Minutes of the Regular Meeting of NMSBIC, August 15, 2025

A meeting of the New Mexico Small Business Investment Corporation was called to order on this date at 9:03 a.m. at WESST Enterprise Center, 609 Broadway Blvd NE, Albuquerque, NM 87102. A quorum was established.

Members Present:
Mr. Joshua Smith, Chair
Ms. Anne Beckett, Vice Chair (via Zoom)
Mr. Robert Valdiviez, Secretary/Treasurer (via Zoom)
Mr. Arsenio Garduño, designee of Hon. Laura M. Montoya, NM State Treasurer
Ms. Sayuri Yamada
Mr. Joshua Grassham (via Zoom)

Members Excused: Ms. Kristina Alley

Executive Director/Financial Adviser to Board: Mr. Russell Cummins

Board Legal Counsel: Mr. Randall McDonald

Guests Present:
Tony Lopez, Chief Financial Officer, Raza Development Fund
Adrian Ruiz, Chief Investment Officer, Raza Development Fund
Amy Laughlin, SVP New Markets Tax Credits, Raza Development Fund

REVIEW AND ACCEPTANCE OF AGENDA

Ms. Beckett moved to accept the agenda, as published. Ms. Yamada seconded the motion, which passed unanimously.

BOARD MINUTES FOR June 20, 2025

Ms. Yamada moved to approve of the Board Minutes for June 20, 2025, as presented. Ms. Beckett seconded the motion, which passed by roll call vote with all directors voting yes except for Chair Smith and Mr. Garduño who both abstained.

RAZA DEVELOPMENT FUND, PROPOSED NEW NMSBIC LINE OF CREDIT

Mr. Cummins introduced Tony Lopez, Adrian Ruiz, and Amy Laughlin of Raza Development Fund (RDF). Mr. Ruiz said he will be leaving RDF, and Ms. Laughlin will take over as chief investment officer. Mr. Lopez provided background information about RDF’s lending operation including:

• A certified development financial institution (CDFI) with a 25-year legacy and a commitment to the next 25 years.
• Standard & Poor’s (S&P) AA- rating.
• Loan portfolio composition includes 14% education, 28% housing, and 16% healthcare.
• Member of Federal Home Loan Bank of San Francisco

Mr. Cummins said at the New Mexico Legislature’s Investments and Pensions Oversight Committee (IPOC) meeting last year, Senator Figueroa highlighted the need for medical facilities in rural areas of New Mexico. RDF has experience financing the construction of medical facilities, in addition to providing financing for small businesses and charter schools.

Mr. Cummins said the proposed NMSBIC line of credit is different in that (1) it would be unsecured, and (2) there would be a requirement to maintain an S&P rating of A- in lieu of a net assets ratio requirement. Mr. Cummins said the only other NMSBIC lending partner with similar terms is the New Mexico Mortgage Finance Authority (MFA). He said RDF has unsecured lines of credit from banks that would make a secured NMSBIC line of credit unworkable for them. The proposed unsecured line of credit is based on RDF’s strong financial position and proven track record of lending to businesses. Mr. Cummins referred to information in the board package showing RDF’s $363 million in assets, $112 million in net assets, and S&P ratings report.

Mr. Cummins asked Mr. Lopez about documents requested from RDF, including bios for key staff and RDFs lending policy. Mr. Cummins added that based on his discussion with Mr. Lopez, RDF’s loan policy is from 2015 and is currently being updated. Mr. Lopez apologized for sending the documents late, and said the documents were emailed this morning. Mr. Cummins checked and confirmed the documents were received this morning.

Ms. Yamada asked for more information about why an unsecured line of credit is proposed. Chair Smith said all of NMSBIC’s lending partners would probably prefer an unsecured line of credit. It makes things easier, but most of our lending partners do not have the same financial strength or an S&P credit rating. Chair Smith said he believes this makes sense from a risk perspective. Mr. Lopez added that RDF has relationships with 16 other financial institutions, and those agreements do not allow RDF to collateralize its assets except for collateral provided to the Federal Home Loan Bank and the U.S. Treasury’s CDFI Fund.

