ex103.htm


    Exhibit
10.3

     

    UNITED
STATES OF AMERICA

    Before
the

    OFFICE
OF THRIFT SUPERVISION

     

    
    

     

    
      	 	 	 
	In the Matter
      of  	) 	Order No.:
      WN-10-032 
	 	) 	 
	 	) 	 
	ALASKA PACIFIC BANCSHARES,
      INC.	) 	Effective Date:
      September 28, 2010 
	 	) 	 
	Juneau,
      Alaska 	) 	 
	OTS Docket No.
      H3440 	) 	 
	 	 	 


    

     

     

    ORDER TO CEASE AND
DESIST

     

    WHEREAS, Alaska Pacific
Bancshares, Inc., Juneau, Alaska, OTS Docket No. H3440 (Holding Company), by and
through its Board of Directors (Board), has executed a Stipulation and Consent
to the Issuance of an Order to Cease and Desist (Stipulation); and

    WHEREAS, the Holding Company,
by executing the Stipulation, has consented and agreed to the issuance of this
Order to Cease and Desist (Order) by the Office of Thrift Supervision (OTS)
pursuant to 12 U.S.C. § 1818(b); and

    WHEREAS, pursuant to delegated
authority, the OTS Regional Director for the Western Region (Regional Director)
is authorized to issue Orders to Cease and Desist where a savings and loan
holding company has consented to the issuance of an order.

     

    NOW,
THEREFORE, IT IS ORDERED that:

     

    Cease and
Desist.

     

    1.    
The Holding Company and its directors, officers, employees, and agents shall
cease and desist
from any action (alone or with another or others) for or toward causing,
bringing about, participating in, counseling or the aiding and abetting of
unsafe or unsound practices that

     

    
      
        
          Alaska Pacific Bancshares,
Inc.

          Order to Cease and
Desist

          Page 1 of 7

        

         


      

      
         


        
          

        

      

      
         


      

    


    resulted
in deteriorating asset quality, ineffective risk management practices,
inadequate internal controls, and inadequate oversight and supervision at its
wholly owned subsidiary, Alaska Pacific Bank, Juneau, Alaska, OTS Docket No.
04202 (Association).

     

    Capital.

     

    2.     By October
29, 2010, the Holding Company shall submit a consolidated capital plan to
preserve
and enhance the capital of the Holding Company and the Association (Capital
Plan) that is acceptable to the Regional Director. At a minimum, the Capital
Plan shall:

     

    (a)    consider
the requirements and restrictions imposed by this Order and the Order
to

     

    Cease and
Desist issued by the OTS against the Association, dated September 28,
2010;
and

     

    (b)    detail
how the Association shall meet and maintain a Tier 1 (Core) Capital ratio equal
to or greater than eight percent (8%) after the funding of an adequate Allowance
for Loan and Lease Losses (ALLL) and a Total Risk-Based Capital ratio equal to
or greater than twelve percent (12%), including a specific description of the
method(s) by which additional capital will be raised, if necessary, and an
identification of the sources of such capital.

     

    3.     Upon
receipt of written notification from the Regional Director that the Capital Plan
is acceptable,
the Holding Company shall implement and comply with the Capital Plan. Within
five (5) days of the Board meeting at which it was adopted, the Holding Company
shall provide a copy of the Capital Plan to the Regional Director.

     

    Operations
Plan.

     

    4.     Within
sixty (60) days, the Holding Company shall submit to the Regional Director for
review
and comment an Operations Plan that addresses how Holding Company will meet all
financial obligations from the present through 2013, including, but not limited
to, payments in 

     

    
      
        
          Alaska Pacific Bancshares,
Inc.

          Order to Cease and
Desist

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    connection
with capital raised through the Troubled Asset Relief Program, without reliance
on dividends from the Association. The Operations Plan shall include, at a
minimum, comprehensive pro forma cash flow projections detailing all anticipated
sources and uses of funds, including, but not limited to, any scheduled payment
obligations of Holding Company related to outstanding debt, operating expenses,
and equity issuances, and a timetable for the repayment or redemption of the
investment in Holding Company made through the Capital Purchase
Program.

    5.  Upon
written notification from the Regional Director that the Operations Plan is
acceptable, the Holding Company shall implement and adhere to the Operations
Plan. Within five (5) days of the Board meeting at which it was adopted, the
Holding Company shall provide a copy of the Operations Plan to the Regional
Director.

    6.  Any
request to modify the Operations Plan shall be submitted to Regional Director
for review and written non-objection at least thirty (30) days prior to the
proposed date to implement any such modification.

    7.  On a
quarterly basis, beginning with the quarter ending December 31, 2010, the Board
shall review a report detailing the adequacy of the Operations Plan given the
projected financial obligations of the Holding Company and actual operating
results, including a detailed description of any deviations from the Operations
Plan and a description of the corrective actions or measures that have been
implemented or are proposed to address each deviation (Variance Analysis
Report).

    8.  Within
forty-five (45) days after the end of each quarter, beginning with the quarter
ending December 31, 2010, the Holding Company shall provide the Regional
Director with a copy of each Variance Analysis Report, and the minutes from the
Board meeting containing the


    
      
        
          Alaska Pacific Bancshares,
Inc.

          Order to Cease and
Desist

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    Board’s
discussion of the Variance Analysis Report, including, if applicable, any Board
discussion of possible modifications to the Operations Plan.

    Capital Distributions and
Stock Repurchases.

     

    9.  Effective
immediately, the Holding Company shall not declare, make, or pay any dividends
or other capital distributions, or repurchase or redeem any capital stock
without receiving the prior written non-objection of the Regional Director. The
Holding Company’s written request for such non-objection shall be submitted to
the Regional Director at least thirty (30) days prior to the anticipated date of
the proposed dividend payment, capital distribution or stock
redemption.

