Anchor Bancorp Reports First Quarter Fiscal 2016 Earnings

LACEY, Wash., Oct. 28, 2015 (GLOBE NEWSWIRE) -- Anchor Bancorp (NASDAQ:ANCB) (“Company”), the holding company for Anchor Bank (“Bank”), today reported first quarter earnings for the fiscal year ending June 30, 2016. For the quarter ended September 30, 2015, the Company reported net income of $345,000 or $0.14 per diluted share, compared to net income of $113,000 or $0.05 per diluted share for the same period last year.

“With the majority of our credit issues behind us, we are focused on future growth and as reflected in increases in our net loans and deposits, of $1.6 million and $1.3 million, respectively, for the quarter ended September 30, 2015. The relocation last year of our Puyallup branch from a Wal-Mart to a larger facility has been a benefit to the organization,” stated Jerald L. Shaw, President and Chief Executive Officer. “Our continuing focus on expense control resulted in our efficiency ratio decreasing from 97.4% at September 30, 2014 to 88.9% at September 30, 2015. Recently we made the difficult decision to close our leased Hoquiam branch, further reducing our expenses. With our Aberdeen branch in close proximity we believe our Hoquiam customers will use this branch to continue to receive the great customer service expected from us,” stated Mr. Shaw.

Fiscal First Quarter Highlights

  • Loan portfolio increased $1.6 million or 0.6% to $285.1 million at September 30, 2015 from $283.4 million at June 30, 2015;
  • Deposits increased $1.3 million or 0.4% to $301.1 million at September 30, 2015 from $299.8 million at June 30, 2015;
  • Net interest margin ("NIM") remained strong at 4.15% for the quarter ended September 30, 2015 compared to 3.94% for the quarter ended September 30, 2014;
  • FHLB borrowing costs decreased $130,000 or 81.3% to $30,000 for the quarter ended September 30, 2015 from $160,000 for the quarter ended September 30, 2014;
  • Real estate owned ("REO") holding costs decreased $143,000 or 92.9% to $11,000 for the quarter ended September 30, 2015 from $154,000 for the quarter ended September 30, 2014;
  • Total classified loans decreased $1.8 million or 39.0% to $2.7 million at September 30, 2015 from $4.5 million at September 30, 2014; and
  • The Company's book value per share at September 30, 2015, increased to $25.95 from $25.69 at June 30, 2015, and $21.67 at September 30, 2014.


Credit Quality

Total delinquent loans (past due 30 days or more), increased $728,000 to $4.3 million at September 30, 2015, from $3.6 million at June 30, 2015. The Company recorded a $20,000 provision for loan losses for the quarter ended September 30, 2015 compared to no provision for the quarter ended September 30, 2014. The allowance for loan losses of $3.7 million at September 30, 2015 represented 1.3% of loans receivable and 160.6% of nonperforming loans. This compares to an allowance of $3.7 million at June 30, 2015, representing 1.3% of loans receivable and 185.0% of nonperforming loans.

Nonperforming loans increased to $2.3 million at September 30, 2015, from $2.0 million at June 30, 2015, and from $2.5 million at September 30, 2014. Nonperforming loans consisted of the following at the dates indicated:


September 30,
2015
June 30, 2015 September 30,
2014
(In thousands)
Real estate:
One-to-four family$1,388 $1,263 $2,303
Multi-family
Commercial
Land 107
Total real estate1,388 1,263 2,410
Consumer:
Home equity 76
Credit cards5 6 18
Other30 31
Total consumer35 37 94
Business:
Commercial business873 711
Total$2,296 $2,011 $2,504


We restructure our delinquent loans, when appropriate, so our borrowers can continue to make payments while minimizing the Company's potential loss. As of September 30, 2015, June 30, 2015, and September 30, 2014, there were 42, 39, and 44 loans, respectively, with aggregate net principal balances of $9.7 million, $9.8 million, and $11.0 million, respectively, classified as “troubled debt restructurings,” of which, $1.6 million, $902,000, and $1.5 million, respectively, were included in the nonperforming loans above.

As of September 30, 2015, the Company had five real estate owned ("REO") properties with an aggregate book value of $302,000 compared to eight properties with an aggregate book value of $797,000 at June 30, 2015, and 18 properties with an aggregate book value of $6.1 million at September 30, 2014. The decrease in the aggregate book value of REO properties during the quarter ended September 30, 2015 from the prior quarter was primarily attributable to the sale of two one-to-four family properties and one parcel, resulting in an aggregate loss on sale of $8,000. At September 30, 2015, the largest REO property was a one-to-four family home in Grays Harbor County, Washington with a carrying value of $153,000.

