Alaska Journal | Banks issue deferrals as economic impacts manifest
Alaska banks have generally had a good start until 2020, but what lies ahead for the rest of a tumultuous year is one to guess.
First National Bank Alaska, the state’s largest local bank, ended the first quarter of the year with assets totaling nearly $ 3.86 billion, up from about $ 3.81 billion at the start of the year. year.
FNBA posted $ 14.1 million in the first quarter, which is in line with the bank’s performance in recent quarters, according to figures in reports released by the Federal Deposit Insurance Corp.
Anchorage-based Northrim Bank had total assets of more than $ 1.67 billion as of March 31 – an increase of 2.4% in the quarter – and generated $ 2.3 million in net income during the quarter. of the first trimester.
In Fairbanks, Denali State Bank broke the $ 300 million asset mark, ending the first quarter with $ 306 million in total assets, an increase of 3.4% in the first quarter. Denali also brought in $ 552,000 in the quarter.
Denali State Bank CEO Steve Lundgren said in an interview that the community bank finished the first quarter “on budget” and has since seen its loan portfolio grow by almost 20%, largely through its participation in the Small Business Administration’s Paycheck Protection Program, which provides low-interest loans to small businesses seeking help with payroll and other fixed costs to overcome the economic upheaval induced by the coronavirus facing the country.
According to Lundgren, Denali processed around 430 PPP loans totaling around $ 41 million. He said most of that cash went to the bank in the form of deposits.
The vast majority of PPP loans are expected to turn into grants as long as borrowers use the financial aid on eligible expenses and do not downsize after receiving the funds.
Despite the ostensible economic shutdown that pushed Alaska’s unemployment rate from 5.2% in March to 12.9% in April, according to the state Department of Labor, Denali has not seen a spike. corresponding delinquencies or chargebacks, according to Lundgren.
“I tell my staff, I tell my board it’s because we are dealing with a significant number of loan deferrals,” he said, adding that most of the deferrals are for three months.
Lundgren said Denali’s clients have mostly been proactive and asked for help if they saw any personal financial issues on the horizon. The real test of the effectiveness of the bank’s aid – and that of the government at all levels – will take place at the end of the summer, when these deferrals expire.
In May, Denali executives used an increase in income to fund their loan loss reserve throughout the year, according to Lundgren. The bank had an allowance for loan losses of $ 3.3 million in the first quarter, according to FDIC reports.
“I’m cautiously optimistic that as the state continues to open up, we won’t see a lot of delinquency,” he said.
Northrim chief loan officer Michael Huston said he couldn’t talk about what bank executives are seeing internally in the second quarter until final numbers are released, but added that financial analysts of the country are generally concerned about the ability of banks to cope with the stress that could come.
“I think the credit quality of the banks is quite worrying,” Huston said.
Joe Everhart, commercial banking market manager for Wells Fargo Alaska, said in an interview that he was among many close observers who had a very positive outlook on the Alaskan economy until the end of the month. from February. However, he now expects the state’s economic recovery from the pandemic to lag behind the rest of the country, as Alaska’s economy relies heavily on industries that have been the biggest. hardest hit by the global shutdown – oil and tourism.
Wells Fargo loan officers quickly began contacting borrowers and processed many 90-day loan deferrals, according to Everhart. He said they are starting to work on the milestones for the next 90 days if trading conditions don’t improve quickly.
Officials at the very large national bank are tailoring their policies to their workplace, Everhart said, noting that the bank even deals with 14-month payment deferrals for companies, such as those in the tourism industry, that might not. generate significant income. up to a year from now.
“It’s hard to expect a customer to have income to make payments when they don’t,” he says.
There are still reasons to be optimistic in the face of challenges and uncertainty, according to Huston.
“I think most of our clients work with their clients. We are all in the same boat, ”he said.
Everhart also noted that, through various aid programs, Alaskan residents, businesses and local governments are expected to receive a total of about $ 3 billion in federal aid – a lot of money for a small state.
“I have to think this is going to provide a great safety net in this (economic) storm,” he said.
Elwood Brehmer can be reached at [email protected].