PUB 22 ISSUE 2 PUBLISHED BY NEW MEXICO BANKERS ASSOCIATION, FOUNDED IN 1906 A Productive and Insightful Year as President By Kyle Beasley Page 4 NAFTA and Its Enduring Legacy By Mark Anderson Page 16 Back to the Future and One Big Beautiful Bill By John W. Anderson Page 6
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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 A Productive and Insightful Year as President By Kyle Beasley, President, New Mexico Bankers Association EXECUTIVE VICE PRESIDENT’S MESSAGE 6 Back to the Future and One Big Beautiful Bill By John W. Anderson, Executive Vice President, New Mexico Bankers Association WASHINGTON UPDATE 10 Cutting Through the Noise — and the Regulatory Red Tape By Rob Nichols, President and CEO, American Bankers Association 12 Housing New Mexico Celebrates 50 Years, Prepares for 2025 Housing Summit By Kristie Garcia, Housing New Mexico 14 ACT Deposit Program A Simple Solution for Improving Your Bank’s CRA Rating By Diane Ellis, Senior Managing Director, IntraFi 16 NAFTA and Its Enduring Legacy By Mark Anderson, Legal and Legislative Assistant, NMBA 20 The Evolving Deposit Landscape What You Need to Know By Michael A. Johnson, SVP and Southwest Regional Manager, PCBB 22 8 Reasons Why Banks Should Go Bananas By Neal Reynolds, President, BankMarketingCenter.com 26 In Memoriam 26 Bank News 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 A PRODUCTIVE AND INSIGHTFUL YEAR AS PRESIDENT BY KYLE BEASLEY President, New Mexico Bankers Association In observing the legislative process, an anonymous quote I read came to mind: “There are few ironclad rules of politics, but to one there is no exception. When a politician reports that talks were useful, it can safely be concluded that nothing was accomplished.” This will be my final President’s Message. It has been an honor to serve as president of the New Mexico Bankers Association. The NMBA is a great organization that has improved our industry and strengthened our communities throughout our state. I want to highlight a few things I particularly enjoyed during my tenure. I found the legislative road trip with John Anderson extremely rewarding and interesting. It was a wonderful opportunity to meet with incredible leaders and bankers in our state. In fact, traveling through our state for the association was my favorite part of my tenure as president. To witness what is going on in Carlsbad was eye-opening. Oil and gas have been very kind to Southeast New Mexico, and the hospitality of their communities is a 10 out of 10. When we arrived in Roswell, the town had just been hit by a 100-year flood. However, what struck me was the positive attitude of the bankers, legislators and city officials we met. Mayor Tim Jennings (former state senator) spoke at our luncheon and felt that the community would get the flood damage under control soon. But, most importantly, the community was getting ready for the Roswell Air Show in the Summer of 2025 in the midst of the flooding. For those who do not know, the famous Reno Air Show has relocated to Roswell. I love the enthusiasm and attitude of that community! We also had a wonderful meeting in Clovis. What I remember most is the chicken fried steak and ranch dressing. As State Rep. Martin Zamora said, “You have not lived until you have dined at K-Bob’s in Clovis.” Farmington is a great community, and it is always a treat to visit with local bankers and legislators. The pro-business attitude is infectious. In Santa Fe, we had a terrific luncheon at the Bull Ring Restaurant, which is co-owned by NMBA President-Elect Max Myers. Sen. Peter Wirth, majority leader in the Senate, provided us with an overview of what to expect during the 2025 Legislature. Sen. Wirth’s overview was fascinating and, in most respects, right on. Our final luncheon in Albuquerque was well-attended by bankers and legislators. Notably, we had a large number of legislators in attendance who had yet to be sworn in. Their excitement was palpable, and I hope they were not disappointed with their first session. The ABA Annual Convention was in New York this year. What a great event! John Asbury, former president of First National Bank, Santa Fe, was sworn in as ABA chairman. What an honor for John. Our own Ken Clayton, Western Bank, Artesia, is serving as chairman of the ABA Government Relations Council. Ken provided us with much insight concerning the federal legislative environment. We were also treated to an eight-course, four-hour dinner in New York by Jay Jenkins that was great fun for all in attendance. 4
3 DECADES OF SERVICE HTRUST.COM ∙ 575.758.7700 ∙ NEW MEXICO Offices in Taos, Santa Fe & Albuquerque Helping New Mexico families fulfill lasting legacies. State-chartered, locally-owned trust company—devoted to families & advisors The NMBA Internship Program continues to be a great success. Special thanks to Liz Earls, who has been a fantastic leader for the program and continues to be its persistent champion. We continue to grow the program with the University of New Mexico and plan to expand the program to New Mexico State University next year. The NMBA had a very successful 2025 legislative session overall. Among the numerous legislative issues that we addressed was the proposed establishment of a state bank. Also, on the calendar was an AI regulation bill and an interchange proposal, none of which we supported. Once again, our lobbying team, led by John, was able to defeat those bills that had a probable negative impact on our industry. I am particularly proud of the NMBA’s decision to provide a scholarship to an emerging bank leader for the most recent session