banking | Idaho Business Review

Legislation to help employ former felons gets another try

photo of chase boise branch — Bank robbers can’t work at this Chase branch, but many other people with criminal records could get jobs in Idaho if proposed legislation succeeds . Photo by Sharon Fisher

Idahoans with felony criminal records may have an easier time getting a job if a proposed bill comes to fruition.

The legislation, called the Fair Chance Employment Act, doesn’t let employers include language in job ads to exclude people with criminal convictions or ask about a criminal conviction on a job application. Employers can ask about criminal convictions after the applicant has been determined qualified for the position and selected for an interview.

In addition, employers must perform an individual assessment on an applicant before denying them a job based on a criminal conviction. This assessment includes the nature and gravity of the offense, the amount of time that has passed and the nature of the job and its relevance to the conviction.

“It doesn’t preclude employers from doing due diligence,” said Sen. Cherie Buckner-Webb, D-Boise, who is sponsoring the legislation. “If you want to work for a bank, you can’t be a bank robber.”

photo of cherie buckner-webb — Cherie Buckner-Webb

Buckner-Webb attempted similar legislation in the 2018 and 2019 sessions, but it didn’t progress due to some legislator concerns, she said. To address those concerns, the bill has been rewritten to clarify definitions and intent, as well as to be cleaned up and shorter, Buckner-Webb said.

The American Civil Liberties Union of Idaho, which has also been working on the legislation for several years, did listening sessions around the state this summer, Buckner-Webb said.

“We would like to bring it as we first go into session,” she said.

Nationwide, 35 states and more than 150 cities and counties have adopted some form of “Fair Chance” legislation, according to the National Employment Law Project (NELP), a New York -based nonprofit that follows the issue. Altogether, more than 258 million people in the United States, or more than 75% of the population, now live in a jurisdiction with some form of fair chance policy, the organization said. This includes residents of Nevada, Oregon, Utah and Washington. In addition, 13 states – including Oregon and Washington – have mandated the removal of conviction history questions from job applications for private employers as well, according to the NELP.

The District of Columbia and 31 cities and counties extend fair-chance hiring policies to government contractors, while 18 of those cities and counties – including Portland and Spokane – cover private employers as well, according to the NELP.

Businesses taking steps

A number of national businesses with an Idaho presence have also taken the initiative to implement fair chance policies. One example is JPMorgan Chase, with 143 employees in Idaho among 20 branches.

“We recognize that business has a role to play to help more people share in the benefits of economic growth,” said Cat Martin, a Seattle-based program officer for the JPMorgan Chase Foundation for the Pacific Northwest.

JPMorgan Chase stopped asking about criminal convictions in 2018, partly because a number of states had adopted legislation to preclude employers from inquiring, said Monique Baptiste, program officer for corporate responsibility, based in New York.

“We decided to be proactive instead of doing it as a domino,” she said.

Monique Baptiste

The financial services organization doesn’t conduct a background check until the applicant has a conditional offer in hand, Baptiste said. “We wanted the fit for the role to be paramount,” she said.

Due to Federal Deposit Insurance Corporation regulations, banks cannot hire people with certain convictions.

“There are certain crimes of dishonesty,” Baptiste said. “We’re not going to hire someone who was convicted of bank robbery to run our bank.”

Otherwise, it is evaluating each applicant individually. So far, about 10% of Chase’s annual hires, about 2,100 people, had criminal backgrounds, Baptiste said.

“They have the same chance to thrive as their co-workers,” she said.

The year in review: Banking

photo of first interstate — First Interstate Bank entered the Idaho market in 2017 with the purchase of Bank of the Cascades, including this Kuna branch. Photo by Sharon Fisher

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.

photo of senator mike crapo — Idaho Sen. Mike Crapo

“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.

Idaho residents less likely to be ‘unbanked’

According to a recent survey, Idahoans are among the least likely in the country to be “unbanked.” Photo by Sharon Fisher.

Idaho residents are more likely than those of neighboring states to use at least some banking services, but residents of the state still use alternative services such as check cashing and payday loans, according to a recent survey by the Federal Deposit Insurance Corp.

The survey is performed every two years based on data from the previous year.

Idaho has a lower rate of unbanked people, 2.3 percent, than its surrounding states. While Washington and Utah also had very low rates, Oregon, Montana, and Wyoming fell between 3.4 and 5 percent, while Nevada was between 5 and 6.5 percent. Nationally, 6.5 percent of U.S. households are considered “unbanked,” the lowest level since the survey began in 2009, the FDIC said.

Moreover, the rate of the Idaho unbanked – that is, people who don’t use any financial products and services within the banking system – has consistently dropped, from 5.7 percent in 2011 to 2.3 percent for 2017, the FDIC said.

