Bankers urge Crapo to hold marijuana banking bill hearings

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The budding legal marijuana industry can’t use banks and credit unions, but bankers are trying to change that. File photo.

Although marijuana is now legal in a number of states, companies that sell it can’t use banks and credit unions to store funds. Banking association officials from all 50 states – including Idaho – are working to change that by writing to Idaho Sen. Mike Crapo, who chairs the Senate Banking, Housing and Urban Affairs Committee.

On March 28, the House Financial Services Committee voted 45 to 15 to pass H.R. 1595, the Secure and Fair Enforcement (SAFE) Banking Act of 2019, with 191 cosponsors, but it hasn’t passed the House. A Senate version was announced on April 11, with 22 cosponsors.

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Amanda Critchfield

Banking associations want Crapo to schedule hearings, but Crapo doesn’t appear likely to do that any time soon.

“Senator Crapo has said that he is very aware of concerns from financial institutions on this front and it is an issue that needs to be addressed, but as long as cannabis is illegal under federal law, it seems difficult for Congress to resolve the issue,” said Amanda Critchfield, Crapo’s spokeswoman. “It is probably something the Department of Justice needs to address before Congress acts. Crapo has not committed to holding a hearing on it, but it is something we are looking at.”

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Mike Crapo

Earlier this year, Crapo criticized eight banks for withholding access to credit and services for other businesses that comply with federal and state laws but are politically disfavored, such as firearms manufacturers.

Since 1996, 33 states, comprising 68% of the nation’s population, have legalized cannabis in some form, the May 20 banking association letter noted. But because federal law prevents banks from serving these businesses without fear of sanctions – including an increasing number of businesses providing products and services to cannabis companies – they operate on an all-cash basis, which is unsafe and inefficient, the associations wrote.

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Trent Wright

That includes an increasing number of businesses that provide products and services to cannabis companies.

“Without relief from Congress, many banks find themselves caught in the financial web created by indirect connections to this business,” said Trent Wright, president and CEO of the Idaho Bankers Association. “Quite simply, it will soon be almost impossible to avoid banking-unrelated businesses that provide services to marijuana-related businesses, as cannabis grows into an estimated $24.1 billion industry by 2025.”

The Independent Community Bankers of America also lists the issue as one of its legislative priorities.

According to an analysis by the Congressional Budget Office, implementing the bill would increase insured deposits at banks nationwide by about $1.2 billion and at credit unions by about $200 million, beginning in 2022. Those amounts would rise to $2.1 billion and $350 million, respectively, by 2029, the agency noted.

Cannabis in any form, including industrial hemp, is currently illegal in Idaho. As long as that is the case, it is uncertain to what degree Idaho banks and credit unions could conduct business with cannabis companies, even if it was allowed on a federal level. However, several Idaho banks and credit unions operate in states where cannabis is legal.

Multistate banks and credit unions operating in Idaho generally wouldn’t take a position on the legislation.

“If the legality were to change at the national level, then we would have an opportunity to take another look at it within the markets we serve,” said Kelly McPhee, vice president of communications & public relations for Banner Bank, which operates in California, Idaho, Oregon and Washington.

“As a federally regulated institution, we follow federal laws,” said Darcy Donahoe-Wilmot, a spokeswoman for Chase Bank, which operates in 26 states. “We support the ABA in their request for more legislative clarity on a complicated issue.”

“If and when the federal laws are changed, we will address our official opinion with all of the relevant information available at that time,” said Tony Rasmussen, vice president of public relations and financial education for Mountain America Credit Union, which operates in Utah, Idaho, Arizona, New Mexico and Nevada.

Idaho financial institutions help furloughed federal employees

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The James A. McClure federal building in Boise. Many nonessential federal agencies are shut down. Photo by Glenn Landberg

In response to the federal government furlough, a number of Idaho banks and credit unions are offering support to federal employees who need it, especially as the furlough hit the mid-January point where some employees no longer received paychecks.

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Trent Wright

“The current government shutdown is the longest in our nation’s history, impacting businesses and consumers alike,” said Trent Wright, president and CEO of the Idaho Bankers Association. “Every single Idaho bank is stepping up to the plate to help their customers weather this storm.”

Wright encouraged government employees suffering hardship as a result of the government shutdown to connect with their local banker to discuss options.

U.S. Bank announced on Jan. 11 a low-rate quick loan of $100 to $6,000 for qualified federal government employee customers. In addition, the company set up a special toll-free number to talk about this and other options, including mortgage relief.

Washington Federal, a Seattle-based community bank with offices in eight states, including Idaho, said on Jan. 15 that it would provide 90-day interest-free loans of up to 12 weeks’ take-home pay to any eligible federal government employee who brought in their last funded paycheck along with either a furlough notice or a zero-balance pay stub. The program applies whether or not they are a current customer, though a Washington Federal checking account is required to gain access to the funds. After the 90 days, borrowers pay 5 percent through the end of the year, rising to 10 percent starting Jan. 1, 2020. Borrowers have until Dec. 31, 2022 to pay the money back.

