10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

___________________________

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2016  or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

     For the transition period from _____ to _____

Commission File Number: 001-34965

ANCHOR BANCORP
(Exact name of registrant as specified in its charter)
Washington	26-3356075
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
601 Woodland Square Loop SE, Lacey, Washington	98503
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code:	(360) 491-2250
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01 per share	The Nasdaq Stock Market LLC
(Title of Class)	(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:	None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES   NO    X   

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES   NO  X 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      X       No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes     X      No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§232.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer _____ Accelerated filer _____ Non-accelerated filer _____ Smaller reporting company   X    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   NO    X    

As of September 9, 2016, there were issued and outstanding 2,505,219 shares of the registrant’s common stock, which are traded on the NASDAQ Global Market under the symbol “ANCB.”  The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price of such stock as of December 31, 2015, was $64.9 million.  (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for the 2016 Annual Meeting of Shareholders are incorporated by reference into Part III.

ANCHOR BANCORP

2016 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Forward-Looking Statements	iii
Available Information	v
PART I
Item 1. Business	1
General	1
Market Area	1
Lending Activities	2
Asset Quality	14
Investment Activities	21
Deposit Activities and Other Sources of Funds	25
Subsidiaries and Other Activities	28
Competition	28
Natural Disasters	29
Employees	29
How We Are Regulated	30
Taxation	38
Item 1A. Risk Factors	38
Item 1B. Unresolved Staff Comments	46
Item 2. Properties	47
Item 3. Legal Proceedings	48
Item 4. Mine Safety Disclosures	48
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	49
Item 6. Selected Financial Data	51
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	54
Overview	54
Operating Strategy	54
Critical Accounting Policies	55
Comparison of Financial Condition at June 30, 2016 and June 30, 2015	56
Comparison of Operating Results for the Years Ended June 30, 2016 and June 30, 2015	58
Comparison of Financial Condition at June 30, 2015 and June 30, 2014	63
Comparison of Operating Results for the Years Ended June 30, 2015 and June 30, 2014	64
Average Balances, Interest and Average Yields/Costs	69
Yields Earned and Rates Paid	70
Rate/Volume Analysis	71
(Table of Contents continued on following page)

(i)

Asset and Liability Management and Market Risk	71
Liquidity	74
Contractual Obligations	75
Commitments and Off-Balance Sheet Arrangements	75
Capital	76
Impact of Inflation	76
Recent Accounting Pronouncements	77
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	78
Item 8. Financial Statements and Supplementary Data	79
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	127
Item 9A. Controls and Procedures	127
Item 9B. Other Information	128
PART III.
Item 10. Directors, Executive Officers and Corporate Governance	128
Item 11. Executive Compensation	128
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	128
Item 13. Certain Relationships and Related Transactions and Director Independence	129
Item 14. Principal Accountant Fees and Services	129
PART IV.
Item 15. Exhibits and Financial Statement Schedules	130
Signatures	132

As used in this report, the terms, “we,” “our,” and “us,” and “Company” refer to Anchor Bancorp and its consolidated subsidiary, unless the context indicates otherwise.  When we refer to “Anchor Bank” or the “Bank” in this report, we are referring to Anchor Bank, the wholly owned subsidiary of Anchor Bancorp.

(ii)

Forward-Looking Statements

This Form 10-K, including information included or incorporated by reference, future filings by the Company on Form 10-Q, and Form 8-K, and future oral and written statements by Anchor Bancorp and its management may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated, including, but not limited to:

• the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets;

• changes in general economic conditions, either nationally or in our market areas;

• changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources;

• fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market area;

• secondary market conditions for loans and our ability to sell loans in the secondary market;

• results of examinations of us by the Federal Deposit Insurance Corporation (“FDIC”), the Washington State Department of Financial Institution, Division of Banks (“DFI”) or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings;

• our ability to attract and retain deposits;

• increases in premiums for deposit insurance;

• management’s assumptions in determining the adequacy of the allowance for loan losses;

• our ability to control operating costs and expenses;

• the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;

• difficulties in reducing risks associated with the loans on our balance sheet;

• staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges;

• computer systems on which we depend could fail or experience a security breach;

• our ability to retain key members of our senior management team;

• costs and effects of litigation, including settlements and judgments;

• our ability to manage loan delinquency rates;

• increased competitive pressures among financial services companies;

• changes in consumer spending, borrowing and savings habits;

• legislative or regulatory changes that adversely affect our business including the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, including as a result of Basel III;

• the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions;

(iii)

• our ability to pay dividends on our common stock;

• adverse changes in the securities markets;

• inability of key third-party providers to perform their obligations to us;

• changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies, or the Financial Accounting Standards Board, including additional guidance and interpretation on existing accounting issues and details of the implementation of new accounting methods, including relating to fair value accounting and loan loss reserve requirements; and

• other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere in our filings with the Securities and Exchange Commission ("SEC"), including this Form 10-K.

These developments could have an adverse impact on our financial position and our results of operations.

Any forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur, and you should not put undue reliance on any forward-looking statements.

(iv)

Available Information

The Company provides a link on its investor information page at www.anchornetbank.com to the Securities and Exchange Commission’s (“SEC”) website (www.sec.gov) for purposes of providing copies of its annual report to shareholders, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and press releases.  Other than an investor’s own internet access charges, these filings are available free of charge and also can be obtained by calling the SEC at 1-800-SEC-0330.  The information contained on the Company’s website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K.

(v)

PART I

Item 1.  Business

General

Anchor Bancorp, a Washington corporation, was formed for the purpose of becoming the bank holding company for Anchor Bank in connection with the Bank’s conversion from mutual to stock form, which was completed on January 25, 2011.  In connection with the mutual to stock conversion, the Bank changed its name from “Anchor Mutual Savings Bank” to “Anchor Bank.”  At June 30, 2016, we had total assets of $431.5 million, total deposits of $300.9 million and total stockholders' equity of $63.2 million.  Anchor Bancorp’s business activities generally are limited to passive investment activities and oversight of its investment in Anchor Bank.  Accordingly, the information set forth in this report, including consolidated financial statements and related data, relates primarily to Anchor Bank.

Anchor Bancorp is a bank holding company and is subject to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”).  Anchor Bank is examined and regulated by the Washington State Department of Financial Institutions, Division of Banks (“DFI”) and by the Federal Deposit Insurance Corporation (“FDIC”).  Anchor Bank is required to have certain reserves set by the Federal Reserve and is a member of the Federal Home Loan Bank of Des Moines (“FHLB” or “FHLB of Des Moines”), which is one of the 11 regional banks in the Federal Home Loan Bank System (“FHLB System”).

Anchor Bank is a community-based savings bank primarily serving Western Washington through our 10 full-service banking offices (including one Wal-Mart in-store location) located within Grays Harbor, Thurston, Lewis, Pierce and Mason counties, and one loan production office located in King County, Washington. We are in the business of attracting deposits from the public and utilizing those deposits to originate loans. We offer a wide range of loan products to meet the demands of our customers, however, at June 30, 2016, 88.0% of our loans were collateralized by real estate and 57.8% of our loans were collateralized by commercial and multi-family real estate. Historically, our principal lending activity has consisted of the origination of loans secured by first mortgages on owner-occupied, one-to-four family residences and loans for the construction of one-to-four family residences, as well as consumer loans, with an emphasis on home equity loans and lines of credit. Since 1990, we have been actively offering commercial real estate loans and multi-family loans primarily in Western Washington.

The executive office of the Company is located at 601 Woodland Square Loop SE, Lacey, Washington 98503, and its telephone number is (360) 491-2250.

Market Area

Anchor Bank is a community-based financial institution primarily serving Western Washington including Grays Harbor, Thurston, Lewis, Pierce, and Mason counties. Based on information from the Washington Center for Real Estate Research, for the quarter ended June 30, 2016, the median home price in our five-county market area was $214,540 a 1.0% increase compared to the quarter ended June 30, 2015. Existing home sales in our five-county primary market area for the quarter ended March 31, 2016 totaled $20.9 million, which reflected a 13.2% increase compared to the quarter ended March 31, 2015.  According to the Department of Labor, the unemployment rate in our five-county primary market area averaged 7.4% during June 2016 compared to 7.3% during June 2015. These unemployment rates are higher than the national unemployment rates of 4.7% and 5.3%, as of June 2016 and June 2015, respectively.  A continuation of the overall economic weakness in the counties in our market area could negatively impact our lending opportunities and profitability.

Grays Harbor County has a population of 71,744 and a median household income of $43,986 according to the latest 2016 information available from the U.S. Census Bureau. The economic base in Grays Harbor has been historically dependent on the timber and fishing industries. Other industries that support the economic base are tourism, manufacturing, agriculture, shipping, transportation and technology.  Based on information from the Washington Center for Real Estate Research, for the quarter ended June 30, 2016,the median home price in Grays Harbor County was $154,800 compared to $141,000 for the quarter ended June 30, 2015 and represents an increase of 9.7%. In addition, existing home sales in Grays Harbor County for the quarter ended March 31, 2016 increased by 28.2% from the total for the quarter ended March 31, 2015.  According to the U.S. Department of Labor, the unemployment rate in Grays Harbor County increased to 8.6% at June 30, 2016 from 8.5% at June 30, 2015.  We have five branches (including our home office) located throughout this county.

Thurston County has a population of 271,588 and a median household income of $60,726 according to the latest 2016 information available from the U.S. Census Bureau.  Thurston County is home of Washington State’s capital (Olympia) and its economic base is largely driven by state government related employment. Based on information from the Washington Center for Real Estate Research, for the quarter ended June 30, 2016, the median home price in Thurston County was $268,000 compared to $246,500 for the quarter ended June 30, 2015, and represents an 8.7% increase.  In addition, existing home sales in Thurston County for the

1

quarter ended March 31, 2016 increased by 11.2% from the quarter ended March 31, 2015. According to the U.S. Department of Labor, the unemployment rate for the Thurston County area increased to 6.1% at June 30, 2016 from 5.9% at June 30, 2015.  We currently have two branches in Thurston County.  Thurston County has a stable economic base primarily attributable to the state government presence.

Lewis County has a population of 75,964 and a median household income of $44,442 according to the latest 2016 information available from the U.S. Census Bureau. The economic base in Lewis County is supported by manufacturing, retail trade, local government and industrial services. Based on information from the Washington Center for Real Estate Research, for the quarter ended June 30, 2016, the median home price in Lewis County was $179,200 compared to $157,500 for the quarter ended June 30, 2015, and represents a 13.8% increase.  In addition, existing home sales in Lewis County for the quarter ended March 31, 2016 increased by 7.1% from the quarter ended March 31, 2015.  According to the U.S. Department of Labor, the unemployment rate in Lewis County decreased to 7.8% at June 30, 2016 from 8.2% at June 30, 2015. We have one branch located in Lewis County.

Pierce County is the second most populous county in the state and has a population of 846,531 and a median household income of $59,463 according to the latest 2016 information available from the U.S. Census Bureau. The economy in Pierce County is diversified with the presence of military related government employment (Lewis/McChord JBLM Base), transportation and shipping employment (Port of Tacoma), and aerospace related employment (Boeing).  Based on information from the Washington Center for Real Estate Research, for the quarter ended June 30, 2016, the median home price in Pierce County was $279,400 compared to $255,600 for the quarter ended June 30, 2015, and represents a 9.3% increase.  In addition, existing home sales in Pierce County for the quarter ended March 31, 2016 increased by 12.5% from the quarter ended March 31, 2015. According to the U.S. Department of Labor, the unemployment rate for the Pierce County area increased to 6.5% at June 30, 2016 from 6.4% at June 30, 2015. We have one branch located in Pierce County.

Mason County has a population of 61,696 and a median household income of $50,419 according to the latest information available from the U.S. Department of Labor.  The economic base in Mason County is supported by wood products.  Based on information from the Washington Center for Real Estate Research, for the quarter ended June 30, 2016, the median home price in Mason County was $191,300 compared to $175,000 for the quarter ended June 30, 2015, and represents a 9.3% increase.  In addition, existing home sales in Mason County for the quarter ended March 31, 2016 increased by 15.9% from the quarter ended March 31, 2015. According to the U.S. Department of Labor, the unemployment rate in Mason County increased to 7.9% at June 30, 2016 from 7.3% at June 30, 2015.  We have one branch located in Mason County.

For a discussion regarding the competition in our primary market area, see “– Competition.”

Lending Activities

General. Historically, our principal lending activity has consisted of the origination of loans secured by first mortgages on owner-occupied, one-to-four family residences and loans for the construction of one-to-four family residences, as well as consumer loans, with an emphasis on home equity loans and lines of credit. Since 1990, we have been actively offering commercial real estate loans and multi-family loans primarily in Western Washington and beginning in 2014 increased our focus on construction lending.  A substantial portion of our loan portfolio is secured by real estate, either as primary or secondary collateral, located in our primary market area. As of June 30, 2016, the net loan portfolio totaled $347.4 million and represented 80.5% of our total assets. As of June 30, 2016, 17.4% of our total loan portfolio was comprised of one-to-four family loans, 4.7% of home equity loans and lines of credit, 42.5% of commercial real estate loans, 15.3% of multi-family real estate loans, 10.5% of commercial business loans, 8.1% of construction and land loans, 1.3% of unsecured consumer loans and 0.2% of automobile loans.

As a state chartered savings bank chartered under Washington law, we are subject to 20% of total risk based capital plus reserves as our statutory lending limit to one borrower or $12.0 million at June 30, 2016.  At June 30, 2016, there were no borrowing relationships that were over the legal amount. Our ten largest credit relationships at June 30, 2016 were as follows:

• Our largest single borrower relationship totaled $11.2 million and consisted of four loans secured by congregate care facilities;

• The second largest borrower relationship is one loan for $10.2 million which is a purchased minority interest in a line of credit to provide warehouse lending to a financial services company which is collateralized by an assignment of finance notes receivable on residential housing secured by properties located in Washington, Oregon and Utah;

• The third largest borrower relationship totaled $10.0 million, excluding $50,000 of undisbursed funds, and consisted of one unsecured credit line and three loans secured by hospitality properties;

2

• The fourth largest borrower relationship is a $9.9 million purchased minority interest loan participation in a commercial real estate participation loan secured by an entertainment, hospitality and dining complex;

• The fifth largest borrower relationship totaled $8.7 million, excluding $2.0 million undisbursed funds, and consisted of two loans secured by an airport parking structure;

• The sixth largest borrower relationship totaled $7.2 million and consisted of two loans secured by 41 single family residential rental homes, excluding a $69,000 undisbursed line of credit;

• The seventh largest borrower relationship totaled $6.6 million and consisted of two loans secured by non-owner occupied commercial real estate properties;

• The eighth largest borrower relationship totaled $6.4 million excluding $4.4 million of undisbursed funds and consisted of one unsecured business line of credit for $1.5 million and four construction loans secured by one multi-family residential and several speculative single family residential properties;

• The ninth largest borrower relationship totaled $6.3 million, excluding $854,000 of undisbursed funds, and consisted of 16 loans, the largest of which was $1.4 million, secured primarily by owner- and non-owner-occupied light industrial and commercial real estate; and

• The tenth largest borrower relationship is one loan for $5.9 million and is a purchased multi-family loan.

All of the properties securing these loans are located in our primary market area in Grays Harbor, Thurston, Lewis, Pierce and Mason counties or our secondary market area in other parts of Washington State or Northwest Oregon.  These loans were all performing according to their repayment terms as of June 30, 2016.

Loan Portfolio Analysis. The following table sets forth the composition of Anchor Bank’s loan portfolio by type of loan at the dates indicated:

	At June 30,
	2016				2015				2014				2013				2012
	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
Real estate:
One-to-four family	$	61,230	17.4	%	$	57,944	20.1	%	$	63,009	21.9	%	$	73,901	26.1	%	$	82,709	28.0	%
Multi-family	53,742		15.3		43,249		15.0		47,507		16.5		38,425		13.6		42,032		14.2
Commercial	149,527		42.5		128,306		44.5		107,828		37.6		106,859		37.7		97,306		32.9
Construction	21,793		6.2		11,731		4.1		19,690		6.9		5,641		2.0		6,696		2.3
Land loans	6,839		1.9		4,069		1.4		4,126		1.4		5,330		1.9		7,062		2.4
Total real estate	$	293,131	83.3	%	$	245,299	85.1	%	$	242,160	84.3	%	$	230,156	81.2	%	$	235,805	79.8	%
Consumer:
Home equity	16,599		4.7		17,604		6.1		20,894		—		25,835		9.1		31,504		10.7
Credit cards	2,969		0.8		3,289		1.1		3,548		—		4,741		1.7		5,180		1.8
Automobile	597		0.2		686		0.2		1,073		—		1,850		0.7		3,342		1.1
Other	1,933		0.5		2,347		0.8		2,838		—		2,723		1.0		2,968		1.0
Total consumer	22,098		6.2		23,926		8.3		28,353		0.099		35,149		12.4		42,994		14.6
Commercial business	36,848		10.5		18,987		6.6		16,737		—		18,211		6.4		16,618		5.6
Total loans	352,077		100.0	%	288,212		100.0	%	287,250		100.0	%	283,516		100.0	%	295,417		100.0	%
Less:
Deferred loan fees and loan premiums, net	947				1,047				1,100				915				605
Allowance for loan losses	3,779				3,721				4,624				5,147				7,057
Loans receivable, net	$	347,351			$	283,444			$	281,526			$	277,454			$	287,755

3

The following table shows the composition of Anchor Bank’s loan portfolio by fixed- and adjustable-rate loans at the dates indicated:

	At June 30,
	2016				2015				2014				2013				2012
	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
FIXED-RATE LOANS	(Dollars in thousands)
Real estate:
One-to-four family	$	38,107	10.8	%	$	46,686	16.2	%	$	50,778	17.7	%	$	58,639	20.7	%	$	69,635	23.6	%
Multi-family	22,666		6.4		23,716		8.2		32,813		11.4		29,603		10.4		33,174		11.2
Commercial	14,555		4.1		25,048		8.7		34,776		12.1		42,128		14.9		57,449		19.4
Land loans	3,731		1.1		2,667		0.9		3,137		1.1		4,316		1.5		6,045		2
Total real estate	79,059		22.4		98,117		34.0		121,504		42.3		134,686		47.5		166,303		56.3
Real estate construction:
One-to-four family	2,498		0.7		—		—		312		0.1		—		—		449		0.2
Multi-family	—		—		—		—		—		—		2,254		0.8		1,370		0.5
Commercial	1,738		0.5		—		—		6,523		2.3		88		—		4,044		1.4
Total real estate construction	4,236		1.2		—		—		6,835		2.4		2,342		0.8		5,863		2
Consumer:
Home equity	8,431		2.4		9,888		3.4		12,042		4.2		15,848		5.6		20,805		7
Automobile	597		0.2		686		0.2		1,073		0.4		1,850		0.7		3,342		1.1
Other	1,931		0.5		2,345		0.8		2,838		1.0		2,723		1.0		2,968		1.0
Total consumer	10,959		3.1		12,919		4.5		15,953		5.6		20,421		7.2		27,115		9.2
Commercial business	13,145		3.7		12,404		4.3		11,717		4.1		11,050		3.9		9,690		3.3
Total fixed-rate loans	$	107,399	30.5		$	123,440	42.8		$	156,009	54.4		$	168,499	59.4		$	208,971	70.7
ADJUSTABLE-RATE LOANS
Real estate:
One-to-four family	$	23,123	6.6		$	11,258	3.9		$	12,231	4.3		$	15,262	5.4		$	13,074	4.4
Multi-family	31,076		8.8		19,533		6.8		14,694		5.1		8,822		3.1		8,858		3.0
Commercial	134,972		38.3		103,258		35.8		73,052		25.4		64,731		22.8		39,857		13.5
Land loans	3,108		0.9		1,402		0.5		989		0.3		1,014		0.4		1,017		0.3
Total real estate	192,279		54.6		135,451		47.0		100,966		35.1		89,829		31.7		62,806		21.3
Real estate construction:
One-to-four family	9,475		2.7		2,119		0.7		2,697		0.9		858		0.3		—		—
Multi-family	1,083		0.3		9,353		3.2		3,432		1.2		1,270		0.4		—		—
Commercial	6,999		2.0		259		0.1		6,726		2.3		1,171		0.4		833		0.3
Total real estate construction	17,557		5.0		11,731		4.1		12,855		4.4		3,299		1.2		833		0.3

(table continued on following page)

4

	At June 30,
	2016				2015				2014				2013				2012
	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
Consumer:
Home equity	8,168		2.3		7,716		2.7		8,852		3.1		9,987		3.5		10,699		3.6
Automobile	—		—		—		—		—		—		—		—		—		—
Credit cards	2,969		0.8		3,289		1.1		3,548		1.2		4,741		1.7		5,180		1.8
Other	2		—		2		—		—		—		—		—		—		—
Total consumer	11,139		3.2		11,007		3.8		12,400		4.3		14,728		5.2		15,879		5.4
Commercial business	23,703		6.7		6,583		2.3		5,020		1.8		7,161		2.5		6,928		2.3
Total adjustable rate loans	244,678		69.5		164,772		57.2		131,241		45.6		115,017		40.6		86,446		29.3
Total loans	352,077		100.0	%	288,212		100.0	%	287,250		100.0	%	283,516		100.0	%	295,417		100.0	%
Less:
Deferred loan fees and loan premiums, net	947				1,047				1,100				915				605
Allowance for loan losses	3,779				3,721				4,624				5,147				7,057
Loans receivable, net	$	347,351			$	283,444			$	281,526			$	277,454			$	287,755

Commercial and Multi-Family Real Estate Lending.   As of June 30, 2016, $203.3 million, or 57.8% of our total loan portfolio was secured by commercial and multi-family real estate property located in our market area.  Of this amount, $44.7 million was identified as owner occupied commercial real estate, and the remaining $156.1 million, or 44.4% of our total loan portfolio was secured by income producing, or non-owner occupied commercial real estate. Our commercial real estate loans include loans secured by properties classified as office, hospitality, mini storage, mobile home park, congregate care, retail, education/worship, airport parking structure and other non-residential.  As of June 30, 2016, commercial real estate loans totaled $149.5 million, or 42.5% of our portfolio. Multi-family real estate totaled $53.7 million, or 15.3% of our portfolio at June 30, 2016, and increased over the last year primarily due to the purchase of $22.8 million in multi-family loans, partially offset by the reclassification of $14.4 million of multi-family loans to the one-to-four family loan portfolio. The loan purchase consisted of 12 multi-family projects in King and Pierce counties. All properties met our underwriting standards and each property was independently visited and re-underwritten.

Commercial and multi-family loans generally are priced at a higher rate of interest than one-to-four family loans. Typically, these loans have higher loan balances, are more difficult to evaluate and monitor, and involve a greater degree of risk than one-to-four family loans. Often payments on loans secured by commercial or multi-family properties are dependent on the successful operation and management of the property; therefore, repayment of these loans may be affected by adverse conditions in the real estate market or the economy. We generally require and obtain loan guarantees from financially capable parties based upon the review of personal financial statements. If the borrower is a corporation, we generally require and obtain personal guarantees from the corporate principals based upon a review of their personal financial statements and individual credit reports.

The average loan size in our commercial and multi-family real estate portfolio was $847,000 as of June 30, 2016.  We target individual commercial and multi-family real estate loans to small and mid-size owner occupants and investors in our market area, between $1.0 million and $6.0 million. At June 30, 2016, the largest commercial loan in our portfolio was a purchased minority interest loan participation of $9.9 million secured by an entertainment, hospitality and dining complex located in Rochester, Washington. Our largest multi-family loan as of June 30, 2016, was a $5.9 million loan is secured by a 105 unit apartment complex located in Auburn, Washington.

We offer both fixed and adjustable rates on commercial and multi-family real estate loans. Loans originated on a fixed rate basis generally are originated at terms up to ten years, with amortization terms up to 30 years. A substantial amount of our commercial and multi-family real estate loans have adjustable interest rates. As a result, these loans may experience a higher rate of default in a rising interest rate environment. As of June 30, 2016, we had $22.7 million and $31.1 million in fixed and adjustable rate multi-family loans, respectively, and $14.6 million and $135.0 million in fixed and adjustable rate commercial real estate loans, respectively.

Commercial and multi-family real estate loans are originated with rates that generally adjust after an initial period ranging from three to ten years. Adjustable rate multi-family and commercial real estate loans are generally priced utilizing the applicable FHLB

5

or U.S. Treasury Term Borrowing Rate plus an acceptable margin. These loans are typically amortized for up to 30 years with a prepayment penalty.  The maximum loan-to-value ratio for commercial and multi-family real estate loans is generally 75%.  We require appraisals of all properties securing commercial and multi-family real estate loans, performed by independent appraisers designated by us.  We require our commercial and multi-family real estate loan borrowers with outstanding balances in excess of $750,000, or a loan-to-value ratio in excess of 60% to submit annual financial statements and rent rolls on the subject property.  The properties that fit within this profile are also inspected annually, and an inspection report and photograph are included.  We generally require a minimum pro forma debt coverage ratio of 1.20 times for loans secured by commercial and multi-family properties.

The following is an analysis of the types of collateral securing our commercial real estate and multi-family loans at June 30, 2016:

Collateral	Amount		Percent of Total
	(Dollars in thousands)
Multi-family	$	53,742	26.4	%
Office	18,619		9.2
Hospitality	25,843		12.7
Mini storage	32,810		16.1
Mobile home park	5,089		2.5
Congregate care	14,012		6.9
Retail	21,560		10.6
Education/Worship	10,327		5.1
Airport parking structure	8,676		4.3
Other non-residential	12,591		6.2
Total	$	203,269	100.0	%

If we foreclose on a multi-family or commercial real estate loan, our holding period for the collateral typically is longer than for one-to-four family mortgage loans because there are fewer potential purchasers of the collateral. Additionally, as a result of our increasing emphasis on this type of lending, a portion of our multi-family and commercial real estate loan portfolio is relatively unseasoned and has not been subjected to unfavorable economic conditions. As a result, we may not have enough payment history with which to judge future collectability or to predict the future performance of this part of our loan portfolio. These loans may have delinquency or charge-off levels above our historical experience, which could adversely affect our future performance. Further, our multi-family and commercial real estate loans generally have relatively large balances to single borrowers or related groups of borrowers. Accordingly, if we make any errors in judgment in the collectability of our commercial real estate loans, any resulting charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. At June 30, 2016, there was one commercial real estate loan for $319,000 and no multi-family loans that were on nonaccrual status.  Commercial real estate loan charge offs for the years ended June 30, 2016 and 2015 were $225,000 and $340,000, respectively. There were no multi-family loans charged-off for the year ended June 30, 2016 compared to one for $159,000 for the year ended June 30, 2015.

One-to-Four Family Real Estate Lending. As of June 30, 2016, $61.2 million, or 17.4%, of our total loan portfolio consisted of permanent loans secured by one-to-four family residences of which $1.5 million were nonperforming. Our one-to-four family loan portfolio increased in part due to reclassification of $14.4 million of multi-family loans to the one-to-four family loan portfolio. We originate both fixed rate and adjustable rate loans in our residential lending program and use Freddie Mac underwriting guidelines.  None of our residential loan products allow for negative amortization of principal.  We typically base our decision on whether to sell or retain secondary market quality loans on the rate and fees for each loan, market conditions and liquidity needs.  Although we have sold the majority of our residential loans over the last two years, we do not sell all qualified loans on the secondary market as we hold in our portfolio many residential loans that may not meet all Freddie Mac guidelines yet meet our investment and liquidity objectives.  

At June 30, 2016, $38.1 million of this loan portfolio consisted of fixed rate loans which were 62.2% of our total one-to-four family portfolio and 10.8% of our total loans at that date. Specifically, we offer fixed rate, residential mortgages from 10 to 30 year terms and we use Freddie Mac daily pricing to set our pricing.  Borrowers have a variety of buy-down options with each loan and most mortgages have a duration of less than ten years.  The average loan duration is a function of several factors, including real estate supply and demand, current interest rates, expected future rates and interest rates payable on outstanding loans.

6

Additionally, we offer a full range of adjustable rate mortgage products.  These loans offer three, five or seven year fixed-rate terms with annual adjustments thereafter.  The annual adjustments are limited to increases or decreases of no more than two percent and carry a typical lifetime cap of five percent above the original rate.  At this time, we hold these adjustable rate mortgages in our portfolio.  Similar to fixed rate loans, borrower demand for adjustable rate mortgage loans is a function of the current rate environment, the expectations of future interest rates and the difference between the initial interest rates and fees charged for each type of loan. The relative amount of fixed rate mortgage loans and adjustable rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment.

While adjustable rate mortgages in our loan portfolio help us reduce our exposure to changes in interest rates, it is possible that, during periods of rising interest rates, the risk of default on adjustable rate mortgage loans may increase as a result of annual repricing and the subsequent higher payment to the borrower.  In some rate environments, adjustable rate mortgages may be offered at initial rates of interest below a comparable fixed rate and could result in a higher risk of default or delinquency. Another consideration is that although adjustable rate mortgage loans allow us to decrease the sensitivity of our asset base as a result of changes in the interest rates, the extent of this interest sensitivity is limited by the periodic and lifetime interest rate adjustment limits. Our historical experience with adjustable rate mortgages has been very favorable.  We do not, however, offer adjustable rate mortgages with initial teaser rates.  At June 30, 2016, $23.1 million of our permanent one-to-four family mortgage loans were adjustable rate loans which were 37.8% of our total one-to-four family loan portfolio and 6.6% of our total loans at that date.

Regardless of the type of loan, we underwrite our residential loans based on Freddie Mac's Loan Prospector guidelines.  This underwriting considers a variety of factors such as credit history, debt to income, property type, loan-to-value, and occupancy, to name a few.  Generally, we use the same Freddie Mac criteria for establishing maximum loan-to-values and also consider whether a transaction is a purchase, rate and term refinance, or cash-out refinance. For loans above 80% loan-to-value, we typically require private mortgage insurance in order to reduce our risk exposure should the loan default.  Regardless of the loan-to-value, our one-to-four family loans are appraised by independent fee appraisers that have been approved by us and generally carry no prepayment restrictions. We also require title insurance, hazard insurance, and if necessary, flood insurance in an amount not less than the current regulatory requirements.

We also have additional products designed to make home ownership available to qualified low to moderate income borrowers. The underwriting guidelines for these programs are usually more flexible in the areas of credit or work history.  For example, some segments of the low to moderate income population have non-traditional credit histories and pay cash for many of their consumer purchases.  They may also work in seasonal industries that do not offer a standard work schedule or salary.  Loans such as Freddie Mac's “Homestart Program” are designed to meet this market's needs and often require a borrower to show a history of saving and budgeting. These types of programs also provide education on the costs and benefits of homeownership.  We plan on continuing to offer these and other programs which reach out to qualifying borrowers in all the markets we serve.

Anchor Bank does not actively engage in subprime lending, either through advertising, marketing, underwriting and/or risk selection, and has no established program to originate or purchase subprime loans to be held in its portfolio.  Residential mortgage loans identified as subprime, with FICO scores of less than 660, were originated and managed in the ordinary course of business, and totaled $3.9 million at June 30, 2016, representing 1.1% of total loans, 6.4% of one-to-four family mortgage loans, and 7.0% of Tier 1 Capital.  Our weighted average seasoning for these loans (the number of months since the funding date of the loans) was 89 months as of June 30, 2016. Our one-to-four family mortgage loans identified as subprime based on the borrower’s FICO score at time the loan was originated do not represent a material part of our lending activity.  Accordingly, these loans are identified as “exclusions” as defined pursuant to regulatory guidance issued by the FDIC in Financial Institutions Letter FIL-9-2001 on subprime lending. At June 30, 2016, $1.5 million of one-to-four family loans were in nonaccrual status. One-to-four family loans of $258,000 were charged off during the year ended June 30, 2016 compared to $561,000 and $897,000 of one-to-four family loans that were charged-off during the years ended June 30, 2015 and 2014, respectively.

Mortgage reform rules mandated by the Dodd-Frank Act became effective in January 2014, requiring lenders to make a reasonable, good faith determination of a borrower’s ability to repay any consumer closed-end credit transaction secured by a dwelling and to limit prepayment penalties. Increased risks of legal challenge, private right of action and regulatory enforcement are presented by these rules. Anchor Bank does not originate loans that do not meet the regulatory definition of a qualified mortgage.

Construction and Land Loans.  We have been an active originator of real estate construction loans in our market area since 1990. At June 30, 2016, our construction loans totaled $21.8 million or 6.2% of the total loan portfolio, an increase of $10.1 million or 85.8% since June 30, 2015. The majority of these loans are for the construction of one-to-four family properties.

We generally provide an interest reserve for funds on builder construction loans that have been advanced.  Interest reserves are a means by which a lender builds in, as a part of the loan approval and as a component of the cost of the project, the amount of the monthly interest required to service the debt during the construction period of the loan.  

7

At June 30, 2016, our construction loan portfolio contained one loan of $229,000 which had been previously extended or renewed. Our entire construction loan portfolio at June 30, 2016 consisted of 38 loans requiring interest only payments, 28 of which totaled $18.3 million and were relying on the interest reserve to make this payment. At June 30, 2016, no construction loans were delinquent. No construction loans were charged-off during the years ended June 30, 2016, 2015 and 2014.

At the dates indicated, the composition of our construction portfolio was as follows:

	At June 30,
	2016		2015		2014
	(In thousands)
One-to-four family:
Speculative	$	11,220	$	2,119	$	2,159
Permanent	—		—		—
Custom	753		—		850
Land acquisition and development loans	156		—		—
Multi-family	1,083		9,353		3,432
Commercial real estate:
Construction	8,581		259		13,249
Total construction (1)	$	21,793	$	11,731	$	19,690

⁽¹⁾  Loans in process for these loans at June 30, 2016, 2015 and 2014 were $37.9 million, $7.2 million and $11.8 million, respectively.

For the year ended June 30, 2016, we originated 28 builder construction loans to fund the construction of one-to-four family properties totaling $25.0 million, as compared to two for $4.2 million during the year ended June 30, 2015, and five for $3.0 million during the year ended June 30, 2014. We originate construction and site development loans to experienced contractors and builders in our market area primarily to finance the construction of single-family homes and subdivisions, which homes typically have an average price ranging from $200,000 to $500,000.  All builders were qualified using the same standards as other commercial loan credits, requiring minimum debt service coverage ratios and established cash reserves to carry projects through construction completion and sale of the project. The maximum loan-to-value limit on both pre-sold and speculative projects is generally up to 75% of the appraised market value or sales price upon completion of the project. Development plans are required from builders prior to making the loan. We also require that builders maintain adequate insurance coverage. Maturity dates for residential construction loans are largely a function of the estimated construction period of the project, and generally did not exceed 18 months for residential subdivision development loans at the time of origination. Our residential construction loans typically have adjustable rates of interest based on The Wall Street Journal prime rate and during the term of construction, the accumulated interest is added to the principal of the loan through an interest reserve. Construction loan proceeds are disbursed periodically in increments as construction progresses and based on inspections by our approved inspectors.  At June 30, 2016, our largest builder relationship consisted of four loans for $6.9 million, including $3.1 million which was undisbursed.

We also make, from time to time, construction loans for commercial development projects. These projects include multi-family, apartment, retail, office/warehouse and office buildings. These loans generally have an interest-only phase during construction, rely on an interest reserve to fund interest payments and generally convert to permanent financing when construction is completed. Disbursement of funds is at our sole discretion and is based on the progress of the construction. The maximum loan-to-value limit applicable to these loans is generally 75% of the appraised post-construction value.  Additional analysis and underwriting of these loans typically results in lower loan-to-value ratios based on the debt service coverage analysis, including our interest rate and vacancy stress testing.  Our target minimum debt coverage ratio is 1.20 for loans on these projects. At June 30, 2016, our portfolio of construction loans for commercial and multi-family projects included eight loans totaling $9.8 million, and there is an additional $19.9 million undisbursed.  These loan commitments range in size from $369,000 to $8.1 million with an average disbursed balance of $1.2 million. These loans were for the construction of two multi-family complexes, three offices, two retail facilities, one hotel and there was one single family residential land development loan, all of which are located in Washington. Monitoring construction progress and managing advances during construction are risks not present when lending on complete commercial properties. In order to mitigate these risks the Bank requires the use of an approved third-party construction process monitoring firm for inspections, progress reports and construction budget oversight and utilizes construction loan management software to assist in assuring that advances are consistent with the progress that has been confirmed.

Properties which are the subject of a construction loan are monitored for progress through our construction loan administration department, and include monthly site inspections, inspection reports and photographs provided by a qualified staff inspector or a

8

licensed and bonded third party inspection service contracted by and for us.  If we make a determination that there is deterioration, or if the loan becomes nonperforming, we halt any disbursement of those funds identified for use in paying interest and bill the borrower directly for interest payments.  Construction loans with interest reserves are underwritten similarly to construction loans without interest reserves.

We also originate land loans which are typically made to individual consumers to buy a lot or parcel of land for the future construction of the buyer’s primary residence and are included in “land loans”.  At June 30, 2016, our land loans totaled $6.8 million or 1.9% of the total loan portfolio, none of which were on nonaccrual status.

Our construction and land acquisition and development loans are based upon estimates of costs in relation to values associated with the completed project. Construction and land acquisition and development lending involves additional risks when compared with permanent residential lending because funds are advanced upon the collateral for the project based on an estimate of costs that will produce a future value at completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation on real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the completed project loan-to-value ratio. Changes in the demand, such as for new housing and higher than anticipated building costs may cause actual results to vary significantly from those estimated. If our appraisal of the value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss. Because construction loans require active monitoring of the building process, including cost comparisons and on-site inspections, these loans are more difficult and costly to monitor. This type of lending also typically involves higher loan principal amounts and is often concentrated with a small number of builders. In addition, generally during the term of a construction loan, no payment from the borrower is generally required since the accumulated interest is added to the principal of the loan through an interest reserve. 

Properties under construction are often difficult to sell and typically must be completed in order to be successfully sold which also complicates the process of working out problem construction loans. This may require us to advance additional funds and/or contract with another builder to complete construction and assume the market risk of selling the project at a future market price, which may or may not enable us to fully recover unpaid loan funds and associated construction and liquidation costs. Increases in market rates of interest may have a more pronounced effect on construction loans by rapidly increasing the end-purchasers' borrowing costs, thereby reducing the overall demand for the project. In addition, speculative construction loans to a builder are often associated with homes that are not pre-sold, and thus pose a greater potential risk to us than construction loans to individuals on their personal residences because there is the added risk associated with identifying an end-purchaser for the finished project.

Land loans also pose additional risk because of the lack of income being produced by the property and the potential illiquid nature of the collateral.  These risks can be significantly impacted by the supply and demand conditions.  As a result, construction lending often involves the disbursement of substantial funds with repayment dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property rather than the ability of the borrower or guarantor themselves to repay principal and interest.

Consumer Lending.  We offer a variety of consumer loans, including home equity loans and lines of credit, automobile loans, credit cards and personal lines of credit. At June 30, 2016, the largest component of the consumer loan portfolio consisted of home equity loans and lines of credit, which totaled $16.6 million, or 4.7%, of the total loan portfolio.  Our home equity loans are risk priced using credit score, loan-to-value and overall credit quality of the applicant.  Home equity loans and lines of credit are made for a variety of purposes including improvement of residential properties. The majority of these loans are secured by a second deed of trust on owner-occupied primary single family residential property. Our home equity lines of credit include a maximum total term of 30 years, including an initial period of 10 years with interest-only payments and a variable rate of interest tied to the Prime Rate, plus a margin (the "draw" period), followed by 20 years of principal and interest payments under a level amortization schedule and an interest rate that is fixed for the 20 years at the fully indexed accrual rate as of the time of variable-to-fixed rate conversion. Our home equity loans are closed-end loans with a term of 20 years and have level amortization with regular monthly payments of principal and interest. The interest rate is risk based and reflects both credit and collateral risk. Both our home equity lines and home equity loans are available up to 95% of the combined loan to value ratio as determined by the Bank.

Our credit card portfolio includes both VISA and MasterCard brands, and totaled $3.0 million, or 0.8% of the total loan portfolio at June 30, 2016.  We have been offering credit cards for more than 20 years and all of our credit cards have interest rates and credit limits determined by the creditworthiness of the borrower.  We use credit bureau scores in addition to other criteria such as income in our underwriting decision process on these loans.

Our automobile loan portfolio totaled $597,000 or 0.2% of the total loan portfolio at June 30, 2016.  We offer several options for vehicle purchase or refinance with a maximum term of 84 months for newer vehicles and 72 months for older vehicles.  As with home equity loans, our vehicle and recreational vehicle loans are risk priced based on creditworthiness, loan term and loan-to-

9

value.  We currently access a Carfax Vehicle Report to ensure that the collateral being loaned against is acceptable and to protect borrowers from a “lemon” or other undesirable histories. Other consumer loans, consisting primarily of unsecured personal lines of credit totaled $1.9 million or 0.5% of our total loan portfolio at June 30, 2016.

Consumer loans entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by rapidly depreciating assets such as automobiles.  In these cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans.  These risks are not as prevalent with respect to our consumer loan portfolio because a large percentage of the portfolio consists of home equity lines of credit that are underwritten in a manner such that they result in credit risk that is substantially similar to one-to-four family mortgage loans.  Nevertheless, home equity lines of credit have greater credit risk than one-to-four family mortgage loans because they are secured by mortgages subordinated to the existing first mortgage on the property, which we may or may not hold and do not have private mortgage insurance coverage.  At June 30, 2016, $17,000 of consumer loans were delinquent in excess of 90 days or in nonaccrual status.  Consumer loans of $390,000 were charged off during the year ended June 30, 2016 compared to $351,000 and $876,000 of consumer loans that were charged-off during the years ended June 30, 2015 and 2014, respectively.

Commercial Business Lending.  These loans are primarily originated as conventional loans to business borrowers, which include lines of credit, term loans and letters of credit.  These loans are typically secured by collateral and are used for general business purposes, including working capital financing, equipment financing, capital investment and general investments.  Loan terms vary from one to seven years.  The interest rates on such loans are generally floating rates indexed to The Wall Street Journal prime rate.  Inherent with our extension of business credit is the business deposit relationship which frequently includes multiple accounts and related services from which we realize low cost deposits plus service and ancillary fee income.

Commercial business loans typically have shorter maturity terms and higher interest spreads than real estate loans, but generally involve more credit risk because of the type and nature of the collateral. We are focusing our efforts on small- to medium-sized, privately-held companies with local or regional businesses that operate in our market area. Our commercial business lending policy includes credit file documentation and analysis of the borrower's background, capacity to repay the loan, the adequacy of the borrower's capital and collateral, as well as an evaluation of other conditions affecting the borrower. Analysis of the borrower's past, present and future cash flows is also an important aspect of our credit analysis. We generally obtain personal guarantees on our commercial business loans.  At June 30, 2016, commercial business loans totaled $36.8 million, or 10.5% of our loan portfolio and was comprised of 185 loans in 86 different business classifications as identified by the North American Industrial Classification System.  The largest commercial business relationship at June 30, 2016 consisted of one loan for $10.2 million which is a purchased minority interest in a line of credit to provide warehouse lending to a financial services company which is collateralized by an assignment of finance notes receivable on residential housing secured by properties located in Washington, Oregon and Utah. Our total commitment under our minority interest in the line of credit is $10.3 million. The line of credit is repaid when the finance note is sold by the financial services company into the secondary market, with the proceeds from the sale used to pay down our pro rata portion of the outstanding line of credit.

Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. Our commercial business loans are originated primarily based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral consists of accounts receivable, inventory or equipment. Credit support provided by the borrower for most of these loans and the probability of repayment is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any. As a result, in the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The collateral securing other loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.  For the years ended June 30, 2016 and 2015, Anchor Bank charged off $84,000 and $86,000 from its commercial business loan portfolio. At June 30, 2016, there was one commercial business loan of $97,000 on nonaccrual status which was collateralized by a documented vessel, equipment and a junior lien on a single family residence.

Loan Maturity and Repricing.  The following table sets forth certain information at June 30, 2016 regarding the dollar amount of loans maturing in our portfolio based on their contractual terms to maturity, but does not include scheduled payments or potential prepayments.  Demand loans, loans having no stated schedule of repayments and no stated maturity, are reported as due in one year or less.  Loan balances do not include undisbursed loan proceeds, unearned discounts, unearned income and allowance for loan losses.

10

	Within One Year		After One Year Through 3 Years		After 3 Years Through 5 Years		After 5 Years Through 10 Years		Beyond 10 Years		Total
	(In thousands)
Real estate:
One-to-four family	$	804	$	4,731	$	2,403	$	18,196	$	35,096	$	61,230
Multi-family	3,872		5,463		1,289		11,287		31,831		53,742
Commercial	5,293		7,183		1,558		120,644		14,849		149,527
Construction	13,582		7,546		—		665		—		21,793
Land loans	3,201		1,596		955		548		539		6,839
Total real estate	26,752		26,519		6,205		151,340		82,315		293,131
Consumer:
Home equity	464		6,033		404		3,464		6,234		16,599
Credit cards	2,969		—		—		—		—		2,969
Automobile	15		48		160		297		77		597
Other	147		545		264		360		617		1,933
Total consumer	3,595		6,626		828		4,121		6,928		22,098
Commercial business	16,917		9,489		4,654		5,132		656		36,848
Total	$	47,264	$	42,634	$	11,687	$	160,593	$	89,899	$	352,077

The following table sets forth the dollar amount of all loans due after June 30, 2017, which have fixed interest rates and have floating or adjustable interest rates:

	Fixed Rates		Floating or Adjustable Rates		Total
	(In thousands)
Real estate:
One-to-four family	$	37,303	$	23,123	$	60,426
Multi-family	18,794		31,076		49,870
Commercial	11,331		132,903		144,234
Construction	4,089		4,122		8,211
Land loans	2,135		1,503		3,638
Total real estate	73,652		192,727		266,379
Consumer:
Home equity	8,428		7,707		16,135
Automobile	582		—		582
Other	1,784		2		1,786
Total consumer	10,794		7,709		18,503
Commercial business	11,714		8,217		19,931
Total	$	96,160	$	208,653	$	304,813

Loan Solicitation and Processing.  Loan originations are obtained from a variety of sources, including direct mail and telephone solicitation, trade and business organization participation.  Our management and staff are also involved in a wide variety of professional, charitable, service and social organizations within the communities in which we operate, and our branch managers, loan representatives and business bankers solicit referrals from existing clients and new prospects.  We also originate and cross sell loans and services to our existing customer base as well as our walk-in/call-in/internet traffic as a result of our long standing community presence and broad based advertising efforts.  Loan processing and underwriting, closing and funding are determined

11

by the type of loan. Consumer loans, including conforming one-to-four family mortgage loans are processed, underwritten, documented and funded through our centralized processing and underwriting center located in Lacey, Washington.  Commercial business loans, including commercial and multi-family real estate loans and any non-conforming one-to-four family mortgage loans are processed and underwritten in one of our two Business Banking Center offices located in Lacey and Aberdeen, Washington. Our consumer and residential loan underwriters have specific approval authority, and requests that exceed such authority are referred to the appropriate supervisory level.

Depending upon the size of the loan request and the total borrower credit relationship with us, loan decisions may include the Executive Loan Committee, Senior Loan Committee, and/or Board of Directors.  The Executive Loan Committee is currently comprised of the President/Chief Executive Officer, Chief Financial Officer, Chief Lending Officer, Chief Credit Officer, Credit Administrator, Business Banking Manager, Note Department Manager, and Senior Data Manager. The Senior Loan Committee, is a Board committee, comprised of three board members. Credit relationships up to $4.0 million may be approved by the Executive Loan Committee.  Loans or aggregated credit relationships which exceed $4.0 million must be approved by Senior Loan Committee, with an authority limit of $6.0 million, or by the Board of Directors.

Commercial and multi-family real estate loans can be approved up to $250,000 by the Chief Financial Officer, up to $500,000 by either the Senior Data Manager or Commercial Loan Administrator, and up to $750,000 by the Special Assets/Construction Manager.  These loans can be approved up to $1.0 million by either the President/Chief Executive Officer, Chief Lending Officer or Chief Credit Officer, and up to $2.0 million with the combination of both President/Chief Executive Officer, Chief Lending Officer or Chief Credit Officer.  Our Executive Loan Committee, is authorized to approve loans to one borrower or a group of related borrowers up to $4.0 million.  Loans over $4.0 million must be approved by the Senior Loan Committee with a limit of $6.0 million, or the Board of Directors.

Loan Originations, Servicing, Purchases and Sales.  During the years ended June 30, 2016 and 2015, our total loan originations and purchases were $141.4 million and $72.6 million, respectively.

One-to-four family loans are generally originated in accordance with the guidelines established by Freddie Mac, with the exception of our special community development loans under the Community Reinvestment Act. We utilize the Freddie Mac Loan Prospector, an automated loan system to underwrite the majority of our residential first mortgage loans (excluding community development loans). The remaining loans are underwritten by designated real estate loan underwriters internally in accordance with standards as provided by our Board-approved loan policy.

During the year ended June 30, 2016, we purchased $22.8 million in multi-family loans. The loan purchase consisted of 12 multi-family projects in King and Pierce counties. All properties met our underwriting standards and each property was independently visited and re-underwritten.

We actively sell the majority of our residential fixed rate first mortgage loans to the secondary market at the time of origination. During the years ended June 30, 2016 and 2015, we sold $7.7 million and $1.1 million, respectively, in whole loans to the secondary market. Our secondary market relationship is with Freddie Mac. We generally retain the servicing on the loans we sell into the secondary market.  Loans are generally sold on a non-recourse basis. As of June 30, 2016 and 2015, our residential loan servicing portfolio was $76.9 million and $81.1 million, respectively.

12

The following table shows total loans originated, purchased, sold and repaid during the periods indicated:

	Year Ended June 30,
	2016			2015		2014
Loans originated:	(In thousands)
Real estate:
One-to-four family	$	22,280		$	5,050	$	3,356
Multi-family	3,043			4,946		17,613
Commercial	32,758			34,444		32,624
Construction	19,997			17,977		21,289
Land loans	4,122			776		—
Total real estate	82,200			63,193		74,882
Consumer:
Home equity	2,616			651		953
Credit cards	191			—		—
Automobile	432			222		175
Other	—			317		1,039
Total consumer	3,239			1,190		2,167
Commercial business	7,389			8,214		6,681
Total loans originated	92,828			72,597		83,730
Participation loans purchased:
Commercial	9,889			—		—
Commercial business	15,845			—		—
	25,734			—		—
Loans purchased:
Multi-family	22,840			—		4,370
Total loans purchased	22,840			—		4,370
Loans sold:
One-to-four family	7,724			1,053		2,532
Participation loans	1,763			—		—
Total loans sold	9,487			1,053		2,532
Principal repayments	64,946			70,473		77,210
Loans securitized	—			—		—
Transfer to real estate owned	852			3,188		7,101
Increase (decrease) in other items, net	(346		)	4,540		2,815
Loans held for sale	1,864			505		—
Net increase in loans receivable, net	$	63,907		$	1,918	$	4,072

Loan Origination and Other Fees.  In some instances, we receive loan origination fees on real estate related products.  Loan fees generally represent a percentage of the principal amount of the loan that is paid by the borrower. Accounting standards require that certain fees received, net of certain origination costs, be deferred and amortized over the contractual life of the loan. Net deferred fees or costs associated with loans that are prepaid or sold are recognized as income at the time of prepayment. We had

13

$1.5 million of net deferred loan fees and costs as of June 30, 2016 compared to $1.0 million and $1.1 million at June 30, 2015 and 2014, respectively.

Asset Quality

The objective of our loan review process is to determine risk levels and exposure to loss. The depth of review varies by asset types, depending on the nature of those assets. While certain assets may represent a substantial investment and warrant individual reviews, other assets may have less risk because the asset size is small, the risk is spread over a large number of obligors or the obligations are well collateralized and further analysis of individual assets would expand the review process without measurable advantage to risk assessment. Asset types with these characteristics may be reviewed as a total portfolio on the basis of risk indicators such as delinquency (consumer and residential real estate loans) or credit rating. A formal review process is conducted on individual assets that represent greater potential risk. A formal review process is a total re-evaluation of the risks associated with the asset and is documented by completing an asset review report. Certain real estate-related assets must be evaluated in terms of their fair market value or net realizable value in order to determine the likelihood of loss exposure and, consequently, the adequacy of valuation allowances.

We define a loan as being impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due under the contractual terms of the loan agreement. Large groups of smaller balance homogeneous loans such as consumer secured loans, residential mortgage loans and consumer unsecured loans are collectively evaluated for potential loss. All other loans are evaluated for impairment on an individual basis.

We generally assess late fees or penalty charges on delinquent loans of five percent of the monthly payment amount due. Substantially all fixed rate and adjustable rate mortgage loan payments are due on the first day of the month; however, the borrower is given a 15-day grace period to make the loan payment. When a mortgage loan borrower fails to make a required payment when it is due, we institute collection procedures. The first notice is mailed to the borrower on the 16th day requesting payment and assessing a late charge. Attempts to contact the borrower by telephone generally begin upon the 30th day of delinquency. If a satisfactory response is not obtained, continual follow-up contacts are attempted until the loan has been brought current. Before the 90th day of delinquency, attempts to interview the borrower are made to establish the cause of the delinquency, whether the cause is temporary, the attitude of the borrower toward the debt and a mutually satisfactory arrangement for curing the default.

When a consumer loan borrower fails to make a required payment on a consumer loan by the payment due date, we institute the same collection procedures as for our mortgage loan borrowers.

The Board of Directors is informed monthly as to the number and dollar amount of mortgage and consumer loans that are delinquent by more than 30 days, and is given information regarding classified assets.

If the borrower is chronically delinquent and all reasonable means of obtaining payments have been exercised, we will seek to recover the collateral securing the loan according to the terms of the security instrument and applicable law.  In the event of an unsecured loan, we will either seek legal action against the borrower or refer the loan to an outside collection agency.

14

Nonperforming Assets.  The following table sets forth information with respect to our nonperforming assets and restructured loans for the periods indicated:

	At June 30,
	2016			2015			2014			2013			2012
Loans accounted for on a nonaccrual basis:	(Dollars in thousands)
Real estate:
One-to-four family	$	1,539		$	1,263		$	2,101		$	4,758		$	1,878
Multi-family	—			—			158			—			—
Commercial	319			—			2,070			—			—
Construction	—			—			—			—			3,369
Land loans	—			—			150			734			109
Total real estate	1,858			1,263			4,479			5,492			5,356
Consumer:
Home equity	16			—			—			428			159
Credit cards	—			—			—			—			16
Automobile	—			—			—			2			66
Other	1			31			—			—			1
Total consumer	17			31			—			430			242
Commercial business	97			711			235			219			3,124
Total	1,972			2,005			4,714			6,141			8,722
Accruing loans which are contractually past due 90 days or more:
One-to-four family	—			—			—			—			55
Multi-family	—			—			—			—			—
Commercial	—			—			—			—			—
Construction	—			—			—			—			—
Land loans	—			—			—			—			—
Total real estate	—			—			—			—			55
Consumer:
Home equity	—			—			—			—			—
Credit cards	—			6			—			18			—
Automobile	—			—			—			—			—
Other	—			—			—			—			—
Total consumer	—			6			—			18			—
Commercial business	—			—			—			—			—
Total of nonaccrual and 90 days past due loans	1,972			2,011			4,714			6,159			8,777
Real estate owned	373			797			5,067			6,212			6,708
Repossessed automobiles	46			—			59			21			—
Total nonperforming assets	$	2,391		$	2,808		$	9,840		$	12,392		$	15,485
Troubled debt restructured loans (1)	$	8,755		$	9,827		$	11,261		$	17,469		$	15,112
Allowance for loan loss as a percent of   nonperforming loans	191.6		%	185.0		%	98.1		%	83.6		%	80.4		%
Classified assets included in nonperforming    assets	$	1,972		$	2,011		$	4,714		$	6,159		$	8,777
Nonaccrual and 90 days or more past due loans as percentage of total loans	0.6		%	0.7		%	1.6		%	2.2		%	3.0		%
Nonaccrual and 90 days or more past due loans as a percentage of total assets	0.5		%	0.5		%	1.2		%	1.4		%	1.9		%
Nonperforming assets as a percentage of     total assets	0.6		%	0.7		%	2.5		%	2.7		%	3.3		%
Nonaccrued interest (2)	$	126		$	140		$	323		$	475		$	665

⁽¹⁾    There were $411,000 of restructured loans included in nonperforming assets as of June 30, 2016.

⁽²⁾ Represents foregone interest on nonaccrual loans.

15

Real Estate Owned and Other Repossessed Assets.  As of June 30, 2016, the Company had six real estate owned ("REO") properties with an aggregate book value of $373,000 compared to eight properties with an aggregate book value of $797,000 at June 30, 2015.  The decrease in number of properties during the year ended June 30, 2016 was primarily attributable to ongoing sales of residential properties and three lots with a net book value of $878,000. At June 30, 2016, the largest of the REO properties was a residential real estate property with an aggregate book value of $124,000 located in Grays Harbor County, Washington.

Restructured Loans. According to generally accepted accounting principles, we are required to account for certain loan modifications or restructurings as “troubled debt restructurings.” Our policy is to track and report all loans modified to terms not generally available in the market, except for those outside of the materiality threshold established for such tracking and reporting. In general, the modification or restructuring of a debt is considered a troubled debt restructuring if we, for economic or legal reasons related to a borrower's financial difficulties, grant a concession to the borrower that we would not otherwise consider.  We will modify the loan when upon completion of the residence the home is rented instead of sold, or when the borrower can continue to make interest payments and is unable to repay the loan until the property is sold as a result of current market conditions. In connection with a loan modification, we may lower the interest rate, extend the maturity date and require monthly payments when monthly payments are not otherwise required. We may also require additional collateral. All loans which are extended with rates and/or terms below market are identified as impaired loans and an appropriate allowance is established pursuant to generally accepted accounting principles.  Loans which are placed in nonaccrual status and subsequently modified are not returned to accruing status until there has been at least six months of consecutive satisfactory performance.  As of June 30, 2016, there were 37 loans with aggregate net principal balances of $8.8 million that we have identified as “troubled debt restructures.”  In connection with these loans, a valuation allowance in the form of charged-off principal equal to $278,000 has been taken.  Of these 37 loans, four loans totaling $884,000 were not performing according to the modified repayment terms at June 30, 2016, of which $411,000 were classsified as nonaccrual loans.

The existence of a guarantor is an important factor that we consider in every deteriorating credit relationship and in our determination as to whether or not to restructure the loan.  Additional factors we consider include the cooperation we receive from the borrower and/or guarantor as determined by the timeliness and quality of their direct and indirect communication, including providing us with current financial information; their willingness to develop new, and report on, previously identified risk mitigation strategies; and whether we receive additional collateral.  The financial ability of the borrower and/or guarantor is determined through a review and analysis of personal and business financial statements, tax return filings, liquidity verifications, personal and business credit reports, rent rolls, and direct reference checks.  The type of financial statements required of a borrower and/or guarantor varies based upon the credit risk and our aggregate credit exposure as it relates to the borrower and any guarantor. Reviewed financial statements are required for commercial business loans greater than $1.5 million and for commercial real estate loans greater than $5.0 million, with the level of outside independent accounting review decreasing as our risk exposure decreases.  We conduct reviews of the financial condition of borrowers and guarantors at least annually for credits of $750,000 or more, and for aggregate relationships of $1.5 million or more.

At both the time of loan origination and when considering a restructuring of a loan, we also assess the guarantor's character and reputation. This assessment is made by reviewing both the duration or length of time such guarantor has been providing credit guarantees, the aggregate of the contingent liabilities of such guarantor as it relates to guarantees of additional debt provided to other lenders, and the results of direct reference checks.  Cooperative and communicative borrowers and/or guarantors may create opportunities for restructuring a loan, however, this cooperation does not affect the amount of the allowance for loan losses recorded or the timing of charging off the loan.

Classified Assets.  Federal regulations provide for the classification of lower quality loans and other assets, such as debt and equity securities, as substandard, doubtful or loss.  An asset is considered substandard if it is inadequately protected by the current net worth and repayment capacity of the borrower or of any collateral pledged.  Substandard assets include those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.  Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values.  Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

When we classify problem assets as either substandard or doubtful, we may establish a specific allowance in an amount we deem prudent and approved by senior management or the Classified Asset Committee to address the risk specifically or we may allow the loss to be charged-off against the general loan allowance. General loan allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been specifically allocated to particular problem assets. When an insured institution classifies problem assets as a loss, it is required to charge off such assets in the period in which they are deemed uncollectible.  Assets that do not currently expose us to sufficient risk to warrant classification as substandard or doubtful but possess identified weaknesses are considered either watch or special

16

mention assets.  Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by our regulators, which can order the establishment of additional loss allowances.

