##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER 0-20006
 ANCHOR BANCORP WISCONSIN INC.
 (Exact name of registrant as specified in its charter)
 Wisconsin
    
    39-1726871(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer Identification No.)25 West Main Street 
Madison, Wisconsin
    
    53703(Address of principal executive office)
    
    (Zip Code)
  Registrants telephone number, including area code
  (Former name, former address, and former fiscal year, if changed since last report)
 þ o
  o þ o
 o þ




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##### 



ANCHOR BANCORP WISCONSIN INC.
INDEX  FORM 10-Q
 Page #Part I  Financial InformationItem 1 Financial Statements (Unaudited)Consolidated Balance Sheets as of June 30, 2007 and March 31, 2007
    
    
    2Consolidated Statements of Income for the Three Months Ended June 30, 2007 and 2006
    
    
    3Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2007 and 2006
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Results of Operations
    
    
    21Financial Condition
    
    
    25Asset Quality
    
    
    26Liquidity & Capital Resources
    
    
    29Guarantees
    
    
    31Asset/Liability Management
    
    
    32Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4 Controls and Procedures
    
    
    34Part II  Other InformationItem 1 Legal Proceedings
    
    
    34Item 1A Risk Factors
    
    
    34Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3 Defaults upon Senior Securities
    
    
    35Item 4 Submission of Matters to a Vote of Security Holders
    
    
    35Item 5 Other Information
    
    
    36Item 6 Exhibits
    
    
    36Signatures
    
    
    37Agreement and Plan of Merger302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
  1




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ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 June 30,
    
    
    March 31,2007
    
    
    2007(Unaudited)(In Thousands, Except Share Data)AssetsCash
    
    $
    76,223
    
    
    $
    77,951Interest-bearing deposits
    
    
    27,554
    
    
    
    44,087Cash and cash equivalents
    
    
    103,777
    
    
    
    122,038Investment securities available for sale
    
    
    74,814
    
    
    
    73,545Mortgage-related securities available for sale
    
    
    240,630
    
    
    
    247,971Mortgage-related securities held to maturity (fair value of $66
and $68, respectively)
    
    
    66
    
    
    
    68Loans, less allowance for loan losses of $22,220 at June 30, 2007
and $20,517 at March 31, 2007:Held for sale
    
    
    9,062
    
    
    
    4,474Held for investment
    
    
    3,890,053
    
    
    
    3,874,049Foreclosed properties and repossessed assets, net
    
    
    4,358
    
    
    
    7,411Real estate held for development and sale
    
    
    58,862
    
    
    
    60,303Office properties and equipment
    
    
    32,357
    
    
    
    32,034Federal Home Loan Bank stockat cost
    
    
    41,361
    
    
    
    41,361Accrued interest on investments, loans and other assets
    
    
    57,462
    
    
    
    56,475Goodwill
    
    
    19,956
    
    
    
    19,956Total assets
    
    $
    4,532,758
    
    
    $
    4,539,685Liabilities and Stockholders EquityDepositsNon-interest bearing
    
    $
    262,878
    
    
    $
    241,234Interest bearing
    
    
    2,986,086
    
    
    
    3,007,012Total deposits
    
    
    3,248,964
    
    
    
    3,248,246Short-term borrowings
    
    
    545,065
    
    
    
    472,400Long-term borrowings
    
    
    345,951
    
    
    
    428,077Other liabilities
    
    
    54,204
    
    
    
    46,610Total liabilities
    
    
    4,194,184
    
    
    
    4,195,333Minority interest in real estate partnerships
    
    
    6,981
    
    
    
    7,486Commitments and contingent liabilities (Note 8)Preferred stock, $.10 par value, 5,000,000 shares
authorized, none outstanding
    
    
    
    
    
    
    Common stock, $.10 par value, 100,000,000 shares authorized,
25,363,339 shares issued, 21,344,693 and 21,669,094 shares outstanding,
respectively
    
    
    2,536
    
    
    
    2,536Additional paid-in capital
    
    
    72,125
    
    
    
    72,122Retained earnings
    
    
    365,175
    
    
    
    359,570Accumulated other comprehensive loss
    
    
    (2,434
    )
    
    
    (542
    )Treasury stock (4,018,646 and 3,694,245 shares, respectively), at cost
    
    
    (100,644
    )
    
    
    (91,751
    )Deferred compensation obligation
    
    
    (5,165
    )
    
    
    (5,069
    )Total stockholders equity
    
    
    331,593
    
    
    
    336,866Total liabilities and stockholders equity
    
    $
    4,532,758
    
    
    $
    4,539,685
  2




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ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Statements of Income
  Three Months Ended June 30,2007
    
    
    2006(In Thousands, Except Per Share Data)Interest income:Loans
    
    $
    68,031
    
    
    $
    61,774Mortgage-related securities
    
    
    3,006
    
    
    
    2,904Investment securities
    
    
    1,215
    
    
    
    957Interest-bearing deposits
    
    
    395
    
    
    
    631Total interest income
    
    
    72,647
    
    
    
    66,266Interest expense:Deposits
    
    
    31,446
    
    
    
    25,356Short-term borrowings
    
    
    6,658
    
    
    
    2,262Long-term borrowings
    
    
    3,526
    
    
    
    5,803Total interest expense
    
    
    41,630
    
    
    
    33,421Net interest income
    
    
    31,017
    
    
    
    32,845Provision for loan losses
    
    
    2,271
    
    
    
    1,205Net interest income after provision for loan losses
    
    
    28,746
    
    
    
    31,640Non-interest income:Real estate investment partnership revenue
    
    
    4,726
    
    
    
    4,486Loan servicing income
    
    
    1,480
    
    
    
    997Credit enhancement income
    
    
    421
    
    
    
    417Service charges on deposits
    
    
    3,091
    
    
    
    2,428Investment and insurance commissions
    
    
    982
    
    
    
    826Net gain on sale of loans
    
    
    1,587
    
    
    
    869Net gain (loss) on sale of investments and mortgage-related securities
    
    
    12
    
    
    
    (283
    )Other revenue from real estate operations
    
    
    1,223
    
    
    
    2,147Other
    
    
    1,118
    
    
    
    1,420Total non-interest income
    
    
    14,640
    
    
    
    13,307Non-interest expense:Compensation
    
    
    11,270
    
    
    
    10,726Real estate investment partnership cost of sales
    
    
    4,340
    
    
    
    3,853Occupancy
    
    
    1,937
    
    
    