Trent Wright

“Historically, Idaho banks have offered special services to meet the needs of low and moderate-income Idahoans,” said Trent Wright, president and CEO of the Idaho Bankers Association, in Boise. “Banks work with federal agencies, community groups and local government to develop successful ways to reach unbanked populations including off-premise financial education and outreach visits. In addition, most Idaho banks offer free, entry-level or low-balance basic savings accounts that are almost always a better value than check cashing outlets.”

In the future, Wright said he expects more people to do banking through their smartphones.

“New mobile technologies offer an opportunity to draw the unbanked and underbanked into the mainstream financial system,” he said. “Moreover, adoption of mobile phones is actually higher among minorities, the young, and the low-income, who are more likely to be unbanked.”

In contrast, Idaho has a larger percentage of residents considered “underbanked’– households that have a checking or savings account but also obtain financial products and services outside of the banking system – than Washington or Montana, but a lower percentage than Oregon, Nevada or Wyoming. However, that rate is also decreasing, from 23.1 percent in 2015 to 17.9 percent in 2017, the FDIC said. Nationally, the rate of underbanked households was 18.7 percent in 2017, down from 19.9 percent in 2015, according to the FDIC.

Idaho residents were also more likely than those of neighboring states (except Oregon) to use general purpose reloadable prepaid cards.

“Prepaid cards can also serve as a solution for unbanked Idahoans who may neither qualify for, nor manage, a traditional checking account for two reasons: they cost less than other types of accounts or services and, unlike checking accounts, most cannot be overdrawn or incur overdraft fees,” Wright said. “When issued by a bank, prepaid cards are an excellent opportunity for Idaho banks to build relationships with unbanked consumers.”

The Idaho Bankers Association supports regulation of prepaid cards that does not diminish their availability or usefulness to customers, he said. “Burdensome or unnecessary regulation will potentially limit the number of banks participating in the prepaid card market.”

Idaho residents were also less likely than those of any of the neighboring states to set aside money for unexpected expenses or emergencies, the FDIC found.

Banks have been criticized in recent months for increasing fees and minimum balance requirements, which makes it more difficult for low-income people to use traditional banks and instead drives them to alternative services. Substantially all of the unbanking improvement in the U.S. was because socioeconomic status improved, the FDIC said, noting that households that were low-income, less-educated, younger, black or Hispanic, working-age disabled, or volatile income were most likely to be unbanked.

Both the Office of the Comptroller of the Currency and the National Credit Union Association recently advised members to offer small-dollar loans to attract payday loan customers, but few have taken them up on it, other than U.S. Bank, which announced such a program in September.

Are you ready for video banking?

The myPioneer Personal Assistant application lets customers communicate with tellers over live video. Photo courtesy of Pioneer Federal Credit Union.

It’s still a nascent technology, but Idaho financial institutions are looking into video banking.

Video banking falls into three categories: interactive teller machines (ITMs) that include video in the ATM, video in the branch office, and online video via smartphone or PC.

Of the Idaho financial institutions that offer some form of video banking, the aptly-named Pioneer Credit Union, based in Mountain Home, is the leader. The company has used NCR ITMs – which it dubs Personal Teller Machines or PTMS – since 2015. It has 18 now, primarily in drive-throughs, such as the State Street branch in Boise, said Tracey Miller, vice president of operations. “It’s mainly so employees can help members with high-level questions” such as mortgages and loans, she said. The machines also let Pioneer service customers during extended hours, from 7 am to 7 pm, and they can handle most transactions. “Anything where we don’t have to physically hand them something,” she said.

Interactive teller machines, which Pioneer calls personal teller machines, give users video access to tellers. Photo courtesy of Pioneer Federal Credit Union.

At Pioneer, PTMs completed 40,000 transactions by the end of 2016, and 86,128 in 2017. By the end of May, they are already at 55,489, Miller said. “We’re on pace to do more than 100,000 by the end of the year,” she said. Pioneer has also added six people to its original team of five to the department, which works 12-hour shifts, she said. Essentially, it provides an extra branch, she said.

More recently, Pioneer is using software from POPin Video Banking Inc., of Sandy, Utah, for its myPioneer Personal Assistant online video banking smartphone application, which it launched earlier this year, Miller said. Like the PTMs, it is serviced from 7 am to 7 pm. (POPin was founded by Gene Pranger, who originally developed Pioneer’s PTMs.)

“Pioneer is one of the first in the country to deploy that,” said Scott Fieber, vice president of strategic solutions for Cook Security Group, a Portland, Oregon company with an office in Boise that installs ITMs. “It allows you to talk to someone face-to-face, in your pajamas and on weekends and after hours.”

Other Idaho financial institutions are taking a look at video as well. East Idaho Credit Union, in Idaho Falls, is working with Invo Solutions, a value-added reseller for banking that uses software from Vidyo Inc., and is expecting to deploy the service this year, said Cindy High, executive vice president. “We are actively seeking how this would work for our members,” she said, emphasizing the company doesn’t intend to use the technology to replace staff.

