Idaho credit unions show robust first-quarter results

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Idaho credit unions, including this White Pine branch of Idaho Central Credit Union, showed good financial results for the first quarter. File photo

Credit union financial reports for the first quarter were solid, with Idaho ranking first in the nation for asset growth at 6.2%.

Lynn Heider, vice president of public relations for the Northwest Credit Union Association, which represents Idaho credit unions, attributed the strong performance to the strategic leadership provided by staff and boards.

“This performance is also in alignment with their growing popularity with consumers,” she said. “With nearly 60% of the population having chosen not-for-profit, cooperative credit unions as their financial services partners, credit unions are seeing asset, deposit and membership growth, and increasing demand for loans.”

Nationally, median asset growth over the year ending in the first quarter of 2019 was 1.6%, according to the National Credit Union Association (NCUA). In the year ending in the first quarter of 2018, the median growth rate in assets was 2.2%.

In other metrics, Idaho grew 5.1% for median annual share and deposit growth – third highest nationwide – and 1.7% in membership growth, Heider said.

Nationally, median growth in shares and deposits over the year ending in the first quarter of 2019 was 1.1%, the NCUA said. In the year ending in the first quarter of 2018, median growth rate in shares and deposits was 2.1%.

Nationally, median growth in membership over the year ending in the first quarter of 2019 was 0.2%, with membership dropping in 14 states – typically in credit unions with less than $50 million in assets, the NCUA said. In comparison, in the year ending in the first quarter of 2018, membership was unchanged at the median. Idaho ranked 7th nationwide with this benchmark.

Median annual loan growth in Idaho was 6.4%, Heider said. This ranked Idaho at 21, compared with 5.8% nationwide.

Nationally, the median growth rate in loans outstanding was 5.8% over the year ending in the first quarter of 2019. The median loan growth rate during the previous year was 5.0%. Over the year ending in the first quarter of 2019, median loan growth was positive in every state. Median loan growth was strongest in Missouri with 9.6%, followed by Minnesota with 9.2%.

Idaho also ranked second in loans-to-shares ratio at 87%, after Vermont with 88%. This means it took in a larger amount of loans rather than deposits, compared with credit unions in other states. While an increased number of loans help support the community, the larger number also means the credit union is taking on higher risk. Generally, the loan-to-share ratio nationwide has been increasing due to the continued confidence in the economy, according to creditunions.com.

Nationally, the median loans-to-shares ratio was 68% at the end of the first quarter of 2019, according to the NCUA. At the end of the first quarter of 2018, the median loans-to-shares ratio was 64%.

Idaho’s median total delinquency rate was 53 basis points, which ranked Idaho No. 24 nationwide. The median total delinquency rate nationwide was 54. The median return on average assets (ROAA) year to date – the net income divided by average gross total assets, which measures the credit union’s bottom line – was 68 basis points for Idaho, ranking it 14, compared with 56 basis points nationwide.

Altogether, 96% of Idaho’s federally insured credit unions had a positive net income year to date, which ranked Idaho eighth nationally. Nationwide, the figure was 86%.

Other Northwest credit unions also scored well, with Oregon beating Idaho in the categories of median annual loan growth, median delinquency rate and ROAA, and Washington beating Idaho in year-over-year membership growth, as well as median annual loan growth, median delinquency rate and ROAA.

Idaho credit unions have consistently ranked highly for several quarters. In the second quarter of 2018, Idaho scored highest in the nation in median annual asset growth, with 6.3%, and second in the nation only to Maine in median annual share and deposit growth with 5.3%.

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.”

The year in review: Banking

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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.

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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.

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Dave Glaser

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.

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Mary Hughes

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.

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Kevin Riley

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.

Four low-income Idaho credit unions awarded grants

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Connections Credit Union has 11 branches throughout the state, including this one in Boise. Photo by Sharon Fisher.

Four Idaho credit unions recently received more than $30,000 in grants from the National Credit Union Administration (NCUA).

Grant awards, intended for low-income credit unions, ranged from $1,300 to $20,000, for a total of $2 million made to 203 credit unions in 42 states and the District of Columbia, the NCUA said. Altogether, 243 credit unions made grant requests of $2.5 million; 44 awardees were first-time recipients, while 28 were minority depository institutions, said the Alexandria, Virginia-based organization, an independent federal agency created by Congress to regulate, charter and supervise federal credit unions.

Awards were in three categories: 141 grants totaling $1,251,670 for digital services and security, 40 grants totaling $350,760 for leadership development, and 22 grants totaling $397,570 for underserved outreach, the NCUA said.

Of the four Idaho recipients, three were in digital services and security, while one was in leadership development.

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Valerie Brooks

“This is going to help us reach out to underserved folks,” said Valerie Brooks, CEO of the Simplot Credit Union, consisting of a single Caldwell branch serving J.R. Simplot employees nationwide, though the majority of its members are from Canyon County. “That means we have a cross-culture of many different members from all different socioeconomic levels.”

