Business outlook positive amid oil price drop
“Slow and steady” was the motto for most of Alaska’s banks and credit unions in the third quarter.
Total assets grew 3 percent combined at five of the major state banks for the quarter. Similar asset growth was 5.9 percent year-over-year.
Northrim Bank had the largest year-over-year asset growth at 20.6 percent, following its acquisition of Juneau-based Alaska Pacific Bank.
With 2.8 percent growth in the third quarter, First National Bank Alaska assets grew to more than $3.2 billion.
All of the state’s major credit unions also saw year-over-year asset growth for the quarter as well. The largest percentage increase was at Denali Alaskan Federal Credit Union with an 8.7 percent asset expansion.
Net income results were mixed compared to the second quarter but positive year-over-year at the banks. FNBA pushed its third quarter income to more than $9.3 million, an 11.5 percent increase quarter-to-quarter and had a 12.2 percent increase year-over-year.
Northrim saw its income decline 9.6 percent from earlier in the year but achieved 16.6 percent income growth from the third quarter of last year.
Fairbanks institutions Mt. McKinley Bank and Denali State Bank saw income growth on both comparisons.
Mt. McKinley CEO Craig Ingham has a positive outlook on the year overall.
“We’re projecting for 2014 to have a better year on net income after tax, but very comparable to last year,” Ingham said.
The mixed results also extended to the credit unions. Alaska USA Federal Credit Union had a 28.7 percent decline in year-to-date income, while Credit Union 1 grew its net earnings more than 35 percent. The most significant increase was at Juneau’s True North Federal Credit Union, which had a 41.1 percent increase in income.
Loan activity picked up slightly from the second quarter when businesses around the state waited for voters to settle the oil tax debate in August.
Wells Fargo Alaska Regional Business Banking Manager Darren Franz said his company’s state portfolio will likely end up growing about $80 million when all of the third quarter loans are funded.
“We’re still hanging in there at about $1.8 billion in commitments,” Franz said.
While the retention of Senate Bill 21’s oil tax structure was generally viewed as positive in the business community, he said there is always a lag in investment, which occurred in the third quarter.
Franz said he expects to see more investment by the first quarter of 2015.
Loan portfolios grew year-over-year at nine of 10 major state banks and credit unions, with an 8.1 percent decline at Denali State Bank being the lone outlier.
The number of small business loans increased at Wells Fargo, Franz said, and deposits did too.
“We continue to see deposits coming in so that’s an indicator to us that companies in Alaska are definitely operating increasingly more profitably,” he said.
He attributed the deposit growth to an overall conservative business climate lingering from the financial crash of 2008-09.
“We had a bunch of people keeping a bunch of dry powder in the bank waiting to see how Senate Bill 21 would go and we’re over that,” Franz said. “All of a sudden we’re worried about how this political race might go; now we’re over that and all of a sudden oil prices are throwing the state in some red operations probably.”
Past due loan totals — those up to 90 days late — decreased 7.7 percent overall at Alaska banks quarter to quarter, but grew about 50 percent at Mt. McKinley and Denali State Bank.
Ingham said there is some seasonality to late loan payments and that while the percentage increased sharply it was not significant in terms of total dollars. The past due total at Mt. McKinley increased about $600,000 in the third quarter.
“Some of the people that are past due when they get their PFD (checks) or whatever, they bring it current,” he said.
According to Franz, Alaska’s economic climate should remain strong for the near term despite Alaska North Slope oil prices approaching $70 per barrel.
“I continue to maintain I would rather be a banker with Wells Fargo here in the great state of Alaska than anywhere else in the world right now for a lot of reasons, but for one its pretty fun,” Franz said. “Things are moving forward and (are) a lot better than a lot of other places.”
In Fairbanks Ingham said the bright side of low oil prices is the hope that the community could see a “pass through” that would lower heating oil prices for the winter.
Elwood Brehmer can be reached at [email protected].