SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Nature of Business
Anchor Bancorp (the “Company”), a Washington corporation, was formed in connection with the conversion of Anchor Mutual Savings Bank (the “Bank”) from the mutual to the stock form of organization. On January 25, 2011, the Bank completed its conversion from mutual to stock form, changed its name to “Anchor Bank” and became the wholly-owned subsidiary of the Company.
Anchor Bank is a community-based savings bank primarily serving Western Washington through its
10
full-service bank 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. Anchor Bank’s business consists of attracting deposits from the public and utilizing those deposits to originate loans.
Note 2 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2017 (“2017 Form 10-K”). The results of operations for the three months ended September 30, 2017 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2018. Certain prior year amounts have been reclassified to conform to current fiscal year presentation. The reclassifications had no impact on previously reported consolidated net income or equity. The Company has evaluated events and transactions subsequent to September 30, 2017 for potential recognition or disclosure.
Note 3 - Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). In August 2015, FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) which postponed the effective date of 2014-09. Subsequently, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. This amendment clarifies that an entity should determine if it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The core principle of Topic 606 is that an entity must recognize revenue when it has satisfied a performance obligation of transferring promised goods or services to a customer. The standard is effective for public entities for interim and annual periods beginning after December 15, 2017; early adoption is not permitted. The standard allows for full retrospective adoption for all periods presented or modified retrospective adoption to only the most current period presented in the financial statements. The cumulative effect of initially applying the standard is recognized at the date of the initial application. Our primary source of revenue is interest income, which is recognized as it is earned and is deemed to be in compliance with this ASU. With respect to noninterest income, the Company is in its preliminary stages of identifying and evaluating the revenue streams and underlying revenue contracts within the scope of the guidance. The Company is expecting to begin developing processes and procedures during 2017 to ensure it is fully compliant with these amendments at the date of adoption. To date, the Company has not yet identified any significant changes in the timing of revenue recognition when considering the amended accounting guidance; however, the Company’s implementation efforts are ongoing and such assessments may change prior to the January 1, 2018 implementation date. Accordingly, the Company does not expect implementation of this standard to have a material impact on our consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01,
Recognition and Measurement of Financial Assets
. The new standard significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured as fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. This ASU is effective for fiscal years beginning
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU No. 2016-01 is not expected to have a material impact on the Company's consolidated financial statements. [Management is in the planning stages of developing processes and procedures to comply with the disclosures requirements of this ASU, which could impact the disclosures the Company makes related to fair value of its financial instruments].
In February 2016, the FASB issued ASU No. 2016-02,
Leases
(Topic 842
). The amendments in this ASU require lessees to recognize the following for all leases (with the exception of short-term) at the commencement date; a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The amendments in this ASU leave lessor accounting largely unchanged, although certain targeted improvements were made to align lessor accounting with the lessee accounting model. This ASU simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The effect of the adoption will depend on leases at time of adoption. Once adopted, we expect to report higher assets and liabilities as a result of including right-of-use assets and lease liabilities related to certain banking offices and certain equipment under noncancelable operating lease agreements, however, based on current leases the adoption is not expected to have a material impact on the Company's consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting
, which amends
ASC Topic 718, Compensation - Stock Compensation
. The ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The ASU was effective for annual and interim periods beginning after December 15, 2016. The Company adopted this standard effective January 1, 2017. The adoption of ASU No. 2016-09 did not have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The standard will take effect for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Once adopted, we expect our allowance for loan losses to increase, however, until our evaluation is complete the magnitude of the increase will not be known.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230), a consensus of the FASB’s Emerging Issues Task Force
. The ASU is intended to reduce diversity in practice in how certain transactions are presented and classified in the statement of cash flows. The standard will take effect for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of ASU No. 2016-15 is
not expected to have a material impact on the Company's consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230), Restricted Cash
. The ASU amends the required statement of cash flow disclosures to include the change in amounts generally described as restricted cash. The standard will take effect for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of ASU No. 2016-18 is not expected to have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-03,
Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update).
This ASU amends the Codification for SEC staff announcements made at recent Emerging Issues Task Force (EITF) meetings. The SEC staff view is that a registrant should evaluate ASU updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the ASU on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an ASU, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The SEC staff expects
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASU amendments to Topic 326, Financial Instruments - Credit Losses; Topic 842, Leases; and Topic 606, Revenue from Contracts with Customers; although, the amendments apply to any subsequent amendments to guidance in the ASU. The Company has adopted the amendments in this ASU and appropriate disclosures have been included in this Note for each recently issued accounting standard.
In March 2017, the FASB issued ASU No. 2017-08,
Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities
. The ASU shortens the amortization period for certain callable debt securities held at a premium. The standard will take effect for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU No. 2017-08 is not expected to have a material impact on the Company's consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09,
Compensation Stock Compensation (Topic 718): Scope of Modification Accounting
. This ASU provides clarity on the guidance related to stock compensation when there has been changes to the terms or conditions of a share-based payment award to which an entity would be required to apply modification accounting under ASC 718. The ASU provides the three following criteria must be met in order to not account for the effect of the modification of terms or conditions: the fair value, the vesting conditions and the classification as an equity or liability instrument of the modified award is the same as the original award immediately before the original award is modified. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The adoption of ASU No. 2017-09 is not expected to have a material impact on the Company's consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12,
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
This ASU amends the hedge accounting recognition and presentation requirements in ASC 815 to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The amendments in this ASU permit hedge accounting for hedging relationships involving nonfinancial risk and interest rate risk by removing certain limitations in cash flow and fair value hedging relationships. In addition, the ASU requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and early adoption is permitted. The adoption of ASU No. 2017-12 is not expected to have a material impact on the Company's consolidated financial statements.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 - Earnings Per Share ("EPS")
Basic earnings per common share is the amount of earnings available to each share of common stock outstanding during the reporting period and is equal to net income divided by the weighted average number of shares outstanding during the period, without considering any dilutive items. Unvested share-based awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method described in ASC 260-10-45-60B. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the period adjusted to include the effect of potentially dilutive common shares that may be issued upon the vesting of restricted stock awards. Therefore, under the two-class method, the difference in EPS is not significant since the Company did not pay dividends. The following table details the calculation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
2017
|
|
2016
|
|
(Dollars in thousands, except share data)
|
Net income
|
$
|
1,044
|
|
|
$
|
573
|
|
Earnings allocated to common shareholders
|
$
|
1,044
|
|
|
$
|
573
|
|
|
|
|
|
Basic weighted-average common shares outstanding
|
2,421,049
|
|
|
2,391,839
|
|
Potentially dilutive incremental shares
|
11,911
|
|
|
22,840
|
|
Diluted weighted-average common shares outstanding
|
2,432,960
|
|
|
2,414,679
|
|
|
|
|
|
Basic earnings per share
|
$
|
0.43
|
|
|
$
|
0.24
|
|
Diluted earnings per share
|
$
|
0.43
|
|
|
$
|
0.24
|
|
Shares owned by the Company's ESOP that have not been allocated are not considered to be outstanding for the purpose of computing basic and diluted EPS. As of September 30, 2017 and June 30, 2017 there were
53,649
and
55,369
shares, respectively, which had not been allocated under the Company's ESOP.
Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. For both the three months ended September 30, 2017 and 2016, there were
no
anti-dilutive shares included in the computation of diluted earnings per share.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Investments
The amortized cost and estimated fair market values of investment securities as of
September 30, 2017
and
June 30, 2017
, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
(In thousands)
|
Securities available-for-sale
|
|
|
|
|
|
|
|
Municipal bonds
|
$
|
163
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
163
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
FHLMC
(1)
|
10,766
|
|
|
110
|
|
|
(110
|
)
|
|
10,766
|
|
FNMA
(2)
|
8,970
|
|
|
—
|
|
|
(153
|
)
|
|
8,817
|
|
GNMA
(3)
|
508
|
|
|
—
|
|
|
(14
|
)
|
|
494
|
|
|
$
|
20,407
|
|
|
$
|
110
|
|
|
$
|
(277
|
)
|
|
$
|
20,240
|
|
Securities held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
FHLMC
|
$
|
2,100
|
|
|
$
|
50
|
|
|
$
|
(47
|
)
|
|
$
|
2,103
|
|
FNMA
|
1,142
|
|
|
68
|
|
|
(16
|
)
|
|
1,194
|
|
GNMA
|
1,311
|
|
|
—
|
|
|
(32
|
)
|
|
1,279
|
|
|
$
|
4,553
|
|
|
$
|
118
|
|
|
$
|
(95
|
)
|
|
$
|
4,576
|
|
(1)
Federal Home Loan Mortgage Corporation ("Freddie Mac")
(2)
Federal National Mortgage Association ("Fannie Mae")
(3)
Government National Mortgage Association ("Ginnie Mae")
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
(In thousands)
|
Securities available-for-sale
|
|
|
|
|
|
|
|
Municipal bonds
|
$
|
165
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
165
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
FHLMC
|
11,140
|
|
|
88
|
|
|
(125
|
)
|
|
11,103
|
|
FNMA
|
9,532
|
|
|
—
|
|
|
(169
|
)
|
|
9,363
|
|
GNMA
|
554
|
|
|
—
|
|
|
(15
|
)
|
|
539
|
|
|
$
|
21,391
|
|
|
$
|
88
|
|
|
$
|
(309
|
)
|
|
$
|
21,170
|
|
Securities held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
FHLMC
|
$
|
2,212
|
|
|
53
|
|
|
(52
|
)
|
|
$
|
2,213
|
|
FNMA
|
1,209
|
|
|
71
|
|
|
(23
|
)
|
|
1,257
|
|
GNMA
|
1,528
|
|
|
—
|
|
|
(44
|
)
|
|
1,484
|
|
|
$
|
4,949
|
|
|
$
|
124
|
|
|
$
|
(119
|
)
|
|
$
|
4,954
|
|
There were
45
and
47
securities in an unrealized loss position at September 30, 2017 and June 30, 2017, respectively. The unrealized losses on investments in mortgage-backed securities relate principally to the general change in interest rates and illiquidity, and not credit quality, that has occurred since the securities' purchase dates, and such unrecognized losses or gains will continue to vary with general interest rate level fluctuations in the future. We do not intend to sell the temporarily impaired securities and it is not likely that we will be required to sell the securities prior to their maturity. We do expect to recover the
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
entire amortized cost basis of the securities. The fair value of temporarily impaired securities, the amount of unrealized losses, and the length of time these unrealized losses existed as of the dates indicated, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
September 30, 2017
|
(In thousands)
|
Securities available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
|
$
|
2,405
|
|
|
$
|
(20
|
)
|
|
$
|
3,013
|
|
|
$
|
(90
|
)
|
|
$
|
5,418
|
|
|
$
|
(110
|
)
|
FNMA
|
3,858
|
|
|
(22
|
)
|
|
4,752
|
|
|
(132
|
)
|
|
8,610
|
|
|
(154
|
)
|
GNMA
|
—
|
|
|
—
|
|
|
494
|
|
|
(13
|
)
|
|
494
|
|
|
(13
|
)
|
|
$
|
6,263
|
|
|
$
|
(42
|
)
|
|
$
|
8,259
|
|
|
$
|
(235
|
)
|
|
$
|
14,522
|
|
|
$
|
(277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
September 30, 2017
|
(In thousands)
|
Securities held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,468
|
|
|
$
|
(47
|
)
|
|
$
|
1,468
|
|
|
$
|
(47
|
)
|
FNMA
|
—
|
|
|
—
|
|
|
510
|
|
|
(16
|
)
|
|
510
|
|
|
(16
|
)
|
GNMA
|
835
|
|
|
(12
|
)
|
|
444
|
|
|
(20
|
)
|
|
1,279
|
|
|
(32
|
)
|
|
$
|
835
|
|
|
$
|
(12
|
)
|
|
$
|
2,422
|
|
|
$
|
(83
|
)
|
|
$
|
3,257
|
|
|
$
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
June 30, 2017
|
(In thousands)
|
Securities available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
|
$
|
2,626
|
|
|
$
|
(25
|
)
|
|
$
|
3,185
|
|
|
$
|
(100
|
)
|
|
$
|
5,811
|
|
|
$
|
(125
|
)
|
FNMA
|
4,578
|
|
|
(29
|
)
|
|
4,563
|
|
|
(140
|
)
|
|
9,141
|
|
|
(169
|
)
|
GNMA
|
—
|
|
|
—
|
|
|
539
|
|
|
(15
|
)
|
|
539
|
|
|
(15
|
)
|
|
$
|
7,204
|
|
|
$
|
(54
|
)
|
|
$
|
8,287
|
|
|
$
|
(255
|
)
|
|
$
|
15,491
|
|
|
$
|
(309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
June 30, 2017
|
(In thousands)
|
Securities held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,548
|
|
|
$
|
(52
|
)
|
|
$
|
1,548
|
|
|
$
|
(52
|
)
|
FNMA
|
—
|
|
|
—
|
|
|
539
|
|
|
(23
|
)
|
|
539
|
|
|
(23
|
)
|
GNMA
|
840
|
|
|
(13
|
)
|
|
645
|
|
|
(31
|
)
|
|
1,485
|
|
|
(44
|
)
|
|
$
|
840
|
|
|
$
|
(13
|
)
|
|
$
|
2,732
|
|
|
$
|
(106
|
)
|
|
$
|
3,572
|
|
|
$
|
(119
|
)
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Contractual maturities of securities at
September 30, 2017
are listed below. Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay the obligations; therefore, these securities are classified separately with no specific maturity date.