    1,999Furniture and equipment
    
    
    1,481
    
    
    
    1,453Data processing
    
    
    1,487
    
    
    
    1,421Marketing
    
    
    1,084
    
    
    
    1,152Other expenses from real estate partnership operations
    
    
    2,085
    
    
    
    2,578Other
    
    
    3,203
    
    
    
    3,257Total non-interest expense
    
    
    26,887
    
    
    
    26,439Minority interest in income (loss) of real estate partnership operations
    
    
    (75
    )
    
    
    438Income before income taxes
    
    
    16,574
    
    
    
    18,070Income taxes
    
    
    6,688
    
    
    
    7,423Net income
    
    $
    9,886
    
    
    $
    10,647Earnings per share:Basic
    
    $
    0.47
    
    
    $
    0.50Diluted
    
    
    0.46
    
    
    
    0.49Dividends declared per share
    
    
    0.17
    
    
    
    0.16
  3




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ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
  Three Months Ended June 30,2007
    
    
    2006(In Thousands)Operating ActivitiesNet income
    
    $
    9,886
    
    
    $
    10,647Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    2,271
    
    
    
    1,205Provision for depreciation and amortization
    
    
    1,016
    
    
    
    1,100Cash paid due to origination of loans held for sale
    
    
    (127,562
    )
    
    
    (91,601
    )Cash received due to sale of loans held for sale
    
    
    124,561
    
    
    
    93,861Net gain on sales of loans
    
    
    (1,587
    )
    
    
    (869
    )Gain (loss) on sale of investments
    
    
    (12
    )
    
    
    283Increase in accrued interest receivable
    
    
    (583
    )
    
    
    (959
    )(Increase) decrease in other assets
    
    
    (404
    )
    
    
    2,538Decrease in accrued interest payable
    
    
    (197
    )
    
    
    (788
    )Increase in other liabilities
    
    
    7,388
    
    
    
    9,626Other
    
    
    3,021
    
    
    
    93Net cash provided by operating activities
    
    
    17,798
    
    
    
    25,136Investing ActivitiesProceeds from sales of investment securities available for sale
    
    
    
    
    
    
    65Proceeds from maturities of investment securities
    
    
    25,112
    
    
    
    22,915Purchase of investment securities available for sale
    
    
    (26,648
    )
    
    
    (41,354
    )Purchase of mortgage-related securities available for sale
    
    
    (10,684
    )
    
    
    (19,913
    )Principal collected on mortgage-related securities
    
    
    15,224
    
    
    
    12,975Decrease in FHLB stock
    
    
    
    
    
    
    3,750Net increase in loans held for investment
    
    
    (17,591
    )
    
    
    (96,349
    )Net of office properties and equipment
    
    
    (1,222
    )
    
    
    (795
    )Investment in real estate held for development and sale
    
    
    1,357
    
    
    
    (2,578
    )Net cash used in investing activities
    
    
    (14,452
    )
    
    
    (121,284
    )
 4




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ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Contd)
 Three Months Ended June 30,2007
    
    
    2006(In Thousands)Financing Activities(Decrease) increase in deposit accounts
    
    $
    (4,593
    )
    
    $
    132,335Increase in advance payments by borrowers
for taxes and insurance
    
    
    5,714
    
    
    
    5,094Increase (decrease) in short-term borrowings
    
    
    72,665
    
    
    
    (6,900
    )Proceeds from long-term borrowings
    
    
    8,183
    
    
    
    4,079Repayment of long-term borrowings
    
    
    (90,309
    )
    
    
    (67,942
    )Treasury stock purchased
    
    
    (10,375
    )
    
    
    (1,427
    )Exercise of stock options
    
    
    533
    
    
    
    686Cash received from employee stock purchase plan
    
    
    178
    
    
    
    (277
    )Tax benefit from stock related compensation
    
    
    3
    
    
    
    745Payments of cash dividends to stockholders
    
    
    (3,606
    )
    
    
    (3,433
    )Net cash provided by (used in) financing activities
    
    
    (21,607
    )
    
    
    62,960Net decrease in cash and cash equivalents
    
    
    (18,261
    )
    
    
    (33,188
    )Cash and cash equivalents at beginning of period
    
    
    122,038
    
    
    
    152,544Cash and cash equivalents at end of period
    
    $
    103,777
    
    
    $
    119,356Supplementary cash flow information:Cash paid or credited to accounts:Interest on deposits and borrowings
    
    $
    41,433
    
    
    $
    32,633Income taxes
    
    
    1,993
    
    
    
    5,990
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ANCHOR BANCORP WISCONSIN INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Principles of Consolidation
  Note 2  Basis of Presentation
       6




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Note 3  Stock-Based Compensation
   Three Months Ended June 30, 2007WeightedAverageOptions
    
    
    PriceOutstanding at beginning of period
    
    
    837,296
    
    
    $
    19.82Granted
    
    
    
    
    
    
    Exercised
    
    
    (50,432
    )
    
    
    13.82Forfeited
    
    
    
    
    
    
    Outstanding at end of period
    
    
    786,864
    
    
    $
    20.20Options exercisable at June 30, 2007
    
    
    786,864
    
    
    $
    20.20
  Options Outstanding
    
    Exercisable OptionsWeighted-AverageRemaining
    
    Weighted-
    
    
    
    
    
    Weighted-Contractual
    
    Average
    
    
    
    
    
    AverageRange of Exercise Prices
    
    Shares
    
    Life (Years)
    
    Exercise Price
    
    Shares
    
    Exercise Price$12.99 - $19.94
    
    
    433,024
    
    
    
    2.59
    
    
    $
    16.66
    
    
    
    433,024
    
    
    $
    16.66$21.81 - $23.77
    
    
    277,750
    
    
    
    5.48
    
    
    
    23.04
    
    
    
    277,750
    
    
    
    23.04$28.50 - $31.95
    
    
    76,090
    
    
    
    7.69
    
    
    
    29.99
    
    
    
    76,090
    
    
    
    29.99786,864
    
    
    
    4.10
    
    
    
    20.20
    
    
    
    786,864
    
    
    
    20.20
  7




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##### Table of Contents



Three Months Ended June 30, 2007WeightedAverageOptions
    
    
    PriceBalance at beginning of period
    
    
    66,600
    
    
    $
    29.62Restricted stock granted
    
    
    
    
    
    
    Restricted stock vested
    
    
    
    
    
    
    Restriced stock forfeited
    
    
    
    
    
