<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q (a)
AMENDMENT NO. 1 TO
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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, 1999: 25,350,130
<PAGE> 2
ANCHOR BANCORP WISCONSIN INC.
INDEX - FORM 10-Q(A)
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE #
------
<S> <C> <C> <C>
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30,1999
and March 31, 1999 2
Consolidated Statements of Income for the Three
Months Ended June 30, 1999 and 1998 3
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 1999 and 1998 4
Notes to Unaudited Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations 9
Financial Condition 13
Asset Quality 15
Liquidity & Capital Resources 18
Asset/Liability Management 20
Item 3 Quantitative and Qualitative Disclosures About Market Risk 23
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 23
Item 2 Changes in Securities 23
Item 3 Defaults upon Senior Securities 23
Item 4 Submission of Matters to Vote of Security Holders 23
Item 5 Other Information 24
Item 6 Exhibits and Reports on Form 8-K 24
SIGNATURES 25
</TABLE>
l
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1999 1999
-----------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash $ 35,071 $ 32,807
Interest-bearing deposits 9,223 31,169
------------ ------------
Cash and cash equivalents 44,294 63,976
Investment securities available for sale 52,943 35,609
Investment securities held to maturity (fair value of $59,800 and
$51,900, respectively) 60,470 51,976
Mortgage-related securities available for sale 64,766 66,956
Mortgage-related securities held to maturity (fair value of $189,200
and $192,700, respectively) 191,639 191,533
Loans receivable, net
Held for sale 10,691 18,080
Held for investment 2,189,647 2,111,566
Foreclosed properties and repossessed assets, net 155 1,710
Real estate held for development and sale 32,121 30,075
Office properties and equipment 24,956 24,879
Federal Home Loan Bank stock--at cost 27,247 27,745
Accrued interest on investments and loans 17,888 17,322
Prepaid expenses and other assets 18,485 22,154
------------ ------------
Total assets $ 2,735,302 $ 2,663,581
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 1,859,057 $ 1,835,416
Federal Home Loan Bank and other borrowings 553,746 530,495
Reverse repurchase agreements 64,360 42,464
Advance payments by borrowers for taxes and insurance 15,441 10,360
Other liabilities 21,980 24,696
------------ ------------
Total liabilities 2,514,584 2,443,431
------------ ------------
Preferred stock, $.10 par value, 5,000,000 shares
authorized, none outstanding - -
Common stock, $.10 par value, 100,000,000 and 30,000,000 shares
authorized, respectively, 25,201,667 shares issued 2,520 2,520
Additional paid-in capital 54,674 80,179
Retained earnings 165,381 168,458
Less: Treasury stock (0 shares and 1,166,483 shares,
respectively), at cost - (29,811)
Borrowings of Employee Stock Ownership Plan (689) (689)
Common stock purchased by benefit plans (1,360) (1,370)
Accumulated other comprehensive income 192 863
------------ ------------
Total stockholders' equity 220,718 220,150
------------ ------------
Total liabilities and stockholders' equity $ 2,735,302 $ 2,663,581
============ ============
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
2
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------
1999 1998
-------------------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C>
INTEREST INCOME:
Loans $ 42,319 $ 41,972
Mortgage-related securities 4,050 3,917
Investment securities 1,870 1,791
Interest-bearing deposits 214 524
--------- ---------
Total interest income 48,453 48,204
INTEREST EXPENSE:
Deposits 19,876 20,356
Notes payable and other borrowings 7,796 7,689
Other 114 191
--------- ---------
Total interest expense 27,786 28,236
--------- ---------
Net interest income 20,667 19,968
Provision for loan losses 856 275
--------- ---------
Net interest income after provision for loan losses 19,811 19,693
NON-INTEREST INCOME:
Loan servicing income 556 757
Service charges on deposits 1,306 1,224
Insurance commissions 218 356
Gain on sale of loans 1,029 2,142
Net income from operations of real estate investment 124 542
Other 427 430
--------- ---------
Total non-interest income 3,660 5,451
NON-INTEREST EXPENSES:
Compensation 6,960 6,919
Occupancy 914 1,014
Federal insurance premiums 267 258
Furniture and equipment 889 852
Data processing 960 780
Marketing 670 676
Merger-related 8,500 -
Goodwill 1,761 70
Other 1,830 1,889
--------- ---------
Total non-interest expenses 22,751 12,458
--------- ---------
Income before income taxes 720 12,686
Income taxes 2,323 4,828
--------- ---------
Net income (loss) $ (1,603) $ 7,858
========= =========
Earnings per share:
Basic $ (0.07) $ 0.32
Diluted (0.06) 0.31
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------
1999 1998
-----------------------------
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ (1,603) $ 7,858
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for losses on loans 856 275
Provision for depreciation and amortization 729 619
Net gain on sales of loans (1,029) (2,142)
Increase (decrease) in accrued interest receivable 566 (2,112)
Decrease in accrued interest payable (979) (354)
Decrease in accounts payable (2,913) (500)
Other 8,118 8,112
------ -----
Net cash provided by operating activities before proceeds
from loan sales 3,745 11,756
Net proceeds (use) from origination and sale of loans held for sale (4,595) 13,349
------- ------
Net cash provided (used) by operating activities (850) 25,105
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 2,143 3,228
Proceeds from maturities of investment securities 5,485 8,101
Purchase of investment securities available for sale (19,600) (18,063)
Purchase of investment securities held to maturity (11,000) (12,933)
Purchase of mortgage-related securities held to maturity (8,851) -