Capital

As of September 30, 2015, the Bank 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 14.3%, 17.0%, 17.0% and 18.2% respectively. As of September 30, 2014, the Bank's Tier 1 Leverage-Based Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios were 13.8%, 17.0%, and 18.3%, respectively. The CET1 ratio is a new regulatory capital ratio required beginning for the quarter ended March 31, 2015.

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 15.9%, 18.9%, 18.9% and 20.0% as of September 30, 2015. As of September 30, 2014, the Company's Tier 1 Leverage-Based Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios were 14.0%, 17.3% and 18.6%, respectively.

Balance Sheet Review

Total assets increased by $1.7 million or 0.4% to $380.9 million at September 30, 2015 from $379.2 million at June 30, 2015. Securities available-for-sale and held-to-maturity decreased $1.6 million or 5.5% and $287,000 or 3.8%, respectively. Cash and cash equivalents increased by $5.2 million or 36.0% to $19.7 million at September 30, 2015, from $14.5 million at June 30, 2015.

Loans receivable, net, increased $1.6 million or 0.6% to $285.0 million at September 30, 2015 from $283.4 million at June 30, 2015 as a result of new loan production exceeding principal reductions. One-to-four family loans increased $6.4 million or 11.0% to $64.3 million from $57.9 million at June 30, 2015, primarily due to the reclassification of multi-family loans to this loan category partially offset by the sale of $3.5 million of loans, servicing retained, to Freddie Mac. Commercial real estate loans increased $5.1 million or 4.0% to $133.4 million from $128.3 million. Multi-family loans decreased $7.7 million or 17.8% to $35.5 million at September 30, 2015 from $43.2 million at June 30, 2015, due to the reclassification discussed above. Consumer loans decreased $803,000 or 3.4% to $23.1 million at September 30, 2015 from $23.9 million at June 30, 2015 as we believe consumers continue to reduce their debt. Land loans decreased $459,000 or 11.3% to $3.6 million at September 30, 2015 from $4.0 million at June 30, 2015 and construction loans decreased $339,000 or 2.9% to $11.4 million from $11.7 million during the same period. Commercial business loans decreased $418,000 or 2.2% to $18.6 million from $19.0 million at June 30, 2015.

Loans receivable consisted of the following at the dates indicated:


September 30,
2015
June 30, 2015 September 30,
2014
(In thousands)
Real estate:
One-to-four family$64,307 $57,944 $60,703
Multi-family35,535 43,249 48,864
Commercial133,422 128,306 105,031
Construction11,392 11,731 20,184
Land loans3,610 4,069 4,298
Total real estate248,266 245,299 239,080
Consumer:
Home equity17,116 17,604 19,573
Credit cards3,143 3,289 3,522
Automobile636 686 984
Other consumer2,228 2,347 2,533
Total consumer23,123 23,926 26,612
Business:
Commercial business18,569 18,987 16,511
Total Loans289,958 288,212 282,203
Less:
Deferred loan fees1,192 1,047 1,107
Allowance for loan losses3,687 3,721 3,994
Loans receivable, net$285,079 $283,444 $277,102


Total liabilities increased $2.1 million between June 30, 2015 and September 30, 2015, primarily as the result of a $6.5 million increase in noninterest bearing demand deposits.

Deposits consisted of the following at the dates indicated:


September 30, 2015 June 30, 2015 September 30, 2014
Amount Percent Amount Percent Amount Percent
(Dollars in thousands)
Noninterest-bearing demand deposits$51,211 17.0% $44,719 15.0% $42,383 13.8%
Interest-bearing demand deposits22,714 7.5 22,448 7.5 21,375 7.0
Money market accounts60,492 20.1 63,916 21.3 69,479 22.6
Savings deposits41,890 13.9 42,399 14.1 40,680 13.2
Certificates of deposit124,772 41.5 126,330 42.1 133,429 43.4
Total deposits$301,079 100.0% $299,812 100.0% $307,346 100.0%


Total stockholders' equity decreased $431,000 or 0.68% to $63.3 million at September 30, 2015 from $63.7 million at June 30, 2015. The decrease was primarily a result of the $875,000 used to repurchase 40,000 shares of our common stock during the quarter under the current share repurchase plan, at an average price of $21.88 per share, partially offset by net income of $345,000. As of September 30, 2015, there were 87,500 shares available for future purchases under the current plan. Accumulated other comprehensive loss decreased $62,000 to $649,000 as a result of unrealized valuation gains on investments available-for-sale.