In connection with the filing of periodic reports with the FDIC classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations. On the basis of our review of our loans, as of June 30, 2016, we had classified loans of $2.8 million.  The total amount classified represented 4.4% of equity capital and 0.6% of assets at June 30, 2016.

The aggregate amounts of our classified loans at the date indicated (as determined by management), were as follows:

	At June 30,
	2016		2015
	(In thousands)
Classified Loans:
Substandard	$	2,773	$	3,682
Doubtful	—		—
Loss	—		—
Total	$	2,773	$	3,682

Our $2.8 million of substandard loans at June 30, 2016, consisted primarily of $2.6 million of real estate secured loans and $161,000 of consumer and commercial business loans. Of the $2.6 million of substandard loans which were real estate secured, $2.1 million were one-to-four family, $318,000 were commercial real estate, and $166,000 were home equity loans, secured by property located in Washington.  

Potential Problem Loans.  Potential problem loans are loans that do not yet meet the criteria for identification as classified assets graded as substandard or doubtful, but where known information about the borrower causes management to have serious concerns about the ability of the borrower to comply with present loan repayment terms and may result in the loan being included as a classified asset for future periods.  At June 30, 2016, we had $13.3 million, or 3.8% of our net loans that were identified as potential problem loans compared to $12.1 million or 4.2% of our net loans at June 30, 2015.

Within these problem loans were the following:

• a term loan of $2.4 million secured by single family residential condominium rental units in Oregon; and

• a term loan of $1.1 million secured by commercial real estate in Washington.

The two loans described above comprise $3.5 million, or 26.4% of the potential problem loans that were identified as of June 30, 2016.  The loans identified above are located in Western Washington and Portland, Oregon and were in compliance with their repayment terms at June 30, 2016. No other potential problem loan had a balance in excess of $1.0 million at June 30, 2016.

Allowance for Loan Losses.  Management recognizes that loan losses may occur over the life of a loan and that 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. Our Chief Credit Officer assesses the allowance for loan and lease losses on a monthly basis and reports to the Board of Directors no less than quarterly.  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.

We believe that the accounting estimate related to the allowance for loan losses is a critical accounting estimate because it is highly susceptible to change from period to period and requires management to make assumptions about probable losses inherent in the loan portfolio. The impact of a sudden large loss could deplete the allowance and potentially require increased provisions to replenish the allowance, which would negatively affect earnings.

Our methodology for analyzing the allowance for loan losses consists of two components: general and specific allowances.  The formula allowance is determined by applying an estimated loss percentage to various groups of loans.  The loss percentages are generally based on various historical measures such as the amount and type of classified loans, past due ratios and loss experience, which could affect the collectability of the respective loan types.

The specific allowance component is created when management believes that the collectability of a specific large loan, such as a real estate, multi-family or commercial real estate loan, has been impaired and a loss is probable.

17

The allowance is increased by the provision for loan losses, which is charged against current period earnings and decreased by the amount of actual loan charge-offs, net of recoveries.

We had a $340,000 provision for loan losses for the year ended June 30, 2016 compared to no provision for loan losses at June 30, 2015, primarily reflecting loan growth.  The specific risks that are considered in our analysis for determining the provision for loan losses include an automatic elevation in risk grade and corresponding reserve requirement based on loan payment and payment delinquencies, including debt to the borrower and related entities under loans to one borrower guidelines; and a qualitative analysis of the economic and portfolio trends.  We also continually monitor the market conditions reported at national, regional, and local levels including those from the FDIC, Case-Shiller, and Realtor Boards.

The calculation of the allowance for loan losses includes an incremental component, a qualitative component, and specific reserve amount as a result of impairment analysis.  The total allowance for loan losses was $3.8 million and $3.7 million at June 30, 2016 and 2015, respectively.  Of the total allowance at June 30, 2016, specific reserves decreased to $590,000 and general reserves increased to $3.2 million from specific reserves of $740,000 and general reserves of $3.0 million, respectively, at June 30, 2015. The level of the allowance is based on estimates, and the ultimate losses may vary from the estimates.  Management will continue to review the adequacy of the allowance for loan losses and make adjustments to the provision for loan losses based on loan growth, economic conditions, charge-offs and portfolio composition.

Levels and trends in delinquencies and nonperforming loans have decreased during the year ended June 30, 2016. During the current economic cycle, we have experienced changes in our portfolio with respect to delinquent, nonperforming and impaired loans.  At June 30, 2016 and June 30, 2015, our total delinquent loans, including loans 30 or more days past due, were $3.3 million and $3.6 million, respectively, which included nonperforming loans of $2.0 million at the end of each year.  Net charge-offs during the years ended June 30, 2016 and June 30, 2015 were $282,000 and $903,000, respectively.

Management identifies a loan as impaired when the source of repayment of the loan is recognized as being in jeopardy, such that economic or other changes have affected the borrower to the extent that it may not be able to meet repayment terms, and that resources available to the borrower, including the liquidation of collateral, may be insufficient.  Impairment is measured on a loan-by-loan basis for each loan based upon its source or sources of repayment. For collateral dependent loans management utilizes the valuation from an appraisal obtained generally within the last six months in establishing the allowance for loan losses, unless additional information known to management results in management applying a downward adjustment to the valuation. Appraisals are updated subsequent to the time of origination when management identifies a loan as impaired or potentially being impaired, as indicated by the borrower’s payment and loan covenant performance, an analysis of the borrower’s financial condition, property tax and/or assessment delinquency, increases in deferred maintenance or other information known to management.  When the results of the impairment analysis indicate a potential loss, the loan is classified as substandard and a specific reserve is established for such loan in the amount determined.  Further, the specific reserve amount is adjusted to reflect any further deterioration in the value of the collateral that may occur prior to liquidation or reinstatement.  The impairment analysis takes into consideration the primary, secondary, and tertiary sources of repayment, whether impairment is likely to be temporary in nature or liquidation is anticipated.

A loan is considered impaired when we have determined that we may be unable to collect payments of principal and/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.

As of June 30, 2016 and 2015, we had impaired loans of $10.7 million and $11.2 million, respectively. Included within the impaired loan totals are loans identified as troubled debt restructures.  

18

The following table summarizes the distribution of the allowance for loan losses by loan category at the dates indicated:

	At June 30,
	2016						2015						2014						2013						2012
	Loan Balance		Amount  by Loan Category		Percent of Loans in Loan Category to total Loans		Loan Balance		Amount  by Loan Category		Percent of Loans in Loan Category to total Loans		Loan Balance		Amount  by Loan Category		Percent of Loans in Loan Category to total Loans		Loan Balance		Amount  by Loan Category		Percent of Loans in Loan Category to total Loans		Loan Balance		Amount  by Loan Category		Percent of Loans in Loan Category to total Loans
	(Dollars in thousands)
Real estate:
One-to-four family	$	61,230	$	798	17.4	%	$	57,944	$	1,113	20.1	%	$	63,009	$	1,550	21.9	%	$	73,901	$	1,393	26.1	%	$	82,709	$	1,659	28.0	%
Multi-family	53,742		454		15.3		43,249		95		15.0		47,507		229		16.5		38,425		156		13.6		42,032		238		14.2
Commercial	149,527		1,333		42.5		128,306		262		44.5		107,828		682		37.6		106,859		671		37.7		97,306		578		32.9
Construction	21,793		271		6.2		11,731		247		4.1		19,690		190		6.9		5,641		356		2.0		6,696		148		2.3
Land loans	6,839		75		1.9		4,069		75		1.4		4,126		74		1.4		5,330		531		1.9		7,062		368		2.4
Total real estate	293,131		2,931		83.3		245,299		1,792		85.1		242,160		2,725		84.3		230,156		3,107		81.2		235,805		2,991		79.8
Consumer:
Home equity	16,599		369		4.7		17,604		189		6.1		20,894		290		7.3		25,835		376		9.1		31,504		681		10.7
Credit cards	2,969		118		0.8		3,289		161		1.1		3,548		167		1.2		4,741		283		1.7		5,180		328		1.8
Automobile	597		3		0.2		686		39		0.2		1,073		63		0.4		1,850		103		0.7		3,342		373		1.1
Other	1,933		26		0.5		2,347		56		0.8		2,838		67		1.0		2,723		55		1.0		2,968		126		1.0
Total consumer	22,098		516		6.2		23,926		445		8.3		28,353		587		9.9		35,149		817		12.4		42,994		1,508		14.6
Commercial      business	36,848		332		10.5		18,987		1,405		6.6		16,737		1,231		5.8		18,211		1,172		6.4		16,618		2,558		5.6
Unallocated	—		—		—		—		79		—		—		81		—		—		51		—		—		—		—
Total	$	352,077	$	3,779	100.0	%	$	288,212	$	3,721	100.0	%	$	287,250	$	4,624	100.0	%	$	283,516	$	5,147	100.0	%	$	295,417	$	7,057	100.0	%

Management believes that it uses the best information available to determine the allowance for loan losses.  However, unforeseen market conditions could result in adjustments to the allowance for loan losses and net income could be significantly affected, if circumstances differ substantially from the assumptions used in determining the allowance.

19

The following table sets forth an analysis of our allowance for loan losses at the dates and for the periods indicated:

	Year Ended June 30,
	2016			2015			2014			2013			2012
	(Dollars in thousands)
Allowance at beginning of period	$	3,721		$	4,624		$	5,147		$	7,057		$	7,239
Provision for loan losses	340			—			—			750			2,735
Recoveries:
Real estate loans:
One-to-four family	194			129			389			143			498
Multi-family	6			—			—			—			—
Commercial	1			—			972			201			18
Construction	349			254			374			43			271
Land loans	—			—			—			—			—
Total real estate	550			383			1,735			387			787
Consumer:
Home equity	61			44			37			57			20
Credit cards	43			60			46			51			121
Automobile	5			3			6			23			20
Other	9			8			49			68			22
Total consumer	118			115			138			199			183
Commercial business	7			96			38			37			131
Total recoveries	675			594			1,911			623			1,101
Charge-offs:
Real estate loans:
One-to-four family	258			561			897			416			1,465
Multi-family	—			159			—			—			—
Commercial	225			340			403			—			571
Construction	—			—			—			105			561
Land loans	—			—			—			—			—
Total real estate	483			1,060			1,300			521			2,597
Consumer:
Home equity	180			239			572			356			337
Credit cards	105			72			198			212			492
Automobile	4			—			41			30			59
Other	101			40			65			633			470
Total consumer	390			351			876			1,231			1,358
Commercial business	84			86			258			1,531			63
Total charge-offs	957			1,497			2,434			3,283			4,018
Net charge-offs	282			903			523			2,660			2,917
Balance at end of period	$	3,779		$	3,721		$	4,624		$	5,147		$	7,057
Allowance for loan losses as a percentage of total loans outstanding at the end of the period	1.1		%	1.3		%	1.6		%	1.8		%	2.4		%
Net charge-offs as a percentage of average total loans outstanding during the period	0.1		%	0.3		%	0.2		%	0.9		%	0.9		%
Allowance for loan losses as a percentage of nonperforming loans at the end of period	191.6		%	185.0		%	98.1		%	83.6		%	80.4		%

20

Our Executive Loan Committee reviews the appropriate level of the allowance for loan losses on a quarterly basis and establishes the provision for loan losses based on the risk composition of our loan portfolio, delinquency levels, loss experience, economic conditions, bank regulatory examination results, seasoning of the loan portfolios and other factors related to the collectability of the loan portfolio as detailed further in this Form 10-K under Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Allowance for Loan Losses” of this Form 10-K. The allowance is increased by the provision for loan losses, which is charged against current period operating results and decreased by the amount of actual loan charge-offs, net of recoveries.

Management believes that our allowance for loan losses as of June 30, 2016 was adequate to absorb the known and inherent risks of loss in the loan portfolio at that date. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provision that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of our allowance for loan losses is subject to review by bank regulators, as part of the routine examination process, which may result in the establishment of additional reserves based upon their judgment of information available to them at the time of their examination.

The following table provides certain summary information with respect to our allowance for loan losses, including charge-offs, recoveries and selected ratios for the periods indicated:

	Year Ended June 30,
	2016			2015			2014			2013			2012
	(Dollars in thousands)
Provision for loan losses	$	340		$	—		$	—		$	750		$	2,735
Allowance for loan losses	3,779			3,721			4,624			5,147			7,057
Allowance for loan losses as a percentage of total loans outstanding at the end of the period	1.1		%	1.3		%	1.6		%	1.8		%	2.4		%
Net charge-offs	282			903			523			2,660			2,917
Total of nonaccrual and 90 days past due loans still accruing interest	1,972			2,011			4,714			6,159			8,722
Allowance for loan losses as a percentage of nonperforming loans at end of period	191.6		%	185.0		%	98.1		%	83.6		%	80.4		%
Nonaccrual and 90 days or more past due loans still accruing interest as a percentage of loans receivable at the end of the period	0.6		%	0.7		%	1.6		%	2.2		%	3.0		%
Total loans	$	352,077		$	288,212		$	287,250		$	283,516		$	295,417

Investment Activities

General.  Under Washington law, savings banks are permitted to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, banker’s acceptances, repurchase agreements, federal funds, commercial paper, investment grade corporate debt securities, and obligations of states and their political sub-divisions.

The Investment Committee has the authority and responsibility to administer our investment policy, monitor portfolio strategies, and recommend appropriate changes to policy and strategies to the Board.  On a monthly basis, our management reports to the Board a summary of investment holdings with respective market values, and all purchases and sales of investments.  The Chief Financial Officer has the primary responsibility for the management of the investment portfolio.  The Chief Financial Officer considers various factors when making decisions regarding proposed investments, including the marketability, maturity and tax consequences. The maturity structure of investments will be affected by various market conditions, including the current and anticipated slope of the yield curve, the level of interest rates, the trend of new deposit inflows and the anticipated demand for funds via deposit withdrawals and loan originations and purchases.

The general objectives of the investment portfolio are to provide liquidity when loan demand is high, to assist in maintaining earnings when loan demand is low and to maximize earnings while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk and interest rate risk.

21

At June 30, 2016, our investment portfolio consisted principally of mortgage-backed securities, municipal bonds and mutual funds consisting of mortgage-backed securities.  From time to time, investment levels may increase or decrease depending upon yields available on investment opportunities and management’s projected demand for funds for loan originations, deposits and other activities.

Mortgage-Backed Securities.  The mortgage-backed securities in our investment portfolio were comprised of Freddie Mac, Fannie Mae and Ginnie Mae mortgage-backed securities.  At June 30, 2016, the amortized cost of mortgage-backed securities held in the available-for-sale category was $23.6 million with a weighted average yield of 2.89%, while the mortgage-backed securities in the held-to-maturity category was $6.3 million with a weighted average yield of 3.21%.

Municipal Bonds.  The tax-exempt and taxable municipal bond portfolios were comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by revenues from the specific project being financed) issued by various municipal corporations.   All bonds are rated “A” or better and are from issuers located within the State of Washington. The weighted average yield on the tax exempt bonds (on a tax equivalent basis) was 5.83% at June 30, 2016, and the total amount of amortized cost of our municipal bonds was $175,000 at that date, of which all were categorized as available-for-sale.

Federal Home Loan Bank Stock.  As a member of the FHLB of Des Moines, we are required to own capital stock in the FHLB of Des Moines.  The amount of stock we hold is based on guidelines specified by the FHLB of Des Moines. The redemption of any excess stock is determined daily based on our membership requirement as well as outstanding borrowings. The carrying value of FHLB stock was $3.0 million at June 30, 2016.

Our investment in  FHLB stock is carried at cost, which approximates fair value.  As a member of the FHLB System, we are required to maintain a minimum level of investment in FHLB stock based on specific percentages of our outstanding mortgages, total assets, or FHLB advances.  At June 30, 2016, our minimum investment requirement was $3.0 million.  We were in compliance with the FHLB minimum investment requirement at June 30, 2016.  For the year ended June 30, 2016, we received $22,000 of dividends from the FHLB.

Bank-Owned Life Insurance.  We purchase bank-owned life insurance policies (“BOLI”) to offset future employee benefit costs.  At June 30, 2016, we had a $19.5 million investment in life insurance contracts.  The purchase of BOLI policies, and its increase in cash surrender value, is classified as “Life insurance investment, net of surrender charges” in our Consolidated Statements of Financial Condition.  The income related to the BOLI, which is generated by the increase in the cash surrender value of the policy. See Item 8. "Financial Statements and Supplementary Data" of this Form 10-K for our Consolidated Financial Statements and specifically the Consolidated Statements of Financial Condition and Consolidated Statements of Income regarding BOLI.

22

The following table sets forth the composition of our investment portfolio at the dates indicated: 

	At June 30,
	2016				2015				2014
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Available-for-sale:
Securities:
Municipal bonds	$	175	$	175	$	434	$	435	$	443	$	446
Mortgage-backed securities:
FHLMC (1)	9,442		9,559		11,780		11,791		16,901		16,956
FNMA (2)	13,199		13,204		16,534		16,408		20,567		20,331
GNMA (3)	734		727		948		931		1,196		1,184
Total available-for-sale	23,550		23,665		29,696		29,565		39,107		38,917
Held-to-maturity:
Securities:
Municipal bonds	—		—		119		119		127		127
Mortgage-backed securities:
FHLMC	2,793		2,845		3,367		3,406		3,958		4,017
FNMA	1,513		1,613		1,858		1,960		2,268		2,394
GNMA	1,985		1,967		2,273		2,207		2,412		2,370
Total held-to-maturity	6,291		6,425		7,617		7,692		8,765		8,908
Total securities	$	29,841	$	30,090	$	37,313	$	37,257	$	47,872	$	47,825

⁽¹⁾Federal Home Loan Mortgage Corporation (Freddie Mac)

⁽²⁾Federal National Mortgage Association (Fannie Mae)

⁽³⁾Government National Mortgage Association (Ginnie Mae)

23

The table below sets forth information regarding the amortized cost, weighted average yields and maturities or call dates of Anchor Bank’s investment portfolio at June 30, 2016:

					At June 30, 2016
	At June 30, 2016				One Year or Less				Over One to Five Years				Over Five to Ten Years				Over Ten Years				Mortgage-Backed Securities				Totals
	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		MBS Securities Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield
	(Dollars in thousands)
Available-for-sale:
Securities:
Municipal bonds (1)	$	175	5.83	%	$	—	—	%	$	—	—	%	$	—	—	%	$	175	5.83	%	$	—	—	%	$	175	5.83	%
Mortgage-backed      securities:
FHLMC	9,442		2.80		—		—		—		—		—		—		—		—		9,442		2.80		9,442		2.80
FNMA	13,199		2.96		—		—		—		—		—		—		—		—		13,199		2.96		13,199		2.96
GNMA	734		2.63		—		—		—		—		—		—		—		—		734		2.63		734		2.63
Total available-for-sale	23,550				—				—				—				175				23,375				23,550
Held-to-maturity:
Securities:
Municipal bonds  (1)	—		—		—		—		—		—		—		—		—		—		—		—		—		—
Mortgage-backed      securities:
FHLMC	2,793		2.86		—		—		—		—		—		—		—		—		2,793		2.86		2,793		2.86
FNMA	1,513		3.76		—		—		—		—		—		—		—		—		1,513		3.76		1,513		3.76
GNMA	1,985		3.29		—		—		—		—		—		—		—		—		1,985		3.29		1,985		3.29
Total held-to-maturity	6,291				—				—				—				—				6,291				6,291
Total	$	29,841			$	—			$	—			$	—			$	175			$	29,666			$	29,841

⁽¹⁾       Yields on tax exempt obligations are computed on a tax equivalent basis using a federal tax rate of 31.0%.

24

Deposit Activities and Other Sources of Funds

General.  Deposits and loan repayments are the major sources of our funds for lending and other investment purposes.  Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by general interest rates and market conditions.  Borrowings from the FHLB of Des Moines are used to supplement the availability of funds from other sources and also as a source of term funds to assist in the management of interest rate risk.

Our deposit composition reflects a mixture with certificates of deposit accounting for approximately one-half of the total deposits and interest and noninterest-bearing checking, savings and money market accounts comprising the balance of total deposits.  We rely on marketing activities, convenience, customer service and the availability of a broad range of deposit products and services to attract and retain customer deposits.

Deposits.  Substantially all of our depositors are residents of Washington State.  Deposits are attracted from within our market area through the offering of a broad selection of deposit instruments, including checking accounts, money market deposit accounts, savings accounts and certificates of deposit with a variety of rates.  Deposit account terms vary according to the minimum balance required the time periods the funds must remain on deposit and the interest rate, among other factors.  In determining the terms of our deposit accounts, we consider the development of long term profitable customer relationships, current market interest rates, current maturity structure and deposit mix, our customer preferences and the profitability of acquiring customer deposits compared to alternative sources.

At June 30, 2016, we had $61.8 million of jumbo ($100,000 or more) retail certificates of deposit.  We also had $8.7 million in public funds, which represented 2.9% of total deposits at June 30, 2016.  Anchor Bank had no brokered deposits at June 30, 2016.  

In the unlikely event we are liquidated, depositors will be entitled to full payment of their deposit accounts prior to any payment being made to Anchor Bancorp, as the sole shareholder of Anchor Bank. For additional information, see Note 1 of the Notes to Consolidated Financial Statements.

Deposit Activities.  The following table sets forth our total deposit activities for the periods indicated:

	Year Ended June 30,
	2016			2015			2014
	(In thousands)
Beginning balance	$	299,812		$	311,034		$	328,584
Net deposits (withdrawals) before interest credited	(1,505		)	(13,952		)	(20,486		)
Interest credited	2,587			2,730			2,936
Net increase (decrease) in deposits	1,082			(11,222		)	(17,550		)
Ending balance	$	300,894		$	299,812		$	311,034

25

The following table sets forth information concerning our time deposits and other deposits at June 30, 2016:

Weighted Average Interest Rate								Percentage of Total Deposits
						Minimum Balance
		Term	Category	Amount
				(In thousands)
0.15	%	N/A	Savings deposits	$	44,986	$	100	15.0	%
0.04		N/A	Demand deposit accounts	78,200		10		26.0
0.17		N/A	Money market accounts	59,270		1,000		19.7
			Certificates of Deposit
0.10		6 month	Fixed-term, fixed rate	1,727		500		0.6
0.25		9-12 month	Fixed-term, fixed rate	6,916		500		2.3
0.49		13-16 month	Fixed-term, fixed rate	436		500		0.1
0.53		18-20 month	Fixed term-fixed or variable rate	7,397		500		2.4
0.26		24 month	Fixed term-fixed or variable rate	6,153		2,000		2.0
0.56		30-36 month	Fixed term-fixed or variable rate	8,001		500		2.7
0.99		48 month	Fixed term-fixed or variable rate	5,810		500		1.9
1.3		60 month	Fixed term-fixed or variable rate	8,148		500		2.7
3.14		96 month	Fixed term-fixed or variable rate	62,497		500		20.8
0.6		Other	Fixed term-fixed or variable rate	11,353		500		3.8
			Total of certificates of deposit	$	118,438			39.3	%
			Total of deposits	$	300,894			100.0	%

Time Deposits by Rate.  The following table sets forth our time deposits classified by rates as of the dates indicated:

	At June 30,
	2016		2015		2014
	(In thousands)
0.00 - 0.99%	$	45,474	$	50,185	$	57,926
1.00 - 1.99	14,024		9,608		11,143
2.00 - 2.99	15,641		17,813		19,600
3.00 - 3.99	42,929		44,062		44,033
4.00 - 4.99	370		4,522		4,973
5.00 - 5.99	—		140		136
Total	$	118,438	$	126,330	$	137,811

26

Time Deposit Certificates.  The following table sets forth the amount and maturities of time deposit certificates at June 30, 2016:

	Amount Due
	Within 1 Year		After 1 Year Through 2 Years		After 2 Years Through 3 Years		After 3 Years Through 4 Years		Beyond 4 Years		Total
	(In thousands)
0.00 - 0.99%	$	34,490	$	7,659	$	3,038	$	179	$	108	$	45,474
1.00 - 1.99	2,658		1,027		137		6,114		4,088		14,024
2.00 - 2.99	290		—		11,019		4,205		127		15,641
3.00 - 3.99	5,433		17,851		19,645		—		—		42,929
4.00 - 4.99	370		—		—		—		—		370
5.00 - 5.99	—		—		—		—		—		—
Total	$	43,241	$	26,537	$	33,839	$	10,498	$	4,323	$	118,438

The following table indicates the amount of our jumbo certificates of deposit by time remaining until maturity as of June 30, 2016.  Jumbo certificates of deposit are certificates in amounts of $100,000 or more.

	Time Deposit Certificates
Maturity Period
	(In thousands)
Three months or less	$	6,239
Over three through six months	6,916
Over six through twelve months	9,175
Over twelve months	39,478
Total	$	61,808

Deposits.  The following table sets forth the balances of deposits in the various types of accounts we offered at the dates indicated:

	At June 30,
	2016							2015							2014
	Amount		Percent of Total		Increase/ (Decrease)			Amount		Percent of Total		Increase/ (Decrease)			Amount		Percent of Total
	(Dollars in thousands)
Savings deposits	$	44,986	15.0	%	$	2,587		$	42,399	14.1	%	$	2,706		$	39,693	12.8	%
Demand deposit accounts	78,200		26.0		11,033			67,167		22.4		3,247			63,920		20.6
Money market accounts	59,270		19.7		(4,646		)	63,916		21.3		(5,694		)	69,610		22.4
Fixed-rate certificates which mature in the year ending:
Within 1 year	39,581		13.2		2,484			37,097		12.4		(6		)	37,103		11.9
After 1 year, but within 2 years	25,090		8.3		6,868			18,222		6.1		3,804			14,418		4.6
After 2 years, but within 5 years	48,534		16.1		(13,310		)	61,844		20.6		(3,259		)	65,103		20.9
Certificates maturing thereafter	50		—		(2,051		)	2,101		0.7		(6,670		)	8,771		2.8
Variable rate certificates	5,183		1.7		(1,883		)	7,066		2.4		(5,350		)	12,416		4.0
Total	$	300,894			$	1,082		$	299,812			$	(11,222	)	$	311,034

27

Borrowings.  Customer deposits are the primary source of funds for our lending and investment activities.  We do, however, use advances from the FHLB of Des Moines to supplement our supply of lendable funds, to meet short-term deposit withdrawal requirements and also to provide longer term funding to better match the duration of selected loan and investment maturities.

As one of our capital management strategies, we have used advances from the FHLB of Des Moines to fund loan originations in order to increase our net interest income.  Depending upon the retail banking activity and the availability of excess capital, we will consider and undertake additional leverage strategies within applicable regulatory requirements or restrictions.  Such borrowings would be expected to primarily consist of FHLB of Des Moines advances.

As a member of the FHLB of Des Moines, we are required to own capital stock in the FHLB of Des Moines and are authorized to apply for advances on the security of that stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the U.S. Government) provided certain creditworthiness standards have been met.  Advances are individually made under various terms pursuant to several different credit programs, each with its own interest rate and range of maturities.  Depending on the program, limitations on the amount of advances are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit.  We also maintain a committed credit facility with the FHLB of Des Moines that provides for immediately available advances up to an aggregate of 35% of the prior quarter’s total assets of Anchor Bank. At June 30, 2016, outstanding advances to Anchor Bank from the FHLB of Des Moines totaled $62.0 million as compared to $10.0 million at June 30, 2015.

The following tables set forth information regarding FHLB of Des Moines advances by us during and at the end of the periods indicated: 

	Year Ended June 30,
	2016			2015			2014
	(Dollars in thousands)
Maximum amount of borrowing outstanding at any month end:
FHLB advances	$	62,000		$	22,500		$	64,900
Approximate average borrowing outstanding:
FHLB advances	29,875			13,629			26,015
Approximate weighted average rate paid on:
FHLB advances	0.94		%	2.65		%	2.86		%

	At June 30,
	2016			2015			2014
	(Dollars in thousands)
Balance outstanding at end of period:
FHLB advances	$	62,000		$	10,000		$	17,500
Weighted average rate paid on:
FHLB advances	0.94		%	1.18		%	3.58		%

Subsidiaries and Other Activities

Anchor Bank.  Anchor Bank has one wholly-owned subsidiary, Anchor Financial Services, Inc., that is currently inactive.   At June 30, 2016, Anchor Bank’s equity investment in Anchor Financial Services, Inc. was $303,000.

Competition

Anchor Bank operates in an intensely competitive market for the attraction of deposits (generally its primary source of lendable funds) and in the origination of loans.  Historically, its most direct competition for deposits has come from large commercial banks, thrift institutions and credit unions in its primary market area.  In times of high interest rates, Anchor Bank experiences additional significant competition for investors' funds from short-term money market securities and other corporate and government securities.  Anchor Bank's competition for loans comes principally from mortgage bankers, commercial banks and other thrift institutions.  Such competition for deposits and the origination of loans may limit Anchor Bank's future growth and earnings prospects.

28

Natural Disasters

Grays Harbor, Thurston, Lewis, Pierce, Mason and King Counties, where substantially all of the real and personal properties securing our loans are located, is an earthquake-prone region.  We have not suffered any losses in the last fifteen years from earthquake damage to collateral secured loans, which include the July 1999 and February 2001 major earthquakes in the region.  Although we have experienced no losses related to earthquakes, a major earthquake could result in material loss to us in two primary ways.  If an earthquake damages real or personal properties collateralizing outstanding loans to the point of insurable loss, material loss would be suffered to the extent that the properties are uninsured or inadequately insured.  A substantial number of our borrowers do not have insurance which provides for coverage as a result of losses from earthquakes.  Earthquake insurance is generally not required by other lenders in the market area, and as a result in order to remain competitive in the marketplace, we do not require earthquake insurance as a condition of making a loan.  Earthquake insurance is also not always available at a reasonable coverage level and cost because of changing insurance underwriting practices in our market area resulting from past earthquake activity and the likelihood of future earthquake activity in the region.  In addition, if the collateralized properties are only damaged and not destroyed to the point of total insurable loss, borrowers may suffer sustained job interruptions or job loss, which may materially impair their ability to meet the terms of their loan obligations.  While risk of credit loss can be insured against by, for example, job interruption insurance or “umbrella” insurance policies, such forms of insurance often are beyond the financial means of many individuals.  Accordingly, for most individuals, sustained job interruption or job loss would likely result in financial hardship that could lead to delinquency in their financial obligations or even bankruptcy.  Accordingly, no assurances can be given that a major earthquake in our primary market area will not result in material losses to us.

Employees

At June 30, 2016, we had 107 full-time equivalent employees.  Our employees are not represented by any collective bargaining group.  We consider our employee relations to be good.

Executive Officers.  The following table sets forth information regarding the executive officers of the Company and the Bank:

	Age at June 30, 2016	Position
Name		Company	Bank
Jerald L. Shaw	70	President and Chief Executive Officer	President and Chief Executive Officer
Terri L. Degner	53	Chief Financial Officer	Chief Financial Officer
Gary P. Koch	62	Executive Vice President	Executive Vice President and Chief Lending Officer
Matthew F. Moran	53	Executive Vice President	Executive Vice President and Chief Credit Officer

Biographical Information.  The following is a description of the principal occupation and employment of the executive officers of the Company and the Bank during at least the past five years:

Jerald L. Shaw is the President and Chief Executive Officer of Anchor Bank, positions he has held since July 2006. He has also served in those capacities for Anchor Bancorp since its formation is September 2008. Prior to serving as President and Chief Executive Officer, he served as Chief Operating Officer from 2004 to 2006 and Chief Financial Officer from 1988 to 2002. Prior to that, he served Anchor Bank and its predecessor, Aberdeen Federal Savings and Loan Association, in a variety of capacities since 1976. Prior to that time, Mr. Shaw piloted C-130 aircraft for the U.S. Air Force including numerous combat missions during the Vietnam War. Having performed virtually every position at Anchor Bank, he has extensive knowledge of our operations. He is a distinguished graduate of the School for Executive Development of the U.S. League of Savings Institutions at the University of Washington. Mr. Shaw is also a graduate of the Asset Liability Management School of America's Community Bankers, and many other educational programs. He is a past member of the Board of Trustees for the Thurston County Chamber of Commerce, and a member of the South Sound YMCA. Mr. Shaw also holds a position on the Board of the Washington Bankers Association.

Terri L. Degner is the Executive Vice President, Chief Financial Officer and Treasurer of Anchor Bank, positions she has held since 2004.  She has also served in those capacities for Anchor Bancorp since its formation in September 2008.  Prior to serving as Executive Vice President, Chief Financial Officer and Treasurer, Ms. Degner has served Anchor Bank in a variety of capacities since 1990, including as Senior Vice President and Controller from 1994 to 2004.  Ms. Degner has been in banking since high school.  She has worked in multiple lending positions in various size institutions.  Since 1990, she has held a variety of positions in the finance area of Anchor Bank.  Ms. Degner demonstrated her determination to succeed when she worked full time in Anchor’s Accounting Department and commuted 60 miles to evening classes at St. Martin’s College where she received her Bachelor’s

29

Degree in Accounting.  At the same time she worked full days and met all expectations for performance.  In 2000, she graduated from the Pacific Coast Banking School at the University of Washington in the top 10% of her class and her thesis was published in the University’s library.  She has become the management expert on issues ranging from information technology to asset-liability management.  Ms. Degner also serves on the board of directors and finance committee of NeighborWorks of Grays Harbor, sits on the St. Martins University Accounting Advisory Committee and is on the Executive Committee of the Providence St. Peter Foundation Christmas Forest.

Gary P. Koch is the Executive Vice President and Chief Lending Officer of Anchor Bank, a position he has held since December 2014. In his current capacity, Mr. Koch serves on many Bank committees, including Chairman of the Executive Loan Committee, and as a member of Executive Management, Senior Management, Risk Management, ALCO, IT, Loan Policy, and Problem Asset committees. Mr. Koch has more than 37 years in banking and finance, beginning in 1976 as an investment officer with National Bank of Alaska. From 1983 until 1989 he served as Senior Vice President Investments and Funds Management for Key Bank of Alaska and Chief Investment Officer and a Director of Key Trust Company of Alaska. From 1989 until 2009 he served in a variety of positions, including most recently as Senior Vice President and Team Leader for Business Banking in Southwest Washington. From 2010 until 2014, he was Commercial Banking Officer at Fife Commercial Bank, Fife, Washington. Mr. Koch joined Anchor Bank in April 2014. In October of 2014 he was named Senior Vice President and Senior Commercial Lender. Mr. Koch earned his Bachelor of Science Degree in Economics from Willamette University in Salem, Oregon. Mr. Koch also participates as a volunteer for charitable organizations including Rotary, Relay for Life, and Habitat for Humanity. He has served on the Board of Directors for United Way and Mason General Hospital Foundation.

Matthew F. Moran is the Executive Vice President and Chief Credit Officer responsible for all aspects of our commercial and retail lending activity. Mr. Moran joined Anchor Bank in April 2015. Mr. Moran previously served as Executive Vice President and Chief Credit Officer at Sound Community Bank from May 2007 through October 2014. Prior to that, he was a Senior Examiner and Credit Specialist with the Office of Thrift Supervision (which has since been merged into the Office of the Comptroller of the Currency ("OCC") for one year. From 2004 to 2006, he was Vice President - Commercial Credit for Inland NW Bank. From 2001 to 2004, he was Vice President and Team Leader SE Washington of Community Bancshares, a $350 million community bank where he was responsible for all new credit development in South East Washington. Mr. Moran brings more than 20 years of banking experience to Anchor Bank, including five years with First Financial Bank of Omaha as the Asset/Liability Manager for the consolidated entities under First National Nebraska, Inc. a $10 billion bank holding company. Prior to that, Mr. Moran spent six years as a National Bank Examiner with the OCC, where in addition to his Safety and Soundness responsibilities he also served as a specialist in the Large Bank Capital Markets Examination Program. In 2010, Mr. Moran graduated from the Pacific Coast Banking School, which is affiliated with the Graduate School of Business of the University of Washington.

How We Are Regulated

The following is a brief description of certain laws and regulations applicable to Anchor Bancorp and Anchor Bank. Descriptions of laws and regulations here and elsewhere in this report do not purport to be complete and are qualified in their entirety by reference to the actual laws and regulations. Legislation is introduced from time to time in the United States Congress or the Washington State Legislature that may affect the operations of Anchor Bancorp and Anchor Bank.  In addition, the regulations governing us may be amended from time to time by our regulators, the FDIC, DFI, Federal Reserve and the Consumer Financial Protection Bureau ("CFPB").  Any such legislation or regulatory changes in the future could have an adverse effect on our operations and financial condition.  We cannot predict whether any such changes may occur.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which was enacted in July 2010 imposed new restrictions and an expanded framework of regulatory oversight for financial institutions, including depository institutions and their holding companies. Among other changes, the Dodd-Frank Act established the CFPB as an independent bureau of the Federal Reserve Board. The CFPB assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements. Anchor Bank is subject to consumer protection regulations issued by the CFPB, but as a smaller financial institution, we are generally subject to supervision and enforcement by the FDIC and the DFI with respect to our compliance with consumer financial protection laws and CFPB regulations.

Many aspects of the Dodd-Frank Act are subject to rulemaking by the federal banking agencies, which has not been completed and will not take effect for some time, making it difficult to anticipate the overall financial impact of the Dodd-Frank Act on the Company, the Bank and the financial services industry more generally.  

Regulation and Supervision of Anchor Bank

30

General. Anchor Bank, as a state-chartered savings bank, is subject to applicable provisions of Washington law and to regulations and examinations of the DFI. As an insured institution, it also is subject to examination and regulation by the FDIC, which insures the deposits of Anchor Bank to the maximum permitted by law. During these state or federal regulatory examinations, the examiners may require Anchor Bank to provide for higher general or specific loan loss reserves, which can impact our capital and earnings. This regulation of Anchor Bank is intended for the protection of depositors and the Deposit Insurance Fund ("DIF") of the FDIC and not for the purpose of protecting shareholders of Anchor Bank or Anchor Bancorp. Anchor Bank is required to maintain minimum levels of regulatory capital and is subject to some limitations on the payment of dividends to Anchor Bancorp. See "- Capital Requirements" and "- Dividends" below.

Federal and State Enforcement Authority and Actions. As part of its supervisory authority over Washington-chartered savings banks, the DFI may initiate enforcement proceedings to obtain a cease-and-desist order against an institution believed to have engaged in unsafe and unsound practices or to have violated a law, regulation, or other regulatory limit, including a written agreement. The FDIC also has the authority to initiate enforcement actions against insured institutions for similar reasons and may terminate the deposit insurance if it determines that an institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition. Both these agencies may utilize less formal supervisory tools to address their concerns about the condition, operations or compliance status of a savings bank.

Regulation by the Washington Department of Financial Institutions. State law and regulations govern Anchor Bank's ability to take deposits and pay interest, to make loans on or invest in residential and other real estate, to make consumer loans, to invest in securities, to offer various banking services to its customers, and to establish branch offices. As a state savings bank, Anchor Bank must pay semi-annual assessments, examination costs and certain other charges to the DFI.

Washington law generally provides the same powers for Washington savings banks as federally and other-state chartered savings institutions and banks with branches in Washington, subject to the approval of the DFI. Washington law allows Washington savings banks to charge the maximum interest rates on loans and other extensions of credit to Washington residents which are allowable for a national bank in another state if higher than Washington limits. In addition, the DFI may approve applications by Washington savings banks to engage in an otherwise unauthorized activity, if the DFI determines that the activity is closely related to banking, and Anchor Bank is otherwise qualified under the statute. This additional authority, however, is subject to review and approval by the FDIC if the activity is not permissible for national banks.

Insurance of Accounts and Regulation by the FDIC. The DIF of the FDIC insures deposit accounts in Anchor Bank up to $250,000 per separately insured depositor.  As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. Our deposit insurance premiums for the year ended June 30, 2016, were $264,000. During the last three years our premiums have decreased due to the termination of the Order and increased quality of loan performance. Management is not aware of any existing circumstances which would result in termination of Anchor Bank's deposit insurance.

Under the FDIC's risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other risk factors. Rates are based on each institution's risk category and certain specified risk adjustments. Stronger institutions pay lower rates while riskier institutions pay higher rates. Assessments are based on an institution’s average consolidated total assets minus average tangible equity with an assessment rate schedule ranging from 2.5 to 45 basis points. The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank.  Management cannot predict what assessment rates may be in the future.

As insurer, the FDIC is authorized to conduct examinations of and to require reporting by FDIC-insured institutions.  It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the DIF.  The FDIC also has the authority to take enforcement actions against banks and savings associations. We are unaware of any practice, condition or violation that may lead to termination of our deposit insurance.

Prompt Corrective Action.  Federal statutes establish a supervisory framework based on five capital categories:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.  An institution’s category depends upon where its capital levels are in relation to relevant capital measures, which include a risk-based capital measure, a leverage ratio capital measure and certain other factors.  The federal banking agencies have adopted regulations that implement this statutory framework. Under these regulations, an institution is treated as well capitalized if its ratio of core capital to risk-weighted assets is 6.0% or more, its ratio of core capital to adjusted total assets (leverage ratio) is 5.0% or more, and it is not subject to any federal supervisory order or directive to meet a specific capital level. In order to be adequately capitalized, an institution must have a total risk-based capital ratio of not less than 8.0%, a core capital to risk-weighted assets ratio of not less than 4.0%, and a leverage ratio of not less than 4%.  An institution that is not well capitalized is subject to certain restrictions on

31

brokered deposits, including restrictions on the rates it can offer on its deposits generally. Any institution which is neither well capitalized nor adequately capitalized is considered undercapitalized.

Undercapitalized institutions are subject to certain prompt corrective action requirements, regulatory controls and restrictions which become more extensive as an institution becomes more severely undercapitalized.  Failure by an institution to comply with applicable capital requirements would, if unremedied, result in progressively more severe restrictions on its activities and lead to enforcement actions, including, but not limited to, the issuance of a capital directive to ensure the maintenance of required capital levels and, ultimately, the appointment of the FDIC as receiver or conservator.  Banking regulators will take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements.  Additionally, approval of any regulatory application filed for their review may be dependent on compliance with capital requirements.

At June 30, 2016, Anchor Bank was categorized as "well capitalized". For additional information, see Note 13 of the Notes to Consolidated Financial Statements included in Item 8., "Financial Statements and Supplementary Data" of this Form 10-K.

Capital Requirements. Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank became subject to new capital regulations adopted by the FDIC, which created a new required ratio for common equity Tier 1 (“CET1”) capital, increased the minimum leverage and Tier 1 capital ratios, changed the risk-weightings of certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over the required capital ratios, and changed what qualifies as capital for purposes of meeting the capital requirements. These regulations implement the regulatory capital reforms required by the Dodd Frank Act and the “Basel III” requirements.

Under the new capital regulations, the minimum capital level requirements applicable to Anchor Bancorp and Anchor Bank are: (i) a CETI capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6.0%; (iii) a total capital ratio of 8.0%; and (iv) a Tier 1 leverage ratio of 4.0% for all financial institutions. CET1 generally consists of common stock; retained earnings; accumulated other comprehensive income (“AOCI”) unless an institution elects to exclude AOCI from regulatory capital; and certain minority interests; all subject to applicable regulatory adjustments and deductions. Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock. Tier 2 capital generally consists of other preferred stock and subordinated debt meeting certain conditions plus an amount of the allowance for loan and lease losses up to 1.25% of assets. Total capital is the sum of Tier 1 and Tier 2 capital.

In addition to the minimum capital requirements, a new capital conservation buffer must be maintained which consists of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.  The capital conservation buffer requirement is subject to a phase in period, which began on January 1, 2016 with the requirement for a buffer of greater than 0.625% of risk-weighted assets. This capital conservation buffer will increase each year until the capital conservation buffer requirement is fully phased in on January 1, 2019.

The table below sets forth Anchor Bank’s capital position under the prompt corrective action regulations of the FDIC at June 30, 2016 and 2015. The Bank paid a $680,000 cash dividend to Anchor Bancorp on June 30, 2016. The dividend will be used to support the Company's operations including the possible repurchase of the Company's common stock.

32

	At June 30,
	2016				2015
	Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
Bank equity capital under GAAP	$	63,196			$	63,723
Total risk-based capital	$	59,938	15.7	%	$	57,321	17.4	%
Total risk-based capital requirement	30,580		8.0		26,422		8.0
Excess	$	29,358	7.7	%	$	30,899	9.4	%
Tier 1 risk-based capital	$	56,159	14.7	%	$	53,600	16.2	%
Tier 1 risk-based capital requirement	22,935		6.0		19,816		6.0
Excess	$	33,224	8.7	%	$	33,784	10.2	%
Common equity Tier 1 capital	$	56,159	14.7	%	$	53,600	16.2	%
Common equity Tier 1 capital requirement	17,201		4.5		14,862		4.5
Excess	$	38,958	10.2	%	$	38,738	11.7	%
Tier 1 leverage capital	$	56,159	13.5	%	$	53,600	14.3	%
Tier 1 leverage capital requirement	16,620		4.0		14,963		4.0
Excess	$	39,539	9.5	%	$	38,637	10.3	%

The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of particular risks or circumstances.

Anchor Bank’s management believes that, under the current regulations, Anchor Bank will continue to meet its minimum capital requirements in the foreseeable future.  However, events beyond the control of Anchor Bank, such as a downturn in the economy in areas where it has most of its loans, could adversely affect future earnings and, consequently, the ability of Anchor Bank to meet its capital requirements. For additional information regarding the Bank’s required and actual capital levels at June 30, 2016, see Note 13 of the Notes to Consolidated Financial Statements included in Item 8., “Financial Statements and Supplementary Data” of this Form 10-K.

Federal Home Loan Bank System.  Anchor Bank is a member of the FHLB of Des Moines following the voluntary merger of the FHLB of Seattle with and into the FHLB Des Moines effective May 31, 2015. The FHLB of Des Moines is one of 11 regional FHLBs that administer the home financing credit function of savings institutions.  As a member, Anchor Bank is required to purchase and maintain stock in the FHLB. At June 30, 2016, the Bank had $3.0 million in FHLB stock, which was in compliance with this requirement. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Bank System. It makes loans or advances to members in accordance with policies and procedures, established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide funds for residential home financing. See "Business - Deposit Activities and Other Sources of Funds - Borrowings" in this Form 10-K.

The FHLBs continue to contribute to low- and moderately-priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects.  These contributions have affected adversely the level of FHLB dividends paid and could continue to do so in the future.  These contributions could also have an adverse effect on the value of FHLB stock in the future.  A reduction in value of Anchor Bank's FHLB stock may result in a corresponding reduction in its capital.

Standards for Safety and Soundness.  The federal banking regulatory agencies have prescribed, by regulation, guidelines for all insured depository institutions relating to: internal controls, information systems and internal audit systems; loan documentation; credit underwriting; interest rate risk exposure; asset growth; asset quality; earnings and compensation, fees and benefits. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.  Each insured depository institution must implement a comprehensive written information security program that includes administrative, technical, and physical safeguards appropriate

33

to the institution’s size and complexity and the nature and scope of its activities.  The information security program also must be designed to ensure the security and confidentiality of customer information, protect against any unanticipated threats or hazards to the security or integrity of such information, protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer, and ensure the proper disposal of customer and consumer information.  Each insured depository institution must also develop and implement a risk-based response program to address incidents of unauthorized access to customer information in customer information systems.  If the FDIC determines that Anchor Bank fails to meet any standard prescribed by the guidelines, it may require Anchor Bank to submit an acceptable plan to achieve compliance with the standard.  FDIC regulations establish deadlines for the submission and review of such safety and soundness compliance plans.  Management of Anchor Bank is not aware of any conditions relating to these safety and soundness standards which would require submission of a plan of compliance.

Real Estate Lending Standards. FDIC regulations require Anchor Bank to adopt and maintain written policies that establish appropriate limits and standards for real estate loans.  These standards, which must be consistent with safe and sound banking practices, must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value ratio limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements.  Anchor Bank is obligated to monitor conditions in its real estate markets to ensure that its standards continue to be appropriate for current market conditions.  Anchor Bank’s Board of Directors is required to review and approve Anchor Bank’s standards at least annually.  The FDIC has published guidelines for compliance with these regulations, including supervisory limitations on loan-to-value ratios for different categories of real estate loans.  Under the guidelines, the aggregate amount of all loans in excess of the supervisory loan-to-value ratios should not exceed 100% of total capital, and the total of all loans for commercial, agricultural, multifamily or other non-one-to-four-family properties should not exceed 30% of total capital.  Loans in excess of the supervisory loan-to-value ratio limitations must be identified in Anchor Bank’s records and reported at least quarterly to Anchor Bank’s Board of Directors.  Anchor Bank is in compliance with the record and reporting requirements.  As of June 30, 2016, Anchor Bank’s aggregate loans in excess of the supervisory loan-to-value ratios were 2.48% and Anchor Bank’s loans on commercial, agricultural, multifamily or other non-one-to-four-family properties in excess of  the supervisory loan-to-value ratios were 1.23%.  Based on strong risk management practices, Anchor Bank has consistently operated above the aggregate 100% of capital guideline limit since these standards were imposed.

Activities and Investments of Insured State-Chartered Financial Institutions.  Federal law generally limits the activities and equity investments of FDIC-insured, state-chartered banks to those that are permissible for national banks.  An insured state bank is not prohibited from, among other things, (1) acquiring or retaining a majority interest in a subsidiary, (2) investing as a limited partner in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the bank’s total assets, (3) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors’, directors’ and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions, and (4) acquiring or retaining the voting shares of a depository institution owned by another FDIC-insured institution if certain requirements are met.

Environmental Issues Associated With Real Estate Lending. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) is a federal statute that generally imposes strict liability on all prior and present “owners and operators” of sites containing hazardous waste.  However, Congress asked to protect secured creditors by providing that the term “owner and operator” excludes a person whose ownership is limited to protecting its security interest in the site.  Since the enactment of the CERCLA, this “secured creditor exemption” has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan.  To the extent that legal uncertainty exists in this area, all creditors, including Anchor Bank, that have made loans secured by properties with potential hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property.

Federal Reserve System.  The Federal Reserve requires that all depository institutions maintain reserves on transaction accounts or non-personal time deposits.  These reserves may be in the form of cash or noninterest-bearing deposits with the regional Federal Reserve Bank.  Negotiable order of withdrawal (NOW) accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to the reserve requirements, as are any non-personal time deposits at a savings bank.  As of June 30, 2016, Anchor Bank’s deposit with the Federal Reserve Bank and vault cash exceeded its reserve requirements.

Affiliate Transactions.  Federal laws strictly limit the ability of banks to engage in certain transactions with their affiliates, including their bank holding companies.  Transactions deemed to be a “covered transaction” under Section 23A of the Federal Reserve Act and between a subsidiary bank and its parent company or the nonbank subsidiaries of the bank holding company are limited to 10% of the bank subsidiary’s capital and surplus and, with respect to the parent company and all such nonbank subsidiaries, to an aggregate of 20% of the bank subsidiary’s capital and surplus.  Further, covered transactions that are loans and extensions

34

of credit generally are required to be secured by eligible collateral in specified amounts.  Federal law also requires that covered transactions and certain other transactions listed in Section 23B of the Federal Reserve Act between a bank and its affiliates be on terms as favorable to the bank as transactions with non-affiliates.

Community Reinvestment Act and Consumer Protection Laws.  Anchor Bank is subject to the provisions of the Community Reinvestment Act of 1977 (“CRA”), which requires the appropriate federal bank regulatory agency to assess a bank’s performance under the CRA in meeting the credit needs of the community serviced by the bank, including low and moderate income neighborhoods.  The regulatory agency’s assessment of the bank’s record is made available to the public.  Further, a bank’s CRA performance must be considered in connection with a bank’s application to, among other things, establish a new branch office that will accept deposits, relocate an existing office or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution.  Anchor Bank received a “satisfactory” rating during its most recent examination.

In connection with its deposit-taking, lending and other activities, the Bank is subject to a number of federal laws designed to protect consumers and promote lending to various sectors of the economy and population. The CFPB issues regulations and standards under these federal consumer protection laws, which include the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act and the Real Estate Settlement Procedures Act. Through its rulemaking authority, the CFPB has promulgated several proposed and final regulations under these laws that will affect our consumer businesses. Among these regulatory initiatives, are final regulations setting “ability to repay” and “qualified mortgage” standards for residential mortgage loans and establishing new mortgage loan servicing and loan originator compensation standards. The Bank is evaluating these recent CFPB regulations and proposals and devotes substantial compliance, legal and operational business resources to ensure compliance with these consumer protection standards. In addition, the FDIC has enacted customer privacy regulations that limit the ability of the Bank to disclose nonpublic consumer information to non-affiliated third parties. The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated parties.

Bank Secrecy Act/Anti-Money Laundering Laws. TheBank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001. These laws and regulations require the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of their customers. Violations of these requirements can result in substantial civil and criminal sanctions. In addition, provisions of the USA PATRIOT Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing mergers and acquisitions.

Dividends. The amount of dividends payable by Anchor Bank to Anchor Bancorp depends upon Anchor Bank’s earnings and capital position, and is limited by federal and state laws, regulations and policies.  According to Washington law, Anchor Bank may not declare or pay a cash dividend on its capital stock if it would cause its net worth to be reduced below (1) the amount required for liquidation accounts or (2) the net worth requirements, if any, imposed by the Director of the DFI.  Dividends on Anchor Bank’s capital stock may not be paid in an aggregate amount greater than the aggregate retained earnings of Anchor Bank, without the approval of the Director of the DFI.

The amount of dividends actually paid during any one period is strongly affected by Anchor Bank’s policy of maintaining a strong capital position.  Federal law further provides that no insured depository institution may pay a cash dividend if it would cause the institution to be “undercapitalized,” as defined in the prompt corrective action regulations.  Moreover, the federal bank regulatory agencies also have the general authority to limit the dividends paid by insured banks if such payments are deemed to constitute an unsafe and unsound practice. In addition, as noted above, under "Capital Requirements", if the Bank does not have the required capital conservation buffer, its ability to pay dividends to the Company is limited, which may limit the ability of the Company to pay dividends to its shareholders.

Regulation and Supervision of Anchor Bancorp

General.  Anchor Bancorp is a bank holding company registered with the Federal Reserve and the sole shareholder of Anchor Bank.  Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the Bank Holding Company Act of 1956, as amended (“BHCA”), and the regulations promulgated thereunder.  This regulation and oversight is generally intended to ensure that Anchor Bancorp limits its activities to those allowed by law and that it operates in a safe and sound manner without endangering the financial health of Anchor Bank.

As a bank holding company, Anchor Bancorp is required to file quarterly reports with the Federal Reserve and any additional information required by the Federal Reserve and will be subject to regular examinations by the Federal Reserve.  The Federal Reserve also has extensive enforcement authority over bank holding companies, including the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries).  In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

35

The Bank Holding Company Act.  Under the BHCA, Anchor Bancorp is supervised by the Federal Reserve.  The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner.  In addition, the Dodd-Frank Act and earlier Federal Reserve policy provides that bank holding companies should serve as a source of strength to its subsidiary banks by being prepared to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity, and should maintain the financial flexibility and capital raising capacity to obtain additional resources for assisting its subsidiary banks.  A bank holding company's failure to meet its obligation to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve's regulations or both.

Under the BHCA, the Federal Reserve may approve the ownership of shares by a bank holding company in any company the activities of which the Federal Reserve has determined to be so closely related to the business of banking or managing or controlling banks as to be a proper incident thereto.  These activities generally include, among others, operating a savings institution, mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing certain investment and financial advice; underwriting and acting as an insurance agent for certain types of credit related insurance; leasing property on a full payout, non-operating basis; selling money orders, travelers’ checks and U.S. Savings Bonds; real estate and personal property appraising; providing tax planning and preparation services; and, subject to certain limitations, providing securities brokerage services for customers.

Acquisitions.  The BHCA prohibits a bank holding company, with certain exceptions, from acquiring ownership or control of more than 5% of the voting shares of any company that is not a bank or bank holding company and from engaging in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries.  A bank holding company that meets certain supervisory and financial standards and elects to be designed as a financial holding company may also engage in certain securities, insurance and merchant banking activities and other activities determined to be financial in nature or incidental to financial activities. The BHCA prohibits a bank holding company, with certain exceptions, from acquiring ownership or control of more than 5% of the voting shares of any company that is not a bank or bank holding company and from engaging in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries.

Interstate Banking.  The Federal Reserve must approve an application of a bank holding company to acquire control of, or acquire all or substantially all of the assets of, a bank located in a state other than the holding company's home state, without regard to whether the transaction is prohibited by the laws of any state.  The Federal Reserve may not approve the acquisition of a bank that has not been in existence for the minimum time period, not exceeding five years, specified by the law of the host state.  Nor may the Federal Reserve approve an application if the applicant controls or would control more than 10% of the insured deposits in the United States or 30% or more of the deposits in the target bank's home state or in any state in which the target bank maintains a branch.  Federal law does not affect the authority of states to limit the percentage of total insured deposits in the state that may be held or controlled by a bank holding company to the extent such limitation does not discriminate against out-of-state banks or bank holding companies.  Individual states may also waive the 30% state-wide concentration limit contained in the federal law.

The federal banking agencies are authorized to approve interstate merger transactions without regard to whether the transaction is prohibited by the law of any state, unless the home state of one of the banks adopted a law prior to June 1, 1997 which applies equally to all out-of-state banks and expressly prohibits merger transactions involving out-of-state banks.  Interstate acquisitions of branches will be permitted only if the law of the state in which the branch is located permits such acquisitions.  Interstate mergers and branch acquisitions will also be subject to the nationwide and statewide insured deposit concentration amounts described above.

Regulatory Capital Requirements.  The Federal Reserve has adopted capital guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications under the BHCA. These guidelines apply on a consolidated basis to bank holding companies with $500 million or more in assets, or with fewer assets but certain risky activities, and on a bank-only basis to other companies. These bank holding company capital adequacy guidelines are similar to those imposed by the FDIC on the Bank. For a bank holding company with less than $500 million in total consolidated assets, such as the Company, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company's subsidiary banks to be well capitalized under the prompt corrective action regulations. In July 2013, the Federal Reserve and the FDIC approved revisions to their capital adequacy guidelines and prompt corrective action rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act. As of June 30, 2016, Anchor Bancorp exceeded all regulatory capital requirements with Tier 1 leverage-based capital, CET1 capital, Tier 1 risk-based capital and total risk-based capital ratios of 14.4%, 15.7%, 15.7% and 16.6%, respectively. For additional information, see the section above entitled “- Regulation and Supervision of Anchor Bank - Capital Requirements” and Note 13 of the Notes to Consolidated Financial Statements included in Item 8., "Financial Statements and Supplementary Data," of this Form 10-K.

36

Restrictions on Dividends.  Anchor Bancorp’s ability to declare and pay dividends may depend in part on dividends received from Anchor Bank.  The Revised Code of Washington regulates the distribution of dividends by savings banks and states, in part, that dividends may be declared and paid out of accumulated net earnings, provided that the bank continues to meet its surplus requirements.  In addition, dividends may not be declared or paid if Anchor Bank is in default in payment of any assessment due the FDIC.

Federal Reserve policy limits the payment of a cash dividend by a bank holding company if the holding company's net income for the past year is not sufficient to cover both the cash dividend and a rate of earnings retention that is consistent with capital needs, asset quality and overall financial condition. A bank holding company that does not meet any applicable capital standard would not be able to pay any cash dividends under this policy. A bank holding company not subject to consolidated capital requirements is expected not to pay dividends unless its debt-to-equity ratio is less than 1:1, and it meets certain additional criteria. The Federal Reserve also has indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends.

Except for a company that meets the well-capitalized standard for bank holding companies, is well managed, and is not subject to any unresolved supervisory issues, a bank holding company is required to give  the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company's consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation or regulatory order, condition, or written agreement. A bank holding company is considered well-capitalized if on a consolidated basis it has a total risk-based capital ratio of at least 10.0% and a Tier 1 risk-based capital ratio of 6.0% or more, and is not subject to an agreement, order, or directive to maintain a specific level for any capital measure.