    
    Balance at end of period
    
    
    66,600
    
    
    $
    29.62
  Note 4  Goodwill and Other Intangible Assets
      8




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##### Table of Contents



Residential
    
    
    Other(In Thousands)Mortgage servicing rights as of March 31, 2006
    
    $
    5,735
    
    
    $
    1,324Additions
    
    
    2,464
    
    
    
    456Amortization
    
    
    (1,835
    )
    
    
    (733
    )Mortgage servicing rights before valuation allowance at end of period
    
    
    6,364
    
    
    
    1,047Valuation allowance
    
    
    (709
    )
    
    
    Net mortgage servicing rights as of March 31, 2007
    
    $
    5,655
    
    
    $
    1,047Fair market value at the end of the period
    
    $
    10,489
    
    
    $
    1,673Key assumptions:Weighted average discount
    
    
    11.23
    %
    
    
    18.65
    %Weighted average prepayment speed assumption
    
    
    13.43
    %
    
    
    12.90
    %Mortgage servicing rights as of March 31, 2007
    
    $
    6,364
    
    
    $
    1,047Additions
    
    
    906
    
    
    
    122Amortization
    
    
    (279
    )
    
    
    (78
    )Reclassification
    
    
    (135
    )
    
    
    135Mortgage servicing rights before valuation allowance at end of period
    
    
    6,856
    
    
    
    1,226Valuation allowance
    
    
    
    
    
    
    Net mortgage servicing rights as of June 30, 2007
    
    $
    6,856
    
    
    $
    1,226Fair market value at the end of the period
    
    $
    13,180
    
    
    $
    1,747Key assumptions:Weighted average discount
    
    
    11.29
    %
    
    
    21.04
    %Weighted average prepayment speed assumption
    
    
    13.07
    %
    
    
    14.39
    %
  9




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##### Table of Contents



Residential
    
    
    Other(In Thousands)Quarter ended June 30, 2007 (actual)
    
    $
    279
    
    
    $
    78Estimate for the year ended March 31,2008
    
    $
    1,116
    
    
    $
    3122009
    
    
    1,116
    
    
    
    3122010
    
    
    1,116
    
    
    
    3122011
    
    
    1,116
    
    
    
    290Thereafter
    
    
    2,392
    
    
    
    $
    6,856
    
    
    $
    1,226
 Note 5  Stockholders Equity
    10




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Note 6  Earnings Per Share
  Three Months Ended June 30,2007
    
    
    2006Numerator:Net income
    
    $
    9,885,633
    
    
    $
    10,647,428Numerator for basic and diluted earnings
per shareincome available to common
stockholders
    
    $
    9,885,633
    
    
    $
    10,647,428Denominator:Denominator for basic earnings per
shareweighted-average common
shares outstanding
    
    
    21,124,164
    
    
    
    21,458,857Effect of dilutive securities:Employee stock options
    
    
    196,143
    
    
    
    332,611Management Recognition Plans
    
    
    
    
    
    
    Denominator for diluted earnings per
shareadjusted weighted-average
common shares and assumed conversions
    
    
    21,320,307
    
    
    
    21,791,468Basic earnings per share
    
    $
    0.47
    
    
    $
    0.50Diluted earnings per share
    
    $
    0.46
    
    
    $
    0.49
 11




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##### Table of Contents



Note 7  Segment Information
  Community Banking:
 Real Estate Investments:
   12




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##### Table of Contents



Three Months Ended June 30, 2007(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    85
    
    
    $
    73,058
    
    
    $
    (496
    )
    
    $
    72,647Interest expense
    
    
    448
    
    
    
    41,678
    
    
    
    (496
    )
    
    
    41,630Net interest income (loss)
    
    
    (363
    )
    
    
    31,380
    
    
    
    
    
    
    
    31,017Provision for loan losses
    
    
    
    
    
    
    2,271
    
    
    
    
    
    
    
    2,271Net interest income (loss) after provision for loan losses
    
    
    (363
    )
    
    
    29,109
    
    
    
    
    
    
    
    28,746Real estate investment partnership revenue
    
    
    4,726
    
    
    
    
    
    
    
    
    
    
    
    4,726Other revenue from real estate operations
    
    
    1,223
    
    
    
    
    
    
    
    
    
    
    
    1,223Other income
    
    
    
    
    
    
    8,721
    
    
    
    (30
    )
    
    
    8,691Real estate investment partnership cost of sales
    
    
    (4,340
    )
    
    
    
    
    
    
    
    
    
    
    (4,340
    )Other expense from real estate partnership operations
    
    
    (2,115
    )
    
    
    
    
    
    
    30
    
    
    
    (2,085
    )Minority interest in loss of real estate partnerships
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    75Other expense
    
    
    
    
    
    
    (20,462
    )
    
    
    
    
    
    
    (20,462
    )Income (loss) before income taxes
    
    
    (794
    )
    
    
    17,368
    
    
    
    
    
    
    
    16,574Income tax (benefit) expense
    
    
    (233
    )
    
    
    6,921
    
    
    
    
    
    
    
    6,688Net income (loss)
    
    $
    (561
    )
    
    $
    10,447
    
    
    $
    
    
    
    $
    9,886Total assets at end of period
    
    $
    72,066
    
    
    $
    4,460,692
    
    
    $
    
    
    
    $
    4,532,758
 Three Months Ended June 30, 2006(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    105
    
    
    $
    66,602
    
    
    $
    (441
    )
    
    $
    66,266Interest expense
    
    
    424
    
    
    
    33,438
    
    
    
    (441
    )
    
    
    33,421Net interest income (loss)
    
    
    (319
    )
    
    
    33,164
    
    
    
    
    
    
    
    32,845Provision for loan losses
    
    
    
    
    
    
    1,205
    
    
    
    
    
    
    
    1,205Net interest income (loss) after provision for loan losses
    
    
    (319
    )
    
    
    31,959
    
    
    
    
    
    
    
    31,640Real estate investment partnership revenue
    
    
    4,486
    
    
    
    
    
    
    
    
    
    
    
    4,486Other revenue from real estate operations
    
    
    2,147
    
    
    
    
    
    
    
    
    
    
    
    2,147Other income
    
    
    
    
    
    
    6,704
    
    
    
    (30
    )
    
    
    6,674Real estate investment partnership cost of sales
    
    
    (3,853
    )
    
    
    
    
    
    
    
    
    
    
    (3,853
    )Other expense from real estate partnership operations
    
    
    (2,608
    )
    
    
    
    
    
    
    30
    
    
    