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Toni Nielsen

Zions Bank clients with a federal employee pay stub can defer their loan payments with no fee for up to 90 days, said Toni Nielsen, region president for western Idaho.

At KeyBank, clients who are on furlough from government jobs can apply for a low interest rate, short-term personal loan for funds to cover budget shortfalls, said Laura Suter, communications manager.

Federal employees whose paycheck was direct-deposited into a JPMorgan Chase account in November 2018 are automatically having some fees on Chase checking and savings accounts waived or refunded. In addition, the company has also set up a toll-free number for federal employees to discuss their personal situations.

Wells Fargo announced Jan. 15 that it is also providing a toll-free number, as well as fee reversals and waivers for loans, credit cards, and overdrafts for people with direct deposit. For mortgage and home equity customers, the company won’t apply late charges or negative credit reports on loans for up to 90 days, and it is putting foreclosure activities on hold. In addition, the company donated $250,000 to support local communities, through the United Way.

Credit unions are also providing assistance, including short-term, low-interest loans, lower-interest credit cards, financial counseling, or opportunities to delay loan payments, according to the Northwest Credit Union Association, which represents Idaho credit unions. “Furloughed employees should contact their credit union immediately to see what options are available to them,” said Lynn Heider, vice president of public relations for the organization.

Icon Credit Union announced Jan. 11 that federal government employees on furlough could bring a past pay stub to any branch to apply for a loan of up to $5,000, on approved credit, with no payments due for 90 days. In addition, current Icon members on furlough can skip a payment on existing Icon loans with no fees.

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Laura Smith

“We can waive late fees and offer payroll advance at 0 percent APR for qualified members,” said Laura Smith, director of public relations for Idaho Central Credit Union. “We have also been able to find ways to help nonmembers.”

According to the WalletHub study 2019 Government Shutdown Report: Most and Least Affected States, Idaho ranks 25th in terms of states affected by the government shutdown. The state has approximately 14,072 federal employees, not all of whom were furloughed, according to the U.S. Department of Labor.

The year in preview: Banking

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Wells Fargo expects that it, as well as the banking industry as a whole, will be using “big data” to help expand their business. File photo.

What life will be like in Idaho’s banking industry in 2019 depends a lot on what the national and global economies do. December saw the stock market edging into bear territory, the bond market teasing the inverted yield curve typically presaging a recession, and the Federal Reserve Bank raising interest rates, which slows down lending.

Idaho and the nation have enjoyed one of the longest bull markets in history, but there have been signs that the party is coming to an end. That said, enough fundamentals remain strong that it may take a while unless something untoward happens.

“In 2019, I anticipate that Idaho’s economy and population will continue to grow nicely,” said Brian Berrett, chief financial officer for Idaho Central Credit Union. “I anticipate that the rate increases we’ve been experiencing over the last year or two will slow down. However, there could be a slowdown in lending due to any new increases on top of the ones we’ve already had.”

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Robert Spendlove

Robert Spendlove, senior vice president and economic and public policy officer for Zions Bank predicted that 2019 will be “characterized by uncertainty because of the inverted yield curve,” where long-term bonds have lower rates than short-term ones.

“Due to increases in interest rates, there has been some pullback on lending, particularly in the refinance market,” he said. “People refinance because they can get a better interest rate, but with interest rates increasing, offerings are going away.”

The economic situation – whatever it is – will also affect credit unions, said Lynn Heider, vice president of public relations for the Northwest Credit Union Association, which represents Idaho credit unions.

“The Fed is expected to continue to incrementally increase interest rates,” she said. “It is even more prudent for consumers to consider credit unions in this environment because they will find more competitive interest rates on their loans, credit cards and savings accounts.”

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Bipin Sahni

Financial institutions are using data – in quantities so large that it is known as “big data” – more to help improve their business, said Bipin Sahni, head of innovation research and development for Wells Fargo.

“Data is the next gold rush,” he said. “While there has been movement across the industry, there are still breakthroughs to be made in surfacing and acting on meaningful insights. Organizations will be looking to use data to bring new value to customers and team members.”

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Idaho Sen. Mike Crapo

Big data is also likely to be a focus of Congress after 2018’s Economic Growth, Regulatory Relief and Consumer Protection Act.

“If I am again chosen to lead the Banking Committee, I expect our focus will largely be on ‘Big Data’ and privacy issues, and whether we can give people the tools they need to protect their privacy and opt out of data collection, and I believe we can find consensus in this area with our House counterparts,” said Sen. Mike Crapo, R-Idaho. “Both chambers have also shown bipartisan support for legislation that will help to facilitate capital formation. There are also multiple expiring programs and charters that will need to be reauthorized, like the National Flood Insurance Program, the Terrorism Risk Insurance Act, and the Export-Import Bank. Last, I do expect us to address housing finance reform in some fashion, as it is the last piece of unfinished business from the financial crisis.”