|
|
|
|
|
|
|
|
|
September 30, 2017
|
Amortized
Cost
|
|
Fair Value
|
|
(In thousands)
|
Securities available-for-sale
|
|
Municipal bonds:
|
|
|
|
Due after ten years
|
$
|
163
|
|
|
$
|
163
|
|
Mortgage-backed securities:
|
|
|
|
FHLMC
|
10,766
|
|
|
10,766
|
|
FNMA
|
8,970
|
|
|
8,817
|
|
GNMA
|
508
|
|
|
494
|
|
|
$
|
20,407
|
|
|
$
|
20,240
|
|
|
|
|
|
|
|
|
|
|
Securities held-to-maturity
|
|
Mortgage-backed securities:
|
|
|
|
FHLMC
|
$
|
2,100
|
|
|
$
|
2,103
|
|
FNMA
|
1,142
|
|
|
1,193
|
|
GNMA
|
1,311
|
|
|
1,279
|
|
|
$
|
4,553
|
|
|
$
|
4,575
|
|
Sales of securities available-for-sale for the dates indicated are summarized as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
2017
|
|
2016
|
|
(In thousands)
|
Proceeds from maturities, sales and calls
|
$
|
—
|
|
|
852
|
|
Pledged securities at the dates indicated are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
June 30, 2017
|
Pledged to secure:
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
(In thousands)
|
Public deposits
|
$
|
4,942
|
|
|
$
|
4,960
|
|
|
$
|
5,143
|
|
|
$
|
5,172
|
|
FHLB borrowings
|
920
|
|
|
956
|
|
|
977
|
|
|
1,009
|
|
Federal Reserve borrowing line
|
847
|
|
|
835
|
|
|
852
|
|
|
840
|
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6 - Loans Receivable, net
Loans receivable consisted of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
June 30,
2017
|
|
(In thousands)
|
Real estate:
|
|
|
|
One-to-four family
|
$
|
61,555
|
|
|
$
|
59,735
|
|
Multi-family
|
61,012
|
|
|
60,500
|
|
Commercial
|
148,867
|
|
|
155,525
|
|
Construction
|
60,963
|
|
|
49,151
|
|
Land
|
8,097
|
|
|
8,054
|
|
Total real estate
|
340,494
|
|
|
332,965
|
|
Consumer:
|
|
|
|
|
|
Home equity
|
13,991
|
|
|
13,991
|
|
Credit cards
|
2,535
|
|
|
2,596
|
|
Automobile
|
573
|
|
|
627
|
|
Other consumer
|
1,484
|
|
|
1,524
|
|
Total consumer
|
18,583
|
|
|
18,738
|
|
|
|
|
|
Business:
|
|
|
|
Commercial business
|
29,455
|
|
|
31,603
|
|
Total loans
|
388,532
|
|
|
383,306
|
|
Less:
|
|
|
|
|
|
Deferred loan fees and loan premiums, net
|
1,294
|
|
|
1,292
|
|
Allowance for loan losses
|
4,017
|
|
|
4,106
|
|
Loans receivable, net
|
$
|
383,221
|
|
|
$
|
377,908
|
|
Allowance for Loan Losses.
The allowance for loan losses must be maintained at a level necessary to absorb specific losses on impaired loans and probable losses inherent in the loan portfolio. The assessment includes analysis of several different factors, including delinquency, charge-off rates and the changing risk profile of our loan portfolio, as well as local economic conditions such as unemployment rates, bankruptcies and vacancy rates of business and residential properties.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to- four family
|
|
Multi-
family
|
|
Commercial
real estate
|
|
Construction
|
|
Land
|
|
Consumer
(1)
|
|
Commercial
business
|
|
Unallocated
|
|
Three months ended 9/30/17
|
|
(In thousands)
|
Allowance for loan losses
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
495
|
|
|
$
|
580
|
|
|
$
|
1,566
|
|
|
$
|
651
|
|
|
$
|
120
|
|
|
$
|
378
|
|
|
$
|
316
|
|
|
$
|
—
|
|
|
$
|
4,106
|
|
Provision (benefit) for loan losses
|
(207
|
)
|
|
10
|
|
|
168
|
|
|
169
|
|
|
(1
|
)
|
|
(40
|
)
|
|
(24
|
)
|
|
—
|
|
|
75
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(201
|
)
|
Recoveries
|
14
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
17
|
|
|
5
|
|
|
—
|
|
|
37
|
|
Ending balance
|
$
|
302
|
|
|
$
|
590
|
|
|
$
|
1,534
|
|
|
$
|
821
|
|
|
$
|
119
|
|
|
$
|
354
|
|
|
$
|
297
|
|
|
$
|
—
|
|
|
$
|
4,017
|
|
|
|
(1)
|
Consumer loans include home equity, credit cards, automobile, and other consumer loans. The only consumer loans with impairment are home equity loans.
|
The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to- four family
|
|
Multi-
family
|
|
Commercial
real estate
|
|
Construction
|
|
Land
|
|
Consumer
(1)
|
|
Commercial
business
|
|
Unallocated
|
|
Three months ended 9/30/16
|
|
(In thousands)
|
Allowance for loan losses
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
798
|
|
|
$
|
454
|
|
|
$
|
1,333
|
|
|
$
|
271
|
|
|
$
|
75
|
|
|
$
|
516
|
|
|
$
|
332
|
|
|
$
|
—
|
|
|
$
|
3,779
|
|
Provision (benefit) for loan losses
|
(91
|
)
|
|
9
|
|
|
(24
|
)
|
|
108
|
|
|
35
|
|
|
42
|
|
|
(4
|
)
|
|
—
|
|
|
75
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
Recoveries
|
10
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
9
|
|
|
3
|
|
|
—
|
|
|
24
|
|
Ending balance
|
$
|
717
|
|
|
$
|
463
|
|
|
$
|
1,309
|
|
|
$
|
381
|
|
|
$
|
110
|
|
|
$
|
513
|
|
|
$
|
331
|
|
|
$
|
—
|
|
|
$
|
3,824
|
|
|
|
(1)
|
Consumer loans include home equity, credit cards, automobile, and other consumer loans. The only consumer loans with impairment are home equity loans.
|
A loan is considered impaired when the Company has determined that it may be unable to collect payments of principal or interest when due under the terms of the loan. In the process of identifying loans as impaired, management takes into consideration factors which include payment history and status, collateral value, financial condition of the borrower, and the probability of collecting scheduled payments in the future. Minor payment delays and insignificant payment shortfalls typically do not result in a loan being classified as impaired. The significance of payment delays and shortfalls is considered by management on a case by case basis, after taking into consideration the totality of circumstances surrounding the loans and the borrowers, including payment history and amounts of any payment shortfall, length and reason for delay, and likelihood of return to stable performance. Impairment is measured on a loan by loan basis for all loans in the portfolio except for the smaller groups of homogeneous consumer loans in the portfolio.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents loans individually evaluated for impairment by class of loans as of
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investments
|
|
Unpaid Principal Balance
|
|
Related Allowance
|
|
(In thousands)
|
With no allowance recorded
|
|
|
|
|
|
One-to-four family
|
$
|
1,613
|
|
|
$
|
1,798
|
|
|
$
|
—
|
|
Home equity
|
263
|
|
|
270
|
|
|
—
|
|
Commercial business
|
353
|
|
|
422
|
|
|
—
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
2,957
|
|
|
$
|
2,967
|
|
|
$
|
125
|
|
Land
|
308
|
|
|
308
|
|
|
20
|
|
Home equity
|
260
|
|
|
260
|
|
|
41
|
|
Total
|
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
4,570
|
|
|
$
|
4,765
|
|
|
$
|
125
|
|
Land
|
308
|
|
|
308
|
|
|
20
|
|
Home equity
|
523
|
|
|
530
|
|
|
41
|
|
Commercial business
|
353
|
|
|
422
|
|
|
—
|
|
Total
|
$
|
5,754
|
|
|
$
|
6,025
|
|
|
$
|
186
|
|
The following table presents loans individually evaluated for impairment by class of loans as of
June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investments
|
|