of the Southwest Graduate School of Banking. Our first recipient is Jason Garcia from Bank of the Southwest. From all reports, Jason was a real credit to his bank and the NMBA. Congratulations to Jason! I have enjoyed working with the NMBA staff planning our 113th Annual Convention at Sandia Resort. I revised the timing of some of the events, including golf and the annual dinner. I hope you enjoy. I am also pleased that Max Myers, Century Bank, will succeed me. Max is always the life of the party, and I know he will serve the NMBA with distinction and contribute significantly to its success. Last but not least, Debbie Schaefer, long-time NMBA member services/event planner, has announced that she will retire from the NMBA effective September 30, 2025. Debbie has consistently provided members, sponsors and vendors with wonderful conventions and other educational events. She will be missed. I personally want to wish all the best to her in retirement. I’m sure our members will join me in that salute. Again, thank you all for the opportunity to serve as the New Mexico Bankers Association president, and I want you to know that I will continue to serve the NMBA. 5
EXECUTIVE VICE PRESIDENT’S MESSAGE JOHN W. ANDERSON Executive Vice President New Mexico Bankers Association BACK TO THE FUTURE AND ONE BIG BEAUTIFUL BILL As you may know, the NMBA recently moved to a new office at 7801 Academy Rd. NE, Bldg. 2, Ste. 202, Albuquerque, NM 87109. We had leased our former office space for 20 years and accumulated an incredible amount of paper, files and memorabilia over the years. Overall, it’s been nice to get a bit of a fresh start. Sunwest Bank While going through articles I have saved, there was one in particular that caught my eye. It was concerning the conversion of Albuquerque National Bank to Sunwest Bank of Albuquerque. I love history, so I thought I would share some of the highlights of the article, if for no other reason than it demonstrates how profoundly times have changed. In 1983, Albuquerque National Bank, the state’s largest bank for 50 years, became Sunwest Bank of Albuquerque. With $1.7 billion in assets, Sunwest was double the size of its nearest competitor, First Interstate Bancorp. 6
The following appeared in a 1983 Albuquerque Journal news article: William “Bing” Grady, president of the bank, admits that he and his team of top executives have been looking over their shoulders of late at the pack of pretenders to the throne of state banking. Loosed from the bonds of regulation and lobbying hard for still more freedom to introduce new packages of financial services and interstate banking, feisty brokers and thrifts throughout the country are knocking banks off at the rate of one a week. “Our competitors are going to be strong,” acknowledges Grady. Still, Sunwest has been a leader in service throughout the state. It was the state’s first mortgage lender, the first to issue credit cards, and the state’s leader in electronic banking. It’s Mesa Grande bank-card center — the state’s only processing center — makes and embosses credit cards, authorizes credit on a 24-hour basis, and processes Visa and Mastercard for 45 banks, 6,500 merchants and 185,000 cardholders. “This community doesn’t like change,” said Grady. “The good old boy days may be gone, but when a customer walks in the door, he likes to know that he’s going to see the same faces.” As of 1983, Sunwest held 25% of deposits in Albuquerque, First National Bank held 15.2%, First Interstate Bank held 7.7%, First City National Bank held 4.4%, Albuquerque Federal held 17.1%, Sandia Federal held 11.0% and all other banks held 20%. Of course, Sunwest is now Bank of America, the second largest bank in Albuquerque by deposit size with $5.51 billion in deposits as of June 30, 2024, and a 12.6% market share. One Big Beautiful Bill (OBBB) My comments concerning OBBB, which was signed into law on July 4 and contains 870 pages, are intended to discuss certain subjects covered in that bill and do not reflect in any way my personal opinions or the opinions of other individuals related to the NMBA. Our intent is to simply report the facts. Business Provisions ACRE Act: OBBB includes a narrow version of the Access to Credit for Our Rural Economy Act of 2025 (ACRE). The act permits a qualified lender to exclude from gross income 25% of interest income derived from certain qualified real estate loans to include any loan secured by rural agriculture real estate such as any real property which is substantially used for the production of one or more agricultural products, any real property which is substantially used for the trade or business of fishing or seafood processing, and any aquaculture facility. Section 199A Pass-Through Deduction: The OBBB maintains the current Section 199A pass-through deduction rate of 20% and makes it permanent. Qualified Business Income Deduction: Noncorporate taxpayers who held interests in certain partnerships and other pass-through entities, including real estate investment trusts 7
