##### 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 September 30, 2010
 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 StreetMadison, 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 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



ANCHOR BANCORP WISCONSIN INC.
INDEX  FORM 10-Q
 Page #Part I  Financial InformationItem 1 Financial StatementsConsolidated Balance Sheets as of September 30, 2010 (Unaudited)
and March 31, 2010
    
    
    2Unaudited Consolidated Statements of Operations for the Three
and Six Months Ended September 30, 2010 and 2009
    
    
    3Unaudited Consolidated Statements of Changes in Stockholders
Equity for the Six Months Ended September 30, 2010 and Year
Ended March 31, 2010
    
    
    5Unaudited Consolidated Statements of Cash Flows for the Six Months
Ended September 30, 2010 and 2009
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    8Item 2 Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    32Executive
Overview
    
    
    32Results of Operations
    
    
    37Financial Condition
    
    
    42Risk Management
    
    
    47Credit
Risk Management
    
    
    47Liquidity Risk Management
    
    
    55Market
Risk Management
    
    
    60Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    66Item 4 Controls and Procedures
    
    
    66Part II  Other InformationItem 1 Legal Proceedings
    
    
    67Item 1A Risk Factors
    
    
    67Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    69Item 3 Intentionally Left Blank
    
    
    69Item 4 Removed and Reserved
    
    
    69Item 5 Other Information
    
    
    69Item 6 Exhibits
    
    
    70Signatures
    
    
    71EX-31.1EX-31.2EX-32.1EX-32.2
  1




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
  September 30,
    
    
    March 31,2010
    
    
    2010(In Thousands, Except Share Data)AssetsCash and due from banks
    
    $
    44,326
    
    
    $
    42,411Interest-bearing deposits
    
    
    104,242
    
    
    
    469,751Cash and cash equivalents
    
    
    148,568
    
    
    
    512,162Investment securities available for sale
    
    
    561,086
    
    
    
    416,203Investment securities held to maturity (fair value of $34
and $40, respectively)
    
    
    33
    
    
    
    39Loans, less allowance for loan losses of $156,186 at September 30, 2010
and $179,644 at March 31, 2010:Held for sale
    
    
    28,744
    
    
    
    19,484Held for investment
    
    
    2,839,217
    
    
    
    3,229,580Foreclosed properties and repossessed assets, net
    
    
    60,222
    
    
    
    55,436Real estate held for development and sale
    
    
    1,251
    
    
    
    1,304Office properties and equipment
    
    
    31,124
    
    
    
    43,558Federal Home Loan Bank stockat cost
    
    
    54,829
    
    
    
    54,829Accrued interest and other assets
    
    
    78,779
    
    
    
    83,670Total assets
    
    $
    3,803,853
    
    
    $
    4,416,265Liabilities and Stockholders EquityDepositsNon-interest bearing
    
    $
    278,353
    
    
    $
    285,374Interest bearing deposits and accrued interest
    
    
    2,749,382
    
    
    
    3,267,388Total deposits and accrued interest
    
    
    3,027,735
    
    
    
    3,552,762Other borrowed funds
    
    
    704,908
    
    
    
    796,153Other liabilities
    
    
    45,940
    
    
    
    37,237Total liabilities
    
    
    3,778,583
    
    
    
    4,386,152Commitments and contingent liabilities (Note 10)Preferred stock, $.10 par value, 5,000,000 shares authorized,
110,000 shares issued and outstanding
    
    
    85,312
    
    
    
    81,596Common stock, $.10 par value, 100,000,000 shares authorized,
25,363,339 shares issued, 21,683,304 and 21,685,925 shares outstanding,
respectively
    
    
    2,536
    
    
    
    2,536Additional paid-in capital
    
    
    109,133
    
    
    
    109,133Retained deficit
    
    
    (78,030
    )
    
    
    (61,249
    )Accumulated other comprehensive income related to AFS securities
    
    
    6,507
    
    
    
    507Accumulated other comprehensive loss related to OTTI non credit issues
    
    
    (3,820
    )
    
    
    (5,906
    )Total accumulated other comprehensive income (loss)
    
    
    2,687
    
    
    
    (5,399
    )Treasury stock (3,680,035 and 3,677,414 shares, respectively), at cost
    
    
    (90,834
    )
    
    
    (90,975
    )Deferred compensation obligation
    
    
    (5,534
    )
    
