Anchor Bancorp, Inc.
Anchor Bancorp, Inc.
Incorporated: 1868 as the Bay Ridge Savings Bank
Sales: $88.1 million
Stock Exchanges: New York
SICs: 6712 Bank Holding Companies; 6035 Federal Savings Institutions
Anchor Bancorp, Inc., and its wholly owned subsidiary, Anchor Savings Bank F.S.B., are among the largest publicly owned savings and loan institutions in the United States. The bank focuses its activities on the New York metropolitan area, with additional operations in Florida. After 100 years of uneventful activity in Brooklyn, Anchor began to expand through acquisitions in the late 1960s and 1970s. In the 1980s, Anchor’s size exploded, as it moved rapidly into areas outside its core operations. By the late 1980s, however, as the savings and loan industry was thrown into a deep crisis, Anchor found itself badly overextended and undercapitalized. In the 1990s, Anchor worked steadily to move back from the brink of disaster to a position of greater financial health.
Anchor was founded in 1868 as the Bay Ridge Savings Bank. Located in the Bay Ridge section of Brooklyn, the bank served many sailors and their families who had settled in the neighborhood around the bank. On its first day of operation, four customers made deposits. By 1926, the Bay Ridge Savings Bank had grown large enough to become the first institution of its kind in New York to open a branch office. This second location was established in Boro Park, Brooklyn. Forty years later, in 1966, a third office was opened in the suburbs of Long Island, reflecting the shift in the bank’s population of customers from urban Brooklyn to more rural areas. With three locations, the bank boasted assets of $330 million.
In 1968, poised to begin a more dramatic expansion, the Bay Ridge Savings Bank changed its name to the Anchor Savings Bank. This change was intended to reflect the fact that the bank’s role had expanded beyond the boundaries of its original neighborhood, as it operated a total of five offices. The bank’s new name was taken from a motif present in the stained glass windows that decorated its main branch building. Many small anchors made up a nautical design in the windows, reflecting the profession of many of the bank’s customers, and thus the Anchor Savings Bank was born.
In the fall of 1969, a year after changing its name, Anchor merged with another Brooklyn-based savings bank, the Bushwick Savings Bank, which had been chartered by the state of New York in the same year that the Bay Ridge Savings Bank was born. Together, the two banks had a total of nine offices, five in Brooklyn, one in Manhattan, one on Staten Island, and two in Nassau County, on Long Island. Within five years, three more branch locations had been added, and the company’s assets had topped $1 billion.
In 1977, Anchor merged with another bank, the North New York Savings Bank. This institution served customers in the Bronx and in Westchester and Rockland counties, making a good geographical match for Anchor and expanding its coverage of the New York metropolitan area. With the addition of the assets of the North New York Savings Bank, Anchor now boasted 20 offices, with assets of $1.6 billion.
On the last day of 1980, Anchor became the first mutual savings bank in New York, and the second in the nation, to be awarded a federal charter, making it a federal savings bank (F.S.B.). With its new charter, Anchor was able to offer its customers a wider range of services than before, including a broader range of loans and corporate checking accounts.
One year later, Anchor continued its pattern of growth through acquisition of other banks when it merged with the Guardian Federal Savings and Loan Association, based on Long Island, and with the New York and Suburban Savings and Loan Association. This move added eleven more branch offices to the bank’s total in the New York area.
Anchor made its first move outside New York when it purchased Mortgage Resources, Inc., which was based in Atlanta, Georgia. This company became a wholly owned subsidiary of the bank, called Anchor Mortgage Resources, Inc., which offered mortgage services to customers located primarily in the southeastern United States.
In early 1982, Anchor expanded its New York operations beyond New York City for the first time, when the First Federal Savings and Loan Association of Hamburg, based in upstate New York, became a part of the company. Later that year, Anchor also merged with the Niagara First Savings and Loan Association. With this move, the bank gained eight more branch offices in Erie and Niagara Counties, in western New York state, and further expanded the scope of its activities across its home state.
In October of 1982, Anchor continued its rapid expansion through a string of acquisitions when it purchased the Dime Banking and Loan Association of Rochester, New York. This bank had 14 separate locations, which were converted to Anchor branches. In November, Anchor solidified its operations in western New York when it opened a new location in Buffalo. By this time, the company boasted a total of 56 bank offices. In late 1982, Anchor’s financial strength, and its operations in Georgia, were tapped by the Federal Home Loan Bank Board, when it chose to merge the ailing Peachtree Federal Savings and Loan Association of Atlanta and the First Federal Savings and Loan Association of Crisp County, Georgia, into Anchor. With this move, Anchor became an interstate bank. The company’s Georgia operations expanded further in March of 1983, when it purchased the Standard Federal Savings and Loan Association, with branches in Dooly and Wilcox counties in Georgia. This moved brought the company’s number of branches in the Atlanta area to 20. Three months later, Anchor added the property of the Tri-City Federal Savings and Loan Association. This added three more locations to the family of Anchor operations in Georgia.
