Anchor Bancorp Reports Fourth Quarter and Fiscal 2014 Financial Earnings

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| Source: Anchor Bancorp

LACEY, Wash., July 28, 2014 (GLOBE NEWSWIRE) -- Anchor Bancorp (Nasdaq:ANCB) ("Company"), the holding company for Anchor Bank ("Bank"), today reported net income of $298,000 or $0.12 per diluted share, for the fourth quarter of its fiscal year ended June 30, 2014 compared to a net loss of $812,000 or $0.33 per diluted share for the same period last year. For the fiscal year ended June 30, 2014 the Company reported net income of $423,000 or $0.17 per diluted share compared to a net loss of $255,000 or $0.10 per diluted share for the fiscal year ended June 30, 2013.

"Our year-over-year operating results improved as a result of our continued commitment to improving our credit quality. Through our focused efforts on resolving our problem assets, nonperforming loans decreased $1.5 million and total classified assets decreased $10.7 million from June 30, 2013 to June 30, 2014. As a result of these declines, we were able to reduce our general loan loss provision by $750,000 for the year ended June 30, 2014 as compared to 2013. In addition, our total noninterest expense decreased $1.6 million from last year as real estate owned related expenses decreased significantly and improving real estate values in our market enabled us to record substantial gains on the sale of real estate owned. Based on our return to profitability we anticipate that continued profitability will enable us to reverse the valuation allowance associated with our deferred tax asset sometime in the next fiscal year," stated Jerald L. Shaw, the Company's President and Chief Executive Officer.

Fiscal Fourth Quarter Highlights (at or for the period ended June 30, 2014, compared to March 31, 2014, or June 30, 2013):

  • Total classified loans decreased $10.7 million or 61.8% to $6.6 million at June 30, 2014 from $17.3 million at June 30, 2013 and were $9.7 million at March 31, 2014;
  • Total delinquent loans (past due 30 days or more) decreased $2.7 million or 26.5% to $7.5 million at June 30, 2014 from $10.2 million at June 30, 2013;
  • Total nonperforming loans decreased by $1.5 million or 24.2% to $4.7 million at June 30, 2014 from $6.2 million at June 30, 2013; and
  • No provision for loan losses was recorded for the quarter and year ended June 30, 2014 or for the quarter ended June 30, 2013.

Credit Quality

Total delinquent loans (past due 30 days or more), decreased $2.7 million, or 26.5% to $7.5 million at June 30, 2014 from $10.2 million at June 30, 2013. The ratio of nonperforming loans, which includes nonaccrual loans and loans which are 90 days or more past due, to total loans decreased to 1.6% at June 30, 2014 from 2.2% at June 30, 2013. The continuing steady improvement in our asset quality has enabled the Company to not record a provision for loan losses since March 31, 2013. The allowance for loan losses of $4.6 million at June 30, 2014 represented 1.6% of loans receivable and 98.1% of nonperforming loans compared to an allowance of $5.1 million at June 30, 2013, representing 1.8% of loans receivable and 83.6% of nonperforming loans.

Nonperforming loans decreased by $51,000 to $4.7 million at June 30, 2014 from $4.8 million at March 31, 2014, and was $6.2 million at both December 31, 2013 and June 30, 2013. Nonperforming loans consisted of the following at the dates indicated:

  June 30, 2014 March 31,
2014
December 31,
2013
June 30, 2013
  (In thousands)
Real estate:        
One-to-four family  $ 2,101  $ 2,222  $ 2,245  $ 4,758
Multi-family 158 158 158
Commercial 2,070 1,898 3,145
Land 150 153 125 734
Total real estate 4,479 4,431 5,673 5,492
Consumer:        
Home equity 141 477 428
Automobile 2
Credit cards 18
Total consumer 141 477 448
Business:        
Commercial business 235 193 40 219
Total  $ 4,714  $ 4,765  $ 6,190  $ 6,159

We continue to restructure our delinquent loans, when appropriate, so our borrowers can continue to make payments while minimizing the Company's potential loss. As of June 30, 2014, March 31, 2014, and June 30, 2013 there were 45, 47, and 48 loans, respectively, with aggregate net principal balances of $11.3 million, $13.5 million, and $17.5 million, respectively, that we have identified as "troubled debt restructures." At June 30, 2014, March 31, 2014, December 31, 2013, and June 30, 2013 there were $2.2 million, $1.8 million, $1.7 million, and $3.6 million, respectively, of "troubled debt restructures" included in the nonperforming loans above. 

