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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
COMMISSION FILE NUMBER 0-20006
ANCHOR BANCORP WISCONSIN INC.
-----------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Wisconsin 39-1726871
----------------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
25 West Main Street
Madison, Wisconsin 53703
---------------------------- --------
(Address of principal executive office) (Zip Code)
(608) 252-8700
--------------------------------------------
Registrant's telephone number, including area code
Not Applicable
---------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class: Common stock -- $.10 Par Value
Number of shares outstanding as of October 31, 2004: 22,941,856
ANCHOR BANCORP WISCONSIN INC.
INDEX - FORM 10-Q
PAGE #
------
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 2004
and March 31, 2004 2
Consolidated Statements of Income for the Three and Six
Months Ended September 30, 2004 and 2003 3
Consolidated Statements of Cash Flows for the Six Months
Ended September 30, 2004 and 2003 5
Notes to Unaudited Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 16
Results of Operations 17
Financial Condition 22
Asset Quality 23
Liquidity & Capital Resources 26
Asset/Liability Management 29
Consent Order 29
Item 3 Quantitative and Qualitative Disclosures About Market Risk 30
Item 4 Controls and Procedures 30
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 30
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 31
Item 3 Defaults upon Senior Securities 31
Item 4 Submission of Matters to a Vote of Security Holders 31
Item 5 Other Information 31
Item 6 Exhibits 32
SIGNATURES 33
1
CONSOLIDATED BALANCE SHEETS
(Unaudited)
SEPTEMBER 30, MARCH 31,
2004 2004
---------------------------------
(In Thousands, Except Share Data)
ASSETS
Cash $ 56,097 $ 65,938
Interest-bearing deposits 117,561 133,055
----------- -----------
Cash and cash equivalents 173,658 198,993
Investment securities available for sale 58,654 29,514
Mortgage-related securities available for sale 207,762 220,918
Mortgage-related securities held to maturity (fair value of $3,288
and $4,489, respectively) 3,168 4,303
Loans receivable, net:
Held for sale 7,057 14,578
Held for investment 3,231,826 3,066,812
Foreclosed properties and repossessed assets, net 760 2,422
Real estate held for development and sale 65,106 77,749
Office properties and equipment 30,796 31,233
Federal Home Loan Bank stock--at cost 64,923 87,320
Accrued interest on investments and loans and other assets 50,591 56,588
Goodwill 19,956 19,956
----------- -----------
Total assets $ 3,914,257 $ 3,810,386
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits and advance payments by borrowers for taxes and insurance $ 2,681,757 $ 2,609,686
Federal Home Loan Bank and other borrowings 846,139 831,559
Other liabilities 63,488 60,902
----------- -----------
Total liabilities 3,591,384 3,502,147
----------- -----------
Minority interest in real estate partnerships 6,514 6,691
----------- -----------
Preferred stock, $.10 par value, 5,000,000 shares
authorized, none outstanding - -
Common stock, $.10 par value, 100,000,000 shares authorized,
25,364,339 shares issued, 23,028,606 and 22,954,535 shares outstanding,
respectively 2,536 2,536
Additional paid-in capital 68,537 67,926
Retained earnings 298,436 284,329
Accumulated other comprehensive income 1,274 2,670
Treasury stock (2,335,733 shares and 2,408,804 shares, respectively), at cost (48,529) (50,324)
Unearned deferred compensation (5,895) (5,589)
----------- -----------
Total stockholders' equity 316,359 301,548
----------- -----------
Total liabilities and stockholders' equity $ 3,914,257 $ 3,810,386
=========== ===========
See accompanying Notes to Unaudited Consolidated Financial Statements.
2
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2004 2003 2004 2003
------- -------- ------- --------
(In Thousands, Except Per Share Data)
INTEREST INCOME:
Loans $45,153 $ 43,570 $88,242 $ 87,683
Mortgage-related securities 2,075 2,211 4,263 5,081
Investment securities 1,146 1,838 2,679 3,718
Interest-bearing deposits 415 266 642 446
------- -------- ------- --------
Total interest income 48,789 47,885 95,826 96,928
INTEREST EXPENSE:
Deposits 12,028 13,879 23,845 28,401
Notes payable and other borrowings 7,146 6,424 14,160 12,485
------- -------- ------- --------
Total interest expense 19,174 20,303 38,005 40,886
------- -------- ------- --------
Net interest income 29,615 27,582 57,821 56,042
Provision for loan losses 300 450 750 900
------- -------- ------- --------
Net interest income after provision for loan losses 29,315 27,132 57,071 55,142
NON-INTEREST INCOME:
Real estate investment partnership revenue 15,143 - 38,879 -
Loan servicing income (loss) 1,039 (1,256) 1,518 (2,857)
Service charges on deposits 2,205 2,121 4,400 4,125
Insurance commissions 611 544 1,245 1,168
Net gain on sale of loans 1,592 1,411 1,891 11,260
Net gain (loss) on sale of investments and mortgage-related securities 529 (12) 1,397 340
Other revenue from real estate operations 881 3,295 2,019 3,933
Other 783 1,796 1,697 2,996
------- -------- ------- --------
Total non-interest income 22,783 7,899 53,046 20,965
3
CONSOLIDATED STATEMENTS OF INCOME (Cont'd)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2004 2003 2004 2003
------- ------- ------- -------
(In Thousands, Except Per Share Data)
NON-INTEREST EXPENSE:
Compensation 10,869 9,276 20,737 19,664
Real estate investment partnership cost of sales 11,067 - 30,778 -
Occupancy 1,601 1,658 3,305 3,267
Furniture and equipment 1,603 1,352 2,986 2,800
Data processing 1,168 1,125 2,444 2,299
Marketing 1,009 792 2,016 1,582
Other expenses from real estate operations 2,569 - 5,391 -
Other 3,114 2,652 5,770 5,393
------- ------- ------- -------
Total non-interest expense 33,000 16,855 73,427 35,005
------- ------- ------- -------
Minority interest in income of real estate partnership operations 1,359 - 2,942 -
------- ------- ------- -------
Income before income taxes 17,739 18,176 33,748 41,102
Income taxes 7,057 6,976 12,469 15,809
------- ------- ------- -------
Net income $10,682 $11,200 $21,279 $25,293
======= ======= ======= =======
Earnings per share:
Basic $ 0.47 $ 0.49 $ 0.94 $ 1.09
Diluted 0.46 0.48 0.92 1.07
Dividends declared per share 0.13 0.11 0.24 0.21
See accompanying Notes to Unaudited Consolidated Financial Statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
2004 2003
------------------------------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income $ 21,279 $ 25,293
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 750 900
Provision for depreciation and amortization 2,203 1,667
Net increase (decrease) due to origination and sale of loans held for sale 7,521 (6,157)
Net gain on sales of loans (1,891) (11,260)
Amortization of stock benefit plans 85 62
Tax benefit from stock related compensation 611 1,451
(Increase) decrease in accrued interest receivable (668) 530
Decrease in accrued interest payable (125) (706)
Increase (decrease) in accounts payable 135 (20,061)
Other 16,669 12,573
--------- ---------
Net cash provided by operating activities 46,569 4,292
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 2,352 3,293
Proceeds from maturities of investment securities 89,460 196,327
Purchase of investment securities available for sale (120,556) (274,336)
Proceeds from sale of mortgage-related securities available for sale 12,869 4,535
Purchase of mortgage-related securities available for sale (35,474) (70,058)
Principal collected on mortgage-related securities 36,038 116,692
Loans originated for investment (946,630) (931,537)
Principal repayments on loans 797,979 791,676
Purchases of office properties and equipment (1,613) (2,720)
Sales of office properties and equipment 210 2,312
Sales of real estate 4,077 645
Investment in real estate held for development and sale 8,416 1,934
--------- ---------
Net cash used by investing activities (152,872) (161,237)
5
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)
(Unaudited)
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
2004 2003
-------------------------------
(IN THOUSANDS)
FINANCING ACTIVITIES
Increase in deposit accounts $ 59,648 $ 5,165
Increase in advance payments by borrowers
for taxes and insurance 12,423 11,642
Proceeds from notes payable to Federal Home Loan Bank 99,900 384,650
Repayment of notes payable to Federal Home Loan Bank (77,200) (264,500)
(Decrease) increase in other loans payable (8,120) 6,028
Treasury stock purchased (1,219) (19,966)
Exercise of stock options 539 761
Issuance of management and benefit plans 406 888
Payments of cash dividends to stockholders (5,409) (4,961)
--------- ---------
Net cash provided by financing activities 80,968 119,707
--------- ---------
Net decrease in cash and cash equivalents (25,335) (37,238)
Cash and cash equivalents at beginning of period 198,993 141,427
--------- ---------
Cash and cash equivalents at end of period $ 173,658 $ 104,189
========= =========
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid or credited to accounts:
Interest on deposits and borrowings $ 37,880 $ 41,416
Income taxes 9,257 20,211
See accompanying Notes to Unaudited Consolidated Financial Statements
6
ANCHOR BANCORP WISCONSIN INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The unaudited consolidated financial statements include the accounts and results
of operations of Anchor BanCorp Wisconsin Inc. (the "Corporation") and its
wholly-owned subsidiaries, AnchorBank fsb (the "Bank"), and Investment
Directions, Inc. ("IDI"). The Bank's accounts and results of operations include
its wholly-owned subsidiaries, Anchor Investment Services, Inc. ("AIS"), ADPC
Corporation ("ADPC") and Anchor Investment Corporation ("AIC"). Significant
inter-company balances and transactions have been eliminated. Investments in 50%
owned partnerships are treated as variable interest entities and are
consolidated into the Corporation's balance sheet and income statement.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the unaudited consolidated financial statements have
been included.
