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

• Author: Barbour, Tracy
• Position: FINANCE - Company overview

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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

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...