our communities were the common topics. There is cautious hope that state leaders will pass stricter crime laws and leverage the current budget surplus (thank you, Southeast New Mexico!) to begin to address the homelessness and crime issues that have escalated in recent years, particularly in Albuquerque. However, there is also trepidation that businesses could be further burdened with the proposed FMLA and other regulations coming out of the upcoming 60-day session. Special thanks to Jay Jenkins for his guided tour of Carlsbad. What a vibrant and energetic town, right in the heart of the activity in the Permian Basin! And, in Roswell, Mayor Jennings gave us his account of the devastating floods that ravaged the town this past summer. It was awful to see the high water damage two blocks above the drainage on both sides! New Mexico communities throughout the state have great banks with great leaders! Thanks to everyone for the hospitality along the way and for helping to make New Mexico better! 5
EXECUTIVE VICE PRESIDENT’S MESSAGE CREDIT UNIONS BUYING BANKS A Closer Look JOHN W. ANDERSON Executive Vice President With MARK ANDERSON Legal and Legislative Assistant New Mexico Bankers Association Credit unions (CUs) acquiring banks has become a hot topic across the financial industry on both a national and statewide level, including in New Mexico, and for good reason. The past year has seen an unprecedented increase in bank acquisitions by CUs, closing in on 2022’s record number of 16 transactions just halfway through 2024. Not only has 2024 seen a marked increase in CUs acquiring banks, but the banks being purchased are larger. In 2023, the largest bank involved in a credit union acquisition was Western Heritage Bank here in New Mexico. It was valued at $338 million in assets and was purchased by Nusenda Credit Union. In 2024, however, several purchased banks exceeded Western Heritage Bank in assets, with First Financial Bank, purchased by Alaska-based Global Federal Credit Union, counting the most in assets at $1.5 billion. Additionally, in 2024, the total bank assets acquired by CUs stood at $7.21 billion as of June, surpassing the annual record of $5.15 billion set in 2022. Following the Heritage acquisition, U.S. Eagle Credit Union announced in August 2024 that it had entered into a definitive agreement to acquire Southwest Capital Bank. The acquisition is to be completed in the second quarter of 2025. U.S. Eagle indicated that the acquisition would allow it to tap into Southwest Capital’s knowledge of the Las Vegas market, including Mora and Pecos, and leverage the bank’s expertise in business and cannabis banking deposit services and lending. U.S. Eagle, founded in 1985, has $1.5 billion in assets, with approximately 95,000 members and 318 employees. Southwest Capital, founded in 1890 in Las Vegas, New Mexico, has total assets of $475 million and deposits of $434 million as of June 2024. If two of the last three years are any indication, the trend of banks being acquired by CUs is steadily increasing. However, this trend is certainly not without controversy, as opponents have articulated numerous potential issues with these acquisitions. One of the most compelling arguments against the trend is that CUs are taxed differently than banks, with CUs carrying both nonprofit and tax-free status. Many opponents of these mergers see CUs essentially acting like banks but being treated completely differently, enjoying the perks of tax-free and nonprofit status. In addition, CUs aren’t obligated to deliver profits to shareholders, nor
are they subjected to the same level of regulatory burden that banks are. For instance, CUs aren’t subject to the Community Reinvestment Act (CRA), which requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities where they do business, including low- and moderate-income neighborhoods. It’s also important to note that CUs have a competitive pricing advantage over banks by virtue of their tax advantages. Moreover, CUs have an appetite to pay greater sums for banks, knowing that when they convert a bank to a credit union, the credit union will automatically have a built-in earnings lift by not having to pay taxes as the bank previously had to do. Additionally, CUs, unlike other nonprofits, don’t have to report the compensation of their senior executives. The bottom line is that it’s much easier to exist as a CU than as a bank. Given this, it is fair to ask if CUs are even remotely wedded to their nonprofit status anymore. Proponents of CUs purchasing banks say that they’re simply filling a vacuum that banks refuse to fill. Curt Long, deputy chief economist at America’s Credit Unions, says, “Credit unions place a higher priority on having face-to-face interactions with their members and are happy to expand into areas that banks are retreating from.” Proponents are comparing CUs to bigger banks, not community banks, and want the best of both worlds. CUs want to offer the same services as banks and act like banks but don’t want to have the taxation and regulation that come with being a bank. It’s an ideal situation, and they’re taking full advantage of it. Credit union representatives claim that these bank-CU mergers are occurring because banks are closing branches rapidly around the country, and CUs