Alaska Economic Update 2021Identifying opportunities from the COVID pandemic

May 2021

Alaska’s Economy

Mark EdwardsExecutive Vice President Chief Credit Officer & Bank Economist

Impacts of COVID one year later

The Alaska Economy in 2020

Payroll jobs declined 8.5% in 2020

Gross State Product declined 4.9%

Billions in federal aid came quickly to support the economy

Per Capita Income increased 3.1%

Interest rates fell to record levels

Housing prices and the number of units sold increased

Oil prices & production fell, but rebounded to healthy levels

COVID Hurts the Workforce

Alaska Job Impact – March 2021 The 8.5% job loss in 2020 has moderated to 6.9% in March of 2021

295,000 jobs in March 2021 is 21,900 fewer than March of 2020

Tourism and Hospitality down 23% March year over year, -7,200

Direct Oil & Gas jobs fell 36% March YoY, -3,600

Transportation, Warehouse, Utilities down 10%, - 2,000

Professional & Business Services declined 9.1%, -2,500

State government was only sector to grow 0.9% or +200 jobs

Alaska Department of Labor

Economic output of goods and services

Alaska Gross State Product - 2020 Alaska’s GSP declined -4.9%, U.S. -3.5%, Hawaii -8%

Alaska’s total GSP was $52.1 billion

GSP declined -6% in 1st quarter and -34% in 2nd quarter

GSP sharp increase of +32% in 3rd quarter and +6% in 4th quarter

Most impacted were Transportation & Warehousing, Accommodation & Food Services, Oil & Gas, and Health Care

Alaska’s 4th quarter 2020 growth was 9th best of 50 U.S. states

Bureau of Economic Analysis

Personal Income 2020

Alaska’s Personal Income $47.4 billion Alaska’s $64,780 per capita income was 9th best of 50 U.S. states

A $1.1 trillion increase in government transfer payments more than offset lost wages and investment income across the county

Personal Income

Federal Bureau of Economic Analysis

2020 vs. 2019 Alaska United States

Wages - 435 million + 35 billion

Dividends, Interest, Rents - 65 million - 41 billion

Government Transfer Payments + 1,920 million + 1,143 billion

Total Personal Income change + 1,420 million + 1,137 billion

Total % change annualized + 3.1% + 6.1%

Oil and Gas Activity

Alaska North Slope Oil Prices 2020 - 2021

Alaska Department of Revenue

20212020

1-4 Unit Residential Properties

Mortgage Delinquency and Foreclosure Rates

U.S. Mortgage Bankers Survey

4Q 2019 3Q 2020 4Q 2020

Alaska Delinquencies 2.85% 6.78% 6.21%

U.S. Delinquencies 4.07% 7.60% 7.19%

Alaska Foreclosures 0.63% 0.49% 0.45%

U.S. Foreclosures 0.78% 0.59% 0.56%

Prices and units sold up in most markets

Housing Market StatewideComparing 2019 to 2020

Average Sales Price

Number of Units Sold

Anchorage + 5.9% + 19.5%

Mat-Su + 9.9% + 9.7%

Fairbanks NSB - 0.3% - 20%

Kenai Peninsula + 8.6% + 11.3%

Kodiak - 1.6% + 17.7%

Alaska MLS

30 year Conventional Interest Rates

Historically Low Mortgage Rates

Federal Home Loan Mortgage Company

0%

2%

4%

6%

8%

10%

12%

14%

16%

18% 16.6% in 1981

April 20213%

8.1% in 2000

Rising Prices

Signs of Inflation A rapid increase in the money supply from COVID stimulus is starting to

cause inflationary pressure

CPI rose + 2.6% between March of 2020 and March of 2021

Clothing - 2.5%Transportation - 1.6%

Energy +13.2%Used cars + 9.8%Food + 3.5%Housing + 1.7%

U.S. Bureau of Labor Statistics

Global trade disorder

Supply Chain Disruptions Much lower workforce productivity from millions unemployed

International trade hampered from differing COVID rules

Many companies were not technologically prepared for change

Government permitting and regulatory approval slowed

Winter storms like Texas hurt chemical production and manufacturing

Cargo shipping had embarrassing setbacks

Led to high commodity prices and low product availability worldwide

Possible Economic Ramifications

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

1 mo. 6 mo. 1 year 2 year 5 year 10 year 30 year

------ April 30, 2020------ April 30, 2021

1.28%

2.3%

0.64%

1.65%

0.86%

0.36%

Steepening Yield Curve After 2 years

U.S. Treasury Rates

Federal Reserve Bank

Stay Positive

Summary Thoughts Large job losses & GDP declines, yet house prices and income rose

Trillions in stimulus money helped avert economic disaster

Tax increases, higher interest rates and inflation are expected

An economic rebound is occurring, consumers are flush with cash

Demand is strong, but global supply chains are disorganized

Health restrictions are easing and the jobs picture is improving

Nimble companies with good IT and financial resources will do well

Opportunities Exist

Mike HustonExecutive Vice President Chief Lending Officer

Consider how a challenged economy could affect your industry. Some sectors will snap-back with pent up demand

Other businesses will languish and change dramatically

Be open to adapting to the changing environment

Operating in a new economic reality

Prepare to SurThriveOvercome challenges & seize opportunities

Financial Resources Small Business Administration

www.sba.gov

US Department of Treasury

www.home.treasury.gov

Alaska Small Business Development Center

www.aksbdc.org

Trade Organizations

Prepare to SurThriveOvercome challenges & seize opportunities

Make competitive and strategic planning decisions Low interest rates

Opportunities for acquiring assets at a discount

Disruptions often create opportunities

Operating in a new economic reality

Prepare to SurThriveOvercome challenges & seize opportunities

Northrim Bank Forbes Best-in-State 2020