Tag Archives: Arizona Bankers Association

Bradley Nynalek of Quarles & Brady; Paul Hickman, president and CEO of Arizona Bankers Association; Elizabeth Reich, CEO of Make-A-Wish Arizona; AZ Big Media Editor in Chief Michael Gossie; and AZ Big Media CEO Mike Atkinson.

AZ Big Media gives almost $17K to Make-A-Wish

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AZ Big Media and the Arizona Bankers Association have teamed up to make wishes come true.

The media company, which publishes Az Business magazine, AZRE, Ranking Arizona and five other Arizona-based publications, created Bankers Care, in which it donated a portion of all bank-related advertising revenue to Make-A-Wish Arizona. The Arizona Bankers Association is featured in supplement that is published annually in the November issue of Az Business magazine.

“We realize how much the banking industry gives back to the communities they serve in Arizona,” said AZ Big Media CEO Mike Atkinson. “We saw this as a way to show the banking industry that we appreciate the support they give to the business community that we cover. We also wanted to do our part to impact the community in a positive way.”

On Tuesday, Atkinson presented a check for $16,824 to Make-A-Wish Arizona CEO Elizabeth Reich, which was the result of the Bankers Care partnership between AZ Big Media and the Arizona Bankers Association.

“The fact that we were able to do this for Make-A-Wish meant a lot to me personally,” said said AZ Big Media Editor in Chief Michael Gossie. “I have two sisters who both had life-threatening medical conditions and both were beneficiaries of the amazing work that Make-A-Wish accomplishes. The joy that Make-A-Wish brought to my sister Lisa’s final days when they arranged for the Buffalo Bills to visit her is something that brought my family comfort in a time of great despair. And the strength that my sister Kristina’s Make-A-Wish trip to Disneyland gave her allowed her to weather her medical crisis and live a full life. I am proud that AZ Big Media’s contribution will help Make-A-Wish impact the lives of other families like it enriched my family.”

Lynne Herndon - 50 Most Influential Women in AZ Business

Lynne Herndon – 50 Most Influential Women in Arizona Business

Lynne Herndon – Phoenix city president, BBVA Compass Bank

Herndon, who has worked in the banking industry for roughly 25 years, oversees the business lending activities in Phoenix for commercial lending and commercial real estate lending, including treasury management and deposits. Total loans outstanding under management are $950 million. Herndon also serves as the 2012-2013 chairman of the board of directors for the Arizona Bankers Association (AzBA). She earned her bachelor’s degree and MBA from the University of Alabama.

Surprising fact: “I love rock ’n’ roll music and I go to about 20 concerts a year.”

Biggest challenge: “Keeping the sales team motivated during the 2008 downturn was challenging. Frequent communication as well as positive feedback for good work was critical.”

Fifty Most Influential Women in Arizona Business – Every year in its July/August issue Arizona Business Magazine features 50 women who make an impact on Arizona business. To see the full list, read the digital issue >>

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Enterprise’s Barry joins AzBA board

The Arizona Bankers Association today announced Jack Barry, chairman of Enterprise Bank & Trust’s Arizona region, was recently elected to the association’s board of directors.

“Jack is well-respected for his leadership at Enterprise as well as for his long-standing commitment to the Phoenix community,” said Lynne Herndon, AzBA board chairman. “We are delighted to welcome him to the board as we continue to expand the scope and reach of AzBA, the voice of Arizona’s banking industry for more than 100 years.”

Barry joined Enterprise in 2008 as President of the Bank’s Arizona Region. Previously, he served as Executive Vice President and Market Leader for the former M&I Bank in Phoenix, where he was responsible for all commercial banking operations in the Phoenix area. He has also held senior management positions at the former Southwest Bank in Arizona and Mark Twain Bancshares in St. Louis, Missouri.

Barry earned a BS from the University of Missouri and holds a Certificate of Accountancy from the State of Missouri. He is past President of the Arizona Chapter of the RMA, is a former director of the Arizona Chapter of the Association for Corporate Growth, is on the board of the Boys & Girls Club of Metropolitan Phoenix and is vice president of Phoenix Country Club.

Jack Barry 9607

Enterprise's Barry joins AzBA board

The Arizona Bankers Association today announced Jack Barry, chairman of Enterprise Bank & Trust’s Arizona region, was recently elected to the association’s board of directors.

“Jack is well-respected for his leadership at Enterprise as well as for his long-standing commitment to the Phoenix community,” said Lynne Herndon, AzBA board chairman. “We are delighted to welcome him to the board as we continue to expand the scope and reach of AzBA, the voice of Arizona’s banking industry for more than 100 years.”

Barry joined Enterprise in 2008 as President of the Bank’s Arizona Region. Previously, he served as Executive Vice President and Market Leader for the former M&I Bank in Phoenix, where he was responsible for all commercial banking operations in the Phoenix area. He has also held senior management positions at the former Southwest Bank in Arizona and Mark Twain Bancshares in St. Louis, Missouri.

Barry earned a BS from the University of Missouri and holds a Certificate of Accountancy from the State of Missouri. He is past President of the Arizona Chapter of the RMA, is a former director of the Arizona Chapter of the Association for Corporate Growth, is on the board of the Boys & Girls Club of Metropolitan Phoenix and is vice president of Phoenix Country Club.

Kyrsten Sinema

AzBA Brings Regulatory Burden to Sinema

Seldom will you find a Member of Congress spending his or her few days out of session at a community bank.  That’s just where freshman U.S. Representative Kyrsten Sinema spent Wednesday afternoon. “It’s our job in Congress to strike the appropriate balance between a secure banking industry and adequate access to capital for families and small businesses,” said Sinema.  “In order to fortify the banking community –a core component of Arizona’s economy – we must strengthen access to capital for middle class families as well as review the impacts of regulatory burdens.”

The Arizona Bankers Association brought Representative Sinema to Arizona Bank & Trust in Phoenix on Wednesday.  Bank President and CEO, Jerry Schwallier, said “[t]his was a great opportunity to demonstrate to Arizona’s only banking committee Member how the decisions made  in Congress impact the people we serve in Arizona.  I wish more public officials would take the time to do what Ms. Sinema did today.”