are coming in to fill the void. Critics of CU-bank purchases have a litany of concerns, but one that repeatedly comes up is the CU exemption from the Community Reinvestment Act. Additionally, there are restrictions on credit union lending to small businesses that can pose serious problems for rural communities. Also, the mission of CUs, in theory, is to serve a specific, clearly defined membership, usually in a particular occupation or field. CUs buying banks in other areas, such as Michigan CUs buying Florida banks in recent years, can easily dilute CU membership. Aaron Klein, a senior fellow at the Brookings Institute focused on financial regulation, claims CUs are straying far afield from their on-paper mission. “Credit unions are buying banks that seemingly have no relationship to their field of membership, and many CUs have turned their field of membership that anyone can join,” he said. According to polling conducted by Morning Consult, 68% of adults said credit union customers should have the same CRA protections that banks provide, while 54% said Congress should investigate whether the credit union tax exemption is still warranted. Many rural communities still don’t have any CUs, but have a community bank, which experts believe is a result of CUs not having to abide by the Community Reinvestment Act. Because of the tendency for CUs to serve the most profitable parts of a state, some states are enacting state CRA laws for state-chartered CUs, such as New York and Illinois. Unlike many nonprofits, some CUs pay their board members high salaries and provide luxury trips and retreats. Importantly, this is being subsidized by taxpayers. For example, Northwest Federal Credit Union recently used tax-payer subsidized profits to sign a $7.5-million-a-year contract for the naming rights to the Washington Commanders football stadium. It begs the question of how a tax-exempt entity that is supposed to serve customers of modest means can afford such a pricey contract. Also, unlike most other nonprofits, CUs are exempt from filing an IRS form 990, meaning they have no obligation to prove that they are on a mission. In September, the FDIC said it may, for the first time, require CUs to provide more information on proposed bank deals so the agency can assess whether they serve community needs. The FDIC claims that if it sees that a CU-bank purchase would slash small business or commercial real estate lending, it can either put conditions on the purchase or block it altogether. However, banking trade groups want the FDIC and other regulators to be tougher on these mergers. One major commitment bankers’ associations want is written explanations and plans on how a proposed merger would benefit a relevant community. Also, banking trade groups are pushing Congress to put an “exit fee” in place that would allow the federal government to recoup lost tax revenue when a credit union purchases a bank. During a recent U.S. House Financial Services Committee oversight hearing, Rep. Emanuel Cleaver (D-Missouri) pressed NCUA Chairman Todd Harper on his agency’s oversight of large CUs. One of the things that concerned Rep. Cleaver is that large CUs are not involved with the CRA, and he discussed that they should, perhaps, be subject to the same requirements as banks. Harper noted that if Congress were to move forward on CRA and apply it to CUs, he would request flexibility, given that there are many different types of credit union charters overall. I found this to be an interesting comment. Ultimately, the core issue is that CUs are acting more and more like banks but aren’t subject to the myriad of rules and regulations that banks are subject to. It seems that subjecting CUs to the same rules and regulations that banks receive is only fair, given that CUs have strayed from their original mission. It’s okay if CUs want to play in the same sandbox as banks, but they should also be subjected to the same scrutiny. Perhaps this same level of scrutiny could improve both CUs and their banking counterparts, leading to a closer examination of the system overall. States can rein in these acquisitions somewhat, but for now, we’re caught in somewhat of a limbo where credit union acquisitions of banks will likely increase without any serious action by the federal government. 7
MEET THE 2024-25 NMBA OFFICERS AND BOARD MEMBERS Kyle Beasley, market CEO of Bank of Albuquerque, was established as president of the New Mexico Bankers Association during the 112th Annual Convention on Friday, September 13. Beasley was introduced as president by outgoing NMBA President Mark Horn, Pinnacle Bank, Gallup. Executive officers elected for 2024-25 are: • President: Kyle Beasley, Market President, Bank of Albuquerque • President-Elect: Max Myers, President and CEO, Century Bank, Santa Fe • Secretary-Treasurer: Elizabeth Earls, EVP, Commercial Banking, Capra Bank • Immediate Past President: Mark Horn, Market President, Pinnacle Bank, Gallup • Executive Vice President: John W. Anderson, NMBA Legislative and Legal Council Alongside the executive team, the NMBA Board of Directors is: • Scott Czarniak, Regional President, First National 1870 • Aaron Emmert, Chief Financial Officer, Pioneer Bank, Roswell • Howie Herbert III, Vice President/ Business Banking Sales Manager, U.S. Bank • Chez Steel, President and CEO, Southwest Capital Bank • Sheila Matthews, President and CEO, Four Corners Community Bank, Farmington • Renanah Taylor, Market President, BMO, Albuquerque • Nicole Noto, Regional Branch Network Executive, Wells Fargo Bank • Jason Wyatt, President and CEO, Western Commerce Bank, Carlsbad • Jay Jenkins, President & CEO, CNB Bank, Carlsbad As NMBA’s governing body, members of the executive committee and board are available for members of the NMBA to share questions, thoughts or suggestions concerning the NMBA or the banking industry. 8
