×

Anchor Bancorp Reports Fourth Quarter and Fiscal 2017 Earnings

LACEY, Wash., July 24, 2017 (GLOBE NEWSWIRE) -- Anchor Bancorp (NASDAQ:ANCB) (“Company”), the holding company for Anchor Bank (“Bank”), today reported net income of $655,000 or $0.27 per diluted share, for the fourth quarter of its fiscal year ended June 30, 2017 compared to net income of $335,000 or $0.14 per diluted share for the same period last year. For the fiscal year ended June 30, 2017 the Company reported net income of $2.4 million or $0.97 per diluted share, compared to net income of $495,000 or $0.20 per diluted share for the fiscal year ended June 30, 2016.

"I am pleased with our quarter as well as our year-end results. Over the last year, deposits increased by $44.3 million, net loans by $30.5 million and borrowings declined by $16.5 million. We managed to increase our net interest margin during fiscal 2017 while decreasing our efficiency ratio," stated Jerald L. Shaw the Company's President and Chief Executive Officer.

Fiscal Fourth Quarter Highlights

  • Loan receivable, net, increased $30.5 million or 8.8% to $377.9 million at June 30, 2017 from $347.4 million at June 30, 2016;
  • Nonperforming loans decreased $1.2 million, or 48.7%, to $1.2 million at June 30, 2017 from $2.4 million at March 31, 2017 and were $2.0 million at June 30, 2016;
  • Our allowance for loan losses to nonperforming loans increased to 338.5% at June 30, 2017 from 167.4% at March 31, 2017, and 191.6% at June 30, 2016; and
  • Net interest margin ("NIM") was 4.32% during the fourth quarter, an increase of 22 basis points compared to 4.10% for the preceding quarter and 18 basis points more than the 4.14% for the quarter ended June 30, 2016.

Balance Sheet Review

Total assets increased by $31.0 million, or 7.2%, to $462.5 million at June 30, 2017 from $431.5 million at June 30, 2016. Cash and cash equivalents increased $5.9 million, or 70.6%, to $14.2 million at June 30, 2017 from $8.3 million at June 30, 2016 due to an increase in deposits. Securities available-for-sale and held-to-maturity decreased during the year by $2.5 million, or 10.5%, and $1.3 million, or 21.3%, respectively. The decreases in these portfolios were primarily the result of contractual principal repayments.

Loans receivable, net, increased $30.5 million, or 8.8%, to $377.9 million at June 30, 2017 from $347.4 million at June 30, 2016. Construction loans increased $27.4 million, or 125.5%, to $49.2 million at June 30, 2017 from $21.8 million at June 30, 2016. There was $61.6 million in undisbursed construction loan commitments at June 30, 2017. Our construction loans are primarily for the construction of multi-family and hospitality properties and to a lesser extent, loans for the construction of one-to-four family residences. Multi-family loans increased $6.8 million, or 12.6%, to $60.5 million at June 30, 2017 from $53.7 million at June 30, 2016. Commercial real estate loans increased $6.0 million, or 4.0%, to $155.5 million at June 30, 2017 from $149.5 million at June 30, 2016. Land loans increased $1.2 million, or 17.8%, to $8.0 million at June 30, 2017 from $6.8 million at June 30, 2016. One-to-four family loans decreased $1.5 million, or 2.4%, to $59.7 million at June 30, 2017 from $61.2 million at June 30, 2016. Consumer loans decreased $3.4 million, or 15.2%, to $18.7 million at June 30, 2017 from $22.1 million at June 30, 2016. Commercial business loans decreased $5.2 million, or 14.2%, to $31.6 million at June 30, 2017 from $36.8 million at June 30, 2016.

