<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
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 October 31, 2000: 23,039,078
<PAGE> 2
ANCHOR BANCORP WISCONSIN INC.
INDEX - FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE #
------
<S> <C>
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 2000
and March 31, 2000 2
Consolidated Statements of Income for the Three and Six
Months Ended September 30, 2000 and 1999 3
Consolidated Statements of Cash Flows for the Six Months
Ended September 30, 2000 and 1999 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 10
Financial Condition 15
Asset Quality 16
Liquidity & Capital Resources 18
Asset/Liability Management 20
Item 3 Quantitative and Qualitative Disclosures About Market Risk 24
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 24
Item 2 Changes in Securities 24
Item 3 Defaults upon Senior Securities 24
Item 4 Submission of Matters to Vote of Security Holders 24
Item 5 Other Information 24
Item 6 Exhibits and Reports on Form 8-K 24
SIGNATURES 25
</TABLE>
1
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
2000 2000
---------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Cash $ 66,544 $ 46,560
Interest-bearing deposits 22,277 37,148
------------- -----------
Cash and cash equivalents 88,821 83,708
Investment securities available for sale 62,234 34,936
Investment securities held to maturity (fair value of $49,935 and
$49,971, respectively) 50,777 51,270
Mortgage-related securities available for sale 54,564 57,276
Mortgage-related securities held to maturity (fair value of$213,781
and $234,505, respectively) 219,456 243,243
Loans receivable, net:
Held for sale 4,742 1,764
Held for investment 2,462,112 2,302,721
Foreclosed properties and repossessed assets, net 310 272
Real estate held for development and sale 48,556 34,063
Office properties and equipment 25,464 25,712
Federal Home Loan Bank stock--at cost 36,547 34,597
Accrued interest on investments and loans 20,365 19,364
Prepaid expenses and other assets 24,323 22,226
------------- -----------
Total assets $ 3,098,271 $ 2,911,152
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 1,991,161 $ 1,897,369
Federal Home Loan Bank and other borrowings 737,161 664,446
Reverse repurchase agreements 100,919 92,413
Advance payments by borrowers for taxes and insurance 23,771 8,213
Other liabilities 35,253 31,496
------------- -----------
Total liabilities 2,888,265 2,693,937
============= ===========
Preferred stock, $.10 par value, 5,000,000 shares
authorized, none outstanding - -
Common stock, $.10 par value, 100,000,000 shares
authorized, 25,363,339 shares issued 2,536 2,536
Additional paid-in capital 56,574 56,496
Retained earnings 188,471 179,211
Less: Treasury stock (2,367,151 shares and 1,275,192 shares,
respectively), at cost (35,746) (18,438)
Common stock purchased by benefit plans (709) (923)
Accumulated other comprehensive loss (1,120) (1,667)
------------- -----------
Total stockholders' equity 210,006 217,215
------------- -----------
Total liabilities and stockholders' equity $ 3,098,271 $ 2,911,152
============= ===========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
2
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ---------------------------
2000 1999 2000 1999
---------------------------- ---------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 49,893 $ 43,793 $ 97,205 $ 86,112
Mortgage-related securities 4,571 3,968 9,317 8,018
Investment securities 2,190 2,148 4,127 4,018
Interest-bearing deposits 316 115 695 329
----------- ---------- ---------- -----------
Total interest income 56,970 50,024 111,344 98,477
INTEREST EXPENSE:
Deposits 23,448 20,153 45,306 40,029
Notes payable and other borrowings 13,508 8,676 25,344 16,472
Other 171 194 278 308
----------- ---------- ---------- -----------
Total interest expense 37,127 29,023 70,928 56,809
----------- ---------- ---------- -----------
Net interest income 19,843 21,001 40,416 41,668
Provision for possible loan losses 160 150 345 1,006
----------- ---------- ---------- -----------
Net interest income after provision for possible loan losses 19,683 20,851 40,071 40,662
NON-INTEREST INCOME:
Loan servicing income 625 513 1,237 1,069
Service charges on deposit accounts 1,438 1,243 2,838 2,549
Insurance commissions 483 282 1,008 500
Gain on sale of loans 1,208 366 1,568 1,395
Net gain on sale of investments and securities 82 3 82 5
Net income (loss) from operations of real estate investment (679) 328 (614) 452
Other 400 259 816 684
----------- ---------- ---------- -----------
Total non-interest income 3,557 2,994 6,935 6,654
NON-INTEREST EXPENSE:
Compensation 6,921 6,722 14,115 13,682
Occupancy 1,106 1,107 2,087 2,021
Federal insurance premiums 97 265 192 532
Data processing 995 859 1,860 1,819
Marketing 609 615 1,218 1,285
Merger-related - - - 8,500
Goodwill - - - 1,761
Other 2,100 1,568 4,104 3,398
----------- ----------- ----------- -----------
Total non-interest expense 12,837 12,047 25,532 34,798
----------- ----------- ----------- -----------
Income before income taxes 10,403 11,798 21,474 12,518
Income taxes 3,822 4,676 7,908 6,999
----------- ----------- ---------- -----------
$ 6,581 $ 7,122 $ 13,566 $ 5,519
========== =========== ========== ===========
Net income
Earnings per share:
Basic $ 0.29 $ 0.29 $ 0.59 $ 0.22
Diluted 0.28 0.28 0.58 0.22
Dividends declared per share 0.08 0.07 0.15 0.12
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
---------------------------------
2000 1999
---------------------------------
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 13,566 $ 5,519
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for possible losses on loans and real estate 345 1,006
Provision for depreciation and amortization 956 1,410
Net gain on sales of loans (1,568) (1,395)
Increase in accrued interest receivable (1,001) (1,069)
Increase in accrued interest payable 2,421 1,413