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ROB NICHOLS President and CEO American Bankers Association WASHINGTON UPDATE IT’S TIME TO STOP PUNTING ON CREDIT UNION ACCOUNTABILITY
Football season is in full swing, and here in the nation’s capital, the home of the Washington Commanders has a new name: Northwest Stadium, the moniker of Virginia-based Northwest Federal Credit Union, which recently inked a multi-year, multi-million-dollar stadium naming deal. If you’re wondering how a credit union — a nonprofit, tax-exempt entity — can afford such a hefty marketing spend, you’d be asking the right question. When Congress passed the Federal Credit Union Act authorizing the creation of federal credit unions, its intention was for these institutions to serve people of modest means within clearly defined communities united by a common bond. But times have changed. Today, many credit unions — in pursuit of endless growth — have dramatically expanded their fields of membership. Northwest — whose marketing budget ballooned by 88% from 2022 to 2023 — was founded in 1947 to serve CIA employees. It now offers membership through multiple federal agencies as well as “hundreds of businesses and community organizations.” Northwest isn’t the only credit union spending top-dollar on marketing to grow membership far beyond its original scope. In fact, several of the largest credit unions now purport their potential membership base to be upwards of 330 million Americans — effectively the entire population of the United States. If credit unions are now empowered to cast a net this wide and compete aggressively for market share with taxpaying institutions, it’s time for policymakers to stop punting the ball on ensuring that these institutions are accountable and transparent in their operations. ABA expressed this view in a recent letter to NCUA Chairman Todd Harper — who has himself questioned whether credit unions should be spending so much on stadium naming deals, when those funds could be better spent supporting members. In addition, there have been several positive policy developments in recent days that suggest a growing appetite in Washington for greater accountability and transparency for the $2.3 trillion credit union industry. One example: In a recent policy statement, the FDIC signaled that it would begin requiring credit unions to provide additional information when applying to acquire an FDIC-insured bank. Credit unions have targeted a total of more than $9 billion in bank assets so far this year, with 18 deals announced in 2024 alone. ABA remains deeply concerned about the increasing number of these types of transactions and the potential tax losses and effects on local communities that accompany them. Regulators should rightfully scrutinize these deals, given that credit unions are not subject to any federal Community Reinvestment Act requirements. Greater accountability is also expected through an upcoming rulemaking on executive compensation transparency from the National Credit Union Administration that would require the disclosure of certain financial information by federal credit unions. Given that credit unions are democratically controlled financial cooperatives, it is essential that their member-owners have greater visibility into how top executives are incentivized relative to these transactions. Regulators are not the only ones taking note — in fact, in just the past year, a total of 80 members of Congress have publicly questioned credit union activities. Taking all these developments into consideration, it seems the time is right to move the chains on credit union accountability. You can count on ABA to continue playing offense on these issues in the months ahead. Email Rob at nichols@aba.com. Personalized Financial Consulting for Your Business Growth Small Business Commercial Real Estate Government Fiscal Analysis & Legislative Advocacy Interested in working together? Visit www.ponderosaeconomics.com or call (505) 699-1841. Financial & Management Consulting Firm 11
COMPLEX SOLUTIONS FOR BASIC PROBLEMS 12
