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Anchor Bancorp Reports Second Quarter Fiscal 2013 Earnings

LACEY, Wash., Jan. 29, 2013 (GLOBE NEWSWIRE) -- Anchor Bancorp (Nasdaq:ANCB) ("Company"), the holding company for Anchor Bank ("Bank"), today reported second quarter earnings for the fiscal year ending June 30, 2013. For the quarter ended December 31, 2012, the Company reported net income of $225,000 or $.09 per diluted share, compared to a net income of $93,000 or $.04 per diluted share for the same period last year.

"Our results continue to improve due to our continued improvement in credit quality and the reduced provision during the quarter. Our total non-interest expense decreased $854,000 during the current quarter as compared to the quarter ended December 31, 2011 which reflects the decline in real estate owned impairment as well as technology expenses as we take advantage of efficiencies from our new core processing system that was completed last year. The prolonged low interest rate environment continues to pressure our net interest margin, which decreased from 3.68% during the quarter ended September 30, 2012 to 3.54% this quarter. This decline was due in part to our focus on credit risk during this difficult economic period resulting in our maintaining higher liquidity at relatively low interest rates. This higher liquidity will enable us to take advantage of lending and other opportunities when the economy recovers and interest rates rise," stated Jerald L. Shaw, President and Chief Executive Officer.

Fiscal Second Quarter Highlights

  • Total classified loans decreased $7.4 million or 22.5% to $25.4 million at December 31, 2012 from $32.8 million at June 30, 2012;
  • Total non-performing loans decreased by $3.8 million to $9.1 million or 29.4% at December 31, 2012 from $12.9 million at December 31, 2011;
  • Provision for loan losses declined to $225,000 for the quarter ended December 31, 2012 compared to $475,000 for the quarter ended December 31, 2011.

Credit Quality

Total delinquent (past due 30 days or more), non-accrual loans and loans 90 days or more past due and still accruing interest increased $2.7 million to $16.9 million at December 31, 2012 from $14.2 million at June 30, 2012. The increase was primarily due to one commercial real estate loan with an unpaid principal balance of $5.5 million more than 90 days past due and still accruing interest because the loan is beyond its maturity date. The ratio of non-performing loans, which includes those loans which are 90 days or more past due and still accruing interest or on non-accrual status, to total loans increased slightly to 3.1% at December 31, 2012 from 3.0% at June 30, 2012 because of this commercial real estate loan. The Company recorded a $225,000 provision for loan losses for the current quarter compared to $475,000 for the quarter ended December 31, 2011. The allowance for loan losses of $5.2 million at December 31, 2012 represented 1.8% of loans receivable and 56.6% of non-performing loans.

Non-performing loans increased by $387,000 to $9.1 million at December 31, 2012 from $8.7 million at June 30, 2012 and decreased from $12.9 million at December 31, 2011. Non-performing loans consisted of the following at the dates indicated:

December 31,
2012

June 30, 2012
December 31,
2011
(In thousands)
Real estate:
One-to-four family $ 2,116 $ 1,878 $ 3,519
Multi-family -- -- --
Commercial 5,516 (1) -- 4,097
Construction -- 3,369 4,134
Land 73 109 23
Total real estate 7,705 5,356 11,773
Consumer:
Home equity 247 159 348
Automobile 53 66 119
Credit cards 19 16 166
Other -- 1 7
Total consumer 319 242 640
Business:
Commercial business 1,085 3,124 484
Total $ 9,109 $ 8,722 $ 12,897
(1) Represents a $5.5 million commercial real estate loan which is past due more than 90 days and still accruing interest.

As of December 31, 2012, June 30, 2012, and December 31, 2011 there were 37, 30, and 31 loans, respectively, with aggregate net principal balances of $16.2 million, $15.1 million, and $17.2 million, respectively, that we have identified as "troubled debt restructures." At December 31, 2012, June 30, 2012, and December 31, 2011 there were $3.6 million, $1.2 million, and $2.0 million, respectively of "troubled debt restructures" included in the non- performing loans above.