(REITs), are allowed a 20% deduction for domestic business profits (the section 199A deduction). Remittance Transfers: OBBB imposes a remittance tax of 1% payable by the sender of cash and cash equivalents to recipients outside the United States. Transfer provider must collect the remittance tax and has secondary liability if the tax is not collected. There are exceptions for transfers funded with a U.S. debit or credit card or from an account held with certain financial institutions. Estate and Gift Tax Exemption: OBBB permanently increased the estate and gift tax exemption to $15 million per individual, with inflation adjustment after 2025. Individual Income Tax Rates Under Tax Cuts and Jobs Act: OBBB makes the 37% top marginal rate permanent. State and Local Tax (SALT) Deduction Cap: OBBB increases the cap to $40,000 for 2025, with an annual increase of 1% per year through 2029. The cap is reduced to $10,000 for those with income above $600,000 (with annual 1% increases to this income threshold). Excise Tax on Investment Income of Private Universities: OBBB creates a tiered system with three rate brackets ranging from 1.4% to 8% based on the size of the institution’s endowment (determined on a per-student basis). This applies to taxable years beginning after December 31, 2025. Health Care Provisions: Health care analysts have commented that every state’s health care system will be adversely affected by the OBBB in a multitude of ways, and New Mexico, being a poor state heavily dependent on government assistance, may feel the effects more acutely than most. Based on most recent estimates, New Mexico stands to lose $2.8 billion in Medicaid funding and at least $224 million in cuts to SNAP benefits (food stamps). As a result, it’s estimated that 88,000 New Mexicans will lose Medicaid coverage while about 58,000 will likely lose SNAP benefits. The New Mexico Health Care Authority (HCA) also estimates that at least six rural hospitals may close, and jobs may drop by 2% across the state. According to Kari Armijo, cabinet secretary for the Health Care Authority, facilities in Gallup, Las Vegas, Taos and Union County are those currently at the highest risk for closure. The nonpartisan Congressional Budget Office has found the legislation is set to strip nearly $700 billion in Medicaid and $267 billion in SNAP funding by 2034, while increasing the number of Americans without health insurance by 16 million. It’s going to hit New Mexico particularly hard in both of these areas, as nearly 40% of our state’s population is on Medicaid and 23% enrolled in SNAP. According to the HCA, New Mexico stands to lose more than a quarter of its annual Medicaid funding, a large percentage of which would have supported reimbursement to health care providers. The outlook for SNAP is similarly bleak, with the state estimated to lose anywhere in the range of $224 million to $352 million in the first year alone. However, analysts believe that these numbers alone don’t paint the full picture of how dire the situation truly is. The budget bill also imposes new community engagement and work requirements for Medicaid and SNAP recipients, requirements the HCA said would create additional red tape and mountains of paperwork for the 254,000 Medicaid enrollees in New Mexico and the 175,979 SNAP recipients in the state. Cuts aren’t just limited to New Mexico’s Medicaid program, but are set to massively affect the state’s hospitals and BeWell, the state’s health insurance marketplace. Sara Fitzgerald, director of policy and compliance at BeWell, said the bill will create narrower eligibility requirements and more obstacles to enrollment while also driving up health insurance premiums. “Ultimately, that makes it harder to get coverage, harder to keep coverage and harder to afford coverage, which at the end of the day spells decreased coverage,” Fitzgerald said. Every analysis of the legislation, including that of state officials, suggests that it may well make life for the average American much more difficult. In a state like New Mexico, where we operate on thin margins and depend greatly on the federal government, it’s going to exacerbate existing problems. One of our state’s most persistent issues is our healthcare system, and the OBBB will make healthcare both more expensive and inaccessible for many New Mexicans. 8
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WASHINGTON UPDATE CUTTING THROUGH THE NOISE — AND THE REGULATORY RED TAPE We are halfway through 2025, and while there have been several significant developments — from the escalation of geopolitical tensions abroad to economic uncertainty at home — there’s a positive message I want to send to bankers: Our agenda is moving forward. With the help of tireless advocates here in Washington and at the state associations, ABA is continuing our steadfast work with the administration and like-minded lawmakers in Congress to advance the policy priorities that are most important for our members, as outlined in our “ABA Blueprint for Growth” and available by scanning the QR code — and we have the tools, the resources and the people in place to make it happen. ROB NICHOLS President and CEO, American Bankers Association https://www.aba.com/advocacy/ what-we-stand-for/blueprint-for-growth In early June, Federal Reserve Gov. Miki Bowman was sworn in as the new vice chair for supervision — which we view as an incredibly positive step for our industry. Her first speech shortly after her confirmation gave a strong signal that we could soon see a return to tailored regulation that will help banks unlock economic growth and better serve their customers, clients and communities while still managing risks. Gov. Bowman is one of many policymakers now occupying key positions in Congress and at the banking agencies who understand just how vital it is that we have a strong, thriving banking sector in this country. We’ve also had a number of wins in the past few months alone that again signal a return to a more rational regulatory framework. Congress came together to pass a bipartisan bill rejecting the CFPB’s misguided overdraft rule — which would have taken a vital credit option off the table for thousands of Americans who rely on it to manage their finances responsibly — and it was signed by President Trump earlier this spring. This action not only scraps the overdraft rule, but it also 10