Purchase of mortgage-related securities available for sale (8,985) -
Principal collected on mortgage-related securities 19,037 24,204
Increase in loans receivable (70,692) (50,953)
Purchase of office properties and equipment (784) (461)
Sales of real estate 1,866 3,155
Purchase of real estate held for sale (3,827) (3,876)
------- -------
Net cash used by investing activities (95,208) (47,598)
</TABLE>
4
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------
1999 1998
------------------------------
(In Thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Increase in deposit accounts $ 23,641 $ 41,639
Increase in advance payments by borrowers
for taxes and insurance 5,081 8,660
Proceeds from notes payable to Federal Home Loan Bank 208,800 296,300
Repayment of notes payable to Federal Home Loan Bank (183,400) (274,800)
Increase (decrease) in securities sold under agreements
to repurchase 21,896 (20,176)
Increase (decrease) in other loans payable (2,150) 3,130
Treasury stock purchased - (4,127)
Stock options exercised 3,137 393
Purchase of stock by retirement plans 230 454
Payments of cash dividends to stockholders (904) (1,553)
------ --------
Net cash provided by financing activities 76,331 49,920
------ --------
Net increase (decrease) in cash and cash equivalents (19,727) 27,427
Cash and cash equivalents at beginning of year 63,976 67,526
------ --------
Cash and cash equivalents at end of year $ 44,249 $ 94,953
======== ========
SUPPLEMENTARY CASH FLOW INFORMATION: Cash paid or credited to accounts:
Interest on deposits and borrowings $ 19,688 $ 28,238
Income taxes 3,288 858
Non-cash transactions:
Loans transferred to foreclosed properties - 73
Retirement of treasury stock 2,613 -
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
5
<PAGE> 7
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, S.S.B. (the "Bank"), Investment
Directions, Inc. ("IDI") and Nevada Investment Directions, Inc. ("NIDI"). The
Bank's statements include its wholly-owned subsidiaries, Anchor Insurance
Services, Inc. ("AIS"), ADPC Corporation ("ADPC"), and Anchor Investment
Corporation ("AIC"). All significant intercompany balances and transactions have
been eliminated. Investments in joint ventures and other less than 50% owned
partnerships, which are not material, are accounted for on the equity method.
Partnerships with 50% ownership or more are consolidated, with significant
intercompany accounts eliminated.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") 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 consolidated financial statements have been included.
In preparing the consolidated financial statements in conformity with GAAP,
management is required to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates. The results of operations and other
data for the three-month period ended June 30, 1999 are not necessarily
indicative of results that may be expected for any other interim period or the
entire fiscal year ending March 31, 2000. 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, 1999.
Statement 13O "Reporting Comprehensive Income" requires unrealized gains or
losses on the Corporation's available-for-sale securities to be included in
other comprehensive income. During the quarter ended June 30, 1999 and 1998,
total comprehensive income (loss) amounted to ($2.27) million and $6.4
million, respectively.
The Corporation restated its financial statements as of and for the three-month
period ended June 30, 1999 from those previously issued. The restatement was
made to recognize additional income tax expense related to the $8.5 million
merger-related charge recorded in connection with the merger with FCB Financial
Corp. Certain merger-related charges are not deductible for tax purposes. As a
result of this restatement, income tax expense for the three-month period ended
June 30, 1999 increased by $1.76 million from that previously reported, with a
corresponding decrease in net income. Basic and diluted earnings per share was
reduced by $.08 and $.07, respectively, for the three-month period ended
June 30, 1999 from the amounts previously reported.
NEW ACCOUNTING STANDARDS In June 1998, SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," established accounting and reporting
standards requiring that derivative instruments (including derivative
instruments embedded in other contracts) be recorded on the balance sheet as
either assets or liabilities measured at fair value. Changes in the derivative's
fair value would be recognized currently in earnings unless specific hedge
accounting criteria are met. The earliest the Corporation would be required to
adopt SFAS No. 133 is April 1, 2000. The Corporation does not believe SFAS No.
133 will have a material impact on its financial position or results of
operations due to its limited use of derivatives.
In October 1998, SFAS No. 134, "Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Entity -- Amendment of FASB No. 64," was issued. This Statement requires
that after the securitization of mortgage loans, an entity classify the
resulting mortgage-backed securities or other retained interest based on its
ability and intent to sell or hold those securities in accordance with SFAS No.
115 "Accounting for Certain Investments in Debt and Equity Securities" (i.e.
trading, available-for-sale or held-to-maturity). This Statement is not required
to be adopted until April 1, 2000. The Corporation does not believe SFAS No. 134
will have a material impact on its financial position or results of operations.
6
<PAGE> 8
RECLASSIFICATIONS Certain 1998 accounts have been reclassified to conform to the
1999 presentations. Also, financial information for 1998 and 1999 has been
restated due to the merger with FCB Financial Corp. (FCBF) in June, 1999. In
addition, all share and per share amounts for 1998 have been adjusted to reflect
the two-for-one stock split distributed in August 1998.
