LACEY, Wash., Oct. 30, 2017 (GLOBE NEWSWIRE) -- Anchor Bancorp (NASDAQ:ANCB) ("Company"), the holding company for Anchor Bank ("Bank"), today reported first quarter earnings for its fiscal year ending June 30, 2018. For the quarter ended September 30, 2017, the Company reported net income of $1.0 million or $0.43 per diluted share, compared to net income of $573,000 or $0.24 per diluted share for the quarter ended September 30, 2016.

"We are pleased with the financial results of our first quarter.  Our net interest margin has remained strong year over year and for the quarter was 4.14%," stated Jerald L. Shaw, President and Chief Executive Officer.  "Additionally we have improved our efficiency ratio by 11.5% over the last year to 71.2% for the current quarter, reflecting our increased net interest income and expense control.  Noninterest expense declined 9% year over year," stated Mr. Shaw.

Fiscal First Quarter Highlights
  • Loans receivable, net, increased $5.3 million, or 1.4%, to $383.2 million at September 30, 2017 from $377.9 million at June 30, 2017;
  • Deposits increased $3.2 million, or 0.9%, to $348.4 million at September 30, 2017 from $345.2 million at June 30, 2017;
  • Net interest income before provision for loan losses increased $273,000, or 6.7%, to $4.3 million for the quarter ended September 30, 2017 compared to $4.1 million for the quarter ended September 30, 2016;
  • Net interest margin ("NIM") was 4.14% for the quarter ended September 30, 2017 compared to 4.16% for the quarter ended September 30, 2016;
  • The efficiency ratio improved to 71.2% for the quarter ended September 30, 2017 compared to 82.7% for the quarter ended September 30, 2016; and
  • Book value per share at September 30, 2017 increased to $26.76 from $26.29 at June 30, 2017.

Balance Sheet Review

Total assets decreased by $2.1 million, or 0.5%, to $460.4 million at September 30, 2017 from $462.5 million at June 30, 2017. Cash and cash equivalents decreased by $5.3 million, or 37.1%, to $8.9 million at September 30, 2017, from $14.2 million at June 30, 2017 as we redeployed excess cash to fund the repayment of FHLB advances and fund our loan growth.  Securities available-for-sale and held-to-maturity decreased $930,000, or 4.4%, and $396,000 or 8.0%, respectively.  The decreases in these portfolios were primarily the result of contractual principal repayments.

Loans receivable, net, increased $5.3 million, or 1.4%, to $383.2 million at September 30, 2017 from $377.9 million at June 30, 2017. Construction loans increased $11.8 million, or 24.0%, to $61.0 million at September 30, 2017 from $49.2 million at June 30, 2017.  There was $57.0 million in undisbursed construction loan commitments at September 30, 2017. Our construction loans are primarily for the construction of multi-family and to a lesser extent, loans for the construction of single family properties. One-to-four family loans increased $1.8 million, or 3.0%, to $61.6 million at September 30, 2017 from $59.7 million at June 30, 2017.  Multi-family loans increased $512,000, or 0.8%, to $61.0 million at September 30, 2017 from $60.5 million at June 30, 2017.  Land loans increased $43,000, or 0.5%, to $8.1 million at September 30, 2017 from $8.0 million at June 30, 2017.  Consumer loans decreased $155,000, or 0.83%, to $18.6 million at September 30, 2017 from $18.7 million at June 30, 2017.  Commercial business loans decreased $2.1 million, or 6.8%, to $29.5 million at September 30, 2017 from $31.6 million at June 30, 2017.  Commercial real estate loans decreased $6.6 million, or 4.3%, to $148.9 million at September 30, 2017 from $155.5 million at June 30, 2017.  This decrease was primarily due to the repayments of a $3.2 million commercial real estate loan secured by a self-storage facility and a $1.7 million industrial property.  We also reclassified a $2.0 million multi-tenant commercial real estate loan to real estate owned ("REO") and recorded a $200,000 charge upon transfer to fair market value.

