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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 (FEE REQUIRED)
For the fiscal year ended March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition report from to __________________ to _______________
Commission File Number 0-20006
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ANCHOR BANCORP WISCONSIN INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1726871
- --------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
25 West Main Street
Madison, Wisconsin 53703
------------------------
(Address of principal executive office)
Registrant's telephone number, including area code (608) 252-8700
--------------
Securities registered pursuant to Section 12 (b) of the Act
Not Applicable
Securities registered pursuant to Section 12 (g) of the Act:
Common stock, par value $.10 per share
--------------------------------------
(Title of Class)
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 if disclosure of delinquent filers pursuant to
Item 405 or Regulation S-K 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 the Form 10-K
or any amendment to this Form 10-K. [ ]
Based upon the $34.50 closing price of the registrant's common stock as
of June 7, 1996, the aggregate market value of the 4,357,246 shares of the
registrant's common stock deemed to be held by non-affiliates of the
registrant was: $150.3 million. Although directors and executive officers
of the registrant and certain of its employee benefit plans were assumed to
be "affiliates" of the registrant for purposes of this calculation, the
classification is not to be interpreted as an admission of such status.
As of June 7, 1996, 4,849,742 shares of the registrant's common stock were
outstanding.
Documents Incorporated by Reference
Part II:
Portions of Anchor BanCorp Wisconsin Inc.'s 1996 Annual Report to
Stockholders.
Part III:
Portions of definitive proxy statement for the 1996 Annual Meeting of
Stockholders.
PART I
ITEM 1. BUSINESS
GENERAL
Anchor BanCorp Wisconsin Inc. (the "Corporation") is a registered
savings and loan holding company incorporated under the laws of the State of
Wisconsin and is engaged in the savings and loan business through its
wholly-owned banking subsidiary, AnchorBank, S.S.B. (the "Bank"). On July
15, 1992, the Bank converted from a state-chartered mutual savings
institution to a stock savings institution. As part of the conversion, the
Corporation acquired all of the outstanding common stock of the Bank. The
Corporation created a non-banking subsidiary in February 1996, Investment
Directions, Inc. ("IDI"), which has invested in a limited partnership
located in Austin, Texas.
The Bank was organized in 1919 as a Wisconsin-chartered savings
institution. As a state-chartered savings institution, the Bank's deposits
are insured up to the maximum allowable amount by the Federal Deposit
Insurance Corporation ("FDIC"). The Bank is a member of the Federal Home
Loan Bank of Chicago ("FHLB"), and is regulated by the Office of Thrift
Supervision ("OTS"), the FDIC and the Wisconsin Commissioner of Savings and
Loan ("Commissioner"), and is subject to the periodic reporting
requirements of the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended ("Exchange Act"). The Bank is
also regulated by the Board of Governors of the Federal Reserve System
("Federal Reserve Board") relating to reserves required to be maintained
against deposits and certain other matters. See "Regulation."
The Bank blends an interest in the consumer and small business markets
with the willingness to expand its numerous checking, savings and lending
programs to meet customers' changing financial needs. The Bank offers
checking, savings, money market accounts, mortgages, home equity and other
consumer loans, student loans, credit cards, annuities and related consumer
financial services. The Bank also offers banking services to businesses,
including checking accounts, lines of credit, secured loans and commercial
real estate loans.
The Bank has five wholly-owned subsidiaries. Anchor Insurance Services,
Inc. ("AIS") offers a full line of insurance products, securities and
annuities to the Bank's customers and other members of the general public.
ADPC II, LLC ("ADPC II") was created in September 1996 to improve and
manage a multi-family property acquired by foreclosure. ADPC Corporation
("ADPC") was engaged in developing land in Arizona into saleable
single-family lots, which have since been sold. Anchor Investment
Corporation ("AIC") is an operating subsidiary which is located in and
formed under the laws of the State of Nevada. AIC was formed for the purpose
of managing a portion the Bank's investment portfolio (primarily
mortgage-related securities). Anchor Financial Corp. ("AFC") is engaged
primarily in nationwide equipment leasing and financing activities. AFC
ceased originating new leases in 1991 and is presently winding down its
operations. All of the subsidiaries, except AIC, are Wisconsin corporations.
1
On June 30, 1995, the Corporation acquired American Equity BanCorp
("American") of Stevens Point, Wisconsin. In the acquisition, 474,753
shares of the Corporation's common stock at a fair market value of $15.7
million were issued to American's stockholders. Upon closing, American's
wholly-owned subsidiary, American Equity Bank, F.S.B., was merged into the
Bank as a branch office. American was merged into the Corporation. The
transaction was accounted for as a purchase. American had total assets,
deposits and stockholders' equity of $102.4 million, $65.3 million and $9.4
million, respectively.
MARKET AREA
The Bank's primary market area consists of the metropolitan area of
Madison, Wisconsin, the suburban communities of Dane County, Wisconsin and
southern Wisconsin as well as contiguous counties in Iowa and Illinois. As
of March 31, 1996, the Bank conducted business from its headquarters and main
office in Madison, Wisconsin and 32 other full-service offices and three loan
origination offices.
The economy of Dane County is characterized by diversified industries,
major medical facilities, state, federal and university governmental bodies,
as well as a sound agricultural base. It is estimated that the population of
Dane County increased by 13.5% from 1980 to 1990, which was more than three
times the percentage increase for the entire State of Wisconsin.
Madison is one of a few cities in the United States which houses both the
State capitol and the major university of the state university system--The
University of Wisconsin-Madison. In addition, Madison Area Technical
College, a part of the highly regarded Wisconsin Vocational Education System,
Edgewood College, a Catholic liberal arts college and Madison Junior College
of Business, a nationally-recognized business college, are located in the
Madison metropolitan area. Major non-governmental employers in Dane County
include Cuna Mutual Insurance Company, American Family Insurance Company and
Oscar Mayer Foods Corporation.
COMPETITION
The Bank is subject to extensive competition from other savings
institutions as well as commercial banks and credit unions in both attracting
and retaining deposits and in real estate and other lending activities.
Competition for deposits also comes from money market funds, bond funds,
corporate debt and government securities. Competition for the origination of
real estate loans comes principally from other savings institutions,
commercial banks and mortgage banking companies. Competition for consumer
loans is primarily from other savings institutions, commercial banks,
automobile manufacturers and their financing subsidiaries, consumer finance
companies and credit unions.
The principal factors which are used to attract deposit accounts and
distinguish one financial institution from another include rates of return,
types of accounts, service fees, convenience of office locations, and other
services. The primary factors in competing for loans are interest rates,
loan fee charges, timeliness and quality of service to the borrower.
2
FINANCIAL RATIOS
Year Ended March 31,
---------------------------------------
1996 1995 1994
---- ---- ----
Return on average assets 0.88% 1.00% 1.00%
Return on average equity 12.13 13.45 12.89
Average equity to average assets 7.24 7.41 7.74
Dividend payout ratio 11.76 8.51 8.28
Net interest margin 3.18 3.60 3.64
LENDING ACTIVITIES
GENERAL. At March 31, 1996, the Corporation's net loans held for
investment totalled $1.361 billion, representing approximately 78% of its
$1.755 billion of total assets at that date. Approximately 80% of the
Corporation's total loans held for investment at March 31, 1996 were secured
by first liens on real estate.
The Bank's primary lending emphasis is on the origination of
single-family residential loans secured by properties located primarily in
Wisconsin, with adjustable-rate loans generally being originated for
inclusion in the Bank's loan portfolio and fixed-rate loans generally being
originated for sale into the secondary market. In addition, in order to
increase the yield and interest rate sensitivity of its portfolio, the Bank
also originates commercial real estate, multi-family, construction, consumer
and commercial business loans in its primary market area.
The non-real estate loans originated by the Bank consist of a variety of
consumer loans and commercial business loans. At March 31, 1996, the
Corporation's total loans held for investment included $257.5 million of
consumer loans and $30.7 million of commercial business loans.
LOAN PORTFOLIO COMPOSITION. The table on the following page presents
information concerning the composition of the Corporation's consolidated
loans held for investment at the dates indicated.
3
March 31,
-----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------- ------------------- ------------------ ------------------ ----------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(Dollars In Thousands)
Mortgage loans:
Single-family residential $ 745,170 51.97% $ 716,212 55.83% $ 618,647 55.25% $493,105 50.35% $455,978 47.68%
Multi-family residential 162,432 11.33 141,401 11.02 142,750 12.75 173,979 17.76 182,604 19.09
Commercial real estate 139,918 9.76 123,438 9.62 129,196 11.54 121,419 12.40 140,781 14.72
Construction 77,187 5.38 66,519 5.19 50,691 4.53 34,699 3.54 24,473 2.56
Land 21,077 1.47 13,644 1.06 8,280 0.74 4,223 0.43 6,292 0.66
---------- ----- ---------- ----- ---------- ----- -------- ----- -------- -----
Total mortgage loans 1,145,784 79.91 1,061,214 82.72 949,564 84.81 827,425 84.48 810,128 84.71
---------- ----- ---------- ----- ---------- ----- -------- ----- -------- -----
Consumer loans:
Second mortgage
and home equity 140,302 9.78 111,725 8.71 84,922 7.58 68,689 7.01 54,286 5.68
Education 88,674 6.18 69,264 5.40 52,289 4.67 48,457 4.95 45,752 4.78
Other 28,481 1.99 18,997 1.48 13,587 1.21 13,598 1.39 16,538 1.73
---------- ----- ---------- ----- ---------- ----- -------- ----- -------- -----
Total consumer loans 257,457 17.95 199,986 15.59 150,798 13.46 130,744 13.35 116,576 12.19
---------- ----- ---------- ----- ---------- ----- -------- ----- -------- -----
Commercial business loans:
Loans 30,352 2.12 20,272 1.58 16,195 1.45 13,378 1.37 11,150 1.17
Lease receivables 363 0.02 1,467 0.11 3,154 0.28 7,859 0.80 18,450 1.93
---------- ----- ---------- ----- ---------- ----- -------- ----- -------- -----
Total commercial
business loans 30,715 2.14 21,739 1.69 19,349 1.73 21,237 2.17 29,600 3.10
---------- ----- ---------- ----- ---------- ----- -------- ----- -------- -----
Gross loans receivable 1,433,956 100.00% 1,282,939 100.00% 1,119,711 100.00% 979,406 100.00% 956,304 100.00%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Contras to loans:
Undisbursed loan proceeds (46,493) (25,980) (27,950) (18,465) (11,263)
Allowance for loan losses (22,807) (22,429) (22,119) (18,437) (14,751)
Unearned loan fees (2,453) (2,000) (1,966) (1,291) (1,038)
Discount on loans purchased (1,005) (1,151) (195) (379) (618)
Unearned interest (118) (272) (536) (1,640) (3,620)
---------- ---------- ---------- -------- --------
Total contras to loans (72,876) (51,832) (51,694) (40,212) (31,290)
---------- ---------- ---------- -------- --------
Loans receivable, net $1,361,080 $1,231,107 $1,068,017 $939,194 $925,014
4
The following table shows, at March 31, 1996, the scheduled contractual
maturities of the Corporation's consolidated gross loans held for investment,
as well as the dollar amount of such loans which are scheduled to mature
after one year which have fixed or adjustable interest rates.
MULTI-FAMILY
RESIDENTIAL
AND
SINGLE-FAMILY COMMERCIAL CONSTRUCTION COMMERCIAL
RESIDENTIAL REAL ESTATE AND LAND CONSUMER BUSINESS
LOANS LOANS LOANS LOANS LOANS
------------- ------------ ------------ -------- ----------
(In Thousands)
Amounts due:
In one year or less $ 33,701 $ 36,598 $69,863 $ 42,861 $11,687
After one year through five years 93,907 44,724 4,218 121,604 9,724
After five years 617,562 221,851 24,183 92,992 9,304
-------- -------- ------- -------- -------
$745,170 $303,173 $98,264 $257,457 $30,715
-------- -------- ------- -------- -------
-------- -------- ------- -------- -------
Interest rate term on amounts due
after one year:
Fixed $125,367 $29,197 $ 2,161 $111,288 $18,689
-------- -------- ------- -------- -------
-------- -------- ------- -------- -------
Adjustable $586,102 $237,378 $26,240 $103,308 $ 339
-------- -------- ------- -------- -------
-------- -------- ------- -------- -------
SINGLE-FAMILY RESIDENTIAL LOANS. Historically, savings associations,
such as the Bank, have concentrated their lending activities on the
origination of loans secured primarily by first mortgage liens on
owner-occupied, existing single-family residences. At March 31, 1996,
$745.2 million of the Bank's total loans held for investment consisted of
single-family residential loans, substantially all of which are conventional
loans, which are neither insured or guaranteed by a federal or state agency.
