PPP still driving income for state’s banks
Compared to his, Bill Murray would envy the kind of Groundhog Day Alaska’s banks have been living.
While full of work, the last year-plus has also been full of growth and profits for Alaska’s lenders. It continued in the second quarter of the year.
Northrim Bank Chief Financial Officer Jed Ballard said the Small Business Administration’s uber-popular Paycheck Protection Program, or PPP, instituted early in the pandemic provided the bank with nearly 6,000 new loans totaling more than $600 million in the past year.
“That was a tremendous amount of money we put into the system. For us that is several years of activity,” he said.
Ballard and leaders at other Alaska banks have said the PPP loans spurred levels of activity that had loan officers working long hours and sometimes weekends while other employees took on new roles to assist where needed.
“A tremendous amount of work,” Ballard said.
Anchorage-based Northrim, which has branches in Southcentral, the Interior and Southeast, reported income of $8.3 million for the second quarter, which followed a $12.1 million first quarter profit.
The pace at which Northrim and other banks are processing PPP loans has slowed but fees normally amortized over the life of a loan are collected up front when a PPP loan is forgiven as intended, which means the program continues to benefit banks’ bottom lines.
According to Ballard, Northrim closed out roughly $130 million of forgiven PPP loans during the second quarter.
Northrim’s assets grew by 4.2 percent to more than $2.45 billion in the quarter, according to its filings with the Federal Deposit Insurance Corp. The bank surpassed $2 billion in assets a year prior.
Northrim’s total loans were down 4 percent to approximately $1.6 billion — a reflection of the forgiven PPP loans — but the bank had solid “core loan growth” in the period as well, Ballard said.
Mortgage activity continues to be strong and PPP loans also gave Northrim access to customers it might not otherwise have secured, he added.
The Alaska Housing Finance Corp. continues to publish daily interest rates for 30-year mortgages starting at 2.5 percent.
Ballard noted that mortgages represented roughly half of the bank’s non-interest income for the quarter; for most banks home loans are about 10 to 20 percent of non-interest income, he said.
First National Bank Alaska, the state’s largest state-based lender, netted nearly $13.7 million in the quarter, its third such period with a profit in the $13 million range following quarterly nets of $15.5 million and $14.5 million in the middle of 2020.
FNBA grew its total position 8.1 percent in the second quarter to more than $5.33 billion in assets. The bank’s total assets have increased more than 16 percent over the past year.
According to an earnings release, FNBA originated more than 3,000 second-round PPP loans totaling $238.1 million in the first half of the year, while other PPP borrowers have had a total of $278.8 million in loans forgiven.
“The lessons learned in 2020 give us great confidence we will continue to be able to deliver the financial services Alaskans need, and to adapt to circumstances as they develop,” FNBA CEO Betsy Lawer said in a statement.
FNBA representatives did not respond to further questions in time for this story.
FNBA’s loan loss allowance stayed ostensibly flat at $23.5 million; Northrim was similar with a loss allowance of $14.5 million for the quarter on a $1.6 billion portfolio.
Fairbanks-based Denali State Bank grew its total position by 14.3 percent in the second quarter to more than $454.2 million. The Interior community bank netted a profit of $1.33 million, nearly matching the $1.37 million earned to start the year.
Elwood Brehmer can be reached at [email protected].