As of June 30, 2014, the Company had 20 real estate owned ("REO") properties with an aggregate book value of $5.1 million compared to19 properties with an aggregate book value of $5.5 million at March 31, 2014 and 21 properties with an aggregate book value of $6.2 million at June 30, 2013.  The decrease in number of properties during the year ended June 30, 2014 was primarily attributable to ongoing sales of residential properties. During the quarter ended June 30, 2014, the Company sold one commercial real estate property for $1.3 million, four residential real estate properties for $478,000 and three land parcels for $48,000 resulting in an aggregate gain on sale of $364,000. At June 30, 2014, the largest of the REO properties was a commercial real estate property totaling $3.4 million located in Pierce County, Washington.

The following is a summary of our REO properties listed by property type and county location:

  County      
  Grays
Harbor
Thurston Pierce All Other Total Number of
properties
Percent of
Total REO
  (In thousands)
REO:              
One-to-four family  $ 497 $ 166 $ — $ 555 $ 1,218 11 24.0 %
Commercial 149 3,415 121 3,685 4 72.8
Land 58 88 18 164 5 3.2
Total $ 704 $ 254 $ 3,433 $ 676 $ 5,067 20 100.0 %

Capital

As of June 30, 2014, 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 13.6%, 16.8% and 18.0%, respectively. As of June 30, 2013, these ratios were 11.4%, 16.7%, and 18.0%, 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 14.0%, 17.1%, and 18.3% as of June 30, 2014. As of June 30, 2013, these ratios were 11.7%, 17.2% and 18.4%, respectively.

Balance Sheet Review

Total assets decreased by $63.1 million, or 14.0%, to $389.1 million at June 30, 2014 from $452.2 million at June 30, 2013. Cash and cash equivalents decreased $50.6 million or 77.4% as we used our excess cash to repay $47.4 million of maturing FHLB advances. Securities available-for-sale and held-to-maturity decreased $9.4 million, or 19.4% and $1.5 million, or 14.9%, respectively. The decreases in securities were primarily the result of contractual principal repayments.

Loans receivable, net, increased $4.0 million or 1.5% to $281.5 million at June 30, 2014 from $277.5 million at June 30, 2013 as a result of new loan production exceeding principal reductions. Construction and land loans increased $12.8 million, net or 117.1% to $23.8 million at June 30, 2014 from $11.0 million at June 30, 2013. Of that increase $9.9 million is related to hotel. The residual increases are commercial real estate properties. Multi-family loans increased $9.1 million or 23.6% to $47.5 million at June 30, 2014 from $38.4 million at June 30, 2013. Commercial real estate loans increased $969,000 or 0.9% to $107.8 million at June 30, 2014 from $106.9 million at June 30, 2013. Partially offsetting these increases, one-to-four family loans decreased $10.9 million or 14.7% to $63.0 million from $73.9 million at June 30, 2013 and commercial business loans decreased $1.5 million or 8.1% to $16.7 million at June 30, 2014 from $18.2 million at June 30, 2013. In addition, consumer loans decreased $6.8 million or 19.3% to $28.3 million at June 30, 2014 from $35.1 million at June 30, 2013 as consumers continue to reduce their debt. The demand for loans in our market area has been modest during the current economic recovery.