Increase (decrease) in accounts payable 2,227 (2,846)
Other 14,364 (3,921)
-------------- -------------
Net cash provided by operating activities before proceeds
from loan sales 31,310 117
Net proceeds from origination and sale of loans held for sale (3,744) 1,925
-------------- -------------
Net cash provided by operating activities 27,566 2,042
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 3,685 10,228
Proceeds from maturities of investment securities 10,499 8,531
Purchase of investment securities available for sale (43,559) (53,356)
Purchase of investment securities held to maturity - (11,000)
Proceeds from sale of mortgage-related securities available for sale - (8,851)
Purchase of mortgage-related securities held to maturity 4,071 (2)
Purchase of mortgage-related securities available for sale (1,485) 14,133)
Principal collected on mortgage-related securities 24,593 35,006
Loans originated for investment (385,710) (435,646)
Principal repayments on loans 211,184 292,727
Net office properties and equipment (248) (1,491)
Sales of real estate 312 2,112
Purchase of real estate held for development and sale (14,752) (4,202)
-------------- -------------
Net cash used by investing activities (191,410) (180,077)
</TABLE>
4
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
---------------------------------
2000 1999
---------------------------------
(In Thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Increase in deposit accounts $ 93,792 $ 27,757
Increase in advance payments by borrowers
for taxes and insurance 15,558 12,556
Proceeds from notes payable to Federal Home Loan Bank 594,900 659,650
Repayment of notes payable to Federal Home Loan Bank (544,500) (554,450)
Increase in securities sold under agreements
to repurchase 8,506 14,302
Increase (decrease) in other loans payable 22,315 (5,300)
Treasury stock purchased (19,634) (1,397)
Reissuance of treasury stock for options 497 4,035
Purchase of stock by retirement plans 942 384
Payments of cash dividends to stockholders (3,419) (904)
------------- ------------
Net cash provided by financing activities 168,957 156,633
------------- ------------
Net increase (decrease) in cash and cash equivalents 5,113 (21,402)
Cash and cash equivalents at beginning of year 83,708 63,976
------------- ------------
Cash and cash equivalents at end of year $ 88,821 $ 42,574
============= ============
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid or credited to accounts:
Interest on deposits and borrowings $ 73,349 $ 43,081
Income taxes 7,783 4,603
Non-cash transactions:
Retirement of treasury stock - 28,563
</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") Nevada Investment Directions, Inc. ("NIDI") and
California Investment Directions, Inc. ("CIDI"). The Bank's accounts and results
of operations include its wholly-owned subsidiaries, Anchor Investment Services,
Inc. ("AIS"), ADPC Corporation ("ADPC"), and Anchor Investment Corporation
("AIC"). 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 by 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 six-month period ended September 30, 2000 are not necessarily
indicative of results that may be expected for any other interim period or the
entire fiscal year ending March 31, 2001. 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, 2000.
Unrealized gains or losses on the Corporation's available-for-sale securities
are included in other comprehensive income. During the quarter ended September
30, 2000 and 1999, total comprehensive income amounted to $7.3 million and $6.7
million, respectively. For the six months ended September 30, 2000 and 1999,
comprehensive income was $14.1 million and $4.4 million, respectively.
NEW ACCOUNTING STANDARDS In June 1999, the Financial Accounting Standards Board
("FASB") issued SFAS No. 137 to effectively defer the implementation date of
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" for
one year. SFAS No. 133 was issued in June 1998 and establishes, for the first
time, comprehensive accounting and reporting standards for derivative
instruments and hedging activities. This new standard requires that all
derivative instruments be recorded in the statement of condition at fair value.
The recording of the gain or loss due to changes in fair value could either be
reported in earnings or as other comprehensive income in the statement of
shareholders' equity, depending on the type of instrument and whether or not it
is considered a hedge. With the issuance of SFAS No. 137, SFAS No. 133 is now
effective for all fiscal quarters beginning after June 15, 2000. The adoption of
this new statement is currently not expected to have a material effect on the
Corporation's future financial condition, results of operations, or liquidity.
Certain 1999 accounts have been reclassified to conform to the 2000
presentations.
6
<PAGE> 8
NOTE 3 - STOCKHOLDERS' EQUITY
On July 7, 2000, 3,500 shares granted pursuant to the Corporation's management
recognition plan were earned by the recipients. During the quarter ended
September 30, 2000, options for 29,780 shares of common stock were exercised at
a weighted-average price of $5.89 per share. Treasury shares were issued in
exchange for the options using the last-in-first-out method. The cost of the
treasury shares issued in excess of the option price paid was charged to
retained earnings $(310,000). During the quarter ended September 30, 2000, the
Corporation repurchased 743,000 shares of common stock. During the quarter,
56,453 shares of treasury stock were reissued to the Corporation's retirement
plans. The weighted-average cost of these shares was $14.47 per share or
$817,000 in the aggregate and the excess of the market price over cost of the
treasury shares $(72,000) was charged to retained earnings. On August 15, 2000,
the Corporation paid a cash dividend of $0.075 per share amounting to $1.7
million.