Operating Results

Net interest income. Net interest income before the provision for loan losses increased $88,000 or 2.6% to $3.5 million from $3.4 million for the quarter ended September 30, 2014, primarily as a result of the $130,000 or 81.3% decrease in the cost of Federal Home Loan Bank ("FHLB") advances primarily due to a $7.5 million decline in the balance of FHLB advances over the last year.

The Company's NIM increased 21 basis points to 4.15% for the quarter ended September 30, 2015 from 3.94% for the comparable period in 2014 as the average yield on interest-earning assets increased four basis points to 4.97% for the quarter ended September 30, 2015 compared to 4.93% for the same period in 2014. The improvement in our net interest margin compared to the same quarter last year reflects a continued reduction in nonperforming assets and reduction in the weighted average cost of FHLB advances to 1.20% at September 30, 2015, compared to 3.66% at September 30, 2014. The weighted average cost of interest-bearing liabilities decreased 16 basis points to 1.05% for the quarter ended September 30, 2015 compared to 1.21% for the same period in the prior year.

Provision for loan losses. In connection with its analysis of the loan portfolio, management determined that a $20,000 provision for loan losses was required for the quarter ended September 30, 2015 compared to none for the quarter ended September 30, 2014, reflecting new loan growth. Although nonperforming loans increased $285,000 during the quarter, the effect of this increase on the provision for loan losses was offset by the $1.0 million or 27.0% decrease in total classified loans during the quarter from $3.7 million at June 30, 2015, to $2.7 million at September 30, 2015.

Noninterest income. Noninterest income increased $60,000 or 6.1% to $1.0 million for the quarter ended September 30, 2015 compared to $983,000 for the same quarter a year ago. The increase was primarily due to a $61,000 gain on sale of loans for the quarter ended September 30, 2015 compared to a $6,000 loss on sale of loans for the same quarter a year ago. Also contributing to the increase was other income increasing $44,000 to $131,000 from $87,000 for the same quarter a year ago primarily due to paper statement charges being increased. In addition, the quarter ended September 30, 2014, included a $47,000 gain on sale of investments compared to no comparable gain in the current quarter.

Noninterest expense. Noninterest expense decreased $245,000 or 5.7% to $4.1 million for the three months ended September 30, 2015 from $4.3 million for the three months ended September 30, 2014. The decrease in noninterest expense was primarily due to REO holding costs decreasing $143,000 or 92.9% to $11,000 for the quarter ended September 30, 2015 from $154,000 for the same quarter a year ago reflecting the decline in the number of our REO properties. Also contributing to the decrease was an $111,000 decline in deposit services expenses to $113,000 for the quarter ended September 30, 2015 compared to $224,000 for the same quarter in 2014, primarily the result of costs involved in restructuring our reward program in 2014.

About the Company
Anchor 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 11 full-service banking offices (including one Wal-Mart in-store location) within Grays Harbor, Thurston, Lewis, Pierce and Mason counties, 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; 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 2016 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,
2015
June 30, 2015
ASSETS
Cash and cash equivalents$19,657 $14,450
Securities available-for-sale, at fair value27,942 29,565
Securities held-to-maturity, at amortized cost7,330 7,617
Loans held for sale 505
Loans receivable, net of allowance for loan losses of $3,687 and $3,721285,079 283,444
Bank owned life insurance investment, net of surrender charges19,132 19,001
Accrued interest receivable925 1,069
Real estate owned, net302 797
Federal Home Loan Bank (FHLB) stock, at cost853 853
Property, premises and equipment, net10,079 10,370
Deferred tax asset, net8,794 8,867
Prepaid expenses and other assets839 2,692
Total assets$380,932 $379,230
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Noninterest-bearing$51,211 $44,719
Interest-bearing249,868 255,093
Total deposits301,079 299,812
FHLB advances10,000 10,000
Advance payments by borrowers for taxes and insurance995 1,002
Supplemental Executive Retirement Plan liability1,737 1,814
Accounts payable and other liabilities3,829 2,879
Total liabilities317,640 315,507
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; 2,510,000 issued and 2,439,145 outstanding at September 2015 and 2,550,000 issued and 2,480,865 outstanding at June 30, 201525 25
Additional paid-in capital22,550 23,404
Retained earnings42,084 41,741
Unearned Employee Stock Ownership Plan (ESOP) shares(718) (736)
Accumulated other comprehensive loss, net of tax(649) (711)
Total stockholders’ equity63,292 63,723
Total liabilities and stockholders’ equity$380,932 $379,230