And until we know for sure, there’s nothing wrong with preparing for a recession, Spendlove said, joking that economists have predicted nine of the last five recessions.

“When is it going to happen, how bad is it going to be, and what will cause it? You can’t tell,” he said. “If you have an emergency fund of three to six months’ of expenses – even though it’s really tough to lose your job or have your business go bankrupt – you can fall back on that. What’s the worst-case scenario if you don’t? You have a lot of money and no debt.”

Banks open branches across state

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Citizens Community Bank is building a new branch in Chubbuck, scheduled to be open next year. Image courtesy of Citizens Community Bank.

New bank branches are popping up all over Idaho, with three banks opening locations outside the Treasure Valley.

Citizens Community Bank is opening a new branch in Chubbuck, scheduled to be complete in mid-2019.

“The location on Quinn Road had the best combination of the things we were looking for,” said Jeff Garvin, senior vice president and chief financial officer. “Some of the factors we considered included proximity to our current branches, ease of access, growth trends in the community, and availability of a suitable building site.”

The company is constructing an 8,500-square-foot building, designed by Advantage Architecture and built by Morgan Construction.

“It will be a full-service branch with deposit services, commercial lending services, consumer lending services, real estate lending services, drive-up and ATM,” Garvin said. “There will also be some additional space to support the bank’s continued growth.”

He characterized it as a multimillion-dollar project but declined to be more specific.

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John V. Evans III
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D.L. Evans Bank is building a permanent branch in Rigby, scheduled to open in January. Image courtesy of D.L. Evans Bank.

D. L. Evans Bank, headquartered in Burley, is building a permanent branch in Rigby to replace the temporary branch that’s been operating there for a year or so, according to John V. Evans III, executive vice president. The new 6,000-square-foot branch, designed by Erstad Architects and built by Construction Solutions Company, is intended to be completed in December for a January opening. He would not reveal the cost.

In addition, Evans said the company expects to build a permanent branch next year to replace an existing temporary facility in Rexburg. “We like rural Idaho communities,” he said.

Washington Trust Bank is planning a new branch in Lewiston. The company has purchased a lot at 16th Avenue and 21st Street that it is preparing for a future branch, said Katy Wagnon, public relations and communications manager for the company, based in Spokane.

“The property has been split into two sections,” she said. “An 11–foot-tall retaining wall has been constructed, and 12,000 cubic yards of dirt have been hauled in on the east side to make it more level with 21st street.”

The bank is in the final stages of design with no estimate on when the branch will be built, she said.

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Trent Wright

Trent Wright, president and CEO of the Idaho Bankers Association in Boise, attributed the development to growth statewide.

“In 1994, Idaho had 376 bank branches with $9.2 billion in deposits located throughout the state,” he said. “Today, Idahoans choose to entrust $25 billion in deposits in over 500 bank branch locations.”

During the past six months, 66 percent of millennials visited a bank branch, most of which involved walk-in and not just ATM services, he said.

“That’s only down slightly from baby boomers, who hold steady at 80 percent over the same time period.”

Nationally, a number of banks, such as KeyBank and Wells Fargo, are closing branches, typically to save money, sometimes after a merger or acquisition. The Wall Street Journal reported more than 1,700 branches shut down between June 2016 and June 2017. At the same time, banks such as Bank of America and JPMorgan Chase are opening branches, with Chase planning to open 400 and Bank of America planning to open 500.

In Idaho, 77 branches have closed since 2010, while 31 branches have opened, according to the Idaho Department of Finance.

Increasingly, bank branches are appearing in supermarkets, office buildings, shopping centers, airports, convenience and retail stores, Wright said. “Banks have continued to expanded their locations to provide more personalized attention from bank staff, he said. “Also, new innovative branch designs and locations reflect a greater emphasis on customer service.”

Will more Idaho banks merge? Maybe.

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First Interstate Bank entered the Idaho market in 2017 with the purchase of Bank of the Cascades, and expanded it in April with the acquisition of Inland Northwest Bank. Officials expect more acquisitions. File photo.

While a change in banking law is expected to spawn more mergers and acquisitions, they aren’t likely to be more prevalent in Idaho – at least, because of that.

Congress passed S.2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, which was signed into law by President Donald Trump on May 24. It was intended to reduce the compliance requirements of smaller banks by raising the ceiling for banks needing to comply with them.

Consequently, some experts believe the raised ceiling will encourage smaller banks to merge with or acquire each other, because even merged, they will still fall below that new threshold. The result could be fewer community banks overall.

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Trent Wright

But that isn’t likely to happen in Idaho, said Trent Wright, president and CEO of the Idaho Bankers Association. “The IBA does not believe that in Idaho the provisions laid out in S.2155 will have an effect of increased mergers or acquisitions in the near future,” he said. “Most Idaho community bank mergers would still fall below the former arbitrary $50 billion [systematically important financial institution] designation.” In addition, many of the rule changes required under the law have not yet happened, he said.

