Alaska banks on solid ground as concerns about banking crisis spread, regulators and execs say
Alaska’s banks are on solid footing and lack the problems that have caused other banks to fail in recent weeks, industry observers say.
The banking crisis sent shockwaves through global markets and raised questions about how far the fallout will spread.
It’s been marked by the failures of California-based Silicon Valley Bank and then New York-based Signature Bank; struggles by First Republic Bank, also from California, to remain alive; and the acquisition of Swiss bank giant Credit Suisse by UBS.
Fleeing customers have sought to yank deposits, especially uninsured accounts above $250,000 at the midsize U.S. banks, contributing to the swift collapses.
In Alaska, some banks and credit unions have made public posts and increased outreach to reassure customers that their investments are secure.
“We maintain strong capital levels and liquidity to meet the financial needs of Alaskans when it matters most,” said Betsy Lawer, chief executive of First National Bank Alaska, in a statement on the bank’s website.
Banks in Alaska are generally far smaller than the midsize banks that failed. They typically have well below $10 billion in assets, though San Francisco-based Wells Fargo is a notable exception. Wells Fargo, the largest bank in Alaska with more than 35 branches, declined to comment for this article.
With close to $2 trillion in assets, Wells Fargo faces strict regulations that midsize banks don’t, such as tougher requirements for liquidity allowing it to access cash quickly to pay out fleeing customers or other debts.
President Donald Trump signed a bill rolling back the requirements for midsize banks in 2018, a move that critics, including President Joe Biden, say set the stage for the crisis. Mismanagement and poor regulatory oversight are factors too, critics say.
Officials familiar with Alaska’s banking industry say the state’s banks are different from those that failed, in part because they have a more diverse customer base and faster access to cash if needed. Also, they have a healthy ratio of insured deposits smaller than $250,000.
“I would say in general, Alaskans should not be worried,” said John Nofsinger, dean of the College of Business and Public Policy at the University of Alaska Anchorage.
No Alaska bank failures since the 1980s
Alaska banks haven’t had the staggering growth that contributed to Silicon Valley Bank’s collapse, said Rob Schmidt, director of the Alaska Division of Banking and Securities.
Silicon Valley Bank, with assets exceeding $200 billion, also focused on the tech startup industry, creating a lot of “concentration risk” for the bank when that industry struggled, Schmidt said.
Silicon Valley Bank couldn’t meet its obligations to depositors when they wanted their money. It had heavily invested in long-term treasury bonds that lost value as the federal government started hiking interest rates last year. The bank lost $2 billion when it tried to sell bonds to raise cash, contributing to the collapse.
Concerned about more collapses, the federal government has taken emergency steps to ensure it will make all depositors whole at Silicon Valley and Signature, even those with accounts above $250,000.
“We saw an amazingly fast flight of capital from that bank,” Schmidt said of Silicon Valley. “It was an old-fashioned bank run using modern tools. We saw people at the bank trying to get their money, but largely it was people withdrawing their money online.”
Schmidt and regulators at the state division oversee four state-chartered banks and one credit union — Anchorage-based Northrim Bank and Credit Union 1, Fairbanks-based Denali State and Mt. McKinley banks, and Ketchikan-based First Bank Alaska.
The division reviews the credit union annually and the banks every 18 months, he said. They must also publish financial reports every three months, like their federally chartered counterparts such as Wells Fargo or First National Bank Alaska.
State regulators have recently checked in with the financial institutions, and they aren’t experiencing an unusual number of requests to close out accounts, Schmidt said.
The state’s banks have nowhere near the high rate of uninsured deposits, around 90%, seen at Silicon Valley and Signature banks, Schmidt said. That large number contributed to the rush on the bank because depositors wanted to protect their money.
“In general, our take is these institutions manage their risk well,” said David Braun, a financial examiner also with the state Division of Banking and Securities.
Schmidt said Alaska banks survived the 2008 Great Recession, a time when hundreds of banks failed nationally.
A bank in Alaska hasn’t failed since the late 1980s, he said. A residential real estate boom crashed in Alaska then, and more than 40% of banks in the state failed.
Alaska banks overall are well-established compared to other areas, such as the West Coast region where Schmidt often interacts with other regulators.
“I’ve got shoes older than some of their banks,” he said.
A century-old bank is one of the largest
Northrim Bank, the third-largest bank in Alaska with 19 branches, posted a statement in March from chief executive Joe Schierhorn describing the bank as financially sound. The bank is the youngest in Alaska at 32 years old.
Schierhorn said in an interview that Northrim is the only bank in Alaska that has purchased two other banks, including Alaska Pacific Bank in Juneau about eight years ago. It also co-founded Residential Mortgage, the largest mortgage originator in Alaska.
“What’s different about our bank versus the banks that have failed is we have a diverse customer base, we’re very liquid and we have strong capital,” Schierhorn said.
Banks in Alaska overall share those strengths, he said. Statewide, delinquent loans in Alaska’s banking industry compared to assets are at record-low levels, he said. Also, pandemic rescue loans and grants boosted deposits and fees, strengthening banks in the state generally.
“The entire banking system in Alaska is strong,” Schierhorn said.
Federally chartered Alaska USA, set to become Global Credit Union on April 3, is the largest credit union in Alaska with about $12 billion in assets. Officials there referred requests for comments to the Alaska Credit Union League, which represents the 11 credit unions in Alaska.
Tim Sullivan, incoming president of the league and government affairs manager at Alaska USA, said in an interview on behalf of the league that “credit unions are a different animal than Silicon Valley Bank.”
“They have good access to liquidity from the federal government,” he said. Also, the vast majority of deposit value at the state’s credit unions are in insured accounts below $250,000, he said.
First National Bank Alaska, the second-largest bank in Alaska with 27 branches, has very high capital ratios with a strong level of liquidity to support the bank’s obligations, said Michele Schuh, First National’s chief financial officer. The bank also has a diverse customer base across industries and sectors.
The bank is 101 years old and has deep relationships with many of its customers, said Lawer, the chief executive, in an interview.
“One of the things that makes us a really stable bank is we have been through the ups and downs of the Alaska economy for 100 years,” Lawer said. “The average longevity for an employee in our bank is close to 12 years. So that means that our customers in the community are dealing with people who have experience up and down the line.”
Contact Alex DeMarban at [email protected].