The Bank has emphasized single-family residential loans which provide
for periodic adjustments to the interest rate since the early 1980s. The
adjustable-rate loans currently emphasized by the Bank have up to 30-year
maturities and terms which permit the Bank to annually increase or decrease
the rate on the loans at its discretion, subject to a limit of 1% per
adjustment and an aggregate 5% adjustment over the life of the loan. The
Bank also originates, to a much lesser extent, adjustable-rate loans with
terms which provide for annual adjustment to the interest rate in accordance
with changes in a designated index, which generally are subject to a limit of
2% per adjustment and an aggregate 5% adjustment over the life of the loan.
Adjustable-rate loans decrease the risks associated with changes in
interest rates but involve other risks, primarily because as interest rates
rise, the payment by the borrower rises to the extent permitted by the terms
of the loan, thereby increasing the potential for default. At the same time,
the marketability of the underlying property may be adversely affected by
higher interest rates. The Bank believes that these risks, which have not
had a material adverse effect on the Bank to date, generally are less than
the risks associated with holding fixed-rate loans in an increasing interest
rate environment. At March 31, 1996, approximately $601.5 million or
5
80.7% of the Corporation's permanent single-family residential loans held for
investment consisted of loans with adjustable interest rates.
The Bank continues to originate long-term, fixed-rate mortgage loans,
including conventional, Federal Housing Administration ("FHA"), Federal
Veterans Administration ("VA") and Wisconsin Housing and Economic
Development Authority ("WHEDA") loans, in order to provide a full range of
products to its customers. The Bank generally sells current production of
these loans with terms of 20 years or more to the Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal National Mortgage Association ("FNMA"),
WHEDA and other institutional investors, while keeping some of the 15-year
term loans in its portfolio. The Bank retains the right to service
substantially all loans that it sells.
At March 31, 1996, approximately $143.7 million or 19.3% of the
permanent single-family residential loans in the Corporation's loans held for
investment consisted of loans which provide for fixed rates of interest.
Almost 70% of these loans have original terms of 15 years or less. Although
these loans generally provide for repayments of principal over a fixed period
of 10 to 30 years, it is the Bank's experience that because of prepayments
and due-on-sale clauses, such loans generally remain outstanding for a
substantially shorter period of time.
MULTI-FAMILY RESIDENTIAL AND COMMERCIAL REAL ESTATE. During the 1980s,
the Bank emphasized the origination and purchase of loans secured by
multi-family residences and commercial real estate located within and outside
of Wisconsin in order to diversify the type and geographic location of its
loan portfolio. Such loans also were emphasized because they generally have
adjustable rates and shorter terms than single-family residential loans, thus
increasing the sensitivity of the loan portfolio to changes in interest
rates, as well as providing higher fees and rates than single-family
residential loans. At March 31, 1996, the Corporation had $162.4 million of
loans secured by multi-family residential real estate and $140.0 million of
loans secured by commercial real estate. The Bank generally limits the
origination of such loans to its own primary market area, except to
facilitate the sale or resolution of certain remaining foreclosed properties
outside its market area.
The Bank's multi-family residential loans are primarily secured by
apartment buildings and commercial real estate loans are primarily secured by
office buildings, industrial buildings, warehouses, small retail shopping
centers and various special purpose properties, including motels, restaurants
and nursing homes.
Although terms vary, multi-family residential and commercial real estate
loans generally have maturities of 15 to 30 years, as well as balloon
payments, and terms which provide that the interest rates thereon may be
adjusted annually at the Bank's discretion, subject to an initial fixed-rate
for a one to three year period and an annual limit of 1% to 1.5% per
adjustment, with no limit on the amount of such adjustments over the life of
the loan.
6
Pursuant to a program of loan income enhancement adopted by the Bank in
the mid-1980s, from time to time the Bank pledged mortgage-backed securities
or issued letters of credit to support revenue bonds (the "Bonds") issued
on behalf of borrowers to finance multi-family residential and commercial
developments, with the Bank receiving initial and annual enhancement fees.
Due to the quality of the security, the Bonds were given the highest rating
by independent rating agencies and the Bonds were sold (with the Bond
proceeds going to the borrower) at a lower interest rate than would be
available without the additional security provided by collateral pledged by
the Bank. The Bank receives an annual guaranty fee up to 1.5% of the
guaranty balance and, at March 31, 1996, the Bank had pledged a total of $3.8
million of mortgage-backed securities to secure the repayment of $2.6 million
of Bonds.
In the event that the third party borrower defaults on principal or
interest payments on the Bonds, the Bank is required to either pay the amount
in default or acquire the then outstanding bonds. The Bank may foreclose on
the underlying real estate to recover amounts in default. The Bank does not
anticipate entering into any new agreements.
Multi-family residential and commercial real estate lending (including
the provision of credit supports for revenue bonds which finance such
lending, as discussed above) generally is considered to involve a higher
degree of risk than single-family residential lending. Such lending
typically involves large loan balances concentrated in a single borrower or
group of related borrowers. In addition, the payment experience on loans
secured by existing income-producing properties is typically dependent on the
successful operation of the related real estate project and thus may be
subject to a greater extent to adverse conditions in real estate markets or
in the economy generally. The Bank generally attempts to limit these risks
by, among other things, adopting what management believes are conservative
underwriting standards and lending primarily in its market area.
CONSTRUCTION AND LAND LOANS. Historically, the Bank has been an active
originator of loans to construct residential and commercial properties
("construction loans"), and to a lesser extent, loans to acquire and
develop real estate for the construction of such properties ("land loans").
At March 31, 1996, construction loans amounted to $77.2 million of the
Corporation's total loans held for investment. Of this amount, $46.7 million
and $9.4 million was represented by loans for the construction of
single-family and multi-family residences, respectively. Land loans amounted
to $21.1 million at March 31, 1996.
The Bank's construction loans generally have terms of six to 12 months,
fixed interest rates and fees which are due at the time of origination and at
maturity if the Bank does not originate the permanent financing on the
constructed property. Loan proceeds are disbursed in increments as
construction progresses and as inspections by the Bank's in-house appraiser
warrant. Land acquisition and development loans generally have the same
terms as construction loans, but may have longer maturities than such loans.
Construction financing is generally considered to involve a higher
degree of risk of loss than long-term financing on improved, owner-occupied
real estate because of the uncertainties
7
of construction, including the possibility of costs exceeding the initial
estimates and the need to obtain a tenant or purchaser if the property will
not be owner-occupied, which similarly can be affected by adverse conditions
in real estate markets or in the general economy.
CONSUMER LOANS. The Bank offers consumer loans in order to provide a
full range of financial services to its customers. At March 31, 1996, $257.5
million of the Corporation's consolidated total loans held for investment
consisted of consumer loans. Consumer loans generally have shorter terms and
higher interest rates than mortgage loans but generally involve more risk
than mortgage loans because of the type and nature of the collateral and, in
certain cases, the absence of collateral. These risks are not as prevalent
in the case of the Bank's consumer loan portfolio, however, because of the
high percentage of insured home equity loans which are underwritten in a
manner such that they result in a lending risk which is substantially similar
to single-family residential loans and secured education loans. Despite the
risks inherent in consumer lending, the Corporation's net charge-offs on
consumer loans as a percentage of gross loans has been minimal.
The largest component of the Corporation's consumer loan portfolio are
second mortgage and home equity loans, which amounted to $140.3 million or
54.5% of consumer loans at March 31, 1996. The Bank has placed additional
emphasis on its home equity loan program in recent years to respond to
changes in federal income tax laws. The primary home equity loan product has
an adjustable interest rate which is linked to the prime interest rate and is
secured by a mortgage, either a primary or a junior lien, on the borrower's
residence. A fixed-rate home equity product is also offered.
Due to the Bank's proximity to the University of Wisconsin,
approximately 34.4% of its consumer loans at March 31, 1996 consisted of
education loans, which generally are made for a maximum of $2,500 per year
for undergraduate studies and $5,000 per year for graduate studies and are
either due within six months of graduation or repaid on an installment basis
after graduation. Education loans generally have interest rates which adjust
monthly in accordance with a designated index. Both the principal amount of
an education loan and interest thereon generally are guaranteed by the Great
Lakes Higher Education Corporation, which generally obtains reinsurance of
its obligations from the U.S. Department of Education. Education loans may
be sold to the Student Loan Marketing Association or to other investors.
However, the Bank's practice has been to retain these in its portfolio.
The remainder of the Corporation's consumer loan portfolio consists of
deposit account secured loans and loans which have been made for a variety of
consumer purposes. These include credit extended through credit cards issued
by the Bank pursuant to an agency arrangement under which the Bank generally
is responsible for 45% of the profit or losses from such activities. At
March 31, 1996, the Bank's approved credit card lines and the outstanding
credit pursuant to such lines amounted to $16.6 million and $2.6 million,
respectively.
8
COMMERCIAL BUSINESS LOANS AND LEASES. The Bank originates loans for
commercial, corporate and business purposes, including issuing letters of
credit. At March 31, 1996, commercial business loans amounted to $30.7
million or 2.1% of the Corporation's total loans held for investment.
The largest component of the Corporation's commercial business loan
portfolio is comprised of loans for a variety of purposes and generally is
secured by various equipment, machinery and other corporate assets. These
loans amounted to $30.4 million at March 31, 1996. Commercial business loans
generally have terms of five years or less and interest rates which float in
accordance with a designated prime lending rate. Substantially all of such
loans are secured and backed by the personal guarantees of the principals of
the borrower.
The remainder of the Corporation's commercial business loan portfolio is
equipment lease receivables, which amounted to $363,000 at March 31, 1996.
Most of these receivables were originated by a subsidiary of the Bank, AFC,
and are primarily secured by telephone and computer equipment. The Bank
currently is winding down the operations of AFC because of the higher level
of risk associated with this type of lending activity. At March 31, 1996,
the Corporation's equipment lease portfolio included $47,000 of
non-performing leases, and $309,000 of the Corporation's allowance for loan
losses was allocated to its equipment lease portfolio. See
"Business--Subsidiaries."
FEE INCOME FROM LENDING ACTIVITIES. Loan origination and commitment
fees and certain direct loan origination costs are being deferred and the net
amounts amortized as an adjustment of the related loan's yield.
The Bank also receives other fees and charges relating to existing
mortgage loans, which include prepayment penalties, late charges and fees
collected in connection with a change in borrower or other loan
modifications. Other types of loans also generate fee income for the Bank.
These include annual fees assessed on credit card accounts, transactional
fees relating to credit card usage and late charges on consumer loans.
ORIGINATION, PURCHASE AND SALE OF LOANS. The Bank's loan originations
come from a number of sources. Residential mortgage loan originations are
attributable primarily to depositors, walk-in customers, referrals from real
estate brokers and builders and direct solicitations. Commercial real estate
loan originations are obtained by direct solicitations and referrals.
Consumer loans are originated from walk-in customers, existing depositors and
mortgagors and direct solicitation. Student loans are originated from
solicitation of eligible students and from walk-in customers.
Applications for all types of loans are obtained at the Bank's five
regional lending offices, certain of its branch offices and three loan
origination facilities. Loans may be approved by members of the Loan
Committee within designated limits. Depending on the type and amount of the
loans, one or more signatures of the members of the Senior Loan Committee
also may be required. At least three signatures of members of the Senior
Loan Committee are required to
9
approve (i) all loans over $250,000 and all loans secured by properties over
eight units and (ii) loans over $750,000 and up to $1.0 million, provided
that the President is one of the approving members. Loans in excess of $1.0
million may be committed by the Senior Loan Committee, subject in all cases
to the prior approval of the Board of Directors of the Bank.