However, there is one possible exception: First Interstate BancSystem, a Billings, Montana, bank that in mid-August closed on its April acquisition of Northwest Bancorporation Inc., which operated in Washington and Idaho as Inland Northwest Bank. Inland Northwest has three branches in Idaho, two in Coeur d’Alene and one in Spirit Lake. First Interstate entered Idaho in May 2017 through another acquisition, Bank of the Cascades. Altogether, it now has about 120 branches in Idaho, Montana, Oregon, South Dakota, Washington and Wyoming. The Idaho region overseen from Boise has 14 branches from Mountain Home to Fruitland with a total of 140 employees.

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Kevin Riley

While the company hasn’t announced any additional acquisitions since then, Kevin Riley, president and CEO of First Interstate, said during the earnings call on April 26 where the Inland Northwest deal was announced that it would consider other deals – likely starting at $1 billion and focused on filling in the six states in which it already operates, as opposed to entering other markets such as California.

Riley didn’t offer any specifics about what banks First Interstate might be eyeing. But with its acquisition of Inland Northwest, First Interstate now has branches in North Idaho, but no branches in the expanse of eastern Idaho between Mountain Home and Montana.

“We aren’t focused on growth simply for growth’s sake,” Riley said. “Instead, we look for prospects that will make us a stronger, better company.  It’s important to us that our prospects align with us culturally. In addition, we look at a number of other factors. Do they have a strong core deposit base? What is the mix of their loan portfolio? And, of course, does the opportunity make sense economically, and will it enhance the overall value to our shareholders?”

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Rob Perez

“I anticipate continued acquisitions [of other banks],” regional president Rob Perez said in June. “I anticipate additional organic growth.”

The Idaho regional headquarters for First Interstate Bank is scheduled to move 35 staffers into the Pioneer Crossing office building under construction at Myrtle and 13th streets in downtown Boise, expected to be completed by summer 2019. Currently headquartered with 25 people in the Plaza 121 tower at Ninth and Idaho streets that Farmers & Merchants Bank occupied, First Interstate has outgrown that space. Bank of the Cascades acquired Farmers & Merchants in 2005, before it was acquired by First Interstate.

Analysts expect the company on Oct. 29 to announce earnings for the third quarter, which ends Sept. 30, ranging from $0.70 to $0.84. In its previous quarter, it reported net income of $41.7 million, or $0.74 per share, compared with net income of $36.7 million, or $0.65 per share, for the first quarter of 2018, and $21.8 million, or $0.45 per share, for the second quarter of 2017.

Idaho banks report a strong quarter

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The FDIC reported that Idaho banks, such as Idaho Independent Bank, continued to do well during the quarter ending June 30. File photo.

Idaho banks continue to do well, according to statistics from the Federal Deposit Insurance Corp. (FDIC) for the most recent quarter, which ended June 30.

Total assets grew to $6.3 billion, an increase of 2 percent over the previous quarter, and 7 percent over the previous year.

However, the number of people employed in Idaho banks dropped by a percentage point, from 1589 to 1578, compared with the previous quarter. That’s still a 2 percent improvement from a year ago.

Altogether, the 13 banks based in Idaho earned $40 million in the first six months of 2018, noted the Idaho Bankers Association (IBA). Net income for the period was up 54 percent over the same time in 2017. Loans grew by 11.3 percent to $4.29 billion, and deposits increased by 6.9 percent to $5.36 billion during the first half of the year. Net interest margin also improved to 4.37 percent, which is above the national average. For the quarter, the state’s banks earned $21 million, an increase of 58 percent over the second quarter 2017.

Family and business finances remain relatively stable as well, with the amount of noncurrent loans and loans charged off declining, the IBA reported. Nine of 10 loans are being paid on time.

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Trent Wright

“The performance numbers validate what we’re hearing from members — that the economic conditions, in general, remain strong around the state, and that, in turn, leads to improved industrywide bank results,” said Trent Wright, IBA president and CEO.


Are banks closing branches or opening them? It depends

The Wells Fargo branch in downtown Boise.

Banks in Idaho and nationally are closing some branches but opening new ones as they adjust to changing consumer preferences.

Nationally, a number of banks, such as KeyBank and Wells Fargo, are closing branches, typically to save money, sometimes after a merger or acquisition. The Wall Street Journal reported more than 1,700 branches shut down between June 2016 and June 2017. At the same time, banks such as Bank of America and JPMorgan Chase are opening branches, with Chase planning to open 400 and Bank of America planning to open 500.

In Idaho, 77 branches have been closed since 2010, while 31 branches have been opened, according to the Idaho Department of Finance. In some cases, banks have closed branches in some areas and opened them in others.