As of December 31, 2012, the Company had 40 properties in real estate owned ("REO") with an aggregate book value of $8.6 million compared to 71 properties with an aggregate book value of $6.7 million at June 30, 2012, and 109 properties in REO with an aggregate book value of $8.2 million at December 31, 2011. The decrease in number of properties during the six months ended December 31, 2012 was primarily attributable to ongoing sales of residential properties. Twelve residential properties and one commercial real estate property were sold last quarter. During the quarter ended December 31, 2012 the Bank sold seven residential real estate properties located in Washington State for an aggregate loss of $84,000. The aggregate book value of REO increased primarily due to the foreclosure during the current quarter of a $3.5 million commercial real estate loan located in Pacific, Washington, which is the Bank's largest REO property at December 31, 2012. At December 31, 2012, the Bank owned 13 one-to-four family residential properties with an aggregate book value of $3.1 million, 20 residential building lots with an aggregate book value of $687,000, one vacant land parcel with a book value of $15,300, and six parcels of commercial real estate with an aggregate book value of $4.8 million. Our REO is located in southwest Washington and the greater Portland area of northwest Oregon, with 34 of the parcels in Washington and the remaining six in Oregon.

Capital

As of December 31, 2012, the Bank exceeded all regulatory capital requirements with Tier 1 Leverage-Based Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios of 11.4%, 16.8% and 18.1%, respectively. As of December 31, 2011, these ratios were 10.6%, 16.2%, and 17.5%, respectively.

Anchor Bancorp exceeded all regulatory capital requirements with Tier 1 Leverage-Based Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios of 11.7%, 17.3%, and 18.5% as of December 31, 2012.

Balance Sheet Review

Total assets decreased by $2.0 million, or 0.4%, to $468.8 million at December 31, 2012 from $470.8 million at June 30, 2012. Cash and due from banks decreased $4.4 million or 5.6%, loans receivable decreased $2.0 million, or 0.7%, and securities available-for-sale increased, $1.5 million, or 3.1%.

Mortgage-backed securities available for sale increased $1.7 million, or 3.6%, to $48.8 million at December 31, 2012 from $47.1 million at June 30, 2012. The increase in this portfolio was primarily the result of purchases of eight Freddie Mac mortgage-backed securities totaling $10.2 million and contractual payments of $8.2 million.

Loans receivable, net, decreased $2.0 million or 0.7% to $285.7 million at December 31, 2012 from $287.7 million at June 30, 2012 as a result of normal principal reductions, transfers to REO and loan charge-offs exceeding new loan production. Commercial real estate loans increased $11.5 million or 11.8% to $108.8 million from $97.3 million at June 30, 2012 and one-to-four family loans decreased $5.7 million or 6.9% to $77.0 million from $82.7 million during the same period. The Bank continues to reduce its exposure to land and construction loans. The balance of these loans declined to $10.0 million at December 31, 2012 compared to $13.8 million at June 30, 2012. All other loan categories decreased a net $4.0 million.

Loans receivable consisted of the following at the dates indicated:

Real Estate: December 31,
2012

June 30, 2012
December 31,
2011
(In thousands)
One-to-four family $ 77,035 $ 82,709 $ 90,352
Multi-family 40,824 42,032 46,004
Commercial 108,786 97,306 100,189
Construction 4,581 6,696 8,128
Land loans 5,429 7,062 6,131
Total real estate 236,655 235,805 250,804
Consumer:
Home equity 28,064 31,504 33,402
Credit cards 5,014 5,180 6,653
Automobile 2,409 3,342 4,287
Other consumer 2,822 2,968 3,259
Total consumer 38,309 42,994 47,601
Business:
Commercial business loans 16,730 16,618 16,083
Total Loans 291,694 295,417 314,488
Less:
Deferred loan fees 808 605 562
Allowance for loan losses 5,152 7,057 6,469
Loans receivable, net $ 285,734 $ 287,755 $ 307,457

Total liabilities decreased $2.3 million between June 30, 2012 and December 31, 2012, primarily as the result of a $2.5 million or 0.7% decrease in deposits. Our core deposits, which consist of all deposits other than certificates of deposit increased by $10.0 million or 5.7% to $184.6 million from $174.6 million at June 30, 2012.