    (2,578
    )Minority interest in income of real estate partnerships
    
    
    (438
    )
    
    
    
    
    
    
    
    
    
    
    (438
    )Other expense
    
    
    
    
    
    
    (20,008
    )
    
    
    
    
    
    
    (20,008
    )Income (loss) before income taxes
    
    
    (585
    )
    
    
    18,655
    
    
    
    
    
    
    
    18,070Income tax (benefit) expense
    
    
    (207
    )
    
    
    7,630
    
    
    
    
    
    
    
    7,423Net income (loss)
    
    $
    (378
    )
    
    $
    11,025
    
    
    $
    
    
    
    $
    10,647Total assets at end of period
    
    $
    77,030
    
    
    $
    4,279,891
    
    
    $
    
    
    
    $
    4,356,921
 13




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##### Table of Contents



Note 8  Commitments and Contingent Liabilities
   June 30,
    
    March 31,2007
    
    2007Commitments to extend credit:
    
    $
    207,111
    
    
    $
    91,081Unused lines of credit:Home equity
    
    
    92,457
    
    
    
    91,630Credit cards
    
    
    40,119
    
    
    
    40,799Commercial
    
    
    127,553
    
    
    
    125,560Letters of credit
    
    
    55,372
    
    
    
    59,910Credit enhancement under the Federal
Home Loan Bank of Chicago Mortgage
Partnership Finance Program
    
    
    21,502
    
    
    
    20,902Real estate investment segment borrowing guarantees unfunded
    
    
    20,352
    
    
    
    18,555Other financial guarantees
    
    
    675
    
    
    
    900
     14




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##### Table of Contents



Note 9  Subsequent Events
    15




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC.
 
 ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Executive Overview
  
    
    Diluted earnings per share decreased to $0.46 for the quarter ended June 30, 2007
compared to $0.49 per share for the quarter ended June 30, 2006 primarily due to a $1.8
million decrease in net interest income and a $1.0 million increase in the loan loss
provision, which were partially offset by a $735,000 decrease in income tax expense;
    
    The interest rate spread decreased to 2.90% for the quarter ended June 30, 2007 compared
to 3.23% for the quarter ended June 30, 2006 because interest-bearing liabilities repriced
upward faster than interest-earning assets;
    
    Loans receivable increased $20.6 million, or 0.53%, since March 31, 2007;
    
    Deposits grew $718,000, or 0.02%, since March 31, 2007;
    
    Book value per share was $15.54 at June 30, 2007 compared to $15.55 at March 31, 2007
and $14.91 at June 30, 2006; and
    
    Total non-performing assets decreased $1.3 million to $53.2 million at June 30, 2007
from March 31, 2007, however total non-accrual loans increased $1.8 million to $48.8
million at June 30, 2007.
 16




---



##### Table of Contents




    
    Real estate investment partnership revenue increased $240,000 from $4.5 million for the
three months ended June 30, 2006 to $4.7 million for the three months ended June 30, 2007.
Real estate investment partnership cost of sales increased $487,000 from $3.9 million to
$4.3 million during the same respective periods. These increases were due to the increase
in the number of sales at the real estate partnership level. Net loss from the real estate
investment segment increased from $378,000 to $561,000 for the three months ended June 30,
2006 and 2007, respectively. The partnerships currently have approximately 50 single
family housing units and approximately 100 individual lots for sale. Management anticipates
continued lower sales activity for the remainder of the fiscal year.
    
    On November 2, 2006, the Federal Deposit Insurance Corporation (FDIC) adopted final
regulations to implement the Federal Deposit Insurance Reform Act of 2005 passed by
Congress earlier this year to create a stronger and more stable insurance system. The final
regulations include the annual assessment rates that became effective at the beginning of
2007. The new rates for nearly all banks will vary between five and seven cents for every
$100 of domestic deposits. Applied to the Banks assessment base of approximately $3.2
billion, this translates to an annual deposit premium of approximately $1.6 to $2.3
million. Most banks, including the Bank, have not been required to pay any deposit
insurance premiums since 1995. As part of the Reform Act, Congress provided credits to
institutions that paid high premiums in the past to bolster the FDICs insurance reserves.
As a result, the majority of banks will have assessment credits to initially offset all of
their premiums in 2007. The preliminary assessment credit for the Bank was calculated at
$2.7 million.
 
 17




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##### Table of Contents



Three Months Ended(Dollars in thousands - except per share amounts)
    
    6/30/2007
    
    3/31/2007
    
    12/31/2006
    
    9/30/2006Operations Data:Net interest income
    
    $
    31,017
    
    
    $
    29,834
    
    
    $
    32,529
    
    
    $
    32,838Provision for loan losses
    
    
    2,271
    
    
    
    4,050
    
    
    
    3,375
    
    
    
    2,625Net gain on sale of loans
    
    
    1,587
    
    
    
    465
    
    
    
    776
    
    
    
    1,349Real estate investment partnership revenue
    
    
    4,726
    
    
    
    2,851
    
    
    
    8,009
    
    
    
    3,631Other non-interest income
    
    
    8,327
    
    
    
    8,205
    
    
    
    7,331
    
    
    
    8,075Real estate investment partnership cost of sales
    
    
    4,340
    
    
    
    3,153
    
    
    
    7,115
    
    
    
    3,486Other non-interest expense
    
    
    22,547
    
    
    
    21,410
    
    
    
    22,443
    
    
    
    23,427Minority interest in loss of
real estate partnership operations
    
    
    (75
    )
    
    
    (573
    )
    
    
    (31
    )
    
    
    (75
    )Income before income taxes
    
    
    16,574
    
    
    
    13,315
    
    
    
    15,743
    
    
    
    16,430Income taxes
    
    
    6,688
    
    
    
    5,086
    
    
    
    5,308
    
    
    
    6,769Net income
    
    
    9,886
    
    
    
    8,229
    
    
    
    10,435
    
    
    
    9,661Selected Financial Ratios(1):Yield on earning assets
    
    
    6.80
    %
    
    
    6.73
    %
    
    
    6.81
    %
    
    
    6.76
    %Cost of funds
    
    
    4.05
    
    
    
    4.08
    
    
    
    3.92
    
    
    
    3.75Interest rate spread
    
    
    2.75
    
    
    
    2.65
    
    
    
    2.89
    
    
    
    3.01Net interest margin
    
    
    2.90
    
    
    
    2.81
    
    
    
    3.05
    
    
    
    3.15Return on average assets
    
    
    0.88
    
    
    