Community bank presidents Gail Grace, Sunrise Bank; Mike Thorell, Pinnacle Bank; and Ed Zito, Alliance Bank, all attended the briefing along with Paul Hickman, CEO of the Arizona Bankers Association.  Hickman commented, “[t]he community banking industry in Arizona today is facing increased pressure on all fronts.  Our association’s highest priority is to help both banks and entire communities by acting as their liaison to the government.”

The industry is working to grow the economy in the wake of the 2008 recession while also responding to the most comprehensive banking reform law of modern times.  The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 is 2,319 pages long.  By comparison, the last major banking industry reform law – Gramm Leach Bliley – was 144 pages.  The Dodd Frank Act directs 398 separate rulemakings, of which 148 have been finalized, 121 are in some form of promulgation and 129 have yet to be even proposed.

Arizona Economic Forecast 2011

Arizona Bankers Association rejects bankruptcy court theory

On February 7, The Arizona Bankers Association joined 10 other western state bankers associations along with the American Bankers Association on a brief (the associations’ brief) to the Ninth U.S. Circuit Court of Appeals urging the reversal of a Ninth Circuit Bankruptcy Appellate Panel (the BAP) decision with far reaching and negative implications for real estate lenders in the western United States.

The lower court decision essentially would allow small creditors in chapter 11 bankruptcies to make the decision on whether to accept the reorganization plan, disregarding the needs of the holder of the largest claim.  It does this by segregating claims with potential and speculative third party sources of payment from the rest of the unsecured class of claimants.

“Allowing a third party guarantee to actually diminish a real estate lender’s rights in bankruptcy makes responsible underwriting that much more difficult,” said Paul Hickman with the Arizona Bankers Association.  Having a third party source of repayment adds flexibility to underwriting and ultimately allows real estate lenders to qualify more borrowers.  “Now we potentially have case law in this district that not only makes that inconsequential, but could make the deal less attractive to a lender,” said Hickman.

The lower court’s decision allows the debtor to gerrymander the creditor classes to permit a small class of unsecured claimants with a relatively small aggregate claim to accept the reorganization plan over the objection of the single asset real estate lender with a much larger claim.  The associations’ brief asserts that the lower court’s “theory . . . contradicts historical bankruptcy policy, drowns plan classification in an interpretive swamp with no logical bottom, and undermines policies on good lending practice.”

The case is In re Loop 76, LLC, Case No. 12-60021, which appeals a BAP decision, In re Loop, LLC, 465 B.R. 525 (9th Cir. BAP 2012).  The BAP decision affirmed four orders of the Arizona bankruptcy court, In re Loop 76, LLC, 442 B.R. 713 (Bankr. D. Ariz. 2010).

The 109-year-old Arizona Bankers Association represents commercial and community banks operating in the State of Arizona, irrespective of asset size or deposit base.

Download the AMICUS CURIAE BRIEF here.

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Anatomy of a bank

Paul Hickman, president and CEO of the Arizona Bankers Association, sat down with Arizona Business magazine to dissect the anatomy of a bank and what makes the industry click.

What is the model of a bank?
The fundamental business model of a bank is to give customers a safe, secure place to deposit their earnings and savings, and to lend money to borrowers for small businesses, homes, education, cars, etc. . . .  Banks pay interest on deposits and charge interest on loans.

Why do banks need to make a profit?
Like most other business enterprises, if banks are not profitable they cannot sustain themselves and stay in business. Additionally, their deposits are insured by the FDIC, which is funded by bank premiums.  A bank that continuously loses money would become uninsurable and lose its charter.

What is a common misconception about banks?
One of the most common misconceptions is that banks don’t need to charge fees for certain services. A prime example is the fees card issuers charge merchants for debit card transactions.  The fees support a safe, secure, ubiquitous medium of exchange that operates 24/7, on a global scale.

Who establishes and enforces the regulations that banks have to follow?
A bank’s primary regulator is determined by whether it is a commercial or savings institution and whether it has a national or state charter.  The primary federal regulatory agencies are the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve.  Additionally, every state has a regulatory agency that oversees state chartered banks.

What regulatory structures inhibit banks’ flexibility in modifying loans?
Banks are required to maintain certain risk-weighted asset to capital ratios.  Once a loan is modified it must be reclassified at a higher risk weight, requiring more capital.  Given the current challenges many firms are facing raising capital, this regulatory structure can act as a disincentive to modify loans.

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Are Arizona’s anti-deficiency statutes feeding the bubble?

Jack and Jill were living the American dream. They bought their dream house in 2006. Then, the economy spiraled downward. Jack lost his job. Housing values dropped, and the amount remaining on Jack and Jill’s mortgage exceeded the value of the property — commonly known as having a house that is “under water.”

Jack and Jill didn’t want to pay the mortgage any more, so they walked away, leaving the bank to clean up the mess from their financial misstep.

They were able to do that because of Arizona’s anti-deficiency statute, which says that if a person or corporation owns a residential property on 2.5 acres or less that is used as a dwelling, the owner is not responsible for any deficiency occurring after a foreclosure, according to Lynne B. Herndon, city president for BBVA Compass.

“The difference between the fair market value of the home — or the amount that the foreclosure sale brings — and the loan balance is known as a deficiency,” said Paul Hickman, president and CEO of the Arizona Bankers Association. “In Arizona, the bank suffers that loss, not the homeowner who walks away from the home.”

But it’s not only the homeowners — whom the statutes were intended to protect — who are catching the breaks.

“Unfortunately, the statute has been interpreted more broadly than originally intended such that properties used for investment are also covered,” Herndon said.

Arizona is one of only 12 states that has some form of anti-deficiency protection. Of the 12, Herndon said Arizona has the most liberal statute.

“This statute absolutely contributed to the housing bubble as investors both in this state and outside of the state knew they could buy residential real estate in Arizona and walk away if the investment became negative,” Herndon said. “Homeowners in this state have experienced larger declines in home value due to this statute allowing investors to speculate and walk away.”

The incidence of homeowners like Jack and Jill walking away from their home, avoiding hundreds of thousands of dollars of negative equity in their home, and legally sticking their lenders with a loss and became an all-too-common move during the Recession, experts said.