Deposits consisted of the following at the dates indicated:

December 31, 2012 June 30, 2012 December 31, 2011
Amount Percent Amount Percent Amount Percent
(Dollars in thousands)
Noninterest-bearing demand deposits $38,504 11.2% $37,941 11.0% $29,966 8.6%
Interest-bearing demand deposits 19,688 5.8% 16,434 4.8% 18,321 5.2%
Savings deposits 36,839 10.7% 36,475 10.5% 35,060 10.0%
Money market accounts 89,576 26.1% 83,750 24.2% 84,746 24.3%
Certificates of deposit 158,706 46.2% 171,198 49.5% 181,385 51.9%
Total deposits $343,313 100.0% $345,798 100.0% $349,478 100.0%

FHLB advances remained unchanged at $64.9 million at December 31, 2012 and June 30, 2012.

Total stockholders' equity increased $375,000 or 0.7% to $54.4 million at December 31, 2012 from $54.0 million at June 30, 2012. The increase was primarily due to the $503,000 in net income during the six months ended December 31, 2012 offset by an increase in accumulated other comprehensive loss of $170,000. Accumulated other comprehensive loss was $195,000 at December 31, 2012 as compared to a loss of $25,000 at June 30, 2012.

Operating Results

Anchor Bancorp had net income of $225,000 or $.09 per diluted share, for the three months ended December 31, 2012 compared to a net income of $93,000 or $0.04 per diluted share for the same period in 2011. For the six months ended December 31, 2012, net income was $503,000 or $.20 per diluted share compared to a net loss of $1.6 million or $.66 per diluted share for the comparable period in 2011.

Net interest income. Net interest income before the provision for loan losses decreased $329,000, or 7.9%, to $3.8 million for the quarter ended December 31, 2012 from $4.2 million for the quarter ended December 31, 2011. For the six months ended December 31, 2012 net interest income before the provision for loan losses decreased $531,000 or 6.4% to $7.8 million from $8.3 million for the same period in 2011.

The Company's net interest margin decreased 15 basis points to 3.54% for the quarter ended December 31, 2012 from 3.69% for the comparable period in 2011. The average yield on interest-earning assets decreased 42 basis points to 4.67% for the quarter ended December 31, 2012 compared to 5.09% for the same period in the prior year. The decline in the yield on interest-earnings assets was primarily attributable to the decrease in loan volume and the downward repricing of investment securities. The average cost of interest-bearing liabilities decreased 29 basis points to 1.32% for the quarter ended December 31, 2012 compared to 1.61% for the same period in the prior year.

Provision for loan losses. In connection with its analysis of the loan portfolio at December 31, 2012 management determined that a provision for loan losses of $225,000 was required for the quarter ended December 31, 2012 compared to $475,000 for the same period of the prior year. The provision for loan losses decreased by $475,000 to $525,000 for the six months ended December 31, 2012 from $1.0 million for the same period last year.

Noninterest income. Noninterest income decreased $643,000, or 32.8%, to $1.3 million for the quarter ended December 31, 2012 compared to $2.0 million for the same quarter a year ago. The decrease in noninterest income was attributable to a combination of several factors: there was no gain on sale of investments for the quarter ended December 31, 2012 as compared to $686,000 for quarter ended December 31, 2011 and deposit service fees declined $122,000. These decreases were partially offset by an increase of $259,000 for gain on sale of loans for the quarter ended December 31, 2012. The increase in the amount of gain on sale of loans was the result of a greater volume of loans sold into the secondary market during the three months ended December 31, 2012 compared to the three months ended December 31, 2011, which was attributable to increased demand for one-to-four family loans as a result of refinancing activity. Noninterest income decreased $720,000 or 21.1% to $2.7 million during the six months ended December 31, 2012 compared to $3.4 million for the same period in 2011. The decrease was primarily due to no gain on sales of investments compared to $879,000 for the same period in prior year and a $261,000 decline in deposit service fees partially offset by a $448,000 increase in gain on sales of loans.