The Bank's general policy is to lend up to 80% of the appraised value of
the property securing a single-family residential loan (referred to as the
loan-to-value ratio). The Bank will lend more than 80% of the appraised value
of the property, but generally will require that the borrower obtain private
mortgage insurance in an amount intended to reduce the Bank's exposure to 80%
or less of the appraised value of the underlying property. At March 31,
1996, the Bank had approximately $14.0 million of loans which had a
loan-to-value ratio of greater than 80% and did not have private mortgage
insurance for the portion of the loan above such amount.
Property appraisals on the real estate and improvements securing the
Bank's single-family residential loans are made by the Bank's staff or
independent appraisers approved by the Bank's Board of Directors. Appraisals
are performed in accordance with federal regulations and policies.
The Bank's underwriting criteria generally require that multi-family
residential and commercial real estate loans have loan-to-value ratios which
amount to 80% or less and debt coverage ratios of at least 110%. The Bank
also generally obtains personal guarantees on its multi-family residential
and commercial real estate loans from the principals of the borrowers, as
well as appraisals of the security property from independent appraisal firms.
The portfolio of commercial and multi-family residential loans is
reviewed on a continuing basis (annually for most loans of $500,000 or more)
to identify any potential risks that exist in regard to the property
management, financial criteria of the loan, operating performance,
competitive marketplace and collateral valuation. The credit analysis
function of the Bank is responsible for identifying and reporting credit risk
quantified through a loan rating system and making recommendations to
mitigate credit risk in the portfolio. These and other underwriting standards
are documented in written policy statements, which are periodically updated,
and approved by the Bank's Board of Directors.
The Bank generally obtains title insurance policies on most first
mortgage real estate loans it originates. If title insurance is not obtained
or is unavailable, the Bank obtains an abstract of title and title opinion.
Borrowers must obtain hazard insurance prior to closing and, when required by
the United States Department of Housing and Urban Development, flood
insurance. Borrowers may be required to advance funds, with each monthly
payment of principal and interest, to a loan escrow account from which the
Bank makes disbursements for items such as real estate taxes, hazard
insurance premiums and mortgage insurance premiums as they become due.
The Bank encounters certain environmental risks in its lending
activities. Under federal and state environmental laws, lenders may become
liable for costs of cleaning up hazardous materials found on secured
properties. Certain states may also impose liens with higher priorities
10
than first mortgages on properties to recover funds used in such efforts.
Although the foregoing environmental risks are more usually associated with
industrial and commercial loans, environmental risks may be substantial for
residential lenders, like the Bank, since environmental contamination may
render the secured property unsuitable for residential use. In addition, the
value of residential properties may become substantially diminished by
contamination of nearby properties. In accordance with the guidelines of
FNMA and FHLMC, appraisals for single-family homes on which the Bank lends
include comments on environmental influences and conditions. The Bank
attempts to control its exposure to environmental risks with respect to loans
secured by larger properties by monitoring available information on hazardous
waste disposal sites and requiring environmental inspections of such
properties prior to closing the loan. No assurance can be given, however,
that the value of properties securing loans in the Bank's portfolio will not
be adversely affected by the presence of hazardous materials or that future
changes in federal or state laws will not increase the Bank's exposure to
liability for environmental cleanup.
The Bank has been actively involved in the secondary market since the
mid-1980s and generally originates single-family residential loans under
terms, conditions and documentation which permit sale to FHLMC, FNMA and
other investors in the secondary market, such as WHEDA, the Wisconsin
Department of Veterans Affairs and other financial institutions. The Bank
sells substantially all of the fixed-rate, single-family residential loans
with terms over 15 years it originates in order to decrease the amount of
such loans in its loan portfolio, as well as all of the FHA and VA loans
originated. The Bank's sales are usually made through forward sales
commitments. The Bank attempts to limit any interest rate risk created by
forward commitments by limiting the number of days between the commitment and
closing, charging fees for commitments, and limiting the amounts of its
uncovered commitments at any one time. Forward commitments to cover closed
loans and loans with rate locks to customers range from 70% to 90% of
committed amounts. The Bank also periodically has used its loans to
securitize mortgage-backed securities.
The Bank generally continues to collect payments on conventional loans
which it sells to others as they become due, to inspect the security
property, to make certain insurance and tax advances on behalf of borrowers
and to otherwise service such loans. The Bank recognizes a servicing fee
when the related loan payments are received. At March 31, 1996, the Bank was
servicing $874.1 million of loans for others. The Bank sells all of the
FHA/VA loans originated by it on a servicing-released basis.
Although the Bank purchased larger multi-family residential and
commercial real estate loans secured by properties located outside of its
market area during the early to mid-1980s in order to obtain assets with
higher yields and shorter maturities than are generally provided by
single-family residential loans, the Bank in more recent years generally has
not been an active purchaser of these types of loans because of sufficient
loan demand in its market area. The Bank has been involved in the purchase of
certain loans and participations (the majority secured by single-family
residences) as part of the Resolution Trust Corporation's (the "RTC")
auctions. During the year ended March 31, 1996, the Bank purchased $2.4
million of loans from the RTC, which was net of $245,600 in loan discount.
Servicing of loans or loan participations purchased
11
by the Bank generally is performed by the seller, with a portion of the
interest being paid by the borrower retained by the seller to cover servicing
costs. At March 31, 1996, approximately $30.1 million of mortgage loans were
being serviced for the Bank by others.
The following table shows the Corporation's consolidated total loans
originated, purchased, sold and repaid during the periods indicated.
Year Ended March 31,
--------------------------------
1996 1995 1994
---- ---- ----
(In Thousands)
Gross loans receivable at beginning of year(1) $1,285,903 $1,136,253 $1,002,803
Loans originated for investment(2):
Single-family residential 159,525 152,781 263,804
Multi-family residential 15,792 14,419 26,264
Commercial real estate 38,440 19,780 42,211
Construction and land 116,556 102,123 65,717
Consumer 141,820 114,825 91,634
Commercial business 23,913 11,094 11,369
---------- ---------- ----------
Total originations 496,046 415,022 500,999
---------- ---------- ----------
Loans purchased for investment:
Single-family residential 2,480 9,173 210
Multi-family residential 4,500 252 --
Commercial real estate 939 1,440 596
American Equity purchase 85,244 -- --
---------- ---------- ----------
Total purchases 93,163 10,865 806
---------- ---------- ----------
Total originations and purchases 589,209 425,887 501,805
Repayments (338,847) (249,619) (361,500)
Transfers of loans to held for sale (99,345) (13,040) --
---------- ---------- ----------
Net activity in loans held for investment 151,017 163,228 140,305
---------- ---------- ----------
Loans originated for sale(2):
Single-family residential 180,055 81,711 411,945
American Equity purchase 5,969 -- --
Transfers of loans from held for investment 99,345 13,040 --
Sales of loans (177,593) (108,329) (403,704)
Loans converted into mortgage-backed securities (96,772) -- (15,096)
---------- ---------- ----------
Net activity in loans held for sale 11,004 (13,578) (6,855)
---------- ---------- ----------
Gross loans receivable at end of year(1) $1,447,924 $1,285,903 $1,136,253
---------- ---------- ----------
---------- ---------- ----------
- ------------------------
(1) Includes loans held for sale and loans held for investment.
(2) Refinancings of loans held in the Corporation's consolidated loan portfolio
amounted to $99.1 million, $27.4 million and $359.6 million during the
years ended March 31, 1996, 1995 and 1994, respectively.
12
DELINQUENCY PROCEDURES. Delinquent and problem loans are a normal part
of any lending business. When a borrower fails to make a required payment by
the 15th day after which the payment is due, the loan is considered
delinquent and internal collection procedures generally are instituted. The
borrower is contacted to determine the reason for the delinquency and
attempts are made to cure the loan. In most cases, deficiencies are cured
promptly. The Bank regularly reviews the loan status, the condition of the
property, and circumstances of the borrower. Based upon the results of its
review, the Bank may negotiate and accept a repayment program with the
borrower, accept a voluntary deed in lieu of foreclosure or, when deemed
necessary, initiate foreclosure proceedings.
A decision as to whether and when to initiate foreclosure proceedings is
based upon such factors as the amount of the outstanding loan in relation to
the original indebtedness, the extent of delinquency and the borrower's
ability and willingness to cooperate in curing the deficiencies. If
foreclosed on, the property is sold at a public sale and the Bank will
generally bid an amount reasonably equivalent to the lower of the fair value
of the foreclosed property or the amount of judgment due the Bank. A
judgment of foreclosure for residential mortgage loans will normally provide
for the recovery of all sums advanced by the mortgagee including, but not
limited to, insurance, repairs, taxes, appraisals, post-judgment interest,
attorneys' fees, costs and disbursements.
Real estate acquired as a result of foreclosure or by deed in lieu of
foreclosure is classified as foreclosed property until it is sold. When
property is acquired, it is carried at the lower of carrying or estimated
fair value at the date of acquisition, with charge-offs, if any, charged to
the allowance for loan losses prior to transfer to foreclosed property. Upon
acquisition, all costs incurred in maintaining the property are expensed.
Costs relating to the development and improvement of the property, however,
are capitalized to the extent of fair value. Remaining gain or loss on the
ultimate disposal of the property is included in operations.
LOAN DELINQUENCIES. Loans are placed on non-accrual status when, in the
judgment of management, the probability of collection of interest is deemed
to be insufficient to warrant further accrual. When a loan is placed on
non-accrual status, previously accrued but unpaid interest is deducted from
interest income. As a matter of policy, the Bank does not accrue interest on
loans past due more than 90 days.
The interest income that would have been recorded during fiscal 1996 if
the Corporation's non-accrual loans at the end of the period had been current
in accordance with their terms during the period was $153,000. The amount of
interest income which was attributable to these loans and included in
interest income during fiscal 1996 was $35,000.
13
The following table sets forth information relating to delinquent loans
of the Corporation and their relation to the Corporation's total loans held
for investment at the dates indicated.
March 31,
---------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
% Of % Of % Of
Total Total Total
Days Past Due Balance Loans Balance Loans Balance Loans
- ------------- ------- ----- ------- ----- ------- -----
(Dollars In Thousands)
30 to 59 days $5,776 0.40% $2,696 0.21% $ 8,258 0.74%
60 to 89 days 789 0.06 1,099 0.09 884 0.08
90 days and over 1,890 0.13 2,493 0.19 2,464 0.22
------ ---- ------ ---- ------- ----
Total $8,455 0.59% $6,288 0.49% $11,606 1.04%
------ ---- ------ ---- ------- ----
------ ---- ------ ---- ------- ----
There were no non-accrual loans with a carrying value of $1.0 million or
more at March 31, 1996. For additional discussion of the Corporation's asset
quality, see Management's Discussion - Financial Condition Non-Performing
Assets in the Corporation's Annual Report to Stockholders, filed as an
exhibit hereto. See also Notes 1 and 5 to the Consolidated Financial
Statements.
FORECLOSED PROPERTIES. Set forth below is a brief description of the
Corporation's foreclosed property which had a net carrying value of $1.0
million or more at March 31, 1996.
HOTEL AND OFFICE BUILDING, GARDEN GROVE, CALIFORNIA. At March 31, 1996,
the Corporation's foreclosed properties included a participation interest in
a first mortgage loan secured by a hotel and office building complex located
in Garden Grove, California. The Corporation's share of the loan amounted to
$3.4 million at March 31, 1996. The owners filed for bankruptcy and the Bank
is awaiting a proposed repayment plan.
APARTMENT COMPLEX, ELM GROVE, WISCONSIN. At March 31, 1996, the
Corporation's foreclosed properties also included a $2.2 million loan which
is secured by an apartment complex in Elm Grove, Wisconsin. Phase I studies
of the environmental impact indicated a need for a Phase II study based on
the history of the property which the Bank is pursuing. The Bank believes
any cleanup needed will be partially reimbursed by the Petroleum
Environmental Cleanup Fund, although there can be no assurance in this
regard. The Bank also believes that in the event of any remaining
environmental cleanup liability that it will pursue reimbursement from the
adjoining land owner, which is believed to have caused the contamination. As
a result, the Bank does not anticipate incurring any cost at this time.
