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Bank of N.D. profits could be included in budget shortfall fix

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Agriculture Commissioner Doug Goehring, left, and Gov. Jack Dalrymple, right, both members of the Industrial Commission, listen as Bank of North Dakota President Eric Hardmeyer requests a pay increase for bank officers during Tuesday's meeting.

Officials have discussed a dollar amount for Bank of North Dakota profits that may be used to help plug the state’s budget shortfall when the Legislature meets in special session next week.

“Let’s suppose we would like to access approximately $100 million of the Bank of North Dakota (profits),” Gov. Jack Dalrymple said, throwing out a number during a meeting of the North Dakota Industrial Commission.

The bank has posted record profits for 12 consecutive years, with a profit of $130.7 million in 2015.

Bank of North Dakota President Eric Hardmeyer said bank officials ran the numbers and believe that if the state took $100 million in profits, the bank would still be very strong through the biennium ending June 30, 2017.

“The bank is extremely strong in capital,” Dalrymple said.

Bank of North Dakota profits were mentioned earlier this month as a potential source to draw from when Dalrymple called for a three-day special legislative session, which is set to begin next Tuesday. Lawmakers will be tasked with addressing a budget shortfall of roughly $310 million for the current biennium.

“We sat down a few weeks ago and had a theoretical discussion,” Hardmeyer said.

He said the $100 million figure is in the ballpark of the final amount that will be included in a comprehensive budget bill to be voted on during the special session.

The bank’s leverage ratio was being specifically discussed when Dalrymple interjected to talk about using bank profits for the budget shortfall.

A bank’s leverage ratio is calculated by dividing tier one capital by the average assets for the quarter. Hardmeyer said tier one capital is basically the state’s ownership stake in the bank’s total assets. 

For the second quarter of 2016, the bank was at a 11.05 percent leverage ratio; its benchmark is 8.5 percent.

“We still would be north of 10 percent,” Hardmeyer said, even with allocation of the $100 million.

The Bank of North Dakota’s average total assets for the second quarter of 2016 was $7.32 billion, down from an average of $7.87 billion during the same period in 2015.

Tier one capital has increased from $749 million at year-end 2015 to $809 million for this year to date.

Changes have been made to this story to more correctly reflect the status of discussions on possible use of Bank of North Dakota profits to remedy budget shortfall

(Reach Nick Smith at 701-250-8255 or 701-223-8482 or at nick.smith@bismarcktribune.com.)

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