<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 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 July 31, 1998: 8,889,900
<PAGE> 2
ANCHOR BANCORP WISCONSIN INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
General. Net income for the three months ended June 30, 1998 increased $1.5
million to $6.1 million from $4.6 million for the same period in the prior year.
The increase in net income for the three month period compared to the same
period last year was largely due to the increase in interest income of $2.4
million and an increase in non-interest income of $1.5 million which were offset
by (i) an increase in interest expense of $900,000, (ii) an increase in
non-interest expense of $500,000, and (iii) an increase in income taxes of
$900,000.
Net Interest Income. Net interest income increased $1.5 million for the three
months ended June 30, 1998 compared to the same period in 1997. The net interest
margin increased to 3.22% from 3.10% for the same respective three-month
periods. The interest rate spread increased to 2.98% from 2.93% for the three
month period.
Interest income on loans increased $2.9 million for the three-month period ended
June 30, 1998 as compared to the same period in the prior year. This increase
was a result of the increase of $157.6 million in the average balance of loans
for the period due to the increased loan originations. Interest income on
mortgage-related securities decreased $790,000 for the same period due primarily
to the decrease of $47.2 million in the average balance of mortgage-related
securities. Interest income on investment securities (including Federal Home
Loan Bank stock) increased $270,000 in the aggregate for the three-month period.
This was primarily a result of an increase of $7.1 million in the average
balance of investment securities and an increase of $1.1 million in the average
balance of Federal Home Loan Bank stock. The rates on securities and stock
increased as well.
Interest expense on deposits increased $810,000 for the three-month period ended
June 30, 1998 as compared to the same period in 1997. The increase was due
primarily to the increase in the average balance of deposits of $90.5 million as
a result of various demand deposit and certificate promotions. Interest expense
on notes payable and other borrowings increased $70,000 during the same period.
Provision for Loan Losses. Provision for loan losses increased $130,000 for the
three-month period ended June 30, 1998 as compared to the same period in the
prior year. The provision was based on management's ongoing evaluation of asset
quality.
Average Interest-Earning Assets, Average Interest-Bearing Liabilities and
Interest Rate Spread. The following table shows the Corporation's average
balances, interest, average rates 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.
9
<PAGE> 3
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------------------------------------------------------
1998 1997
----------------------------------- -------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST(1) BALANCE INTEREST COST(1)
----------------------------------- -------------------------------------
(Dollars In Thousands)
<S> <C>
INTEREST-EARNING ASSETS
Mortgage loans $1,293,081 $ 25,757 7.97% $1,149,043 $ 23,418 8.15%
Consumer loans 340,700 7,699 9.04 332,685 7,332 8.82
Commercial business loans 34,452 793 9.21 28,873 580 8.04
---------- -------- ---------- --------
Total loans receivable 1,668,233 34,249 8.21 1,510,601 31,330 8.30
Mortgage-related securities 184,500 2,943 6.38 231,656 3,736 6.45
Investment securities 65,411 923 5.64 58,275 667 4.58
Interest-bearing deposits 7,303 97 5.31 9,704 127 5.23
Federal Home Loan Bank stock 20,858 344 6.60 19,751 332 6.72
---------- -------- ---------- --------
Total interest-earning assets 1,946,305 38,556 7.92 1,829,987 36,192 7.91
Non-interest-earning assets 68,714 77,689
---------- ----------
Total assets $2,015,019 $1,907,676
========== ==========
INTEREST-BEARING LIABILITIES
Demand deposits $ 368,835 2,541 2.76 $ 311,807 2,246 2.88
Regular passbook savings 101,825 518 2.03 100,842 572 2.27
Certificates of deposit 934,400 13,452 5.76 901,930 12,882 5.71
---------- -------- ---------- --------
Total deposits 1,405,060 16,511 4.70 1,314,579 15,700 4.78
Notes payable and other borrowings 438,254 6,297 5.75 443,385 6,223 5.61
Other 10,689 101 3.78 11,539 103 3.57
---------- -------- ---------- --------
Total interest-bearing liabilities 1,854,003 22,909 4.94 1,769,503 22,026 4.98
-------- ------ -------- ----
Non-interest-bearing liabilities 27,338 14,166
---------- ----------
Total liabilities 1,881,341 1,783,669
Stockholders' equity 133,678 124,007
---------- ----------
Total liabilities and stockholders' equity $2,015,019 $1,907,676
========== ==========
Net interest income/interest rate spread $ 15,647 2.98% $ 14,166 2.93%
======== ===== ======== =====
Net interest-earning assets $ 92,302 $ 60,484
======== ========
Net interest margin 3.22% 3.10%
===== =====
Ratio of average interest-earning assets
to average interest-bearing liabilities 1.05 1.03
==== ====
</TABLE>
- -------------------------------------------
(1) Annualized
Non-Interest Income. Non-interest income increased $1.5 million to $4.4 million
during the three months ended June 30, 1998 as compared to $2.9 million during
the same period in the prior year as a result of several factors.
