CFAB warns state refinancing could shrink its lending role; proposes paired investment to preserve community loans

Sharon Lechner, president of the Alaska Commercial Fishing and Agricultural Bank (CFAB), testified to the Jan. 10 task force that the bank is shrinking because many of its outstanding loans are being refinanced by the state commercial revolving loan fund under recently enacted relief measures. Lechner said CFAB has roughly $33 million in active loans, of which about $30 million are fishing loans, and that the state’s below‑market refinancing reduces CFAB’s loan volume and earnings.

Lechner and CFAB board representatives said CFAB has introduced a seasonal bullet loan product (small, rapid loans for startup costs) with minimal paperwork for existing CFAB borrowers and that CFAB supported House Bill 273 (the recent program that licensed below‑market terms). But they warned that as the state refinances CFAB loans—often taking first lien position on collateral—CFAB’s balance sheet and collateral base erode and its future loan capacity diminishes.

CFAB proposed a workable state partnership option: CFAB would match a state market rate (the state’s 5.25% rate was cited) on new loans and, in return, the Division of Investments/Commercial Revolving Loan Fund would annually reimburse CFAB for the difference between CFAB’s yield and the state’s market rate by making an equity investment in CFAB rather than a straight reimbursement. Lechner characterized this as an investment that preserves CFAB lending capacity to more than 300 borrowers in 80 Alaskan communities; the bank argued that CFAB’s local, member‑governed structure allows it to underwrite loans and collateral types (limited‑entry permit liens) that commercial banks typically will not.

CFAB leaders told the task force they can no longer generate new loans at previous volumes because state refinancing and targeted below‑market assistance reduces their market. They asked the task force to consider legislative or administrative follow‑up to preserve CFAB’s operational role and to consider their paired investment proposal in conversations with the Division of Investments. CFAB offered to provide detailed financials and projections to legislative staff for further analysis.

Task force members asked clarifying questions about CFAB’s portfolio composition, repayment scenarios and the mechanics of the proposed investment model; CFAB said it would provide financial data and follow up with the Department of Commerce and the Division of Investments. No legislation was introduced at the meeting.