Loans receivable consisted of the following at the dates indicated:

June 30, 2017 March 31, 2017 June 30, 2016
(In thousands)
Real estate:
One-to-four family$59,735 $59,275 $61,230
Multi-family60,500 61,106 53,742
Commercial155,525 147,336 149,527
Construction49,151 49,939 21,793
Land loans8,054 9,330 6,839
Total real estate332,965 326,986 293,131
Consumer:
Home equity13,991 14,655 16,599
Credit cards2,596 2,559 2,969
Automobile627 622 597
Other consumer1,524 1,643 1,933
Total consumer18,738 19,479 22,098
Business:
Commercial business31,603 37,762 36,848
Total Loans383,306 384,227 352,077
Less:
Deferred loan fees and loan premiums, net1,292 1,393 947
Allowance for loan losses4,106 3,959 3,779
Loans receivable, net$377,908 $378,875 $347,351

Total liabilities increased $28.4 million between June 30, 2017 and June 30, 2016, primarily as the result of a $44.3 million increase in deposits, primarily due to a $26.1 million increase in certificates of deposit and a $13.9 million increase in money market accounts, partially offset by the repayment of $16.5 million of FHLB advances during the year ended June 30, 2017. The increase in deposit accounts was the result of the Bank's deposit marketing campaign, as well as other deposit gathering activities. We have also increased commercial lending which has increased the level of larger deposit customers.

Deposits consisted of the following at the dates indicated:

June 30, 2017 March 31, 2017 June 30, 2016
Amount Percent Amount Percent Amount Percent
(Dollars in thousands)
Noninterest-bearing demand deposits$52,606 15.2% $57,732 16.8% $50,781 16.8%
Interest-bearing demand deposits31,464 9.1 29,863 8.7 27,419 9.1
Money market accounts73,154 21.2 84,105 24.5 59,270 19.7
Savings deposits43,454 12.6 44,558 13.0 44,986 15.0
Certificates of deposit144,509 41.9 127,007 37.0 118,438 39.4
Total deposits$345,187 100.0% $343,265 100.0% $300,894 100.0%

Credit Quality

Total delinquent loans (past due 30 days or more), increased $621,000, or 19.0%, to $3.9 million at June 30, 2017 from $3.3 million at June 30, 2016. The increase was primarily due to a $2.0 million commercial real estate loan becoming delinquent during this quarter although at June 30, 2017 the loan was still accruing interest. The percentage of nonperforming loans, consisting solely of nonaccrual loans, to total loans decreased to 0.3% at June 30, 2017 from 0.6% at June 30, 2016. The Company recorded a $25,000 provision for loan losses for the quarter ended June 30, 2017 compared to a $175,000 provision for the quarter ended June 30, 2016 as a result of increased credit quality in our loan portfolio. The allowance for loan losses of $4.1 million at June 30, 2017 represented 1.1% of loans receivable and 338.5% of nonperforming loans. This compares to an allowance for loan losses of $3.8 million at June 30, 2016, representing 1.1% of loans receivable and 191.6% of nonperforming loans.

Nonperforming loans decreased by $1.2 million to $1.2 million at June 30, 2017 from $2.4 million at March 31, 2017 and $2.0 million at June 30, 2016. Nonperforming loans consisted of the following at the dates indicated:

June 30, 2017 March 31, 2017 June 30, 2016
(In thousands)
Real estate:
One-to-four family$1,170 $2,059 $1,539
Commercial 202 319
Total real estate1,170 2,261 1,858
Consumer:
Home equity43 22 16
Other 1
Total consumer43 22 17
Business:
Commercial business 82 97
Total$1,213 $2,365 $1,972

Capital

As of June 30, 2017, 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 13.0%, 14.1%, 14.1% and 15.1%, respectively. As of June 30, 2016, these ratios were 13.5%, 14.7%, 14.7%, and 15.7%, 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 14.0%, 15.2%, 15.2%, and 16.2% as of June 30, 2017. As of June 30, 2016, these ratios were 14.4%, 15.7%, 15.7%, and 16.6%, respectively.