Unpaid Principal Balance
|
|
Related Allowance
|
|
(In thousands)
|
With no allowance recorded
|
|
|
|
|
|
One-to-four family
|
$
|
1,818
|
|
|
$
|
1,991
|
|
|
$
|
—
|
|
Commercial real estate
|
1,992
|
|
|
1,992
|
|
|
—
|
|
Home equity
|
299
|
|
|
303
|
|
|
—
|
|
Commercial business
|
606
|
|
|
668
|
|
|
—
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
3,210
|
|
|
$
|
3,220
|
|
|
$
|
143
|
|
Land
|
311
|
|
|
311
|
|
|
22
|
|
Home equity
|
262
|
|
|
262
|
|
|
32
|
|
Commercial business
|
23
|
|
|
23
|
|
|
1
|
|
Total
|
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
5,028
|
|
|
$
|
5,211
|
|
|
$
|
143
|
|
Commercial real estate
|
1,992
|
|
|
1,992
|
|
|
—
|
|
Land
|
311
|
|
|
311
|
|
|
22
|
|
Home equity
|
561
|
|
|
565
|
|
|
32
|
|
Commercial business
|
629
|
|
|
691
|
|
|
1
|
|
Total
|
$
|
8,521
|
|
|
$
|
8,770
|
|
|
$
|
198
|
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the three months ended September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017
|
|
Three Months Ended September 30, 2016
|
|
|
|
Average Recorded Investment
|
|
Interest Income
Recognized
|
|
Average Recorded Investment
|
|
Interest Income
Recognized
|
|
(In thousands)
|
With no allowance recorded
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
1,716
|
|
|
$
|
3
|
|
|
$
|
3,152
|
|
|
$
|
14
|
|
Commercial real estate
|
996
|
|
|
—
|
|
|
433
|
|
|
—
|
|
Land
|
—
|
|
|
—
|
|
|
180
|
|
|
1
|
|
Home equity
|
281
|
|
|
1
|
|
|
71
|
|
|
—
|
|
Commercial business
|
480
|
|
|
1
|
|
|
108
|
|
|
1
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
3,084
|
|
|
$
|
11
|
|
|
$
|
5,967
|
|
|
$
|
16
|
|
Land
|
310
|
|
|
7
|
|
|
318
|
|
|
7
|
|
Home equity
|
261
|
|
|
1
|
|
|
366
|
|
|
1
|
|
Commercial business
|
12
|
|
|
—
|
|
|
118
|
|
|
—
|
|
Total
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
4,800
|
|
|
$
|
14
|
|
|
$
|
9,119
|
|
|
$
|
30
|
|
Commercial real estate
|
996
|
|
|
—
|
|
|
433
|
|
|
—
|
|
Land
|
310
|
|
|
7
|
|
|
498
|
|
|
8
|
|
Home equity
|
543
|
|
|
2
|
|
|
437
|
|
|
1
|
|
Commercial business
|
491
|
|
|
—
|
|
|
226
|
|
|
1
|
|
Total
|
$
|
7,140
|
|
|
$
|
23
|
|
|
$
|
10,713
|
|
|
$
|
40
|
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
Multi-
family
|
|
Commercial
real estate
|
|
Construction
|
|
Land
|
|
Consumer(1)
|
|
Commercial
business
|
|
Unallocated
|
|
Total
|
|
(In thousands)
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
$
|
302
|
|
|
$
|
590
|
|
|
$
|
1,534
|
|
|
$
|
821
|
|
|
$
|
119
|
|
|
$
|
354
|
|
|
$
|
297
|
|
|
$
|
—
|
|
|
$
|
4,017
|
|
Ending balance: individually evaluated for impairment
|
125
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
186
|
|
Ending balance: collectively evaluated for impairment
|
$
|
177
|
|
|
$
|
590
|
|
|
$
|
1,534
|
|
|
$
|
821
|
|
|
$
|
99
|
|
|
$
|
313
|
|
|
$
|
297
|
|
|
$
|
—
|
|
|
$
|
3,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
$
|
61,555
|
|
|
$
|
61,012
|
|
|
$
|
148,867
|
|
|
$
|
60,963
|
|
|
$
|
8,097
|
|
|
$
|
18,583
|
|
|
$
|
29,455
|
|
|
$
|
—
|
|
|
$
|
388,532
|
|
Ending balance: individually evaluated for impairment
|
4,570
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
308
|
|
|
523
|
|
|
353
|
|
|
—
|
|
|
5,754
|
|
Ending balance: collectively evaluated for impairment
|
$
|
56,985
|
|
|
$
|
61,012
|
|
|
$
|
148,867
|
|
|
$
|
60,963
|
|
|
$
|
7,789
|
|
|
$
|
18,060
|
|
|
$
|
29,102
|
|
|
$
|
—
|
|
|
$
|
382,778
|
|
|
|
(1)
|
Consumer loans include home equity, credit cards, auto and other consumer loans.
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
|
|
Multi-
family
|
|
Commercial
real estate
|
|
Construction
|
|
Land
|
|
Consumer(1)
|
|
Commercial
business
|
|
Unallocated
|
|
Total
|
|
(In thousands)
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
$
|
495
|
|
|
$
|
580
|
|
|
$
|
1,566
|
|
|
$
|
651
|
|
|
$
|
120
|
|
|
$
|
378
|
|
|
$
|
316
|
|
|
$
|
—
|
|
|
$
|
4,106
|
|
Ending balance: individually evaluated for impairment
|
143
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
32
|
|
|
1
|
|
|
—
|
|
|
198
|
|
Ending balance: collectively evaluated for impairment
|
$
|
352
|
|
|
$
|
580
|
|
|
$
|
1,566
|
|
|
$
|
651
|
|
|
$
|
98
|
|
|
$
|
346
|
|
|
$
|
315
|
|
|
$
|
—
|
|
|
$
|
3,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
$
|
59,735
|
|
|
$
|
60,500
|
|
|
$
|
155,525
|
|
|
$
|
49,151
|
|
|
$
|
8,054
|
|
|
$
|
18,738
|
|
|
$
|
31,603
|
|
|
$
|
—
|
|
|
$
|
383,306
|
|
Ending balance: individually evaluated for impairment
|
5,028
|
|
|
—
|
|
|
1,992
|
|
|
—
|
|
|
311
|
|
|
561
|
|
|
629
|
|
|
—
|
|
|
8,521
|
|
Ending balance: collectively evaluated for impairment
|
$
|
54,707
|
|
|
$
|
60,500
|
|
|
$
|
153,533
|
|
|
$
|
49,151
|
|
|
$
|
7,743
|
|
|
$
|
18,177
|
|
|
$
|
30,974
|
|
|
$
|
—
|
|
|
$
|
374,785
|
|
|
|
(1)
|
Consumer loans include home equity, credit cards, auto, and other consumer loans.
|
Nonaccrual and Past Due Loans
. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual when, in management's opinion, the borrower may be unable to meet payment of obligations as they become due, as well as when required by regulatory provisions.
The following table presents the recorded investment in nonaccrual loans by type of loans as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
June 30, 2017
|
|
(In thousands)
|
One-to-four family
|
$
|
968
|
|
|
$
|
1,170
|
|
Commercial
|
—
|
|
|
1,992
|
|
Home equity
|
207
|
|
|
242
|
|
Commercial business
|
289
|
|
|
300
|
|
Total
|
$
|
1,464
|
|
|
$
|
3,704
|
|
There were
no
loans past due 90 days or more and still accruing interest at September 30, 2017 and June 30, 2017.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents past due loans, net of partial loan charge-offs, by class of loan, as of
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days
Past Due
|
|
60-89 Days
Past Due
|
|
90 Days Or
More Past Due
(1)
|
|
Total Past
Due
|
|
Current
|
|
Total Loans
|
|
(In thousands)
|
One-to-four family
|
$
|
732
|
|
|
$
|
117
|
|
|
$
|
968
|
|
|
$
|
1,817
|
|
|
$
|
59,738
|
|
|
$
|
61,555
|
|
Multi-family
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61,012
|
|
|
61,012
|
|
Commercial real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
148,867
|
|
|
148,867
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,963
|
|
|
60,963
|
|
Land
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,097
|
|
|
8,097
|
|
Home equity
|
41
|
|
|
—
|
|
|
207
|
|
|
248
|
|
|
13,743
|
|
|
13,991
|
|
Credit cards
|
5
|
|
|
3
|
|
|
—
|
|
|
8
|
|
|
2,527
|
|
|
2,535
|
|
Automobile
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
573
|
|
|
573
|
|
Other consumer
|
2
|
|
|
7
|
|
|
—
|
|
|
9
|
|
|
1,475
|
|
|
1,484
|
|
Commercial business
|
—
|
|
|
—
|
|
|
289
|
|
|
289
|
|
|
29,166
|
|
|
29,455
|
|
Total
|
$
|
780
|
|
|
$
|
127
|
|
|
$
|
1,464
|
|
|
$
|
2,371
|
|
|
$
|
386,161
|
|
|
$
|
388,532
|
|
|
|
|
(1)
Includes loans on nonaccrual status.
