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%.

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.

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.”