National financial institutions, such as Citibank and Wells Fargo, are testing or deploying video banking, though they have not yet made it to Idaho.

For example, Wells is piloting video banking, but it has not yet been implemented in Idaho, said Julie Fogerson, assistant vice president of Idaho regional communications.

Some Idaho credit unions have bought ITMs but have not implemented video banking, said Fieber. In fact, over the past three years, his company has sold more ITMs than standard ATMs, he said. Idaho financial institutions that he said have installed the machines include Malheur Credit Union, an Ontario, Oregon-based credit union with two Idaho branches, and Chubbuck-based Idaho Central Credit Union (ICCU). Malheur expects to roll out video functionality in Q3 2019, said Bobbi Alcoser, vice president of operations and chief operating officer. ICCU is “actively working on implementation” but doesn’t have a timeline, said Laura Smith, director of public relations.

Other Idaho financial institutions tested video banking and decided it wasn’t for them. For example, in 2013 Mountain America Credit Union, which at the time operated 75 branches throughout five Western states including Idaho, tested Diebold Inc. ITMs. But the credit union decided not to go through with the project, said Mike Jacobsen, senior director of corporate communications for Diebold Nixdorf, in North Canton, Ohio. Mountain America confirmed it wasn’t going through with the project but didn’t provide details.

Jason Smith

In Idaho, credit unions are generally ahead of banks in video banking. “We see a lot of early adopters being smaller institutions, and especially credit unions,” said Damien Simonneau, director of financial services marketing for Vidyo, in Hackensack, N.J.

In addition, the original ITMs, from uGenius Technology from Sandy, Utah, were sold only to credit unions, though that changed when NCR bought uGenius in 2013, Fieber said. “We do find credit unions are more retail-focused, and banks are more commercial-focused, and it’s more of a retail solution,” he said. Video banking with document sharing can also help credit union members in rural Idaho with more complicated interactions such as completing mortgage documents, said Jason Smith, vice president of strategic resources for the Northwest Credit Union Association (NWCUA), which represents Idaho credit unions.

How people feel about video banking

According to Video Banking Report 2018, a worldwide Vidyo survey, 82 percent of financial institution respondents said they already offer or plan to offer video banking – a figure the company said has been consistent for three years. Of that figure, 9 percent said they planned to offer only branch video, while 10 percent said they planned to offer only online video. But the majority, 63 percent, said they planned to deploy both. (Vidyo did not include ITMs in its survey.)

Also of that figure, 35 percent said they have already deployed or are piloting a video banking service, while 20 percent already have a fully operational service. Of the ones who had deployed it, 75 percent said the outcome was as they expected or better, while 77 percent said their sales close rate was the same or better.

For the 18 percent of financial institutions that said they are not planning to offer video banking, 62 percent said it was not a business priority while 40 percent blamed a lack of information technology resources.

On the consumer side, a four-country Vidyo survey found that only 15 percent of consumers had been invited to either kind of video banking, while fewer than 3 percent had tried both. However, of the consumers who had tried it, 85 percent of online video banking users and 90 percent of branch video banking users said they would be willing to use it again.

Idaho banks — actually, all of them — had a good quarter

First Interstate Bank entered the Idaho market in 2016 with the purchase of Bank of the Cascades, and expanded it in April with the acquisition of Inland Northwest Bank. Photo by Sharon Fisher.

It was a really good earnings quarter for banks nationwide, and Idaho’s publicly owned banks were no exception.

It was, in fact, the highest quarter for quarterly net income ever, according to a representative who asked not to be named from the Federal Deposit Insurance Corp., which issued its report for Q1 2018 on May 22.

Banks saw a big increase in quarterly net income. Chart courtesy of FDIC.

“Aggregate net income for the 5,606 FDIC-insured commercial banks and savings institutions reporting first quarter performance totaled $56 billion in first quarter 2018, an increase of $12.1 billion (27.5 percent) from a year earlier,” the organization noted. It attributed the improvement to higher net operating income and a lower effective tax rate. Before the Tax Cuts and Jobs Act, implemented in December, estimated net income would have been $49.4 billion, an increase of $5.5 billion, or 12.6 percent, year over year.

Total assets in Idaho banks amounted to $6.17 billion, compared with $5.76 billion a year ago, the FDIC reported. Total deposits amounted to $5.28 billion, compared with $4.90 billion the year before, the FDIC noted.