blocks the CFPB from issuing a substantively similar rule in the future. ABA played a significant role in getting the CRA resolution over the finish line, working to educate lawmakers and their staff on the harm this rule would do if allowed to take effect. There were some in our industry who didn’t think we could get this done, but ABA and our members pushed hard, and our industry is stronger for it. We also continue our advocacy on Capitol Hill in support of longstanding ABA priorities like the Access to Credit for our Rural Communities Act (ACRE) — which was reintroduced with strong bipartisan support in this Congress — as well as bills that would encourage de novo formation and support the important work of community development financial institutions and minority depository institutions. On the regulatory side, we’ve seen rollbacks of several misguided rules or policy statements, and the banking agencies have signaled forthcoming changes to the 2023 Community Reinvestment Act final rule, as well as changes to rules implementing Sections 1071 and 1033 of the Dodd-Frank Act. 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 And — after sustained advocacy by ABA — the CFPB rescinded a package of “guidance” documents that we felt actually set new regulatory expectations, while circumventing the rule-writing process. Coupled with several recent victories in court — including favorable settlements with the CFPB over their appeal of our UDAAP win and late fee final rule — it seems that a regulatory recalibration is well underway. We continue to hear commitments from Treasury Secretary Scott Bessent about working constructively with our sector to cut through the red tape. While they might not be the things making national headlines, these changes are happening — and they are incredibly meaningful not just for banks, but for the American economy. Email Rob at nichols@aba.com. 11
HOUSING NEW MEXICO It was April 10, 1975, when Gov. Jerry Apodaca signed House Bill 88 during the state’s 32nd legislature, enacting the Mortgage Finance Authority Act and creating the New Mexico Mortgage Finance Authority. Housing New Mexico — which the organization rebranded to last year — commemorated its 50th anniversary at a press conference on April 10, 2025. Two 1975 representatives — Adele Cinelli Hundley and Raymond Sanchez, who was also speaker of the House — spoke at the press conference. Cinelli Hundley recruited Sanchez and the late Rep. Edward Lopez to get the proposed housing agency legislation passed 50 years ago. Housing New Mexico Executive Director/CEO Isidoro Hernandez highlighted the quasi-governmental entity’s partnerships as an integral part of its 50-year history. “The fact that we have served over 505,000 New Mexicans since our inception in 1975 is due in large part to the hundreds of partnerships we have with service providers, lenders, developers, realtors, housing authorities, local governments, Tribal partners and more,” said Hernandez. “The impact we have had would also not have been possible without the support of our legislators, governors and board members — as well as the hard work of our dedicated staff — over the years.” In its 50-year history, Housing New Mexico has impacted New Mexicans as follows: • 27,371 homes built. • 34,359 homes preserved through rehabilitation or weatherization. • 72,668 families that became homeowners through first mortgage and down payment assistance programs. • 122,425 people and families who received rental assistance. CELEBRATES 50 YEARS, PREPARES FOR 2025 HOUSING SUMMIT By Kristie Garcia, Housing New Mexico • 10,557 families that received mortgage assistance through the Homeowner Assistance Fund. • 238,546 people who received homelessness prevention or support services. • 505,926 total people, families and homes impacted. The economic impact of Housing New Mexico’s investment in these affordable housing initiatives has been conservatively estimated to be more than $4.3 billion and has supported over 43,800 jobs. After 49 years of operating as New Mexico Mortgage Finance Authority, the agency rebranded to Housing New Mexico in July of 2024 to better reflect its diversity of programs across the housing continuum, from homelessness to homeownership. While its legal name remains New Mexico Mortgage Finance Authority, Housing New Mexico more accurately encompasses its vision that all New Mexicans will have quality, affordable housing opportunities. In addition to providing mortgage and down payment assistance, Housing New Mexico has grown immensely over the years, providing funding for specialized 12
and transitional housing, multifamily development, single-family development, rehabilitation and weatherization for homeowners, and more. “We are strong believers that housing is the foundation for strong families and communities,” said Hernandez. To commemorate five decades of providing housing opportunities, Housing New Mexico launched a 50th anniversary web page on which “50 Stories from 50 Years” are being shared. A “50 Stories from 50 Years” social media campaign began March 26 and features two stories per week through September 17. The 50th anniversary celebration will culminate at the 2025 New Mexico Housing Summit, which will be held September 17-19 in Albuquerque. The summit will offer three days of educational workshops, networking events and keynote speakers to approximately 500 professionals from all sectors of the state’s housing industry. This year’s theme is “Housing New Mexico for 50 