10
<PAGE> 4
The gain on sale of assets increased $1.1 million due to increased volume of
loan sales during the period. Net income from operations of real estate
investments increased $450,000 because of an increase in sales of partnership
interests at IDI. Insurance commissions increased by $90,000 due to increased
volume in this area. In addition, loan servicing income increased by $40,000 and
service charges on deposits increased $30,000 for the same period. These items
were offset by a decrease in other non-interest income of $250,000. The decrease
in this last category was largely due to the removal of partnership income from
other non-interest income to its own income category, net income from the
operations of real estate investment.
Non-Interest Expense. Non-interest expense increased $500,000 during the
three-month period ended June 30, 1998 as compared to the same period in 1997 as
a result of several factors. Compensation expense increased $670,000 due
primarily to an increase in salaries. Furniture and equipment expenses increased
$100,000 largely due to normal increases in depreciation and other costs. Data
processing expense increased $30,000 and marketing expense increased $20,000.
These increases were partially offset by a decrease in occupancy expense of
$120,000, a decrease in other non-interest expenses such as legal expense and
telephone and postage expense of $140,000, and net income of $50,000 from
operations of foreclosed properties.
Income Taxes. Income tax expense increased $880,000 during the three months
ended June 30, 1998 as compared to the same period in 1997. The effective tax
rate was 38.1% as compared to 38.4% for the same period last year.
11
<PAGE> 5
FINANCIAL CONDITION
During the three months ended June 30, 1998, the Corporation increased its
assets $58.3 million from $2.0 billion at March 31, 1998, to $2.06 billion. The
majority of this increase was attributable to increases in loans and securities.
Investment securities (both available for sale and held to maturity) increased
$8.0 million as a result of purchases of $16.8 million of U.S. Government and
agency securities which was partially offset by sales and maturities of $8.8
million.
Mortgage-related securities (both available for sale and held to maturity)
decreased $21.0 million as a result of principal repayments and market value
adjustments. Mortgage-related securities consisted of $152.5 million of
mortgage-backed securities and $21.2 million of Collateralized Mortgage
Obligations ("CMO's") and Real Estate Mortgage Investment Conduits ("REMIC's")
at June 30, 1998.
The Corporation's investments in CMO's and REMIC's are limited to federal agency
issued REMICs which represent an interest in mortgage-backed securities. 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.
Total loans (including loans held for sale) increased $55.7 million during the
three months ended June 30, 1998. Activity for the period included (i)
originations and purchases of $326.5 million, (ii) sales of $132.4 million, and
(iii) principal repayments and other adjustments of $138.4 million.
Deposits increased $38.8 million during the three months ended June 30, 1998.
The increase was due primarily to new demand deposit products and certificate
promotions. Brokered deposits have been used in the past and may be used in the
future as the need for funds requires it. Brokered deposits totaled $75.1
million at June 30, 1998 and generally mature in one year. FHLB advances
increased $27.0 million during the three months ended June 30, 1998. Reverse
repurchase agreements and other borrowings decreased $17.1 million during the
three months ended June 30, 1998. Advance payments by borrowers for taxes and
insurance increased $6.6 million.