Loans receivable consisted of the following at the dates indicated:
  September 30,2017   June 30, 2017   September 30,2016
                       
  (In thousands)
Real estate:          
One-to-four family $ 61,555     $ 59,735     $ 60,067  
Multi-family 61,012     60,500     54,556  
Commercial 148,867     155,525     144,402  
Construction 60,963     49,151     30,635  
Land loans 8,097     8,054     7,534  
Total real estate 340,494     332,965     297,194  
           
Consumer:          
Home equity 13,991     13,991     16,890  
Credit cards 2,535     2,596     2,871  
Automobile 573     627     630  
Other consumer 1,484     1,524     1,776  
Total consumer 18,583     18,738     22,167  
           
Business:          
Commercial business 29,455     31,603     36,688  
           
Total Loans 388,532     383,306     356,049  
           
Less:          
Deferred loan fees and loan premiums, net 1,294     1,292     1,215  
Allowance for loan losses 4,017     4,106     3,824  
Loans receivable, net $ 383,221     $ 377,908     $ 351,010  

Total liabilities decreased $3.1 million to $393.6 million at September 30, 2017 from $396.7 million at June 30, 2017, primarily as the result of the repayment of $7.8 million of FHLB advances, partially offset by an increase of $3.2 million in deposits. The increase in deposit accounts was the result of the Bank's deposit marketing campaign; as well as other deposit gathering activities.

Deposits consisted of the following at the dates indicated:

  September 30, 2017   June 30, 2017   September 30, 2016
  Amount   Percent   Amount   Percent   Amount   Percent
                                         
  (Dollars in thousands)
Noninterest-bearing demand deposits $ 54,474     15.7 %   $ 52,606     15.2 %   $ 55,329     18.2 %
Interest-bearing demand deposits 31,424     9.0     31,464     9.1     27,522     9.0  
Money market accounts 71,335     20.5     73,154     21.2     60,176     19.8  
Savings deposits 44,349     12.7     43,454     12.6     43,677     14.4  
Certificates of deposit 146,794     42.1     144,509     41.9     117,502     38.6  
Total deposits $ 348,376     100.0 %   $ 345,187     100.0 %   $ 304,206     100.0 %

Credit Quality

Total delinquent loans (past due 30 days or more), decreased $1.7 million to $2.4 million at September 30, 2017 from $4.1 million at June 30, 2017, primarily due to the transfer of the $2.0 million commercial real estate loan discussed above to REO at fair market value of $1.8 million.  The percentage of nonperforming loans, consisting solely of nonaccrual loans, to total loans decreased to 0.4% at September 30, 2017 from 1.0% at June 30, 2017. The Company recorded a $75,000 provision for loan losses for the quarter ended September 30, 2017. The allowance for loan losses of $4.0 million at September 30, 2017 represented 1.0% of loans receivable and 274.4% of nonperforming loans. This compares to an allowance of $4.1 million at June 30, 2017, representing 1.1% of loans receivable and 110.8% of nonperforming loans.

Nonperforming loans decreased to $1.5 million at September 30, 2017, from $3.7 million at June 30, 2017, and were $2.5 million at September 30, 2016.  Nonperforming loans consisted of the following at the dates indicated:

  September 30,2017   June 30, 2017   September 30,2016
     
                       
          (In thousands)        
Real estate:          
One-to-four family $ 968     $ 1,170     $ 2,010  
Commercial     1,992     315  
Total real estate 968     3,162     2,325  
Consumer:          
Home equity 207     242     37  
Total consumer 207     242     37  
Business:          
Commercial business 289     300     96  
Total $ 1,464     $ 3,704     $ 2,458  
           

As of September 30, 2017, the Company had four REO properties with an aggregate book value of $2.7 million compared to three properties with an aggregate book value of $867,000 at June 30, 2017, and three properties with an aggregate book value of $271,000 at September 30, 2016. The increase in the aggregate book value of REO properties during the quarter ended September 30, 2017 from the prior quarter was primarily attributable to reclassification of the commercial real estate loan, discussed above.

Capital

As of September 30, 2017, the Bank was considered "well capitalized" in accordance with its regulatory capital guidelines and exceeded all regulatory capital requirements with Tier 1 Leverage-Based Capital, Common Equity Tier 1 Capital ("CET1"), Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios of 13.3%, 14.0%, 14.0%, and 14.9% respectively.  As of September 30, 2016, the Bank's Tier 1 Leverage-Based Capital, CET1, Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios were 13.3%, 14.3%, 14.3%, and 15.3%, respectively.

Anchor Bancorp exceeded all regulatory capital requirements with Tier 1 Leverage-Based Capital, CET1, Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios of 14.4%, 15.0%, 15.0%, and 16.0% as of September 30, 2017.  As of September 30, 2016, the Company's Tier 1 Leverage-Based Capital, CET1, Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios were 14.2%, 15.3%, 15.3%, and 16.2%, respectively.

