trent wright | Idaho Business Review

Sunwest Bank moves back office functions to Idaho from California

photo of sunwest bank — Sunwest Bank has moved its back office operations from California to Nampa. Photo courtesy of Sunwest Bank

Sunwest Bank has moved all its back office functionality to Idaho from California and is looking for locations for new branches in downtown Boise and south Meridian.

The bank, based in Irvine, entered the Idaho market in 2014 when Syringa Bank failed and Sunwest took it over, as it did several other failed Western banks.

photo of justin archuleta — Justin Archuleta

“They were one of the banks that had been impacted in a negative way through the downtown,” said Justin Archuleta, market area president for the Idaho division, who started working for Sunwest in 2014. “They had a ton of great people. We were pretty lucky on that front.”

Sunwest now has 40 Idaho employees – about 25% of its overall workforce – with half in Nampa and the rest among the bank’s branches in Boise and Middleton.

Sunwest moved part of its back office operation to Idaho in 2017, but has continued to add to that. Now essentially all back office operations are in Idaho, including construction draw administration, the wire department, a call center and an information technology component, Archuleta said. The bank moved the back office operation in July to Nampa in the Premier/Title One building on Franklin near the Idaho Center.

Archuleta had originally thought of south Meridian for the back office operation, but found that square footage and parking were harder to come by. In addition, a number of the bank’s employees lived in Canyon County.

“That building came up, and the square footage met our needs,” he said.

It’s also conveniently located to the highway and has room for expansion, he added. The bank is occupying about 5,000 square feet of the building, and used the owner’s architectural firm and general contractor for some renovations, Archuleta said.

“The IBA is not surprised to learn of Sunwest Bank’s plan to relocate support staff and certain bank operations to Idaho from California,” said Trent Wright, president and CEO of the Idaho Bankers Association, in an email to the IBR. “All banks or all sizes have worked tirelessly to address challenges in recruiting and retaining a talented workforce. Idaho provides such a wealth of talent in our workforce that other states just can’t compete with.”

Currently, Sunwest has two retail branch locations, one in Middleton and one on Orchard Street in Boise, both of which it acquired through its purchase of Syringa. The bank had also had a location in Eagle, but that was primarily back office functionality.

This summer, Sunwest purchased the building it had been leasing in Middleton, where it is the only bank, though there are two credit unions.

“We feel the Star/Middleton market is in an up-and-coming area from a business standpoint,” Archuleta said. “It seemed like the right thing to do, to place our roots there and be the leader in that market for the long term.”

Sunwest president Carson Lappetito had said last year he was looking for a location for a downtown Boise branch, but the bank hasn’t found one yet, Archuleta said.

“We’re still keeping our eyes and ears open,” he said. “With the expansion of downtown, there’s not an abundance of available square footage.”

Sunwest shut down Syringa’s downtown branch in March 2014.

The bank is now also looking for a branch location in south Meridian, likely in the Overland Road/Eagle Road corridor.

“We don’t need an abundance of locations, but we need places for our people to link up,” he said. “We can easily get from Meridian to downtown for a meeting if need be.”

Sunwest ranks No. 57 on the American Banker list of the top 200 publicly traded community banks.

Idaho banks did well overall in 2018, but US Bank is closing seven branches

photo of us bank — Despite a good year for banks in Idaho overall, US Bank plans to close seven branches across the state in the coming months. Not this one, though. File photo.

Last year was generally a good one for Idaho banks, but U.S. Bank is still shutting down a number of branches in the state.

“In broad terms, Idaho’s economy, families and business had a good 2018 financially, and that’s reflected in the performance of our state’s banking industry,” said Trent Wright, president and CEO of the Idaho Bankers Association, noting that all of Idaho’s banks were profitable. “Idaho’s banks were active in lending, they remained trusted protectors of deposits and borrowers were able to meet their obligations. Those factors are always a recipe for good economic and banking results.”

According to the Federal Deposit Insurance Corporation’s fourth-quarter report, which also covered the year as a whole, net income of Idaho banks was $87 million, an increase of 38% over the previous year. Idaho banks had total assets of $6.61 billion. While that was up just 0.44%, it marked the highest level since 2013, Wright said. Total deposits were $5.6 billion, up 0.4%, while total loans and leases were $4.45 billion, up 0.39%.