|
The following table presents past due loans, net of partial loan charge-offs, by class of loan as of
June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days
Past Due
|
|
60-89 Days
Past Due
|
|
90 Days Or
More Past Due
(1)
|
|
Total Past
Due
|
|
Current
|
|
Total
Loans
|
|
(In thousands)
|
One-to-four family
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
1,170
|
|
|
$
|
1,185
|
|
|
$
|
58,550
|
|
|
$
|
59,735
|
|
Multi-family
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,500
|
|
|
60,500
|
|
Commercial real estate
|
187
|
|
|
—
|
|
|
1,992
|
|
|
2,179
|
|
|
153,346
|
|
|
155,525
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
49,151
|
|
|
49,151
|
|
Land
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,054
|
|
|
8,054
|
|
Home equity
|
16
|
|
|
4
|
|
|
242
|
|
|
262
|
|
|
13,729
|
|
|
13,991
|
|
Credit cards
|
13
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
2,583
|
|
|
2,596
|
|
Automobile
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
627
|
|
|
627
|
|
Other consumer
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
|
1,516
|
|
|
1,524
|
|
Commercial business
|
107
|
|
|
—
|
|
|
300
|
|
|
407
|
|
|
31,196
|
|
|
31,603
|
|
Total
|
$
|
338
|
|
|
$
|
12
|
|
|
$
|
3,704
|
|
|
$
|
4,054
|
|
|
$
|
379,252
|
|
|
$
|
383,306
|
|
(1)
Includes loans on nonaccrual status.
Credit Quality Indicators.
We utilize a ten-point risk rating system and assign a risk rating for all credit exposures. The risk rating system is designed to define the basic characteristics and identify risk elements of each credit extension.
Credits risk rated 1 through 7 are considered to be “pass” credits. Pass credits can be assets where there is virtually no credit risk, such as cash secured loans with funds on deposit with the Bank. Pass credits also include credits that are on our watch and special mention lists, where the borrower exhibits potential weaknesses, which may, if not checked or corrected, negatively affect the borrower's financial capacity and threaten their ability to fulfill debt obligations in the future. A seasoned loan with a Debt Service Coverage Ratio ("DSCR") of greater than
1.00
is the minimum acceptable level for a "Pass Credit". Particular attention is paid to the coverage trend analysis as any loan with a declining DSCR trend may warrant a higher risk grade even if the current coverage is at or above the
1.00
threshold.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Credits classified as Watch are risk rated 6 and possess weaknesses that deserve management's close attention. These assets do not expose the Bank to sufficient risk to warrant adverse classification in the substandard, doubtful or loss categories. We use this rating when a material documentation deficiency exists but correction is anticipated within an acceptable time frame.
A loan classified as Watch may have the following characteristics:
|
|
•
|
Acceptable asset quality, but requiring increased monitoring. Strained liquidity and less than anticipated performance. The loan may be fully leveraged.
|
|
|
•
|
Apparent management weakness, perhaps demonstrated by an irregular flow of adequate and/or timely performance information required to support the credit.
|
|
|
•
|
The borrower has a plausible plan to correct problem(s) in the near future that is devoid of material uncertainties.
|
|
|
•
|
Lacks reserve capacity, so the risk rating will improve or decline in relatively short time (results of corrective actions should be apparent within six months or less).
|
Credits classified as Special Mention are risk rated 7. These credits have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.
A loan classified as Special Mention may have the following characteristics:
|
|
•
|
Performance is poor or significantly less than expected. A debt service deficiency either exists or cannot be ruled out.
|
|
|
•
|
Generally an undesirable business credit. Assets in this category are protected, but are potentially weak. These assets constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of Substandard. Special Mention assets have potential weaknesses which may, if not checked or corrected, weaken the asset or inadequately protect the Bank's credit position at some future date.
|
|
|
•
|
Assets which might be detailed in this category include credits that the lending officer may be unable to supervise properly because of lack of expertise, an inadequate loan agreement, the condition of and control over collateral, failure to obtain proper documentation, or any other deviations from prudent lending practices.
|
|
|
•
|
An adverse trend in the borrower's operations or an imbalanced position in the balance sheet which does not jeopardize liquidation may best be handled by this classification.
|
|
|
•
|
A Special Mention classification should not be used as a compromise between a pass and substandard rating. Assets in which actual, not potential, weaknesses are evident and significant, and should be considered for more serious criticism.
|
A loan classified as Substandard is risk rated 8. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. An asset is considered Substandard if it is inadequately protected by the current net worth and payment capacity of the borrower or of any collateral pledged.
A loan classified as Substandard may have the following characteristics:
|
|
•
|
Unacceptable business credit. The asset is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a well defined weakness or weaknesses that jeopardize the liquidation of the debt.
|
|
|
•
|
Though no loss is envisioned, the outlook is sufficiently uncertain to preclude ruling out the possibility. Some liquidation of assets will likely be necessary as a corrective measure.
|
|
|
•
|
Assets in this category may demonstrate performance problems such as debt servicing deficiencies with no immediate relief, including having a DSCR of less than
1.00
. Borrowers have an inability to adjust to prolonged and unfavorable industry or economic trends. Management's character and/or effectiveness have become suspect.
|
A loan classified as Doubtful is risk rated 9 and has all the inherent weaknesses as those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values highly questionable is improbable.
A loan classified as Doubtful is risk rated 9 and has the following characteristics:
|
|
•
|
The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
•
|
Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.
|
A loan risk rated 10 is a loan for which a total loss is expected.
