Bank earnings climb in 2000

Bank earnings generated from interests paid out of loans increased close to 30 percent by end-December 2000 which translates into about $6 million compared with figures recorded in the third quarter of last year.

A banking quarterly report prepared by Jesse Palacios of the Department of Commerce also disclosed interest income registered higher than the amount of interests paid to savings and commercial deposits during the same period.

Banking institutions in the Northern Marianas spent $18.58 million in total interest expense during the fourth quarter of last year, higher by 45 percent from the third quarter’s $12.83 million primarily because people saw the need for saving instead of borrowing funds in the last months.

Bankers say the increase in earnings from loans could be spurred by the fact that more consumers have secured loans or more outstanding borrowers, whose bills may be past due, are starting to pay off their credits.

Either way, the development indicates good sign for the financial market in the Northern Marianas because this may be translated to more funds circulating around the local economy, which has been rallying rather slowly in the past three years.

More loans that are being issued out by banking and other financing institutions are sure to have direct or indirect positive effect in the economy since these funds may strengthen the consumers’ buying power or the businesses’ ability to survive the crisis.

The need for additional financing by local businesses paved the road for a significant increase in banking activities in the Northern Marianas, with bank assets growing 27 percent and liabilities modestly dropping by 1.3 percent by end-December 2000.

Outstanding loans soared 27 percent to $325 million in the last quarter of the calendar year 2000 from the previous period’s $255.7 million. Loans had been on a steady decline beginning the first quarter of last year, dropping from $293 million to $256 million in the third quarter.

This, as liabilities dropped 1.3 percent to $596 million from the last quarter’s $604 million as bank clients see lesser need to save on savings and commercial deposits due to increased activities in the tourism industry.

Correspondingly, loan to deposit ratio dipped from 51.1 percent in the first quarter to 42.4 percent in the July-September period, and rebounded to 54.6 percent towards the end of the year.

Government loans dropped to $2.8 million during the period under review, posting a dramatic fall of 74 percent from $10.7 million in the third quarter when the Commonwealth sealed a multi-million bridge financing for Capital Improvement Projects with the Bank of Guam.

Volume of consumer loans in the last quarter was slightly higher compared with that of the previous period, from $70.058 million to $70.790 million by end-December 2000.

Activities in the construction industry contributed little growth in the overall increase of bank assets, pitching in an additional $3.7 million to total $42 million from the third quarter’s $38.3 million.

Needs by small- and medium-scale businesses for more funding spurred the overall growth of bank assets, as commercial loans amounted $210 million that is higher by 53 percent from the previous quarter’s $137 million.

Banking institutions in the Northern Marianas have reduced overall lending base by 11 percent in the second quarter of last year due to cautiousness on the local borrowers’ ability to pay mainly because of the slow recovery of the island’s economy.