In addition, the net interest margin was up by 4.53%, which is above the national average, Wright said. Similarly, return on assets and return on equity were also above the national average. Finally, credit quality remained very good, with about 99% of loans being paid on time, he said.

Nonetheless, U.S. Bank is closing a number of Idaho branches over the next few months.

“As we reviewed our branch network, we determined that the demand for services at these locations necessitated a change in our approach and to our presence in the community,” said Evan Lapiska, vice president of public affairs and corporate communications. “This was a difficult decision and not one taken lightly. We understand that the closure of any branch is a disruption for our customers and our employees and we are working to make the transition as smooth as possible for all involved.”

The bank said it intends to close the Capital branch on 27^th Street as of June 12; two branches located in Albertsons stores in Emmett and Meridian as of June 11 and June 5, respectively; the Moscow office on Main Street as of June 18; the Skyline office on Broadway in Idaho Falls as of June 19; the Kellogg office on McKinley Ave. in Kellogg as of June 25; and the Nezperce office on Oak Street in Nezperce as of July 2.

The announcement was not entirely unexpected. The Minneapolis-based bank had said in November that it planned to lay off about 1% of its total workforce of 74,000, but would not say at that time what the effect would be in Idaho. At the time, the company had attributed the move to “changing business needs,” noting that it had also added close to 2,000 jobs companywide in the past year.

And U.S. Bank isn’t alone. Wells Fargo had said earlier in the fall that it expected to lay off between 5 and 10% of its employees within the next three years.

Business cheers Little’s first State of the State

photo of brad little — Idaho Gov. Brad Little behind the podium on the Senate floor in the Idaho Legislature during the previous session. File photo.

Business leaders praised Gov. Brad Little’s first State of the State speech, specifically calling out improvements to education, Medicaid expansion and reducing government regulations.

“Gov. Little’s State of the State Address was a home run for Idaho’s business community,” said Roy Eiguren, partner with Eiguren Ellis Public Policy. “The governor is providing strong leadership in addressing many of the most crucial issues important to Idaho businesses.”

“There was really nothing in Gov. Little’s State of the State that we didn’t like,” said Bill Connors, president and CEO of the Boise Metro Chamber. “He struck all the right notes for driving Idaho’s continued economic growth and prosperity.”

Little – whose management style is characterized by House representatives as “policy wonk,” compared with previous governor C.L. “Butch” Otter’s “10,000-foot” approach – touched on a number of business areas in his speech, including previous areas of interest such as cybersecurity, occupational licenses and Medicaid expansion.

Business representatives praised Little’s emphasis on education, including completing the current five-year plan, starting another, and raising starting teacher salaries to $40,000, as well as implementing many programs.

“It’s critically important to our employers to have an educated workforce,” said Alex LaBeau, president of the Idaho Association of Commerce and Industry, which was involved in the first five-year plan. “We’re strongly supportive of that.”

In issues where budgets are involved, Little’s initiatives will require the cooperation of the Idaho Legislature, Eiguren noted. But several initiatives were set up through executive order, which last for, at most, four years. These include formalizing an opioid substance abuse plan, implementing sunrise and sundown provisions for new occupational licenses, and requiring state agencies to remove two regulations for every new one they wish to implement – greeted enthusiastically by Idaho’s business community.

“We are committed to working with Gov. Little’s administration and regulators on regulatory reductions to allow banks to better serve their customers and communities, without compromising safety and soundness,” said Trent Wright, president and CEO of the Idaho Bankers Association, in Boise.

photo of jaclyn kettler — Jaclyn Kettler

Following a campaign promise, Little called for eliminating the tax on groceries for fiscal year 2021 – which begins July 1, 2020 – using the budget surplus. However, because the surplus varies from year to year, including not existing some years, it is not clear how that would work.

“It was not clear to me what exactly the plan is, beyond that the state probably won’t be fiscally ready for the grocery tax repeal until FY 2021,” said Jaclyn Kettler, assistant professor in the School of Public Service at Boise State University, noting that increased funding for education and corrections would probably make grocery tax repeal infeasible this year.

Following another campaign promise, Little called for expanding Medicaid to low-income people, funding the state’s $17.9 million share through budget savings in the Catastrophic Health Care Fund and from the Joint Millennium Fund, the state’s share of a multibillion-dollar class-action tobacco settlement. He did not mention sideboards such as work requirements, though he would like to ensure there is a pathway out of Medicaid, he said.