Stock Repurchases.  Bank holding companies, except for certain “well-capitalized” and highly rated bank holding companies, are required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of their consolidated net worth.  The Federal Reserve may disapprove a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order, or any condition imposed by, or written agreement with, the Federal Reserve.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. On July 21, 2010, the Dodd-Frank Act was signed into law. The Dodd-Frank-Act imposes new restrictions and an expanded framework of regulatory oversight for financial institutions, including depository institutions and implements new capital regulations that Anchor Bancorp will become subject to and that are discussed above under “- Regulation and Supervision of Anchor Bank - New Capital Rules.” In addition, among other changes, the Dodd-Frank Act requires public companies, such as Anchor Bancorp, to (i) provide their shareholders with a non-binding vote (a) at least once every three years on the compensation paid to executive officers and (b) at least once every six years on whether they should have a “say on pay” vote every one, two or three years; (ii) have a separate, non-binding shareholder vote regarding golden parachutes for named executive officers when a shareholder vote takes place on mergers, acquisitions, dispositions or other transactions that would trigger the parachute payments; (iii) provide disclosure in annual proxy materials concerning the relationship between the executive compensation paid and the financial performance of the issuer; and (iv) amend Item 402 of Regulation S-K to require companies to disclose the ratio of the Chief Executive Officer's annual total compensation to the median annual total compensation of all other employees. For certain of these changes, the implementing regulations have not been promulgated, so the full impact of the Dodd-Frank Act on public companies cannot be determined at this time.

Sarbanes-Oxley Act of 2002.  As a public company, Anchor Bancorp is subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), which implements a broad range of corporate governance and accounting measures for public companies designed to promote honesty and transparency in corporate America and better protect investors from corporate wrongdoing.  The Sarbanes-Oxley Act was enacted in 2002 in response to public concerns regarding corporate accountability in connection with various accounting scandals.  The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.

The Sarbanes-Oxley Act includes very specific additional disclosure requirements and corporate governance rules and required the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules. The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a Board of Directors and management and between a Board of Directors and its committees.

37

TAXATION

Federal Taxation

General. Anchor Bancorp and Anchor Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to Anchor Bancorp or Anchor Bank. The Company files income tax returns in the U.S. federal jurisdiction. With few exceptions, the Company is no longer subject to

U.S. federal or state/local income tax examinations by tax authorities for years before 2010.

Anchor Bancorp files a consolidated federal income tax return with Anchor Bank. Any cash distributions made by Anchor Bancorp to its shareholders would be considered to be taxable dividends and not as a non-taxable return of capital to shareholders for federal and state tax purposes.

Method of Accounting. For federal income tax purposes, Anchor Bank currently reports its income and expenses on the accrual method of accounting and uses a fiscal year ending on June 30 for filing its federal income tax return.

Minimum Tax. The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, called alternative minimum taxable income.  The alternative minimum tax is payable to the extent such alternative minimum taxable income is in excess of an exemption amount. Net operating losses can offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years.

Net Operating Loss Carryovers. A financial institution may carryback net operating Federal losses to the preceding two taxable years and forward to the succeeding 20 taxable years. This provision applies to losses incurred in taxable years beginning after August 6, 1997.

Corporate Dividends-Received Deduction. Anchor Bancorp may eliminate from its income dividends received from Anchor Bank as a wholly-owned subsidiary of Anchor Bancorp if it elects to file a consolidated return with Anchor Bank.  The corporate dividends-received deduction is 100% or 80%, in the case of dividends received from corporations with which a corporate recipient does not file a consolidated tax return, depending on the level of stock ownership of the payor of the dividend.  Corporations which own less than 20% of the stock of a corporation distributing a dividend may deduct 70% of dividends received or accrued on their behalf.

Washington Taxation

Anchor Bank is subject to a business and occupation tax imposed under Washington law at the rate of 1.8% of gross receipts.  Interest received on loans secured by mortgages or deeds of trust on residential properties and certain securities are exempt from this tax.

Oregon Taxation

The Company files income tax returns in Oregon State and within local jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal or state/local income tax examinations by tax authorities for years before 2010.

Item 1A.  Risk Factors.

An investment in our common stock involves various risks which are particular to Anchor Bancorp, our industry, and our market area.  Before making an investment decision, you should carefully consider the risks and uncertainties described below, together with all of the other information included in this report.  In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations.  The value or market price of our common stock could decline due to any of these identified or other risks, and you could lose all or part of your investment.

The current weak economic conditions in the market areas we serve may continue to adversely impact our earnings and could increase the credit risk associated with our loan portfolio.

Substantially all of our loans are to businesses and individuals in the state of Washington.  A decline in the economies of the five counties in which we operate, which we consider to be our primary market areas, could have a material adverse effect on our business, financial condition, results of operations and prospects.  Weak economic conditions and previous strains in the financial

38

and housing markets in our market area has resulted in higher levels of loan delinquencies, problem assets and foreclosures and a decline in the values of the collateral securing our loans.

Continued weakness or a further deterioration in economic conditions in the market areas we serve could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition and results of operations:

• loan delinquencies, problem assets and foreclosures may increase;

• the slowing of sales of foreclosed assets;

• demand for our products and services may decline, possibly resulting in a decrease in our total loans or assets;

• collateral for loans made may decline further in value, exposing us to increased risk of loss on existing loans, reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans;

• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and

• the amount of our low-cost or noninterest bearing deposits may decrease and the composition of our deposits may be adversely affected.

A return of recessionary conditions could result in increases in our level of nonperforming loans and/or reduce demand for our products and services, which could have adverse effect on our results of operations.

Economic conditions have improved since the end of the economic recession that officially ended in June, 2009; however, economic growth has been slow and uneven, unemployment remains relatively high and concerns still exist over the federal deficit, government spending and global geopolitical risks which have all contributed to diminished expectations for the economy in our market areas. A return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and continued high unemployment levels may result in higher than expected loan delinquencies and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.

Furthermore, the Board of Governors of the Federal Reserve System, in an attempt to help the overall economy, has, among other things, kept interest rates low through its targeted federal funds rate and the purchase of mortgage-backed securities. The Federal Reserve Board has recently increased the federal funds rate by 25 basis points and indicated further increases in the federal funds rate in 2016. As the federal funds rate increases, market interest rates will likely rise, which may negatively impact the housing markets and the U.S. economic recovery. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Our loan portfolio is concentrated in loans with a higher risk of loss.

In addition to residential mortgage loans, we originate construction and land loans, commercial and multi-family mortgage loans, commercial business loans, and consumer loans primarily within our market areas.  At June 30, 2016, we had $220.5 million outstanding in non-residential loans.  At that date, loans delinquent 30 days or more, including nonperforming loans, were $3.3 million, and delinquent loans represented 0.9% of total loans. Many of these loans are perceived to have greater credit risk than residential real estate loans for a number of reasons, including those described below:

Commercial and Multi-family Mortgage Loans.  These loans typically involve higher principal amounts than other types of loans. Repayment is dependent upon income being generated from the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions.  Commercial and multi-family mortgage loans also expose a lender to greater credit risk than loans secured by residential real estate because the collateral securing these loans may not be sold as easily as residential real estate.  In addition, many of our commercial and multi-family real estate loans are not fully amortizing and contain large balloon payments upon maturity.  Such balloon payments may require the borrower to either sell or refinance the underlying property in order to make the payment, which may increase the risk of default or non-payment.  At June 30, 2016, we had $203.3 million or 57.7% of total loans in commercial and multi-family mortgage loans, $318,000 or 0.1% of which were nonperforming.

Construction and Land Loans. During the fiscal years ended June 30, 2016 and 2015, we originated $65.2 million and $12.8 million in construction loans, and $4.4 million and $776,000 in land loans. From June 30, 2012 through June 30, 2016, our

39

construction loans grew 225.5%, while our land loans declined by 3.2%. At June 30, 2016, we had $28.6 million or 8.1% of total loans in construction and land loans of which $6.8 million were land loans.

Construction and land acquisition and development lending involves additional risks when compared with permanent residential lending because funds are advanced upon the collateral for the project based on an estimate of costs that will produce a future value at completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation on real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the completed project loan-to-value ratio. Changes in the demand, such as for new housing and higher than anticipated building costs may cause actual results to vary significantly from those estimated. If our appraisal of the value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss.  Because construction loans require active monitoring of the building process, including cost comparisons and on-site inspections, these loans are more difficult and costly to monitor. This type of lending also typically involves higher loan principal amounts and is often concentrated with a small number of builders. In addition, generally during the term of a construction loan, no payment from the borrower is generally required since the accumulated interest is added to the principal of the loan through an interest reserve.  

Properties under construction are often difficult to sell and typically must be completed in order to be successfully sold which also complicates the process of working out problem construction loans. This may require us to advance additional funds and/or contract with another builder to complete construction and assume the market risk of selling the project at a future market price, which may or may not enable us to fully recover unpaid loan funds and associated construction and liquidation costs. Increases in market rates of interest may have a more pronounced effect on construction loans by rapidly increasing the end-purchasers' borrowing costs, thereby reducing the overall demand for the project.

Loans on land under development or held for future construction as well as lot loans made to individuals for the future construction of a residence also pose additional risk because the length of time from financing to completion of a development project is significantly longer than for a traditional construction loan, which makes them more susceptible to declines in real estate values, declines in overall economic conditions which may delay the development of the land and changes in the political landscape that could affect the permitted and intended use of the land being financed, and the potential illiquid nature of the collateral.  In addition, during this long period of time from financing to completion, the collateral often does not generate any cash flow to support the debt service.

As a result, construction and land lending often involves the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or to obtain permanent take-out financing, rather than the ability of the borrower or guarantor to independently repay principal and interest.  In addition, speculative construction loans to a builder are often associated with homes that are not pre-sold, and thus pose a greater potential risk to us than construction loans to individuals on their personal residences because there is the added risk associated with identifying an end-purchaser for the finished project. At June 30, 2016, $11.2 million of our construction loans were to builders for speculative residential construction.  At June 30, 2016, none of our construction and land loans were nonperforming.

Commercial Business Loans. At June 30, 2016, we had $36.8 million or 10.5% of total loans in commercial business loans, however, we are currently planning on expanding our commercial business lending, subject to market conditions.  Commercial business lending involves risks that are different from those associated with residential and commercial real estate lending. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values and liquidation of the underlying real estate collateral being viewed as the primary source of repayment in the event of borrower default. Our commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The borrower's cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment because accounts receivable may be uncollectible, inventories may be obsolete or of limited use, and other collateral securing other loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.  Accordingly, the repayment of commercial business loans depends primarily on the cash flow and creditworthiness of the borrower and secondarily on the underlying collateral provided by the borrower.  At June 30, 2016, nonperforming commercial business loans totaled $97,000.

Consumer Loans.  We make secured and unsecured consumer loans.  Our secured consumer loans are collateralized with assets that may not provide an adequate source of payment of the loan due to depreciation, damage, or loss.  In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans.   At June 30, 2016, we had $22.1 million or 6.3% of total loans in consumer loans of which $17,000 were nonperforming.  Of this amount, $16.6 million were in

40

home equity loans, some of which are loans in amounts for up to 100% of collateral value.  For more information about the credit risk, we face with respect to these types of loans, see “Our business may be adversely affected by credit risk associated with residential property.”

Our business may be adversely affected by credit risk associated with residential property.

At June 30, 2016, $61.2 million, or 17.4%, of our total loan portfolio, was secured by one-to-four single-family real property. This type of lending is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. A decline in residential real estate values resulting from a downturn in the Washington housing markets in which we operate may reduce the value of the real estate collateral securing these loans and increase our risk of loss if borrowers default on their loans. Recessionary conditions or declines in the volume of real estate sales and/or the sales prices couples with elevated unemployment rates may result in higher than expected loan delinquencies or problem assets, and a decline in demand for our products and services. These potential negative events may cause us to incur losses, adversely affect our capital and liquidity and damage our financial condition and business operations. These declines may also have a greater effect on our earnings and capital than on the earnings and capital of financial institutions whose loan portfolios are more diversified.

Many of our residential mortgage loans are secured by liens on mortgage properties in which the borrowers have little or no equity because either we originated the loan with a relatively high combined loan-to-value ratio or because of the decline in home values in our market areas.  Residential loans with combined higher loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, such borrowers may be unable to repay their loans in full from the sale proceeds.  Further, a significant amount of our home equity lines of credit consist of second mortgage loans. For those home equity lines secured by a second mortgage, it is unlikely that we will be successful in recovering all or a portion of our loan proceeds in the event of default unless we are prepared to repay the first mortgage loan and such repayment and the costs associated with a foreclosure are justified by the value of the property.  For these reasons, we may experience higher rates of delinquencies, default and losses on our residential loans.

Our loan portfolio possesses increased risk as the result of subprime loans.

As of June 30, 2016, we held in our loan portfolio $4.2 million in one-to-four family mortgage loans ($2.5 million of which were fixed rate), $1.8 million of home equity loans (of which $933,000 were fixed rate) and $180,000 of other types of consumer loans (all of which were fixed rate), which are considered “subprime” by federal banking regulators.  The aggregate amount of loans considered subprime at June 30, 2016 was $6.2 million or 1.7% of our total loan portfolio. In exchange for the additional lender risk associated with these loans, these borrowers generally are required to pay a higher interest rate, and depending on the severity of the credit history, a lower loan-to-value ratio may be required than for a conforming loan borrower. At the time of loan origination, our subprime borrowers had an average Fair Isaac and Company, Incorporated, or FICO, credit score of 629 and a weighted average loan-to-value ratio of 64%, which loan-to-value ratio may be significantly understated if current market values are used. A FICO score is a principal measure of credit quality and is one of the significant criteria we rely upon in our underwriting. Generally, a FICO score higher than 660 indicates the borrower has an acceptable credit reputation. At June 30, 2016, $153,000 or 2.5% of our subprime loans were categorized as nonperforming assets. Subprime loans are generally considered to have an increased risk of delinquency and foreclosure than do conforming loans, especially when adjustable rate loans adjust to a higher interest rate. We had not experienced such increased delinquencies or foreclosures at June 30, 2016, however, our subprime loan portfolio will be adversely affected in the event of a further downturn in regional or national economic conditions. In addition, we may not recover funds in an amount equal to any remaining loan balance. Consequently, we could sustain loan losses and potentially incur a higher provision for loan loss expense.

Our concentration in non-owner occupied residential real estate loans may expose us to increased credit risk.

At June 30, 2016, $25.8 million, or 42.2% of our residential mortgage loan portfolio and 9.0% of our total loan portfolio, consisted of loans secured by non-owner occupied residential properties. Loans secured by non-owner occupied properties generally expose a lender to greater risk of non-payment and loss than loans secured by owner occupied properties because repayment of such loans depends primarily on the tenant’s continuing ability to pay rent to the property owner, who is our borrower, or, if the property owner is unable to find a tenant, the property owner’s ability to repay the loan without the benefit of a rental income stream. In addition, the physical condition of non-owner occupied properties is often below that of owner occupied properties due to lax property maintenance standards, which has a negative impact on the value of the collateral properties. Furthermore, some of our non-owner occupied residential loan borrowers have more than one loan outstanding with us. At June 30, 2016, we had 12 non-owner occupied residential loan relationships, with aggregate outstanding balances of $16.7 million, of which five loan relationships had an aggregate outstanding balance over $500,000. Consequently, an adverse development with respect to one credit relationship may expose us to a greater risk of loss compared to an adverse development with respect to an owner occupied residential mortgage

41

loan. At June 30, 2016, all of our non-owner occupied residential mortgage loans complied with their loan repayment terms, except for two loans which totaled $214,000 at that date.

We have a concentration of large loans outstanding to a limited number of borrowers that increases our risk of loss.

We have extended significant amounts of credit to a limited number of borrowers, largely in connection with our commercial real estate, non-owner occupied residential real estate loans and construction loans. At June 30, 2016, the aggregate amount of loans to our ten largest borrowers amounted to approximately $82.5 million or 23.4% of total loans. At this date, none of the loans to our ten largest borrowers were nonperforming.

A high concentration of credit to a limited number of borrowers increases the risk of our loan portfolio. In the event that one or more of these borrowers is not able to meet interest payments or pay scheduled amortization on such obligations, the potential loss to us is more likely to have a material adverse impact on our business, financial condition and results of operations.

The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.

The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency, have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending, guidance for those institutions which are deemed to have concentrations in commercial real estate lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have total commercial real estate loans representing 300% or more of the institutions total risk-based capital and the institution's commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk. Institutions which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios, and may be required to hold higher levels of capital. Like many community banks, we have a concentration in commercial real estate loans, and have also experienced a 67.9% growth in our commercial real estate portfolio during the past 36 months. Commercial real estate loans represent 249.5% of total risk based capital as of June 30, 2016 compared to 223.8% of total risk based capital at June 30, 2015. In addition, our total of income producing or non-owner occupied commercial real estate loans was $155.4 million or 259.2% of total capital at June 30, 2016 compared to $126.8 million or 211.7% of total capital at June 30, 2015.  While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us.

Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.

Lending money is a substantial part of our business and each loan carries a certain risk that it will not be repaid in accordance with its terms, or that any underlying collateral will not be sufficient to assure repayment.  This risk is affected by, among other things:

• cash flow of the borrower and/or the project being financed;

• the changes and uncertainties as to the future value of the collateral, in the case of a collateralized loan;

• the duration of the loan;

• the character and creditworthiness of a particular borrower; and

• changes in economic and industry conditions.

We maintain an allowance for loan losses, which we believe is an appropriate reserve to provide for probable losses in our loan portfolio.  The allowance is funded by provisions for loan losses charged to expense.  The amount of this allowance is determined by our management through periodic reviews and consideration of several factors, including, but not limited to:

• our general reserve, based on our historical default and loss experience, certain macroeconomic factors, and management's expectations of future events;

• our specific reserve, based on our evaluation of nonperforming loans and their underlying collateral; and

• an allocated pool reserve to provide for other credit losses including allocations for secured and unsecured loans.

The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes.  Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for

42

loan losses.  Additionally, pursuant to our growth strategy, management recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our allowance may be insufficient to absorb losses without significant additional provisions. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.  In addition, if charge-offs in future periods exceed the allowance for loan losses we will need additional provisions to replenish the allowance for loan losses.  Any additional provisions will result in a decrease in net income and possibly capital, and may have a material adverse effect on our financial condition and results of operations.

If our nonperforming assets increase, our earnings will be adversely affected.

At June 30, 2016, our nonperforming assets which consist of nonaccruing loans and real estate owned were $2.4 million, or 0.6% of total assets.  Our nonperforming assets adversely affect our net income in various ways:

• we record interest income only on a cash basis for nonaccrual loans and any nonperforming securities and we do not record interest income for real estate owned;

• we must provide for probable loan losses through a current period charge to the provision for loan losses;

• noninterest expense increases when we write down the value of properties in our real estate owned portfolio to reflect changing market values or recognize other-than-temporary impairment on nonperforming securities;

• there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees related to our real estate owned; and

• the resolution of nonperforming assets requires the active involvement of management, which can distract them from more profitable activity.

If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our nonperforming assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations.

If our investments in real estate are not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation reserves, our earnings could be reduced.

We obtain updated valuations in the form of appraisals and broker price opinions when a loan has been foreclosed upon and the property taken in as real estate owned and at certain other times during the asset's holding period.  Our net book value (“NBV”) in the loan at the time of foreclosure and thereafter is compared to the updated market value of the foreclosed property less estimated selling costs (“fair value”). A charge-off is recorded for any excess in the asset's NBV over its fair value.  If our valuation process is incorrect, the fair value of the investments in real estate may not be sufficient to recover our NBV in such assets, resulting in the need for additional charge-offs. Additional material charge-offs to our investments in real estate could have a material adverse effect on our financial condition and results of operations.

In addition, bank regulators periodically review our real estate owned and may require us to recognize further charge-offs.  Any increase in our charge-offs, as required by the bank regulators, may have a material adverse effect on our financial condition and results of operations.

Our securities portfolio may be negatively impacted by fluctuations in market value and interest rates.

Our securities portfolio may be impacted by fluctuations in market value, potentially reducing accumulated other comprehensive income and/or earnings. Fluctuations in market value may be caused by changes in market interest rates, lower market prices for securities and limited investor demand. Our securities portfolio is evaluated for other-than-temporary impairment. If this evaluation shows impairment to the actual or projected cash flows associated with one or more securities, a potential loss to earnings may occur. Changes in interest rates can also have an adverse effect on our financial condition, as our available-for-sale securities are reported at their estimated fair value, and therefore are impacted by fluctuations in interest rates. We increase or decrease our shareholders' equity by the amount of change in the estimated fair value of the available-for-sale securities, net of taxes. There can be no assurance that the declines in market value will not result in other-than-temporary impairments of these assets, which would lead to accounting charges that could have a material adverse effect on our net income and capital levels.

43

Fluctuating interest rates can adversely affect our profitability.

Our profitability is dependent to a large extent upon net interest income, which is the difference, or spread, between the interest earned on loans, securities and other interest-earning assets and the interest paid on deposits, borrowings, and other interest-bearing liabilities. Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. In a changing interest rate environment, we may not be able to manage this risk effectively. Changes in interest rates also can affect: (1) our ability to originate and/or sell loans; (2) the fair value of our financial assets and liabilities, which could negatively impact shareholders' equity, and our ability to realize gains from the sale of such assets; (3) our ability to obtain and retain deposits in competition with other available investment alternatives; (4) the ability of our borrowers to repay adjustable or variable rate loans; and (5) the average duration of our mortgage backed securities portfolio and other interest-earning assets.

If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. As a result of the relatively low interest rate environment, an increasing percentage of our deposits have been comprised of short-term certificates of deposit and other deposits yielding no or a relatively low rate of interest. At June 30, 2016, we had $43.2 million in certificates of deposit that mature within one year and $50.8 million in non-interest bearing demand deposits. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. In addition, a substantial amount of our mortgage loans and home equity loans have adjustable interest rates. As a result, these loans may experience a higher rate of default in a rising interest rate environment. Further, a prolonged period of exceptionally low market interest rates, such as we are currently experiencing, could have an adverse effect on our results of operations as a result of substantially reduced asset yields. 

Although management believes it has implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on our results of operations, any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. Further, a prolonged period of exceptionally low market interest rates, such as we are currently experiencing, limits our ability to lower our interest expense, while the average yield on our interest-earning assets may continue to decrease as our loans reprice or are originated at these low market rates. Accordingly, our net interest income may continue to decrease, which may have an adverse effect on our profitability. Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our balance sheet.

Decreases in noninterest income could adversely affect our ability to remain profitable and, if we cannot generate and increase our income, our stock price may be adversely affected.

Our noninterest expense often exceeds our net interest income before provision for loan losses and we have relied on our noninterest income to record net income. We face significant challenges that will hinder our ability to generate competitive returns. Our most significant challenge has been our low interest rate spread and margin during recent periods. As a result, we have become even more reliant on our noninterest income, including from time to time significant gains on sales of investments in order to increase noninterest income.  These gains on sales of investments are subject to market and other risks and cannot be relied upon.  During the years ended June 30, 2016 and 2015, net interest income before provision for loan losses was less than noninterest expense by $3.3 million and $3.0 million, respectively. While we have identified various strategic initiatives that we will pursue in our efforts to overcome these challenges and improve earnings, our strategic initiatives may not succeed in generating and increasing income. If we are unable to generate or increase income, our stock price may be adversely affected.

In addition, we originate and sell residential mortgage loans. Changes in interest rates affect demand for our residential loan products and the revenue realized on the sale of loans. A decrease in the volume of loans sold can decrease our revenues and net income.  Further, recent regulatory changes to the rules for overdraft fees for debit transactions and interchange fees have reduced our fee income, resulting in a reduction of our noninterest income.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition, and growth prospects.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. We rely on customer deposits and advances from the Federal Home Loan Bank of Des Moines (“FHLB”) and other borrowings to fund our operations.  At June 30, 2016, we had $62.0 million of FHLB advances outstanding with an additional $84.9 million of available borrowing capacity.  Additionally we have $5.0 million available with Pacific Coast Bankers Bank and $1.0 million available with the Federal Reserve. Although we have historically been able to replace maturing deposits and advances if desired, we may not be able to replace such funds in the future if, among other things,

44

our financial condition, the financial condition of the FHLB, or market conditions change. Our access to funding sources in amounts adequate to finance our activities or the terms of which are acceptable could be impaired by factors that affect us specifically or the financial services industry or economy in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the Washington markets where our loans are concentrated, or adverse regulatory action against us.  Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry.

Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Although we consider our sources of funds adequate for our liquidity needs, we may seek additional debt in the future to achieve our long-term business objectives. Additional borrowings, if sought, may not be available to us or, if available, may not be available on reasonable terms. If additional financing sources are unavailable, or are not available on reasonable terms, our financial condition, results of operations, growth and future prospects could be materially adversely affected.  Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs.  In this case, our operating margins and profitability would be adversely affected.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. Recently several banking institutions have received large fines for non-compliance with these laws and regulations. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations.  At some point, we may need to raise additional capital to support continued growth.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance.  Accordingly, we may not be able to raise additional capital if needed on terms that are acceptable to us, or at all.  If we cannot raise additional capital when needed, our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected.  In addition, if we are unable to raise additional capital when required by the FDIC and DFI, we may be subject to adverse regulatory action.

We are subject to certain risks in connection with our use of technology.

Our security measures may not be sufficient to mitigate the risk of a cyber attack. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber attacks that could have a security impact. If one or more of these events occur, this could jeopardize our or our customers' confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our customers or counterparties. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. We could also suffer significant reputational damage.

Security breaches in our internet banking activities could further expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on standard internet security systems to provide the security and authentication necessary to

45

effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures, and could result in significant legal liability and significant damage to our reputation and our business.

Our security measures may not protect us from system failures or interruptions. While we have established policies and procedures to prevent or limit the impact of systems failures and interruptions, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. If our third-party providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely impacted. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any failures or interruptions may require us to identify alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all. Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.

Our loans to businesses and individuals and our deposit relationships and related transactions are subject to exposure to the risk of loss due to fraud and other financial crimes. Nationally, reported incidents of fraud and other financial crimes have increased. We have also experienced losses due to apparent fraud and other financial crimes. While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur.

Managing reputational risk is important to attracting and maintaining customers, investors and employees.

Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers. We have policies and procedures in place to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation.

Item 1B. Unresolved Staff Comments

None.

46

Item 2.  Properties

At June 30, 2016, we had one administrative office, 10 full service banking offices of which eight locations are owned and two locations are leased.  At June 30, 2016, the net book value of our investment in premises, equipment and leaseholds was $10.4 million.  The net book value of our data processing and computer equipment at June 30, 2016 was $215,000.

The following table provides a list of our main and branch offices and indicates whether the properties are owned or leased:

Location	Leased or Owned	Lease Expiration Date	Square Footage	Net Book Value at June 30, 2016
				(In thousands)
ADMINISTRATIVE OFFICE
100 West First Aberdeen, Washington 98520	Owned	—	7,410	$	1,203
BRANCH OFFICES:
Aberdeen (1) (2) 120 N. Broadway Aberdeen, Washington 98520	Owned	—	17,550	1,165
Centralia(2) 604 S. Tower Centralia, Washington 98531	Owned	—	3,000	593
Elma (2) 216 S. Third Street Elma, Washington 98541	Owned	—	2,252	277
Lacey (2) 601 Woodland Square Loop SE Lacey, Washington 98503	Owned	—	13,505	2,170
Montesano (2) 301 Pioneer Avenue East Montesano, Washington 98563	Owned	—	2,125	2,580
Ocean Shores (2) 795 Pt. Brown Avenue NW Ocean Shores, Washington 98569	Owned	—	2,550	546
Olympia (2) 2610 Harrison Avenue West Olympia, Washington 98502	Owned	—	1,882	441
(table continued on following page)

47

Location	Leased or Owned	Lease Expiration Date	Square Footage	Net Book Value at June 30, 2016
Puyallup (2) 10514 156th Street East Bldg B4, Suite 106 Puyallup, Washington 98374	Leased	11/30/2019	3,027	85
Shelton (3) 100 E. Wallace Kneeland Boulevard Shelton, Washington 98584	Leased	5/31/2018	673	23
Westport (2) 915 N. Montesano Westport, Washington 98595	Owned	—	3,850	918

________

⁽¹⁾  Includes our home branch. 

⁽²⁾  Drive-up ATM available.

⁽³⁾  Wal-Mart location. 

Item 3. Legal Proceedings

The Company or Anchor Bank from time to time is involved in various claims and legal actions arising in the ordinary course of business. There are currently no matters that in the opinion of management would have material adverse effect on our consolidated financial position, results of operation, or liquidity.

Item 4. Mine Safety Disclosures

Not applicable

48

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on The NASDAQ Stock Market LLC’s Global Market, under the symbol “ANCB.”  As of June 30, 2016, there were 2,515,803 shares of common stock issued and outstanding and we had approximately 211 shareholders of record, excluding persons or entities who hold stock in nominee or “street name” accounts with brokers.  The Company has not paid any dividends to shareholders since its formation.

Under Washington law, the Company is prohibited from paying a dividend if, as a result of its payment, the Company would be unable to pay its debts as they become due in the normal course of business, or if the Company's total liabilities would exceed its total assets. The principal source of funds for the Company is dividend payments from the Bank. According to Washington law, Anchor Bank may not declare or pay a cash dividend on its capital stock if it would cause its net worth to be reduced below (1) the amount required for liquidation accounts or (2) the net worth requirements, if any, imposed by the Director of the DFI.  Dividends on Anchor Bank's capital stock may not be paid in an aggregate amount greater than the aggregate retained earnings of Anchor Bank, without the approval of the Director of the DFI.

Stock Repurchases.  The following table summarizes Anchor Bancorp's common stock repurchases during the quarter ended June 30, 2016:

				Total Number of Shares Repurchased as Part of Publicly Announced	Maximum Number of Shares that May Yet Be Repurchased
	Total Number of Shares Purchased	Average Price Paid per Share
Period
April 1 - April 30, 2016	4,000	$	24.00	4,000	73,500
May 1 - May 31, 2016	—	—		—	—
June 1 - June 30, 2016	73,500	24.00		73,500	—
	77,500	$	24.00	77,500

In July 2015, the Board of Directors of Anchor Bancorp approved the repurchase of up to 127,500 shares of the Company's common stock, or five percent of the Company's outstanding shares. The plan expired on February 1, 2016, at which time 50,000 shares had been repurchased at an average price per share of $21.89. In March 2016, the Board of Directors authorized the repurchase of up to 77,500 of the Company's outstanding shares, which were repurchased during the quarter ended June 30, 2016 at an average price per share of $24.00.

Equity Compensation Plan Information.  The equity compensation plan information presented under subparagraph (d) in Part III, Item 12 of this Form 10-K is incorporated herein by reference.

49

Performance Graph.  The following graph compares the cumulative total shareholder return on the Company’s Common Stock with the cumulative total return on the NASDAQ Composite Index and a peer group of the SNL All Thrift Index.  Total return assumes the reinvestment of all dividends and that the value of Common Stock and each index was $100 on January 26, 2011.

	Period Ending
Index	01/26/11		06/30/12		06/30/13		06/30/14		06/30/15		06/30/16
Anchor Bancorp	$	100.00	$	103.40	$	167.70	$	190.87	$	224.90	$	236.30
NASDAQ Composite	100.00		108.85		128.27		168.34		192.92		188.79
SNL Thrift Index	100.00		92.20		116.40		138.49		156.51		157.62

Source: SNL Financial LC, Charlottesville, VA

50

Item 6. Selected Financial Data

The following table sets forth certain information concerning our consolidated financial position and results of operations at and for the dates indicated and have been derived from our audited consolidated financial statements.  The information below is qualified in its entirety by the detailed information included elsewhere herein and should be read along with Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations” and Item 8., "Financial Statements and Supplementary Data” of this Form 10-K.

	At June 30,
	2016		2015		2014		2013		2012
FINANCIAL CONDITION DATA:	(In thousands)
Total assets	$	431,504	$	379,230	$	389,128	$	452,179	$	470,815
Securities	175		554		573		1,591		1,798
Mortgage-backed securities	29,781		36,628		47,109		57,012		54,098
Loans receivable, net (1)	347,351		283,444		281,526		277,454		287,755
Deposits	300,894		299,812		311,034		328,584		345,798
FHLB advances	62,000		10,000		17,500		64,900		64,900
Total equity	63,196		63,722		53,674		52,367		54,024

__________________

⁽¹⁾           Net of allowances for loan losses, loans in process and deferred loan fees.

	Year Ended June 30,
OPERATING DATA:	2016		2015			2014		2013			2012
	(In thousands)
Total interest income	$	17,524	$	16,886		$	17,789	$	19,727		$	22,464
Total interest expense	2,830		3,076			3,681		4,764			6,090
Net interest income before provision    for loan losses	14,694		13,810			14,108		14,963			16,374
Provision for loan losses	340		—			—		750			2,735
Net interest income after provision for loan losses	14,354		13,810			14,108		14,213			13,639
Noninterest income	4,205		4,503			4,075		4,924			6,674
Noninterest expense	18,025		16,807			17,760		19,392			22,025
Income (loss) before provision (benefit)    for income tax	534		1,506			423		(255		)	(1,712		)
Total provision (benefit) for income tax	39		(8,321		)	—		—			—
Net income (loss)	$	495	$	9,827		$	423	$	(255	)	$	(1,712	)

	At June 30,
OTHER DATA:	2016	2015	2014	2013	2012
Number of:
Real estate loans outstanding	1,840	1,907	1,997	1,733	1,950
Deposit accounts	19,275	20,588	21,834	23,366	25,411
Full-service offices	10	11	11	11	13

51

	At or For the Year Ended June 30,
KEY FINANCIAL RATIOS:	2016			2015			2014			2013			2012
Performance Ratios:
Return on assets (1)	0.13		%	0.43		%	0.10		%	(0.05		)%	(0.36		)%
Return on equity (2)	0.86			3.10			0.83			(0.49		)	(3.13		)
Equity to total assets ratio (3)	14.75			13.87			12.66			11.23			11.36
Interest rate spread (4)	3.91			3.83			3.68			3.35			3.43
Net interest margin (5)	4.12			4.05			3.87			3.53			3.65
Average interest-earning assets to average interest-bearing liabilities	126.8			124.7			119.2			115.9			116.4
Efficiency ratio (6)	95.4			91.8			97.7			97.5			95.6
Other operating expenses as a percent of average total assets	4.6			4.5			4.4			4.2			4.6
Book value per common share	$	25.12		$	25.69		$	21.70		$	21.25		$	21.98
Tangible book value per common share (7)	$	25.04		$	25.59		$	21.55		$	21.04		$	21.76
Anchor Bank Capital Ratios:
Tier I leverage	13.5			14.3			13.6			11.4			10.9
Common equity tier I capital (8)	14.7			16.2			N/A			N/A			N/A
Tier I risk-based	14.7			16.2			16.8			16.7			17.0
Total risk-based	15.7			17.4			18.0			18.8			18.2
Asset Quality Ratios:
Nonaccrual and 90 days or more past due loans as a percent of total loans	0.6			0.7			1.6			2.2			3.0
Nonperforming assets as a percent of total assets	0.6			0.7			2.5			2.7			3.3
Allowance for loan losses as a percent of total loans	1.1			1.3			1.6			1.8			2.4
Allowance for loan losses as a percent of nonperforming loans	191.6			185.0			98.1			83.6			80.4
Net charge-offs to average outstanding loans	0.1			0.3			0.2			0.9			0.9

_______________________

⁽¹⁾  Net income (loss) divided by average total assets.

⁽²⁾  Net income (loss) divided by average equity.

⁽³⁾  Average equity divided by average total assets.

⁽⁴⁾  Difference between weighted average yield on interest-earning assets and weighted average rate on interest-bearing liabilities.

⁽⁵⁾  Net interest income as a percentage of average interest-earning assets.

⁽⁶⁾  The efficiency ratio represents the ratio of noninterest expense divided by the sum of net interest income and noninterest income.

⁽⁷⁾  We calculate tangible book value per share, a non-GAAP financial measure, by dividing tangible common equity by the number of common shares outstanding. We calculate tangible common equity by excluding intangible assets from stockholders' equity. The Company believes that this measure is consistent with the capital treatment by our bank regulatory agencies, which excludes intangible assets from the calculation of risk-based capital ratios and presents this measure to facilitate comparison of the quality and composition of the Company's capital over time and in comparison to its competitors. This non-GAAP financial measure has inherent limitations, is not required to be uniformly applied and is not audited. Further, the non-GAAP financial measure should not be considered in isolation or as a substitute for book value per share or total stockholders' equity determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. Reconciliations of the GAAP and non-GAAP financial measures is presented below.

⁽⁸⁾  The common equity tier 1 capital ratio was required beginning the quarter ended March 31, 2015.

52

	June 30, 2016		June 30, 2015
	(In thousands)
Stockholders' equity	$	63,196	$	63,723
Less: intangible assets	206		235
Tangible common stockholders' equity	$	62,990	$	63,488
Total assets	$	431,504	$	379,230
Less: intangible assets	206		235
Tangible assets	$	431,298	$	378,995
Tangible common stockholders' equity	$	62,990	$	63,488
Common shares outstanding at end of period	2,515,803		2,480,865
Common stockholders' equity (book value) per share (GAAP)	$	25.12	$	25.69
Tangible common stockholders' equity (tangible book value) per share (non-GAAP)	$	25.04	$	25.59

53

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reviews our consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of our financial conditions and results of operations. The information in this section has been derived from the Consolidated Financial Statements and footnotes thereto, which are included in Item 8., "Financial Statements and Supplementary Data" of this Form 10-K. You should read the information in this section in conjunction with the business and financial information regarding us as provided in this Form 10-K. Unless otherwise indicated, the financial information presented in this section reflects the consolidated financial condition and results of operations of Anchor Bancorp and its subsidiary.

Overview

Anchor Bancorp is a bank holding company which primarily engages in the business activity of its subsidiary, Anchor Bank.  Anchor Bank is a community-based savings bank primarily serving Western Washington through our 10 full-service banking offices (including one Wal-Mart in-store location) located within Grays Harbor, Thurston, Lewis, Pierce, and Mason counties, and one loan production office located in King County, Washington. We are in the business of attracting deposits from the public and utilizing those deposits to originate loans. We offer a wide range of loan products to meet the demands of our customers. Historically, our principal lending activity has consisted of the origination of loans secured by first mortgages on owner-occupied, one-to-four family residences and loans for the construction of one-to-four family residences, as well as consumer loans, with an emphasis on home equity loans and lines of credit. Since 1990, we have been aggressively offering commercial real estate loans and multi-family loans primarily in Western Washington.

Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings.  Changes in levels of interest rates also affect our net interest income.  Additionally, to offset the impact of the current low interest rate environment, we are seeking other means of increasing interest income while controlling expenses. We intend to enhance the mix of our assets by further increasing our commercial business relationships which have higher risk-adjusted returns.  These commercial business relationships also typically help us generate lower cost deposits.  A secondary source of income is noninterest income, which includes gains on sales of assets, and revenue we receive from providing products and services. In recent years, our noninterest expense has exceeded our net interest income after provision for loan losses and we have relied primarily on fee income to supplement our net interest income.

Our operating expenses consist primarily of compensation and benefits, general and administrative, real estate owned expenses, FDIC insurance premiums, information technology, occupancy and equipment, deposit services and marketing expenses. Compensation and benefits expense consist primarily of the salaries and wages paid to our employees, payroll taxes, expenses for retirement and other employee benefits. Occupancy and equipment expenses, which are the fixed and variable costs of building and equipment, consist primarily of lease payments, taxes, depreciation charges, maintenance and costs of utilities.

Operating Strategy

Our focus is on managing our problem assets, increasing our higher-yielding assets (in particular commercial business loans), increasing our core deposit balances, reducing expenses, and retaining experienced employees with a commercial lending focus.  We seek to achieve these results by focusing on the following objectives:

Origination of commercial real estate loans. We plan to continue our focus on commercial real estate loans; we maintain a diversified portfolio the majority of these loans are secured by commercial income producing properties, including retail centers, warehouses, and office buildings located in our market areas.  At June 30, 2016 our commercial real estate portfolio totaled $149.5 million, or 42.5% of our total loan portfolio. We plan to increase our focus of owner-occupied commercial real estate which will bring a relationship that will potentially increase commercial business as well as deposits.

Focusing on Asset Quality.  We have aggressively sought to reduce our level of nonperforming assets through write-downs, collections, modifications and sales of nonperforming loans and the sale of properties once they become real estate owned.  We have taken proactive steps to resolve our nonperforming loans, including negotiating repayment plans, forbearances, loan modifications and loan extensions with our borrowers when appropriate, and accepting short payoffs on delinquent loans, particularly when such payoffs result in a smaller loss to us than foreclosure.  During the latter part of fiscal 2007, as part of management’s decision to reduce the risk profile of our loan portfolio, we implemented more stringent underwriting guidelines and procedures.  Prior to this time our underwriting emphasis with respect to commercial real estate, multi-family and construction loans focused heavily on the value of the collateral securing the loan, with less emphasis placed on the borrower’s debt servicing capacity or other credit factors.  Our revised underwriting guidelines place greater emphasis on the borrower’s credit, debt service

54

coverage and cash flows as well as on collateral appraisals.  Additionally, our policies with respect to loan extensions became more conservative than our previous policies, and now require that a review of all relevant factors, including loan terms, the condition of the security property, market changes and trends that may affect the security property and financial condition of the borrower conform to our revised underwriting guidelines and that the extension be in our best interest.

Improving our Earnings by Expanding Our Product Offerings.  We intend, subject to market conditions, to prudently increase the percentage of our assets consisting of higher-yielding commercial business loans, which offer higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations.  At June 30, 2016, our commercial business loans totaled $36.8 million, or 10.5% of our total loan portfolio.  We also intend to selectively add additional products to further diversify revenue sources and to capture more of each customer’s banking relationship by cross selling our loan and deposit products and additional services to our customers such as electronic invoicing and payroll services for our business customers.

Attracting Core Deposits and Other Deposit Products.  Our strategic focus is to emphasize total relationship banking with our customers to increase core deposits to internally fund our loan growth.  The Company has reduced its reliance on other wholesale funding sources, including FHLB advances and brokered deposits, by focusing on customer deposits. We believe that by focusing on customer relationships, our level of core deposits and locally-based retail certificates of deposit will increase.

Continued Expense Control.  Management has undertaken several initiatives to reduce noninterest expense and will continue to emphasize the identification of cost savings opportunities throughout all phases of our operations.  Our expense control measures have included eliminating Anchor Bank’s discretionary matching contribution to its 401(k) plan, reducing most marketing expenses and charitable contributions, cancelling certain projects and capital purchases, and reducing travel and entertainment expenditures.  In particular we have also reduced our number of full-time equivalent employees from 194 at September 30, 2008 to 107 at June 30, 2016, primarily by closing six in store Wal-Mart branch offices as a result of their failure to meet our required growth standards.  The reduction in personnel, cost savings and the closure of offices resulted in savings of approximately $1.8 million per year from the closure of these six offices. Notwithstanding these initiatives, our efforts to reduce noninterest expense were until recently adversely affected by significant costs associated with our REO and during the year ended June 30, 2016 by $1.8 million of stock-based compensation awards. As a result, noninterest expense increased by $1.2 million or 7.2% to $18.0 million during fiscal 2016 as compared to $16.8 million and $17.8 million during fiscal years 2015 and 2014, respectively.

Retaining Experienced Personnel with a Focus on Relationship Banking.  Our ability to continue to retain banking professionals with strong community relationships and significant knowledge of our markets will be a key to our success.  We believe that we enhance our market position and add profitable growth opportunities by focusing on retaining experienced bankers who are established in their communities.  We emphasize to our employees the importance of delivering exemplary customer service and seeking opportunities to build further relationships with our customers.  Our goal is to compete with other financial service providers by relying on the strength of our customer service and relationship banking approach.

Critical Accounting Policies

We use estimates and assumptions in our consolidated financial statements in accordance with generally accepted accounting principles. Management has identified several accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of our consolidated financial statements. These policies relate to the determination of the allowance for loan losses and the associated provision for loan losses, deferred income taxes and the associated income tax expense, as well as valuation of real estate owned. Management reviews the allowance for loan losses for adequacy on a monthly basis and establishes a provision for loan losses that it believes is sufficient for the loan portfolio growth expected and the loan quality of the existing portfolio. The carrying value of real estate owned is assessed on a quarterly basis. Income tax expense and deferred income taxes are calculated using an estimated tax rate and are based on management's understanding of our effective tax rate and the tax code.

Allowance for Loan Losses. Management recognizes that loan losses may occur over the life of a loan and that 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. Our Board of Directors and management assess the allowance for loan losses on a quarterly basis. The Executive Loan Committee analyzes several different factors including delinquency rates, charge-off rates and the changing risk profile of our loan portfolio, as well as local economic conditions such as unemployment rates, number of bankruptcies and vacancy rates of business and residential properties.

We believe that the accounting estimate related to the allowance for loan losses is a critical accounting estimate because it is highly susceptible to change from period to period, requiring management to make assumptions about future losses on loans. The impact

55

of a sudden large loss could deplete the allowance and require increased provisions to replenish the allowance, which would negatively affect earnings.

Our methodology for analyzing the allowance for loan losses consists of specific allocations on significant individual credits that meet the definition of impaired and a general allowance amount. The specific allowance component is determined when management believes that the collectability of a specifically identified large loan has been impaired and a loss is probable. The general allowance component relates to assets with no well-defined deficiency or weakness and takes into consideration loss that is inherent within the portfolio but has not been realized. The general allowance is determined by applying an expected loss percentage to various classes of loans with similar characteristics and classified loans that are not analyzed specifically for impairment. Because of the imprecision in calculating inherent and potential losses, the national and local economic conditions are also assessed to determine if the general allowance is adequate to cover losses.

The allowance is increased by the provision for loan losses, which is charged against current period operating results and decreased by the amount of actual loan charge-offs, net of recoveries.

Deferred Income Taxes. Deferred income taxes are reported for temporary differences between items of income or expense reported in the financial statements and those reported for income tax purposes. Deferred taxes are computed using the asset and liability method. Under this method, a deferred tax asset or liability is determined based on the enacted tax rates that will be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in an institution's income tax returns. Deferred tax assets are deferred tax consequences attributable to deductible temporary differences and carryforwards. After the deferred tax asset has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance. A valuation allowance is needed when, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. As required by GAAP, available evidence is weighted heavily on cumulative losses with less weight placed on future projected profitability. Realization of the deferred tax asset is dependent on whether there will be sufficient future taxable income of the appropriate character in the period during which deductible temporary differences reverse or within the carryback and carryforward periods available under tax law. Based upon the available evidence, we carried no valuation allowance at June 30, 2016. The tax provision for the period is equal to the net change in the net deferred tax asset from the beginning to the end of the period, less amounts applicable to the change in value related to securities available-for-sale. The effect on deferred taxes of a change in tax rates is recognized as income in the period that includes the enactment date. The primary differences between financial statement income and taxable income result from REO, deferred loan fees and costs, and loan loss reserves. Deferred income taxes do not include a liability for pre-1988 bad debt deductions allowed to thrift institutions that may be recaptured if the institution fails to qualify as a bank for income tax purposes in the future.

Real Estate Owned. Real estate acquired through foreclosure is transferred to the real estate owned asset classification at fair value estimated fair market value less estimated costs of disposal and subsequently carried at the lower of cost or market. Any impairment on the initial transfer is charged to the allowance for loan losses. Costs associated with real estate owned for maintenance, repair, property tax, etc., are expensed during the period incurred. Assets held in real estate owned are reviewed quarterly for potential impairment. When impairment is indicated the impairment is charged against current period operating results and netted against the real estate owned to reflect a net book value. At disposition any residual difference is either charged to current period earnings as a loss on sale or reflected as income in a gain on sale.

Comparison of Financial Condition at June 30, 2016 and June 30, 2015

General. Total assets increased $52.3 million, or 13.8%, to $431.5 million at June 30, 2016 from $379.2 million at June 30, 2015.  The increase in assets was primarily a result of a $63.9 million, or 22.6% increase in loans receivable, net, to $347.4 million at June 30, 2016 from $283.4 million at June 30, 2015. Partially offsetting this increase was a $6.1 million or 42.4% decline in cash and cash equivalents, a $5.9 million, or 20.0% decline in securities available-for-sale, comprised almost entirely of mortgage-backed securities, and a $1.3 million, or 17.4% decline in securities held-to-maturity. The decreases in securities were primarily the result of contractual principal repayments. In addition, Federal Home Loan Bank ("FHLB") stock increased $2.1 million, or 246.9% to $3.0 million as required to support our increase in FHLB advances which primarily funded our loan growth. Total liabilities increased $52.8 million or 16.7% to $368.3 million at June 30, 2016 compared to $315.5 million at June 30, 2015 primarily as the result of an increase in FHLB advances of $52.0 million or 520.0% to $62.0 million and a $1.1 million increase in deposits.

56

Assets.  For the year ended June 30, 2016, total assets increased $52.3 million. The following table details the increases and decreases in the composition of our assets from June 30, 2015 to June 30, 2016:

	Balance at June 30, 2016		Balance at June 30, 2015		Increase/(Decrease)
					Amount			Percent
	(Dollars in thousands)
Cash and cash equivalents	$	8,320	$	14,450	$	(6,130	)	(42.4	)%
Mortgage-backed securities, available-for-sale	23,490		29,130		(5,640		)	(19.4	)
Mortgage-backed securities, held-to-maturity	6,291		7,498		(1,207		)	(16.1	)
Loans receivable, net of allowance for loan losses	347,351		283,444		63,907			22.5
Real estate owned, net	373		797		(424		)	(53.2	)

Mortgage-backed securities available-for-sale decreased by $5.6 million or 19.4% to $23.5 million at June 30, 2016 from $29.1 million at June 30, 2015. Mortgage-backed securities held-to-maturity decreased $1.2 million or 16.1% to $6.3 million at June 30, 2016 from $7.5 million at June 30, 2015. The decreases in these portfolios were primarily the result of contractual principal repayments.

Loans receivable, net, increased $63.9 million, or 22.5%, to $347.4 million at June 30, 2016 from $283.4 million at June 30, 2015 as a result $141.4 million of new loan production and the purchase of $22.8 million of loans. During the year ended June 30, 2016, commercial real estate loans increased $21.2 million, or 16.5%, to $149.5 million at June 30, 2016 from $128.3 million at June 30, 2015. Commercial business loans increased $17.9 million, or 94.1%, to $36.9 million at June 30, 2016 from $19.0 million at June 30, 2015. The increase was primarily due to two commercial lines of credit. The first is secured by assignments of promissory notes by the underlying deeds of trust located in Washington, Oregon and Utah. The second are also promissory notes of deed of trust on construction loans located in King County. Multi-family loans increased $10.5 million, or 24.3%, to $53.7 million at June 30, 2016 from $43.2 million at June 30, 2015, primarily due to the purchase of $22.8 million in multi-family loans, partially offset by the reclassification of $14.4 million of multi-family loans to one-to-four family loans. The loan purchase consisted of 12 multi-family projects in King and Pierce counties. All properties met our underwriting standards and each property was independently visited and re-underwritten. Construction loans increased $10.1 million, or 85.8%, to $21.8 million at June 30, 2016 from $11.7 million at June 30, 2015. One-to-four family loans increased $3.3 million or 5.7%, to $61.2 million at June 30, 2016 from $57.9 million at June 30, 2015, due primarily to the reclassification discussed above. Land loans increased $2.8 million, or 68.1%, to $6.8 million at June 30, 2016 from $4.1 million at June 30, 2015. Consumer loans decreased $1.8 million, or 7.6%, to $22.1 million at June 30, 2016 from $23.9 million at June 30, 2015.

Real estate owned, net decreased $424,000, or 53.2% to $373,000 at June 30, 2016 from $797,000 at June 30, 2015 as a result of ongoing sales to reduce our nonperforming assets. The $424,000 decline was a result of REO sales of $915,000, net of impairments, and $83,000 of REO valuation write-downs partially offset by the transfer of loans to REO totaling $574,000.

Deposits.  Total deposits increased $1.1 million, or 0.4%, to $300.9 million at June 30, 2016 from $299.8 million at June 30, 2015. Our core deposits, which consist of all deposits other than certificates of deposit, increased by $9.0 million, or 5.2%, to $182.5 million at June 30, 2016 from $173.5 million at June 30, 2015. Partially offsetting this increase, certificates of deposit decreased $7.9 million, or 6.2%, to $118.4 million at June 30, 2016 from $126.3 million at June 30, 2015.

57

The following table details the changes in deposit accounts at the dates indicated:

	Balance at June 30, 2016		Balance at June 30, 2015		Increase/(Decrease)
					Amount			Percent
	(Dollars in thousands)
Noninterest-bearing demand deposits	$	50,781	$	44,719	$	6,062		13.6	%
Interest-bearing demand deposits	27,419		22,448		4,971			22.1
Money market accounts	59,270		63,916		(4,646		)	(7.3	)
Savings deposits	44,986		42,399		2,587			6.1
Certificates of deposit	118,438		126,330		(7,892		)	(6.2	)
Total deposit accounts	$	300,894	$	299,812	$	1,082		0.4	%

Borrowings. FHLB advances increased $52.0 million, or 520.0%, to $62.0 million at June 30, 2016 from $10.0 million at June 30, 2015, primarily funding our loan growth.

Equity.  Total stockholders' equity decreased $527,000, or 0.8%, to $63.2 million at June 30, 2016 from $63.7 million at June 30, 2015 primarily due to stock repurchases of $3.0 million. During the year we repurchased 127,500 shares of common stock at a weighted average price of $23.17 per share. This decrease was partially offset by $1.6 million of stock-based compensation under the Anchor Bancorp 2015 Equity Incentive Plan approved by shareholders on October 21, 2015 (the "Plan") and net income of $495,000. Accumulated other comprehensive loss decreased $162,000 to $549,000 as a result of unrealized valuation changes on investments available-for-sale.

Comparison of Operating Results for the Years Ended June 30, 2016 and June 30, 2015

General.  Net income for the year ended June 30, 2016 was $495,000 or $0.20 per diluted share compared to net income of $9.8 million or $3.97 per diluted share for the year ended June 30, 2015, which included an $8.3 million tax benefit related to the reversal of the valuation allowance on deferred tax assets ("DTA").

Net Interest Income.  Net interest income before the provision for loan losses increased $884,000, or 6.4%, to $14.7 million for the year ended June 30, 2016, from $13.8 million for the year ended June 30, 2015 due primarily to an increase in average loans receivable.

Our net interest margin increased seven basis points to 4.12% for the year ended June 30, 2016, from 4.05% for the prior fiscal year.  The improvement in our net interest margin compared to a year ago primarily reflects the increase in the average balance of loans receivable, net and a decline in our average cost of interest-bearing liabilities, in particular, FHLB advances. The average yield on interest-earning assets decreased five basis points to 4.91% for the year ended June 30, 2016 from 4.96% for the year ended June 30, 2015, primarily the result of the yield on loans receivable, net, decreasing 26 basis points. The average cost of interest-bearing liabilities decreased 12 basis points to 1.01% during the year ended June 30, 2016 from 1.13% during the year ended June 30, 2015.  This decrease primarily reflects the 171 basis point decline in the average cost of FHLB advances, a reduction in the average balance of certificates of deposit, as well as the low interest rate environment that persisted throughout the year. We expect further declines in our funding costs as our certificates of deposit mature and reprice to current market rates.  The average cost of certificates of deposit remained unchanged at 1.96%, during the year ended June 30, 2016 and for the same period of the prior year.  At June 30, 2016, $43.2 million of our certificates of deposit with a weighted average rate of 0.95% will mature within one year. Our net interest rate spread increased to 3.91% for the year ended June 30, 2016 as compared to 3.83% for the year ended June 30, 2015.

58

The following table sets forth the results of changes in our balance sheet and in interest rates to our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). Changes attributable to both rate and volume, which cannot be segregated, are allocated proportionately to the changes in rate and volume.

	Year Ended June 30, 2016 Compared to June 30, 2015
	Increase (Decrease) Due to
	Rate			Volume			Total
	(In thousands)
Interest-earning assets:
Loans receivable, net	$	(806	)	$	1,579		$	773
Mortgage-backed securities	21			(168		)	(147		)
Investment securities, FHLB and cash and cash equivalents	24			(12		)	12
Total net change in income on interest-earning assets	(761		)	1,399			638
Interest-bearing liabilities:
Savings deposits	1			4			5
Interest bearing demand deposits	(1		)	3			2
Money market accounts	14			(9		)	5
Certificates of deposit	—			(155		)	(155		)
FHLB advances	(442		)	339			(103		)
Total net change in expense on interest-bearing liabilities	(428		)	182			(246		)
Net change in net interest income	$	(333	)	$	1,217		$	884

Interest Income. Total interest income for the year ended June 30, 2016 increased $638,000, or 3.8%, to $17.5 million, from $16.9 million for the year ended June 30, 2015. The increase during the year was primarily attributable to the increase in the average balance of loans receivable, net. For the year ended June 30, 2016, average loans receivable, net, increased $27.9 million or 9.9% to $310.7 million from $282.8 million for the year ended June 30, 2015. The average yield on loans receivable, net, decreased 26 basis points to 5.40% for the year ended June 30, 2016 compared to 5.66% for the prior year. Average mortgage-backed securities declined $8.5 million during the year ended June 30, 2016 compared to the prior year. The average yield on mortgage-backed securities increased seven basis points to 2.05% for the year ended June 30, 2016 compared to 1.98% for the prior year. Average interest-earning assets increased $16.0 million, or 4.7 %, to $356.8 million for the year ended June 30, 2016 compared to $340.8 million for 2015.

59

The following table compares detailed average earning asset balances, associated yields, and resulting changes in interest income for the years ended June 30, 2016 and 2015:

	Year Ended June 30,
	2016				2015				Increase/(Decrease) in Interest and Dividend Income from 2015
	Average Balance		Yield		Average Balance		Yield
	(Dollars in thousands)
Loans receivable, net	$	310,740	5.40	%	$	282,841	5.66	%	$	773
Mortgage-backed securities	33,035		2.05		41,493		1.98		(147		)
Investment securities	318		5.35		562		4.98		(11		)
FHLB stock	1,491		1.48		5,544		0.13		15
Cash and cash equivalents	11,210		0.27		10,326		0.21		8
Total interest-earning assets	$	356,794	4.91	%	$	340,766	4.96	%	$	638

Interest Expense.  Interest expense decreased $246,000, or 8.0%, to $2.8 million for the year ended June 30, 2016 from $3.1 million for the year ended June 30, 2015.  The decrease during the year was primarily attributable to reductions in the average cost of FHLB advances and in the average balance of certificates of deposit. The average cost of FHLB advances decreased 171 basis points to 0.94% for the year ended June 30, 2016 compared to 2.65% for the prior year. The average balance of FHLB advances increased $12.8 million, or 97.8% to $25.8 million for the year ended June 30, 2016 compared to $13.1 million for last year. The average balance of certificates of deposit declined $7.9 million, or 6.1%, to $122.5 million for the year ended June 30, 2016 compared to $130.4 million for the for the year ended June 30, 2015. The average cost of certificates of deposit remained unchanged at 1.96% for the years ended June 30, 2016 and 2015.

The average balance of total interest-bearing liabilities increased $8.0 million, or 2.9%, to $281.3 million for the year ended June 30, 2016 from $273.3 million for the year ended June 30, 2015 primarily as a result of the increase in the average balance of FHLB advances.

In addition, as a result of the reduction in the average cost of FHLB advances and, to a lesser extent, general market rate decreases, the average cost of funds for total interest-bearing liabilities decreased 12 basis points to 1.01% for the year ended June 30, 2016 compared to 1.13% for the year ended June 30, 2015.

