Banks see some impacts of oil crash, fiscal uncertainty
As the state Legislature chases solutions to a $4 billion budget gap and the oil and gas industry bleeds cash on the North Slope, Alaska’s financial institutions are still increasing loans but seeing some impacts from the price collapse on the state’s leading economic driver.
Some of the state’s three largest banks — Wells Fargo, First National Bank Alaska, and Northrim BanCorp — have continued to increase loan portfolios and deposits, though they acknowledge the state’s precarious oil-driven position.
Wells Fargo — a sizable underwriter of oil and gas operations — has seen several revenue streams associated with oil and gas decline.
“We saw healthy business loan demand in the first quarter of 2016 with 10 percent growth year-over-year,” said Wells Fargo Alaska Region President Joe Everhart. “Loan demand has slowed with the headwinds in our economy, primarily in oil and gas, but also worries about state government spending. Retail demand is showing modest growth.
“Wells Fargo’s total deposits in Alaska dipped 5 percent due to money movement and deployment of capital by large Alaska-based corporations. Consumer deposits are up six percent in the first quarter.”
Wells Fargo held 53 percent of Alaska’s deposits, or just more than $6 billion, according to FDIC reports as of June 30, 2015.
First National Bank Alaska mostly posted increases for the first quarter of 2016. FNBA’s net income for first quarter 2016 was $10 million. This compares to $7.8 million for the same quarter in 2015, a 28 percent increase.
The company’s total assets grew 13 percent to $3.6 billion; total loans increased $11.7 million year-over-year. Deposits grew by $18.1 million to $3.1 billion.
Northrim BanCorp Inc. reported a net income in the first quarter of 2016 of $3.4 million, a decline both from the last quarter of 2015 and the same quarter last year.
This compares to $4.1 million in the fourth quarter of 2015 and $3.6 million in the first quarter of 2015.
Northrim assets increased 4 percent to $1.5 billion, compared to $1.45 billion a year ago and $1.5 billion in the last quarter. In a release, bank officials said the income decline is a typical seasonal fluctuation.
“Our first quarter results primarily reflect the seasonal trends in the Alaska economy,” said Joseph Beedle, President and CEO.
“Moderate year-over-year loan and deposit growth, a stable net interest margin, and a profitable quarter for mortgage banking despite a decrease in refinance activity contributed to net income in the first quarter of 2016.
“The acquisitions we made in 2014 continue to contribute to earnings and enhance our Alaska banking franchise.”
Northrim closed deals to take full ownership of Residential Mortgage and Juneau-based Alaska Pacific Bank in 2014.
Refinancing revenues accounted for 39 percent of total loans in the first quarter of 2015, and this year the numbers in that income stream declined.
Net income from home mortgage lending operations contributed $588,000 in the first quarter of 2016, less than half the $1.3 million in the same quarter 2015.
Northrim acknowledged the oil and gas industry’s grim outlook in Alaska in reporting its results to shareholders.
More than 1,200 oil and gas industry workers to received unemployment benefits in 2015, up 545 from the prior year. The Department of Labor indicates that this trend has continued through the first quarter of this year with a total decrease of 1,900 jobs in the oil and gas sector as compared to the same period last year.
Northrim doesn’t have loans to oil producers, but it estimates that it has $44.1 million, or approximately 5 percent of portfolio loans as of March 31, 2016, with direct exposure to the oil and gas industry in Alaska. None had been adversely classified.
The bank also has substantial investment in ancillary businesses. According to Northrim’s quarterly financial statement, the bank has an additional “$52.9 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska.”
“We currently have no loans to oil producers or drilling and exploration companies,” said Chief Financial Officer Latosha Frye in its quarterly release.
“Our direct exposure to the oil and gas sector is to oilfield service companies and other companies that we have identified as significantly reliant upon activity in Alaska related to the oil and gas industry, such as lodging, equipment rental, transportation and other logistics services specific to this industry.”
Alaska’s credit unions maintained a flat income from the first quarter of 2015, growing net income a collective 0.1 percent year-over-year.
Juneau’s True North led in net income growth, which spiked from $61,487 in 2015 to $271,584 in the first quarter of 2016. Denali Alaska also posted substantial gains with a 47 percent net income increase from last year.
Only Credit Union 1 posted a loss with a 50 percent net income decline from $1.8 million in 2015. Alaska USA grew net income from $9.2 million to $9.6 million.
Total assets increased 7.5 percent, or a total $8.7 billion. Each company posted an increase over the first quarter of 2015. Matanuska Valley led with a 9.7 percent boost.
Each of Alaska’s six largest credit unions increased their total loan portfolios, a collective 10 percent increase from last year.
The amount of delinquent loans, however, also increased a total 5.7 percent. Alaska USA’s delinquent loan rate dropped 1.4 percent, but the next largest credit unions both posted sizable increases in past due loans. Credit Union 1 increased delinquent loans by 41 percent.
Denali Alaskan’s delinquent loan rate doubled, much of which can be attributed to nearly $600,000 in foreclosed property the credit union acquired during the first quarter.
DJ Summers can be reached at [email protected].