    0.74
    
    
    
    0.93
    
    
    
    0.88Return on average equity
    
    
    11.77
    
    
    
    9.72
    
    
    
    12.51
    
    
    
    11.72Average equity to average assets
    
    
    7.49
    
    
    
    7.61
    
    
    
    7.45
    
    
    
    7.53Non-interest expense to average assets
    
    
    2.40
    
    
    
    2.21
    
    
    
    2.64
    
    
    
    2.46Per Share:Basic earnings per share
    
    $
    0.47
    
    
    $
    0.39
    
    
    $
    0.49
    
    
    $
    0.45Diluted earnings per share
    
    
    0.46
    
    
    
    0.38
    
    
    
    0.48
    
    
    
    0.44Dividends per share
    
    
    0.17
    
    
    
    0.17
    
    
    
    0.17
    
    
    
    0.17Book value per share
    
    
    15.54
    
    
    
    15.55
    
    
    
    15.45
    
    
    
    15.18Financial Condition:Total assets
    
    $
    4,532,758
    
    
    $
    4,539,685
    
    
    $
    4,505,896
    
    
    $
    4,481,586Loans receivable, netHeld for sale
    
    
    9,062
    
    
    
    4,474
    
    
    
    4,470
    
    
    
    5,393Held for investment
    
    
    3,890,053
    
    
    
    3,874,049
    
    
    
    3,834,381
    
    
    
    3,794,039Deposits
    
    
    3,248,964
    
    
    
    3,248,246
    
    
    
    3,240,540
    
    
    
    3,223,759Borrowings
    
    
    891,016
    
    
    
    900,477
    
    
    
    841,219
    
    
    
    875,014Stockholders equity
    
    
    331,593
    
    
    
    336,866
    
    
    
    336,522
    
    
    
    330,774Allowance for loan losses
    
    
    22,220
    
    
    
    20,517
    
    
    
    20,031
    
    
    
    18,393Non-performing assets
    
    
    53,180
    
    
    
    54,452
    
    
    
    39,484
    
    
    
    22,506
 
 (1) Annualized when appropriate. 18




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##### Table of Contents



Three Months Ended(Dollars in thousands - except per share amounts)
    
    6/30/2006
    
    3/31/2006
    
    12/31/2005
    
    9/30/2005Operations Data:Net interest income
    
    $
    32,845
    
    
    $
    33,294
    
    
    $
    33,837
    
    
    $
    33,428Provision for loan losses
    
    
    1,205
    
    
    
    1,450
    
    
    
    700
    
    
    
    1,485Net gain on sale of loans
    
    
    869
    
    
    
    1,348
    
    
    
    144
    
    
    
    1,193Real estate investment partnership revenue
    
    
    4,486
    
    
    
    4,524
    
    
    
    6,378
    
    
    
    11,559Other non-interest income
    
    
    7,952
    
    
    
    8,063
    
    
    
    7,898
    
    
    
    7,090Real estate investment partnership cost of sales
    
    
    3,853
    
    
    
    3,791
    
    
    
    5,527
    
    
    
    10,780Other non-interest expense
    
    
    22,586
    
    
    
    22,534
    
    
    
    23,238
    
    
    
    22,536Minority interest in income of
real estate partnership operations
    
    
    438
    
    
    
    29
    
    
    
    304
    
    
    
    102Income before income taxes
    
    
    18,070
    
    
    
    19,425
    
    
    
    18,488
    
    
    
    18,367Income taxes
    
    
    7,423
    
    
    
    7,973
    
    
    
    7,595
    
    
    
    7,589Net income
    
    
    10,647
    
    
    
    11,452
    
    
    
    10,893
    
    
    
    10,778Selected Financial Ratios(1):Yield on earning assets
    
    
    6.52
    %
    
    
    6.34
    %
    
    
    6.15
    %
    
    
    5.97
    %Cost of funds
    
    
    3.43
    
    
    
    3.11
    
    
    
    2.88
    
    
    
    2.68Interest rate spread
    
    
    3.09
    
    
    
    3.23
    
    
    
    3.27
    
    
    
    3.29Net interest margin
    
    
    3.23
    
    
    
    3.35
    
    
    
    3.39
    
    
    
    3.40Return on average assets
    
    
    1.00
    
    
    
    1.10
    
    
    
    1.04
    
    
    
    1.04Return on average equity
    
    
    13.14
    
    
    
    14.46
    
    
    
    13.91
    
    
    
    13.62Average equity to average assets
    
    
    7.60
    
    
    
    7.59
    
    
    
    7.45
    
    
    
    7.66Non-interest expense to average assets
    
    
    2.48
    
    
    
    2.52
    
    
    
    2.74
    
    
    
    3.22Per Share:Basic earnings per share
    
    $
    0.50
    
    
    $
    0.54
    
    
    $
    0.51
    
    
    $
    0.49Diluted earnings per share
    
    
    0.49
    
    
    
    0.53
    
    
    
    0.50
    
    
    
    0.48Dividends per share
    
    
    0.16
    
    
    
    0.16
    
    
    
    0.16
    
    
    
    0.16Book value per share
    
    
    14.91
    
    
    
    14.69
    
    
    
    14.32
    
    
    
    14.28Financial Condition:Total assets
    
    $
    4,356,921
    
    
    $
    4,275,140
    
    
    $
    4,200,234
    
    
    $
    4,204,470Loans receivable, netHeld for sale
    
    
    4,118
    
    
    
    5,509
    
    
    
    5,847
    
    
    
    6,957Held for investment
    
    
    3,709,745
    
    
    
    3,614,265
    
    
    
    3,545,436
    
    
    
    3,466,265Deposits
    
    
    3,177,220
    
    
    
    3,040,217
    
    
    
    2,987,284
    
    
    
    3,032,976Borrowings
    
    
    791,098
    
    
    
    861,861
    
    
    
    814,641
    
    
    
    794,044Stockholders equity
    
    
    326,495
    
    
    
    321,025
    
    
    
    312,089
    
    
    
    315,349Allowance for loan losses
    
    
    15,636
    
    
    
    15,570
    
    
    
    15,252
    
    
    
    22,582Non-performing assets
    
    
    18,836
    
    
    
    15,721
    
    
    
    17,265
    
    
    