NOTE 4 - EARNINGS PER SHARE
Earnings per share for the three and six months ended September 30, 2000 and
1999 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.
7
<PAGE> 9
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------
2000 1999
----------------------------------------
<S> <C> <C>
Numerator:
Net income $ 6,581,500 $ 7,121,784
-------------- --------------
Numerator for basic and diluted earnings
per share--income available to common
stockholders $ 6,581,500 $ 7,121,784
Denominator:
Denominator for basic earnings per
share--weighted-average shares 22,627,115 24,713,209
Effect of dilutive securities:
Employee stock options 614,060 865,942
Denominator for diluted earnings per
share--adjusted weighted-average -------------- --------------
shares and assumed conversions 23,241,175 25,579,151
============== ==============
Basic earnings per share $ 0.29 $ 0.29
============== ==============
Diluted earnings per share 0.28 0.28
============== ==============
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
----------------------------------------
2000 1999
----------------------------------------
<S> <C> <C>
Numerator:
Net income $ 13,566,311 $ 5,518,599
-------------- --------------
Numerator for basic and diluted earnings
per share--income available to common
stockholders $ 13,566,311 $ 5,518,599
Denominator:
Denominator for basic earnings per
share--weighted-average shares 22,967,268 24,608,048
Effect of dilutive securities:
Employee stock options 609,203 924,789
Denominator for diluted earnings per
share--adjusted weighted-average
-------------- --------------
shares and assumed conversions 23,576,471 25,532,837
============== ==============
Basic earnings per share $ 0.59 $ 0.22
============== ==============
Diluted earnings per share $ 0.58 $ 0.22
============== ==============
</TABLE>
8
<PAGE> 10
Note 5 - Subsequent Events
On October 19, 2000, the Corporation declared a $0.075 per share cash dividend
on its common stock to be paid on November 15, 2000 to stockholders of record on
November 1, 2000.
9
<PAGE> 11
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 of 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 and six months ended September 30, 2000
decreased $540,000 to $6.6 million and increased $8.0 million to $13.6 million,
respectively, from the same periods in the prior year. The decrease in net
income for the three-month period compared to the same period last year was
largely due to the increase in interest expense of $8.1 million. In addition,
non-interest expense for the three months ended September 30, 2000 increased
$790,000. These increases were offset by an increase in interest income of $6.9
million, an increase in non-interest income of $560,000 and a decrease in income
tax expense of $850,000 for the three-month period. The increase in net income
for the six-month period compared to the same period last year was largely due
to the decrease in non-interest expense of $9.3 million, primarily due to prior
year merger-related expenses of $8.5 million in connection with the acquisition
of FCB Financial Corp. (FCBF) and the write off of goodwill of $1.8 million from
a previous acquisition that had become impaired. An increase in interest income
of $12.9 million, an increase in non-interest income of $280,000, and a decrease
in provision for possible loan losses of $660,000 also contributed to the
increase in net income for the six-month period. The decrease in loss provision
was due to an adjustment made in the prior six-month period due to the merger
with FCBF. These income increases, for the six months ended September 30, 2000,
were offset by an increase in interest expense of $14.1 million and an increase
in income taxes of $910,000.
Net Interest Income. Net interest income decreased $1.2 million and $1.3 million
for the three and six months ended September 30, 2000 compared to the same
periods in 1999. The net interest margin decreased to 2.77% from 3.14% for the
respective three-month periods and decreased to 2.86% from 3.17% for the
respective six-month periods. The interest rate spread decreased to 2.61% from
2.88% and decreased to 2.68% from 2.93%, respectively, for the same periods.
10
<PAGE> 12
Interest income on loans increased $6.1 million and $11.1 million for the three
and six months ended September 30, 2000 as compared to the same periods in the
prior year. These increases were the result of an increase of $163.8 million and
$166.1 million, respectively, in the average balance of loans for the periods
due to increased loan originations. Interest income on mortgage-related
securities increased $600,000 and $1.3 million for the same periods due
primarily to the increase of $34.3 million and $41.2 million, respectively, in
the average balance of mortgage-related securities. Interest income on
investment securities (including Federal Home Loan Bank stock) increased $40,000
and $110,000 for the three- and six-month periods ended September 30, 2000 as
compared to the same periods in the prior year. Although the average balances of
the investment securities and FHLB stock decreased $16.2 million and $12.7
million, respectively, for the three-and six-month periods, these decreases were
more than offset by an increase in the average yield from 5.35% to 5.87% for the
three-month period, and from 5.33% to 5.81% for the six-month period for
investment securities. The average yield for FHLB stock increased from 6.50% to
7.68% and from 6.50% to 7.45% for the respective three and six months ended
September 30, 2000 as compared to the same periods in the prior year. Interest
income on interest-bearing deposits increased $200,000 and $370,000,
respectively, for the three and six months ended September 30, 2000, due to the
increase of $10.7 million and $8.1 million in the average balance of
interest-bearing deposits.