In preparing the unaudited consolidated financial statements in conformity with
GAAP, management is required to make estimates and assumptions that affect the
amounts reported in the unaudited consolidated financial statements and
accompanying notes. Actual results could differ from those estimates. The
results of operations and other data for the six-month period ended September
30, 2004 are not necessarily indicative of results that may be expected for any
other interim period or the entire fiscal year ending March 31, 2005. The
unaudited consolidated financial statements presented herein should be read in
conjunction with the audited consolidated financial statements and related notes
thereto included in the Corporation's Annual Report for the year ended March 31,
2004.
Unrealized gains or losses on the Corporation's available-for-sale securities
are included in other comprehensive income. During the quarter ended September
30, 2004 and 2003, total comprehensive income amounted to $11.8 million and
$10.5 million, respectively. For the six months ended September 30, 2004 and
2003, comprehensive income was $19.9 million and $24.0 million, respectively.
The Corporation's investment in real estate held for investment and sale
includes 50% owned real estate partnerships which are considered variable
interest entities ("VIE's") and therefore subject to the requirements of
Financial Accounting Standards Interpretation No. 46, Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research Bulletin No. 51
("FIN 46"). FIN 46 requires the consolidation of entities in which an enterprise
absorbs a majority of the entity's expected losses, receives a majority of the
entity's expected residual returns, or both, as a result of ownership,
contractual or other financial interests in the entity.
Real estate investment partnership revenue is presented in non-interest income
and represents revenue recognized upon the closing of sales of developed lots
and homes to independent third parties. Real estate investment partnership cost
of sales is included in non-interest expense and represents the costs of such
closed sales. Other revenue and other expenses from real estate operations are
also included in non-interest income and non-interest expense, respectively.
Minority interest in real estate partnerships represents the equity interests of
development partners in the real estate investment partnerships. The development
partners' share of income is reflected as minority interest in income of real
estate partnership operations. For all VIE's formed after February 1, 2003, the
balance sheets and statements of income must reflect prior period assets,
liabilities, income and expense. Since none of the Corporation's VIE's were
formed after February 1, 2003, no restatement of prior periods is required.
7
The Financial Accounting Standards Board ("FASB") issued SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" in
December, 2002. SFAS No. 148 amended SFAS No. 123, "Accounting for Stock-Based
Compensation" to provide alternative methods of transition to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amended the disclosure provisions of SFAS No. 123 to require disclosure
in the summary of significant accounting policies of the effect of the Company's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
SFAS No. 148's amendment of the transition and annual disclosure provisions of
SFAS No. 123 are effective for fiscal years ending after December 15, 2002. The
Corporation will continue to account for stock-based compensation in accordance
with APB Opinion 25 as allowed under FASB No. 123.
The Corporation applies APB Opinion No. 25 and related interpretations in
accounting for stock options. Accordingly, no compensation cost has been
recognized for its stock option plans. Had compensation cost for the
Corporation's stock option plans been determined based on the fair value at the
date of grant for awards under the stock option plans consistent with the method
of SFAS No. 123, the Corporation's net income and earnings per share would have
been reduced to the pro forma amounts indicated:
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------------------------
2004 2003
---------------------------------------
(In Thousands, Except Per Share Data)
Net Income
As reported $ 21,279 $ 25,293
Pro forma 21,052 25,109
Earnings per share-Basic
As reported $ 0.94 $ 1.09
Pro forma 0.93 1.08
Earnings per share-Diluted
As reported $ 0.92 $ 1.07
Pro forma 0.91 1.06
The pro forma amounts indicated above may not be representative of the effects
on reported net income for future years. The fair values of stock options
granted in the six months ended September 30, 2004 and September 30, 2003 were
estimated on the date of grant using the Black-Scholes option-pricing model.
Certain 2003 accounts have been reclassified to conform to the 2004
presentations.
8
NOTE 3 - GOODWILL AND OTHER INTANGIBLE ASSETS
The Corporation's carrying value of goodwill was $20.0 million at September 30,
2004 and at March 31, 2004. Information regarding the Company's other intangible
assets follows:
SEPTEMBER 30, 2004 MARCH 31, 2004
------------------------------- -------------------------------
CARRYING ACCUMULATED CARRYING ACCUMULATED
AMOUNT AMORTIZATION NET AMOUNT AMORTIZATION NET
------------------------------- -------------------------------
(In Thousands)
Other intangible assets:
Core deposit premium $ 3,408 $2,655 $ 753 $ 3,408 $ 2,229 $ 1,179
Mortgage servicing rights 17,195 3,828 13,367 21,613 9,325 12,288
------- ------ ------- ------- ------- -------
Total $20,603 $6,483 $14,120 $25,021 $11,554 $13,467
======= ====== ======= ======= ======= =======
The projections of amortization expense for mortgage servicing rights and core
deposit premium set forth below are based on asset balances and the interest
rate environment as of September 30, 2004. Future amortization expense may be
significantly different depending upon changes in the mortgage servicing
portfolio, mortgage interest rates and market conditions.
The following table shows the current period and estimated future amortization
expense for amortized intangible assets:
MORTGAGE CORE
SERVICING DEPOSIT
RIGHTS PREMIUM TOTAL
--------- ------- --------
(In Thousands)
Quarter ended September 30, 2004 (actual) $ 1,100 $ 213 $ 1,313
Estimate for the year ended March 31,
2005 2,700 639 3,339
2006 5,400 114 5,514
2007 2,634 - 2,634
2008 2,633 - 2,633
------- ----- --------
$13,367 $ 753 $ 14,120
======= ===== ========
NOTE 4 - STOCKHOLDERS' EQUITY
During the quarter ended September 30, 2004, options for 74,381 shares of common
stock were exercised at a weighted-average price of $8.19 per share. Treasury
shares were issued in exchange for the options using the last-in-first-out
method. The cost of the treasury shares issued in excess of the option price
paid of $1,248,000 was charged to retained earnings. During the quarter ended
September 30, 2004, the Corporation issued 18,364 shares of treasury stock to
the Corporation's retirement plans. The weighted-average cost of these shares
was $22.05 per share or $404,800 in the aggregate and the cost of the treasury
shares issued in excess of the market price of $6,000 was charged to retained
earnings. On August 13, 2004, the Corporation paid a cash dividend of $0.125 per
share, amounting to $2.88 million, in the aggregate.
9
NOTE 5 - EARNINGS PER SHARE
Basic earnings per share for the three and six months ended September 30, 2004
and 2003 have been determined by dividing net income for the respective periods
by the weighted average number of shares of common stock outstanding. Diluted
earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding plus common stock equivalents. Common stock
equivalents are computed using the treasury stock method.