The following table details average balances, cost of funds and the change in interest expense for the years ended June 30, 2016 and 2015:

	Year Ended June 30,
	2016				2015				Increase/(Decrease) in Interest Expense from 2015
	Average Balance		Yield		Average Balance		Yield
	(Dollars in thousands)
Savings deposits	$	44,160	0.15	%	$	41,220	0.15	%	$	5
Interest-bearing demand deposits	26,844		0.04		20,355		0.04		2
Money market accounts	61,949		0.17		68,245		0.15		5
Certificates of deposit	122,528		1.96		130,428		1.96		(155		)
FHLB advances	25,816		0.94		13,049		2.65		(103		)
Total interest-bearing liabilities	$	281,297	1.01	%	$	273,297	1.13	%	$	(246	)

60

Provision for Loan Losses.  In connection with our analysis of the loan portfolio, management determined that a $340,000 provision for loan losses was required for the year ended June 30, 2016 compared to no provision for the year ended June 30, 2015, primarily reflecting loan growth. Loans charge-offs decreased to $957,000 for year ended June 30, 2016 as compared to $1.5 million for the last fiscal year.  The $957,000 of loans charged off during the fiscal year included $258,000 of one-to-four family mortgage loans, $225,000 of commercial real estate loans, $180,000 of home equity loans, $210,000 of direct consumer loans, including credit cards, and $84,000 of commercial business loans.  Nonperforming assets were $2.4 million or 0.6% of total assets at June 30, 2016, compared to $2.8 million, or 0.7% of total assets at June 30, 2015.  Total delinquent loans (past due 30 days or more), decreased $333,000, or 9.2% to $3.3 million at June 30, 2016 from $3.6 million at June 30, 2015. Nonperforming loans remained unchanged at $2.0 million at both June 30, 2016 and June 30, 2015. The ratio of nonperforming loans, consisting solely of nonaccrual loans, to total loans decreased to 0.6% at June 30, 2016 from 0.7% at June 30, 2015, reflecting the growth in the loan portfolio. Classified loans declined to $2.8 million at June 30, 2016 from $3.7 million a year ago. The allowance for loan losses of $3.8 million at June 30, 2016 represented 1.1% of loans receivable and 191.6% of nonperforming loans.

Management considers the allowance for loan losses at June 30, 2016 to be adequate to cover probable losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of our allowance for loan losses is subject to review by bank regulators, as part of the routine examination process, which may result in the establishment of additional reserves based upon their judgment of information available to them at the time of their examination.

The following table details activity and information related to the allowance for loan losses for the year ended June 30, 2016 and 2015:

	At or For the Year Ended June 30,
	2016			2015
	(Dollars in thousands)
Provision for loan losses	$	340		$	—
Net charge-offs	282			903
Allowance for loan losses	3,779			3,721
Allowance for losses as a percentage of total loans receivable at the end of this period	1.1		%	1.3		%
Nonaccrual and 90 days or more past due loans still accruing interest	$	1,972		$	2,011
Allowance for loan losses as a percentage of nonperforming loans at the end of the period	191.6		%	185.0		%
Nonaccrual and 90 days or more past due loans still accruing interest as a percentage of loans receivable at the end of the period	0.6		%	0.7		%
Total loans, gross and excluding loans held for sale	$	352,077		$	288,212

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, 2016 and June 30, 2015 there were 37 and 39 loans, respectively, with aggregate net principal balances of $8.8 million and $9.8 million, respectively, that we have identified as TDRs. At June 30, 2016 and June 30, 2015 there were $884,000 and $902,000, respectively, of TDRs included in nonperforming loans.

Noninterest Income.  Noninterest income decreased $298,000, or 6.6%, to $4.2 million for the year ended June 30, 2016 from $4.5 million for the year ended June 30, 2015.  The following table provides a detailed analysis of the changes in the components of noninterest income:

61

	Year Ended June 30,					Increase (Decrease)
	2016		2015			Amount			Percent
	(Dollars in thousands)
Deposit services fees	$	1,347	$	1,381		$	(34	)	(2.5	)%
Other deposit fees	721		735			(14		)	(1.9	)
Gain on sale of investments	—		47			(47		)	(100.0	)
Other loan fees	707		588			119			20.2
Gain (loss) on sale of loans	158		(15		)	173			(1,153.3	)
Increase in surrender value of life insurance investment	514		540			(26		)	(4.8	)
Gain on death benefit of life insurance investment, net	26		479			(453		)	(94.6	)
Other income	732		748			(16		)	(2.1	)
Total noninterest income	$	4,205	$	4,503		$	(298	)	(6.6	)%

Noninterest income decreased during the year ended June 30, 2016, primarily attributable to the receipt last year of $479,000 related to a former Anchor Bank executive's insurance death benefit partially offset by gain on sale of loans increasing to $158,000 due to an increase in loans originated for sale and by other loan fees increasing $119,000 from increased loan production.

Noninterest Expense.  Noninterest expense increased $1.2 million, or 7.2%, to $18.0 million for the year ended June 30, 2016 from $16.8 million for the year ended June 30, 2015.  The following table provides an analysis of the changes in the components of noninterest expense:

	At or For the Year Ended June 30,						Increase (Decrease)
	2016			2015			Amount			Percent
	(Dollars in thousands)
Compensation and benefits	$	9,708		$	8,003		$	1,705		21.3	%
General and administrative expenses	3,175			2,663			512			19.2
Real estate owned impairment	83			32			51			159.4
Real estate holding cost	63			267			(204		)	(76.4	)
FDIC insurance premium	264			342			(78		)	(22.8	)
Information technology	1,760			1,739			21			1.2
Occupancy and equipment	1,875			1,944			(69		)	(3.5	)
Deposit services	477			570			(93		)	(16.3	)
Marketing	674			710			(36		)	(5.1	)
Loss (gain) on sale of property, premises and equipment	4			820			(816		)	(99.5	)
Gain on sale of REO	(58		)	(283		)	225			(79.5	)
Total noninterest expense	$	18,025		$	16,807		$	1,218		7.2	%

Noninterest expense increased during the year ended June 30, 2016 primarily due to compensation benefits increasing $1.7 million, or 21.3%, from $8.0 million at June 30, 2015 to $9.7 million for the year ended June 30, 2016. The increase in compensation benefits was primarily due to $1.8 million of stock based compensation awarded under the Plan and general and administrative expenses increasing primarily due to proxy contest expenses of $391,000. Partially offsetting this increase was a decrease in loss on sale of premises and equipment of $816,000 from $820,000 in the previous year to $4,000 in the year ended June 30, 2016 primarily due to the $758,000 loss on sale of our Aberdeen Loan Center locations last year. REO holding costs decreased $204,000, or 76.4%, from $267,000 to $63,000 as compared to the same period in 2015, reflecting the REO portfolio containing more residential REO properties instead of commercial real estate REO properties which historically incur higher holding costs.

Our efficiency ratio, which is the percentage of noninterest expense to net interest income plus noninterest income, was 95.4% for the year ended June 30, 2016 compared to 91.8% for the year ended June 30, 2015. The increase in efficiency ratio was primarily

62

attributable to the increase in noninterest expense and decrease in noninterest income offsetting the increase in net interest income before the provision for loan losses. By definition, a lower efficiency ratio would be an indication that we are more efficiently utilizing resources to generate net interest income and other fee income.

Provision (benefit) for Income Taxes.  The Company had a $39,000 provision for income taxes for the year ended June 30, 2016 compared to an $8.3 million (benefit) for income taxes for the year ended June 30, 2015 due to the Bank's valuation allowance. At June 30, 2016, the Company had a DTA of $8.9 million which included $12.7 million for federal net operating loss carryforwards, which will begin to expire in 2031.

DTAs are deferred tax consequences attributable to deductible temporary differences and carryforwards.  After the DTA has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance.  A valuation allowance is needed when, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized.  As required by generally accepted accounting principles, available evidence is weighted heavily on cumulative losses with less weight placed on future projected profitability.  Realization of the DTA is dependent on whether there will be sufficient future taxable income of the appropriate character in the period during which deductible temporary differences reverse or within the carryback and carryforward periods available under tax law.  During fiscal 2015, the Company reversed its DTA valuation allowance related to the Company’s’ deferred tax assets as management deemed that it was no longer appropriate to carry a DTA valuation allowance as a result of changes in the factors considered by management when the Company initially established the valuation allowance. In reaching this determination, management considered, among other factors, the scheduled reversal of deferred tax assets and liabilities, taxes paid in carryback years, available tax planning strategies, the Company’s cumulative earnings during the past three years, including the Company’s recent financial performance, the improvement in the Company’s asset quality and financial condition, as well as projected earnings. As of June 30, 2016 and 2015, management deemed that a deferred tax asset valuation allowance related to the Company’s DTA was not necessary as compared to a valuation allowance of $8.5 million at June 30, 2014, respectively. See Note 14 of the Notes to the Consolidated Financial Statements included in Item 8., "Financial Statements and Supplementary Data" of this Form 10-K, for further discussion of the Company’s income taxes.

Comparison of Financial Condition at June 30, 2015 and June 30, 2014

General. Total assets decreased $9.9 million, or 2.5%, to $379.2 million at June 30, 2015 from $389.1 million at June 30, 2014.  Federal Home Loan Bank ("FHLB") stock decreased $5.2 million, or 85.9% to $853,000. The FHLB stock decreased due to the merger of the Seattle FHLB with the Des Moines FHLB. Our excess FHLB Seattle stock was redeemed upon the merger in June 2015. Securities available-for-sale decreased $9.4 million, or 24.0% and securities held-to-maturity decreased $1.1 million, or 13.1% from June 30, 2014. The decreases in securities were primarily the result of contractual principal repayments and the sale of five securities totaling $2.4 million resulting in a gain of $47,000. In addition, total real estate owned decreased $4.3 million, or 84.3%, to $797,000 at June 30, 2015 from $5.1 million at June 30, 2014.  These declines were partially offset by an increase in the deferred tax asset (“DTA”), net, of $8.3 million as the valuation allowance was reversed during the year due to the our return to profitability and our expectations of sustainable profitability for future periods. Total liabilities decreased $20.0 million or 5.9% to $315.5 million at June 30, 2015 compared to $335.5 million at June 30, 2014 primarily as the result of a decline in our interest bearing deposits, mostly certificates of deposit, of $14.8 million or 5.5% and a decrease in FHLB advances of $7.5 million or 42.9% to $10.0 million.

Assets.  For the year ended June 30, 2015, total assets decreased $9.9 million. The following table details the increases and decreases in the composition of our assets from June 30, 2014 to June 30, 2015:

	Balance at June 30, 2015		Balance at June 30, 2014		Increase (Decrease)
					Amount			Percent
	(Dollars in thousands)
Cash and cash equivalents	$	14,450	$	14,758	$	(308	)	(2.1	)%
Mortgage-backed securities, available-for-sale	29,130		38,471		(9,341		)	(24.3	)
Mortgage-backed securities, held-to-maturity	7,498		8,638		(1,140		)	(13.2	)
Loans receivable, net of allowance for loan losses	283,444		281,526		1,918			0.7
Real estate owned	797		5,067		(4,270		)	(84.3	)

From June 30, 2014 to June 30, 2015, cash and cash equivalents decreased $308,000.

63

Mortgage-backed securities available-for-sale decreased by $9.3 million or 24.3% to $29.1 million at June 30, 2015 from $38.5 million at June 30, 2014. Mortgage-backed securities held-to-maturity decreased $1.1 million or 13.2% to $7.5 million at June 30, 2015 from $8.6 million at June 30, 2014. The decreases in these portfolios were primarily the result of contractual principal repayments.

Loans receivable, net, increased $1.9 million or 0.7% to $283.4 million at June 30, 2015 from $281.5 million at June 30, 2014 as a result of new loan production exceeding principal reductions and loans transferred to REO. Commercial real estate loans increased $20.5 million or 19.0% to $128.3 million at June 30, 2015 from $107.8 million at June 30, 2014, primarily due to a $7.7 million and $5.7 million increase in retail and office properties, respectively. In addition, several commercial construction projects were completed and converted to permanent financing during the year. Commercial business loans increased $2.3 million or 13.4% to $19.0 million at June 30, 2015 from $16.7 million at June 30, 2014. Partially offsetting these increases were decreases in all other loan categories. Construction and land loans decreased $8.0 million, net, or 33.7% to $15.8 million at June 30, 2015 from $23.8 million at June 30, 2014. In addition, one-to-four family loans decreased $5.1 million or 8.0% to $57.9 million from $63.0 million at June 30, 2014. Multi-family loans decreased $4.3 million or 9.0% to $43.2 million at June 30, 2015 from $47.5 million at June 30, 2014. In addition, consumer loans decreased $4.4 million or 15.6% to $23.9 million at June 30, 2015 from $28.3 million at June 30, 2014 as consumers continue to reduce their debt. The demand for loans in our market area has been modest during the current economic recovery.

Real estate owned, net decreased $4.3 million, or 84.3% to $797,000 at June 30, 2015 from $5.1 million at June 30, 2014 as a result of ongoing sales to reduce our nonperforming assets. The $4.3 million decline was a result of REO sales of $6.5 million, net of impairments, and $32,000 of REO valuation write-downs partially offset by the transfer of loans to REO totaling $2.2 million as well as $27,000 of capital improvements to REO.

Deposits.  Deposits decreased $11.2 million, or 3.6%, to $299.8 million at June 30, 2015 from $311.0 million at June 30, 2014 primarily as a result of an $11.2 million or 8.3% decrease in certificates of deposit, partially offset by increases in savings deposits and non-interest bearing demand deposits. 

The following table details the changes in deposit accounts at the dates indicated:

	Balance at June 30, 2015		Balance at June 30, 2014		Increase (Decrease)
					Amount			Percent
	(Dollars in thousands)
Noninterest-bearing demand deposits	$	44,719	$	41,149	$	3,570		8.7	%
Interest-bearing demand deposits	22,448		22,771		(323		)	(1.4	)
Money market accounts	63,916		69,610		(5,694		)	(8.2	)
Savings deposits	42,399		39,693		2,706			6.8
Certificates of deposit	126,330		137,811		(11,481		)	(8.3	)
Total deposit accounts	$	299,812	$	311,034	$	(11,222	)	(3.6	)%

Borrowings. FHLB advances decreased $7.5 million, or 42.9%, to $10.0 million at June 30, 2015 from $17.5 million at June 30, 2014.  

Equity.  Total stockholders' equity increased $10.0 million or 18.7% to $63.7 million at June 30, 2015 from $53.7 million at June 30, 2014. The increase was primarily the result of net income of $9.8 million of which $8.3 million was from the reversal of our DTA valuation allowance and $1.5 million from operating income for year the ended June 30, 2015.

Comparison of Operating Results for the Years Ended June 30, 2015 and June 30, 2014

General.  Net income for the year ended June 30, 2015 was $9.8 million or $3.97 per diluted share compared to net income of $423,000 or $0.17 per diluted share for the year ended June 30, 2014.

64

Net Interest Income.   Net interest income before the provision for loan losses decreased $298,000, or 2.1%, to $13.8 million for the year ended June 30, 2015, from $14.1 million for the year ended June 30, 2014. For the year ended June 30, 2015, average loans receivable, net, increased $271,000 or 0.09% to $282.8 million from $282.6 million for the year ended June 30, 2014.

Our net interest margin increased 18 basis points to 4.05% for the year ended June 30, 2015, from 3.87% for the prior fiscal year.  The improvement in our net interest margin compared to a year ago reflects a significant reduction in the adverse effect of nonperforming assets and reductions in the cost of deposits and FHLB advances.  Our yield on earnings assets increased to 4.96% for the year ended June 30, 2015 from 4.88% for the year ended June 30, 2014.  Our funding costs have decreased to 1.13% during the year ended June 30, 2015 from 1.20% during the year ended June 30, 2014.  The declines reflect the low interest rate environment that has persisted throughout the year. We expect further declines in our funding costs as our certificates of deposit mature and reprice to current market rates.  The cost of certificates of deposit increased to 1.96%, during the year ended June 30, 2015 from 1.93% for the same period of the prior year.  At June 30, 2015, $40.4 million of our certificates of deposit with a weighted average rate of 0.67% will mature within one year. Our net interest rate spread increased to 3.83% for the year ended June 30, 2015 as compared to 3.68% for the year ended June 30, 2014.

The following table sets forth the results of changes in our balance sheet and in interest rates to our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). Changes attributable to both rate and volume, which cannot be segregated, are allocated proportionately to the changes in rate and volume.

	Year Ended June 30, 2015 Compared to June 30, 2014
	Increase (Decrease) Due to
	Rate			Volume			Total
	(In thousands)
Interest-earning assets:
Loans receivable, net	$	(728	)	$	16		$	(712	)
Mortgage-backed securities	51			(184		)	(133		)
Investment securities, FHLB and cash and cash equivalents	(4		)	(54		)	(58		)
Total net change in income on interest-earning assets	(681		)	(222		)	(903		)
Interest-bearing liabilities:
Savings deposits	—			4			4
Interest bearing demand deposits	—			—			—
Money market accounts	2			(14		)	(12		)
Certificates of deposit	46			(244		)	(198		)
FHLB advances	(28		)	(371		)	(399		)
Total net change in expense on interest-bearing liabilities	20			(625		)	(605		)
Net change in net interest income	$	(701	)	$	403		$	(298	)

Interest Income. Total interest income for the year ended June 30, 2015 decreased $903,000, or 5.1%, to $16.9 million, from $17.8 million for the year ended June 30, 2014. The decrease during the year was primarily attributable to the 26 basis point decline in the yield on loans compared to the prior fiscal year. In addition, the average balance of mortgage backed-securities decreased $9.9 million or 19.3% to $41.5 million from $51.4 million for the year ended June 30, 2014.

65

The following table compares detailed average earning asset balances, associated yields, and resulting changes in interest income for the years ended June 30, 2015 and 2014:

	Year Ended June 30,
	2015				2014				Increase/ (Decrease) in Interest Income from 2014
	Average Balance		Yield		Average Balance		Yield
	(Dollars in thousands)
Loans receivable, net	$	282,841	5.66	%	$	282,570	5.92	%	$	(712	)
Mortgage-backed securities	41,493		1.98		51,407		1.86	%	(133		)
Investment securities	562		4.98		920		5.00	%	(18		)
FHLB stock	5,544		0.13		6,179		—	%	1
Cash and cash equivalents	10,326		0.21		23,792		0.26	%	(41		)
Total interest-earning assets	$	340,766	4.96	%	$	364,868	4.88	%	$	(903	)

Interest Expense.  Interest expense decreased $605,000, or 16.4%, to $3.1 million for the year ended June 30, 2015 from $3.7 million for the year ended June 30, 2014 primarily due to a decline in our average interest bearing liabilities.  The average balance of total interest-bearing liabilities decreased $32.9 million, or 10.7%, to $273.3 million for the year ended June 30, 2015 from $306.2 million for the year ended June 30, 2014 primarily as a result of our managed decline in FHLB advances and certificates of deposit. In addition, as a result of general market rate decreases, the average cost of funds for total interest-bearing liabilities decreased seven basis points to 1.13% for the year ended June 30, 2015 compared to 1.20% for the year ended June 30, 2014.

The following table details average balances, cost of funds and the change in interest expense for the years ended June 30, 2015 and 2014:

	Year Ended June 30,
	2015				2014				Increase/(Decrease) in Interest Expense from 2014
	Average Balance		Yield		Average Balance		Yield
	(Dollars in thousands)
Savings deposits	$	41,220	0.15	%	$	38,610	0.15	%	$	4
Interest-bearing demand deposits	20,355		0.04		20,570		0.04	%	—
Money market accounts	68,245		0.15		77,886		0.14	%	(12		)
Certificates of deposit	130,428		1.96		143,080		1.93	%	(198		)
FHLB advances	13,049		2.65		26,015		2.86		(399		)
Total interest-bearing liabilities	$	273,297	1.13	%	$	306,161	1.20	%	$	(605	)

Provision for Loan Losses.  In connection with our analysis of the loan portfolio, management determined that no provision for loan losses was required for the years ended June 30, 2015 and 2014. No provision was required during these periods due to the stabilization of the general economy and real estate market, the decline in the level of nonperforming and classified loans, and the decrease in loan charge-offs during these periods. Loan charge-offs decreased to $1.5 million for year ended June 30, 2015 as compared to $2.4 million for the last fiscal year.  The $1.5 million of loans charged off during the fiscal year included $561,000 of one-to-four family mortgage loans, $159,000 of multi-family loans, $340,000 of commercial real estate loans, $239,000 of home equity loans, $112,000 of direct consumer loans, including credit cards, and $86,000 of commercial business loans.  Nonperforming assets were $2.8 million or 0.7% of total assets at June 30, 2015, compared to $9.8 million, or 2.5% of total assets at June 30, 2014.  Total delinquent loans (past due 30 days or more), decreased $3.9 million, or 52.0% to $3.6 million at June 30, 2015 from $7.5 million at June 30, 2014. Nonperforming loans decreased to $2.0 million at June 30, 2015 from $4.7 million at June 30, 2014. The ratio of nonperforming loans, which includes nonaccrual loans and loans which are 90 days or more

66

past due and still accruing interest, to total loans decreased to 0.7% at June 30, 2015 from 1.6% at June 30, 2014. Classified loans declined to $3.7 million at June 30, 2015 from $6.6 million a year ago. The allowance for loan losses of $3.7 million at June 30, 2015 represented 1.3% of loans receivable and 185.0% of nonperforming loans.

The following table details activity and information related to the allowance for loan losses for the year ended June 30, 2015 and 2014:

	At or For the Year Ended June 30,
	2015			2014
	(Dollars in thousands)
Provision for loan losses	$	—		$	—
Net charge-offs	903			523
Allowance for loan losses	3,721			4,624
Allowance for losses as a percentage of total loans receivable at the end of the period	1.3		%	1.6		%
Nonaccrual and 90 days or more past due loans still accruing interest	$	2,011		$	4,714
Allowance for loan losses as a percentage of nonperforming loans at the end of the period	185.0		%	98.1		%
Nonaccrual and 90 days or more past due loans still accruing interest as a percentage of loans receivable at the end of the period	0.7		%	1.6		%
Total loans	$	288,212		$	287,250

Noninterest Income. Noninterest income increased $428,000, or 10.5%, to $4.5 million for the year ended June 30, 2015 from $4.1 million for the year ended June 30, 2014.  The following table provides a detailed analysis of the changes in the components of noninterest income:

	Year Ended June 30,					Increase (Decrease)
	2015			2014		Amount			Percent
	(Dollars in thousands)
Deposit services fees	$	1,381		$	1,562	$	(181	)	(11.6	)%
Other deposit fees	735			790		(55		)	(7.0	)
Gain on sale of investments	47			—		47			—
Loan fees	588			657		(69		)	(10.5	)
Gain on sale of loans	(15		)	8		(23		)	(287.5	)
Bank owned life insurance	1,019			549		470			85.6
Other income	748			509		239			47.0
Total noninterest income	$	4,503		$	4,075	$	428		10.5	%

Noninterest income increased during the year ended June 30, 2015, primarily attributable to a $470,000 increase in bank owned life insurance, due to the receipt of $479,000 related to a former Anchor Bank executive's insurance death benefit. In addition, other income increased $239,000 primarily due to a large prepayment on a commercial real estate loan.

Noninterest Expense.  Noninterest expense decreased $953,000, or 5.4%, to $16.8 million for the year ended June 30, 2015 from $17.8 million for the year ended June 30, 2014.  The following table provides an analysis of the changes in the components of noninterest expense:

67

	At or For the Year Ended June 30,						Increase (Decrease)
	2015			2014			Amount			Percent
	(Dollars in thousands)
Compensation and benefits	$	8,003		$	8,100		$	(97	)	(1.2	)%
General and administrative expenses	2,663			3,086			(423		)	(13.7	)
Real estate owned reserve	32			1,090			(1,058		)	(97.1	)
Real estate holding costs	267			447			(180		)	(40.3	)
FDIC insurance premium	342			505			(163		)	(32.3	)
Information technology	1,739			1,710			29			1.7
Occupancy and equipment	1,944			1,833			111			6.1
Deposit services	570			725			(155		)	(21.4	)
Marketing	710			679			31			4.6
Loss on sale of property, premises and equipment	820			(8		)	828			(10,350.0	)
Net (gain) loss on sale of REO	(283		)	(407		)	124			(30.5	)
Total noninterest expense	$	16,807		$	17,760		$	(953	)	(5.4	)%

Noninterest expense decreased during the year ended June 30, 2015 primarily due to decreases in REO impairment expense and REO holding costs of $1.1 million and $180,000, respectively as compared to 2014, reflecting the stabilization in real estate prices in our market and the reduction in the number of REO properties held by us. In addition our general and administrative expenses decreased $423,000 or 13.7% during the year ended June 30, 2015 to $2.7 million from $3.1 million last year reflecting our focus on cost control. Partially offsetting these decreases was a $820,000 loss on sale of premises, primarily due to a $758,000 loss on sale of our Aberdeen Loan Center locations.

Our efficiency ratio, which is the percentage of noninterest expense to net interest income plus noninterest income, was 91.8% for the year ended June 30, 2015 compared to 97.7% for the year ended June 30, 2014. By definition, a lower efficiency ratio would be an indication that we are more efficiently utilizing resources to generate net interest income and other fee income.

Provision (benefit) for Income Taxes.  The Company had an $8.3 million benefit for income taxes for the year ended June 30, 2015 and no provision (benefit) for income taxes for the year ended June 30, 2014 due to the Bank's valuation allowance. At June 30, 2015, the Company had a DTA of $8.9 million which included $13.9 million for federal net operating loss carryforwards, which will begin to expire in 2031.

As of June 30, 2015, management deemed that a deferred tax asset valuation allowance related to the Company’s DTA was not necessary as compared to a valuation allowance of $8.5 million and $8.7 million at June 30, 2014 and 2013, respectively. See Note 14 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Form 10-K, for further discussion of the Company’s income taxes.

68

Average Balances, Interest and Average Yields/Cost

The following table sets forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin, and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using the average of weekly interest-earning assets and interest-bearing liabilities.  Noninterest-earning assets and noninterest-bearing liabilities have been computed on a monthly basis.

	Year Ended June 30,
	2016							2015							2014
	Average Balance (1)		Interest and  Dividends		Yield/ Cost			Average Balance (1)		Interest and  Dividends		Yield/ Cost			Average Balance (1)		Interest and  Dividends		Yield/ Cost
								(Dollars in thousands)
Interest-earning assets:
Loans receivable, net (1)	$	310,740	$	16,779	5.40		%	$	282,841	$	16,006	5.66		%	$	282,570	$	16,718	5.92		%
Mortgage-backed securities	33,035		676		2.05			41,493		823		1.98			51,407		956		1.86
Investment securities	318		17		5.35			562		28		4.98			920		46		5.00
FHLB stock	1,491		22		1.48			5,544		7		—			6,179		6		—
Cash and cash equivalents	11,210		30		0.27			10,326		22		0.21			23,792		63		0.26
Total interest-earning assets	356,794		17,524		4.91			340,766		16,886		4.96			364,868		17,789		4.88
Noninterest earning assets	31,849							36,521							39,789
Total average assets	$	388,643						$	377,287						$	404,657
Interest-bearing liabilities:
Savings deposits	44,160		67		0.15			41,220		62		0.15			38,610		58		0.15
Interest-bearing demand deposits	26,844		11		0.04			20,355		9		0.04			20,570		9		0.04		%
Money market accounts	61,949		105		0.17			68,245		100		0.15			77,886		112		0.14
Certificates of deposit	122,528		2,404		1.96			130,428		2,559		1.96			143,080		2,757		1.93
Total deposits	255,481		2,587		1.01			260,248		2,730		1.05			280,146		2,936		1.05
FHLB advances	25,816		243		0.94			13,049		346		2.65			26,015		745		2.86
Total interest-bearing liabilities	281,297		2,830		1.01			273,297		3,076		1.13			306,161		3,681		1.20
Noninterest-bearing liabilities	50,007							51,666							47,265
Total average liabilities	331,304							324,963							353,426
Average equity	57,339							52,324							51,231
Total liabilities and equity	$	388,643						$	377,287						$	404,657
Net interest income					$	14,694						$	13,810						$	14,108
Interest rate spread					3.91		%					3.83		%					3.68		%
Net interest margin					4.12		%					4.05		%					3.87		%
Ratio of average interest-earning assets to average interest-bearing liabilities					126.8		%					124.7		%					119.2		%

___________________

⁽¹⁾ Average loans receivable includes nonperforming loans and does not include net deferred loan fees.  

69

Yields Earned and Rates Paid

The following table sets forth (on a consolidated basis) for the periods and at the dates indicated, the weighted average yields earned on our assets, the weighted average interest rates paid on our liabilities, together with the net yield on interest-earning assets.

	At June 30, 2016		Year Ended June 30,
			2016		2015		2014
Weighted average yield on:
Loans receivable, net	4.95	%	5.40	%	5.66	%	5.92	%
Mortgage-backed securities	2.96		2.05		1.98		1.86
Investment securities	5.83		5.35		4.98		5.00
FHLB stock	0.75		1.48		0.13		0.10
Cash and cash equivalents	0.65		0.27		0.21		0.26
Total interest-earning assets	4.70		4.91		4.96		4.88
Weighted average rate paid on:
Savings accounts	0.15		0.15		0.15		0.15
Interest-bearing demand deposits	0.06		0.04		0.04		—
Money market accounts	0.24		0.17		0.15		0.14
Certificates of deposit	1.96		1.96		1.96		1.93
Total average deposits	1.06		1.01		1.05		1.05
FHLB advances	0.89		0.94		2.65		2.86
Total interest-bearing liabilities	0.83		1.01		1.13		1.20
Interest rate spread (spread between weighted average rate on all interest-earning assets and all interest-bearing liabilities)	3.87		3.91		3.83		3.68
Net interest margin (net interest income (expense) as a percentage of average interest-earning assets)	N/A		4.12		4.05		3.87

70

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on our net interest income. Information is provided with respect to: (1) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate); and (2) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes attributable to both rate and volume, which cannot be segregated, are allocated proportionately to the changes in rate and volume.

	Year Ended June 30, 2016 Compared to June 30, 2015 Increase (Decrease) Due to									Year Ended June 30, 2015 Compared to June 30, 2014 Increase (Decrease) Due to
	Rate			Volume			Total			Rate			Volume			Total
	(In thousands)
Interest-earning assets:
Loans receivable, net	$	(806	)	$	1,579		$	773		$	(728	)	$	16		$	(712	)
Mortgage-backed securities	21			(168		)	(147		)	51			(184		)	(133		)
Investment securities, FHLB stock and cash and cash equivalents	24			(12		)	12			(4		)	(54		)	(58		)
Total net change in income on interest-earning assets	$	(761	)	$	1,399		$	638		$	(681	)	$	(222	)	$	(903	)
Interest-bearing liabilities:
Savings accounts	$	1		$	4		$	5		$	—		$	4		$	4
Interest-bearing demand deposits	(1		)	3			2			—			—			—
Money market accounts	14			(9		)	5			2			(14		)	(12		)
Certificates of deposit	—			(155		)	(155		)	46			(244		)	(198		)
FHLB advances	(442		)	339			(103		)	(28		)	(371		)	(399		)
Total net change in expense on interest-bearing liabilities	$	(428	)	$	182		$	(246	)	$	20		$	(625	)	$	(605	)
Net change in net interest income	$	(333	)	$	1,217		$	884		$	(701	)	$	403		$	(298	)

Asset and Liability Management and Market Risk

General.  Our Board of Directors has established an asset and liability management policy to guide management in maximizing net interest rate spread by managing the differences in terms between interest-earning assets and interest-bearing liabilities while maintaining acceptable levels of liquidity, capital adequacy, interest rate sensitivity, changes in net interest income, credit risk and profitability. The policy includes the use of an Asset Liability Management Committee whose members include certain members of senior management. The Committee’s purpose is to communicate, coordinate and manage our asset/liability positions consistent with our business plan and Board-approved policies. The Asset Liability Management Committee meets monthly to review various areas including:

• economic conditions;

• interest rate outlook;

• asset/liability mix;

• interest rate risk sensitivity;

• change in net interest income;

• current market opportunities to promote specific products;

• historical financial results;

• projected financial results; and

• capital position.

The Committee also reviews current and projected liquidity needs monthly. As part of its procedures, the Asset Liability Management Committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution’s existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential change in market value of portfolio equity that is authorized by the Board of Directors.

71

Our Risk When Interest Rates Change.  The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Our loans generally have longer maturities than our deposits. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.  

In recent years, we primarily have utilized the following strategies in our efforts to manage interest rate risk:

• we have increased our originations of shorter term loans and particularly, home equity loans (limited recent originations) and commercial business loans;

• we have structured certain borrowings with maturities that match fund our loan portfolios; and

• we have sold our fixed rate single family loans to generate noninterest income as well as managing interest rate risk.

How We Measure the Risk of Interest Rate Changes.  We measure our interest rate sensitivity on a quarterly basis utilizing an internal model. Management uses various assumptions to evaluate the sensitivity of our operations to changes in interest rates. Although management believes these assumptions are reasonable, the interest rate sensitivity of our assets and liabilities on net interest income and the market value of portfolio equity could vary substantially if different assumptions were used or actual experience differs from such assumptions. The assumptions we use are based upon proprietary and market data and reflect historical results and current market conditions. These assumptions relate to interest rates, prepayments, deposit decay rates and the market value of certain assets under the various interest rate scenarios. An independent service was used to provide market rates of interest and certain interest rate assumptions to determine prepayments and maturities of loans, investments and borrowings and decay rates on deposits. Time deposits are modeled to reprice to market rates upon their stated maturities. We assumed that non-maturity deposits can be maintained with rate adjustments not directly proportionate to the change in market interest rates.

In the past, we have demonstrated that the tiering structure of our deposit accounts during changing rate environments results in relatively low volatility and less than market rate changes in our interest expense for deposits. Our deposit accounts are tiered by balance and rate, whereby higher balances within an account earn higher rates of interest. Therefore, deposits that are not very rate sensitive (generally, lower balance tiers) are separated from deposits that are rate sensitive (generally, higher balance tiers).

We generally have found that a number of our deposit accounts are less rate sensitive than others.  Thus, when interest rates increase, the interest rates paid on these deposit accounts do not require a proportionate increase in order for us to retain them.  These assumptions are based upon an analysis of our customer base, competitive factors and historical experience. The following table shows the change in our net portfolio value at June 30, 2016 that would occur upon an immediate change in interest rates based on our assumptions, but without giving effect to any steps that we might take to counteract that change. The net portfolio value is calculated based upon the present value of the discounted cash flows from assets and liabilities. The difference between the present value of assets and liabilities is the net portfolio value and represents the market value of equity for the given interest rate scenario. Net portfolio value is useful for determining, on a market value basis, how much equity changes in response to various interest rate scenarios. Large changes in net portfolio value reflect increased interest rate sensitivity and generally more volatile earnings streams.  

Basis Point Change in Rates	Net Portfolio Value						Net Portfolio as % of Portfolio Value of Assets				Market Value of Assets (4)
	Amount		$ Change (1)		% Change		NPV Ratio (2)		% Change (3)
	(Dollars in thousands)
300	$	60,405	$	1,146	1.93	%	15.27	%	1.07	%	$	395,488
200	60,448		1,189		2.01		15.01		0.80		402,773
100	59,970		711		1.20		14.63		0.42		409,872
Base	59,259		—		—		14.21		—		417,090
(100)	63,587		4,328		7.30		14.95		0.75		425,248
(200)	68,869		9,610		16.22		15.73		1.52		437,788

__________

⁽¹⁾  Represents the increase (decrease) in the estimated net portfolio value at the indicated change in interest rates compared to the net portfolio value assuming no change in interest rates.

⁽²⁾  Calculated as the net portfolio value divided by the market value of assets (“net portfolio value ratio”).

72

⁽³⁾  Calculated as the increase (decrease) in the net portfolio value ratio assuming the indicated change in interest rates over the estimated net portfolio value ratio assuming no change in interest rates.

⁽⁴⁾  Calculated based on the present value of the discounted cash flows from assets.  The market value of assets represents the value of assets under the various interest rate scenarios and reflects the sensitivity of those assets to interest rate changes.

The following table illustrates the change in net interest income that would occur in the event of an immediate change in interest rates at June 30, 2016, but without giving effect to any steps that might be taken to counter the effect of that change in interest rates.

Basis Point Change in Rates	Net Interest Income
	Amount		$ Change (1)			% Change
	(Dollars in thousands)
300	$	18,342	$	1,813		11.0	%
200	17,760		1,231			7.4
100	17,130		601			3.6
Base	16,529		—			—
(100)	15,644		(885		)	(5.4	)
(200)	14,760		(1,769		)	(10.7	)

⁽¹⁾  Represents the increase (decrease) of the estimated net interest income at the indicated change in interest rates compared to net interest income assuming no change in interest rates.

We use certain assumptions in assessing our interest rate risk. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates and the market values of certain assets under differing interest rate scenarios, among others.

As with any method of measuring interest rate risk, shortcomings are inherent in the method of analysis presented in the foregoing tables. For example, although assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in the market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in calculating the table.

73

The following table presents our interest sensitivity gap between interest-earning assets and interest-bearing liabilities at June 30, 2016.  These amounts are based on daily averages.

	Within Six Months			Over Six Months to One Year			Over 1 - 3 Years			Over 3 - 5 Years			Over 5 - 10 Years			Over 10 Years			Total
	(Dollars in thousands)
Interest-earning assets:
Loans	$	133,126		$	47,748		$	113,285		$	46,833		$	7,733		$	2,674		$	351,399
Investments and other interest bearing deposits	4,198			2,903			8,400			5,207			9,589			1,226			31,523
Life insurance investment, net	19,517			—			—			—			—			—			19,517
Total rate sensitive assets	156,841			50,651			121,685			52,040			17,322			3,900			402,439
Interest-bearing liabilities:
Deposits	150,084			22,050			76,100			31,408			23,620			—			303,262
Borrowings	19,500			5,000			30,000			7,500			—			—			62,000
Total rate sensitive liabilities	169,584			27,050			106,100			38,908			23,620			—			365,262
Excess (deficiency) of interest sensitivity assets over interest sensitivity liabilities	(12,743		)	23,601			15,585			13,132			(6,298		)	3,900			37,177
Cumulative excess (deficiency) of interest sensitivity assets	(12,743		)	10,858			26,443			39,575			33,277			37,177			—
Cumulative gap as a % of earning assets	(3.17		)%	2.70		%	6.57		%	9.83		%	8.27		%	9.24		%	—

Anchor Bank currently runs an internal model to simulate interest rate risk; the model in use is a Fiserv model which calculates interest-earning assets and liabilities using a monthly average.

Liquidity

We are required to have enough cash flow in order to maintain sufficient liquidity to ensure a safe and sound operation. Historically, we have maintained cash flow above the minimum level believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. On a monthly basis, we review and update cash flow projections to ensure that adequate liquidity is maintained.

Our primary sources of funds are from customer deposits, loan repayments, loan sales, investment payments, maturing securities and advances from the FHLB of Des Moines. These funds, together with retained earnings and equity, are used to make loans, acquire securities and other assets, and fund continuing operations. While maturities and the scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by the level of interest rates, economic conditions and competition.

We believe that our current liquidity position is sufficient to fund all of our existing commitments.  At June 30, 2016, the total approved loan origination commitments outstanding amounted to $14.1 million. At the same date, unused lines of credit were $64.6 million. At June 30, 2016, cash and cash equivalents was $8.3 million and securities available for sale totaled $23.7 million. The Bank also maintains advance lines of credit with FHLB Des Moines, Pacific Coast Bankers Bank and the Federal Reserve totaling $84.9 million.

For purposes of determining our liquidity position, we use the liquidity ratio, a regulatory measure of liquidity calculated as the total of net cash, short-term, and marketable assets divided by net deposits and short-term liabilities. Our Board of Directors has established a liquidity ratio target of 10%.  During the year ended June 30, 2016, our average liquidity ratio was 11.19%, which indicates we were slightly above the liquidity standard set by our Board. Management believes the Bank's current liquidity position is adequate to meet foreseeable short and long term liquidity requirements.

74

Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as overnight deposits or mortgage-backed securities.

We use our sources of funds primarily to meet ongoing commitments, to pay maturing certificates of deposit and savings withdrawals, to fund loan commitments and to maintain our portfolio of mortgage-backed securities and other securities.

Certificates of deposit scheduled to mature in one year or less at June 30, 2016 totaled $43.2 million. We had no brokered deposits at June 30, 2016. Management’s policy is to generally maintain deposit rates at levels that are competitive with other local financial institutions. Recently we have targeted certain deposit rates at a lower level as part of our efforts to reduce higher costing certificates of deposits as part of our overall capital and liquidity strategy. Based on historical experience, we believe that a significant portion of maturing deposits will remain with Anchor Bank. In addition, we had the ability at June 30, 2016 to borrow an additional $84.9 million from the FHLB of Des Moines. We also have a line of credit with the Federal Reserve Bank for $1.0 million which is collateralized with securities and a line of credit for $5.0 million with Pacific Coast Bankers Bank.

We measure our liquidity based on our ability to fund our assets and to meet liability obligations when they come due. Liquidity (and funding) risk occurs when funds cannot be raised at reasonable prices, or in a reasonable time frame, to meet our normal or unanticipated obligations. We regularly monitor the mix between our assets and our liabilities to manage effectively our liquidity and funding requirements.

Our primary source of funds is our deposits. When deposits are not available to provide the funds for our assets, we use alternative funding sources. These sources include, but are not limited to: cash management from the FHLB of Des Moines, wholesale funding, brokered deposits, federal funds purchased and dealer repurchase agreements, as well as other short-term alternatives. Alternatively, we may also liquidate assets to meet our funding needs.  On a monthly basis, we estimate our liquidity sources and needs for the coming three-month, six-month, and one-year time periods. Also, we determine funding concentrations and our need for sources of funds other than deposits. This information is used by our Asset Liability Management Committee in forecasting funding needs and investing opportunities.

The Company is a separate legal entity from the Bank and provides for its own liquidity to pay its operating expenses and other financial obligations. The Company's primary sources of income are dividends from the Bank, ESOP loan payments and ESOP loan interest income. During the year ended June 30, 2016, the Bank paid a $665,000 dividend to the Company. The payment is being used for the Company's general corporate purposes, including supporting the Company's ongoing operations and stock repurchases. At June 30, 2016, the Company (on an unconsolidated basis) had liquid assets of $2.4 million.

Contractual Obligations

Through the normal course of operations, we have entered into certain contractual obligations. Our obligations generally relate to funding of operations through deposits and borrowings as well as leases for premises. Lease terms generally cover a five-year period, with options to extend, and are non-cancelable.

At June 30, 2016, our scheduled maturities of contractual obligations were as follows:

	Within  1 Year		After 1 Year Through 3 Years		After 3 Years Through 5 Years		Beyond 5 Years		Total Balance
	(In thousands)
Certificates of deposit	$	43,241	$	60,376	$	14,771	$	50	$	118,438
FHLB advances	24,500		30,000		7,500		—		62,000
Operating leases	124		208		37		—		369
Other long-term liabilities (1)	178		479		344		2,204		3,205
Total contractual obligations	$	68,043	$	91,063	$	22,652	$	2,254	$	184,012

⁽¹⁾ Maximum payments related to our employee benefit plan, assuming all future vesting conditions are met. Additional information about the employee benefit plan is provided in Note 10 of the Notes to Consolidated Financial Statements included in Item 8., "Financial Statements and Supplementary Data" of this Form 10-K

75

Commitments and Off-Balance Sheet Arrangements

We are party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the financing needs of our customers. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans, and involve to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. Our maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Because some commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We use the same credit policies in making commitments as we do for on-balance sheet instruments. Collateral is not required to support commitments.

Undisbursed balances of loans closed include funds not disbursed but committed for construction projects. Unused lines of credit include funds not disbursed, but committed to, home equity, commercial and consumer lines of credit.

The following table summarizes our commitments and contingent liabilities with off-balance sheet risks as of June 30, 2016:

	Amount of Commitment Expiration - Per Period
	Total Amounts Committed (2)		Due in One Year
	(In thousands)
Commitments to originate loans (1)	$	14,130	$	14,130
Line of Credit
Fixed rate (3)	10,160		365
Adjustable rate	54,460		13,770
Undisbursed balance of loans closed	64,620		14,135
Total balance	78,750		28,265

⁽¹⁾ Interest rates on fixed rate loans range from 3.88% to17.99%.

⁽²⁾ At June 30, 2016 there were no reserves for unfunded commitments.

⁽³⁾ Includes standby letters of credit.

Capital

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a “well capitalized” institution in accordance with regulatory standards. Anchor Bank’s total regulatory capital was $59.9 million at June 30, 2016, or 13.9%, of total assets on that date. As of June 30, 2016, we exceeded all regulatory capital requirements to be considered well capitalized as of that date. Our regulatory capital ratios at June 30, 2016 were as follows: Tier 1 capital 13.5%; common equity Tier 1 capital (CET1)14.7%, Tier 1 (core) risk-based capital 14.7%; and total risk-based capital 15.7%. The regulatory capital requirements to be considered well capitalized are 5%, 6.5%, 8% and 10%, respectively.  We were “well capitalized” at June 30, 2016 based on financial statements prepared in accordance with generally accepted accounting principles in the United States and the general percentages in the regulatory guidelines, for federal regulatory purposes. Anchor Bancorp exceeded all regulatory capital requirements with Tier 1 Leverage Capital, CET1, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios of 14.4%, 15.7%, 15.7%, and 16.6%, respectively, as of June 30, 2016.

Impact of Inflation

The Consolidated Financial Statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. The primary impact of inflation is reflected in the increased cost of our operations. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the

76

same direction or to the same extent as the prices of goods and services. In a period of rapidly rising interest rates, the liquidity and maturity structures of our assets and liabilities are critical to the maintenance of acceptable performance levels.

The principal effect of inflation on earnings, as distinct from levels of interest rates, is in the area of noninterest expense. Expense items such as employee compensation, employee benefits and occupancy and equipment costs may be subject to increases as a result of inflation. An additional effect of inflation is the possible increase in dollar value of the collateral securing loans that we have made. Our management is unable to determine the extent, if any, to which properties securing loans have appreciated in dollar value due to inflation.

Recent Accounting Pronouncements

In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-14, Revenue from Contracts with Customers, deferring the effective date of the new revenue standard by one year. The standard also allows entities to choose to adopt the standard as of the original effective date. The FASB decided, based on its outreach to various stakeholders and the forthcoming amendments to the new revenue standard, that a deferral is necessary to provide adequate time to effectively implement the new revenue standard. The adoption of ASU No. 2015-14 is not expected to have a material impact on the Company's consolidated financial statements.

In August 2015, FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. The ASU provides guidance not previously included in ASU 2015-03 regarding debt issuance related to line-of-credit arrangements. The amendment in this ASU allows an entity to present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs over the term of the line-of-credit arrangement, regardless if there are any outstanding borrowings on the line-of-credit arrangement. This ASU was effective for fiscal years beginning after December 15, 2015. The adoption of ASU No. 2015-15 did not have a material impact on the Company's consolidated financial statements.

In September 2015, FASB issued ASU No. 2015-16, Business Combinations (Topic 805). The ASU simplifies the accounting for measurement period adjustments. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period when the adjustment amounts are determined. The acquirer is required to record in the same period's financial statements the effect on earnings from changes in depreciation, amortization, or other income effects resulting from the change to provisional amounts, calculated as if the accounting had been completed at the acquisition date. The acquirer must present separately on the income statement, or disclose in the notes, the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the provisional amount had been recognized at the acquisition date. This ASU was effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The adoption of ASU No. 2015-16 did not have a material impact on the Company's consolidated financial statements.

In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The ASU is part of the FASB simplification initiative aimed at reducing complexity in accounting standards. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. Importantly, the guidance does not change the existing requirement that only permits offsetting within a jurisdiction - that is, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. This ASU is effective for annual periods beginning after December 31, 2016 and interim periods within those annual periods. The adoption of ASU No. 2015-17 is not expected to have a material impact on the Company's consolidated financial statements.

In January 2016, 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 after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU No. 2016-01 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In February 2016, 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

77

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 Company is currently evaluating the provisions of ASU No. 2016-02 to determine any material impact the new standard will have on the Company's consolidated financial statements.

In March 2016, FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments in this ASU require entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the provisions of ASU No. 2016-08 to determine any material impact there may be on the Company's consolidated financial statements.

In March 2016, 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 is effective for annual and interim periods beginning after December 15, 2016. The adoption of ASU 2016-09 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations. The amendments in this ASU provide more detailed guidance on the revenue recognition standard including additional implementation guidance and examples of identifying performance obligations and licenses of intellectual property. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that year. The Company is currently evaluating the provisions of ASU No. 2016-10 to determine any material impact there may be on the Company's consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this ASU clarified several key areas of the revenue recognition standard including accessing collectability, presenting sales taxes and other similar taxes collected from customers, noncash consideration, contract modification at transitions, completed contracts at transition, and disclosing the accounting change in the period of adoption.The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that year. The Company is currently evaluating the provisions of ASU No. 2016-12 to determine any material impact there may be on the Company's consolidated financial statements.

In June 2016, 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 Dec. 15, 2019. The adoption of ASU No. 2016-13 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises principally from interest rate risk inherent in our lending, investing, deposit and borrowings activities. Management actively monitors and manages its interest rate risk exposure. In addition to other risks that we manage in the normal course of business, such as credit quality and liquidity, management considers interest rate risk to be a significant market risk that could have a potential material effect on our financial condition and result of operations. The information contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset and Liability Management and Market Risk” in this Form 10-K is incorporated herein by reference.

78

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements  Page

Report of Independent Registered Public Accounting Firm	80
Consolidated Statements of Financial Condition, June 30, 2016 and 2015	81
Consolidated Statements of Income For the Years      Ended June 30, 2016, 2015 and 2014	82
Consolidated Statements of Comprehensive Income For the Years      Ended June 30, 2016, 2015 and 2014	83
Consolidated Statements of Stockholders’ Equity For the Years      Ended June 30, 2016, 2015 and 2014	84
Consolidated Statements of Cash Flows For the Years      Ended June 30, 2016, 2015 and 2014	85
Notes to Consolidated Financial Statements	87

79

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Anchor Bancorp

We have audited the accompanying consolidated statements of financial condition of Anchor Bancorp (the Company) as of June 30, 2016 and 2015, and the related consolidated statements of income, comprehensive income(loss), stockholders’ equity, and cash flows for the three years in the period ended June 30, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Anchor Bancorp as of June 30, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2016, in conformity with accounting principles generally accepted in the United States of America.

/s/Moss Adams LLP

Everett, Washington

September 7, 2016

80

ANCHOR BANCORP

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)

	June 30,
	2016			2015
ASSETS
Cash and cash equivalents	$	8,320		$	14,450
Securities available-for-sale, at fair value, amortized cost of $23,550 and $29,696	23,665			29,565
Securities held-to-maturity, at amortized cost, fair value of $6,425 and $7,692	6,291			7,617
Loans held for sale	1,864			505
Loans receivable, net of allowance for loan losses of $3,779 and $3,721	347,351			283,444
Life insurance investment, net of surrender charges	19,515			19,001
Accrued interest receivable	1,182			1,069
Real estate owned, net	373			797
Federal Home Loan Bank  ("FHLB") stock, at cost	2,959			853
Property, premises, and equipment, at cost, less accumulated depreciation of $11,382 and $13,482	10,001			10,370
Deferred tax asset, net	8,870			8,867
Prepaid expenses and other assets	1,113			2,692
Total assets	$	431,504		$	379,230
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Noninterest-bearing	$	50,781		$	44,719
Interest-bearing	250,113			255,093
Total deposits	300,894			299,812
FHLB advances	62,000			10,000
Advance payments by borrowers for taxes and insurance	1,114			1,002
Supplemental Executive Retirement Plan liability	1,691			1,814
Accounts payable and other liabilities	2,609			2,880
Total liabilities	368,308			315,508
Commitments and Contingencies (Note 16)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value per share, authorized 5,000,000 shares; no shares issued or outstanding	—			—
Common stock, $0.01 par value per share, authorized 45,000,000 shares; 2,550,000 issued and 2,515,803 and 2,480,865 outstanding at June 30, 2016 and 2015, respectively	25			25
Additional paid-in capital	22,157			23,404
Retained earnings	42,235			41,740
Unearned Employee Stock Ownership Plan ("ESOP") shares	(672		)	(736		)
Accumulated other comprehensive loss, net of tax	(549		)	(711		)
Total stockholders’ equity	63,196			63,722
Total liabilities and stockholders’ equity	$	431,504		$	379,230

See accompanying notes to these consolidated financial statements.

81

ANCHOR BANCORP

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended June 30, 2016, 2015, and 2014

(Dollars in thousands, except per share data)

	Years Ended June 30,
	2016			2015				2014
Interest income:
Loans receivable, including fees	$	16,779		$	16,006			$	16,718
Securities	69			57				115
Mortgage-backed securities	676			823				956
Total interest income	17,524			16,886				17,789
Interest expense:
Deposits	2,587			2,730				2,936
FHLB advances	243			346				745
Total interest expense	2,830			3,076				3,681
Net interest income before provision for loan losses	14,694			13,810				14,108
Provision for loan losses	340			—				—
Net interest income after provision for loan losses	14,354			13,810				14,108
Noninterest income
Deposit service fees	1,347			1,381				1,562
Other deposit fees	721			735				790
Gain on sale of investments	—			47				—
Other loan fees	707			588				657
Gain (loss) on sale of loans	158			(15		)		8
Increase in cash surrender value of life insurance investment	514			540				549
Gain on death benefit of life insurance investment, net	26			479			479	—
Other income	732			748				509
Total noninterest income	4,205			4,503				4,075
Noninterest expense
Compensation and benefits	9,708			8,003				8,100
General and administrative expenses	3,175			2,663				3,086
Real estate owned impairment, net	83			32				1,090
Real estate owned holding costs	63			267				447
Federal Deposit Insurance Corporation ("FDIC") insurance premiums	264			342				505
Information technology	1,760			1,739				1,710
Occupancy and equipment	1,875			1,944				1,833
Deposit services	477			570				725
Marketing	674			710				679
Loss (gain) on sale of property, premises and equipment	4			820				(8		)
Gain on sale of real estate owned	(58		)	(283		)		(407		)
Total noninterest expense	18,025			16,807				17,760
Income before provision (benefit) for income taxes	534			1,506				423
Provision (benefit) for income taxes	39			(8,321		)		—
Net income	$	495		$	9,827			$	423
Basic earnings per share	$	0.20		$	3.97			$	0.17
Diluted earnings per share	$	0.20		$	3.97			$	0.17

See accompanying notes to these consolidated financial statements.

82

ANCHOR BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended June 30, 2016, 2015, and 2014

(Dollars in thousands, except share data)

	Years Ended June 30,
	2016		2015			2014
NET INCOME	$	495	$	9,827		$	423
OTHER COMPREHENSIVE INCOME, net of tax
Unrealized holding gain on available-for-sale securities during the period, net of tax benefit of $84, $9, and $0, respectively	162		96			761
Adjustment for realized gains included in net income	—		(47		)	—
Other comprehensive income, net of tax	162		49			761
COMPREHENSIVE INCOME	$	657	$	9,876		$	1,184

See accompanying notes to these consolidated financial statements.

83

ANCHOR BANCORP

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Years Ended June 30, 2016, 2015, and 2014

(Dollars in thousands, except share data)

	Shares		Common Stock		Additional Paid-in Capital			Retained Earnings		Unearned ESOP shares			Accumulated Other Comprehensive Income (Loss), net of tax			Total Stockholders’ Equity
Balance at June 30, 2013	2,550,000		$	25	$	23,229		$	31,490	$	(856	)	$	(1,521	)	$	52,367
Net income	—		—		—			423		—			—			423
Other comprehensive income net of tax	—		—		—			—		—			761			761
ESOP shares allocated	—		—		64			—		59			—			123
Balance at June 30, 2014	2,550,000		$	25	$	23,293		$	31,913	$	(797	)	$	(760	)	$	53,674
Net income	—		$	—	$	—		$	9,827	$	—		$	—		$	9,827
Other comprehensive income net of tax	—		—		—			—		—			49			49
ESOP shares allocated	—		—		111			—		61			—			172
Balance at June 30, 2015	2,550,000		$	25	$	23,404		$	41,740	$	(736	)	$	(711	)	$	63,722
Net income	—		$	—	$	—		$	495	$	—		$	—		$	495
Other comprehensive income net of tax	—		—		—			—		—			162			162
Repurchase and retirement of common stock	(127,500	)	—		(2,952		)	—		—			—			(2,952		)
Compensation related to restricted stock awards	—		—		1,822			—		—			—			1,822
Issuance of new shares related to stock award plan, net	97,903		—		(216		)	—		—			—			(216		)
Restricted stock forfeitures	(4,600	)	—		—			—		—			—			—
ESOP shares allocated	—		—		99			—		64			—			163
Balance at June 30, 2016	2,515,803		$	25	$	22,157		$	42,235	$	(672	)	$	(549	)	$	63,196

See accompanying notes to these consolidated financial statements.

84

ANCHOR BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended June 30, 2016, 2015, and 2014

(In thousands)

	Year Ended June 30,
	2016			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	495		$	9,827		$	423
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	650			665			608
Net amortization of premiums on securities	411			576			725
Provision for loan losses	340			—			—
ESOP expense	163			172			123
Real estate owned impairment	83			32			1,090
Deferred income taxes provision (benefit)	(87		)	148			—
Stock compensation expense	1,822			—			—
Increase in cash surrender value of life insurance investment	(514		)	(540		)	(549		)
Gain on death benefit of life insurance investment	(26		)	(479		)	—
(Gain) loss on sale of loans	(158		)	15			(8		)
Gain on sale of investments	—			(47		)	—
Originations of loans held for sale	(8,925		)	(1,572		)	(2,303		)
Proceeds from sale of loans held for sale	7,724			1,053			2,532
Loss (gain) on sale of property, premises, and equipment	4			820			(8		)
Gain on sale of real estate owned	(58		)	(283		)	(407		)
Changes in operating assets and liabilities:
Accrued interest receivable	(113		)	167			347
Prepaid expenses and other assets	1,579			370			4,129
Change in deferred tax asset reserve	—			(8,469		)	—
Supplemental Executive Retirement Plan ("SERP")	(123		)	99			12
Accounts payable and other liabilities	(271		)	(1,534		)	480
Net cash provided by operating activities	2,996			1,020			7,194
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of available-for-sale securities	250			2,335			995
Principal repayments on mortgage-backed securities available-for-sale	5,535			6,549			8,435
Principal repayments on mortgage-backed securities held-to-maturity	1,277			1,137			1,464
Loan originations, net of undisbursed loan proceeds and principal repayments	(64,796		)	(3,392		)	(9,569		)
Proceeds from sale of real estate owned	973			6,789			6,846
Capital improvements on real estate owned	—			(27		)	(591		)
Proceeds from sale of property, premises, and equipment, net	2			2			8
Purchase of fixed assets	(287		)	(1,303		)	(527		)
(Purchase) redemption of FHLB stock	(2,106		)	5,193			—
Net cash provided by investing activities	(59,152		)	17,283			7,061

85

ANCHOR BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For the Years Ended June 30, 2016, 2015, and 2014

(In thousands)

	Year Ended June 30,
	2016			2015			2014
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits	1,082			(11,222		)	(17,550		)
Net change in advance payments by borrowers for taxes and insurance	112			111			100
Proceeds from FHLB advances	103,000			36,110			—
Repayment of FHLB advances	(51,000		)	(43,610		)	(47,400		)
Repurchase and retirement of common stock	(2,952		)	—			—
Net share settlement of stock awards	(216		)	—			—
Net cash used for financing activities	$	50,026		$	(18,611	)	$	(64,850	)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(6,130		)	(308		)	(50,595		)
Beginning of period	14,450			14,758			65,353
End of period	$	8,320		$	14,450		$	14,758
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	2,789		$	3,119		$	3,732
Income taxes	$	126		$	—		$	—
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Noncash investing activities:
Net loans transferred to real estate owned	$	574		$	2,241		$	5,793
Unrealized holding gains on available-for-sale securities, net of tax	$	162		$	96		$	761
Transfer of receivable related to proceeds from death benefit to other assets	$	—		$	1,545		$	—

See accompanying notes to these consolidated financial statements.

86

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Note 1 - Organization and Summary of Significant Accounting Policies

General - Anchor Bancorp is a bank holding company which operates primarily through its subsidiary, Anchor Bank (the Bank) (collectively referred to as the "Company"). Anchor Bank is a community-based savings bank primarily serving Western Washington through its 10 full-service banking offices (including one Wal-Mart in-store location) located 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.

Segment Information - The Bank’s operations include commercial banking services, such as lending activities, deposit products, and other cash management services. The performance of the Bank is reviewed by the Board of Directors and Senior Management Committee. The Senior Management Committee, which is the senior decision-making group of the Bank, is composed of three members, including the President and Chief Executive Officer, the Executive Vice President, Chief Financial Officer, and Treasurer, and the Executive Vice President and Chief Lending Officer. The Company’s activities are considered to be a single industry segment for financial reporting purposes.

Financial statement presentation and use of estimates - The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and reporting practices applicable to the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, as of the date of the consolidated statements of financial condition, and revenues and expenses for the period. Actual results could differ from estimated amounts. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the valuation of real estate owned, impaired loans and deferred tax assets.

