Alaska dodges banking collapse

HEALTHY ENVIRONMENT: More conservative policies help avoid outside crush.

March 15, 2009 

Most major banks and credit unions in Alaska seem to be in good health, despite the worsening news about the economy and the recent bailout of troubled national banks.

One positive sign is that many of the state's largest banks and credit unions grew in local profits, revenue, loan activity or deposits last year.

What will happen this year is a different question. Last year, many local financial institutions benefited from high oil prices and fatter-than-normal Permanent Fund dividends. This year, oil and mineral prices are down, tourism is expected to suffer and some of the state's largest employers are laying off workers.

But because most banks in Alaska avoided risky loans, and because economists aren't predicting severe job losses in Alaska this year, Anchorage financial executives don't expect the sort of meltdown and loss of shareholder confidence that has pummeled their colleagues in the Lower 48.

"There's a dislocation between what people are seeing on the national news and what's happening here," said Jason Roth, chief financial officer at First National Bank Alaska.

ADEQUATE BACKING?

According to regulatory filings at the end of last year, all of the state's major banks exceeded federal regulators' threshold for maintaining enough financial backing to cover the risk of failed loans. And that includes the three banks -- Wells Fargo, Key Bank and Alaska Pacific Bancshares -- that accepted money from the U.S. Treasury as part of its Troubled Asset Relief Program, otherwise known as the national bank bailout or TARP.

Credit unions also seem to be doing OK, though they say they are affected by the financial woes of their customers.

"Most credit unions in Alaska are well capitalized but these are tough times," said James Wileman, president of the Alaska Credit Union League.

Members of his Sitka credit union, for example, are hurting due to troubles in the community's tourism- and fishing-dependent economy, he said.

Like Alaska's banks, the credit unions recently had to begin paying a higher premium into a national fund that protects customer deposits if financial institutions fail.

"All the credit unions (and banks) in the country had to pay in," Wileman said, noting that because it was a one-time event, his company does not plan to pass along that cost to its customers.

HEAVY LOSSES

Several banks in Alaska have benefitted from the national bailout.

Juneau-based Alaska Pacific received $4.8 million from TARP this year -- the only Alaska-based bank to do so. The Juneau bank suffered financial losses last year due to delinquent loans. Over half those loans were in the Lower 48 and involved troubled real estate projects. As a result, the bank suspended its dividends to investors in the final part of 2008.

Key Bank suffered a $1.5 billion national loss in 2008, in part because it needed to reserve a large part of its income for delinquent loans, according to its most recent financial statement. In November, Key Bank accepted a $2.5 billion loan from the Treasury's TARP fund.

But Key Bank says its business grew in Alaska last year: lending increased 16 percent last year.

In October, Wells Fargo Bank accepted a $25 billion loan from the TARP that it says it didn't want or need, and only took at the insistence of federal officials.

The bank reported a $2.6 billion profit last year and its business in Alaska was the best it's ever been, said the bank's regional president Richard Strutz.

In Alaska, Wells Fargo's revenue and deposits grew more than 9 percent last year, and its loan activity increased more than 4 percent.

Strutz said he doesn't expect this year to go as well. "We haven't escaped the issues in the Lower 48," he said, noting lower commodity prices and the predicted downturn in tourism.

PROSPERING BANKS

How did Alaska's prospering banks avoid the troubles of others that have generated cringe-inducing headlines in recent months?

Last year's strong economy and high oil prices certainly played a role. But local banks also claim they were more conservative than some of their larger colleagues.

"You don't see community banks putting people in loans that aren't appropriate and you don't see them with toxic assets," said Roth, of First National.

His bank and Anchorage-based Northrim BanCorp both decided not to participate in the TARP program. Both banks were profitable last year.

First National's annual profit last year increased about 13 percent to $42.9 million and the value of its assets was about $2.4 billion.

Northrim reported a $6.1 million profit last year and assets of $1 billion.


Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

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