    16,201
 
 (1) Annualized when appropriate. 19




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##### Table of Contents



Significant Accounting Policies
  
    
    The allowance for loan losses is maintained at a level believed adequate by management to
absorb probable and estimable losses inherent in the loan portfolio and is based on the size
and current risk characteristics of the loan portfolio; an assessment of individual problem
loans; actual and anticipated loss experience; and current economic events in specific
industries and geographical areas. These economic events include unemployment levels,
regulatory guidance, and general economic conditions. Determination of the allowance is
inherently subjective as it requires significant estimates, including the amounts and timing
of expected future cash flows on impaired loans, estimated losses on pools of homogeneous
loans based on historical loss experience, and consideration of current economic trends, all
of which may be susceptible to significant change. Loan losses are charged off against the
allowance, while recoveries of amounts previously charged off are credited to the allowance.
A provision for loan losses is charged to operating expense based on managements periodic
evaluation of the factors previously mentioned as well as other pertinent factors.Specific allowances are established for expected losses resulting from analysis developed
through specific credit allocations on individual loans and are based on a regular analysis of
impaired loans where the internal credit rating is at or below a predetermined classification.
A loan is considered impaired when it is probable that the Corporation will be unable to collect
all contractual principal and interest due according to the terms of the loan agreement. Loans
subject to impairment are defined as non-accrual and restructured loans exclusive of smaller
homogeneous loans such as home equity, installment, and 1-4 family residential loans. The fair
value of the loans is determined based on the present value of expected future cash flows
discounted at the loans effective interest rate, the market price of the loan, or the fair
value of the underlying collateral less costs to sell, if the loan is collateral dependent.
    
    Valuation of mortgage servicing rights requires the use of
judgment. Mortgage servicing rights are established on loans that
are originated and subsequently sold with servicing rights
retained. A portion of the loans book basis is allocated to
mortgage servicing rights when a loan is sold. The fair value of
mortgage servicing rights is the present value of estimated future
net cash flows from the servicing relationship using current
market assumptions for prepayments, servicing costs and other
factors. As the loans are repaid and net servicing revenue is
earned, mortgage servicing rights are amortized into expense. Net
servicing revenues are expected to exceed this amortization
expense. However, if actual prepayment experience exceeds what
was originally anticipated, net servicing revenues may be less
than expected and mortgage servicing rights may be impaired.
    
    Goodwill is reviewed at least annually for impairment, which
requires judgment. Goodwill has been recorded as a result of an
acquisition in which purchase price exceeded fair value of net
assets acquired. The price paid for the acquisition is analyzed
and compared to a number of current indices. If goodwill is
determined to be impaired, it would be expensed in the period in
which it became impaired.
 20




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##### Table of Contents



RESULTS OF OPERATIONS
 General.
 Net Interest Income.
   Provision for Loan Losses.
 21




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##### Table of Contents



Average Interest-Earning Assets, Average Interest-Bearing Liabilities and Interest Rate
Spread.
 22




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##### Table of Contents



Three Months Ended June 30,2007
    
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost(1)
    
    
    Balance
    
    
    Interest
    
    
    Cost(1)(Dollars In Thousands)Interest-Earning AssetsMortgage loans
    
    $
    3,016,235
    
    
    $
    51,474
    
    
    
    6.83
    %
    
    $
    2,840,872
    
    
    $
    46,487
    
    
    
    6.55
    %Consumer loans
    
    
    639,242
    
    
    
    11,787
    
    
    
    7.38
    
    
    
    620,841
    
    
    
    11,014
    
    
    
    7.10Commercial business loans
    
    
    231,799
    
    
    
    4,770
    
    
    
    8.23
    
    
    
    203,198
    
    
    
    4,273
    
    
    
    8.41Total loans receivable (2) (3)
    
    
    3,887,276
    
    
    
    68,031
    
    
    
    7.00
    
    
    
    3,664,911
    
    
    
    61,774
    
    
    
    6.74Mortgage-related securities (4)
    
    
    244,773
    
    
    
    3,006
    
    
    
    4.91
    
    
    
    248,949
    
    
    
    2,904
    
    
    
    4.67Investment securities (4)
    
    
    76,425
    
    
    
    932
    
    
    
    4.88
    
    
    
    54,904
    
    
    
    610
    
    
    
    4.44Interest-bearing deposits
    
    
    26,660
    
    
    
    395
    
    
    
    5.93
    
    
    
    51,685
    
    
    
    631
    
    
    
    4.88Federal Home Loan Bank stock
    
    
    41,361
    
    
    
    283
    
    
    
    2.74
    
    
    
    44,895
    
    
    
    347
    
    
    
    3.09Total interest-earning assets
    
    
    4,276,495
    
    
    
    72,647
    
    
    
    6.80
    
    
    
    4,065,344
    
    
    
    66,266
    
    
    
    6.52Non-interest-earning assets
    
    
    211,500
    
    
    
    
    
    
    
    
    
    
    
    200,411Total assets
    
    $
    4,487,995
    
    
    
    
    
    
    
    
    
    
    $
    4,265,755Interest-Bearing LiabilitiesDemand deposits
    
    $
    940,345
    
    
    
    5,703
    
    
    
    2.43
    
    
    $
    830,797
    
    
    
    4,409
    
    
    
    2.12Regular passbook savings
    
    
    193,630
    
    
    
    212
    
    
    
    0.44
    
    
    
    214,062
    
    
    
    244
    
    
    
    0.46Certificates of deposit
    
    
    2,109,636
    
    
    
    25,531
    
    
    
    4.84
    
    
    
    2,044,304
    
    
    
    20,703
    
    
    
    4.05Total deposits
    
    
    3,243,611
    
    
    
    31,446
    
    
    
    3.88
    
    
    
    3,089,163
    
    
    
    25,356
    
    
    
    3.28Short-term borrowings
    
    
    494,281
    
    
    
    6,658
    
    
    
    5.39
    
    
    
    166,090
    
    
    
    2,262
    
    
    
    5.45Long-term borrowings
    
    
    375,317
    
    
    
    3,526
    
    
    
    3.76
    
    
    
    646,181
    
    
    
    5,803
    
    
    
    3.59Total interest-bearing liabilities
    
    
    4,113,209
    
    
    
    41,630
    
    
    
    4.05
    
    
    
    3,901,434
    
    
    
    33,421
    
    
    
    3.43Non-interest-bearing liabilities
    
    
    38,694
    
    
    
    
    
    
    
    
    
    
    
    40,099Total liabilities
    
    
    4,151,903
    
    
    
    
    
    
    
    
    
    
    
    3,941,533Stockholders equity
    
    
    336,092
    
    
    
    
    
    
    
    
    
    
    
