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Strength of banks: Alaska's financial institutions overall healthy.


While a record number of banks are failing nationwide, many financial institutions in Alaska reported increases in lending activity and earnings last year.

Eight banks and 14 credit unions have a presence in the state, according to the Alaska Division of Banking and Securities. Currently, the division charters, licenses and supervises three state-chartered commercial banks, one mutual savings banks, one credit union, two trust companies and three bank holding companies, among other financial entities.

Most of Alaska's banks and credit unions appear to be healthy, reports Katrina Mitchell, chief examiner with the Alaska Division of Banking and Securities. "All banks that are headquartered in Alaska, as of Dec. 31, 2008, are well-capitalized, and a majority of those banks reported positive earnings," she said.

The thriving nature of Alaska's financial institutions can be attributed to various factors, including a strong economy, higher oil prices and avoidance of high-risk lending practices. During the meltdown of the real estate market in the 1980s, a lot of Alaska's banks failed and valuable lessons were learned. "I think the institutions that were left standing are pretty conservative," Mitchell said.

She noted, however, that Alaska banks are seeing some loan delinquencies, which is a natural consequence of the lending business. "The level of loans that are delinquent have increased, but that level appears manageable based on the capital and earnings," Mitchell said. "Looking at levels of capital and earnings, the majority of banks are doing fine."

Banks that are headquartered in Alaska compare favorably to their counterparts in the Lower 48, according to data compiled by the Federal Deposit Insurance Corp. While some Alaska banks experienced a decline in the level of earnings from 2007 and 2008, the majority of them reported a return on assets (income generated by assets) that exceeded industry averages, Mitchell said.

Likewise, most Alaska banks have reported positive profits for the last two years, with increases in total loans, total deposits and total assets. Credit unions also have reaped positive earnings for the past several years, seeing growth in total loans and total shares.

Regulators use a variety of measurements to characterize the health of banks and credit unions. Capital ratios--which indicate the level of cash an institution has compared to assets--are a common evaluative tool. As a general rule, the higher the ratio the more sound the bank. A bank with a high capital-to-asset ratio is considered to be protected against operating losses more than one with a lower ratio.

Minimum capital ratios are prescribed by the FDIC. But the actual amount of capital maintained should be commensurate with the level of risk an institution assumes, Mitchell said. However, there's no one number or ratio that can give a true picture of a financial institution's health, she cautioned. "That's why state and federal regulations perform detailed on-site examinations that include evaluating the quality of the loans in the loan portfolio," Mitchell said. "Additionally, we assess the capability of the board of directors and management team."

The following is a snapshot of the financial condition, activities and recent accomplishments of some of the banks and credit unions that operate within Alaska.


First National Bank Alaska is the state's largest locally owned and operated commercial bank. In 2008, First National realized its most profitable year ever, with net income of $42.9 million. According to the bank's chief financial officer, Jason Roth, loans totaled $1.2 billion as of the end of 2008--up $40 million from a year ago. And deposits increased nearly $120 million to total $1.46 billion that year. "We are very proud of the fact that Alaskans have selected us to be their bank of choice," he said.

Roth attributes First National's success to its adherence to a core business model that centers around making good loans and buying sensible investments. "As an Alaska-based bank, we have seen many ups and down over our 87-year history, and learned well the lessons and benefits of maintaining discipline and never deviating from sound banking practices," he said.

In terms of capital ratios, First National has well-above-average industry standards. The bank has a total capital to average assets ratio of 18.20 percent, a Tier 1 capital to risk weighted assets ratio of 27.82 and a total capital to risk weighted assets ratio of 29.01. (Adequate levels for these ratios range from 4 percent to 5 percent, 4 percent to 6 percent and 8 percent to 10 percent, respectively.) "We do maintain very high-capital positions, and that truly is so our bank manages its own risk," Roth said.

First National has seen an increase in its overall delinquencies in certain areas. "The increase is concentrated primarily in land development as well as some construction loans, but these remain nominal with regard to our overall loan portfolio," Roth said.

First National has made strides in a number of other areas. Recently, the bank added two new branch locations in Glennallen and Healy, bringing its total number of branches to 30. These and other efforts have helped the bank receive "Outstanding" Community Reinvestment Act ratings in its recent examinations. "We work very hard to be an integral part of our state, and are proud to have those efforts recognized," Roth said.

He added First National also is proud of the involvement and commitment of its employees to making Alaska a great place to live and do business. "To support their efforts, the bank made nearly $750,000 in donations to Alaska community nonprofits including arts, social services, education, community and youth groups and provided an additional $900,000+ in sponsorships in the form of cash, office supplies, children's toys, sporting goods, clothing and gift items that were given to Alaska civic organizations in 2008," Roth said.


