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Bank of ND could lose $500M in assets to economic downturn

BISMARCK - The Bank of North Dakota expects to lose $400 million to $500 million in assets during the current economic downturn, but President Eric Hardmeyer said the state-owned bank will remain on solid footing and proceed with construction of ...

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This rendering by JLG Architects shows what the financial services center (left) will look like next to the existing Bank of North Dakota building in Bismarck. Construction on the $17 million center is expected to begin in late spring or early summer. Rendering courtesy of JLG Architects

BISMARCK – The Bank of North Dakota expects to lose $400 million to $500 million in assets during the current economic downturn, but President Eric Hardmeyer said the state-owned bank will remain on solid footing and proceed with construction of a $17 million financial services center.

The bank’s assets have more than tripled over the past decade, from just more than $2 billion in 2005 to slightly more than $7.4 billion last year, driven largely by strong energy and agricultural sectors.

But plunging crude oil and farm commodity prices have sent state tax revenues tumbling, with a $1.07 billion shortfall projected by July 2017.

That’s caused a dip in deposits of tax revenues used by the bank to fund loans for things such as businesses, college tuition and home mortgages.

Hardmeyer said the bank’s internal analysis predicts it may lose $400 million to $500 million in assets, depending on how long the downturn lasts.

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“So we don’t see a drastic reduction in size, but it’s something that we look at daily,” he said.

Student loans account for about $1.3 billion of the bank’s $4.3 billion loan portfolio. The rest of the bank’s assets are in securities and other investments, giving the bank “plenty of ability and liquidity,” Hardmeyer said, adding the bank has other sources for loans.

“We just don’t see any concerns here at this point,” he said. “We still see a lot of good things happening throughout the state. … There’s a diversified economy underneath all of this commodity-based stuff that continues to plug along pretty well.”

The bank plans to start construction in late spring or early summer on the financial services center, which will encompass 40,000 to 45,000 square feet next to the existing glass-and-brick bank building that opened in January 2008 near the Missouri River.

State lawmakers authorized the use of $17 million in assets for the center if the bank’s income exceeded $125 million in 2015. The bank posted its 12th consecutive year of record profits last year, at $130.6 million, up from $111 million in 2014.

The center will house three state agencies currently renting private space in Bismarck: the Department of Commerce, Department of Financial Institutions and Housing Finance Agency. Hardmeyer said the goal is to create a one-stop shop for economic development, noting the bank building already houses the state’s Small Business Development Center and U.S. Small Business Administration office.

“This is just expanding on a concept that has been here for 20 years plus,” he said.

As a state agency supported by special funds, the bank avoided the 4.05 percent budget cuts in mid-February that hit agencies that receive general fund dollars. But Hardmeyer said the bank understands the struggles happening around the state and is viewing the center as a way to boost government efficiency and reduce costs in the long run.

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“We think there’s a longer-term view of this than just the immediate issues we’re dealing with,” he said, adding it’s a good time to build with construction costs coming down and more competition for work.

The last time a North Dakota governor ordered across-the-board budget cuts to offset a general fund shortfall was in 2002, when the bank also transferred $18.7 million to help cover the $37 million shortfall. But that contingent transfer was specifically authorized in a bill passed by the 2001 Legislature, and similar authorization was not in place this time around to help cover the $1.07 billion shortfall, according to Office of Management and Budget Director Pam Sharp.


Reach Nowatzki at (701) 255-5607 or by email at mnowatzki@forumcomm.com .

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