Paul Silva

“Things are going really well,” said Paul Silva, Chase market director of banking, who is responsible for 18 of Chase’s 20 branches in Idaho. (The other two, near Coeur d’Alene, are covered by the Spokane market director.). Nationwide, the bank reported net income of $8.7 billion, an increase of 35 percent over the previous year. “We continue to have double-digit growth year over year,” he said. Specifically in Idaho, Chase has seen a 10 percent growth year-over-year with deposits, with an average deposit growth of 6 percent, he said. Moreover, Chase is seeing increased activity in all of its lines of business, from consumers to business, he said, with no one particular factor amounting for the increase.

Banner Corp., the parent company of Banner Bank and Islanders Bank, reported that net income in the first quarter of 2018 increased 21 percent to $28.8 million, or $0.89 per diluted share, compared to $23.8 million, or $0.72 per diluted share, in the first quarter a year ago. Revenues were $120.7 million during the quarter ended March 31, 2018, $125.9 million during the preceding quarter and $113.9 million during the first quarter a year ago.

Columbia Bank, which operates 14 locations in North Idaho, the Treasure Valley, and Twin Falls, had assets of $12.53 billion and $10.40 billion, with earnings per share increasing from $.50 a year ago to $.55 now.

First Interstate BancSystem, Inc., which gained an Idaho presence in 2016 by acquiring Bank of the Cascades, reported net income of $36.7 million, or $ .65 per share, compared with net income of $34.2 million, or $ .61 per share, for the fourth quarter of 2017, and $23.2 million, or $ .51 per share, for the first quarter of 2017. The company further expanded its Idaho presence in April by acquiring Inland Northwest Bank.

Washington Federal, Inc. announced quarterly earnings of $49,271,000 or $ .57 per diluted share for the quarter, compared with $42,070,000 or $ .47 per diluted share for the quarter ended March 31, 2017, a $ .10 or 21 percent increase in fully diluted earnings per share. Its total assets were $15.6 billion as of March 31, 2018 compared to $15.3 billion as of September 30. Asset growth since September 30 resulted primarily from a $341 million increase in net loans receivable and a $70 million increase in held-to-maturity securities, the organization said.

The sunny earnings reports came under some criticism by those who were opposed to the loosening of Dodd-Frank regulations.

The FDIC noted that revenue was offset by non-interest expenses, which rose 5.8 percent, and that salary and benefits grew by 4.3 percent. In addition, banks’ loan-loss provisions increased by 3 percent, with almost 37 percent of banks reporting higher loan-loss provisions. The FDIC attributed this to higher net charge-offs and a growing loan portfolio.

Houses passes S.2155, Idaho Sen. Crapo’s banking deregulation bill

The House of Representatives joined the Senate in voting to roll back banking regulations instituted after the 2008 recession. File photo.

The House of Representatives on May 22 passed S.2155, a bill intended to roll back some of the regulations of the Dodd-Frank law for smaller banks, by a bipartisan vote of 258 to 159.

The bill was sponsored by Idaho Sen. Mike Crapo, chairman of the Senate Banking Committee and passed the Senate on March 15 by a bipartisan vote of 67 to 31. Idaho’s two Congressmen, Rep. Raul Labrador and Rep. Mike Simpson, both voted in favor of the bill.

Idaho Sen. Mike Crapo

“This step toward right-sizing regulation will allow local banks and credit unions to focus more on lending, in turn propelling economic growth and creating jobs on Main Street and in our communities,” Crapo said in a statement.

It is widely expected that President Donald Trump will sign it, perhaps as soon as within ten days, because he ran on a campaign pledge of gutting Dodd-Frank. When it would take effect is more complicated because the bill has many sections, said Lynn Heider, vice president of public relations for the Northwest Credit Union Association (NWCUA), which represents Idaho credit unions.

Credit unions and banks alike, which had heavily lobbied Congress, lauded the bill’s passage. Formally known as the Economic Growth, Regulatory Relief and Consumer Protection Act, the bill removed some of the more stringent regulations implemented in 2010 in response to the 2008 recession, but which community banks and credit unions found onerous.

Trent Wright

“Today’s passage of S.2155 by the House of Representatives was a win for all constituents, families and businesses,” said Trent Wright, president and CEO of the Idaho Bankers Association, calling it “commonsense fixes to ill-fitting financial regulations that have limited the ability of banks to serve their communities.”

The legislation increases, from $50 billion to $250 billion in assets, the threshold at which banks are deemed so big and plugged into the financial grid that if one were to fail it would cause major havoc. Those banks currently are subject to stricter capital and planning requirements.

Troy Stang

Also, one provision of the bill will classify credit union loans on 1-4 unit rental housing as real estate loans instead of business loans, freeing more capital for loans to Main Street businesses, according to the NWCUA. Northwest credit unions have $1.3 billion invested in loans on that type of housing, said Troy Stang, president and CEO of the organization.

In another example, Dodd-Frank had doubled the amount of data that banks had to collect to offer a loan, from 24 data fields to 48, covering demographic areas such as sex and race. S.2155 said that banks that originate fewer than 500 loans per year were exempt from the new data requirements. Dodd-Frank also implemented more stringent capital requirements, which would be rolled back for community banks under S.2155.

