Small business, health care sectors steady for state banks

It’s steady as she goes for the first quarter of 2015 at Alaska’s financial institutions, with consistent gains in total asset and net income growth for all but a few of the state’s leading banks and credit unions.

Like 2014, interest rates are low in the first quarter of 2015, and consumers with pent-up expansion plans are poking their heads above the waters of the Great Recession for small business loans.

Wells Fargo saw total Alaska deposits increase at the end of the first quarter of 2015 to $6.2 billion, or about 14 percent from the same quarter last year. Darren Franz, Wells Fargo’s Alaska regional business banking manager, characterized the growth as steady overall with notable action in small business loans including medical professionals and the commercial fishing industry.

“This year hasn’t been big acquisitions,” said Franz. “Peanut butter and jelly sandwiches is a good way to describe it; lots of good small business loans. In the medical community we’ve continued to see loans there; lots of activity in the health care segment. For the first time in awhile we’ve seen people building new boats.”

The five largest Alaska-based banks grew total assets 8 percent from $5.5 billion in 2014 to $5.9 billion in 2015. Banks grew their combined first quarter net income 9.6 percent from $12.5 million in 2014 to $13.6 million in 2015.

First National Bank Alaska Senior Vice President and Chief Financial Officer Michele Shuh said the quality of 2014 loans has carried over into the new year, with fewer delinquencies and deposit growth from a new University of Alaska Anchorage-area branch. FNBA slashed its loans in nonaccrual rate, or delinquent rate, 36 percent from $5.4 million in 2014 to $3.5 million in 2015.

“Deposits and loans are up already as a result of their focus on the medical and university consumers,” said Shuh. “We continue to be very proud. Our non-accrual and delinquency are at the lowest level since the financial crisis of 2007.”

Ketchikan’s First Bank led year-over-year net income growth, with a 53 percent first quarter jump from $403,000 in 2014 to $616,000 in 2015. Like FNBA, First Bank also had good fortune cutting its delinquent loans. The rate of delinquent loans dropped 74 percent from a total of $2.5 million in 2014 to $656,000 in 2015.

Fairbanks’ Denali State Bank grew its first quarter net income 11 percent, from $471,000 in 2014 to $522,000 in 2015, though its assets dropped 2 percent from $265 million to $260 million in 2015. Denali State President and CEO Steve Lundgren said the income growth, like the Southcentral banks, has been a steady fulfillment of 2014’s cautious optimism.

Lundgren said the bank is still looking forward to an anticipated rise in residential construction due to the 2014 U.S. Air Force announcement that Eielson Air Force Base is its preferred location for two new squadrons of F-35 fighters.

Northrim topped the list for total asset growth, thanks to its 2014 acquisition of Residential Mortgage and Pacific Bank in Juneau, which helped the company boost total assets 21 percent from $1.2 billion in first quarter 2014 to $1.4 billion in first quarter 2015.

Northrim’s first quarter net income grew 18 percent from the same quarter in 2014, from $3.3 million to $3.9 million.

“Here in the first quarter those acquisitions have had time to kick in,” said Northrim chief financial officer Latosha Frye. “We’re really pleased by their performance.”

Unlike FNBA and First Bank, Northrim’s delinquent loans rose in 2015 as carryover from the Alaska Pacific purchase. The total amount of loans in nonaccrual grew from $999,000 in the 2014 first quarter  to $4.8 million by first quarter 2015.

Northrim picked up $138.4 million in loans connected to its acquisition of Alaska Pacific, $1.2 million of which were loans in nonaccrual, or delinquent loans. Frye attributes the remaining delinquent loans to a borrower whose winter-dependent business suffered during the unusually mild 2014-15 season.

Northrim also got $1.7 million worth of foreclosed properties from Alaska Pacific, which consisted of two commercial properties worth $1.5 million, one piece of developed land worth $130,000, and three lots worth $112,000. The purchase of Residential Mortgage gave a single-family home worth $270,000. Foreclosures for Northrim climbed 22 percent from $3.4 million in 2014 to $4.2 million in 2015.

Fairbanks-based Mt. McKinley Bank also had an increase in foreclosures and delinquent loans; total loans in nonaccrual rose from $251,000 in 2014 to $1.1 million in 2015.

 

Credit unions

Alaska’s credit unions had a modest first quarter year-over-year growth. Total assets for the six largest Alaska credit unions climbed 4 percent from $7.6 billion in 2014 to $7.9 billion in 2015. Total net income for the first quarter of 2015 was $12.7 million, up 1 percent from $12.6 million in the first quarter of 2014.

All six credit unions grew their assets except Denali Alaskan, whose total assets sank 20 percent from $531 million in 2014 to $425 million in 2015. The credit union’s net income also decreased, from $2.6 million in 2014 to $479,300 in 2015.

Spirit of Alaska also saw a drop in quarterly net income from $262,985 to $212,566.

Alaska USA led the credit unions that did grow, with a 6 percent year-over-year growth from $5.6 billion in 2014 to $5.9 billion in 2015. First quarter income increased 31 percent from $7.1 million to $9.2 million in 2015.

The average net income growth would’ve been higher but for Denali Alaskan’s 81 percent drop in quarterly income from $2.6 million in 2014 to $479,300 in 2015.

Collectively, credit union foreclosures and delinquent loans are increasing. The total past due loans of the six largest credit unions rose 31 percent from $55.5 million in 2014 to $72.8 million in 2015. Foreclosures rose 7 percent from $13.8 million to $14.7 million.

The largest spike in foreclosures came from Spirit of Alaska, whose rate increased 184 percent to $1.4 million in the first quarter of 2015.

DJ Summers is a reporter for the Alaska Journal of Commerce. He can be contacted at daniel.summers@alaskajournal.com.

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