NOTE 3 - BUSINESS COMBINATION
On June 7, 1999 the Corporation merged with FCB Financial Corp (FCBF). FCBF was
merged into the Corporation and its wholly owned subsidiary bank, Fox Cities
Bank, became a wholly-owned subsidiary of the Corporation. In the merger, FCBF
shareholders received 1.83 shares of the Corporation's common stock for each
outstanding share of FCBF common stock. This merger resulted in the issuance of
7,028,444 shares of common stock, at an average cost of $6.84 per share, in
exchange for 3,840,680 shares of outstanding FCBF common stock. The merger has
been accounted for as a pooling-of-interests and, accordingly, all historical
financial information and share data for the Corporation has been restated to
include FCBF for all periods presented. Certain reclassifications were made to
the FCBF's statements to conform to the Corporation's presentations.
In connection with the merger, the Corporation recorded pre-tax merger-related
charges of approximately $8.5 million. These charges are expected to include
$5.4 million in change of control severance, retirement plan, and other related
employee payments, $2.3 million in investment banking, legal and accounting fees
and $0.8 million in direct merger-related data processing and other equipment
costs. At June 30, 1999, $6.8 million in merger-related charges had been
incurred. The balance of the merger-related charges will be paid in the
remaining quarters of fiscal 2000.
NOTE 4 - STOCKHOLDERS' EQUITY
On June 16, 1999, 3,600 shares granted pursuant to the Corporation's management
recognition plan were earned by the recipients. During the quarter ended June
30, 1999, options for 94,115 shares of common stock were exercised at a weighted
price of $5.08 per share. Treasury shares were issued in exchange for the
options using the last-in-first-out method. The cost of treasury shares issued
in excess of the option price paid was charged to retained earnings ($600,000).
During the quarter ended June 30, 1999, the Corporation did not repurchase any
shares of common stock. During the quarter, 13,790 shares of treasury stock were
reissued to the Corporation's retirement plans. The weighted cost of these
shares was $16.625 per share or $230,000 and the excess of the market price over
cost of the treasury shares ($30,000) was credited to paid-in capital. On May
15, 1999, the Corporation paid out a cash dividend of $.05 per share, amounting
to $900,000.
7
<PAGE> 9
NOTE 5 - EARNINGS PER SHARE
The weighted average number of shares of common stock and common stock
equivalents outstanding for June 30, 1999 and 1998 have been adjusted to
reflect the two-for-one stock split effected on August 24, 1998. Earnings per
share for the three months ended June 30, 1999 and 1998 have been determined by
dividing net income for the respective periods by the weighted average number
of shares of common stock and common stock equivalents outstanding. Common
stock equivalents are computed using the treasury stock method.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
--------------------------------------
1999 1998
--------------------------------------
<S> <C> <C>
Numerator:
Net income $ (1,603,185) $ 7,857,880
Numerator for basic and diluted earnings
per share--income available to common
stockholders $ (1,603,185) $ 7,857,880
Denominator:
Denominator for basic earnings per
share--weighted-average shares 24,501,732 24,200,294
Effect of dilutive securities:
Employee stock options 984,283 1,473,629
Denominator for diluted earnings per
share--adjusted weighted-average
shares and assumed conversions 25,486,015 25,673,923
============= =============
Basic earnings per share $ (0.07) $ 0.32
============= =============
Diluted earnings per share $ (0.06) $ 0.31
============= =============
</TABLE>
NOTE 6 - SUBSEQUENT EVENTS
On July 27, 1999, the Corporation declared a $0.065 per share cash dividend to
be paid on August 13, 1999 to stockholders of record on July 30, 1999.
8
<PAGE> 10
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. The Corporation desires to take
advantage of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 and is including this statement for the expressed purpose of
availing itself of the protection of the safe harbor with respect to all such
forward-looking statements. 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, 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. 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.
The following discussion is designed to provide a more thorough discussion of
the Corporation's financial condition and results of operations as well as to
provide additional information on the Corporation's asset/liability
management strategies, sources of liquidity and capital resources. Management's
discussion and analysis should be read in conjunction with the consolidated
financial statements and supplemental data contained elsewhere in this report.
RESULTS OF OPERATIONS
General. Net income for the three months ended June 30, 1999 decreased $9.5
million to a net loss of $1.6 million from net income of $7.9 million, for the
same period 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 the increase in
non-interest expense of $10.3 million, primarily due to the merger-related
expenses of $8.5 million in connection with the merger of FCBF, and the decrease
in non-interest income of $1.8 million. Interest income for the three months
ended June 30, 1999, increased $250,000. These were offset by the $2.5 million
decrease in income taxes and the decrease in interest expense of $450,000 for
the same three-month period.
Net Interest Income. Net interest income increased $700,000 for the three months
ended June 30, 1999 compared to the same period in 1998. The net interest margin
decreased to 3.20% from 3.29% for the same respective three-month periods. The
interest rate spread deceased to 2.94% from 2.97% respectively, for the three-
month periods.
