Alaska Journal | Low interest rate, PPP loans boost banking gains for 2020

Homebuyers taking advantage of record interest rates and businesses using federal disaster funds led to a record year for Alaskan banks.

The three largest Alaska-based banks all saw an increase in their annual revenues and achieved total asset growth of over 15% in 2020.

Anchorage-based Northrim led the way with 29% year-on-year asset growth to more than $ 2.1 billion. First National Bank Alaska, the largest Alaska-based institution, surpassed $ 4 billion in assets and nearly reached $ 4.7 billion with growth of 23%.

Ketchikan-based First Bank rose more than 16% to $ 689 million in assets by year-end.

Jed Ballard, chief financial officer of Anchorage-based Northrim, said the bank had likely experienced its busiest fourth quarter for mortgages.

Throughout the year, bank officials have reported a strong consumer response to mortgage rates below 3%, even as the pandemic has led to long-term plans being suspended in many other aspects of life.

“There have been just a lot of people over the past year who have improved the square footage or the number of bedrooms – whatever they wanted,” Ballard said in an interview.

Alaska Housing Finance Corp. announced 30-year mortgage rates starting at 2.75% on March 23.

The rate-driven buying frenzy has spread beyond homes to other large items such as cars and RVs, bank executives say.

Northrim, which grossed $ 32.9 million for a 59% increase in annual revenue, also saw the Small Business Administration speed up the processing of pardon applications for the hugely popular paycheck protection program in December, according to Ballard.

Better known as PPP, the agency has used it to provide widely repayable forgiveness loans to small businesses across the country.

This allowed the bank to immediately realize the fee income from the transaction.

“When (the loans) are forgiven, you don’t have to amortize it anymore, so you get it all in one fell swoop,” Ballard said.

He noted that the second round of PPP requests ends on March 31, unless Congress extends it. As of March 21, the SBA had approved more than 3.1 million loans totaling $ 195 billion in this year’s P3 funding round, leaving about $ 90 billion available.

Northrim increased its total loan and lease portfolio by 41% in 2020 to $ 1.6 billion. The FNBA also saw portfolio growth of nearly 10% to over $ 2.2 billion and First Bank added loans for 14% growth to $ 241 million to end the year, according to the documents. deposited by the bank with the Federal Deposit Insurance Corp.

Wells Fargo’s Alaska market manager Joe Everhart said the national bank’s Alaska portfolio had “performed remarkably well” during last year’s economic downturn and continues to do so.

“Wells Fargo and many banks have been very proactive with deferrals and extensions of loans,” Everhart said, adding that stimulus funds, such as PPP loans, have helped keep a lot of small businesses afloat. .

Northrim executives still expect to process a significant number of applications in the second round of PPP loans, even with additional restrictions on funds, according to Ballard.

“There are still a lot of people who need the money, but overall it hasn’t been as bad as expected,” he said.

He noted that many tourism-focused businesses in the Southeast will continue to have extremely tight cash flows for much of this year if a second cruise season is ultimately canceled or significantly reduced.

Traditional borrowers also made their payments largely in 2020 despite income disruptions caused by restrictions on business activity at various times of the year.

FNBA saw a 3.6% increase in the value of up to 89-day loans past due to $ 2.7 million during the year, while Northrim’s delinquent volume was narrowly reduced half to $ 889,000 and First Bank held no loans up to 89 days past due, according to FDIC statements.

The FNBA has roughly doubled its volume of unrecorded loans; however, it was a return to more normal levels at $ 13.6 million to end the year. Northrim ended 2020 with $ 11.1 million in non-performing loans, down 27% and First Bank went from nothing to $ 781,000.

Despite the continued strong financial performance and the significant improvement in COVID-19 indicators, there is still a climate of uncertainty among many banking executives, as evidenced by a 10% increase in their provisions for loan losses at the bank. end of the year by FNBA, Northrim and Première Banque.

Ballard said he doesn’t believe the mortgage boom will be sustainable because relatively few new homes are being built in Alaska, adding that interest rates are expected to rise at some point.

He added that the benefits have come from long hours for many bank workers throughout 2020; much of the work came from processing carry-overs at the start of the year and processing PPP loans afterwards. It was also a significant strain on the IT staff of the banks, noted Ballard, calling the year “an effort at all levels.”

“Profits are one thing but stocks are another, so it’s been a really tough year,” he said.

Everhart said it was too early to predict much if the commercial real estate market will take the long-term hit many expect after the pandemic. He noted that while many office businesses are shrinking their footprint as employees choose to work from home all the time, some of Wells Fargo’s customers who require on-site labor have had to increase their work space. work to provide more space for their employees.

He expects visitor-based businesses along the Railbelt to have a better year 2021 even if the cruise traffic does not materialize.

“The hope is that we see people in railcars and buses, using hotels and restaurants on the Kenai Peninsula in Anchorage and Fairbanks,” Everhart said.

Elwood Brehmer can be contacted at [email protected].

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