    
    (5,529
    )Total stockholders equity
    
    
    25,270
    
    
    
    30,113Total liabilities and stockholders equity
    
    $
    3,803,853
    
    
    $
    4,416,265
  2




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##### Table of Contents



ANCHOR
BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 Three Months Ended September 30,
    
    
    Six Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands, Except Per Share Data)Interest income:Loans
    
    $
    40,149
    
    
    $
    49,551
    
    
    $
    80,830
    
    
    $
    103,341Investment securities and Federal Home Loan Bank stock
    
    
    3,421
    
    
    
    5,473
    
    
    
    6,866
    
    
    
    11,520Interest-bearing deposits
    
    
    126
    
    
    
    361
    
    
    
    376
    
    
    
    630Total interest income
    
    
    43,696
    
    
    
    55,385
    
    
    
    88,072
    
    
    
    115,491Interest expense:Deposits
    
    
    13,240
    
    
    
    23,040
    
    
    
    29,055
    
    
    
    47,173Other borrowed funds
    
    
    8,138
    
    
    
    13,406
    
    
    
    17,891
    
    
    
    24,464Total interest expense
    
    
    21,378
    
    
    
    36,446
    
    
    
    46,946
    
    
    
    71,637Net interest income
    
    
    22,318
    
    
    
    18,939
    
    
    
    41,126
    
    
    
    43,854Provision for credit losses
    
    
    10,674
    
    
    
    60,900
    
    
    
    19,608
    
    
    
    131,300Net interest income (loss) after provision for credit losses
    
    
    11,644
    
    
    
    (41,961
    )
    
    
    21,518
    
    
    
    (87,446
    )Non-interest income:Total other than temporary losses
    
    
    
    
    
    
    (874
    )
    
    
    
    
    
    
    (1,038
    )Portion of loss recognized in other comprehensive income
    
    
    
    
    
    
    795
    
    
    
    
    
    
    
    955Reclassification from other comprehensive income
    
    
    (113
    )
    
    
    (107
    )
    
    
    (199
    )
    
    
    (316
    )Net impairment losses recognized in earnings
    
    
    (113
    )
    
    
    (186
    )
    
    
    (199
    )
    
    
    (399
    )Loan servicing income
    
    
    339
    
    
    
    669
    
    
    
    1,492
    
    
    
    487Credit enhancement income on mortgage loans sold
    
    
    236
    
    
    
    319
    
    
    
    489
    
    
    
    696Service charges on deposits
    
    
    3,165
    
    
    
    4,146
    
    
    
    6,918
    
    
    
    7,975Investment and insurance commissions
    
    
    769
    
    
    
    798
    
    
    
    1,725
    
    
    
    1,602Net gain on sale of loans
    
    
    9,216
    
    
    
    1,062
    
    
    
    10,563
    
    
    
    12,465Net gain on sale of investment securities
    
    
    6,653
    
    
    
    2,108
    
    
    
    6,765
    
    
    
    3,613Net gain on sale of branches
    
    
    2,318
    
    
    
    
    
    
    
    7,248
    
    
    
    Other revenue from real estate partnership operations
    
    
    1
    
    
    
    1,482
    
    
    
    387
    
    
    
    2,393Other
    
    
    1,136
    
    
    
    533
    
    
    
    1,999
    
    
    
    1,719Total non-interest income
    
    
    23,720
    
    
    
    10,931
    
    
    
    37,387
    
    
    
    30,551
  3




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Cont.)
 Three Months Ended September 30,
    
    
    Six Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands, Except Per Share Data)Non-interest expense:Compensation
    
    $
    9,578
    
    
    $
    14,099
    
    
    $
    21,403
    
    
    $
    28,449Occupancy
    
    
    2,017
    
    
    
    2,647
    
    
    
    4,384
    
    
    
    5,060Federal deposit insurance premiums
    
    
    3,621
    
    
    
    4,608
    
    
    
    7,696
    
    
    
    10,186Furniture and equipment
    
    
    1,741
    
    
    
    2,092
    
    
    
    3,503
    
    
    
    4,142Data processing
    
    
    1,782
    
    
    
    1,689
    
    
    
    3,354
    
    
    
    3,621Marketing
    
    
    410
    
    
    
    642
    
    
    
