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Farm Credit of New Mexico Board Pursues Merger

A courageous Board of Directors does its job by committing to an honest assessment of the cooperative’s challenges, strengths and needs, and taking the best business path forward for the cooperative – regardless of that path’s popularity.

That’s the journey Farm Credit New Mexico’s Board undertook more than five years ago. They began the process at a time when it could have just as easy to maintain the status quo because there were no pressing issues. Instead, the Board took on the hard work of committing years to fully study and understand the challenges likely to confront FCNM in the future, the tools and resources FCNM would need to thrive, and the best ways to acquire what was needed. That journey resulted in a big decision for the benefit of the cooperative.

“Farm Credit New Mexico’s board had the courage and strength to commit to a strategic journey wherever it led in the best interests of our members,” says Alan Feit, the now-retired FCNM CEO. “FCNM had enjoyed years of financial success and completed an important reorganization in 2018. After enhancing the control environment which included adding internal audit, General Counsel, quality assurance and a Chief Operating Officer position, internal operations became proficient. Despite increased operational overhead, financial results remained adequate so the board could have become complacent, but instead they committed to staying ahead of the curve and ensuring we stayed competitive in supporting New Mexico agriculture.”

A number of years ago the Board began including focused strategic sessions at every board meeting, exploring future trends and dynamics that could impact FCNM and its members. Recognizing the value of outside perspectives, the Board enhanced its discussions with outside perspectives from industry experts, including RevGen and Aimpoint, FCCS Passkey Partners. Robust discussions focused on how the Board wanted the association to look in five years, based on the possible futures they could anticipate.

FCNM’s Board was supported in this strategic journey by knowledge and tools acquired through the Premier Governance Series (PGS), an FCCS Director education program that FCNM Directors have long attended.

“PGS helped our directors identify challenges and external risks we might be facing and offers content and conversations with Directors from Farm Credit organizations of different sizes and from different regions that help broaden perspectives and deepen understanding of the bigger situation we all face,” says Alan.

Over the course of years, the Board examined expense and income trendlines and recognized the possibility for financial challenges that couldn’t be overcome with capital alone. It considered FCNM’s high market penetration with limited opportunities for meaningful growth outside of the capital markets. It looked at portfolio concentration and associated risks in the current market, and in light of expected economic and industry trends. It considered the driving need for current technology to support employees and members, and disruptions in the marketplace including
increased competition and changing customer expectations. And underpinning all these considerations, the board asked itself a critical question: Although FCNM enjoyed a competitive advantage, did it have the scale to respond to all of these challenges into the future?

While the intent of FCNM’s strategic journey was not to discuss a merger, the multiyear process of education and strategic discussion ultimately led to this decision. After facilitated conversations to consider the pros and cons, the Board began to consider possible merger partners: a smaller association with a merger of equals, or a large association where FCNM would be the smaller partner. Ultimately, looking for a longer-term solution with immediate impact, the board opted to merge with the larger organization, American AgCredit (AAC).

“This wasn’t an easy decision or an easy process. Mergers are hard and everyone has a stake in both the status quo and in the outcome,” says Alan. “Our board could have kicked the can down the road, but they made the difficult decision to merge and opted to take the more challenging path to merge with a larger association because of the ultimate benefit to FCNM’s members.”

The FCNM/AAC merger was successfully completed on October 1, 2023.

For more information on how FCCS can support your Board’s strategic planning, training, or self-evaluation processes, contact Leslie Hilton, Vice President of Governance/Board Development at 720.951.2999 or via email.

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