Last year was a very good year for San Francisco-based Wells Fargo & Co. The diversified financial services company, which operates more than 11,000 stores across North America and internationally, was one of the few large banks that made money last year. In Alaska, Wells Fargo had significant loan, deposit and revenue growth. From 2007 to 2008, the bank had a 4.2 percent growth in loans, a 9.2 percent increase in deposits and a 9.8 percent growth in revenue. "In Alaska in 2008, when you look at the aggregate (figures), our earnings were about 15 percent better than the previous year, said Alaska Regional President Richard Strutz. "It's a great regional performance. The team is doing an exceptional job."

Nationally last year, Wells Fargo reaped nearly $3 billion in earnings. Its January purchase of Wachovia helped the bank to roughly double in size. Today, Wells Fargo--with a capital-to-asset ratio of 7.8 percent--has $1.3 trillion in assets. "Wachovia is doing a great deal for our earnings ability, as well as our geographic expansion," Strutz said.

In an April 9 news release, Wells Fargo said it expects to report record net income of approximately $3 billion for first quarter this year. Strong traditional banking businesses, capital market activities and mortgage banking were cited as contributing factors to its performance.

Wells Fargo's mortgage unit in Alaska is also performing well. Although volume is down in new housing construction, "We're not seeing a lot of excessive builder inventory or builder failures," Strutz said.

In terms of accomplishments, Wells Fargo recently received the Business Philanthropist of the Year Award from the Juneau Community Foundation for its $50,000 donation to the Dimond Park Field House. On a national level, Fortune Magazine ranked Wells Fargo No. 14 on its annual list of World's Most Admired Companies. A Barons survey rated Wells Fargo No. 21 among the most 100 respected public companies in the world. "I think that really goes to show that we have strong leadership," Strutz said.


Established in 1990, Northrim BanCorp Inc. is Alaska's third-largest commercial bank. Northrim Bank, which operates more than 10 branches in Anchorage, Wasilla and Fairbanks, is traded on the NASDAQ stock exchange under the symbol NRIM.

The stress of the national economic downturn has impacted the publically traded company in a number of ways. According to Northrim's 2008 annual report, its net income was $6.1 million for the year ending Dec. 31, 2008, compared to $11.7 million for 2007. Total deposits were $843 million, compared to $867 million the previous year.

However, total assets remained stable at $1 billion on Dec. 31, 2008, compared to $1 billion a year ago. Northrim was well capitalized with Tier 1 Capital/risk adjusted assets of 12.65 percent on Dec. 31, 2008, up from 12.32 percent a year ago.

Northrim Chairman, President and CEO Marc Langland summarizes Northrim's financial position in positive terms. "We've got strong capital, good earnings and a lot of liquidity," he said. "Our concerns are around the political environment ... and how it will relate to us as an industry."

With the uncertainties of the economy, Northrim is concentrating on "blocking and tackling" to ensure things are going well for its customers, Langland said. "We're trying to make sure people understand that we are strong, we are here, and we are going to take care of their needs," he said.

That includes expanding to provide more and better services for its customers. Last year, the bank's Seventh Avenue Branch moved to the new downtown Anchorage parking garage. And in April, Northrim opened a Financial Center in the middle of a growing retail district in Fairbanks.

Northrim Bank is dedicated to giving back to the communities in which it operates. The bank supports a variety of nonprofit organizations, such as Anchorage's Salvation Army and the United Way. It also partners with Fairview Elementary, Fire Lake Elementary, Cottonwood Creek Elementary, Weller Elementary and Denali Elementary schools. Northrim employees participate in Teach Kids to Save, Good Citizenship Assemblies and Math Nights, among other school programs. In recognition of its effort at Fairview Elementary, the bank and its employee volunteers received a 2008 School Business Partnership Star Award. Additionally, the State Chamber of Commerce presented Langland with the 2008 Outstanding Alaskan of the Year William A. Egan Award.


Alaska USA Federal Credit Union reports that it is very healthy. The member-owned, not-for-profit cooperative has more than 340,000 members worldwide and is the largest financial institution headquartered in Alaska. The credit union, which was chartered in 1948, has 52 branches in Alaska and Washington.

"Alaska USA is diversified geographically and by product line, is well capitalized, and is experiencing record growth in members, deposits and loans," Nancy Bear Usera, senior vice president of corporate development said before her retirement May 15. "Revenue and income from operations are strong and the mortgage refinancing boom has resulted in record activity and income in that line of Alaska USA's business."

As of February month-end, deposits were up 13.8 percent (year over year), loans were up 20.7 percent, membership was up 9.5 percent, and total reserves were up 10.3 percent, Usera said. The credit union's total capital exceeded $350 million and the capital-to-asset ratio was 9 percent.

A key strategy of Alaska USA has been to focus on member service as a top priority. As a result, the credit union listens closely to its members and anticipates and responds to their evolving financial needs, Usera said. That approach has served the credit union well. So has its conservative stance. "We closely monitor the economy and other market factors, plan carefully and execute strategies to both take advantage of opportunities and avoid pitfalls," she said.