    717
    
    
    
    1,015Other expenses from real estate partnership operations
    
    
    13
    
    
    
    2,208
    
    
    
    515
    
    
    
    3,659Foreclosed properties and repossessed assetsnet expense
    
    
    6,784
    
    
    
    8,838
    
    
    
    12,440
    
    
    
    12,770Foreclosure cost advance impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,708Mortgage servicing rights impairment (recovery)
    
    
    1,272
    
    
    
    (6
    )
    
    
    1,462
    
    
    
    (1,350
    )Legal services
    
    
    2,680
    
    
    
    1,165
    
    
    
    4,779
    
    
    
    1,873Other professional fees
    
    
    315
    
    
    
    1,549
    
    
    
    2,109
    
    
    
    2,161Other
    
    
    3,899
    
    
    
    4,534
    
    
    
    7,445
    
    
    
    8,043Total non-interest expense
    
    
    34,112
    
    
    
    44,065
    
    
    
    69,807
    
    
    
    83,337Income (loss) before income taxes
    
    
    1,252
    
    
    
    (75,095
    )
    
    
    (10,902
    )
    
    
    (140,232
    )Income taxes
    
    
    14
    
    
    
    
    
    
    
    14
    
    
    
    Net income (loss)
    
    
    1,238
    
    
    
    (75,095
    )
    
    
    (10,916
    )
    
    
    (140,232
    )Loss attributable to non-controlling interest in real estate partnerships
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    Preferred stock dividends and discount accretion
    
    
    (2,401
    )
    
    
    (3,228
    )
    
    
    (5,769
    )
    
    
    (6,472
    )Net loss available to common equity of Anchor BanCorp
    
    $
    (1,163
    )
    
    $
    (78,408
    )
    
    $
    (16,685
    )
    
    $
    (146,704
    )Comprehensive income (loss)
    
    $
    1,452
    
    
    $
    (72,195
    )
    
    $
    (2,830
    )
    
    $
    (135,261
    )Loss per common share:Basic
    
    $
    (0.05
    )
    
    $
    (3.71
    )
    
    $
    (0.79
    )
    
    $
    (6.94
    )Diluted
    
    
    (0.05
    )
    
    
    (3.71
    )
    
    
    (0.79
    )
    
    
    (6.94
    )Dividends declared per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  4




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Statements of Changes in Stockholders Equity
  Accu-mulatedOtherCompre-Non-
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Retained
    
    
    
    
    
    
    Deferred
    
    
    hensiveControlling
    
    
    Preferred
    
    
    Common
    
    
    Paid-in
    
    
    Earnings
    
    
    Treasury
    
    
    Compensation
    
    
    IncomeInterest
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    (Deficit)
    
    
    Stock
    
    
    Obligation
    
    
    (Loss)
    
    
    Total(Dollars in thousands except per share data)Balance at April 1, 2009
    
    $
    411
    
    
    $
    74,185
    
    
    $
    2,536
    
    
    $
    109,327
    
    
    $
    131,878
    
    
    $
    (94,744
    )
    
    $
    (5,480
    )
    
    $
    (6,337
    )
    
    $
    211,776Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (177,062
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (177,062
    )Non-credit portion of other-than-
temporary impairments:Available-for-sale securities, net of tax
of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,100
    )
    
    
    (2,100
    )Reclassification adjustment for net gains
realized in income, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,095
    )
    
    
    (11,095
    )Reclassification adjustment for credit portion
of other-than-temporary investments
realized in income, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    847
    
    
    
    847Change in net unrealized gains (losses)
on available-for-sale securities
net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,286
    
    
    
    13,286Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (176,124
    )Change in non-controlling interest
    
    
    (411
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (411
    )Dividend on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,500
    )Issuance of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (194
    )
    
    
    (3,154
    )
    
    
    3,769
    
    
    
    (49
    )
    
    
    
    
    
    
    372Accretion of preferred stock discount
    
    
    
    
    
    
    7,411
    
    
    
    
    
    
    
    
    
    
    
    (7,411
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at March 31, 2010
    
    $
    
    
    
    $
    81,596
    
    
    $
    2,536
    
    
    $
    109,133
    
    
    $
    (61,249
    )
    
    $
    (90,975
    )
    
    $
    (5,529
    )
    
    $
    (5,399
    )
    