“In my view, the average borrower was not likely aware of the finer points of the anti-deficiency statutes when determining whether to purchase a home,” said Jennifer Hadley Dioguardi, a partner in Snell & Wilmer’s Phoenix office. “However, once the housing market crashed, the anti-deficiency statutes likely caused some homeowners who had the means to make their mortgage payments to decide to simply walk away from the residence given the fact that the lender had no recourse against them other than to foreclose upon the residence once the residence was under water. The borrower was not responsible for the deficiency. This likely contributed to some homeowners who could pay their mortgage simply walking away from the property and leaving the lender on the hook.”

Experts believe that homeowners and investors who seized the opportunity to take advantage of Arizona’s anti-deficiency statutes to protect their own financial futures, might be stifling the state’s chance at an economic recovery and exacerbating the economic collapse.

“The broadness of the deficiency statute has had an overall negative impact not just on the banking industry, but more importantly, Arizona’s long-term economy,” said Keith Maio, president and chief executive officer of National Bank of Arizona. “Arizona’s statute is the most liberally interpreted of the 12 non-recourse/deficiency states, the majority of which limit the protection to primary residences or some other means that limit its contribution to speculation. In Arizona, it allows investors to finance their speculation in housing, risk-free. If their investment does not work out, they don’t have to pay back the difference between what they sold the home for and what they owe. This statute was intended to protect homeowners, but what it has really done is hurt traditional homeowners by opening them up to large swings in housing values. I believe the impact, while negatively effecting banks earnings, is greater on the homeowners in the community at large.”

Despite the impact on the overall economy, it’s still been the banks who take the initial and biggest hit because they are often precluded from recovering the balance of the loan deficiency from the foreclosed borrower. While short sales are not protected by the Arizona’s anti-deficiency statutes, lenders have often been willing to agree to short sales and reduce or otherwise waive deficiency claims, because lenders know they could not otherwise recover loan deficiencies, should the borrower elect to foreclose.

“The deficiency statute has led to greater losses for residential lenders in Arizona because they cannot obtain a judgment against the borrower who may have the ability to repay the deficiency,” Kevin Sellers, executive vice president of First Fidelity Bank. “Lenders’ inability to pursue the borrower for the deficiency creates an environment that results in a higher incidence of strategic defaults.”

The biggest problem for lenders may be that it doesn’t appear that they will get any relief from lawmakers. Dioguardi said properties initially covered by the anti-deficiency statutes had to be two and one-half acres or less and utilized either for a single one-family or a single two-family dwelling. This language was interpreted by the Arizona Supreme Court to require that the dwelling be built and at least occasionally occupied.

“However, a recent decision by the Arizona Court of Appeals has extended the anti-deficiency protection to cover a residence that was not yet constructed and in which the borrowers had never resided,” Dioguardi said. “The Court found that even though the home was never utilized for a residence as required by the statute, because the borrowers intended to live in the single-family home upon its completion, they were subject to the protections of the anti-deficiency statute.”

The court decision, Dioguardi said, needs to be refined to protect both lenders and borrowers.

“Given that the Arizona Supreme Court declined the petition for review of the decision, the legislature should amend the statute to make it even clearer that the borrower must physically inhabit the property to claim the protection of the anti-deficiency statute,” she said. “The current risk to lenders created by the decision as it currently stands will likely drive up the cost of construction loans.”

Bank executives also believe that amending — not necessarily getting rid of — the state anti-deficiency statutes is what the banking industry needs to continue on the road to post-Recession economic recovery.

“A very reasonable solution proposed by the Arizona banking community is to simply require that a property protected from a deficiency judgment be the primary residence of you or a member of your family as already defined in Arizona’s property tax statues,” Maio said. “This will have the effect of limiting this protection for homeowners, which is what was intended. Those in our Arizona business community that oppose this type of change are motivated by their own special interests. Those whose real motivation is to profit on speculative investment or from the fees and commissions that come from buying and selling speculative homes for profit, you will oppose this type of change. But for the rest of us that want to protect Arizonans from future bubbles and encourage a long-term and sustainable economy, we should support this simple change, as it is in our best long-term interest.”

home.prices

Are Arizona’s anti-deficiency statutes feeding the bubble?

Jack and Jill were living the American dream. They bought their dream house in 2006. Then, the economy spiraled downward. Jack lost his job. Housing values dropped, and the amount remaining on Jack and Jill’s mortgage exceeded the value of the property — commonly known as having a house that is “under water.”

Jack and Jill didn’t want to pay the mortgage any more, so they walked away, leaving the bank to clean up the mess from their financial misstep.

They were able to do that because of Arizona’s anti-deficiency statute, which says that if a person or corporation owns a residential property on 2.5 acres or less that is used as a dwelling, the owner is not responsible for any deficiency occurring after a foreclosure, according to Lynne B. Herndon, city president for BBVA Compass.

“The difference between the fair market value of the home — or the amount that the foreclosure sale brings — and the loan balance is known as a deficiency,” said Paul Hickman, president and CEO of the Arizona Bankers Association. “In Arizona, the bank suffers that loss, not the homeowner who walks away from the home.”

But it’s not only the homeowners — whom the statutes were intended to protect — who are catching the breaks.

“Unfortunately, the statute has been interpreted more broadly than originally intended such that properties used for investment are also covered,” Herndon said.
Arizona is one of only 12 states that has some form of anti-deficiency protection. Of the 12, Herndon said Arizona has the most liberal statute.

“This statute absolutely contributed to the housing bubble as investors both in this state and outside of the state knew they could buy residential real estate in Arizona and walk away if the investment became negative,” Herndon said. “Homeowners in this state have experienced larger declines in home value due to this statute allowing investors to speculate and walk away.”

The incidence of homeowners like Jack and Jill walking away from their home, avoiding hundreds of thousands of dollars of negative equity in their home, and legally sticking their lenders with a loss and became an all-too-common move during the Recession, experts said.

“In my view, the average borrower was not likely aware of the finer points of the anti-deficiency statutes when determining whether to purchase a home,” said Jennifer Hadley Dioguardi, a partner in Snell & Wilmer’s Phoenix office. “However, once the housing market crashed, the anti-deficiency statutes likely caused some homeowners who had the means to make their mortgage payments to decide to simply walk away from the residence given the fact that the lender had no recourse against them other than to foreclose upon the residence once the residence was under water. The borrower was not responsible for the deficiency. This likely contributed to some homeowners who could pay their mortgage simply walking away from the property and leaving the lender on the hook.”