The organization plans to use its $10,000 grant to make its online access more smartphone-specific, Brooks said. “Anytime we extend our technology, we have to look at the safety and soundness aspect of it as well,” she said. “When members access us, we want it to be in a secure environment to protect their data.”

The credit union also received a grant for $10,000 in 2016 to provide mobile access and for its debit cards to be “live,” or immediately updated, rather than updated in a batch process, she said.

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Paula Morrison

Desert Sage, a community credit union serving Nampa and Caldwell primarily for employees of the Amalgamated Sugar Company, received $10,000 for digital services and security. “We are one of the smallest credit unions in the state, with around 400 members,” said Paula Morrison, manager.

Morrison wasn’t sure if Desert Sage had received such a grant before, but said it hadn’t received a grant of this size since she became manager in 2008. They plan to use the grant to add digital services such as electronic notifications and digital signatures.

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Amanda Nixon

Lewis Clark Credit Union, based in Lewiston with five branches in Idaho and Washington, received $10,000 for leadership development. “We hired a facilitator to come in and talk to us and help us with some different leadership techniques,” said Amanda Nixon, human resources and compliance coordinator.

The organization has received at least five such grants before. Nixon led a webinar this summer for Northwest Credit Union Association members to help other credit unions apply.

“We’ve been very lucky, and I’ve got it down to an exact science now,” she said. “It’s really helpful to smaller credit unions, to expand their footprint and think about things they wouldn’t have been able to without those funds.”

Other grants were used for strategic planning, helping branches expand their footprint, and to develop services such as remote deposit capture, which lets a customer take a picture of a check and deposit it with their phone, she said.

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Aaron Fewkes

Connections Credit Union received $4,900 for digital services and security. The company was created from the union of Potelco Credit Union, based out of Pocatello, and Idaho Advantage Credit Union, based in Boise. “Both credit unions traditionally served employees of the telephone company, but prior to the merge, both held community charters,” said Aaron Fewkes, marketing director.

The credit union has 11 branches spread across Southern Idaho from Nampa to Idaho Falls.

The organization plans to use the funds to help develop a secure online membership application.

“Being a smaller credit union, one of our main marketing strategies is participation in community involvement and events,” Fewkes said. “We currently have no way to securely sign up new members while we are at these events, so having access to a secure online membership application would help us out immensely. In addition, we just rebuilt our website and we’ve been getting feedback from prospective members asking how they can join Connections. The ability to offer an online membership application makes it easier and quicker for us to respond to these inquiries.”

The NCUA’s Office of Credit Union Resources and Expansion administers grant funding provided by the Community Development Revolving Loan Fund, which offers grants and loans to credit unions serving low-income communities. Since 2001, Congress has provided the NCUA with $20.8 million for these grants.

The Office of Credit Union Resources and Expansion supports low-income-designated credit unions; credit unions interested in a low-income designation; minority credit unions; credit unions seeking changes in their charters, bylaws or fields of membership; and groups organizing to start new credit unions.

Idaho Credit Union League formalizes NWCUA merger

The merger between the Idaho Credit Union League (ICUL) and the Northwest Credit Union Association (NWCUA) is now final after a positive vote from a majority of its 184 members.

The organization, which now represents credit unions from Oregon and Washington as well as Idaho, did not release the vote count, but it was “clearly overwhelming,” said Lynn Heider, vice president of public relations for the NWCUA.

The next step is for the groups to create a merged board of directors, which is expected to add three Idaho members. “The boards of directors for ICUL and NWCUA will remain intact until December 31,” Heider said. Sometime between now and then – likely probably after the organization’s convention, scheduled for October 16-18 in Tacoma, Washington – the organization will release information about the NWCUA Board of Directors, because election of officers happens at the convention, she said.

The ICUL started talking with the NWCUA about a merger in January 2017. The two groups started a two-year management agreement for 2017 and 2018. After the first year worked out well, the boards of the two organizations agreed in December to merge, effective December 2018.

Members pay an annual fee depending on size. Services include training in areas such as compliance, loans, and deposits, as well as advocacy on the state and national level.

The NWCUA formed about seven years ago through a similar merger between credit union leagues in Oregon and Washington. As of January, the vast majority of eligible credit unions in the three states were members.

National credit union problems not an issue for Idaho, NWCUA says

Some issues facing credit unions nationally are not yet an issue in Idaho.

The U.S. District Court for the District of Columbia on March 29 upheld two challenged portions of the field of membership rule for the National Credit Union Association, or NCUA. Each portion had to do with defining the size of a region from which a credit union could draw its members. The court agreed with the NCUA on two other rules.