Years.” “The housing summit is the premier housing event in the state, and we look forward to collaborating and sharing ideas with everyone involved in the industry,” said Housing New Mexico Chief Housing Officer Donna Maestas-De Vries. “This is the time to come together to have important discussions regarding how to address today’s housing challenges and share ideas about innovative solutions and opportunities.” To register for the summit or to become a sponsor, scan the QR code. Originally signed into law through House Bill 88 with the Mortgage Finance Authority Act in 1975, Housing New Mexico celebrates 50 years in 2025. This 50th Anniversary logo concept is the result of an employee contest. Just as with the rebranded Housing New Mexico logo revealed in July 2024, the 50th Anniversary design was submitted to the Pueblo of Zia in order to obtain permission to use the Zia sun symbol. (Image courtesy of Housing New Mexico) Former Gov. Jerry Apodaca At a news conference on April 10, 2025, officials from Housing New Mexico commemorated its 50th anniversary by recognizing April 10 as the day Gov. Jerry Apodaca signed House Bill 88 during the state’s 32nd legislature, signing the Mortgage Finance Authority Act into law on April 10, 1975. Former Rep. Adele Cinelli Hundley (left) and former Rep. and Speaker of the House Raymond Sanchez (center) stand with current Housing New Mexico Executive Director/CEO Isidoro Hernandez (right) at the press conference. Hundley, Sanchez and late Rep. Edward Lopez introduced the bill in 1975. (Photo courtesy of Housing New Mexico.) https://summit.housingnm.org/ 13
ACT DEPOSIT PROGRAM A Simple Solution for Improving Your Bank’s CRA Rating By Diane Ellis, Senior Managing Director, IntraFi For many bank executives, meeting the Community Reinvestment Act (CRA) requirements can feel like solving an intricate puzzle. But a new initiative offers a safe, straightforward solution to one key aspect of CRA compliance. Launched this past year by the Community Development Bankers Association (CDBA) and the National Bankers Association (NBA), the Advancing Communities TogetherSM (ACT) Deposit Program provides banks with a secure and efficient way to fulfill their CRA obligations. By placing deposits into Community Development Financial Institutions (CDFIs) or Minority Depository Institutions (MDIs), your bank can earn credit toward the CRA’s community development and investment tests. “The ACT Deposit Program is a promising new tool for community and regional banks to earn CRA credit,” says Brian Blake, CDBA’s chief public policy officer and a former bank CRA officer, “ACT excels at meeting both the spirit and the letter of the CRA, and I believe it is very competitive compared with more complex, costly or time-consuming alternatives.” How Does the ACT Deposit Program Work? The ACT Deposit Program uses IntraFi’s ICS®, or IntraFi Cash Service®, so your bank’s deposit is eligible for millions of dollars in aggregate FDIC insurance at network banks. The minimum deposit under the program is $1 million for banks with $10 billion or less in assets and $5 million for larger banks. And the deposits earn interest. 14
Note: IntraFi is not an FDIC-insured bank, and deposit insurance covers the failure of an insured bank. A list identifying IntraFi network banks can be found at intrafi.com/network-banks. Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply. Regulators define CRA “qualified investments” to include bank deposits with a primary purpose of community development. Under this definition, and subject to considerations such as the asset size and assessment area of the bank seeking CRA credit, deposits placed at CDFI and MDI banks qualify for CRA consideration. While CRA guidelines require CDFIs to be located within a bank’s assessment area to qualify for the credit, deposits into any MDI bank qualify regardless of geographic location. Currently there are 34 MDIs and 64 CDFIs1 operating in 31 states participating in the ACT Deposit Program. You can see a full list of participating CDFIs and MDIs by scanning the QR code. 1 Fifteen ACT Deposit Program banks are both CDFIs and MDIs. Deposit placement in the ACT Deposit Program within ICS (“Program”) is subject to the terms, conditions, and disclosures in applicable agreements, including the ACT Addendum to the ICS Deposit Placement Agreement. A portion of a deposit placed in the Program may be allocated to IntraFi network banks that are not CDFIs or MDIs. The interest rate earned on Program deposits will likely be lower than the interest rate available on deposits outside of the Program. IntraFi and ICS are registered service marks, and ACT is a service mark, of IntraFi LLC. Diane Ellis is the senior managing director at IntraFi. She leads the Advancing Communities TogetherSM, or ACTSM, Deposit Program for IntraFi. Previously, she was the director of the Division of Insurance and Research at the Federal Deposit Insurance Corporation (FDIC), where she led efforts to maintain the adequacy of the Deposit Insurance Fund and an effective and fair risk-based premium system, assess economic and financial sector risks to the banking industry, conduct policy-oriented research and analysis for rulemakings, and collect and publish bank financial information and statistics, including the Quarterly Banking Profile. She has extensive executive-level experience in deposit insurance pricing and fund management and was elected twice to serve as an Executive Council member for the International Association of Deposit Insurers. Earlier, she was a senior financial analyst and bank examiner with the FDIC. https://www.intrafi.com/ act-deposit-program#find-a-bank Brian notes that these deposits will help CDFIs and MDIs do even more to help underserved communities. “ACT program deposits put capital to work in communities that need it most,” he says. “Because CDFI and MDI banks operate in low-income or low-wealth communities, their funding options are limited — but they excel at financing affordable housing and small businesses, creating jobs and expanding neighborhood facilities in low-income communities.” Blake adds that ACT deposits offer banks qualitative benefits when it comes to CRA ratings, since the deposits meet standards of being responsive, flexible and innovative. He concludes that “when leveraged by CDFI and MDI banks, ACT deposits go to very good use.” Learn More about ACT If your bank is looking for a secure, effective way to meet CRA’s community development or investment tests, learn more by emailing Diane Ellis at dellis@intrafi.com or by scanning the QR code. You’ll be doing something smart for your bank while also supplying a CDFI or MDI with much-needed deposits to lend in their markets. https://www.intrafi.com/ act-deposit-program 15
NAFTA AND ITS ENDURING LEGACY By Mark Anderson, Legal and Legislative Assistant, NMBA 16
A truism in historical, political and media analysis is that our current times are often defined by decisions or factors long in the past that are rarely discussed anymore, and are sometimes even relegated to the dustbin of obscurity. While some current problem rankles our modern society, its root causes can often comfortably exist in relative anonymity in the past, and current pundits are often left to present a kind of context-free, history-free version of events that leaves the reader or viewer in a fog of uncertainty and mystification. One such example is the North American Free Trade Agreement (NAFTA), which took effect on January 1, 1994. NAFTA isn’t discussed much in current political discourse, but it’s one of the most consequential policy decisions of the past 50 years and is a core component of the modern economy. The trade deal, which received bipartisan support in Congress at the time, was negotiated by President George H.W. Bush with Canada and Mexico from 1990 to 1992, and Bush subsequently signed the deal into law shortly before Bill Clinton’s inauguration in early 1993. NAFTA has since been renegotiated into the similar U.S.-Mexico-Canada (USMCA) trade agreement in 2020, but its legacy and consequences certainly endure. NAFTA was a controversial issue during the 1992 presidential election, with independent candidate Ross Perot hammering both Bush and Clinton for supporting the deal. Perot said it would lead to a “giant sucking sound” of jobs rushing to Mexico. Perot’s attacks were effective, as he received the highest percentage of votes for an independent candidate in a general election in American history. However, Perot’s attacks primarily stuck to the incumbent Bush, who oversaw the negotiation of the deal, and didn’t have quite the same effect on the younger Clinton, who didn’t have Bush’s extended national track record nor his blue-blood, patrician bearing. Clinton also received notable criticism from the left wing of his own party and trade unions, but seemed largely oblivious to them and sold the legislation with enormous confidence and conviction. In the early 90s, there was a full-court press by the American media and political class to depict NAFTA as an economic panacea, a deal that would both protect the essential components of the American economy while simultaneously launching the U.S. into an unlimited utopian future. For the most part, NAFTA wasn’t particularly difficult to sell the American public, as it was couched in politically expedient buzzwords such as “growth”, “innovation”, “future” and “opportunity.” Its potentially negative consequences were written off as the concerns of stick-in-the-mud types caught in the past or economically protectionist fringe elements. However, in Mexico, it was quite different. The Zapatista guerrilla army in southern Mexico launched an armed rebellion against the free trade deal, leading to days of fighting with the Mexican government and dozens of deaths. As an article from the Economic Policy Institute details, “Clinton and his collaborators promised that the deal would bring ‘good-paying American jobs’, a rising trade surplus with Mexico, and a dramatic reduction in illegal immigration. Instead, NAFTA directly cost the United States a net loss of 700,000 jobs. The surplus with Mexico turned into a chronic deficit. And the economic dislocation in Mexico increased the flow of undocumented workers into the United States. Nevertheless, Clinton and his Republican successor, George W. Bush, then used the NAFTA template to design the World Trade Organization, more than a dozen bilateral trade treaties, and the deal that opened the American market to China, which Increased migration from Mexico to the U.S. in recent decades is a perfect example of an issue with material, concrete causes that our political class refuses to explain in direct, honest terms. Elevated Lending CDC Proud to help businesses grow with SBA 504 loans. 505-627-6816 505-200-2358 | ELCDC.com | JulyLiz@elcdc.com “I’m here to guide you through the loan process. Contact me to get started.” July Liz - Business Development Officer Your new storefront Your new storefront ELCDC.com Unlock the Capital Your Business Needs to Thrive Unlock the Capital Your Business Needs to Thrive 17