Principles of consolidation - The consolidated financial statements include the accounts of Anchor Bancorp and its wholly-owned subsidiary, Anchor Bank. All material intercompany accounts have been eliminated in the consolidation.

Subsequent events - The Company has evaluated events and transactions subsequent to June 30, 2016 for potential recognition or disclosure.

Cash and cash equivalents - For purposes of the consolidated statements of cash flows, the Company considers all deposits and funds in interest-bearing accounts with an original term to maturity of three months or less to be cash equivalents. The Bank maintains its cash in bank deposit accounts that, at times, may exceed the federally insured limits. The Bank has not experienced any losses in such accounts and evaluates the credit quality of these banks and financial institutions to mitigate its credit risk.

Restricted assets - Federal Reserve regulations require maintenance of certain minimum reserve balances on deposit with the Federal Reserve Bank of San Francisco ("FRB"). The amount required to be on deposit was $1.9 million and $1.4 million at June 30, 2016 and 2015, respectively. The Bank was in compliance with this requirement at June 30, 2016 and 2015.

Investment securities - Securities are classified as held-to-maturity when the Company has the ability and positive intent to hold them to maturity. Securities held-to-maturity are carried at cost, adjusted for amortization of premiums and accretion of discounts to maturity. Securities bought and held principally for the purpose of sale in the near term are classified as trading securities and are carried at fair value. There were no trading securities at June 30, 2016 and 2015. Securities not classified as trading or held-to-maturity are classified as available-for-sale. Unrealized holding gains and losses on securities available-for-sale are excluded from earnings and are reported net of tax as a separate component of equity until realized. These unrealized holding gains and losses, net of tax, are also included as a component of comprehensive income. Realized gains and losses are recorded on the trade date and are determined using the specific identification method. Amortization of premiums and accretion of discounts are recognized into interest income using the effective interest method over the period to maturity.

The Company evaluates securities for other-than-temporary impairment on a periodic basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and whether the Bank has the intent and ability to hold these securities or if it is likely that it will be required to sell the securities before their anticipated recovery. In analyzing an issuer’s financial condition, the Bank may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. If the Bank does not intend to sell the security and it is not likely it will be required to sell the security prior to recovery of its cost basis, the credit loss component of impairment is recognized in earnings and impairment associated with non-credit factors, such as

87

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

market liquidity, is recognized in other comprehensive income, net of tax. A credit loss is the difference between the cost basis of the security and the present value of cash flows expected to be collected, discounted at the security's effective interest rate at the date of acquisition. The cost basis of an other-than-temporarily impaired security is written down by the amount of impairment recognized in earnings. The new cost basis is not adjusted for subsequent recoveries in fair value. However, the difference between the new amortized cost basis and the cash flows expected to be collected is accreted as interest income. The total other-than-temporary impairment is presented in the consolidated statements of income with a reduction for the amount of other-than-temporary impairment that is recognized in other comprehensive income, if any.

Federal Home Loan Bank stock - The Bank’s investment in FHLB stock is carried at cost, which approximates fair value. As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances. At June 30, 2016 and 2015, the Bank’s minimum investment requirement was $3.0 million and $853,000, respectively. The Bank was in compliance with the FHLB minimum investment requirement at June 30, 2016 and 2015.

Management evaluates FHLB stock for impairment as needed. Management’s determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as (1) the significance of any decline in net assets of the FHLB as compared with the capital stock amount for the FHLB and the length of time this situation has persisted; (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; (3) the impact of legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB; and (4) the liquidity position of the FHLB. Based on its evaluation, management determined that there was no impairment of FHLB stock at June 30, 2016 and 2015, respectively.

Securitizations - The Bank historically has securitized and services interests in residential home loans. The Bank has securitized these loans through the Federal Home Loan Mortgage Corporation ("FHLMC"). Of the total serviced loan portfolio of $76.9 million and $81.1 million at June 30, 2016 and 2015, $20.4 million and $24.7 million, respectively, represent securitized loans. The loans have been sold without recourse, servicing retained. There were no new securitizations during the years ended June 30, 2016 and 2015. All principal, interest, late fees, and escrow payments are collected and remitted to the investor daily.

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of unamortized nonrefundable loan fees and related direct loan origination costs. Deferred net fees and costs are recognized in interest income over the loan term using a method that generally produces a level yield on the unpaid loan balance. Interest is accrued primarily on a simple interest basis.

Nonaccrual loans are those for which management has discontinued accrual of interest because there exists significant uncertainty as to the full and timely collection of either principal or interest or because such loans have become contractually past due 90 days with respect to principal or interest. When a loan is placed on nonaccrual, all previously accrued but uncollected interest is reversed against current-period interest income. All subsequent payments received are first applied to unpaid principal and then to unpaid interest. Interest income is accrued at such time as the loan is brought fully current as to both principal and interest, and, in management’s judgment, such loans are considered to be fully collectible.

Loans are considered impaired when the Bank 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.

Troubled debt restructured loans- A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider. These concessions may include interest rate reductions, principal forgiveness, extension of maturity date and other actions intended to minimize potential losses. Generally, a nonaccrual loan that is restructured remains on nonaccrual status for a period of six months to demonstrate that the borrower can meet the restructured terms. If the borrower's performance under the new terms is not reasonably assured, the loan remains classified as a nonaccrual loan.

88

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Allowance for loan losses - Key elements of the allowance for loan loss methodology include the specific loan loss reserve, the general loan loss reserve, and the unallocated reserve, individually described below.

The specific loan loss reserve is established for individually impaired loans when the discounted cash flow or collateral value of the impaired loan is lower than the carrying value of that loan. Restructured loans are accounted for as impaired loans.

The general loan loss reserve is calculated by applying a specific loss percentage factor to the various groups of loans by loan type, based upon historic loss experience, and adjusted based upon the risk grade attached to any loan or group of loans. This portion of the allowance may be further adjusted for qualitative and environmental conditions such as changes in lending policies and procedures; experience and ability of lending staff; concentrations of credit; national, regional, and local economic conditions; and other factors including levels and trends of delinquency.

The unallocated reserve recognizes the estimation risk associated with the mathematical calculations applied in both specific and general portions of the allowance for loan loss, together with the assumption risk relative to management’s assessment of the variables included in the qualitative and environmental factors.

The Bank maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on ongoing quarterly assessments of the probable estimated losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses, which is charged against current-period operating results and decreased by the amount of charge-offs, net of recoveries. Various regulatory agencies, as part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require management to make adjustments to the allowance using judgments available to them at the time of their examination.

Loans held-for-sale - Loans originated as held-for-sale are carried at the lower of cost or market value on an aggregate basis. Net unrealized losses, if any, are recognized through a valuation allowance by a charge to income. Nonrefundable fees and direct loan origination costs related to loans held-for-sale are deferred and recognized when the loans are sold.

Real estate owned - Real estate owned (REO) and other repossessed items consist of properties or assets acquired through or in lieu of foreclosure in full satisfaction of a loan receivable, and are recorded initially at fair value of the REO properties less estimated costs of disposal with any initial losses charged to the allowance for loan losses. Costs relating to development and improvement of the properties or assets are capitalized, while costs relating to holding the properties or assets are expensed. Valuations are periodically performed by management, and a charge to earnings is recorded if the recorded value of a property exceeds its estimated fair value.

Gains or losses at the time the property is sold are charged or credited to noninterest expense in the period in which they are realized. The amounts the Bank will ultimately recover from REO may differ substantially from the carrying value of the assets because of future market factors beyond the control of the Bank or because of changes in the Bank’s strategy for recovering its investments.

Life insurance investment - The Bank is the sole beneficiary of life insurance policies that are recorded at their cash surrender value, net of any surrender charges, and cover certain key executives of the Bank.

Transfers of financial assets - Transfers of financial asset, a group of financial assets, or a participating interest in a financial asset are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Mortgage servicing rights - Mortgage servicing rights are recorded as separate assets at fair value when mortgage loans are originated and subsequently sold or securitized (and held as available-for-sale securities) with servicing rights retained. Periodically, the Bank estimates the fair value of its mortgage servicing rights based upon observed market prices.

Mortgage servicing rights are amortized in proportion to, and over, the estimated period that net servicing income will be collected. The carrying value of mortgage servicing rights is periodically evaluated in relation to estimated future cash flows to be received, and such carrying value is adjusted for indicated impairments based on management’s best estimate of the remaining cash flows. The Bank has stratified its mortgage servicing rights based on whether the loan was sold or securitized and the interest rate of the underlying loans. The Bank uses the direct write-down method for mortgage servicing rights where the serviced loan has been paid off. The mortgage servicing asset was $206,000 and $235,000 at June 30, 2016 and 2015, respectively, and is included in

89

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

prepaid expenses and other assets in the consolidated statements of financial condition and is not considered material to the consolidated financial statements.

Property, premises, and equipment - Property, premises, and equipment are stated at cost less accumulated depreciation. The depreciation charged is computed on the straight-line method over estimated useful lives as follows:

Buildings	40 years
Furniture and equipment	5-10 years
Improvements	10 years
Computer equipment	3 years

Income taxes-The provision for income taxes includes current and deferred income tax expense on net income adjusted for permanent and temporary differences such as interest income on state and municipal securities and BOLI. Deferred tax assets and liabilities are recognized for the expected future tax consequences of existing temporary differences between the financial reporting and tax reporting basis of assets and liabilities using enacted tax laws and rates. 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. On a quarterly basis, management evaluates deferred tax assets to determine if these tax benefits are expected to be realized in future periods. This determination is based on facts and circumstances, including the Company's current and future tax outlook. To the extent a deferred tax asset is no longer considered “more likely than not” to be realized, a valuation allowance is established.

Marketing costs - The Company expenses marketing costs as they are incurred. Total marketing expenses were $674,000, $710,000, and $679,000 for the years ended June 30, 2016, 2015, and 2014, respectively.

Financial instruments - In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received.

Employee Stock Ownership Plan (ESOP) - The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of stockholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.

Earnings Per Share (EPS) - Basic EPS is computed by dividing net income or (loss) by the weighted-average number of common shares outstanding during the period. As ESOP shares are committed to be released they become outstanding for EPS calculation purposes. ESOP shares not committed to be released are not considered outstanding. The basic EPS calculation excludes the dilutive effect of all common stock equivalents. 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 (loss) per share reflects the weighted-average potential dilution that could occur if all potentially dilutive securities or other commitments to issue common stock were exercised or converted into common stock using the treasury stock method.

Comprehensive income - Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale investments, are reported as a separate component of stockholders' equity.

Fair value - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair values. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Bank’s estimates for market assumptions.

90

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Recently issued accounting pronouncements - In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-14, Revenue from Contracts with Customers, deferring the effective date of the new revenue standard by one year. The standard also allows entities to choose to adopt the standard as of the original effective date. The FASB decided, based on its outreach to various stakeholders and the forthcoming amendments to the new revenue standard, that a deferral is necessary to provide adequate time to effectively implement the new revenue standard. The adoption of ASU No. 2015-14 is not expected to have a material impact on the Company's consolidated financial statements.

In August 2015, FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. The ASU provides guidance not previously included in ASU 2015-03 regarding debt issuance related to line-of-credit arrangements. The amendment in this ASU allows an entity to present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs over the term of the line-of-credit arrangement, regardless if there are any outstanding borrowings on the line-of-credit arrangement. This ASU was effective for fiscal years beginning after December 15, 2015. The adoption of ASU No. 2015-15 did not have a material impact on the Company's consolidated financial statements.

In September 2015, FASB issued ASU No. 2015-16, Business Combinations (Topic 805). The ASU simplifies the accounting for measurement period adjustments. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period when the adjustment amounts are determined. The acquirer is required to record in the same period's financial statements the effect on earnings from changes in depreciation, amortization, or other income effects resulting from the change to provisional amounts, calculated as if the accounting had been completed at the acquisition date. The acquirer must present separately on the income statement, or disclose in the notes, the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the provisional amount had been recognized at the acquisition date. This ASU was effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The adoption of ASU No. 2015-16 did not have a material impact on the Company's consolidated financial statements.

In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The ASU is part of the FASB simplification initiative aimed at reducing complexity in accounting standards. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. Importantly, the guidance does not change the existing requirement that only permits offsetting within a jurisdiction - that is, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. This ASU is effective for annual periods beginning after December 31, 2016 and interim periods within those annual periods. The adoption of ASU No. 2015-17 is not expected to have a material impact on the Company's consolidated financial statements.

In January 2016, 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 after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU No. 2016-01 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In February 2016, 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 Company is currently evaluating the provisions of ASU No. 2016-02 to determine any material impact the new standard will have on the Company's consolidated financial statements.

91

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

In March 2016, FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments in this ASU require entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the provisions of ASU No. 2016-08 to determine any material impact there may be on the Company's consolidated financial statements.

In March 2016, 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 is effective for annual and interim periods beginning after December 15, 2016. The adoption of ASU 2016-09 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations. The amendments in this ASU provide more detailed guidance on the revenue recognition standard including additional implementation guidance and examples of identifying performance obligations and licenses of intellectual property. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that year. The Company is currently evaluating the provisions of ASU No. 2016-10 to determine any material impact there may be on the Company's consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this ASU clarified several key areas of the revenue recognition standard including accessing collectability, presenting sales taxes and other similar taxes collected from customers, noncash consideration, contract modification at transitions, completed contracts at transition, and disclosing the accounting change in the period of adoption.The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that year. The Company is currently evaluating the provisions of ASU No. 2016-12 to determine any material impact there may be on the Company's consolidated financial statements.

In June 2016, 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. The adoption of ASU No. 2016-13 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

92

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Note 2 - Securities

The amortized cost and estimated fair market values of investment securities were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2016
Securities available-for-sale
Municipal bonds	$	175	$	—	$	—		$	175
Mortgage-backed securities:
FHLMC (1)	9,442		161		(44		)	9,559
FNMA (2)	13,199		67		(62		)	13,204
GNMA (3)	734		—		(7		)	727
	$	23,550	$	228	$	(113	)	$	23,665
Securities held-to-maturity
Mortgage-backed securities:
FHLMC (1)	2,793		72		(20		)	2,845
FNMA (2)	1,513		103		(3		)	1,613
GNMA (3)	1,985		5		(23		)	1,967
	$	6,291	$	180	$	(46	)	$	6,425

⁽¹⁾ Federal Home Loan Mortgage Corporation (Freddie Mac)

⁽²⁾ Federal National Mortgage Association (Fannie Mae)

⁽³⁾ Government National Mortgage Association (Ginnie Mae)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Securities available-for-sale
Municipal bonds	$	434	$	1	$	—		$	435
Mortgage-backed securities:
FHLMC	11,780		134		(123		)	11,791
FNMA	16,534		70		(196		)	16,408
GNMA	948		—		(17		)	931
	$	29,696	$	205	$	(336	)	$	29,565
Securities held-to-maturity
Municipal bonds	$	119	$	—	$	—		$	119
Mortgage-backed securities:
FHLMC	3,367		95		(56		)	3,406
FNMA	1,858		124		(22		)	1,960
GNMA	2,273		—		(66		)	2,207
	$	7,617	$	219	$	(144	)	$	7,692

There were 24 and 30 securities in an unrealized loss position at June 30, 2016 and June 30, 2015, respectively. The unrealized losses on investments in debt securities relate principally to the general change in interest rates in changing market conditions 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 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 June 30, 2016 and 2015 were as follows:

93

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016
Securities available-for-sale
Mortgage-backed securities:
FHLMC	$	710	$	(5	)	$	4,031	$	(39	)	$	4,741	$	(44	)
FNMA	855		(1		)	5,900		(61		)	6,755		(62		)
GNMA	—		—			727		(7		)	727		(7		)
	$	1,565	$	(6	)	$	10,658	$	(107	)	$	12,223	$	(113	)

	Less Than 12 Months				12 Months or Longer					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	—	$	—	$	1,973	$	(20	)	$	1,973	$	(20	)
FNMA	—		—		684		(3		)	684		(3		)
GNMA	—		—		989		(23		)	989		(23		)
	$	—	$	—	$	3,646	$	(46	)	$	3,646	$	(46	)

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2015
Securities available-for-sale
Mortgage-backed securities:
FHLMC	$	747	$	(1	)	$	5,404	$	(122	)	$	6,151	$	(123	)
FNMA	3,105		(45		)	6,898		(151		)	10,003		(196		)
GNMA	—		—			931		(17		)	931		(17		)
	$	3,852	$	(46	)	$	13,233	$	(290	)	$	17,085	$	(336	)

	Less Than 12 Months				12 Months or Longer					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2015
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	—	$	—	$	2,299	$	(56	)	$	2,299	$	(56	)
FNMA	—		—		772		(22		)	772		(22		)
GNMA	—		—		2,207		(66		)	2,207		(66		)
	$	—	$	—	$	5,278	$	(144	)	$	5,278	$	(144	)

94

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Contractual maturities of securities at June 30, 2016 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.

	Amortized Cost		Fair Value
June 30, 2016
Securities available-for-sale
Municipal bonds:
Due after ten years	$	175	$	175
Mortgage-backed securities:
FHLMC	9,442		9,559
FNMA	13,199		13,204
GNMA	734		727
	$	23,550	$	23,665
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	2,793	$	2,845
FNMA	1,513		1,613
GNMA	1,985		1,967
	$	6,291	$	6,425

Sales, maturities, and calls of securities for the years presented are summarized as follows:

	Year Ended June 30,
	2016		2015			2014
Proceeds from sales	$	—	$	2,355		$	—
Proceeds from maturities and calls	250		—			995
Gross realized gains	—		65			—
Gross realized losses	—		(18		)	—

Pledged securities at the dates indicated are summarized as follows:

	June 30, 2016				June 30, 2015
Pledged to secure:	Book Value		Fair Value		Book Value		Fair Value
Certain public deposits	$	12,575	$	12,719	$	12,184	$	12,189
FHLB borrowings	1,302		1,358		1,727		1,788
Federal Reserve borrowing line	973		978		1,001		990

95

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Note 3 - Loans Receivable

Loans receivable consisted of the following at the dates indicated:

	June 30,
	2016		2015
Real estate:
One-to-four family	$	61,230	$	57,944
Multi-family	53,742		43,249
Commercial	149,527		128,306
Construction	21,793		11,731
Land	6,839		4,069
Total real estate	293,131		245,299
Consumer:
Home equity	16,599		17,604
Credit cards	2,969		3,289
Automobile	597		686
Other consumer	1,933		2,347
Total consumer	22,098		23,926
Commercial business	36,848		18,987
Total loans	352,077		288,212
Less:
Deferred loan fees and loan premiums, net	947		1,047
Allowance for loan losses	3,779		3,721
Loans receivable, net	$	347,351	$	283,444

A summary of activity in the allowance for loan losses follows:

	June 30,
	2016			2015			2014
Beginning balance	$	3,721		$	4,624		$	5,147
Provision for losses	340			—			—
Charge-offs	(957		)	(1,497		)	(2,434		)
Recoveries	675			594			1,911
Ending balance	$	3,779		$	3,721		$	4,624

96

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 2016:

	One-to- four family			Multi- family		Commercial real estate			Construction			Land		Consumer (1)			Commercial business			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,113		$	95	$	262		$	247		$	75	$	445		$	1,405		$	79		$	3,721
Provision (benefit) for loan losses	(251		)	353		1,295			(325		)	—		343			(996		)	(79		)	340
Charge-offs	(258		)	—		(225		)	—			—		(390		)	(84		)	—			(957		)
Recoveries	194			6		1			349			—		118			7			—			675
Ending balance	$	798		$	454	$	1,333		$	271		$	75	$	516		$	332		$	—		$	3,779

⁽¹⁾  Consumer loans include home equity, credit cards, auto, 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 year ended June 30, 2015:

	One-to- four family			Multi- family			Commercial real estate			Construction			Land		Consumer (1)			Commercial business			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,550		$	229		$	682		$	190		$	74	$	587		$	1,231		$	81		$	4,624
Provision (benefit) for loan losses	(5		)	25			(80		)	(197		)	1		94			164			(2		)	—
Charge-offs	(561		)	(159		)	(340		)	—			—		(351		)	(86		)	—			(1,497		)
Recoveries	129			—			—			254			—		115			96			—			594
Ending balance	$	1,113		$	95		$	262		$	247		$	75	$	445		$	1,405		$	79		$	3,721

⁽¹⁾  Consumer loans include home equity, credit cards, auto, 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 year ended June 30, 2014:

	One-to- four family			Multi- family		Commercial real estate			Construction			Land			Consumer (1)			Commercial business			Unallocated		Total
Allowance for loan losses:
Beginning balance	$	1,393		$	156	$	671		$	356		$	531		$	817		$	1,172		$	51	$	5,147
Provision (benefit) for loan losses	665			73		(558		)	(540		)	(457		)	508			279			30		—
Charge-offs	(897		)	—		(403		)	—			—			(876		)	(258		)	—		(2,434		)
Recoveries	389			—		972			374			—			138			38			—		1,911
Ending balance	$	1,550		$	229	$	682		$	190		$	74		$	587		$	1,231		$	81	$	4,624

⁽¹⁾  Consumer loans include home equity, credit cards, auto, and other consumer loans. The only consumer loans with impairment are home equity loans.

97

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2016:

	Recorded Investments		Unpaid Principal Balance		Related Allowance
With no allowance recorded
One-to-four family	$	2,049	$	2,269	$	—
Commercial real estate	319		547		—
Land	174		188		—
Home equity	60		62		—
Commercial business	64		125		—
With an allowance recorded
One-to-four family	7,234		7,284		419
Land	316		316		4
Home equity	367		367		145
Commercial business	124		138		22
Total
One-to-four family	9,283		9,553		419
Commercial real estate	319		547		—
Land	490		504		4
Home equity	427		429		145
Commercial business	188		263		22
Total	$	10,707	$	11,296	$	590

98

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2015:

	Recorded Investments		Unpaid Principal Balance		Related Allowance
With no allowance recorded
One-to-four family	$	1,557	$	1,860	$	—
Land	231		245		—
Home equity	64		65		—
Other consumer	31		32		—
Commercial business	64		126		—
With an allowance recorded
One-to-four family	7,716		7,743		500
Land	408		408		3
Home equity	212		212		26
Commercial business	868		868		211
Total
One-to-four family	9,273		9,603		500
Land	639		653		3
Home equity	276		277		26
Other consumer	31		32		—
Commercial business	932		994		211
Total	$	11,151	$	11,559	$	740

99

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2016:

	Year Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	1,913	$	62
Commercial real estate	—		15
Land	210		11
Home equity	63		3
Other consumer	16		—
Commercial business	95		9
With an allowance recorded
One-to-four family	7,500		310
Land	362		22
Home equity	290		19
Commercial business	503		2
Total
One-to-four family	9,413		372
Commercial real estate	—		15
Land	572		33
Home equity	353		22
Other consumer	16		—
Commercial business	598		11
Total	$	10,952	$	453

100

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2015:

	Year Ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	3,802	$	67
Multi-family	1,132		—
Commercial real estate	984		—
Land	355		12
Home equity	153		3
Other consumer	—		1
Commercial business	723		8
With an allowance recorded
One-to-four family	7,989		308
Land	765		25
Home equity	325		10
Commercial business	469		36
Total
One-to-four family	11,791		375
Multi-family	1,132		—
Commercial real estate	984		—
Land	1,120		37
Home equity	478		13
Other consumer	—		1
Commercial business	1,192		44
Total	$	16,697	$	470

101

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2014:

	Year Ended June 30, 2014
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	4,199	$	97
Multi-family	1,132		—
Commercial real estate	1,094		12
Land	393		18
Home equity	194		6
Commercial business	723		8
With an allowance recorded
One-to-four family	8,360		379
Multi-family	79		—
Commercial real estate	925		21
Land	815		32
Home equity	330		11
Commercial business	231		20
Total
One-to-four family	12,559		476
Multi-family	1,211		—
Commercial real estate	2,019		33
Land	1,208		50
Home equity	524		17
Commercial business	954		28
Total	$	18,475	$	604

102

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

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, 2016:

	One-to-four family		Multi- family		Commercial real estate		Construction		Land		Consumer(1)		Commercial business		Unallocated		Total
Allowance for loan losses:
Ending balance	$	798	$	454	$	1,333	$	271	$	75	$	516	$	332	$	—	$	3,779
Ending balance: individually evaluated for impairment	419		—		—		—		4		145		22		—		590
Ending balance: collectively evaluated for impairment	$	379	$	454	$	1,333	$	271	$	71	$	371	$	310	$	—	$	3,189
Loans receivable:
Ending balance	$	61,230	$	53,742	$	149,527	$	21,793	$	6,839	$	22,098	$	36,848	$	—	$	352,077
Ending balance: individually evaluated for impairment	9,283		—		319		—		490		427		188		—		10,707
Ending balance: collectively evaluated for impairment	$	51,947	$	53,742	$	149,208	$	21,793	$	6,349	$	21,671	$	36,660	$	—	$	341,370

⁽¹⁾   Consumer loans include home equity, credit cards, auto and other consumer loans.

103

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

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, 2015:

	One-to-four family		Multi- family		Commercial real estate		Construction		Land		Consumer (1)		Commercial business		Unallocated		Total
Allowance for loan losses:
Ending balance	$	1,113	$	95	$	262	$	247	$	75	$	445	$	1,405	$	79	$	3,721
Ending balance: individually evaluated for impairment	500		—		—		—		3		26		211		—		740
Ending balance: collectively evaluated for impairment	$	613	$	95	$	262	$	247	$	72	$	419	$	1,194	$	79	$	2,981
Loans receivable:
Ending balance	$	57,944	$	43,249	$	128,306	$	11,731	$	4,069	$	23,926	$	18,987	$	—	$	288,212
Ending balance: individually evaluated for impairment	9,273		—		—		—		639		307		932		—		11,151
Ending balance: collectively evaluated for impairment	$	48,671	$	43,249	$	128,306	$	11,731	$	3,430	$	23,619	$	18,055	$	—	$	277,061

⁽¹⁾   Consumer loans include home equity, credit cards, auto, and other consumer loans.

The following table presents the recorded investment in nonaccrual and loans past due 90 days still on accrual by type of loans as of the dates indicated:

	June 30,
	2016		2015
One-to-four family	$	1,539	$	1,263
Commercial real estate	319		—
Home equity	16		—
Credit cards	—		6
Other consumer	1		31
Commercial business	97		711
Total	$	1,972	$	2,011

The table above includes $2.0 million in nonaccrual and no loans past due 90 days or more and still accruing interest, net of partial loan charge-offs at June 30, 2016. There were $2.0 million in nonaccrual and $6 of loans past due 90 days or more and still accruing interest, net of partial loan charge-offs at June 30, 2015.

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.

104

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table presents past due loans, net of partial loan charge-offs, by class of loans, as of June 30, 2016:

	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due (1)		Total Past Due		Current		Total Loans
One-to-four family	$	566	$	623	$	1,539	$	2,728	$	58,502	$	61,230
Multi-family	—		—		—		—		53,742		53,742
Commercial real estate	—		—		319		319		149,208		149,527
Construction	—		—		—		—		21,793		21,793
Land	—		—		—		—		6,839		6,839
Home equity	14		8		16		38		16,561		16,599
Credit cards	77		—		—		77		2,892		2,969
Automobile	1		—		—		1		596		597
Other consumer	12		—		1		13		1,920		1,933
Commercial business	—		—		97		97		36,751		36,848
Total	$	670	$	631	$	1,972	$	3,273	$	348,804	$	352,077

⁽¹⁾ Includes loans on nonaccrual status, that may be less than 90 days contractually past due.

The following table presents past due loans, net of partial loan charge-offs, by class of loans as of June 30, 2015:

	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due (1)		Total Past Due		Current		Total Loans
One-to-four family	$	616	$	552	$	1,263	$	2,431	$	55,513	$	57,944
Multi-family	—		—		—		—		43,249		43,249
Commercial real estate	—		—		—		—		128,306		128,306
Construction	—		—		—		—		11,731		11,731
Land	—		—		—		—		4,069		4,069
Home equity	15		16		—		31		17,573		17,604
Credit cards	8		26		6		40		3,249		3,289
Automobile	9		—		—		9		677		686
Other consumer	16		—		31		47		2,300		2,347
Commercial business	64		273		711		1,048		17,939		18,987
Total	$	728	$	867	$	2,011	$	3,606	$	284,606	$	288,212

⁽¹⁾ Includes loans on nonaccrual status, that may be less than 90 days contractually past due.

Credit Quality Indicators. The Bank utilizes 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.

105

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

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. The Bank uses 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.

106

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

• 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 represents the internally assigned grade as of June 30, 2016, 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
Grade:
Pass	$	52,438	$	53,002	$	146,587	$	21,793	$	6,349	$	15,377	$	2,892	$	542	$	1,839	$	35,149	$	335,968
Watch	4,875		740		1,978		—		316		836		77		55		94		1,005		9,976
Special Mention	1,789		—		644		—		174		220		—		—		—		533		3,360
Substandard	2,128		—		318		—		—		166		—		—		—		161		2,773
Doubtful	—		—		—		—		—		—		—		—		—		—		—
Total	$	61,230	$	53,742	$	149,527	$	21,793	$	6,839	$	16,599	$	2,969	$	597	$	1,933	$	36,848	$	352,077

The following table represents the internally assigned grade as of June 30, 2015, 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
Grade:
Pass	$	49,119	$	42,884	$	125,586	$	11,731	$	3,430	$	16,585	$	3,249	$	615	$	2,214	$	16,981	$	272,394
Watch	2,151		—		2,044		—		—		697		34		71		102		915		6,014
Special Mention	4,755		—		676		—		231		301		—		—		—		159		6,122
Substandard	1,919		365		—		—		408		21		6		—		31		932		3,682
Doubtful	—		—		—		—		—		—		—		—		—		—		—
Total	$	57,944	$	43,249	$	128,306	$	11,731	$	4,069	$	17,604	$	3,289	$	686	$	2,347	$	18,987	$	288,212

Troubled Debt Restructured Loans. A troubled debt restructured ("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.

The Bank has utilized a combination of rate and term modifications for its TDRs.

107

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table represents TDRs by accrual versus nonaccrual status and by class of loans as of June 30, 2016:

	June 30, 2016
	Accrual Status		Nonaccrual Status		Total Modifications
One-to-four family	$	7,503	$	411	$	7,914
Land	490		—		490
Home equity	261		—		261
Commercial business	90		—		90
Total	$	8,344	$	411	$	8,755

The following table represents TDRs by accrual versus nonaccrual status and by class of loans as of June 30, 2015:

	June 30, 2015
	Accrual Status		Nonaccrual Status		Total Modifications
One-to-four family	$	8,010	$	681	$	8,691
Land	639		—		639
Home equity	276		—		276
Commercial business	221		—		221
Total	$	9,146	$	681	$	9,827

The following tables present TDRs and their recorded investment prior to the modification and after the modification for TDR transactions that originated during the years ended June 30, 2016, 2015 and 2014:

	Year Ended June 30, 2016
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	1	$	273	$	240
Total	1	$	273	$	240

	Year Ended June 30, 2015
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	1	$	197	$	194
Total	1	$	197	$	194

108

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

	Year Ended June 30, 2014
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	7	$	1,530	$	1,545
Home equity	1	75		67
Commercial business	1	145		158
Total	9	$	1,750	$	1,770

There were no TDRs for which there was a payment default within the first 12 months of modification during the years ended June 30, 2016, 2015 and 2014.

Note 4 - Real Estate Owned, net

The following table is a summary of REO for the years ended June 30, 2016, 2015 and 2014:

	Year Ended June 30,
	2016			2015			2014
Balance at the beginning of the period	$	797		$	5,067		$	6,212
Net loans transferred to real estate owned	574			2,241			5,793
Capitalized improvements	—			27			591
Gross proceeds from sale of REO	(973		)	(6,789		)	(6,846		)
Gain on sale of REO	58			283			407
Impairments	(83		)	(32		)	(1,090		)
Balance at the end of the period	$	373		$	797		$	5,067

Note 5 - Property, Premises, and Equipment

Property, premises, and equipment owned by the Bank are summarized as follows:

	June 30,
	2016			2015
Land	$	2,192		$	2,247
Building and improvements	14,372			15,883
Furniture and fixtures	3,778			4,778
Automobiles	345			334
Software	619			593
Leasehold improvements	77			17
	21,383			23,852
Less accumulated depreciation and amortization	(11,382		)	(13,482		)
Property, premises, and equipment, net of depreciation and amortization	$	10,001		$	10,370

Depreciation and amortization expense for the years ended June 30, 2016, 2015 and 2014, was $650,000, $665,000 and $608,000, respectively.

109

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Note 6 - Deposits

Deposits consist of the following:

	June 30,
	2016				2015
	Amount		Percent		Amount		Percent
Noninterest-bearing demand deposits	$	50,781	16.8	%	$	44,719	15.0	%
Interest-bearing demand deposits, weighted-average rate of 0.04% and 0.04% in fiscal 2016 and fiscal 2015, respectively	27,419		9.1		22,448		7.5
Savings deposits, weighted-average rate of 0.15% in fiscal 2016 and 0.15% in fiscal 2015	44,986		15.0		42,399		14.1
Money market accounts, weighted-average rate of 0.17% and 0.15% in fiscal 2016 and fiscal 2015, respectively	59,270		19.7		63,916		21.3
Certificates of deposit
0.00 to 3.49%	97,788		32.5		100,286		33.4
3.50 to 5.49%	20,650		6.9		26,044		8.7
Total of certificates of deposit	118,438		39.4		126,330		42.1
Total deposits	$	300,894	100.0	%	$	299,812	100.0	%

Certificates of deposit in denominations of $250,000 or more totaled $17.3 million and $16.4 million at June 30, 2016 and 2015, respectively. Included in deposits at June 30, 2016 and 2015, were $8.7 million and $8.6 million, respectively, of public funds. There were no brokered deposits at June 30, 2016 or 2015.

As of June 30, 2016, certificates of deposit mature as follows:

Year Ended June 30,
	Amount
2017	$	43,241
2018	26,537
2019	33,839
2020	10,498
Thereafter	4,323
	$	118,438

Note 7 - Borrowings

The Bank is a member of the FHLB of Des Moines. Based on eligible collateral, consisting of loans at June 30, 2016 and 2015, the total amount available under this line of credit was $146.9 million and $132.3 million, respectively. The total balance of loans pledged at June 30, 2016 and 2015 was $263.7 million and $228.6 million, respectively.  The total balance of advances outstanding was $62.0 million and $10.0 million at June 30, 2016 and 2015. The net remaining amounts available as of June 30, 2016 and 2015 were $84.9 million and $122.3 million, respectively. Borrowings generally provide for interest at the then-current published rates. FHLB advances (at weighted-average interest rates of 0.93% and 1.18% at June 30, 2016 and 2015, respectively) and lines of credit are scheduled to mature as follows:

110

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

	June 30,
	2016		2015
One year or less	$	24,500	$	—
After one year through three years	30,000		10,000
More than three years	7,500		—
	$	62,000	$	10,000

Advances from the FHLB are collateralized by all FHLB stock owned by the Bank, deposits with the FHLB, certain investments, and all loans as described in the Advances, Pledge, and Security Agreement with the FHLB. The maximum and average outstanding advances and lines of credit from the FHLB are as follows:

	June 30,
	2016		2015
Highest outstanding advances at month-end for the previous 12 months	$	62,000	$	22,500
Average outstanding	$	29,875	$	13,629

The Bank also maintains a short-term borrowing line with the Federal Reserve with total credit based on eligible collateral. As of June 30, 2016, the Bank had a borrowing capacity of $1.0 million, of which none was outstanding. Additionally we have a $5.0 million borrowing line with Pacific Coast Bankers' Bank of which none was outstanding at June 30, 2016 and 2015.

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 Anchor Bancorp and used those funds to acquire 102,000 shares of the Anchor Bancorp'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 Anchor Bancorp. 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 30, 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 years ended June 30, 2016, 2015 and 2014 was $163,000, $172,000 and $123,000 respectively.

Shares held by the ESOP as of the dates indicated are as follows:

	June 30,
	2016		2015
Allocated shares	39,748		32,865
Unallocated shares	62,252		69,135
Total ESOP shares	102,000		102,000
Fair value of unallocated shares	$	1,471	$	1,555

111

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Note 9 - Stock-Based Compensation

On October 21, 2015, the Company’s shareholders 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 shares or repurchased shares.

As of June 30, 2016, awards for restricted stock totaling 87,572 shares were outstanding and no restricted stock units or stock options have been granted under the Plan. 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 year ended June 30, 2016 total compensation expense for the Plan was $1.8 million and the related income tax benefit was $619,000.

The following tables provide a summary of changes in non-vested restricted stock awards for the year ended June 30, 2016:

	For the Year Ended June 30, 2016
			Weighted-Average Grant Date Fair Value
	Shares
Non-vested at July 1, 2015	—		$	—
Granted	106,228		25.71
Vested	(22,459	)	25.75
Forfeited and canceled	(12,925	)	25.75
Non-vested at June 30, 2016	70,844		25.69

As of June 30, 2016, there was $790,000 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 two years. The total fair value of shares vested during the year ended June 30, 2016 was $793,000.

Note 10 - Supplemental Executive Retirement Plan (SERP)

On July 1, 2002, the Bank implemented a nonqualified SERP for the benefit of senior officers and directors of the Bank. The SERP entitles these individuals to receive defined benefits upon their retirement or death based on the appreciation in Bank value. The SERP value is based on the Company's stock price and the change from the last trading day of March 31, 2015 to March 31, 2016. On January 1, 2004, the SERP was amended to provide that a participant’s SERP unit shall be valued at no less than 90%, and no more than 125%, of the participant’s SERP unit as of the preceding valuation date. The value of the participant’s SERP unit is based upon the stock value of the Bank. The accrual for the deferred compensation owed under the SERP is based upon the net present value of the vested benefits expected to be paid under the SERP. The Bank recognized $123,000, $99,000, and $61,000 in compensation cost related to the SERP for the years ended June 30, 2016, 2015, and 2014, respectively. The SERP liability totaled $1.7 million and $1.8 million at June 30, 2016 and 2015, respectively.

Note 11 - Earnings Per Share

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. At June 30, 2016, the difference in EPS under the two-class method was not significant.

112

The following table details the calculation of basic and diluted earnings per share:

	For the Year Ended June 30,
	2016		2015		2014
Net income	$	495	$	9,827	$	423
Less: Earnings allocated to participating securities	—		—		—
Earnings allocated to common shareholders	495		9,827		423
Basic weighted-average common shares outstanding	2,452,455		2,477,423		2,466,983
Potentially dilutive incremental shares	7,071		—		—
Diluted weighted-average common shares outstanding	2,459,526		2,477,423		2,466,983
Basic earnings per share	$	0.20	$	3.97	$	0.17
Diluted earnings per share	$	0.20	$	3.97	$	0.17

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 June 30, 2016, 2015 and 2014 there were 62,252, 69,135 and 76,019 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 the year ended June 30, 2016, 9,448 shares were not included in the computation of diluted earnings per share because the incremental shares under the treasury stock method of calculation resulted in them being anti-dilutive.

Note 12 - Related Party Transactions

During the normal course of business, the Bank originates loans to directors, committee members, and senior management. Such loans are granted with interest rates, terms, and collateral requirements substantially the same as those for all other customers.

Total deposits from directors, executive officers, and their affiliates for the years ended June 30, 2016, 2015, and 2014 were $1.8 million, $1.9 million, and $1.9 million, respectively.

Total loans to directors, executive officers, and their affiliates are subject to regulatory limitations. Aggregate loans balances are as follows and were within regulatory limitations:

	At June 30,
	2016		2015		2014
Beginning balance	$	277	$	887	$	228
Extensions of credit	5		—		668
Repayments	60		610		9
Ending balance	$	222	$	277	$	887

Note 13 - Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

113

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table that follows) of total and Tier I capital to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined).

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank became subject to new capital requirements which created a new required ratio for common equity Tier 1 (“CET1”) capital, increased the leverage and Tier 1 capital ratios, changed the risk-weightings of certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over the required capital ratios and changed what qualifies as capital for purposes of meeting these various capital requirements. The Bank is required to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before it may pay dividends, repurchase shares or pay discretionary bonuses.

The new minimum requirements are a ratio of common equity Tier 1 capital (CET1 capital) to total risk-weighted assets the (“CET1 risk-based ratio”) of 4.5%, a Tier 1 capital ratio of 6.0%, a total capital ratio of 8.0%, and a leverage ratio of 4.0%.

In addition to the capital requirements, there are a number of changes in what constitutes regulatory capital, subject to a certain transition period. These changes include the phasing-out of certain instruments as qualifying capital. The Bank does not have any of these instruments. Mortgage servicing and deferred tax assets over designated percentages of CET1 are deducted from capital, subject to a transition period ending December 31, 2017. CET1 consists of Tier 1 capital less all capital components that are not considered common equity. In addition, Tier 1 capital includes accumulated other comprehensive income, which includes all unrealized gains and losses on available for sale debt and equity securities, subject to a transition period ending December 31, 2017. Because of the Bank’s asset size, the Bank is not considered an advanced approaches banking organization and has elected to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt and equity securities in its capital calculations.

The new requirements also included changes in the risk-weighting of assets to better reflect credit risk and other risk exposure. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days past due or otherwise in nonaccrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight (up from 100%) for mortgage servicing and deferred tax assets that are not deducted from capital.

In addition to the minimum CET1, Tier 1 and total capital ratios, the Bank will have to maintain a capital conservation buffer consisting of additional CET1 capital equal to 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement began to be phased in starting in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019.

Under the new standards, in order to be considered well-capitalized, the Bank must maintain a CET1 risk-based ratio of 6.5% (new), a Tier 1 risk-based ratio of 8% (increased from 6%), a total risk-based capital ratio of 10% (unchanged) and a leverage ratio of 5% (unchanged). As of June 30, 2016, the Bank was categorized as well-capitalized under the regulatory framework for prompt corrective action.

114

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The Bank’s capital accounts and ratios are also presented in the following table:

	Actual				Minimum Capital Requirement				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2016
Total capital (to risk-weighted assets)	$	59,938	15.7	%	$	30,580	8.0	%	$	38,225	10.0	%
Tier I capital (to risk-weighted assets)	56,159		14.7		22,935		6.0		30,580		8.0
Common equity Tier 1 capital (to risk-weighted assets)	56,159		14.7		17,201		4.5		24,846		6.5
Tier I leverage capital (to average assets)	56,159		13.5		16,620		4.0		20,775		5.0
As of June 30, 2015
Total capital (to risk-weighted assets)	$	57,321	17.4	%	$	26,422	8.0	%	$	33,027	10.0	%
Tier I capital (to risk-weighted assets)	53,600		16.2		19,816		6.0		26,422		8.0
Common equity Tier 1 capital (to risk-weighted assets)	53,600		16.2		14,862		4.5		21,468		6.5
Tier I leverage capital (to average assets)	53,600		14.3		14,963		4.0		18,703		5.0

Anchor Bancorp exceeded all regulatory capital requirements with Tier 1 Leverage-Based Capital, Common Equity Tier 1 Capital, Tier 1 Risk- Based Capital and Total Risk-Based Capital ratios of 14.4%, 15.7%, 15.7% and 16.6%, respectively, as of June 30, 2016. As of June 30, 2015, Anchor Bancorp's Tier 1 Leverage-Based Capital, Common Equity Tier 1 Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios were 16.6%, 19.0%, 19.0% and 20.1%, respectively.

115

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Note 14 - Income Taxes

The components of current and deferred tax expense for the years ended June 30, 2016 and 2015 were as follows:

	Year Ended June 30,
	2016			2015
Current	$	126		$	—
Deferred	(87		)	148
Change in valuation allowance	—			(8,469		)
Total	$	39		$	(8,321	)

Retained earnings at June 30, 2016 and 2015, included $5.5 million in tax-basis bad debt reserves for which no income tax liability has been recorded. In the future, if this tax-basis bad debt reserve is used for purposes other than to absorb bad debts, or if legislation is enacted requiring recapture of all tax-basis bad debt reserves, the Bank will incur a federal tax liability at the then-prevailing corporate tax rate.

A reconciliation of the provision for income taxes based on statutory corporate tax rates on pre-tax income and the provision shown in the accompanying consolidated statements of income at the dates indicated is summarized as follows:

	Amount			Percent of Pre-Tax Income (loss)
June 30, 2016
Income taxes computed at statutory rates	$	182		34.0	%
Tax-exempt income	(189		)	(35.4	)
Other, net	46			8.6
Provision for income taxes	$	39		7.2	%
June 30, 2015
Income taxes computed at statutory rates	$	511		34.0	%
Tax-exempt income	(193		)	(12.8	)
Deferred tax asset valuation allowance	(8,469		)	(562.5	)
Other, net	(170		)	(11.4	)
Benefit for income taxes	$	(8,321	)	(552.7	)%
June 30, 2014
Income taxes computed at statutory rates	$	144		34.0	%
Tax-exempt income	(202		)	(47.8	)
Deferred tax asset valuation allowance	50			11.9
Other, net	8			1.9
Provision for income taxes	$	—		—	%

116

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The components of net deferred tax assets and liabilities at the dates indicated are summarized as follows:

	June 30,
	2016		2015
Deferred tax assets
Allowance for loan losses	$	3,159	$	3,139
AMT credit carryforward	352		199
Deferred compensation - SERP	561		573
Stock awards	350		—
Securities impairment charge	340		340
Net operating loss carryforward	4,304		4,726
Real estate owned	155		198
Accumulated depreciation	305		314
Unrealized loss on securities available-for-sale			45
Other, net	53		—
Total deferred tax assets	9,579		9,534
Deferred tax liabilities
Deferred loan fees and costs	434		396
FHLB stock dividends	166		166
Mortgage servicing rights	70		80
Unrealized gain on securities available-for-sale	39		—
Other, net	—		25
Total deferred tax liabilities	709		667
Net deferred tax asset, after valuation allowance	$	8,870	$	8,867

DTAs are deferred tax consequences attributable to deductible temporary differences and carryforwards.  After the DTA has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance.  A valuation allowance is needed when, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized.  As required by generally accepted accounting principles, available evidence is weighted heavily on cumulative losses with less weight placed on future projected profitability.  Realization of the DTA is dependent on whether there will be sufficient future taxable income of the appropriate character in the period during which deductible temporary differences reverse or within the carryback and carryforward periods available under tax law. During fiscal 2015, the Company reversed its DTA valuation allowance related to the Company’s deferred tax assets as management deemed that it was no longer appropriate to carry a DTA valuation allowance as a result of changes in the factors considered by management when the Company initially established the valuation allowance. In reaching this determination, management considered, among other factors, the scheduled reversal of deferred tax assets and liabilities, taxes paid in carryback years, available tax planning strategies, the Company’s cumulative earnings during the past three years, including the Company’s recent financial performance, the improvement in the Company’s asset quality and financial condition, as well as projected earnings. As of June 30, 2016 and 2015, management deemed that a deferred tax asset valuation allowance related to the Company’s DTA was not necessary.

As of June 30, 2016, the Company had a federal net operating loss carryforwards totaling $12.7 million and insignificant Oregon state and local net operating loss carryforwards which can be used to offset future taxable income. The net operating losses begin to expire in 2031 for federal and 2024 for Oregon. The Company’s net operating loss carryforwards may be subject to limitations under Internal Revenue Code Section 382.

The Company had no uncertain tax positions at June 30, 2016, 2015, and 2014. The Company recognizes interest accrued on and penalties related to uncertain tax positions in tax expense. During the years ended June 30, 2016, 2015, and 2014, the Company recognized no interest and penalties.

117

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The Company files income tax returns in the U.S. federal and Oregon state and local jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal or state/local income tax examinations by tax authorities for years before 2013.

Note 15 – Parent Company Financials

Presented below are the condensed statements of financial condition, statements of income, and statements of cash flows for Anchor Bancorp.

ANCHOR BANCORP STATEMENTS OF FINANCIAL CONDITION

	June 30,
	2016			2015
ASSETS
Cash	$	2,378		$	5,324
ESOP loan	672			735
Investment in bank subsidiary	58,428			47,506
Prepaid and other assets	747			505
Total assets	$	62,225		$	54,070
LIABILITIES
Total liabilities	$	—		$	3
STOCKHOLDERS’ EQUITY
Common stock	$	25		$	25
Additional paid-in-capital	22,157			23,404
Retained earnings	41,264			32,084
Unearned ESOP shares	(672		)	(735		)
Accumulated other comprehensive loss, net of tax	(549		)	(711		)
Total stockholders’ equity	$	62,225		$	54,067
Total liabilities and stockholders’ equity	$	62,225		$	54,070

118

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

ANCHOR BANCORP STATEMENTS OF INCOME

	For the Years Ended June 30,
	2016			2015			2014
Operating income
Interest income ESOP loan	$	24		$	26		$	28
Dividends received from subsidiary	680			5,350			—
Total operating income	704			5,376			28
Operating expenses
Legal expense	354			105			127
Accounting expense	49			47			44
Professional fees	116			60			60
Management fees	69			67			68
General and administrative	62			54			77
Other expense	75			—			—
Total operating expenses	725			333			376
(Loss) profit before income tax	(21		)	5,043			(348		)
Income tax benefit	(227		)	(478		)	—
Income before equity in undistributed income of subsidiary	206			5,521			(348		)
Equity in undistributed income of subsidiary	970			4,306			771
Net income	$	1,176		$	9,827		$	423

ANCHOR BANCORP STATEMENTS OF CASH FLOWS

	For the Years Ended June 30,
	2016			2015			2014
Cash flows from operating activities
Net income	$	1,176		$	9,827		$	423
Adjustments to reconcile net loss to net cash from operating activities:
Equity in undistributed income of subsidiary	(970		)	(4,306		)	(771		)
Change in deferred tax assets, net	(227		)	(478		)	—
Change in other assets	(60		)	(46		)	(45		)
Net cash used by operating activities	(81		)	4,997			(393		)
Cash flows from financing activities
Repurchase and retirement of common stock	(2,952		)	—			—
ESOP loan repayments	87			88			123
Net cash provided by investing activities	(2,865		)	88			123
Net change in cash and cash equivalents	(2,946		)	5,084			(270		)
Cash and cash equivalents at beginning of period	5,324			240			510
Cash and cash equivalents at end of period	$	2,378		$	5,324		$	240

119

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Note 16 - Commitments and Contingencies

Credit-related financial instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to a varying degree, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

The following financial instruments were outstanding whose contract amounts represent credit risk at June 30, 2016:

	Amount of Commitment Expiration - Per Period
	Total Amounts Committed (2)		Due in One Year
Commitments to originate loans (1)	$	14,130	$	14,130
Line of credit
Fixed rate (3)	10,160		365
Adjustable rate	54,460		13,770
Undisbursed balance of loans closed	64,620		14,135
Total balance	$	78,750	$	28,265

⁽¹⁾ Interest rates on fixed rate loans range from 3.88% to 17.99%.

⁽²⁾ At June 30, 2016 there were no reserves for unfunded commitments.

⁽³⁾ Includes standby letters of credit.

The following financial instruments were outstanding whose contract amounts represent credit risk at June 30, 2015:

	Amount of Commitment Expiration - Per Period
	Total Amounts Committed (2)		Due in One Year
Commitments to originate loans (1)	$	5,024	$	5,024
Line of credit
Fixed rate (3)	1,708		399
Adjustable rate	26,961		962
Undisbursed balance of loans closed	28,669		1,361
Total balance	$	33,693	$	6,385

⁽¹⁾ Interest rates on fixed rate loans range from 3.75% to 17.99%.

⁽²⁾ At June 30, 2015 there was $79 in reserves for unfunded commitments.

⁽³⁾ Includes standby letters of credit.    

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon.

Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the borrower.

120

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

Unfunded commitments under commercial lines of credit, revolving credit lines, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent that the Bank is committed.

Contingent liabilities for sold loans - In the ordinary course of business, the Bank sells loans without recourse that may have to subsequently be repurchased due to defects that occurred during the origination of the loan. The defects are categorized as documentation errors, underwriting errors, early payment defaults, breach of representation or warranty, and fraud. When a loan sold to an investor without recourse fails to perform according to its contractual terms, the investor will typically review the loan file to determine whether defects in the origination process occurred. If a defect is identified, the Bank may be required to either repurchase the loan or indemnify the investor for losses sustained. If there are no such defects, the Bank has no commitment to repurchase the loan. The Bank has recorded no reserve to cover loss exposure related to these guarantees. The principal balance of loans sold without recourse for the years ended June 30, 2016 and 2015, was $80.6 million and $86.8 million, respectively. The Bank repurchased no loans for the years ended June 30, 2016, 2015 and 2014.

Contingencies - The Company is a defendant in various legal proceedings arising in connection with its business. It is the opinion of management that the financial position and the results of operations of the Company will not be materially adversely affected by the final outcome of the legal proceedings and that adequate provision has been made in the accompanying consolidated financial statements.

At periodic intervals, the Washington State Department of Financial Institutions, Division of Banks ("DFI") and the FDIC routinely examine the Bank’s financial statements as part of their legally prescribed oversight of the banking industry. Based on these examinations, the regulators can direct that the Bank’s financial statements be adjusted in accordance with their findings.

Operating lease commitment - The Bank leases space for branches and operations located in Shelton, and Puyallup, Washington. These leases run for periods ranging from three to five years. All leases require the Bank to pay all taxes, maintenance, and utility costs, as well as maintain certain types of insurance. The annual lease commitments for the next five years are as follows:

Year Ended June 30,	Amount
2017	$124
2018	$124
2019	$84
2020	$37
2021	$—

Rental expense charged to operations was $140,000, $133,000 and $121,000 for the years ended June 30, 2016, 2015, and 2014, respectively.

Note 17 - 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.

Valuation inputs refer to the assumptions market participants would use in pricing a given asset or liability using one of the three valuation techniques. Inputs can be observable or unobservable. Observable inputs are those assumptions that market participants would use in pricing the particular asset or liability. These inputs are based on market data and are obtained from an independent source. Unobservable inputs are assumptions based on the Company’s own information or estimate of assumptions used by market participants in pricing the asset or liability. Unobservable inputs are based on the best and most current information available on the measurement date.

All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy:

• Level 1 - Quoted prices for identical instrument in active markets.

121

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

• Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuations whose inputs are observable.

• Level 3 - Instruments whose significant value drivers are unobservable.

The following tables show the Company's assets and liabilities at the dates indicated measured at fair value on a recurring basis:

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	—	$	175	$	—	$	175
Mortgage-backed securities:
FHLMC	—		9,559		—		9,559
FNMA	—		13,204		—		13,204
GNMA	—		727		—		727

	June 30, 2015
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	—	$	435	$	—	$	435
Mortgage-backed securities:
FHLMC	—		11,791		—		11,791
FNMA	—		16,408		—		16,408
GNMA	—		931		—		931

Assets and liabilities measured at fair value on a nonrecurring basis - Assets and liabilities are considered to be fair valued 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.

122

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The following table presents the balances of assets measured at fair value on a nonrecurring basis during the year ended June 30, 2016:

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Impaired loans:
Mortgage loans
One-to-four family	$	—	$	—	$	8,046	$	8,046
Commercial	—		—		318		318
Land	—		—		316		316
Home equity	—		—		367		367
Commercial business	—		—		124		124
Total impaired loans	—		—		9,171		9,171
Real estate owned:
One-to-four family	$	—	$	—	$	113	$	113
Land	—		—		19		19
Total real estate owned	—		—		132		132
Total	$	—	$	—	$	9,303	$	9,303

The following table presents the balance of assets measured at fair value on a nonrecurring basis during the year ended June 30, 2015:

	June 30, 2015
	Level 1		Level 2		Level 3		Total
Impaired loans:
Mortgage loans
One-to-four family	$	—	$	—	$	4,172	$	4,172
Commercial	—		—		408		408
Land	—		—		212		212
Commercial business	—		—		868		868
Total impaired loans	—		—		5,660		5,660
Real estate owned:
One-to-four family	$	—	$	—	$	188	$	188
Land	—		—		418		418
Total real estate owned	—		—		606		606
Total	$	—	$	—	$	6,266	$	6,266

The fair value of impaired loans is calculated using the collateral value method or on a discounted cash flow basis. Inputs used in the collateral value method include appraisal values, estimates of certain completion costs and closing and selling costs. Some of these inputs may not be observable in the marketplace.

123

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

The fair value of real estate owned properties is measured at the lower of their carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisal of the property, resulting in Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

The following tables present quantitative information about Level 3 fair value measurements at June 30, 2016 and 2015:

	June 30, 2016
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Average Discount
Impaired loans	$	9,171	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 100% (5%)
Real estate owned	$	132	Fair value of collateral	Discount applied to the obtained appraisal	0% - 100% (12%)

	June 30, 2015
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Average Discount
Impaired loans	$	5,660	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 100% (4%)
Real estate owned	$	606	Fair value of collateral	Discount applied to the obtained appraisal	0% - 100% (1%)

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company's financial instruments as of June 30, 2016 and June 30, 2015.  For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as demand deposits, savings, and money market, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

124

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

	June 30, 2016
	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)
Financial Instruments-Assets
Cash and cash equivalents	$	8,320	$	8,320	$	8,320	$	—	$	—
Securities available-for-sale	23,665		23,665		—		23,665		—
Securities held-to-maturity	6,291		6,425		—		6,425		—
FHLB stock	2,959		2,959		—		2,959		—
Loans held for sale	1,864		1,864		1,864		—		—
Loans receivable	351,130		349,244		—		—		349,244
Accrued interest receivable	1,182		1,182		—		1,182		—
Financial Instruments-Liabilities
Demand deposits, savings and money market	$	182,456	$	182,456	$	182,456	$	—	$	—
Certificates of deposit	118,438		118,059		—		118,059		—
FHLB advances	62,000		62,124		—		62,124		—
Advance payments by borrowers taxes and insurance	1,114		1,114		1,114		—		—

	June 30, 2015
	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)
Financial Instruments-Assets
Cash and cash equivalents	$	14,450	$	14,450	$	14,450	$	—	$	—
Securities available-for-sale	29,565		29,565		—		29,565		—
Securities held-to-maturity	7,617		7,692		—		7,692		—
FHLB stock	853		853		—		853		—
Loans held for sale	505		505		505		—		—
Loans receivable	287,165		288,424		—		—		288,424
Accrued interest receivable	1,069		1,069		—		1,069		—
Financial Instruments-Liabilities
Demand deposits, savings and money market	$	173,482	$	173,482	$	173,482	$	—	$	—
Certificates of deposit	126,330		125,942		—		125,942		—
FHLB advances	10,000		9,882		—		9,882		—
Advance payments by borrowers taxes and insurance	1,002		1,002		1,002		—		—

125

ANCHOR BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except share data)

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.

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.

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.

126

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a)    Evaluation of Disclosure Controls and Procedures: An evaluation of the Company’s disclosure controls and procedures (as defined in Section 13a-15(e) of the Securities Exchange Act of 1934 (the “Act”)) was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and several other members of the Company’s senior management as of the end of the period covered by this report.  The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures in effect as of June 30, 2016 were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act was (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)     Report of Management on Internal Control over Financial Reporting:  The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2016, utilizing the framework established in Internal Control – Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of June 30, 2016 was effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States; (2) receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements are prevented or timely detected.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(c)      Changes in Internal Controls: There have been no changes in the Company’s internal control over financial reporting during the year ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company intends to continually review and evaluates the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company's business.  While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures. The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent every error or instance of fraud.  A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met.  Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may

127

deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information contained under the section captioned “ Proposal 1 – Election of Directors” in the Company’s proxy statement, a copy of which will be filed with the SEC no later than 120 days after the Company’s year end (the “Proxy Statement”) is incorporated herein by reference.

For information regarding the executive officers of the Company and the Bank, see the information contained herein under the section captioned “Item 1.  Business – Employees – Executive Officers.”

Audit Committee Financial Expert.  The Audit Committee of the Company is composed of Directors Kay (Chairperson), Ruecker and Donovan.  Each member of the Audit Committee is “independent” in accordance with the requirement for companies listed on NASDAQ. In addition the Board of Directors has determined that Mr. Kay meets the definition of “audit committee financial expert,” as defined by the SEC.

Code of Business Conduct and Ethics.  The Board of Directors adopted our Code of Business Conduct and Ethics, which applies to all employees and directors and is designed to deter wrongdoing and to promote honest and ethical conduct in every respect. The Code addresses conflicts of interest, the treatment of confidential information, general employee conduct and compliance with applicable laws, rules, and regulations. A copy of the Code of Business Conduct and Ethics is available on our website at www.anchornetbank.com.