Experts believe that homeowners and investors who seized the opportunity to take advantage of Arizona’s anti-deficiency statutes to protect their own financial futures, might be stifling the state’s chance at an economic recovery and exacerbating the economic collapse.

“The broadness of the deficiency statute has had an overall negative impact not just on the banking industry, but more importantly, Arizona’s long-term economy,” said Keith Maio, president and chief executive officer of National Bank of Arizona. “Arizona’s statute is the most liberally interpreted of the 12 non-recourse/deficiency states, the majority of which limit the protection to primary residences or some other means that limit its contribution to speculation. In Arizona, it allows investors to finance their speculation in housing, risk-free. If their investment does not work out, they don’t have to pay back the difference between what they sold the home for and what they owe. This statute was intended to protect homeowners, but what it has really done is hurt traditional homeowners by opening them up to large swings in housing values. I believe the impact, while negatively effecting banks earnings, is greater on the homeowners in the community at large.”

Despite the impact on the overall economy, it’s still been the banks who take the initial and biggest hit because they are often precluded from recovering the balance of the loan deficiency from the foreclosed borrower. While short sales are not protected by the Arizona’s anti-deficiency statutes, lenders have often been willing to agree to short sales and reduce or otherwise waive deficiency claims, because lenders know they could not otherwise recover loan deficiencies, should the borrower elect to foreclose.

“The deficiency statute has led to greater losses for residential lenders in Arizona because they cannot obtain a judgment against the borrower who may have the ability to repay the deficiency,” Kevin Sellers, executive vice president of First Fidelity Bank. “Lenders’ inability to pursue the borrower for the deficiency creates an environment that results in a higher incidence of strategic defaults.”

The biggest problem for lenders may be that it doesn’t appear that they will get any relief from lawmakers. Dioguardi said properties initially covered by the anti-deficiency statutes had to be two and one-half acres or less and utilized either for a single one-family or a single two-family dwelling. This language was interpreted by the Arizona Supreme Court to require that the dwelling be built and at least occasionally occupied.

“However, a recent decision by the Arizona Court of Appeals has extended the anti-deficiency protection to cover a residence that was not yet constructed and in which the borrowers had never resided,” Dioguardi said. “The Court found that even though the home was never utilized for a residence as required by the statute, because the borrowers intended to live in the single-family home upon its completion, they were subject to the protections of the anti-deficiency statute.”

The court decision, Dioguardi said, needs to be refined to protect both lenders and borrowers.

“Given that the Arizona Supreme Court declined the petition for review of the decision, the legislature should amend the statute to make it even clearer that the borrower must physically inhabit the property to claim the protection of the anti-deficiency statute,” she said. “The current risk to lenders created by the decision as it currently stands will likely drive up the cost of construction loans.”

Bank executives also believe that amending — not necessarily getting rid of — the state anti-deficiency statutes is what the banking industry needs to continue on the road to post-Recession economic recovery.

“A very reasonable solution proposed by the Arizona banking community is to simply require that a property protected from a deficiency judgment be the primary residence of you or a member of your family as already defined in Arizona’s property tax statues,” Maio said. “This will have the effect of limiting this protection for homeowners, which is what was intended. Those in our Arizona business community that oppose this type of change are motivated by their own special interests. Those whose real motivation is to profit on speculative investment or from the fees and commissions that come from buying and selling speculative homes for profit, you will oppose this type of change. But for the rest of us that want to protect Arizonans from future bubbles and encourage a long-term and sustainable economy, we should support this simple change, as it is in our best long-term interest.”

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Q&A with Lynne Herndon

Lynne Herndon, city president for BBVA Compass, will serve as the 2012-2013 chairman of the board of directors for the Arizona Bankers Association (AzBA).  Herndon succeeds James Lundy, president and CEO of Alliance Bank of Arizona, as chairman of the association.

“I am excited to step into the chairman role and work with the other board and association members,” said Herndon.  “These last few years have required steadfast legislative attention and advocacy at all levels.  We have also had to respond to heightened regulatory attention and pressures.  Acting with a single voice has made a larger impact.  I look forward to continuing to strengthen the unified voice of the bankers within the state.”
Herndon sat down with Az Business magazine for a far-reaching Q&A.

AB: Why did you choose banking as a career?
Lynne Herndon: I chose banking because it allowed me to utilize both my interpersonal and analytical skills. I enjoy meeting with customers and I enjoy analyzing a business situation and offering a solution. Bankers help companies accomplish their goals of growth and expansion.  It’s a perfect fit.

AB: Tell us one thing about you that would surprise most people?
LH: My two favorite things are college football, namely Alabama football, and rock ’n’ roll music.  My husband and I go to at least 20 concerts a year, both in and out of state.

AB: What’s the biggest change you’ve seen in the banking industry since you started?
LH: Regulation.  Banks are held to a much higher standard in areas of underwriting, appraisals, and compliance. Our required level of due diligence is therefore deeper.

AB: What has been your biggest challenge in the banking industry?
LH: Winning business in a highly competitive market. Arizona has many, many banks. And many banks are chasing the same deals.

AB: What has been your greatest accomplishment in banking?
LH: Lending when times are good is easy. Lending when economic times are tough is hard. I’m proud of the fact that BBVA Compass was able to lend money during 2009 and 2010, two very difficult years.

AB: The Valley is home to many female banking leaders. Why have so many more women risen to the top of the industry here in Arizona compared with other parts of the country?
LH: There are more women in banking today because more women are seeking and aspiring to senior management positions in this industry. In particular, more women are pursuing positions in commercial banking.

AB: What do you hope to accomplish as chairwoman of the Arizona Bankers Association?
LH: Our marquee issue is amending Arizona’s anti-deficiency statute.

AB: The banking industry has been beaten up a bit over the last few years thanks in part to Wall Street, what does the industry need to do to begin to mend its public perception?
LH: Bankers need to proactively speak to clients about what we are doing.  We are in business to make loans and we are looking for ways to loan money to individuals and businesses.  Our workforce is also very active in our communities giving both time and treasure.  We need to tell our story.