Critics of the bill said it doesn’t really address the problems community banks face, and at the same time it takes away tools from regulators. In addition, because the bill raises the threshold for banks that are subject to enhanced regulatory standards from $50 billion to $250 billion, some are concerned that smaller banks might be more subject to mergers and acquisitions because of the higher ceiling – actually resulting in fewer community banks.

The Associated Press contributed to this story.

JPMorgan Chase expands business services

The JPMorgan Chase middle market office will be located in The Village at Meridian, a shopping center west of downtown Boise. File photo.

As part of a nationwide expansion announced in January, JPMorgan Chase is opening an office in Idaho intended for the “middle market” of business customers, including hiring an Idaho-based commercial banking market executive.

Gregory Smith

Chase entered the Idaho market in 2008 with its acquisition of Washington Mutual, and since then has primarily served consumers and small business, said Gregory Smith, market executive. Customers in the middle market – which Chase defines as between $20 million and $500 million in top line revenues – were being served out of Salt Lake City. Existing and prospective Idaho business customers made it clear they wanted to be serviced more locally, he said.

“It’s not that myself or my team is bringing something new from the expertise standpoint,” Smith said. “What the firm has done is committed resources to serve businesses and communities locally.”

For now, the office, which includes two additional middle market bankers, is in a temporary office space at the Regus facility in The Village in Meridian, but by the first quarter of next year it will likely move into the Chase branch in downtown Boise, Smith said.

“We’re leaning toward the downtown location, given that we already have folks there with the rest of the financial services group,” he said.

In addition to covering middle market, Smith also covers “specialized industries,” or vertical markets, including technology, healthcare, and government entities, including universities, he said.

Smith was recruited from Wells Fargo, where he spent the last 13 years, most recently as director of business development for the middle market group.

JPMorgan Chase has 20 branches in Idaho and employs more than 150 people. The company announced a nationwide $20 billion, five-year expansion plan in January.

Banks face pressure for firearms industry decisions

Boise’s Wells Fargo Center. Wells Fargo has reiterated its support for firearms manufacturers, as other banks move away from clients that make and sell military-style weapons. File photo.

Idaho Sen. Mike Crapo, chairman of the Senate Banking Committee, has criticized two banks for corporate decisions limiting firearms in the wake of incidents such as February’s shooting at a school in Parkland, Florida.

In a March 22 blog post, Citigroup Inc. announced that it would require new retail sector clients not to sell firearms to someone who hasn’t passed a background check, to restrict the sale of firearms for individuals under 21 years of age, and not to sell bump stocks or high-capacity magazines.

Bank of America made a similar statement. “We want to contribute in any way we can to reduce these mass shootings,” said Anne Finucane, Bank of America vice chairman, in an interview on Bloomberg. While the bank did have a few clients that manufacture military-style firearms, it was having discussions with those vendors and it was not the bank’s intent to underwrite or finance such products in the future, she said.

Idaho Sen. Mike Crapo

In response, Crapo wrote to each of the two institutions criticizing them for their actions. “I am concerned when government agencies use their power to try to cut off financial services for lawful businesses they may disfavor,” he wrote. “I am also concerned when large national banks use their market power for similar purposes.”

Neither Bank of America nor Citigroup would comment on Crapo’s letter.

Some other national banks have also examined their relationships with firearms companies in recent months. “We do have robust risk management practices and policies associated with this and we have had for a number of years,” said Marianne Lake, chief financial officer at JPMorgan Chase in a recent earnings call, responding to a question about financing military-style weapon for non-military purposes. “We continue to always refine them and work on them. As a result, our exposures have come down significantly and are pretty limited.”

Julie Fogerson

Other banks, most notably Wells Fargo, have reiterated their support of firearms manufacturers. “Firearms manufacturers are among the hundreds of different industries that Wells Fargo banks,” said Julie Fogerson, assistant vice president of Idaho regional communications at Wells Fargo, in Boise. ”We have a strict due diligence process that monitors our customer’s adherence to all state and federal laws in order to be a customer of the bank. Wells Fargo wants schools and communities to be safe from gun violence, but changes to laws and regulations should be determined through a legislative process that gives the American public an opportunity to participate and not be arbitrarily set by a bank.”

Financial institutions with more of an Idaho regional presence steered clear of the issue, with Idaho Central Credit Union, First Interstate Bank, and Zions Bank representatives all saying they had no comment. “Credit unions that are members of the NWCUA make their own determinations about the products and services that they offer, based on the needs of their members and their local communities,” said Lynn Heider, vice president of public relations for the Northwest Credit Union Association, which represents Idaho credit unions after its merger with the Idaho Credit Union League.

