Alaska's business banking trends affected by economy and customers: growing deposits fuel desire for diversification and financial relationships.

• Author: Barbour, Tracy
• Position: FINANCIAL SERVICES

Current business banking trends in Alaska are being influenced by a tenuous economic climate, a persistent penchant for technology, and customer preferences. Overall, Alaska's commercial bankers say they are seeing growing deposits, a change in loan activity, greater desire for diversification, and increased interest from companies outside the state. Many customers are continuing to capitalize on technology to enhance their operations and value having a flexible, relationship-focused partnership with their financial institution.

Economy Having an Impact

As low oil prices fuel Alaska's massive budget deficit, many members of the business community are feeling less confident and more anxious about the economy. That economic uncertainty is playing out in various ways, with business banking customers adjusting their habits to match their attitudes.

"Generally, with our customers, everybody is concerned about the direction of the economy, and it doesn't look rosy," says ]ay Page, a vice president and loan officer with First National Bank Alaska. "Each of our customer's No. 1 concern is continuing to be successful."

But many companies that are in the oil service industry anticipated the drop in oil prices, Page says. The smart ones have accumulated large savings account balances and kept their lines of credit in place to weather the storm.

However, Page, who has spent thirty-seven years in the banking industry, is overall optimistic about Alaska's economy. "We've seen it be a roller coaster, but we always get through it--and we always will," he says. "Alaskans pull together, and we ultimately pull through."

Commercial customers are also maintaining more cash at Northrim Bank, according to AVP, Commercial Loan Officer Adam Baxter. "We're seeing deposit balances go up, and people are sitting on cash," he says.

But customers aren't necessarily less confident about the economy. Instead, he says, they know the state has some economic headwinds coming down the pike and have a sense of hesitancy. "They don't know what's going to happen," he explains. "And when you don't know what's going to happen, you can't plan either way."

The situation is leaving some businesses in a state of virtual limbo. "With oil prices being low, I think you have a lot of larger companies holding tight and waiting to see what happens," he says. "Downstream, that effects the smaller businesses, our customers."

However, Baxter says, he is anticipating a shift in this trend with the recent agreement by the Organization of the Petroleum Exporting Countries (OPEC) to cut oil production.

In Fairbanks, business banking customers at Denali State Bank are "cautiously optimistic" about the economy, says President and CEO Steve Lundgren. The cautious part emanates from what's been happening with oil prices and the state budget. "Until our state Legislature and governor figure that out, we have reason to be cautious about how they plan to fund the government," he says.

However, there are a number of reasons for optimism among Fairbanks businesses, Lundgren says. A key cause for optimism is that Fairbanks is getting closer to bringing affordable, clean-burning natural gas to town. Currently, heating oil--which is subject to the price of gas and oil--is the primary method of heating in Fairbanks. And it's one of the biggest expenses for many businesses, but that will change once the natural gas lines are installed.

But for Lundgren, an...