By Mark Anderson, Legal and Legislative Assistant, NMBA There’s a phrase sometimes used in political discussions that essentially stands in as a shorthand for Occam’s Razor, the principle that can be boiled down to the notion that the simplest explanation is often the correct one. The phrase I’m referring to is “It’s the economy.” In evaluating the mood or temperature of the American public, both media and political elites tend to search for overly complicated, vague and ephemeral reasons for why people hold certain opinions when the simplest explanation is often the correct one. Economic fears and anxiety drive a lot of people’s beliefs, whether those beliefs are correct or incorrect. And, as the world has become far more complex and difficult to navigate economically, so increases the amount of anger, irrationality, paranoia and fear coursing through the veins of the average person. The phrase, “It’s the economy,” acts as a shorthand to remind people that many problems are eventual fallout from economic precarity and volatility, and are often not as complex as we want to make them. The notion that the world and the economy are becoming increasingly difficult to navigate certainly isn’t new, but it’s becoming more frighteningly accurate over time. A recent article from The New York Times details the financial struggles of senior citizens in America, with much of the article being framed around Social Security taxation, which is something of a surprise to many seniors. The thrust of the article revolves around the increasing complexity of managing one’s finances and navigating the proverbial sharks in the financial waters, just while trying to keep one’s head above water. The article highlights 72-year-old Jennie Phipps, a single woman who was caught off guard by the taxation of Social Security. “It’s not that I didn’t know about the tax, but, in my head, I didn’t calculate it,” she said. “I’m always surprised at the end of the year by how much I owe.” Luis Rosa, a certified financial planner in Los Angeles, says in that same Times article that it’s becoming increasingly difficult to navigate the economy without a financial adviser. “A lot of people who don’t work with a financial adviser are very surprised to find out that Social Security benefits can be taxable,” he said. “Then they have to take more money out of their IRAs to compensate for the difference, and it becomes a 13
never-ending cycle of taking money out to pay taxes and then paying taxes on that money. It’s not good.” Despite the need for sound financial advice, many people don’t have access to financial advisers, so they’re left to navigate the economic headwinds on their own. This is an increasingly fraught path in the 21st century, as Jeremy Shipp, a certified financial planner in Richmond, Virginia, explains in the Times piece. “People sometimes still manage their money as if they’re living in the Great Depression because that’s how their parents handled things,” Shipp said. “That speaks to the way financial mindsets are passed down through generations. Grandpa and Grandma and Mom and Dad never paid taxes on their benefits, so they’re very surprised.” The Times article highlights the increasing difficulty seniors have in managing their money, and Social Security taxes, which many seniors are unaware of, are yet another obstacle. Phipps, mentioned earlier, is a good example of how many seniors view Social Security as a lifeline and are usually operating on tight monthly budgets. Phipps, for example, owed federal income taxes on 85% of her most recent benefits, which defeats the purpose of Social Security in the first place. Social Security is meant to be a minimal financial safety net for senior citizens, and taxing the benefits is extremely regressive, counter-productive and counter-intuitive. After the passage of the Social Security Act in 1935, benefits weren’t taxed at all for nearly the first 50 years of Social Security’s existence. However, that changed in 1984, when taxation on benefits was signed into law by President Ronald Reagan. Then, in 1993, President Bill Clinton signed legislation that expanded tax thresholds, making up to 85% of benefits taxable for recipients with incomes of more than $34,000 ($44,000 for joint filers). Since 1984, both Social Security payments and federal income tax brackets have continually shifted upward to combat inflation, but the income thresholds that result in a recipient’s benefits being taxed haven’t budged. So, as a result, by 2022, 48% of recipients were paying tax on some of their benefits, compared to 10% when the tax began in 1984. Many states, on the other hand, do not apply state income taxes to Social Security benefits. Starting in 2022, New Mexico no longer taxes most Social Security benefits for seniors, legislation that the NMBA is proud to have worked on and helped push into law. It’s no surprise that taxing Social Security benefits began in the 1980s and ‘90s, as those are the decades when the neoliberal turn began in earnest, and counter-intuitive ideas like taxing benefits for seniors started to gain bipartisan support in Washington, D.C. From the 1930s to the 1970s, it would be fair to describe the economy in the United States as managed capitalism, which included antitrust enforcement, a strong social safety net, protections and steadily rising wages for workers, access to affordable housing and healthcare, and reasonable but strong regulation of major industries. However, in the 1970s, when economic growth stagnated, the American economy was steadily transformed into a much more neoliberal model, which had fully taken hold by the 1980s. Neoliberalism can be defined as a political model premised on the belief that free markets can regulate themselves, and maintains an almost fundamentalist view of the free market. While the free market can certainly yield spectacular economic growth, neoliberalism largely views the free market as unimpeachable and