Stockholders' equity increased $2.82 million during the three months ended June
30, 1998 as a net result of (i) comprehensive income of $6.04 million, (ii)
stock options exercised of $1.37 million (with the excess of the cost of
treasury shares over the option price ($720,000) charged to retained earnings),
(iii) management recognition plan shares earned and related tax adjustments
totaling $80,000, and (iv) the tax benefit from certain stock options of
$60,000. These were offset by (i) treasury stock repurchased of $3.20 million,
(ii) cash dividends of $800,000 and (iii) loss on treasury shares repurchased
for management employee retirement plans of $10,000.
IMPACT OF YEAR 2000 The Corporation is currently in the process of addressing a
potential problem that faces all users of automated systems including
information systems. Many computer systems process transactions based on two
digits representing the year of transaction, rather than four digits. These
computer systems may not operate properly when the last two digits become "00",
as will occur on January 1, 2000. The problem could affect a wide variety of
automated information systems, such as mainframe applications, personal
computers, communication systems, environmental systems and other information
systems.
The Corporation has identified areas of operations critical for the delivery of
its products and services. The majority of the Corporation's applications used
in operations are purchased from an outside vendor. The vendor providing the
software is responsible for maintenance of the systems and modifications to
enable uninterrupted usage after December 31, 1999. The Corporation's plan
includes obtaining certification of compliance from third parties and testing
all of the impacted applications (both internally developed and third party
provided). The Corporation's goal is to have the plan complete and to be fully
compliant by December 31, 1998. Testing of the system will occur during 1998.
Contingency plans, if any are needed, will be developed during 1998 to address
potential problems that are identified. The Corporation's plan also includes
reviewing any potential risks associated with the loan and investment portfolios
due to the year 2000 issue.
12
<PAGE> 6
Based on currently available information, management does not anticipate that
the cost to address the year 2000 issues will have a material adverse impact on
the Corporation's financial position.
ASSET QUALITY
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 90 days or more.
Non-performing assets (consisting of non-accrual loans, certain real estate held
for development and sale, foreclosed properties and repossessed assets)
decreased to $11.3 million at June 30, 1998 from $12.9 million at March 31, 1998
and decreased as a percentage of total assets to 0.55% from 0.64% at such dates,
respectively.
13
<PAGE> 7
Non-performing assets are summarized as follows at the dates indicated:
<TABLE>
<CAPTION>
AT JUNE 30, AT MARCH 31,
-------------------------------------------------
1998 1998 1997 1996
---------------- -------------------------------------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Non-accrual loans:
Single-family residential $ 1,324 $ 1,273 $ 1,712 $ 629
Multi-family residential 898 898 3,199 -
Commercial real estate 497 288 778 470
Construction and land - - 58 81
Consumer 680 577 438 202
Commercial business 746 673 610 508
------- -------- ------- --------
Total non-accrual loans 4,145 3,709 6,795 1,890
Real estate held for development and sale 4,502 4,431 2,736 2,319
Foreclosed properties and repossessed assets, net 2,669 4,723 4,222 6,077
-------- -------- ------ --------
Total non-performing assets $ 11,316 $ 12,863 $13,753 $ 10,286
======== ======== ======= ========
Performing troubled debt restructurings $ 704 $ 725 $ 329 $ 332
======== ======== ======= ========
Total non-accrual loans to total loans 0.24% 0.22% 0.44% 0.13%
Total non-performing assets to total assets 0.55 0.64 0.73 0.59
Allowance for loan losses to total loans 1.25 1.30 1.48 1.59
Allowance for loan losses to total
non-accrual loans 524.85 588.65 334.81 1,206.72
Allowance for loan and foreclosure losses
to total non-performing assets 195.06 172.26 173.26 228.70
</TABLE>
At June 30, 1998, there were no non-accrual loans with a carrying value of
greater than $1.0 million. Non-accrual loans increased $440,000 during the three
months ended June 30, 1998. Non-performing real estate held for development and
sale increased $70,000 for the three months ended June 30, 1998.