“Zions avoids taking a stance on political issues outside of the financial services industry, believing that it is best that the appropriate legislative body set policy,” said Rob Brough, Zions Bank executive vice president. “Zions strives to bank customers who obey the law and who have a risk profile that is consistent with Zions’ standards.”

Crapo’s letters criticized banks for using “their market power to manage social policy by withholding access to credit to customers and companies they disfavor.” Over time, banks have made other decisions that influence social policy, such as investing in renewable energy (which Crapo also criticized).

In addition, the federal government has also put restrictions on banks that could be said to influence social policy. Most notable was the Obama administration’s Operation Choke Point, intended to discourage banks from doing business with companies ranging from payday lenders to gun retailers. While that program ended in August, some industries reportedly still find it difficult to find banks that support them, such as the marijuana industry in states where that is legal, noted the Brookings Institution. More broadly speaking, legislation such as the Community Reinvestment Act, which guides banks’ philanthropic efforts, could also be characterized as an attempt to effect social policy. Crapo’s office wouldn’t comment on the senator’s opinion about banking and social policy issues other than firearms.

Some organizations are also taking steps to pressure banks to change their firearms policies. For example, on a national level, the Sierra Club is asking supporters to tell Wells Fargo to stop funding gunmakers, as well as oil pipeline companies.

In response to incidents such as Parkland, several retailers have decided to limit firearms sales.

For the low-income, banks are moving out of reach

Idaho Independent Bank's office in Boise. — Idaho Independent Bank’s office in Boise. The bank refers customers if needed to the Bank On financial literacy program. Photo by Anne Wallace Allen.

Banking isn’t easy if you’re poor.

Nationwide, checking accounts are getting more expensive and fees are getting harder to avoid, according to the most recent MoneyRates.com Checking Account Fee Survey. “Compared with five years ago, monthly maintenance fees are up by 8 percent, overdraft fees are up by 9.4 percent, and ATM fees are up by 10.7 percent,” the organization noted. For example, the average maintenance fee is $13.24 per month, or $158.88 a year to keep the account open, up from $153.96 a year ago. In addition, the number of banks offering free checking has declined from 36.62 percent in 2013 to 27.88 percent in 2018, while the minimum balance required to waive fees has increased to $11,845. “This threshold has nearly tripled over the past five years, and is up by over $1,000 in just the last six months,” the organization said.

According to the Federal Deposit Insurance Corp., 7 percent of U.S. households, or about 9 million, were “unbanked” in 2015, the most recent year for which numbers are available. “An additional 19.9 percent of U.S. households (24.5 million) were underbanked, meaning that the household had a checking or savings account but also obtained financial products and services outside of the banking system,” the FDIC added.

Idaho banks said they are attempting to address this population’s needs.

Jason Meyerhoeffer

“As a mutual savings bank, serving low-income populations is fundamental to our mission,” said Jason A. Meyerhoeffer, president and CEO of First Federal, in Twin Falls. “I don’t believe there is a high threshold for the ‘legal requirements’ needed to open an account, but laws do require us to adequately verify the identity of a customer prior to opening an account. As for serving lower-income populations, we offer accounts with no service charges or fees and very low opening balance requirements.”

“We have checking accounts with no fee and no income requirements, which means our services are available to anyone regardless of income level,” said Kelly Parker, vice president of community relations & product development for Idaho Independent Bank, in Boise.

People with a history of charged-off checking accounts at other banks are referred to the Bank On financial literacy program, available in southern Idaho since 2013 and now expanding to North Idaho, Parker said. “This program offers financial education for adults and, upon completion of the program, we’ll open a checking account for them with no monthly fees,” she said.

Bruce Lowry

“We make a concerted effort to help with financial literacy for populations who may not be familiar with modern banking or have concerns about how banking works,” said Bruce Lowry, president and chief executive officer of Ireland Bank, based in Malad City. “Each of our branches finds opportunities to reach out, provide education, charitable donations or a helping hand to reach low-income populations.” Low-income patrons are particularly an issue for Ireland Bank because many of its branches are located in rural areas, he said.

Low-income people need more than just checking. They also need business loans and mortgages. “We are very willing to make small business and personal loans that often times benefit this population,” Lowry said.

Julie Fogerson

Similarly, banks are looking to help low-income people buy homes. “In Idaho last year, Wells Fargo launched its first ever statewide down payment assistance program, bringing $3.55 million into the state,” said Julie Fogerson, assistant vice president of Idaho regional communications at Wells Fargo, in Boise. “Wells Fargo’s NeighborhoodLIFT program has become an important catalyst for homeownership in numerous cities across America. Funds were made available in Idaho virtually on June 5, and as of last month, all down payment monies were allocated, helping get more than 300 Idaho families into homes.” Funds are distributed through NeighborWorks Boise, she said.