Interest expense on deposits increased $3.3 million and $5.3 million,
respectively, for the three and six months ended September 30, 2000 as compared
to the same periods in 1999. These increases were due primarily to the increases
in the average balance of deposits of $51.3 million and $42.5 million,
respectively, for the three- and six-month periods, as a result of various
demand deposit and certificate promotions. Interest expense on notes payable and
other borrowings increased $4.8 million and $8.9 million, respectively, during
the same periods due to an increase of $208.0 million and $205.1 million,
respectively, in the average balance of notes payable and other borrowings.
Other interest expense decreased $20,000 and $30,000, respectively, for the
three and six months ended September 30, 2000.
Provision for Possible Loan Losses. Provision for possible loan losses increased
$10,000 to $160,000, and decreased $660,000 to $350,000 for the three- and
six-month periods ended September 30, 2000 compared to the same periods for the
prior year. The six-month period decrease included a $650,000 conforming
adjustment in fiscal 2000 to bring FCBF's allowance in conformity with the
Corporation's allowance policy. Exclusive of this one-time conforming provision,
provision for loan losses for the six-month period would have decreased $10,000
to $360,000. 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, net interest margin and the spread between
the combined average rates earned on interest-earning assets and average cost of
interest-bearing liabilities for the periods indicated. The average balances are
derived from average daily balances.
11
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
2000 1999
---------------------------------- ---------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE COST (1) BALANCE (1)
INTEREST INTEREST COST
---------------------------------------------------------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Mortgage loans $ 1,889,416 $ 37,761 7.99% $1,787,574 $33,565 7.51%
Consumer loans 462,722 10,368 8.96 408,193 8,825 8.65
Commercial business loans 72,045 1,764 9.79 64,578 1,403 8.69
------------ -------- ---------- -------
Total loans receivable 2,424,183 49,893 8.23 2,260,34 43,793 7.75
Mortgage-related securities 285,083 4,571 6.41 250,793 3,968 6.33
Investment securities 02,266 1,501 5.87 125,408 1,677 5.35
Interest-bearing deposits 20,140 316 6.28 9,445 115 4.87
Federal Home Loan Bank stock 35,866 689 7.68 28,963 471 6.50
------------ -------- ---------- ------
Total interest-earning assets 2,867,538 56,970 7.95 2,674,954 50,024 7.48
Non-interest-earning assets 162,788 ---- 100,732
------------ ----------
Total assets 3,030,326 2,775,686
============ ==========
INTEREST-BEARING LIABILITIES
Demand deposits 578,755 4,975 3.44 558,667 3,750 2.68
Regular passbook savings 139,296 579 1.66 171,403 1,153 2.69
Certificates of deposit 1,196,169 17,894 5.98 1,132,88 15,250 5.38
------------ ------- ---------- ------
Total deposits 1,914,220 23,448 4.90 1,862,95 20,153 4.33
Notes payable and other borrowings 848,174 13,508 6.37 640,206 8,676 5.42
Other 20,014 171 3.42 20,137 194 3.85
------------ ------- ---------- ------
Total interest-bearing liabilities 2,782,408 37,127 5.34 2,523,298 29,023 4.60
------- ---- ------ ----
Non-interest-bearing liabilities 38,502 28,671
------------ ----------
Total liabilities 2,820,910 2,551,969
Stockholders' equity 209,416 223,717
------------ ----------
Total liabilities and stockholders' equity 3,030,326 2,775,686
============ ==========
Net interest income/interest rate spread $19,843 2.61% $21,001 2.88%
======= ==== ======= ====
Net interest-earning assets $ 85,130 $ 151,656
============ ==========
Net interest margin 2.77% 3.14%
==== ====
Ratio of average interest-earning assets
to average interest-bearing
liabilities 1.03 1.06
==== ====
</TABLE>
------------------------------------------
(1) Annualized
12
<PAGE> 14
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
2000 1999
---------------------------------- ------------------------------------
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 $1,862,181 $ 73,623 7.91% $1,742,344 $ 65,499 7.52%
Consumer loans 455,570 20,175 8.86 405,298 17,481 8.63
Commercial business loans 68,650 3,407 9.93 72,706 3,132 8.62
---------- ---------- ---------- ----------
Total loans receivable 2,386,401 97,205 8.15 2,220,348 86,112 7.76
Mortgage-related securities 289,806 9,317 6.43 248,624 8,018 6.45
Investment securities 96,478 2,804 5.81 116,661 3,108 5.33
Interest-bearing deposits 22,071 695 6.30 13,946 329 4.72
Federal Home Loan Bank stock 35,515 1,323 7.45 27,982 910 6.50
---------- ---------- ---------- ----------
Total interest-earning assets 2,830,271 111,344 7.87 2,627,561 98,477 7.50
---- ----
Non-interest-earning assets 152,585 84,720
---------- ----------
Total assets $2,982,856 $2,712,281
========== ==========
INTEREST-BEARING LIABILITIES
Demand deposits $ 571,976 9,465 3.31 $ 548,328 7,211 2.63
Regular passbook savings 139,392 1,139 1.63 243,886 3,317 2.72
Certificates of deposit 1,186,646 34,702 5.85 1,063,301 29,501 5.55
---------- ---------- ---------- ----------
Total deposits 1,898,014 45,306 4.77 1,855,515 40,029 4.31
Notes payable and other borrowings 818,490 25,344 6.19 613,378 16,472 5.37
Other 16,193 278 3.43 16,218 308 3.80
---------- ---------- ---------- ----------
Total interest-bearing liabilities 2,732,697 70,928 5.19 2,485,111 56,809 4.57
---------- ---- ---------- ----
Non-interest-bearing liabilities 38,013 3,737