10
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2004 2003
--------------------------------
Numerator:
Net income $10,681,927 $11,199,665
----------- -----------
Numerator for basic and diluted earnings
per share--income available to common
stockholders $10,681,927 $11,199,665
Denominator:
Denominator for basic earnings per
share--weighted-average shares 22,671,470 23,052,139
Effect of dilutive securities:
Employee stock options 447,303 501,194
Management Recognition Plans 5,071 14,700
Denominator for diluted earnings per
share--adjusted weighted-average
----------- -----------
shares and assumed conversions 23,123,844 23,568,033
=========== ===========
Basic earnings per share $ 0.47 $ 0.49
=========== ===========
Diluted earnings per share $ 0.46 $ 0.48
=========== ===========
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
2004 2003
------------------------------
Numerator:
Net income $21,279,125 $25,292,683
----------- -----------
Numerator for basic and diluted earnings
per share--income available to common
stockholders $21,279,125 $25,292,683
Denominator:
Denominator for basic earnings per
share--weighted-average shares 22,634,407 23,138,969
Effect of dilutive securities:
Employee stock options 461,082 515,585
Management Recognition Plans 5,072 14,663
Denominator for diluted earnings per
share--adjusted weighted-average
----------- -----------
shares and assumed conversions 23,100,561 23,669,217
=========== ===========
Basic earnings per share $ 0.94 $ 1.09
=========== ===========
Diluted earnings per share $ 0.92 $ 1.07
=========== ===========
11
NOTE 6 - SEGMENT INFORMATION
According to the materiality thresholds of SFAS No. 131, the Corporation is
required to report each operating segment based on materiality thresholds of ten
percent or more of certain amounts, such as revenue. Additionally, the
Corporation is required to report separate operating segments until the revenue
attributable to such segments is at least 75 percent of total consolidated
revenue. SFAS No. 131 allows the Corporation to combine operating segments, even
though they may be individually material, if the segments have similar basic
characteristics in the nature of the products, production processes, and type or
class of customer for products or services. Based on the above criteria, the
Corporation has two reportable segments.
COMMUNITY BANKING: This segment is the main basis of operation for the
Corporation and includes the branch network and other deposit support services;
origination, sales and servicing of one-to-four family loans; origination of
multifamily, commercial real estate and business loans; origination of a variety
of consumer loans; and sales of alternative financial investments such as tax
deferred annuities.
REAL ESTATE INVESTMENTS: The Corporation's non-banking subsidiary, IDI, and its
subsidiary, NIDI, invest in limited partnerships in real estate developments.
Such developments include recreational residential developments and industrial
developments (such as office parks).
The following represents reconciliations of reportable segment revenues, profit
or loss, and assets to the Corporation's consolidated totals for the three and
six months ended September 30, 2004 and 2003, respectively.
12
THREE MONTHS ENDED SEPTEMBER 30, 2004
---------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
REAL ESTATE COMMUNITY INTERSEGMENT FINANCIAL
INVESTMENTS BANKING ELIMINATIONS STATEMENTS
----------- ----------- ------------ -----------
Interest income $ 57 $ 49,181 $(449) $ 48,789
Interest expense 501 19,122 (449) 19,174
-------- ----------- ----- -----------
Net interest income (loss) (444) 30,059 - 29,615
Provision for loan losses - 300 - 300
-------- ----------- ----- -----------
Net interest income (loss) after provision for loan losses (444) 29,759 - 29,315
Real estate investment partnership revenue 15,143 - - 15,143
Other revenue from real estate operations 881 - - 881
Other income - 6,819 (60) 6,759
Real estate investment partnership cost of sales (11,067) - - (11,067)
Other expense from real estate partnership operations (2,569) - - (2,569)
Minority interest in income of real estate partnerships (1,359) - - (1,359)
Other expense - (19,424) 60 (19,364)
-------- ----------- ----- -----------
Income before income taxes 585 17,154 - 17,739
Income tax expense 205 6,852 - 7,057
-------- ----------- ----- -----------
Net income $ 380 $ 10,302 $ - $ 10,682
======== =========== ===== ===========
Total Assets $ 74,447 $ 3,839,810 $ - $ 3,914,257
THREE MONTHS ENDED SEPTEMBER 30, 2004
---------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
REAL ESTATE COMMUNITY INTERSEGMENT FINANCIAL
INVESTMENTS BANKING ELIMINATIONS STATEMENTS
----------- ----------- ------------ -----------
Interest income $ 120 $ 47,885 $ (120) $ 47,885
Interest expense 57 20,303 (57) 20,303
------- ---------- ----------- ----------
Net interest income 63 27,582 (63) 27,582
Provision for loan losses - 450 - 450
------- ---------- ----------- ----------
Net interest income after provision for loan losses 63 27,132 (63) 27,132
Other income 7,941 4,604 (4,646) 7,899
Other expense 4,709 16,855 (4,709) 16,855
------- ---------- ----------- ----------
Income before income taxes 3,295 14,881 - 18,176
Income tax expense 1,203 5,773 - 6,976
------- ---------- ----------- ----------
Net income $ 2,092 $ 9,108 $ - $ 11,200
======= ========== =========== ==========
Total assets $42,184 $3,619,374 $3,661,558
13
SIX MONTHS ENDED SEPTEMBER 30, 2004
----------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
REAL ESTATE COMMUNITY INTERSEGMENT FINANCIAL
INVESTMENTS BANKING ELIMINATIONS STATEMENTS
----------- ----------- ------------ -----------
Interest income $ 187 $ 96,142 $(503) $ 95,826
Interest expense 639 37,869 (503) 38,005
-------- ----------- ----- -----------
Net interest income (loss) (452) 58,273 - 57,821
Provision for loan losses - 750 - 750
-------- ----------- ----- -----------
Net interest income (loss) after provision for loan losses (452) 57,523 - 57,071
Real estate investment partnership revenue 38,879 - - 38,879
Other revenue from real estate operations 2,019 - - 2,019
Other income - 12,208 (60) 12,148
Real estate investment partnership cost of sales (30,778) - - (30,778)
Other expense from real estate partnership operations (5,451) - 60 (5,391)
Minority interest in income of real estate partnerships (2,942) - - (2,942)
Other expense - (37,258) - (37,258)
-------- ----------- ----- -----------
Income before income taxes 1,275 32,473 - 33,748
Income tax expense 534 11,935 - 12,469
-------- ----------- ----- -----------
Net income $ 741 $ 20,538 $ - $ 21,279
======== =========== ===== ===========
Total Assets $ 74,447 $ 3,839,810 $ - $ 3,914,257
SIX MONTHS ENDED SEPTEMBER 30, 2004
----------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
REAL ESTATE COMMUNITY INTERSEGMENT FINANCIAL
INVESTMENTS BANKING ELIMINATIONS STATEMENTS
----------- ----------- ------------ -----------
Interest income $ 142 $ 96,928 $ (142) $ 96,928
Interest expense 89 40,884 (87) 40,886
------- ---------- ----------- -----------
Net interest income 53 56,044 (55) 56,042
Provision for loan losses - 900 - 900
------- ---------- ----------- -----------
Net interest income after provision for loan losses 53 55,144 (55) 55,142
Other income 11,452 17,032 (7,519) 20,965
Other expense 7,572 35,007 (7,574) 35,005
------- ---------- ----------- -----------
Income before income taxes 3,933 37,169 - 41,102
Income tax expense 1,440 14,369 - 15,809
------- ---------- ----------- -----------
Net income $ 2,493 $ 22,800 $ - $ 25,293
======= ========== =========== ===========
Total assets $42,184 $3,619,374 $ 3,661,558
14
NOTE 7 - REGULATORY ACTION
In September 2004, the Board of Directors of the Bank entered into a Stipulation
and Consent to the Issuance of an Order to Cease and Desist for Affirmative
Relief with the Office of Thrift Supervision ("OTS") and the OTS issued a
Consent Order to Cease and Desist for Affirmative Relief ("Consent Order").
Under the Consent Order, the Bank's board of directors has agreed, among other
things, to take a range of actions with respect to the review and conduct of its
Bank Secrecy Act ("BSA") compliance activities. The Bank remains subject to the
possibility of additional governmental actions with regard to these matters,
including potential monetary penalties. The Bank is actively engaged in the
process of addressing the issues related to the Consent Order, including
reviewing and strengthening its BSA compliance process, and has taken a number
of actions in this regard which are in addition to those required by the OTS.
The Corporation expects that it will experience an increase in its operating
costs in connection with addressing matters related to the Consent Order but
cannot quantify the amount of the increases.
NOTE 8 - SUBSEQUENT EVENTS
On October 22, 2004, the Corporation declared a $0.125 per share cash dividend
on its common stock, amounting to $2.87 million in the aggregate, to be paid on
November 15, 2004 to stockholders of record on November 1, 2004.
15
ANCHOR BANCORP WISCONSIN INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
describe future plans or strategies and include the Corporation's expectations
of future financial results. The Corporation's ability to predict results or the
effect of future plans or strategies is inherently uncertain and the Corporation
can give no assurance that those results or expectations will be attained.
Factors that could affect actual results include but are not limited to i)
general market rates, ii) changes in market interest rates and the shape of the
yield curve, iii) general economic conditions, iv) real estate markets, v)
legislative/regulatory changes, vi) monetary and fiscal policies of the U.S.
