Low rates fuel financing activity for banks in 3Q

The Federal Reserve’s strategy of keeping interest rates ultra-low to support the challenged economy seems to be working for banks in Alaska.

State bank leaders reported strong profits in the third quarter primarily because of near-unprecedented mortgage lending.

Northrim Bank Chief Financial Officer Jed Ballard said the activity first came in the form of mortgage refinances this year but has shifted to actual home purchases.

“We made $12 million and not too many years ago that would’ve been our net income for the year,” Ballard said of the third quarter.

Northrim workers also celebrated the bank’s 30th birthday on Dec. 4, Ballard said. The bank opened in late 1990 in a trailer in the parking lot of its current Midtown Anchorage headquarters and 21 original employees; current CEO Joe Schierhorn among them, according to Ballard.

“We started the bank with $8 million of capital and now we’re dividing like $9 million per year — so pretty impressive growth,” he said.

Specifically, Northrim netted $11.8 million in the third quarter following a $12.7 million quarter in the spring. The second largest Alaska-based bank grew its total assets by $80 million to nearly $2.1 billion and its loan portfolio by 3.5 percent to more than $1.6 billion over the period.

The Alaska Housing Finance Corp. advertised 15-year mortgage rates as low as 2.25 percent in late November, with 30-year loans starting at 2.5 percent.

Denali State Bank CEO Steve Lundgren also predicted a record mortgage year at the Fairbanks-based community bank. He said about half of the business has been from refinances.

“We’re seeing more activity in home sales than I would’ve expected,” Lundgren said.

Denali State Bank grew 3.2 percent to hold $388 million in assets at the end of the quarter and netted $826,000 with nearly 5 percent growth in its loan portfolio.

Leaders of First National Bank Alaska — the largest Alaska-based bank — did not get back to the Journal in time for this story but they may have taken the day off to celebrate a $15.5 million quarterly profit, which was a 6.7 percent improvement over the second quarter. FNBA also surpassed $4.7 billion in assets and saw its past due loan total drop by 75 percent to $3.8 million of a $2.3 billion portfolio.

FNBA’s loans in nonaccrual bumped up 1.6 percent to $12.9 million. Non-accruing loan amounts stayed mostly flat across Alaska’s banks, as did loan loss amounts.

The exceptions were First Bank in Southeast, which saw its loans in nonaccrual jump, but from just $196,000 to $796,000. Past due loan totals also dropped at several institutions except Northrim. However, Northrim’s loans up to 89 days past due increased from virtually nothing at $861,000 in the second quarter to $2.3 million in the third.

“We have record profits but there’s still a lot of uncertainty out there,” Ballard said.

He said Northrim has made its share of accommodations to large customers, particularly commercial property owners with tenants impacted by the pandemic economy.

Ballard said the CARES Act support businesses received helped immensely in the first months of the pandemic and owners have been resourceful as well but he believes more help will be needed to get through the winter, noting that in spite of expected COVID-19 vaccines, the economy, and tourism in particular, is likely going to take years to recover — back to being stable.

Lundgren said the consumer activity goes beyond home buying to other large purchases such as cars, boats, and home renovations.

“If you’re not in the tourist industry you’re probably doing pretty good in Fairbanks,” he said.

Still, he agreed with Ballard that some sort of additional business relief is needed, “maybe not for everybody, but certainly for some people,” Lundgren said. “I have customers that are surviving, but they’re struggling.”

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Elwood Brehmer can be reached at [email protected].

Updated: 
12/09/2020 - 9:20am