---------- ----------
Total liabilities 2,770,710 2,488,848
Stockholders' equity 212,146 223,433
---------- ----------
Total liabilities and stockholders' equity $2,982,856 $2,712,281
========== ==========
Net interest income/interest rate spread $ 40,416 2.68% $ 41,668 2.93%
========== ---- ========== ----
Net interest-earning assets $ 97,574 $ 142,450
========== ==========
Net interest margin 2.86% 3.17%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 1.04 1.06
==== ====
</TABLE>
----------------------
(1) Annualized
13
<PAGE> 15
Non-Interest Income. Non-interest income increased $560,000 to $3.6 million and
$280,000 to $6.9 million, respectively, for the three and six months ended
September 30, 2000 as compared to the same periods in the prior year as a result
of several factors. The gain on sale of loans increased $840,000 and $170,000
for the three- and six-month periods due to increased gain on student loan sale
and an originated mortgage servicing rights (OMSR) adjustment. Insurance
commissions increased $200,000 and $510,000 for the three and six months ended
September 30, 2000 as compared to the same periods in the prior year due to
increased sales. Service charges on deposit accounts increased $200,000 and
$290,000 for the three- and six-month periods due to a growth in deposits and
increased fees. In addition, loan servicing income increased $110,000 and
$170,000 for the three and six months ended September 30, 2000 as compared to
the same periods in the prior year largely due to an increase in the volume of
serviced loans. Other non-interest income increased $140,000 and $130,000 for
the three- and six-month periods. Net gain on sale of investments and securities
increased $80,000 for both the three and six months ended September 30, 2000 as
compared to the same periods in the prior year. These increases were partially
offset by a decrease in net income from operations of real estate investments of
$1.0 million and $1.1 million for the three and six months ended September 30,
2000 as compared to the same prior, respective periods. These decreases were
largely due to decreased resort and golf net income at the partnerships and
losses on the sale of two condominium units in a development in Bloomington,
Minnesota.
Non-Interest Expense. Non-interest expense increased $790,000 to $12.8 million
and decreased $9.3 million to $25.5 million, respectively, during the three and
six months ended September 30, 2000 as compared to the same periods in 1999 as a
result of several factors. The increase in non-interest expense for the
three-month period ended September 30, 2000 as compared to the same period in
the prior year was largely due to an increase in other expense of $530,000. This
increase was primarily due to the reclassification of some items between other
non-interest expense and other categories. Compensation expense increased
$200,000 due primarily to an increase in incentive compensation resulting from
increased loan production, and data processing expense increased $140,000 for
the three-month period due to increased equipment fees, line charges and support
staff payments. Furniture and equipment expense increased $100,000 largely due
to normal increases in depreciation and other costs for the three months ended
September 30, 2000 as compared to the same period in 1999. These increases were
partially offset by a decrease in federal insurance premiums of $170,000 for the
three-month period due to a reduction in the assessment. The decrease in
non-interest expense for the six-month period ended September 30, 2000 was
attributable to merger-related expense of $8.5 million in the first quarter of
fiscal 2000 due to the merger with FCBF and increased goodwill expense of $1.8
million also in the first quarter of fiscal 2000. Unamortized goodwill from a
previous merger became impaired and was written off in the first quarter of
fiscal 2000. Exclusive of the one-time charges for the merger and goodwill,
non-interest expense increased $1.0 million for the six-month period ended
September 30, 2000 as compared to the same period in the prior year. This
increase was primarily due to an increase in other non-interest expense of
$710,000. This increase was largely due to the reclassification of some items
between other non-interest expense and other categories. Compensation expense
increased $430,000 due primarily to an increase in incentive compensation
resulting from increased loan production. Additionally, furniture and equipment
expense increased $160,000 largely due to normal increases in depreciation and
other costs for the six-month period ended September 30, 2000. Occupancy expense
increased $70,000 and data processing expense increased $40,000 for the same
six-month period as compared to the same period in the prior year. Partially
offsetting these increases was a decrease of $340,000 in federal insurance
premiums due to a reduction in the assessment, and a decrease of $70,000 in
marketing expense as compared to the prior six-month period.
Income Taxes. Income tax expense decreased $850,000 and increased $910,000
during the three and six months ended September 30, 2000 as compared to the same
periods in 1999. The effective tax rate was 36.7% and 36.8%, respectively, for
the current year as compared to 39.6% and 55.9% for the three- and six-month
periods last year. The unusual effective tax rate for the six-month period for
1999 was a result of certain merger-related costs and goodwill amortization that
are not deductible for tax purposes.