There has been no increase in Alaska USA's loan delinquency rate in Alaska over the past few years, according to Usera. However, she said: "The credit union is closely monitoring the health of the Alaska economy and is reserving appropriately in the event losses occur. Last fall, we experienced an increase in loan delinquency from members in the Lower 48; however, that delinquency is now subsiding."

Alaska USA continues to pursue new opportunities to benefit its members. A number of branch renovations are under way in Anchorage and throughout its branch network. The credit union also has expanded its branch services in Ketchikan and recently purchased two parcels of land in Alaska for future branch expansion.

During its 60 years of service, Alaska USA has garnered a variety of awards. For 2008, it was named Corporate Sponsor of the Year by the Armed Services YMCA. The credit union was instrumental in raising more than $150,000 that was donated to children's and veterans' programs by the Alaska USA Foundation last year. Alaska USA also was recognized as one of the Best Places to Work in Alaska for 2008 by a weekly news publication. And it was named Alaska's favorite financial institution in 2007 and 2008 in surveys taken by newspapers in Anchorage and Fairbanks.


Last year, Credit Union 1 had an 85 percent increase in net income over 2007. Despite the weak economy, the credit union grew in almost all areas, including membership, lending, assets and deposits. "We had a wonderful 2008, and we are looking forward to an equally great 2009," said President and CEO Leslie Ellis.

Month-end February, Credit Union 1 had $3.9 billion in loans, $632,800 in assets and $5.7 billion in deposits. Deposits are running 10 percent to 15 percent ahead of schedule, and the credit union has plenty of money to lend, she said. "Our credit union has $140,000 million available for loans," Ellis said. "These are very good times."

Credit Union 1 has strong earnings at 0.73 percent return on assets, which is healthy in the current economic climate, Ellis said. Its capital-to-asset ratio, as of the end of February, was a healthy 9.4 percent.

Loan delinquencies at Credit Union 1 were up slightly at 0.79 percent as of the end of February, Ellis said. Those delinquencies mainly involved consumer loans. "We're seeing some members who received subprime mortgages from other lenders and are trying to work out of those, which is impacting their ability to pay for their car loans here," she said. "Our consumer loan portfolio is being well managed."

Fortunately, the credit union has not had to foreclose on or take possession of any real estate due to delinquencies. "We are not seeing indications that our real estate loan portfolio is deteriorating," Ellis said.

Established more than 56 years ago, Credit Union 1 has 13 branches and more than 55,500 members. And it is expanding its presence in Alaska. In April, the institution opened a new $2.6 million, 4,200-square-foot Midtown branch. In early August, the credit union is planning to launch a cyber branch at West High School. And this summer, Credit Union 1 is hoping to begin construction on a new branch in Mountain View. The branch, to be located at the corner of North Bragaw Street and Mountain View Drive, should be completed by early next year, Ellis said.

Credit Union 1 has received several recent awards for its contributions. It was named Employer of the Year by the Fairbanks Resource Agency, received the 2008 Work Family Award by the Chamber of Commerce and won a first-place Louise Herring Award for Philosophy in Action. In addition, the credit union's Kodiak branch was selected Best Banking Facility by the Kodiak daily newspaper.


Key was included in the test because of its importance to the nation's economy. The 19 tested institutions represent two-thirds of the nation's banking assets and half of its lending. The heads of the Federal Reserve and the Treasury Department have said that these banks will not be allowed to fail, and all would have access to government funds if needed.

Key was found to have enough overall capital even in the most severe economic scenario tested. However, like certain other banks, Key was asked to alter its capital mix by increasing its tangible common equity by $1.8 billion.

Key has a range of available alternatives to raise the common equity from non-governmental sources over the next six months. It is also Key's objective to be in a position to repay the TARP/Capital Purchase Program as promptly as permitted.

Key remains safe and strong. Its fundamental banking business is sound, and its clients' money and business are safe with Key. Since Key first saw trouble brewing for the economy, it has been working hard and making tough choices to maintain Key's strong financial position. Key has raised capital, sharpened its lending practices, exited or reduced selected loan portfolios and increased loan loss reserves. Deposits are growing throughout its 14-state branch network. Key is actively making loans to relationship clients, and investing in its businesses. Key is FDIC insured, and throughout its 183-year history, no depositor has ever lost money with Key. Beyond FDIC-insured accounts, Key also has a number of off-balance-sheet investment options to ensure customers' financial peace of mind.

Source: KeyCorp
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Title Annotation:FINANCE
Comment:Strength of banks: Alaska's financial institutions overall healthy.(FINANCE)
Author:Barbour, Tracy
Publication:Alaska Business Monthly
Article Type:Company overview
Date:Jun 1, 2009
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