Net income decreases as rates rise, lending activity slows

Alaska’s financial institutions ended 2013 strong, despite challenges from the economy and a flattening mortgage environment.

Total assets at Alaska-based banks increased compared to the prior year, although net income generally decreased.

Combined, Alaska banks posted about a 3 percent increase in total assets, with Northrim Bank and First National Bank Alaska posting the largest increases, at about 4.8 and 2.9 percent, respectively, compared to the prior year.

Northrim ended 2013 with $1.2 billion in assets, an increase of about $56 million. First National Bank Alaska, or FNBA, finished the year with about $3.1 billion, and increase of nearly $100 million.

Alaska USA Federal Credit Union also saw an increase in total assets, up to $5.4 billion at the end of 2013, compared to $5.1 billion at the end of 2012.

The largest banks all saw a decrease in net income, however.

At FNBA, fourth quarter net income was $7.8 million, less than the $9.4 million it had in the fourth quarter of 2012.

Denali State Bank’s net income for the fourth quarter was $303,000, slightly more than a 50 percent decrease compared to the fourth quarter of 2012. For the full year, net income decreased to about $1.8 million from $2.3 million for 2012.

Denali State Bank President and CEO Steve Lundgren said the drop in net income was driven in part by a decrease in loans and leases.

Loans and leases were down about 9 percent. Lundgren said the decrease came in part because interest rates went up slightly, and all of the refinancing activity from 2011 and 2012 dropped off. For the most part, anyone who wanted to refinance has done so, he said.

Despite those challenges, Lundgren said 2013 still showed strong earnings, and the bank increased its dividend, as it has done in recent years.

“During a year of pretty low activity locally here in Fairbanks and a flat economy, we were still able to grow our reserves, grow our capital, and grow our dividend,” Lundgren said. “So we’re pleased to have been able to do that.”

Southeast’s Alaska Pacific Bank was the only bank with an increase in net income for the fourth quarter of 2013 compared to the fourth quarter of 2012, at about $401,000 compared to $388,000. That bank, however, saw a decrease in both total assets and loans and leases.

Other institutions had increases in loans and leases.

Denali Alaskan Federal Credit Union had more than 11 percent loan growth, according to Denali Alaskan President and CEO Bob Teachworth.

“Our loan growth was pretty impressive,” Teachworth said.

Teachworth said the credit union has loaned out 102 percent of the shares it has on deposit, compared with 72.8 percent for its national peer group.

“We’re pretty proud of that,” he said. This year the credit union will sell about $50 million in loans so that it can re-lend to its members, Teachworth said.

Northrim saw the largest increase in loans and leases of Alaska’s banks, ending the year with about $781 million, an 8.7 percent increase from 2012.

First National Bank Alaska and Ketchikan-based First Bank also saw loan and lease increases, as did some credit unions.

Alaska USA had about $3.6 billion in loans and leases at the end of 2013, compared to $3.3 billion at the end of 2012.

Credit Union 1 had about $621 million in loans and leases at the end of 2013, up from $567.4 million at the end of 2012.

Denali Alaskan also saw a 3.77 percent growth in shares, up from 2.13 percent the year before, according to Teachworth, and has also seen a shift in the type of lending it is doing, with more of an emphasis on direct lending in recent years. That means more individuals are seeking out the credit union to get loans, rather than being connected with it via third party, like a car dealership.

Growth anticipated

The state’s banks and credit unions are expecting growth in 2014.

Nationally, Lundgren said the low interest rate environment is expected to continue. If employment continues to improve nationally, and the national economy picks up a little, Alaska could see the benefit in 2014.

Lundgren said that the continued military presence in Fairbanks would likely help the Interior’s regional economy for 2014, as would increased North Slope activity.

For 2014, Denali State Bank is aiming to continue maintaining its credit quality, and provide competitive products, services and prices. Lundgren said Denali would also work to continue growing its customer base and increasing its market share.

Northrim is working toward its merger with Alaska Pacific, according to Joe Schierhorn, the bank’s executive vice president, chief operations officer and chief financial officer, with an expected close later at the end of the first quarter. Alaska Pacific shareholders approved the merger March 11, and the banks were waiting for final regulatory approval as of mid-March.

“We have been working very closely with them, and we definitely look forward to a successful close,” Schierhorn said. “We do plan to close that merger here… at the end of the first quarter of this year.”

The merger won’t cause an immediate change for customers. Staff working with the public will remain the same, he said.

Denali Alaskan FCU will also branch out for 2014 — but rather than acquiring another entity, the credit union will expand the products and services it offers by creating a credit union service organization, selling a risk mitigation program and other tools that will help other credit unions perform better and working to expand its offerings to business members, Teachworth said.

11/15/2016 - 5:45pm