** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

** **

**Form 10-QSB**

** **

| ý | ** ** | **QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September  30, 2005**                                                                                                                                                                                                                                                                |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                               |
| o      | ** ** | **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT FOR THE TRANSITION PERIOD FROM                          TO                        ** |

 

**CommissionFile Number 0-28894**

**ACCESSANYTIME BANCORP, INC.**

(Nameof small business issuer in its charter)

 

| **DELAWARE**                                                     | **85-0444597**                        |
|------------------------------------------------------------------|---------------------------------------|
| (State  or other jurisdiction of  incorporation or organization) | (I.R.S.  Employer Identification No.) |
|                                                             |                                  |
| **5210 Eubank, NE, Albuquerque, New Mexico**                     | **87111**                             |
| (Address  of principal executive offices)                        | (Zip  Code)                           |

Issuer’stelephone number, including area code:  **(505) 299-0900**

                Check whether the issuer (1)filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

Yes ý                    Noo

                Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o                    Noý

** **

**1,739,285 Shares of Capital Stock $.01 par value**

**Outstanding as of November 10, 2005**

 

                Transitional Small Business Disclosure Format (checkone):  Yes o    No ý

** **

 

----

** **

**TABLEOF CONTENTS**

 
|                                                                                 |       |
|--------------------------------------------------------------------------------------|------------|
| **PART I — FINANCIAL INFORMATION**                                              | ** ** |
| ** **                                                                           | ** ** |
| Item  1 — Financial Statements                                                  |       |
|                                                                                 |       |
| Consolidated Statements of Financial Condition  (Unaudited as of September 30, 2005) |       |
|                                                                                 |       |
| Consolidated Statements of Operations (unaudited)                                    |       |
|                                                                                 |       |
| Consolidated Statement of Stockholders’ Equity  (unaudited)                     |       |
|                                                                                 |       |
| Consolidated Statements of Cash Flows (unaudited)                                    |       |
|                                                                                 |       |
| Notes to Consolidated Financial Statements (unaudited)                               |       |
|                                                                                 |       |
| Item 2 — Management’s Discussion and Analysis or Plan  of Operation        |       |
|                                                                                 |       |
| Item 3 — Controls and Procedures                                                |       |
|                                                                                 |       |
| **PART  II — OTHER INFORMATION**                                                | ** ** |
| ** **                                                                           | ** ** |
| Item 1 — Legal Proceedings                                                      |       |
|                                                                                 |       |
| Item 2 —Unregistered Sales of Equity Securities and  Use of Proceeds            |       |
|                                                                                 |       |
| Item 3 — Defaults Upon Senior Securities                                        |       |
|                                                                                 |       |
| Item 4 — Submission of Matters to a Vote of Security  Holders                   |       |
|                                                                                 |       |
| Item 5 — Other Information                                                      |       |
|                                                                                 |       |
| Item 6 — Exhibits                                                               |       |
|                                                                                 |       |
| SIGNATURES                                                                           |       |

 

2

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** **

**PART I —FINANCIAL INFORMATION**

# **Item1 — Financial Statements**

The following unauditedconsolidated financial statements include all adjustments, which, in theopinion of management, are necessary in order to make such financial statementsnot misleading.

 

# **A**CCESSANYTIME BANCORP, INC. AND SUBSIDIARY

# **ConsolidatedStatements of Financial Condition**

(unaudited)

** **
| ** **                                                                                                                                                                    | ** ** | **September 30,  2005** | ** **  | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|-------------|------------------------|------------|
| ASSETS                                                                                                                                                                        | ** ** | ** **              | ** **  | ** **             | ** ** |
|                                                                                                                                                                          |       |                    |        |                   |       |
| Cash and cash equivalents                                                                                                                                                     |       | $                       | 8,317,121   |                   | $          | 8,942,538 |   |
| Certificates of deposit                                                                                                                                                       |       | 5,552,000               |        | 3,770,000              |       |
| Securities available-for-sale (amortized cost of $2,948,728 and  $17,379,171)                                                                                                 |       | 2,940,354               |        | 17,372,169             |       |
| Securities held-to-maturity (aggregate fair value of $118,667,304 and  $106,384,372)                                                                                          |       | 119,819,801             |        | 106,890,177            |       |
| Securities trading                                                                                                                                                            |       | 1,147,810               |        | 988,163                |       |
| Loans held-for-sale (aggregate fair value of $4,562,463 and  $4,637,921)                                                                                                      |       | 4,533,941               |        | 4,556,135              |       |
| Loans receivable, net                                                                                                                                                         |       | 199,806,319             |        | 201,072,521            |       |
| Interest receivable, loans                                                                                                                                                    |       | 827,982                 |        | 891,018                |       |
| Interest receivable, securities                                                                                                                                               |       | 623,362                 |        | 625,494                |       |
| Real estate owned, net                                                                                                                                                        |       | 202,365                 |        | 311,357                |       |
| Federal Home Loan Bank (“FHLB”) stock                                                                                                                               |       | 1,965,700               |        | 1,838,000              |       |
| Premises and equipment, net                                                                                                                                                   |       | 10,391,036              |        | 8,254,310              |       |
| Goodwill                                                                                                                                                                      |       | 8,132,854               |        | 9,137,399              |       |
| Other intangible assets, net of accumulated amortization of $943,746  and $783,498                                                                                            |       | 1,920,342               |        | 2,080,590              |       |
| Deferred tax assets                                                                                                                                                           |       | 29,288                  |        | —                 |       |
| Other assets                                                                                                                                                                  |       | 882,695                 |        | 809,283                |       |
| Total assets                                                                                                                                                                  |       | $                       | 367,092,970 |                   | $          | 367,539,154 |   |
|                                                                                                                                                                          |       |                    |        |                   |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                     |       |                    |        |                   |       |
|                                                                                                                                                                          |       |                    |        |                   |       |
| Liabilities:                                                                                                                                                                  |       |                    |        |                   |       |
| Deposits                                                                                                                                                                      |       | $                       | 310,706,170 |                   | $          | 329,433,756 |   |
| FHLB advances                                                                                                                                                                 |       | 23,089,934              |        | 6,542,055              |       |
| Accrued interest and other liabilities                                                                                                                                        |       | 1,743,987               |        | 2,104,634              |       |
| Advanced payments by borrowers for taxes and insurance                                                                                                                        |       | 340,196                 |        | 312,441                |       |
| Deferred tax liabilities                                                                                                                                                      |       | —                  |        | 8,618                  |       |
| Trust Preferred Securities—Notes Payable                                                                                                                                 |       | 8,248,000               |        | 8,248,000              |       |
| Total liabilities                                                                                                                                                             |       | 344,128,287             |        | 346,649,504            |       |
|                                                                                                                                                                          |       |                    |        |                   |       |
| Commitments and contingencies                                                                                                                                                 |       |                    |        |                   |       |
|                                                                                                                                                                          |       |                    |        |                   |       |
| Stockholders’ equity:                                                                                                                                                    |       |                    |        |                   |       |
| Preferred stock, $.01 par value; 4,000,000 shares authorized; none  issued                                                                                                    |       | —                  |        | —                 |       |
| Common stock, $.01 par value; 6,000,000 shares authorized; 1,827,725  and 1,800,971 shares issued; 1,634,033 and 1,591,418 shares outstanding in  2005 and 2004, respectively |       | 18,277                  |        | 18,010                 |       |
| Capital in excess of par value                                                                                                                                                |       | 16,121,818              |        | 15,522,508             |       |
| Retained earnings                                                                                                                                                             |       | 8,348,317               |        | 6,960,346              |       |
| Accumulated other comprehensive loss, net of tax benefit of $3,518  and $2,801                                                                                                |       | (4,856                  | )           | (4,201                 | )          |
|                                                                                                                                                                          |       | 24,483,556              |        | 22,496,663             |       |
| Unallocated Employee Stock Ownership Plan shares; 90,712 and 106,693                                                                                                          |       | (510,255                | )           | (600,148               | )          |
| Treasury stock, at cost; 102,980 and 102,860 shares                                                                                                                           |       | (1,008,618              | )           | (1,006,865             | )          |
| Total stockholders’ equity                                                                                                                                               |       | 22,964,683              |        | 20,889,650             |       |
| Total liabilities and stockholders’ equity                                                                                                                               |       | $                       | 367,092,970 |                   | $          | 367,539,154 |   |
|                                                                                                                                                                               |            |                         |             |                        |            |  |  |  |  |

# ** **

# **The accompanying notes are anintegral part of these unaudited consolidated financial statements.**

 

3

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# ** **

# **ACCESS ANYTIMEBANCORP, INC. AND SUBSIDIARY**

# **ConsolidatedStatements of Operations**

(unaudited)

 
| ** **                                            | ** ** | **Three Month Periods Ended  September 30,** | ** ** | **Nine Month Periods Ended  September 30,** | ** ** |
|-------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                            | ** ** | **2005**                                     | ** ** | **2004**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Interest income:                                      |       |                                         |       |                                        |       |   |   |   |   |
| Loans receivable                                      |       | $                                            | 3,522,600  |                                        | $          | 3,140,086 |   | $ | 10,424,846 |   | $ | 8,697,740 |   |
| Investment securities                                 |       | 383,043                                      |       | 180,461                                     |       | 1,240,443 |   | 468,811 |   |
| Mortgage-backed securities                            |       | 759,364                                      |       | 290,310                                     |       | 2,205,476 |   | 564,358 |   |
| Other interest income                                 |       | 48,416                                       |       | 37,724                                      |       | 119,789 |   | 133,629 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Total interest income                                 |       | 4,713,423                                    |       | 3,648,581                                   |       | 13,990,554 |   | 9,864,538 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Interest expense:                                     |       |                                         |       |                                        |       |   |   |   |   |
| Deposits                                              |       | 1,649,643                                    |       | 883,519                                     |       | 4,521,214 |   | 2,469,095 |   |
| Federal Home Loan Bank  advances                      |       | 238,431                                      |       | 132,810                                     |       | 705,607 |   | 341,457 |   |
| Other borrowings                                      |       | 194,743                                      |       | 168,836                                     |       | 574,325 |   | 496,371 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Total interest expense                                |       | 2,082,817                                    |       | 1,185,165                                   |       | 5,801,146 |   | 3,306,923 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Net interest income before  provision for loan losses |       | 2,630,606                                    |       | 2,463,416                                   |       | 8,189,408 |   | 6,557,615 |   |
| Provision for loan losses                             |       | 45,000                                       |       | 142,000                                     |       | 420,000 |   | 568,000 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Net interest income after  provision for loan losses  |       | 2,585,606                                    |       | 2,321,416                                   |       | 7,769,408 |   | 5,989,615 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Noninterest income:                                   |       |                                         |       |                                        |       |   |   |   |   |
| Loan servicing and other  fees                        |       | 164,902                                      |       | 126,992                                     |       | 428,772 |   | 443,151 |   |
| Gains on sales of loans  held-for-sale                |       | 440,359                                      |       | 277,184                                     |       | 1,415,600 |   | 771,382 |   |
| Deposit account service  fees                         |       | 243,943                                      |       | 219,416                                     |       | 669,936 |   | 664,600 |   |
| Income from real estate  owned                        |       | —                                       |       | 89,617                                      |       | — |   | 89,617 |   |
| Rental income                                         |       | 59,962                                       |       | 43,946                                      |       | 145,397 |   | 68,870 |   |
| Other income                                          |       | 89,837                                       |       | 51,641                                      |       | 267,324 |   | 211,087 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Total noninterest income                              |       | 999,003                                      |       | 808,796                                     |       | 2,927,029 |   | 2,248,707 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Noninterest expense:                                  |       |                                         |       |                                        |       |   |   |   |   |
| Salaries and employee  benefits                       |       | 1,593,603                                    |       | 1,367,495                                   |       | 4,541,989 |   | 3,429,886 |   |
| Occupancy expense                                     |       | 420,421                                      |       | 363,015                                     |       | 1,205,330 |   | 887,973 |   |
| Deposit insurance premium                             |       | 33,728                                       |       | 15,873                                      |       | 89,808 |   | 56,198 |   |
| Advertising                                           |       | 79,865                                       |       | 39,034                                      |       | 226,698 |   | 117,313 |   |
| Professional fees                                     |       | 57,730                                       |       | 189,925                                     |       | 398,493 |   | 455,850 |   |
| Data processing expense                               |       | 117,562                                      |       | 89,029                                      |       | 368,436 |   | 224,500 |   |
| Loan expense                                          |       | 98,201                                       |       | 80,398                                      |       | 252,968 |   | 228,827 |   |
| Supplies expense                                      |       | 76,945                                       |       | 73,476                                      |       | 228,736 |   | 195,348 |   |
| Telephone expense                                     |       | 47,270                                       |       | 57,062                                      |       | 147,196 |   | 158,212 |   |
| Subscription services                                 |       | 57,411                                       |       | 48,739                                      |       | 177,012 |   | 136,020 |   |
| Bank service fees                                     |       | 35,893                                       |       | 60,362                                      |       | 130,445 |   | 162,997 |   |
| Postage expense                                       |       | 68,610                                       |       | 57,276                                      |       | 201,683 |   | 154,458 |   |
| Amortization of other  intangible assets              |       | 53,416                                       |       | 46,615                                      |       | 160,248 |   | 126,245 |   |
| Other expense                                         |       | 93,115                                       |       | 164,905                                     |       | 272,778 |   | 302,986 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Total noninterest expense                             |       | 2,833,770                                    |       | 2,653,204                                   |       | 8,401,820 |   | 6,636,813 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Income before income taxes                            |       | 750,839                                      |       | 477,008                                     |       | 2,294,617 |   | 1,601,509 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Income tax expense                                    |       | 316,824                                      |       | 200,412                                     |       | 906,646 |   | 712,412 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Net income                                            |       | $                                            | 434,015    |                                        | $          | 276,596 |   | $ | 1,387,971 |   | $ | 889,097 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Earnings per common  share-basic                      |       | $                                            | .26        |                                        | $          | .22 |   | $ | .84 |   | $ | .71 |   |
|                                                  |       |                                         |       |                                        |       |   |   |   |   |
| Earnings per common  share-assuming dilution          |       | $                                            | .25        |                                        | $          | .19 |   | $ | .82 |   | $ | .63 |   |
|                                                       |            |                                              |            |                                             |            |  |  |  |  |  |  |  |  |  |  |  |