Some of Little’s proposals lacked details. For example, he asked the Tax Commission to “do all they can” to help ensure Idahoans know they might need to adjust withholding to keep from having large tax bills. He also wanted to “pursue all options to improve broadband connectivity” without saying what they might be.

Little’s budget also called for a 3 percent merit raise for state employees. A recent annual report on Idaho state employee salaries found they were 25.6 percent below the private sector in 2018, compared with 23.9 percent in 2017. While benefits were better, total compensation was still 12.4 percent below the private sector in 2018, down from 12.2 percent in 2017.

Little called out a number of Idaho businesses, including Woodgrain Millworks in Fruitland, Rohinni, an LED manufacturer in Coeur d’Alene, and BiologiQ, which makes plastic out of potato starch in Idaho Falls.

Idaho residents less likely to be ‘unbanked’

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

First Interstate buys Idaho Independent, Community 1st banks

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

Continuing its plan to dominate the Northwest, First Interstate BancSystem has acquired not one but two Idaho banks, in addition to the two it had previously acquired.

The Billings, Montana-based company announced Oct. 11 that it had acquired Idaho Independent Bank, based in Coeur d’Alene, and Community 1^st Bank, based in Post Falls. In mid-August, the company 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. Before the new acquisitions, it had about 120 branches in Idaho, Montana, Oregon, South Dakota, Washington and Wyoming. The Idaho region, overseen from Boise, had 14 branches from Mountain Home to Fruitland with a total of 140 employees.

“When companies decide to merge, often their first consideration is whether the strategy and culture of the acquired company aligns with their own,” said Kevin Riley, president and CEO of First Interstate. “In this case, we are confident our individual strategies and cultures align well. In addition, the geographically complementary locations of Idaho Independent Bank, Community 1^st Bank, and existing First Interstate and Inland Northwest Bank branches offer a tremendous opportunity to grow and better serve our clients and communities.”

Idaho Independent Bank, whose CEO, Kurt Gustavel, was appointed on Jan. 1 after being named president when he was just 35, has about 200 employees and 11 branches in Boise, Caldwell, Coeur d’Alene, Hayden, Meridian, Mountain Home, Nampa, Star and Sun Valley/Ketchum. It was established in 1993 as an Idaho state-chartered commercial bank. Community 1^st Bank, founded in just 2007 in Post Falls as the first new community bank in that city in more than a century, now has three branches in Post Falls and Coeur d’Alene. That gives First Interstate a total of 28 branches in Idaho.

However, with the new acquisitions, there is overlap, particularly in Boise and Coeur d’Alene, Riley said.

“Some branches will undoubtedly be closed,” he said. He would not say how many, but said all three banks have implemented a hiring freeze in those markets to ensure as many existing employees as possible could remain with the company.

Both of the acquired banks, like First Interstate and its previous two acquisitions, are public. First Interstate paid $181.3 million for Idaho Independent and $21.5 million for Community 1^st in all-stock transactions based on current stock prices. All of the acquisitions have been approved unanimously by their respective boards.

Idaho Independent has approximately $725 million in assets, $362 million in loans, $610 million in deposits, and $69 million in shareholders’ equity as of June 30. Community 1^st has $130 million in assets, $78 million in loans, $116 million in deposits, and $13 million in shareholders’ equity as of June 30. Pro forma including both acquisitions, First Interstate will have approximately $14.1 billion in total assets, $8.9 billion in total loans, $11.4 billion in total deposits, and $1.8 billion in shareholders’ equity.

Gustavel will serve as regional president for Idaho and Eastern Washington. David Bobbitt, chairman and CEO of Community 1st, intends to retire, First Interstate said. Rob Perez, current regional president for First Interstate, will be retiring in the first half of 2019, according to Sara Becker, vice president and marketing manager.

Other than the new Ketchum/Sun Valley branches, much of Idaho east of Mountain Home remains without a First Interstate branch.

“While we find these regions very attractive, we have no immediate plans to move into these areas at this time, although we may consider it at some point in the future,” Riley said.

“Because of the increased capital for loans and the ability to offer new services, Idahoans stand to benefit as a result of this merger,” said Trent Wright, president of the Idaho Bankers Association in Boise. “Bank merger activity is a sign of a competitive industry. To meet or beat the competition, some banks choose to join other institutions that either offer more products or serve a different market.”

At the same time, the merger could create opportunities for other community banks to differentiate themselves from the larger bank, he added.