Operating Results

Net interest income. Net interest income before the provision for loan losses increased $273,000, or 6.7%, to $4.3 million for the quarter ended September 30, 2017 compared to $4.1 million for the same period last year primarily due to the increase in average loans receivable, net.  Average loans receivable, net, for the quarter ended September 30, 2017 increased $31.9 million, or 9.0%, to $387.0 million compared to $355.1 million for the quarter ended September 30, 2016.

The Company's net interest margin was 4.14% for the quarter ended September 30, 2017 compared to 4.16% for the quarter ended September 30, 2016. The average yield on loans receivable, net, increased seven basis points to 5.31% for the quarter ended September 30, 2017 compared to 5.24% for the same period of the prior year, reflecting the increase in construction loans.  The average yield on mortgage-backed securities decreased to 2.05% from 2.24% for the same period in the prior year primarily due to large principal pay downs resulting in an increase in amortization of premiums. The average yield on interest-earning assets increased 11 basis points to 5.05% from 4.94% for the quarters ended September 30, 2017 and 2016. The average cost of total deposits increased 14 basis points to 1.13% for the quarter ended September 30, 2017 compared to 0.99% for the same period in the prior year.  The average cost of interest-bearing liabilities increased 15 basis points to 1.14% for the quarter ended September 30, 2017 compared to 0.99% for the same period in the prior year, reflecting the increases in the federal funds rate over the last year.

Provision for loan losses. In connection with its analysis of the loan portfolio, management determined that a $75,000 provision for loan losses was required for both the quarters ended September 30, 2017 and 2016, primarily reflecting our recent loan growth.

Noninterest income. Noninterest income remained relatively the same at $1.2 million for the quarters ended September 30, 2017 and September 30, 2016. The $50,000 increase in commercial real estate loan prepayment penalties was mostly offset by a decrease of $35,000 in deposit service fees from $348,000 to $313,000 as consumers reduced their deposit account overdrafts.

Noninterest expense. Noninterest expense decreased $396,000, or 9.2%, to $3.9 million for the quarter ended September 30, 2017 from $4.3 million for the quarter ended September 30, 2016. Compensation and benefits expense decreased $226,000 from $2.3 million or 9.8%, to $2.1 million for the quarter ended September 30, 2017 compared to the same period in the previous year. The decrease was primarily due to a reduction in stock-based compensation expense from $224,000 for the quarter last year to $47,000 for the quarter ended September 30, 2017 related to the Anchor Bancorp 2015 Equity Plan. General and administrative expenses declined $162,000 to $574,000 for the quarter ended September 30, 2017 compared to $736,000 for the quarter ended September 30, 2016. This decrease was primarily due to a $37,000 decline in consulting services, a $26,000 decrease in credit card expenses due to the efficiencies realized from our new credit card program, a $19,000 reduction in loan origination expenses and no losses related to repossessed vehicles compared to $23,000 for the same quarter last year.  For the quarter ended September 30, 2017 we expensed $34,000 associated with our proposed merger with Washington Federal, Inc. compared to none for the same period ended September 30, 2016 primarily due to legal and professional fees which partially offset the decreases discussed above.

About the CompanyAnchor Bancorp is headquartered in Lacey, Washington and is the parent company of Anchor Bank, a community-based savings bank primarily serving Western Washington through its 10 full-service banking offices (including one Wal-Mart in-store location) within Grays Harbor, Thurston, Lewis, Pierce and Mason counties, and one loan production office located in King County, Washington. The Company's common stock is traded on the NASDAQ Global Market under the symbol "ANCB" and is included in the Russell 2000 Index. For more information, visit the Company's web site www.anchornetbank.com.

Forward-Looking Statements: Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and nonperforming assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; the Agreement and Plan of Merger ("Merger Agreement") with Washington Federal, Inc. may be terminated in accordance with its terms, and the merger may not be completed; termination of the Merger Agreement could negatively impact us; we will be subject to business uncertainties and contractual restrictions while the merger is pending; results of examinations of us by the Federal Reserve Bank of San Francisco and our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings and other factors described in the Company's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission-which are available on our website at www.anchornetbank.com and on the SEC's website at www.sec.gov. Any of the forward-looking statements that we make in this Press Release and in the other public statements we make may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed or implied in any forward-looking statements made by or on our behalf and the Company's operating and stock price performance may be negatively affected. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  These risks could cause our actual results for fiscal 2018 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us, and could negatively affect the Company's operations and stock price performance.