 

Theaccompanying notes are an integral part of these unaudited consolidatedfinancial statements.

 

4

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# **ACCESS ANYTIMEBANCORP, INC. AND SUBSIDIARY**

# **ConsolidatedStatement of Stockholders’ Equity**

(unaudited)

 
| ** **                                                                | ** ** | ** **                | ** ** | **Common  Stock**     | ** ** | **Capital** | ** ** | ** **                    | ** ** | **Accumulated  Other** | ** ** | ** **                    | ** ** | **Treasury  Stock**          | ** ** | ** **            | ** ** |
|---------------------------------------------------------------------------|------------|---------------------------|------------|-----------------------|------------|-------------|------------|-------------------------------|------------|------------------------|------------|-------------------------------|------------|------------------------------|------------|-----------------------|------------|
| ** **                                                                | ** ** | **Comprehensive  Income** | ** ** | **Number  of shares** | ** ** | **Amount**  | ** ** | **in  Excess  of Par  Value** | ** ** | **Retained  Earnings** | ** ** | **Comprehensive  Loss,  Net** | ** ** | **Unallocated  ESOP Shares** | ** ** | **Number  of Shares** | ** ** | **Amount** | ** ** | **Total** | ** ** |
| Balance at  December 31, 2004                                        |       |                      |       | 1,800,971             |       | $           | 18,010     |                          | $          | 15,522,508             |       | $                             | 6,960,346  |                         | $          | (4,201                | )          | $ | (600,148 | ) | 102,860 |   | $ | (1,006,865 | ) | $ | 20,889,650 |   |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| Net income                                                                |       | $                         | 1,387,971  |                  | —     |        | —     |                          | —     |                   | 1,387,971  |                          | —     |                         | —     |                  | —     |   | — |   | 1,387,971 |   |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| Net change in  fair value of available-for-sale securities, net of tax    |       | (655                      | )          | —                |       | —      |       | —                        |       | —                 |       | (655                          | )          | —                       |       | —                |       | — |   | (655 | ) |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| Total  comprehensive income                                               |       | $                         | 1,387,316  |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |   |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| Common shares  issued                                                     |       |                      |       | 26,754                |       | 267         |       | 176,773                       |       |                   |       |                          |       |                         |       |                  |       |   |   | 177,040 |   |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| Income tax  benefit from stock option exercises                           |       |                      |       |                  |       |        |       | 196,451                       |       |                   |       |                          |       |                         |       |                  |       |   |   | 196,451 |   |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| Common stock  rights awarded in lieu of directors’ cash compensation |       |                      |       | —                |       | —      |       | 83,500                        |       | —                 |       | —                        |       | —                       |       | —                |       | — |   | 83,500 |   |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| Purchases of  treasury stock                                              |       |                      |       | —                |       | —      |       | —                        |       | —                 |       | —                        |       | —                       |       | 120                   |       | (1,753 | ) | (1,753 | ) |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| ESOP shares  allocated                                                    |       |                      |       | —                |       | —      |       | 142,586                       |       | —                 |       | —                        |       | 89,893                       |       | —                |       | — |   | 232,479 |   |
|                                                                      |       |                      |       |                  |       |        |       |                          |       |                   |       |                          |       |                         |       |                  |       |   |   |   |   |
| Balance at  September 30, 2005                                       |       |                      |       | 1,827,725             |       | $           | 18,277     |                          | $          | 16,121,818             |       | $                             | 8,348,317  |                         | $          | (4,856                | )          | $ | (510,255 | ) | 102,980 |   | $ | (1,008,618 | ) | $ | 22,964,683 |   |

 

 
| ** **                                                            | ** ** | **September 30, 2005** | ** ** |
|-----------------------------------------------------------------------|------------|------------------------|------------|
|                                                                  |       |                   |       |
| Disclosure of reclassification amounts:                               |       |                   |       |
| Unrealized holding losses arising during period                       |       | $                      | (655       | ) |
| Reclassification adjustment for gains included in net income          |       | —                 |       |
| Net change in fair value of available-for-sale securities, net of tax |       | $                      | (655       | ) |

 

Theaccompanying notes are an integral part of these unaudited consolidatedfinancial statements.

 

5

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**ACCESS ANYTIME BANCORP, INC. ANDSUBSIDIARY**

**Consolidated Statements of CashFlows**

(unaudited)

 
| ** **                                                                          | ** ** | **Nine Month Periods Ended  September 30,** | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                          | ** ** | **2005**                                    | ** ** | **2004** | ** ** |
| Cash flows from operating activities:                                               |       |                                        |       |   |   |
| Net income                                                                          |       | $                                           | 1,387,971  |   | $ | 889,097 |   |
| Adjustments to reconcile net income to cash from operating  activities:             |       |                                        |       |   |   |
| Depreciation                                                                        |       | 449,600                                     |       | 347,497 |   |
| Deferred income taxes                                                               |       | (37,906                                     | )          | 220,555 |   |
| Provision for loan losses                                                           |       | 420,000                                     |       | 568,000 |   |
| Amortization of premiums on investment securities                                   |       | 166,421                                     |       | 10,951 |   |
| Amortization of loan premiums, discounts and deferred fees, net                     |       | 114,577                                     |       | 214,001 |   |
| Amortization of other intangible assets                                             |       | 160,248                                     |       | 126,244 |   |
| Non-cash ESOP contribution                                                          |       | 232,479                                     |       | 238,979 |   |
| Income tax benefit from stock option exercises                                      |       | 196,451                                     |       | — |   |
| Gains on sales of loans held-for-sale                                               |       | (1,415,600                                  | )          | (771,382 | ) |
| Proceeds from sales of loans held-for-sale                                          |       | 69,470,330                                  |       | 41,573,764 |   |
| Originations of loans held-for-sale                                                 |       | (51,351,674                                 | )          | (42,710,073 | ) |
| Common stock rights awarded in lieu of directors compensation                       |       | 83,500                                      |       | 108,250 |   |
| Loss (gain) on sale of foreclosed real estate                                       |       | 758                                         |       | (38,811 | ) |
| Gain on disposition of assets                                                       |       | —                                      |       | (18,000 | ) |
| Net increase in trading securities                                                  |       | (159,647                                    | )          | — |   |
| Net increase in accrued interest receivable and other assets                        |       | (14,812                                     | )          | (381,920 | ) |
| Decrease in accrued interest and other liabilities                                  |       | (361,302                                    | )          | (588,189 | ) |
|                                                                                |       |                                        |       |   |   |
| Net cash from operating activities                                                  |       | 19,341,394                                  |       | (211,037 | ) |
|                                                                                |       |                                        |       |   |   |
| Cash flows from investing activities:                                               |       |                                        |       |   |   |
| Purchases of available for sale securities                                          |       | —                                      |       | (3,971,360 | ) |
| Proceeds from maturities and principal repayments of  available-for-sale securities |       | 14,424,898                                  |       | 861,761 |   |
| Purchases of held-to-maturity securities                                            |       | (36,239,649                                 | )          | (33,012,977 | ) |
| Proceeds from maturities and principal repayments of held-to-maturity  securities   |       | 23,150,521                                  |       | 3,302,120 |   |
| Purchases of certificates of deposit                                                |       | (2,179,000                                  | )          | (198,000 | ) |
| Proceeds from maturities of certificates of deposit                                 |       | 397,000                                     |       | 904,000 |   |
| Net increase in loans                                                               |       | (15,949,237                                 | )          | (21,075,298 | ) |
| Purchase of FHLB stock                                                              |       | (2,250,700                                  | )          | (907,500 | ) |
| Redemption of FHLB stock                                                            |       | 2,123,000                                   |       | 509,300 |   |
| Proceeds from sales of foreclosed real estate                                       |       | 79,333                                      |       | 443,702 |   |
| Purchases of premises and equipment                                                 |       | (1,546,312                                  | )          | (317,632 | ) |
| Net cash received in branch acquisition                                             |       | —                                      |       | 51,514,817 |   |
|                                                                                |       |                                        |       |   |   |
| Net cash from investing activities                                                  |       | (17,990,146                                 | )          | (1,947,067 | ) |
|                                                                                |       |                                        |       |   |   |
| Cash flows from financing activities:                                               |       |                                        |       |   |   |
| Net decrease in deposits                                                            |       | (18,727,586                                 | )          | (12,237,876 | ) |
| Net increase in advance payments by borrowers for taxes and insurance               |       | 27,755                                      |       | 56,614 |   |
| Net increase in FHLB advances                                                       |       | 16,547,879                                  |       | 8,505,462 |   |
| Proceeds from advances on line of credit                                            |       | 268,142                                     |       | — |   |
| Payments on advances on line of credit                                              |       | (268,142                                    | )          | — |   |
| Purchase of treasury stock                                                          |       | (1,753                                      | )          | (125,022 | ) |
| Sale of treasury stock                                                              |       | —                                      |       | 61,705 |   |
| Proceeds from issuance of common stock                                              |       | 177,040                                     |       | 3,010,872 |   |
|                                                                                |       |                                        |       |   |   |
| Net cash from financing activities                                                  |       | (1,976,665                                  | )          | (728,245 | ) |
|                                                                                |       |                                        |       |   |   |
| Decrease in cash and cash equivalents                                               |       | (625,417                                    | )          | (2,886,349 | ) |
| Cash and cash equivalents at beginning of period                                    |       | 8,942,538                                   |       | 11,611,364 |   |
| Cash and cash equivalents at end of period                                          |       | 8,317,121                                   |       | 8,725,015 |   |
|                                                                                     |            |                                             |            |  |  |  |  |