A loan classified as a Loss has the following characteristics:
|
|
•
|
An uncollectible asset or one of such little value that it does not warrant classification as an active, earning asset. Such an asset may, however, have recovery or salvageable value, but not to the point of deferring full write off, even though some recovery may occur in the future.
|
|
|
•
|
The Bank will charge off such assets as a loss during the accounting period in which they were identified.
|
|
|
•
|
Loan to be eliminated from the active loan reporting system via charge off.
|
The following table presents the internally assigned grade as of
September 30, 2017
, by class of loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to- four
family
|
|
Multi-
family
|
|
Commercial
real estate
|
|
Construction
|
|
Land
|
|
Home equity
|
|
Credit cards
|
|
Automobile
|
|
Other
consumer
|
|
Commercial business
|
|
Total
|
|
(In thousands)
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
59,378
|
|
|
$
|
60,489
|
|
|
$
|
147,262
|
|
|
$
|
60,963
|
|
|
$
|
8,097
|
|
|
$
|
13,247
|
|
|
$
|
2,527
|
|
|
$
|
573
|
|
|
$
|
1,478
|
|
|
$
|
28,363
|
|
|
$
|
382,377
|
|
Watch
|
917
|
|
|
523
|
|
|
1,605
|
|
|
—
|
|
|
—
|
|
|
371
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
697
|
|
|
4,121
|
|
Special Mention
|
305
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|
427
|
|
Substandard
|
955
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
357
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
289
|
|
|
1,607
|
|
Doubtful
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
61,555
|
|
|
$
|
61,012
|
|
|
$
|
148,867
|
|
|
$
|
60,963
|
|
|
$
|
8,097
|
|
|
$
|
13,991
|
|
|
$
|
2,535
|
|
|
$
|
573
|
|
|
$
|
1,484
|
|
|
$
|
29,455
|
|
|
$
|
388,532
|
|
The following table presents the internally assigned grade as of
June 30, 2017
, by class of loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to- four family
|
|
Multi-family
|
|
Commercial
real estate
|
|
Construction
|
|
Land
|
|
Home equity
|
|
Credit cards
|
|
Automobile
|
|
Other
consumer
|
|
Commercial business
|
|
Total
|
|
(In thousands)
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
57,075
|
|
|
$
|
59,973
|
|
|
$
|
150,762
|
|
|
$
|
49,151
|
|
|
$
|
7,743
|
|
|
$
|
13,202
|
|
|
$
|
2,583
|
|
|
$
|
627
|
|
|
$
|
1,510
|
|
|
$
|
29,972
|
|
|
$
|
372,598
|
|
Watch
|
984
|
|
|
527
|
|
|
2,771
|
|
|
—
|
|
|
311
|
|
|
361
|
|
|
13
|
|
|
—
|
|
|
6
|
|
|
1,224
|
|
|
6,197
|
|
Special Mention
|
646
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
107
|
|
|
790
|
|
Substandard
|
1,030
|
|
|
—
|
|
|
1,992
|
|
|
—
|
|
|
—
|
|
|
392
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
300
|
|
|
3,721
|
|
Doubtful
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
59,735
|
|
|
$
|
60,500
|
|
|
$
|
155,525
|
|
|
$
|
49,151
|
|
|
$
|
8,054
|
|
|
$
|
13,991
|
|
|
$
|
2,596
|
|
|
$
|
627
|
|
|
$
|
1,524
|
|
|
$
|
31,603
|
|
|
$
|
383,306
|
|
Troubled Debt Restructures
. A troubled debt restructure ("TDR") is a loan where the Company, for economic or legal reasons related to the borrower's financial condition, has granted a concession to the borrower that it would otherwise not consider so that the borrower can continue to make payments while minimizing the Company's potential loss. The modifications have included items such as lowering the interest rate on the loan for a period of time and extending the maturity date of the loan. These modifications are made only when there is a reasonable and attainable workout plan that has been agreed to by the borrower and is in the Bank's best interest. At
September 30, 2017
, there were no commitments to lend additional funds to borrowers whose loans have been modified in a TDR.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents TDRs by accrual versus nonaccrual status and by loan class as of
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Accrual
Status
|
|
Nonaccrual
Status
|
|
Total
Modifications
|
|
(In thousands)
|
One-to-four family
|
$
|
3,602
|
|
|
$
|
124
|
|
|
$
|
3,726
|
|
Land
|
308
|
|
|
—
|
|
|
308
|
|
Home equity
|
166
|
|
|
—
|
|
|
166
|
|
Commercial business
|
63
|
|
|
—
|
|
|
63
|
|
Total
|
$
|
4,139
|
|
|
$
|
124
|
|
|
$
|
4,263
|
|
The following table presents TDRs by accrual versus nonaccrual status and by loan class as of
June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Accrual
Status
|
|
Nonaccrual
Status
|
|
Total
Modifications
|
|
(In thousands)
|
One-to-four family
|
$
|
3,622
|
|
|
$
|
131
|
|
|
$
|
3,753
|
|
Land
|
311
|
|
|
—
|
|
|
311
|
|
Home equity
|
169
|
|
|
—
|
|
|
169
|
|
Commercial business
|
87
|
|
|
—
|
|
|
87
|
|
Total
|
$
|
4,189
|
|
|
$
|
131
|
|
|
$
|
4,320
|
|
There were
no
new TDR loans, or renewals or modifications of existing TDR loans during the three months ended September 30, 2017 and 2016.
For both the three months ended September 30, 2017 and 2016, there were
no
TDRs for which there was a payment default within 12 months of their restructure.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 - Real Estate Owned, net
The following table is a summary of REO activity for the three months ended September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
2017
|
|
2016
|
|
(In thousands)
|
Balance at the beginning of the period
|
$
|
867
|
|
|
$
|
373
|
|
Net loans transferred to real estate owned
|
1,791
|
|
|
168
|
|
Sales
|
—
|
|
|
(282
|
)
|
Gain on sale of REO
|
—
|
|
|
12
|
|
Balance at the end of the period
|
$
|
2,658
|
|
|
$
|
271
|
|
At September 30, 2017, there were two loans totaling $402,000 secured by residential real estate properties for which formal foreclosure proceedings were in process.
Note 8 - Employee Benefit Plans
On January 25, 2011, the Company established an ESOP for the benefit of substantially all employees. The ESOP borrowed
$1.0 million
from the Company and used those funds to acquire
102,000
shares of the Company's common stock at the time of the initial public offering at a price of
$10.00
per share.
Shares purchased by the ESOP with the loan proceeds are held in a suspense account and allocated to ESOP participants on a pro rata basis as principal and interest payments are made by the ESOP to the Company. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Company's discretionary contributions to the ESOP and earnings on the ESOP assets. Payments of principal and interest are due annually on June 30th, the Company's fiscal year end.
As shares are committed to be released from collateral, the Company reports compensation expense equal to the daily average market prices of the shares and the shares become outstanding for EPS computations. The compensation expense is accrued throughout the year.
Compensation expense related to the ESOP for the
three months ended September 30, 2017
and
2016
was
$43,000
and
$44,000
, respectively.
Shares held by the ESOP as of the dates indicated are as follows:
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
June 30, 2017
|
|
(Dollars in thousands)
|
Allocated shares
|
48,351
|
|
|
46,631
|
|
Unallocated shares
|
53,649
|
|
|
55,369
|
|
Total ESOP shares
|
102,000
|
|
|
102,000
|
|
Fair value of unallocated shares
|
$
|
1,328
|
|
|
$
|
1,387
|
|
Note 9 - Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis
- Assets and liabilities are considered to be fair valued on a recurring basis if fair value is measured regularly. The following definitions describe the levels of inputs that may be used to measure fair value:
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2: Significant observable inputs other than quoted prices included within Level 1, such as quoted prices in markets that are not active, and inputs other than quoted prices that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company's own assumptions about the assumptions market participants would use in pricing an asset or liability based on the best information available in the circumstances.