80410231

BBVA Compass’ Herndon Will Chair Arizona Bankers Association

The Arizona Bankers Association (AzBA) announced  that Lynne B. Herndon, city president for BBVA Compass, will serve as the 2012-2013 chairman of the board of directors for the association.  Herndon succeeds James Lundy, president and CEO of Alliance Bank of Arizona, as chairman of the association.

“I am excited to step into the chairman role and work with the other board and association members,” said Herndon.  “These last few years have required steadfast legislative attention and advocacy at all levels.  We have also had to respond to heightened regulatory attention and pressures.  Acting with a single voice has made a larger impact.  I look forward to continuing to strengthen the unified voice of the bankers within the state.”

Herndon has worked in banking for roughly 24 years.  She earned a Bachelor of Science in Business Administration and MBA from the University of Alabama as well as obtained the certified public accountant designation.  Herndon has served as an active member of the AzBA board since 2008.  She has served in the capacity of chair-elect for the association for the past two years.

In addition to Herndon’s election to chairman, the AzBA announced the election of its 2012-2013 board of directors during its recent 109th Annual Convention & Meeting.  The new board consists of the following officers who provide leadership to the association and the members of its staff.
· Chair:  Lynne B. Herndon, City President, BBVA Compass
· Chair-Elect:  Mike Thorell, President, Pinnacle Bank
· Vice-Chairman:  Benito Almanza, Arizona President, Bank of America
· Immediate Past Chairman:  James Lundy, CEO, Alliance Bank of Arizona

· Toby Day, Arizona President, Arizona Business Bank
· Gail Grace, President & CEO, Sunrise Bank of Arizona
· Steve Johnson, President, BMO Harris Bank
· Chuck Luhtala, President, Canyon Community Bank
· Brian Riley, CEO, Mohave State Bank
· Joe Stewart, Chairman & CEO Arizona, JP Morgan Chase N.A.
· Gerrit van Huisstede, Regional President, Well Fargo Bank N.A.
· Candace Wiest, President & CEO, West Valley National Bank

“I am pleased and honored to have these distinguished banking professionals serve and guide our association in the coming year,” said Paul Hickman, president and CEO of the AzBA.  “I look forward to a successful and productive year with Lynne and the newly-elected board.”

2012 Valley Partnership Roundtable

2012 Valley Partnership Roundtable

The 2012 Valley Partnership Roundtable discusses the need to engage and monitor federal issues impacting the development community, which is greater than ever. 

Every real estate development company actively manages issues such as water quality, dust control and industry taxation/regulation at the city and state level. However, we must be more vigilant in watching the impact of federal regulation on the real estate industry. Decisions made by the federal agencies and our Congressional delegation have a  long-term impact on our businesses.

As a sector, we have a responsibility to advocate for fair and pragmatic regulation that allows the industry to be nimble and grow responsibly. Federal regulation and oversight have expanded over the past few years and some of these expansions in oversight could negatively impact Arizona businesses. Arizona’s climate, employment bases and natural resources pose unique challenges on the federal level, and we must ensure that our delegation is prepared to fight for our state’s future.

As it celebrates its 25th anniversary, Valley Partnership, in conjunction with AZRE magazine, convened a virtual roundtable discussion on the need to engage and monitor federal and state issues that impact the development community. They include:

  • Expansion of the Clean Water Act;
  • Business taxes/workforce training credits/research and development tax credits
  • Military installations, including Luke Air Force Base;
  • Solar incentives;
  • Aerospace/defense industry, research.

Participants are members of Valley Partnership’s federal and legislative committees, including: Rob Anderson (RA), Fennemore Craig; Paul Hickman (PH), Arizona Bankers Association; Charley Freericks (CF), DMB Associates, Inc.; Rusty Mitchell (RM), Luke AFB; Mary Peters (MP), consultant, former secretary, U.S. Department of Transportation; Grady Gammage JR. (GG), Gammage & Burnham; and Michelle de Blasi (MD), Quarles & Brady.

- Karrin Taylor, DMB Associates Inc.

Q: The federal government’s growing regulation of water, environment issues and endangered species has an immediate effect on private property owners and at the state and local levels. In the Western U.S., there can be tremendous unintended consequences to these one-size-fits-all regulations promulgated in Washington. What are the risks and/or potential impacts for the development community?

GG: There are huge risks for Arizona development in ignoring federal issues. We tend to either rail at the Feds, or just hope they’ll go away. The truth is, neither attitude is useful. We need our federal representatives to vigorously engage in explaining things that seem obvious to us: like dry desert washes not being navigable, or the fact that Arizona tends to be dusty. But we need to recognize that there is an appropriate federal role in environmental regulation, rather than behave as though the EPA will go away.

RA: The risks for the development community are three-fold: Increased compliance costs; increased uncertainties associated with securing federal approval (Well will I get my permit? What will my project look like when I do?); and the possibility that the federal requirements will actually block you from developing at all. The first two risks are fairly pervasive in the development world already. The third risk is relatively rare but increasing, particularly in the area of endangered species where there is tremendous pressure to list more species and protect more habitats. We also may see more of this as the first two risks grow and become unmanageable. For example, if I do not know when I can get my permit, and do not know what my project will look like at the end of the permitting process, how can I get financing or raise capital to do the project at all?

Q: What can we (leaders in real estate) do to influence federal regulation and legislation?

MD: Consistency and certainty in policy is crucial to develop and sustain any industry. It is difficult to have certainty without having an energy policy in place. Some immediate initiatives that could provide certainty in the energy industry are: Build out/improve access to transmission; remove redundancy/inefficiencies in permitting; expand production-based incentives; and provide better/quicker access to federal land for project development.

GG: The real estate industry needs to come together with workable solutions on things like dust control of construction, and standards for developing in the desert that recognize circumstances where washes should be preserved or mass grading minimized. Constructive engagement means offering sensible alternatives for some federal involvement, that is climate and geography appropriate for the arid West. There’s a lot of of serious expertise in Arizona in dealing with these issues. The development industry will find that Arizona’s cities are valuable allies in understanding the nature of development here, and why it is different from many other parts of the country.

RA: Follow regulatory developments through agencies of concern (EPA, the Corps of Engineers) and follow legislation through Congress. Do not hesitate to contact your congressman or congresswoman on issues of concern. Be active in trade associations that lobby in Washington D.C.