 

(Continued)

 

6

----

 

**ACCESS ANYTIME BANCORP, INC. ANDSUBSIDIARY**

**ConsolidatedStatements of Cash Flows**

(unaudited)

 

**(Continued)**

** **
| ** **                                                | ** ** | **Nine Month Periods Ended  September 30,** | ** ** |
|-----------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                | ** ** | **2005**                                    | ** ** | **2004** | ** ** |
| Supplemental disclosures of cash flow information:        |       |                                        |       |   |   |
| Cash paid during the period for:                          |       |                                        |       |   |   |
| Interest                                                  |       | $                                           | 3,714,937  |   | $ | 3,410,148 |   |
| Income taxes                                              |       | 984,687                                     |       | 300,150 |   |
| Supplemental disclosure of non-cash investing activities: |       |                                        |       |   |   |
| Real estate acquired in settlement of loans               |       | —                                      |       | 108,079 |   |
| Transfer of loans receivable to loans held-for-sale       |       | 16,680,862                                  |       | — |   |
| Transfer of goodwill to premises and equipment            |       | 1,040,014                                   |       | — |   |
|                                                           |            |                                             |            |  |  |  |  |

 

#### **The accompanying notes are anintegral part of these unaudited consolidated financial statements**

 

7

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** **

**ACCESS ANYTIME BANCORP, INC. ANDSUBSIDIARY**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Unaudited)**

 

#### **NOTE 1 BASIS OF CONSOLIDATION AND PRESENTATION**

 

ACCESS ANYTIME BANCORP, INC. (the “Company”) is a thrift holdingcompany for its wholly owned subsidiary ACCESSBANK (the “Bank”)and the Bank’s wholly owned subsidiary, First Equity Development Corporation (“FEDCO”).  The unaudited consolidated financialstatements include the accounts and transactions of the Company, the Bank andFEDCO.  All significant intercompanyaccounts and transactions have been eliminated in consolidation.

 

The unaudited interim consolidated financialstatements have been prepared by management of the Company, without audit.  Certain information and footnote disclosuresnormally included in audited consolidated financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America have been omitted pursuant to such rules and regulations, althoughmanagement believes that the disclosures included herein are adequate to makethe information presented not misleading. In the opinion of management, all adjustments (consisting of only normalrecurring accruals) considered necessary for a fair presentation of theinformation have been included.  TheDecember 31, 2004 consolidated statement of financial condition, as presentedherein, was derived from audited financial statements, but does not include alldisclosures required by accounting principles generally accepted in the UnitedStates of America and should be read in conjunction with the auditedconsolidated financial statements of the Company for the year ended December31, 2004 included in the Company’s Annual Report on 10-KSB.

 

#### **NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

***Impact of Accounting Standards*** — In December2002, the Financial Accounting Standards Board (“FASB”) issued Statement No.148 (“Statement 148”), *Accounting for Stock-BasedCompensation-Transition and Disclosure-an amendment of FASB Statement No. 123.*  This statement amends Statement 123 toprovide alternative methods of transition to a voluntary change to the fairvalue based method of accounting for stock-based employee compensation.  In addition, Statement 148 amends thedisclosure requirements to require prominent disclosures in both annual andinterim financial statements about the method of accounting for stock-basedemployee compensation and the effect of the method used on reported results.

 

Statement 148 allows for the fair value basedmethod under Statement 123, *Accounting for Stock BasedCompensation*, or the intrinsic value based method under APB OpinionNo. 25 (“Opinion 25”), *Accounting for StockIssued to Employees*.  Underthe fair value based method of accounting, compensation cost is measured at thegrant date based on the value of the award and is recognized over the serviceperiod, which is generally the vesting period. Under the intrinsic value method of accounting, compensation cost is theexcess, if any, of the quoted market price of the stock at grant date or othermeasurement date over the amount an employee must pay to acquire thestock.  The Company has elected tocontinue to use the intrinsic value method of accounting under Opinion 25, and willdisclose the proforma effects of the fair value based method for the periodspresented in its consolidated financial statements.

 

In December 2004, the FASB issued StatementNo. 123(R), *Share-Based Payment.*  See further discussion below.

 

8

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Had compensation cost for all grants of stock options and the directorretainer plan shares during 2005 and 2004 been determined based onthe fair value at the date of grant, reported net income and earnings per sharewould have been adjusted to the pro-forma amounts shown below:

 
| ** **                                                                                                                           | ** ** | **Three Month Periods Ended  September 30,** | ** ** | **Nine Month Periods Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                                                           | ** ** | **2005**                                     | ** ** | **2004**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income, as reported                                                                                                              |       | $                                            | 434,015    |                                        | $          | 276,596 |   | $ | 1,387,971 |   | $ | 889,097 |   |
| Stock-based employee compensation expense Included in reported net  income, net of related tax effects                               |       | —                                       |       | —                                      |       | — |   | (78,777 | ) |
| Total stock-based employee compensation expense determined under fair  value based method for all awards, net of related tax effects |       | (3,580                                       | )          | (8,919                                      | )          | (51,030 | ) | (35,676 | ) |
|                                                                                                                                 |       |                                         |       |                                        |       |   |   |   |   |
| Pro forma net income                                                                                                                 |       | $                                            | 430,435    |                                        | $          | 267,677 |   | $ | 1,336,941 |   | $ | 774,644 |   |
|                                                                                                                                 |       |                                         |       |                                        |       |   |   |   |   |
| Earnings per share-basic                                                                                                             |       |                                         |       |                                        |       |   |   |   |   |
| As reported                                                                                                                          |       | $                                            | .26        |                                        | $          | .22 |   | $ | .84 |   | $ | .71 |   |
| Pro forma                                                                                                                            |       | $                                            | .26        |                                        | $          | .21 |   | $ | .81 |   | $ | .61 |   |
|                                                                                                                                 |       |                                         |       |                                        |       |   |   |   |   |
| Earnings per share-assuming dilution                                                                                                 |       |                                         |       |                                        |       |   |   |   |   |
| As reported                                                                                                                          |       | $                                            | .25        |                                        | $          | .19 |   | $ | .82 |   | $ | .63 |   |
| Pro forma                                                                                                                            |       | $                                            | .25        |                                        | $          | .19 |   | $ | .79 |   | $ | .55 |   |
|                                                                                                                                      |            |                                              |            |                                             |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

In May 2003, the FASB issued Statement No.150 (“Statement 150”), *Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity*.  Statement 150 establishes standards for how abusiness enterprise classifies, measures and discloses in its financialstatements certain financial instruments with characteristics of bothliabilities and equity.  Statement 150requires that a business enterprise classify financial instruments that arewithin its scope as liabilities (or as assets in some circumstances).  Statement 150 is effective for contractsentered into or modified after May 31, 2003, and is otherwise effective at thebeginning of the first interim period beginning after June 15, 2003.  The FASB deferred the provisions related tomandatorily redeemable financial instruments to periods beginning after December15, 2004.  The adoption of Statement 150on July 1, 2003 had no impact on the Company’s consolidated financialstatements, and the adoption of deferred provisions on January 1, 2005 had noimpact on the Company’s consolidated financial statements.

 

In March 2004, the FASB’s Emerging Issues TaskForce (“EITF”) issued EITF No. 03-1, *The Meaning ofOther-Than-Temporary Impairment and Its Application to CertainInvestments. *EITF No. 03-1provides accounting guidance regarding the determination of when an impairment(i.e. fair value is less than amortized cost) of debt and marketable equitysecurities and investments accounted for under the cost method should beconsidered other-than-temporary and recognized in earnings.  EITF No. 03-1 also requires annual disclosuresof certain quantitative and qualitative factors of debt and marketable equity

 

9

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securities classified as available-for-saleor held-to-maturity that are in an unrealized loss position at the balancesheet date, but for which an other-than-temporary impairment has not beenrecognized.  The FASB has beenreconsidering in its entirety the EITF’s and all other guidance on disclosing,measuring, and recognizing other-than-temporary impairments of debt and equitysecurities.  In June, 2005, the FASBnullified the guidance on the determination of whether an investment isother-than-temporarily impaired as set forth in paragraphs 10-18 of EITF No.03-1.  In addition, the FASB decided notto provide additional guidance on the meaning of other-than-temporaryimpairment, but planned to emphasize in a final FASB Staff Position ("FSP")that entities recognize other-than-temporary impairments by applying therelevant guidance such as Statement No. 115, and paragraph 6 of APB Opinion No.18.  This Staff Position was issued onNovember 3, 2005 as FSP FAS 115-1 and FAS 124-1.  The FSP specifically nullifies therequirements of paragraphs 10-18 of EITF No. 03-1, carries forward therequirements of paragraphs 8 and 9 of EITF No. 03-1 with respect tocost-method investments, carries forward the disclosure requirements includedin paragraphs 21 and 22 of EITF No. 03-1 and references existingother-than-temporary impairment guidance.

 

In December 2004, the FASB issued StatementNo. 123(R), *Share-Based Payment.*  Statement No. 123(R) requires companies torecognize in the statement of operations the grant-date fair value of stockoptions and other equity-based compensation issued to employees.  The revised Statement generally requires thatcompanies account for these share-based transactions using the fair-value-basedmethod, and eliminates a company’s ability to account for these transactionsusing the intrinsic value method of accounting in APB Opinion No. 25.  For small business issuers, Statement No.123(R) is effective as of the beginning of the first fiscal year that beginsafter December 15, 2005.  The Company hasnot yet determined the exact impact the new standard will have on its 2006consolidated financial statements.  Theabove disclosures, as required by FASB Statement No. 148, *Accountingfor Stock-Based Compensation-Transition and Disclosure-an amendment of FASBStatement No. 123*, provide detail as to its results of operations asif it had applied the fair value based method and recognition provisions of StatementNo. 148 to stock-based employee compensation to the current reporting periods.

 

In December 2004, the AICPA issued Statementof Position (“SOP”) 03-03, *Accounting for CertainLoans or Debt Securities Acquired in a Transfer*.  The SOP addresses accounting for differencesbetween contractual cash flows and cash flows expected to be collected from aninvestor’s initial investment in loans or loans accounted for as debtsecurities acquired in a transfer if those differences are attributable, atleast in part, to credit quality.  TheSOP requires that the excess of contractual cash flows over cash flows expectedto be collected not be recognized as an adjustment of yield, loss accrual, orvaluation allowance.  It includes loanswith evidence of deterioration of credit quality since origination, acquired bycompletion of a transfer, including such loans acquired in purchase businesscombinations, and applies to all nongovernmental entities, includingnot-for-profit organizations.  The SOPdoes not apply to loans originated by the entity or acquired loans that havenot deteriorated in credit quality since origination.  The SOP is effective for loans acquired infiscal years beginning after December 15, 2004. Since the   Company has notacquired any loans in fiscal 2005, the SOP had no impact on its consolidatedfinancial statements.

