Anchor BanCorp Wisconsin Inc. Announces First Quarter Results

Madison, Wisconsin, UNITED STATES

MADISON, Wis., Aug. 14, 2013 (GLOBE NEWSWIRE) -- Anchor BanCorp Wisconsin Inc. (the "Corporation" or the "Holding Company") (OTC Market:ABCW) today announced a net loss available to common equity of $8.9 million, or $0.42 per common share, for the three months ended June 30, 2013. This compares to a net loss available to common equity of $17.5 million, or $0.82 per common share and $3.4 million, or $0.16 per common share, for the three months ended March 31, 2013 and June 30, 2012, respectively.

Recapitalization and Chapter 11 Reorganization

As previously announced, on August 12, 2013, the Holding Company has entered into definitive stock purchase agreements with institutional and other private investors as part of a $175 million recapitalization of the institution. At the same time, in order to facilitate the recapitalization, the Holding Company announced that it has filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Western District of Wisconsin to implement a "pre-packaged" plan of reorganization to restructure the Holding Company and recapitalize its wholly-owned subsidiary, AnchorBank, fsb ("AnchorBank" or the "Bank").

The Reorganization filing includes only Anchor BanCorp, the holding company for the Bank, allowing the Bank to remain outside of bankruptcy and to continue normal operations. Operations at the Bank will continue as usual throughout the reorganization process. "It is important for our customers, employees and the community to know that AnchorBank, which operates separately from the Holding Company, is not a part of the Chapter 11 process." said Chris Bauer, AnchorBank President & CEO. "It will be business as usual at the Bank. Our customers will continue to work with the same employees, our leadership team remains in place, committed to AnchorBank and its success, and all customer deposits remain safe and insured to the fullest extent possible by the FDIC."

Pursuant to the plan of reorganization, the Holding Company will discharge its senior secured credit facility with approximately $183 million in outstanding obligations for a cash payment of $49 million. In addition, the Holding Company's TARP preferred securities with an aggregate liquidation preference and deferred dividends of approximately $139 million will be cancelled in exchange for new common equity. The shares of common stock of the Holding Company currently outstanding will be cancelled for no consideration pursuant to the plan of reorganization.

Consummation of the foregoing reorganization and recapitalization is subject to certain conditions, including bankruptcy court approval of the plan of reorganization, receipt of all required regulatory approvals and closing of the capital raise, including satisfaction of the conditions contained in the subscription agreements for the new common equity. Subject to the foregoing conditions, the reorganization process is expected to be completed within 45-90 days.

Mr. Bauer continued: "This is an important and necessary step in the transformation and turnaround of the institution. Upon completion of this transaction, AnchorBank will have capital in excess of levels required by our regulators. This will position the Bank for a return to profitability and growth."

The securities to be issued in the recapitalization transaction will not be registered under the Securities Act of 1933, as amended, or the securities laws of any state and may not be transferred, sold or otherwise disposed of except while a registration statement relating thereto is in effect under such Act and applicable state securities laws or pursuant to an exemption from registration under such Act or such laws. This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities. For more information and the full press release related to the recapitalization, please see the press release dated August 13, 2013.

Financial Highlights

  • The Bank remains adequately capitalized1 for the twelfth consecutive quarter.
  • Tier 1 leverage and total risk-based capital ratios of 4.57 percent and 9.21 percent increased 4 and 19 basis points, respectively, during the quarter and increased one and 23 basis points, respectively, over the past twelve months.1

  • Total assets declined less than one percent during the quarter by $23.1 million to $2.34 billion at June 30, 2013.
  • Non-performing loans decreased 10.0 percent to $107.0 million at June 30, 2013 from $118.8 million at March 31, 2013 and 43.4 percent from $189.0 million at June 30, 2012.
  • Net charge-offs decreased by $403,000 in the current quarter to $4.2 million from $4.6 million in the quarter ending March 31, 2013.
  • Gross return on mortgage banking totaled $4.1 million in the current quarter, a decrease of $1.2 million, or 22.2 percent, from $5.3 million in the preceding quarter; and was $67,000 lower than the $4.2 million reported in the same period a year ago.
  • Cost of funds declined one basis point to 1.34 percent in the quarter ending June 30, 2013 compared to 1.35 percent in the preceding quarter, and declined 22 basis points compared to 1.56 percent in the year ago quarter as the Bank continued to carefully manage deposit pricing.
1Under standard regulatory requirements, a bank must have a tier 1 leverage ratio of 4.0 percent or greater and a total risk-based capital ratio of 8.0 percent or greater to be considered adequately capitalized.