Interest income on loans increased $350,000 for the three months ended June 30,
1999 as compared to the same period in the prior year. This increase was a
result of an increase of $154.6 million in the average balance of loans for the
periods due to increased loan originations. Interest income on mortgage-related
securities increased $130,000 for the same period due primarily to the increase
of $10.5 million in the average balance of mortgage-related securities. Interest
income on investment securities (including Federal Home Loan Bank stock)
increased $80,000 for the three-month period ended June 30, 1999 as compared to
the same period in the prior year. This was primarily a result of an increase of
$13.9 million in the average balance of investment securities for the three
months ended June 30, 1999 as compared to the same period in 1998. Interest
income on interest-bearing deposits
9
<PAGE> 11
decreased $310,000 for the three months ended June 30, 1999, due to the decrease
of $23.5 million in the average balance of interest-bearing deposits.
Interest expense on deposits decreased $480,000 for the three months ended June
30, 1999 as compared to the same period in 1998. The decrease was due primarily
to the increase in the average balance of deposits of $127.1 million for the
three-month period as a result of various demand deposit and certificate
promotions. Interest expense on notes payable and other borrowings increased
$110,000 during the same period due to an increase of $41.3 million in the
average balance of notes payable and other borrowings. Other interest expense
decreased $80,000.
PROVISION FOR LOAN LOSSES. Provision for loan losses increased $580,000 to
$860,000 for the three-month period ended June 30, 1999 from $280,000 in the
same period for the prior year. The increase included a $650,000 conforming
adjustment to bring FCBF's allowance in conformity with the Corporation's
allowance policy. Exclusive of this one-time conforming provision, provision
for loan losses would have decreased $70,000 to $210,000. 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 tables show 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.
10
<PAGE> 12
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------
1999 1998
----------------------------------- -----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST(1) BALANCE INTEREST COST(1)
----------------------------------- -----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Mortgage loans $1,697,115 $ 31,934 7.53% $1,585,783 $ 31,980 8.07%
Consumer loans 402,402 8,656 8.60 399,468 9,099 9.11
Commercial business loans 83,634 1,729 8.27 43,263 893 8.26
---------- -------- ---------- --------
Total loans receivable 2,183,151 42,319 7.75 2,028,514 41,972 8.28
Mortgage-related securities 253,455 4,050 6.39 242,985 3,917 6.45
Investment securities 106,907 1,431 5.35 93,347 1,354 5.80
Interest-bearing deposits 13,792 214 6.21 37,303 524 5.62
Federal Home Loan Bank stock 27,000 439 6.50 26,645 437 6.56
---------- -------- ---------- --------
Total interest-earning assets 2,584,305 48,453 7.50 2,428,794 48,204 7.94
Non-interest-earning assets 95,713 85,023
---------- ----------
Total assets $2,680,018 $2,513,817
========== ==========
INTEREST-BEARING LIABILITIES
Demand deposits $ 526,479 3,461 2.63 $ 424,740 2,941 2.77
Regular passbook savings 146,708 858 2.34 136,710 808 2.36
Certificates of deposit 1,163,380 15,557 5.35 1,148,065 16,607 5.79
---------- -------- ---------- --------
Total deposits 1,836,567 19,876 4.33 1,709,515 20,356 4.76
Notes payable and other borrowings 586,550 7,796 5.32 545,254 7,689 5.64
Other 12,298 114 3.71 16,889 191 4.52
========== -------- ---------- --------
Total interest-bearing liabilities 2,435,415 27,786 4.56 2,271,658 28,236 4.97
-------- ---- -------- ----
Non-interest-bearing liabilities 23,389 33,338
========== ----------
Total liabilities 2,458,804 2,304,996
Stockholders' equity 221,214 208,821
---------- ----------
Total liabilities and stockholders' equity $2,680,018 $2,513,817
========== ==========
Net interest income/interest rate spread $ 20,667 2.94% $ 19,968 2.97%
======== ==== ======== ====
Net interest-earning assets $ 148,890 $ 157,136
========== ==========
Net interest margin 3.20% 3.29%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 1.06 1.07
==== ====
</TABLE>
- -------------------------------
(1) Annualized
11
<PAGE> 13
Non-Interest Income. Non-interest income decreased $1.8 million to $3.7 million
from $5.5 million, for the three months ended June 30, 1999 as compared to the
same period in the prior year as a result of several factors. The gain on sale
of loans decreased $1.1 million for the three-month period due to decreased
volume of loan sales. Net income from operations of real estate investments for
the three months ended June 30, 1999 decreased $420,000 because there were no
sales of partnership interests at IDI. Loan servicing income decreased $200,000,
for the same three-month period, largely due to an increase in the amortization
of Originated Mortgage Servicing Rights of $130,000. Insurance commissions
decreased $140,000 for the three-month period. These decreases were offset
slightly by an increase in service charges on deposits of $80,000 for the same
three-month period ended June 30, 1999 due to growth in deposits.
Non-Interest Expense. Non-interest expense increased $10.3 million to $22.8
million from $12.5 million during the three months ended June 30, 1999 as
compared to the same period in 1998 as a result of several factors.