First Interstate’s move wasn’t surprising. Riley 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.

“I anticipate continued acquisitions (of other banks),” Perez added in June. “I anticipate additional organic growth.”

Banking experts had suggested that the passage of S.2155 – the Economic Growth, Regulatory Relief and Consumer Protection Act, which was signed into law by President Donald Trump on May 24 – might encourage smaller banks to merge with or acquire each other, because even merged, they will still fall below that new threshold for compliance with large bank requirements. However, Riley said S.2155 wasn’t a factor in the acquisitions.

The company will announce earnings for the third quarter, which ended Sept. 30, on Oct. 25. Analyst estimates range 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.

This article was updated on October 12 to include Rob Perez’ status.

Banks open branches across state

image of new citizens community bank — 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.

photo of john v. evans iii — John V. Evans III

rending of d.l. evans rigby branch — 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.

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.

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.

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.

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?”

“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 13^th 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.

Forgot your ATM card? Use your phone

photo of cardless atm — Using a cardless ATM is a three-step process. Photo courtesy of JPMorgan Chase.

Idahoans will now have more opportunities to use ATMs with their smartphones rather than a card, as JPMorgan Chase joins Wells Fargo in offering the service in the state.

Chase began offering the service quietly in May, after piloting it in February, at its 30 Idaho ATMS. The move is part of a rollout that saw the service become available to 15,000 of the company’s 16,000 ATMs nationwide.

“Regardless of whether you have an Apple or Android phone, as long as you have your debit card in your mobile wallet, you can access an ATM with the cardless feature,” said Paul Silva, market director for Idaho for JPMorgan Chase. Users still have to know their personal identification number code, he added. “Somebody can’t just get your phone and break into it,” he said.

photo of julie fogerson — Julie Fogerson

Wells Fargo began offering the service in Idaho in March 2017, and it is available at 13,000 ATMs nationwide, according to Julie Fogerson, assistant vice president of Idaho regional communications, in Boise. In its first year of service, almost 7 million card-free ATM access codes have been used nationally for ATM transactions, including more than $850 million in transactions, she said. Idaho statistics were not available.

Both Chase and Wells Fargo provide the service using near-field communication (NFC), which requires, first of all, that the customer have a smartphone with them, and that the smartphone supports the communications protocol. It is the same technology used in smartphone mobile wallet technology such as Apple Pay and Samsung Pay, and in fact Chase is partnering with those companies on benefits like loyalty programs, such as Samsung Rewards and Chase Ultimate Rewards points.

In addition to convenience – people typically have their smartphones with them, though they may not have their ATM cards – cardless ATMs, especially ones using NFC, are considered to be more secure because there isn’t a card that someone could steal or find. In addition, they are not susceptible to card-skimming, where someone puts a device inside an ATM card slot to steal information from inserted cards.

“Cardless is an encrypted wireless transaction with minimal risk of skimming or cloning,” said Robert Siciliano, a member of the board of directors of the Identity Theft Resource Center — a San Diego-based nonprofit that raises awareness of identity theft – and a security analyst with Hotspot Shield, a downloadable virtual private network program. “No card, no compromise.”

That’s not to say that cardless ATMs are a security panacea (see box). Some users reported early on in the technology that people obtained their bank account information, called their bank and added a cell phone number to their account, then used that cell phone to withdraw money.

For now, it appears that primarily national banks such as Chase and Wells Fargo are providing the technology in Idaho, though Idaho Central Credit Union plans to offer the functionality soon at a single location in Rexburg. Idaho Central members will be able to get cash without a card via video chat at the new Rexburg Innovation Center, scheduled to open September 4, using its new ILTs (In Lobby Tellers), according to Marion Oswald, card services manager.

Otherwise, local and regional banks and credit unions are not planning to offer the service yet, according to company representatives. “We have no immediate plans to implement this technology,” said Malcolm Hong, communications officer for Zions Bank in Boise.

“We do not have immediate plans to implement cardless ATMs, but we are continuously evaluating new technology across all our delivery channels,” said Josh Botnen, director of digital strategy and client experience for First Interstate Bank.

“We have considered it and researched implementation,” concurred Elizabeth Thomas, vice president of marketing and development for Pioneer Federal Credit Union. “At this time we do not have it on our calendar to implement, but we are always looking for ways to reduce friction for our members’ access to their money, and this would be a great option for that.” Cardless functionality is also typically available only on a financial institution’s own ATMs.