There were no transfers between Level 1, Level 2, or Level 3 during the
three months ended September 30, 2017
. The following tables show the Company's assets and liabilities at the dates indicated measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
(In thousands)
|
Municipal bonds
|
$
|
—
|
|
|
$
|
163
|
|
|
$
|
—
|
|
|
$
|
163
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
FHLMC
|
—
|
|
|
10,766
|
|
|
—
|
|
|
10,766
|
|
FNMA
|
—
|
|
|
8,817
|
|
|
—
|
|
|
8,817
|
|
GNMA
|
—
|
|
|
494
|
|
|
—
|
|
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
(In thousands)
|
Municipal bonds
|
$
|
—
|
|
|
$
|
165
|
|
|
$
|
—
|
|
|
$
|
165
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
FHLMC
|
—
|
|
|
11,103
|
|
|
—
|
|
|
11,103
|
|
FNMA
|
—
|
|
|
9,363
|
|
|
—
|
|
|
9,363
|
|
GNMA
|
—
|
|
|
539
|
|
|
—
|
|
|
539
|
|
Assets and liabilities measured at fair value on a nonrecurring basis
- Assets and liabilities are considered to be reflected at fair value on a nonrecurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the balance sheet. Generally, a nonrecurring valuation is the result of the application of other accounting pronouncements that require assets or liabilities to be assessed for impairment or recorded at the lower of cost or fair value.
The following table presents the balances of assets measured at fair value on a nonrecurring basis at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
(In thousands)
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,963
|
|
|
$
|
3,963
|
|
Land
|
—
|
|
|
—
|
|
|
308
|
|
|
308
|
|
Home equity
|
—
|
|
|
—
|
|
|
260
|
|
|
260
|
|
Total impaired loans
|
—
|
|
|
—
|
|
|
4,531
|
|
|
4,531
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,531
|
|
|
$
|
4,531
|
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the balances of assets measured at fair value on a nonrecurring basis at June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
(In thousands)
|
Impaired loans:
|
|
|
|
|
|
|
|
Mortgage loans
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,227
|
|
|
$
|
4,227
|
|
Construction
|
—
|
|
|
—
|
|
|
262
|
|
|
262
|
|
Land
|
—
|
|
|
—
|
|
|
311
|
|
|
311
|
|
Commercial business
|
—
|
|
|
—
|
|
|
23
|
|
|
23
|
|
Total impaired loans
|
—
|
|
|
—
|
|
|
4,823
|
|
|
4,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,823
|
|
|
$
|
4,823
|
|
The fair values of impaired loans and real estate owned properties are generally based on third party appraisal of the properties, resulting in Level 3 classification.
The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2017 and June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Fair Value
|
|
Valuation Technique(s)
|
|
Unobservable Input(s)
|
|
Range (Average Discount)
|
|
(Dollars in thousands)
|
Impaired loans
|
$
|
4,531
|
|
|
Fair value of underlying collateral
|
|
Discount applied to the obtained appraisal
|
|
0% - 10% (4%)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Fair Value
|
|
Valuation Technique(s)
|
|
Unobservable Input(s)
|
|
Range (Average Discount)
|
|
(Dollars in thousands)
|
Impaired loans
|
$
|
4,823
|
|
|
Fair value of underlying collateral
|
|
Discount applied to the obtained appraisal
|
|
0% - 10% (3%)
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of the Company's financial instruments as of
September 30, 2017
and
June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Carrying Amount
|
|
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
(In thousands)
|
Financial Instruments-Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
8,925
|
|
|
$
|
8,925
|
|
|
$
|
8,925
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Securities available-for-sale
|
20,240
|
|
|
20,240
|
|
|
—
|
|
|
20,240
|
|
|
—
|
|
Securities held-to-maturity
|
4,553
|
|
|
4,575
|
|
|
—
|
|
|
4,575
|
|
|
—
|
|
FHLB stock
|
2,036
|
|
|
2,036
|
|
|
—
|
|
|
2,036
|
|
|
—
|
|
Loans held for sale
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loans receivable
|
387,238
|
|
|
378,999
|
|
|
—
|
|
|
—
|
|
|
378,999
|
|
Bank owned life insurance investment
|
20,159
|
|
|
20,159
|
|
|
—
|
|
|
20,159
|
|
|
—
|
|
Accrued interest receivable
|
1,344
|
|
|
1,344
|
|
|
—
|
|
|
1,344
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments-Liabilities
|
|
|
|
|
|
|
|
|
|
Demand deposits, savings and money market
|
$
|
201,582
|
|
|
$
|
201,582
|
|
|
$
|
201,582
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit
|
146,794
|
|
|
147,171
|
|
|
—
|
|
|
144,854
|
|
|
—
|
|
FHLB advances
|
37,700
|
|
|
37,476
|
|
|
—
|
|
|
37,226
|
|
|
—
|
|
Advance payments by borrowers for taxes and insurance
|
1,903
|
|
|
1,903
|
|
|
1,903
|
|
|
—
|
|
|
—
|
|
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Carrying Amount
|
|
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
(In thousands)
|
Financial Instruments-Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
14,194
|
|
|
$
|
14,194
|
|
|
$
|
14,194
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Securities available-for-sale
|
21,170
|
|
|
21,170
|
|
|
—
|
|
|
21,170
|
|
|
—
|
|
Securities held-to-maturity
|
4,949
|
|
|
4,954
|
|
|
—
|
|
|
4,954
|
|
|
—
|
|
FHLB stock
|
2,348
|
|
|
2,348
|
|
|
—
|
|
|
2,348
|
|
|
—
|
|
Loans held for sale
|
1,551
|
|
|
1,551
|
|
|
1,551
|
|
|
—
|
|
|
—
|
|
Loans receivable
|
382,014
|
|
|
374,599
|
|
|
—
|
|
|
—
|
|
|
374,599
|
|
Accrued interest receivable
|
1,332
|
|
|
1,332
|
|
|
—
|
|
|
1,332
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments-Liabilities
|
|
|
|
|
|
|
|
|
|
Demand deposits, savings and money market
|
$
|
200,678
|
|
|
$
|
200,678
|
|
|
$
|
200,678
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit
|
144,509
|
|
|
144,854
|
|
|
—
|
|
|
144,854
|
|
|
—
|
|
FHLB advances
|
45,500
|
|
|
45,226
|
|
|
—
|
|
|
45,226
|
|
|
—
|
|
Advance payments by borrowers for taxes and insurance
|
1,195
|
|
|
1,195
|
|
|
1,195
|
|
|
—
|
|
|
—
|
|
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents, accrued interest receivable and advance payments by borrowers for taxes and insurance
-The carrying amount is a reasonable estimate of fair value.
Securities
- The estimated fair values of securities are based on quoted market prices of similar securities.
FHLB stock
- FHLB stock is carried at par and does not have a readily determinable fair value. Ownership of FHLB stock is restricted to the member institutions, and can only be purchased and redeemed at par.
Loans held for sale
- The fair value of loans held-for-sale is based on quoted market prices from FHLMC. FHLMC quotes are updated daily and represent prices at which loans are exchanged in high volumes and in a liquid market.
Loans receivable
- For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair value of fixed-rate loans is estimated using discounted cash flow analysis, utilizing interest rates that would be offered for loans with similar terms to borrowers of similar credit quality. As a result of current market conditions, cash flow estimates have been further discounted to include a credit factor. The fair value of nonperforming loans is estimated using the fair value of the underlying collateral.
Bank owned life insurance investment, net of surrender charges
- The carrying amount is a reasonable estimate of its fair value.
Demand deposits, savings, money market, and certificates of deposit
- The fair value of the Bank's demand deposits, savings, and money market accounts is the amount payable on demand. The fair value of fixed-maturity certificates is estimated using a discounted cash flow analysis using current rates offered for deposits of similar remaining maturities.