Merger-related expense was $8.5 million due to the merger this quarter with
FCBF. Goodwill expense increased $1.7 million because unamortized goodwill from
a previous merger became impaired and was written off. Exclusive of the one-time
charges for the merger and goodwill, other non-interest expense increased
$100,000. Data processing expense increased $180,000 for the three months ending
June 30, 1999. Compensation expense increased $40,000 due primarily to an
increase in incentive compensation resulting from increased loan production.
Furniture and equipment expenses increased $40,000 for the same time period,
largely due to normal increases in depreciation and other costs. These increases
were partially offset by a decrease in occupancy expense of $100,000 and a
decrease in other non-interest expense of $60,000 for the three months ended
June 30, 1999.
Income Taxes. Income tax expense decreased $2.5 million during the three months
ended June 30, 1999 as compared to the same period in 1998. The effective tax
rate was 322.6% for the current year as compared to 38.1% for the three-month
period last year. The unusual effective tax rate is a result of certain
merger-related costs and goodwill amortization that are not deductible for tax
purposes.
12
<PAGE> 14
FINANCIAL CONDITION
During the three months ended June 30, 1999, the Corporation's assets increased
by $71.7 million from $2.66 billion at March 31, 1999, to $2.73 billion. The
majority of this increase was attributable to increases in loans and investment
securities.
Investment securities (both available for sale and held to maturity) increased
$25.8 million during the three months ended June 30, 1999 as a result of
purchases of $33.2 million of U.S. Government and agency securities which was
partially offset by sales and maturities of $7.4 million.
Mortgage-related securities (both available for sale and held to maturity)
decreased $2.1 million during the three months ended June 30, 1999 as a result
of principal repayments and market value adjustments of $19.9 million. This
decrease was partially offset by purchases of $17.8 million. Mortgage-related
securities consisted of $234.4 million of mortgage-backed securities and $22.0
million of Collateralized Mortgage Obligations ("CMO's") and Real Estate
Mortgage Investment Conduits ("REMIC's") at June 30, 1999.
The Corporation's investments in CMO's and REMIC's are limited to federal agency
issued REMIC's 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 $70.7 million during the
three months ended June 30, 1999. Activity for the period included (i)
originations and purchases of $323.8 million, (ii) sales of $88.7 million, and
(iii) principal repayments and other adjustments of $164.4 million.
Deposits increased $23.6 million during the three months ended June 30, 1999.
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 them. Brokered deposits totaled $83.5
million at June 30, 1999 and generally mature in one year. FHLB advances
increased $25.4 million during the three months ended June 30, 1999. Reverse
repurchase agreements and other borrowings increased $21.9 million during the
three months ended June 30, 1999. Advance payments by borrowers for taxes and
insurance increased $5.1 million.
Stockholders' equity increased $570,000 during the three months ended June 30,
1999 as a net result of (i) stock options exercised of $3.73 million (with the
excess of the cost of treasury shares over the option price ($600,000) charged
to retained earnings), (ii) the tax benefit from certain stock options of
$370,000, (iii) the purchase of stock by retirement plans of $230,000, and (iv)
benefit plan shares earned and related tax adjustments totaling $10,000. These
were offset by (i) cash dividends of $900,000 and (ii) a comprehensive loss of
$2.27 million.
IMPACT OF YEAR 2000
STATE OF READINESS 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 (referred to later in this
paragraph as the primary third party data processing provider). The vendor
providing the software is responsible for maintenance of the systems and
modifications to enable uninterrupted usage after December 31, 1999. The
13
<PAGE> 15
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 was fully compliant by June 30, 1999.
The Corporation has completed two tests with its primary third party data
processing provider. The tests, completed on August 16, 1998 and September 20,
1998, were both successful in all applications. On December 6, 1998, the loan
origination system was tested by a third party and found to be Year 2000
compliant as well. On March 7, 1999 the item processing data system was tested
by a third party and was also found to be Year 2000 compliant. The following
table indicates the Corporation's completion in the assessment, remediation,
testing and implementation of Year 2000 compliance.
- --------------------------------------------------------------------------------
Resolution Phases of Year 2000 Compliance at June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Exposure
Type Assessment Remediation Testing Implementation
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Information 100% Complete 100% Complete 100% Complete 100% Complete
Technology
- ---------------------------------------------------------------------------------------------------------------
Operating 100% Complete 100% Complete 100% Complete 100% Complete
Equipment with
Embedded
Chips or
Software
- ---------------------------------------------------------------------------------------------------------------
3rd Party 100% Complete 100% Complete for 100% Complete for 100% Complete for
for system system interface system interface system interface
interface; 100%
Complete for all Developed Implemented
other material contingency contingency
exposures plans as appropriate. plans or other
alternatives,
as necessary.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
COSTS The Corporation utilizes both internal and external resources to
reprogram, or replace, test, and implement the software and operating equipment
for Year 2000 modifications. The total cost of the Year 2000 project is
estimated at $500,000 and is being funded through operating cash flows. To date,
the Corporation has incurred $250,000 ($100,000 expensed and $150,000
capitalized for new systems and equipment), related to all phases of the Year
2000 project. Of the total remaining project costs, approximately $100,000 is
attributable to the purchase of new software and operating equipment, which will
be capitalized. The remaining $150,000 relates to consulting and remediation of
hardware and software. Both of the latter will be expensed as incurred.