Bank Capital Ratios

    June 30, 2013
  Jun. 30, Mar. 31, Jun. 30, Increase (decr.) vs
(Dollars in thousands) 2013 2013 2012 3/31/2013 6/30/2012
Tier 1 capital  $ 107,070  $ 107,272  $ 127,026  $ (202)  $ (19,956)
Adjusted total assets  2,340,399  2,369,385  2,783,319  (28,986)  (442,920)
Tier 1 leverage ratio 4.57% 4.53% 4.56% 0.04% 0.01%
Total risk-based capital  $ 124,778  $ 125,459  $ 148,738  $ (681)  $ (23,960)
Risk-weighted assets  1,354,755  1,391,386  1,656,451  (36,631)  (301,696)
Total risk-based capital ratio 9.21% 9.02% 8.98% 0.19% 0.23%
Ref: Bank quarterly net income (loss)  $ (464)  $ (9,259)  $ 913  $ 8,795  $ (1,377)

The Bank's tier 1 leverage and total risk-based capital ratios were 4.57 percent and 9.21 percent at June 30, 2013, increasing by 4 and 19 basis points, respectively, compared to March 31, 2013. Adjusted total assets and risk-weighted assets of $2.34 billion and $1.35 billion, respectively, at June 30, 2013 decreased 1.2 percent and 2.6 percent, respectively, during the quarter benefitting the capital ratios. Lower adjusted and risk-weighted asset totals reflect a $43.3 million decrease in net loans held for investment during the period primarily due to payments, charge-offs and transfers to other real estate owned (OREO) outpacing loan originations. 

Financial Results

Financial results for the quarter ended June 30, 2013, include:

  • Net interest margin declined to 2.38 percent for the three months ended June 30, 2013, from 2.56 percent for the same period in the previous year. Interest income decreased $5.8 million or 21.5 percent for the three months ended June 30, 2013, as compared to the same period in the prior year. These changes were primarily due to a decline in average balances in the loan portfolio as principal repayments again outpaced new loan origination activity. Interest expense decreased $2.8 million or 26.7 percent for the quarter, as compared to the first quarter in the prior year, due to a reduction in certificates of deposit average balances and lower borrowed funds balances. The cost of deposits declined from 0.64 percent to 0.30 percent when compared to the same quarter in the prior year quarter. 
  • The provision for credit losses increased $3.1 million to $275,000 for the three months ended June 30, 2013 compared to a recovery of $2.8 million in the same period in the previous year. Continued declines in non-performing loan balances resulted in the small provision for credit losses recorded in the current year quarter. 
  • Non-interest income totaled $8.9 million for the quarter ended June 30, 2013, down $4.6 million compared to the same period in the previous year. The decrease was primarily due to lower gains on the sale of residential mortgage loans and lower gains on the sale of other real estate owned. 
  • Total non-interest expense decreased by $5.3 million to $27.4 million from $32.6 million in the same period in 2012. The favorable variance was the result of lower OREO expenses as a result of a decrease in the valuation allowance on repossessed property. Also contributing to the favorable variance was a mortgage servicing rights recovery of $1.3 million recorded during the quarter compared to an impairment of $1.3 million in the prior year quarter.

Credit Quality

    June 30, 2013
(Dollars in thousands) Jun. 30, Mar. 31, Jun. 30, Increase (decr.) vs
  2013 2013 2012 3/31/2013 6/30/2012
Quarterly Financial Results          
Provision for credit losses  $ 275  $ 830  $ (2,803)  $ (555)  $ 3,078
Net charge-offs  4,218  4,621  7,935  (403)  (3,717)
Key Metrics (at period end)          
Loans 30 to 89 days past due  20,406  24,403  39,843  (3,997)  (19,437)
Non-performing loans (NPL)  106,968  118,790  188,987  (11,822)  (82,019)
Other real estate owned  68,241  84,342  83,955  (16,101)  (15,714)
Non-performing assets  175,209  203,132  272,942  (27,923)  (97,733)
Allowance for loan losses to NPL 70.93% 67.19% 53.17% 3.74% 17.76%