CLASSIFIED ASSETS. OTS regulations require that each insured savings
institution classify its assets on a regular basis. In addition, in
connection with examinations of insured associations, OTS examiners have
authority to identify problem assets and, if appropriate, require them to be
classified. There are three classifications for problem assets:
"substandard," "doubtful" and "loss." Substandard assets have one or
more defined weaknesses and are characterized by the
14
distinct possibility that the insured institution will sustain some loss if
the deficiencies are not corrected. Doubtful assets have the weaknesses of
substandard assets with the additional characteristic that the weaknesses
make collection or liquidation in full highly questionable and improbable, on
the basis of currently existing facts, conditions, and values. An asset
classified loss is considered uncollectible and of such little value that
continuance as an asset of the institution is not warranted. Another
category designated special mention also must be established and maintained
for assets which do not currently expose an insured institution to a
sufficient degree of risk to warrant classification as substandard, doubtful
or loss but do possess credit deficiencies or potential weaknesses deserving
management's close attention.
Assets classified as substandard or doubtful require the institution to
establish general allowances for loan losses. If an asset or portion thereof
is classified loss, the insured institution must either establish specific
allowances for loan losses in the amount of 100% of the portion of the asset
classified loss or charge off such amount.
Classified assets include non-performing assets plus other loans and
assets, including contingent liabilities, meeting the criteria for
classification. Non-performing assets include loans and foreclosed
properties which are not performing under all material contractual terms of
the original notes.
As of March 31, 1996, the Bank's classified assets consisted of $12.6
million of loans and foreclosed properties classified as substandard, net of
specific reserves, and no loans classified as special mention, doubtful or
loss. At March 31, 1995, substandard assets amounted to $16.0 million and no
loans were classified as special mention, doubtful or loss.
ALLOWANCE FOR LOSSES. A provision for losses on loans and foreclosed
properties is provided when a loss is probable and can be reasonably
estimated. The allowance is established by charges against operations in the
period in which those losses are identified.
The Bank establishes general allowances based on the amount and types of
loans in its loan portfolio and the amount of its classified assets. In
addition the Bank monitors and uses standards for these allowances which
depend on the nature of the classification and loan and location of the
security property.
Additional discussion on the allowance for losses at March 31, 1996 has
been presented as part of the discussion of Allowance for Loan and
Foreclosure Losses in Management's Discussion, which is contained in the
Corporation's Annual Report to Stockholders, filed as an exhibit hereto.
SECURITIES - GENERAL
Management determines the appropriate classification of securities at
the time of purchase. Securities are classified as held to maturity when the
Corporation has the intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.
15
Securities are classified as trading when the Corporation actively buys and
sells securities in order to make a profit. Trading securities are carried
at fair value, with unrealized holding gains and losses included in the
income statement.
Securities not classified as held to maturity or trading are classified
as available for sale. Available-for-sale securities are stated at fair
value, with the unrealized gains and losses, net of tax, reported as a
separate component of stockholders' equity. At March 31, 1996 and 1995
balances of stockholders' equity were reduced by $82,000 and $458,000 (net of
$55,000 and $305,000 in deferred income taxes), respectively, to reflect the
change in net unrealized loss on holding securities classified as available
for sale. There were no securities designated as trading during the three
years ending March 31, 1996.
In October 1995, the Financial Accounting Standards Board ("FASB")
approved a modification of Statement of Financial Accounting Standards
("SFAS") No. 115, wherein from November 15, 1995 through December 31, 1995,
the Corporation had the opportunity to reconsider its classifications of
investment and mortgage-related securities as held to maturity, trading, or
available for sale. Accordingly, the Corporation chose to reclassify certain
mortgage-backed securities from held to maturity to available for sale. At
the date of transfer, the amortized cost of the mortgage-backed securities
was $90.4 million. The unrealized gain on those securities was $684,000,
which is included in stockholders' equity net of income tax effect of
$274,000.
MORTGAGE-RELATED SECURITIES
The Corporation purchases mortgage-related securities to supplement loan
production and to provide collateral for borrowings. The Corporation invests
in mortgage-backed securities which are insured or guaranteed by FHLMC, FNMA,
or the Government National Mortgage Association ("GNMA") and in
mortgage-derivative securities backed by FHLMC, FNMA and GNMA mortgage-backed
securities.
At March 31, 1996, the amortized cost of the Corporation's
mortgage-backed securities held to maturity amounted to $83.0 million and
included $65.2 million, $13.3 million and $4.5 million which are insured or
guaranteed by FHLMC, FNMA and GNMA, respectively. The GNMA securities are
the only adjustable-rate securities included in securities held to maturity.
The fair value of the Corporation's mortgage-backed securities available
for sale amounted to $103.0 million at March 31, 1996, of which $18.3 million
are five- and seven-year balloon securities, $81.4 million are 15- and
30-year securities and $3.3 million are adjustable-rate securities.
Mortgage-backed securities increase the quality of the Corporation's
assets by virtue of the insurance or guarantees of federal agencies that back
them, require less capital under risk-based regulatory capital requirements
than non-insured or guaranteed mortgage loans, are more liquid than
individual mortgage loans and may be used to collateralize borrowings or
other
16
obligations of the Corporation. At March 31, 1996, $78.7 million of the
Corporation's mortgage-backed securities available for sale were pledged to
secure various obligations of the Bank.
The following table sets forth the activity in the Corporation's
mortgage-backed securities during the periods indicated.
Year Ended March 31,
----------------------------
1996 1995 1994
-------- -------- --------
(In Thousands)
Mortgage-backed securities at
beginning of year (1) $123,358 $145,687 $200,474
Held to maturity:
Purchases 3,025 8,355 33,758
Transfers to available for sale (90,376) -- --
Available for sale:
Purchases 5,531 2,497 12,282
Acquired in exchange of loans 96,772 -- 15,096
Transfers from held to maturity 90,376 -- --
Sales (9,107) (888) (31,730)
Repayments and other (33,574) (32,293) (84,193)
-------- -------- --------
Mortgage-backed securities at
end of year (1) $186,005 $123,358 $145,687
-------- -------- --------
-------- -------- --------
- ------------------------
(1) Includes mortgage-backed securities held to maturity and available for sale
and does not include mortgage-derivative securities, discussed below.
Management believes that certain mortgage-derivative securities
represent an attractive alternative relative to other investments due to the
wide variety of maturity and repayment options available through such
investments and due to the limited credit risk associated with such
investments. The Bank's mortgage-derivative securities are made up of
collateralized mortgage obligations ("CMOs"), including CMOs which qualify as
Real Estate Mortgage Investment Conduits ("REMIC") under the Internal Revenue
Code of 1986, as amended ("Code") and are scheduled to mature within five
years. At March 31, 1996, the amortized cost of the Corporation's
mortgage-derivative securities held to maturity amounted to $27.7 million.
The fair value of the mortgage-derivative securities available for sale
amounted to $7.3 million at the same date.
17
The following table sets forth the maturity and weighted average yield
characteristics of the Corporation's mortgage-related securities at March 31,
1996, classified by term to maturity. The balance is at amortized cost for
held-to-maturity securities and at fair value for available-for-sale
securities.
One to Five Years Six to Ten Years Over Ten Years
------------------- ----------------- -----------------
Weighted Weighted Weighted
Average Average Average
Balance Yield Balance Yield Balance Yield Total
-------- -------- ------- -------- ------- -------- -------
(Dollars in Thousands)
Available for sale:
Mortgage-derivative securities $ 7,255 5.62% $ -- --% $ -- --% $ 7,255
Mortgage-backed securities 19,236 6.29 21,323 6.76 62,454 6.73 103,013
-------- ---- ------- ---- ------- ---- --------
26,491 6.11 21,323 6.76 62,454 6.73 110,268
-------- ---- ------- ---- ------- ---- --------
Held to maturity:
Mortgage-derivative securities 25,293 5.61 2,445 6.35 -- -- 27,738
Mortgage-backed securities 49,019 5.94 24,573 7.71 9,400 6.85 82,992
-------- ---- ------- ---- ------- ---- --------
74,312 5.83 27,018 7.59 9,400 6.85 110,730
-------- ---- ------- ---- ------- ---- --------
Mortgage-related securities $100,803 5.90% $48,341 7.22% $71,854 6.75% $220,998
-------- ---- ------- ---- ------- ---- --------
-------- ---- ------- ---- ------- ---- --------
Due to repayments of the underlying loans, the actual maturities of
mortgage-related securities are expected to be substantially less than the
scheduled maturities.
For additional information regarding the Corporation's mortgage-related
securities, see the Corporation's Consolidated Financial Statements,
including note 4 thereto.
INVESTMENT SECURITIES
In addition to lending activities and investments in mortgage-related
securities, the Corporation conducts other investment activities on an
ongoing basis in order to diversify assets, limit interest rate risk and
credit risk and meet regulatory liquidity requirements. Investment decisions
are made by authorized officers in accordance with policies established by
the respective boards of directors.
The Corporation's policy does not permit investment in non-investment
grade bonds and permits investment in various types of liquid assets
permissible for the Bank under OTS regulations, which include U.S. Government
obligations, securities of various federal agencies, certain certificates of
deposit of insured banks and savings institutions, certain bankers'
acceptances, repurchase agreements and federal funds. Subject to limitations
on investment grade securities, the Corporation also invests in corporate
debt securities from time to time.
The table on the following page sets forth information regarding the
amortized cost and fair values of the Corporation's investment securities at
the dates indicated.
18
March 31,
----------------------------------------------------------
1996 1995 1994
------------------ ------------------ ------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- ------- --------- ------- --------- -------
(In Thousands)
Available For Sale:
U.S. Government and federal
agency obligations $20,498 $20,333 $13,733 $13,347 $10,472 $10,284
Mutual funds 9,059 9,058 10,185 10,185 10,497 10,497
Corporate stock and other 791 850 -- -- -- --
------- ------- ------- ------- ------- -------
30,348 30,241 23,918 23,532 20,969 20,781
Held To Maturity:
U.S. Government and federal
agency obligations 2,500 2,503 -- -- -- --
Certificates of deposit 96 96 100 100 -- --
------- ------- ------- ------- ------- -------
2,596 2,599 100 100 -- --
------- ------- ------- ------- ------- -------
Total investment securities $32,944 $32,840 $24,018 $23,632 $20,969 $20,781
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
The following table shows the amortized cost, fair value and yield of
the Corporation's investment securities by contractual maturity at
March 31, 1996.
Available For Sale Held To Maturity
------------------------- -------------------------
Amortized Fair Amortized Fair
Cost Value Yield Cost Value Yield
--------- ------- ----- --------- ------- -----
Due in one year or less $ 9,059 $ 9,058 5.42% $ 96 $ 96 6.08%
Due after one year through five years 20,598 20,433 5.96 2,500 2,503 6.66
Corporate stock 691 750 -- -- -- --
-------- ------- ------ ------
$30,348 $30,241 $2,596 $2,599
-------- ------- ------ ------
-------- ------- ------ ------
For additional information regarding the Corporation's securities, see
the Corporation's Consolidated Financial Statements, including Note 3 thereto.
The Bank is required by the OTS to maintain liquid assets at minimum
levels which vary from time to time and which amounted to 5.0% at March 31,
1996. The Bank's liquidity ratio was 11.3% as of March 31, 1996.
SOURCES OF FUNDS
GENERAL. Deposits are a major source of the Bank's funds for lending
and other investment activities. In addition to deposits, the Bank derives
funds from loan and mortgage-related securities principal repayments and
prepayments, maturities of investment securities, sales of loans and
securities, interest payments on loans and securities, advances from the FHLB
and, from time to time, repurchase agreements and other borrowings. Loan
repayments and interest payments are a relatively stable source of funds,
while deposit inflows
19
and outflows and loan prepayments are significantly influenced by general
interest rates, economic conditions and competition. Borrowings may be used
on a short-term basis to compensate for reductions in the availability of
funds from other sources. They also may be used on a longer term basis for
general business purposes, including providing financing for lending and
other investment activities and asset/liability management strategies.
DEPOSITS. The Bank's deposit products include passbook savings
accounts, demand accounts, NOW accounts, money market deposit accounts and
certificates of deposit ranging in terms of 42 days to seven years. Included
among these deposit products are Individual Retirement Account certificates
and Keogh retirement certificates, as well as negotiable-rate certificates of
deposit with balances of $100,000 or more ("jumbo certificates").