Mr. Garduño asked if RDF has a Moody’s rating in addition to its S&P rating. Mr. Cummins responded that RDF only has an S&P rating. He said Moody’s information was included in the board package to provide a comparison to what NMSBIC has approved for MFA. Chair Smith said having only one rating agency is probably related to the cost of maintaining a rating. Mr. Cummins referred to a table in the board package showing that:

• RDF’s current S&P rating of AA- is comparable to MFA’s Moody’s rating of Aa3.
• RDF’s proposed minimum S&P rating of A- is comparable to NMSBIC’s required minimum Moody’s rating of A3 for MFA.
• NMSBIC’s minimum ratings of S&P A- for RDF, and Moody’s Aa3 for MFA, are both investment grade ratings.

Chair Smith said he attended a charter school conference where everyone spoke very highly about RDF. He then learned that RDF also provides financing for medical facilities which was intriguing and might help fill a gap in New Mexico.

Mr. Grassham asked if RDF has loans in its pipeline where NMSBIC funds might be deployed quickly, if NMSBIC funds will be blended with other funding sources, and if builder’s risk insurance coverage is required on construction projects. Mr. Lopez responded that RDF does not have any current New Mexico projects in its pipeline. He said several years ago RDF was active in New Mexico and developed a large concentration of loans in New Mexico. Because of the large concentration RDF has had less focus in New Mexico. He said many of the New Mexico loans have paid down or paid off which has reduced RDF’s concentration in New Mexico, and it makes sense for RDF to become more active in New Mexico again. Mr. Lopez said RDF’s typical loan size is around $4 million to $6 million, and NMSBIC funds will likely be blended with other funding sources. Mr. Lopez added that even though the NMSBIC’s proposed line of credit would be unsecured, RDF’s loans to its borrowers are secured by first liens and require appropriate insurance including builder’s risk coverage for construction projects.

Chair Smith said this is similar to what NMSBIC has done with Clearinghouse CDFI. We want NMSBIC’s line of credit to incentivize RDF to do loans in New Mexico and hopefully sharpen the pencil for interest rates it charges borrowers in New Mexico.

Chair Smith asked if the board would like to move forward, subject to Mr. Cummins reviewing supplemental information, and that his due diligence supports moving forward.

Ms. Yamada moved for NMSBIC’s board directors to approve a new NMSBIC line of credit for Raza Development Fund (RDF), as follows:

• Mr. Cummins will confirm he has received and reviewed RDF staff bios and loan policy and the information supports an NMSBIC line of credit.
• $5 million maximum funding amount.
• 10-year term, subject to termination by either party with 90 days written notice.
• 2.0% annual interest rate.
• Unsecured, provided RDF will submit quarterly reports showing specific loans to New Mexico businesses provided with NMSBIC funds.
• RDF shall maintain Standard & Poor’s Financial Services LLC rating of A- or better.
• That the NMSBIC’s board chair and president, or vice chair and vice president, be authorized to sign any all documents related to this loan transaction, subject to review and approval by the NMSBIC’s legal counsel and the NMSBIC’s executive director/investment advisor.
• That the NMSBIC’s executive director/investment advisor report back to the board when the loan documents have been completed and signed.

Mr. Garduño seconded the motion which passed unanimously by roll call vote.

Chair Smith thanked the RDF associates for their presentation, and the RDF associates then left the meeting. Chair Smith said Mr. McDonald and Mr. Cummins have put a lot of time into this and thanked them for their hard work.

PRELIMINARY FINANCIAL REPORTS AS OF JUNE 30, 2025

Mr. Cummins noted the financial reports are preliminary as we are waiting for equity partners to provide results as of June 30, 2025. He provided the following highlights:

• Net assets increased $32 million during the year, of which $28 million was a contribution from the severance tax permanent fund, and $3.6 million was net profit from operations. Roughly $3.6 million in net profits will be returned to the severance tax permanent fund.
• Outstanding loans are $108 million.
• Available funds are $19.7 million. We approved a $5 million request today, and Ventana Fund might request an additional $5 million in October. For the remaining $9 million in available funds, there might be opportunities to expand relationships with MFA, Homewise, and RBC GAM over the next several months.

Mr. Garduño moved to accept the preliminary financial reports as of June 30, 2025, as presented. Mr. Valdiviez seconded the motion, which passed unanimously by roll call vote.

NMSBIC PURPOSE FROM THE SMALL BUSINESS INVESTMENT ACT

Mr. Cummins said this information is provided for reference in the board package.