Treasury and the Federal Reserve Board, vii) changes in the quality or
composition of the Corporation's loan and investment portfolios, viii) demand
for loan products, ix) the level of loan and MBS repayments, x) deposit flows,
xi) competition, xii) demand for financial services in the Corporation's
markets, and xiii) changes in accounting principles, policies or guidelines. In
addition, acquisitions may result in large one-time charges to income, may not
produce revenue enhancements or cost savings at levels or within time frames
originally anticipated and may result in unforeseen integration difficulties.
These factors should be considered in evaluating the forward-looking statements,
and undue reliance should not be placed on such statements.
The Corporation does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
SIGNIFICANT ACCOUNTING POLICIES
There are a number of accounting policies that require the use of
judgment. Some of the more significant policies are as follows:
- - Establishing the amount of the allowance for loan losses requires the use
of judgment as well as other systematic objective and quantitative
methods. The loan portfolio, foreclosed properties, and repossessed assets
are evaluated on a continuous basis to determine the necessity for
additions to the allowances for losses and the related balance in the
allowances. These evaluations consider several factors including, but not
limited to, general economic conditions, collateral value, loan portfolio
composition, loan delinquencies, prior loss experience, anticipated loss
of interest and losses inherent in the portfolio. The evaluation of the
allowance for loan losses includes a review of known loan problems as well
as potential loan problems based upon historical trends and ratios. To
determine the level and composition of the loan loss allowance, the loan
portfolio is broken out by categories of single-family residential,
multi-family residential, commercial real estate, construction and land,
consumer and commercial business. These categories are then further
divided into performing and substandard, which includes performing and
non-performing groups of loans. A five-year historical trend is applied to
each category of performing loans to arrive at the appropriate levels of
loss reserves for those respective categories based on the ratio of loss
history to overall balance in each respective loan category. The
non-performing groups are analyzed using the trends of the current year in
which they are being evaluated. For commercial business loans, a
three-year historical trend is applied since that category has shown
significant growth both in terms of overall balance and loss history
associated with that growth. The Corporation has allocated all of its
allowance for loan losses to specific categories as a result of more
precise analysis of loan portfolio performance. Also, within specific loan
categories, certain loans may be identified for specific reserve
allocations as well as the whole category of that loan type being reviewed
for a calculated general reserve based on the foregoing analysis of trends
and overall balance growth within that category.
16
- - Valuation of mortgage servicing rights requires the use of judgment.
Mortgage servicing rights are established on loans that are originated and
subsequently sold with servicing rights retained. A portion of the loan's
book basis to mortgage servicing rights is allocated when a loan is sold.
The fair value of mortgage servicing rights is the present value of
estimated future net cash flows from the servicing relationship using
current market assumptions for prepayments, servicing costs and other
factors. As the loans are repaid and net servicing revenue is earned,
mortgage servicing rights are amortized into expense. Net servicing
revenues are expected to exceed this amortization expense. However, if
actual prepayment experience exceeds what was originally anticipated, net
servicing revenues may be less than expected and mortgage servicing rights
may be impaired.
- - Judgment is also used in the valuation of other intangible assets (core
deposit intangibles). Core deposit intangibles have been recorded for core
deposits (defined as checking, money market and savings deposits) that
have been acquired in acquisitions that were accounted for as purchase
business combinations. The core deposit intangible assets have been
recorded using the assumption that they provide a more favorable source of
funding than more expensive wholesale borrowings. An intangible asset has
been recorded for the present value of the difference between the expected
interest to be incurred on these deposits and interest expense that would
be expected if these deposits were replaced by wholesale borrowings, over
the expected lives of the core deposits. The current estimate of the
underlying lives of the core deposits is seven to fifteen years. If it is
determined that these deposits have a shorter life, the asset will be
adjusted to reflect an expense associated with the amount that is
impaired.
- - Goodwill is reviewed at least annually for impairment, which requires
judgment. Goodwill has been recorded as a result of an acquisition in
which purchase price exceeded fair value of net assets acquired. The price
paid for the acquisition is analyzed and compared to a number of current
indices. If goodwill is determined to be impaired, it would be expensed in
the period in which it became impaired.
Set forth below is management's discussion and analysis of the Corporation's
financial condition and results of operations for the three and six months ended
September 30, 2004, which includes information on the Corporation's
asset/liability management strategies, sources of liquidity and capital
resources. This discussion should be read in conjunction with the unaudited
consolidated financial statements and supplemental data contained elsewhere in
this report.
RESULTS OF OPERATIONS
General. Net income for the three and six months ended September 30, 2004
decreased $520,000 to $10.7 million from $11.2 million and decreased $4.0
million to $21.3 million from $25.3 million, respectively, for the same periods
in the prior year. The decrease in net income for the three-month period
compared to the same period last year was largely due to a net decrease in other
revenue from real estate operations of $2.3 million, an increase in compensation
expense of $1.6 million and a decrease in other non-interest income of $1.0
million, which were partially offset by an increase in loan servicing income of
$2.3 million and an increase in net interest income of $2.0 million. The
decrease in net income for the six-month period compared to the same period last
year was largely due to a decrease in net gain on sale of loans of $9.4 million
and a decrease in net other revenue from real estate operations of $2.1 million,
which were partially offset by an increase in loan servicing income of $4.4
million and a decrease in income tax expense of $3.3 million.
Net Interest Income. Net interest income increased $2.0 million and $1.8 million
for the three and six months ended September 30, 2004, respectively, as compared
to the same respective periods in the prior year. Interest income increased
$900,000 and decreased $1.1 million for the three and six months ended September
30, 2004 as compared to the same respective periods in the prior year. Interest
expense decreased $1.1 million and $2.9 million for the three and six months
ended September 30, 2004 as compared to the same respective periods in the prior
year. The net interest margin decreased to 3.25% for the three-month period
ended September 30, 2004 from 3.26% in the same period in the prior year, and
decreased to 3.19% for the six-month period ended September 30, 2004 from 3.35%
in the same period in the prior year. The decreases in the net interest margin
reflected decreases in yields on loans as interest rates continue to decrease,
which more than offset decreases in the cost of funds. The interest rate
17
spread decreased to 3.13% from 3.20% for the three-month period and decreased to
3.09% from 3.28% for the six-month period ended September 30, 2004 as compared
to the same respective periods in the prior year.
Interest income on loans increased $1.6 million and $560,000, respectively, for
the three and six months ended September 30, 2004, respectively, as compared to
the same respective periods in the prior year. These increases were primarily
attributable to an increase in the average balance of loans, which increased
$322.8 million and $314.2 million in the three and six months ended September
30, 2004, respectively, as compared to the same respective periods in the prior
year. These increases more than offset a decrease of 42 basis points in the
average yield on loans to 5.66% from 6.08% for the respective three-month period
and a decrease of 58 basis points to 5.58% from 6.16% for the respective
six-month period. Interest income on mortgage-related securities decreased
$140,000 and $820,000, respectively for the three- and six-month periods ended
September 30, 2004, as compared to the same periods in the prior year, primarily
due to a decrease of $7.4 million and $13.5 million, respectively, in the
three-month and six-month average balances of mortgage-related securities. These
decreases were also due to a decrease of 11 basis points in the average yield on
mortgage-related securities to 4.02% from 4.13% for the three-month period and a
decrease of 49 basis points to 4.00% from 4.49% for the six-month period. In
addition, interest income on investment securities (including Federal Home Loan
Bank stock) decreased $690,000 and $1.0 million, respectively, for the three-
and six-month periods ended September 30, 2004, as compared to the same
respective periods in the prior year. This was primarily a result of a decrease
of $80.6 million and $62.6 million, respectively, in the average balance of
investment securities for the three- and six-month period ended September 30,
2004, as compared to the same respective periods in 2003. Interest income on
interest-bearing deposits increased $150,000 and $200,000, respectively, for the
three and six months ended September 30, 2004, as compared to the same periods
in 2003, primarily due to increases in average balances
Interest expense on deposits decreased $1.9 million and $4.6 million for the
three and six months ended September 30, 2004, respectively, as compared to the
same respective periods in 2003. These decreases were due to a decrease of 29
basis points in the weighted average cost of deposits to 1.80% from 2.09% and a
decrease of 37 basis points to 1.79% from 2.16% for the respective three- and
six-month periods. Interest expense on notes payable and other borrowings
increased $720,000 and $1.7 million, respectively, during the three and six
months ended September 30, 2004, as compared to the same respective periods in
the prior year due primarily to an increase of $125.6 million and $169.0
million, respectively, in the average balance of notes payable and other
borrowings for the three- and six-month periods ended September 30, 2004,
respectively, as compared to the same respective periods in 2003.