The goal is to get people into banks rather than check-cashing companies, which typically cost more. “We don’t try to compete with the check cashing industry,” Meyerhoeffer said. “However, we do try to provide needed banking services. Most of the check cashing needs come from unbanked consumers. We try to help these people by bringing them into the banking system and offering them much lower-cost services.”

Another low-income banking avenue

A different method for providing banking services to low-income people, particularly for housing, is the community development financial institution (CDFI).

Idaho has six certified CDFIs. “It’s an elite, nonprofit group with Idaho that have that CDFI status,” said Bud Compher Jr., CEO of NeighborWorks Boise, formerly Neighborhood Housing Services. “The funds come to us from the U.S. Treasury and NeighborWorks uses those funds to leverage other dollars for our lending operation. In 2016, the organization was awarded $500,000, and this year, the organization applied for $700,000, after not receiving anything in 2017. “It’s very competitive across the nation,” he said.

Typically, the funds are used to pay for second mortgages, while another organization pays for the first 80 percent of the mortgage, Compher said. “So between the two, that gives them their 100 percent financing, and they don’t have to do mortgage insurance,” he said. “It helps create affordability within monthly payments.”

photo of mark dahlquist — Mark Dahlquist

Before and after pictures of a Pocatello home funded by Neighborworks.

NeighborWorks Pocatello focuses more on home improvement loans that help people maintain the value of their houses by improvements including replacing the roof, wiring, or siding, said Mark Dahlquist, executive director. “It’s our mission to lend to people who don’t have access to affordable credit,” he said. “We saw a need in the community that there were residents who needed lending, particularly for fixing up their houses.” In an average year, the organization will deploy about $300,000 at interest rates ranging from 0 percent to 4 percent to help about 40 individuals, he said.

The Idaho-Nevada CDFI, based in Boise, has provided about $75 million toward affordable housing since its inception, which it has leveraged to provide $403 million in financing, 3,000 units of housing, 6,200 construction jobs, and 500 permanent jobs, said Dutch Haarsma, president. “High-quality, sustainable projects that are an asset to your neighborhood,” he said. “If we do it right, you don’t know it’s affordable housing.” And it’s not just for the formerly homeless, but for the “working poor,” such as first responders and teachers. “That’s who’s in affordable housing these days.”

Icon Credit Union opens Nampa branch

Icon Credit Union has expanded into Nampa by purchasing the former Chase branch building downtown.

“We had members banking in Boise, who live in Canyon County, who have requested a branch for several years,” said Amy Rovig, newly hired director of marketing for the credit union, which is headquartered in Boise and has five other branches. “When an open building became available, we looked at it and looked at the demographics. It was a great decision based on members’ wants and needs.”

The building, at 164 E. Maine St., is being renovated and is slated to have a soft opening around May 7, with a grand opening event at the end of June, Rovig said. The branch manager will be JJ Belyeu.

FDIC’s 2017 report is good news for Idaho banks

FDIC headquarters. File photo.

The state profiles for the fourth quarter and for 2017 as a whole from the Federal Deposit Insurance Corp. (FDIC) are out in a report, and show good news for Idaho banking and the Idaho economy in general

Mary Hughes

“Idaho banks are healthy and continue to grow,” said Mary Hughes, financial institutions bureau chief for the Idaho Department of Finance, of the report. “Total assets have increased from $5.55 billion in 2016 to $6.18 billion in 2017.” Just since the last quarter, assets have increased from $6.02 billion.

In addition, bank profitability continues to improve, Hughes said. “Return on average assets (an indicator of profitability) increased from 0.66 percent in 2016 to 0.71 percent in 2017.” These figures, however, have been more volatile, changing from 0.71 percent in the fourth quarter of 2016 to 0.83 percent in the third quarter of 2017, to 0.60 percent in the fourth quarter of 2017.

Another indicator of profitability is that increasing interest rates have resulted in improved net interest margins, increasing from 3.90 percent in 2016 to 4.09 percent in 2017, Hughes said. The 4th quarter net interest margin for Idaho banks was even higher, at 4.25 percent, she added.

This all means that capital for business expansion is available. “Idaho banks have seen an increase in lending across every loan type,” Hughes said. “Credit quality across Idaho banks remains sound. Past due and nonaccrual loans are low and continue to trend down, declining from 0.74 percent of total loans in 2016 to 0.69 percent in 2017. Net loan losses are modest at 0.02 percent of total loans. Median credit losses in the 4th quarter were 0.00 percent.”

Finally, provisions to average assets – another indicator of credit quality – also remain low, Hughes said, with 2017 median provisions at 0.09 percent of average assets.