Noninterest expense. Noninterest expense decreased $854,000, or 15.4%, to $4.7 million for the three months ended December 31, 2012 from $5.6 million for the three months ended December 31, 2011. The decrease was primarily due to expenses related to information technology which decreased $383,000 or 50.6% to $374,000 from $757,000 and to decline in REO related expenses. Real estate owned impairment expense decreased $256,000 or 54.6% to $213,000 from $469,000 during the second fiscal quarter 2012 compared to the same period in 2011, reflecting the stabilization in the real estate market. Noninterest expense decreased $2.9 million in the six months ended December 31, 2012 to $9.5 million from $12.4 million for the six months ended December 31, 2011. The decrease was primarily due to the decrease for information technology of $1.3 million which was related to core conversion costs and a decrease in REO impairment expense of $1.1 million in the same period in 2011.

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 13 full-service banking offices (including three Wal-Mart store locations) within Grays Harbor, Thurston, Lewis, Pierce and Mason counties, Washington. In addition we have one loan production office located in Grays Harbor County. The Company's common stock is traded on the NASDAQ Global Select 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: 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 non-performing 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, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Federal Reserve Bank of San Francisco and our bank subsidiary by the Federal Deposit Insurance Corporation ("FDIC"), the Washington State Department of Financial Institutions, Division of Banks ("Washington DFI") or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute additional enforcement actions against the Company or the Bank, to take additional corrective action and refrain from unsafe and unsound practices, which may also 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; our compliance with regulatory enforcement actions including; the requirements and restrictions that have been imposed under the Supervisory Directive the Bank entered into with the FDIC and the Washington DFI and the possibility that noncompliance by the Bank could result in the imposition of additional requirements or restrictions; our ability to attract and retain deposits; increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretations of regulatory capital or the other rules, including changes related to the Basel III requirements, the impact of the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations, including the interpretation of regulatory capital or other rules; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed in our Form 10-K and other reports filed with the Securities and Exchange Commission. 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 undertake no responsibility to update or revise any forward-looking statements.