CF: Real estate industry leaders and everyone in the community have many options for supporting Luke and the effort to secure the F-35 mission. First, participate in the Luke Forward campaign by registering your support (lukeforward.com), submit a letter from your company or community support organization, and spread the word by sending the link for Luke Forward to your colleagues and friends Second, participate in the upcoming public hearings for the F-35 mission Environmental Impact Study (EIS) process. Dates, times and locations will be posted on the website to visibly show your support to the community and government representatives. Finally, write or email your local, state and federal elected officials and state your support for the F-35 mission.

PH: Stay engaged. Coordinate multiple visit to members of Congress and agency officials. Be active on responding to requests for comments on proposed regultions. Create “echo chambers” on issues of vital importance to our state.

Our western state is rich in space, most of which is managed by some form of government (Fed/state/military/tribal). This requires our real estate development industry to engage in public/private partnerships. Our only alternative is not to grow our economy.

Q: There has been significant scrutiny on federal and state incentives of certain industries recently. How do you think those incentives have impacted the Arizona job and real estate markets? Are the incentives needed to jump-start an industry and spur growth? Are they worth the risks?

MP: I am generally opposed to public-funded incentives that tend to distort the market. If a determination is made that public interest is best served by advancing an issue, the better way to proceed is to focus on the desired outcome rather than a specific technology. In terms of developing alternative fuels for vehicles, for example, the outcome might be to reduce our dependence on foreign oil. Current policy provides public subsidies as an incentive to produce ethanol, and the subsidies are provided largely to mid-west, corn producing states. The process used by the Defense Advanced Research Projects Agency (DARPA) that encourages competition toward an outcome-based goal is far better than offering specific incentives. Arizona businesses and entrepreneurs could be very competitive in a DARPA-like competition resulting in more Arizona jobs and real estate development.

MD: Incentives are necessary to help spur growth and develop infrastructure that benefits society as a whole, but should be implemented in such a way that they reward success. The incentive provides the carrot, but should not provide the fuel as was the case with Solyndra. Incentives provide the necessary framework to foster economic development — job creation. Just as Arizona was feeling the effects of a downturn in the real estate market, the incentives available to the renewable energy industry helped spur the grow of a burgeoning industry for Arizona. As more projects have come to fruition, the economy has felt the impacts through the transitioning of jobs and the influx of investment in renewable generation and manufacturing. However, as an industry and state, one needs to be careful not to incentivize an industry that will not survive into the future without incentives.

Q: The debate around “earmarks” and “pork” projects continues at the federal level. Some of Arizona’s federal delegation have earned national reputations for their stand against earmarks. What are the benefits or the losses to Arizona on this issue? Should Arizona’s federal delegation work to bring federal dollars back to our community? What kinds of projects does Arizona need?

MP: When members of Congress designate special projects as part of authorizing or appropriation bills powerful committee chairs are able to direct disproportionate amounts of funding to their district or state regardless of the merits of the project. The so-called “Bride to Nowhere” in the 2005 Highway Bill is a prime example. I think, on the whole, Arizona and other states lose in this process, and our delegation is right to take a stand against earmarks. A better way is for Congress to give the states their proportionate share of funding, and let state and local officials working with our Congressional Delegation decide how and where the funds should be spent. Arizona could then use those funds to build transportation in infrastructure to support high-growth areas, such as the north-sout corridor in Pinal County.

GG: We couldn’t live in Central Arizona without federal projects. Both SRP and CAP are examples of using the Treasury of the Unites States to make it possible to live in the arid West. Sky Harbor Airport and the interstate highway system are other examples. We should not oppose the use of federal dollars for these kinds of purposes. The evil of “earmarks” is when ad hoc projects (I think “Bride to Nowhere”) are slipped into unrelated bills without any debate or being part of a comprehensive program. Our senators and congressmen shouldn’t oppose the use of federal funds for worthy projects in Arizona. They should oppose a process that disguises federal spending, that doesn’t invite public scrutiny, or that trades frivolous projects in one district for similar boondoggles elsewhere.

PH: We expect our members of Congress to fight for parochial projects that make sense. What some members of our congressional delegation object to — properly in my view — is skirting the competitive process to do that. The losses incurred by the practice of earmarking redound to us as federal taxpayers, not necessarily Arizonans. When we engage in it we may win projects for our state, but as federal taxpayers we probably paid too much inferior projects or products.

We should be working with out congressional delegation as well as the applicable federal agencies to get out projects included into the agency budgets, authorized by the congressional authorization committees and approved by the members of the appropriations committees. We also need to partner with the global growth sectors of our economy: healthcare, energy, aerospace, and high-tech manufacturing. If this crash of 2008 has taught us anything it is that the residential housing industry can’t drive an economy by itself. It has to have other sectors to support or it collapses.

Q: The Arizona Commerce Authority and local economic development groups such as GPEC have prioritized a number of industries for expansion and growth. Aerospace/defense, technology and the solar industry seem to be major opportunities for Arizona’s future. What role should leaders of the real estate development industry play at the federal level in working to support these business expansion efforts?

MP: The ACA has defined aerospace/defense, solar/renewable energy, science and technology, and Arizona innovation-small businesses and entrepreneurs as our four focus areas. The areas provide the biggest opportunity to attract and retain high paying jobs and sustainable economic development for our state. The real estate development community can help support these focus areas by working together with organizations like ACA and GPEC to let out congressional delegation know when we are competing for federal funds and programs. An example is the funding now available under the Defense Appropriations Act in which the FAA will select sites for testing UAVs. The real estate development community can also assist in redeveloping areas such as the Williams Gateway and in ensuring that growth complements, but does not encroach on, our current military installations such as Luke AFB.

MD: The message has to be clear and provide certainty for foster meaningful industry growth. For the energy sector, the growth plan needs to be inclusive of a portfolio of energy resources. The support for renewable energy at the federal level needs to be based on a broad array of goals: jobs, diversity of energy sources, national security and economic development. The industry leaders should be advocating for production-based or back-end incentives where there are metrics requiring a certain level of project development to better ensure the long-term success of the industry.

Q: Arizona has long enjoyed the benefits of having major military installations, such as Luke Air Force Base, as part of our economic base. These installations create and sustain thousands of jobs and billions of dollars in economic impact. What are the potential risks and rewards with selection of Arizona for the F-35 mission?