Compliance with Section 16(a) of the Exchange Act.  The information contained under the section captioned “Section 16(a) Beneficial Ownership Reporting Compliance” is included in the Company’s Proxy Statement and is incorporated herein by reference.

Nomination Procedures. There have been no material changes to the procedures by which shareholders may recommend nominees to the Company's Board of Directors.

Item 11.   Executive Compensation

The information contained in the section captioned “Executive Compensation” and "Directors' Compensation" in the Proxy Statement is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

(a) Security Ownership of Certain Beneficial Owners.

The information contained in the section captioned “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference.

(b) Security Ownership of Management.

The information contained in the section captioned “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference.

(c)  Changes In Control

The Company is not aware of any arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

128

(d)  Equity Compensation Plan Information

The following table summarizes share and exercise price information about Anchor Bancorp's equity compensation plans as of June 30, 2016:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights	Weighted-average exercise price of outstanding options, warrants, and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders:
2015 Equity Incentive Plan (1)	—	$	—	87,572
Equity compensation plans not approved by security holders	N/A	N/A		N/A
Total	—	$	—	87,572

⁽¹⁾ As of June 30, 2016, there were no outstanding options, warrants and rights. At that date, there were 106,228 restricted shares granted pursuant to the 2015 Equity Incentive Plan (the "Plan") and 87,572 shares were available for future grants of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, non-qualified stock options, which do not satisfy the requirements for treatment as incentive stock options, restricted stock and restricted stock units under the Plan.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Related Transactions.  The information contained in the section captioned “Meetings and Committees of the Board of Directors and Corporate Governance Matters – Corporate Governance – Transactions with Related Persons” in the Proxy Statement is incorporated herein by reference.

Director Independence.  The information contained in the section captioned “Meetings and Committees of the Board of Directors and Corporate Governance Matters – Corporate Governance – Director Independence” in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

The information contained under the section captioned “Proposal 3 – Ratification of Appointment of Independent Auditor” is included in the Company’s Proxy Statement and is incorporated herein by reference.

PART IV

129

Item 15.  Exhibits and Financial Statement Schedules

(a)    1. Financial Statements.

For a list of the financial statements filed as part of this report see Part II – Item 8.

2. Financial Statement Schedules.

All schedules have been omitted as the required information is either inapplicable or contained in the Consolidated Financial Statements or related Notes contained in Part II, Item 8 of this Form 10-K.

130

3. Exhibits:

Exhibits are available from the Company by written request.

3.1	Articles of Incorporation (1)
3.2	Amended and Restated Bylaws (2)
4.1	Form of Stock Certificate of the Company (1)
10.1	Form of Anchor Bank Employee Severance Compensation Plan (1)
10.2	Anchor Bank Phantom Stock Plan (1)
10.3	Form of 401(k) Retirement Plan (1)
10.4	Form of Employment Agreement between Anchor Bank and Jerald L. Shaw and Terri L. Degner (3)
10.5	Form of Severance Agreement and Release (4)
10.6	Agreement in Connection with Anchor Annual Meeting between Anchor Bancorp and Joel S. Lawson IV dated October 21, 2015 (5)
10.7	Standstill Agreement and Non-Disclosure Agreement by and among Anchor Bancorp, Joel S. Lawson IV and Varonica S. Ragan dated December 8, 2015 (6)
10.8	Anchor Bancorp, Inc. 2015 Equity Incentive Plan ("Equity Incentive Plan") (7)
10.9	Form of Incentive Stock Option Award Agreement under the Equity Incentive Plan (7)
10.10	Form of Non-Qualified Stock Option Award Agreement under the Equity Incentive Plan (7)
10.11	Form of Restricted Stock Award agreement under the Equity Incentive Plan (7)
10.12	Form of Restricted Stock Unit Award agreement under the Equity Incentive Plan (7)
14	Code of Ethics (8)
21	Subsidiaries of Registrant
23	Consent of Independent Registered Public Accounting Firm - Moss Adams LLP
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
101	The following materials from Anchor Bancorp's Annual Report on Form 10-K for the year ended June 30, 2016, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Statements of Financial Condition; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income; (4) Consolidated Statements of Stockholders' Equity; (5) Consolidated Statements of Cash Flows; and (6) Notes to Consolidated Financial Statements

________________________

(1	)	Filed on October 24, 2008, as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-154734) and incorporated herein by reference.
(2	)	Filed as an exhibit to the Company’s Current Report on Form 8-K dated December 10, 2015 and incorporated herein by reference.
(3	)	Filed as an exhibit to the Company's Current Report on Form 8-K dated May 22, 2014 and incorporated herein by reference.
(4	)	Filed as an exhibit to the Company's Current Report on Form 8-K dated January 22, 2015 and incorporated herein by reference.
(5	)	Filed as an exhibit to the Company's Current Report on Form 8-K dated October 23, 2015 and incorporated herein by reference.
(6	)	Filed as an exhibit to the Company's Current Report on Form 8-K dated December 10, 2015 and incorporated herein by reference.
(7	)	Filed as an exhibit to the Company's Registration Statement on Form S-8 date December 8, 2015 and incorporated herein by reference.
(8	)	The Company elects to satisfy Regulation S-K §229.406(c) by posting its Code of Ethics on its website at www.anchornetbank.com.

131

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ANCHOR BANCORP
September 9, 2016	By:/s/Jerald L. Shaw
	Jerald L. Shaw
	President, Chief Executive Officer and Director
	(Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:/s/Jerald L. Shaw	September 9, 2016
Jerald L. Shaw        President, Chief Executive Officer and Director       (Principal Executive Officer)
By: /s/Terri L. Degner	September 9, 2016
Terri L. Degner        Chief Financial Officer and Director       (Principal Financial and Accounting Officer)
By: /s/Robert D. Ruecker	September 9, 2016
Robert D. Ruecker
Chairman of the Board and Director
By: /s/Douglas A. Kay	September 9, 2016
Douglas A. Kay
Director
By: /s/George W. Donovan	September 9, 2016
George W. Donovan
Director
By: /s/Reid A. Bates	September 9, 2016
Reid A. Bates
Director
By: /s/Varonica S. Ragan	September 9, 2016
Varonica S. Ragan
Director
By:______________________________________________	September __, 2016
Gordon Stephenson
Director

132

INDEX TO EXHIBITS

Exhibit Number

21	Subsidiaries of the Registrant
23	Consent of Independent Registered Public Accounting Firm - Moss Adams LLP
31.1	Certification of Chief Executive Officer of Anchor Bancorp Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer of Anchor Bancorp Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer of Anchor Bancorp Pursuant to Section 906 of the Sarbanes-Oxley Act
101	The following materials from Anchor Bancorp's Annual Report on Form 10-K for the year ended June 30, 2016, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Statements of Financial Condition; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income (Loss); (4) Consolidated Statements of Stockholders' Equity; (5) Consolidated Statements of Cash Flows; and (6) Notes to Consolidated Financial Statements

EX-21

Exhibit 21

Subsidiaries of the Registrant

Parent

Anchor Bancorp

Subsidiaries	Percentage of Ownership	Jurisdiction or State of Incorporation
Anchor Bank	100%	Washington
Anchor Financial Services, Inc. (1)	100%	Washington

(1) Wholly-owned subsidiary of Anchor Bank.

EX-23

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (No. 333-208380) on Form S-8 of our report dated September 7, 2016, relating to the consolidated financial statements of Anchor Bancorp appearing in this Annual Report on Form 10‑K of Anchor Bancorp for the year ended June 30, 2016.

/s/ Moss Adams LLP

Everett, Washington

September 7, 2016

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Jerald L. Shaw, President and Chief Executive Officer of Anchor Bancorp, certify that:

1. I have reviewed this Annual Report on Form 10-K of Anchor Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2016	/s/Jerald L. Shaw
	Jerald L. Shaw
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Executive Officer Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Terri L. Degner, Executive Vice President and Chief Financial Officer of Anchor Bancorp, certify that:

1. I have reviewed this Annual Report on Form 10-K of Anchor Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2016	/s/Terri L. Degner
	Terri L. Degner
	Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

Certification of Chief Executive Officer and Chief Financial Officer of Anchor Bancorp

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned hereby certify, in their capacity as an officer of the Anchor Bancorp, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Annual Report on Form 10-K, that:

1. the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the report fairly presents, in all material respects, the company's financial condition and results of operations as of the dates and for the periods presented in the financial statements included in the report.

/s/Jerald L. Shaw	/s/Terri L. Degner
Jerald L. Shaw	Terri L. Degner
President and	Executive Vice President and
Chief Executive Officer	Chief Financial Officer
Date: September 9, 2016

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Jun. 30, 2016	Sep. 09, 2016	Dec. 31, 2015
Document and Entity Information
Entity Registrant Name	Anchor Bancorp
Entity Central Index Key	0001448301
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Document Type	10-K
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		2,505,219
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 64.9

XML

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
ASSETS
Cash and cash equivalents	$ 8,320	$ 14,450
Securities available-for-sale, at fair value	23,665	29,565
Securities held-to-maturity, at amortized cost	6,291	7,617
Loans held for sale	1,864	505
Loans receivable, net of allowance for loan losses	347,351	283,444
Life insurance investment, net of surrender charges	19,515	19,001
Accrued interest receivable	1,182	1,069
Real estate owned, net	373	797
Federal Home Loan Bank (FHLB) stock, at cost	2,959	853
Property, premises, and equipment, at cost, less accumulated depreciation	10,001	10,370
Deferred tax asset, net	8,870	8,867
Prepaid expenses and other assets	1,113	2,692
Total assets	431,504	379,230
Deposits:
Noninterest-bearing	50,781	44,719
Interest-bearing	250,113	255,093
Total deposits	300,894	299,812
FHLB advances	62,000	10,000
Advance payments by borrowers for taxes and insurance	1,114	1,002
Supplemental Executive Retirement Plan liability	1,691	1,814
Accounts payable and other liabilities	2,609	2,880
Total liabilities	368,308	315,508
Commitments and Contingencies (Note 16)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value per share	0	0
Common stock, $0.01 par value per share	25	25
Additional paid-in capital	22,157	23,404
Retained earnings	42,235	41,740
Unearned Employee stock ownership plan (ESOP) shares	(672)	(736)
Accumulated other comprehensive income, net of tax	(549)	(711)
Total stockholders' equity	63,196	63,722
Total liabilities and stockholders' equity	$ 431,504	$ 379,230

XML

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Assets [Abstract]
Amortized cost of securities available for sale	$ 23,550	$ 29,696
Fair value of securities held to maturity	6,425	7,692
Allowance for loan losses	3,779	3,721
Accumulated depreciation of property, premises and equipment	$ 11,382	$ 13,482
STOCKHOLDERS' EQUITY
Preferred stock par value per share	$ 0.01	$ 0.01
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value per share	$ 0.01	$ 0.01
Common stock shares authorized	45,000,000	45,000,000
Common stock shares issued	2,550,000	2,550,000
Common stock shares outstanding	2,515,803	2,480,865

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Interest income:
Loans receivable, including fees	$ 16,779	$ 16,006	$ 16,718
Securities	69	57	115
Mortgage-backed securities	676	823	956
Total interest income	17,524	16,886	17,789
Interest expense:
Deposits	2,587	2,730	2,936
FHLB advances	243	346	745
Total interest expense	2,830	3,076	3,681
Net Interest Income before provision for loan losses	14,694	13,810	14,108
Provision for loan losses	340	0	0
Net interest income after provision for loan losses	14,354	13,810	14,108
Noninterest income
Deposit service fees	1,347	1,381	1,562
Other deposit fees	721	735	790
Gain on sale of investments	0	47	0
Other loan fees	707	588	657
(Gain) loss on sale of loans	158	(15)	8
Increase in cash surrender value of life insurance investment	514	540	549
Gain on death benefit of life insurance investment, net	26	479	0
Other income	732	748	509
Total noninterest income	4,205	4,503	4,075
Noninterest expense
Compensation and benefits	9,708	8,003	8,100
General and administrative expenses	3,175	2,663	3,086
Real estate owned impairment	83	32	1,090
Real estate owned holding costs	63	267	447
Federal Deposit Insurance Corporation (FDIC) insurance premiums	264	342	505
Information technology	1,760	1,739	1,710
Occupancy and equipment	1,875	1,944	1,833
Deposit services	477	570	725
Marketing	674	710	679
Loss (gain) on sale of property, premises, and equipment	4	820	(8)
Gain on sale of real estate owned	(58)	(283)	(407)
Total noninterest expense	18,025	16,807	17,760
Income (loss) before (benefit) provision for income taxes	534	1,506	423
Provision (benefit) for income taxes	39	(8,321)	0
Net income	$ 495	$ 9,827	$ 423
Basic earnings per share	$ 0.20	$ 3.97	$ 0.17
Diluted earnings per share	$ 0.20	$ 3.97	$ 0.17

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 495	$ 9,827	$ 423
OTHER COMPREHENSIVE INCOME, net of tax
Unrealized holding gain on available-for-sale securities during the period	162	96	761
Adjustment for realized gains included in net income	0	(47)	0
Other comprehensive income, net of tax	162	49	761
COMPREHENSIVE INCOME	$ 657	$ 9,876	$ 1,184

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Income tax (benefit) expense on unrealized holding gain on available-for-sale securities	$ 84	$ 9	$ 0

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Unearned ESOP shares	Accumulated Other Comprehensive Income (Loss), net of tax
Beginning balance, shares at Jun. 30, 2013		2,550,000
Beginning balance at Jun. 30, 2013	$ 52,367	$ 25	$ 23,229	$ 31,490	$ (856)	$ (1,521)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	423			423
Other comprehensive income net of tax	761					761
ESOP shares allocated	123		64		59
Ending balance, shares at Jun. 30, 2014		2,550,000
Ending balance at Jun. 30, 2014	53,674	$ 25	23,293	31,913	(797)	(760)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	9,827			9,827
Other comprehensive income net of tax	49					49
ESOP shares allocated	$ 172		111		61
Ending balance, shares at Jun. 30, 2015	2,550,000	2,550,000
Ending balance at Jun. 30, 2015	$ 63,722	$ 25	23,404	41,740	(736)	(711)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	495			495
Other comprehensive income net of tax	$ 162					162
Repurchase and retirement of common stock	(127,500)
Repurchase and retirement of common stock, Value	$ (2,952)		(2,952)
Compensation related to restricted stock awards	$ 1,822		1,822
Issuance of new shares related to stock award plan, net	97,903
Issuance of new shares related to stock award plan, value, net	$ (216)		(216)
Restricted Stock Award, Forfeitures	(4,600)
ESOP shares allocated	$ 163		99		64
Ending balance, shares at Jun. 30, 2016	2,550,000	2,515,803
Ending balance at Jun. 30, 2016	$ 63,196	$ 25	$ 22,157	$ 42,235	$ (672)	$ (549)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 495	$ 9,827	$ 423
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	650	665	608
Net amortization of premiums on securities	411	576	725
Provision for loan losses	340	0	0
ESOP expense	163	172	123
Real estate owned impairment	83	32	1,090
Deferred income taxes benefit	(87)	148	0
Allocated Share-based Compensation Expense	1,822	0	0
Increase in cash surrender value of life insurance investment	(514)	(540)	(549)
Gain on death benefit of life insurance investment	(26)	(479)	0
(Gain) loss on sale of loans	(158)	15	(8)
Gain on sale of investments	0	(47)	0
Originations of loans held for sale	(8,925)	(1,572)	(2,303)
Proceeds from sale of loans held for sale	7,724	1,053	2,532
Loss (gain) on sale of property, premises, and equipment	4	820	(8)
Gain on sale of real estate owned	(58)	(283)	(407)
Changes in operating assets and liabilities:
Accrued interest receivable	(113)	167	347
Prepaid expenses and other assets	1,579	370	4,129
Federal Income Tax Expense (Benefit), Continuing Operations	0	(8,469)	0
Supplemental Executive Retirement Plan (SERP)	(123)	99	12
Accounts payable and other liabilities	(271)	(1,534)	480
Net cash provided by operating activities	2,996	1,020	7,194
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of available-for-sale securities	250	2,335	995
Principal repayments on mortgage-backed securities available-for-sale	5,535	6,549	8,435
Principal repayments on mortgage-backed securities held-to-maturity	1,277	1,137	1,464
Payments for (Proceeds from) Loans and Leases	(64,796)	(3,392)	(9,569)
Proceeds from sale of real estate owned	973	6,789	6,846
Capital improvements on real estate owned	0	(27)	(591)
Proceeds from sale of property, premises, and equipment, net	2	2	8
Purchase of fixed assets	(287)	(1,303)	(527)
Payments for (Proceeds from) Federal Home Loan Bank Stock	(2,106)	5,193	0
Net cash provided by investing activities	(59,152)	17,283	7,061
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits	1,082	(11,222)	(17,550)
Net change in advance payments by borrowers for taxes and insurance	112	111	100
Proceeds from FHLB advances	103,000	36,110	0
Repayment of FHLB advances	(51,000)	(43,610)	(47,400)
Repurchase and retirement of common stock	(2,952)	0	0
Stock award net settlement	(216)	0	0
Net cash used for financing activities	50,026	(18,611)	(64,850)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(6,130)	(308)	(50,595)
Beginning of period	14,450	14,758	65,353
End of period	8,320	14,450	14,758
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest	2,789	3,119	3,732
Income taxes	126	0	0
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Net loans transferred to real estate owned	574	2,241	5,793
Unrealized holding gains on available-for-sale securities, net of tax	162	96	761
Payments for (Proceeds from) Life Insurance Policies	$ 0	$ 1,545	$ 0

XML

Organization and Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

General - Anchor Bancorp is a bank holding company which operates primarily through its subsidiary, Anchor Bank (the Bank) (collectively referred to as the "Company"). Anchor Bank is a community-based savings bank primarily serving Western Washington through its 10 full-service banking offices (including one Wal-Mart in-store location) located 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.

Segment Information - The Bank’s operations include commercial banking services, such as lending activities, deposit products, and other cash management services. The performance of the Bank is reviewed by the Board of Directors and Senior Management Committee. The Senior Management Committee, which is the senior decision-making group of the Bank, is composed of three members, including the President and Chief Executive Officer, the Executive Vice President, Chief Financial Officer, and Treasurer, and the Executive Vice President and Chief Lending Officer. The Company’s activities are considered to be a single industry segment for financial reporting purposes.

Financial statement presentation and use of estimates - The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and reporting practices applicable to the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, as of the date of the consolidated statements of financial condition, and revenues and expenses for the period. Actual results could differ from estimated amounts. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the valuation of real estate owned, impaired loans and deferred tax assets.

Principles of consolidation - The consolidated financial statements include the accounts of Anchor Bancorp and its wholly-owned subsidiary, Anchor Bank. All material intercompany accounts have been eliminated in the consolidation.

Subsequent events - The Company has evaluated events and transactions subsequent to June 30, 2016 for potential recognition or disclosure.

Cash and cash equivalents - For purposes of the consolidated statements of cash flows, the Company considers all deposits and funds in interest-bearing accounts with an original term to maturity of three months or less to be cash equivalents. The Bank maintains its cash in bank deposit accounts that, at times, may exceed the federally insured limits. The Bank has not experienced any losses in such accounts and evaluates the credit quality of these banks and financial institutions to mitigate its credit risk.

Restricted assets - Federal Reserve regulations require maintenance of certain minimum reserve balances on deposit with the Federal Reserve Bank of San Francisco ("FRB"). The amount required to be on deposit was $1.9 million and $1.4 million at June 30, 2016 and 2015, respectively. The Bank was in compliance with this requirement at June 30, 2016 and 2015.

Investment securities - Securities are classified as held-to-maturity when the Company has the ability and positive intent to hold them to maturity. Securities held-to-maturity are carried at cost, adjusted for amortization of premiums and accretion of discounts to maturity. Securities bought and held principally for the purpose of sale in the near term are classified as trading securities and are carried at fair value. There were no trading securities at June 30, 2016 and 2015. Securities not classified as trading or held-to-maturity are classified as available-for-sale. Unrealized holding gains and losses on securities available-for-sale are excluded from earnings and are reported net of tax as a separate component of equity until realized. These unrealized holding gains and losses, net of tax, are also included as a component of comprehensive income. Realized gains and losses are recorded on the trade date and are determined using the specific identification method. Amortization of premiums and accretion of discounts are recognized into interest income using the effective interest method over the period to maturity.

The Company evaluates securities for other-than-temporary impairment on a periodic basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and whether the Bank has the intent and ability to hold these securities or if it is likely that it will be required to sell the securities before their anticipated recovery. In analyzing an issuer’s financial condition, the Bank may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. If the Bank does not intend to sell the security and it is not likely it will be required to sell the security prior to recovery of its cost basis, the credit loss component of impairment is recognized in earnings and impairment associated with non-credit factors, such as market liquidity, is recognized in other comprehensive income, net of tax. A credit loss is the difference between the cost basis of the security and the present value of cash flows expected to be collected, discounted at the security's effective interest rate at the date of acquisition. The cost basis of an other-than-temporarily impaired security is written down by the amount of impairment recognized in earnings. The new cost basis is not adjusted for subsequent recoveries in fair value. However, the difference between the new amortized cost basis and the cash flows expected to be collected is accreted as interest income. The total other-than-temporary impairment is presented in the consolidated statements of income with a reduction for the amount of other-than-temporary impairment that is recognized in other comprehensive income, if any.

Federal Home Loan Bank stock - The Bank’s investment in FHLB stock is carried at cost, which approximates fair value. As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances. At June 30, 2016 and 2015, the Bank’s minimum investment requirement was $3.0 million and $853,000, respectively. The Bank was in compliance with the FHLB minimum investment requirement at June 30, 2016 and 2015.

Management evaluates FHLB stock for impairment as needed. Management’s determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as (1) the significance of any decline in net assets of the FHLB as compared with the capital stock amount for the FHLB and the length of time this situation has persisted; (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; (3) the impact of legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB; and (4) the liquidity position of the FHLB. Based on its evaluation, management determined that there was no impairment of FHLB stock at June 30, 2016 and 2015, respectively.

Securitizations - The Bank historically has securitized and services interests in residential home loans. The Bank has securitized these loans through the Federal Home Loan Mortgage Corporation ("FHLMC"). Of the total serviced loan portfolio of $76.9 million and $81.1 million at June 30, 2016 and 2015, $20.4 million and $24.7 million, respectively, represent securitized loans. The loans have been sold without recourse, servicing retained. There were no new securitizations during the years ended June 30, 2016 and 2015. All principal, interest, late fees, and escrow payments are collected and remitted to the investor daily.

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of unamortized nonrefundable loan fees and related direct loan origination costs. Deferred net fees and costs are recognized in interest income over the loan term using a method that generally produces a level yield on the unpaid loan balance. Interest is accrued primarily on a simple interest basis.

Nonaccrual loans are those for which management has discontinued accrual of interest because there exists significant uncertainty as to the full and timely collection of either principal or interest or because such loans have become contractually past due 90 days with respect to principal or interest. When a loan is placed on nonaccrual, all previously accrued but uncollected interest is reversed against current-period interest income. All subsequent payments received are first applied to unpaid principal and then to unpaid interest. Interest income is accrued at such time as the loan is brought fully current as to both principal and interest, and, in management’s judgment, such loans are considered to be fully collectible.

Loans are considered impaired when the Bank 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.

Troubled debt restructured loans- A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider. These concessions may include interest rate reductions, principal forgiveness, extension of maturity date and other actions intended to minimize potential losses. Generally, a nonaccrual loan that is restructured remains on nonaccrual status for a period of six months to demonstrate that the borrower can meet the restructured terms. If the borrower's performance under the new terms is not reasonably assured, the loan remains classified as a nonaccrual loan.

Allowance for loan losses - Key elements of the allowance for loan loss methodology include the specific loan loss reserve, the general loan loss reserve, and the unallocated reserve, individually described below.

The specific loan loss reserve is established for individually impaired loans when the discounted cash flow or collateral value of the impaired loan is lower than the carrying value of that loan. Restructured loans are accounted for as impaired loans.

The general loan loss reserve is calculated by applying a specific loss percentage factor to the various groups of loans by loan type, based upon historic loss experience, and adjusted based upon the risk grade attached to any loan or group of loans. This portion of the allowance may be further adjusted for qualitative and environmental conditions such as changes in lending policies and procedures; experience and ability of lending staff; concentrations of credit; national, regional, and local economic conditions; and other factors including levels and trends of delinquency.

The unallocated reserve recognizes the estimation risk associated with the mathematical calculations applied in both specific and general portions of the allowance for loan loss, together with the assumption risk relative to management’s assessment of the variables included in the qualitative and environmental factors.

The Bank maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on ongoing quarterly assessments of the probable estimated losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses, which is charged against current-period operating results and decreased by the amount of charge-offs, net of recoveries. Various regulatory agencies, as part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require management to make adjustments to the allowance using judgments available to them at the time of their examination.

Loans held-for-sale - Loans originated as held-for-sale are carried at the lower of cost or market value on an aggregate basis. Net unrealized losses, if any, are recognized through a valuation allowance by a charge to income. Nonrefundable fees and direct loan origination costs related to loans held-for-sale are deferred and recognized when the loans are sold.

Real estate owned - Real estate owned (REO) and other repossessed items consist of properties or assets acquired through or in lieu of foreclosure in full satisfaction of a loan receivable, and are recorded initially at fair value of the REO properties less estimated costs of disposal with any initial losses charged to the allowance for loan losses. Costs relating to development and improvement of the properties or assets are capitalized, while costs relating to holding the properties or assets are expensed. Valuations are periodically performed by management, and a charge to earnings is recorded if the recorded value of a property exceeds its estimated fair value.

Gains or losses at the time the property is sold are charged or credited to noninterest expense in the period in which they are realized. The amounts the Bank will ultimately recover from REO may differ substantially from the carrying value of the assets because of future market factors beyond the control of the Bank or because of changes in the Bank’s strategy for recovering its investments.

Life insurance investment - The Bank is the sole beneficiary of life insurance policies that are recorded at their cash surrender value, net of any surrender charges, and cover certain key executives of the Bank.

Transfers of financial assets - Transfers of financial asset, a group of financial assets, or a participating interest in a financial asset are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Mortgage servicing rights - Mortgage servicing rights are recorded as separate assets at fair value when mortgage loans are originated and subsequently sold or securitized (and held as available-for-sale securities) with servicing rights retained. Periodically, the Bank estimates the fair value of its mortgage servicing rights based upon observed market prices.

Mortgage servicing rights are amortized in proportion to, and over, the estimated period that net servicing income will be collected. The carrying value of mortgage servicing rights is periodically evaluated in relation to estimated future cash flows to be received, and such carrying value is adjusted for indicated impairments based on management’s best estimate of the remaining cash flows. The Bank has stratified its mortgage servicing rights based on whether the loan was sold or securitized and the interest rate of the underlying loans. The Bank uses the direct write-down method for mortgage servicing rights where the serviced loan has been paid off. The mortgage servicing asset was $206,000 and $235,000 at June 30, 2016 and 2015, respectively, and is included in prepaid expenses and other assets in the consolidated statements of financial condition and is not considered material to the consolidated financial statements.

Property, premises, and equipment - Property, premises, and equipment are stated at cost less accumulated depreciation. The depreciation charged is computed on the straight-line method over estimated useful lives as follows:

Buildings	40 years
Furniture and equipment	5-10 years
Improvements	10 years
Computer equipment	3 years

Income taxes-The provision for income taxes includes current and deferred income tax expense on net income adjusted for permanent and temporary differences such as interest income on state and municipal securities and BOLI. Deferred tax assets and liabilities are recognized for the expected future tax consequences of existing temporary differences between the financial reporting and tax reporting basis of assets and liabilities using enacted tax laws and rates. 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. On a quarterly basis, management evaluates deferred tax assets to determine if these tax benefits are expected to be realized in future periods. This determination is based on facts and circumstances, including the Company's current and future tax outlook. To the extent a deferred tax asset is no longer considered “more likely than not” to be realized, a valuation allowance is established.

Marketing costs - The Company expenses marketing costs as they are incurred. Total marketing expenses were $674,000, $710,000, and $679,000 for the years ended June 30, 2016, 2015, and 2014, respectively.

Financial instruments - In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received.

Employee Stock Ownership Plan (ESOP) - The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of stockholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.

Earnings Per Share (EPS) - Basic EPS is computed by dividing net income or (loss) by the weighted-average number of common shares outstanding during the period. As ESOP shares are committed to be released they become outstanding for EPS calculation purposes. ESOP shares not committed to be released are not considered outstanding. The basic EPS calculation excludes the dilutive effect of all common stock equivalents. 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 (loss) per share reflects the weighted-average potential dilution that could occur if all potentially dilutive securities or other commitments to issue common stock were exercised or converted into common stock using the treasury stock method.

Comprehensive income - Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale investments, are reported as a separate component of stockholders' equity.

Fair value - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair values. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Bank’s estimates for market assumptions.

Recently issued accounting pronouncements - In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-14, Revenue from Contracts with Customers, deferring the effective date of the new revenue standard by one year. The standard also allows entities to choose to adopt the standard as of the original effective date. The FASB decided, based on its outreach to various stakeholders and the forthcoming amendments to the new revenue standard, that a deferral is necessary to provide adequate time to effectively implement the new revenue standard. The adoption of ASU No. 2015-14 is not expected to have a material impact on the Company's consolidated financial statements.

In August 2015, FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. The ASU provides guidance not previously included in ASU 2015-03 regarding debt issuance related to line-of-credit arrangements. The amendment in this ASU allows an entity to present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs over the term of the line-of-credit arrangement, regardless if there are any outstanding borrowings on the line-of-credit arrangement. This ASU was effective for fiscal years beginning after December 15, 2015. The adoption of ASU No. 2015-15 did not have a material impact on the Company's consolidated financial statements.

In September 2015, FASB issued ASU No. 2015-16, Business Combinations (Topic 805). The ASU simplifies the accounting for measurement period adjustments. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period when the adjustment amounts are determined. The acquirer is required to record in the same period's financial statements the effect on earnings from changes in depreciation, amortization, or other income effects resulting from the change to provisional amounts, calculated as if the accounting had been completed at the acquisition date. The acquirer must present separately on the income statement, or disclose in the notes, the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the provisional amount had been recognized at the acquisition date. This ASU was effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The adoption of ASU No. 2015-16 did not have a material impact on the Company's consolidated financial statements.

In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The ASU is part of the FASB simplification initiative aimed at reducing complexity in accounting standards. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. Importantly, the guidance does not change the existing requirement that only permits offsetting within a jurisdiction - that is, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. This ASU is effective for annual periods beginning after December 31, 2016 and interim periods within those annual periods. The adoption of ASU No. 2015-17 is not expected to have a material impact on the Company's consolidated financial statements.

In January 2016, 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 after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU No. 2016-01 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In February 2016, 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 Company is currently evaluating the provisions of ASU No. 2016-02 to determine any material impact the new standard will have on the Company's consolidated financial statements.

In March 2016, FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments in this ASU require entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the provisions of ASU No. 2016-08 to determine any material impact there may be on the Company's consolidated financial statements.

In March 2016, 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 is effective for annual and interim periods beginning after December 15, 2016. The adoption of ASU 2016-09 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations. The amendments in this ASU provide more detailed guidance on the revenue recognition standard including additional implementation guidance and examples of identifying performance obligations and licenses of intellectual property. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that year. The Company is currently evaluating the provisions of ASU No. 2016-10 to determine any material impact there may be on the Company's consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this ASU clarified several key areas of the revenue recognition standard including accessing collectability, presenting sales taxes and other similar taxes collected from customers, noncash consideration, contract modification at transitions, completed contracts at transition, and disclosing the accounting change in the period of adoption.The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that year. The Company is currently evaluating the provisions of ASU No. 2016-12 to determine any material impact there may be on the Company's consolidated financial statements.

In June 2016, 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. The adoption of ASU No. 2016-13 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

XML

Securities

12 Months Ended

Jun. 30, 2016

Investments [Abstract]

Securities

Securities

The amortized cost and estimated fair market values of investment securities were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2016
Securities available-for-sale
Municipal bonds	$	175	$	—	$	—		$	175
Mortgage-backed securities:
FHLMC (1)	9,442		161		(44		)	9,559
FNMA (2)	13,199		67		(62		)	13,204
GNMA (3)	734		—		(7		)	727
	$	23,550	$	228	$	(113	)	$	23,665
Securities held-to-maturity
Mortgage-backed securities:
FHLMC (1)	2,793		72		(20		)	2,845
FNMA (2)	1,513		103		(3		)	1,613
GNMA (3)	1,985		5		(23		)	1,967
	$	6,291	$	180	$	(46	)	$	6,425

⁽¹⁾ Federal Home Loan Mortgage Corporation (Freddie Mac)

⁽²⁾ Federal National Mortgage Association (Fannie Mae)

⁽³⁾ Government National Mortgage Association (Ginnie Mae)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Securities available-for-sale
Municipal bonds	$	434	$	1	$	—		$	435
Mortgage-backed securities:
FHLMC	11,780		134		(123		)	11,791
FNMA	16,534		70		(196		)	16,408
GNMA	948		—		(17		)	931
	$	29,696	$	205	$	(336	)	$	29,565
Securities held-to-maturity
Municipal bonds	$	119	$	—	$	—		$	119
Mortgage-backed securities:
FHLMC	3,367		95		(56		)	3,406
FNMA	1,858		124		(22		)	1,960
GNMA	2,273		—		(66		)	2,207
	$	7,617	$	219	$	(144	)	$	7,692

There were 24 and 30 securities in an unrealized loss position at June 30, 2016 and June 30, 2015, respectively. The unrealized losses on investments in debt securities relate principally to the general change in interest rates in changing market conditions 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 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 June 30, 2016 and 2015 were as follows:

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016
Securities available-for-sale
Mortgage-backed securities:
FHLMC	$	710	$	(5	)	$	4,031	$	(39	)	$	4,741	$	(44	)
FNMA	855		(1		)	5,900		(61		)	6,755		(62		)
GNMA	—		—			727		(7		)	727		(7		)
	$	1,565	$	(6	)	$	10,658	$	(107	)	$	12,223	$	(113	)

	Less Than 12 Months				12 Months or Longer					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	—	$	—	$	1,973	$	(20	)	$	1,973	$	(20	)
FNMA	—		—		684		(3		)	684		(3		)
GNMA	—		—		989		(23		)	989		(23		)
	$	—	$	—	$	3,646	$	(46	)	$	3,646	$	(46	)

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2015
Securities available-for-sale
Mortgage-backed securities:
FHLMC	$	747	$	(1	)	$	5,404	$	(122	)	$	6,151	$	(123	)
FNMA	3,105		(45		)	6,898		(151		)	10,003		(196		)
GNMA	—		—			931		(17		)	931		(17		)
	$	3,852	$	(46	)	$	13,233	$	(290	)	$	17,085	$	(336	)

	Less Than 12 Months				12 Months or Longer					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2015
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	—	$	—	$	2,299	$	(56	)	$	2,299	$	(56	)
FNMA	—		—		772		(22		)	772		(22		)
GNMA	—		—		2,207		(66		)	2,207		(66		)
	$	—	$	—	$	5,278	$	(144	)	$	5,278	$	(144	)

Contractual maturities of securities at June 30, 2016 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.

	Amortized Cost		Fair Value
June 30, 2016
Securities available-for-sale
Municipal bonds:
Due after ten years	$	175	$	175
Mortgage-backed securities:
FHLMC	9,442		9,559
FNMA	13,199		13,204
GNMA	734		727
	$	23,550	$	23,665
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	2,793	$	2,845
FNMA	1,513		1,613
GNMA	1,985		1,967
	$	6,291	$	6,425

Sales, maturities, and calls of securities for the years presented are summarized as follows:

	Year Ended June 30,
	2016		2015			2014
Proceeds from sales	$	—	$	2,355		$	—
Proceeds from maturities and calls	250		—			995
Gross realized gains	—		65			—
Gross realized losses	—		(18		)	—

Pledged securities at the dates indicated are summarized as follows:

	June 30, 2016				June 30, 2015
Pledged to secure:	Book Value		Fair Value		Book Value		Fair Value
Certain public deposits	$	12,575	$	12,719	$	12,184	$	12,189
FHLB borrowings	1,302		1,358		1,727		1,788
Federal Reserve borrowing line	973		978		1,001		990

XML

Loans Receivable, Net

12 Months Ended

Jun. 30, 2016

Loans Receivable, Net [Abstract]

Loans Receivable, Net

Loans Receivable

Loans receivable consisted of the following at the dates indicated:

	June 30,
	2016		2015
Real estate:
One-to-four family	$	61,230	$	57,944
Multi-family	53,742		43,249
Commercial	149,527		128,306
Construction	21,793		11,731
Land	6,839		4,069
Total real estate	293,131		245,299
Consumer:
Home equity	16,599		17,604
Credit cards	2,969		3,289
Automobile	597		686
Other consumer	1,933		2,347
Total consumer	22,098		23,926
Commercial business	36,848		18,987
Total loans	352,077		288,212
Less:
Deferred loan fees and loan premiums, net	947		1,047
Allowance for loan losses	3,779		3,721
Loans receivable, net	$	347,351	$	283,444

A summary of activity in the allowance for loan losses follows:

	June 30,
	2016			2015			2014
Beginning balance	$	3,721		$	4,624		$	5,147
Provision for losses	340			—			—
Charge-offs	(957		)	(1,497		)	(2,434		)
Recoveries	675			594			1,911
Ending balance	$	3,779		$	3,721		$	4,624

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 2016:

	One-to- four family			Multi- family		Commercial real estate			Construction			Land		Consumer (1)			Commercial business			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,113		$	95	$	262		$	247		$	75	$	445		$	1,405		$	79		$	3,721
Provision (benefit) for loan losses	(251		)	353		1,295			(325		)	—		343			(996		)	(79		)	340
Charge-offs	(258		)	—		(225		)	—			—		(390		)	(84		)	—			(957		)
Recoveries	194			6		1			349			—		118			7			—			675
Ending balance	$	798		$	454	$	1,333		$	271		$	75	$	516		$	332		$	—		$	3,779

⁽¹⁾  Consumer loans include home equity, credit cards, auto, 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 year ended June 30, 2015:

	One-to- four family			Multi- family			Commercial real estate			Construction			Land		Consumer (1)			Commercial business			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,550		$	229		$	682		$	190		$	74	$	587		$	1,231		$	81		$	4,624
Provision (benefit) for loan losses	(5		)	25			(80		)	(197		)	1		94			164			(2		)	—
Charge-offs	(561		)	(159		)	(340		)	—			—		(351		)	(86		)	—			(1,497		)
Recoveries	129			—			—			254			—		115			96			—			594
Ending balance	$	1,113		$	95		$	262		$	247		$	75	$	445		$	1,405		$	79		$	3,721

⁽¹⁾  Consumer loans include home equity, credit cards, auto, 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 year ended June 30, 2014:

	One-to- four family			Multi- family		Commercial real estate			Construction			Land			Consumer (1)			Commercial business			Unallocated		Total
Allowance for loan losses:
Beginning balance	$	1,393		$	156	$	671		$	356		$	531		$	817		$	1,172		$	51	$	5,147
Provision (benefit) for loan losses	665			73		(558		)	(540		)	(457		)	508			279			30		—
Charge-offs	(897		)	—		(403		)	—			—			(876		)	(258		)	—		(2,434		)
Recoveries	389			—		972			374			—			138			38			—		1,911
Ending balance	$	1,550		$	229	$	682		$	190		$	74		$	587		$	1,231		$	81	$	4,624

⁽¹⁾  Consumer loans include home equity, credit cards, auto, and other consumer loans. The only consumer loans with impairment are home equity loans.

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2016:

	Recorded Investments		Unpaid Principal Balance		Related Allowance
With no allowance recorded
One-to-four family	$	2,049	$	2,269	$	—
Commercial real estate	319		547		—
Land	174		188		—
Home equity	60		62		—
Commercial business	64		125		—
With an allowance recorded
One-to-four family	7,234		7,284		419
Land	316		316		4
Home equity	367		367		145
Commercial business	124		138		22
Total
One-to-four family	9,283		9,553		419
Commercial real estate	319		547		—
Land	490		504		4
Home equity	427		429		145
Commercial business	188		263		22
Total	$	10,707	$	11,296	$	590

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2015:

	Recorded Investments		Unpaid Principal Balance		Related Allowance
With no allowance recorded
One-to-four family	$	1,557	$	1,860	$	—
Land	231		245		—
Home equity	64		65		—
Other consumer	31		32		—
Commercial business	64		126		—
With an allowance recorded
One-to-four family	7,716		7,743		500
Land	408		408		3
Home equity	212		212		26
Commercial business	868		868		211
Total
One-to-four family	9,273		9,603		500
Land	639		653		3
Home equity	276		277		26
Other consumer	31		32		—
Commercial business	932		994		211
Total	$	11,151	$	11,559	$	740

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2016:

	Year Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	1,913	$	62
Commercial real estate	—		15
Land	210		11
Home equity	63		3
Other consumer	16		—
Commercial business	95		9
With an allowance recorded
One-to-four family	7,500		310
Land	362		22
Home equity	290		19
Commercial business	503		2
Total
One-to-four family	9,413		372
Commercial real estate	—		15
Land	572		33
Home equity	353		22
Other consumer	16		—
Commercial business	598		11
Total	$	10,952	$	453

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2015:

	Year Ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	3,802	$	67
Multi-family	1,132		—
Commercial real estate	984		—
Land	355		12
Home equity	153		3
Other consumer	—		1
Commercial business	723		8
With an allowance recorded
One-to-four family	7,989		308
Land	765		25
Home equity	325		10
Commercial business	469		36
Total
One-to-four family	11,791		375
Multi-family	1,132		—
Commercial real estate	984		—
Land	1,120		37
Home equity	478		13
Other consumer	—		1
Commercial business	1,192		44
Total	$	16,697	$	470

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2014:

	Year Ended June 30, 2014
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	4,199	$	97
Multi-family	1,132		—
Commercial real estate	1,094		12
Land	393		18
Home equity	194		6
Commercial business	723		8
With an allowance recorded
One-to-four family	8,360		379
Multi-family	79		—
Commercial real estate	925		21
Land	815		32
Home equity	330		11
Commercial business	231		20
Total
One-to-four family	12,559		476
Multi-family	1,211		—
Commercial real estate	2,019		33
Land	1,208		50
Home equity	524		17
Commercial business	954		28
Total	$	18,475	$	604

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, 2016:

	One-to-four family		Multi- family		Commercial real estate		Construction		Land		Consumer(1)		Commercial business		Unallocated		Total
Allowance for loan losses:
Ending balance	$	798	$	454	$	1,333	$	271	$	75	$	516	$	332	$	—	$	3,779
Ending balance: individually evaluated for impairment	419		—		—		—		4		145		22		—		590
Ending balance: collectively evaluated for impairment	$	379	$	454	$	1,333	$	271	$	71	$	371	$	310	$	—	$	3,189
Loans receivable:
Ending balance	$	61,230	$	53,742	$	149,527	$	21,793	$	6,839	$	22,098	$	36,848	$	—	$	352,077
Ending balance: individually evaluated for impairment	9,283		—		319		—		490		427		188		—		10,707
Ending balance: collectively evaluated for impairment	$	51,947	$	53,742	$	149,208	$	21,793	$	6,349	$	21,671	$	36,660	$	—	$	341,370

⁽¹⁾   Consumer loans include home equity, credit cards, auto and other consumer loans.

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, 2015:

	One-to-four family		Multi- family		Commercial real estate		Construction		Land		Consumer (1)		Commercial business		Unallocated		Total
Allowance for loan losses:
Ending balance	$	1,113	$	95	$	262	$	247	$	75	$	445	$	1,405	$	79	$	3,721
Ending balance: individually evaluated for impairment	500		—		—		—		3		26		211		—		740
Ending balance: collectively evaluated for impairment	$	613	$	95	$	262	$	247	$	72	$	419	$	1,194	$	79	$	2,981
Loans receivable:
Ending balance	$	57,944	$	43,249	$	128,306	$	11,731	$	4,069	$	23,926	$	18,987	$	—	$	288,212
Ending balance: individually evaluated for impairment	9,273		—		—		—		639		307		932		—		11,151
Ending balance: collectively evaluated for impairment	$	48,671	$	43,249	$	128,306	$	11,731	$	3,430	$	23,619	$	18,055	$	—	$	277,061

⁽¹⁾   Consumer loans include home equity, credit cards, auto, and other consumer loans.

The following table presents the recorded investment in nonaccrual and loans past due 90 days still on accrual by type of loans as of the dates indicated:

	June 30,
	2016		2015
One-to-four family	$	1,539	$	1,263
Commercial real estate	319		—
Home equity	16		—
Credit cards	—		6
Other consumer	1		31
Commercial business	97		711
Total	$	1,972	$	2,011

The table above includes $2.0 million in nonaccrual and no loans past due 90 days or more and still accruing interest, net of partial loan charge-offs at June 30, 2016. There were $2.0 million in nonaccrual and $6 of loans past due 90 days or more and still accruing interest, net of partial loan charge-offs at June 30, 2015.

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.

The following table presents past due loans, net of partial loan charge-offs, by class of loans, as of June 30, 2016:

	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due (1)		Total Past Due		Current		Total Loans
One-to-four family	$	566	$	623	$	1,539	$	2,728	$	58,502	$	61,230
Multi-family	—		—		—		—		53,742		53,742
Commercial real estate	—		—		319		319		149,208		149,527
Construction	—		—		—		—		21,793		21,793
Land	—		—		—		—		6,839		6,839
Home equity	14		8		16		38		16,561		16,599
Credit cards	77		—		—		77		2,892		2,969
Automobile	1		—		—		1		596		597
Other consumer	12		—		1		13		1,920		1,933
Commercial business	—		—		97		97		36,751		36,848
Total	$	670	$	631	$	1,972	$	3,273	$	348,804	$	352,077

⁽¹⁾ Includes loans on nonaccrual status, that may be less than 90 days contractually past due.

The following table presents past due loans, net of partial loan charge-offs, by class of loans as of June 30, 2015:

	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due (1)		Total Past Due		Current		Total Loans
One-to-four family	$	616	$	552	$	1,263	$	2,431	$	55,513	$	57,944
Multi-family	—		—		—		—		43,249		43,249
Commercial real estate	—		—		—		—		128,306		128,306
Construction	—		—		—		—		11,731		11,731
Land	—		—		—		—		4,069		4,069
Home equity	15		16		—		31		17,573		17,604
Credit cards	8		26		6		40		3,249		3,289
Automobile	9		—		—		9		677		686
Other consumer	16		—		31		47		2,300		2,347
Commercial business	64		273		711		1,048		17,939		18,987
Total	$	728	$	867	$	2,011	$	3,606	$	284,606	$	288,212

⁽¹⁾ Includes loans on nonaccrual status, that may be less than 90 days contractually past due.

Credit Quality Indicators. The Bank utilizes 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.

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. The Bank uses 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.

• 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 represents the internally assigned grade as of June 30, 2016, 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
Grade:
Pass	$	52,438	$	53,002	$	146,587	$	21,793	$	6,349	$	15,377	$	2,892	$	542	$	1,839	$	35,149	$	335,968
Watch	4,875		740		1,978		—		316		836		77		55		94		1,005		9,976
Special Mention	1,789		—		644		—		174		220		—		—		—		533		3,360
Substandard	2,128		—		318		—		—		166		—		—		—		161		2,773
Doubtful	—		—		—		—		—		—		—		—		—		—		—
Total	$	61,230	$	53,742	$	149,527	$	21,793	$	6,839	$	16,599	$	2,969	$	597	$	1,933	$	36,848	$	352,077

The following table represents the internally assigned grade as of June 30, 2015, 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
Grade:
Pass	$	49,119	$	42,884	$	125,586	$	11,731	$	3,430	$	16,585	$	3,249	$	615	$	2,214	$	16,981	$	272,394
Watch	2,151		—		2,044		—		—		697		34		71		102		915		6,014
Special Mention	4,755		—		676		—		231		301		—		—		—		159		6,122
Substandard	1,919		365		—		—		408		21		6		—		31		932		3,682
Doubtful	—		—		—		—		—		—		—		—		—		—		—
Total	$	57,944	$	43,249	$	128,306	$	11,731	$	4,069	$	17,604	$	3,289	$	686	$	2,347	$	18,987	$	288,212

Troubled Debt Restructured Loans. A troubled debt restructured ("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.

The Bank has utilized a combination of rate and term modifications for its TDRs.

The following table represents TDRs by accrual versus nonaccrual status and by class of loans as of June 30, 2016:

	June 30, 2016
	Accrual Status		Nonaccrual Status		Total Modifications
One-to-four family	$	7,503	$	411	$	7,914
Land	490		—		490
Home equity	261		—		261
Commercial business	90		—		90
Total	$	8,344	$	411	$	8,755

The following table represents TDRs by accrual versus nonaccrual status and by class of loans as of June 30, 2015:

	June 30, 2015
	Accrual Status		Nonaccrual Status		Total Modifications
One-to-four family	$	8,010	$	681	$	8,691
Land	639		—		639
Home equity	276		—		276
Commercial business	221		—		221
Total	$	9,146	$	681	$	9,827

The following tables present TDRs and their recorded investment prior to the modification and after the modification for TDR transactions that originated during the years ended June 30, 2016, 2015 and 2014:

	Year Ended June 30, 2016
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	1	$	273	$	240
Total	1	$	273	$	240

	Year Ended June 30, 2015
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	1	$	197	$	194
Total	1	$	197	$	194

	Year Ended June 30, 2014
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	7	$	1,530	$	1,545
Home equity	1	75		67
Commercial business	1	145		158
Total	9	$	1,750	$	1,770

There were no TDRs for which there was a payment default within the first 12 months of modification during the years ended June 30, 2016, 2015 and 2014.

XML

Real Estate Owned, Net

12 Months Ended

Jun. 30, 2016

Real Estate Owned, Disclosure of Detailed Components [Abstract]

Real Estate Owned, Net

Real Estate Owned, net

The following table is a summary of REO for the years ended June 30, 2016, 2015 and 2014:

	Year Ended June 30,
	2016			2015			2014
Balance at the beginning of the period	$	797		$	5,067		$	6,212
Net loans transferred to real estate owned	574			2,241			5,793
Capitalized improvements	—			27			591
Gross proceeds from sale of REO	(973		)	(6,789		)	(6,846		)
Gain on sale of REO	58			283			407
Impairments	(83		)	(32		)	(1,090		)
Balance at the end of the period	$	373		$	797		$	5,067

XML

Property, Premises, and Equipment

12 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property, Premises, and Equipment

Property, Premises, and Equipment

Property, premises, and equipment owned by the Bank are summarized as follows:

	June 30,
	2016			2015
Land	$	2,192		$	2,247
Building and improvements	14,372			15,883
Furniture and fixtures	3,778			4,778
Automobiles	345			334
Software	619			593
Leasehold improvements	77			17
	21,383			23,852
Less accumulated depreciation and amortization	(11,382		)	(13,482		)
Property, premises, and equipment, net of depreciation and amortization	$	10,001		$	10,370

Depreciation and amortization expense for the years ended June 30, 2016, 2015 and 2014, was $650,000, $665,000 and $608,000, respectively.

XML

Deposits

12 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

Deposits

Deposits

Deposits consist of the following:

	June 30,
	2016				2015
	Amount		Percent		Amount		Percent
Noninterest-bearing demand deposits	$	50,781	16.8	%	$	44,719	15.0	%
Interest-bearing demand deposits, weighted-average rate of 0.04% and 0.04% in fiscal 2016 and fiscal 2015, respectively	27,419		9.1		22,448		7.5
Savings deposits, weighted-average rate of 0.15% in fiscal 2016 and 0.15% in fiscal 2015	44,986		15.0		42,399		14.1
Money market accounts, weighted-average rate of 0.17% and 0.15% in fiscal 2016 and fiscal 2015, respectively	59,270		19.7		63,916		21.3
Certificates of deposit
0.00 to 3.49%	97,788		32.5		100,286		33.4
3.50 to 5.49%	20,650		6.9		26,044		8.7
Total of certificates of deposit	118,438		39.4		126,330		42.1
Total deposits	$	300,894	100.0	%	$	299,812	100.0	%

Certificates of deposit in denominations of $250,000 or more totaled $17.3 million and $16.4 million at June 30, 2016 and 2015, respectively. Included in deposits at June 30, 2016 and 2015, were $8.7 million and $8.6 million, respectively, of public funds. There were no brokered deposits at June 30, 2016 or 2015.

As of June 30, 2016, certificates of deposit mature as follows:

Year Ended June 30,
	Amount
2017	$	43,241
2018	26,537
2019	33,839
2020	10,498
Thereafter	4,323
	$	118,438

XML

Borrowings

12 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

Borrowings

Borrowings

The Bank is a member of the FHLB of Des Moines. Based on eligible collateral, consisting of loans at June 30, 2016 and 2015, the total amount available under this line of credit was $146.9 million and $132.3 million, respectively. The total balance of loans pledged at June 30, 2016 and 2015 was $263.7 million and $228.6 million, respectively.  The total balance of advances outstanding was $62.0 million and $10.0 million at June 30, 2016 and 2015. The net remaining amounts available as of June 30, 2016 and 2015 were $84.9 million and $122.3 million, respectively. Borrowings generally provide for interest at the then-current published rates. FHLB advances (at weighted-average interest rates of 0.93% and 1.18% at June 30, 2016 and 2015, respectively) and lines of credit are scheduled to mature as follows:

	June 30,
	2016		2015
One year or less	$	24,500	$	—
After one year through three years	30,000		10,000
More than three years	7,500		—
	$	62,000	$	10,000

Advances from the FHLB are collateralized by all FHLB stock owned by the Bank, deposits with the FHLB, certain investments, and all loans as described in the Advances, Pledge, and Security Agreement with the FHLB. The maximum and average outstanding advances and lines of credit from the FHLB are as follows:

	June 30,
	2016		2015
Highest outstanding advances at month-end for the previous 12 months	$	62,000	$	22,500
Average outstanding	$	29,875	$	13,629

The Bank also maintains a short-term borrowing line with the Federal Reserve with total credit based on eligible collateral. As of June 30, 2016, the Bank had a borrowing capacity of $1.0 million, of which none was outstanding. Additionally we have a $5.0 million borrowing line with Pacific Coast Bankers' Bank of which none was outstanding at June 30, 2016 and 2015.

XML

Employee Benefit Plans

12 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Benefit Plans

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 Anchor Bancorp and used those funds to acquire 102,000 shares of the Anchor Bancorp'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 Anchor Bancorp. 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 30, 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 years ended June 30, 2016, 2015 and 2014 was $163,000, $172,000 and $123,000 respectively.

Shares held by the ESOP as of the dates indicated are as follows:

	June 30,
	2016		2015
Allocated shares	39,748		32,865
Unallocated shares	62,252		69,135
Total ESOP shares	102,000		102,000
Fair value of unallocated shares	$	1,471	$	1,555

XML

Stock-Based Compensation (Notes)

12 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

On October 21, 2015, the Company’s shareholders 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 shares or repurchased shares.

As of June 30, 2016, awards for restricted stock totaling 87,572 shares were outstanding and no restricted stock units or stock options have been granted under the Plan. 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 year ended June 30, 2016 total compensation expense for the Plan was $1.8 million and the related income tax benefit was $619,000.

The following tables provide a summary of changes in non-vested restricted stock awards for the year ended June 30, 2016:

	For the Year Ended June 30, 2016
			Weighted-Average Grant Date Fair Value
	Shares
Non-vested at July 1, 2015	—		$	—
Granted	106,228		25.71
Vested	(22,459	)	25.75
Forfeited and canceled	(12,925	)	25.75
Non-vested at June 30, 2016	70,844		25.69

As of June 30, 2016, there was $790,000 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 two years. The total fair value of shares vested during the year ended June 30, 2016 was $793,000.

XML

Supplemental Executive Retirement Plan (SERP)

12 Months Ended

Jun. 30, 2016

Compensation and Retirement Disclosure [Abstract]

Supplemental Executive Retirement Plan (SERP)

Supplemental Executive Retirement Plan (SERP)

On July 1, 2002, the Bank implemented a nonqualified SERP for the benefit of senior officers and directors of the Bank. The SERP entitles these individuals to receive defined benefits upon their retirement or death based on the appreciation in Bank value. The SERP value is based on the Company's stock price and the change from the last trading day of March 31, 2015 to March 31, 2016. On January 1, 2004, the SERP was amended to provide that a participant’s SERP unit shall be valued at no less than 90%, and no more than 125%, of the participant’s SERP unit as of the preceding valuation date. The value of the participant’s SERP unit is based upon the stock value of the Bank. The accrual for the deferred compensation owed under the SERP is based upon the net present value of the vested benefits expected to be paid under the SERP. The Bank recognized $123,000, $99,000, and $61,000 in compensation cost related to the SERP for the years ended June 30, 2016, 2015, and 2014, respectively. The SERP liability totaled $1.7 million and $1.8 million at June 30, 2016 and 2015, respectively.

XML

Earnings Per Share

12 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Earnings Per Share

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. At June 30, 2016, the difference in EPS under the two-class method was not significant.

The following table details the calculation of basic and diluted earnings per share:

	For the Year Ended June 30,
	2016		2015		2014
Net income	$	495	$	9,827	$	423
Less: Earnings allocated to participating securities	—		—		—
Earnings allocated to common shareholders	495		9,827		423
Basic weighted-average common shares outstanding	2,452,455		2,477,423		2,466,983
Potentially dilutive incremental shares	7,071		—		—
Diluted weighted-average common shares outstanding	2,459,526		2,477,423		2,466,983
Basic earnings per share	$	0.20	$	3.97	$	0.17
Diluted earnings per share	$	0.20	$	3.97	$	0.17

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 June 30, 2016, 2015 and 2014 there were 62,252, 69,135 and 76,019 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 the year ended June 30, 2016, 9,448 shares were not included in the computation of diluted earnings per share because the incremental shares under the treasury stock method of calculation resulted in them being anti-dilutive.

XML

Related Party Transactions

12 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

During the normal course of business, the Bank originates loans to directors, committee members, and senior management. Such loans are granted with interest rates, terms, and collateral requirements substantially the same as those for all other customers.

Total deposits from directors, executive officers, and their affiliates for the years ended June 30, 2016, 2015, and 2014 were $1.8 million, $1.9 million, and $1.9 million, respectively.

Total loans to directors, executive officers, and their affiliates are subject to regulatory limitations. Aggregate loans balances are as follows and were within regulatory limitations:

	At June 30,
	2016		2015		2014
Beginning balance	$	277	$	887	$	228
Extensions of credit	5		—		668
Repayments	60		610		9
Ending balance	$	222	$	277	$	887

XML

Regulatory Capital Requirements

12 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

Regulatory Capital Requirements

Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table that follows) of total and Tier I capital to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined).

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank became subject to new capital requirements which created a new required ratio for common equity Tier 1 (“CET1”) capital, increased the leverage and Tier 1 capital ratios, changed the risk-weightings of certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over the required capital ratios and changed what qualifies as capital for purposes of meeting these various capital requirements. The Bank is required to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before it may pay dividends, repurchase shares or pay discretionary bonuses.

The new minimum requirements are a ratio of common equity Tier 1 capital (CET1 capital) to total risk-weighted assets the (“CET1 risk-based ratio”) of 4.5%, a Tier 1 capital ratio of 6.0%, a total capital ratio of 8.0%, and a leverage ratio of 4.0%.

In addition to the capital requirements, there are a number of changes in what constitutes regulatory capital, subject to a certain transition period. These changes include the phasing-out of certain instruments as qualifying capital. The Bank does not have any of these instruments. Mortgage servicing and deferred tax assets over designated percentages of CET1 are deducted from capital, subject to a transition period ending December 31, 2017. CET1 consists of Tier 1 capital less all capital components that are not considered common equity. In addition, Tier 1 capital includes accumulated other comprehensive income, which includes all unrealized gains and losses on available for sale debt and equity securities, subject to a transition period ending December 31, 2017. Because of the Bank’s asset size, the Bank is not considered an advanced approaches banking organization and has elected to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt and equity securities in its capital calculations.

The new requirements also included changes in the risk-weighting of assets to better reflect credit risk and other risk exposure. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days past due or otherwise in nonaccrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight (up from 100%) for mortgage servicing and deferred tax assets that are not deducted from capital.

In addition to the minimum CET1, Tier 1 and total capital ratios, the Bank will have to maintain a capital conservation buffer consisting of additional CET1 capital equal to 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement began to be phased in starting in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019.

