First National Bank Alaska Announces Third Quarter 2020 Dividend Declaration and Second Quarter Unaudited Results
The Board of Directors of First National Bank Alaska (OTCQX:FBAK) announced the bank’s unaudited net income for second quarter 2020 was $14.6 million, or $4.60 per share. The board also declared a cash dividend of $3.20 per share at their July 30, 2020 meeting, payable on September 15, 2020, to shareholders of record as of September 1, 2020.
The bank’s net income for the period compares to net income of $13.1 million, or $4.12 per share, for the same period in 2019. Unaudited year-to-date net income was $28.7 million, or $9.07 per share. This compares to net income of $26.6 million, or $8.39 per share for the same period in 2019.
“Like most other banks across the nation, we are seeing rapid changes in consumer and business behaviors that will likely leave permanent marks across the financial services spectrum, such as the increasing adoption of digital services,” said Chair and CEO Betsy Lawer. “First National’s success has always reflected the success of Alaskans as they rise up to meet and adapt to quickly evolving circumstances. While it’s difficult to predict what’s yet to come, the bank’s strength lies in our experienced team’s ability not just to adapt, but also to transform our business processes and services to leverage the power of change. I think our 2020 performance to date provides the evidence to support that and I’m very proud of the hard-working team.”
Net interest and loan fee income for second quarter 2020 was $37.9 million, an increase of 13.0% from second quarter 2019. This improvement was driven by an increase in average earning assets of $223.9 million during the second quarter. Total assets increased $734.9 million year-to-date, to reach $4.59 billion at June 30, 2020. Gross loans increased $305.3 million to $2.31 billion during the quarter. The bank demonstrated its commitment to Alaskans by participating in the Small Business Administration Paycheck Protection Program (SBA PPP). The bank originated 2,156 unique SBA PPP loans totaling $329.7 million with an average weighted origination fee of 3.70%. Deposits and repurchase agreements increased $682.8 million to $3.94 billion during the quarter on unspent PPP funds and CARES Act resources to Native tribes and government entities and other deposit growth attributed to increased savings behavior.
Customers were further supported through modification of existing loan terms. Loan modifications through June 30, 2020 totaled $394.4 million, or 19.87% of total loans, excluding SBA PPP loans. Modification to interest-only payments accounted for more than 80% of the modifications, with interest-only periods ranging from three to fourteen months. Modifications were concentrated in commercial real estate loans, supporting our customers facing economic pressures in the rental and leasing sectors, and hotel and food service industries.
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At June 30, 2020, delinquent loans from 30 to 89 days were $15.6 million, 0.78% of outstanding loans excluding SBA PPP loans, an increase of $9.8 million from March 31, 2020. Nonperforming loans were $13.4 million, 0.67% of outstanding loans excluding SBA PPP loans, an increase of $3.0 million from the prior quarter. In response to the economic uncertainty and elevated delinquency and loan modification activity, the allowance for loan losses was increased in second quarter by $2.0 million to $21.6 million, 0.93% of total loans (1.09% of loans excluding SBA PPP), resulting in an increased provision for loan loss expense of $1.8 million over second quarter 2019.
Noninterest income for second quarter 2020, excluding realized investment gains and losses, increased 6.1% from second quarter 2019 on elevated mortgage loan origination driven by the significant decrease in market interest rates in March. Noninterest expenses for second quarter 2020 increased 4.8% as compared to second quarter 2019 on increases in salary and benefit expenses. The efficiency ratio improved to 52.24% compared to 53.71% in 2019 on revenue growth and strong overall expense management.
The blended yield on interest-earning assets decreased to 3.87% from 4.14% for the six month periods ended June 30, 2020 and 2019, respectively, with the addition of the PPP 1% interest loans and other repricing assets. The cost to fund earning assets for the same six-month comparative periods decreased faster to 0.15% from 0.46%. As a result, the net interest margin year to date improved to 3.72% compared to 3.69% in 2019. Return on assets through June 30, 2020 was 1.43%, comparable to prior year. Return on equity of 10.06% for the first half of 2020 decreased from 10.22% in the first half of 2019 on an increase in total shareholders’ equity of $14.2 million to $590.0 million. Book value per share as of June 30, 2020 was $186.26, compared with $168.73 and $172.91 as of June 30, 2019 and December 31, 2019, respectively. The bank tier 1 leverage capital ratio remains above well capitalized at 12.72% as of June 30, 2020, as compared to 13.76% as of December 31, 2019.
Lawer added, “These are unprecedented times, but our community bank entered the pandemic well-positioned to serve the banking needs of Alaskans just as we have for nearly a century. Our strong liquidity, capital position, operating metrics and heroic statewide employee team have enabled us to effectively manage the banking risks and serve our valuable customers—friends and neighbors—during these challenging times.”
First National Bank Alaska files a quarterly financial report with the Federal Financial Institution Examination Council. Our latest Consolidated Report of Condition and Income (Call Report) is filed by the 30th of the month following quarter-end and is subsequently posted at www.FNBAlaska.com > Financial Reports and at www.OTCMarkets.com.
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Spreading the Word
When Bristol Bay Native Corporation (BBNC) first aired TV commercials featuring the tagline, “A Place That’s Always Been,” the reaction was surprising. Not only because they received numerous accolades and marketing awards for the campaign but because, at the time, it was rare for Alaska Native corporations to market themselves through the media.