 

**NOTE 3 SECURITIES**

 

Securities have been classified in theconsolidated statements of financial condition according to management’sability and intent.  See discussion oftrading securities below.  The carryingamount of securities and their approximate fair value follow:

 

10

----

 
| ** **                         | ** ** | **Amortized** | ** **  | **Gross unrealized** | ** ** | **Fair**   | ** ** |
|------------------------------------|------------|---------------|-------------|----------------------|------------|------------|------------|
| ** **                         | ** ** | **Cost**      | ** **  | **Gains**            | ** ** | **Losses** | ** ** | **Value** | ** ** |
| **Available-for-sale securities:** |       |          |        |                 |       |       |       |   |   |
| September 30, 2005:                |       |          |        |                 |       |       |       |   |   |
| Mortgage-backed securities:        |       |          |        |                 |       |       |       |   |   |
| GNMA adjustable rate               |       | $             | 1,502,238   |                 | $          | 952        |       | $ | 10,793 |   | $ | 1,492,397 |   |
| GNMA fixed rate                    |       | 239,632       |        | 10,484               |       | —     |       | 250,116 |   |
| Equity securities:                 |       |          |        |                 |       |       |       |   |   |
| FNMA common stock                  |       | 6,858         |        | —               |       | 2,687      |       | 4,171 |   |
| FNMA bonds                         |       | 1,000,000     |        | —               |       | 11,250     |       | 988,750 |   |
| Trust preferred securities         |       | 200,000       |        | 4,920                |       | —     |       | 204,920 |   |
|                               |       | $             | 2,948,728   |                 | $          | 16,356     |       | $ | 24,730 |   | $ | 2,940,354 |   |
| December 31, 2004:                 |       |          |        |                 |       |       |       |   |   |
| Mortgage-backed securities:        |       |          |        |                 |       |       |       |   |   |
| GNMA adjustable rate               |       | $             | 1,826,160   |                 | $          | 1,603      |       | $ | 15,002 |   | $ | 1,812,761 |   |
| GNMA fixed rate                    |       | 346,471       |        | 19,686               |       | —     |       | 366,157 |   |
| Equity securities:                 |       |          |        |                 |       |       |       |   |   |
| FNMA common stock                  |       | 6,858         |        | 283                  |       | —     |       | 7,141 |   |
| FNMA bonds                         |       | 1,000,000     |        | —               |       | 11,250     |       | 988,750 |   |
| U.S. Treasury notes                |       | 13,999,682    |        | 650                  |       | 14,092     |       | 13,986,240 |   |
| Trust preferred securities         |       | 200,000       |        | 11,120               |       | —     |       | 211,120 |   |
|                               |       | $             | 17,379,171  |                 | $          | 33,342     |       | $ | 40,344 |   | $ | 17,372,169 |   |
|                               |       |          |        |                 |       |       |       |   |   |
| **Held-to-maturity securities:**   |       |          |        |                 |       |       |       |   |   |
| September 30, 2005:                |       |          |        |                 |       |       |       |   |   |
| Mortgage-backed securities:        |       |          |        |                 |       |       |       |   |   |
| GNMA adjustable rate               |       | $             | 49,005,345  |                 | $          | 15,696     |       | $ | 347,068 |   | $ | 48,673,973 |   |
| FHLMC adjustable rate              |       | 141,912       |        | 422                  |       | 808        |       | 141,526 |   |
| GNMA fixed rate                    |       | 19,873,454    |        | 7,393                |       | 149,341    |       | 19,731,506 |   |
| CMO fixed rate                     |       | 4,402,460     |        | —               |       | 65,629     |       | 4,336,831 |   |
| FHLB bonds                         |       | 4,256,420     |        | 699                  |       | 42,332     |       | 4,214,787 |   |
| FHLMC bonds                        |       | 3,998,304     |        | 285                  |       | 2,810      |       | 3,995,779 |   |
| FNMA bonds                         |       | 1,000,000     |        | —               |       | 14,690     |       | 985,310 |   |
| US Treasury bonds                  |       | 35,888,696    |        | —               |       | 519,746    |       | 35,368,950 |   |
| Corporate bonds                    |       | 492,386       |        | —               |       | 11,356     |       | 481,030 |   |
| Municipal tax exempt fixed rate    |       | 760,824       |        | —               |       | 23,212     |       | 737,612 |   |
|                               |       | $             | 119,819,801 |                 | $          | 24,495     |       | $ | 1,176,992 |   | $ | 118,667,304 |   |
| December 31, 2004:                 | ** ** | ** **    | ** **  | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Mortgage-backed securities:        |       |          |        |                 |       |       |       |   |   |
| GNMA adjustable rate               |       | $             | 46,341,854  |                 | $          | 1,620      |       | $ | 286,988 |   | $ | 46,056,486 |   |
| FHLMC adjustable rate              |       | 162,663       |        | 580                  |       | 561        |       | 162,682 |   |
| GNMA fixed rate                    |       | 7,271,104     |        | 70,565               |       | 8,050      |       | 7,333,619 |   |
| CMO fixed rate                     |       | 4,939,455     |        | —               |       | 5,406      |       | 4,934,049 |   |
| FHLB bonds                         |       | 4,252,961     |        | 11,553               |       | 2,460      |       | 4,262,054 |   |
| FHLMC bonds                        |       | 1,000,000     |        | —               |       | 5,000      |       | 995,000 |   |
| FFCB bonds                         |       | 2,011,700     |        | 800                  |       | —     |       | 2,012,500 |   |
| FNMA bonds                         |       | 1,000,000     |        | —               |       | 17,500     |       | 982,500 |   |
| US Treasury bonds                  |       | 38,813,119    |        | —               |       | 240,351    |       | 38,572,768 |   |
| Corporate bonds                    |       | 490,407       |        | —               |       | 6,132      |       | 484,275 |   |
| Municipal tax exempt fixed rate    |       | 606,914       |        | —               |       | 18,475     |       | 588,439 |   |
|                               |       | $             | 106,890,177 |                 | $          | 85,118     |       | $ | 590,923 |   | $ | 106,384,372 |   |

 

 

11

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The Company’s unrealized losses at September30, 2005 were approximately $1.2 million. The majority of the unrealized losses relate to the Company’s GNMA andU.S. Treasury bond portfolio, which are guaranteed by the full faith and creditof the United States Government and have been classified by the Company asheld-to-maturity.  These unrealizedlosses are caused by fluctuations in market interest rates.  The Company believes that the United StatesGovernment will honor its interest payment schedules, as well as the full debtat maturity.  Because the unrealizedlosses are due to market interest rates and no credit worthiness factors exist,and because the Company has the ability and intent to hold these investments tomaturity, the Company believes that the investments are not considered other-than-temporarilyimpaired.

 

**Trading Securities** — The Companyhas an executive savings plan to provide additional benefits for select highlycompensated management employees of the Bank as a means for participants todefer an unlimited portion of their compensation for the future.  Salary deferrals and the Bank’s discretionarycontributions, if any, are funded into a Rabbi Trust.  The assets of the Trust are available to thegeneral creditors of the Bank and, as a result, are recorded on the books and recordsof the Company.

 

Through June 18, 2004, all salary deferralcontributions were invested in the Company’s common stock, and pursuant to EITF97-14, *Accounting for Deferred Compensation ArrangementsWhere Amounts Earned Are Held in a Rabbi Trust and Invested*, theseshares were classified as equity in a manner similar to the manner in whichtreasury stock is accounted for. Subsequent to June 18, 2004, as part of a plan to diversify plan assets,the plan’s trustee began selling the shares of Company common stock held by theRabbi Trust on the open market.  Allproceeds from the sale transactions were deposited into the Rabbi Trust andwere invested in mutual bond and equity funds, money market funds, and realestate investment trusts by the trustee for the benefit of plan participants inaccordance with the trust agreement. Under EITF 97-14, the diversified assets held by the Rabbi Trust areaccounted for in accordance with FASB Statement No. 115, *Accountingfor Certain Investments in Debt and Equity Securities*, and areclassified as trading securities. Trading Securities are carried at fair value with unrealized holdinggains and losses included in earnings. At September 30, 2005 and December 31, 2004, the fair value of thetrading securities held by the Rabbi Trust was $1,147,810 and $988,163,respectively.

 

**NOTE 4 LOANS HELD-FOR-SALE**

 

The carrying amount of loans held-for-saleand their estimated fair value, as determined on an aggregate basis, follow:

 
| ** **         | ** ** | ** **         | ** ** | **Gross unrealized** | ** ** | ** ** | ** ** |
|--------------------|------------|--------------------|------------|----------------------|------------|------------|------------|
| ** **         | ** ** | **Amortized cost** | ** ** | **Gains**            | ** ** | **Losses** | ** ** | **Fair value** | ** ** |
| September 30, 2005 |       | $                  | 4,533,941  |                 | $          | 28,522     |       | $ | — |   | $ | 4,562,463 |   |
| December 31, 2004  |       | 4,556,135          |       | 81,786               |       | —     |       | 4,637,921 |   |
|                    |            |                    |            |                      |            |            |            |  |  |  |  |  |  |

 

 

12

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The components of loans in the consolidatedstatements of financial condition were as follows:

 
| ** **                                        | ** ** | **September 30,  2005** | ** **  | **December 31,  2004** | ** ** |
|---------------------------------------------------|------------|-------------------------|-------------|------------------------|------------|
| First mortgage loans:                             |       |                    |        |                   |       |
| Conventional                                      |       | $                       | 74,596,725  |                   | $          | 82,088,273 |   |
| FHA insured and VA guaranteed                     |       | 4,631,230               |        | 9,451,207              |       |
| Commercial real estate loans                      |       | 55,074,889              |        | 53,130,323             |       |
| Commercial loans, other  than mortgage            |       | 16,095,522              |        | 19,686,535             |       |
| Consumer and installment  loans                   |       | 36,989,370              |        | 24,440,978             |       |
| Construction loans                                |       | 6,248,426               |        | 7,913,743              |       |
| Other                                             |       | 8,357,503               |        | 7,768,561              |       |
|                                              |       |                    |        |                   |       |
|                                              |       | 201,993,665             |        | 204,479,620            |       |
|                                              |       |                    |        |                   |       |
| Less:                                             |       |                    |        |                   |       |
| Loans in process                                  |       | 199,597                 |        | 1,642,240              |       |
| Unearned discounts, deferred loan fees, and other |       | 330,994                 |        | 413,692                |       |
| Allowance for loan losses                         |       | 1,656,755               |        | 1,351,167              |       |
|                                              |       |                    |        |                   |       |
|                                              |       | $                       | 199,806,319 |                   | $          | 201,072,521 |   |
|                                                   |            |                         |             |                        |            |  |  |  |  |

 

The level of allowance for loan losses isestablished by management of the Bank to incorporate a systematic methodology,which is applied quarterly, to determine the elements of the allowance for loanlosses and the resultant provisions for loan losses it considers adequate to providefor anticipated loan losses.  Thismethodology includes the following elements:

 

- A systematic loan gradingsystem

- A periodic review of thesummary of the allowance for loan loss balance using historical loss factors

- Identification of loans tobe evaluated on an individual basis for impairment

- Consideration of internalfactors such as the Bank’s size, organizational structure, loan portfolio structure,loan administration procedures, past due and delinquency trends, and loss experience

- Consideration of risksinherent in different kinds of lending

- Consideration of externalfactors such as local, regional, and national economic factors

