Alaska Journal | Bank income reflects the treatment of PPP loans

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Being the conduit for large sums of government aid helped Alaska’s banks largely weather the initial months of the pandemic.

The state’s largest local banks all increased their net income in the second quarter from the start of the year, some substantially.

Anchorage-based Northrim Bank multiplied its net income by several times, from $ 2.3 million to $ 10.4 million in the second quarter, while Denali State Bank of Fairbanks more than doubled its net income, rising from $ 552,000 in the first three months of the year to over $ 1.4. million in the second quarter, according to figures released by the Federal Deposit Insurance Corp.

First Bank in the Southeast nearly doubled its bottom line for the quarter, also bringing in more than $ 1.4 million.

First National Bank Alaska, the state’s largest bank, saw more modest revenue growth of 2.9% to $ 14.4 million, in line with recent quarters.

Northrim CFO Jed Ballard said the bank had tried to take full advantage of the “huge opportunity” presented by the popular Small Business Administration paycheck protection program, which was administered by institutions. financials of all sizes across the country for the SBA.

“We have really exceeded our weight class in terms of the volume of PPP loans that Northrim has made,” said Ballard, noting that the bank has distributed over 2,500 PPP loans totaling around $ 350 million – loans converted into grants. if companies followed the guidelines of the program – which accounted for 28% of the more than $ 1.2 billion distributed statewide. Northrim has about 12% of the market share among Alaskan banks, according to Ballard.

The bank has also attracted new customers by offering PPP loans to everyone, whether they are already Northrim customers or not, according to Ballard.

All of this represented several months of weekend work for many bank workers.

“It was several years of loans over a three-month period,” he said. “All the departments in the bank have sort of become the lending department. It was a great team effort all around.

Denali State Bank has made the most PPP loans inside Alaska, its region, which has helped boost the bank’s income, CEO Steve Lundgren said in an interview. He said the bottom line of Alaska banks could have been even better if it weren’t for a broad industry initiative to increase loan loss provisions or the amount of money set aside to cover. uncollected payments, which directly affects bank profitability.

“It took a big leap because we just don’t know what’s going to happen,” Lundgren said.

Growth in underlying assets was also strong during the quarter. Denali State Bank increased its total assets 22% to $ 376 million, while Northrim and FNBA both rose 19%. Northrim eclipsed the $ 2 billion mark in the second quarter as FNBA nears $ 4.6 billion in assets.

The widespread negative effects of the coronavirus pandemic have manifested themselves in some, but not all of the underlying indicators of banks.

The FNBA has seen its total loans past due one to three months drop from $ 5.7 million in the first quarter to $ 15.5 million in the second, which President Doug Longacre said in a prepared statement was the direct result of economic and travel restrictions imposed by the government aimed at slowing the spread of the virus.

According to Longacre, FNBA’s loan officers were exhausted by a backlog of loan modification and PPP requests and could not contact other clients in need of assistance until payment problems arose.

“Now that we have passed the wave of loan modifications and PPP loan production, our officers are once again working proactively with clients to help them mitigate potential loan payment issues. And, I’m happy to note that our current delinquent loan volume has improved dramatically, ”said Longacre.

Ballard of Northrim and Lundgren of Denali said their banks haven’t faced the same challenges as FNBA, at least so far. Both said the situation was not as bad as they expected.

The amount of delinquent loans held by Northrim fell 75% in the quarter to $ 861,000, while Denali State Bank saw its total drop 35% to $ 784,000.

Total unrecorded loans rose 24% for FNBA to over $ 12.7 million, while the metric remained broadly stable for Northrim and Denali State Bank at around $ 15 million and 1.7 million. million dollars, respectively.

First Bank saw its past due and unaccounted amounts drop significantly during the quarter.

“Our delinquency, repossessions and foreclosures have been so much better than we could have expected,” Lundgren said.

He anecdotally attributed some of the disparity between the poor raw economic indicators of unemployment and job losses and Denali’s strong performance to the belief that people who are still employed still spend money, in large part. party within the state given the current risks and challenges of traveling.

Ballard said historically low interest rates encourage home and business owners to refinance their mortgages and other loans, which is also a fortuitous way to save money in the face of an uncertain future.

“We’ve had a really amazing, amazing production there in our residential mortgage (department),” he said.

Lundgren added that he has also seen a significant increase in home improvement projects indoors.

Ballard further speculated that while many state-owned businesses continue to struggle – especially those in the tourism sector – for a multitude of reasons, some business owners who have been able to access some of the roughly 3, The $ 5 billion in federal aid that came to the state used that money to buy time to reorganize their business.

“Companies have restructured their operations to meet cash flow needs. Entrepreneurs are very resourceful, ”he said. “You see it all over the country. There are a number of ways that companies simply do business to generate income and meet customer needs. “

Elwood Brehmer can be contacted at [email protected].


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