RISKS Management of the Corporation believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner. As noted above, the
Corporation has not yet completed all necessary phases of the Year 2000 program.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also materially adversely affect the Corporation. The Corporation
could be subject to litigation for computer systems product
14
<PAGE> 16
failure, for example, failure to properly date business records such as accrued
loan interest. The amount of potential liability and lost revenue cannot be
reasonably estimated at this time.
CONTINGENCY PLANS The Corporation has completed its contingency plans for all
critical applications. These contingency plans involve, among other actions,
additional equipment and supplies, additional staff and training, and hard copy
records of critical information.
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) for all
periods shown have been restated to include non-performing assets from the
merger with FCBF. Of the amount merged with the Corporation's non-performing
loans, none of the loans were greater than $1.0 million. Non-performing assets
decreased $1.2 million to $5.2 million at June 30, 1999 from $6.4 million at
March 31, 1999 and decreased as a percentage of total assets to 0.19% from 0.24%
at such dates, respectively.
15
<PAGE> 17
Non-performing assets are summarized as follows at the dates indicated:
<TABLE>
<CAPTION>
At June 30, At March 31,
--------------------------------------------------
1999 1999 1998 1997
----------------- --------------------------------------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Non-accrual loans:
Single-family residential $ 2,150 $ 2,931 $ 3,256 $ 3,019
Multi-family residential - - 898 4,489
Commercial real estate 138 145 288 778
Construction and land - - - 2,258
Consumer 584 571 765 463
Commercial business 362 359 769 610
--- --- ----- ---
Total non-accrual loans 3,234 4,006 5,976 11,617
Real estate held for development and sale 1,781 1,764 4,431 2,736
Foreclosed properties and repossessed assets, net 155 630 3,806 246
--- --- ----- ---
Total non-performing assets $ 5,170 $ 6,400 $ 14,213 $ 14,599
======= ======= ======== ========
Performing troubled debt restructurings $ 293 $ 293 $ 329 $ 329
======= ======= ======== ========
Total non-accrual loans to total loans 0.14% 0.18% 0.29% 0.66%
Total non-performing assets to total assets 0.19 0.24 0.24 0.24
Allowance for loan losses to total loans 1.07 1.08 1.23 1.36
Allowance for loan losses to total
non-accrual loans 760.76 599.78 425.03 207.93
Allowance for loan and foreclosure losses
to total non-performing assets 479.65 379.97 181.00 172.84
</TABLE>
Non-accrual loans decreased $770,000 during the three months ended June 30, 1999
largely due to a decrease in single family non-accrual loans. At June 30, 1999,
there were no non-accrual loans with a carrying value greater than $1.0 million.
Non-performing real estate held for development and sale remained relatively
unchanged with a slight increase of $20,000 for the three months ended June 30,
1999. At June 30, 1999, there was one property in non-performing real estate
held for development and sale with a carrying value greater than $1.0 million.
The property consists of several condominium units in Bloomington, Minnesota
with a carrying value of $2.1 million. The units were related to, but not a part
of, a former non-accrual loan for a condominium project that was sold in fiscal
1999. The Corporation is in the process of completing the units for subsequent
sale. The sale of a multi-family project in Madison, Wisconsin, that had been a
non-accrual loan, resulted in the Corporation providing interim financing to the
buyer until permanent financing can be obtained. A deferred gain of $300,000,
associated with the project remains in real estate held for development and sale
until the sale of the property is deemed final.
Foreclosed properties and repossessed assets decreased $480,000 largely due to
the sale of a multi-family unit that had a carrying value of $370,000. There are
no foreclosed properties and repossessed assets with a carrying value greater
than $1.0 million at June 30, 1999.
16
<PAGE> 18
Performing troubled debt restructurings, the amount of which is considered
immaterial, remained relatively unchanged at June 30, 1999 from March 31, 1999.
At June 30, 1999, assets that the Corporation has classified, as substandard net
of reserves, consisted of $10.8 million of loans and foreclosed properties. As
of March 31, 1999, the substandard assets amounted to $10.5 million. There have
been no significant additions or deletions in substandard assets.
The following table sets forth information relating to the Corporation's loans
that were less than 90 days delinquent at the dates indicated.
<TABLE>
<CAPTION>
At June 30, At March 31,
------------------------------------------
1999 1999 1998 1997
----------------- ------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
30 to 59 days $ 5,817 $ 5,535 $ 7,525 $ 4,133
60 to 89 days 3,521 693 1,397 1,091
----- --- ----- -----
Total $ 9,338 $ 6,228 $ 8,922 $ 5,224
======= ======= ======= =======
</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.
