The year in review: Banking

2018 was a pretty darn good year for banking.

“Idaho-headquartered banks registered a strong increase in earnings, with a 39 basis point rise in the average return on assets ratio, compared with one year prior,” said Mary Hughes, deputy director for the Idaho Department of Finance. “Compared with banks nationwide, Idaho-headquartered banks have higher average capital, a stronger net interest margin, lower concurrent loans and net charge-off ratios, and more robust asset, loan, and deposit growth rates. These are, in part, a reflection on Idaho’s strong economy.”

That strong economy helped Idaho grow, almost too fast. “Many people have moved here from other states to take advantage of the job market, housing market and way of life,” said Brian Berrett, chief financial officer for Idaho Central Credit Union (ICCU).

That wasn’t always good news. “The housing market in Idaho continued to increase and even caused some housing shortages in certain markets,” he said. “Houses in the middle to lower price ranges sold very quickly, while houses on the upper end of prices haven’t been moving as fast.”

That said, it was a pretty darn good year for banks nationwide, too. Aside from the strong economy, there was S.2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, which Congress passed in May to reduce the amount of regulation required from the federal government for smaller banks. That legislation was sponsored by Sen. Mike Crapo, R-Idaho, chair of the Banking Committee.

“The 115th Congress was incredibly productive for the Banking Committee,” Crapo said. “We ushered dozens of bills through the committee and into law, one of which was the Economic Growth, Regulatory Relief and Consumer Protection Act. We also passed important sanctions legislation, and legislation to protect our national security interests.”

In fact, the national news was so good that interest rates went up. “The Federal Reserve aggressively raised rates that impacted short-term rates,” Barrett said.

But even that provided an opportunity for some banking sectors, such as community development financial institutions.

“Because of uncertainty in the economy and interest rate pressures, we’re seeing more banks tightening their credit,” said Dave Glaser, president of MoFi, a CDFI that covers Idaho, Montana and Wyoming. “MoFi has seen a steady increase in its small business lending activity in the Treasure Valley over the last four years. In 2018, we will lend more money to Idaho small business than in any other state we serve. The flexible, responsible capital we provide is more important than ever to ensure a sustainable, inclusive economy in Idaho.”

Idaho’s success in banking led to growth in the industry, whether through acquisition, as on the bank side, or by organic growth, as on the credit union side.

First Interstate Bank – which just entered Idaho though acquisition in 2017, when it acquired Bank of the Cascades – apparently decided it liked the place, and made three more acquisitions in 2018: Inland Northwest Bank in April, followed by Idaho Independent Bank and Community 1st Bank in October.

Hughes attributed these moves to the strength of Idaho’s banking industry. “These are a reason why out-of-state banks want to expand in Idaho, and our banks are attractive targets for acquisition,” she said.

Kevin Riley, president and CEO of First Interstate BancSystem, Inc., said one of the highlights of 2018 was his company’s expansion into Idaho markets.

“Culturally, it felt like a natural extension to our pre-existing footprint, a network of community banks committed to giving back to the places we call home while delivering exceptional customer service,” he said.

Credit unions – which are used by more than half of Idahoans, one of the largest proportions in the country – also grew. Nowhere was this more true than for ICCU, the state’s largest. It announced a variety of new and renovated branches, as well as an Innovation Center in Rexburg to demonstrate new banking technology, a new data center in Chubbuck, and what will be a new regional mortgage and call center in Meridian, where the company bought a more than 50-acre parcel along Highway 84.

“Nearly one million Idahoans belong to a credit union – 55 percent of the population,” said Lynn Heider, vice president of public relations for the Northwest Credit Union Association (NWCUA), which represents Idaho credit unions. “We expect that when new economic data is released early next year, it will indicate that membership has grown as more consumers become aware of the benefits that not-for-profit cooperative credit unions can deliver to them.”

For example, as of September, Idahoans saved $22.4 million on interest from loans and credit cards, and earned $27.7 million in account interest, compared with what they would have spent or earned with banks, according to a report from the Credit Union National Association.