CF: The rewards are numerous — thousands of highly trained, educated and well-paid employees continue to thrive in the West Valley; billions of dollars in annual economic impact continue to flow into Arizona’s economy; and the community around Luke is bolstered by the consumption of goods and services from this amazing economic engine and the positive community contributions from the people of Luke. The mission for this advanced aircraft will sustain Luke for decades to come.

The risks as minimal, but important to keep in context. The military is subject to the ebbs and flows of federal military investment and resting after securing the F-35 mission would be a critical error. The state, especially those communities closest to Luke, have grown accustomed to, even dependent on, having Luke as a major employer and economic driver. As the West Valley continues to grow and evolve, it is critical to keep the economic development focus on highly-educated, high-income employment and to continue diversifying the number and types of industries represented. The risk of reductions in Luke’s mission are always a factor to be considered; and, the best solution will be a strong and diverse regional economy.

RM: If Luke AFB is selected as the second PTC, it is conceivable that it would remain a valuable national asset and an incomparable economic engine for decades to come.

The most recent study (commissioned by the state of Arizona) of Luke’s economic impact was approximately $2.17B. However,  beyond the pure dollars involved, the men and women of Luke AFB are significant contributors to the surrounding community as school and church leaders, business participants as well as stable homeowners for the community. These men and women should be viewed not only as part of the economic engine, but equally as important, quality community participants and leaders.

For more information on Valley Partnership visit, valleypartnership.org

AZRE Magazine March/April 2012

Arizona Bankers Association, Bankers Give Back - AZ Business Magazine November/December 2011

Arizona Bankers Association Impacts State’s Economy, Communities

Arizona Bankers Association Impacts State’s Economy, Communities

Ryan Suchala, Bank of Arizona, Arizona Bankers AssociationBank of Arizona President Ryan Suchala recognizes the importance of community.

“This is where we live, work and play and in many cases the city where we are shaping our families,” Suchala says. “As a father of three I give my time to better our community because this is where my boys will become men. Last year, Bank of Arizona employees spent close to 450 hours working in our community and I personally became a board member at Arizona Women Education and Employment.”

To show the Arizona banking industry’s impact on its communities, the Arizona Bankers Association (AzBA) produced a brochure titled “Arizona Banks Give Back.” The report provides a picture of the economic and charitable support the banking industry gives back to the communities it serves, and shows the influence banks have on Arizona’s economy.

Arizona Bankers Association is an organization with more than 70 members that works to create a unified voice and engage members in issues that affect the banking industry.

Lynne Herndon, city president at BBVA Compass“It’s clear the banking industry has been under a microscope the last few years,” says Lynne Herndon, city president of BBVA Compass. “We wanted to pull our information and be treated collectively as an industry to say we are looking to work with companies to help them with their financial needs.”

Arizona Bankers Association created the “Arizona Banks Give Back” survey in November 2010 to collect a variety of data from Arizona banks. The results were released in February 2011. The 12-page brochure includes statistical data that shows how banks provide financial and social stability in Arizona.

The banks that chose to participate in the survey felt that it provided a good opportunity to change the way people currently view banks. The biggest surprise to Paul Hickman, president and CEO of Arizona Bankers Association, was how high bank lending was in Arizona in 2010.

According to the survey results, Arizona banks lent $5.9 billion in new and renewed commercial loans, and more than $11 billion in new and renewed consumer loans in 2010.

“A lot of the feedback we’ve been getting is ‘Wow, I didn’t realize the volume of lending was that great in this economy,’” Hickman says.

The number is likely higher as only 35 AzBA-member institutions responded to the survey, which only represents 63 percent of the organization’s membership, and does not include information from non-member banks.

In today’s economy, banks are more cautious about lending, but the data proves that Arizona banks are continuing to lend to commercial businesses and consumers.

“We keep hearing banks won’t lend,” Hickman says. “But banks don’t make money if they don’t lend.”

Banks want to lend so they can pump money into Arizona’s economy.

Arizona banks provide direct loans to help the state government finance public improvements by improving water, sewer and public health facilities and by helping build schools.

Banks pay income tax to help support local communities as opposed to credit unions, which don’t pay federal income tax.

Arizona banks are also putting money into the economy by being a leading employer of local residents. Banks bring high-wage jobs to the local community, and employ more than 42,000 Arizonans.

Wells Fargo Bank was the fifth largest employer of Arizonans in 2010, and the average salary for an employee working at a bank was around $66,625 in 2010.

By providing jobs, banks provide a ripple effect in the community, because employees pay state taxes and are also consumers that put money back into local businesses.

Arizona banks are also doing more than just putting money into the economy. Members of Arizona banks are striving to aid their community through service.

According to the results from the Arizona Banks Give Back survey, bank employees donated 211,615 volunteer hours to community service in 2010, and donated $15.5 million to charitable and cultural organizations.

“Actions speak louder than words,” says Craig P. Doyle, Arizona regional president of Comerica Bank. “We get out and are active in making a difference in our communities. It’s better than just handing money out.”

To show their commitment to the communities they serve, Comerica employees work with nonprofits like Fresh Start Women’s Foundation, Homeward Bound, Junior Achievement, Sojourner Women’s Shelter, United Food Bank, Central AZ Shelter Services and many others.

An effort from Suchala and the Bank of Arizona helped improve literacy across the Valley.

“Last year, we hosted our annual Caring for Kids Book Drive and collected over 14,000 books for children and adults in our community,” Suchala says. “We educate with multiple employees teaching Junior Achievement programs and with educational programs to local school children. Our employees have worked together this past year sorting school supplies at the annual Salvation Army Pack to School Drive, serving food alongside Alice Cooper for the Cooperstown Christmas for Kids event and pounded nails at two Habitat for Humanity events.”

“These are good members of the community,” Hickman says. “These are people that are donating their money and time at philanthropies around the state and they’re trying hard to impart their discipline.”

Arizona banks participate in programs such as neighborhood revitalization, financial education and assistance for the underprivileged.

In 2008, Mohave State Bank created a program called “Junior Bankers.” Three years later, Mohave State bankers are still training children at Jamaica Elementary School in Lake Havasu about balancing accounts, taking deposits and bank rules. Volunteers meet each week with students before school. The program has expanded to three other elementary schools.

