Banks see slowing loan growth in third quarter 

  • Some banks in Alaska are seeing a softening in loan demand.

Alaska’s fiscal climate continues to chip away at the loan growth and income of the state’s financial institutions, slowing somewhat over the last year.

Wells Fargo, which has a bit more than half of Alaska’s deposits, has noticed loan demand start to slow, though they are still up from the same point in 2015.

“Although we are beginning to see a softening in loan demand, total loans (consumer and business) for Wells Fargo in Alaska are up six percent year-over-year,” said Greg Deal, Wells Fargo Alaska Region’s new president. “Total Alaska deposits have shown modest growth through October. Consumer deposits are up five percent year-over-year.”

The Alaska-only banks have been seeing the same. 

First National Bank Alaska, or FNBA, continued an upward trend in loan and income growth year over year, though loan growth was modest like that of Wells Fargo.

FNBA’s stock was $37.25 per share this quarter, compared to $31.12 per share for the same quarter in 2015.

FNBA had a net income of $32 million through the third quarter of 2016, up from $26.8 million in the third quarter of 2015. For the quarter income was $11.8 million versus $9.9 million in the third quarter of 2015. The bank grew to $3.7 billion in assets in the third quarter of 2016, up from $3.6 billion last year. 

The bank secured $1.6 billion in net loans and leases, up from $1.5 billion the year before. Other real estate owned stayed flat from last year at $14 million.

Not all banks had the same positive outcome for income. Northrim Bancorp posted decreases in profitability, with the same slow loan growth noted by Wells Fargo and FNBA.

Net income for Northrim dropped by nearly half year-over-year, from $5.3 million in third quarter 2015 to $3.1 million this year. The bank’s total assets have remained flat year over year at $1.5 billion. The bank grew its total loan portfolio from $974 million in 2015 to $997 million this year.  

In a release, Northrim explained that the income downturn is due to an accounting shift and to lower mortgage demand relative to last year, reflecting Alaska’s overall economic outlook in the face of a state budget crisis and declining oil production. 

“New construction projects in the Anchorage market are coming in at a slower pace than in the past few years, as the economy contracts mainly due to the effects of continued low oil prices,” said Joe Schierhorn, Northrim’s president and CEO.  “Construction loans were down 30 percent year-over-year in the third quarter of 2016, primarily due to approximately $84 million in projects which were completed and termed out in the last 12 months.”

Joe Beedle, Northrim’s chairman, said the employment stagnation is connected to the bank’s slowing loan growth. According to the Alaska Department of Labor, the average employment in the Alaska economy was down an estimated 0.2 percent or 689 jobs in the first nine months of 2016 compared to the same period in 2015.

“While the decreases in both average and period end estimated employment represent a more moderate overall impact from the decrease in the global price of oil compared to what other energy producing regions in the nation have experienced thus far, this is a larger decline than was originally predicted for 2016. Our loan demand has slowed moderately, as the Alaska economy contracts,” said Beedle.

Credit unions are faring worse in terms of income in 2016. With the exception of Juneau’s True North, each of Alaska’s six largest credit unions saw a decline in net income compared to the same quarter last year.

Alaska USA saw net income for the quarter drop 16 percent, from $39.5 million in 2015 to $33.1 million this year. Credit Union 1’s net income dropped 51 percent to $2.2 million this year. Denali Federal Credit Union dropped 83 percent, from $4.9 million to $835,000. 

Along with dip in net income, each credit union saw a rise in past due loans. Alaska USA has 4.7 percent more past due loans than the same quarter last year, and Credit Union 1 saw a 17 percent rise year over year.

The credit unions are continuing to grow their loan portfolio, however, collectively adding 8.3 percent compared to the previous year, fueling an over 3.7 percent total asset growth.

DJ Summers can be reached at [email protected].

11/30/2016 - 9:11pm