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Alaska Pacific Bank struggles with losses

Juneau-based bank suspends its dividend to conserve cash

Posted: Sunday, November 23, 2008

Alaska Pacific Bank is facing big losses, mostly in troubled housing markets, and has suspended its dividend to conserve cash.

Alaska Pacific Bancshares, the Juneau-based parent corporation of Alaska Pacific Bank, reported a loss of $672,000 for the quarter that ended Sept. 30, bringing its losses for the year to $1.3 million, compared to profits for the same periods last year.

In response, the bank suspended its dividend to shareholders, a move that will enable it to conserve cash in hard times. The recent 10 cents per share quarterly dividend cost the bank about $65,000 a quarter.

The bank previously paid a dividend every quarter since going public in 1999. Alaska Pacific Bank was founded as a mutually owned savings and loan in 1935, and has offices in Sitka and Ketchikan as well as Juneau.

In a statement the bank issued announcing the suspension of the dividend, Craig Dahl, the bank's president and chief executive officer, said the decision had been "difficult" for the board of directors. He did not return phone calls Thursday or Friday.

Suspending the dividend will help the bank "as we work through these loan problems," his statement said.

The bank will try to resume dividends in the future, Dahl said.

In filings with the Securities and Exchange Commission, the bank said much of its difficulty had to do with bad loans, largely outside Alaska.

The bank's largest source of income, interest on loans, declined during the quarter, which the bank attributed to failing to receive interest on loans that were not performing up to the loan terms.

Most of the quarterly loss was driven by substantial losses on loans in which Alaska Pacific Bank joined with other community banks to each fund a small share of larger projects. Those loans were for projects in Oregon, Washington and Utah.

The bank reported that its residential mortgage and construction loan business was declining, in some cases substantially, but its commercial lending and consumer lending was still going strong.

As of Sept. 30, commercial non residential real estate loans had grown to $56 million, the largest part of Alaska Pacific's portfolio. Loans for one-to-four-family houses declined.

Construction loans declined from $23.9 million as of Dec. 21, 2007, to $16.3 million on Sept. 30 of this year. Commercial business loans increased from $22.9 million to $26.3 million over the same period.

The bank's mortgage banking income fell by 50 percent, to $46,000 in the quarter, compared to the same quarter last year. The company blamed that on a decrease in mortgage loans originated and sold during the quarter.

The bank remains well capitalized under federal bank regulator criteria, being well above minimum ratios.

In the SEC filing, however, the bank reported that it could not be sure that would remain the case.

"In the current challenging operating environment, along with the Bank's elevated level of non-performing assets, delinquencies and adversely classified assets, the Bank may be subject to increased regulatory scrutiny, regulatory restrictions, and potential enforcement actions," the bank said.

At the end of September, the bank had impaired loans of $14.2 million, compared to $1.2 million at the end of last year. Impaired loans are those which the bank doesn't expect to get all the interest the loan agreement calls for.

Total loans at the end of September were $174.4 million, a decrease of $1.4 million from a year ago, while deposits were $177.3 million, a $17.5 million increase from June 30 and a $23 million increase from a year ago.

The bank credited the increase in deposits to the receipt of permanent fund dividends and energy rebate checks.

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



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