ANCHOR BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands), (unaudited)
December 31, 2012 June 30, 2012
ASSETS
Cash and due from banks $ 74,258 $ 78,673
Securities available for sale, at fair value 50,245 48,717
Securities held to maturity, at amortized cost 9,289 7,179
Loans held for sale 123 312
Loans receivable, net of allowance for loan losses of $5,152 and $7,057 285,734 287,755
Life insurance investment, net of surrender charges 18,573 18,257
Accrued interest receivable 1,704 1,532
Real estate owned, net 8,610 6,708
Federal Home Loan Bank (FHLB) of Seattle stock, at cost 6,394 6,510
Property, premises and equipment, net 11,700 12,213
Deferred tax asset, net 642 555
Prepaid expenses and other assets 1,577 2,404
Total assets $ 468,849 $ 470,815
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 38,504 $ 37,941
Interest-bearing 304,809 307,857
Total deposits 343,313 345,798
FHLB advances 64,900 64,900
Advance payments by borrowers for taxes and insurance 865 562
Supplemental Executive Retirement Plan liability 1,683 1,764
Accounts payable and other liabilities 3,689 3,767
Total liabilities 414,450 416,791
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value per share; authorized 5,000, 5,000,000 shares; no shares issued or outstanding
-- --
Common stock, $.01 par value per share; authorized 45,000,000 shares; 2,550,000 issued and 2,461,033 outstanding at December 31, 2012 and 2,550,000 shares issued and 2,457,633 outstanding at June 30, 2012, respectively 25 25
Additional paid-in capital 23,211 23,202
Retained earnings, substantially restricted 32,248 31,746
Unearned employee stock ownership plan shares (890) (924)
Accumulated other comprehensive income (loss), net of tax (195) (25)
Total stockholders' equity 54,399 54,024
Total liabilities and stockholders' equity $ 468,849 $ 470,815
ANCHOR BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data) (unaudited)
Three Months Ended
December 31,
Six Months Ended
December 31,
2012 2011 2012 2011
Interest income:
Loans receivable, including fees $ 4,514 $ 5,181 $ 9,260 $ 10,428
Securities 67 84 128 178
Mortgage-backed securities 470 487 944 949
Total interest income 5,051 5,752 10,332 11,555
Interest expense:
Deposits 905 1,238 1,895 2,504
FHLB advances 313 352 626 709
Total interest expense 1,218 1,590 2,521 3,213
Net interest income before provision for loan losses 3,833 4,162 7,811 8,342
Provision for loan losses 225 475 525 1,000
Net interest income after provision for loan losses 3,608 3,687 7,286 7,342
Noninterest income
Deposit service fees 384 506 775 1,036
Other deposit fees 195 206 384 423
Gain on sale of investments -- 686 -- 879
Loan fees 215 257 399 485
Gain (loss) on sale of loans 238 (21) 415 (33)
Other income 288 329 719 622
Total noninterest income 1,320 1,963 2,692 3,412
Noninterest expense
Compensation and benefits 2,113 2,067 4,248 4,196
General and administrative expenses 922 903 1,741 2,012
Real estate owned impairment 213 469 448 1,588
Real estate owned holding costs 106 198 292 455
Federal Deposit Insurance Corporation (FDIC) insurance premiums 162 252 325 503
Information technology 374 757 734 2,036
Occupancy and equipment 602 523 1,140 1,050
Deposit services 166 120 355 227
Marketing 129 172 256 324
Loss on sale of property, premises and equipment -- 159 -- 107
Gain on sale of real estate owned (84) (63) (64) (122)
Total noninterest expense 4,703 5,557 9,475 12,376
Income (loss) before provision for income tax 225 93 503 (1,622)
Provision for income tax -- -- -- --
Net income (loss) $ 225 $ 93 $ 503 $ (1,622)
Basic earnings (loss) per share $0.09 $0.04 $0.20 $(0.66)
Diluted earnings (loss) per share $0.09 $0.04 $0.20 $(0.66)
As of or for the
Quarter Ended
(unaudited)
December 31,
2012
September 30,
2012

June 30, 2012
December 31,
2011
SELECTED PERFORMANCE RATIOS
Return (loss) on average assets (1) 0.19% 0.24% (0.07)% 0.08%
Return (loss) on average equity (2) 1.72% 2.12% (0.58)% 0.67%
Average equity-to-average assets (3) 11.24% 11.28% 11.35% 11.39%
Interest rate spread (4) 3.35% 3.48% 3.56% 3.49%
Net interest margin (5) 3.54% 3.68% 3.76% 3.69%
Efficiency ratio (6) 91.3% 89.2% 79.7% 90.7%
Average interest-earning assets to average interest-bearing liabilities 116.8% 117.0% 115.8% 114.2%
Other operating expenses as a percent of average total assets 4.0% 4.1% 3.7% 4.6%
CAPITAL RATIOS (Anchor Bank)
Tier 1 leverage 11.4% 11.3% 10.9% 10.6%
Tier 1 risk-based 16.8% 17.1% 17.0% 16.2%
Total risk-based 18.1% 18.4% 18.2% 17.5%
ASSET QUALITY
Nonaccrual and 90 days or more past due loans as a percent of total loans 3.1% 2.9% 3.0% 4.1%
Allowance for loan losses as a percent of total loans 1.8% 2.3% 2.4% 2.1%
Allowance as a percent of total non-performing loans 56.6% 78.4% 80.9% 50.2%
Non-performing assets as a percent of total assets 3.6% 3.0% 3.3% 4.3%
Net charge-offs to average outstanding loans 0.6% 0.2% 0.1% 0.4%
(1) Net income (loss) divided by average total assets.
(2) Net income (loss) divided by average equity.
(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.

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