The Bank's deposits are obtained primarily from residents of Wisconsin.
The Bank has entered into agreements with certain brokers which will provide
funds for a specified fee. At March 31, 1996, the Bank had $20.5 million in
brokered deposits.
The Bank attracts deposits through a network of convenient office
locations by utilizing a detailed customer sales and service plan and by
offering a wide variety of accounts and services, competitive interest rates
and convenient customer hours. Deposit terms offered by the Bank vary
according to the minimum balance required, the time period the funds must
remain on deposit and the interest rate, among other factors. In determining
the characteristics of its deposit accounts, consideration is given to the
profitability to the Bank, matching terms of the deposits with loan products,
the attractiveness to customers and the rates offered by the Bank's
competitors.
The following table sets forth the activity in the Corporation's
deposits during the periods indicated.
Year Ended March 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(In Thousands)
Beginning balance $1,092,120 $1,061,262 $1,057,678
Net increase (decrease) before interest credited 29,041 (3,482) (33,089)
Interest credited 48,914 34,340 36,673
Purchase of American Equity 64,803 -- --
---------- ---------- ----------
Net increase in deposits 142,758 30,858 3,584
---------- ---------- ----------
Ending balance $1,234,878 $1,092,120 $1,061,262
---------- ---------- ----------
---------- ---------- ----------
20
The following table sets forth the amount and maturities of the
Corporation's certificates of deposit at March 31, 1996.
Over Six Over Over Two
Months One Year Years Over
Six Months Through Through Through Three
Interest Rate and Less One Year Two Years Three Years Years Total
- ------------- -------- -------- --------- ----------- ----- -----
(In Thousands)
3.00% to 4.99% $102,901 $ 7,682 $ 1,448 $ 236 $ 100 $122,367
5.00% to 6.99% 182,963 265,009 196,229 33,039 28,705 705,945
7.00% to 8.99% 4,871 3,331 8,856 36 405 17,499
-------- -------- -------- ------- ------- --------
$290,735 $286,022 $206,533 $33,311 $29,210 $845,811
-------- -------- -------- ------- ------- --------
-------- -------- -------- ------- ------- --------
At March 31, 1996, the Corporation had $68.5 million of jumbo
certificates, of which $11.6 million are scheduled to mature within three
months, $7.3 million in over three months through six months, $38.5 million
in over six months through 12 months and $11.1 million in over 12 months.
BORROWINGS. From time to time the Bank obtains advances from the FHLB,
which generally are secured by capital stock of the FHLB required to be held
by the Bank and by certain of the Bank's mortgage loans. See "Regulation."
Such advances are made pursuant to several different credit programs, each
of which has its own interest rate and range of maturities. The FHLB may
prescribe the acceptable uses for these advances, as well as limitations on
the size of the advances and repayment provisions.
From time to time the Bank enters into repurchase agreements with
nationally recognized primary securities dealers. Repurchase agreements are
accounted for as borrowings by the Bank and are secured by mortgage-backed
securities. The Bank has utilized this source of funds during the year ended
March 31, 1996 and may continue to do so in the future.
The Corporation has a short-term loan payable obtained for a specific
investment purpose. The loan is payable in quarterly installments, with
interest at the lender's prime rate payable monthly. ADPC II has a mortgage
on the multi-family property it owns. Principal and interest payments are
due monthly, with the final payment due in October 2005. See Note 9 to the
Corporation's Consolidated Financial Statements for more information on
borrowings.
21
The following table sets forth the outstanding balance and weighted
average interest rate for the Corporation's borrowings (short-term and
long-term) at the dates indicated.
March 31,
--------------------------------------------------------
1996 1995 1994
------------------ ------------------ ----------------
Weighted Weighted Weighted
Average Average Average
Balance Rate Balance Rate Balance Rate
------- -------- ------- --------- ------- -------
(Dollars In Thousands)
FHLB advances $316,869 5.69% $274,500 5.71% $186,750 4.72%
Repurchase agreements 47,582 5.32 5,600 6.72 -- --
Other loans payable 7,031 9.94 -- -- -- --
The following table sets forth information relating to the Corporation's
short-term (maturities of one year or less) borrowings at the dates and for
the periods indicated.
March 31,
------------------------------------------
1996 1995 1994
---- ---- ----
(In Thousands)
Maximum month-end balance:
FHLB advances $177,500 $152,000 $69,750
Repurchase agreements 72,850 5,600 --
Other loans payable 5,998 -- --
Average balance:
FHLB advances 161,939 95,832 48,769
Repurchase agreements 35,352 467 --
Other loans payable 917 -- --
SUBSIDIARIES
INVESTMENT DIRECTIONS, INC. IDI is a wholly-owned non-banking subsidiary
of the Corporation formed in February 1996, which has invested in a limited
partnership located in Austin, Texas.
ANCHOR INSURANCE SERVICES, INC. AIS is a wholly-owned subsidiary of the
Bank which offers a full line of insurance products, securities and annuities
to its customers and members of the general public. For the year ended March
31, 1996, AIS had a net loss of $30. The Bank's investment in AIS amounted
to $139,000 at March 31, 1996.
ADPC II, LLC. ADPC II is a wholly-owned subsidiary of the Bank (99%
ownership) and ADPC (1% ownership) formed in September 1995, which is engaged
in the improvement and management of a multi-family property. This former
foreclosed property was acquired from ADPC as a result of the reorganization
plan from the bankruptcy proceedings. ADPC II obtained a $2.0 million loan
from the Bank for renovations, all of which has now been sold to private
22
investors in the secondary market. The Bank's investment in ADPC II at March
31, 1996 amounted to $1.6 million. ADPC II had a net loss of $74,000 for the
year ended March 31, 1996.
ADPC CORPORATION. ADPC is a wholly-owned subsidiary of the Bank which
was engaged in the development of land in Arizona into saleable single-family
lots. The development of land and sale of lots was completed during fiscal
year 1996. ADPC also sold its multi-family foreclosed property to ADPC II.
The Bank's investment in ADPC at March 31, 1996 amounted to $528,000. ADPC
had net income of $215,000 for the year ended March 31, 1996.
ANCHOR INVESTMENT CORPORATION. AIC is an operating subsidiary of the
Bank which was incorporated in March 1993. AIC, which is located in the
State of Nevada, was formed for the purpose of managing a portion of the
Bank's investment portfolio (primarily mortgage-backed securities). As an
operating subsidiary, AIC's results of operations are combined with the
Bank's for financial and regulatory purposes. The Bank's investment in AIC
amounted to $140.2 million at March 31, 1996. AIC had net income of $6.1
million for the year ended March 31, 1996. The Bank had outstanding notes to
AIC of $24.0 million at March 31, 1996, with a weighted average rate of 8.56%
and maturities during the next six months.
ANCHOR FINANCIAL CORP. AFC is a wholly-owned subsidiary of the Bank
which is engaged primarily in nationwide leasing and financing activities.
AFC ceased originating new leases in 1991 because of the relatively poor
payment experience of a portion of its lease portfolio and is presently
winding down its operations. For the year ended March 31, 1996, AFC had net
income of $102,000. The Bank's investment in AFC amounted to $265,000 at
March 31, 1996.
EMPLOYEES
The Bank had 499 full-time employees and 161 part-time employees at March
31, 1996. The Bank promotes equal employment opportunity and considers its
relationship with its employees to be good. The employees are not
represented by a collective bargaining unit.
23
REGULATION
Set forth below is a brief description of certain laws and regulations
which relate to the regulation of the Corporation and the Bank. The
description of these laws and regulations, as well as descriptions of laws
and regulations contained elsewhere herein, does not purport to be complete
and is qualified in its entirety by reference to applicable laws and
regulations.
From time to time there are changes in applicable laws and regulations.
In 1995, there were several bills introduced in the U.S. Congress which would
affect the banking and savings industries. The Corporation currently is
unable to predict whether these proposals will be enacted into law and, if
so, any resulting impact on the Corporation or the Bank.
THE CORPORATION
The Corporation is a unitary savings and loan holding company subject to
regulatory oversight by the OTS. As such, the Corporation is required to
register and file reports with the OTS and is subject to regulation and
examination by the OTS. In addition, the OTS has enforcement authority over
the Corporation and its non-savings association subsidiaries which permits
the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings association. In addition, the
Corporation is subject to the examination and supervision by the
Commissioner. The Commissioner is authorized to prohibit by order the
activities of a savings and loan holding company which, among other things,
the Commissioner feels endangers the safety of the savings and loan
association or is contrary to the public interest. The Commissioner is
empowered to direct the operations of the savings and loan association and
its holding company until the order is complied with and may prohibit
dividends from the savings and loan association to its holding company during
such period.
As a unitary savings and loan holding company, the Corporation generally
is not subject to activity restrictions as long as the Bank is in compliance
with the Qualified Thrift Lender ("QTL") Test. See "Qualified Thrift
Lender Requirement."
The Corporation must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Interstate acquisitions
generally are permitted based on specific state authorization or in a
supervisory acquisition of a failing savings association.
24
THE BANK
The Bank is a state chartered savings institution, the deposits of which
are federally insured and backed by the full faith and credit of the United
States Government. Accordingly, the Bank is subject to broad state and
federal regulation and oversight by the OTS and the FDIC extending to all
aspects of its operations. The Bank is a member of the FHLB of Chicago and
is subject to certain limited regulation by the Federal Reserve Board. The
Bank is a member of the Savings Association Insurance Fund ("SAIF") and the
deposits of the Bank are insured by the FDIC. As a Wisconsin-chartered
institution, the Bank is also subject to regulation, examination and
supervision by the Commissioner.
FEDERAL AND STATE REGULATION OF SAVINGS ASSOCIATIONS. The OTS has
extensive authority over the operations of all insured savings associations.
In addition, the Bank is subject to regulation and supervision by the
Commissioner. As part of this authority, the Bank is required to file
periodic reports with the OTS and the Commissioner and is subject to periodic
examinations by the OTS, the Commissioner and the FDIC. Examinations by the
Commissioner are usually conducted jointly with the OTS. When these
examinations are conducted by the OTS, the Commissioner or the FDIC, the
examiners may require the Bank to provide for higher general or specific loan
loss allowances. The last regular joint examination of the Bank by the OTS
and the Commissioner was as of February 29, 1996. The FDIC was included in a
joint examination as of November 30, 1992.
The OTS has established a schedule for the assessment of fees upon all
savings associations to fund the operations of the OTS. A schedule of fees
has also been established for the various types of applications and filings
made by savings associations with the OTS. The general assessment, to be
paid on a semi-annual basis, is computed upon the savings association's total
assets, including consolidated subsidiaries, as reported in the association's
latest quarterly thrift financial report. Savings associations that (unlike
the Bank) are classified as "troubled" (i.e., having a supervisory rating
of "4" or "5" or subject to a conservatorship) are required to pay a 50%
premium over the standard assessment. The Bank's semi-annual OTS assessment
for the six months ending June 30, 1996 was $147,000.
Wisconsin-chartered institutions are also required to pay an annual state
assessment. Under Wisconsin law, the fee cannot exceed 12 cents per $1,000
of assets or fraction thereof, as of the close of the preceding calendar
year. In addition to an annual fee, each Wisconsin-chartered institution is
subject to examination fees. The Bank's assessment for the year ending June
30, 1996 was $68,000.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including the Bank and the
Corporation, and their affiliated parties such as directors, officers,
employees, agents and certain other persons providing services to the Bank or
the Corporation. This enforcement authority includes, among other things,
the ability to assess civil money penalties, to issue cease-and-desist or
removal orders and to initiate injunctive actions. In general, these
enforcement actions may be initiated for violations of laws and
25
regulations and unsafe or unsound practices. Other actions or inactions may
provide the basis for enforcement action, including misleading or untimely
reports filed with the OTS. Except under certain circumstances, public
disclosure of final enforcement actions by the OTS is required. The
Commissioner has similar enforcement authority over the Bank and the
Corporation.
In addition, the investment and lending authority of the Bank is
prescribed by federal and state laws and regulations, and the Bank is
prohibited from engaging in any activities not permitted by such laws and
regulations. The Bank is in compliance with each of these restrictions.