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Sonya Hawley

KeyBank announced in April that it was going to close 40 branches nationwide, by the end of the year. In Idaho, KeyBank is closing one branch, the Country Club branch in Idaho Falls, effective June 29, said Sonya Hawley, area retail leader. “We’re consolidating that into the Idaho Falls downtown branch, less than 2 ½ miles away,” she said. That branch also offers more services than the branch that is closing, she said, such as a mortgage officer and business expertise. “Satellite branches don’t always have that service,” she said. “Now, clients have a one-stop shop.” All the existing employees are transferring to the downtown branch, she added.

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Julie Fogerson

“We expect to close 300 branches throughout the network, which is an increase from the 250 we announced previously,” said Julie Fogerson, assistant vice president of Idaho regional communications at Wells Fargo in Boise. “Based on our assumptions regarding consumer behavior and technology advances, as well as other factors, we still could see our total branch network decline to approximately 5,000 by the end of 2020.” In Idaho, the bank will be closing its Sun Valley and Capitol branches, each of which have another branch within a mile, she said. Capitol branch customers were notified in April that the branch would be closing in July.

Wells Fargo will also close its Kimberly and Buhl branches on August 15. Fogerson said the nearest Wells Fargo branches for Buhl customers will then be in Perrine or Jerome, both about 15 miles away. The nearest branch for Kimberly customers will be in Twin Falls, about 5 miles away, she said.

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Paul Silva

“We’re actually just seeing what our customers want,” said Paul Silva, Chase market director of banking, who is responsible for 18 of the 20 branches in Idaho. (The other two, near Coeur d’Alene, are covered by the Spokane market director.) “We have closed a couple of branches, we’ve opened some branches. Right now, we don’t have any anticipated closings, but we continually monitor what’s appropriate.”

Chase’s most recent closing was the East Bench branch inside a Fred Meyer department store, because the bank had two freestanding branches within a mile in each direction, Silva said. At the same time, the bank is looking at several sites in Boise and Meridian, particularly because of the latter’s growth, that it expects to have open by 2021 or 2022, he said. Most likely, it would be a new, standalone building, he said.

Generally, bank officials hesitated to go into a lot of detail about their plans for closing branches, with a number saying only that they are always looking at business options. Bankers mentioned they made decisions based on increased support for digital banking, proximity of neighboring branches,

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Becky Sechler Patnoi

and whether branch space was leased or owned.

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Jason Meyerhoeffer

“The banking industry is definitely evolving,” said Jason A. Meyerhoeffer, president and CEO of First Federal, in Twin Falls. “The number of branches has declined in recent years and will likely continue to do so.” His bank hasn’t closed any branches and he doesn’t plan to close any, he said.

In particular, some are concerned that banks are closing rural branches and opening urban ones. That could mean that, while the overall number of branches remains the same, rural areas become “bank deserts” where there aren’t any bank services around, other than automated teller machines.

That said, banks said branches still play a role, particularly when customers are looking for guidance rather than simply performing a transaction. “Most of our clients who come in, it’s for advice,” Silva said.

“We want the customer to be able to use the channel they prefer for what they’re trying to accomplish,” said Becky Sechler Patnoi, regional manager for retail for Washington Trust Bank. “Simple transactions may be going a digital route for many people, but not for everyone, and complex transactions are still occurring face to face.”

This story was updated on May 23 to add information about Wells Fargo branch closures in Buhl and Jerome.

Banks help communities with philanthropy

A full house at the Idaho Shakespeare Festival in the summer of 2017. Photo courtesy of Idaho Shakespeare Festival.
A full house at the Idaho Shakespeare Festival in the summer of 2017. Photo courtesy of Idaho Shakespeare Festival.

If you’ve ever been to the Idaho Shakespeare Festival, you know the person announcing the night’s performance and sponsors – typically producing artistic director Charles Fee – concludes with: “And our season sponsor, for the 20th consecutive year, is …” and the audience shouts, “KEYBANK!”

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Debbie Trujillo

“It gets our name out there,” said Debbie Trujillo, corporate responsibility officer for the Rocky Mountain region of KeyBank, which covers Colorado, Utah, and Idaho. The bank has similar major sponsorships in most cities in which it operates, she added.

KeyBank isn’t alone. Throughout Idaho, banks play a major philanthropic role in communities, whether through direct financial contributions or in-kind contributions of employee time and talent.

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Jennifer Oxley

“Banks play a significant and important role in Idaho philanthropy,” said Jennifer Oxley, chief communications and marketing office for the Idaho Community Foundation, a Boise-based nonprofit that accepts contributions from donors and makes grants. “All or most of the banks are active in the community in some way, whether it’s with sponsorships, volunteering or other support.” For example, the foundation receives donations from U.S. Bank, D. L. Evans Bank, and Washington Trust Bank, which helps it fund grants. “Our relationship with U.S. Bank, in particular, stretches back decades,” she said. “When we were established 30 years ago in 1988, U.S. Bank allowed us to have rent-free space in the U.S. Bank building. That was a generous benefit that allowed the Idaho Community Foundation to concentrate on our mission.”