Expansion also took place during this time in Anchor’s northern holdings. In June of 1983, the company returned to its roots when it opened a new office in Bay Ridge, Brooklyn. Two months later, Anchor made another move in the metropolitan area when it purchased the Suburban Savings and Loan Association, which ran 27 offices in New Jersey. With the purchase of Suburban, Anchor became the first bank in the New York metropolitan area to have branches on both sides of the Hudson River, allowing people who lived in New Jersey and commuted to New York to work to take care of banking both at home or at work. Anchor converted Suburban to a wholly owned subsidiary of the company, and changed its name to Anchor Savings Bank FSB New Jersey. With this move, Anchor became the country’s second largest federally chartered savings bank.
As part of its purchase of Suburban, Anchor also attained ownership of the Suburban Coastal Corporation, located in Wayne, New Jersey. This company, which provided mortgage servicing for loans that totaled more than $6 billion, became known as Anchor Mortgage Services, Inc., following its change in ownership. This subsidiary operated 21 loan servicing offices in 10 states, including Texas and California, increasing the geographical scope of Anchor’s holdings further.
At the end of September of 1983, Anchor acquired another bank in the New York area, when it merged with the Heritage Federal Savings and Loan Association of Huntington, New York. This move gave Anchor a total of 19 offices on Long Island.
In 1984, Anchor opened an additional office in both New York and Georgia, adding branches in Rego Park, its first outlet in the borough of Queens, and also one in Marietta, Georgia. In August, Anchor purchased United Federal Savings and Loan of Waycross, Georgia. With this move, the company’s number of branch offices grew to 111.
The mid-1980s saw a continuation of Anchor’s steady growth through acquisition of other banks. In October of 1985, the company bought the First Federal Savings Bank of Brunswick, based in southern Georgia. With this purchase, Anchor’s assets topped $7 billion, and its number of branch offices reached 115. The bulk of the company’s offices, 58, were located in New York state, but it also had 31 in Georgia and 26 in New Jersey.
At the end of 1985, Anchor expanded its operations to include another state when it purchased the Sun Federal Savings and Loan Association of Tallahassee, Florida. This bank had 18 branch offices, located throughout the Florida peninsula.
In the following year, Anchor moved outside the financial services industry for the first time, when it acquired an equipment leasing company that became Anchor Financial Corporation. Based in Fairfield, Connecticut, this company rented specialized equipment to the graphic arts, paper, and transportation industries. Its operations were based in the northeast, in Illinois, and in California. Anchor hoped that this company would be able to attract customers from among the bank’s business clients.
By the end of 1986, Anchor had solid banking operations in place in four of the fastest growing markets in the United States: New York, New Jersey, Georgia, and Florida. In addition, the company owned two mortgage servicing enterprises and three insurance agencies: Standard of Georgia Insurance Agency, Inc.; ASB Agency, Inc.; and ASB/NJ Agency, Inc. After a decade and a half of aggressive expansion through acquisition, Anchor had become the 17th largest thrift institution in the United States, with deposits exceeding $6 billion. In just five years, between 1981 and 1986, the company had taken over 13 savings and loan associations, most of which were in financial difficulty at the time that they were purchased.
Having attained this impressive size, Anchor converted from a mutual savings and loan association into a publicly held company on April 1, 1987. This was done through an offering of stock to people who held accounts at the bank’s various branches. After a series of community meetings, shares in the bank were sold in a six week subscription period.
In the following year, Anchor increased its holdings in the mortgage industry, purchasing the Residential Funding Corporation for $61 million. This company specialized in very large, or “jumbo” mortgage loans. This move was part of an overall attempt by Anchor to sharpen its focus on the residential mortgage lending field, in which it saw high potential for profit.
At the same time, however, Anchor also began to streamline its activities in other areas and implement a cost-containment program, as its financial position weakened alarmingly. The company withdrew from its participation in the indirect market for automobile loans and drastically de-emphasized its commercial loan operations, firing all its employees in this area. These moves were designed to offset the squeeze on Anchor’s profits caused by high interest rates on deposits. Overall, Anchor fired more than 12 percent of its workforce. In addition, the company shut down seven mortgage offices, sold eight banking branches in southern Georgia, and consolidated three locations in Northern Florida.
Anchor’s financial condition worsened in 1989, as the entire savings and loan industry suffered a crisis and shakeout in which many banks failed. In March of 1989, the Hamilton Holding Company, which had signed a letter of intent to purchase Anchor, withdrew from its agreement to do so, citing uncertainty about pending federal legislation designed to redress the mess in the thrift industry. In early August of 1989, the Financial Institution Reform, Recovery, and Enforcement Act went into effect, changing the climate of business for Anchor and the nation’s other savings and loan associations. By redefining assets, this bill left Anchor undercapitalized by $329 million. In order to comply with this regulation, the company was forced to begin a major effort to raise capital to avoid being closed by the federal government. To do so, and also to eliminate less profitable operations that were dragging down results, Anchor began to sell off many of its assets.