Operating Results

Net interest income. Net interest income before the provision for loan losses increased $636,000, or 16.1%, to $4.6 million for the quarter ended June 30, 2017 from $3.9 million for the quarter ended June 30, 2016. For the year ended June 30, 2017, net interest income before the provision for loan losses increased $2.3 million, or 15.4%, to $17.0 million from $14.7 million for fiscal 2016. For both periods the increase was due primarily to an increase in average loans receivable. Average loans receivable, net, for the quarter ended June 30, 2017 increased $47.7 million, or 13.8%, to $391.2 million from $343.5 million for the quarter ended June 30, 2016. For the year ended June 30, 2017, average loans receivable, net, increased $59.0 million, or 19.0%, to $369.7 million from $310.7 million for the year ended June 30, 2016.

The Company's net interest margin increased 18 basis points to 4.32% for the quarter ended June 30, 2017 compared to 4.14% for the quarter ended June 30, 2016. The yield on mortgage-backed securities increased to 2.36% from 2.03% for the same period in the prior year. The average yield on interest-earning assets increased 28 basis points to 5.19% from 4.91% for the quarters ended June 30, 2017 and 2016. The average cost of interest-bearing liabilities increased 11 basis points to 1.08% for the fourth quarter ended June 30, 2017 compared to 0.97% for the same period in the prior year. For the year ended June 30, 2017, the Company's net interest margin increased seven basis points to 4.19% compared to 4.12% for the year ended June 30, 2016. The improvement in our net interest margin compared to the same period last year reflects an increase in average loans receivable during the year, in particular construction loans. The average yield on interest-earning assets increased 10 basis points to 5.01% for the year ended June 30, 2017 compared to 4.91% for the same period in the prior year. The average cost of interest-bearing liabilities increased two basis points to 1.03% for the year ended June 30, 2017 compared to 1.01% for the same period of the prior year reflecting the low interest rate environment that persisted throughout the year.

Provision for loan losses. In connection with its analysis of the loan portfolio at June 30, 2017, management determined that a $25,000 provision for loan losses was required for the quarter compared to a $175,000 provision for the same period in the prior year. There was a $310,000 provision for loan losses for the year ended June 30, 2017 and a $340,000 provision for loan losses was recorded during the same period in the prior year.

Noninterest income. Noninterest income increased $47,000, or 4.5%, to $1.1 million for the quarter ended June 30, 2017 compared to $1.0 million for the same quarter a year ago. The increase in noninterest income was primarily attributable due to the $28,000, or 90.3%, increase in the gain on sale of loans to $59,000 from $31,000 for the same quarter a year ago. In addition, other loan fees income increased $24,000 in the quarter ended June 30, 2017 to $214,000 compared to $190,000 for the same quarter a year ago. Noninterest income increased $59,000, or 1.4%, to $4.3 million during the year ended June 30, 2017 compared to $4.2 million for the same period in 2016 primarily due to a $125,000 or 17.7% increase in other loan fees income during fiscal 2017 reflecting our increased loan production during the year.

Noninterest expense. Noninterest expense increased $213,000, or 4.7%, to $4.7 million for the quarter ended June 30, 2017 from $4.5 million for the quarter ended June 30, 2016. As announced on April 11, 2017, we entered into a merger agreement with Washington Federal, Inc. Pending the receipt of regulatory approvals, the approval of Anchor's shareholders and the satisfaction of other customary closing conditions, the transaction is expected to close in the fourth calendar quarter of 2017. General and administrative expenses increased $415,000, or 58.3%, to $1.1 million from $712,000 primarily due to legal and professional fees of $406,000 associated with the proposed merger. In addition our information technology costs increased $104,000, or 22.3%, to $571,000 from $467,000 for the quarter ended June 30, 2017 primarily due to increased core processing costs and a software termination cost of $44,000. Partially offsetting these increases was a $167,000 decrease in compensation and benefits expense primarily due to a $393,000 reduction in stock-based compensation expense related to the Anchor Bancorp 2015 Equity Plan.