14
<PAGE> 16
FINANCIAL CONDITION
During the six months ended September 30, 2000, the Corporation's assets
increased by $187.1 million from $2.91 billion at March 31, 2000, to $3.10
billion. The majority of this increase was attributable to increases in loans
and investment securities and was partially offset by decreases in
mortgage-related securities.
Investment securities (both available for sale and held to maturity) increased
$26.8 million during the six months ended September 30, 2000 as a result of
purchases of $43.6 million of U.S. Government and agency securities which were
offset by sales and maturities of $16.8 million.
Mortgage-related securities (both available for sale and held to maturity)
decreased $26.5 million during the six months ended September 30, 2000 as a
result of principal repayments and market value adjustments of $23.9 million and
sales of $4.1 million. This decrease was partially offset by purchases of $1.5
million. Mortgage-related securities consisted of $242.0 million of
mortgage-backed securities and $32.0 million of Collateralized Mortgage
Obligations ("CMO's") and Real Estate Mortgage Investment Conduits ("REMIC's")
at September 30, 2000.
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 $162.4 million during the
six months ended September 30, 2000. Activity for the period included (i)
originations and purchases of $610.8 million, (ii) sales of $221.4 million, and
(iii) principal repayments and other adjustments of $227.0 million.
Total liabilities increased $194.3 million during the six months ended September
30, 2000. Deposits increased $93.8 million during the six months ended September
30, 2000. 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 $113.6 million at September 30, 2000 and generally mature in one year.
FHLB advances and other borrowings increased $72.7 million during the six months
ended September 30, 2000. Reverse repurchase agreements increased $8.5 million
during the six months ended September 30, 2000. Advance payments by borrowers
for taxes and insurance increased $15.6 million during this same period.
Stockholders' equity decreased $7.2 million during the six months ended
September 30, 2000 as a net result of (i) comprehensive income of $14.1 million
(ii) stock options exercised of $1.3 million (with the excess of the cost of
treasury shares over the option price ($810,000) charged to retained earnings),
(iii) the tax benefit from certain stock options of $80,000, (iv) the purchase
of stock by retirement plans of $940,000, and (v) benefit plan shares earned and
related tax adjustments totaling $210,000. These increases were offset by (i)
purchases of treasury stock of $19.6 million and (ii) cash dividends of $3.4
million.
15
<PAGE> 17
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 decreased $410,000 to $5.2 million at September 30, 2000
from $5.6 million at March 31, 2000 and decreased as a percentage of total
assets to 0.17 % from 0.19% at such dates, respectively.
Non-performing assets are summarized as follows at the dates indicated:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
------------------------------------------
2000 2000 1999 1998
------- ------------------------------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Non-accrual loans:
Single-family residential $ 2,280 $ 2,582 $ 2,931 $ 3,256
Multi-family residential 2 3 -- 898
Commercial real estate 443 126 145 288
Construction and land 91 -- -- --
Consumer 423 571 571 765
Commercial business 526 332 359 769
------- ------- ------- -------
Total non-accrual loans 3,765 3,614 4,006 5,976
Real estate held for development and sale 1,090 1,691 1,764 4,431
Foreclosed properties and repossessed assets, net 310 272 630 3,794
------- ------- ------- -------
Total non-performing assets $ 5,165 $ 5,577 $ 6,400 $14,201
======= ======= ======= =======
Performing troubled debt restructurings $ 444 $ 144 $ 293 $ 725
======= ======= ======= =======
Total non-accrual loans to total loans 0.14% 0.15% 0.18% 0.29%
Total non-performing assets to total assets 0.17 0.19 0.24 0.56
Allowance for loan losses to total loans 0.93 1.00 1.08 1.23
Allowance for loan losses to total
non-accrual loans 641.17 675.26 599.78 425.03
Allowance for loan and foreclosure losses
to total non-performing assets 469.66 439.63 379.97 181.15
</TABLE>
Non-accrual loans increased $150,000 during the six months ended September 30,
2000. At September 30, 2000, there were no non-accrual loans with a carrying
value greater than $1.0 million.
Non-performing real estate held for development and sale decreased $600,000 for
the six months ended September 30, 2000. At September 30, 2000, there were no
properties in non-performing real estate held for development and sale with a
carrying value greater than $1.0 million.
Foreclosed properties and repossessed assets increased $40,000 during the six
months ended September 30, 2000. There were no foreclosed properties and
repossessed assets with a carrying value greater than $1.0 million at September
30, 2000.
16
<PAGE> 18
Performing troubled debt restructurings increased $300,000 during the six months
ended September 30, 2000 due to the addition of an unimproved land mortgage
loan.
At September 30, 2000, assets that the Corporation has classified as
substandard, net of reserves, consisted of $5.6 million of loans and foreclosed
properties. As of March 31, 2000, the substandard assets amounted to $10.7
million. The decrease of $5.1 million in substandard assets was due largely to a
decrease of $4.4 million in substandard mortgage loans and a decrease of
$900,000 in substandard investments. The decrease in substandard mortgage loans
was substantially due to a $4.0 million commercial mortgage loan that paid off
during the six-month period ended September 30, 2000. The decrease in
substandard investments was due to the sale of two units of a condominium
project in Bloomington, Minnesota which were held for development and sale.