 
ANCHOR BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Dollars in thousands) (unaudited) September 30,2017   June 30, 2017
ASSETS      
Cash and cash equivalents $ 8,925     $ 14,194  
Securities available-for-sale, at fair value 20,240     21,170  
Securities held-to-maturity, at amortized cost 4,553     4,949  
Loans held for sale     1,551  
Loans receivable, net of allowance for loan losses of $4,017 and $4,106 383,221     377,908  
Bank owned life insurance investment, net of surrender charges 20,159     20,030  
Accrued interest receivable 1,344     1,332  
Real estate owned, net 2,658     867  
Federal Home Loan Bank (FHLB) stock, at cost 2,036     2,348  
Property, premises and equipment, net 9,037     9,360  
Deferred tax asset, net 7,666     8,011  
Prepaid expenses and other assets 548     805  
Total assets $ 460,387     $ 462,525  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
LIABILITIES      
Deposits:      
Noninterest-bearing $ 54,474     $ 52,606  
Interest-bearing 293,902     292,581  
Total deposits 348,376     345,187  
       
FHLB advances 37,700     45,500  
Advance payments by borrowers for taxes and insurance 1,903     1,195  
Supplemental Executive Retirement Plan liability 1,717     1,709  
Accounts payable and other liabilities 3,915     3,083  
Total liabilities 393,611     396,674  
       
STOCKHOLDERS' EQUITY      
Preferred stock, $0.01 par value per share authorized 5,000,000 shares; no shares issued or outstanding      
Common stock, $0.01 par value per share, authorized 45,000,000 shares; 2,494,940 issued and outstanding at September 30, 2017 and 2,504,740 issued and outstanding at June 30, 2017 25     25  
Additional paid-in capital 22,447     22,619  
Retained earnings 45,629     44,585  
Unearned Employee Stock Ownership Plan (ESOP) shares (590 )   (607 )
Accumulated other comprehensive loss, net of tax (735 )   (771 )
Total stockholders' equity 66,776     65,851  
Total liabilities and stockholders' equity $ 460,387     $ 462,525  
               

 
ANCHOR BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (unaudited) Three Months EndedSeptember 30,
  2017   2016
Interest income:      
Loans receivable, including fees $ 5,133     $ 4,652  
Securities 34     23  
Mortgage-backed securities 130     166  
Total interest income 5,297     4,841  
Interest expense:      
Deposits 842     619  
FHLB advances 109     149  
Total interest expense 951     768  
Net interest income before provision for loan losses 4,346     4,073  
Provision for loan losses 75     75  
Net interest income after provision for loan losses 4,271     3,998  
Noninterest income:      
Deposit service fees 313     348  
Other deposit fees 199     194  
Other loan fees 228     235  
Gain on sale of loans 110     101  
Bank owned life insurance investment 129     132  
Other income 193     147  
Total noninterest income 1,172     1,157  
Noninterest expense:      
Compensation and benefits 2,084     2,310  
General and administrative expenses 574     736  
Merger expenses 34      
Real estate owned holding costs 30     19  
Federal Deposit Insurance Corporation insurance premiums 36     69  
Information technology 537     485  
Occupancy and equipment 433     506  
Deposit services 104     111  
Marketing 91     100  
Loss on sale of property, premises and equipment 5      
Gain on sale of real estate owned     (12 )
Total noninterest expense 3,928     4,324  
Income before provision for income taxes 1,515     831  
Provision for income taxes 471     258  
Net income $ 1,044     $ 573  
Basic earnings per share $ 0.43     $ 0.24  
Diluted earnings per share $ 0.43     $ 0.24  
Weighted average number of basic shares outstanding 2,421,049     2,391,839  
Weighted average number of diluted shares outstanding 2,432,960     2,414,679  
           

 
  As of or For the Quarter Ended(unaudited)
  September 30,2017   June 30, 2017   March 31,2017   September 30,2016
                               