- An overall evaluation ofthe quality of the underlying collateral, and holding and disposition costs

 

Allowances are provided for individual loanswhere ultimate collection is considered questionable by management afterreviewing the current status of loans that are contractually past due as wellas considering the net realizable value of the security and of the loanguarantees, if applicable.  The followingtable is an analysis of changes in the allowance for loan losses:

 

 

13

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| ** **                                      | ** ** | **Nine Months Ended  September 30, 2005** | ** ** | **Nine Months Ended  September 30, 2004** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------|------------|-------------------------------------------|------------|
| Balance at beginning of period                  |       | $                                         | 1,351,167  |                                      | $          | 949,516 |   |
|                                            |       |                                      |       |                                      |       |
| Loans charged-off                               |       | (230,954                                  | )          | (287,284                                  | )          |
| Recoveries                                      |       | 116,542                                   |       | 14,236                                    |       |
|                                            |       |                                      |       |                                      |       |
| Net loans charged-off                           |       | (114,412                                  | )          | (273,048                                  | )          |
| Provision for loan losses charged to operations |       | 420,000                                   |       | 568,000                                   |       |
| Allowance related to acquired loans             |       | —                                    |       | 170,000                                   |       |
|                                            |       |                                      |       |                                      |       |
| Balance at end of period                        |       | $                                         | 1,656,755  |                                      | $          | 1,414,468 |   |

 

An analysis of the changes of loans todirectors, executive officers, and major stockholders is as follows:

 
| ** **                                   | ** ** | **Nine Months Ended  September 30, 2005** | ** ** | **Year Ended  December 31, 2004** | ** ** |
|----------------------------------------------|------------|-------------------------------------------|------------|-----------------------------------|------------|
| Balance at beginning of period               |       | $                                         | 1,715,334  |                              | $          | 1,449,117 |   |
| Loans originated                             |       | 285,600                                   |       | 539,079                           |       |
| Loan principal payments and other reductions |       | (757,836                                  | )          | (272,862                          | )          |
|                                         |       |                                      |       |                              |       |
| Balance at end of period                     |       | $                                         | 1,243,098  |                              | $          | 1,715,334 |   |

 

**NOTE 6 NON-PERFORMING ASSETS**

 

Thecomposition of the Bank’s portfolio of non-performing assets is shown in thefollowing table:
| ** **                                      | ** ** | **September 30, 2005** | ** ** | **December 31, 2004** | ** ** |
|-------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| Non-accruing loans*                             |       | $                      | 161,546    |                  | $          | 507,555 |   |
| Past due 90 days or more  and still accruing    |       | —                 |       | —                |       |
| Troubled debt restructured                      |       | —                 |       | —                |       |
| Real estate owned, net                          |       | 202,365                |       | 311,357               |       |
|                                            |       |                   |       |                  |       |
|                                            |       | $                      | 363,911    |                  | $          | 818,912 |   |
|                                            |       |                   |       |                  |       |
| Ratio of non-performing  assets to total assets |       | 0.10                   | %          | 0.22                  | %          |

----

  *   Primarilyloans which are past due for 90 days or more

 

14

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**ACCESSANYTIME BANCORP, INC. AND SUBSIDIARY**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

 

**NOTE 7 FHLB ADVANCES**

 

The following table summarizes the Bank’sFHLB advances:

 
| ** **                                                                                                                                                        | ** ** | **September 30,  2005** | ** ** | **December 31, 2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| $19,000,000 note payable to FHLB, interest at 3.54%, interest and  principal due on October 7, 2005                                                               |       | $                       | 19,000,000 |                  | $          | — |   |
| $1,500,000 note payable to FHLB, interest at 4.04%, interest and  principal due on October 3, 2005                                                                |       | 1,500,000               |       | —                |       |
| $3,200,000 note payable to FHLB, interest at 2.46%, interest and  principal due on January 3, 2005                                                                |       | —                  |       | 3,200,000             |       |
| $500,000 note payable to FHLB, interest only at 5.011%, payable  monthly, due on December 5, 2005                                                                 |       | 500,000                 |       | 500,000               |       |
| $5,000,000 note payable to FHLB, interest at 2.988%, payable in  monthly principal and interest installments of approximately $100,000 through  September 4, 2007 |       | 2,089,934               |       | 2,842,055             |       |
| Total FHLB advances                                                                                                                                               |       | $                       | 23,089,934 |                  | $          | 6,542,055 |   |

 

**NOTE 8 EARNINGS PER SHARE**

 

Basic earnings per common share have beencomputed by dividing net income for the period by the weighted average numberof common shares outstanding during the period. Diluted earnings per common share has been computed by dividing netincome for the period by the weighted average number of common sharesoutstanding during the period adjusted for the assumed exercise of outstandingstock options and other contingently issuable shares of common stock.

 

A reconciliation between basic and dilutedweighted average common shares outstanding follows:

 
| ** **                                            | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                                            | ** ** | **2005**                              | ** ** | **2004**                             | ** ** | **2005** | ** ** | **2004** | ** ** |
| Weighted average common shares—Basic             |       | 1,672,095                             |       | 1,279,483                            |       | 1,656,167 |   | 1,259,644 |   |
|                                                  |       |                                  |       |                                 |       |   |   |   |   |
| Plus effect of dilutive securities:                   |       |                                  |       |                                 |       |   |   |   |   |
| Stock Options                                         |       | 47,091                                |       | 79,799                               |       | 42,892 |   | 79,244 |   |
| Shares held by rabbi trust                            |       | 2,980                                 |       | 66,587                               |       | 2,947 |   | 67,697 |   |
|                                                  |       |                                  |       |                                 |       |   |   |   |   |
| Weighted average common shares—Assuming Dilution |       | 1,722,166                             |       | 1,425,869                            |       | 1,702,006 |   | 1,406,585 |   |

 

15

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**NOTE 9 OFF-STATEMENT OF FINANCIAL CONDITION ARRANGEMENTS**

 

The Bank may be a party to financialinstruments with off-statement of financial condition risk in the normal courseof business to meet the financing needs of its customers and to reduce its ownexposure to fluctuation in interest rates. These financial instruments include commitments to extend credit(including credit cards), standby letters of credit, and financial guarantees.  These instruments involve, to varyingdegrees, elements of credit and interest rate risk in excess of the amountrecognized in the consolidated statements of financial condition.  The contract or notional amounts of theseinstruments reflect the extent of involvement the Bank has in particularclasses of financial instruments.  TheBank uses the same credit policies in making commitments and conditionalobligations as it does for the consolidated statements of financial conditioninstruments.

 

The following table details the amounts andexpected maturities of significant commitments as of September 30, 2005.

** **
| ** **                         | ** ** | **Payments Due In**        | ** ** | ** **               | ** ** |
|------------------------------------|------------|----------------------------|------------|--------------------------|------------|
| ** **                         | ** ** | **One  Year or  Less**     | ** ** | **One to  Three  Years** | ** ** | **Three to  Five  Years** | ** ** | **Over  Five  Years** | ** ** | **Total** | ** ** |
| ** **                         | ** ** | **(Dollars in Thousands)** | ** ** | ** **               | ** ** |
| Commitments to extend credit:      |       |                       |       |                     |       |   |   |   |   |   |   |
| Residential real estate loans      |       | $                          | 5,886      |                     | $          | — |   | $ | — |   | $ | — |   | $ | 5,886 |   |
| Construction loans                 |       | 200                        |       | —                   |       | — |   | — |   | 200 |   |
| Lines of credit                    |       | 22,298                     |       | —                   |       | — |   | — |   | 22,298 |   |
| Credit cards                       |       | 2,395                      |       | —                   |       | — |   | — |   | 2,395 |   |
| Letters of credit                  |       | 77                         |       | —                   |       | — |   | — |   | 77 |   |
| Commitments to sell mortgage loans |       | 10,420                     |       | —                   |       | — |   | — |   | 10,420 |   |
|                                    |            |                            |            |                          |            |  |  |  |  |  |  |  |  |  |  |  |

 

Commitments to extend credit are agreementsto lend to a customer as long as there is no violation of any conditionestablished in the contract.  Commitmentsgenerally have fixed expiration dates or other termination clauses and mayrequire payment of a fee.  Some of thecommitments are expected to expire without being drawn upon.  The total commitment amounts do notnecessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-casebasis.  The amount of collateralobtained, if deemed necessary by the Bank upon extension of credit, is based onmanagement’s credit evaluation of the customers.

 

Standby letters of credit and financialguarantees written are conditional commitments issued by the Bank to guaranteethe performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially thesame as that involved in extending loan facilities to customers.  The Bank holds collateral and personalguarantees as deemed necessary.

 

16

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**NOTE 10               MATERIAL BUSINESS COMBINATIONS**

 

The Company completed its acquisitions of twobranches in Las Cruces, New Mexico on May 1, 2004 and one branch in Sun City,Arizona on November 1, 2004.  Thebranches were purchased from Matrix Capital Bank, a wholly owned subsidiary ofMatrix Bancorp, Inc.  The acquisitionswere accounted for using the purchase method of accounting, and accordingly,the acquired assets and liabilities were recorded at their respective fairvalues on the dates of acquisition.  TheSun City purchase price allocation has not been finalized pending valuation ofcertain assets.

 

In March 2005, appraisals of the Las Cruces,New Mexico properties were completed. The appraisals resulted in a $1,040,000 increase in the estimatedrecorded value of the properties. Accordingly, goodwill was reduced by $1,040,000.  In addition, during the nine months endedSeptember 30, 2005, the Company recorded additional acquisition costs,resulting in an increase to goodwill of approximately $35,000.

 

The Company performed its annual goodwillimpairment tests as of April 30, 2005. Based on this analysis, there was no indication of goodwill impairment.

 

The following table reflects the pro formaresults of operations as though the acquisitions of the branches had beencompleted on January 1, 2004.  The proforma results of operations do not include pro forma adjustments related topotential earnings from the potential investment of the net cash received fromMatrix Capital Bank at the close of the acquisitions.

 
| ** **                                           | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                           | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| Net interest income before provision for loan losses |       | $                                    | 8,189,408  |   | $ | 4,819,022 |   |
| Net income (loss)                                    |       | 1,387,971                            |       | (508,755 | ) |
| Income (loss) per share                              |       |                                 |       |   |   |
| Basic                                                |       | 0.84                                 |       | (0.40 | ) |
| Assuming dilution                                    |       | 0.82                                 |       | (0.40 | ) |
|                                                      |            |                                      |            |  |  |  |  |

 

**NOTE 11               PROPOSED ACQUISITION OF COMPANY**

 

On August 31, 2005, the Company and FirstState Bancorporation (“First State”), a New Mexico corporation, entered into anAgreement and Plan of Merger (the “Merger Agreement”), pursuant to which theCompany will merge (the “Merger”) with and into First State with First Statesurviving.  Concurrent with the Merger,First State Bank N.M., a New Mexico state chartered bank and a wholly ownedsubsidiary of First State, and AccessBank will enter into a subsidiary mergeragreement where AccessBank will merge with and into First State Bank N.M. with FirstState Bank N.M. surviving.  On September29, 2005, the Company and First State signed Amendment Number 1 to the MergerAgreement.  This amendment provides forthe treatment in the merger of those shares of Company stock as to which theholders thereof have complied with the appraisal rights provisions of DelawareGeneral Corporation Law.

