Bank survives Alaska, takes beating in Lower 48

Posted: Friday, September 26, 2008

Juneau's Alaska Pacific Bank is feeling the pain of its fellow banks elsewhere, caught up in an economic downturn and real estate recession.

Last quarter the bank faced rare losses, and so far this year it has seen its stock price halved.

That's a bigger decline than the average 31 percent for banks in the last year, but not nearly as big a decline as many of the hardest-hit banks nationally.

In the quarter that ended June 30, Alaska Pacific Bancshares, the parent company of Alaska Pacific Bank, reported a loss of $761,000, compared to a profit of $281,000 in the same quarter last year.

The bank has been profitable every year since going public in 1999.

The bank reported that the loss was primarily due to setting aside $1.7 million to cover bad loans.

The good news for the bank is that the local economy remains relatively strong.

Alaska Pacific CEO Craig Dahl said the bank has had certain types of loans outside Alaska that have run into difficulty, while its core Southeast market remains robust.

"In the Alaskan market we really haven't seen any decline," Dahl said. "Our delinquencies are as low as they've ever been."

Three problem loans in Orem, Utah, Vancouver, Wash. and Portland, Ore., contributed to a rise in impaired loans from $1.2 million to $6.2 million over the last six months.

All three loans are construction loans for residential or commercial properties, and in each of the cases construction work has ceased. The bank is estimating a possible loss of $1.9 million on the three loans, based on possible recovery of collateral.

Dahl said part of the reason for investing outside Alaska was to diversify geographically.

"Over time we have wanted to make sure we have a certain amount of lending outside the Southeast market," he said.

Alaska Pacific currently has loans in the Fairbanks market, and has had loans in the Anchorage market, Dahl said.

To make loans in places where Alaska Pacific Bank does not have lending officers, it relies on what are called "participation" loans. In some cases dozens of community banks form a consortium to fund a project that none could take on by themselves without exceeding their lending limits.

Alaska Pacific will be reluctant to participate in projects that big in the future, Dahl said.

"In the consortium, you have a lead institution that's doing all of the transaction," he said. "You are relying on a managing central bank."

In Utah, that loan's problem was not a result of the real estate market, Dahl said.

"Its difficulties had nothing to with the economy. It had to do with project management," he said.

Despite the difficulty faced down south, the Alaska economy continues to be "counter cyclical" to the national economy. High oil prices and optimism about a natural gas pipeline are keeping the economy stable, Dahl said.

• Contact reporter Pat Forgey at patrick.forgey@juneauempire.com.



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