As part of this process, Anchor decided to withdraw completely from its activities in Georgia and Florida. In August of 1989, the bank sold nine of its bank branches in northern Florida to the Citizen’s Federal Savings Bank. In addition, the company put its leasing subsidiary on the block and closed additional mortgage operations. Further staff cuts bought the number of employees let go to nearly 1,000.
In an effort to rebuild its declining market share, in September of 1989, Anchor shifted its promotional slogan, for the first time since its name change 22 years earlier, from “Your Anchor Bankers . .. Understand” to “We’re Your Anchor Bankers... Here For You.” Nevertheless, the company’s difficulties continued, and at the end of 1989, Anchor reported a loss of $23.1 million. It appeared extremely likely that Anchor would join the long list of other American thrift institutions which had failed.
In the first year of the 1990s, in dire straits, Anchor continued its efforts to overcome the problems brought about as a result of its rapid expansion and diversification in the previous decade. In early March, the company sold its Residential Funding Corporation unit to the GMAC Mortgage Corporation, a subsidiary of General Motors. In April of 1990, Anchor announced that it would take a $175 million loss in order to shed assets, including 68 more bank branches. In July, the company continued its process of divestment by selling off 19 bank branches in Georgia. In addition, Anchor closed 15 mortgage offices outside the New York area, shut down a construction loan operation in Georgia, and sold its credit card business. The point of these changes was to allow the bank to focus exclusively on its core area, the New York City metropolitan region, and its core business: gathering deposits and lending those funds to people who wished to buy houses.
After losing nearly $150 million in 1990, Anchor made progress toward profitability in the following year, posting profits of $65 million, almost all of which resulted from the sale of assets. The company was steadily accruing the capital required by law and solidifying its operations in its basic business areas, despite the difficulties caused by a real estate slump throughout the Northeast.
In March of 1991, after an arduous process, Anchor formed a holding company, Anchor Bancorp, Inc., so that it could restructure its stock offerings to increase its capitalization. Although Anchor’s effort to move out of the Georgia market had been completed, its program to shed its Florida assets had stalled. Because so many savings and loans had failed or been taken over by the government, the market was saturated with thrift branch offices, and Anchor was unable to demand a reasonable price for its Florida property and deposits. As a result of its inability to raise capital by selling branch offices, the company turned instead to sales of its mortgage operations.
By June of 1992, these efforts had shown fruit, as Anchor was released from close regulatory supervision of its efforts to rebuild capital. The company finally appeared to be out of the woods after the crisis of the late 1980s. Its profitability improved throughout 1992, attaining a level of $50.9 million, with only $7 million of that contributed by asset sales. This progress came despite an unexpected blow to one of Anchor’s key operations, as historically low-interest rates caused many people to refinance their houses, paying off their old high-interest mortgages, which were valuable revenue raisers for Anchor, and taking out new, much cheaper loans. To keep pace with this trend, Anchor retooled its advertising program, moving from an emphasis on gathering deposits to a focus on making loans.
In 1993, as the thrift business as a whole began to recover, Anchor was able to complete its original plan to sell off some of its more far-flung branches. The company shed 14 outlets in western New York state, along with two locations in southern New Jersey, and another two in Florida. Plans were completed to transfer six more branches in northern Florida, leaving Anchor with only a token presence in southern Florida, an area to which many New Yorkers retired.
With its newly solidified capital position, Anchor began to cautiously expand the scope of its activities. The company aimed to move from banking in which the bulk of revenues were generated by fees for various basic transactions, to banking based on long-term, more complex relationships with its customers, shifting from a traditional savings and loan, to a full-service consumer bank. To that end, Anchor instituted a limited commercial mortgage lending program to make loans for the purchase of multifamily houses and small commercial properties. In addition, the company sought to increase its market share of its traditional constituency, middle and lower-middle income people, by adding more minority customers. By the end of June of 1993, Anchor’s profits over a yearlong period had reached $52 million.
As it moved into the mid-1990s, Anchor was able to look forward to the future with cautious optimism. Although it had survived the worst of its financial crisis and was able to anticipate future expansion within its core market area, Anchor remained chastened and somewhat limited financially by its close brush with disaster. Nevertheless, it appeared likely that the institution which first opened its doors in the mid-19th century would still be operating at the dawn of the 21st century.
Anchor Mortgage Resources, Inc.; Anchor Savings Bank F.S.B.; Anchor Savings Bank F.S.B. New Jersey; Anchor Mortgage Services, Inc.
“Large Write-Down Is Set; Firm May Sell 68 Branches,” Wall Street Journal, April 20, 1990.