    $
    30,113Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,916
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,916
    )Reclassification adjustment for net gains
realized in income, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,765
    )
    
    
    (6,765
    )Reclassification adjustment for credit portion
of other-than-temporary investments
realized in income, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199
    
    
    
    199Change in net unrealized gains (losses)
on available-for-sale securities
net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,652
    
    
    
    14,652Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,830
    )Dividend on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,053
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,053
    )Issuance of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96
    )
    
    
    141
    
    
    
    (5
    )
    
    
    
    
    
    
    40Accretion of preferred stock discount
    
    
    
    
    
    
    3,716
    
    
    
    
    
    
    
    
    
    
    
    (3,716
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at September 30, 2010
    
    $
    
    
    
    $
    85,312
    
    
    $
    2,536
    
    
    $
    109,133
    
    
    $
    (78,030
    )
    
    $
    (90,834
    )
    
    $
    (5,534
    )
    
    $
    2,687
    
    
    $
    25,270
  5




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
  Six Months Ended September 30,2010
    
    
    2009(In Thousands)Operating ActivitiesNet loss
    
    $
    (10,916
    )
    
    $
    (140,232
    )Adjustments to reconcile net loss to net
cash provided by operating activities:Provision for credit losses
    
    
    19,608
    
    
    
    131,300OREO losses, net
    
    
    8,721
    
    
    
    9,376Depreciation and amortization
    
    
    3,043
    
    
    
    2,599Amortization and accretion of investment securities, net
    
    
    1,832
    
    
    
    852Mortgage servicing rights impairment (recovery)
    
    
    1,462
    
    
    
    (1,350
    )Foreclosure cost advance impairment
    
    
    
    
    
    
    3,708Cash paid due to origination of loans held for sale
    
    
    (410,896
    )
    
    
    (801,974
    )Cash received due to sale of loans held for sale
    
    
    412,199
    
    
    
    947,499Net gain on sale of loans
    
    
    (10,563
    )
    
    
    (12,465
    )Net gain on sale of investment securities
    
    
    (6,765
    )
    
    
    (3,613
    )(Gain) loss on sale of foreclosed properties
    
    
    (2,034
    )
    
    
    130Net gain on sale of branches
    
    
    (7,248
    )
    
    
    Net impairment losses recognized in earnings
    
    
    199
    
    
    
    399Capitalized improvements of OREO
    
    
    (522
    )
    
    
    Stock-based compensation expense
    
    
    41
    
    
    
    33Decrease in accrued interest receivable
    
    
    1,395
    
    
    
    3,479Decrease in prepaid expense and other assets
    
    
    9,282
    
    
    
    4,897Increase (decrease) in accrued interest payable on deposits
    
    
    3,816
    
    
    
    (2,162
    )Increase in other liabilities
    
    
    2,051
    
    
    
    901Net cash provided by operating activities
    
    
    14,705
    
    
    
    143,377Investing ActivitiesProceeds from sale of investment securities
    
    
    302,719
    
    
    
    148,070Proceeds from maturities investment securities
    
    
    60,100
    
    
    
    46,965Purchase of investment securities
    
    
    (523,851
    )
    
    
    (185,288
    )Principal collected on investment securities
    
    
    28,976
    
    
    
    57,445Net decrease in loans held for investment
    
    
    252,156
    
    
    
    197,355Purchases of office properties and equipment
    
    
    (1,042
    )
    
    
    (1,911
    )Sales of office properties and equipment
    
    
    345
    
    
    
    201Proceeds from sale of foreclosed properties
    
    
    20,954
    
    
    
    17,068Investment in real estate held for development and sale
    
    
    53
    
    
    
    13,916Branch sale  Royal Credit Union net of cash and cash equivalents
    
    
    (99,897
    )
    
    
    Branch sale  Nicolet net of cash and cash equivalents
    
    
    (80,256
    )
    
    
    Net cash provided by investing activities
    
    
    (39,743
    )
    
    
    293,821
  6




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Contd)
 Six Months Ended September 30,2010
    
    
    2009(In Thousands)Financing ActivitiesDecrease in deposit accounts
    
    $
    (253,521
    )
    
    $
    (189,924
    )Increase in advance payments by borrowers
for taxes and insurance
    
    
    8,265
    
    
    
    8,256Proceeds from borrowed funds
    
    
    
