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.

photo of senator mike crapo
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.”

photo of julie fogerson
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.

Idaho’s efforts to attract firearms, ammunition makers have paid off

Gun range photo courtesy of KTVB-TV.
Gun range photo courtesy of KTVB-TV.

A recent survey ranked Idaho as the state most dependent on the firearms industry.

According to WalletHub, Idaho ranked first in the firearms industry, 10th in “gun prevalence,” and third in “gun politics.” Other states rounding out the top five were Montana, Alaska, South Dakota, and Wyoming. The study ranked Idaho as having the most firearms industry jobs per capita, and the highest total firearms-industry output per capita, tied with New Hampshire. The state did not rank in the top five for the highest average wages and benefits nor in the total taxes paid per capita.

The National Shooting Sports Foundation, one of the sources for the WalletHub study, noted in its Firearms and Ammunition Industry Economic Impact Report 2018 that the Idaho firearm and ammunition industry was responsible for 3,219 jobs with wages of $129 million and output of $556 million. Suppliers were responsible for an additional 1,500 jobs, $77 million in wages, and $300 million in output, while there were 1,371 induced jobs at $53 million in wages and $180 million in output, for a total of 6,090 jobs, $259 million in wages, and more than $1 billion in output, the report continued. Average wages were $42,600, while the federal excise tax collected was almost $10 million.

In 2008, the Idaho Department of Commerce started targeting the firearms industry, touting the state’s low wages, gun-friendly culture, and business-friendly environment. A June 2016 brochure encouraged firearms companies. “Idaho’s average workforce costs are 84 percent below the national average,” the flyer noted. “Recognized as a gun-friendly state by the National Rifle Association. Among the least restrictive gun laws in the nation.”

The program was successful. Idaho’s firearms and ammunition industry employment grew by nearly 40 percent from 2012 to 2017, said Megan Hill, a public information specialist for the Department of Commerce, citing EMSI figures. “Over this same period, the industry in the US as whole grew by 20 percent,” she said. “In 2017, Idaho had approximately 1,600 firearms and ammunition jobs.”

Several firearms companies moved to Idaho including Next Generation Arms in 2010, Caracal USA in 2014, Advantage Arms in 2015, and Nemo Arms in 2016, Hill said. “None of these companies received any incentives,” Hill pointed out. Vista Outdoors – formerly ATK — was awarded a tax reimbursement incentive for the expansion of its facility in Lewiston in 2016, but the company does not manufacture firearms there, Hill said.

But both nationally and statewide, the industry has been slowing down. Vista cited a reorganization involving severance, as well as a goodwill writeoff of $354 million, in its most recent earnings report. “A challenging retail environment and other market pressures resulted in deeper discounting of Vista Outdoor’s accessories products during the quarter ended January 1, 2017,” the company noted.

Published reports indicated that Howell Munitions & Technology also had layoffs, and that PNW Arms – quoted in the Commerce brochure – had filed for bankruptcy in July 2016. Attempts to reach the companies were unsuccessful. In addition, according to the Associated Press, Boise Gun Co. has closed. The Idaho Firearms and Accessories Manufacturers Association Inc. no longer exists.

“We did see a downtick with the most recent presidential election,” said Jeff Hoskinson, director of sales & marketing for MGM Targets, in Caldwell, though he said his company’s business remains good. “We are very heavily tied to the political undertones of the country” and there was no longer such a sense of urgency, he said. (A 2013 City Club program on Idaho’s firearms industry asked, presciently, what would happen to the industry should Republicans regain control of the presidency.)

Nationally, gun manufacturer Remington has filed for bankruptcy, while a number of retailers, including Dick’s and Fred Meyer, have changed their policies regarding selling firearms.  FBI background checks dropped in 2017 for the first time, while the first two months of 2018 were lower than those of 2017.

“As a whole, the firearms industry suffered a decline in sales mid- to late 2017,” said JR Shepard, CEO of Lone Wolf Distributors, in Priest River. “This was caused in part by overall confidence in the president’s firm pro-gun, pro-Second Amendment stance. The buying public was lethargic; there was no sense of urgency to purchase firearms, magazines or ammunition.” But things are changing, he said. “Although January 2018 sales reflected a stabilized 2017, February and March both showed 23 percent to 25 percent increases! Recent renewed attacks on the Second Amendment have once again bolstered sales. 2018 is looking healthy indeed.”

photo of doug mattoon
Doug Mattoon

“Overall, the industry remains a strong employer in this region,” said Doug Mattoon, president and CEO of Valley Vision, an economic development organization for the Lewis-Clark Valley, home to many of the state’s firearms manufacturers. “Vista Outdoor did reduce work force some through attrition.  Howell did do a layoff last year, but appears to be pretty steady during recent months. Our firearms and accessories manufacturers all appear to be doing well.”