deems regulation to be an unnecessary, foolhardy constraint on perpetual growth. In the neoliberal model, the government is incompetent at best, malicious at worst, and only captive to special interests. By the 1980s and 1990s, there was a belief that the neoliberal economic model could not only create fabulous wealth, but also fix existential crises and cure societal ills and, in turn, take society to levels of prosperity never seen before. However, the neoliberal turn contained massive blind spots that have now led to a series of cascading, seemingly intractable problems, all of which usually end in many people feeling like they’re completely overwhelmed economically. While it’s difficult to find an ideal form of governance and government is certainly riddled with flaws, neoliberalism posits that government is the entire problem and that the free market is flawless. If we inversed that ideology and said that the free market is the entire problem and government is flawless, then most people would correctly mock that as absurd. So, why do we accept the premise of neoliberalism? It has become readily apparent that perhaps the main consequence of neoliberalism is extreme market and wealth concentration. We now have entire industries controlled by a few, if not one or two, purely self-interested individuals, leading to a complete inability to address existential issues. These issues include housing, homelessness, healthcare, climate and infrastructure. We can all agree that extreme power and wealth concentration, whether done through the forces of the government or the free market, is far from ideal and leads to a myriad of intractable problems. If there are a few individuals with all the power and no incentive to fix or improve anything, then society inevitably breaks down. Ideas like taxing Social Security, a completely counter-intuitive notion, can only arise from a neoliberal model. Neoliberalism encourages complex solutions to simple problems. People lacking the funds to live month to month is a relatively simple problem to address in the grand scheme of things, but, in a neoliberal model, no problem is simple. Taxing Social Security only makes sense if you view giving senior citizens a safety net as anything but positive. In a neoliberal model, something unambiguously positive, like the government giving senior citizens a financial safety net, must be viewed with a jaundiced eye and, eventually, transferred into the free market. Because under the logic that the free market is always correct and that government is always wrong, Social Security is viewed as a market inefficiency, an entity that can’t be profited from in the free market. 14
The phrase, “It’s the economy,” acts as a shorthand to remind people that many problems are eventual fallout from economic precarity and volatility, and are often not as complex as we want to make them. Many of America’s problems can be attributed to market and wealth concentration and the inability to get certain individuals to act in the best interest of society at large, which, ironically, are factors that advocates of neoliberal economics claim it mitigates. One claim made early in the neoliberal era was that antitrust enforcement actually weakened competition and, if the government got out of the way, market forces would remain more competitive because monopoly pricing would invite innovation and new entrants into the market. In reality, industry after industry became more concentrated and problems became more intractable. Many of the horrors that advocates of neoliberalism claim arise from too much government control have actually become a reality from its own model. This comes back to the notion of fairly simple economic problems like being unable to afford groceries or pay rent being addressed with overly technocratic, complicated solutions. For all of the government’s flaws, one of its strengths is its ability to address a problem in a universal way without having to bear the free market in mind. Neoliberalism so thoroughly rejects the efficacy of government action that, even in cases where universal government action is the obvious solution, neoliberalism usually rejects these solutions. That is why so many problems feel intractable, because the free market often isn’t equipped to deal with larger, existential questions. It’s equipped to turn quarterly profits to generate fabulous wealth for subsets of individuals, but not to address more pressing, existential problems such as climate change, healthcare, homelessness, etc. That is why managed capitalism was so much more effective in the long run than this far more laissez-faire, hands-off approach. The next time elite media pundits or politicians act surprised that most Americans are dissatisfied with their economic plights, just remember that a neoliberal model essentially rejects simple solutions and promotes short-term thinking and precarity. We’re now in the final stages of 40+ years of this model and currently exist in the world that it has created. Past victories like Social Security should never be taken for granted in this type of model, as a government-backed safety net goes against the very nature of the system. People must be vigilant in fighting for any form of protection or safety net they have in a system like this, because the ultimate goal is to place it in the realm of the free market, as we have seen time and time again for the past 40+ years. 15