    
    
    
    257Repayment of borrowed funds
    
    
    (93,300
    )
    
    
    (319,170
    )Decrease in non-controlling interest in real estate partnerships
    
    
    
    
    
    
    (411
    )Tax benefit from stock related compensation
    
    
    
    
    
    
    (10
    )Net cash used in financing activities
    
    
    (338,556
    )
    
    
    (501,002
    )Net decrease in cash and cash equivalents
    
    
    (363,594
    )
    
    
    (63,804
    )Cash and cash equivalents at beginning of period
    
    
    512,162
    
    
    
    433,826Cash and cash equivalents at end of period
    
    $
    148,568
    
    
    $
    370,022Supplementary cash flow information:Cash paid or credited to accounts:Interest on deposits and borrowings
    
    $
    50,762
    
    
    $
    72,689Income taxes
    
    
    
    
    
    
    (7,048
    )Non-cash transactions:Transfer of loans to foreclosed properties
    
    
    31,905
    
    
    
    12,442Securitization of mortgage loans held for sale to mortgage-backed
securities
    
    
    
    
    
    
    48,878
  7




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##### Table of Contents



ANCHOR
BANCORP WISCONSIN INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Principles of Consolidation
  Note 2  Basis of Presentation
      8




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##### Table of Contents



Note 3  Significant Risks and Uncertainties
 Regulatory Agreements
        9




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##### Table of Contents



Going Concern
  Credit Risks
    Note 4  Recent Accounting Pronouncements
 ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)  Improving Disclosures About
Fair Value Measurements.
 10




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##### Table of Contents



FASB ASC Topic 860, Transfers and Servicing.
 ASU No. 2010-11, Derivatives and Hedging (Topic 815)  Scope Exception Related to Embedded Credit
Derivatives.
 ASU No. 2010-20, Receivables (Topic 830)  Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses.
 11




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##### Table of Contents



Note 5  Investment Securities
  Amortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    (Losses)
    
    
    Fair ValueAt September 30, 2010:Available-for-sale:U.S. government and federal agency obligations
    
    $
    6,742
    
    
    $
    175
    
    
    $
    
    
    
    $
    6,917Corporate stock and other
    
    
    1,176
    
    
    
    78
    
    
    
    (117
    )
    
    
    1,137Agency CMOs and REMICs
    
    
    422
    
    
    
    28
    
    
    
    
    
    
    
    450Non-agency CMOs
    
    
    65,803
    
    
    
    827
    
    
    
    (3,969
    )
    
    
    62,661Residential mortgage-backed securities
    
    
    6,897
    
    
    
    314
    
    
    
    
    
    
    
    7,211GNMA securities
    
    
    477,359
    
    
    
    5,472
    
    
    
    (121
    )
    
    
    482,710$
    558,399
    
    
    $
    6,894
    
    
    $
    (4,207
    )
    
    $
    561,086Held-to-maturity:Residential mortgage-backed securities
    
    $
    33
    
    
    $
    1
    
    
    $
    
    
    
    $
    34$
    33
    
    
    $
    1
    
    
    $
    
    
    
    $
    34At March 31, 2010:Available-for-sale:U.S. government and federal agency obligations
    
    $
    51,029
    
    
    $
    49
    
    
    $
    (47
    )
    
    $
    51,031Corporate stock and other
    
    
    1,176
    
    
    
    72
    
    
    
    (50
    )
    
    
    1,198Agency CMOs and REMICs
    
    
    1,393
    
    
    
    20
    
    
    
    
    
    
    
    1,413Non-agency CMOs
    
    
    91,140
    
    
    
    550
    
    
    
    (6,323
    )
    
    
    85,367Residential mortgage-backed securities
    
    
    14,907
    
    
    
    593
    
    
    
    (60
    )
    
    
    15,440GNMA securities
    
    
    261,957
    
    
    
    1,226
    
    
    
    (1,429
    )
    
    
    261,754$
    421,602
    
    
    $
    2,510
    
    
    $
    (7,909
    )
    
    $
    416,203Held-to-maturity:Residential mortgage-backed securities
    
    $
    39
    
    
    $
    1
    
    
    $
    
    
    
    $
    40$
    39
    
    
    $
    1
    
    
    $
    
    
    
    $
    40
  12




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At September 30, 2010Unrealized loss position
    