The Bank's permissible loans-to-one-borrower lending limit under federal
law is to the greater of $500,000 or 15% of unimpaired capital and surplus
(except for loans fully secured by certain readily marketable collateral, in
which case this limit is increased to 25% of unimpaired capital and surplus).
At March 31, 1996, the Bank had no loans to one borrower which exceeded the
15% or $16.2 million limitation. A broader limitation (the lesser of $30
million or 30% of unimpaired capital and surplus) is provided, under certain
circumstances and subject to OTS approval, for loans to develop domestic
residential housing units. In addition, the Bank may provide purchase money
financing for the sale of any asset without regard to the
loans-to-one-borrower limitation so long as no new funds are advanced and the
Bank is not placed in a more detrimental position than if it had held the
asset. Under Wisconsin law, the aggregate amount of loans that an
association may make to any one borrower may not exceed 5% of the aggregate
of an association's mortgage, consumer and commercial assets, except as
otherwise authorized by the Commissioner. The Bank is in compliance with
these loans-to-one-borrower limitations.
INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC. The Bank is a member
of the SAIF, which along with the Bank Insurance Fund ("BIF"), is one of
the two insurance funds administered by the FDIC. Savings deposits are
insured up to $100,000 per insured member (as defined by law and regulation)
by the FDIC and such insurance is backed by the full faith and credit of the
United States Government. As insurer, the FDIC imposes deposit insurance
premiums and 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 risk to the FDIC. The FDIC also has
the authority to initiate enforcement actions against savings associations,
after giving the OTS an opportunity to take such action, and may terminate
the deposit insurance if it determines that the institution has engaged, or
is engaging in, unsafe or unsound practices, or is in an unsafe or unsound
condition.
The annual assessment for SAIF members for deposit insurance for the
period from January 1, 1991 through December 31, 1992 was equal to .23% of
insured deposits, which was payable on a semi-annual basis. Recent
legislation eliminated limitations in increases in federal deposit insurance
premiums and authorized the FDIC to increase the assessment rates to the
extent necessary to protect the SAIF (as well as the BIF). Under current
FDIC regulations,
26
institutions are assigned to one of three capital groups which are based
solely on the level of an institution's capital - "well capitalized,"
"adequately capitalized," and "undercapitalized" - which are defined in
the same manner as the regulations establishing the prompt corrective action
system under Section 38 of the FDIA. These three groups are then divided
into three subgroups which reflect varying levels of supervisory concern,
from those which are considered to be healthy to those which are considered
to be of substantial supervisory concern. The matrix so created results in
nine assessment risk classifications, with rates ranging from .23% for well
capitalized, healthy institutions to .31% for undercapitalized institutions
with substantial supervisory concerns. As of March 31, 1996, the insurance
premiums for the Bank amounted to .23% of insured deposits.
Both the SAIF and the BIF are required by law to attain and thereafter
maintain a reserve ratio of 1.25% of insured deposits. The BIF has achieved
the required reserve ratio, and, as discussed below, the FDIC recently
substantially reduced the average deposit insurance premium paid by
BIF-insured banks to a level substantially below the average premium paid by
savings institutions.
On November 14, 1995, the FDIC approved a final rule regarding deposit
insurance premiums. The final rule reduced deposit insurance premiums for
BIF member institutions to zero basis points (subject to a $2,000 minimum)
for institutions in the lowest risk category, while holding deposit insurance
premiums for SAIF members at their current levels (23 basis points for
institutions in the lowest risk category). The reduction was effective with
respect to the semiannual premium assessment beginning January 1, 1996.
Accordingly, in the absence of further legislative action, SAIF members such
as the Bank will be competitively disadvantaged as compared to commercial
banks by the resulting premium differential.
Recently, the U.S. House of Representatives and U.S. Senate have actively
considered legislation which would eliminate the premium differential between
SAIF-insured institutions and BIF-insured institutions by recapitalizing the
SAIF's reserves to the required ratio. For additional information, see Note
15 to the Consolidated Financial Statements included in Item 15 hereof.
FDIC regulations govern the acceptance of brokered deposits by insured
depository institutions. The capital position of an institution determines
whether and with what limitations an institution may accept brokered
deposits. A "well capitalized" institution (one that significantly exceeds
specified capital ratios) may accept brokered deposits without restriction.
"Undercapitalized" institutions (those that fail to meet minimum regulatory
capital requirements) may not accept brokered deposits and "adequately
capitalized" institutions (those that are not "well capitalized" or
"undercapitalized") may only accept such deposits with the consent of the
FDIC. The Bank meets the definition of a "well capitalized" institution and
therefore may accept brokered deposits without restriction. At March 31,
1996, the Bank had $20.5 million in brokered deposits.
27
REGULATORY CAPITAL REQUIREMENTS. Federally insured savings associations,
such as the Bank, are required to maintain a minimum level of regulatory
capital. The OTS has established capital standards, including a tangible
capital requirement, a core capital requirement and a risk-based capital
requirement applicable to such savings associations. FIRREA mandated that
these capital requirements be generally as stringent as the comparable
capital requirements for national banks. The OTS is also authorized to
impose capital requirements in excess of these standards on individual
associations on a case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained earnings, and certain
noncumulative perpetual preferred stock and related surplus and minority
interest in the equity accounts of fully consolidated subsidiaries. In
addition, all intangible assets, other than a limited amount of purchased
mortgage servicing rights (in no event exceeding the amount of tangible
capital), must be deducted from tangible capital.
The capital standards require core capital equal to at least 3% of
adjusted total assets (as defined by regulation). Core capital generally
consists of tangible capital plus up to 25% of certain other intangibles
which meet certain separate salability and market valuation tests. The OTS
has issued notice of a proposed regulation that would require all but the
most highly rated savings institutions to maintain a minimum core capital
ratio of between 4% and 5%. The Bank had a ratio of core capital to total
assets of 6.10% at March 31, 1996.
The OTS risk-based capital requirement requires savings associations to
have total capital of at least 8% of risk-weighted assets. Total capital,
for purposes of the risk-based capital requirement, equals the sum of core
capital plus supplementary capital (which, as defined, includes the sum of,
among other items, certain permanent and maturing capital instruments that do
not qualify as core capital and general loan and lease loss allowances up to
1.25% of risk-weighted assets) less certain deductions. The amount of
supplementary capital that may be used to satisfy the risk-based requirement
is limited to the extent of core capital, and OTS regulations require the
maintenance of a minimum ratio of core capital to total risk-weighted assets
of 4.0%. At March 31, 1996, the Bank met all capital requirements on a fully
phased-in basis. (See Note 10 to the Corporation's Consolidated Financial
Statements, which is incorporated herein by reference.) In determining the
amount of risk-weighted assets, all assets, including certain off-balance
sheet items, are multiplied by a risk-weight based on the risks inherent in
the type of assets as determined by the OTS.
In August 1993, the OTS adopted a final rule incorporating an interest
rate risk component into the risk-based capital regulation. Under the rule,
an institution with a greater than "normal" level of interest rate risk is
subject to a deduction of its interest rate risk component from total capital
for purposes of calculating the risk-based capital requirement. As a result,
such an institution is required to maintain additional capital in order to
comply with the risk-based capital requirement. An institution with a
greater than normal interest rate risk is defined as an institution that
would suffer a loss of net portfolio value exceeding 2.0% of the estimated
market value of its assets in the event of a 200 basis point increase or
decrease (with
28
certain minor exceptions) in interest rates. The interest rate risk
component is calculated, on a quarterly basis, as one-half of the difference
between an institution's measured interest rate risk and the market value of
its assets multiplied by 2.0%. The final rule is effective as of January 1,
1994, subject however, to a two quarter "lag" time between the reporting
date of the data used to calculate an institution's interest rate risk and
the effective date of each quarter's interest rate risk component. Thus, an
institution with greater than normal risk would not have been subject to any
deduction from total capital until July 1, 1994 (based on the calculation of
the interest rate risk component using data as of December 31, 1993).
However, in October 1994, the Director of the OTS indicated that it would
waive the capital deductions for institutions with a greater than "normal"
risk until the OTS publishes an appeal process. In August 1995, the OTS
issued Thrift Bulletin No. 67 which allows eligible institutions to request
an adjustment to their interest rate risk component as calculated by the OTS,
or to request to use their own models to calculate their interest rate
component. The OTS also indicated that it will delay invoking its interest
rate risk rule requiring institutions with above normal interest rate risk
exposure to adjust their regulatory capital requirement until new procedures
are implemented and evaluated. The OTS has not yet established an effective
date for the capital deduction. Management does not believe that the OTS'
adoption of an interest rate risk component to the risk-based capital
requirement will have a material effect on the Bank.
Under current OTS policy, savings associations must value securities
available for sale at amortized cost for regulatory purposes. This means
that in computing regulatory capital, savings associations add back any
unrealized losses and deduct any unrealized gains, net of income taxes, on
securities reported as a separate component to stockholders' equity under
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against any association that fails to meet
its capital requirements (an "undercapitalized association"). The OTS may
grant to an undercapitalized association an exemption from the various
sanctions or penalties for failure to meet its capital requirements (other
than appointment of a conservator or receiver and the mandatory growth
restrictions) through the association's submission of and compliance with an
approved capital plan. If the plan is not approved, the association
generally will be prohibited from making capital distributions, increasing
its assets or making any loans and investments without OTS approval and must
comply with other limits imposed by the OTS.
Any undercapitalized association is also subject to possible enforcement
actions by the OTS or the FDIC. Such actions could include a capital
directive, a cease-and-desist order, civil money penalties or the
establishment of restrictions on all aspects of the association's operations.
The OTS also could impose harsher measures, such as the appointment of a
receiver or conservator or a forced merger into another institution. The
grounds for appointment of a conservator or receiver include substantially
insufficient capital and losses or likely losses that will deplete
substantially all capital with no reasonable prospect for replenishment of
capital without federal assistance.
29
Wisconsin-chartered associations are required to maintain a net worth
ratio of at least 6.0%. Under this provision, an association's "net worth
ratio" is defined as a ratio, expressed as a percentage of assets,
calculated by subtracting liabilities from assets, adding to the resulting
difference unallocated general loan loss allowances, and dividing the sum by
the association's assets. The rule authorizes the Commissioner to require an
association to maintain a higher level of net worth if the Commissioner
determines that the nature of the association's operations entails a risk
requiring greater net worth to ensure the association's stability. A failure
to comply with such requirements authorizes the Commissioner to direct the
association to adhere to a plan, which can include various operating
restrictions, in order to restore the association's net worth to required
levels. At March 31, 1996, the Bank was in compliance with this net worth
requirement with a ratio of 7.44%.
LIMITATION ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS. OTS regulations
impose various restrictions or requirements on associations with respect to
their ability to pay dividends or make other distributions of capital. OTS
regulations prohibit an association from declaring or paying any dividends or
from repurchasing any of its stock if, as a result, the regulatory (or total)
capital of the association would be reduced below the amount required to be
maintained for the liquidation account established in connection with its
mutual to stock conversion.
The OTS utilizes a three-tiered approach to permit associations, based on
their capital level and supervisory condition, to make capital distributions
which include dividends, stock redemptions or repurchases, cash-out mergers,
interest payments on certain convertible debt and other transactions charged
to the capital account. Under the rule, a savings institution is classified
as a tier 1 institution, a tier 2 institution or a tier 3 institution
depending on its level of regulatory capital both before and after giving
effect to a proposed capital distribution. A tier 1 institution (i.e., one
that both before and after a proposed capital distribution has net capital
equal to or in excess of its fully phased-in regulatory capital requirement)
may make capital distributions during any calendar year equal to 100% of its
net income for the year-to-date period plus 50% of the amount by which the
association's total capital exceeds its fully phased-in capital requirement
(the "capital surplus"), as measured at the beginning of the calendar year.
The Bank meets the requirements for a tier 1 association.
A tier 2 institution (i.e., one that both before and after a proposed
capital distribution has net capital equal to its then-applicable minimum
capital requirement) may make distributions not exceeding 75% of net income
over the most recent four-quarter period.
A tier 3 institution (i.e., one that either before or after a proposed
capital distribution fails to meet its then-applicable minimum capital
requirement) may not make any capital distributions without the prior written
approval of the OTS or the OTS may prohibit a capital distribution.