At June 30, 1998, there were two properties in non-performing real estate held
for development and sale. The first is a multi-family project in Madison,
Wisconsin with a carrying value of $2.9 million. The sale of the project is
expected to close in July 1998 with the Corporation providing interim financing
for the majority of the sale. The second property consists of several
condominium units in Bloomington, Minnesota with a carrying value of $1.6
million. The units were related to, but not a part of, a former non-accrual loan
for a condominium project. These units were purchased in the last fiscal year in
an effort to solidify the Corporation's position with regard to the original
non-accrual loan. The Corporation is in the process of completing the units for
subsequent sale.
At June 30, 1998, there were no foreclosed properties and repossessed assets
with a carrying value of greater than $1.0 million. Foreclosed properties and
repossessed assets decreased $2.1 million during the same period. The decrease
was due primarily to the sale of an apartment complex in Elm Grove, Wisconsin,
which formerly secured a $2.2 million loan. A portion of the property that had
been identified as containing environmental contamination remains on the
Corporation's books, however, due to limited use restrictions and contamination,
the parcel is
14
<PAGE> 8
deemed to have no value. Environmental cleanup costs may be covered by Petroleum
Environmental Cleanup Funds. This matter has not been resolved because of
ongoing litigation.
Performing troubled debt restructurings remained relatively unchanged during the
three months ended June 30, 1998 and contains no loans with a carrying value of
greater than $1.0 million.
At June 30, 1998, assets that the Corporation has classified, as substandard net
of reserves, consisted of $14.1 million of loans and foreclosed properties. As
of March 31, 1998, the substandard assets amounted to $15.8 million. The
decrease of $1.7 million was primarily due to the removal of the above-discussed
Elm Grove, Wisconsin property from foreclosed properties and repossessed assets,
as a result of the sale. The decrease was partially offset by the addition of
several commercial and consumer substandard loans.
The following table sets forth information relating to the Corporation's loans
which were less than 90 days delinquent at the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30, AT MARCH 31,
--------------------------------------------------
1998 1998 1997 1996
-------------- --------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
30 to 59 days $ 8,106 $ 3,732 $ 3,144 $ 5,776
60 to 89 days 2,126 994 909 789
-------------- -------------- ----------- ------------
Total $ 10,232 $ 4,726 $ 4,053 $ 6,565
============== ============== =========== ============
</TABLE>
The Corporation's loan portfolio, foreclosed properties and repossessed assets
are evaluated on a continuing basis to determine the necessity for additions to
the allowance for losses and the related balance in the allowances. 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 potential losses. The evaluation of the allowance for loan
losses includes a review of known loan problems as well as potential 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.
15
<PAGE> 9
A summary of the activity in the allowance for losses on loans follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------------
1998 1997
-------------------------
(Dollars In Thousands)
<S> <C> <C>
Allowance at beginning of period $ 21,833 $ 22,750
Charge-offs:
Mortgage (30) (41)
Consumer (259) (346)
Commercial business (12) -
-------- --------
Total charge-offs (301) (387)
Recoveries:
Mortgage 16 44
Consumer 75 2
Commercial business 7 22
-------- --------
Total recoveries 98 68
-------- --------
Net recoveries (charge-offs) (203) (319)
-------- --------
Provision 125 -
-------- --------
Allowance at end of period $ 21,755 $ 22,431
======== ========
Net recoveries (charge-offs) to
average loans (0.05)% (0.08)%
======== ========
</TABLE>
Although management believes that the June 30, 1998 allowance for loan losses is
adequate, based upon the current evaluation of loan delinquencies, non-accrual
loans, charge-off trends, economic conditions and other factors, there can be no
assurance that future adjustments to the allowance, which could adversely affect
the Corporation's results of operations, will not be necessary. Management also
continues to pursue all practical and legal methods of collection, repossession
and disposal, as well as adhering to high underwriting standards in the
origination process, in order to maintain strong asset quality.