TOP PREDICTIONS FOR COMMUNITY BANKS IN 2025 By Michael A. Johnson, SVP & Southwest Regional Manager, PCBB We can’t know for sure what 2025 will bring, but an educated look at current trends and recent data might give us a glimpse of the future. We interviewed PCBB President Mike Dohren about the key trends he thinks will affect community banks in 2025. Regulatory Changes With the Republican party taking charge of both the executive and legislative branches of the federal government in January 2025, expectations for regulatory reform have shifted, according to Dohren. “It’s too soon to determine specifics, but some of the things that were going to occur next year are likely to be tabled,” he says. Open banking, both as a compliance necessity and a business risk, will affect community banks in the coming year. “Open banking makes it easier for customers to leave a bank, and I think we’ll see more individuals and small and medium businesses having relationships with multiple banks. It will be challenging for community banks to keep market share,” Dohren says. Community banks that have used debt at the holding company level may need to reengineer it in 2025. Many community banks took on trust-preferred debt at the holding company level between 1998 and 2008. As some of these near maturity, banks need to develop a repayment or replacement capital strategy. “Early users are within that five-year window,” Dohren says. Those that haven’t paid off the loans may look to refinance. They may not find new debt 16
that’s as affordable or as accessible as the old debt because rates are higher and bank-to-bank credit isn’t as readily available. Mergers & Acquisitions (M&A) The coming year will likely see more M&A activity, in part because community bank stock values have gone up. “Many boards have an expectation around what their bank is worth, and when valuations go up, the new numbers are more likely to square with their own ideas,” Dohren says. Higher stock prices also mean that sellers can deliver more value to their stockholders. That may be especially true for community banks that haven’t found other ways to grow. They might lack a business niche, have lost customers to competitors, or have aging leadership teams without clear successors. In these and other circumstances, M&A could be the clearest path to growth. Increasing numbers of bank M&A deals involve credit unions buying banks, a trend that continued in 2024. Dohren expects it to last into 2025, unless regulations slow the trend. Without the tax burden of a bank, credit unions are often able to pay more for a bank than other bidders can offer. Loan Quality and SMB Lending Trends Community bank loan volume has been growing slowly over the past few years — at a modest annual rate of 1% or 2%. Dohren thinks that loan demand will increase in the coming year. That’s partly because of the relieved uncertainty around the 2024 election. “Borrowers and banks tend to sit on their hands in the runup to the presidential election every four years,” he says. “There’s usually a lag in all kinds of decisions, a little bit of a backlog that occurs before the election.” With more certainty around election results, businesses move ahead with projects, and that often means borrowing. An upturn in borrowing also follows the Fed’s interest rate cut and intention to slash rates further. “The long end of the curve on 10-year Treasury bills has moved up while the short end moves down, which is normal when the Feds start cutting,” Dohren says. The overnight rate has also gone down; borrowers with adjustable-rate loans and financial sector firms will likely benefit, as will construction businesses, revolving-loan borrowers, and commercial and industrial customers. Interest rates will also affect borrowers with loans coming up to maturity. “A lot of past transactions happened at the bottom of the rate cycle,” Dohren says. “Unless the cash flow or value of the asset they financed has improved, borrowers won’t be able to refinance and have the same outcome. Borrowing is more expensive than it was, and some borrowers will have trouble refinancing loans, even at lower rates. Ultimately, Dohren says, community banks won’t successfully compete on interest rates against big banks. Instead, they need to figure out how they’ll use digital methods to deliver the high-touch service their customers want. Commercial real estate had rough patches in 2024, particularly for office properties, which will probably continue to struggle in many markets during 2025. Industrial, warehouse and distribution businesses are all opportunities, thriving as consumers order more goods for home delivery and firms need places to warehouse the orders. The multifamily residential market is frothy, Dohren says, with demand in the many places that don’t have sufficient housing. “The demand for middle-market housing is strong,” he says, adding that there is less call for luxury housing. With an aging U.S. population, senior living and its many categories that transition from active living to situations offering more care are a growing asset class. Technology and AI Community banks are just beginning to