Kirtland federal credit union

Most of New Mexico's banks apparently are on their way to regaining their health, far better than the nationwide average.

Overall, banks in the Land of Enchantment posted a 54.5 percent increase in profits in 1991 over 1990, compared to an 11 percent profit increase nationwide.

Even though 12 of New Mexico's 83 banks did not make a profit in 1991, the state ranked fifth in profitability among all other states.

Seventy-one of New Mexico's 83 banks were profitable in 1991, or 85.5 percent.

"Higher profits have to do with more than lower interest rates," says John Jennings, senior vice president of Sunwest Bank of Albuquerque.

Sunwest and United New Mexico Financial Corp., the state's two largest bank holding companies, both reported sharply higher earnings even for the first three months of this year.

"We went through a period of over-building that created loan problems," says Jennings. Sunwest Bank of Albuquerque, incidentally, posted a .34 percent profit for 1991.

Though Sunwest's profits in Albuquerque were up in 1991, it still had to suspend dividends, which it did about the first quarter of 1991.

Sunwest, as New Mexico's largest financial institution, has 12 banks in the state and a bank in El Paso.

United New Mexico, with 12 banks and total assets of more than $1.7 billion, is the second largest multi-bank holding company in the state.

Sheshunoff Information Services Inc., a leading information and consulting firm for the banking industry, attributes higher profitability among banks to declining interest rates, which contributed to higher net interest income and higher gains from the sale of fixed income securities.

If Sunwest's merger with Boatmen's Bancshares is approved at the next shareholders' meeting June 8, Jennings says the new shareholders of Boatmen's Bancshares would probably be receiving a dividend sometime in the fall.

"Rapidly falling interest rates have contributed to a rise in profits," said Bruce Thomas, senior vice president and cashier of First National Bank in Tucumcari. First National Bank's profitability rose 0.23 percent.

Jennings contends the higher profit margins indicate the economy is regaining its health.

Since 1985, 11 New Mexico banks have closed. Three closed last year. Southwest National Bank in Albuquerque, American Bank in Rio Rancho and Liberty National Bank in Lovington closed in '91.

So far this year, no banks in the state have shut their doors.

Although New Mexico ranks 43rd in total assets, New Mexico's bank assets grew 9.8 percent, ranking New Mexico third among states in asset growth from 1990 to 1991.

New Mexico's largest banks, according to assets, are: Sunwest with $1.9 billion; First National Bank in Albuquerque with $1.3 billion; Bank of America with $957 million; United New Mexico Bank (Albuquerque only) with $893 million; and First National Bank of Farmington with $376 million.

Three of the five posted profits in 1991: Sunwest with 0.34 percent; United New Mexico with .4 percent; and, First National Bank in Farmington, with 1.03 percent.

Since a loan to a bank is an asset, banks making a lot of loans have a way of looking very good, which is why they probably looked so good through the 1980s, until 1987 when loans began turning into nonperforming assets.

In 1991, New Mexico's nonperforming loan portfolio dropped 9.9 percent from 1990, ranking it 37th in the nation; 2.8 percent of New Mexico's total loans are nonperforming, ranking it 18th in the country in that category.

Sunwest and First National Bank in Albuquerque had the dubious distinction of posting the largest percentage of nonperforming loans as a percent of total loans.

Sunwest's nonperforming loans comprised 5.84 percent of its total loans; First National Bank in Albuquerque's nonperforming loans comprised 5.77 percent of its total outstanding loans.

Next was United New Mexico with 1.63 percent, then First National Bank of Farmington with .60 percent. Bank of America's non-performing loans comprised .06 percent of its total loans.

Loan demand is still low nationwide although in New Mexico, loans were up by 9.5 percent last year over 1990.

Although New Mexico posted more loans in 1991 than in 1990, many banks -- even those whose loan portfolios had risen -- indicated that loan demand was on the low side.

Edward O'Leary, president of First National Bank in Albuquerque, reports that their loan demand was down, reflecting what he called the current malaise in the overall economy.

