Alaska Commercial Fishing & Agricultural Bank warns refinancing is shrinking its capacity; proposes state investment to preserve lending

Sharon Lechner, president of the Alaska Commercial Fishing and Agricultural Bank (CFAB), told the task force on Jan. 10 that a wave of state refinancings under recent legislation is shrinking CFAB’s loan volume and earnings and could threaten the bank’s ability to serve hundreds of fishing families and community operations.

CFAB — statutorily formed in the 1970s and now member-owned — reported roughly $33 million in active loans, about $30 million of which are fishing loans. Lechner said recent action by the legislature (House Bill 273, discussed in testimony) set a uniform 5.25 percent interest rate for new state loans and raised revolving-fund loan maximums, measures that have provided immediate relief for borrowers but produced two unintended effects for CFAB: a rapid refinancing of existing CFAB loans into the state program, and borrowers seeking the lower, fixed-rate option, reducing CFAB’s new loan originations.

“Because we serve a public purpose, we are unlike commercial banks,” Lechner said, and described CFAB’s seasonal “bullet” loans — $10,000 or $20,000 advances with few underwriting requirements — as a nimble product the private market would not provide. She warned that CFAB’s earnings are shrinking: recent monthly earnings were approximately $19,000, near breakeven, and the bank is receiving payoff requests and partial refinancings that erode both volume and its collateral position.

Lechner and CFAB board chair Doug Bloomer proposed a state partnership: CFAB would match the state’s 5.25 percent fixed rate for loans to remain competitive. The state’s commercial revolving loan fund would reimburse CFAB annually for the difference between CFAB’s normal yield and the 5.25 percent market by taking an investment stake in CFAB rather than a simple grant. Under the proposal, the revolving fund would preserve fishermen’s access to CFAB’s tailored lending products while limiting state cash outlays and maintaining CFAB’s capital base.

CFAB leaders said the bank can originate different loan sizes and make quick decisions through its board and that preserving CFAB is critical because the revolving fund alone would lend to far fewer borrowers if CFAB’s community reach disappeared. Task force members asked CFAB for detailed financials and confirmed CFAB’s portfolio composition and exposure; CFAB said it will provide financial data and seek to coordinate with the Division of Investments and the commercial revolving loan fund.

CFAB said it will soon present formal legislative proposals but asked task-force members to note that short-term crisis refinancing has an unintended long-term cost to community lending capacity if no parallel step preserves CFAB’s operating model.