Alaska Pacific Posts Record Earnings for 2006 and Fourth Quarter.

JUNEAU, Alaska -- Alaska Pacific Bancshares, Inc. (OTCBB: AKPB), the parent company of Alaska Pacific Bank, announced record earnings for 2006 and for the fourth quarter. Net income for the year was $1,061,000, or $1.63 per diluted share. This represents a 45% increase compared with $731,000 ($1.15 per diluted share) earned in 2005. For the fourth quarter, net income was $409,000, or $.63 per diluted share, a 78% increase from $230,000 ($.36 per diluted share) in the fourth quarter of 2005.

Net interest income increased $456,000 (5.6%) to $8.5 million in 2006 compared to 2005, reflecting a 4.8% increase in average loans. The net interest margin on average earning assets was 5.13% for 2006 compared with 5.08% in 2005.

Loans (excluding loans held for sale) were $158.6 million at December 31, 2006, an increase of 4.5% from last quarter and 3.8% from a year ago, reflecting strong loan demand. Deposits at December 31, 2006, were $145.2 million, an $8.6 million (5.6%) decrease from last quarter, and a $1.4 million decrease (1.0%) from a year ago.

Nonperforming loans at December 31, 2006, were zero compared with $1.3 million last quarter and $1.4 million a year ago, reflecting the return of a commercial loan to accruing status. This troubled loan was restructured in 2005 and has performed in accordance with the restructured terms since that time. Due to uncertainties in the ultimate recoverability of principal, however, the loan remains in a substandard classification and an impairment of $450,000 has been recognized in management's assessment of the allowance for loan losses at year end.

Net loan chargeoffs for the year amounted to $32,000 compared with $52,000 in 2005. The provision for loan losses increased to $250,000 in 2006 from $120,000 in 2005, reflecting loan growth as well as management's assessment of risks in the portfolio.

Gains on sale of loans in 2006 increased to $255,000 compared with $95,000 in 2005 as a result of improved mortgage production and an increase in the portion sold in the secondary market.

Noninterest expense for 2006, excluding branch closure costs, was $139,000 (1.8%) lower than 2005. The net decrease is due to savings resulting from closing the two offices during the first quarter of 2006, partially offset by normal increases in expenses.

As previously announced, the Company declared a regular quarterly dividend of $.09 per share, payable February 23, 2007, to shareholders of record as of February 12, 2007.

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.

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