tap the possibilities of artificial intelligence (AI) and machine learning, and larger community banks in particular can find a lot of value in it. Dohren sees “a lot of focus on how we can get better insight from customer data around behavior and transactions” in 2025. For instance, AI has the potential to help community banks connect data that is spread between different silos. “Banks have struggled with data housed in legacy systems that weren’t built or designed for the current operating environment,” Dohren says. “I’d start by looking at a CRM solution and a system that contains transaction data. See where you make more money. Why do you make more money there? Maybe you should get more of those.” AI can also help free employees from rote and repetitive tasks so that they’re free to take on more valuable and interesting projects. It can help community banks detect fraud and make credit decisions. The new technology is an implementation challenge for most organizations. “You need a person or a team that’s devoted to finding opportunities,” Dohren says. “Existing employees already have full-time gigs.” From increased M&A and borrowing to marked shifts in regulation and interest rates, what’s in store for 2025 won’t be seen for a bit longer but is sure to be impactful. Dedicated to serving the needs of community banks, PCBB’s comprehensive and robust set of solutions includes cash management services such as settlement and liquidity for the FedNow Service, international services, lending solutions, and risk management advisory services. Recognized by American Banker as one of the “Best Banks to Work For” in 2024. To continue this discussion or for more information, please contact Michael A. Johnson at mjohnson@pcbb.com or visit www.pcbb.com. 17
HOUSING NEW MEXICO: PROVIDING HOMEOWNERSHIP OPPORTUNITIES FOR DECADES By Kristie Garcia, Housing New Mexico Housing New Mexico — also known as New Mexico Mortgage Finance Authority (MFA) — has been helping people realize their dream of homeownership for nearly five decades. After its creation through the state legislature in 1975, New Mexico Mortgage Finance Authority executed its first bond issue in December 1976 with letters of credit from four banks: Albuquerque Federal Savings and Loan, First National Bank of Albuquerque, New Mexico Savings and Loan, and Southwest Mortgage. That $20 million bond sale in 1976 was followed by another $38 million bond sale in June 1977, which kicked off years of assisting New Mexicans with purchasing homes. Suburban Mortgage in Albuquerque was one of the first mortgage lenders to use MFA’s bond money to help low-income families buy homes. Fast Forward to the Present MFA rebranded to Housing New Mexico in July 2024, and nearly 50 years later, the quasi-governmental agency continues to house New Mexicans. Its mortgage programs provide homebuyers with down payment and closing cost assistance, as well as competitive interest-rate mortgage loans. A minimum credit score of 620 is required, and all first-time homebuyers must receive pre-purchase homebuyer counseling. Housing New Mexico currently offers the following mortgage programs: • FirstHome and FirstDown are first and optional second mortgage loan programs for individuals or families who have not owned and occupied a home as their primary residence in the past three years. FirstHome may be used with Housing New Mexico’s down payment assistance programs, 18
Albuquerque resident Daniela Freamon recently became a homeowner thanks to one of Housing New Mexico’s mortgage programs. Housing New Mexico partners with approved lenders to ensure homebuyers are aware of the many mortgage programs available. (Photo courtesy of Daniela Freamon.)
FirstDown and FirstDown Plus, or as a stand-alone first mortgage. • FirstDown Plus is a third mortgage down payment assistance loan designed to provide additional down payment to first-time homebuyers qualified to use the FirstHome program. Previous homeowners who have not owned and occupied a home as their primary residence in the past three years may also be eligible for the program. FirstDown Plus must always be used in conjunction with the FirstHome and FirstDown programs. • HomeForward is a mortgage loan for individuals or families who have owned a home in the past three years or who do not qualify for the FirstHome loan program. It may be used with Housing New Mexico’s HomeForward down payment assistance second mortgage program or as a stand-alone first mortgage. To promote these programs, Housing New Mexico has two homeownership representatives who dedicate their time to educating lenders and realtors about these programs to ensure homebuyers can take advantage of these opportunities. Teri Baca is the homeownership representative that covers the southern half of the state. “It is extremely gratifying to witness a first-time buyer’s journey to becoming a homeowner,” said Baca. “To know that a family no longer has to worry about paying rent but instead has the opportunity to build generational wealth inspires a deep sense of satisfaction.” Eunice Duran is the homeownership representative that covers the central and northern parts of the state. “My role as a homeownership representative for Housing New Mexico-MFA is incredibly rewarding,” said Duran. “Supporting our