Provision for Loan Losses. Provision for loan losses decreased $150,000 for the
three- and six-month periods period ended September 30, 2004, respectively, as
compared to the same respective periods for the prior year. The provisions were
based on management's ongoing evaluation of asset quality and pursuant to a
policy to maintain an allowance for losses at a level which management believes
is adequate to absorb future charge-offs of loans deemed uncollectible.
Average Interest-Earning Assets, Average Interest-Bearing Liabilities and
Interest Rate Spread. The tables on the following pages show the Corporation's
average balances, interest, average rates, net interest margin and the spread
between the combined average rates earned on interest-earning assets and average
cost of interest-bearing liabilities for the periods indicated. The average
balances are derived from average daily balances.
18
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------
2004 2003
------------------------------------- -----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST (1) BALANCE INTEREST COST (1)
----------------------------------------------------------------------------
(Dollars In Thousands)
INTEREST-EARNING ASSETS
Mortgage loans $ 2,462,223 $ 34,437 5.59% $ 2,214,691 $ 33,557 6.06%
Consumer loans 558,793 8,336 5.97 514,157 8,043 6.26
Commercial business loans 168,266 2,380 5.66 137,623 1,970 5.73
----------- --------- ------------ ---------
Total loans receivable 3,189,282 45,153 5.66 2,866,471 43,570 6.08
Mortgage-related securities 206,656 2,075 4.02 214,033 2,211 4.13
Investment securities 52,117 277 2.13 113,435 494 1.74
Interest-bearing deposits 135,425 415 1.23 106,035 266 1.00
Federal Home Loan Bank stock 64,474 869 5.39 83,791 1,344 6.42
----------- --------- ------------ ---------
Total interest-earning assets 3,647,954 48,789 5.35 3,383,765 47,885 5.66
---- ----
Non-interest-earning assets 161,370 264,595
----------- ------------
Total assets $ 3,809,324 $ 3,648,360
=========== ============
INTEREST-BEARING LIABILITIES
Demand deposits $ 736,356 949 0.52 $ 807,294 797 0.39
Regular passbook savings 258,353 285 0.44 230,740 275 0.48
Certificates of deposit 1,681,790 10,794 2.57 1,618,272 12,807 3.17
----------- --------- ------------ ---------
Total deposits 2,676,499 12,028 1.80 2,656,306 13,879 2.09
Notes payable and other borrowings 774,676 7,146 3.69 649,063 6,424 3.96
----------- --------- ------------ --------
Total interest-bearing liabilities 3,451,175 19,174 2.22 3,305,369 20,303 2.46
----- ----
Non-interest-bearing liabilities 45,880 46,633
----------- ------------
Total liabilities 3,497,055 3,352,002
Stockholders' equity 312,269 296,358
----------- ------------
Total liabilities and stockholders' equity $ 3,809,324 $ 3,648,360
=========== ============
Net interest income/interest rate spread $ 29,615 3.13% $ 27,582 3.20%
========= ==== ========= ====
Net interest-earning assets $ 196,779 $ 78,396
=========== ============
Net interest margin 3.25% 3.26%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 1.06 1.02
=========== ============
- -------------
(1) Annualized
19
SIX MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------
2004 2003
------------------------------------- -----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST (1) BALANCE INTEREST COST (1)
----------------------------------------------------------------------------
(Dollars In Thousands)
INTEREST-EARNING ASSETS
Mortgage loans $ 2,443,776 $ 67,313 5.51% $ 2,199,027 $ 67,441 6.13%
Consumer loans 552,821 16,328 5.91 511,397 16,234 6.35
Commercial business loans 164,661 4,601 5.59 136,592 4,008 5.87
----------- --------- ------------ ---------
Total loans receivable 3,161,258 88,242 5.58 2,847,016 87,683 6.16
Mortgage-related securities 212,940 4,263 4.00 226,442 5,081 4.49
Investment securities 56,832 547 1.92 112,428 1,019 1.81
Interest-bearing deposits 118,873 642 1.08 79,751 446 1.12
Federal Home Loan Bank stock 76,119 2,132 5.60 83,153 2,699 6.49
----------- --------- ------------ --------
Total interest-earning assets 3,626,022 95,826 5.29 3,348,790 96,928 5.79
---- ----
Non-interest-earning assets 191,975 250,240
----------- ------------
Total assets $ 3,817,997 $ 3,599,030
=========== ============
INTEREST-BEARING LIABILITIES
Demand deposits $ 736,597 1,703 0.46 $ 792,468 1,760 0.44
Regular passbook savings 253,329 547 0.43 222,611 568 0.51
Certificates of deposit 1,676,896 21,595 2.58 1,618,463 26,073 3.22
----------- --------- ------------ ---------
Total deposits 2,666,822 23,845 1.79 2,633,542 28,401 2.16
Notes payable and other borrowings 795,192 14,160 3.56 626,189 12,485 3.99
----------- --------- ------------ ---------
Total interest-bearing liabilities 3,462,014 38,005 2.20 3,259,731 40,886 2.51
---- ----
Non-interest-bearing liabilities 47,331 46,288
----------- ------------
Total liabilities 3,509,345 3,306,019
Stockholders' equity 308,652 293,011
----------- ------------
Total liabilities and stockholders' equity $ 3,817,997 $ 3,599,030
=========== ============
Net interest income/interest rate spread $ 57,821 3.09% $ 56,042 3.28%
========= ==== ========= ====
Net interest-earning assets $ 164,008 $ 89,059
=========== ============
Net interest margin 3.19% 3.35%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 1.05 1.03
=========== ============
- --------------
(1) Annualized
20
Non-Interest Income. Non-interest income increased to $22.8 million and $53.0
million for the three and six months ended September 30, 2004, respectively, as
compared to $7.9 million and $21.0 million for the same respective periods in
2003, primarily due to the implementation of FIN 46 in the quarter ended
December 31, 2003. This resulted in the addition of real estate investment
partnership revenue of $15.1 million and $38.9 million for the three- and
six-month periods ended September 30, 2004, respectively, and in decreased other
revenue from real estate operations of $2.4 million and $1.9 million for the
three and six months ended September 30, 2004, respectively. Exclusive of the
effects of FIN 46, non-interest income decreased $110,000 for the three-month
period ended September 30, 2004, as compared to the same period in the prior
year, primarily as a result of a decrease in other non-interest income of $1.0
million and a decrease in other revenue from real estate operations of $2.3
million for the three-month period ended September 30, 2004, as compared to the
same period in the prior year. These decreases were partially offset by an
increase in loan servicing income of $2.3 million and a net gain on sale of
investments and mortgage-related securities of $540,000. In addition, net gain
on sale of loans increased $180,000, service charges on deposits increased
$80,000 and insurance commissions increased $70,000 for the three months ended
September 30, 2004, as compared to the same period in the prior year. Exclusive
of the effects of FIN 46, non-interest income decreased $7.0 million for the
six-month period ended September 30, 2004, as compared to the same period in the
prior year, primarily as a result of a decrease in net gain on sale of loans of
$9.4 million. The decrease in the gain on sale of loans was primarily due to the
rising interest rate environment, which resulted in significantly lower levels
of refinancing activity. In addition, other non-interest income, which includes
a variety of loan fee and other miscellaneous fee income, decreased $1.3 million
and other revenue from real estate operations decreased $2.1 million during the
six months ended September 30, 2004, as compared to the same period in the prior
year. These decreases were partially offset by an increase in loan servicing
income of $4.4 million, due primarily to decreased amortization of mortgage
servicing rights, which resulted from decreases in loan sales and mortgage loan
refinancings in the rising interest rate environment. Also partially offsetting
the decreases were an increase in net gain on sale of investments and
mortgage-related securities of $1.1 million, an increase in service charges on
deposits of $280,000 and an increase in insurance commissions of $80,000 for the
six-month period ended September 30, 2004.
Non-Interest Expense. Non-interest expense increased to $33.0 million and $73.4
million for the three and six months ended September 30, 2004, respectively, as
compared to $16.9 million and $35.0 million for the same respective periods in
2003, primarily due to the implementation of FIN 46 in the quarter ended
December 31, 2003. This resulted in the addition of real estate investment
partnership cost of sales of $11.1 million and $30.8 million for the three- and
six-month periods ended September 30, 2004, respectively, as compared to the
same respective periods in the prior year, and other expenses from real estate
operations of $2.6 million and $5.4 million for the three and six months ended
September 30, 2004, respectively, as compared to the same respective periods in
the prior year. Exclusive of the effects of FIN 46, non-interest expense
increased $2.5 million for the three-month period ended September 30, 2004,
primarily as a result of an increase in compensation expense of $1.6 million,
resulting primarily from increased employee benefits, and an increase of
$460,000 in other non-interest expense. In addition, furniture and equipment
expense increased $250,000, marketing expense increased $220,000 and data
processing expense increased $40,000 for the three months ended September 30,
2004 as compared to the same period in the prior year. These increases were
partially offset by a decrease in occupancy expense of $60,000 for the
three-month period. Exclusive of the effects of FIN 46, non-interest expense
increased $2.3 million for the six-month period ended September 30, 2004,
primarily as a result of an increase in compensation expense of $1.1 million
primarily resulting from increased employee benefits, an increase in marketing
expense of $430,000 and an increase in other non-interest income of $380,000. In
addition, furniture and equipment expense increased $190,000, data processing
expense increased $150,000, and occupancy expense increased $40,000 for the six
months ended September 30, 2004 as compared to the same period in the prior
year.