  (Dollars in thousands)
SELECTED PERFORMANCE RATIOS              
Return on average assets (1) 0.93 %   0.58 %   0.64 %   0.54 %
Return on average equity (2) 6.85     4.48     4.79     3.88  
Average equity-to-average assets (3) 13.52     12.85     13.31     13.95  
Interest rate spread (4) 3.91     4.11     3.88     3.95  
Net interest margin (5) 4.14     4.32     4.10     4.16  
Efficiency ratio (6) 71.2     82.9     78.2     82.7  
Average interest-earning assets to average interest-bearing liabilities 125.8     124.2     126.2     126.5  
Other operating expenses as a percent of average total assets 3.5 %   4.1 %   3.7 %   4.1 %
Book value per common share $ 26.76     $ 26.29     $ 25.95     $ 25.46  
Tangible book value per common share (7) $ 26.67     $ 26.20     $ 25.86     $ 25.37  
               
CAPITAL RATIOS (Anchor Bank)              
Tier 1 leverage 13.3 %   13.0 %   13.1 %   13.3 %
Common equity tier 1 capital 14.0     14.1     13.7     14.3  
Tier 1 risk-based 14.0     14.1     13.7     14.3  
Total risk-based 14.9     15.1     14.6     15.3  
               
ASSET QUALITY              
Nonaccrual and loans 90 days or more past due and still accruing interest as a percent of total loans 0.4 %   1.0 %   0.6 %   0.7 %
Allowance for loan losses as a percent of total loans 1.0     1.1     1.0     1.1  
Allowance as a percent of total nonperforming loans 274.4     110.8     167.4     157.9  
Nonperforming assets as a percent of total assets 0.9     1.0     0.6     0.6  
Net charge-offs (recoveries) to average outstanding loans 0.04 %   (0.03 )%   0.01 %   0.01 %
Classified loans $ 1,607     $ 3,721     $ 2,645     $ 3,185  
_____________________              

(1)  Net income divided by average total assets, annualized. (2)  Net income divided by average equity, annualized. (3)  Average equity divided by average total assets. (4)  Difference between weighted average yield on interest-earning assets and weighted average rate on interest-bearing liabilities. (5)  Net interest income as a percentage of average interest-earning assets. (6)  Noninterest expense divided by the sum of net interest income and noninterest income. (7)  Tangible book value per common share excludes intangible assets. Tangible assets excludes intangible assets. This ratio represents a non-GAAP financial measure. See also Non-GAAP Financial Measures reconciliation in the table below.

Non-GAAP Financial Measures: In addition to results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains the tangible book value per share, a non-GAAP financial measure. We calculate tangible common equity by excluding intangible assets from stockholders' equity. We calculate tangible book value per share by dividing tangible common equity by the number of common shares outstanding.  We calculate tangible common equity by excluding intangible assets from stockholders' equity. The Company believes that this measure is consistent with the capital treatment by our bank regulatory agencies, which excludes intangible assets from the calculation of risk-based capital ratios and presents this measure to facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. This non-GAAP financial measure has inherent limitations, is not required to be uniformly applied and is not audited. Further, the non-GAAP financial measure should not be considered in isolation or as a substitute for book value per share or total stockholders' equity determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. Reconciliations of the GAAP and non-GAAP financial measures are presented below.

  September 30,2017   June 30, 2017   March 31, 2017   September 30,2016
                               
  (In thousands)
               
Stockholders' equity $ 66,776     $ 65,851     $ 64,989     $ 63,778  
Less: intangible assets 246     232     214     216  
Tangible common stockholders' equity $ 66,530     $ 65,619     $ 64,775     $ 63,562  
               
Total assets $ 460,387     $ 462,525     $ 465,449     $ 435,963  
Less: intangible assets 246     232     214     216  
Tangible assets $ 460,141     $ 462,293     $ 465,235     $ 435,747  
               
               
Tangible common stockholders' equity $ 66,530     $ 65,619     $ 64,775     $ 63,562  
Common shares outstanding at end of period 2,494,940     2,504,740     2,504,740     2,505,219  
Common stockholders' equity (book value) per share (GAAP) $ 26.76     $ 26.29     $ 25.95     $ 25.46  
Tangible common stockholders' equity (tangible book value) per share (non-GAAP) $ 26.67     $ 26.20     $ 25.86     $ 25.37  
                               

Contact: Jerald L. Shaw, President and Chief Executive Officer Terri L. Degner, EVP and Chief Financial Officer Anchor Bancorp (360) 491-2250