While most community banks are putting their excess capital to work paying huge dividends, buying back stock, or doing costly acquisitions, National Bancorp of Alaska is putting it into the stock market.

Over the past few years, the $2.5 billion-asset Anchorage bank has invested $32 million in eight limited partnerships that buy controlling stakes in other banks and in commercial companies.

The goal, according to company officials and the annual report, is to deploy extra cash in a manner that will produce higher yields than traditional bank investments.

And it seems to be working. Last year the partnerships yielded $6.1 million in profits for National Bancorp, for a return on investment of 19%.

The company now plans to more than double its investments, with commitments for another $46 million, according to its 1996 annual report.

Officials even chose for the first time to refer directly to the investments in the report's message to shareholders.

"We felt it was important ... to let our shareholders know that we're getting involved in this activity," said Gary Dalton, chief financial officer.

"We feel that it's a good use of capital, and we're going to continue to do it."

Though many bank holding companies maintain some direct investments in other financial institutions or companies, few are actively involved in limited partnerships as a business line, analysts said.

Most with such involvement are larger institutions-Chase Manhattan Corp., Bankers Trust New York Corp., BankAmerica Corp., and Bank of New York Co. invested at least $100 million each in New York-based Kohlberg Kravis Roberts & Co.'s buyout fund in 1996. However, the practice is virtually unheard of among community banks, analysts said.

National Bancorp's success, however, could change that.

"It's definitely something that's not a traditional activity for a community bank," said Joseph Morford, bank analyst for Alex. Brown & Sons in San Francisco. "But they found a way to create value for the shareholder that way, so all power to them."

The problem facing National Bancorp is an overabundance of capital-the bank's ratio of equity to assets was 14.33% on Dec. 31-and a dearth of ways to use it.

Acquisition opportunities in the Alaska market are few, and traditional means of disposing of capital, including repurchasing 30,000 shares in 1996 and paying out almost 35% of earnings in dividends, haven't deployed enough.

With the investment strategy paying off-the bank has had total expenses and writedowns during the last three years of $2.2 million, most due to one soured investment in 1996-officials are now seeking more funds in which to invest.

"It sounds pretty creative," said Richard W. Decker Jr., president of Belvedere Capital Partners in San Francisco. "If you're a forward-thinking CFO and you're more than well capitalized, what do you do to earn good returns?"

Mr. Dalton said the bank doesn't care what industry the partnerships invest in-as long as they have "a superior rate of return."

Among its known investments are stakes in KKR, known for its leveraged buyouts of such companies as RJR Nabisco, and a new fund created recently by Belvedere that will target community banks.

"We are looking for people who are expert at investing capital, and we've been somewhat eclectic in the type of managers that we've engaged," Mr. Dalton said. "I don't think there's a single industry group. I don't know that there's an individual style."

But Anthony M. Frank, chairman of Belvedere, cautioned against banks with less than $1 billion of assets getting very involved in limited partnerships, because of the need to analyze each investment.

"You have to be a pretty good-size bank to do this," Mr. Frank said. "I don't think an overcapitalized small bank should be looking in this area."

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