Income Taxes. Income tax expense increased $80,000 and decreased $3.3 million,
respectively, during the three and six months ended September 30, 2004, as
compared to the same respective periods in 2003. The decrease for the six- month
period was the result of a decrease in income before income tax of $7.4 million
to $33.7 million for the six months ended September 30, 2004, as compared to
$41.1 million for the same period in the prior year. The effective tax rate was
39.8% and 37.0%, for the three-and six-month periods ended September 30, 2004,
respectively, as compared to 38.4% and 38.5% for the same respective periods
last year.
21
FINANCIAL CONDITION
During the six months ended September 30, 2004, the Corporation's assets
increased by $103.9 million from $3.81 billion at March 31, 2004 to $3.91
billion. The majority of this increase was attributable to an increase in loans
and investments, which were partially offset by decreases in other categories
such as mortgage-related securities, real estate held for development and
Federal Home Loan Bank stock.
Total loans (including loans held for sale) increased $157.5 million during the
six months ended September 30, 2004. Activity for the period consisted of (i)
originations and purchases of $1.34 billion, (ii) sales of $402.3 million, and
(iii) principal repayments and other adjustments of $780.2 million.
Mortgage-related securities (both available for sale and held to maturity)
decreased $14.3 million during the six months ended September 30, 2004 as a
result of principal repayments and market value adjustments of $36.9 million and
sales of $12.9 million. These decreases were partially offset by purchases of
$35.5 million of mortgage-related securities in this six-month period.
Mortgage-related securities consisted of $111.3 million of mortgage-backed
securities and $99.6 million of collateralized mortgage obligations ("CMO's")
and real estate mortgage investment conduits ("REMIC's") at September 30, 2004.
The Corporation invests in corporate CMOs and agency-issued REMICs. These
investments are deemed to have limited credit risk. The investments do have
interest rate risk due to, among other things, actual prepayments being more or
less than those predicted at the time of purchase. The Corporation invests only
in short-term tranches in order to limit the reinvestment risk associated with
greater than anticipated prepayments, as well as changes in value resulting from
changes in interest rates.
Investment securities increased $29.1 million during the six months ended
September 30, 2004 as a result of purchases of $120.6 million of U.S. Government
and agency securities, which were substantially offset by sales and maturities
of $91.8 million of such securities.
Federal Home Loan Bank ("FHLB") stock decreased $22.4 million during the six
months ended September 30, 2004. This decrease was related to a return of excess
holdings of FHLB stock and was used to provide liquidity.
Real estate held for development decreased $12.6 million to $65.1 million as of
September 30, 2004 from $77.7 million as of March 31, 2004. This decrease was
the result of continued home and land lot sales.
Total liabilities increased $89.2 million during the six months ended September
30, 2004. This increase was largely due to a $72.1 million increase in deposits
and a $14.6 million increase in FHLB advances and other borrowings during the
six-month period. Brokered deposits have been used in the past and may be used
in the future as the need for funds requires them. Brokered deposits totaled
$338.6 million at September 30, 2004 and $285.2 million at March 31, 2004, and
generally mature within one to five years.
Stockholders' equity increased $14.8 million during the six months ended
September 30, 2004 as a net result of (i) comprehensive income of $19.9 million,
(ii) stock options exercised of $2.3 million (with the excess of the cost of
treasury shares over the option price ($1.8 million) charged to retained
earnings), (iii) the issuance of shares for management and benefit plans of
$410,000, and (iv) benefit plan shares earned and related tax adjustments
totaling $610,000. This net increase was partially offset by (i) cash dividends
of $5.4 million and (ii) purchases of treasury stock of $1.2 million.
22
ASSET QUALITY
Non-performing assets increased $3.8 million to $21.2 million at September 30,
2004 from $17.3 million March 31, 2004 and increased as a percentage of total
assets to 0.54% from 0.46% at such dates, respectively.
Non-performing assets are summarized as follows at the dates indicated:
AT MARCH 31,
AT SEPTEMBER 30, ---------------------------------
2004 2004 2003 2002
---------------- ------- -------- -------
(Dollars In Thousands)
Non-accrual loans:
Single-family residential $ 3,881 $ 3,247 $ 4,510 $ 4,505
Multi-family residential -- -- 444 187
Commercial real estate 10,691 8,764 1,776 2,212
Construction and land -- -- -- 168
Consumer 524 642 661 933
Commercial business 5,331 2,268 2,678 1,037
------- ------- ------- -------
Total non-accrual loans 20,427 14,921 10,069 9,042
Real estate held for development and sale -- -- 49 74
Foreclosed properties and repossessed assets,
net 760 2,422 1,535 1,475
------- ------- ------- -------
Total non-performing assets $21,187 $17,343 $11,653 $10,591
======= ======= ======= =======
Performing troubled debt restructurings $ 130 $ 2,649 $ 2,590 $ 403
======= ======= ======= =======
Total non-accrual loans to total loans 0.59% 0.45% 0.34% 0.32%
Total non-performing assets to total assets 0.54 0.46 0.33 0.30
Allowance for loan losses to total loans 0.82 0.87 1.00 1.09
Allowance for loan losses to total
non-accrual loans 138.12 191.72 294.74 346.04
Allowance for loan losses
to total non-performing assets 133.29 165.78 257.87 300.05
Non-accrual loans increased $5.5 million during the six months ended September
30, 2004. The increase was largely attributable to three commercial loans placed
on non-accrual status during this period. One was a $5.2 million commercial
business loan secured by a computer software and consulting company located in
Tempe, Arizona. The second was a $1.5 million commercial real estate loan
secured by commercial development property located in Madison, Wisconsin. The
third was a $900,000 loan secured by a 54 unit motel located in Dodgeville,
Wisconsin. At September 30, 2004, there were five non-accrual commercial loans
with loan balances greater than $1.0 million. One loan is a commercial real
estate loan which is secured by a 70 unit hotel located in Kenosha, Wisconsin,
with a loan balance of $3.1 million at September 30, 2004. Another loan is a
commercial real estate loan which is secured by retail property in Dallas,
Texas, with a loan balance of $1.7 million at September 30, 2004. Another loan
is a commercial real estate loan which is secured by a 161 unit motel located in
Schiller Park, Illinois, with a loan balance of $1.5 million at September 30,
2004. The other two loans with loan balances greater than $1.0 million are the
commercial business loan secured by the computer software and consulting company
discussed above, and the commercial real estate loan secured by the commercial
development property also discussed above. 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 Corporation does not accrue
interest on loans past due more than 90 days.
23
Foreclosed properties and repossessed assets decreased $1.7 million for the six
months ended September 30, 2004. The decrease was not attributable to any one
specific property.
Performing troubled debt restructurings decreased $2.5 million during the six
months ended September 30, 2004 primarily due to a $2.1 million commercial real
estate loan in Sonoma, California that was paid off during the period.
At September 30, 2004, assets that the Corporation had classified as
substandard, net of reserve, consisted of $25.2 million of loans and foreclosed
properties. As of March 31, 2004, substandard assets amounted to $31.1 million.
An asset is classified as substandard when it is determined that it is
inadequately protected by the current net worth and paying capacity of the
obligor or by the collateral pledged, if any, and that the Corporation will
sustain some loss if the deficiencies are not corrected. The decrease of $5.9
million in the substandard balance for the six months ended September 30, 2004
was in part attributable to the pay off of three previously classified loans
which had carrying values of greater than $1.0 million. The three loans were
secured by properties located in Janesville, Wisconsin; Sonoma, California; and
Minneapolis, Minnesota.