Under the new standards, in order to be considered well-capitalized, the Bank must maintain a CET1 risk-based ratio of 6.5% (new), a Tier 1 risk-based ratio of 8% (increased from 6%), a total risk-based capital ratio of 10% (unchanged) and a leverage ratio of 5% (unchanged). As of June 30, 2016, the Bank was categorized as well-capitalized under the regulatory framework for prompt corrective action.

The Bank’s capital accounts and ratios are also presented in the following table:

	Actual				Minimum Capital Requirement				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2016
Total capital (to risk-weighted assets)	$	59,938	15.7	%	$	30,580	8.0	%	$	38,225	10.0	%
Tier I capital (to risk-weighted assets)	56,159		14.7		22,935		6.0		30,580		8.0
Common equity Tier 1 capital (to risk-weighted assets)	56,159		14.7		17,201		4.5		24,846		6.5
Tier I leverage capital (to average assets)	56,159		13.5		16,620		4.0		20,775		5.0
As of June 30, 2015
Total capital (to risk-weighted assets)	$	57,321	17.4	%	$	26,422	8.0	%	$	33,027	10.0	%
Tier I capital (to risk-weighted assets)	53,600		16.2		19,816		6.0		26,422		8.0
Common equity Tier 1 capital (to risk-weighted assets)	53,600		16.2		14,862		4.5		21,468		6.5
Tier I leverage capital (to average assets)	53,600		14.3		14,963		4.0		18,703		5.0

Anchor Bancorp exceeded all regulatory capital requirements with Tier 1 Leverage-Based Capital, Common Equity Tier 1 Capital, Tier 1 Risk- Based Capital and Total Risk-Based Capital ratios of 14.4%, 15.7%, 15.7% and 16.6%, respectively, as of June 30, 2016. As of June 30, 2015, Anchor Bancorp's Tier 1 Leverage-Based Capital, Common Equity Tier 1 Capital, Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios were 16.6%, 19.0%, 19.0% and 20.1%, respectively.

XML

Income Taxes

12 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of current and deferred tax expense for the years ended June 30, 2016 and 2015 were as follows:

	Year Ended June 30,
	2016			2015
Current	$	126		$	—
Deferred	(87		)	148
Change in valuation allowance	—			(8,469		)
Total	$	39		$	(8,321	)

Retained earnings at June 30, 2016 and 2015, included $5.5 million in tax-basis bad debt reserves for which no income tax liability has been recorded. In the future, if this tax-basis bad debt reserve is used for purposes other than to absorb bad debts, or if legislation is enacted requiring recapture of all tax-basis bad debt reserves, the Bank will incur a federal tax liability at the then-prevailing corporate tax rate.

A reconciliation of the provision for income taxes based on statutory corporate tax rates on pre-tax income and the provision shown in the accompanying consolidated statements of income at the dates indicated is summarized as follows:

	Amount			Percent of Pre-Tax Income (loss)
June 30, 2016
Income taxes computed at statutory rates	$	182		34.0	%
Tax-exempt income	(189		)	(35.4	)
Other, net	46			8.6
Provision for income taxes	$	39		7.2	%
June 30, 2015
Income taxes computed at statutory rates	$	511		34.0	%
Tax-exempt income	(193		)	(12.8	)
Deferred tax asset valuation allowance	(8,469		)	(562.5	)
Other, net	(170		)	(11.4	)
Benefit for income taxes	$	(8,321	)	(552.7	)%
June 30, 2014
Income taxes computed at statutory rates	$	144		34.0	%
Tax-exempt income	(202		)	(47.8	)
Deferred tax asset valuation allowance	50			11.9
Other, net	8			1.9
Provision for income taxes	$	—		—	%

The components of net deferred tax assets and liabilities at the dates indicated are summarized as follows:

	June 30,
	2016		2015
Deferred tax assets
Allowance for loan losses	$	3,159	$	3,139
AMT credit carryforward	352		199
Deferred compensation - SERP	561		573
Stock awards	350		—
Securities impairment charge	340		340
Net operating loss carryforward	4,304		4,726
Real estate owned	155		198
Accumulated depreciation	305		314
Unrealized loss on securities available-for-sale			45
Other, net	53		—
Total deferred tax assets	9,579		9,534
Deferred tax liabilities
Deferred loan fees and costs	434		396
FHLB stock dividends	166		166
Mortgage servicing rights	70		80
Unrealized gain on securities available-for-sale	39		—
Other, net	—		25
Total deferred tax liabilities	709		667
Net deferred tax asset, after valuation allowance	$	8,870	$	8,867

DTAs are deferred tax consequences attributable to deductible temporary differences and carryforwards.  After the DTA has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance.  A valuation allowance is needed when, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized.  As required by generally accepted accounting principles, available evidence is weighted heavily on cumulative losses with less weight placed on future projected profitability.  Realization of the DTA is dependent on whether there will be sufficient future taxable income of the appropriate character in the period during which deductible temporary differences reverse or within the carryback and carryforward periods available under tax law. During fiscal 2015, the Company reversed its DTA valuation allowance related to the Company’s deferred tax assets as management deemed that it was no longer appropriate to carry a DTA valuation allowance as a result of changes in the factors considered by management when the Company initially established the valuation allowance. In reaching this determination, management considered, among other factors, the scheduled reversal of deferred tax assets and liabilities, taxes paid in carryback years, available tax planning strategies, the Company’s cumulative earnings during the past three years, including the Company’s recent financial performance, the improvement in the Company’s asset quality and financial condition, as well as projected earnings. As of June 30, 2016 and 2015, management deemed that a deferred tax asset valuation allowance related to the Company’s DTA was not necessary.

As of June 30, 2016, the Company had a federal net operating loss carryforwards totaling $12.7 million and insignificant Oregon state and local net operating loss carryforwards which can be used to offset future taxable income. The net operating losses begin to expire in 2031 for federal and 2024 for Oregon. The Company’s net operating loss carryforwards may be subject to limitations under Internal Revenue Code Section 382.

The Company had no uncertain tax positions at June 30, 2016, 2015, and 2014. The Company recognizes interest accrued on and penalties related to uncertain tax positions in tax expense. During the years ended June 30, 2016, 2015, and 2014, the Company recognized no interest and penalties.

The Company files income tax returns in the U.S. federal and Oregon state and local jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal or state/local income tax examinations by tax authorities for years before 2013.

XML

Parent Company Financials

12 Months Ended

Jun. 30, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Parent Company Financials

Parent Company Financials

Presented below are the condensed statements of financial condition, statements of income, and statements of cash flows for Anchor Bancorp.

ANCHOR BANCORP STATEMENTS OF FINANCIAL CONDITION

	June 30,
	2016			2015
ASSETS
Cash	$	2,378		$	5,324
ESOP loan	672			735
Investment in bank subsidiary	58,428			47,506
Prepaid and other assets	747			505
Total assets	$	62,225		$	54,070
LIABILITIES
Total liabilities	$	—		$	3
STOCKHOLDERS’ EQUITY
Common stock	$	25		$	25
Additional paid-in-capital	22,157			23,404
Retained earnings	41,264			32,084
Unearned ESOP shares	(672		)	(735		)
Accumulated other comprehensive loss, net of tax	(549		)	(711		)
Total stockholders’ equity	$	62,225		$	54,067
Total liabilities and stockholders’ equity	$	62,225		$	54,070

ANCHOR BANCORP STATEMENTS OF INCOME

	For the Years Ended June 30,
	2016			2015			2014
Operating income
Interest income ESOP loan	$	24		$	26		$	28
Dividends received from subsidiary	680			5,350			—
Total operating income	704			5,376			28
Operating expenses
Legal expense	354			105			127
Accounting expense	49			47			44
Professional fees	116			60			60
Management fees	69			67			68
General and administrative	62			54			77
Other expense	75			—			—
Total operating expenses	725			333			376
(Loss) profit before income tax	(21		)	5,043			(348		)
Income tax benefit	(227		)	(478		)	—
Income before equity in undistributed income of subsidiary	206			5,521			(348		)
Equity in undistributed income of subsidiary	970			4,306			771
Net income	$	1,176		$	9,827		$	423

ANCHOR BANCORP STATEMENTS OF CASH FLOWS

	For the Years Ended June 30,
	2016			2015			2014
Cash flows from operating activities
Net income	$	1,176		$	9,827		$	423
Adjustments to reconcile net loss to net cash from operating activities:
Equity in undistributed income of subsidiary	(970		)	(4,306		)	(771		)
Change in deferred tax assets, net	(227		)	(478		)	—
Change in other assets	(60		)	(46		)	(45		)
Net cash used by operating activities	(81		)	4,997			(393		)
Cash flows from financing activities
Repurchase and retirement of common stock	(2,952		)	—			—
ESOP loan repayments	87			88			123
Net cash provided by investing activities	(2,865		)	88			123
Net change in cash and cash equivalents	(2,946		)	5,084			(270		)
Cash and cash equivalents at beginning of period	5,324			240			510
Cash and cash equivalents at end of period	$	2,378		$	5,324		$	240

XML

Commitments and Contingencies

12 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Commitments and Contingencies

Credit-related financial instruments - The Bank is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to a varying degree, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

The following financial instruments were outstanding whose contract amounts represent credit risk at June 30, 2016:

	Amount of Commitment Expiration - Per Period
	Total Amounts Committed (2)		Due in One Year
Commitments to originate loans (1)	$	14,130	$	14,130
Line of credit
Fixed rate (3)	10,160		365
Adjustable rate	54,460		13,770
Undisbursed balance of loans closed	64,620		14,135
Total balance	$	78,750	$	28,265

⁽¹⁾ Interest rates on fixed rate loans range from 3.88% to 17.99%.

⁽²⁾ At June 30, 2016 there were no reserves for unfunded commitments.

⁽³⁾ Includes standby letters of credit.

The following financial instruments were outstanding whose contract amounts represent credit risk at June 30, 2015:

	Amount of Commitment Expiration - Per Period
	Total Amounts Committed (2)		Due in One Year
Commitments to originate loans (1)	$	5,024	$	5,024
Line of credit
Fixed rate (3)	1,708		399
Adjustable rate	26,961		962
Undisbursed balance of loans closed	28,669		1,361
Total balance	$	33,693	$	6,385

⁽¹⁾ Interest rates on fixed rate loans range from 3.75% to 17.99%.

⁽²⁾ At June 30, 2015 there was $79 in reserves for unfunded commitments.

⁽³⁾ Includes standby letters of credit.    

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon.

Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the borrower.

Unfunded commitments under commercial lines of credit, revolving credit lines, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent that the Bank is committed.

Contingent liabilities for sold loans - In the ordinary course of business, the Bank sells loans without recourse that may have to subsequently be repurchased due to defects that occurred during the origination of the loan. The defects are categorized as documentation errors, underwriting errors, early payment defaults, breach of representation or warranty, and fraud. When a loan sold to an investor without recourse fails to perform according to its contractual terms, the investor will typically review the loan file to determine whether defects in the origination process occurred. If a defect is identified, the Bank may be required to either repurchase the loan or indemnify the investor for losses sustained. If there are no such defects, the Bank has no commitment to repurchase the loan. The Bank has recorded no reserve to cover loss exposure related to these guarantees. The principal balance of loans sold without recourse for the years ended June 30, 2016 and 2015, was $80.6 million and $86.8 million, respectively. The Bank repurchased no loans for the years ended June 30, 2016, 2015 and 2014.

Contingencies - The Company is a defendant in various legal proceedings arising in connection with its business. It is the opinion of management that the financial position and the results of operations of the Company will not be materially adversely affected by the final outcome of the legal proceedings and that adequate provision has been made in the accompanying consolidated financial statements.

At periodic intervals, the Washington State Department of Financial Institutions, Division of Banks ("DFI") and the FDIC routinely examine the Bank’s financial statements as part of their legally prescribed oversight of the banking industry. Based on these examinations, the regulators can direct that the Bank’s financial statements be adjusted in accordance with their findings.

Operating lease commitment - The Bank leases space for branches and operations located in Shelton, and Puyallup, Washington. These leases run for periods ranging from three to five years. All leases require the Bank to pay all taxes, maintenance, and utility costs, as well as maintain certain types of insurance. The annual lease commitments for the next five years are as follows:

Year Ended June 30,	Amount
2017	$124
2018	$124
2019	$84
2020	$37
2021	$—

Rental expense charged to operations was $140,000, $133,000 and $121,000 for the years ended June 30, 2016, 2015, and 2014, respectively.

XML

Fair Value Measurements

12 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

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.

Valuation inputs refer to the assumptions market participants would use in pricing a given asset or liability using one of the three valuation techniques. Inputs can be observable or unobservable. Observable inputs are those assumptions that market participants would use in pricing the particular asset or liability. These inputs are based on market data and are obtained from an independent source. Unobservable inputs are assumptions based on the Company’s own information or estimate of assumptions used by market participants in pricing the asset or liability. Unobservable inputs are based on the best and most current information available on the measurement date.

All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy:

• Level 1 - Quoted prices for identical instrument in active markets.

• Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuations whose inputs are observable.

• Level 3 - Instruments whose significant value drivers are unobservable.

The following tables show the Company's assets and liabilities at the dates indicated measured at fair value on a recurring basis:

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	—	$	175	$	—	$	175
Mortgage-backed securities:
FHLMC	—		9,559		—		9,559
FNMA	—		13,204		—		13,204
GNMA	—		727		—		727

	June 30, 2015
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	—	$	435	$	—	$	435
Mortgage-backed securities:
FHLMC	—		11,791		—		11,791
FNMA	—		16,408		—		16,408
GNMA	—		931		—		931

Assets and liabilities measured at fair value on a nonrecurring basis - Assets and liabilities are considered to be fair valued 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 during the year ended June 30, 2016:

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Impaired loans:
Mortgage loans
One-to-four family	$	—	$	—	$	8,046	$	8,046
Commercial	—		—		318		318
Land	—		—		316		316
Home equity	—		—		367		367
Commercial business	—		—		124		124
Total impaired loans	—		—		9,171		9,171
Real estate owned:
One-to-four family	$	—	$	—	$	113	$	113
Land	—		—		19		19
Total real estate owned	—		—		132		132
Total	$	—	$	—	$	9,303	$	9,303

The following table presents the balance of assets measured at fair value on a nonrecurring basis during the year ended June 30, 2015:

	June 30, 2015
	Level 1		Level 2		Level 3		Total
Impaired loans:
Mortgage loans
One-to-four family	$	—	$	—	$	4,172	$	4,172
Commercial	—		—		408		408
Land	—		—		212		212
Commercial business	—		—		868		868
Total impaired loans	—		—		5,660		5,660
Real estate owned:
One-to-four family	$	—	$	—	$	188	$	188
Land	—		—		418		418
Total real estate owned	—		—		606		606
Total	$	—	$	—	$	6,266	$	6,266

The fair value of impaired loans is calculated using the collateral value method or on a discounted cash flow basis. Inputs used in the collateral value method include appraisal values, estimates of certain completion costs and closing and selling costs. Some of these inputs may not be observable in the marketplace.

The fair value of real estate owned properties is measured at the lower of their carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisal of the property, resulting in Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

The following tables present quantitative information about Level 3 fair value measurements at June 30, 2016 and 2015:

	June 30, 2016
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Average Discount
Impaired loans	$	9,171	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 100% (5%)
Real estate owned	$	132	Fair value of collateral	Discount applied to the obtained appraisal	0% - 100% (12%)

	June 30, 2015
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Average Discount
Impaired loans	$	5,660	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 100% (4%)
Real estate owned	$	606	Fair value of collateral	Discount applied to the obtained appraisal	0% - 100% (1%)

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company's financial instruments as of June 30, 2016 and June 30, 2015.  For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as demand deposits, savings, and money market, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

	June 30, 2016
	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)
Financial Instruments-Assets
Cash and cash equivalents	$	8,320	$	8,320	$	8,320	$	—	$	—
Securities available-for-sale	23,665		23,665		—		23,665		—
Securities held-to-maturity	6,291		6,425		—		6,425		—
FHLB stock	2,959		2,959		—		2,959		—
Loans held for sale	1,864		1,864		1,864		—		—
Loans receivable	351,130		349,244		—		—		349,244
Accrued interest receivable	1,182		1,182		—		1,182		—
Financial Instruments-Liabilities
Demand deposits, savings and money market	$	182,456	$	182,456	$	182,456	$	—	$	—
Certificates of deposit	118,438		118,059		—		118,059		—
FHLB advances	62,000		62,124		—		62,124		—
Advance payments by borrowers taxes and insurance	1,114		1,114		1,114		—		—

	June 30, 2015
	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)
Financial Instruments-Assets
Cash and cash equivalents	$	14,450	$	14,450	$	14,450	$	—	$	—
Securities available-for-sale	29,565		29,565		—		29,565		—
Securities held-to-maturity	7,617		7,692		—		7,692		—
FHLB stock	853		853		—		853		—
Loans held for sale	505		505		505		—		—
Loans receivable	287,165		288,424		—		—		288,424
Accrued interest receivable	1,069		1,069		—		1,069		—
Financial Instruments-Liabilities
Demand deposits, savings and money market	$	173,482	$	173,482	$	173,482	$	—	$	—
Certificates of deposit	126,330		125,942		—		125,942		—
FHLB advances	10,000		9,882		—		9,882		—
Advance payments by borrowers taxes and insurance	1,002		1,002		1,002		—		—

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.

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.

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.

XML

Organization and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Lines of business

Segment Information - The Bank’s operations include commercial banking services, such as lending activities, deposit products, and other cash management services. The performance of the Bank is reviewed by the Board of Directors and Senior Management Committee. The Senior Management Committee, which is the senior decision-making group of the Bank, is composed of three members, including the President and Chief Executive Officer, the Executive Vice President, Chief Financial Officer, and Treasurer, and the Executive Vice President and Chief Lending Officer. The Company’s activities are considered to be a single industry segment for financial reporting purposes.

Financial statement presentation and use of estimates

Financial statement presentation and use of estimates - The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and reporting practices applicable to the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, as of the date of the consolidated statements of financial condition, and revenues and expenses for the period. Actual results could differ from estimated amounts. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the valuation of real estate owned, impaired loans and deferred tax assets.

Principles of consolidation

Principles of consolidation - The consolidated financial statements include the accounts of Anchor Bancorp and its wholly-owned subsidiary, Anchor Bank. All material intercompany accounts have been eliminated in the consolidation.

Subsequent events

Subsequent events - The Company has evaluated events and transactions subsequent to June 30, 2016 for potential recognition or disclosure.

Cash and cash equivalents

Cash and cash equivalents - For purposes of the consolidated statements of cash flows, the Company considers all deposits and funds in interest-bearing accounts with an original term to maturity of three months or less to be cash equivalents. The Bank maintains its cash in bank deposit accounts that, at times, may exceed the federally insured limits. The Bank has not experienced any losses in such accounts and evaluates the credit quality of these banks and financial institutions to mitigate its credit risk.

Restricted assets

Restricted assets - Federal Reserve regulations require maintenance of certain minimum reserve balances on deposit with the Federal Reserve Bank of San Francisco ("FRB").

Investment securities

Investment securities - Securities are classified as held-to-maturity when the Company has the ability and positive intent to hold them to maturity. Securities held-to-maturity are carried at cost, adjusted for amortization of premiums and accretion of discounts to maturity. Securities bought and held principally for the purpose of sale in the near term are classified as trading securities and are carried at fair value. There were no trading securities at June 30, 2016 and 2015. Securities not classified as trading or held-to-maturity are classified as available-for-sale. Unrealized holding gains and losses on securities available-for-sale are excluded from earnings and are reported net of tax as a separate component of equity until realized. These unrealized holding gains and losses, net of tax, are also included as a component of comprehensive income. Realized gains and losses are recorded on the trade date and are determined using the specific identification method. Amortization of premiums and accretion of discounts are recognized into interest income using the effective interest method over the period to maturity.

The Company evaluates securities for other-than-temporary impairment on a periodic basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and whether the Bank has the intent and ability to hold these securities or if it is likely that it will be required to sell the securities before their anticipated recovery. In analyzing an issuer’s financial condition, the Bank may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. If the Bank does not intend to sell the security and it is not likely it will be required to sell the security prior to recovery of its cost basis, the credit loss component of impairment is recognized in earnings and impairment associated with non-credit factors, such as market liquidity, is recognized in other comprehensive income, net of tax. A credit loss is the difference between the cost basis of the security and the present value of cash flows expected to be collected, discounted at the security's effective interest rate at the date of acquisition. The cost basis of an other-than-temporarily impaired security is written down by the amount of impairment recognized in earnings. The new cost basis is not adjusted for subsequent recoveries in fair value. However, the difference between the new amortized cost basis and the cash flows expected to be collected is accreted as interest income. The total other-than-temporary impairment is presented in the consolidated statements of income with a reduction for the amount of other-than-temporary impairment that is recognized in other comprehensive income, if any.

Federal Home Loan Bank stock

Federal Home Loan Bank stock - The Bank’s investment in FHLB stock is carried at cost, which approximates fair value. As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances. At June 30, 2016 and 2015, the Bank’s minimum investment requirement was $3.0 million and $853,000, respectively. The Bank was in compliance with the FHLB minimum investment requirement at June 30, 2016 and 2015.

Management evaluates FHLB stock for impairment as needed. Management’s determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as (1) the significance of any decline in net assets of the FHLB as compared with the capital stock amount for the FHLB and the length of time this situation has persisted; (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; (3) the impact of legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB; and (4) the liquidity position of the FHLB. Based on its evaluation, management determined that there was no impairment of FHLB stock at June 30, 2016 and 2015, respectively.

Securitizations

Securitizations - The Bank historically has securitized and services interests in residential home loans. The Bank has securitized these loans through the Federal Home Loan Mortgage Corporation ("FHLMC"). Of the total serviced loan portfolio of $76.9 million and $81.1 million at June 30, 2016 and 2015, $20.4 million and $24.7 million, respectively, represent securitized loans. The loans have been sold without recourse, servicing retained. There were no new securitizations during the years ended June 30, 2016 and 2015. All principal, interest, late fees, and escrow payments are collected and remitted to the investor daily.

Loans

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of unamortized nonrefundable loan fees and related direct loan origination costs. Deferred net fees and costs are recognized in interest income over the loan term using a method that generally produces a level yield on the unpaid loan balance. Interest is accrued primarily on a simple interest basis.

Nonaccrual loans are those for which management has discontinued accrual of interest because there exists significant uncertainty as to the full and timely collection of either principal or interest or because such loans have become contractually past due 90 days with respect to principal or interest. When a loan is placed on nonaccrual, all previously accrued but uncollected interest is reversed against current-period interest income. All subsequent payments received are first applied to unpaid principal and then to unpaid interest. Interest income is accrued at such time as the loan is brought fully current as to both principal and interest, and, in management’s judgment, such loans are considered to be fully collectible.

Loans are considered impaired when the Bank 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

Restructured loans

Troubled debt restructured loans- A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and the Bank grants concessions to the borrower in the restructuring that it would not otherwise consider. These concessions may include interest rate reductions, principal forgiveness, extension of maturity date and other actions intended to minimize potential losses. Generally, a nonaccrual loan that is restructured remains on nonaccrual status for a period of six months to demonstrate that the borrower can meet the restructured terms. If the borrower's performance under the new terms is not reasonably assured, the loan remains classified as a nonaccrual loan.

Troubled Debt Restructured Loans. A troubled debt restructured ("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.

The Bank has utilized a combination of rate and term modifications for its TDRs.

Allowance for loan losses

Allowance for loan losses - Key elements of the allowance for loan loss methodology include the specific loan loss reserve, the general loan loss reserve, and the unallocated reserve, individually described below.

The specific loan loss reserve is established for individually impaired loans when the discounted cash flow or collateral value of the impaired loan is lower than the carrying value of that loan. Restructured loans are accounted for as impaired loans.

The general loan loss reserve is calculated by applying a specific loss percentage factor to the various groups of loans by loan type, based upon historic loss experience, and adjusted based upon the risk grade attached to any loan or group of loans. This portion of the allowance may be further adjusted for qualitative and environmental conditions such as changes in lending policies and procedures; experience and ability of lending staff; concentrations of credit; national, regional, and local economic conditions; and other factors including levels and trends of delinquency.

The unallocated reserve recognizes the estimation risk associated with the mathematical calculations applied in both specific and general portions of the allowance for loan loss, together with the assumption risk relative to management’s assessment of the variables included in the qualitative and environmental factors.

The Bank maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on ongoing quarterly assessments of the probable estimated losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses, which is charged against current-period operating results and decreased by the amount of charge-offs, net of recoveries. Various regulatory agencies, as part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require management to make adjustments to the allowance using judgments available to them at the time of their examination.

Loans held-for-sale

Loans held-for-sale - Loans originated as held-for-sale are carried at the lower of cost or market value on an aggregate basis. Net unrealized losses, if any, are recognized through a valuation allowance by a charge to income. Nonrefundable fees and direct loan origination costs related to loans held-for-sale are deferred and recognized when the loans are sold.

Real estate owned

Real estate owned - Real estate owned (REO) and other repossessed items consist of properties or assets acquired through or in lieu of foreclosure in full satisfaction of a loan receivable, and are recorded initially at fair value of the REO properties less estimated costs of disposal with any initial losses charged to the allowance for loan losses. Costs relating to development and improvement of the properties or assets are capitalized, while costs relating to holding the properties or assets are expensed. Valuations are periodically performed by management, and a charge to earnings is recorded if the recorded value of a property exceeds its estimated fair value.

Gains or losses at the time the property is sold are charged or credited to noninterest expense in the period in which they are realized. The amounts the Bank will ultimately recover from REO may differ substantially from the carrying value of the assets because of future market factors beyond the control of the Bank or because of changes in the Bank’s strategy for recovering its investments.

Life insurance investment

Life insurance investment - The Bank is the sole beneficiary of life insurance policies that are recorded at their cash surrender value, net of any surrender charges, and cover certain key executives of the Bank.

Transfers of financial assets

Transfers of financial assets - Transfers of financial asset, a group of financial assets, or a participating interest in a financial asset are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Mortgage servicing rights

Mortgage servicing rights - Mortgage servicing rights are recorded as separate assets at fair value when mortgage loans are originated and subsequently sold or securitized (and held as available-for-sale securities) with servicing rights retained. Periodically, the Bank estimates the fair value of its mortgage servicing rights based upon observed market prices.

Mortgage servicing rights are amortized in proportion to, and over, the estimated period that net servicing income will be collected. The carrying value of mortgage servicing rights is periodically evaluated in relation to estimated future cash flows to be received, and such carrying value is adjusted for indicated impairments based on management’s best estimate of the remaining cash flows. The Bank has stratified its mortgage servicing rights based on whether the loan was sold or securitized and the interest rate of the underlying loans. The Bank uses the direct write-down method for mortgage servicing rights where the serviced loan has been paid off.

Property, premises, and equipment

Property, premises, and equipment - Property, premises, and equipment are stated at cost less accumulated depreciation. The depreciation charged is computed on the straight-line method over estimated useful lives as follows:

Buildings	40 years
Furniture and equipment	5-10 years
Improvements	10 years
Computer equipment	3 years

Income taxes

Income taxes-The provision for income taxes includes current and deferred income tax expense on net income adjusted for permanent and temporary differences such as interest income on state and municipal securities and BOLI. Deferred tax assets and liabilities are recognized for the expected future tax consequences of existing temporary differences between the financial reporting and tax reporting basis of assets and liabilities using enacted tax laws and rates. 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. On a quarterly basis, management evaluates deferred tax assets to determine if these tax benefits are expected to be realized in future periods. This determination is based on facts and circumstances, including the Company's current and future tax outlook. To the extent a deferred tax asset is no longer considered “more likely than not” to be realized, a valuation allowance is established.

Marketing costs

Marketing costs - The Company expenses marketing costs as they are incurred.

Financial instruments

Financial instruments - In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received.

Contingencies

Employee Stock Ownership Plan (ESOP)

Employee Stock Ownership Plan (ESOP) - The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of stockholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.

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 Anchor Bancorp. 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 30, 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.

Earnings (Loss) Per Share (EPS)

Earnings Per Share (EPS) - Basic EPS is computed by dividing net income or (loss) by the weighted-average number of common shares outstanding during the period. As ESOP shares are committed to be released they become outstanding for EPS calculation purposes. ESOP shares not committed to be released are not considered outstanding. The basic EPS calculation excludes the dilutive effect of all common stock equivalents. 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 (loss) per share reflects the weighted-average potential dilution that could occur if all potentially dilutive securities or other commitments to issue common stock were exercised or converted into common stock using the treasury stock method.

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. At June 30, 2016, the difference in EPS under the two-class method was not significant.

Comprehensive income

Comprehensive income - Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale investments, are reported as a separate component of stockholders' equity.

Fair value

Fair value - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair values. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Bank’s estimates for market assumptions.

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.

Recently issued accounting pronouncements

Recently issued accounting pronouncements - In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-14, Revenue from Contracts with Customers, deferring the effective date of the new revenue standard by one year. The standard also allows entities to choose to adopt the standard as of the original effective date. The FASB decided, based on its outreach to various stakeholders and the forthcoming amendments to the new revenue standard, that a deferral is necessary to provide adequate time to effectively implement the new revenue standard. The adoption of ASU No. 2015-14 is not expected to have a material impact on the Company's consolidated financial statements.

In August 2015, FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. The ASU provides guidance not previously included in ASU 2015-03 regarding debt issuance related to line-of-credit arrangements. The amendment in this ASU allows an entity to present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs over the term of the line-of-credit arrangement, regardless if there are any outstanding borrowings on the line-of-credit arrangement. This ASU was effective for fiscal years beginning after December 15, 2015. The adoption of ASU No. 2015-15 did not have a material impact on the Company's consolidated financial statements.

In September 2015, FASB issued ASU No. 2015-16, Business Combinations (Topic 805). The ASU simplifies the accounting for measurement period adjustments. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period when the adjustment amounts are determined. The acquirer is required to record in the same period's financial statements the effect on earnings from changes in depreciation, amortization, or other income effects resulting from the change to provisional amounts, calculated as if the accounting had been completed at the acquisition date. The acquirer must present separately on the income statement, or disclose in the notes, the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the provisional amount had been recognized at the acquisition date. This ASU was effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The adoption of ASU No. 2015-16 did not have a material impact on the Company's consolidated financial statements.

In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The ASU is part of the FASB simplification initiative aimed at reducing complexity in accounting standards. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. Importantly, the guidance does not change the existing requirement that only permits offsetting within a jurisdiction - that is, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. This ASU is effective for annual periods beginning after December 31, 2016 and interim periods within those annual periods. The adoption of ASU No. 2015-17 is not expected to have a material impact on the Company's consolidated financial statements.

In January 2016, 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 after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU No. 2016-01 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In February 2016, 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 Company is currently evaluating the provisions of ASU No. 2016-02 to determine any material impact the new standard will have on the Company's consolidated financial statements.

In March 2016, FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments in this ASU require entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the provisions of ASU No. 2016-08 to determine any material impact there may be on the Company's consolidated financial statements.

In March 2016, 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 is effective for annual and interim periods beginning after December 15, 2016. The adoption of ASU 2016-09 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations. The amendments in this ASU provide more detailed guidance on the revenue recognition standard including additional implementation guidance and examples of identifying performance obligations and licenses of intellectual property. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that year. The Company is currently evaluating the provisions of ASU No. 2016-10 to determine any material impact there may be on the Company's consolidated financial statements.

In May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this ASU clarified several key areas of the revenue recognition standard including accessing collectability, presenting sales taxes and other similar taxes collected from customers, noncash consideration, contract modification at transitions, completed contracts at transition, and disclosing the accounting change in the period of adoption.The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that year. The Company is currently evaluating the provisions of ASU No. 2016-12 to determine any material impact there may be on the Company's consolidated financial statements.

In June 2016, 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. The adoption of ASU No. 2016-13 is being reviewed for any material impact there may be on the Company's consolidated financial statements.

Credit Quality Indicators

Credit Quality Indicators. The Bank utilizes 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.

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. The Bank uses 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.

• 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.

Fair Value Methods and Assumptions Policy

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.

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.

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.

XML

Organization and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Property, premises, and equipment estimated useful lives

The depreciation charged is computed on the straight-line method over estimated useful lives as follows:

Buildings	40 years
Furniture and equipment	5-10 years
Improvements	10 years
Computer equipment	3 years

Property, premises, and equipment owned by the Bank are summarized as follows:

	June 30,
	2016			2015
Land	$	2,192		$	2,247
Building and improvements	14,372			15,883
Furniture and fixtures	3,778			4,778
Automobiles	345			334
Software	619			593
Leasehold improvements	77			17
	21,383			23,852
Less accumulated depreciation and amortization	(11,382		)	(13,482		)
Property, premises, and equipment, net of depreciation and amortization	$	10,001		$	10,370

XML

Securities (Tables)

12 Months Ended

Jun. 30, 2016

Investments [Abstract]

Schedule of Investment Securities by Amortized Cost and Estimated Fair Market Value

The amortized cost and estimated fair market values of investment securities were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2016
Securities available-for-sale
Municipal bonds	$	175	$	—	$	—		$	175
Mortgage-backed securities:
FHLMC (1)	9,442		161		(44		)	9,559
FNMA (2)	13,199		67		(62		)	13,204
GNMA (3)	734		—		(7		)	727
	$	23,550	$	228	$	(113	)	$	23,665
Securities held-to-maturity
Mortgage-backed securities:
FHLMC (1)	2,793		72		(20		)	2,845
FNMA (2)	1,513		103		(3		)	1,613
GNMA (3)	1,985		5		(23		)	1,967
	$	6,291	$	180	$	(46	)	$	6,425

⁽¹⁾ Federal Home Loan Mortgage Corporation (Freddie Mac)

⁽²⁾ Federal National Mortgage Association (Fannie Mae)

⁽³⁾ Government National Mortgage Association (Ginnie Mae)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Securities available-for-sale
Municipal bonds	$	434	$	1	$	—		$	435
Mortgage-backed securities:
FHLMC	11,780		134		(123		)	11,791
FNMA	16,534		70		(196		)	16,408
GNMA	948		—		(17		)	931
	$	29,696	$	205	$	(336	)	$	29,565
Securities held-to-maturity
Municipal bonds	$	119	$	—	$	—		$	119
Mortgage-backed securities:
FHLMC	3,367		95		(56		)	3,406
FNMA	1,858		124		(22		)	1,960
GNMA	2,273		—		(66		)	2,207
	$	7,617	$	219	$	(144	)	$	7,692

Schedule of Temporary Impairment Losses, Investments

The fair value of temporarily impaired securities, the amount of unrealized losses, and the length of time these unrealized losses existed as of June 30, 2016 and 2015 were as follows:

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016
Securities available-for-sale
Mortgage-backed securities:
FHLMC	$	710	$	(5	)	$	4,031	$	(39	)	$	4,741	$	(44	)
FNMA	855		(1		)	5,900		(61		)	6,755		(62		)
GNMA	—		—			727		(7		)	727		(7		)
	$	1,565	$	(6	)	$	10,658	$	(107	)	$	12,223	$	(113	)

	Less Than 12 Months				12 Months or Longer					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	—	$	—	$	1,973	$	(20	)	$	1,973	$	(20	)
FNMA	—		—		684		(3		)	684		(3		)
GNMA	—		—		989		(23		)	989		(23		)
	$	—	$	—	$	3,646	$	(46	)	$	3,646	$	(46	)

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2015
Securities available-for-sale
Mortgage-backed securities:
FHLMC	$	747	$	(1	)	$	5,404	$	(122	)	$	6,151	$	(123	)
FNMA	3,105		(45		)	6,898		(151		)	10,003		(196		)
GNMA	—		—			931		(17		)	931		(17		)
	$	3,852	$	(46	)	$	13,233	$	(290	)	$	17,085	$	(336	)

	Less Than 12 Months				12 Months or Longer					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2015
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	—	$	—	$	2,299	$	(56	)	$	2,299	$	(56	)
FNMA	—		—		772		(22		)	772		(22		)
GNMA	—		—		2,207		(66		)	2,207		(66		)
	$	—	$	—	$	5,278	$	(144	)	$	5,278	$	(144	)

Schedule of Contractual Maturities of Securities

Contractual maturities of securities at June 30, 2016 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.

	Amortized Cost		Fair Value
June 30, 2016
Securities available-for-sale
Municipal bonds:
Due after ten years	$	175	$	175
Mortgage-backed securities:
FHLMC	9,442		9,559
FNMA	13,199		13,204
GNMA	734		727
	$	23,550	$	23,665
Securities held-to-maturity
Mortgage-backed securities:
FHLMC	$	2,793	$	2,845
FNMA	1,513		1,613
GNMA	1,985		1,967
	$	6,291	$	6,425

Schedule of Sales of Securities and Maturities

Sales, maturities, and calls of securities for the years presented are summarized as follows:

	Year Ended June 30,
	2016		2015			2014
Proceeds from sales	$	—	$	2,355		$	—
Proceeds from maturities and calls	250		—			995
Gross realized gains	—		65			—
Gross realized losses	—		(18		)	—

Schedule of Financial Instruments Owned and Pledged as Collateral [Table Text Block]

Pledged securities at the dates indicated are summarized as follows:

	June 30, 2016				June 30, 2015
Pledged to secure:	Book Value		Fair Value		Book Value		Fair Value
Certain public deposits	$	12,575	$	12,719	$	12,184	$	12,189
FHLB borrowings	1,302		1,358		1,727		1,788
Federal Reserve borrowing line	973		978		1,001		990

XML

Loans Receivable, Net (Tables)

12 Months Ended

Jun. 30, 2016

Loans Receivable, Net [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

Loans receivable consisted of the following at the dates indicated:

	June 30,
	2016		2015
Real estate:
One-to-four family	$	61,230	$	57,944
Multi-family	53,742		43,249
Commercial	149,527		128,306
Construction	21,793		11,731
Land	6,839		4,069
Total real estate	293,131		245,299
Consumer:
Home equity	16,599		17,604
Credit cards	2,969		3,289
Automobile	597		686
Other consumer	1,933		2,347
Total consumer	22,098		23,926
Commercial business	36,848		18,987
Total loans	352,077		288,212
Less:
Deferred loan fees and loan premiums, net	947		1,047
Allowance for loan losses	3,779		3,721
Loans receivable, net	$	347,351	$	283,444

Schedule of Allowance for Loan Losses

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, 2016:

	One-to-four family		Multi- family		Commercial real estate		Construction		Land		Consumer(1)		Commercial business		Unallocated		Total
Allowance for loan losses:
Ending balance	$	798	$	454	$	1,333	$	271	$	75	$	516	$	332	$	—	$	3,779
Ending balance: individually evaluated for impairment	419		—		—		—		4		145		22		—		590
Ending balance: collectively evaluated for impairment	$	379	$	454	$	1,333	$	271	$	71	$	371	$	310	$	—	$	3,189
Loans receivable:
Ending balance	$	61,230	$	53,742	$	149,527	$	21,793	$	6,839	$	22,098	$	36,848	$	—	$	352,077
Ending balance: individually evaluated for impairment	9,283		—		319		—		490		427		188		—		10,707
Ending balance: collectively evaluated for impairment	$	51,947	$	53,742	$	149,208	$	21,793	$	6,349	$	21,671	$	36,660	$	—	$	341,370

⁽¹⁾   Consumer loans include home equity, credit cards, auto and other consumer loans.

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, 2015:

	One-to-four family		Multi- family		Commercial real estate		Construction		Land		Consumer (1)		Commercial business		Unallocated		Total
Allowance for loan losses:
Ending balance	$	1,113	$	95	$	262	$	247	$	75	$	445	$	1,405	$	79	$	3,721
Ending balance: individually evaluated for impairment	500		—		—		—		3		26		211		—		740
Ending balance: collectively evaluated for impairment	$	613	$	95	$	262	$	247	$	72	$	419	$	1,194	$	79	$	2,981
Loans receivable:
Ending balance	$	57,944	$	43,249	$	128,306	$	11,731	$	4,069	$	23,926	$	18,987	$	—	$	288,212
Ending balance: individually evaluated for impairment	9,273		—		—		—		639		307		932		—		11,151
Ending balance: collectively evaluated for impairment	$	48,671	$	43,249	$	128,306	$	11,731	$	3,430	$	23,619	$	18,055	$	—	$	277,061

⁽¹⁾   Consumer loans include home equity, credit cards, auto, and other consumer loans.

A summary of activity in the allowance for loan losses follows:

	June 30,
	2016			2015			2014
Beginning balance	$	3,721		$	4,624		$	5,147
Provision for losses	340			—			—
Charge-offs	(957		)	(1,497		)	(2,434		)
Recoveries	675			594			1,911
Ending balance	$	3,779		$	3,721		$	4,624

The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 2016:

	One-to- four family			Multi- family		Commercial real estate			Construction			Land		Consumer (1)			Commercial business			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,113		$	95	$	262		$	247		$	75	$	445		$	1,405		$	79		$	3,721
Provision (benefit) for loan losses	(251		)	353		1,295			(325		)	—		343			(996		)	(79		)	340
Charge-offs	(258		)	—		(225		)	—			—		(390		)	(84		)	—			(957		)
Recoveries	194			6		1			349			—		118			7			—			675
Ending balance	$	798		$	454	$	1,333		$	271		$	75	$	516		$	332		$	—		$	3,779

⁽¹⁾  Consumer loans include home equity, credit cards, auto, 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 year ended June 30, 2015:

	One-to- four family			Multi- family			Commercial real estate			Construction			Land		Consumer (1)			Commercial business			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	1,550		$	229		$	682		$	190		$	74	$	587		$	1,231		$	81		$	4,624
Provision (benefit) for loan losses	(5		)	25			(80		)	(197		)	1		94			164			(2		)	—
Charge-offs	(561		)	(159		)	(340		)	—			—		(351		)	(86		)	—			(1,497		)
Recoveries	129			—			—			254			—		115			96			—			594
Ending balance	$	1,113		$	95		$	262		$	247		$	75	$	445		$	1,405		$	79		$	3,721

⁽¹⁾  Consumer loans include home equity, credit cards, auto, 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 year ended June 30, 2014:

	One-to- four family			Multi- family		Commercial real estate			Construction			Land			Consumer (1)			Commercial business			Unallocated		Total
Allowance for loan losses:
Beginning balance	$	1,393		$	156	$	671		$	356		$	531		$	817		$	1,172		$	51	$	5,147
Provision (benefit) for loan losses	665			73		(558		)	(540		)	(457		)	508			279			30		—
Charge-offs	(897		)	—		(403		)	—			—			(876		)	(258		)	—		(2,434		)
Recoveries	389			—		972			374			—			138			38			—		1,911
Ending balance	$	1,550		$	229	$	682		$	190		$	74		$	587		$	1,231		$	81	$	4,624

⁽¹⁾  Consumer loans include home equity, credit cards, auto, and other consumer loans. The only consumer loans with impairment are home equity loans.

Schedule of Loans Individually Evaluated for Impairment

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2016:

	Recorded Investments		Unpaid Principal Balance		Related Allowance
With no allowance recorded
One-to-four family	$	2,049	$	2,269	$	—
Commercial real estate	319		547		—
Land	174		188		—
Home equity	60		62		—
Commercial business	64		125		—
With an allowance recorded
One-to-four family	7,234		7,284		419
Land	316		316		4
Home equity	367		367		145
Commercial business	124		138		22
Total
One-to-four family	9,283		9,553		419
Commercial real estate	319		547		—
Land	490		504		4
Home equity	427		429		145
Commercial business	188		263		22
Total	$	10,707	$	11,296	$	590

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2015:

	Recorded Investments		Unpaid Principal Balance		Related Allowance
With no allowance recorded
One-to-four family	$	1,557	$	1,860	$	—
Land	231		245		—
Home equity	64		65		—
Other consumer	31		32		—
Commercial business	64		126		—
With an allowance recorded
One-to-four family	7,716		7,743		500
Land	408		408		3
Home equity	212		212		26
Commercial business	868		868		211
Total
One-to-four family	9,273		9,603		500
Land	639		653		3
Home equity	276		277		26
Other consumer	31		32		—
Commercial business	932		994		211
Total	$	11,151	$	11,559	$	740

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2016:

	Year Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	1,913	$	62
Commercial real estate	—		15
Land	210		11
Home equity	63		3
Other consumer	16		—
Commercial business	95		9
With an allowance recorded
One-to-four family	7,500		310
Land	362		22
Home equity	290		19
Commercial business	503		2
Total
One-to-four family	9,413		372
Commercial real estate	—		15
Land	572		33
Home equity	353		22
Other consumer	16		—
Commercial business	598		11
Total	$	10,952	$	453

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2015:

	Year Ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	3,802	$	67
Multi-family	1,132		—
Commercial real estate	984		—
Land	355		12
Home equity	153		3
Other consumer	—		1
Commercial business	723		8
With an allowance recorded
One-to-four family	7,989		308
Land	765		25
Home equity	325		10
Commercial business	469		36
Total
One-to-four family	11,791		375
Multi-family	1,132		—
Commercial real estate	984		—
Land	1,120		37
Home equity	478		13
Other consumer	—		1
Commercial business	1,192		44
Total	$	16,697	$	470

The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2014:

	Year Ended June 30, 2014
	Average Recorded Investment		Interest Income Recognized
With no allowance recorded
One-to-four family	$	4,199	$	97
Multi-family	1,132		—
Commercial real estate	1,094		12
Land	393		18
Home equity	194		6
Commercial business	723		8
With an allowance recorded
One-to-four family	8,360		379
Multi-family	79		—
Commercial real estate	925		21
Land	815		32
Home equity	330		11
Commercial business	231		20
Total
One-to-four family	12,559		476
Multi-family	1,211		—
Commercial real estate	2,019		33
Land	1,208		50
Home equity	524		17
Commercial business	954		28
Total	$	18,475	$	604

Schedule of Financing Receivables, Non Accrual Status

The following table presents the recorded investment in nonaccrual and loans past due 90 days still on accrual by type of loans as of the dates indicated:

	June 30,
	2016		2015
One-to-four family	$	1,539	$	1,263
Commercial real estate	319		—
Home equity	16		—
Credit cards	—		6
Other consumer	1		31
Commercial business	97		711
Total	$	1,972	$	2,011

Schedule of Past Due Loans by Class

The following table presents past due loans, net of partial loan charge-offs, by class of loans, as of June 30, 2016:

	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due (1)		Total Past Due		Current		Total Loans
One-to-four family	$	566	$	623	$	1,539	$	2,728	$	58,502	$	61,230
Multi-family	—		—		—		—		53,742		53,742
Commercial real estate	—		—		319		319		149,208		149,527
Construction	—		—		—		—		21,793		21,793
Land	—		—		—		—		6,839		6,839
Home equity	14		8		16		38		16,561		16,599
Credit cards	77		—		—		77		2,892		2,969
Automobile	1		—		—		1		596		597
Other consumer	12		—		1		13		1,920		1,933
Commercial business	—		—		97		97		36,751		36,848
Total	$	670	$	631	$	1,972	$	3,273	$	348,804	$	352,077

⁽¹⁾ Includes loans on nonaccrual status, that may be less than 90 days contractually past due.

The following table presents past due loans, net of partial loan charge-offs, by class of loans as of June 30, 2015:

	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due (1)		Total Past Due		Current		Total Loans
One-to-four family	$	616	$	552	$	1,263	$	2,431	$	55,513	$	57,944
Multi-family	—		—		—		—		43,249		43,249
Commercial real estate	—		—		—		—		128,306		128,306
Construction	—		—		—		—		11,731		11,731
Land	—		—		—		—		4,069		4,069
Home equity	15		16		—		31		17,573		17,604
Credit cards	8		26		6		40		3,249		3,289
Automobile	9		—		—		9		677		686
Other consumer	16		—		31		47		2,300		2,347
Commercial business	64		273		711		1,048		17,939		18,987
Total	$	728	$	867	$	2,011	$	3,606	$	284,606	$	288,212

⁽¹⁾ Includes loans on nonaccrual status, that may be less than 90 days contractually past due.

Schedule of Financing Receivable Credit Quality Indicators

The following table represents the internally assigned grade as of June 30, 2016, 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
Grade:
Pass	$	52,438	$	53,002	$	146,587	$	21,793	$	6,349	$	15,377	$	2,892	$	542	$	1,839	$	35,149	$	335,968
Watch	4,875		740		1,978		—		316		836		77		55		94		1,005		9,976
Special Mention	1,789		—		644		—		174		220		—		—		—		533		3,360
Substandard	2,128		—		318		—		—		166		—		—		—		161		2,773
Doubtful	—		—		—		—		—		—		—		—		—		—		—
Total	$	61,230	$	53,742	$	149,527	$	21,793	$	6,839	$	16,599	$	2,969	$	597	$	1,933	$	36,848	$	352,077

The following table represents the internally assigned grade as of June 30, 2015, 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
Grade:
Pass	$	49,119	$	42,884	$	125,586	$	11,731	$	3,430	$	16,585	$	3,249	$	615	$	2,214	$	16,981	$	272,394
Watch	2,151		—		2,044		—		—		697		34		71		102		915		6,014
Special Mention	4,755		—		676		—		231		301		—		—		—		159		6,122
Substandard	1,919		365		—		—		408		21		6		—		31		932		3,682
Doubtful	—		—		—		—		—		—		—		—		—		—		—
Total	$	57,944	$	43,249	$	128,306	$	11,731	$	4,069	$	17,604	$	3,289	$	686	$	2,347	$	18,987	$	288,212

Troubled Debt Restructurings on Financing Receivables

The following table represents TDRs by accrual versus nonaccrual status and by class of loans as of June 30, 2016:

	June 30, 2016
	Accrual Status		Nonaccrual Status		Total Modifications
One-to-four family	$	7,503	$	411	$	7,914
Land	490		—		490
Home equity	261		—		261
Commercial business	90		—		90
Total	$	8,344	$	411	$	8,755

The following table represents TDRs by accrual versus nonaccrual status and by class of loans as of June 30, 2015:

	June 30, 2015
	Accrual Status		Nonaccrual Status		Total Modifications
One-to-four family	$	8,010	$	681	$	8,691
Land	639		—		639
Home equity	276		—		276
Commercial business	221		—		221
Total	$	9,146	$	681	$	9,827

The following tables present TDRs and their recorded investment prior to the modification and after the modification for TDR transactions that originated during the years ended June 30, 2016, 2015 and 2014:

	Year Ended June 30, 2016
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	1	$	273	$	240
Total	1	$	273	$	240

	Year Ended June 30, 2015
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	1	$	197	$	194
Total	1	$	197	$	194

	Year Ended June 30, 2014
	Number of Contracts	Pre-TDR Recorded Investment		Post -TDR Recorded Investment
One-to-four family	7	$	1,530	$	1,545
Home equity	1	75		67
Commercial business	1	145		158
Total	9	$	1,750	$	1,770

There were no TDRs for which there was a payment default within the first 12 months of modification during the years ended June 30, 2016, 2015 and 2014.

XML

Real Estate Owned, Net (Tables)

12 Months Ended

Jun. 30, 2016

Real Estate Owned, Disclosure of Detailed Components [Abstract]

Schedule of Real Estate Properties

The following table is a summary of REO for the years ended June 30, 2016, 2015 and 2014:

	Year Ended June 30,
	2016			2015			2014
Balance at the beginning of the period	$	797		$	5,067		$	6,212
Net loans transferred to real estate owned	574			2,241			5,793
Capitalized improvements	—			27			591
Gross proceeds from sale of REO	(973		)	(6,789		)	(6,846		)
Gain on sale of REO	58			283			407
Impairments	(83		)	(32		)	(1,090		)
Balance at the end of the period	$	373		$	797		$	5,067

XML

Property, Premises, and Equipment (Tables)

12 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property, premises, and equipment owned

The depreciation charged is computed on the straight-line method over estimated useful lives as follows:

Buildings	40 years
Furniture and equipment	5-10 years
Improvements	10 years
Computer equipment	3 years

Property, premises, and equipment owned by the Bank are summarized as follows:

	June 30,
	2016			2015
Land	$	2,192		$	2,247
Building and improvements	14,372			15,883
Furniture and fixtures	3,778			4,778
Automobiles	345			334
Software	619			593
Leasehold improvements	77			17
	21,383			23,852
Less accumulated depreciation and amortization	(11,382		)	(13,482		)
Property, premises, and equipment, net of depreciation and amortization	$	10,001		$	10,370

XML

Deposits (Tables)

12 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

Schedule of Deposits

Deposits consist of the following:

	June 30,
	2016				2015
	Amount		Percent		Amount		Percent
Noninterest-bearing demand deposits	$	50,781	16.8	%	$	44,719	15.0	%
Interest-bearing demand deposits, weighted-average rate of 0.04% and 0.04% in fiscal 2016 and fiscal 2015, respectively	27,419		9.1		22,448		7.5
Savings deposits, weighted-average rate of 0.15% in fiscal 2016 and 0.15% in fiscal 2015	44,986		15.0		42,399		14.1
Money market accounts, weighted-average rate of 0.17% and 0.15% in fiscal 2016 and fiscal 2015, respectively	59,270		19.7		63,916		21.3
Certificates of deposit
0.00 to 3.49%	97,788		32.5		100,286		33.4
3.50 to 5.49%	20,650		6.9		26,044		8.7
Total of certificates of deposit	118,438		39.4		126,330		42.1
Total deposits	$	300,894	100.0	%	$	299,812	100.0	%

Schedule of Maturities of Certificates

As of June 30, 2016, certificates of deposit mature as follows:

Year Ended June 30,
	Amount
2017	$	43,241
2018	26,537
2019	33,839
2020	10,498
Thereafter	4,323
	$	118,438

XML

Borrowings (Tables)

12 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

FHLB Advances and Lines of Credit

FHLB advances (at weighted-average interest rates of 0.93% and 1.18% at June 30, 2016 and 2015, respectively) and lines of credit are scheduled to mature as follows:

	June 30,
	2016		2015
One year or less	$	24,500	$	—
After one year through three years	30,000		10,000
More than three years	7,500		—
	$	62,000	$	10,000

Maximum and Average Outstanding Advances and Lines of Credit

The maximum and average outstanding advances and lines of credit from the FHLB are as follows:

	June 30,
	2016		2015
Highest outstanding advances at month-end for the previous 12 months	$	62,000	$	22,500
Average outstanding	$	29,875	$	13,629

XML

Employee Benefit Plans (Tables)

12 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Stock Ownership Plan (ESOP) Disclosures

Shares held by the ESOP as of the dates indicated are as follows:

	June 30,
	2016		2015
Allocated shares	39,748		32,865
Unallocated shares	62,252		69,135
Total ESOP shares	102,000		102,000
Fair value of unallocated shares	$	1,471	$	1,555

XML

Stock-Based Compensation (Tables)

12 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

The following tables provide a summary of changes in non-vested restricted stock awards for the year ended June 30, 2016:

	For the Year Ended June 30, 2016
			Weighted-Average Grant Date Fair Value
	Shares
Non-vested at July 1, 2015	—		$	—
Granted	106,228		25.71
Vested	(22,459	)	25.75
Forfeited and canceled	(12,925	)	25.75
Non-vested at June 30, 2016	70,844		25.69

XML

Earnings Per Share (Tables)

12 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table details the calculation of basic and diluted earnings per share:

	For the Year Ended June 30,
	2016		2015		2014
Net income	$	495	$	9,827	$	423
Less: Earnings allocated to participating securities	—		—		—
Earnings allocated to common shareholders	495		9,827		423
Basic weighted-average common shares outstanding	2,452,455		2,477,423		2,466,983
Potentially dilutive incremental shares	7,071		—		—
Diluted weighted-average common shares outstanding	2,459,526		2,477,423		2,466,983
Basic earnings per share	$	0.20	$	3.97	$	0.17
Diluted earnings per share	$	0.20	$	3.97	$	0.17

XML

Related Party Transactions (Tables)

12 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

Loans to Directors, Executive Officers, and Their Affiliates

Aggregate loans balances are as follows and were within regulatory limitations:

	At June 30,
	2016		2015		2014
Beginning balance	$	277	$	887	$	228
Extensions of credit	5		—		668
Repayments	60		610		9
Ending balance	$	222	$	277	$	887

XML

Regulatory Capital Requirements (Tables)

12 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

Bank’s Actual Capital Accounts and Ratios

The Bank’s capital accounts and ratios are also presented in the following table:

	Actual				Minimum Capital Requirement				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2016
Total capital (to risk-weighted assets)	$	59,938	15.7	%	$	30,580	8.0	%	$	38,225	10.0	%
Tier I capital (to risk-weighted assets)	56,159		14.7		22,935		6.0		30,580		8.0
Common equity Tier 1 capital (to risk-weighted assets)	56,159		14.7		17,201		4.5		24,846		6.5
Tier I leverage capital (to average assets)	56,159		13.5		16,620		4.0		20,775		5.0
As of June 30, 2015
Total capital (to risk-weighted assets)	$	57,321	17.4	%	$	26,422	8.0	%	$	33,027	10.0	%
Tier I capital (to risk-weighted assets)	53,600		16.2		19,816		6.0		26,422		8.0
Common equity Tier 1 capital (to risk-weighted assets)	53,600		16.2		14,862		4.5		21,468		6.5
Tier I leverage capital (to average assets)	53,600		14.3		14,963		4.0		18,703		5.0

XML

Income Taxes (Tables)

12 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

The components of current and deferred tax expense for the years ended June 30, 2016 and 2015 were as follows:

	Year Ended June 30,
	2016			2015
Current	$	126		$	—
Deferred	(87		)	148
Change in valuation allowance	—			(8,469		)
Total	$	39		$	(8,321	)

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the provision for income taxes based on statutory corporate tax rates on pre-tax income and the provision shown in the accompanying consolidated statements of income at the dates indicated is summarized as follows:

	Amount			Percent of Pre-Tax Income (loss)
June 30, 2016
Income taxes computed at statutory rates	$	182		34.0	%
Tax-exempt income	(189		)	(35.4	)
Other, net	46			8.6
Provision for income taxes	$	39		7.2	%
June 30, 2015
Income taxes computed at statutory rates	$	511		34.0	%
Tax-exempt income	(193		)	(12.8	)
Deferred tax asset valuation allowance	(8,469		)	(562.5	)
Other, net	(170		)	(11.4	)
Benefit for income taxes	$	(8,321	)	(552.7	)%
June 30, 2014
Income taxes computed at statutory rates	$	144		34.0	%
Tax-exempt income	(202		)	(47.8	)
Deferred tax asset valuation allowance	50			11.9
Other, net	8			1.9
Provision for income taxes	$	—		—	%

Schedule of Deferred Tax Assets and Liabilities

The components of net deferred tax assets and liabilities at the dates indicated are summarized as follows:

	June 30,
	2016		2015
Deferred tax assets
Allowance for loan losses	$	3,159	$	3,139
AMT credit carryforward	352		199
Deferred compensation - SERP	561		573
Stock awards	350		—
Securities impairment charge	340		340
Net operating loss carryforward	4,304		4,726
Real estate owned	155		198
Accumulated depreciation	305		314
Unrealized loss on securities available-for-sale			45
Other, net	53		—
Total deferred tax assets	9,579		9,534
Deferred tax liabilities
Deferred loan fees and costs	434		396
FHLB stock dividends	166		166
Mortgage servicing rights	70		80
Unrealized gain on securities available-for-sale	39		—
Other, net	—		25
Total deferred tax liabilities	709		667
Net deferred tax asset, after valuation allowance	$	8,870	$	8,867

XML

Parent Company Financials (Tables)

12 Months Ended

Jun. 30, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule of Condensed Financial Statements

Presented below are the condensed statements of financial condition, statements of income, and statements of cash flows for Anchor Bancorp.

