Anchor in Washington Facing Proxy Fight

Anchor Bancorp in Lacey, Wash., is facing a renewed proxy battle from activist investor Joel Lawson 4th ahead of its annual shareholders meeting in late October.

Lawson announced his intent to seek a seat on the $379 million-asset company's board of directors at the Oct. 21 annual meeting, according to a filing with the Securities and Exchange Commission Monday. He argues that incumbent board members have not "demonstrated a willingness to open-mindedly consider all options available to maximize shareholder value."

"I strongly believe that the Board must be reconstituted to ensure that the directors take the necessary steps for the Company's shareholders to realize the maximum value of their investment," Lawson, who holds an 8.9% stake in Anchor, wrote in a letter to shareholders.

Neither Lawson nor Anchor Bancorp returned requests for comment.

Lawson has been one of Anchor's largest shareholders since 2011. He pushed for the company to sell in 2014, but met the resistance of fellow activist investor Joseph Stilwell. He also sought a proposal for a sale in 2013, which the company sought to exclude. Since Sept. 1, Lawson has grown his stake in the company by more than 87,000 shares.

In defense of his candidacy, Lawson pointed to Anchor's underperformance compared to selected peers, such as Timberland Bancorp and Pacific Financial Corp., on measures such as loan growth and return on average assets. He also raised concern with the announcement of a stock incentive plan for top executives, which he views as excessive given Anchor's financial results. Anchor reported annual net income of $9.8 million for the fiscal year ended June 30, up from $423,000 the year before. Return on assets for the year was 0.43%, while the return on equity was 3.10%. The efficiency ratio for the fiscal year was 91.80%.

If elected to the board, Lawson said he would advise directors to explore "all strategic options" for the company, including a sale.

Even if elected to the board, though, Lawson could be stymied by a provision in Anchor's bylaws, which stipulates that anyone elected to the board who is not a resident of Washington State shall be considered to have automatically resigned. Lawson, who lives in Pennsylvania, said in his proxy that he feels the board should allow him to serve if elected, calling the provision "poor corporate governance."

"Shareholders deserve the right to elect the most qualified director candidates available to represent their best interests regardless of where they reside," Lawson said in the SEC filing. "In my view, if the incumbent board hopes to have any credibility in terms of representing the best interests of all shareholders, the board must amend or repeal the residency restriction immediately, rather than use it as a means to thwart direct shareholder representation on the board."

David Baris, a partner at the law firm of BuckleySandler, said that if Lawson were elected, Anchor would be within its rights to ban him from serving.

"If the bylaw is legally adopted, he's going to be barred from serving on the board unless he overturns it through litigation or persuading the board or shareholders to change the bylaw," Baris, who also serves as the president of the American Association of Bank Directors, told American Banker. "The board would appear to have the legal right to establish residency requirements through its authority to adopt bylaws. One could quibble whether it's absolutely necessary to have them all be a resident of the state … but they have the prerogative to do that."