17
<PAGE> 19
A summary of the activity in the allowance for losses on loans follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------
1999 1998
--------------------------
(Dollars In Thousands)
<S> <C> <C>
Allowance at beginning of period $ 24,027 $ 25,400
Charge-offs:
Mortgage (3) (45)
Consumer (393) (271)
Commercial business (1) (12)
---- ----
Total charge-offs (397) (328)
Recoveries:
Mortgage 13 36
Consumer 96 75
Commercial business 8 8
---- ----
Total recoveries 117 119
---- ----
Net charge-offs (280) (209)
---- ----
Provision 856 275
---- ----
Allowance at end of period $ 24,603 $ 25,466
======== =========
Net recoveries (charge-offs) to
average loans (0.05)% (0.04)%
======== =========
</TABLE>
Although management believes that the June 30, 1999 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, 1999, the Corporation had outstanding commitments to originate loans
of $91.7 million, commitments to extend funds to, or on behalf of, customers
pursuant to lines and letters of credit of $115.6 million and loans sold with
recourse to the Corporation in the event of default by the borrower of $1.5
million. The Corporation had firm commitments outstanding to deliver loans
through the FHLB Mortgage Partnership Finance Program of $4.7 million at June
30, 1999. Scheduled maturities of certificates of deposit during the twelve
months following June 30, 1999 amounted to $975.5 million and scheduled
maturities of FHLB advances during the same period totaled $279.2 million. At
June 30, 1999, the Corporation also had $64.4 million of reverse repurchase
agreements, all of which are scheduled to mature during the twelve months
following June 30, 1999. Management believes adequate capital and borrowings are
available from various sources to fund all commitments to the extent required.
18
<PAGE> 20
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 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, 1999, the Bank's average liquidity ratio was 14.02%.
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 7.57% as of June 30, 1999.
The following summarizes the Bank's capital levels and ratios and the levels and
ratios required by the OTS at June 30, 1999 and June 30, 1998 (dollars in
thousands):
<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, 1999:
Tier 1 capital
(to adjusted tangible assets) $ 181,326 6.72% $ 80,943 3.00% $ 134,905 5.00%
Risk-based capital
(to risk-based assets) 203,159 11.63 139,727 8.00 174,659 10.00
Tangible capital
(to tangible assets) 181,326 6.72 40,472 1.50 N/A N/A
As of June 30, 1998:
Tier 1 capital
(to adjusted tangible assets) 173,790 6.83 76,315 3.00 127,191 5.00
Risk-based capital
(to risk-based assets) 193,669 11.94 129,720 8.00 162,150 10.00
Tangible capital
(to tangible assets) 173,790 6.83 38,157 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, 1999. Management does not believe these rules will
significantly impact the Bank's ability to meet the capital requirements.
19
<PAGE> 21
The following table reconciles stockholder equity to regulatory capital at June
30, 1999 and 1998 (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------------------
1999 1998
-------------------------------
<S> <C> <C>
Stockholders' equity of the Corporation $ 220,718 $ 206,121
Less: Capitalization of the Corporation and Non-Bank
subsidiaries (39,160) (28,146)
--------- ---------
Stockholders' equity of the Bank 181,558 177,975
Less: Intangible assets and other non-includable assets (232) (4,185)
--------- ---------
Tier 1 and tangible capital 181,326 173,790
Plus: Allowable general valuation allowances 21,833 19,879
--------- ---------
Risk based capital $ 203,159 $ 193,669
========= =========
</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 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 have been no material changes in the
Corporation's asset/liability structure or management strategies and assumptions
since the prior fiscal year ended March 31, 1999. The cumulative net gap
position at June 30, 1999 has not changed materially since March 31, 1999.
20
<PAGE> 22
SEGMENT REPORTING
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 it's
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
months ended June 30, 1999 and 1998, respectively.
21
<PAGE> 23
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
-------------------------------------------------
Consolidated
Real Estate Community Financial
Investments Banking Statements
----------- ------------ ------------
<S> <C> <C> <C>
Interest income $ 523 $ 48,453 $ 48,976
Interest expense 0 27,786 27,786
-------- ----------- -----------
Net interest income 523 20,667 21,190
Provision for loan losses 0 856 856
-------- ----------- -----------
Net interest income after provision for loan losses 523 19,811 20,334
Other income (loss) (463) 3,536 3,073
Other expense (64) 22,751 22,687
-------- ----------- -----------
Net operating income 124 596 720
Gain on sale of real estate partnership investments 0 0 0
-------- ----------- -----------
Income before income taxes 124 596 720
Income taxes 290 2,033 2,323
-------- ----------- -----------
Net income $ (166) $ (1,437) $ (1,603)
======== =========== ===========
Average assets $ 31,098 $ 2,828,920 $ 2,860,018
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
-------------------------------------------------
Consolidated
Real Estate Community Financial
Investments Banking Statements
----------- ------------ ------------
<S> <C> <C> <C>
Interest income $ 107 $ 48,204 $ 48,311
Interest expense 0 28,236 28,236
-------- ----------- -----------
Net interest income 107 19,968 20,075
Provision for loan losses 0 275 275
-------- ----------- -----------
Net interest income after provision for loan losses 107 19,693 19,800
Other income 405 4,909 5,314
Other expense (30) 12,458 12,428
-------- ----------- -----------
Net operating income 542 12,144 12,686
Gain on sale of real estate partnership investments 0 0 0
-------- ----------- -----------
Income before income taxes 542 12,144 12,686
Income taxes 186 4,642 4,828
-------- ----------- -----------
Net income $ 356 $ 7,502 $ 7,858
======== =========== ===========
Average assets $ 28,345 $ 1,986,674 $ 2,015,019
</TABLE>
22
<PAGE> 24
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.