ANCHOR BANCORP STATEMENTS OF FINANCIAL CONDITION

	June 30,
	2016			2015
ASSETS
Cash	$	2,378		$	5,324
ESOP loan	672			735
Investment in bank subsidiary	58,428			47,506
Prepaid and other assets	747			505
Total assets	$	62,225		$	54,070
LIABILITIES
Total liabilities	$	—		$	3
STOCKHOLDERS’ EQUITY
Common stock	$	25		$	25
Additional paid-in-capital	22,157			23,404
Retained earnings	41,264			32,084
Unearned ESOP shares	(672		)	(735		)
Accumulated other comprehensive loss, net of tax	(549		)	(711		)
Total stockholders’ equity	$	62,225		$	54,067
Total liabilities and stockholders’ equity	$	62,225		$	54,070

ANCHOR BANCORP STATEMENTS OF INCOME

	For the Years Ended June 30,
	2016			2015			2014
Operating income
Interest income ESOP loan	$	24		$	26		$	28
Dividends received from subsidiary	680			5,350			—
Total operating income	704			5,376			28
Operating expenses
Legal expense	354			105			127
Accounting expense	49			47			44
Professional fees	116			60			60
Management fees	69			67			68
General and administrative	62			54			77
Other expense	75			—			—
Total operating expenses	725			333			376
(Loss) profit before income tax	(21		)	5,043			(348		)
Income tax benefit	(227		)	(478		)	—
Income before equity in undistributed income of subsidiary	206			5,521			(348		)
Equity in undistributed income of subsidiary	970			4,306			771
Net income	$	1,176		$	9,827		$	423

ANCHOR BANCORP STATEMENTS OF CASH FLOWS

	For the Years Ended June 30,
	2016			2015			2014
Cash flows from operating activities
Net income	$	1,176		$	9,827		$	423
Adjustments to reconcile net loss to net cash from operating activities:
Equity in undistributed income of subsidiary	(970		)	(4,306		)	(771		)
Change in deferred tax assets, net	(227		)	(478		)	—
Change in other assets	(60		)	(46		)	(45		)
Net cash used by operating activities	(81		)	4,997			(393		)
Cash flows from financing activities
Repurchase and retirement of common stock	(2,952		)	—			—
ESOP loan repayments	87			88			123
Net cash provided by investing activities	(2,865		)	88			123
Net change in cash and cash equivalents	(2,946		)	5,084			(270		)
Cash and cash equivalents at beginning of period	5,324			240			510
Cash and cash equivalents at end of period	$	2,378		$	5,324		$	240

XML

Commitments and Contingencies (Tables)

12 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Outstanding Fnancial Instruments Whose Contract Amounts Represent Credit Risk

The following financial instruments were outstanding whose contract amounts represent credit risk at June 30, 2016:

	Amount of Commitment Expiration - Per Period
	Total Amounts Committed (2)		Due in One Year
Commitments to originate loans (1)	$	14,130	$	14,130
Line of credit
Fixed rate (3)	10,160		365
Adjustable rate	54,460		13,770
Undisbursed balance of loans closed	64,620		14,135
Total balance	$	78,750	$	28,265

⁽¹⁾ Interest rates on fixed rate loans range from 3.88% to 17.99%.

⁽²⁾ At June 30, 2016 there were no reserves for unfunded commitments.

⁽³⁾ Includes standby letters of credit.

The following financial instruments were outstanding whose contract amounts represent credit risk at June 30, 2015:

	Amount of Commitment Expiration - Per Period
	Total Amounts Committed (2)		Due in One Year
Commitments to originate loans (1)	$	5,024	$	5,024
Line of credit
Fixed rate (3)	1,708		399
Adjustable rate	26,961		962
Undisbursed balance of loans closed	28,669		1,361
Total balance	$	33,693	$	6,385

⁽¹⁾ Interest rates on fixed rate loans range from 3.75% to 17.99%.

⁽²⁾ At June 30, 2015 there was $79 in reserves for unfunded commitments.

⁽³⁾ Includes standby letters of credit.

Operating Lease Commitments

The annual lease commitments for the next five years are as follows:

Year Ended June 30,	Amount
2017	$124
2018	$124
2019	$84
2020	$37
2021	$—

XML

Fair Value Measurements (Tables)

12 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following tables show the Company's assets and liabilities at the dates indicated measured at fair value on a recurring basis:

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	—	$	175	$	—	$	175
Mortgage-backed securities:
FHLMC	—		9,559		—		9,559
FNMA	—		13,204		—		13,204
GNMA	—		727		—		727

	June 30, 2015
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	—	$	435	$	—	$	435
Mortgage-backed securities:
FHLMC	—		11,791		—		11,791
FNMA	—		16,408		—		16,408
GNMA	—		931		—		931

Schedule of Fair Value, Assets and Liabilities Measured on Nonrecurring Basis

The following table presents the balances of assets measured at fair value on a nonrecurring basis during the year ended June 30, 2016:

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Impaired loans:
Mortgage loans
One-to-four family	$	—	$	—	$	8,046	$	8,046
Commercial	—		—		318		318
Land	—		—		316		316
Home equity	—		—		367		367
Commercial business	—		—		124		124
Total impaired loans	—		—		9,171		9,171
Real estate owned:
One-to-four family	$	—	$	—	$	113	$	113
Land	—		—		19		19
Total real estate owned	—		—		132		132
Total	$	—	$	—	$	9,303	$	9,303

The following table presents the balance of assets measured at fair value on a nonrecurring basis during the year ended June 30, 2015:

	June 30, 2015
	Level 1		Level 2		Level 3		Total
Impaired loans:
Mortgage loans
One-to-four family	$	—	$	—	$	4,172	$	4,172
Commercial	—		—		408		408
Land	—		—		212		212
Commercial business	—		—		868		868
Total impaired loans	—		—		5,660		5,660
Real estate owned:
One-to-four family	$	—	$	—	$	188	$	188
Land	—		—		418		418
Total real estate owned	—		—		606		606
Total	$	—	$	—	$	6,266	$	6,266

Schedule of Quantitative Information About Level 3 Fair Value Instruments

The following tables present quantitative information about Level 3 fair value measurements at June 30, 2016 and 2015:

	June 30, 2016
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Average Discount
Impaired loans	$	9,171	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 100% (5%)
Real estate owned	$	132	Fair value of collateral	Discount applied to the obtained appraisal	0% - 100% (12%)

	June 30, 2015
	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Average Discount
Impaired loans	$	5,660	Fair value of underlying collateral	Discount applied to the obtained appraisal	0% - 100% (4%)
Real estate owned	$	606	Fair value of collateral	Discount applied to the obtained appraisal	0% - 100% (1%)

Schedule of Financial Instruments Carrying Amount, Fair Value and Placement in the Fair Value Hierarchy

he following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company's financial instruments as of June 30, 2016 and June 30, 2015.  For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as demand deposits, savings, and money market, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

	June 30, 2016
	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)
Financial Instruments-Assets
Cash and cash equivalents	$	8,320	$	8,320	$	8,320	$	—	$	—
Securities available-for-sale	23,665		23,665		—		23,665		—
Securities held-to-maturity	6,291		6,425		—		6,425		—
FHLB stock	2,959		2,959		—		2,959		—
Loans held for sale	1,864		1,864		1,864		—		—
Loans receivable	351,130		349,244		—		—		349,244
Accrued interest receivable	1,182		1,182		—		1,182		—
Financial Instruments-Liabilities
Demand deposits, savings and money market	$	182,456	$	182,456	$	182,456	$	—	$	—
Certificates of deposit	118,438		118,059		—		118,059		—
FHLB advances	62,000		62,124		—		62,124		—
Advance payments by borrowers taxes and insurance	1,114		1,114		1,114		—		—

	June 30, 2015
	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)
Financial Instruments-Assets
Cash and cash equivalents	$	14,450	$	14,450	$	14,450	$	—	$	—
Securities available-for-sale	29,565		29,565		—		29,565		—
Securities held-to-maturity	7,617		7,692		—		7,692		—
FHLB stock	853		853		—		853		—
Loans held for sale	505		505		505		—		—
Loans receivable	287,165		288,424		—		—		288,424
Accrued interest receivable	1,069		1,069		—		1,069		—
Financial Instruments-Liabilities
Demand deposits, savings and money market	$	173,482	$	173,482	$	173,482	$	—	$	—
Certificates of deposit	126,330		125,942		—		125,942		—
FHLB advances	10,000		9,882		—		9,882		—
Advance payments by borrowers taxes and insurance	1,002		1,002		1,002		—		—

XML

Organization and Summary of Significant Accounting Policies (Narrative) (Details) $ / shares in Units, $ in Thousands		12 Months Ended
	Jan. 25, 2011 $ / shares shares	Jun. 30, 2016 USD ($) Office	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)
Accounting Policies [Abstract]
Common stock issued, shares, offering price per share | $ / shares	$ 10.00
Shares contributed to ESOP | shares	102,000
Number of full-service bank offices | Office		10
Number of bank offices in Wal-Mart store locations | Office		1
Minimum reserve balances on deposit with the Federal Reserve Bank		$ 1,900	$ 1,400
FHLB stock		3,000	853
Serviced loans		76,900	81,100
Securitized loans		20,400	24,700
Income from life insurance investment		514	540	$ 549
Gain on death benefit of life insurance investment, net		26	479	0
Mortgage servicing asset		206	235
Advertising expenses		$ 674	$ 710	$ 679

XML

Organization and Summary of Significant Accounting Policies (Propert, Premises, and Equipment) (Details)	12 Months Ended
	Jun. 30, 2016
Buildings
Property, Plant and Equipment [Line Items]
Estimated useful life	40 years
Furniture and equipment | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful life	5 years
Furniture and equipment | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful life	10 years
Improvements
Property, Plant and Equipment [Line Items]
Estimated useful life	10 years
Computer equipment
Property, Plant and Equipment [Line Items]
Estimated useful life	3 years

XML

Securities (Schedule of Investment Securities by Amortized Cost and Estimated Fair Market Value) (Details) $ in Thousands	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)
Investment Holdings [Line Items]
Number of Securities in Unrealized Loss Position	24	30
Securities available-for-sale | Municipal Bonds
Investment Holdings [Line Items]
Investment Securities Amortized Cost	$ 175	$ 434
Investment Securities Gross Unrealized Gains	0	1
Investment Securities Gross Unrealized Losses	0	0
Investment Securities Fair Value	175	435
Securities available-for-sale | FHLMC
Investment Holdings [Line Items]
Investment Securities Amortized Cost	9,442	11,780
Investment Securities Gross Unrealized Gains	161	134
Investment Securities Gross Unrealized Losses	(44)	(123)
Investment Securities Fair Value	9,559	11,791
Securities available-for-sale | FNMA
Investment Holdings [Line Items]
Investment Securities Amortized Cost	13,199	16,534
Investment Securities Gross Unrealized Gains	67	70
Investment Securities Gross Unrealized Losses	(62)	(196)
Investment Securities Fair Value	13,204	16,408
Securities available-for-sale | GNMA
Investment Holdings [Line Items]
Investment Securities Amortized Cost	734	948
Investment Securities Gross Unrealized Gains	0	0
Investment Securities Gross Unrealized Losses	(7)	(17)
Investment Securities Fair Value	727	931
Securities available-for-sale | Total available-for-sale
Investment Holdings [Line Items]
Investment Securities Amortized Cost	23,550	29,696
Investment Securities Gross Unrealized Gains	228	205
Investment Securities Gross Unrealized Losses	(113)	(336)
Investment Securities Fair Value	23,665	29,565
Securities held-to-maturity | Municipal Bonds
Investment Holdings [Line Items]
Investment Securities Amortized Cost		119
Investment Securities Gross Unrealized Gains		0
Investment Securities Gross Unrealized Losses		0
Investment Securities Fair Value		119
Securities held-to-maturity | FHLMC
Investment Holdings [Line Items]
Investment Securities Amortized Cost	2,793	3,367
Investment Securities Gross Unrealized Gains	72	95
Investment Securities Gross Unrealized Losses	(20)	(56)
Investment Securities Fair Value	2,845	3,406
Securities held-to-maturity | FNMA
Investment Holdings [Line Items]
Investment Securities Amortized Cost	1,513	1,858
Investment Securities Gross Unrealized Gains	103	124
Investment Securities Gross Unrealized Losses	(3)	(22)
Investment Securities Fair Value	1,613	1,960
Securities held-to-maturity | GNMA
Investment Holdings [Line Items]
Investment Securities Amortized Cost	1,985	2,273
Investment Securities Gross Unrealized Gains	5	0
Investment Securities Gross Unrealized Losses	(23)	(66)
Investment Securities Fair Value	1,967	2,207
Securities held-to-maturity | Total held-to-maturity
Investment Holdings [Line Items]
Investment Securities Amortized Cost	6,291	7,617
Investment Securities Gross Unrealized Gains	180	219
Investment Securities Gross Unrealized Losses	(46)	(144)
Investment Securities Fair Value	$ 6,425	$ 7,692

XML

Securities (Schedule of Temporary Impairment Losses, Investments) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Held-to-maturity Securities [Member]
Investment Holdings [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 0	$ 0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	3,646	5,278
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	(46)	(144)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	3,646	5,278
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Losses	(46)	(144)
Held-to-maturity Securities [Member] | FHLMC
Investment Holdings [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,973	2,299
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	(20)	(56)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	1,973	2,299
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Losses	(20)	(56)
Held-to-maturity Securities [Member] | FNMA
Investment Holdings [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	684	772
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	(3)	(22)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	684	772
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Losses	(3)	(22)
Held-to-maturity Securities [Member] | GNMA
Investment Holdings [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	989	2,207
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	(23)	(66)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	989	2,207
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Losses	(23)	(66)
Investments available for sale [Member]
Investment Holdings [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	1,565	3,852
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	(6)	(46)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	10,658	13,233
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	(107)	(290)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	12,223	17,085
Available for Sale Securities Continuous Unrealized Loss Position Losses	(113)	(336)
Investments available for sale [Member] | FHLMC
Investment Holdings [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	710	747
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	(5)	(1)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	4,031	5,404
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	(39)	(122)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	4,741	6,151
Available for Sale Securities Continuous Unrealized Loss Position Losses	(44)	(123)
Investments available for sale [Member] | FNMA
Investment Holdings [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	855	3,105
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	(1)	(45)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	5,900	6,898
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	(61)	(151)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	6,755	10,003
Available for Sale Securities Continuous Unrealized Loss Position Losses	(62)	(196)
Investments available for sale [Member] | GNMA
Investment Holdings [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	727	931
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	(7)	(17)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	727	931
Available for Sale Securities Continuous Unrealized Loss Position Losses	$ (7)	$ (17)

XML

Securities (Schedule of Contractual Maturities of Securities) (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Securities available-for-sale | FHLMC
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	$ 9,442
Investment Securities Contractual Maturity Fair Value	9,559
Securities available-for-sale | FNMA
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	13,199
Investment Securities Contractual Maturity Fair Value	13,204
Securities available-for-sale | GNMA
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	734
Investment Securities Contractual Maturity Fair Value	727
Securities available-for-sale | Due after ten years
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	175
Investment Securities Contractual Maturity Fair Value	175
Securities available-for-sale | Total available-for-sale securities contractual maturity
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	23,550
Investment Securities Contractual Maturity Fair Value	23,665
Securities held-to-maturity | FHLMC
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	2,793
Investment Securities Contractual Maturity Fair Value	2,845
Securities held-to-maturity | FNMA
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	1,513
Investment Securities Contractual Maturity Fair Value	1,613
Securities held-to-maturity | GNMA
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	1,985
Investment Securities Contractual Maturity Fair Value	1,967
Securities held-to-maturity | Total held-to-maturity securities contractual maturity
Investment Holdings [Line Items]
Investment Securities Contractual Maturity Amortized Cost	6,291
Investment Securities Contractual Maturity Fair Value	$ 6,425

XML

Securities (Schedule of Sales of Securities and Maturities) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Investments [Abstract]
Proceeds from sales	$ 0	$ 2,355	$ 0
Proceeds from maturities and calls	250	0	995
Gross realized gains	0	65	0
Gross realized losses	$ 0	$ (18)	$ 0

XML

Securities (Securities Pledged as Collateral Policy) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Pledged to secure public deposits
Investment Holdings [Line Items]
Investment Securities Pledged as Collateral Book Value	$ 12,575	$ 12,184
Investment Securities Pledged as Collateral Fair Value	12,719	12,189
Pledged to secure FHLB borrowings
Investment Holdings [Line Items]
Investment Securities Pledged as Collateral Book Value	1,302	1,727
Investment Securities Pledged as Collateral Fair Value	1,358	1,788
Pledged to secure Federal Reserve borrowing line
Investment Holdings [Line Items]
Investment Securities Pledged as Collateral Book Value	973	1,001
Investment Securities Pledged as Collateral Fair Value	$ 978	$ 990

XML

Loans Receivable, Net (Schedule of Accounts, Notes, Loans and Financing Receivable) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2013
Real estate:
One-to-four family	$ 61,230	$ 57,944
Multi-family	53,742	43,249
Commercial	149,527	128,306
Construction	21,793	11,731
Land	6,839	4,069
Total real estate	293,131	245,299
Consumer:
Home equity	16,599	17,604
Credit cards	2,969	3,289
Automobile	597	686
Other consumer	1,933	2,347
Total consumer	22,098	23,926
Commercial business	36,848	18,987
Total loans	352,077	288,212
Deferred loan fees and loan premiums, net	947	1,047
Allowance for loan losses	3,779	3,721	$ 4,624	$ 5,147
Loans and Leases Receivable, Net Amount	$ 347,351	$ 283,444

XML

Loans Receivable, Net (Schedule of Activity in Allowance for Loan Losses) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	$ 3,721	$ 4,624	$ 5,147
Provision for losses	340	0	0
Charge-offs	(957)	(1,497)	(2,434)
Recoveries	675	594	1,911
Ending Balance	$ 3,779	$ 3,721	$ 4,624

XML

Loans Receivable, Net (Schedule of Activity in Allowance for Loan Losses by Portfolio Segment) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	$ 3,721	$ 4,624	$ 5,147
Provision for loan losses	340	0	0
Charge-offs	(957)	(1,497)	(2,434)
Recoveries	675	594	1,911
Ending Balance	3,779	3,721	4,624
One-to-four family
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	1,113	1,550	1,393
Provision for loan losses	(251)	(5)	665
Charge-offs	(258)	(561)	(897)
Recoveries	194	129	389
Ending Balance	798	1,113	1,550
Multi-family
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	95	229	156
Provision for loan losses	353	25	73
Charge-offs	0	(159)	0
Recoveries	6	0	0
Ending Balance	454	95	229
Commercial Real Estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	262	682	671
Provision for loan losses	1,295	(80)	(558)
Charge-offs	(225)	(340)	(403)
Recoveries	1	0	972
Ending Balance	1,333	262	682
Construction
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	247	190	356
Provision for loan losses	(325)	(197)	(540)
Charge-offs	0	0	0
Recoveries	349	254	374
Ending Balance	271	247	190
Land
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	75	74	531
Provision for loan losses	0	1	(457)
Charge-offs	0	0	0
Recoveries	0	0	0
Ending Balance	75	75	74
Consumer (1)
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	445	587	817
Provision for loan losses	343	94	508
Charge-offs	(390)	(351)	(876)
Recoveries	118	115	138
Ending Balance	516	445	587
Commercial business
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	1,405	1,231	1,172
Provision for loan losses	(996)	164	279
Charge-offs	(84)	(86)	(258)
Recoveries	7	96	38
Ending Balance	332	1,405	1,231
Unallocated
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	79	81	51
Provision for loan losses	(79)	(2)	30
Charge-offs	0	0	0
Recoveries	0	0	0
Ending Balance	$ 0	$ 79	$ 81

XML

Loans Receivable, Net (Schedule of Loans Individually Evaluated for Impairment) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Recorded Investment	$ 10,707	$ 11,151
Impaired Financing Receivable, Unpaid Principal Balance	11,296	11,559
Impaired Financing Receivable, Related Allowance	590	740
One-to-four family
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,049	1,557
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	2,269	1,860
Impaired Financing Receivable, with Related Allowance, Recorded Investment	7,234	7,716
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	7,284	7,743
Impaired Financing Receivable, Recorded Investment	9,283	9,273
Impaired Financing Receivable, Unpaid Principal Balance	9,553	9,603
Impaired Financing Receivable, Related Allowance	419	500
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	319
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	547
Impaired Financing Receivable, Recorded Investment	319
Impaired Financing Receivable, Unpaid Principal Balance	547
Impaired Financing Receivable, Related Allowance	0
Land
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	174	231
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	188	245
Impaired Financing Receivable, with Related Allowance, Recorded Investment	316	408
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	316	408
Impaired Financing Receivable, Recorded Investment	490	639
Impaired Financing Receivable, Unpaid Principal Balance	504	653
Impaired Financing Receivable, Related Allowance	4	3
Home equity
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	60	64
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	62	65
Impaired Financing Receivable, with Related Allowance, Recorded Investment	367	212
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	367	212
Impaired Financing Receivable, Recorded Investment	427	276
Impaired Financing Receivable, Unpaid Principal Balance	429	277
Impaired Financing Receivable, Related Allowance	145	26
Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		31
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		32
Impaired Financing Receivable, Recorded Investment		31
Impaired Financing Receivable, Unpaid Principal Balance		32
Impaired Financing Receivable, Related Allowance		0
Commercial business
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	64	64
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	125	126
Impaired Financing Receivable, with Related Allowance, Recorded Investment	124	868
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	138	868
Impaired Financing Receivable, Recorded Investment	188	932
Impaired Financing Receivable, Unpaid Principal Balance	263	994
Impaired Financing Receivable, Related Allowance	$ 22	$ 211

XML

Loans Receivable, Net (Schedule of Loans Evaluated for Impairment Average Recorded Investment and Interest Income Recognized) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, Average Recorded Investment	$ 10,952	$ 16,697	$ 18,475
Impaired Financing Receivable, Interest Income, Accrual Method	453	470	604
One-to-four family
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	1,913	3,802	4,199
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	62	67	97
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	7,500	7,989	8,360
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	310	308	379
Impaired Financing Receivable, Average Recorded Investment	9,413	11,791	12,559
Impaired Financing Receivable, Interest Income, Accrual Method	372	375	476
Multi-family
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		1,132	1,132
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method		0	0
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment			79
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method			0
Impaired Financing Receivable, Average Recorded Investment		1,132	1,211
Impaired Financing Receivable, Interest Income, Accrual Method		0	0
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	0	984	1,094
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	15	0	12
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment			925
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method			21
Impaired Financing Receivable, Average Recorded Investment	0	984	2,019
Impaired Financing Receivable, Interest Income, Accrual Method	15	0	33
Land
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	210	355	393
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	11	12	18
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	362	765	815
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	22	25	32
Impaired Financing Receivable, Average Recorded Investment	572	1,120	1,208
Impaired Financing Receivable, Interest Income, Accrual Method	33	37	50
Home equity
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	63	153	194
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	3	3	6
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	290	325	330
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	19	10	11
Impaired Financing Receivable, Average Recorded Investment	353	478	524
Impaired Financing Receivable, Interest Income, Accrual Method	22	13	17
Consumer Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	16	0
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	1
Impaired Financing Receivable, Average Recorded Investment	16	0
Impaired Financing Receivable, Interest Income, Accrual Method	0	1
Commercial business
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	95	723	723
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	9	8	8
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	503	469	231
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	2	36	20
Impaired Financing Receivable, Average Recorded Investment	598	1,192	954
Impaired Financing Receivable, Interest Income, Accrual Method	$ 11	$ 44	$ 28

XML

Loans Receivable, Net (Schedule of Balance in Allowance for Loan Losses) (Details) - Loans Receivable - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Allowance for loan losses:
Ending balance	$ 3,779	$ 3,721
Ending balance: individually evaluated for impairment	590	740
Ending balance: collectively evaluated for impairment	3,189	2,981
Loans receivable:
Total Loans	352,077	288,212
Ending balance: individually evaluated for impairment	10,707	11,151
Ending balance: collectively evaluated for impairment	341,370	277,061
One-to-four family
Allowance for loan losses:
Ending balance	798	1,113
Ending balance: individually evaluated for impairment	419	500
Ending balance: collectively evaluated for impairment	379	613
Loans receivable:
Total Loans	61,230	57,944
Ending balance: individually evaluated for impairment	9,283	9,273
Ending balance: collectively evaluated for impairment	51,947	48,671
Multi-family
Allowance for loan losses:
Ending balance	454	95
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	454	95
Loans receivable:
Total Loans	53,742	43,249
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	53,742	43,249
Commercial Real Estate [Member]
Allowance for loan losses:
Ending balance	1,333	262
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	1,333	262
Loans receivable:
Total Loans	149,527	128,306
Ending balance: individually evaluated for impairment	319	0
Ending balance: collectively evaluated for impairment	149,208	128,306
Construction
Allowance for loan losses:
Ending balance	271	247
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	271	247
Loans receivable:
Total Loans	21,793	11,731
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	21,793	11,731
Land
Allowance for loan losses:
Ending balance	75	75
Ending balance: individually evaluated for impairment	4	3
Ending balance: collectively evaluated for impairment	71	72
Loans receivable:
Total Loans	6,839	4,069
Ending balance: individually evaluated for impairment	490	639
Ending balance: collectively evaluated for impairment	6,349	3,430
Consumer (1)
Allowance for loan losses:
Ending balance	516	445
Ending balance: individually evaluated for impairment	145	26
Ending balance: collectively evaluated for impairment	371	419
Loans receivable:
Total Loans	22,098	23,926
Ending balance: individually evaluated for impairment	427	307
Ending balance: collectively evaluated for impairment	21,671	23,619
Commercial business
Allowance for loan losses:
Ending balance	332	1,405
Ending balance: individually evaluated for impairment	22	211
Ending balance: collectively evaluated for impairment	310	1,194
Loans receivable:
Total Loans	36,848	18,987
Ending balance: individually evaluated for impairment	188	932
Ending balance: collectively evaluated for impairment	36,660	18,055
Unallocated
Allowance for loan losses:
Ending balance	0	79
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	0	79
Loans receivable:
Total Loans	0	0
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	$ 0	$ 0

XML

Loans Receivable, Net (Schedule of Financing Receivables, Non Accrual Status) (Details) - USD ($)	Jun. 30, 2016	Jun. 30, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Recorded investment, nonaccrual status	$ 2,000,000	$ 2,000,000
Recorded investment 90 days or more past due and still accruing	0	6
Loans Receivable
Financing Receivable, Recorded Investment, Past Due [Line Items]
Recorded investment 90 days or more past due and still accruing	1,972,000	2,011,000
Loans Receivable | One-to-four family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Recorded investment 90 days or more past due and still accruing	1,539,000	1,263,000
Loans Receivable | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Recorded investment 90 days or more past due and still accruing	319,000	0
Loans Receivable | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Recorded investment 90 days or more past due and still accruing	16,000	0
Loans Receivable | Credit cards
Financing Receivable, Recorded Investment, Past Due [Line Items]
Recorded investment 90 days or more past due and still accruing	0	6,000
Loans Receivable | Other consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Recorded investment 90 days or more past due and still accruing	1,000	31,000
Loans Receivable | Commercial business
Financing Receivable, Recorded Investment, Past Due [Line Items]
Recorded investment 90 days or more past due and still accruing	$ 97,000	$ 711,000

XML

Loans Receivable, Net (Schedule of Past Due Loans by Class) (Details) - Loans Receivable - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 3,273	$ 3,606
Current	348,804	284,606
Total Loans	352,077	288,212
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	670	728
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	631	867
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,972	2,011
One-to-four family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2,728	2,431
Current	58,502	55,513
Total Loans	61,230	57,944
One-to-four family | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	566	616
One-to-four family | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	623	552
One-to-four family | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,539	1,263
Multi-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	53,742	43,249
Total Loans	53,742	43,249
Multi-family | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Multi-family | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Multi-family | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	319	0
Current	149,208	128,306
Total Loans	149,527	128,306
Commercial Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Commercial Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Commercial Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	319	0
Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	21,793	11,731
Total Loans	21,793	11,731
Construction | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Construction | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Construction | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Land
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Current	6,839	4,069
Total Loans	6,839	4,069
Land | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Land | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Land | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	38	31
Current	16,561	17,573
Total Loans	16,599	17,604
Home equity | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	14	15
Home equity | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	8	16
Home equity | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	16	0
Credit cards
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	77	40
Current	2,892	3,249
Total Loans	2,969	3,289
Credit cards | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	77	8
Credit cards | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	26
Credit cards | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	6
Automobile
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1	9
Current	596	677
Total Loans	597	686
Automobile | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1	9
Automobile | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Automobile | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Other consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	13	47
Current	1,920	2,300
Total Loans	1,933	2,347
Other consumer | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	12	16
Other consumer | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Other consumer | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1	31
Commercial business
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	97	1,048
Current	36,751	17,939
Total Loans	36,848	18,987
Commercial business | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	64
Commercial business | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	273
Commercial business | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 97	$ 711

XML

Loans Receivable, Net (Schedule of Financing Receivable Credit Quality Indicators) (Details) $ in Thousands	12 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)
Loans Receivable
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	$ 352,077	$ 288,212
Loans Receivable | One-to-four family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	61,230	57,944
Loans Receivable | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	53,742	43,249
Loans Receivable | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	149,527	128,306
Loans Receivable | Construction
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	21,793	11,731
Loans Receivable | Land
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	6,839	4,069
Loans Receivable | Home equity
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	16,599	17,604
Loans Receivable | Credit cards
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	2,969	3,289
Loans Receivable | Automobile
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	597	686
Loans Receivable | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	1,933	2,347
Loans Receivable | Commercial business
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	36,848	18,987
Loans Receivable | Pass
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	335,968	272,394
Loans Receivable | Pass | One-to-four family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	52,438	49,119
Loans Receivable | Pass | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	53,002	42,884
Loans Receivable | Pass | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	146,587	125,586
Loans Receivable | Pass | Construction
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	21,793	11,731
Loans Receivable | Pass | Land
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	6,349	3,430
Loans Receivable | Pass | Home equity
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	15,377	16,585
Loans Receivable | Pass | Credit cards
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	2,892	3,249
Loans Receivable | Pass | Automobile
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	542	615
Loans Receivable | Pass | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	1,839	2,214
Loans Receivable | Pass | Commercial business
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	35,149	16,981
Loans Receivable | Watch
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	9,976	6,014
Loans Receivable | Watch | One-to-four family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	4,875	2,151
Loans Receivable | Watch | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	740	0
Loans Receivable | Watch | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	1,978	2,044
Loans Receivable | Watch | Construction
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Watch | Land
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	316	0
Loans Receivable | Watch | Home equity
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	836	697
Loans Receivable | Watch | Credit cards
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	77	34
Loans Receivable | Watch | Automobile
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	55	71
Loans Receivable | Watch | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	94	102
Loans Receivable | Watch | Commercial business
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	1,005	915
Loans Receivable | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	3,360	6,122
Loans Receivable | Special Mention [Member] | One-to-four family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	1,789	4,755
Loans Receivable | Special Mention [Member] | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Special Mention [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	644	676
Loans Receivable | Special Mention [Member] | Construction
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Special Mention [Member] | Land
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	174	231
Loans Receivable | Special Mention [Member] | Home equity
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	220	301
Loans Receivable | Special Mention [Member] | Credit cards
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Special Mention [Member] | Automobile
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Special Mention [Member] | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Special Mention [Member] | Commercial business
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	533	159
Loans Receivable | Substandard
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	2,773	3,682
Loans Receivable | Substandard | One-to-four family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	2,128	1,919
Loans Receivable | Substandard | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	365
Loans Receivable | Substandard | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	318	0
Loans Receivable | Substandard | Construction
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Substandard | Land
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	408
Loans Receivable | Substandard | Home equity
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	166	21
Loans Receivable | Substandard | Credit cards
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	6
Loans Receivable | Substandard | Automobile
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Substandard | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	31
Loans Receivable | Substandard | Commercial business
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	161	932
Loans Receivable | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | One-to-four family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Construction
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Land
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Home equity
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Credit cards
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Automobile
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Other consumer
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	0	0
Loans Receivable | Doubtful | Commercial business
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	$ 0	$ 0
Minimum | Pass
Financing Receivable, Recorded Investment [Line Items]
Debt Service Coverage Ratio	1.00
Minimum | Substandard
Financing Receivable, Recorded Investment [Line Items]
Debt Service Coverage Ratio	1.00

XML

Loans Receivable, Net (Troubled Debt Restructurings on Financing Receivables) (Details)	12 Months Ended
	Jun. 30, 2016 USD ($) Contract	Jun. 30, 2015 USD ($) Contract	Jun. 30, 2014 USD ($) Contract
Financing Receivable, Modifications [Line Items]
Subsequent default, number of contracts	0
Total modifications [Member]
Financing Receivable, Modifications [Line Items]
TDR recorded investment	$ 8,755,000	$ 9,827,000
One-to-four family
Financing Receivable, Modifications [Line Items]
TDR recorded investment	7,914,000	8,691,000
Land
Financing Receivable, Modifications [Line Items]
TDR recorded investment	490,000	639,000
Home equity
Financing Receivable, Modifications [Line Items]
TDR recorded investment	261,000	276,000
Commercial business
Financing Receivable, Modifications [Line Items]
TDR recorded investment	90,000	221,000
Accrual Status
Financing Receivable, Modifications [Line Items]
TDR recorded investment	8,344,000	9,146,000
Accrual Status | One-to-four family
Financing Receivable, Modifications [Line Items]
TDR recorded investment	7,503,000	8,010,000
Accrual Status | Land
Financing Receivable, Modifications [Line Items]
TDR recorded investment	490,000	639,000
Accrual Status | Home equity
Financing Receivable, Modifications [Line Items]
TDR recorded investment	261,000	276,000
Accrual Status | Commercial business
Financing Receivable, Modifications [Line Items]
TDR recorded investment	90,000	221,000
Nonaccrual Status
Financing Receivable, Modifications [Line Items]
TDR recorded investment	411,000	681,000
Nonaccrual Status | One-to-four family
Financing Receivable, Modifications [Line Items]
TDR recorded investment	411,000	681,000
Nonaccrual Status | Land
Financing Receivable, Modifications [Line Items]
TDR recorded investment	0	0
Nonaccrual Status | Home equity
Financing Receivable, Modifications [Line Items]
TDR recorded investment	0	0
Nonaccrual Status | Commercial business
Financing Receivable, Modifications [Line Items]
TDR recorded investment	$ 0	$ 0
Home equity
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring Number of Contracts | Contract			1
Pre-TDR recorded investment			$ 75,000
Post-TDR recorded investment			$ 67,000
Total modifications [Member]
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring Number of Contracts | Contract	1	1	9
Pre-TDR recorded investment	$ 273,000	$ 197,000	$ 1,750,000
Post-TDR recorded investment	$ 240,000	$ 194,000	$ 1,770,000
Commercial business
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring Number of Contracts | Contract			1
Pre-TDR recorded investment			$ 145,000
Post-TDR recorded investment			$ 158,000
One-to-four family
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring Number of Contracts | Contract	1	1	7
Pre-TDR recorded investment	$ 273,000	$ 197,000	$ 1,530,000
Post-TDR recorded investment	$ 240,000	$ 194,000	$ 1,545,000

XML

Real Estate Owned, Net (Schedule of Real Estate Properties) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Other Real Estate [Roll Forward]
Balance at the beginning of the period	$ 797	$ 5,067	$ 6,212
Other Real Estate, Additions	574	2,241	5,793
Capitalized improvements	0	27	591
Proceeds from sale of real estate owned	(973)	(6,789)	(6,846)
Gains (Losses) on Sales of Other Real Estate	58	283	407
Real estate owned impairment	(83)	(32)	(1,090)
Balance at the end of the period	$ 373	$ 797	$ 5,067

XML

Property, Premises, and Equipment (Property, Premises, and Equipment Owned) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Property, Plant and Equipment [Line Items]
Property, premises and equipment, gross	$ 21,383	$ 23,852
Less accumulated depreciation and amortization	(11,382)	(13,482)
Property, premises, and equipment, net of depreciation and amortization	10,001	10,370
Depreciation and amortization	650	665	$ 608
Land
Property, Plant and Equipment [Line Items]
Property, premises and equipment, gross	2,192	2,247
Building and improvements
Property, Plant and Equipment [Line Items]
Property, premises and equipment, gross	14,372	15,883
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property, premises and equipment, gross	3,778	4,778
Automobiles
Property, Plant and Equipment [Line Items]
Property, premises and equipment, gross	345	334
Software
Property, Plant and Equipment [Line Items]
Property, premises and equipment, gross	619	593
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, premises and equipment, gross	$ 77	$ 17

XML

Deposits (Schedule of Deposits) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Amount
Noninterest-bearing demand deposits, amount	$ 50,781	$ 44,719
Interest-bearing demand deposits, weighted-average rate of .04% and .04% in 2015 and 2014, respectively, amount	27,419	22,448
Savings deposits, weighted-average rate of .15% in 2015 and .15% in 2014, amount	44,986	42,399
Money market accounts, weighted-average rate of .15% and .14% in 2015 and 2014, respectively, amount	59,270	63,916
Total deposits, amount	$ 300,894	$ 299,812
Percent
Noninterest-bearing demand deposits, percent	16.80%	15.00%
Interest-bearing demand deposits, weighted-average rate of .08% and .33% in 2013 and 2012, respectively, percent	9.10%	7.50%
Savings deposits, weighted-average rate of .23% in 2013 and .56% in 2012, percent	15.00%	14.10%
Money market accounts, weighted-average rate of .27% and .66% in 2013 and 2012, respectively, percent	19.70%	21.30%
Total deposits, percent	100.00%	100.00%
Weighted Average Rate
Interest-bearing demand deposits, weighted-average rate	0.04%	0.04%
Savings deposits, weighted-average rate	0.15%	0.15%
Money market accounts, weighted-average rate	0.17%	0.15%
Schedule Of Deposits [Line Items]
Total of certificates of deposit, amount	$ 118,438	$ 126,330
Total of certificates of deposit, percent	39.40%	42.10%
0.00 to 3.49%
Schedule Of Deposits [Line Items]
Total of certificates of deposit, amount	$ 97,788	$ 100,286
Total of certificates of deposit, percent	32.50%	33.40%
0.00 to 3.49% | Minimum
Schedule Of Deposits [Line Items]
Certificate of deposit, interest rate	0.00%	0.00%
0.00 to 3.49% | Maximum
Schedule Of Deposits [Line Items]
Certificate of deposit, interest rate	3.49%	3.49%
3.50 to 5.49%
Schedule Of Deposits [Line Items]
Total of certificates of deposit, amount	$ 20,650	$ 26,044
Total of certificates of deposit, percent	6.90%	8.70%
3.50 to 5.49% | Minimum
Schedule Of Deposits [Line Items]
Certificate of deposit, interest rate	3.50%	3.50%
3.50 to 5.49% | Maximum
Schedule Of Deposits [Line Items]
Certificate of deposit, interest rate	5.49%	5.49%

XML

Deposits (Schedule of Maturities of Certificates) (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Time Deposits, Fiscal Year Maturity [Abstract]
2016	$ 43,241
2017	26,537
2018	33,839
2019	10,498
Thereafter	4,323
Total	$ 118,438

XML

Deposits (Narrative) (Details) - USD ($)	Jun. 30, 2016	Jun. 30, 2015
Banking and Thrift [Abstract]
Time Deposits, $100,000 or More	$ 17,300,000	$ 16,400,000
Public funds included in deposits	8,700,000	8,600,000
Brokered deposit balances	$ 0	$ 0

XML

Borrowings (FHLB Advances and Lines of Credit) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Line of Credit Facility [Line Items]
One year or less	$ 24,500	$ 0
After one year through three years	30,000	10,000
More than three years	7,500	0
Total balance of advances outstanding	62,000	$ 10,000
Pacific Coast Banker's Bank [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Current Borrowing Capacity	$ 5,000

XML

Borrowings (Maximum and Average Outstanding Advances and Lines of Credit) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Banking and Thrift [Abstract]
Highest outstanding advances at month-end for the previous 12 months	$ 62,000	$ 22,500
Average outstanding	$ 29,875	$ 13,629

XML

Borrowings (Narrative) (Details) - USD ($)	Jun. 30, 2016	Jun. 30, 2015
Banking and Thrift [Abstract]
Total amount available under this line of credit	$ 146,900,000	$ 132,300,000
Total balance of loans pledged	263,700,000	228,600,000
Total balance of advances outstanding	62,000,000	10,000,000
Net remaining amounts available	$ 84,900,000	$ 122,300,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Interest Rate at Period End	0.93%	1.18%
Federal Reserve Bank [Member] | Domestic Line of Credit [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Current Borrowing Capacity	$ 1,000,000
Amount outstanding	0
Pacific Coast Banker's Bank [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Current Borrowing Capacity	$ 5,000,000

XML

Employee Benefit Plans (Schedule of Employee Stock Ownership Plan (ESOP) Disclosures) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Allocated shares	39,748	32,865
Unallocated shares	62,252	69,135
Total ESOP shares	102,000	102,000
Fair value of unallocated shares	$ 1,471	$ 1,555

XML

Employee Benefit Plans (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Jan. 25, 2011	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Employee Stock Ownership Plan (ESOP), Amount borrowed	$ 1,000
Shares contributed to ESOP	102,000
Common stock issued, shares, offering price per share	$ 10.00
ESOP expense		$ 163	$ 172	$ 123

XML

Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	193,800
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	87,572
Allocated Share-based Compensation Expense	$ 1,822	$ 0	$ 0
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense	619
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 790
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	2 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	$ 793
Anchor Bancorp 2015 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Nonvested Beginning Balance	0
Granted	106,228
Vested	(22,459)
Forfeited	(12,925)
Nonvested Ending Balance	70,844	0
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Nonvested Beginning Balance, Weighted Average Grant Date Fair Value	$ 0
Grants in Period, Weighted Average Grant Date Fair Value	25.71
Vested in Period, Weighted Average Grant Date Fair Value	25.75
Forfeitures, Weighted Average Grant Date Fair Value	25.75
Nonvested Ending Balance, Weighted Average Grant Date Fair Value	$ 25.69	$ 0

XML

Supplemental Executive Retirement Plan (SERP) (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Defined Benefit Plan Disclosure [Line Items]
Supplemental Executive Retirement Plan liability	$ 1,691	$ 1,814
Supplemental Employee Retirement Plans, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Compensation cost (benefit) recognized	123	99	$ 61
Supplemental Executive Retirement Plan liability	$ 1,700	$ 1,800
Minimum | Supplemental Employee Retirement Plans, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Value of SERP unit as a percentage of SERP unit value as of preceeding valuation date	90.00%
Maximum | Supplemental Employee Retirement Plans, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Value of SERP unit as a percentage of SERP unit value as of preceeding valuation date	125.00%

XML

Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Net income	$ 495	$ 9,827	$ 423
Undistributed Earnings (Loss) Allocated to Participating Securities, Basic	0	0	0
Undistributed Earnings, Basic	$ 495	$ 9,827	$ 423
Weighted Average Number of Shares Outstanding, Basic	2,452,455	2,477,423	2,466,983
Weighted Average Number of Shares, Restricted Stock	7,071	0	0
Weighted Average Number of Shares Outstanding, Diluted	2,459,526	2,477,423	2,466,983
Basic earnings per share	$ 0.20	$ 3.97	$ 0.17
Diluted earnings per share	$ 0.20	$ 3.97	$ 0.17

XML

Earnings Per Share (Narrative) (Details) - shares	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Employee Stock Ownership Plan (ESOP), Number of Suspense Shares	62,252	69,135	76,019
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	9,448

XML

Related Party Transactions (Loans to Directors, Executive Officers, and Their Affiliates) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Related Party Transactions [Abstract]
Extensions of credit	$ 1,800	$ 1,900	$ 1,900
Loans and Leases Receivable, Related Parties [Roll Forward]
Beginning Balance	277	887	228
Origination of Notes Receivable from Related Parties	5	0	668
Repayment of Notes Receivable from Related Parties	60	610	9
Ending Balance	$ 222	$ 277	$ 887

XML

Regulatory Capital Requirements (Bank's Actual Capital Accounts and Ratios) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total capital (to risk-weighted assets), Actual, Ratio	16.60%	20.10%
Tier I capital (to risk-weighted assets), Actual, Ratio	15.70%	19.00%
Excess Tier One Risk Based Capital to Risk Weighted Assets, Actual, Ratio	15.70%	19.00%
Tier I leverage capital (to average assets), Actual, Ratio	14.40%	16.60%
Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total capital (to risk-weighted assets), Actual, Amount	$ 59,938	$ 57,321
Total capital (to risk-weighted assets), Actual, Ratio	15.70%	17.40%
Total capital (to risk-weighted assets), Minimum Capital Requirement, Amount	$ 30,580	$ 26,422
Total capital (to risk-weighted assets), Minimum Capital Requirement, Ratio	8.00%	8.00%
Total capital (to risk-weighted assets), Minimum to be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 38,225	$ 33,027
Total capital (to risk-weighted assets), Minimum to be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Tier I capital (to risk-weighted assets), Actual, Amount	$ 56,159	$ 53,600
Tier I capital (to risk-weighted assets), Actual, Ratio	14.70%	16.20%
Tier I capital (to risk-weighted assets), Minimum Capital Requirement, Amount	$ 22,935	$ 19,816
Tier I capital (to risk-weighted assets), Minimum Capital Requirement, Ratio	6.00%	6.00%
Tier I capital (to risk-weighted assets), Minimum to be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 30,580	$ 26,422
Tier I capital (to risk-weighted assets), Minimum to be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	8.00%	8.00%
Excess Tier One Risk Based Capital, Actual, Amount	$ 56,159	$ 53,600
Excess Tier One Risk Based Capital to Risk Weighted Assets, Actual, Ratio	14.70%	16.20%
Excess Tier I capital (to risk-weighted assets), Minimum Capital Requirement, Amount	$ 17,201	$ 14,862
Excess Tier I capital (to risk-weighted assets), Minimum, Capital Requirement, Ratio	4.50%	4.50%
Excess Tier I capital (to risk-weighted assets), Minimum to be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 24,846	$ 21,468
Excess Tier I capital (to risk-weighted assets), Minimum to be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	6.50%	6.50%
Tier I leverage capital (to average assets), Actual, Amount	$ 56,159	$ 53,600
Tier I leverage capital (to average assets), Actual, Ratio	13.50%	14.30%
Tier I leverage capital (to average assets), Minimum Capital Requirement, Amount	$ 16,620	$ 14,963
Tier I leverage capital (to average assets), Minimum Capital Requirement, Ratio	4.00%	4.00%
Tier I leverage capital (to average assets), Minimum to be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 20,775	$ 18,703
Tier I leverage capital (to average assets), Minimum to be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	5.00%	5.00%

XML

Regulatory Capital Requirements (Narrative) (Details)	Jun. 30, 2016	Jun. 30, 2015
Banking and Thrift [Abstract]
Tier 1 Leverage-Based Capital ratio	14.40%	16.60%
Excess Tier One Risk Based Capital to Risk Weighted Assets, Actual, Ratio	15.70%	19.00%
Tier 1 Risk- Based Capital ratio	15.70%	19.00%
Total Risk-Based Capital ratio	16.60%	20.10%

XML

Income Taxes (Provision for Income Tax) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Current Income Tax Expense (Benefit)	$ 126	$ 0
Deferred Income Tax Expense (Benefit)	(87)	148
Deferred tax asset valuation allowance	0	(8,469)	$ 50
Provision for income taxes	$ 39	$ (8,321)	$ 0

XML

Income Taxes (Reconciliation of Provision (Benefit) for Income Tax) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Income taxes computed at statutory rates	$ 182	$ 511	$ 144
Tax-exempt income	(189)	(193)	(202)
Deferred tax asset valuation allowance	0	(8,469)	50
Other, net	46	(170)	8
Provision for income taxes	$ 39	$ (8,321)	$ 0
Effective Income Tax Rate, Continuing Operations, Tax Rate Reconciliation [Abstract]
Income taxes computed at statutory rates, Percent of Pre-Tax Income	34.00%	34.00%	34.00%
Tax-exempt income, Percent of Pre-Tax Income	(35.40%)	(12.80%)	(47.80%)
Deferred tax asset valuation allowance, Percent of Pre-Tax Income		(562.50%)	11.90%
Other, net, Percent of Pre-Tax Income	8.60%	(11.40%)	1.90%
Benefit for income tax, Percent of Pre-Tax Income	7.20%	(552.70%)	0.00%

XML

Income Taxes (Components of Net Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Deferred tax assets
Allowance for loan losses	$ 3,159	$ 3,139
AMT credit carryforward	352	199
Deferred compensation - SERP	561	573
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits, Share-based Compensation Cost	350	0
Securities impairment charge	340	340
Net operating loss carryforward	4,304	4,726
Real estate owned	155	198
Accumulated depreciation	305	314
Unrealized loss on securities available-for-sale		45
Deferred Tax Assets, Other	53	0
Total deferred tax assets	9,579	9,534
Deferred tax liabilities
Deferred loan fees and costs	434	396
FHLB stock dividends	166	166
Mortgage servicing rights	70	80
Deferred Tax Liabilities, Unrealized Gains on Trading Securities	39	0
Other, net	0	25
Total deferred tax liabilities	709	667
Net deferred tax asset, after valuation allowance	$ 8,870	$ 8,867

XML

Income Taxes (Narrative) (Details) - USD ($) $ in Millions	Jun. 30, 2016	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Tax-basis bad debt reserves	$ 5.5	$ 5.5
Domestic Tax Authority
Operating Loss Carryforwards [Line Items]
Net operating loss carryforward	$ 12.7

XML

Parent Company Financials (Condensed Statements of Financial Condition) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2013
ASSETS
Prepaid expenses and other assets	$ 1,113	$ 2,692
Total assets	431,504	379,230
LIABILITIES
Total liabilities	368,308	315,508
STOCKHOLDERS' EQUITY
Common stock	25	25
Additional paid-in capital	22,157	23,404
Retained earnings	42,235	41,740
Unearned ESOP shares	(672)	(736)
Accumulated other comprehensive loss, net of tax	(549)	(711)
Total stockholders' equity	63,196	63,722	$ 53,674	$ 52,367
Total liabilities and stockholders' equity	431,504	379,230
Parent Company [Member]
ASSETS
Cash	2,378	5,324
ESOP loan	672	735
Investment in bank subsidiary	58,428	47,506
Prepaid expenses and other assets	747	505
Total assets	62,225	54,070
LIABILITIES
Total liabilities	0	3
STOCKHOLDERS' EQUITY
Common stock	25	25
Additional paid-in capital	22,157	23,404
Retained earnings	41,264	32,084
Unearned ESOP shares	(672)	(735)
Accumulated other comprehensive loss, net of tax	(549)	(711)
Total stockholders' equity	62,225	54,067
Total liabilities and stockholders' equity	$ 62,225	$ 54,070

XML

Parent Company Financials (Condensed Statements of Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Operating expenses
General and administrative	$ 3,175	$ 2,663	$ 3,086
Income tax benefit	39	(8,321)	0
Net income	495	9,827	423
Parent Company [Member]
Operating income
Interest income ESOP loan	24	26	28
Dividends received from subsidiary	680	5,350	0
Total operating income	704	5,376	28
Operating expenses
Legal expense	354	105	127
Accounting expense	49	47	44
Professional fee	116	60	60
Management fee	69	67	68
General and administrative	62	54	77
Other Expenses	75	0	0
Total operating expenses	725	333	376
(Loss) profit before income tax	(21)	5,043	(348)
Income tax benefit	(227)	(478)	0
Income before equity in undistributed income of subsidiary	206	5,521	(348)
Equity in undistributed income of subsidiary	970	4,306	771
Net income	$ 1,176	$ 9,827	$ 423

XML

Parent Company Financials (Condensed Statement of Cash Flows) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities
Net income	$ 495	$ 9,827	$ 423
Adjustments to reconcile net loss to net cash from operating activities:
Deferred income taxes benefit	(87)	148	0
Change in other assets	1,579	370	4,129
Net cash provided by operating activities	2,996	1,020	7,194
Cash flows from financing activities
Repurchase and retirement of common stock	(2,952)	0	0
Net cash used for financing activities	50,026	(18,611)	(64,850)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(6,130)	(308)	(50,595)
Beginning of period	14,450	14,758	65,353
End of period	8,320	14,450	14,758
Parent Company [Member]
Cash flows from operating activities
Net income	1,176	9,827	423
Adjustments to reconcile net loss to net cash from operating activities:
Equity in undistributed income of subsidiary	(970)	(4,306)	(771)
Deferred income taxes benefit	(227)	(478)	0
Change in other assets	(60)	(46)	(45)
Net cash provided by operating activities	(81)	4,997	(393)
Cash flows from financing activities
Repurchase and retirement of common stock	(2,952)
ESOP loan repayments	87	88	123
Net cash used for financing activities	(2,865)	88	123
NET CHANGE IN CASH AND CASH EQUIVALENTS	(2,946)	5,084	(270)
Beginning of period	5,324	240	510
End of period	$ 2,378	$ 5,324	$ 240

XML

Commitments and Contingencies (Credit-related Financial Instruments) (Details) - USD ($)	Jun. 30, 2016	Jun. 30, 2015
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability face amount	$ 78,750,000	$ 33,693,000
Off-balance sheet risks, current liability	28,265,000	6,385,000
Off-balance sheet risks, liability reserve	0	79,000
Unused lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability face amount	64,620,000	28,669,000
Off-balance sheet risks, current liability	14,135,000	1,361,000
Loan Origination Commitments [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability face amount	14,130,000	5,024,000
Off-balance sheet risks, current liability	14,130,000	5,024,000
Adjustable Rate Line Of Credit [Member] | Unused lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability face amount	54,460,000	26,961,000
Off-balance sheet risks, current liability	13,770,000	962,000
Fixed Rate Line Of Credit [Member] | Unused lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, liability face amount	10,160,000	1,708,000
Off-balance sheet risks, current liability	$ 365,000	$ 399,000
Minimum | Fixed Rate Line Of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, interest rate	3.88%	3.75%
Maximum | Fixed Rate Line Of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks, interest rate	17.99%	17.99%

XML

Commitments and Contingencies (Operating Lease Commitments) (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2017	$ 124
2018	124
2019	84
2020	37
2021	$ 0

XML

Commitments and Contingencies (Narrative) (Details) $ in Thousands	12 Months Ended
	Jun. 30, 2016 USD ($) loan	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Principal balance of loans sold without recourse	$ 80,600	$ 86,800
Number of loans repurchased | loan	0
Operating Leased Assets [Line Items]
Rental expense charged to operations	$ 140	$ 133	$ 121
Minimum
Operating Leased Assets [Line Items]
Operating leases, term of contract	3 years
Maximum
Operating Leased Assets [Line Items]
Operating leases, term of contract	5 years

XML

Fair Value Measurements (Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 23,665	$ 29,565
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	23,665	29,565
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Municipal bonds	175	435
Fair Value, Measurements, Recurring | FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	9,559	11,791
Fair Value, Measurements, Recurring | FNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	13,204	16,408
Fair Value, Measurements, Recurring | GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	727	931
Fair Value, Measurements, Recurring | Level 1 | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Municipal bonds	0	0
Fair Value, Measurements, Recurring | Level 1 | FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Fair Value, Measurements, Recurring | Level 1 | FNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Fair Value, Measurements, Recurring | Level 1 | GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Fair Value, Measurements, Recurring | Level 2 | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Municipal bonds	175	435
Fair Value, Measurements, Recurring | Level 2 | FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	9,559	11,791
Fair Value, Measurements, Recurring | Level 2 | FNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	13,204	16,408
Fair Value, Measurements, Recurring | Level 2 | GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	727	931
Fair Value, Measurements, Recurring | Level 3 | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Municipal bonds	0	0
Fair Value, Measurements, Recurring | Level 3 | FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Fair Value, Measurements, Recurring | Level 3 | FNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	0	0
Fair Value, Measurements, Recurring | Level 3 | GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 0	$ 0

XML

Fair Value Measurements (Schedule of Fair Value, Assets and Liabilities Measured on Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 9,303	$ 6,266
Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	9,171	5,660
Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	132	606
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 1 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 1 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 2 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 2 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	9,303	6,266
Level 3 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	9,171	5,660
Level 3 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	132	606
One-to-four family [Member] | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	8,046	4,172
One-to-four family [Member] | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	113	188
One-to-four family [Member] | Level 1 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
One-to-four family [Member] | Level 1 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
One-to-four family [Member] | Level 2 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
One-to-four family [Member] | Level 2 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
One-to-four family [Member] | Level 3 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	8,046	4,172
One-to-four family [Member] | Level 3 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	113	188
Commercial real estate | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	318	408
Commercial real estate | Level 1 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Commercial real estate | Level 2 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Commercial real estate | Level 3 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	318	408
Land [Member] | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	316	212
Land [Member] | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	19	418
Land [Member] | Level 1 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Land [Member] | Level 1 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Land [Member] | Level 2 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Land [Member] | Level 2 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Land [Member] | Level 3 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	316	212
Land [Member] | Level 3 | Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	19	418
Home equity | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		367
Home equity | Level 1 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		0
Home equity | Level 2 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		0
Home equity | Level 3 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		367
Commercial business | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	124	868
Commercial business | Level 1 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Commercial business | Level 2 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0	0
Commercial business | Level 3 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 124	$ 868

XML

Fair Value Measurements (Schedule of Quantitative Information About Level 3 Fair Value Instruments) (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 9,303	$ 6,266
Impaired loans
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	9,171	5,660
Real estate owned
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	132	606
Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	9,303	6,266
Level 3 | Impaired loans
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	9,171	5,660
Level 3 | Real estate owned
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	132	606
Collateral Value Method | Level 3 | Impaired loans
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 9,171	$ 5,660
Collateral Value Method | Level 3 | Impaired loans | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate	0.00%	0.00%
Collateral Value Method | Level 3 | Impaired loans | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate	100.00%	100.00%
Collateral Value Method | Level 3 | Impaired loans | Weighted Average
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate	5.00%	4.00%
Collateral Value Method | Level 3 | Real estate owned
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 132	$ 606
Collateral Value Method | Level 3 | Real estate owned | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate	0.00%	0.00%
Collateral Value Method | Level 3 | Real estate owned | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate	100.00%	100.00%
Collateral Value Method | Level 3 | Real estate owned | Weighted Average
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount Rate	12.00%	1.00%

XML

Fair Value Measurements (Schedule of Carrying Values and Estimated Fair Values of Debt Instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2013
Financial Instruments-Assets
Cash and cash equivalents	$ 8,320	$ 14,450	$ 14,758	$ 65,353
Securities available-for-sale	23,665	29,565
Fair value of securities held to maturity	6,425	7,692
FHLB stock	3,000	853
Loans held for sale	1,864	505
Accrued interest receivable	1,182	1,069
Financial Instruments-Liabilities
Advance payments by borrowers for taxes and insurance	1,114	1,002
Fair Value
Financial Instruments-Assets
Cash and cash equivalents	8,320	14,450
Securities available-for-sale	23,665	29,565
Fair value of securities held to maturity	6,425	7,692
FHLB stock	2,959	853
Loans held for sale	1,864	505
Loans receivable	349,244	288,424
Accrued interest receivable	1,182	1,069
Financial Instruments-Liabilities
Demand deposits, savings and money market	182,456	173,482
Certificates of deposit	118,059	125,942
FHLB advances	62,124	9,882
Advance payments by borrowers for taxes and insurance	1,114	1,002
Carrying Amount
Financial Instruments-Assets
Cash and cash equivalents	8,320	14,450
Securities available-for-sale	23,665	29,565
Fair value of securities held to maturity	6,291	7,617
FHLB stock	2,959	853
Loans held for sale	1,864	505
Loans receivable	351,130	287,165
Accrued interest receivable	1,182	1,069
Financial Instruments-Liabilities
Demand deposits, savings and money market	182,456	173,482
Certificates of deposit	118,438	126,330
FHLB advances	62,000	10,000
Advance payments by borrowers for taxes and insurance	1,114	1,002
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
Financial Instruments-Assets
Cash and cash equivalents	8,320	14,450
Securities available-for-sale	0	0
Fair value of securities held to maturity	0	0
FHLB stock	0	0
Loans held for sale	1,864	505
Loans receivable	0	0
Accrued interest receivable	0	0
Financial Instruments-Liabilities
Demand deposits, savings and money market	182,456	173,482
Certificates of deposit	0	0
FHLB advances	0	0
Advance payments by borrowers for taxes and insurance	1,114	1,002
Significant Other Observable Inputs (Level 2)
Financial Instruments-Assets
Cash and cash equivalents	0	0
Securities available-for-sale	23,665	29,565
Fair value of securities held to maturity	6,425	7,692
FHLB stock	2,959	853
Loans held for sale	0	0
Loans receivable	0	0
Accrued interest receivable	1,182	1,069
Financial Instruments-Liabilities
Demand deposits, savings and money market	0	0
Certificates of deposit	118,059	125,942
FHLB advances	62,124	9,882
Advance payments by borrowers for taxes and insurance	0	0
Significant Unobservable Inputs (Level 3)
Financial Instruments-Assets
Cash and cash equivalents	0	0
Securities available-for-sale	0	0
Fair value of securities held to maturity	0	0
FHLB stock	0	0
Loans held for sale	0	0
Loans receivable	349,244	288,424
Accrued interest receivable	0	0
Financial Instruments-Liabilities
Demand deposits, savings and money market	0	0
Certificates of deposit	0	0
FHLB advances	0	0
Advance payments by borrowers for taxes and insurance	$ 0	$ 0