    10.  Effective
immediately, the Holding Company shall not take, directly or indirectly,
dividends or any other form of payment representing a reduction in the
Association’s capital from the Association without receiving the prior written
non-objection of the Regional Director. The Holding Company’s written request
for such non-objection shall be submitted to the Regional Director at least
thirty (30) days prior to the anticipated date of the proposed dividend payment
or capital distribution.

    Thrift
Oversight.

    11.  Effective
immediately, the Holding Company shall ensure the Association’s compliance with
applicable laws, rules and regulations and all terms and conditions of the Order
to Cease and Desist issued by the OTS against the Association, dated September
28, 2010.

    Debt
Limitations/Restrictions.

    12.  Effective
immediately, the Holding Company shall not incur, issue, renew, repurchase, or
rollover any debt, increase any current lines of credit, or guarantee the debt
of any entity without receiving the prior written notice of non-objection of the
Regional Director. The Holding


    
      
        
          Alaska Pacific Bancshares,
Inc.

          Order to Cease and
Desist

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    Company’s
written request for such non-objection shall be submitted to the Regional
Director at least thirty (30) days prior to the anticipated date of any such
proposed action.

     

    Payment
Limitations/Restrictions.

    13.  Effective
immediately, the Holding Company shall make no payments (including but not
limited to principal, interest, or fees of any kind) on any existing debt
without receiving the prior written non-objection of the Regional Director. The
Holding Company’s written request for such non-objection shall be submitted to
the Regional Director at least thirty (30) days prior to the anticipated date of
any such proposed payment.

    Directorate and Management
Changes.

    14.  Effective
immediately, the Holding Company shall comply with the prior notification
requirements for changes in directors and Senior Executive Officers1 as
set forth in 12 C.F.R. Part 563, Subpart H.

    Employment
Contracts/Compensation Arrangements.

    15.  Effective
immediately, the Holding Company shall not enter into, renew, extend, or revise
any contractual arrangement relating to compensation or benefits for any Senior
Executive Officer or Director of the Holding Company, unless it first provides
the Regional Director with not less than thirty (30) days prior written notice
of the proposed transaction. The notice to the Regional Director shall include a
copy of the proposed employment contract or compensation arrangement, or a
detailed written description of the compensation arrangement to be offered such
Officer or Director, including all benefits and perquisites. The Board shall
ensure that any contract, agreement, or arrangement submitted to the Regional
Director fully complies with the requirements of 12 C.F.R. Part
359.

    ______________

    1 The term “Senior Executive Officer” is
defined at 12 C.F.R. § 563.555.


    
      
        
          Alaska Pacific Bancshares,
Inc.

          Order to Cease and
Desist

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    Severance and
Indemnification Payments.

    16.  Effective
immediately, the Holding Company shall not make any golden parachute
payment2 or
prohibited indemnification payment3
unless, with respect to each such payment, the Holding Company has complied with
the requirements of 12 C.F.R. Part 359.

    Effective Date,
Incorporation of Stipulation.

    17.  This
Order is effective on the Effective Date as shown on the first page. The
Stipulation is made a part hereof and is incorporated herein by this
reference.

    Duration.

    18.  This
Order shall remain in effect until terminated, modified, or suspended by written
notice of such action by the OTS, acting by and through its authorized
representatives.

    Time
Calculations.

    19.  Calculation
of time limitations for compliance with the terms of this Order run from the
Effective Date and shall be based on calendar days, unless otherwise
noted.

    20.  The
Regional Director, or an OTS authorized representative, may extend any of the
deadlines set forth in the provisions of this Order upon written request by the
Holding Company that includes reasons in support for any such extension. Any OTS
extension shall be made in writing.

    Submissions and
Notices.

    21.  All
submissions, including any reports, to the OTS that are required by or
contemplated by this Order shall be submitted within the specified
timeframes.

    22.  Except as
otherwise provided herein, all submissions, requests, communications, consents
or other documents relating to this Order shall be in writing and sent by
first-class U.S.

     

    ______________

    2 The term “golden parachute payment” is
defined at 12 C.F.R. § 359.1(f).

    3 The term “prohibited indemnification
payment” is defined at 12 C.F.R. § 359.1(l).


    
      
        
          Alaska Pacific Bancshares,
Inc.

          Order to Cease and
Desist

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    mail (or
by reputable overnight carrier, electronic facsimile transmission or hand
delivery by messenger) addressed as follows:

     

    
      	
              (a)            

            	
              To the
      OTS:

            


    

    Philip A.
Gerbick, Regional Director

    Attn:
Dale R. Blackburn, Assistant Director 

    Office of
Thrift Supervision, Western Region 

    101
Stewart Street, Suite 1010

    Seattle,
WA 98101-2419

    Facsimile:
(206) 829-2620

     

    
      	
              (b)            

            	
              To the Holding
      Company:  

              William
      A. Corbus, Chairman 

              Alaska
      Pacific Bancshares, Inc. 

              2094
      Jordan Avenue

              Juneau,
      AK 99801-8046

            


    

     

    No Violations
Authorized.

    23.    
Nothing in this Order or the Stipulation shall be construed as allowing the
Holding Company,
its Board, officers, or employees to violate any law, rule, or regulation.


    IT IS SO ORDERED.

     

    OFFICE
OF THRIFT SUPERVISION

     

    By: /s/Philip A.
Gerbick                                             
                                                              

    Philip A.
Gerbick

    Regional
Director, Western Region

     

    Date: See
Effective Date on page 1

     

     

    
      Alaska Pacific Bancshares,
Inc.

      Order to Cease and
Desist

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