Of the 12 Idaho community banks headquartered in Idaho, a total of 1,971 employees provided 56,240 volunteer hours, said Trent Wright, president and CEO of the Idaho Bankers Association, in Boise. In addition, they provided $1.1 million to charitable organizations, he said.

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First Interstate Bank in Kuna. Photo by Sharon Fisher.

Some banks have a corporate giving program, some have a foundation, and some, like First Interstate, have both, said Kelly Bruggeman, vice president of the First Interstate Foundation, based in Billings, Montana. The bank contributes a minimum of 2 percent of its net income before tax each year – $3.2 million in 2017, she said. Idaho organizations the bank supports include the Home Partnership Foundation and Boise Valley Habitat for Humanity, she said.

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Kelley Bruggeman

Banks don’t donate purely out of the goodness of their hearts. As part of the Community Reinvestment Act, banks are rated as part of their compliance, Bruggeman said. And banks have been criticized for using philanthropy as a marketing tool, such as making donations to organizations with good demographics – like the Idaho Shakespeare Festival. “You see banks advertising or providing grants to places that are frequented by the kinds of clients that they are trying to attract as bank clients, like elite cultural organizations,” said Aaron Dorfman, president and CEO of the National Committee for Responsive Philanthropy, in Washington, D.C. “The line gets a little blurry. Is this marketing, or true philanthropy?”

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Brian Stewart

Increasingly, though, banks are donating to economic development causes. “We’ve really tried to concentrate around community development and affordable housing as our main philanthropic priorities,” said Brian Stewart, relationship manager with the Office of Nonprofit Engagement for JPMorgan Chase & Co., in Portland. Idaho programs the bank supports include NeighborWorks Boise, the Treasure Valley Education Partnership, and job programs such as Life’s Kitchen, he said.

Employees contribute as well. In 2017, employees in Utah and Idaho raised $765,000 for the United Way, said Toni Nielsen, region president for western Idaho for Zions Bank, in Boise. Most employees are involved with at least two nonprofits – one with a networking component “and one they’re passionate about,” she said.

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Justin Smith

In response to the 2017 Tax Cut and Jobs Act, some banks said they would be increasing philanthropic efforts. For example, U.S. Bank donated an additional $150 million to its foundation, said Justin Smith, U.S. Bank region president in southern Idaho. But most Idaho banks said the tax cut wasn’t changing their philanthropic plans.

As well as helping society, bank philanthropic efforts can also be good for business, Dorfman said. “A lot of corporate philanthropy is from the desire to give back to communities, but there is self-interest as well,” he said. “When you lift up the most vulnerable, that makes the whole society stronger and healthier – and that’s good for banks.”

States, feds debate taxing credit unions

Idaho Central Credit Union's downtown Boise branch.
Idaho Central Credit Union’s downtown Boise branch. The lender, the largest credit union in Idaho, grew 20 percent last year in deposits, according to the state Department of Finance. Photo by Anne Wallace Allen.

One of the distinctions between banks and credit unions is that credit unions are nonprofit, meaning they are exempt from some taxes. However, on both the federal and state level there is discussion about changing this.

While there has not yet been a significant discussion about this in Idaho, and it is unlikely to surface this late in the legislative session, the Iowa Senate has passed a bill that would raise the taxes paid by credit unions and lower the taxes paid by banks so they are under the same structure, according to the Sioux City Journal. It is uncertain whether the House will approve the measure.

However, taxing or attempting to remove the tax exemption from credit unions on a state basis is problematic because the credit unions could simply switch to a federal charter and still not pay taxes, said Sen. Jim Patrick, R-Twin Falls, chair of the Senate Commerce & Human Resources committee, which governs banking. Idaho could tax only state-chartered credit unions, not federally chartered ones, he said.

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Idaho Sen. Mike Crapo

On a federal level, Sen. Orrin Hatch, R-Utah, chair of the Senate Finance Committee, wrote to the National Credit Union Administration on Jan. 31, suggesting that the tax exemption may have served its purpose. (Idaho Sen. Mike Crapo, who chairs the banking committee and also serves on the finance committee, has not taken a position, according to his office.)

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Trent Wright

Proponents of taxing credit unions say the original distinction between banks and credit unions, where the latter were open to only a small group of people, has blurred as credit unions have merged and become larger.

“You pay more income tax than Idaho Central Credit Union does, and they are a multibillion-dollar institution,” said Trent Wright, president and CEO of the Idaho Bankers Association, or IBA. “It seems offensive to me that someone making that much in income doesn’t have to pay taxes. It is an unfair and unlevel playing field.”  However, the IBA is not at this point working on changing credit union taxes on a state level, he said.