RBC GLOBAL ASSET MANAGEMENT, PROPOSED NEW CUSTODIAL ACCOUNT

Mr. Cummins said that at the last NMSBIC board meeting, the board approved adding SBA and USDA certificates as eligible investments for assets managed by RBC Global Asset Management (RBC GAM). RBC GAM investment advisory documents related to this change were modified and signed. NMSBIC has a safekeeping account at Wells Fargo where assets managed by RBC GAM are held. RBC GAM notified Mr. Cummins that Wells Fargo cannot hold SBA and USDA certificates because the certificates are physical documents that need to be stored in a safe, rather than “book-entry” securities. RBC GAM provided Mr. Cummins with a list of four custodians that it believes can hold SBA and USDA certificates.

Mr. Cummins contacted all four custodians and received responses from US Bank and Principal. The estimated annual pricing was quoted at $25,000 by US Bank, and $26,100 by Principal. The NMSBIC currently pays $900 per year to Wells Fargo for safekeeping services.

It was noted the proposed prices were significantly higher than what NMSBIC currently pays Wells Fargo. Mr. McDonald asked if NMSBIC could hold the certificates in its safe deposit box. Mr. Cummins responded that he did not know but would check into it.

Mr. Cummins said he has been discussing the matter with Mr. Grassham. Mr. Grassham said his bank owns SBA and USDA certificates. It holds some documents itself, and others are held in a custodial account at Bank of New York at a cost of about $12,000 per year. Mr. Cummins said Mr. Grassham plans to provide him with contact information for Bank of New York. Mr. Cummins said he would like to obtain an additional price quote.

Chair Smith asked if the board would like to table this item to allow Mr. Cummins to do more research. Mr. Grassham said he sees a lot of trading activity in SBA and USDA certificates and would prefer not to delay too long. He suggested approving a new custodian at a cost of up to $25,000 per year and giving Chair Smith and Mr. Cummins authority to look for better pricing and make a decision.

Mr. Grassham moved for NMSBIC’s board of directors to approve:

• Opening a new custodial account at a price of up to $25,000 annually.
• Giving Chair Smith and Mr. Cummins authority to do research to see if better pricing is available and make a decision about a new custodian.
• That the NMSBIC’s board chair and president, or vice chair and vice president, be authorized to sign any all documents related to this transaction, subject to review and approval by the NMSBIC’s legal counsel and the NMSBIC’s executive director/investment advisor.
• That the NMSBIC’s executive director/investment advisor report back to the board when the changes have been completed.

Mr. Valdiviez seconded the motion which passed unanimously by roll call vote.

EXECUTIVE DIRECTOR/INVESTMENT ADVISOR REPORT

Mr. Cummins provided the following updates:

The Loan Fund: At the last board meeting the board approved $1 million in Equity Equivalent (EQ2) funding be included in net assets for calculating the liabilities-to-net assets ratio and extended the delivery date for audited financial statements to August 31, 2025. The modification and extension documents were completed and signed.

New Mexico Community Capital Limited Partnership (NMCC). This venture capital equity fund has been in a winding up period. NMCC reported the fund was closed on June 30, 2025. NMCC had no value when closed. NMSBIC was carrying the investment at $0 and there was no impact on NMSBIC’s financial statements.

New Mexico Mezzanine Partners (NMMP). For this venture capital equity investment, at the last meeting the board approved recording $688,800 in other than temporary impairment, bringing NMSBIC’s book value to $0. The other than temporary impairment was recorded as of June 30, 2025. Chair Smith asked about the impact. Mr. Cummins responded that other than temporary impairment is a realized loss. It reduces NMSBIC’s net assets, and the amount of net excess funds paid to the severance tax permanent fund.

Verge I II Combined. Tom Stephenson, Verge managing member, still plans to terminate this venture capital limited partnership at the end of this year. The limited partnership will probably be closed about thirty days before December 31, 2025, to allow time for any purchases/sales of ownership interests among limited partners before year-end.

Investments and Pensions Oversight Committee (IPOC). Mr. Cummins said he made a presentation to IPOC on August 13, 2025, which appeared to be well received. Interest was expressed in NMSBIC’s potential new partnership with Raza Development Fund, with the possibility of funding construction of health care facilities in rural areas of New Mexico.

Ms. Beckett asked about NMSBIC’s $1 million commitment to Enchantment Land Certified Development Company. Mr. Cummins said NMSBIC approved the commitment over a year ago, however, Enchantment Land is not ready to move forward. Mr. Valdiviez noted the organization has changed its name to Elevated Lending CDC. Mr. Cummins said he has removed the commitment from NMSBIC reports and will bring it back to the board for approval when Elevated Lending CDC is ready to move forward.