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 mortgage-related securities, deposits from retail and
wholesale sources, advances and other borrowings.
At June 30, 1998, the Corporation had outstanding commitments to originate loans
of $80.2 million, commitments to extend funds to, or on behalf of, customers
pursuant to lines and letters of credit of $80.9 million and loans sold with
recourse to the Corporation in the event of default by the borrower of $1.8
million. Scheduled maturities of certificates of deposit during the twelve
months following June 30, 1998 amounted to $763.7 million and scheduled
maturities of FHLB advances during the same period totaled $292.4 million. At
June 30, 1998, the Corporation also had $22.8 million of reverse repurchase
agreements, all of which are scheduled to mature during the twelve months
following June 30, 1998. Management believes adequate capital and borrowings are
available from various sources to fund all commitments to the extent required.
The Bank is required by the Office of Thrift Supervision ("OTS") to maintain
specified levels of liquid investments in qualifying types of U.S. Government
and agency securities and other investments. This requirement, which may
16
<PAGE> 10
be varied by the OTS, is based upon a percentage of deposits and short-term
borrowings. The required percentage is currently 4.0%. During the quarter ended
June 30, 1998, the Bank's average liquidity ratio was 12.69%.
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. As a state-chartered savings
institution, the Bank is also subject to the minimum regulatory capital
requirement of the State of Wisconsin, which is 6% of total assets. The Bank's
capital ratio for this measurement was 6.68% as of June 30, 1998.
The following summarizes the Bank's capital levels and ratios and the levels and
ratios required by the OTS at June 30, 1998 and June 30, 1997.
<TABLE>
<CAPTION>
MINIMUM REQUIRED
MINIMUM REQUIRED TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ACTUAL ADEQUACY PURPOSES OTS REQUIREMENTS
----------------------------------------------------------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF JUNE 30, 1998:
Tier 1 capital
(to adjusted tangible assets) $ 113,709 5.59% $ 61,023 3.00% $ 101,706 5.00%
Risk-based capital
(to risk-based assets) 129,896 10.06 103,298 8.00 129,122 10.00
Tangible capital
(to tangible assets) 113,709 5.59 30,512 1.50 N/A N/A
AS OF JUNE 30, 1997:
Tier 1 capital
(to adjusted tangible assets) 107,027 5.63 56,986 3.00 94,976 5.00
Risk-based capital
(to risk-based assets) 121,541 10.53 92,372 8.00 115,466 10.00
Tangible capital
(to tangible assets) 107,027 5.63 28,493 1.50 N/A N/A
</TABLE>
The OTS has proposed to increase the core capital ratio from the current 3.00%
to a range of 4.00% to 5.00% for all but the most healthy financial
institutions. The OTS also has proposed an interest rate risk calculation such
that an institution with a measured interest rate risk exposure, as defined,
greater than specified levels must deduct an interest rate risk component when
calculating the OTS risk-based capital. Final implementation of these proposals
was pending at June 30, 1998. Management does not believe these rules will
significantly impact the Bank's ability to meet the capital requirements.
17
<PAGE> 11
The following table reconciles stockholder equity to regulatory capital at June
30, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
----------------------------
<S> <C> <C>
AS OF JUNE 30, 1998:
Stockholders' equity of the Corporation $ 130,767 $ 119,847
Less: Capitalization of the Corporation and Non-Bank
subsidiaries (14,681) (10,898)
--------- ---------
Stockholders' equity of the Bank 116,086 108,949
Less: Intangible assets and other non-includable assets (2,377) (1,922)
--------- ---------
Tier 1 and tangible capital 113,709 107,027
Plus: Allowable general valuation allowances 16,187 14,514
--------- ---------
Risk based capital 129,896 121,541
========= =========
</TABLE>
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, invests in adjustable-rate
or medium-term, fixed-rate, single-family residential mortgage loans, invests in
medium-term mortgage-related securities and invests in consumer loans which
generally have shorter terms to maturity and higher and/or adjustable interest
rates.
