Pago Pago, AMERICAN SAMOA — Samoa News recently received a copy of the American Samoa Economic Development Authority (ASEDA) FY2022 Annual Continuing Disclosure Report for the General Revenue (and Refunding) Bonds that basically announces that the Territorial Bank American Samoa (TBAS) “has informed ASEDA that it will not have its FY2022 complete [report] on time” nor has it given a timeframe for it to be complete.

“We therefore provide this failure to file this section (d) of the annual report,” it states.

The TBAS audited financial is part of the annual financial statements of the Territory prepared for the ASEDA report to investors in the more than $137 Million in bonds that the American Samoa Government (ASG) has floated.

The annual financial statements comprising the ASEDA report includes a summary of the Pledged Revenue to repay the bonds, the annual budget of the Territory as approved by the Fono for each fiscal year, the annual audited financial statements of the American Samoa Government Employees’ Retirement Fund (ASGERF), which includes the Actuarial Valuation Report, and the annual audited financial statements of the Territorial Bank of American Samoa (TBAS).

Of note: A new Actuarial Valuation Report was anticipated to be included in the FY2022 Annual (ASEDA) Report, as it’s updated every two years.

The last ASEDA report was released for FY2021 - Updated — resubmitted on May 19, 2022.

With no TBAS audited financials, the ASEDA has had to report to investors — that it cannot submit a complete report.

The Annual Investor Call (AIC) happened on June 21, 2020 — it’s a part of the requirements of the investors. Written questions are submitted in advance, and while the call itself is a “live” call with investors, there are no discussions only responses to the investor questions.

According to the ASEDA document on the 2023 AIC, questions about the Territory’s financial outlook, economy, Medicaid, ARPA and federal assistance, LBJ Medical Center, ASG Employment Retirement Fund, and TBAS were answered.

In a brief review of the AIC document, Samoa News noted that according to Danielle C. King, TBAS CFO, “Our auditor Crowe has delayed completing the 2022 audit because they will not accept an internal review of a complaint and are requesting an outside, third-party to do a review. The Audit Committee has yet to make a decision on this request.”

Aside from the catastrophic possible fallout from the bond investors due to the report not being submitted, such as — 1) Bonds could be called in to be paid in full; 2) The interest rate on the bonds could be raised; or, 3) American Samoa’s financial rating could suffer — TBAS not being able to submit an audited financial is a disaster not only to the Territory’s financial standing, but also to the people of American Samoa.

It is the only bank in the territory and it is uninsured.

The question becomes: What is the Office of Financial Institutions  Commissioner (the Regulator) Tuisivi John Marsh doing to rectify this situation?

According to the TBAS statute, the audited financial report is due 4 months after the end of the fiscal year.

If the commissioner had enforced this statute, perhaps we would not be currently looking at the bond situation?

This follows other decisions of the Regulator/ Commissioner to provide favorable treatment to TBAS. It is his job to protect customer deposits, not TBAS — that’s what a bank regulator does.

The Commissioner has not enforced capital requirements. FRB requires 5% of deposits or $15 million. TBAS’s own requirement is 9% or $27 million. The OFI statute says $10 million. At the end of FY2021, TBAS capital stood at $7.7 million.

Nor has the Commissioner done anything about the FY2020 restatement of earnings, which resulted in the bank restating the FY2020 profit of $648,000 to a loss of $2.3 million.

Samoa News reported on the issue in March 2022, “TBAS financials show a historical trend of ‘losses’ after ‘restating’,” based on the TBAS’ FY2021 financials that “restated” FY2020 Profit/ Loss and Retained Earnings.

According to notes in the FY2021 financial report, the restated amounts point to material inaccuracies in the reporting of the value of its losses in its loan portfolio — in particular it’s off-island loans — It was “unidentified loan delinquencies” that led to TBAS having to restate its allowances for loan losses — Sept 30, 2020 and 2019 respectively.

The off-island loan delinquencies were noted in the financials to be due to the COVID pandemic, which resulted in economic hardships to borrowers.

However, in March 2022, TBAS former CFO Nate Clayville testified at the Fono that he was told by TBAS CEO Dave Buehler not to book the loan losses.

The OFI Commissioner has made no comment and made no move to call the bank’s actions into question.

In fact, when he appeared with Buehler at a Fono committee hearing on April 12 this year, about faipule concerns about TBAS liquidity, he said, as far as concerns about TBAS, “there is none except acquiring auditory financial statements but other than that, it is in a satisfactory position right now.”