Noninterest expense decreased $502,000, or 2.8%, for the year ended June 30, 2017 to $17.5 million from $18.0 million for the year ended June 30, 2016. The decrease was primarily due to compensation and benefits expense decreasing $689,000, or 7.1%, from $9.7 million at June 30, 2016 to $9.0 million for the year ended June 30, 2017. The decrease in compensation and benefits expense was primarily due to a reduction of $1.2 million of stock based compensation awarded under the Plan to $636,000 for the year ended June 30, 2017 from $1.8 million in the previous year. Partially offsetting the decrease in compensation and benefits was an increase of $315,000 for employee loan commissions to $505,000 for the year ended June 30, 2017 from $190,000 in the previous year resulting from increased loan production. These decreases were partially offset by a $345,000 increase in information technology expense to $2.1 million for the year ended June 30, 2017 from $1.8 million for the previous year primarily resulting from the same reasons discussed above for the fourth quarter. General and administrative costs increased $175,000, or 5.5%, to $3.4 million during the year ended June 30, 2017 from $3.2 million for the same period in 2016 primarily for the same reason discussed above for the fourth quarter.

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 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; the Merger Agreement limits our ability to pursue an alternative acquisition proposal and requires us to pay a termination fee of $2.2 million under limited circumstances relating to alternative acquisition proposals; 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 CONDITIONJune 30, March 31, June 30,
(Dollars in thousands), (unaudited)2017 2017 2016
ASSETS
Cash and cash equivalents$14,194 $16,614 $8,320
Securities available-for-sale, at fair value21,170 20,720 23,665
Securities held-to-maturity, at amortized cost4,949 5,145 6,291
Loans held for sale1,551 1,528 1,864
Loans receivable, net of allowance for loan losses of $4,106, $3,959 and $3,779 377,908 378,875 347,351
Life insurance investment, net of surrender charges20,030 19,902 19,515
Accrued interest receivable1,332 1,198 1,182
Real estate owned, net867 220 373
Federal Home Loan Bank (FHLB) stock, at cost2,348 2,548 2,959
Property, premises and equipment, net9,360 9,533 10,001
Deferred tax asset, net8,011 8,319 8,870
Prepaid expenses and other assets805 847 1,113
Total assets$462,525 $465,449 $431,504
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Noninterest-bearing$52,606 $57,732 $50,781
Interest-bearing292,581 285,533 250,113
Total deposits345,187 343,265 300,894
FHLB advances45,500 50,500 62,000
Advance payments by borrowers for taxes and insurance1,195 910 1,114
Supplemental Executive Retirement Plan liability1,709 1,702 1,691
Accounts payable and other liabilities3,083 4,083 2,609
Total liabilities396,674 400,460 368,308
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; 2,504,740 issued and outstanding at June 30, 2017, and 2,504,740 issued and outstanding at March 31, 2017, and 2,515,803 issued and outstanding at June 30, 201625 25 25
Additional paid-in capital22,619 22,459 22,157
Retained earnings44,585 43,930 42,235
Unearned Employee Stock Ownership Plan (ESOP) shares(607) (623) (672)
Accumulated other comprehensive loss, net of tax(771) (802) (549)
Total stockholders’ equity65,851 64,989 63,196
Total liabilities and stockholders’ equity$462,525 $465,449 $431,504