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 SEPTEMBER 30, AT MARCH 31,
-----------------------------------------------------
2000 2000 1999 1998
------ -----------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
30 to 59 days $6,845 $3,224 $5,535 $7,525
60 to 89 days 526 903 693 1,397
------ ------ ------ ------
Total $7,371 $4,127 $6,228 $8,922
====== ====== ====== ======
</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 SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
2000 1999 2000 1999
---------------------------- ----------------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Allowance at beginning of period $ 24,404 $ 24,900 $ 24,404 $ 24,324
Charge-offs:
Mortgage (502) (1) (513) (4)
Consumer (157) (189) (366) (582)
Commercial business -- (171) (1) (172)
-------- -------- -------- --------
Total charge-offs (659) (361) (880) (758)
Recoveries:
Mortgage 208 20 217 33
Consumer 14 20 39 116
Commercial business 13 3 15 11
-------- -------- -------- --------
Total recoveries 235 43 271 160
-------- -------- -------- --------
Net charge-offs (424) (318) (609) (598)
Provision 160 150 345 1,006
-------- -------- -------- --------
Allowance at end of period $ 24,140 $ 24,732 $ 24,140 $ 24,732
======== ======== ======== ========
Net charge-offs to average loans (0.07)% (0.06)% (0.05)% (0.05)%
======== ======== ======== ========
</TABLE>
Although management believes that the September 30, 2000 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 September 30, 2000, the Corporation had outstanding commitments to originate
loans of $59.1 million, commitments to extend funds to, or on behalf of,
customers pursuant to lines and letters of credit of $144.7 million and loans
sold with recourse to the Corporation in the event of default by the borrower of
$1.1 million. The Corporation had firm commitments outstanding to deliver loans
through the FHLB Mortgage Partnership Finance Program of $5.6 million at
September 30, 2000. Scheduled maturities of certificates of deposit during the
twelve months following September 30, 2000 amounted to $948.1 million and
scheduled maturities of FHLB advances during the same period totaled $447.9
million. At September 30, 2000, the Corporation also had $100.9 million of
reverse repurchase agreements, all of which are scheduled to mature during the
twelve months following September 30, 2000. 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
September 30, 2000, the Bank's average liquidity ratio was 11.6%.
Under federal law and regulation, the Bank is required to meet certain tangible,
core and risk-based capital requirements. Tangible capital generally consists of
stockholders' equity minus certain intangible assets. Core capital generally
consists of tangible capital plus qualifying intangible assets. The risk-based
capital requirements presently address credit risk related to both recorded and
off-balance sheet commitments and obligations. The OTS requirement for the core
capital ratio for the Bank is currently 3.00%. The requirement is 4.00% for all
but the most highly-rated financial institutions.
The following summarizes the Bank's capital levels and ratios and the levels and
ratios required by the OTS at September 30, 2000 and March 31, 2000 (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 SEPTEMBER 30, 2000:
Tier 1 capital
(to adjusted tangible assets) $187,190 6.15% $ 91,262 3.00% $152,103 5.00%
Risk-based capital
(to risk-based assets) 211,072 10.06 167,829 8.00 209,786 10.00
Tangible capital
(to tangible assets) 187,190 6.15 45,631 1.50 N/A N/A
AS OF MARCH 31, 2000:
Tier 1 capital
(to adjusted tangible assets) 188,606 6.56 86,201 3.00 143,669 5.00
Risk-based capital
(to risk-based assets) 212,066 11.07 153,196 8.00 191,495 10.00
Tangible capital
(to tangible assets) 188,606 6.56 43,101 1.50 N/A N/A
</TABLE>
19
<PAGE> 21
The following table reconciles stockholder equity to regulatory capital at
September 30, 2000 and March 31, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------------------------------
2000 2000
----------------------------------------
<S> <C> <C>
Stockholders' equity of the Corporation $ 210,006 $ 217,215
Less: Capitalization of the Corporation and Non-Bank
subsidiaries (22,345) (28,944)
--------- ---------
Stockholders' equity of the Bank 187,661 188,271
Less: Intangible assets and other non-includable assets (471) 335
--------- ---------
Tier 1 and tangible capital 187,190 188,606
Plus: Allowable general valuation allowances 23,882 23,460
--------- ---------
Risk based capital $ 211,072 $ 212,066
========= =========
</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, and invests in
adjustable-rate or medium-term, fixed-rate, single-family residential mortgage
loans, medium-term mortgage-related securities and consumer loans, which
generally have shorter terms to maturity and higher interest rates than
single-family mortgage loans.
The Corporation also originates multi-family residential and commercial real
estate loans, which generally have adjustable or floating interest rates and/or
shorter terms to maturity than conventional single-family residential loans.
Long-term, fixed-rate, single-family residential mortgage loans originated for
sale in the secondary market are generally committed for sale at the time the
interest rate is locked with the borrower. As such, these loans involve little
interest rate risk to the Corporation.