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Troy Stang

The situation arose with the change in the financial industry, said Troy Stang, president and CEO of the Northwest Credit Union Association, or NWCUA. While credit unions were often started specifically for the employees of a single organization, that made them more vulnerable, he said.

“If that company goes out of business, all those paychecks are gone,” he said. From a safety and soundness perspective, credit unions’ membership needed to be broader, he said.  Moreover, consumer behavior has changed, and credit unions can draw from a larger geographic area, he added.  In particular, the appellate court challenged the definition of “rural” as having 1 million or fewer people, when the statute had no definition, he said.

The NCUA has 60 days from the date of the ruling to decide whether to appeal the ruling to the Supreme Court, Stang said. But even if the organization chooses not to appeal the ruling, or should the appeal fail at the Supreme Court level, it would only affect credit unions that are federally chartered, not the ones that are state-chartered, he said. “The majority of credit unions in Idaho are state-chartered, so this wouldn’t affect them,” he said.

In the meantime, credit unions that received an expanded rural community charter expansion or a combined statistical area expansion can keep any members that they have accepted under that designation, but will not be able to continue accepting additional members, the NWCUA advised its members.

In another situation, some credit unions in other states are being targeted for lawsuits because their websites are allegedly failing to comply with Americans with Disabilities Act requirements. “All credit unions want to be as compliant as possible,” Stang said, but sometimes they miss things. Typically, what has happened is that a website has a file in an older format that does not support conversion to voice. “If somewhere you’ve updated your website, and you have a PDF from the last Adobe version, it’s not convertible,” he said. “It’s a gotcha.”

One law firm in California has been filing lawsuits against credit unions – one in Washington, some in Oregon, and a number in California, Stang said, though he wasn’t aware of any yet in Idaho. The lawsuits hinge on whether credit unions are considered to be “public entities” under the ADA. Because credit unions are not open to the general public, and the plaintiffs are sometimes not even eligible to join the credit union they are suing, several of these lawsuits have been thrown out as frivolous, he said.

In addition, nationally, as well as in some states such as Iowa, there has been discussion of requiring credit unions to pay corporate income taxes. Credit unions are typically exempt from such taxes because they are considered nonprofit organizations.

Stang noted that credit unions pay real estate taxes and employment taxes.

“The only tax we do not pay is federal income tax,” he said. Instead, credit unions’ corporate profits are distributed to members, on an average of $120 per member per year. “Banks are welcome to become not-for-profits,” he said. “We don’t yet have a bank willing to take us up on it.”

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.

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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.

Credit union bill progresses

The Idaho Statehouse.
The Idaho Statehouse. The Senate Commerce and Human Resources Committee on Feb. 22 approved a measure that updates the Idaho Credit Union Act. Photo by Anne Wallace Allen. 

For the first time in 25 years, the Idaho Credit Union Act is being updated to bring it more in line with current trends.

The bill, S1285, modifies sections of code, originally written in 1977, having to do with the internal governance of Idaho credit unions. The new code updates requirements around meetings, such as allowing members to vote via absentee ballots, according to Ryan Fitzgerald, vice president of legislative affairs for Idaho for the Northwest Credit Union Association. Fitzgerald testified to the Senate Commerce and Human Resources Committee Feb. 22.

Other changes include allowing the credit union to hold its annual membership meetings where the majority of its members reside, updating the reasons to hold special membership meetings, and modernizing the administration of credit union boards of directors, such as potentially reducing the number of required board meetings. In addition, a new section establishes provisions regarding bond coverage. Fitzgerald called it a “targeted and balanced” update for credit unions that also gives the Department of Finance more tools to help govern credit unions.

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Kent Oram

Kent Oram, CEO of the Idaho Central Credit Union in Pocatello, and chairman of the Idaho Credit Union League, characterized the changes as “minor housekeeping.”

The committee moved the bill to the full Senate on a do-pass recommendation with no testimony and no opposition.

Study: more than half of Idaho residents are credit union members

About 55 percent of Idaho residents are credit union members, according to a study called 2017 Economic Impacts of Credit Unions in Idaho by ECONorthwest.

photo of Michael Wilkerson of ECONorthwest
Michael Wilkerson

ECONorthwest found that Idaho’s credit unions spend about $283 million in compensation and other payments. The report looked at the direct and indirect economic impacts of credit unions. The largest impact was jobs. Idaho credit unions provide 2,520 jobs, for a total of $147 million in compensation, said Michael Wilkerson, principal and project director for ECONorthwest.

ECONorthwest also looked at the impact of credit unions in Oregon, Washington, California, and Nevada.

Chart with a list of Idaho credit unions and their assets
Idaho credit unions and asset sizes. Information courtesy of Northwest Credit Union Association.

While 55 percent of Idaho residents are credit union members, about 50 percent of Washington citizens and 49 percent of Oregon citizens are, Wilkerson said.