alone has cost the United States another net 2.7 million jobs. The result has been decades of relentless outsourcing of jobs and technology.” In the past 30 years, in large part due to economic upheaval, demagoguery has become a notable, even defining, feature of American politics. When people are economically precarious, it becomes easier to convince them that scapegoats, no matter how irrational or misplaced the blame, are the cause of intractable systemic problems instead of the actual culprits. NAFTA had dramatic effects not only on the American economy but also on the economies of Mexico and Canada, leading to cascading externalities. This includes immigration, which continues to be a defining issue of American politics. Putting aside the uglier elements of the immigration debate, its salience as an issue has rapidly expanded since NAFTA’s passage, for a few notable reasons. It’s undeniable that immigration has essentially become a political football, used as a stand-in for a myriad of other problems Congress has no desire to address, and, when deployed most cynically as an issue, a tool of demagoguery. NAFTA was a flashpoint for this new reality, and it’s largely straightforward to see why. A highly detailed article in The American Prospect about NAFTA’s history explains, “Like the other trade agreements of our age, NAFTA is not really about trade. U.S. tariffs on Mexican imports were relatively low before they went into effect. In actuality, the treaty was an agreement to allow market penetration and investment, the relocation of production and the creation of supply chains in manufacturing. Up until the mid-1980s, Mexico had a very protective policy that restricted foreign investment and controlled the exchange rate to encourage domestic growth. A sharp shift in the late 1980s included market opening measures, privatization and economic reforms. These reforms were accelerated by NAFTA’s provisions on foreign investment.” NAFTA caused a huge influx of capital from the U.S. into Mexico, and vice versa. As the article continues, “NAFTA produced an increase in U.S. investment in auto plants, electronics and garment factories, meatpacking plants and other enterprises. Foreign direct investment rose from $17 billion in 1994 to $104 billion in 2012. U.S. companies, not only in manufacturing, expanded into Mexico generally, using economic reforms and privatization as their wedge. Walmart became Mexico’s largest private-sector employer. Union Pacific and Grupo Mexico bought up the nation’s railroads and ended passenger service, which Union Pacific had long since ended in the U.S. Big Mexican capital also moved into the U.S. A number of these corporations brought with them the anti-worker policies they had honed at home. These changes put Mexican workers increasingly into competition with American and Canadian workers.” As the article further details, NAFTA super-charged immigration from Mexico to the U.S., for understandable reasons. “At the time of its enactment, some NAFTA champions argued that it would reduce the wage differential between American and Canadian versus Mexican workers. Though the wages of U.S. workers have largely stagnated, that differential has nonetheless grown. NAFTA hurt Mexican wages, rather than reducing the wage differential. In the 20 years after NAFTA went into effect, the buying power of the Mexican minimum wage dropped by 24%. In 2000-01, at the time of the dot-com crash, 400,000 jobs were lost on the U.S./Mexico border, and in the Great Recession of 2008, thousands more were eliminated. With the border so close, many crossed it to survive. NAFTA went far beyond freeing investment; it produced displaced people and swelled an immense wave of migration to the U.S. and Canada. Congress had been warned that NAFTA might increase poverty and fuel migration, but they moved forward with the deal nonetheless.” The two principal consequences of NAFTA for most everyday people were economic precarity and geographic displacement. In 1990, 4.5 million Mexican migrants were living in the U.S. By 2008, the number reached 12.67 million, roughly 9% of Mexico’s total population. Many of those migrants came after the passage of NAFTA. And because our political leaders refuse to be culpable for the consequences of their decisions, they don’t fess up to the actual reasons behind migration. Instead of leveling with the American people about the consequences of certain policy decisions, most politicians choose to fear-monger, search for convenient scapegoats, mystify the source of the problem, remove historic context from systemic issues, and, in some cases, outright lie. Instead of being honest about the source of increased migration from Mexico, which would be mighty inconvenient for the political class, it’s easier to demagogue, to continually stoke fear and prejudice. Politicians know that an environment of increased economic uncertainty is the perfect one to create fear and to encourage people to lean into their worst impulses. It’s telling that nearly every decision our political leaders make increases economic uncertainty. One of the primary tools of demagogues is to strip current events of history or context and replace them with their own warped interpretation of reality. In recent decades, Americans have seen a rapid increase in this mode of politics, and policy decisions like NAFTA provide the fuel for this explosive atmosphere. Increased migration from Mexico to the U.S. in recent decades is a perfect example of an issue with material, concrete causes that our political class refuses to explain in direct, honest terms. Instead, we now live in an atmosphere of fear, distrust and paranoia, and the people who have had access to the levers of power in recent decades refuse to take any blame, course correct or be honest about the sources of any of our intractable problems. We have a class of political leaders who have made a series of wildly destructive decisions, and they’ve chosen to double down and head down an extremely dark path. Let’s hope we make it out mostly intact. 18