Certain key credit related metrics continue to trend favorably with loans 30 to 89 days past due falling again this quarter to $20.4 million as of June 30, 2013 from $24.4 million at March 31, 2013 and $39.8 million at June 30, 2012. Non-performing loans of $107.0 million at June 30, 2013 were lower than the preceding quarter and the year ago quarter, decreasing $11.8 million and $82.0 million, respectively. The impact of these trends contributed to the lower provision for credit losses in the current quarter. Despite the decrease in provision for credit losses in the current quarter compared to the prior quarter, the allowance for loan loss at 70.93 percent of non-performing loans at June 30, 2013 rose compared to 67.19 percent at March 31, 2013. Other real estate owned, net of valuation allowance, also decreased during the quarter to $68.2 million, falling $16.1 million during the quarter and $15.7 million from a year ago. 

Mortgage Banking

  For the Quarter Ending: June 30, 2013
  Jun. 30, Mar. 31, Jun. 30, Increase (decr.) vs
(In thousands) 2013 2013 2012 3/31/2013 6/30/2012
Loan servicing income (loss), net  $ 55  $ 55  $ (406)  $ --  $ 461
Gain on sale of mortgages  2,793  3,030  5,836  (237)  (3,043)
OMSR (impairment) / recovery  1,258  2,190  (1,257)  (932)  2,515
Residential mortgage banking          
gross returns  $ 4,106  $ 5,275  $ 4,173  $ (1,169)  $ (67)
Key Metrics          
Origination volume (closed loans)  $ 173,100  $ 169,300  $ 258,500  $ 3,800  $ (85,400)
Serviced loan portfolio  2,842,000  2,910,000  3,095,000  (68,000)  (253,000)

Gross returns on residential mortgage banking totaled $4.1 million for the quarter ending June 30, 2013, compared to $5.3 million in the preceding quarter and was flat compared to the year ago quarter. Lower returns in the quarter ending June 30, 2013 compared to the prior quarter were due to a decrease in gain on sale of mortgages and a smaller originated mortgage servicing rights (OMSR) impairment/recovery recorded over the prior period, reflecting narrowing margins on the sale of production into the secondary market. OMSR impairment/recovery quarterly results are highly sensitive to changes in mortgage market interest rates as the current quarter reflects a 65 basis point increase in the 10-year Treasury rate. Loan servicing results also reflect the impact of rising interest rates as OMSR amortization expense decreased compared to the year ago period. Residential mortgage origination volume increased slightly to $173.1 million in the current quarter compared to $169.3 million in the preceding quarter but declined significantly from $258.5 million in the year ago quarter as the uptick in interest rates has served to dampen industry-wide customer demand for this product.

About Anchor BanCorp Wisconsin Inc.

Anchor BanCorp Wisconsin Inc.'s stock is traded in the over-the-counter market under the symbol ABCW. AnchorBank, fsb (the "Bank"), the wholly owned subsidiary, has 55 offices. All are located in Wisconsin.

For More Information

For more information, contact Emily Campbell, VP – Marketing & Communications, at (608) 252-1436.

Forward-Looking Statements

This news release contains certain forward-looking statements, as that term is defined in the U.S. federal securities laws. In the normal course of business, we, in an effort to help keep our shareholders and the public informed about our operations, may from time to time issue or make certain statements, either in writing or orally, that are or contain forward-looking statements. Generally, these statements relate to business plans or strategies, projected or anticipated benefits from acquisitions or dispositions made by or to be made by us, projections involving anticipated revenues, earnings, liquidity, profitability or other aspects of operating results or other future developments in our affairs or the industry in which we conduct business. Although we believe that the anticipated results or other expectations reflected in our forward-looking statements are based on reasonable assumptions, we can give no assurance that those results or expectations will be attained. You should not put undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update them in light of new information or future events, except to the extent required by federal securities laws. Please refer to our Annual Report for the fiscal year ending March 31, 2013 on Form 10-K, as filed with the Securities and Exchange Commission, for a more comprehensive discussion of forward-looking statements and the risks and uncertainties associated with our business.