Loans receivable consisted of the following at the dates indicated:

  June 30, 2014 March 31, 2014 June 30, 2013
  (In thousands)
Real estate:      
One-to-four family  $ 63,009  $ 65,928  $ 73,901
Multi-family 47,507 46,863 38,425
Commercial 107,828 108,178 106,859
Construction 19,690 11,234 5,641
Land loans 4,126 4,334 5,330
Total real estate 242,160 236,537 230,156
       
Consumer:      
Home equity 20,894 21,612 25,835
Credit cards 3,548 3,675 4,741
Automobile 1,073 1,216 1,850
Other consumer 2,838 2,629 2,723
Total consumer 28,353 29,132 35,149
       
Business:      
Commercial business 16,737 15,369 18,211
       
Total Loans 287,250 281,038 283,516
       
Less:      
Deferred loan fees 1,100 1,075 915
Allowance for loan losses 4,624 4,197 5,147
Loans receivable, net  $ 281,526  $ 275,766  $ 277,454

Total liabilities decreased $64.4 million between June 30, 2014 and June 30, 2013, primarily as the result of a $47.4 million or 73.0% decrease in Federal Home Loan Bank advances and a $17.6 million or 5.3% decline in deposits.

Deposits consisted of the following at the dates indicated:

  June 30, 2014 March 31, 2014 June 30, 2013
  Amount Percent Amount Percent Amount Percent
  (Dollars in thousands)        
Noninterest-bearing demand deposits  $ 41,149 13.2 %  $ 41,551 13.2 %  $ 39,713 12.1 %
Interest-bearing demand deposits 22,771 7.3 22,004 7.0 20,067 6.1
Money market accounts 69,610 22.4 72,434 22.9 82,603 25.1
Savings deposits 39,693 12.8 40,229 12.7 36,518 11.1
Certificates of deposit 137,811 44.3 139,516 44.2 149,683 45.6
Total deposits  $ 311,034 100.0 %  $ 315,734 100.0 %  $ 328,584 100.0 %

Total stockholders' equity increased $1.3 million or 2.5% to $53.7 million at June 30, 2014 from $52.4 million at June 30, 2013. The increase was primarily due to the $761,000 decrease in accumulated other comprehensive loss representing a decline in our unrealized losses on securities available-for-sale and our net income of $423,000 for year the ended June 30, 2014.

Operating Results

Net interest income. Net interest income before the provision for loan losses increased $291,000, or 9.2%, to $3.5 million for the quarter ended June 30, 2014 from $3.2 million for the quarter ended June 30, 2013. For the year ended June 30, 2014, net interest income before the provision for loan losses decreased $855,000 or 5.7% to $14.1 million from $15.0 million for fiscal 2013. Average loans receivable, net, for the quarter ended June 30, 2014 decreased $6.0 million or 2.1% to $282.2 million from $288.2 million for the quarter ended June 30, 2013. For the year ended June 30, 2014, average loans receivable, net, decreased $9.7 million or 3.3% to $282.6 million from $292.3 million for the year ended June 30, 2013.

The Company's net interest margin increased 90 basis points to 3.93% for the fourth quarter ended June 30, 2014 from 3.03% for the comparable period in 2013. The yield on mortgage-backed securities increased to 1.88% from 0.64% for the same period in the prior year. The average yield on interest-earning assets increased 82 basis points to 4.91% from 4.09% for the quarters ended June 30, 2014 and 2013. The average cost of interest-bearing liabilities decreased four basis points to 1.19% for the fourth quarter ended June 30, 2014 compared to 1.23% for the same period in the prior year. For the year ended June 30, 2014, the Company's net interest margin increased 34 basis points to 3.87% compared to 3.53% for the year ended June 30, 2013. The improvement in our net interest margin compared to the same quarter last year and a year ago reflects a significant reduction in the adverse effect of nonperforming assets and reductions in the cost of deposits and Federal Home Loan Bank ("FHLB") advances. The average yield on interest-earning assets increased 22 basis points to 4.88% for the year ended June 30, 2014 compared to 4.66% for the same period in the prior year. The average cost of interest-bearing liabilities decreased 10 basis points to 1.20% for the year ended June 30, 2014 compared to 1.30% for the same period of the prior year reflecting the low interest rate environment that has persisted throughout the year.

Provision for loan losses. In connection with its analysis of the loan portfolio at June 30, 2014, management determined that no provision for loan losses was required for the quarter ended June 30, 2014 and there was no provision for the same period of the prior year. There was no provision for loan losses for the year ended June 30, 2014 compared to $750,000 for last year, reflecting the decline in the amount of our nonperforming loans during the year.

