Seasonal shift ahead for lenders


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Alaska’s banks and credit unions held steady in their 2013 first quarter performance, a typically slow quarter given the state’s seasonal economy.

Many institutions saw year-over-year growth, although activity was down compared to end of 2012.

Northrim Bank’s net income was $2.9 million, relatively equal to the first quarter 2012 income, but a decrease from the end of 2012, when Northrim saw income of $3.3 million.

Northrim Chief Financial Officer Joe Schierhorn said the decline from year-end to first quarter isn’t uncommon, as business activity tends to be stronger at the end of the year than it is in the first quarter.

The bank’s mortgage affiliate had a strong year in 2012, and about a $730,000 decline from the fourth quarter, Schierhorn said, which was a factor in that drop.

At Juneau-based Alaska Pacific Bank, interest-bearing deposits grew from $112.8 million in the first quarter of 2012 to $120.9 million for the same time period in 2013. Total deposits also grew.

First National Bank Alaska saw more of a drop.

The bank’s net income fell to 17 percent to $8.4 million from $10.2 million in the first quarter of 2012. That was driven almost entirely by interest income recognized for loans returned to performing status, although non-interest income also decreased.

Overall, the low-interest rate environment and recovering economy are driving many of the trends at the state’s financial institutions.

AlaskaUSA Federal Credit Union saw nearly across-the-board growth in shares and deposits. Senior Vice President for Corporate Administration Dan McCue said that was driven by the economy, and members’ desire not to try other investment strategies.

Total deposits were up, with share deposits at $477.9 million comprising most of the growth compared to the prior quarter, when they came in at $421.8 million, and the same quarter of 2012, when they totaled $123.3 million. That growth was largely comprised from outside Alaska.

“Often deposits grow in financial institutions during economic uncertainty as consumers seek short-term, safe, insured investment alternatives,” McCue wrote in an email.

The low-interest rates have another impact.

Net interest margins are shrinking, as new loans have lower rates than older ones that are being paid off, McCue said. But it also means that mortgage purchase and refinance activity is continuing, an area that contributes to the overall health of AlaskaUSA.

Schierhorn said mortgage refinance activity looks to hold steady, which will help maintain Northrim’s bottom line.

Also at Northrim, the first quarter ended with an increase in non-interest bearing accounts compared to interest bearings ones, which Schierhorn attributed largely to interest rates.

Lending is also doing relatively well.

Northrim had year-over-year loan growth of 9 percent, which Schierhorn said was a positive marker.

“We’re happy about that,” he said. “We’ve been effective in increasing our portfolio loans in all major areas of our lending,”

AlaskaUSA saw an overall growth in loans and leases, driven by vehicle loans. Credit card and real estate loans dropped.

McCue said the credit union has expanded to new areas in Washington and California, which has helped fuel the vehicle loan growth. In Alaska, the credit union has seen overall moderate consumer loan growth, McCue said.

Other loan performance has also been strong, with institutions reporting a decrease in charge-offs, and loans in nonaccrual.

Northrim saw a decrease in loans measured for impairment and in nonaccrual in the first quarter.

Loans measured for impairment were $11.6 million at the end of the first quarter, compared to $13.1 million at the end of the prior quarter, and $12.3 million at the end of first quarter 2012.

Nonperforming assets were also down year-over-year, and compared to the prior quarter. That’s a positive change for the bank, and one that indicates a solid performance trend.

Since about 2010, Northrim has seen a steady drop in nonperforming assets versus total assets, he said, and that continued in the first quarter.

Northrim’s not alone in those results. Other financial institutions are seeing the same trend, which Schierhorn said is an indication of credit quality throughout the state.

It helps, he said, that Alaska has maintained a stronger position than other regions throughout the country’s economic difficulties. Overbuilding wasn’t an issue here, and Alaska’s institutions had better balance sheets overall, Schierhorn said.

Alaska’s financial institutions have also looked to other sources of growth, officials said.

Schierhorn said that at Northrim, the bank has maintained a focus on bringing in new customers as well as retaining existing one. That contributed to a net increase in income, which he said is a critical piece of the bank’s ability to grow revenue.

Factors beyond the institution’s controls are also playing a role in performance.

Schierhorn said that the legislature’s recent action to change the state’s oil tax structure has fueled “cautious optimism” about oil and gas development. For now, that has a largely psychological affect in the economy, although it will also drive development in the future, he said.

On the flipside, First National Bank pointed to regulatory issues, including reduced bankcard revenues, as a challenge for its first quarter performance in a May earnings release.

AlaskaUSA also saw an increase in charge-offs due to a change in requirements of how they were handled, but said that would likely still result in an overall decrease in number at the end of the year.

As far the future goes, Schierhorn said the summer looks to be a good one for the Anchorage economy. The legislature’s action in reducing oil taxes should spur some growth, both psychologically and through resulting projects, and the region is seeing increasing mortgage purchase activity, rather than just refinancing. The refinancing activity should also continue to hold, he said.

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