Alaska Pacific Bank delays repaying feds as loan woes continue

Posted: Sunday, August 29, 2010

Alaska Pacific Bank has suspended payment to the U.S. Treasury on the TARP funds it received as it continues to struggle with numerous problem loans.

Cost cutting helped the Juneau-based bank turn a small profit in the year's second quarter, ended June 30, but is still losing money for the year.

The bank is part of Alaska Pacific Bancshares, the publicly-traded company headquartered locally.

Bank President Craig Dahl said that the decision to suspend payment to the Treasury was forced by the bank's regulator, the Office of Thrift Supervision, which wanted it to keep the cash on hand to ensure the bank remains strong.

The action was revealed in a recent filing with the Securities and Exchange Commission in which the bank provided its quarterly results.

Alaska Pacific was the only bank in Alaska that needed assistance from the Troubled Asset Relief Program, which invested $4.8 million in the bank through the Capital Purchase Program in 2008.

That money has to be paid back quarterly, initially at a 5 percent interest rate.

Failing to make that payment to the U.S. Treasury came at the insistence of the OTS, another federal agency, which wanted to ensure Alaska Pacific remains strong while it works through its bad loans, Dahl said.

"They didn't want us to pay the CPP," but wanted the bank to instead hold onto the money to preserve capital, he said.

The money will have to be repaid later, but Dahl said there's not really a consequence for missing the payment.

Alaska Pacific expanded into making loans outside Alaska before the recession, and initially it was many of those loans which became problems.

Dahl said that the regulators were taking a tough line to making sure the bank has adequate resources.

"They're harder on the banks that have had some of these issues," he said.

The bank's quarterly report also states the bank's revenue is declining, the bank is issuing fewer loans and more of its loans are impaired.

Dahl said Alaska Pacific has been holding down expenses while it works through its bad loans.

This quarter the bank increased its list of "impaired loans," those for which there is some question that they'll be repaid. As of June 30 the bank had $11.5 million in impaired loans, up $6.2 million from the start of the year.

Dahl said that despite the reported increase, there were no new problem loans discovered during the quarter. Some of those "impaired" loans are actually to longtime business customers who are making timely payments, but which are listed as impaired because the businesses are struggling.

"There are no new problem loans, most of those balances are starting to decline," he said. "Hopefully we'll get those numbers going in the right direction."

There were actually some bright spots during the quarter, Dahl said, including a small profit, a lack of surprises and the mortgage business coming back.

Alaska Pacific Bank had a profit of $149,000 for the quarter, but remains down $321,000 for the year as a whole.

Bank loans at the end of June were $157.3 million, down $6.6 million from the same quarter of 2009.

• Contact Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com.



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