ANCHOR BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOMEThree Months Ended Year Ended
(Dollars in thousands, except per share data) (unaudited)June 30, June 30,
2017 2016 2017 2016
Interest income:
Loans receivable, including fees$5,324 $4,506 $19,580 $16,779
Securities24 17 105 69
Mortgage-backed securities155 155 594 676
Total interest income5,503 4,678 20,279 17,524
Interest expense:
Deposits770 618 2,758 2,587
FHLB advances152 115 563 243
Total interest expense922 733 3,321 2,830
Net interest income before provision for loan losses4,581 3,945 16,958 14,694
Provision for loan losses25 175 310 340
Net interest income after provision for loan losses4,556 3,770 16,648 14,354
Noninterest income:
Deposit service fees320 328 1,330 1,347
Other deposit fees193 191 751 721
Other loan fees214 190 832 707
Gain on sale of loans59 31 183 158
Bank owned life insurance127 127 515 540
Other income183 182 653 732
Total noninterest income1,096 1,049 4,264 4,205
Noninterest expense:
Compensation and benefits2,222 2,389 9,019 9,708
General and administrative expenses1,127 712 3,350 3,175
Real estate owned holding costs11 50 48 146
Federal Deposit Insurance Corporation insurance premiums39 66 145 264
Information technology571 467 2,105 1,760
Occupancy and equipment456 480 1,889 1,875
Deposit services111 143 462 477
Marketing167 184 564 674
Loss on sale of property, premises and equipment 1 4
Gain on sale of real estate owned (1) (59) (58)
Total noninterest expense4,704 4,491 17,523 18,025
Income before provision for income taxes948 328 3,389 534
Provision (benefit) for income taxes293 (7) 1,039 39
Net income$655 $335 $2,350 $495
Basic earnings per share$0.27 $0.14 $0.98 $0.20
Diluted earnings per share$0.27 $0.14 $0.97 $0.20


As of or For the
Quarter Ended
(unaudited)
June 30,
2017
March 31,
2017
December 31,
2016
June 30,
2016
(Dollars in thousands)
SELECTED PERFORMANCE RATIOS
Return on average assets (1)0.58% 0.64% 0.39% 0.32%
Return on average equity (2)4.48 4.79 2.85 2.31
Average equity-to-average assets (3)12.85 13.31 13.76 14.07
Interest rate spread (4)4.11 3.88 3.95 3.94
Net interest margin (5)4.32 4.10 4.16 4.14
Efficiency ratio (6)82.9 78.2 86.6 89.9
Average interest-earning assets to average interest-bearing liabilities124.2 126.2 125.4 126.0
Other operating expenses as a percent of average total assets4.1% 3.7% 4.1% 4.4%
Book value per common share$26.29 $25.95 $25.58 $25.12
Tangible book value per common share (7)$26.20 $25.86 $25.5 $25.04
CAPITAL RATIOS (Anchor Bank)
Tier 1 leverage13.0% 13.1% 13.3% 13.5%
Common equity Tier 1 capital14.1 13.7 14.2 14.7
Tier 1 risk-based14.1 13.7 14.2 14.7
Total risk-based15.1 14.6 15.2 15.7
ASSET QUALITY
Nonaccrual and loans 90 days or more past due and still accruing interest as a percent of total loans0.3% 0.6% 0.8% 0.6%
Allowance for loan losses as a percent of total loans1.1 1.0 1.1 1.1
Allowance as a percent of total nonperforming loans338.5 167.4 139.1 191.6
Nonperforming assets as a percent of total assets0.4 0.6 0.7 0.6
Net (recoveries) charge-offs to average outstanding loans(0.03)% 0.01% 0.10% 0.11%
Classified loans$3,222 $2,645 $3,115 $2,773
_____________________
(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 tables 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 is presented below.

June 30, 2017 March 31, 2017 December 31, 2016 June 30, 2016
(In thousands)
Stockholders' equity $65,851 $64,989 $64,082 $63,196
Less: intangible assets 232 214 213 206
Tangible common stockholders' equity $65,619 $64,775 $63,869 $62,990
Total assets $462,525 $465,449 $440,911 $431,504
Less: intangible assets 232 214 213 206
Tangible assets $462,293 $465,235 $440,698 $431,298
Tangible common stockholders' equity $65,619 $64,775 $63,869 $62,990
Common shares outstanding at end of period 2,504,740 2,504,740 2,504,740 2,515,803
Common stockholders' equity (book value) per share (GAAP) $26.29 $25.95 $25.58 $25.12
Tangible common stockholders' equity (tangible book value) per share (non-GAAP) $26.20 $25.86 $25.50 $25.04

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