Tier 2 associations proposing to make a capital distribution within the
safe harbor provisions and tier 1 associations proposing to make any capital
distribution need only submit written notice to the OTS 30 days prior to such
distribution.
30
On December 5, 1994, the OTS published a notice of proposed rulemaking to
amend its capital distribution regulation. Under the proposal, the
"tiered" approach described above would be replaced and institutions would
be permitted to make capital distributions that would not result in their
capital being reduced below the level required to remain "adequately
capitalized," as defined in the OTS regulations. Under the proposal,
savings associations which are held by a savings and loan holding company
would continue to be required to provide advance notice of the capital
distribution to the OTS. The Bank does not believe that the proposal will
adversely affect its ability to make capital distributions if it is adopted
substantially as proposed.
Unless prior approval of the Commissioner is obtained, the Bank may not
pay a dividend or otherwise distribute any profits if it fails to maintain
its required net worth ratio either prior to, or as a result of, such
distribution.
QUALIFIED THRIFT LENDER REQUIREMENT. All savings associations, including
the Bank, are required to meet a QTL test to avoid certain restrictions on
their operations. Currently, a savings institution will be a QTL if the
savings institution's qualified thrift investments continue to equal or
exceed 65% of the institution's portfolio assets on a monthly average basis
in nine out of every 12 months. Subject to certain exceptions, qualified
thrift investments generally consist of housing related loans and investments
and certain groups of assets, such as consumer loans, to a limited extent.
The term "portfolio assets" means the savings institution's total assets
minus goodwill and other intangible assets, the value of property used by the
savings institution to conduct its business and liquid assets held by the
savings institution in an amount up to 20% of its total assets. As of March
31, 1996, the Bank was in compliance with the QTL test.
OTS regulations provide that any savings institution that fails to meet
the definition of a QTL must either convert to a bank charter, other than a
savings bank charter, or limit its future investments and activities
(including branching and payments of dividends) to those permitted for both
savings institutions and national banks. Additionally, any such savings
institution that does not convert to a bank charter will be ineligible to
receive further FHLB advances and, beginning three years after the loss of
QTL status, will be required to repay all outstanding FHLB advances and
dispose of or discontinue any preexisting investment or activities not
permitted for both savings institutions and national banks. Further, within
one year of the loss of QTL status, the holding company of a savings
institution that does not convert to a bank charter must register as a bank
holding company and will be subject to all statutes applicable to bank
holding companies.
LIQUIDITY. Under applicable federal regulations, savings institutions
are required to maintain an average daily balance of liquid assets (including
cash, certain time deposits, certain bankers' acceptances, certain corporate
debt securities and highly rated commercial paper, securities of certain
mutual funds and specified United States Government, state or federal agency
obligations) equal to a certain percentage of the sum of its average daily
balance of net withdrawable deposits plus short-term borrowings. This
liquidity requirement may be changed
31
from time to time by the Director of the OTS to any amount within the range
of 4% to 10% depending upon economic conditions and the deposit flows of
member institutions, and currently is 5%.
Savings institutions are also required to maintain an average daily
balance of short-term liquid assets at a specified percentage (currently 1%)
of the total of the average daily balance of its net withdrawable deposits
and short-term borrowings. At March 31, 1996, the Bank was in compliance
with these liquidity requirements.
TRANSACTIONS WITH AFFILIATES. Generally, transactions between a savings
association or its subsidiaries and its affiliates are required to be on
terms as favorable to the association as transactions with non-affiliates.
In addition, certain of these transactions are restricted to a percentage of
the association's capital. Affiliates of the Bank include the Corporation
and any company which is under common control with the Bank. In addition, a
savings association may not lend to any affiliate engaged in activities not
permissible for a bank holding company or acquire the securities of most
affiliates. The Bank's subsidiaries are not deemed affiliates; however, the
OTS has the discretion to treat subsidiaries of savings associations as
affiliates on a case by case basis.
FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB of
Chicago, which is one of 12 regional FHLBs, that administers the home
financing credit function of savings associations. The FHLBs provide a
central credit facility for member savings institutions. It is funded
primarily from proceeds derived from the sale of consolidated obligations of
the FHLB System. It makes loans to member (i.e., advances) in accordance
with policies and procedures established by the board of directors of the
FHLB. These policies and procedures are subject to regulation and 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.
As a member, the Bank is required to own shares of capital stock in the
FHLB of Chicago. At March 31, 1996, the Bank owned $16.0 million in FHLB
stock, which is in compliance with this requirement. The Bank has received
substantial dividends on its FHLB stock. The dividend for fiscal 1996
amounted to $1.2 million as compared to $787,000 for fiscal 1995.
The FHLBs are required to provide funds for the resolution of troubled
savings associations and 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 adversely affected 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 the Bank's FHLB stock may result in a charge to the Corporation's
earnings.
32
FEDERAL RESERVE SYSTEM. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at
specified levels against their transaction accounts (primarily checking, NOW
and Super NOW checking accounts) and non-personal time deposits. At March
31, 1996, the Bank was in compliance with these requirements. These reserves
may be used to satisfy liquidity requirements imposed by the Director of the
OTS. Because required reserves must be maintained in the form of cash or a
non-interest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce the amount of the institution's
interest-earning assets.
Savings institutions also have the authority to borrow from the Federal
Reserve "discount window." Federal Reserve Board regulations, however,
require savings institutions to exhaust all FHLB sources before borrowing
from a Federal Reserve Bank.
33
TAXATION
FEDERAL
The Corporation files a consolidated federal income tax return on behalf
of itself, the Bank and its subsidiaries on a fiscal tax year basis. Income
and expense are reported on the liability method of accounting.
Savings institutions, such as the Bank, are generally taxed in the same
manner as other corporations. Unlike other corporations, however, qualifying
savings institutions that meet certain definitional tests relating to the
composition of assets and other conditions prescribed by the Internal Revenue
Code of 1986, as amended (the "Code"), are allowed to establish a reserve for
bad debts and each tax year are permitted, within specified formula limits,
to deduct additions to that reserve. The amount of the bad debt reserve
deduction for "non-qualifying loans" is computed under the experience method.
The amount of the bad debt reserve deduction for "qualifying real property
loans" (generally loans secured by improved real estate) may be computed
under either the experience method or the percentage of taxable income method
(based on an annual election).
Under the experience method, the bad debt reserve deduction is an amount
determined under a formula based generally upon the bad debts actually
sustained by the savings association over a period of years.
The percentage of specially computed taxable income that is used to
compute a savings association's bad debt reserve deduction under the
percentage of taxable income method (the "percentage bad debt deduction") is
8%. The percentage bad debt deduction thus computed is reduced by the amount
permitted as a deduction for non-qualifying loans under the experience
method. The availability of the percentage of taxable income method permits
qualifying savings associations to be taxed at a lower effective federal
income tax rate than that applicable to corporations generally (approximately
32.2% assuming the maximum percentage bad debt deduction).
If an association's specified assets (generally, loans secured by
residential real estate or deposits, educational loans, cash and certain
government obligations) constitute less than 60% of its total assets, the
association may not deduct any addition to a bad debt reserve and generally
must include existing reserves in income over a four year period. No
representation can be made as to whether the Bank will meet the 60% test for
subsequent taxable years.
Under the percentage of taxable income method, the percentage bad debt
deduction cannot exceed the amount necessary to increase the balance in the
reserve for "qualifying real property loans" to an amount equal to 6% of such
loans outstanding at the end of the taxable year or the greater of (i) the
amount deductible under the experience method or (ii) the amount which when
added to the bad debt deduction for "non-qualifying loans" equals the amount
by which 12% of the amount comprising savings accounts at year-end exceeds
the sum of surplus, undivided profits
34
and reserves at the beginning of the year. It is not expected that these
limitations would be a limiting factor in the foreseeable future.
In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on
alternative minimum taxable income, which is the sum of a corporation's
regular taxable income with certain adjustments and tax preference items,
less any available exemption. The alternative minimum tax is imposed to the
extent it exceeds the corporation's regular income tax, and net operating
losses can offset no more than 90% of alternative minimum taxable income. For
taxable years beginning after 1986 and before 1996, corporations, including
savings associations such as the Bank, are also subject to an environmental
tax equal to 0.12% of the excess of alternative minimum taxable income for
the taxable year (determined without regard to net operating losses and the
deduction for the environmental tax) over $2 million.
Earnings appropriated to a savings institution's bad debt reserves and
deducted for federal income tax purposes may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad
debt losses). As of March 31, 1996, the Bank's bad debt reserves for tax
purposes totaled approximately $31.3 million.
Recently, there have been various legislative proposals in the U.S.
Congress which provided for the repeal of the percentage bad debt reduction
provision of the Code. The proposed legislation would have required the Bank
to recapture for tax purposes (i.e. take into income) over a six-year period
the excess of the balance of its bad debt reserves as of December 31, 1995
over the balance of such reserves as of December 31, 1987. Deferred taxes
have been provided on this amount and as a result, adoption of this
legislation as currently proposed would have an insignificant impact on the
consolidated financial statements of the Corporation. Management currently
is unable to predict whether any legislation regarding the repeal of the bad
debt reduction will be adopted.
The consolidated federal income tax returns of the Bank and its
subsidiaries through March 31, 1992 are closed to examination by the Internal
Revenue Service due to the expiration of the statute of limitations.
The State of Wisconsin imposes a corporate franchise tax measured by the
separate Wisconsin taxable income of each of the members. The current
corporate tax rate imposed by Wisconsin is 7.9%. Wisconsin taxable income is
substantially similar to federal taxable income except that no deduction is
allowed for state income taxes paid. The current bad debt deduction
35
for Wisconsin income tax purposes is the same as the deduction permitted for
federal income tax purposes. Wisconsin does not allow the carryback of a net
operating loss to prior taxable years. Thus, any net operating loss for state
income tax purposes must be carried forward to offset income in future years.
The Wisconsin corporate franchise tax is deductible for purposes of computing
federal taxable income. The separate Wisconsin state income tax returns of
the members of the Bank's group through March 31, 1991 are closed to
examination by the Wisconsin Department of Revenue due to the expiration of
the statute of limitations.
The Bank also has an operating subsidiary (AIC) located in Nevada which
manages a portion of the Bank's investment portfolio. The income of AIC is
only subject to taxation in Nevada, which currently does not impose a
corporate income or franchise tax.
ITEM 2. PROPERTIES
At March 31, 1996, The Bank conducted its business from its headquarters
and main office at 25 West Main Street, Madison, Wisconsin and 32 other
deposit-taking offices located primarily in southcentral and southwest
Wisconsin. The Bank owns 23 of its deposit-taking offices, leases the land on
which four such offices are located, and leases the remaining 6
deposit-taking offices. In addition, the Bank leases offices for three loan
origination facilities. The leases expire between 1996 and 2005. The
aggregate net book value at March 31, 1996 of the properties owned or leased,
including headquarters, properties and leasehold improvements, was $12.4
million. See Note 7 to the Corporation's Consolidated Financial Statements,
filed as an exhibit hereto, for information regarding the premises and
equipment. The following tables set forth the location of the Corporation's
banking and other offices.
MADISON, WISCONSIN OFFICES: 6501 Monona Drive
Monona, Wisconsin
25 West Main Street
Madison, Wisconsin 4702 East Towne Boulevard
Madison, Wisconsin
302 North Midvale Boulevard
Madison, Wisconsin 2000 Atwood Avenue
Madison, Wisconsin (2)
2929 North Sherman Avenue
Madison, Wisconsin (1) DANE COUNTY OFFICES:
216 Cottage Grove Road 1516 West Main Street
Madison, Wisconsin (1) Sun Prairie, Wisconsin
5750 Raymond Road 6200 Century Avenue
Madison, Wisconsin (2) Middleton, Wisconsin (1)
333 South Westfield Road 300 East Main Street
Madison, Wisconsin (1) Mount Horeb, Wisconsin
36
420 West Verona Avenue 500 East Walworth Avenue
Verona, Wisconsin Delavan, Wisconsin
705 North Main Street 606 Highway 69
Oregon, Wisconsin New Glarus, Wisconsin (2)
601 South Main Street 2215 Holiday Drive
DeForest, Wisconsin Janesville, Wisconsin
204A-1 South Century Avenue 150 North Ludington Street
Waunakee, Wisconsin (2) Columbus, Wisconsin
1720 Highway 51 187 South Central Avenue
Stoughton, Wisconsin Richland Center, Wisconsin
316 West Spring Street
SURROUNDING AREA OFFICES: Dodgeville, Wisconsin
1712 12th Street 102 South Rock Avenue
Monroe, Wisconsin Viroqua, Wisconsin
80 South Court Street 640 Division Street
Platteville, Wisconsin Stevens Point, Wisconsin
106 West Oak Street 1101 Post Road
Boscobel, Wisconsin (2) Plover, Wisconsin (2)
100 West Racine Street
Janesville, Wisconsin LENDING ONLY OFFICES:
600 East Blackhawk Avenue 772 Main Street, Suite 204
Prairie du Chien, Wisconsin Lake Geneva, Wisconsin (2)
708 North Madison Street 1775 Witzel Avenue
Lancaster, Wisconsin Oshkosh, Wisconsin (2)
302 Bay Street 2711 North Mason Street
Chippewa Falls, Wisconsin Appleton, Wisconsin (2)
- -------------------------
(1) Land is leased.