    
    Unrealized loss positionLess than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss(In Thousands)Corporate stock and other
    
    $
    
    
    
    $
    
    
    
    $
    35
    
    
    $
    (117
    )
    
    $
    35
    
    
    $
    (117
    )Agency CMOs and REMICs
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    Non-agency CMOs
    
    
    
    
    
    
    
    
    
    
    29,051
    
    
    
    (3,969
    )
    
    
    29,051
    
    
    
    (3,969
    )GNMA securities
    
    
    37,241
    
    
    
    (121
    )
    
    
    
    
    
    
    
    
    
    
    37,241
    
    
    
    (121
    )$
    37,249
    
    
    $
    (121
    )
    
    $
    29,086
    
    
    $
    (4,086
    )
    
    $
    66,335
    
    
    $
    (4,207
    )
 At March 31, 2010Unrealized loss position
    
    
    Unrealized loss positionLess than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss(In Thousands)US
government and federal agency obligations
    
    $
    4,000
    
    
    $
    (47
    )
    
    $
    
    
    
    $
    
    
    
    $
    4,000
    
    
    $
    (47
    )Corporate stock and other
    
    
    51
    
    
    
    (13
    )
    
    
    50
    
    
    
    (37
    )
    
    
    101
    
    
    
    (50
    )Non-agency CMOs
    
    
    4,244
    
    
    
    (37
    )
    
    
    43,029
    
    
    
    (6,286
    )
    
    
    47,273
    
    
    
    (6,323
    )Residential mortgage-backed
securities
    
    
    1,336
    
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    1,336
    
    
    
    (60
    )GNMA securities
    
    
    138,996
    
    
    
    (1,429
    )
    
    
    
    
    
    
    
    
    
    
    138,996
    
    
    
    (1,429
    )$
    148,627
    
    
    $
    (1,586
    )
    
    $
    43,079
    
    
    $
    (6,323
    )
    
    $
    191,706
    
    
    $
    (7,909
    )
    13




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14




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Three Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedSeptember 30, 2010
    
    
    September 30, 2009
    
    
    September 30, 2010
    
    
    September 30, 2009Beginning
balance of the amount of OTTI related to credit losses
    
    $
    1,975
    
    
    $
    1,018
    
    
    $
    1,889
    
    
    $
    805The credit portion of OTTI not previously recognized
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    82Additional increases to the amount related to the
credit loss
for which OTTI was previously recognized
    
    
    113
    
    
    
    107
    
    
    
    199
    
    
    
    316Credit portion of OTTI previously recognized for
securities sold during the period
    
    
    (124
    )
    
    
    
    
    
    
    (124
    )
    
    
    Ending balance of the amount of OTTI related to
credit losses
    
    $
    1,964
    
    
    $
    1,203
    
    
    $
    1,964
    
    
    $
    1,203
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)Proceeds from sales
    
    $
    298,404
    
    
    $
    101,429
    
    
    $
    302,719
    
    
    $
    148,070Gross gains on sales
    
    
    6,653
    
    
    
    2,108
    
    
    
    6,765
    
    
    
    3,615Gross losses on sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Net gain on sales
    
    $
    6,653
    
    
    $
    2,108
    
    
    $
    6,765
    
    
    $
    3,613
   15




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##### Table of Contents



After 1
    
    
    After 5Year
    
    
    YearsWithin 1
    
    
    through 5
    
    
    through 10
    
    
    Over TenYear
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Total(In Thousands)Available-for-sale, at fair value:U.S. government and federal
agency obligations
    
    $
    2,700
    
    
    $
    4,217
    
    
    $
    
    
    
    $
    
    
    
    $
    6,917Corporate stock and other
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    1,112
    
    
    
    1,137Agency CMOs and REMICs
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    418
    
    
    
    450Non-agency CMOs
    
    
    
    
    
    
    1,867
    
    
    
    12,034
    
    
    
    48,760
    
    
    
    62,661Residential mortgage-backed securities
    
    
    
    
    
    
    672
    
    
    
    939
    
    
    
    5,600
    
    
    
    7,211GNMA secrurities
    
    
    
    
    
    
    
    
    
    
    746
    
    
    
    481,964
    
    
    