Jim Rose, executive vice president of First National Bank of Farmington, says that his bank's loan to deposit ratio has declined as its deposits continued to grow.

"But we generally are not experiencing the loan demand to match our deposits," Rose says. He indicates that for loan demand to rise the economy would have to improve.

"In our area the price of oil and gas is still really low," Rose says.

To a great extent, New Mexico's large banks have paralleled the country's traditional money center banks that have either had to lay off employees, sell assets, or eliminate dividends in order to survive.

First National Bank in Albuquerque's last dividend distribution was in the latter part of 1990 due to extensive TABULAR DATA OMITTED loan loss reserves in 1990 and 1991, O'Leary says.

Sunwest suspended its dividend in March of 1991. It also had to sell almost $20 million of real estate to buttress its loan loss reserves.

First National Bank in Albuquerque lowered its staff by 5 percent from 1990 to 1991; in 1990 Sunwest offered qualifying employees a voluntary early retirement which cost the company $3.3 million.

Nationwide, the banking industry has eliminated 29,000 jobs -- that's a 1.9 percent reduction in the industry workforce in 1991, a continuation of a national trend.

Since 1987, the industry has lost 60,000 jobs, or 3.7 percent of the industry total.

The nation's bank dropped from 12,323 at the end of 1990 to 11,907 at the end of 1991. Mergers and bank closings reduced New Mexico's banks by seven in 1991.

As of year end 1991, 83 banks were operating in New Mexico.

Meanwhile the merger of BankAmerica Corporation and Security Pacific Corporation became the largest banking merger in U.S. history in April.

The new institution will be known as BankAmerica Corporation, with assets of approximately $200 billion, shareholders' equity of more than $13 billion, retail branches in 10 western states including New Mexico and offices in 34 countries.

"We're looking at a future of continuous change, consolidation and standardization," says Ike Kalangis, president and CEO of Sunwest Financial Services Inc.

The United States just has too many banks per customer. Japan, for instance, has 18,000 people per bank; France 63,000 per bank; Britain, 86,000; and the United States has 7,300 people per bank.

Sheshunoff Information Services reports that losses of the 50 largest banks in the nation accounted for well over one-third of the entire industry losses in 1991.

Seven banks, with $282.3 billion in combined total assets, or 8.3 percent of TABULAR DATA OMITTED total industry assets, account for 37.3 percent of industry losses for the period.

David Barr with the Federal Deposit Insurance Corporation in Washington, D.C., says the FDIC projects another 230 to 239 insured banks will fail in 1992.

Credit unions still growing

THE LINES BETWEEN credit unions and banks in New Mexico are becoming more blurred with each passing day.

Sometimes it's difficult to tell whether you're dealing with one or the other, considering both are ballyhooing service and quality.

"Banks in the area of service and quality are trying to be more like credit unions, and credit unions, in the area of services, are trying to be more like banks," says Kevin Reilly, marketing director for the 35,000-member New Mexico Educators Federal Credit Union.

What credit unions don't like, however, are attempts to lump credit union deposit insurance into the FDIC, which is now at least $7 billion in the red.

Credit unions pay 35 cents for every $100 of deposits to the National Credit Union Administration.

"We're much better capitalized than FDIC," says Ron Moore, new president of the New Mexico Credit Union League and president and CEO of the State Employees Credit Union in Santa Fe.

"Our insurance fund is very strong, and that's due to our conservative nature," Moore said.

Thrifts still struggling

TOTAL ASSETS FOR New Mexico's thrifts declined by 55.2 percent last year to $133.7 million compared to a 15.2 percent decline nationwide.

Con Rusling, president of Sheshunoff Information Services, attributes the drop to the removal of unhealthy S&Ls from the industry.

Like banks, S&Ls profitability was up in 1991, but the increase was not high -- a mere .07 cents per $100 worth of assets.

New Mexico and California S&Ls both saw a return of 7 cents per $100 in deposits in 1991, ranking lowest of all S&Ls that showed a positive return.

Out of the 14 operating New Mexico thrifts, 12 posted a profit in 1991, compared to only 7 of 18 in 1990.