In 2010, the National Bank of Arizona donated one of its foreclosed homes in Glendale to Habitat for Humanity Central Arizona. The bank partnered with the organization to help renovate the property, and 118 people worked to build walls, paint and landscape the property.

Arizona banks are committed to helping the community both financially and through service, Hickman says.
“This industry is like the cardiovascular system of our economy and it needs to be robust and healthy,” Hickman says. “We don’t grow or recover without this industry.”

For more information about the Arizona Bankers Association, visit azbankers.org.

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Arizona Gives Back: By the Numbers

  • More than $5.9 billion distributed in commercial loans (new and renewed) in 2010
  • More than $11 billion distributed in consumer loans (new and renewed) in 2010
  • More than 1,300 banking center locations in Arizona
  • More than 42,000 people work for Arizona banks
  • $66,625 is the average bank employee salary

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Arizona Business Magazine November/December 2011

 

Cov1

Cover Story – Subprime Shake Out

Subprime Shake Out

Will a house of cards trump Arizona’s economy?

 

Fallout from the subprime mortgage lending mess is roiling Wall Street and roughing up the national economy. But in Arizona, at least so far, experts say its impact has been mostly psychological. “There is a perspective that we are in a crisis due to foreclosures of subprime mortgages and this is leading to gloom and doom, if not total doomsday,” says Lee McPheters, economics professor at the W.P. Carey School of Business at Arizona State University. “The numbers simply don’t back that up.”

subprime_shake_out

McPheters says as of Sept. 30, according to the most recent numbers available from the Mortgage Bankers Association, Arizona was well below the national rate for seriously delinquent subprime mortgages (delinquent 90 days or in foreclosure). Arizona’s rate was 7.47 percent compared to 11.38 percent nationally.

“Arizona is not among the troubled states,” McPheters says. “However, there are troubled areas, particularly newly developed communities such as Maricopa, where there are many foreclosed properties for sale and prices have been affected.”

John Finnegan with Colliers International says there is an emotional aspect to subprime.

“The psychological effect subprime is having on our market is more damaging than the problem itself,” Finnegan says.

Homebuyers see eye-popping foreclosure headlines and then discover home prices aren’t as low as they expect, Finnegan says. Confused, they wait.

“I’ve heard subprime has knocked out 20 to 25 percent of the buying pool for homes,” Finnegan notes.

Although home construction and sales have dramatically slowed and prices are falling, Arizona’s housing market is relatively strong.

“It’s doing what it’s supposed to be doing, which is correcting itself,” Finnegan says.

Arizona last endured a significant housing downturn in the late 1980s and early 1990s, but experts say that was a true real estate depression. Today, the residential real estate sector is returning to a normal pace after years of hyperactivity, they say.

Larry Seay with Meritage Homes says most Arizonans with subprime mortgages can qualify for traditional mortgages and also can afford higher interest rates that kick in when lower introductory rates expire.

Subprime psychology also trickled into the commercial real estate market. Last summer, investors in Arizona commercial real estate were rattled by residential subprime problems nationally and pulled back from the market. Lenders tightened their credit standards and offers to buy property dropped by half, says Bob Young with CB Richard Ellis.

“We’re seeing some investors returning to the marketplace because they sense things are settling down,” Young says. He expects investor activity will pick up this year.

But there’s more than psychology at play. The dampened housing market has impacted office leasing and industrial space absorption in Phoenix. Relaxed mortgage lending standards were availed to borrowers of all types, and lenders have tightened their criteria, says Joe Biondo of Sunwest Mortgage. Now, Arizona’s mortgage brokers and title companies are consolidating or closing as loans default and business slows, he says.

“There has been a lot of office space leased by those companies over the years and we’re hearing that a good portion of it is coming back to the marketplace or being subleased,” says Rick Danis with Grubb & Ellis/BRE Commercial.

Most of the Valley’s leased industrial space is occupied by companies with ties to residential construction and Danis says that by third quarter 2007, industrial space absorption dropped by more than half from a record 7.8 million square feet in 2005. Housing is a catalyst for retail development and Danis says retail construction will slow.

However, Paul Boyle with Grubb & Ellis expects the commercial real estate market to do well this year.

“We may not be as vibrant as we have been in the past, but I look for things in commercial to continue to stay active,” he says.

But Arizona’s economy is cooling faster than expected, McPheters concedes. He cites four factors — the slow housing market; a loss of 20,000 residential construction jobs from third quarter 2006 to third quarter 2007; significantly declining consumer spending, particularly in areas that depend on a strong housing market; and the fact that Arizona is not benefiting from a national export boom fueled by the weak dollar.

“Arizona is no longer a top 10 growth state,” McPheters says.

Possibly making matters worse is the toll the subprime collapse is having on other parts of the nation. Arizona is accustomed to, indeed dependent on, having a large number of people move here from other states. McPheters says the inflow of new residents to Arizona could slow and have a negative impact on Arizona’s economy if people living in states with serious housing market slumps can’t sell their homes. If they can’t sell their homes, they probably won’t move to Arizona as planned. That’s one less potential buyer to help reduce the glut of homes in the Arizona market and one less person living, working and spending money in the state.

But, there are bright spots.

The state’s population is still growing and unemployment is lower than the national average. Arizona ranks first nationally in growth of personal-services jobs, second in tourism-related jobs and fourth in retail and wholesale trade jobs. Nonresidential construction remains strong. The state’s banking sector is weathering subprime, as well.

Tanya Wheeless, president of the Arizona Bankers Association, says Arizona banks are “healthy and certainly not near crisis.”

Arizona Business Magazine February 2008More good news: Arizona State Treasurer Dean Martin says the state government has no investments in subprime mortgages. Plus, Arizona’s economy is diversified with wealthy retirees and service, high-tech, health care, manufacturing, communications and knowledge-oriented employment. Nevertheless,McPheters says there is a “specter of recession and a cloud of uncertainty” about the state’s economy.

“Arizona would not be immune to a national recession,” McPheters says. “If there is a national recession, theeconomic outlooks for Arizona would have to be recalibrated.”

www.brephoenix.com
www.cbre.com/phoenix
www.colliers.com
www.meritagehomes.com
www.thesunwestgroup.com

 

 

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