    482,710Total
    
    $
    2,725
    
    
    $
    6,756
    
    
    $
    13,751
    
    
    $
    537,854
    
    
    $
    561,086Held-to-maturity, at fair value:Residential mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    34
    
    
    $
    
    
    
    $
    34Total
    
    $
    
    
    
    $
    
    
    
    $
    34
    
    
    $
    
    
    
    $
    34$
    2,725
    
    
    $
    6,756
    
    
    $
    13,785
    
    
    $
    537,854
    
    
    $
    561,120Held-to-maturity, at cost:Residential mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    33
    
    
    $
    
    
    
    $
    33
 16




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##### Table of Contents



Note 6  Loans Receivable
  September 30,
    
    
    March 31,2010
    
    
    2010First mortgage loans:Single-family residential
    
    $
    684,977
    
    
    $
    765,312Multi-family residential
    
    
    550,051
    
    
    
    614,930Commercial real estate
    
    
    747,097
    
    
    
    842,905Construction
    
    
    85,534
    
    
    
    108,486Land
    
    
    216,561
    
    
    
    231,3302,284,220
    
    
    
    2,562,963Second mortgage loans
    
    
    298,579
    
    
    
    352,795Education loans
    
    
    294,742
    
    
    
    331,475Commercial business loans and leases
    
    
    124,197
    
    
    
    164,329Credit card and other consumer loans
    
    
    21,459
    
    
    
    24,9903,023,197
    
    
    
    3,436,552Contras to loans:Undisbursed loan proceeds*
    
    
    (23,815
    )
    
    
    (23,334
    )Allowance for loan losses
    
    
    (156,186
    )
    
    
    (179,644
    )Unearned loan fees
    
    
    (3,881
    )
    
    
    (3,898
    )Net discount on loans purchased
    
    
    (5
    )
    
    
    (8
    )Unearned interest
    
    
    (93
    )
    
    
    (88
    )(183,980
    )
    
    
    (206,972
    )$
    2,839,217
    
    
    $
    3,229,580
 
 *
    
    Undisbursed loan proceeds are funds to be disbursed upon a draw request approved by the Bank.  Three Months Ended September 30,
    
    
    Six Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars In Thousands)
    
    
    (Dollars In Thousands)Allowance at beginning of period
    
    $
    166,649
    
    
    $
    139,455
    
    
    $
    179,644
    
    
    $
    137,165Provision
    
    
    9,588
    
    
    
    60,900
    
    
    
    18,522
    
    
    
    131,300Charge-offs
    
    
    (22,597
    )
    
    
    (30,488
    )
    
    
    (44,790
    )
    
    
    (99,661
    )Recoveries
    
    
    2,546
    
    
    
    797
    
    
    
    2,810
    
    
    
    1,860Allowance at end of period
    
    $
    156,186
    
    
    $
    170,664
    
    
    $
    156,186
    
    
    $
    170,664
  17




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Three Months Ended September 30,
    
    
    Six Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars In Thousands)
    
    
    (Dollars In Thousands)Provision for loan losses
    
    $
    9,588
    
    
    $
    60,900
    
    
    $
    18,522
    
    
    $
    131,300Provision for unfunded commitment losses
    
    
    1,086
    
    
    
    
    
    
    
    1,086
    
    
    
    Provision for credit losses
    
    $
    10,674
    
    
    $
    60,900
    
    
    $
    19,608
    
    
    $
    131,300
   At September 30,
    
    
    At March 31,2010
    
    
    2010
    
    
    2009
    
    
    2008(In Thousands)Impaired loans with specific
reserve required
    
    $
    134,767
    
    
    $
    210,422
    
    
    $
    124,179
    
    
    $
    52,866Impaired loans without a
specific reserve
    
    
    256,063
    
    
    
    238,541
    
    
    
    103,635
    
    
    
    51,192Total impaired loans
    
    
    390,830
    
    
    
    448,963
    
    
    
    227,814
    
    
    
    104,058Less:Specific valuation allowance
    
    
    (46,986
    )
    
    
    (60,620
    )
    
    
    (30,799
    )
    