For their part, credit unions point out that they still do pay some taxes. “Credit unions do pay taxes!” said Lynn Heider, vice president of public relations for the Northwest Credit Union Association, which now represents Idaho credit unions after its merger with the Idaho Credit Union League. “In the last tax year, Idaho’s credit unions contributed more than $11 million in payroll and real estate taxes.” But by virtue of their nonprofit structure, credit unions don’t currently pay corporate income taxes, she said.

“That not-for-profit cooperative structure alone is what determines the corporate tax exemption, not the credit union’s asset size, number of members, or the services they offer,” Heider said. “Because of their structure, credit unions don’t pay stockholders. So they are uniquely positioned to deliver tangible benefits back to their members on Main Street. And that benefits the economy overall, to a much greater extent than an additional tax on credit unions would generate for government spending.”

But even some credit unions themselves believe they should pay taxes in at least some cases, such as when the credit unions are very large and competing with smaller credit unions.

photo of senator jim patrick
Sen. Jim Patrick

“The largest bank headquartered in my home state of Idaho holds $1.3 billion in assets, which is less than half the size of the largest credit union based here,” wrote Robert Taylor, president and CEO of Idaho State University Credit Union, in Pocatello, in the Credit Union Journal. “This bank has never been in direct competition with my credit union for consumer loans or deposits, even though we have branches in the same cities. However, every day we compete vigorously with the aforementioned credit union for consumer deposits and loans from overlapping members.”

Idaho Central Credit Union, the largest credit union in Idaho, has assets of $3.5 billion, according to the Idaho Department of Finance.

If the tax exemption were removed, it should be on very large credit unions, or ones that no longer have a tight common bond of members, Taylor wrote.

Umpqua Bank readies its move to Front Street and Capitol Boulevard

Umpqua Bank follow Washington Federal Bank and Bank of America to the bank building at Front Street and Capitol Boulevard. Photo by Teya Vitu.
Umpqua Bank is moving into this building at Front Street and Capitol Boulevard. It was once occupied by Washington Federal Bank and before that by Bank of America. Photo by Teya Vitu.

Roseburg, Ore.,-based Umpqua Bank is moving its downtown Boise branch from Main Street to the longtime Bank of America building at Front Street and Capitol Boulevard.

The new Umpqua location will open April 24 as the bank’s largest Idaho location among its 10 branches.  Umpqua will fill most of the two-story, 18,465-square-foot structure, but 4,500 square feet will be available for lease, said Eve Callahan, senior VP corporate communications.

The neighborhood branch at 280 S. Capitol Blvd will offer retail, commercial and home lending, Callahan said.

Umpqua is moving from its 5,515-square-foot suite in the Veltex Building, 420 W. Main St., that Umpqua inherited in its acquisition of Sterling Savings Bank in September 2013. Umpqua operated at Main Street since April 2014.

“We were interested in finding a location in the center of the community,” Callahan said, referring to the busy downtown location at Front and Capitol.

Community organizations can reserve at no charge the two meeting rooms or the entire bank branch during off-hours, she said.

LCA Architects in Boise is the project architect and The Russell Corporation in Meridian is the general contractor.

Umpqua has branches in Boise, Meridian, Cascade, McCall, Riggins, Grangeville, Kooskia and Lewiston, all acquired in the Sterling acquisition.

The Front/Capitol building had been empty since Washington Federal Bank closed its branch there Aug. 15, 2014. Washington Federal acquired the building in December 2013 as part of the acquisition of 31 Bank of America branches in Idaho.

Bonneville County will move treasurer into former bank building

Bonneville County bought the former Washington Federal Bank/Bank of America building across from the county courthouse. Photo taken from Loopnet.
Bonneville County bought the former Washington Federal Bank/Bank of America building across from the county courthouse. Photo taken from Loopnet.

Bonneville County has bought the former Washington Federal Bank/Bank of America building in Idaho Falls, across the street from the county courthouse, for $360,000 from its reserve fund.

The bank building will house the county treasurer and geographic information systems office, both moving out of the courthouse to free space for court functions, Bonneville County Commissioner Roger Christensen said.

The 7,036-square-foot building at Capital Avenue and B Street has street level and basement space. Street level will be occupied now and the basement will remain for future use, he said.

“Our courts are so crowded right now,” Christensen said. “When buildings become available, we look to acquire them and create a campus-style appearance.”

Christensen said having the treasurer in a separate building will be more convenient for the public, which will no longer have to go through security checks as it does in the courthouse. The treasurer will also use the bank’s drive-up window.

The treasurer will move after property tax collections are completed in June.

The Washington Federal building is the fifth in downtown Idaho Falls that the county has acquired in the last 16 years, each time to move another county entity out of the courthouse. The public defender, motor vehicle division, elections office and juvenile probation occupy these separate buildings.

Bonneville County is trying to push aside the need to build a new courthouse, which Christensen estimates would entail a $50 million to $70 million bond.