Consolidated Balance Sheets
  June 30, March 31,
  2013 2013
  (In thousands, except share data)
Cash and cash equivalents  $ 241,539  $ 228,536
Investment securities available for sale, at fair value  288,965  266,787
Held for sale  19,705  18,058
Held for investment, net  1,627,243  1,670,543
Other real estate owned, net  68,241  84,342
Premises and equipment, net  24,497  24,469
Federal Home Loan Bank stock--at cost  25,630  25,630
Mortgage servicing rights, net  22,718  21,824
Accrued interest receivable  9,063  9,563
Other assets  16,868  17,831
Total assets  $ 2,344,469  $ 2,367,583
Liabilities and Stockholders' Deficit    
Non-interest bearing  $ 266,076  $ 267,732
Interest bearing  1,735,837  1,757,293
Total deposits  2,001,913  2,025,025
Other borrowed funds  318,749  317,225
Accrued interest and fees payable  65,948  61,290
Accrued taxes, insurance and employee related expenses  6,956  6,389
Other liabilities  22,292  17,518
Total liabilities  2,415,858  2,427,447
Preferred stock, $0.10 par value, 5,000,000 shares authorized, 110,000 shares issued and outstanding; dividends in arrears of $27,046 at June 30, 2013 and $25,345 at March 31, 2013  105,696  103,833
Common stock, $0.10 par value, 100,000,000 shares authorized, 25,363,339 shares issued at June 30 and March 31, 2013  2,536  2,536
Additional paid-in capital  110,034  110,034
Retained deficit  (196,341)  (189,097)
Accumulated other comprehensive income  (2,565)  3,579
Treasury stock (4,116,114 shares at June 30 and  March 31, 2013), at cost  (89,848)  (89,848)
Deferred compensation obligation  (901)  (901)
Total stockholders' deficit  (71,389)  (59,864)
Total liabilities and stockholders' deficit  $ 2,344,469  $ 2,367,583
Consolidated Statements of Operations and Comprehensive Income (Loss)
  Three Months Ended
  June 30,
  2013 2012
  (In thousands, except per share data)
Interest income    
Loans  $ 19,766  $ 25,288
Investment securities and Federal Home Loan Bank stock  1,279  1,549
Interest-earning deposits  131  154
Total interest income  21,176  26,991
Interest expense    
Deposits  1,504  3,591
Other borrowed funds  6,255  7,001
Total interest expense  7,759  10,592
Net interest income  13,417  16,399
Provision for loan losses  275  (2,803)
Net interest income after provision for loan losses  13,142  19,202
Non-interest income    
Net impairment losses on securities recognized in earnings  --  (64)
Loan servicing income (loss), net of amortization  55  (406)
Service charges on deposits  2,580  2,682
Investment and insurance commissions  1,063  1,032
Net gain on sale of loans  2,793  5,836
Net gain on sale and call of investment securities  --  62
Net gain on sale of OREO  925  3,172
Other income  1,436  1,184
Total non-interest income  8,852  13,498
Non-interest expense    
Compensation and benefits  11,130  10,470
Occupancy  1,986  1,833
Furniture and equipment  850  1,512
Federal deposit insurance premiums  1,332  1,564
Data processing  1,420  1,385
Communications  536  445
Marketing  396  248
OREO expense, net  4,289  7,012
Investor loss reimbursement  371  226
Mortgage servicing rights impairment (recovery)  (1,258)  1,257
Provision for unfunded loan commitments  1,734  1,087
Legal services  1,271  1,598
Other professional fees  495  643
Insurance  376  393
Other expense  2,447  2,972
Total non-interest expense  27,375  32,645
Income (loss) before income taxes  (5,381)  55
Income tax expense (benefit)  --  --
Net income (loss)  (5,381)  55
Preferred stock dividends in arrears  (1,701)  (1,610)
Preferred stock discount accretion  (1,863)  (1,863)
Net loss available to common equity  $ (8,945)  $ (3,418)
Net income (loss)  $ (5,381)  $ 55
Reclassification adjustment for realized net (gains) losses recognized in Statement of Operations  --  (62)
Reclassification adjustment recognized in Statement of Operations for credit related other-than-temporary impairment, net  --  64
Change in net unrealized gains (losses) on available-for-sale securities  (6,144)  985
Comprehensive income (loss)  $ (11,525)  $ 1,042
Loss per common share:    
Basic  $ (0.42)  $ (0.16)
Diluted  (0.42)  (0.16)