The Bank 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.
ITEM 2 CHANGES IN SECURITIES.
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4 SUBMISSION OF MATTER TO VOTE OF SECURITIES HOLDERS.
The Special Meeting of Stockholders to approve and adopt the
Agreement and Plan of Merger dated January 5, 1999, between the
Corporation and FCBF, and to approve the merger of FCBF with and
into the company was held on June 7, 1999. The vote included the
issuance of up to 7,449,974 shares of the Corporation's common
stock as part of the Plan of Merger. There were 18,066,490 shares
of common stock that could be voted at the Special Meeting and
14,840,577 shares were present at the meeting by holders thereof
in person or by proxy which constituted a quorum.
<TABLE>
<CAPTION>
For Against Withheld
------------- ------------ -------------
<S> <C> <C> <C>
Approval and adoption of the Agreement and Plan
of Merger and the merger of FCBF with and into
the Corporation 14,371,638 350,599 118,340
</TABLE>
The Annual Meeting of Stockholders was held on July 27, 1999.
There were 25,221,409 shares of common stock that could be voted,
and 22,380,093 shares present at the meeting by holders thereof
in person or by proxy which constituted a quorum. The following
is a summary of the results of items voted upon.
23
<PAGE> 25
<TABLE>
<CAPTION>
Number of Votes
-----------------------------------
For Withheld
------------- -------------
<S> <C> <C>
Nominees for three-year term ending 2002:
Pat Richter 22,137,231 241,137
Donald D. Parker 22,151,327 227,041
Richard A. Bergstrom 22,151,312 227,056
Donald D. Kropidlowski 22,151,532 226,836
</TABLE>
<TABLE>
<CAPTION>
For Against Withheld
------------- ------------ -------------
<S> <C> <C> <C>
Appointment of Ernst & Young LLP as independent
auditor for the year ending March 31, 2000 22,208,668 81,718 87,982
</TABLE>
<TABLE>
<CAPTION>
For Against Withheld
------------- ------------ -------------
<S> <C> <C> <C>
Amendment to Corporation's Articles of Incorporation
to increase the number of authorized shares of the
Corporation's common stock from 30,000,000
to 100,000,000 17,766,374 4,163,288 428,490
</TABLE>
<TABLE>
<CAPTION>
For Against Withheld
------------- ------------ -------------
<S> <C> <C> <C>
Approval of the Employee Stock Purchase Plan 20,705,037 1,004,842 510,611
</TABLE>
ITEM 5 OTHER INFORMATION.
None.
ITEM 6 EXHIBITS AND REPORTS.
(a) EXHIBIT NO. 27 RESTRICTED FINANCIAL DATA SCHEDULES (three month
period ended June 30,1999).
(b) REPORTS ON FORM 8-K.
On June 7, 1999, the Corporation filed a Current Report on Form 8-K to
report, pursuant to Item 5 thereto, consummating the merger of FCB
Financial Corp. with and into Anchor BanCorp.
On August 13, 1999, the Corporation filed a Current Report on Form
8-K(a) as an amendment to the June 7, 1999 filing of the 8-K to
include Item 7(a) Financial Statements of the Acquiree and Item 7(b)
Pro forma financial information of the Corporation.
24
<PAGE> 26
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, 1999 By: /s/ Douglas J. Timmerman
------------------------- -----------------------------------
Douglas J. Timmerman, Chairman of the
Board, President and Chief
Executive Officer
Date: July 31, 1999 By: /s/ Michael W. Helser
------------------------- ----------------------------------------
Michael W. Helser, Treasurer and
Chief Financial Officer
25
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 35,071
<INT-BEARING-DEPOSITS> 1
<FED-FUNDS-SOLD> 9,222
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 117,709
<INVESTMENTS-CARRYING> 252,109
<INVESTMENTS-MARKET> 249,045
<LOANS> 2,309,035
<ALLOWANCE> 24,603
<TOTAL-ASSETS> 2,735,302
<DEPOSITS> 1,859,057
<SHORT-TERM> 354,259
<LIABILITIES-OTHER> 37,421
<LONG-TERM> 263,847
0
0
<COMMON> 57,194
<OTHER-SE> 163,524
<TOTAL-LIABILITIES-AND-EQUITY> 2,735,302
<INTEREST-LOAN> 42,319
<INTEREST-INVEST> 5,920
<INTEREST-OTHER> 214
<INTEREST-TOTAL> 48,453
<INTEREST-DEPOSIT> 19,876
<INTEREST-EXPENSE> 27,786
<INTEREST-INCOME-NET> 20,667
<LOAN-LOSSES> 856
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 22,751
<INCOME-PRETAX> 720
<INCOME-PRE-EXTRAORDINARY> 720
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,603)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.06)
<YIELD-ACTUAL> 7.50
<LOANS-NON> 3,234
<LOANS-PAST> 0
<LOANS-TROUBLED> 293
<LOANS-PROBLEM> 4,224
<ALLOWANCE-OPEN> 24,027
<CHARGE-OFFS> 397
<RECOVERIES> 117
<ALLOWANCE-CLOSE> 24,603
<ALLOWANCE-DOMESTIC> 24,603
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 10,133
</TABLE>