(2) Building and land is leased.
37
ITEM 3. LEGAL PROCEEDINGS
The Corporation is involved in routine legal proceedings occurring in
the ordinary course of business which, in the aggregate, are believed by
management of the Corporation to be immaterial to the financial condition and
results of operations of the Corporation. See "Management's Discussion"
on page 18 of the Registrant's 1996 Annual Report to Stockholders filed as an
exhibit hereto.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended March 31, 1996, no
matters were submitted to a vote of security holders through a solicitation
of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Information relating to the market for Registrant's common equity and
related stockholder matters appears under "Common Stock Information" on page
45 of the 1996 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The above-captioned information appears under "Management's Discussion"
on page 6 of the Registrant's 1996 Annual Report to Stockholders and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The above-captioned information appears under "Management's Discussion"
on pages 8-18 of the Registrant's 1996 Annual Report to Stockholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements of Anchor BanCorp Wisconsin Inc.
and its subsidiary, together with the report thereon by Ernst & Young LLP,
appear on pages 20-44 of the Registrant's 1996 Annual Report to Stockholders
and are incorporated herein by reference.
Information with respect to the Employee Stock Option Plan ("ESOP") in
Note 11 is supplemented with the following. During the year ended March 31,
1996, the ESOP released 97,493 shares to the plan participants with a value
of $3.0 million. As of March 31, 1996, there remained 80,021 shares with a
value of $2.7 million which are scheduled to be released in the year ending
March 31, 1997.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
38
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information relating to Directors and Executive Officers is
incorporated herein by reference to pages 2-5 to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on July 23, 1996.
ITEM 11. EXECUTIVE COMPENSATION.
The information relating to executive compensation is incorporated
herein by reference to pages 8-12 to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on July 23, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information relating to security ownership of certain beneficial
owners and management is incorporated herein by reference to pages 5-8 to the
Registrant's Proxy Statement for the Annual Meeting of Stockholders to be
held on July 23, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information relating to certain relationships and related
transactions is incorporated herein by reference to pages 16-17 to the
Registrant's Proxy Statement for the Annual Meeting of Stockholders to be
held on July 23, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Corporation and
its subsidiaries, together with the report thereon of Ernst & Young LLP,
dated April 24, 1996, appearing in the 1996 Annual Report to Stockholders are
incorporated herein by reference:
Consolidated Balance Sheets at March 31, 1996 and 1995.
Consolidated Statements of Income for each year in the three-year
period ended March 31, 1996.
39
Consolidated Statements of Stockholders' Equity for each year in
the three-year period ended March 31, 1996.
Consolidated Statements of Cash Flows for each year in the
three-year period ended March 31, 1996.
Notes to Consolidated Financial Statements.
The remaining information appearing in the Annual Report to Stockholders
is not deemed to be filed as part of this report, except as expressly
provided herein.
(a)(2) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not required or are not
applicable or the required information is shown in the consolidated financial
statements or notes thereto.
(a)(3) EXHIBITS
The following exhibits are either filed as part of this Report on Form
10-K or are incorporated herein by reference:
EXHIBIT NO. 3. CERTIFICATE OF INCORPORATION AND BYLAWS:
3.1 Articles of Incorporation of Anchor BanCorp Wisconsin Inc.
(incorporated herein by reference to Exhibit 3.1
of Registrant's Form S-1, Registration Statement, filed
on March 19, 1992, as amended, Registration No. 46536
("Form S-1")).
3.2 Bylaws of Anchor BanCorp Wisconsin Inc. (incorporated
herein by reference to Exhibit 3.2 of Registrant's Form S-1).
EXHIBIT NO. 4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS:
4 Form of Common Stock Certificate (incorporated herein
by reference to Exhibit 4 of Registrant's Form S-1).
EXHIBIT NO. 10. MATERIAL CONTRACTS:
10.1 Anchor BanCorp Wisconsin Inc. Retirement Plan
(incorporated herein by reference to Exhibit 10.1 of
Registrant's Form S-1).
40
10.2 Anchor BanCorp Wisconsin Inc. 1992 Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.2 of
Registrant's Form S-1).
10.3 Anchor BanCorp Wisconsin Inc. 1992 Director's Stock
Option Plan (incorporated herein by reference to
Exhibit 10.3 of Registrant's Form S-1).
10.4 Anchor BanCorp Wisconsin Inc. Management Recognition
Plans (incorporated herein by reference to Exhibit 10.4
of Registrant's Form S-1).
10.5 Anchor BanCorp Wisconsin Inc. Employee Stock Ownership
Plan (incorporated herein by reference to Exhibit 10.5
of Registrant's Form S-1).
10.6 Employment Agreement among the Corporation, the Bank
and Douglas J. Timmerman (incorporated by reference to
Exhibit 10.6 of Registrant's Form 10-K for the year
ended March 31, 1995).
10.7 Deferred Compensation Agreement between the Corporation
and Douglas J. Timmerman, as amended (incorporated by
reference to Exhibit 10.7 of Registrant's Form S-1) and
form of related Deferred Compensation Trust Agreement,
as amended (incorporated by reference to Exhibit 10.7
of Registrant's Form 10-K for the year ended March 31, 1994).
10.8 1995 Stock Option Plan for Non-Employee Directors
(incorporated by reference to the Registrant's proxy
statement filed on June 16, 1995).
10.9 1995 Stock Incentive Plan (incorporated by reference to
the Registrant's proxy statement filed on June 16, 1995).
10.10 Employment Agreement among the Corporation, the Bank and J.
Anthony Cattelino (incorporated by reference to Exhibit 10.10
of Registrant's Form 10-K for the year ended March 31, 1995).
10.11 Employment Agreement among the Corporation, the Bank and
Michael W. Helser (incorporated by reference to Exhibit 10.11
of Registrant's Form 10-K for the year ended March 31, 1995).
10.12 Severance Agreement among the Corporation, the Bank and
Ronald R. Osterholz (incorporated by reference to Exhibit 10.12
of Registrant's Form 10-K for the year ended March 31, 1995).
10.13 Severance Agreement among the Corporation, the Bank and David L.
Weimert (incorporated by reference to Exhibit 10.13 of
Registrant's Form 10-K for the year ended March 31, 1995).
41
10.14 Severance Agreement among the Corporation, the Bank and
Donald F. Bertucci (incorporated by reference to Exhibit 10.14
of Registrant's Form 10-K for the year ended March 31, 1995).
10.15 Anchor BanCorp Wisconsin Inc. Directors' Deferred Compensation
Plan (incorporated by reference to Exhibit 10.9 of Registrant's
Form S-1).
10.16 Anchor BanCorp Wisconsin Inc. Annual Incentive Bonus Plan
(incorporated by reference to Exhibit 10.10 of Registrant's
Form S-1).
10.17 AnchorBank, S.S.B. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.11 of Registrant's
Form 10-K for the year ended March 31, 1994).
10.18 AnchorBank, S.S.B. Excess Benefit Plan (incorporated by
reference to Exhibit 10.12 of Registrant's Form 10-K for the
year ended March 31, 1994).
The Corporation's management contracts or compensatory plans or arrangements
consist of Exhibits 10.1-10.18 above.
EXHIBIT NO. 11. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
The statement re: computation of per share earnings for fiscal year 1996 is
as follows:
Primary Fully Diluted
----------- -------------
1. Net Income $14,506,953 $14,506,953
----------- -----------
----------- -----------
2. Weighted average common shares
outstanding 5,116,709 5,116,709
3. Common stock equivalents due to dilutive
effect of stock options 224,943 252,337
----------- -----------
4. Total weighted average common shares and
equivalents outstanding 5,341,652 5,369,046
----------- -----------
----------- -----------
5. Earnings per share $ 2.72 $ 2.70
----------- -----------
----------- -----------
EXHIBIT NO. 13. 1996 ANNUAL REPORT TO STOCKHOLDERS
The 1996 Annual Report to Stockholders is attached as an exhibit to this
Report. Portions of the 1996 Annual Report to Stockholders have been
incorporated by reference into this Form 10-K, as indicated under Part II
above.
42
EXHIBIT NO. 21. SUBSIDIARIES OF THE REGISTRANT
Subsidiary information is incorporated herein by reference to "Part I,
Item 1, Business-General" and "Part I, Item 1, Business-Subsidiaries."
EXHIBIT NO. 23. CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young LLP is included herein as an exhibit to
this Report.
EXHIBIT NO. 27. FINANCIAL DATA SCHEDULE
The Financial Data Schedule is included herein as an exhibit to
this Report.
(b) FORMS 8-K
None
(c) EXHIBITS
Exhibits to the Form 10-K required by Item 601 of Regulation S-K are
attached or incorporated herein by reference as stated in the Index to
Exhibits.
(d) FINANCIAL STATEMENTS EXCLUDED FROM ANNUAL REPORT TO SHAREHOLDERS PURSUANT
TO RULE 14A3(b)
Not applicable
43
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 WISCONSIN INC.
By: /s/ Douglas J. Timmerman
------------------------------------
Douglas J. Timmerman
Chairman of the Board, President
and Chief Executive Officer
Date: May 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
By: /s/ Douglas J. Timmerman By: /s/ Michael W. Helser
--------------------------------------- -----------------------------------------
Douglas J. Timmerman Michael W. Helser
Chairman of the Board, President Treasurer and Chief Financial Officer
and Chief Executive Officer (principal financial and
(principal executive officer) accounting officer)
Date: May 28, 1996 Date: May 28, 1996
44
By: /s/ Robert C. Buehner By: /s/ Greg M. Larson
--------------------------------------- -----------------------------------------
Robert C. Buehner Greg M. Larson
Director Director
Date: May 28, 1996 Date: May 28, 1996
By: /s/ Arlie M. Mucks, Jr. By: /s/ Pat Richter
--------------------------------------- -----------------------------------------
Arlie M. Mucks, Jr. Pat Richter
Director Director
Date: May 28, 1996 Date: May 28, 1996
By: /s/ Bruce A. Robertson By: /s/ Holly Cremer Berkenstadt
--------------------------------------- -----------------------------------------
Bruce A. Robertson Holly Cremer Berkenstadt
Director Director
Date: May 28, 1996 Date: May 28, 1996
By: /s/ Donald D. Kropidlowski
---------------------------------------
Donald D. Kropidlowski
Director
Date: May 28, 1996
45
INDEX TO EXHIBITS
Page
EXHIBIT NO. 3. CERTIFICATE OF INCORPORATION AND BYLAWS --
Incorporated herein by reference.
EXHIBIT NO. 4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS --
Incorporated herein by reference.
EXHIBIT NO. 10. MATERIAL CONTRACTS --
Incorporated herein by reference.
EXHIBIT NO. 11. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 42
Included herewith.
EXHIBIT NO. 13. 1996 ANNUAL REPORT TO STOCKHOLDERS 47
Filed herewith.
EXHIBIT NO. 21. SUBSIDIARIES OF THE REGISTRANT --
Incorporated herein by reference.
EXHIBIT NO. 23. CONSENT OF ERNST & YOUNG LLP 97
Filed herewith.
EXHIBIT NO. 27 FINANCIAL DATA SCHEDULE 98
Filed herewith.
46