 

17

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**NOTE 11               PROPOSED ACQUISITION OF COMPANY (continued)**

 

Under and subject to the terms of the MergerAgreement, the stockholders of the Company will receive .791 shares of FirstState common stock in exchange for each share of common stock of the Companythat they own, subject to certain possible adjustments as set forth in theMerger Agreement.  The exchange ratio isbased on the average closing price of First State common stock as reported onthe NASDAQ during the 40 consecutive trading days ending on August 30, 2005,and a $17.00 price per share for the Company’s stock.  Under the terms of the Merger Agreement, theCompany will be permitted to declare and pay a dividend prior to closing in anamount not to exceed $.35 per share or $660,000 in the aggregate.  The Company presently anticipates that itwill pay this special dividend to its stockholders immediately prior to themerger in the event the merger is consummated, but the dividend is subject todeclaration and approval by the Company’s board of directors.

 

In connection with the proposed merger, theCompany and First State will file relevant materials with the SEC, includingone or more registration statements(s) that contain a prospectus and proxystatement.  First State filed aregistration statement with the SEC, in connection with the proposed merger, onOctober 11, 2005.  This registrationstatement was amended on November 1, 2005 and was declared effective bythe SEC on November 3, 2005.

 

Completion of the transaction is subject tovarious customary closing conditions, including regulatory approval, receipt ofrequired third party consents, and approval of the Company’s stockholders.  In the event of a termination of the MergerAgreement under certain limited circumstances, the Company may be required topay First State a termination fee of $750,000.

 

 

18

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**Item 2—Management’sDiscussion and Analysis or Plan of Operation**

** **

**Thefollowing discussion should be read in conjunction with A**CCESS ANYTIME BANCORP, INC.’s (“the Company”) 2004 Annual Report on Form 10-KSB.

 

**Forward-LookingStatements**

Statements made in thisForm 10-QSB and other documents the Company files with the SEC that relate tofuture events or the Company’s expectations, projections, estimates,intentions, goals, targets and strategies are made pursuant to the PrivateSecurities Litigation Reform Act of 1995. These forward-looking statements are based upon current expectations andestimates and the Company assumes no obligation to update thisinformation.  Because actual results maydiffer materially from those expressed or implied by forward-lookingstatements, the Company cautions readers not to place undue reliance on thesestatements.  Factors that could causeactual results to differ, and that could affect the Company’s future financialcondition, cash flow and operating results include changes in economicconditions in the Company’s market area, including the suggested changes atCannon Air Force Base in Clovis, New Mexico, the failure of the Company’sstockholders to approve and adopt the Merger Agreement and/or the failure toobtain approvals from regulators or other groups, timing of the close or thefailure to close or satisfy other conditions to closing the proposedacquisition of the Company by First State, disruption from the proposedacquisition of the Company by First State, making it more difficult to maintainrelationships with customers or employees, loss of personnel or the ability tohire suitable personnel, changes in policies or adverse decisions by regulatoryagencies, fluctuations in interest rates, demand for loans in the Company’smarket area, and competition.  Furtherdiscussion regarding the factors affecting the Company that could cause actualresults to differ from those expressed or implied by the Company’sforward-looking statements is contained in the Company’s current and futureAnnual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, and CurrentReports on Form 8-K filed with the SEC.

 

**General**

 

The Company is a Delaware corporation which was organized in 1996 forthe purpose of becoming the thrift holding company of AccessBank (the “Bank”).  The Bank is a federally chartered stocksavings bank conducting business from nine full-service banking locations inAlbuquerque, Clovis, Gallup, Portales, and Las Cruces, New Mexico, and onefull-service banking location in Sun City, Arizona.  The Bank has a wholly owned subsidiary,FEDCO, which is currently inactive.

 

The Las Cruces, New Mexico branches were acquired from Matrix CapitalBank on May 1, 2004.  The fair values ofacquired loans and deposits at the branches were approximately $19.6 millionand $79.1 million, respectively.  TheCompany also received approximately $51.5 million in cash (net of acquisitioncosts) at the close of the transaction. The Sun City, Arizona branch was acquired from Matrix Capital Bank onNovember 1, 2004.  The fair values ofacquired loans and deposits at the branch were approximately $1,435 and $104.6million, respectively.  The Company alsoreceived approximately $98.2 million in cash (net of acquisition costs) at theclose of the transaction.

 

The Bank is principally engaged in the business of attracting retailand commercial deposits from the general public and investing those funds infirst mortgage loans in owner occupied, single-family residential loans andsecurities.  The Bank also originatescommercial real estate loans and, to a lesser

 

19

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extent, residential construction loans. In addition, the Bank originates consumer loans, including loans for thepurchase of automobiles and home improvement loans, and commercial businessloans including Small Business Administration loans.

 

The most significant outside factorsinfluencing the operations of the Bank and other financial institutions includegeneral economic conditions, competition in the local market place and therelated monetary****and fiscal policies of agenciesthat regulate financial institutions. More specifically, the cost of funds, primarily consisting of deposits,is influenced by interest rates on competing investments and general marketrates of interest.  Lending activitiesare influenced by the demand for real estate financing and other types ofloans, which in turn is affected by the interest rates at which such loans maybe offered and other factors affecting loan demand and funds availability.  The Bank considers the state of New Mexico asits primary trade area.  Federalgovernment outlays in research and development, defense, and agriculturerepresent a significant portion of the New Mexico economy.  The Bank’s lending territory also includesMaricopa County in Arizona and portions of the State of Texas.

 

On May 13, 2005, the Defense Base Closure andRealignment Commission (the “BRAC Commission”) received the list of militarybases suggested by the Department of Defense for realignment or closure.  This list includes the suggested closure ofCannon Air Force Base (the “Base”) in Clovis, New Mexico.  Cannon Air Force Base employs approximately2,385 military personnel and 384 civilians. The BRAC Commission performed an independent analysis and evaluation ofthe list, which included the opportunity for public and community input, and onAugust 26, 2005, voted to keep the Base open until at least 2009.  However, the BRAC Commission agreed that theair wing and attached aircraft should still be relocated and that long-termoperations at the Base are dependent on the Department of Defense identifyingnew missions for the Base.  The BRACCommission furnished the report of its findings and suggestions to thePresident and to the American public on September 8, 2005.  On September 15, 2005, the Presidentforwarded the report to Congress. Congress must enact a joint resolution to reject the report in fullwithin 45 days of receipt or the report becomes law.

 

Management has not yet determined thepotential impact of the suggested changes at the Base on the Company’sfinancial condition or results of operations. However, the suggested changes at the Base could have a significantimpact on the economies of both Clovis, New Mexico and Portales, New Mexico andthe credit quality of the Company’s loan portfolio in these areas coulddeteriorate.  In addition, the Company’sdeposit base in these areas could be reduced. At September 30, 2005, the loan portfolios in Clovis, New Mexico andPortales, New Mexico represented approximately 34% of the Company’s total loanportfolio.  Deposits in Clovis andPortales represented approximately 30% of the Company’s total deposit base atSeptember 30, 2005.    The estimated timeto relocate the Base’s air wing and attached aircraft is unknown.

 

On August 31, 2005, the Company and FirstState Bancorporation (“First State”), a New Mexico corporation, entered into anAgreement and Plan of Merger (the “Merger Agreement”), pursuant to which theCompany will merge (the “Merger”) with and into First State with First Statesurviving.  Concurrent with the Merger,First State Bank N.M., a New Mexico state chartered bank and a wholly ownedsubsidiary of First State, and AccessBank will enter into a subsidiary mergeragreement where AccessBank will merge with and into First State Bank N.M. withFirst State Bank N.M. surviving.  OnSeptember 29, 2005, the Company and First State signed Amendment Number 1 tothe Merger Agreement.  This amendmentprovides for the treatment in the merger of those shares of Company stock

 

20

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as to which the holders thereof have compliedwith the appraisal rights provisions of Delaware General Corporation Law.

 

Under and subject to the terms of the MergerAgreement, the stockholders of the Company will receive .791 shares of FirstState common stock in exchange for each share of common stock of the Companythat they own, subject to certain possible adjustments as set forth in theMerger Agreement.  The exchange ratio isbased on the average closing price of First State common stock as reported onthe Nasdaq during the 40 consecutive trading days ending on August 30, 2005,and a $17.00 price per share for the Company’s stock.  Under the terms of the Merger Agreement, theCompany will be permitted to declare and pay a dividend prior to closing in anamount not to exceed $.35 per share or $660,000 in the aggregate.  The Company presently anticipates that itwill pay this special dividend to its stockholders immediately prior to themerger in the event the merger is consummated, but the dividend is subject todeclaration and approval by the Company’s board of directors.

 

In connection with the proposed merger, theCompany and First State will file relevant materials with the SEC, includingone or more registration statements(s) that contain a prospectus and proxystatement.  First State filed aregistration statement with the SEC, in connection with the proposed merger, onOctober 11, 2005.  This registration statementwas amended on November 1, 2005 and was declared effective by the SEC onNovember 3, 2005.

 

Completion of the transaction is subject tovarious customary closing conditions, including regulatory approval, receipt ofrequired third party consents, and approval of the Company’s stockholders.  In the event of a termination of the MergerAgreement under certain limited circumstances, the Company may be required topay First State a termination fee of $750,000.

 

### **FinancialCondition**

 

Total assets of the Company decreased by $.4million or 0.12%, from December 31, 2004 to September 30, 2005.  During the nine month period ended September30, 2005, the Company purchased approximately $36.2 million of securitiesheld-to-maturity, primarily financed by FHLB advances.  In May 2005, the Company completed thepurchase of a parcel of land in Albuquerque, New Mexico for approximately $1.2million.  Plans for construction of abuilding at the property site are pending.

 

Total liabilities decreased by $2.5 millionor 0.73%, from December 31, 2004 to September 30, 2005, primarily due to an$18.7 million decrease in customer deposits, partially offset by a $16.5increase in FHLB advances.

 

### **Capital Adequacyand Liquidity**

 

**Capital Adequacy -**Under the FinancialInstitutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) and theimplementation of Office of Thrift Supervision (“OTS”) regulations on December7, 1989, the Bank must have:  (1) Tier 1or core capital equal to 4% of adjusted total assets and (2) total capitalequal to 8.0% of risk-weighted assets, which includes off-balance sheet items.

 

Under the Federal Deposit InsuranceCorporation Improvement Act (“FDICIA”), to be deemed “well capitalized” theminimum ratios the Bank must have are: (1) Tier 1 or core capital of 5% ofadjusted total assets, (2) Tier 1 risk-based capital of 6% of risk-weightedassets, and (3) total risk-based capital of 10% of risk weighted assets.