Noninterest income. Noninterest income decreased $149,000, or 13.0%, to $1.0 million for the quarter ended June 30, 2014 compared to $1.1 million for the same quarter a year ago. The decrease in noninterest income was primarily attributable to the $99,000 or 49.7% decrease in other income from $199,000 and to no gain on sales of investments in the quarter ended June 30, 2014 compared to $70,000 for the same quarter a year ago. Noninterest income decreased $849,000 or 17.2% to $4.1 million during the year ended June 30, 2014 compared to $4.9 million for the same period in 2013 primarily due to a $436,000 decline in gain on sales of loans and a $237,000 decline in other income due to the decrease in interest rate lock fees reflecting the decline in loan sales.

Noninterest expense. Noninterest expense decreased $968,000, or 18.9%, to $4.2 million for the quarter ended June 30, 2014 from $5.1 million for the quarter ended June 30, 2013. The decrease was primarily due to a gain on sale of REO property increasing $343,000 or 1,633.3% to $364,000 from $21,000 and REO impairment expense declining $528,000 or 77.0% to $158,000 from $686,000. Noninterest expense decreased $1.6 million or 8.4% in the year ended June 30, 2014 to $17.8 million from $19.4 million for the year ended June 30, 2013. The decrease was due to a decrease in REO impairment expense of $397,000 and an increase of $313,000 in the gain on sale of REO as compared to the same period in 2013, reflecting the stabilization in the real estate market. Also contributing to the decrease was a decline in occupancy and equipment and compensation and benefits expenses which decreased $349,000 and $341,000, respectively, from the previous year. The decreases reflect the realized savings from the closure of one Wal-Mart branch and one leased branch.

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 two 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 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 ("FDIC"), the Washington State Department of Financial Institutions, Division of Banks ("Washington DFI") or other regulatory authorities, rite-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; 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 2015 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) June 30, March 31, June 30,
ASSETS  2014  2014  2013
Cash and cash equivalents  $ 14,758  $ 22,083  $ 65,353
Securities available-for-sale, at fair value 38,917 40,398 48,308
Securities held-to-maturity, at amortized cost 8,765 9,063 10,295
Loans held for sale 222
Loans receivable, net of allowance for loan losses of $4,624, $4,197 and $5,147 281,526 275,766 277,454
Life insurance investment, net of surrender charges 19,428 19,296 18,879
Accrued interest receivable 1,236 1,277 1,583
Real estate owned, net 5,067 5,529 6,212
Federal Home Loan Bank (FHLB) stock, at cost 6,046 6,105 6,278
Property, premises and equipment, net 11,313 11,381 11,394
Deferred tax asset, net 555 555 555
Prepaid expenses and other assets 1,517 1,721 5,646
Total assets  $ 389,128  $ 393,174  $ 452,179
LIABILITIES AND STOCKHOLDERS' EQUITY      
LIABILITIES      
Deposits:      
Noninterest-bearing  $ 41,149  $ 41,551  $ 39,713
Interest-bearing 269,885 274,183 288,871
Total deposits 311,034 315,734 328,584
       
FHLB advances 17,500 17,500 64,900
Advance payments by borrowers for taxes and insurance 891 1,447 791
Supplemental Executive Retirement Plan liability 1,715 1,657 1,703
Accounts payable and other liabilities 4,313 3,996 3,833
Total liabilities 335,453 340,334 399,811
       
STOCKHOLDERS' EQUITY      
Preferred stock, $.01 par value per share authorized 5,000,000 shares; no shares issued or outstanding
Common stock, $.01 par value per share, authorized 45,000,000 shares; 2,550,000 shares issued at June 30, 2014, March 31, 2014 and June 30, 2013 and 2,473,981, 2,469,533 and 2,464,433 shares outstanding at June 30, 2014, March 31, 2014 and June 30, 2013, respectively 25 25 25
Additional paid-in capital 23,293 23,267 23,229
Retained earnings, substantially restricted 31,914 31,616 31,491
Unearned Employee Stock Ownership Plan (ESOP) shares (797) (805) (856)
Accumulated other comprehensive loss, net of tax (760) (1,263) (1,521)
Total stockholders' equity 53,675 52,840 52,368
Total liabilities and stockholders' equity  $ 389,128  $ 393,174  $ 452,179
         