Looking at the Idaho economy as a whole, the FDIC report had more good news. “Idaho continues to have one of the nation’s lowest unemployment rates at 3.2 percent for 2017 and 3.0 percent in the 4th quarter,” Hughes said. This does, however, mean it can be more difficult for businesses to find and replace employees. In addition, single-family and multi-family permits have increased year-over-year at 32.5 percent and 41.5 percent, respectively. “Builders and developers are working to meet the large demand for housing in Idaho.” The result is that home prices in Idaho continue to climb, with the home price index increasing from 7.5 percent in 2016 to 9.6 percent in 2017, and 10.2 percent in the fourth quarter alone.

As wealth and population grow, so do private banking services

Credit cards. About two-thirds of banks nationally offer private banking services of some sort, said Donnie Ethier, director of the Boston consultancy Cerulli Associates. File photo.

As the economy and market have continued their growth, more Idahoans find that they need more than a checking account and an automated teller machine. That’s where private banking comes in.

Also known as concierge banking and wealth management (see box), these services have several features in common. Generally, they offer customers with complex financial lives a single point of contact to a pre-selected team of experts in various financial areas, including estate planning, trust planning, and investment strategies, as well as banking services such as checking accounts. In addition, private bankers typically act as fiduciaries, meaning they are typically paid on salary, not on commission, and are required to act only in the client’s best interest. Fees for private banking are typically based on a percentage of the assets managed.

Trent Wright

“Idaho being the growth state that it is, we have more groups of people than ever who are looking at that type of service,” said Trent Wright, president and CEO of the Idaho Bankers Association. In fact, there is so much demand the association is planning a wealth management conference for the fourth quarter.

There’s a growing focus on wealth management services, said Donnie Ethier, director of Cerulli Associates, a Boston consultancy. He said about two-thirds of banks offer “private banking services” of some sort, though they may define it in different ways. “Some smaller community banks, as they move upmarket or have a merger or acquisition, reach more scale and offer more true private banking,” he said.

Private banking as a service can play a good role in wealth management because regional banks, such as many in Idaho, have been working with clients for their banking needs. Private banking gives banks a way to ask customers if they’re aware of the bank’s wealth management services, he said.

Not all banks set a floor on the amount of assets a client needs for private banking, but typically it is $500,000 to $1.5 million, Wright said. Chase Private Client typically starts at $500,000, said Linda Vigneri, client service analyst for JP Morgan Securities in Chicago. Banks typically find private banking customers through referrals from other bank staff, from accountants and stockbrokers, and from word of mouth.

Thomas Prohaska

“Private banking inherently involves not only products and services, but also a very deep personal relationship,” said Tom Prohaska, president of Idaho Trust, which has one office each in Coeur d’Alene, Boise and Las Vegas. The bank offers private banking to all its customers, he said. It reports 27 percent asset growth in its wealth management division in 2017, and 25 percent asset growth so far in 2018.

Northern Trust’s Seattle office, while it covers the six northwest states, doesn’t have an office in Idaho. “I go there once a month, and spend a few days on the ground,” said Jordon Voss, vice president of wealth strategies. While he said the bank is exploring a physical presence in Idaho, he added that having an out-of-town banker is a plus for some clients.

“When some people come into wealth, they don’t necessarily want everyone to know,” he said. “In a community like Boise where everyone is so friendly and close, word could get out.” In addition, large market centers like Seattle can have more sophisticated service offerings, such as being able to hold operating businesses in trust as a trustee, he said.

While Voss didn’t have a specific asset requirement, he said that the bank’s fewer than 100 Idaho clients typically had between $5 million and $15 million of liquidity. “In situations where people are coming into a windfall” – such as a business sale, inheritance, or a divorce – “those are situations where we really thrive.”

Jason Stoddard

KeyBank has three private bankers in southern Idaho, and has just placed a private banker in eastern Idaho as well, for a total staff of 12, said Jason Stoddard, interim market manager for Key Private Bank, based in Salt Lake City. While the bank services a number of clients in North Idaho, it doesn’t have staff there, he said.

“Just because you’re a small bank doesn’t mean you don’t have the expertise,” Wright said. “Obviously, large banks offer it. I would imagine each and every one of our institutions offer that level of service in one way or another.”

Private? Concierge? Wealth management?

Banks use different terms, so people looking for these services need to know what term a bank uses.

“There’s no such thing as concierge banking,” said Tom Prohaska, president of Idaho Trust. “That’s the person who picks the restaurant. Nothing gets me more fired up than that term.”

On the other hand, Washington Trust Bank likes the term “concierge” because it implies customized banking services, said Brian Gonzalez, branch manager of the Boise branch. In fact, it offers a financial concierge on its retail banking side as well. “Essentially, it’s the idea of a one-stop shop for any of your financial needs, so you have one person,” rather than the individual roles of “new accounts” and “tellers,” he said.

While private banking can often include wealth management as a service, wealth management is a more general term that includes investments but doesn’t necessarily include banking services.

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