lender and realtor partners to help New Mexico families achieve the dream of homeownership is like handing them the keys to a new chapter of hope, stability and endless possibilities. I am honored to be a part of the process.” Making an Impact Housing New Mexico continues to make an impact on the lives of New Mexicans. In fiscal year 2024, Housing New Mexico reached a milestone with $582.2 million in funding expended for down payment assistance and first mortgages. These efforts have directly contributed to increasing homeownership opportunities, helping thousands of individuals and families find a place to call home. “Thanks to our partnerships with participating lenders and realtors, we have leveraged both state and federal funding to impact the lives of New Mexicans through all of our mortgage programs,” said Housing New Mexico Executive Director/CEO Isidoro Hernandez. “Our vision is that all New Mexicans will have quality, affordable housing opportunities, and we are working together toward that goal by helping create homeownership and wealth-building opportunities across the state.” Housing New Mexico’s overall fiscal year 2024 production highlights also include: • 18,981 families served. • 5,769 homes produced, financed or preserved. • 940 new rental and single-family homes financed. • $736,970,000 total funding administered. To learn more about Housing New Mexico’s homebuyer programs, scan this QR code. https://housingnm.org/programs/homebuyers To view a list of participating lenders, scan this QR code. https://housingnm.org/programs/homebuyers/mfa-participating-lenders 20
Housing New Mexico offers UP TO $30,000 in down payment and closing cost assistance for housing in the state, depending on the borrower’s qualifications. Make Your Homeownership Dream Come True! 18,981 Families served 5,769 Homes produced, financed or preserved 940 New rental and single-family homes financed $736,970,000 Total funding administered Production Pipeline 2024 Production Highlights WE HAVE MOVED! Our new address is: 7425 Jefferson St. NE, Albuquerque, NM 87109 To get started on your homeownership journey, visit: www.housingnm.org/programs/homebuyers In fiscal year 2024, we reached a milestone with $582,200,000 in funding expended for down payment assistance and first mortgages. These efforts have directly contributed to increasing homeownership opportunities, helping thousands of individuals and families find a place to call home. 4,765 Apartment homes at various stages of development Representing 51 different housing developments Located in 20 municipalities in 15 counties across the state $357,716,795 Total funding from tax credits, bonds and loans
BANK NEWS John Anderson Included in 15th Edition of Best Law Firms John Anderson was recently recognized once again in the 15th edition of Best Law Firms. Congratulations to John for being included in this extremely impressive group. Best Law Firms’ rankings celebrate firms that have consistently demonstrated excellence in legal expertise and industry knowledge. Each firm included has been rigorously evaluated based on client feedback, peer recommendations, leadership interviews and the depth of their practice. The result is a comprehensive guide for businesses and individuals seeking top-tier legal counsel in the United States. American Bankers Mutual Insurance Approaches $105 Million in Total Distributions The American Bankers Association recently announced that American Bankers Mutual Insurance, the reinsurer for the ABA-endorsed insurance program, has declared a $3.8 million annual distribution to be shared by qualified ABA member banks insured through ABA Insurance Services, a member of Great American Insurance Group. This is the 35th consecutive year that the professional liability and bond insurance provider has declared distributions to eligible ABA member banks, bringing the total to $104.6 million since the program’s inception. ABA member banks that purchase their directors and officers (D&O), bond, cyber, property and casualty, and related insurances from this program are eligible to receive a distribution. Native-Focused Organizations Receive More than $6 Million in Grants from Wells Fargo Across a six-state region, 33 nonprofits received a total of $6.4 million in grant funding from Wells Fargo’s Invest Native Initiative to strengthen housing access and affordability, small business growth, financial health and sustainability in Native communities. The funding is part of Wells Fargo’s two-year effort focused on collaborating with Native organizations and communities in Arizona, Montana, New Mexico, North Dakota, South Dakota and Wyoming. Grantees share that Invest Native funding is anticipated to deliver tangible community outcomes, including: • Producing 156 homes for purchase and 102 homes for rent; • Serving an estimated 2,000 small businesses, including more than 1,500 sole proprietor businesses; • Supporting businesses in creating 322 jobs and preserving 477 jobs; • Facilitating debt reduction for 1,000 participants, with total debt reduction exceeding $1 million; • Providing financial counseling or coaching to more than 8,000 Native people; and • Training 27 community-based organizations on climate resiliency topics. 22
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