ANCHOR BANCORP AND SUBSIDIARY        
CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended  Year Ended 
(Dollars in thousands, except per share data) (unaudited) June 30, June 30,
  2014 2013 2014 2013
Interest income:        
Loans receivable, including fees  $ 4,076  $ 4,106  $ 16,718  $ 18,040
Securities 18 59 115 242
Mortgage-backed securities 227 98 956 1,445
Total interest income 4,321 4,263 17,789 19,727
Interest expense:        
Deposits 707 788 2,936 3,522
FHLB advances 158 310 745 1,242
Total interest expense 865 1,098 3,681 4,764
Net interest income before provision for loan losses 3,456 3,165 14,108 14,963
Provision for loan losses 750
Net interest income after provision for loan losses 3,456 3,165 14,108 14,213
Noninterest income        
Deposit service fees 416 355 1,562 1,468
Other deposit fees 198 198 790 863
Gain on sale of investments 70 70
Loans fees 144 167 657 712
Gain on sale of loans 7 9 8 444
Bank owned life insurance 132 148 549 621
Other income 100 199 509 746
Total noninterest income 997 1,146 4,075 4,924
Noninterest expense        
Compensation and benefits 2,054 2,040 8,100 8,441
General and administrative expenses 738 795 3,086 3,277
Real estate owned impairment 158 686 1,090 1,487
Real estate owned holding costs 117 76 447 496
Federal Deposit Insurance Corporation (FDIC) insurance premiums 115 163 505 651
Information technology 410 543 1,710 1,661
Occupancy and equipment 457 488 1,833 2,182
Deposit services 262 152 725 651
Marketing 208 179 679 584
Loss (gain) on sale of property, premises and equipment 22 (8) 56
Gain on sale of real estate owned (364) (21) (407) (94)
Total noninterest expense 4,155 5,123 17,760 19,392
Loss before provision for income taxes 298 (812) 423 (255)
Provision for income taxes
Net income (loss)  $ 298  $ (812)  $ 423  $ (255)
Basic earnings (loss) per share  $ 0.12  $ (0.33)  $ 0.17  $ (0.10)
Diluted earnings (loss) per share  $ 0.12  $ (0.33)  $ 0.17  $ (0.10)
   
   As of or For the
Quarter Ended
(unaudited)
  June 30, 2014 March 31,
2014
December 31,
2013
June 30, 2013
  (Dollars in thousands)
SELECTED PERFORMANCE RATIOS        
Return (loss) on average assets (1) 0.30 % 0.39 % (0.25)% (0.71)%
Return (loss) on average equity (2) 2.31 3.01 (1.94) (6.26)
Average equity-to-average assets (3) 13.17 13.10 12.91 11.34
Interest rate spread(4) 3.72 3.89 3.70 2.86
Net interest margin (5) 3.93 4.09 3.89 3.03
Efficiency ratio (6) 93.3 91.8 105.5 118.8
Average interest-earning assets to average interest-bearing liabilities 121.0 120.3 118.8 116.8
         
Other operating expenses as a percent of average total assets 4.3 4.4 4.8 4.5
         
CAPITAL RATIOS (Anchor Bank)        
         
Tier 1 leverage 13.6 13.5 13.2 11.4
Tier 1 risk-based 16.8 17.0 17.3 16.7
Total risk-based 18.0 18.3 18.5 18.0
         
ASSET QUALITY        
Nonaccrual and 90 days or more past due loans as a percent of total loans 1.6 1.7 2.2 2.2
Allowance for loan losses as a percent of total loans 1.6 1.5 1.5 1.8
Allowance as a percent of total nonperforming loans 98.1 88.1 69.0 83.6
Nonperforming assets as a percent of total assets 2.5 2.6 2.9 2.7
Net charge-offs (recoveries) to average outstanding loans (0.15) 0.03 0.24 0.1
Classified loans  $ 6,608  $ 9,665  $ 12,361  $ 17,290
_____________________        
         
(1)  Net income (loss) divided by average total assets, annualized.        
(2)  Net income (loss) 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.      
Jerald L. Shaw, President
Terri L. Degner, EVP and Chief Financial Officer
Anchor Bancorp
(360) 491-2250