    324,222Total liabilities and stockholders equity
    
    $
    4,487,995
    
    
    
    
    
    
    
    
    
    
    $
    4,265,755Net interest income/interest rate spread (5)
    
    
    
    
    
    $
    31,017
    
    
    
    2.75
    %
    
    
    
    
    
    $
    32,845
    
    
    
    3.09
    %Net interest-earning assets
    
    $
    163,286
    
    
    
    
    
    
    
    
    
    
    $
    163,910Net interest margin (6)
    
    
    
    
    
    
    
    
    
    
    2.90
    %
    
    
    
    
    
    
    
    
    
    
    3.23
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    1.04
    
    
    
    
    
    
    
    
    
    
    
    1.04
 
 (1)
    
    Annualized(2)
    
    For the purpose of these computations, non-accrual loans are included in
the daily average loan amounts outstanding.(3)
    
    Interest earned on loans includes loan fees (which are not material in
amount) and interest income which has been received from borrowers whose loans were
removed from non-accrual status during the period indicated.(4)
    
    Average
balances of securities available-for-sale are based on amortized cost.(5)
    
    Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing liabilities and is
represented on a fully tax equivalent basis.(6)
    
    Net interest margin represents net interest income as a percentage of average
interest-earning assets. 23




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##### Table of Contents



Non-Interest Income.
 Non-Interest Expense.
 Income Taxes.
    24




---



##### Table of Contents



FINANCIAL CONDITION
          25




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##### Table of Contents



ASSET QUALITY
   June 30,
    
    
    March 31,2007
    
    
    2007
    
    
    2006
    
    
    2005(Dollars In Thousands)Non-accrual loans:Single-family residential
    
    $
    13,058
    
    
    $
    13,038
    
    
    $
    2,856
    
    
    $
    2,406Multi-family residential
    
    
    10,328
    
    
    
    17,289
    
    
    
    4,214
    
    
    
    Commercial real estate
    
    
    10,262
    
    
    
    12,030
    
    
    
    3,398
    
    
    
    4,894Construction and land
    
    
    11,787
    
    
    
    1,696
    
    
    
    
    
    
    
    Consumer
    
    
    684
    
    
    
    705
    
    
    
    548
    
    
    
    453Commercial business
    
    
    2,703
    
    
    
    2,283
    
    
    
    2,513
    
    
    
    6,697Total non-accrual loans
    
    
    48,822
    
    
    
    47,041
    
    
    
    13,529
    
    
    
    14,450Foreclosed properties and repossessed assets, net
    
    
    4,358
    
    
    
    7,411
    
    
    
    2,192
    
    
    
    1,458Total non-performing assets
    
    $
    53,180
    
    
    $
    54,452
    
    
    $
    15,721
    
    
    $
    15,908Performing troubled debt restructurings
    
    $
    400
    
    
    $
    400
    
    
    $
    
    
    
    $
    Total non-accrual loans to total loans(1)
    
    
    1.21
    %
    
    
    1.16
    %
    
    
    0.35
    %
    
    
    0.40
    %Total non-performing assets to total assets
    
    
    1.17
    
    
    
    1.20
    
    
    
    0.37
    
    
    
    0.39Allowance for loan losses to total loans(1)
    
    
    0.55
    
    
    
    0.50
    
    
    
    0.41
    
    
    
    0.73Allowance for loan losses to total
non-accrual loans
    
    
    45.51
    
    
    
    43.62
    
    
    
    115.09
    
    
    
    183.00Allowance for loan and foreclosure losses
to total non-performing assets
    
    
    41.82
    
    
    
    37.71
    
    
    
    100.48
    
    
    
    167.39
 
 (1)
    
    Total loans are gross loans receivable before the reduction for loans in process,
unearned interest and loan fees and the allowance for loan losses. 
   26




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##### Table of Contents



June 30,
    
    
    March 31,2007
    
    
    2007
    
    
    2006
    
    
    2005(In Thousands)Impaired loans with valuation
reserve required
    
    $
    1,442
    
    
    $
    1,426
    
    
    $
    6,381
    
    
    $
    10,827Less:Specific valuation allowance
    
    
    497
    
    
    
    504
    
    
    
    3,111
    
    
    
    7,126Total impaired loans
    
    $
    945
    
    
    $
    922
    
    
    $
    3,270
    
    
    $
    3,701Average impaired loans
    
    $
    1,895
    
    
    $
    2,360
    
    
    $
    3,829
    
    
    $
    11,535Interest income recognized
on impaired loans
    
    $
    
    
    
    $
    44
    
    
    $
    208
    
    
    $
    249Interest income recognized on a cash basis
on impaired loans
    
    $
    
    
    
    $
    44
    
    
    $
    208
    
    
    $
    249
 27




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##### Table of Contents



June 30,
    
    
    March 31,2007
    
    
    2007
    
    
    2006
    
    
    2005(In Thousands)30 to 59 days
    
    $
    31,744
    
    
    $
    12,776
    
    
    $
    9,874
    
    
    $
    5,85360 to 89 days
    
    
    8,796
    
    
    
    5,414
    
    
    
    733
    
    
    
    714Total
    
    $
    40,540
    
    
    $
    18,190
    
    
    $
    10,607
    
    
    $
    6,567
    Three Months EndedJune 30,2007
    
    
    2006(Dollars In Thousands)Allowance at beginning of period
    
    $
    20,517
    
    
    $
    15,570Charge-offs:Mortgage
    
    
    (450
    )
    
    
    (415
    )Consumer
    
    
    (206
    )
    
    
    (70
    )Commercial business
    
    
    (3
    )
    
    
    (836
    )Total charge-offs
    
    
    (659
    )
    
    
    (1,321
    )Recoveries:Mortgage
    
    
    7
    
    
    
    1Consumer
    
    
    14
    
    
    
    6Commercial business
    
    
    70
    
    
    
    175Total recoveries
    
    
    91
    
    
    
    182Net charge-offs
    
    
    (568
    )
    
    
    (1,139
    )Provision
    
    
    2,271
    
    
    
    1,205Allowance at end of period
    
    $
    22,220
    
    
    $
    15,636Net charge-offs to
average loans
    
    
    (0.06
    )%
    
    
    (0.12
    )%
 28




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LIQUIDITY AND CAPITAL RESOURCES
     29




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##### Table of Contents



Minimum RequiredMinimum Required
    
    to be WellFor Capital
    
    Capitalized UnderActual
    
    Adequacy Purposes
    
    OTS RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars In Thousands)At June 30, 2007:Tier 1 capital
(to adjusted tangible assets)
    