 

21

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The following table is a reconciliation ofthe Bank’s capital for regulatory purposes at September 30, 2005, as reportedto the OTS.

 
| ** **                                                            | ** ** | **Tier 1-  Core  Capital** | ** **  | **Tier 1-  Risk-based  Capital** | ** **  | **Total  Risk-based  Capital** | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------|-------------|----------------------------------|-------------|--------------------------------|------------|
| Total regulatory assets                                               |       | $                          | 365,528,013 |                             |        |                           |       |   |
| Net change in fair value of available-for-sale securities             |       | 8,374                      |        |                             |        |                           |       |
| Less intangible assets disallowed for regulatory purposes             |       | (10,053,196                | )           |                             |        |                           |       |
|                                                                  |       |                       |        |                             |        |                           |       |
| Adjusted regulatory total assets                                      |       | $                          | 355,483,191 |                             |        |                           |       |   |
|                                                                  |       |                       |        |                             |        |                           |       |
| Risk-based assets                                                     |       |                       |        | $                                | 192,314,000 |                           | $          | 192,314,000 |   |
|                                                                  |       |                       |        |                             |        |                           |       |
| Stockholder’s equity                                             |       | $                          | 31,009,837  |                             | $           | 31,009,837                     |       | $ | 31,009,837 |   |
| Net change in fair value of available-for-sale securities, net of tax |       | 4,856                      |        | 4,856                            |        | 4,856                          |       |
| Valuation allowance                                                   |       | —                     |        | —                           |        | 1,656,755                      |       |
| Less intangible assets disallowed forregulatory purposes              |       | (10,053,196                | )           | (10,053,196                      | )           | (10,053,196                    | )          |
|                                                                  |       |                       |        |                             |        |                           |       |
| Regulatory capital                                                    |       | 20,961,497                 |        | 20,961,497                       |        | 22,618,252                     |       |
| Regulatory capital required to be “well capitalized”        |       | 17,774,160                 |        | 11,538,840                       |        | 19,231,400                     |       |
|                                                                  |       |                       |        |                             |        |                           |       |
| Excess regulatory capital                                             |       | $                          | 3,187,337   |                             | $           | 9,422,657                      |       | $ | 3,386,852 |   |
|                                                                  |       |                       |        |                             |        |                           |       |
| Bank’s capital to adjusted regulatory assets                     |       | 5.90                       | %           |                             |        |                           |       |
|                                                                  |       |                       |        |                             |        |                           |       |
| Bank’s capital to risk-based assets                              |       |                       |        | 10.90                            | %           | 11.76                          | %          |
|                                                                       |            |                            |             |                                  |             |                                |            |  |  |  |  |  |  |  |

 

**Liquidity**

 

Liquidity enables the Bank to meetwithdrawals of its deposits and the needs of its loan customers.  The Bank maintains its liquidity positionthrough maintenance of cash resources and a core deposit base.  A further source is the Bank’s ability toborrow funds.  The Bank is a member ofthe Federal Home Loan Bank (“FHLB”) which provides a source of borrowings tothe Bank for asset and asset/liability matching.  FHLB advances were $23.1 million and $6.5million at September 30, 2005 and December 31, 2004, respectively.  The additional advances were primarily usedto fund purchases of securities held-to-maturity.  At the close of business on November 8, 2005,FHLB advances were $17.3 million.

 

Liquidity risk results from the mismatchingof assets and liabilities cash flows. Management chooses asset/liability strategies that promote stableearnings and reliable funding.  Interestrate risk and funding positions are kept within limits established by the Boardof Directors of the Bank to ensure that risk taking is not excessive and thatliquidity is properly managed.  The Bankkeeps a portion of its interest-bearing assets in adjustable-rate products toreduce interest rate sensitivity. Therefore, if rates increase the Bank can retain its deposits byincreasing rates paid on deposits, while limiting the impact on the Bank’s netinterest margin.  The primary additionalsource of funding is provided by FHLB borrowings

 

22

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available to the Bank, of $166.1 million and$192.3 million at September 30, 2005 and December 31, 2004, respectively.

 

At September 30, 2005 and December 31, 2004,the Company had lines of credit totaling $400,000 each year from other banks.The Company had no borrowings outstanding under these arrangements at September30, 2005 and December 31, 2004.  Thelines of credit bear market rates of interest and borrowings thereunder are tobe used for general purposes.

 

 

# **Results ofOperations**

### ** **

### **Three-MonthComparative Analysis for Periods September 30, 2005 and 2004**

 

Net income for the three months endedSeptember 30, 2005 was $434,015 or $.26 per basic share and $.25 per dilutedshare, compared to $276,596 or $.22 per basic share and $.19 per diluted sharefor the three-months ended September 30, 2004, an increase of $157,419 or56.9%.  Net income per diluted shareincreased by 31.6%, primarily due to the increase in net income, partiallyoffset by an increase in weighted average common shares.

 

*Net Interest Income.*  Net interest income before provision for loanlosses increased by 6.8% to $2,630,606 for the three months ended September 30,2005, compared to $2,463,416 for the same period in 2004.  The increase was primarily due to an increasein total interest income of $1,064,842. This improvement was primarily due to the increase in average loanbalances as compared to September 30, 2004 and to an increase in interestincome from securities purchased in the fourth quarter of 2004 and the firstquarter of 2005.  The increase ininterest income was partially offset by a $766,124 increase in interest expenseon deposits, primarily due to the substantial increase in deposits whichresulted from the acquisition of the Sun City, Arizona branch in November2004.  See Note 10 to the UnauditedConsolidated Financial Statements in this Form 10-QSB for additional discussionon this acquisition.  The increase ininterest income was also partially offset by an increase in interest expense onFHLB advances.

 

*Provision for Loan Losses.*  The level of the allowance for loan losses isbased on such factors as the amount of non-performing assets, historical lossexperience, general economic conditions, the estimated fair value of theunderlying collateral, and other factors which may affect the collectibility ofloans.  Management’s analysis of currentconditions resulted in a provision for loan losses of $45,000 and $142,000 forthe three months ended September 30, 2005 and 2004, respectively.  The decrease in the provision is consistentwith the decrease in net loans charged off, which included an atypical $50,000recovery of a commercial real estate loan that was charged off in a prior year,and a decrease in non-performing assets, during the three month period endedSeptember 30, 2005, partially offset by the increase in the average loanbalance.  Although management believes ituses the best information available to make such determinations, futureadjustments to the allowance may be necessary, and net income could besignificantly affected, if circumstances differ substantially from theassumptions used in making initial determinations.  See Note 5 to the Unaudited ConsolidatedFinancial Statements in this Form 10-QSB for additional discussion on theallowance for loan losses.

 

23

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*Noninterest Income.*  During the three months ended September 30,2005, noninterest income increased by $190,207, or 23.5%, to $999,003 from$808,796 for the same period in 2004.  Ofthis $190,207 increase, $163,175 was due to an increase in gains generated bysales of one-to-four family residential mortgage loans.  This increase was partially offset by adecrease in income from other real estate owned.

 

*Noninterest Expense.*  During the three months ended September 30,2005, noninterest expense increased by $180,566, or 6.8%, to $2,833,770 from$2,653,204 for the same period in 2004. The increase consisted primarily of increases in salaries and employeebenefits of $226,108, and occupancy expense of $57,406, and was partiallyoffset by a decrease in professional fees of $132,195.  The increase in salaries and employeebenefits and occupancy expense was primarily due to the acquisition of the SunCity, Arizona branch in November 2004 (see Note 10 to the UnauditedConsolidated Financial Statements in this Form 10-QSB).  The increase in salaries and employeebenefits was also due to an increase in loan origination incentives.  The decrease in professional fees wasprimarily due to a decrease in audit and outsourced compliance expense.

 

*Income Tax Expense.*  Income tax expense for the three months endedSeptember 30, 2005 increased by $116,412, to $316,824, from $200,412 for thethree months ended September 30, 2004, primarily due to the increase in incomebefore taxes.

 

### **Nine-MonthComparative Analysis for Periods September 30, 2005 and 2004**

 

Net income for the nine months endedSeptember 30, 2005 was $1,387,971 or $.84 per basic share and $.82 per dilutedshare, compared to $889,097 or $.71 per basic share and $.63 per diluted sharefor the nine months ended September 30, 2004, an increase of $498,874 or56.1%.  Net income per diluted shareincreased by 30.2%, primarily due to the increase in net income, partiallyoffset by an increase in weighted average common shares.

 

*Net Interest Income.*  Net interest income before provision for loanlosses increased by 24.9% to $8,189,408 for the nine months ended September 30,2005, compared to $6,557,615 for the same period in 2004.  The increase was primarily due to an increasein total interest income of $4,126,016. This improvement was primarily due the increase in average loan balancesas compared to September 30, 2004, attributable to loans acquired from thepurchase of two branches in Las Cruces, New Mexico in 2004 and to a generalincrease in average loan volume within the Bank.  The improvement is also attributable to anincrease in interest income from securities purchased in the fourth quarter of2004 and the first quarter of 2005.  Theincrease in interest income was partially offset by a $2,052,119 increase ininterest expense on deposits, primarily due to the substantial increase indeposits which resulted from the acquisitions of the two Las Cruces, New Mexicobranches and the Sun City, Arizona branch. See Note 10 to the Unaudited Consolidated Financial Statements in thisForm 10-QSB for additional discussion on these acquisitions.  The increase in interest income was alsopartially offset by an increase in interest expense on FHLB advances.

 

*Provision for Loan Losses.*  The level of the allowance for loan losses isbased on such factors as the amount of non-performing assets, historical lossexperience, general economic conditions, the estimated fair value of theunderlying collateral, and other factors which may affect the collectibility ofloans.  Management’s analysis of currentconditions resulted in a provision for loan losses of $420,000 and $568,000 forthe nine months ended September 30, 2005 and 2004, respectively.  The decrease in the 

 

24

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provision is consistent with the decrease innet loans charged off, which included an atypical $50,000 recovery of acommercial real estate loan that was charged off in a prior year, and to adecrease in non-performing assets, during the nine month period ended September30, 2005, partially offset by the increase in the average loan balance.  Although management believes it uses the bestinformation available to make such determinations, future adjustments to theallowance may be necessary, and net income could be significantly affected, ifcircumstances differ substantially from the assumptions used in making initialdeterminations.  See Note 5 to theUnaudited Consolidated Financial Statements in this Form 10-QSB for additionaldiscussion on the allowance for loan losses.

 

*Noninterest Income.*  During the nine months ended September 30,2005, noninterest income increased by $678,322, or 30.2%, to $2,927,029 from$2,248,707 for the same period in 2004. The increase in noninterest income was primarily due to the gainsgenerated by the increase in sales of one-to-four family residential mortgageloans.  During the nine month periodended September 30, 2005, the Bank sold $68.1 million of these loans, whichresulted in a $1,415,600 gain.  Of this$68.1 million, $16.7 million were transferred from held-to-maturity toheld-for-sale, and subsequently sold to a third party.  During the same period in 2004, sales ofthese loans were $40.8 million, which resulted in a $771,382 gain.  The increase in noninterest income was alsodue to an increase in rental income from the Company’s properties in LasCruces, New Mexico, partially offset by a decrease in income from other realestate owned.

 

*Noninterest Expense.*  During the nine months ended September 30,2005, noninterest expense increased by $1,765,007, or 26.6%, to $8,401,820 from$6,636,813 for the same period in 2004. The increase consisted primarily ofincreases in salaries and employee benefits of $1,112,103, occupancy expense of$317,357, and data processing expense of $143,936. The increase in salaries andemployee benefits and occupancy expense was primarily due to the acquisition ofthe Las Cruces, New Mexico and Sun City, Arizona branches (see Note 10 to theUnaudited Consolidated Financial Statements in this Form 10-QSB), as well as anincrease in employee medical claims and loan origination incentives.  The increase in data processing expense wasprimarily due to the branch acquisitions and an increase in fees paid to theCompany’s outsourced data processing service provider, due to increases ininternet banking volume.

 

*Income Tax Expense.*  Income tax expense for the nine months endedSeptember 30, 2005 increased by $194,234 to $906,646, from $712,412 for thenine months ended September 30, 2004. The increase in income tax expense is primarily due to an increase inincome before taxes, partially offset by an increase in the estimatedutilization of the Company’s New Mexico state net operating losscarryforward.   For the same reasons, theeffective tax rate decreased to 39.5% for the nine months ended September 30,2005, from 44.4% for the same period in 2004.

