Alaska Pacific Announces Second Quarter Earnings.

JUNEAU, Alaska -- Alaska Pacific Bancshares, Inc. (OTCBB: AKPB), the parent company of Alaska Pacific Bank, announced second quarter 2006 net income of $208,000, or $.32 per diluted share. This compares with $125,000 ($.19 per share) in the first quarter, which was reduced by a $68,000 after-tax charge for the costs of closing its two smallest offices in January. In 2005, second-quarter net income was $157,000 ($.24 per share).

The Bank closed its two smallest offices in Hoonah and Yakutat, Alaska in order to eliminate most of the approximately $350,000 annual expense of operating the facilities. At present, no other financial institution has a facility in either of these small communities, each with a population less than 1,000. The Bank continues to serve its customers in Hoonah and Yakutat through remote services, including on-line banking.

Net interest income increased $113,000 (5.8%) to $2.1 million in the second quarter compared to the second quarter of 2005, primarily due to growth in the loan portfolio. Average loans increased $12.8 million (9.0%) to $154.7 million in the second quarter, compared with $141.9 million in the second quarter of 2005. The net interest margin on average earning assets was 5.02% for the second quarter compared with 5.10% a year ago.

Loans (excluding loans held for sale) were $153.8 million at June 30, 2006, an increase of 5.8% from a year ago and a small increase from last quarter. Deposits at June 30, 2006 were $140.8 million, a $1.8 million (1.3%) increase from a year ago, and an increase of $0.7 million (0.5%) from last quarter.

Total nonperforming assets at June 30, 2006 were $1.4 million, compared with $1.5 million last quarter. Net loan chargeoffs for the quarter were unchanged from last quarter at $17,000. The provision for loan losses was also unchanged from last quarter at $75,000.

Noninterest income for the second quarter, excluding gains on sale of loans, was $265,000, an increase of 2.7% from a year ago, and a 5.6% increase from last quarter.

Noninterest expense for the second quarter was $1.9 million, approximately unchanged from a year ago. Normal increases in compensation and benefits and other expenses were approximately offset by the savings resulting from closing the two offices during the first quarter.

As previously announced, the Company declared a regular quarterly dividend of $.09 per share, payable August 11, 2006, to shareholders of record as of August 1, 2006.

Forward-Looking Statements

Certain matters in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among others, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Company's mission and vision. These forward-looking statements are based upon current management expectations, and may, therefore, involve risks and uncertainties. The Company's actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements due to a wide range of factors including, but not limited to, the general business environment, interest rates, the economy in Southeast Alaska, the real estate market, competitive conditions between banks and non-bank financial services providers, regulatory changes, and other risks detailed in the Company's reports filed with the Securities and Exchange Commission.

Alaska Pacific Bancshares, Inc.
Financial Highlights (Unaudited)
Second Quarter 2006
(dollars in thousands, except per-share amounts)


                                               Three Months Ended
                                           ---------------------------
                                           June 30, March 31, June 30,
                                             2006     2006      2005
                                           ---------------------------
Condensed Income Statement:
 Interest income                             $2,875   $2,798   $2,412
 Interest expense                              (812)    (737)    (462)
                                           ---------------------------
   Net interest income                        2,063    2,061    1,950
 Provision for loan losses                      (75)     (75)     (30)
 Gain on sale of mortgage loans                  27       53       16
 Other noninterest income                       265      251      258
 Branch closure costs                             -     (113)       -
 Other noninterest expense                   (1,934)  (1,968)  (1,932)
                                           ---------------------------
   Net income before income tax                 346      209      262
 Income tax expense                            (138)     (84)    (105)
                                           ---------------------------
   Net income                                  $208     $125     $157
                                           ===========================

Earnings per share:
 Basic                                         $.34     $.20     $.26
 Diluted                                        .32      .19      .24

Performance Ratios:
 Return on average equity                      4.95%    3.00%    3.87%
 Return on average assets                      0.48     0.29     0.38
 Yield on average earning assets               7.01     6.81     6.30
 Cost of average interest-bearing
  liabilities                                  2.48     2.23     1.53
 Interest rate spread                          4.53     4.58     4.77
 Net interest margin on:
   Average earning assets                      5.03     5.02     5.10
   Average total assets                        4.75     4.76     4.80
 Efficiency ratio (a)                         78.22    85.12    87.58

Average balances:
 Loans                                     $154,674 $154,280 $141,903
 Earning assets                             164,071  164,230  152,949
 Assets                                     173,706  173,095  162,409
 Interest-bearing deposits                  114,016  118,122  111,628
 Total deposits                             137,168  140,054  134,914
 Interest-bearing liabilities               130,948  132,106  120,440
 Shareholders' equity                        16,809   16,669   16,124

Average shares outstanding:
 Basic                                      620,392  614,942  608,665
 Diluted                                    649,873  645,191  638,370



                                           June 30, March 31,June 30,
                                               2006     2006     2005
                                           ---------------------------
Balance sheet data:
 Total assets                              $174,469 $171,628 $166,030
 Loans, before allowance                    153,781  153,630  144,169
 Loans held for sale                            465      140      204
 Investment securities                        6,132    6,766    8,638
 Total deposits                             140,847  140,112  139,077
 Federal Home Loan Bank advances             13,605   12,526    8,090
 Shareholders' equity                        16,918   16,700   16,205

Shares outstanding (b)                      638,654  628,254  627,754

Book value per share                         $26.49   $26.58   $25.81

Asset quality:
 Allowance for loan losses                   $1,565   $1,506   $1,419
 Allowance as a percent of loans               1.02%    0.98%    0.98%
 Nonaccrual loans                            $1,408   $1,392   $1,192
 Total nonperforming assets                   1,408    1,477    1,340
 Net chargeoffs (recoveries) for quarter         17       17        -

(a) Noninterest expense, excluding branch closure costs, divided
by the sum of net interest income and noninterest income, excluding
gains on sale of loans or securities.

(b)  Excludes only treasury stock.