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THE EVOLVING What You Need to Know DEPOSIT LANDSCAPE The rise of digital banking and fintech platforms has transformed depositor behavior, making it increasingly important for community banks to adapt their strategies to manage the cost of funds and remain competitive. This challenge has been a top concern for community banks in recent years, as rising rate sensitivity, digital banking adoption and evolving depositor expectations continue to reshape the industry. To stay ahead, community banks must understand these structural shifts and develop sustainable funding strategies. The Growing Cost of Funds and Deposit Competition Nearly 90% of community banks identified cost of funds as a very or extremely important issue, according to the Conference of State Bank Supervisors’ (CSBS) 2024 Community Bank Survey. This proportion has nearly doubled since the 2022 survey, reflecting both rising funding costs and heightened deposit competition. The cost of funds has more than tripled since 2020, increasing from 0.74% in December 2020 to 2.85% by March 2024. As rates increased, depositors became more rate-sensitive, leading to greater money movement between banks and non-bank financial institutions. By Michael A. Johnson, SVP and Southwest Regional Manager, PCBB 20
Shifting Depositor Behavior: A Structural Change Historically, deposit rates followed a slow, predictable cycle, with customer movements largely driven by bank-led pricing decisions. However, since 2022, digital tools and fintech’s have accelerated deposit flows, making customer behavior more dynamic and unpredictable. • A growing proportion of deposit outflow events involved instant transfer apps like Zelle or Venmo, enabling same-day transfers. • Deposit beta surged from 0.25 before the 2022 Fed funds rate hikes to 0.5-0.6 in 2023, meaning rate hikes are passed to depositors much faster. This represents a fundamental shift in how depositors behave — community banks must adapt by offering competitive products and leveraging customer relationships for retention. Three Critical Questions Before Raising Deposit Rates While higher rates may seem like the easiest way to compete for deposits, community banks should consider three strategic questions before making pricing decisions: 1. Does your bank need additional deposits? There’s only one fundamental reason to spend money on attracting deposits: because your bank has profitable ways to deploy them. Assess your overall funding strategy, including: • How much funding is needed for loans and other profitable uses? • How much of your current deposit base is at risk of outflow? • What alternative funding sources exist, such as correspondent banking services, liquidity lines or structured funding solutions that may provide flexibility while maintaining deposit pricing discipline? 2. Are you reacting to market data or individual complaints? Some institutions feel pressured to raise rates when a competitor does or when a single high-value customer demands higher returns. However, with today’s digital landscape, high-rate depositors are the most likely to move their money elsewhere at the next opportunity. Instead of chasing rates: • Use data to determine competitive but sustainable pricing. • Explore diversified funding options that align with long-term profitability and risk management strategies. 3. How can you optimize your deposit strategy? Attracting large-balance customers with premium rates is tempting, but these customers are more likely to move their funds quickly when rates shift. A more sustainable strategy is to: • Reward customers who use multiple products, such as treasury management services, commercial loans or wealth planning. • Incentivize relationship-based deposits over rate-driven accounts. • Consider requiring a depository account with every lending relationship. Breaking down silos between different departments can help identify your best customers and create a strategy that looks at the entire customer relationship. • Ensure deposit gatherers are being appropriately incentivized through product pricing and funds transfer pricing. Strategic Takeaways for Community Banks 1. Cost of funds has risen significantly, and depositors are more rate-sensitive than ever. Community banks need a clear funding strategy before aggressively pursuing new deposits. 2. Digital banking and fintech platforms have made deposit flows highly dynamic. Offering niche digital banking solutions and real-time payments may help retain customers. 3. Rather than chasing rate-sensitive funds, community banks should focus on relationship-based deposits. Encouraging client engagement and establishing primacy with them as their main financial institution can increase the client’s net value. By adapting to this new deposit environment, community banks can optimize their balance sheets while maintaining a competitive edge in an increasingly volatile financial landscape. To continue this discussion or for more information, please contact Michael A. Johnson, SVP and southwest regional manager for PCBB, at mjohnson@pcbb.com. Learn more at pcbb.com. 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. PCBB was recognized by American Banker as one of the “Best Banks to Work For” in 2024. 21
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