The technology is likely to be more broadly available in the future, said Trent Wright, president and CEO of the Idaho Bankers Association. “Consumers will dictate the speed at which cardless ATMs take off,” he said. “But IBA believes that all of the nation’s 6,000 banks will offer cardless ATM access within five years, once the technology matures and past security concerns are resolved. Consumers want everything on their phones — why should a cardless ATM experience be any different?”

Security tips for cardless ATMs

The Idaho Bankers Association recommends following these tips to protect a mobile device:

Use the passcode lock on your smartphone and other devices. This will make it more difficult for thieves to access your information if your device is lost or stolen.
Log out completely when you finish any type of mobile banking session.
Protect your phone from viruses and malicious software, or malware, just like you do for your computer by installing mobile security software.
Use caution when downloading apps. Apps can contain malicious software, worms and viruses. Beware of apps that ask for unnecessary “permissions.”
Download the updates for your phone and mobile apps.
Avoid storing sensitive information like passwords or a Social Security number on your mobile device.
Tell your financial institution immediately if you change your phone number or lose your mobile device.
Be aware of shoulder surfers. The most basic form of information theft is observation. Be aware of your surroundings especially when you’re punching in sensitive information.
Wipe your mobile device before you donate, sell or trade it using specialized software or using the manufacturer’s recommended technique. Some software allows you to wipe your device remotely if it is lost or stolen.
Beware of mobile phishing. Avoid opening links and attachments in emails and texts, especially from senders you don’t know. And be wary of notifications (not from your security provider) claiming that your device is infected.
Watch out for public Wi-Fi. Public connections aren’t very secure, so don’t perform banking transactions on a public network. If you need to access your account, try disabling the Wi-Fi and switching to your mobile network.
Report any suspected fraud to your bank immediately.

Idaho banks report a strong quarter

photo of idaho independent bank — 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.

“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.

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

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

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

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

photo of senator mike crapo — Idaho Sen. Mike Crapo

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

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

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

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

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

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

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

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

The Associated Press contributed to this story.

2018 Legislature good for business

photo of idaho statehouse — Idaho Statehouse. File photo.

As the 2018 legislative session came to a close, Idaho business people said they were pretty happy with the results.

“In my nine years here, this was the best legislative session in terms of our agenda and its efficiency,” said Bill Connors, president and CEO of the Boise Metro Chamber of Commerce. “There weren’t a lot of shenanigans.”

What made business people particularly happy?

Workforce Development Council (H432). That was the top priority for the Idaho Association of Commerce and Industry, Idaho’s business lobby, said Alex LaBeau, president. “It gave that council some authority to coordinate efforts for developing Idaho’s workforce.” Its new structure also has more private sector business industry leaders on it, which should help it develop skilled workforce more quickly, said Steve Wilson, chair of the Idaho Chamber Alliance and president and CEO of the Coeur d’Alene Chamber of Commerce.

H432 was also the top priority of the Idaho Associated General Contractors, said Wayne Hammon, chief executive officer. In fact, the organization had actually drafted legislation, which got rolled into the bill. “In the past, it was almost all job-specific training,” he said. “What this bill does is pre-employment training.” That means the AGC will be able to work with the six members of Idaho’s Workforce Training Network – the four community colleges, plus Idaho State University and Lewis-Clark State College – to develop a four-week introductory class to help people decide whether they want a job in the construction industry, he said.

Tax conformity bill (H463). While technically this bill’s purpose was to conform with changes in the federal tax code, the real meat of it to business was a 0.475 percent cut in the corporate tax rate, from 7.4 percent to 6.95 percent. “We’ve been pushing for that for nine years,” said Connors. “It’s an economic development issue. Above 7 percent, you fall off a lot of people’s radars if they’re looking for relocation and expansion.”

Unemployment insurance tax reduction (H335). One of the first bills passed this legislative session – the victim last year of intercameral warfare – it reduces the unemployment insurance tax employers pay by $115 million over three years. “That was a big one for us,” LaBeau said, saying it would save businesses $41 million in 2018 alone while still keeping the unemployment insurance fund solvent. Connors said it would save businesses about $120 per employee. “Even in my organization, with 20 employees, that’s $2,000 we can plow into salaries or the business,” he said.