Mr. Cummins provided detailed information about The Loan Fund’s lending program that included loans by size, types of small business borrowers, geographic areas, charge-off history, and allowance for loan losses. Mr. Cummins said The Loan Fund has a long history of low charge-offs. Charge-offs have historically been less than 1% of total loans. While charge-offs have increased to a little over 1%, the charge-off level is still considered to be relatively low. Ms. Beckett asked about the liabilities-to-net assets ratio that is higher than other NMSBIC lending partners. Mr. Cummins said it was increased for The Loan Fund due to a long history of low loan charge-offs and to make more funding available to small businesses during the pandemic. Ms. Beckett asked if it would be appropriate to start reducing the liabilities-to-net assets ratio. Mr. Cummins said it would be appropriate to look at that, adding it would likely take time for The Loan Fund to adjust to a reduced liabilities-to-net assets ratio.

At a previous meeting the board requested NMSBIC start tracking lending partner loan spreads. Mr. Cummins referred to a new report in the board package that tracks loan spreads, which is the difference between what lending partners charge their borrowers versus what NMSBIC charges lending partners. Chair Smith asked Mr. Cummins to add information to the report showing if spreads are moving up or down.

Severance Tax Permanent Fund. Mr. Cummins referred to a report showing the severance tax permanent fund balance of over $11 billion as of June 30, 2025. Based on growth, it appears the NMSBIC might receive a contribution this coming year of roughly $27 million from the severance tax permanent fund. NMSBIC will pay back roughly $3.6 million in net excess funds resulting in net new funding of roughly $23 million.

Take-Away Report. Mr. Cummins referred to an item in the report about a presentation by him and Randy McDonald regarding NMSBIC growth plans. He said the purpose was to discuss other types of future NMSBIC investments such as Equity Equivalent (EQ2) investments in CDFIs, and loan participations with traditional banks. Mr. Cummins said there appears to be strong demand for NMSBIC’s current CDFI lending program and asked if the board is interested in moving forward with a discussion about other investment options. The board’s feedback was that while there might not be immediate need, it would be helpful to discuss other options. Mr. Cummins will keep this as a pending item, and he and Mr. McDonald will present the information at an upcoming meeting.

LENDING PARTNER ANNUAL CERTIFICATION AND LOAN POLICIES

Mr. Cummins said NMSBIC requires lending partners to sign certifications each year stating that NMSBIC funds (1) are used to provide loans to New Mexico Businesses, and (2) no loan to any one small business exceeds ten percent of NMSBIC’s net assets. All lending partners have signed certificates this year except RCAC and B:Side that have not made any loans with NMSBIC funds.

Mr. Cummins said NMSBIC has added a requirement for certain lending partners to provide lending policies to NMSBIC annually, and to highlight any changes. Mr. Cummins provided a summary of loan policy changes during the past year. He said the new requirement has been added whenever there has been a modification of loan agreements. He added the new requirement has not been added to loan agreements for DreamSpring, WESST, RCAC and LiftFund, because there have not been any modifications of these agreements. Mr. Cummins said he will request updated lending policies from the active lending partners, DreamSpring and WESST, and ask them to provide the policies on a voluntary basis.

BUREAU OF BUSINESS AND ECONOMIC RESEARCH IMPACT STUDY UPDATE

Mr. Cummins said work is in process on the impact study. He has a weekly status meeting with BBER. Lending partners have provided requested data, and there is some back-and-forth with questions and clarifications. BBER has requested data from the Department of Workforce Solutions (DWS) on new jobs created. There has been a delay with DWS’ response. The target completion date is September 30, 2025, but it appears additional time will be needed.

BOARD CONTINUING EDUCATION

Mr. Cummins referenced information in the board package with correspondence with the New Mexico Attorney General’s office from 2001 to 2007. He noted there is a summary of key points from the letters. Mr. Cummins said reviewing this correspondence with the Attorney General’s office is helpful in understanding the NMSBIC’s responsibilities and permitted activities.

CHAIR’S COMMENTS

Chair Smith thanked everyone for their time. He said he loves how we are being creative, and if anyone sees opportunities for new lending partners to please contact him or Mr. Cummins.

ADJOURNMENT

Mr. Garduño moved to adjourn at 11:40 a.m. Ms. Yamada seconded the motion, which passed unanimously by roll call vote.