    $
    356,186
    
    
    
    8.01
    %
    
    $
    133,447
    
    
    
    3.00
    %
    
    $
    222,411
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    377,908
    
    
    
    10.96
    
    
    
    275,899
    
    
    
    8.00
    
    
    
    344,873
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    356,186
    
    
    
    8.01
    
    
    
    66,723
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/AAt March 31, 2007:Tier 1 capital
(to adjusted tangible assets)
    
    $
    352,333
    
    
    
    7.92
    %
    
    $
    133,407
    
    
    
    3.00
    %
    
    $
    222,344
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    372,346
    
    
    
    10.84
    
    
    
    274,773
    
    
    
    8.00
    
    
    
    343,466
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    352,333
    
    
    
    7.92
    
    
    
    66,703
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
  June 30,
    
    
    March 31,2007
    
    
    2007(In Thousands)Stockholders equity of the Bank
    
    $
    373,783
    
    
    $
    371,708Less: Goodwill and intangible assets
    
    
    (19,956
    )
    
    
    (19,956
    )Accumulated other comprehensive income
    
    
    2,359
    
    
    
    581Tier 1 and tangible capital
    
    
    356,186
    
    
    
    352,333Plus: Allowable general valuation allowances
    
    
    21,722
    
    
    
    20,013Risk-based capital
    
    $
    377,908
    
    
    $
    372,346
 30




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##### Table of Contents



GUARANTEES
   Amount
    
    
    AmountSubsidiary
    
    Partnership
    
    Amount
    
    
    Outstanding
    
    
    Outstandingof IDI
    
    Entity
    
    Guaranteed
    
    
    at 6/30/07
    
    
    at 3/31/07(Dollars in thousands)Oakmont
    
    Chandler Creek
    
    $
    14,150
    
    
    $
    12,350
    
    
    $
    12,350Davsha III
    
    Indian Palms 147, LLC
    
    
    4,655
    
    
    
    422
    
    
    
    851Davsha V
    
    Villa Santa Rosa, LLC
    
    
    11,000
    
    
    
    1,463
    
    
    
    1,601Davsha VII
    
    La Vista Grande 121, LLC
    
    
    14,619
    
    
    
    9,837
    
    
    
    11,067Total
    
    
    
    $
    44,424
    
    
    $
    24,072
    
    
    $
    25,869
      31




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##### Table of Contents



ASSET/LIABILITY MANAGEMENT
     FORWARD-LOOKING STATEMENTS
  32




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##### Table of Contents



33




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##### Table of Contents



Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4
    
    Controls and Procedures
   
 Part II  Other Information
 
 Item 1
    
    Legal Proceedings.
  
 Item 1A
    
    Risk Factors.
  34




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##### Table of Contents



Item 2 Unregistered Sales of Equity Securities and Use of Proceeds.
   Total Number ofShares Purchased
    
    
    Maximum Number ofTotal Number
    
    
    Average
    
    
    as Part of Publicly
    
    
    Shares that May Yet Beof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs
    
    
    Plans or Programs(2)April 1 -April 30, 2007
    
    
    67,669
    
    
    $
    27.77
    
    
    
    62,400
    
    
    
    902,560May 1 - May 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    902,560June 1 - June 30, 2007
    
    
    320,204
    
    
    
    27.04
    
    
    
    319,700
    
    
    
    582,860Total
    
    
    387,873(1)
    
    
    $
    27.17
    
    
    
    382,100
    
    
    
    582,860
 
 (1)
    
    Consists of 382,100 shares purchased pursuant to a publicly announced repurchase
program, and 5,773 shares acquired from employees in payment for the exercise price of stock
options granted to them pursuant to the Corporations stock option program.(2)
    
    Effective November 3, 2006, the Board of Directors extended the current share repurchase
program of approximately 1.3 million shares of its outstanding common stock in the open market
for an additional year. In July, 2007, the Board of Directors approved the repurchase of an
additional 5% of the Corporations common stock, representing approximately 1,068,000 of
outstanding shares. The repurchases are authorized to be made from time to time in
open-market and/or negotiated transactions as, in the opinion of management, market conditions
may warrant. The repurchased shares will be held as treasury stock and will be available for
general corporate purposes. The Corporation utilizes various securities brokers as its agent
for the stock repurchase program. 
 Item 3 Defaults upon Senior Securities.
  
 Item 4 Submission of Matters to a Vote of Security Holders.
  35




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##### Table of Contents



Number of VotesFor
    
    WithheldElection of Directors for three-year terms
expiring in 2010:Greg M. Larson
    
    
    16,396,585
    
    
    
    3,140,556David L. Omachinski
    
    
    16,396,835
    
    
    
    3,140,306Pat Richter
    
    
    16,316,489
    
    
    
    3,220,652Douglas J. Timmerman
    
    
    16,253,447
    
    
    
    3,283,694
 For
    
    Against
    
    AbstainedAppointment of McGladrey & Pullen LLP as independent
registered public accounting firm for the fiscal
year ending March 31, 2008
    
    
    19,358,858
    
    
    
    96,287
    
    
    
    81,996
 
 Item 5 Other Information.
    
 Item 6 Exhibits
  Exhibit 2.1
    
    Agreement and Plan of Merger by and Between S&C Banco, Inc. and Anchor
Bancorp Wisconsin, Inc.Exhibit 31.1
    
    Certification of Chief Executive Officer Pursuant to Rules 13a-14 and
15d-14 of the Securities Exchange Act of 1934 and Section 302 of the
Sarbanes-Oxley Act of 2002 is included herein as an exhibit to this Report.Exhibit 31.2
    
    Certification of Chief Financial Officer Pursuant to Rules 13a-14 and
15d-14 of the Securities Exchange Act of 1934 and Section 302 of the
Sarbanes-Oxley Act of 2002 is included as an exhibit to this Report.Exhibit 32.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) is included herein as an
exhibit to this Report.Exhibit 32.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) is included herein as an
exhibit to this Report.
 36




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##### Table of Contents



SIGNATURES
  ANCHOR BANCORP WISCONSIN INC.Date: August 3, 2007
    
    By:
    
    /s/ Douglas J. Timmerman

Douglas J. Timmerman, Chairman of the
Board, President and Chief Executive OfficerDate: August 3, 2007
    
    By:
    
    /s/ Dale C. Ringgenberg

Dale C. Ringgenberg, Treasurer andChief Financial Officer
 37