FHLB advances
- The fair value of the Bank's FHLB advances was calculated using the discounted cash flow method. The discount rate was equal to the current rate offered by the FHLB for advances of similar remaining maturities.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Commitments to extend credit represent the principal categories of off-balance-sheet financial instruments
- The fair values of these commitments are not material since they are for a short period of time and are subject to customary credit terms.
Note 10 - Stock-Based Compensation
On October 21, 2015, the Company’s stockholders approved the Anchor Bancorp 2015 Equity Incentive Plan ("Plan"), which provides for awards of restricted stock, restricted stock units, and stock options to directors, advisory directors, directors emeriti, officers and employees. The cost of awards under the Plan generally is based on the fair value of the awards on their grant date. The maximum number of shares that may be utilized for awards under the Plan is
193,800
. Shares of common stock issued under the Plan may be authorized but unissued.
As of September 30, 2017, awards for restricted stock totaling
87,572
were outstanding and no stock options were granted. Awarded shares of restricted stock typically vest over various periods as long as the director, advisory director, directors emeriti, officer or employee remains in service to the Company. The Company recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the award date.
For the three months ended September 30, 2017 total compensation expense for the Plan was
$47,000
, and the related income tax benefit was
$16,000
.
The following tables provide a summary of changes in non-vested restricted stock awards for the three months ended September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2017
|
|
|
|
|
|
|
Weighted-Average Grant Date Fair Value
|
|
|
Shares
|
|
Non-vested at July 1, 2017
|
|
38,424
|
|
|
$
|
25.75
|
|
Granted
|
|
—
|
|
|
—
|
|
Vested
|
|
(11,532
|
)
|
|
25.75
|
|
Forfeited and canceled
|
|
(9,800
|
)
|
|
25.05
|
|
Non-vested at September 30, 2017
|
|
17,092
|
|
|
25.75
|
|
As of September 30, 2017, there was
$107,000
of total unrecognized compensation costs related to non-vested shares granted as restricted stock awards. The cost is expected to be recognized over the remaining weighted-average vesting period of approximately
three
years.
Note 11 - Federal Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. These calculations are based on many complex factors including estimates of the timing of reversals of temporary differences, the interpretation of federal income tax laws, and a determination of the differences between the tax and the financial reporting basis of assets and liabilities. Actual results could differ significantly from the estimates and interpretations used in determining the current and deferred income tax assets and liabilities.
As of September 30, 2017, the Condensed Consolidated Statements of Financial Condition included a net deferred tax asset of
$7.7 million
. The Company's primary deferred tax assets relate to the allowance for loan losses. The Company has prepared federal tax returns through June 30, 2017. At June 30, 2017 the net operating loss carryforward was
$9.2 million
which will begin to expire in 2031.
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Under GAAP, a valuation allowance is required to be recognized if it is “more likely than not” that a portion of the deferred tax asset will not be realized. Our policy is to evaluate our deferred tax assets on a quarterly basis and record a valuation allowance for our deferred tax asset if we do not have sufficient positive evidence indicating that it is more likely than not that some or all of the deferred tax asset will be realized. Each quarter, we consider positive evidence, which may include taxes paid in carryback years, reversing timing differences, available tax planning strategies, and projected taxable income and weigh it against negative evidence, which may include cumulative losses in the most recent three year period and uncertainty regarding short-term future earnings, among other items. At September 30, 2017, management determined that no valuation allowance on the deferred tax asset was required. This determination was based on sufficient positive evidence associated with our return to profitability, demonstrated through cumulative earnings over the recent three year period, strong quarterly income, and our projections for future taxable income.
Note 12 - Agreement and Plan of Merger
On April 11, 2017, Washington Federal, Inc., a Washington corporation ("Washington Federal"), entered into an Agreement and Plan of Merger, with the Company, which was amended on September 27, 2017 ("Amendment No. 1", and collectively with the Agreement and Plan of Merger, the "Merger Agreement"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company will merge with and into Washington Federal (the "Merger"), with Washington Federal as the surviving corporation in the Merger. Immediately after the effective time of the Merger (the "Effective Time"), Washington Federal intends to merge Anchor Bank, a wholly-owned subsidiary of the Company, with and into Washington Federal, National Association, a wholly-owned subsidiary of Washington Federal (the "Bank Merger"), with Washington Federal, National Association as the surviving institution in the Bank Merger.
Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of the common stock of the Company outstanding immediately prior to the Effective Time will be converted into the right to receive a fraction of a share of the common stock of Washington Federal equal to the quotient of 100.7% of the Company's tangible book value price per share (adjusted to include the outstanding balance of its ESOP loan) as of the end of the quarter immediately preceding the closing date divided by the average of the volume-weighted price of Washington Federal common stock for the twenty (20) trading days ending on the fifth trading day immediately preceding the closing date. On April 11, 2017, the Washington Federal shares to be issued pursuant to the Merger Agreement would have had an aggregate value of approximately $63.9 million and each share of Company common stock would have been valued at $25.75. Because the exchange ratio is not fixed and is not subject to a cap or collar, it is not possible until the completion of the Merger to determine the exact amount of Washington Federal common stock that a share of Company will be converted into the right to receive and the value of each share of Company common stock. All unvested restricted stock awards of the Company outstanding immediately prior to the Effective Time will become fully vested and will be converted into a right to receive the merger consideration described immediately above, as provided in the Merger Agreement.
The Merger Agreement contains customary representations and warranties from both Washington Federal and the Company, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of its business during the interim period between the execution of the Merger Agreement and the Effective Time, including, in the case of the Company, specific forbearances with respect to its business activities, (2) the Company's obligation to call a meeting of its shareholders to approve the Merger Agreement, and, subject to certain exceptions, that its board of directors recommend that the Company’s shareholders vote to approve the Merger Agreement, and (3) the Company's non-solicitation obligations regarding alternative acquisition proposals. The Merger Agreement provides certain termination rights for both Washington Federal and the Company and further provides that a termination fee of 1.5% of the aggregate Merger consideration will be payable by Anchor upon termination of the Merger Agreement under certain circumstances.
The need for the Amendment No. 1 was due to the identification of certain issues with respect to procedures, systems and processes of Washington Federal's bank subsidiary, Washington Federal, National Association, relating to its Bank Secrecy Act ("BSA") program. In addition, Amendment No. 1 also clarifies that a "burdensome condition" (i.e., a condition to regulatory approval of the merger that would be a basis for Washington Federal not to complete the merger) does not include any condition imposed on Washington Federal, or its subsidiary Washington Federal, National Association, related to its BSA program and that Washington Federal’s registration statement on Form S-4 will not go effective, and the Company’s special meeting of shareholders to vote on the Merger Agreement will not be called until the receipt of all regulatory approvals for the Merger. To provide Washington Federal additional time to complete its remediation efforts and obtain regulatory approvals, Amendment No. 1 extends from December 31, 2017 to June 30, 2018 the date after which either party can elect to terminate the Merger Agreement if the Merger has not yet been completed and provides for up to three additional six month extensions of the Merger Agreement beyond June 30, 2018. In light of the extension, the Company is now permitted to pay a dividend on its common stock or repurchase its common stock as long as it does not reduce its tangible common equity to assets ratio below 12% and, to
ANCHOR BANCORP AND SUBSIDIARY
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
provide greater flexibility in retaining employees through the closing of the Merger, may pay retention incentives and hire replacements for terminated executive officers at increased salaries.
The completion of the Merger is subject to customary conditions, including approval of the Merger Agreement by the Company's shareholders, by the holders of at least two thirds of the outstanding shares of the Company's common stock, and the receipt of all required regulatory approvals.