DICK’S to stop selling assault-style rifles

An Idaho DICK'S sporting goods store.
A DICK’S sporting goods store in Boise. The company, which owns five Idaho stores, has said it will stop selling certain firearms and accessories after the most recent school shooting. Photo by Liz Patterson.

DICK’S Sporting Goods, which operates five stores in Idaho, has announced that it will stop selling certain firearms and accessories after the Feb. 14 school shooting in Parkland, Florida.

Ed Stack
Ed Stack

“Thoughts and prayers are not enough,” Chairman and CEO Ed Stack said in a statement, where he noted that the store had sold a shotgun to the alleged shooter, although it was not used in the Parkland incident. “We support and respect the Second Amendment, and we recognize and appreciate that the vast majority of gun owners in this country are responsible, law-abiding citizens. But we have to help solve the problem that’s in front of us.”

The company removed assault rifles from the DICK’S stores after a shooting killed 20 children and six school staff at Sandy Hook Elementary School in Connecticut in 2012. On Feb. 28, the company said it would also stop selling assault-style rifles from its 35 Field & Stream stores, of which there are none in Idaho. The company will also no longer sell high-capacity magazines, noting that it has never sold bump stocks. Finally, it will no longer sell firearms to people under 21 years of age.

Bobbi-Jo Meuleman, director of the Idaho Department of Commerce, said Feb. 28 that arms and ammunition are important to Idaho’s economy. She added that the DICK’S decision won’t have a significant impact on the state’s weapons industry. The five Idaho DICK’S stores are in Boise, Nampa, Twin Falls, Pocatello, and Meridian.

As of 2016, the most recent year for which statistics are available, there are 257 sporting goods stores employers in Idaho, providing a total of 2,792 jobs, according to Kathryn Tacke, a regional economist for the Idaho Department of Labor, in Lewiston. “It’s important to remember that a lot of other stores sell ammunition and guns, and that sporting goods involves equipment for a lot of sports and not just guns and ammo,” she said.

The size of the gun and ammunition manufacturing sector in Idaho depends on whom you ask. According to Commerce, Idaho employs 1,565 people in the firearms and ammunition industry sector, with an average annual wage of $48,619, as of Q4 2017, Meuleman said. According to Labor, Idaho employed 2,007 people in its firearms and ammunition sector among 18 employers earning more than $87.8 million as of 2016, Tacke said.

According to the federal Bureau of Alcohol, Tobacco, Firearms and Explosives, Idaho has two importers, 82 manufacturers, and 81 dealers, and 1,452 federal firearms licensees, as of 2016, the most recent year for which statistics are available. Idaho has a total of 49,566 National Firearms Act registered weapons as of April 2017.

DICK’S stock rose almost 1 percent on Feb. 28, the day DICK’S announced the decision. In the company’s most recent quarter for which it has announced results, it reported consolidated net income of $36.9 million, or $0.35 per diluted share, compared with its expectations of $0.22 to 0.30 per diluted share. Net sales for the quarter increased 7.4 percent to approximately $1.94 billion. The company does not separate out its firearms sales and was not able to provide Idaho sales figures by press time.

In the third quarter, the company opened 15 new DICK’S Sporting Goods stores and six new Field & Stream stores, as well as closing two specialty concept stores. As of October 28, the company operated 719 DICK’S Sporting Goods stores in 47 states, with approximately 38.2 million square feet, 98 Golf Galaxy stores in 32 states, with approximately 2.1 million square feet, and 35 Field & Stream stores in 16 states, with approximately 1.6 million square feet, according to its quarterly statement.

Stack is the son of founder Richard “Dick” Stack. He has worked for the company full time since 1977 in a variety of positions, including president, store manager and merchandise manager.  He has served as chairman and chief executive officer since 1984 when the elder Stack retired from the then two-store chain.

Walmart stopped selling military-style semiautomatic weapons in August 2015.