The category of substandard assets contains several loans with a carrying value
of greater than $1.0 million. One loan, with a carrying value of $3.9 million,
is secured by the assets of a stainless tank operation located in Cottage Grove,
Wisconsin. Two loans with a carrying value of $4.7 million, are secured by a
computer software and consulting company located in Tempe, Arizona. A third
loan, with a carrying value of $2.8 million, is secured by a 70 unit hotel
located in Kenosha, Wisconsin. A fourth loan, with a carrying value of $1.2
million, is secured by a commercial property located in Beloit, Wisconsin. A
fifth loan, with a carrying value of $1.2 million is secured by commercial
development property located in Madison, Wisconsin. A sixth loan, with a
carrying value of $1.0 million is secured by retail property located in Dallas,
Texas. A seventh loan, with a carrying value of $1.0 million, is secured by a
161 unit motel located in Schiller Park, Illinois.
At September 30, 2004, the Corporation had identified assets of $15.2 million as
impaired, net of reserves. As of March 31, 2004, impaired loans were $11.7
million. A loan is defined as impaired when, according to FAS 114, based on
current information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. A summary of the details regarding impaired loans follows:
AT SEPTEMBER 30, AT MARCH 31,
---------------- -------------------------------
2004 2004 2003 2002
---------------- ------- ------- -------
(In Thousands)
Impaired loans with valuation
reserve required $20,204 $17,126 $ 8,483 $11,467
Less:
Specific valuation allowance 4,966 5,382 3,717 4,240
------- ------- ------- -------
Total impaired loans $15,238 $11,744 $ 4,766 $ 7,227
======= ======= ======= =======
Average impaired loans $ 9,819 $ 6,389 $ 6,288 $ 6,216
Interest income recognized
on impaired loans $ 353 $ 710 $ 613 $ 740
Interest income recognized on a
cash basis on impaired loans $ 353 $ 710 $ 613 $ 740
24
The following table sets forth information relating to the Corporation's loans
that were less than 90 days delinquent at the dates indicated.
AT MARCH 31,
AT SEPTEMBER 30, --------------------------------
2004 2004 2003 2002
---------------- ------- ------- -------
(In Thousands)
30 to 59 days $ 3,948 $ 4,887 $10,083 $17,647
60 to 89 days 2,122 10,941 5,612 2,671
------- ------- ------- -------
Total $ 6,070 $15,828 $15,695 $20,318
======= ======= ======= =======
The Corporation's loan portfolio, foreclosed properties and repossessed assets
are evaluated on a continuing basis to determine the necessity for additions and
recaptures to the allowance for loan losses and the related adequacy of the
balance in the allowance for loan losses account. These evaluations consider
several factors, including, but not limited to, general economic conditions,
loan portfolio composition, loan delinquencies, prior loss experience,
collateral value, anticipated loss of interest and management's estimation of
future losses. The evaluation of the allowance for loan losses includes a review
of known loan problems as well as inherent problems based upon historical trends
and ratios. Foreclosed properties are recorded at the lower of carrying value or
fair value with charge-offs, if any, charged to the allowance for loan losses
prior to transfer to foreclosed property. The fair value is primarily based on
appraisals, discounted cash flow analysis (the majority of which are based on
current occupancy and lease rates) and pending offers.
A summary of the activity in the allowance for loan losses follows:
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2004 2003 2004 2003
-------- -------- -------- --------
(Dollars In Thousands)
Allowance at beginning of period $ 28,535 $ 30,037 $ 28,607 $ 29,677
Charge-offs:
Mortgage (121) (63) (430) (213)
Consumer (186) (155) (460) (372)
Commercial business (393) (1,792) (398) (1,865)
-------- -------- -------- --------
Total charge-offs (700) (2,010) (1,288) (2,450)
Recoveries:
Mortgage 29 26 37 262
Consumer 20 10 42 38
Commercial business 29 88 65 174
-------- -------- -------- --------
Total recoveries 78 124 144 474
-------- -------- -------- --------
Net charge-offs (622) (1,886) (1,144) (1,976)
Provision for loan losses 300 450 750 900
-------- -------- -------- --------
Allowance at end of period $ 28,213 $ 28,601 $ 28,213 $ 28,601
======== ======== ======== ========
Net charge-offs to average loans (0.08)% (0.26)% (0.07)% (0.14)%
======== ======== ======== ========
Although management believes that the September 30, 2004 allowance for loan
losses is adequate based upon the current evaluation of loan delinquencies,
non-performing assets, charge-off trends, economic conditions and other factors,
there can be no assurance that future adjustments to the allowance will not be
necessary. Management also continues to pursue all practical and legal methods
of collection, repossession and disposal, and adheres to high underwriting
standards in the origination process in order to continue to maintain strong
asset quality.
25
LIQUIDITY AND CAPITAL RESOURCES
On an unconsolidated basis, the Corporation's sources of funds include dividends
from its subsidiaries, including the Bank, interest on its investments and
returns on its real estate held for sale. The Bank's primary sources of funds
are payments on loans and securities, deposits from retail and wholesale
sources, FHLB advances and other borrowings.
At September 30, 2004, the Corporation had outstanding commitments to originate
loans of $123.8 million, commitments to extend funds to, or on behalf of,
customers pursuant to lines and letters of credit of $309.8 million and loans
sold with recourse to the Corporation in the event of default by the borrower of
$264,000. The Corporation had sold loans with recourse in the amount of $12.4
million through the FHLB Mortgage Partnership Finance Program at September 30,
2004. Scheduled maturities of certificates of deposit during the twelve months
following September 30, 2004 amounted to $921.8 million and scheduled maturities
of FHLB advances during the same period totaled $184.3 million. At September 30,
2004, the Corporation had no reverse repurchase agreements. Management believes
adequate resources are available to fund all commitments to the extent required.
The Bank is required by the Office of Thrift Supervision ("OTS") to maintain
liquid investments in qualifying types of U.S. Government and agency securities
and other investments sufficient to ensure its safe and sound operation. During
the quarter ended September 30, 2004, the Bank's average liquidity ratio was
9.48%.
Under federal law and regulation, the Bank is required to meet certain tangible,
core and risk-based capital requirements. Tangible capital generally consists of
stockholders' equity minus certain intangible assets. Core capital generally
consists of tangible capital plus qualifying intangible assets. The risk-based
capital requirements presently address credit risk related to both recorded and
off-balance sheet commitments and obligations. The OTS requirement for the core
capital ratio for the Bank is currently 3.00%. The requirement is 4.00% for all
but the most highly-rated financial institutions.
26
The following summarizes the Bank's capital levels and ratios and the levels and
ratios required by the OTS at September 30, 2004 and March 31, 2004:
MINIMUM REQUIRED
MINIMUM REQUIRED TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ACTUAL ADEQUACY PURPOSES OTS REQUIREMENTS
--------------------- --------------------- ---------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(Dollars In Thousands)
AS OF SEPTEMBER 30, 2004:
Tier 1 capital
(to adjusted tangible assets) $303,037 7.93% $114,652 3.00% $191,087 5.00%
Risk-based capital
(to risk-based assets) 326,289 10.54 247,578 8.00 309,473 10.00
Tangible capital
(to tangible assets) 303,037 7.93 57,326 1.50 N/A N/A
AS OF MARCH 31, 2004:
Tier 1 capital
(to adjusted tangible assets) $285,680 7.71% $111,208 3.00% $185,346 5.00%
Risk-based capital
(to risk-based assets) 308,912 10.61 232,858 8.00 291,073 10.00
Tangible capital
(to tangible assets) 285,680 7.71 55,604 1.50 N/A N/A
The following table reconciles the Corporation's stockholders' equity to
regulatory capital at September 30, 2004 and March 31, 2004:
SEPTEMBER 30, MARCH 31,
2004 2004
------------- ---------
(In Thousands)
Stockholders' equity of the Corporation $ 316,359 $ 301,548
Less: Capitalization of the Corporation and non-bank
subsidiaries 8,504 8,674
--------- ---------
Stockholders' equity of the Bank 324,863 310,222
Less: Intangible assets and other non-includable assets (21,826) (24,542)
--------- ---------
Tier 1 and tangible capital 303,037 285,680
Plus: Allowable general valuation allowances 23,252 23,232
--------- ---------
Risk based capital $ 326,289 $ 308,912
========= =========
27
GUARANTEES
Financial Interpretation No. 45 "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to
Others" ("FIN 45") requires certain guarantees to be recorded at fair value as a
liability at inception and when a loss is probable and reasonably estimatable,
as those terms are defined in FASB Statement No. 5 "Accounting for
Contingencies." The recording of the liability has not significantly affected
the Corporation's financial condition.
The Corporation's real estate investment segment, IDI, is required to guarantee
the partnership loans of its subsidiaries, for the development of homes for
sale. As of September 30, 2004, IDI had guaranteed $76.1 million for the
following partnerships on behalf of the respective subsidiaries. As of the same
date, $25.1 million was outstanding. The table below summarizes the individual
subsidiaries and their respective guarantees and outstanding loan balances.