ANCHOR BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data) (unaudited)
Three Months Ended
September 30,
2015 2014
Interest income:
Loans receivable, including fees$4,018 $4,053
Securities16 14
Mortgage-backed securities182 220
Total interest income4,216 4,287
Interest expense:
Deposits670 699
FHLB advances30 160
Total interest expense700 859
Net interest income before provision for loan losses3,516 3,428
Provision for loan losses20
Net interest income after provision for loan losses3,496 3,428
Noninterest income:
Deposit service fees373 384
Other deposit fees178 189
Gain on sale of investments 47
Other loans fees144 144
Gain (loss) on sale of loans61 (6)
Bank owned life insurance investment156 138
Other income131 87
Total noninterest income1,043 983
Noninterest expense:
Compensation and benefits2,020 2,023
General and administrative expenses734 667
Real estate owned impairment38 37
Real estate owned holding costs11 154
Federal Deposit Insurance Corporation insurance premiums69 121
Information technology441 428
Occupancy and equipment490 483
Deposit services113 224
Marketing126 156
Loss (gain) on sale of property, premises and equipment3 (1)
Loss on sale of real estate owned8 6
Total noninterest expense4,053 4,298
Income before provision for income taxes486 113
Provision for income taxes141
Net income$345 $113
Basic earnings per share$0.14 $0.05
Diluted earnings per share$0.14 $0.05




As of or For the
Quarter Ended
(unaudited)
September 30,
2015
June 30, 2015 March 31,
2015
September 30,
2014
(Dollars in thousands)
SELECTED PERFORMANCE RATIOS
Return on average assets (1)0.37% 0.67% 0.33% 0.12%
Return on average equity (2)2.42 4.82 2.32 0.86
Average equity-to-average assets (3)15.29 13.96 14.15 13.56
Interest rate spread(4)3.92 3.92 3.85 3.72
Net interest margin (5)4.15 4.14 4.07 3.94
Efficiency ratio (6)88.9 90.1 127.0 97.4
Average interest-earning assets to average interest-bearing liabilities
126.9 126.3 89.9 122.6
Other operating expenses as a percent of average total assets4.4 5.0 4.1 4.4
Book value per common share$25.95 $25.69 $25.48 $21.67
Tangible common stockholders' equity to tangible assets (7)$25.85 $25.59 $25.37 $21.54
CAPITAL RATIOS (Anchor Bank)

Tier 1 leverage14.3 14.3 16.3 13.8
Common equity tier 1 capital (8)17.0 16.2 19.0 N/A
Tier 1 risk-based17.0 16.2 19.0 17.0
Total risk-based18.2 17.4 20.2 18.3
ASSET QUALITY
Nonaccrual and loans 90 days or more past due and still accruing interest as a percent of total loans0.8 0.7 0.9 0.9
Allowance for loan losses as a percent of total loans1.3 1.3 1.4 1.4
Allowance as a percent of total nonperforming loans160.6 185.0 146.1 159.5
Nonperforming assets as a percent of total assets0.7 0.7 0.9 2.3
Net charge-offs to average outstanding loans0.02 0.03 0.06 0.22
Classified loans$2,748 $3,682 $5,093 $4,503
_____________________

(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 common stockholders' equity excludes intangible assets. Tangible assets exclude intangible assets. These ratios represent non-GAAP financial measures. See also Non-GAAP Financial Measures reconciliation tables below.
(8) The common equity Tier 1 capital ratio was required beginning the quarter ended March 31, 2015.

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 ratio of tangible common stockholders’ equity to tangible assets, a non-GAAP financial measure. We calculate tangible common equity by excluding intangible assets from stockholders’ equity. We calculate tangible assets by excluding the balance of intangible assets from total assets. The Company believes that this 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 these measures to facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity determined in accordance with GAAP. These non-GAAP measures 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,
2015
June 30, 2015 March 31, 2015 September 30,
2014
(In thousands)
Stockholders' equity$63,292 $63,723 $63,167 $53,656
Less: intangible assets238 235 265 332
Tangible common stockholders' equity$63,054 $63,488 $62,902 $53,324
Total assets$380,932 $379,230 $378,289 $385,571
Less: intangible assets238 235 265 332
Tangible assets$380,694 $378,995 $378,024 $385,239




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

Source:Anchor Bancorp