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 Corporation's cumulative net gap position at June 30, 1998 for one year or
less was a negative (0.37)% of total assets. 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.
18
<PAGE> 12
The following table summarizes the Corporation's interest rate sensitivity gap
position as of June 30, 1998.
<TABLE>
<CAPTION>
06/30/99 06/30/00 06/30/01 06/30/02 06/30/03 THEREAFTER TOTAL
--------------------------------------------------------------------------------
(In thousands)
Rate sensitive assets:
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans - Fixed (1) (2) 175,789 75,829 39,818 21,583 12,011 17,229 342,259
Average interest rate 7.30% 7.21% 7.20% 7.23% 7.29% 7.54%
Mortgage loans -Variable (1) (2) 629,614 201,239 104,489 15,528 8,361 959,231
Average interest rate 7.97% 7.69% 7.70% 7.96% 7.96%
Consumer loans (1) 314,992 17,529 5,002 2,165 1,060 927 341,675
Average interest rate 8.85% 9.56% 9.66% 9.37% 9.34% 9.42%
Commercial business loans (1) 28,748 7,464 1,590 449 308 739 39,298
Average interest rate 8.94% 8.94% 8.94% 8.94% 8.94% 8.94%
Mortgage-related securities (3) 94,318 41,684 20,162 9,569 4,514 3,472 173,719
Average interest rate 6.70% 6.69% 6.71% 6.72% 6.71% 6.73%
Investment securities and other
interest-earning assets (3) 70,756 5,021 8,753 6,536 12,877 8,345 112,288
Average interest rate 6.52% 12.46% 7.39% 7.16% 6.09% 6.23%
Total rate sensitive assets 1,314,217 348,766 179,814 55,830 39,131 30,712 1,968,470
Rate sensitive liabilities:
Interest-bearing
transaction accounts (4) 176,555 65,111 44,142 30,033 20,513 46,158 382,512
Average interest rate 3.07% 3.75% 3.67% 3.58% 3.49% 3.20%
Time-deposits (4) 763,319 80,910 80,910 11,016 11,016 625 947,796
Average interest rate 5.74% 5.87% 5.87% 5.98% 5.98% 5.92%
Borrowings 381,678 46,049 23,500 796 2,500 10,000 464,523
Average interest rate 5.67% 5.99% 5.39% 6.24% 5.96% 6.01%
Total rate sensitive liabilities 1,321,552 192,070 148,552 41,845 34,029 56,783 1,794,831
Interest sensitivity gap (7,335) 156,696 31,262 13,985 5,102 (26,071) 173,639
Cumulative interest sensitivity gap (7,335) 149,361 180,623 194,608 199,710 173,639
Cumulative interest sensitivity
gap as a percent of total assets (0.37)% 7.47% 9.03% 9.73% 9.99% 8.68%
</TABLE>
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(1) Balances have been reduced for (i) undisbursed loan proceeds, which
aggregated $56.5 million, and (ii) non-accrual loans, which amounted to
$4.1 million.
(2) Includes $11.4 million of loans held for sale spread throughout the
periods.
(3) Includes $93.7 million of securities available for sale spread throughout
the periods.
(4) Does not include $92.2 million of demand accounts because they are
non-interest-bearing. Also does not include accrued interest payable, which
amounted to $8.8 million. Projected decay rates for demand deposits and
passbook savings are selected by management from various sources such as
the OTS.
19
<PAGE> 13
ITEM 6 EXHIBITS AND REPORTS.
(A) EXHIBIT NO. 27 FINANCIAL DATA SCHEDULES HAVE BEEN
PREVIOUSLY FILED.
(B) REPORTS ON FORM 8-K.
None.
21
<PAGE> 14
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: July, 31, 1998 By: /s/ Douglas J. Timmerman
------------------------- --------------------------
Douglas J. Timmerman,
Chairman of the Board,
President and Chief
Executive Officer
Date: July 31, 1998 By: /s/ Michael W. Helser
------------------------- --------------------------
Michael W. Helser,
Treasurer and Chief
Financial Officer
22
