Banks, CUs haven’t seen downturn yet

Alaska’s state budget and economy hang over dangerous cliff, but the state’s financial institutions haven’t been pushed to the edge yet.

Alaska’s banks and credit unions showed growth in 2015, driven by commercial lending growth statewide and optimism for housing markets in the Interior.

“Wells Fargo has continued to see our Alaska business customers stockpile cash with total deposits topping $6 billion in Alaska for the first time,” said Joe Everhart, president of Wells Fargo Alaska region. “That’s an eight percent increase from year-end 2014 to year-end 2015. We have also seen steady loan demand with total loans at $2 billion in Alaska, up five percent over 2014. Wells Fargo provided more than $400 million in new business loans in Alaska in 2015, and we were the No. 1 (Small Business Administration) lender in Alaska for the eighth consecutive year.”

Statewide, Alaska’s five largest state-based banks grew net income 5.5 percent throughout 2015, from $61.6 million in 2014 to $65 million. Collectively, the banks represent $6.2 billion in total assets, up from $5.9 billion. Banks increased their total loans by 13 percent to $3.1 billion.

Tops in growth was Denali State Bank in Fairbanks, which increased its net income 11 percent in 2015 to $2.1 million.

Denali State Bank President Steve Lundgren said a push in mortgages and commercial loans drove the income bump, which came with a sizable dividend for the bank’s investors. Denali State paid out nearly twice the normal dividend than in the previous year.

“I think last year we had a couple drivers that helped with that,” said Lundgren. “We saw increased mortgage activity. We had focused on that. Our lending activity overall remained as strong as we could expect it to considering our geography and economy, largely as a result in increase in commercial lending activity.”

Lundgren said no particular sector of the commercial world grew in particular; rather, traditional commercial loans and commercial real estate opportunities peppered the year.

Denali State Bank also saw a $2 million jump in delinquent loan rates, the majority of which Lundgren said are Outside government-backed loans.

Unlike some “doom and gloom” seers, he said, Denali State expects a healthy 2016. Lower oil prices rake the state’s budget, but Fairbanksans — whose homes are generally heated with heating oil, one of the largest household expenses — are reaping the benefits of a disposable income boost.

Interior banks Denali State Bank and Mt. McKinley Bank remain hopeful for a construction uptick 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. An estimated 3,000 new Fairbanksans will be made in the process.

The runner-up in growth as a percentage was the largest state-based bank. First National Bank Alaska grew net income 10.8 percent to $36.1 million. Growth was natural considering a 12 percent boost in total loans and leases, and a shedding of millions worth of delinquent loans.

Public relations director Lyn Whitley said the bank’s strong balance sheet is due to deposit growth and steady growth in interest income. The bank’s $2.5 million increase in other real estate owned came mainly from land improvements to existing properties.

Northrim Bank’s balance sheet showed a small downturn for 2015 with a 2 percent net income loss.

Bank Executive Vice President and Chief Financial Officer Latosha Frye said the bottom line number is misleading after Northrim’s record-breaking 2014, in which net income increased 42 percent from the previous year.

Northrim finalized its purchase of Alaska Pacific Bank April 2014, which gave the company access to the long-sought Southeast Alaska market.

Northrim also bought the remaining shares of Residential Mortgage, which was already 23.5 percent Northrim-owned. The mortgage company is now a wholly owned subsidiary of Northrim Bancorp.

When merger costs and new revenues are extracted, Frye said, Northrim Bank posted a 33 percent organic net income growth for 2015. Total loans and leases grew 6 percent.

Like Lundgren, Frye said Northrim hasn’t yet noticed any impacts of the oil industry’s and state’s problems — she said Northrim still sees “stable demand” compared to this time last year, and no decline in credit quality — but she’s begun to see signals, and lacks the Lundgren’s federal spending-driven optimism.

“We certainly expect it to be more challenging to grow,” said Frye. “To have a no growth year is not a goal of ours, but we know it’s going to be harder to grow, when the economy is projected to be flat to slightly down.”

Frye said Northrim is noticing some customers appearing to prepare for an economic downturn by paying off debts ahead of schedule.

“We have seen our most well capitalized and liquid customers are paying down some debt,” said Frye. “That’s a good thing as far as risk management goes, but of course has its own challenges for us.”

Ketchikan-based First Bank had a modest 5.4 percent net income growth for 2015, expanding its loan portfolio by 4.3 percent.

Alaska’s six credit unions also performed well in 2015, growing their collective income 23 percent to $67.9 million, driven by an overall 11 percent loan growth.

Denali Federal Credit Union more than doubled net income to $4.9 million from $1.8 million.

Alaska USA, the state’s largest credit union, drove hard in 2015 as well, growing net income from $34.9 million to $49.4 million with a 14 percent growth in total loans and leases.

Matanuska Valley credit union reaped the benefits of a strong 2015 along with Interior and Anchorage, posting $4.2 million in net income, a 14 percent increase from 2014. 

Denali big year buries losses in the average. Credit Union 1, Spirit of Alaska, and Juneau’s True North all posted net income decreases for 2015, at 25 percent, 6 percent, and 56 percent, respectively.

DJ Summers can be reached at [email protected].

03/21/2016 - 4:38pm