Washington Federal  Bank acquired the building in 2013 as it acquired 15 Idaho branches of Bank of America. It was built in 1945.

Idaho retailers are slow to get on board with new EMV cards

xx and Danish Sohail, owners of the family-run Taj Mahal restaurant in downtown Boise. Photo by Celia Southcombe.
Sohail Ishaq and Danish Sohail, owners of the family-run Taj Mahal restaurant in downtown Boise. Danish Sohail said he hasn’t seen many chip-and-pin cards in the restaurant yet. Photo by Celia Southcombe.

Many Idaho businesses will miss an Oct. 1 deadline for using new credit and debit cards and payment processing systems.

The new cards, known as chip-and-pin or EMV cards, are designed to reduce the card fraud that happens at point of sale systems. Customers of many national banks received the new cards months ago. But some local banks won’t have issued them by Oct. 1.

And while national retailers are on board, many Idaho retailers haven’t switched over to point of sale systems that accept the cards, aid Gavin Gee, the director of the Idaho Department of Finance. He said he’s learned in recent meetings with the financial institutions he regulates that “currently in Idaho, many, if not most of their small business customers are not yet EMV-compliant.”

Chip and pin and EMV (for Europay Mastercard Visa) cards have been used in Europe for years, replacing the easily copied magnetic strip cards that are still in wide use in the United States. EMV machines can recognize if a card has been duplicated, and then decline the suspicious transactions.

While there is no federal mandate that retailers accept the cards, after Oct. 1 they will be liable for any credit card fraud committed through their point of sale systems if they accept a card but don’t have a chip reader. Under existing rules, the banks are responsible for guaranteeing cards were legitimate, and are liable if cards are counterfeit. Retailers are responsible for verifying cardholder legitimacy, and they must pay for the fraud if they don’t.

Under the new system, if a retailer accepts a chip card but doesn’t have a chip reader, the bank will no longer bear responsibility for fraud if the card is counterfeit, shifting the burden to the retailer, according to the National Retail Federation.

That deadline has spurred some Idaho small businesses to switch to the new cards.

“These rules are long overdue and will protect the consumer and businesses,” said Dan Balluff, who owns the City Peanut store in downtown Boise.

Balluff, who is ready to accept the new cards at his store, said credit card companies could have started upgrading to EMV cards at least a decade ago but were slowed by the expense.

“I understand it’s a burden for some, but in the long term, I think the new readers will be a worthy investment,” Balluff said.

But many are also holding back, stymied by conflicting or inaccurate communication by their credit card or point of sale processors, said Pam Eaton, the president and CEO of the Idaho Retailers Association. Eaton said it’s impossible to assess exactly how many Idaho retailers have made the switch to new equipment.

Pam Eaton
Pam Eaton

“I will say that we’ve been encouraging all of our members to upgrade, along with holding educational sessions and continually sending out educational information so that our members are aware of what all is at stake and why upgrading their equipment is worthwhile,” she said.  “I fear, however, that there’s a large part of the business community that either doesn’t understand or is simply ignoring the looming October date and liability shift that will occur.”

It’s not just Idaho retailers who are holding back. National publications that cover the banking and credit union industry report that retailers around the country have been slow to change their point of sale systems to accept the cards.

Joy Rogers
Joy Rogers

“Reasons range from ignorance about the mandate to justifying the implementation costs to a heated debate between retailers and the card industry on whether the new cards will provide all the security they could,” said the NRF.

Some banks are waiting as well. They don’t face the same Oct. 1 deadline, but customers are asking for the new cards and aren’t getting them. The Idaho-based Mountain West Bank is just now planning its rollout of the chip and pin cards. Joy Rogers, senior vice president of e-Banking at Mountain West, said the cards will be available by next summer. She didn’t say why the cards won’t be available sooner.

Nicola McIntosh
Nicola McIntosh

Zions Bank has been issuing the chip credit cards in phases, first to commercial customers who provide expense cards to employees early this year, and then to small business customers in June. Chip debit cards will be available late next month, said spokeswoman Nicola McIntosh.

“The Oct. 1 deadline applies to merchants, not card issuers,” McIntosh noted. She added that clients can request a chip card before their existing card expires.

Cap Ed Credit Union will start issuing EMV credit cards in mid-October, said Richard Arnold, the credit union’s vice president of finance. EMV debit cards will be available early next year, he said.

At the Taj Majal, a small family-owned restaurant in downtown Boise, the national change in payment came just as the family decided to look at upgrading their point of sale system anyway. Son Danish Ishaq said he found a new system that will allow servers to use iPad minis to send orders to the kitchen and accept payment at customers’ tables. They will accept EMV or magnetic-strip cards.

“We haven’t seen many chip cards in the store,” Ishaq said.

Javelin Research and Strategy, a consumer research company in Pleasanton, Calif. estimates 59 percent of all U.S. retail locations will be EMV-compliant by the end of the year.