The report also noted that Idaho credit unions had more than 548,000 loans to its members, totaling $7.3 billion.

Credit unions are available in 34 of Idaho’s 44 counties, and 153,000 members are considered to reside in rural communities, the ECONorthwest study found.

Idaho Credit Union League slated to merge with Northwest Credit Union Association

The ATMs at CapEd Credit Union's new Nampa branch can issue $1, $5 and $10 bills. Photo courtesy of CapEd Credit Union.
CapEd Credit Union’s new Nampa branch. There are 23 credit unions under the supervision of the Idaho Department of Finance. Photo courtesy of CapEd Credit Union.

It’s been a long engagement, but the Idaho Credit Union League and the Northwest Credit Union Association will marry by the end of the year – assuming at least half their 184 family members agree.

The Idaho Credit Union League (ICUL) started talking with the Northwest Credit Union Association (NWCUA) about a potential merger in January 2017. The two groups started with a management agreement, said Kent Oram, CEO of the Idaho Central Credit Union (ICCU), in Pocatello, and chair of the ICUL. “Size matters in today’s world,” he said. “We thought, why not partner with the surrounding states and pool our resources.” The ICUL started talking with other organizations two or three years ago, and the NWCUA made sense because of the geographic factor, he said.

photo of Kent Oram, Idaho Credit Union League Chair
Kent Oram, Idaho Credit Union League chair

The two organizations created a two-year management agreement for 2017 and 2018. After the first year worked out well, the boards of the two organizations agreed in December that they would merge, effective December 2018. The merger requires majority approval of their member 184 credit unions in three states – Idaho, Oregon, and Washington. Each credit union in the organization gets a single vote, regardless of its size. Both the ICUL and the NWCUA expect the merger to pass.

“More in the family means a stronger voice,” said Troy Stang, president and CEO of the NWCUA, based in Tigard, Oregon, with offices in SeaTac, Washington, and Boise. The organization has a staff of about 30.

Stang plans to spend the next six months doing town hall meetings with credit unions in all three states to answer questions about the merger, with the goal of a member vote by early summer. Members need 90 days’ notice of the merger, and “we want to put a bow on this by the end of the year,” he said. State approval is not required, he added.

Credit unions in the organization pay an annual fee that varies by their size. For example,  ICCU’s $3.5 billion in assets means its annual fee is approximately $95,000. Most Idaho credit unions are smaller and so will pay a lower fee. The fee for joining the NWCUA will be slightly higher than ICUL’s, on the order of two to five percent, but “we’re getting a lot more for our money,” Oram said. According to Stang, “99 percent” of the credit union assets in the three states are affiliated with the NWCUA.

Services offered by the NWCUA include training in areas such as compliance, loans, and deposits, as well as advocacy on the state and national level, Oram said. “What’s most important to us is that we retained a local voice,” he said.

photo of Tony Stang, Northwest Credit Union Association president and CEO
Tony Stang, Northwest Credit Union Association president and CEO

The NWCUA formed about seven years ago when credit union leagues in Oregon and Washington decided to merge, so adding Idaho to the mix made sense. “We all paid attention in geography class,” Stang said. For example, a credit union member who lives in Boise likely visits family in Ontario, Oregon, and visits credit unions there as well. “Consumer behavior doesn’t stop at state lines,” he said, adding that half of Idaho consumers are members of credit unions.

Assuming the merger passes, NWCUA will be governed by a board with up to 15 directors. Oram, as well as Trisha Baker, president and CEO of Lewis Clark Credit Union, and Dan Thurman, president and CEO of East Idaho Credit Union, are the Idaho leaders being recommended to the membership by the ICUL board. If all goes as planned, ICUL’s equity would be divided among direct rebate credits to ICUL member credit unions; a $500,000 donation will be made to the Northwest Credit Union Foundation for initiatives such as asset building, economic empowerment, and cooperative development; and approximately $1.2 million will go to the combined future equity of the continuing association.

Idaho banks and credit unions

According to the 2017 annual report from the Idaho Department of Finance, as of June 30 there were 23 credit unions under the department’s direct supervision, with seven new branches opening during fiscal 2017. In addition, one branch moved and one relocated, and two pair of credit unions merged. Finally, one credit union converted from being federally chartered to state chartered. They finished the calendar year 2016 with total assets of $4.77 billion, an increase of $587 million from the previous year – an annual growth rate of 14.03 percent, compared with a national growth rate of 7.37 percent.

On the banking side, the state directly supervised 12 commercial banks, as well as one business and industrial development corporation, plus 11 state-chartered banks operating in Idaho and chartered by other states. Four new branches were opened, four were closed, and two were relocated. One national bank converted to a state-chartered bank. They finished the calendar year with total assets of $5.1 billion, an increase of $500 million from the previous year – an annual growth rate of 9.2 percent, compared with a nationwide growth rate of 5.1 percent.