New Mexico Thrifts, Betting On Insurance Fund Merger, Prepare

Several of New Mexico's 11 savings institutions are gearing up to convert to commercial banks.

The move is in anticipation of the merger of commercial bank and thrift charters. At the heart of that change are efforts to facilitate bad debt recapture and recapitalize the Savings Association Insurance Fund.

Should the bank and thrift funds merge, New Mexico's thrift executives say there would be few reasons left to keep a thrift charter.

"If there wasn't the BIF-SAIF issue and the bad debt recapture issue, I think you'd see everybody in the state convert right now," said Bryan J. Chaippeaux, chief operating officer, Century Bank, Santa Fe.

Gary Lenzo, chief executive officer, Matrix Capital Bank, Las Cruces, said it's only a matter of time before the thrifts are gone.

"I think over the next three to five years, the traditional differences between thrifts and banks are going to disappear," he said. "Savings and loans are going to have to move out of the traditional one- to four-family structures and into more competitive niches."

New Mexico's savings institutions have lagged behind commercial banks for some time. According to Sheshunoff Information Services, the group posted a collective return on equity of 13% in 1995, well below the 17.4% average for the state's 66 commercial banks.

At Century and Matrix, the switch is already under way on the balance sheet. Century has beefed up its commercial loan capacities, and Matrix is working on increasing its consumer lending portfolio and credit card operations.

Others are thinking along the same lines

"I think we'll ultimately convert to being a bank," said George W. Mitchell, president, Pioneer Savings Bank, Roswell. "We're somewhat like a commercial bank now, and I think most savings institutions will convert before too long."

"I'd say that thrifts and commercial banks would probably be under a universal charter within the next three or four or five years," said Robert Wertheim, chief executive of Charter Bank for Savings, Santa Fe. "We've essentially had all the rights of a commercial bank for some time and we feel we serve our area as a community bank."

The issue of bad debt recapture is the biggest obstacle keeping many savings banks from making the conversion now. For several decades, federal savings institutions have received government subsidies for at least a portion of their taxes. A thrift that converted to a bank would have to pay back at least a share of the subsidy, which could be quite a large sum, especially for an older institution.

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