The calculation of a gap position requires management to make a number of
assumptions as to when an asset or liability will reprice or mature. Management
believes that its assumptions approximate actual experience and considers them
reasonable, although the actual amortization and repayment of assets and
liabilities may vary substantially. The cumulative net gap position at September
30, 2000 has not changed materially since March 31, 2000.
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 and
six months ended September 30, 2000 and 1999, respectively.
21
<PAGE> 23
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------
CONSOLIDATED
REAL ESTATE COMMUNITY FINANCIAL
INVESTMENTS BANKING STATEMENTS
----------- ----------- ------------
<S> <C> <C> <C>
Interest income $ 164 $ 56,970 $ 57,134
Interest expense 35 37,127 37,162
----------- ----------- ------------
Net interest income 129 19,843 19,972
Provision for possible loan losses 0 160 160
----------- ----------- ------------
Net interest income after possible provision for loan losses 129 19,683 19,812
Other income 267 4,236 4,503
Other expense 1,075 12,837 13,912
----------- ----------- ------------
Net operating income (loss) (679) 11,082 10,403
Gain on sale of real estate partnership investments 0 0 0
----------- ----------- ------------
Income (loss) before income taxes (679) 11,082 10,403
Income taxes (455) 4,277 3,822
----------- ----------- ------------
Net income (loss) $ (224) $ 6,805 $ 6,581
=========== =========== ============
Average assets $ 48,619 $ 2,981,707 $ 3,030,326
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------------------
CONSOLIDATED
REAL ESTATE COMMUNITY FINANCIAL
INVESTMENTS BANKING STATEMENTS
----------- ----------- ------------
<S> <C> <C> <C>
Interest income $ 537 $ 50,024 $ 50,561
Interest expense 0 29,023 29,023
----------- ----------- ------------
Net interest income 537 21,001 21,538
Provision for possible loan losses 0 150 150
----------- ----------- ------------
Net interest income after provision for possible loan losses 537 20,851 21,388
Other income (loss) (179) 2,666 2,487
Other expense 30 12,047 12,077
----------- ----------- ------------
Net operating income 328 11,470 11,798
Gain on sale of real estate partnership investments 0 0 0
----------- ----------- ------------
Income before income taxes 328 11,470 11,798
Income taxes 149 4,527 4,676
----------- ----------- ------------
Net income $ 179 $ 6,943 $ 7,122
=========== =========== ============
Average assets $ 32,143 $ 2,743,543 $ 2,775,686
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------
CONSOLIDATED
REAL ESTATE COMMUNITY FINANCIAL
INVESTMENTS BANKING STATEMENTS
----------- ----------- ------------
<S> <C> <C> <C>
Interest income $ 500 $ 111,344 $ 111,844
Interest expense 73 70,928 71,001
----------- ----------- ------------
Net interest income 427 40,416 40,843
Provision for possible loan losses 0 345 345
----------- ----------- ------------
Net interest income after provision for possible loan losses 427 40,071 40,498
Other income 882 7,549 8,431
Other expense 1,923 25,532 27,455
----------- ----------- ------------
Net operating income (loss) (614) 22,088 21,474
Gain on sale of real estate partnership investments 0 0 0
----------- ----------- ------------
Income (loss) before income taxes (614) 22,088 21,474
Income taxes (699) 8,607 7,908
----------- ----------- ------------
Net income $ 85 $ 13,481 $ 13,566
=========== =========== ============
Average assets $ 45,276 $ 2,937,580 $ 2,982,856
=========== =========== ============
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------------------
CONSOLIDATED
REAL ESTATE COMMUNITY FINANCIAL
INVESTMENTS BANKING STATEMENTS
----------- ----------- ------------
<S> <C> <C> <C>
Interest income $ 1,060 $ 98,477 $ 99,537
Interest expense 0 56,809 56,809
----------- ----------- ------------
Net interest income 1,060 41,668 42,728
Provision for possible loan losses 0 1,006 1,006
----------- ----------- ------------
Net interest income after provision for possible loan losses 1,060 40,662 41,722
Other income (loss) (642) 6,202 5,560
Other expense (34) 34,798 34,764
----------- ----------- ------------
Net operating income 452 12,066 12,518
Gain on sale of real estate partnership investments 0 0 0
----------- ----------- ------------
Income before income taxes 452 12,066 12,518
Income taxes 439 6,560 6,999
----------- ----------- ------------
Net income $ 13 $ 5,506 $ 5,519
=========== =========== ============
Average assets $ 31,120 $ 2,681,161 $ 2,712,281
</TABLE>
23
<PAGE> 25
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.
The Corporation is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by management
of the Corporation to be immaterial to the financial condition and results of
operations of the Corporation.
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.
Not applicable.
ITEM 5 OTHER INFORMATION.
None.
ITEM 6 EXHIBITS AND REPORTS.
(A) EXHIBIT NO. 27 FINANCIAL DATA SCHEDULES
(B) REPORTS ON FORM 8-K.
None.
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: October 31, 2000 By: /s/ Douglas J. Timmerman
----------------- ------------------------------------------
Douglas J. Timmerman, Chairman of the
Board, President and Chief Executive
Officer
Date: October 31, 2000 By: /s/ Michael W. Helser
----------------- ------------------------------------------
Michael W. Helser, Treasurer and
Chief Financial Officer
25