 

**Net Interest Income**

 

TheCompany’s operating results are impacted by many factors, the most importantfactor being the interest spread between the yield on loans and investments andthe cost of funds.  The following tablepresents operating results for the Company. The table presents for the periods indicated the total dollar amount ofinterest income from average interest-earning assets and the resultant yields, aswell as the interest expense on average interest-bearing liabilities, expressedboth in dollars and rates.  No taxequivalent adjustments were made and all average balances are monthly averagebalances.  Non-accruing loans have beenincluded in the table as loans carrying a zero yield.

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| ** **                                                               | ** ** | **Three Months ended September 30,** | ** **  |
|--------------------------------------------------------------------------|------------|--------------------------------------|-------------|
| ** **                                                               | ** ** | **2005**                             | ** **  | **2004** | ** ** |
| ** **                                                               | ** ** | **Average  outstanding  balance**    | ** **  | **Interest  earned/  Paid** | ** ** | **Yield/  Rate** | ** ** | **Average  outstanding  balance** | ** ** | **Interest  earned/  Paid** | ** ** | **Yield/  Rate** | ** ** |
| Interest-earning assets:                                                 |       |                                 |        |   |   |   |   |   |   |   |   |   |   |
| Loans receivable(1)                                                      |       | $                                    | 207,511,661 |   | $ | 3,522,600 |   | 6.79 | % | $ | 200,822,461 |   | $ | 3,140,086 |   | 6.25 | % |
| Mortgage-backed securities                                               |       | 79,103,957                           |        | 759,364 |   | 3.84 |   | 30,568,413 |   | 290,310 |   | 3.80 |   |
| Investment securities                                                    |       | 50,716,604                           |        | 383,043 |   | 3.02 |   | 27,479,149 |   | 180,461 |   | 2.63 |   |
| Other interest-earning assets                                            |       | 6,585,856                            |        | 48,416 |   | 2.94 |   | 6,975,301 |   | 37,724 |   | 2.16 |   |
|                                                                     |       |                                 |        |   |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets(1)                                         |       | $                                    | 343,918,078 |   | $ | 4,713,423 |   | 5.48 | % | $ | 265,845,324 |   | $ | 3,648,581 |   | 5.49 | % |
|                                                                     |       |                                 |        |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                            |       |                                 |        |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                 |       | $                                    | 311,800,355 |   | $ | 1,649,643 |   | 2.12 | % | $ | 234,031,679 |   | $ | 883,519 |   | 1.51 | % |
| Federal Home Loan Bank advances                                          |       | 26,888,766                           |        | 238,431 |   | 3.55 |   | 25,145,781 |   | 132,810 |   | 2.11 |   |
| Other borrowings                                                         |       | 8,248,000                            |        | 194,743 |   | 9.44 |   | 8,000,000 |   | 168,836 |   | 8.44 |   |
|                                                                     |       |                                 |        |   |   |   |   |   |   |   |   |   |   |
| Total interest-bearing liabilities                                       |       | $                                    | 346,937,121 |   | $ | 2,082,817 |   | 2.40 | % | $ | 267,177,460 |   | $ | 1,185,165 |   | 1.77 | % |
|                                                                     |       |                                 |        |   |   |   |   |   |   |   |   |   |   |
| Net interest income before provision for loan losses                     |       |                                 |        | $ | 2,630,606 |   |   |   |   |   | $ | 2,463,416 |   |   |   |
| Net interest rate spread                                                 |       |                                 |        |   |   | 3.08 | % |   |   |   |   | 3.72 | % |
|                                                                     |       |                                 |        |   |   |   |   |   |   |   |   |   |   |
| Net interest-earning (liabilities)                                       |       | $                                    | (3,019,043  | ) |   |   |   |   | $ | (1,332,136 | ) |   |   |   |   |
| Net yieldon average interest-earning assets                              |       |                                 |        |   |   | 3.06 | % |   |   |   |   | 3.71 | % |
|                                                                     |       |                                 |        |   |   |   |   |   |   |   |   |   |   |
| Average interest-earning assets to average interest-bearing  liabilities |       |                                 |        | 99.13 | % |   |   |   |   | 99.50 | % |   |   |

----

(1) Calculated net of loans in process

 

 
| ** **                                                               | ** ** | **Nine Months ended September 30,** | ** **  |
|--------------------------------------------------------------------------|------------|-------------------------------------|-------------|
| ** **                                                               | ** ** | **2005**                            | ** **  | **2004** | ** ** |
| ** **                                                               | ** ** | **Average  outstanding  balance**   | ** **  | **Interest  earned/  Paid** | ** ** | **Yield/  Rate** | ** ** | **Average  outstanding  balance** | ** ** | **Interest  earned/  Paid** | ** ** | **Yield/  Rate** | ** ** |
| Interest-earning assets:                                                 |       |                                |        |   |   |   |   |   |   |   |   |   |   |
| Loans receivable(1)                                                      |       | $                                   | 209,882,012 |   | $ | 10,424,846 |   | 6.62 | % | $ | 184,336,035 |   | $ | 8,697,740 |   | 6.29 | % |
| Mortgage-backed securities                                               |       | 77,469,025                          |        | 2,205,476 |   | 3.80 |   | 19,792,601 |   | 564,358 |   | 3.80 |   |
| Investment securities                                                    |       | 57,869,045                          |        | 1,240,443 |   | 2.86 |   | 22,188,671 |   | 468,811 |   | 2.82 |   |
| Other interest-earning assets                                            |       | 5,860,803                           |        | 119,789 |   | 2.73 |   | 9,650,705 |   | 133,629 |   | 1.85 |   |
|                                                                     |       |                                |        |   |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets(1)                                         |       | $                                   | 351,080,885 |   | $ | 13,990,554 |   | 5.31 | % | $ | 235,968,012 |   | $ | 9,864,538 |   | 5.57 | % |
|                                                                     |       |                                |        |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                            |       |                                |        |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                 |       | $                                   | 315,215,725 |   | $ | 4,521,214 |   | 1.91 | % | $ | 205,303,921 |   | $ | 2,469,095 |   | 1.60 | % |
| Federal Home Loan Bank advances                                          |       | 29,997,102                          |        | 705,607 |   | 3.14 |   | 19,747,069 |   | 341,457 |   | 2.31 |   |
| Other borrowings                                                         |       | 8,248,000                           |        | 574,325 |   | 9.28 |   | 8,000,000 |   | 496,371 |   | 8.27 |   |
|                                                                     |       |                                |        |   |   |   |   |   |   |   |   |   |   |
| Total interest-bearing liabilities                                       |       | $                                   | 353,460,827 |   | $ | 5,801,146 |   | 2.19 | % | $ | 233,050,990 |   | $ | 3,306,923 |   | 1.89 | % |
|                                                                     |       |                                |        |   |   |   |   |   |   |   |   |   |   |
| Net interest income before provision for loan losses                     |       |                                |        | $ | 8,189,408 |   |   |   |   |   | $ | 6,557,615 |   |   |   |
| Net interest rate spread                                                 |       |                                |        |   |   | 3.12 | % |   |   |   |   | 3.68 | % |
|                                                                     |       |                                |        |   |   |   |   |   |   |   |   |   |   |
| Net interest-earning (liabilities) assets                                |       | $                                   | (2,379,942  | ) |   |   |   |   | $ | 2,917,022 |   |   |   |   |   |
| Net yieldon average interest-earning assets                              |       |                                |        |   |   | 3.11 | % |   |   |   |   | 3.71 | % |
|                                                                     |       |                                |        |   |   |   |   |   |   |   |   |   |   |
| Average interest-earning assets to average interest-bearing  liabilities |       |                                |        | 99.33 | % |   |   |   |   | 101.25 | % |   |   |

----

(1) Calculated net of loans in process

 

26

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**Item 3—Controlsand Procedures**

** **

**Evaluation of Disclosure Controlsand Procedures**

** **

**The Company carried out an evaluation,under the supervision and with the participation of the Company’s management,including the Company’s Chief Executive Officer, President and Chief FinancialOfficer, of the effectiveness of the design and operation of the Company’sdisclosure controls and procedures as of the end of the period covered by thisreport.  The Company’s disclosurecontrols and procedures are designed to ensure that information required to bedisclosed by the Company in its periodic Securities and Exchange Commission (“SEC”)filings is recorded, processed and reported within the time periods specifiedin the SEC’s rules and forms.  Based onthat evaluation, the Chief Executive Officer, President and Chief FinancialOfficer concluded that the Company’s disclosure controls and procedures areeffective in timely alerting them to material information relating to theCompany (including its consolidated subsidiaries) required to be included inthe Company’s periodic SEC filings. There was no change in the small business issuer’s internal control overfinancial reporting that occurred during the small business issuer’s mostrecent fiscal quarter that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting.**

 

 

##### **PARTII - OTHER INFORMATION**

# **Item 1—Legal Proceedings**

# **               **None

 

# **Item2—Unregistered Sales of Equity Securities and Use of Proceeds**

None

 

# **Item3—Defaults Upon Senior Securities**

# **               **None

 

# **Item4—Submission of Matters to a Vote of Security Holders**

# **                None**

 

27

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# **Item 5—Other Information**

 

In April, 2005, the Officeof Thrift Supervision (“OTS”) notified the Company that, due to its ratio oftangible capital to tangible assets at December 31, 2004, which was 2.71%, theCompany must notify the OTS thirty days in advance of issuing, renewing orincreasing debt of the Company, including hybrid capital instruments, orguarantying the debt of any entity.  Thisrequirement of notification does not apply to liabilities incurred in thenormal course of business that are normally recorded as accounts payable.  The notification requirement applies to theCompany only and does not apply to AccessBank.    In May, 2005, the Company requested the OTSto revisit and potentially suspend the notification requirement, based on theimprovement in its tangible capital to tangible assets ratio from 2.71% atDecember 31, 2004 to 2.96% at March 31, 2005. The OTS declined to modify the notification requirement, andaccordingly, the Company will continue to comply with it.  As of September 30, 2005, the Company hadincreased its tangible capital to tangible assets ratio to 3.63%.  The Company does not expect this notificationrequirement to materially adversely affect its consolidated financial positionor results of operations or the financial position or results of operations ofAccessBank.  AccessBank was considered “wellcapitalized” at September 30, 2005, June 30, 2005, March 31, 2005, and December31, 2004.  See “Capital Adequacy andLiquidity” on page 21 of this 10-QSB.

 

# **Item 6—Exhibits**

 

31.1 Certification of Chief Executive Officer as adopted pursuant tosection 302 of the Sarbanes-Oxley Act of 2002

 

31.2 Certification of Chief Financial Officer as adopted pursuant tosection 302 of the Sarbanes-Oxley Act of 2002

 

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of2002

 

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of2002.

 

28

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# **SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 
|                     | ACCESS ANYTIME BANCORP, INC.               |
|--------------------------|-------------------------------------------------|
|                     |                                            |
|                     |                                            |
| Date:  November 10, 2005 | /s/ Norman R. Corzine                           |
|                     | Norman R.  Corzine, Chairman of the Board,      |
|                     | Chief Executive  Officer                        |
|                     | *(Duly Authorized  Representative)*             |
|                     | * *                                        |
|                     |                                            |
| Date:  November 10, 2005 | /s/ Ken Huey, Jr.                               |
|                     | Ken Huey, Jr., Chief  Financial Officer         |
|                     | Director                                        |
|                     | *(Principal Financial and  Accounting Officer)* |
|                     | *(Duly Authorized  Representative)*             |
|                     | * *                                        |
|                     |                                            |
| Date:  November 10, 2005 | /s/ Don K. Padgett                              |
|                     | Don K. Padgett, President                       |
|                     | Director                                        |
|                     | *(Duly Authorized  Representative)*             |

 

 

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