Online sales tax collection (H578). When Idahoans buy products online, they typically don’t have to pay sales tax if the business doesn’t have a physical presence in the state. Instead, people are supposed to keep track of their online purchases and pay a use tax with their income tax, though in practice few do. Brick-and-mortar businesses say that puts them at a disadvantage. After several years, the Legislature passed a bill that requires Internet businesses of a certain size to collect the sales tax. “That’s a piece of legislation that levels the playing field for the brick-and-mortar Main Street businesses that represent so many Chambers of Commerce,” Wilson said.

photo of russ hendricks — Russ Hendricks

Not all Idaho business people were happy about it. “We’ve had a policy for more than 20 years that opposes the collection of a use tax,” said Russ Hendricks, director of governmental affairs for the Idaho Farm Bureau Federation, a voluntary association of farmers and ranchers, based in Pocatello.

Fee rule of the Idaho Brand Board (Rule 11-02-1-1701). What do bankers and farmers have in common? They both liked this rule, which increased the money paid to the Idaho State Brand Board from 94 cents to $1.19 per head. This increased cost was related to the new slaughterhouse in Kuna, said Bob Naerebout, lead of government affairs for the Idaho Dairymen’s Association, based in Twin Falls. Seventy percent of the animals killed at that plant are dairy cattle, he said. “Prior to that plant being built, the closest place we could bring dairy to slaughter was Fresno or Arizona,” he said. “It saved our industry a lot of money.”

The funding helps ensure the Board is adequately funded, which is important for banks, said Trent Wright, president and CEO of the Idaho Bankers Association. “If the bank collateral is not adequately branded, there is a liability or risk problem,” he said. “It was paramount that this rule was adopted.”

What business people were less happy about
That said, business didn’t get everything it wanted in the 2018 legislative session.

“We still haven’t solved the Medicaid problem,” said Alex LaBeau, president of the Idaho Association for Commerce and Industry. “That’s something the Legislature has been failing to deal with over the past six years. Certainly, that is unfinished business, and we have a difference of opinion of what is the most fiscally responsible thing to do.”

Aside from the humanitarian aspect, Medicaid is a business issue because Idaho businesses are paying twice for the uninsured – both through higher premiums for unreimbursed hospital expenses, and what the state has to pay through the Idaho Catastrophic Health Care Program for indigent care, as well as the first $11,000 of such care that counties have to pay, LaBeau said. “It’s irresponsible for the state to continue to not deal with this particular issue from a policy as well as a fiscal standpoint,” he said. Instead, Idaho should expand Medicaid, he said. “We think they should take the match,” he said. And he was disappointed that the governor’s dual-waiver plan didn’t pass. “That legislation couldn’t even get traction to get out of committee,” he said, “At this point, we need a solution, and they haven’t dealt with it.”

Steve Wilson, chair of the Idaho Chamber Alliance as well as president and CEO of the Coeur d’Alene Chamber of Commerce, wished for more investment in infrastructure. “The movement of freight and goods is critical,” he said. “It’s absolutely critical that the state begin investing.” This is particularly true in North Idaho, which has suffered through some difficult winters. Businesses would even be willing to pay increased user fees and fuel taxes, he said. “The cost of not being able to get goods to market is significantly greater,” he said. “Every time you have a container truck sitting in traffic at half-speed, it’s costing somebody money.”

Wilson was also disappointed that the Legislature has not yet addressed the issue of granting cities and counties local option taxing authority, something that’s currently granted only to resort cities. Such authority allows residents in a particular region to vote to tax themselves to pay for projects such as roads, public transit, and jail expansion. “The best decisions are made at a local level,” he said. “We’ve advocated for that for years. The Legislature doesn’t believe so, and it wasn’t even a topic this year. It’s been on our agenda, and it will stay on our agenda.”

Post Falls, for example, used urban renewal funds to pay for a freeway overpass instead, Wilson said. Local option taxing authority would have been a more efficient method, and would have allowed travelers from Montana and Washington crossing through the 60-mile region to help contribute through sales tax, he said.

About the only disappointment the Boise Metro Chamber of Commerce had was a bill to exempt data center equipment from sales tax. While the bill stalled last year in the Senate after passing the House, it didn’t even get a print hearing this year. “We spent some resources trying to get people excited, and it didn’t happen,” said Bill Connors, president and CEO. “But the gains in tax relief and prioritized education spending more than made up for that. We’ll try again next year.”

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