AMOUNT AMOUNT
SUBSIDIARY PARTNERSHIP AMOUNT OUTSTANDING OUTSTANDING
OF IDI ENTITY GUARANTEED AT 9/30/04 AT 3/31/04
------ ------ ---------- ---------- ----------
(Dollars in thousands)
Oakmont Chandler Creek $ 8,440 $ 4,411 $ 7,340
Davsha II Paragon 9,435 5,971 3,130
Davsha III Indian Palms 147, LLC 13,155 1,711 1,650
Davsha IV DH Indian Palms, LLC 9,840 1,233 3,330
Davsha V Villa Santa Rosa, LLC 12,518 5,598 5,490
Davsha VI Bellasara 168, LLC 12,743 2,238 4,700
Davsha VII La Vista Grande 121, LLC 9,939 3,902 -
-------- -------- --------
Total $ 76,070 $ 25,064 $ 25,640
======== ======== ========
IDI has real estate partnership investments within its subsidiaries for which it
guarantees the above loans. These partnerships are also funded by financing with
loans guaranteed by IDI and secured by the lots and homes being developed within
each of the respective partnership entities.
As a limited partner, the Corporation still has the ability to exercise
significant influence over operating and financial policies. This influence is
evident in the terms of the respective partnership agreements and participation
in policy-making processes. The Corporation has a 50% controlling interest in
the respective limited partnerships and therefore has significant influence over
the right to approve the sale or refinancing of assets of the respective
partnerships in accordance with those partnership agreements.
In acting as a partner with a controlling interest, the Corporation is committed
to providing additional levels of funding to meet partnership operating deficits
up to an aggregate amount of $76.1 million. At September 30, 2004, the
Corporation's investment in these partnerships consisted of assets of $51.8
million and cash and other assets of $4.0 million. The liabilities of these
partnerships consisted of other borrowings of $25.1 million (reported as a part
of FHLB and other borrowings), other liabilities of $5.5 million (reported as a
part of other liabilities) and minority interest of $6.5 million. These amounts
represent the Corporation's maximum exposure to loss at September 30, 2004 as a
result of involvement with these limited partnerships.
28
The partnership agreements generally contain buy-sell provisions whereby certain
partners can require the purchase or sale of ownership interests by certain
partners.
ASSET/LIABILITY MANAGEMENT
The primary function of asset and liability management is to provide liquidity
and maintain an appropriate balance between interest-earning assets and
interest-bearing liabilities within specified maturities and/or repricing dates.
Interest rate risk is the imbalance between interest-earning assets and
interest-bearing liabilities at a given maturity or repricing date, and is
commonly referred to as the interest rate gap (the "gap"). A positive gap exists
when there are more assets than liabilities maturing or repricing within the
same time frame. A negative gap occurs when there are more liabilities than
assets maturing or repricing within the same time frame. During a period of
rising interest rates, a negative gap over a particular period would tend to
adversely affect net interest income over such period, while a positive gap over
a particular period would tend to result in an increase in net interest income
over such period.
The Corporation's strategy for asset and liability management is to maintain an
interest rate gap that minimizes the impact of interest rate movements on the
net interest margin. As part of this strategy, the Corporation sells
substantially all new originations of long-term, fixed-rate, single-family
residential mortgage loans in the secondary market, and invests in
adjustable-rate or medium-term, fixed-rate, single-family residential mortgage
loans, medium-term mortgage-related securities and consumer loans, which
generally have shorter terms to maturity and higher interest rates than
single-family mortgage loans.
The Corporation also originates multi-family residential and commercial real
estate loans, which generally have adjustable or floating interest rates and/or
shorter terms to maturity than conventional single-family residential loans.
Long-term, fixed-rate, single-family residential mortgage loans originated for
sale in the secondary market are generally committed for sale at the time the
interest rate is locked with the borrower. As such, these loans involve little
interest rate risk to the Corporation.
The calculation of a gap position requires management to make a number of
assumptions as to when an asset or liability will reprice or mature. Management
believes that its assumptions approximate actual experience and considers them
reasonable, although the actual amortization and repayment of assets and
liabilities may vary substantially. The Corporation's cumulative net gap
position at September 30, 2004 has not changed materially since March 31, 2004.
CONSENT ORDER
In September 2004, the Board of Directors of the Bank entered into a Stipulation
and Consent to the Issuance of an Order to Cease and Desist for Affirmative
Relief with the Office of Thrift Supervision ("OTS") and the OTS issued a
Consent Order to Cease and Desist for Affirmative Relief ("Consent Order").
Under the Consent Order, the Bank's board of directors has agreed, among other
things, to take a range of actions with respect to the review and conduct of its
Bank Secrecy Act ("BSA") compliance activities. The Bank remains subject to the
possibility of additional governmental actions with regard to these matters,
including potential monetary penalties. The Bank is actively engaged in the
process of addressing the issues related to the Consent Order, including
reviewing and strengthening its BSA compliance process, and has taken a number
of actions in this regard which are in addition to those required by the OTS.
The Corporation expects that it will experience an increase in its operating
costs in connection with addressing matters related to the Consent Order but
cannot quantify the amount of the increases.
29
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Corporation's market rate risk has not materially changed from March
31, 2004. See the Corporation's Annual Report on Form 10-K for the year
ended March 31, 2004.
ITEM 4 CONTROLS AND PROCEDURES
The management of the Corporation evaluated, with the participation of the
Chief Executive Officer and Chief Financial Officer, the effectiveness of
the Corporation's disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of
the end of the period covered by this report. Based on such evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded
that the Corporation's disclosure controls and procedures are designed to
ensure that information required to be disclosed in the reports that are
filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
the SEC's rules and regulations and are operating in an effective manner.
No change in the Corporation's internal control over financial reporting
(as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities
Exchange Act of 1934) occurred during the most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
Corporation's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDING.
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.
In September 2004, the Board of Directors of the Bank entered into a
Stipulation and Consent to the Issuance of an Order to Cease and Desist
for Affirmative Relief with the OTS and the OTS issued a Consent Order to
Cease and Desist for Affirmative Relief. For additional information, see
Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations - Consent Order.
30
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(a) - (b) Not applicable.
(c) The following table sets forth information with respect to any
purchase made by or on behalf of the Corporation or any "affiliated
purchaser," as defined in Section 240.10b-18(a)(3) under the Exchange Act,
of shares of the Corporation's Common Stock during the indicated periods.
TOTAL NUMBER OF
SHARES PURCHASED MAXIMUM NUMBER OF
TOTAL NUMBER AVERAGE AS PART OF PUBLICLY SHARES THAT MAY YET BE
OF SHARES PRICE PAID ANNOUNCED PLANS PURCHASED UNDER THE
PERIOD PURCHASED PER SHARE OR PROGRAMS PLANS OR PROGRAMS (1)
- ----------------------------- ------------ ---------- ------------------- ----------------------
July 1 - July 31, 2004 - - - 960,650
August 1 - August 31, 2004 - - - 960,650
September 1 - September 30,
2004 47,300 25.77 47,300 913,350
------ ------- ------ -------
Total 47,300 $ 25.77 47,300 913,350
====== ======= ====== =======
(1) On October 28, 2003, the Corporation announced a program
to repurchase up to 1.2 million shares of the Corporation's Common
Stock. This repurchase plan expired on October 28, 2004.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5 OTHER INFORMATION.
None.
31
ITEM 6 EXHIBITS
The following exhibits are filed with this report:
Exhibit 31.1 Certification of Chief Executive Officer Pursuant
to Rules 13a-14 and 15d-14 of the Securities Exchange
Act of 1934 and Section 302 of the Sarbanes-Oxley Act of
2002 is included herein as an exhibit to this Report.
Exhibit 31.2 Certification of Chief Financial Officer Pursuant
to Rules 13a-14 and 15d-14 of the Securities Exchange
Act of 1934 and Section 302 of the Sarbanes-Oxley Act of
2002 is included as an exhibit to this Report.
Exhibit 32.1 Certification of the Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350) is included herein as an exhibit
to this Report.
Exhibit 32.2 Certification of the Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350) is included herein as an exhibit
to this Report.
32
SIGNATURES
Pursuant to the requirements 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.
Date: November 5, 2004 By: /s/ Douglas J. Timmerman
--------------------------------------------
Douglas J. Timmerman, Chairman of the
Board, President and Chief Executive Officer
Date: November 5, 2004 By: /s/ Michael W. Helser
--------------------------------------------
Michael W. Helser, Treasurer and
Chief Financial Officer
33