    
    (17,639
    )$
    343,844
    
    
    $
    388,343
    
    
    $
    197,015
    
    
    $
    86,419Average impaired loans
    
    $
    424,695
    
    
    $
    364,585
    
    
    $
    194,923
    
    
    $
    67,138Interest income recognized
on impaired loans
    
    $
    3,453
    
    
    $
    11,939
    
    
    $
    9,484
    
    
    $
    107Loans and troubled debt restructurings
on non-accrual status
    
    $
    325,242
    
    
    $
    369,072
    
    
    $
    227,814
    
    
    $
    104,058Troubled debt restructurings  accrual
    
    $
    65,588
    
    
    $
    79,891
    
    
    $
    
    
    
    $
    Troubled debt restructurings  non-accrual
    
    $
    22,926
    
    
    $
    44,578
    
    
    $
    61,460
    
    
    $
    400Loans past due ninety days or more and
still accruing
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  18




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##### Table of Contents



Note 7  Foreclosed Properties and Repossessed Assets
   Six months ended
    
    
    Year endedSeptember 30,
    
    
    March 31,2010
    
    
    2010Balance at beginning of period
    
    $
    55,436
    
    
    $
    52,563Additions
    
    
    31,905
    
    
    
    61,090Capitalized improvements
    
    
    522
    
    
    
    Valuations/write-offs
    
    
    (8,721
    )
    
    
    (18,129
    )Net gain on sale
    
    
    2,034
    
    
    
    632Sales
    
    
    (20,954
    )
    
    
    (40,720
    )Balance at end of period
    
    $
    60,222
    
    
    $
    55,436
   19




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##### Table of Contents



Note 8  Regulatory Capital
  Minimum RequiredMinimum Required
    
    
    to be WellFor Capital
    
    
    Capitalized UnderActual
    
    
    Adequacy Purposes
    
    
    OTS RequirementsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars In Thousands)At September 30, 2010Tier 1 capital
(to adjusted tangible assets)
    
    $
    165,824
    
    
    
    4.36
    %
    
    $
    114,105
    
    
    
    3.00
    %
    
    $
    190,175
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    197,727
    
    
    
    8.14
    
    
    
    194,233
    
    
    
    8.00
    
    
    
    242,792
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    165,824
    
    
    
    4.36
    
    
    
    57,053
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/AAt March 31, 2010:Tier 1 capital
(to adjusted tangible assets)
    
    $
    164,932
    
    
    
    3.73
    %
    
    $
    132,696
    
    
    
    3.00
    %
    
    $
    221,159
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    201,062
    
    
    
    7.32
    
    
    
    219,751
    
    
    
    8.00
    
    
    
    274,689
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    164,932
    
    
    
    3.73
    
    
    
    66,348
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
   20




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##### Table of Contents



September 30,
    
    
    March 31,2010
    
    
    2010(In Thousands)Stockholders equity of the Bank
    
    $
    170,369
    
    
    $
    165,043Less: Intangible assets
    
    
    
    
    
    
    (4,092
    )Disallowed servicing assets
    
    
    (1,858
    )
    
    
    (1,418
    )Accumulated other comprehensive income
    
    
    (2,687
    )
    
    
    5,399Tier 1 and tangible capital
    
    
    165,824
    
    
    
    164,932Plus: Allowable general valuation allowances
    
    
    31,903
    
    
    
    36,130Risk-based capital
    
    $
    197,727
    
    
    $
    201,062
 Note 9  Earnings Per Share
  Three Months Ended September 30,2010
    
    
    2009(in thousands)Numerator:Numerator for basic and diluted earnings
per shareloss available to common
stockholders
    
    $
    (1,163
    )
    
    $
    (78,408
    )Denominator:Denominator for basic earnings per
shareweighted-average shares
    
    
    21,253
    
    
    
    21,155Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    Management Recognition Plans
    
    
    
    
    
    
    Denominator for diluted earnings per
shareadjusted weighted-averageshares and assumed conversions
    
    
    21,253
    
    
    
    21,155Basic earnings (loss) per common share
    
    $
    (0.05
    )
    
    $
    (3.71
    )Diluted earnings (loss) per common share
    
    $
    (0.05
    )
    
    $
    (3.71
    )
 21




---



##### Table of Contents



Six Months Ended September 30,2010
    
    
    2009(in thousands)Numerator:Numerator
for basic and diluted earnings per shareloss available to
common stockholders
    
    $
    (16,685
    )
    
    $
    (146,704
    )Denominator:Denominator
for basic earnings per shareweighted-average shares
    
    
    21,252
    
    
    
    21,150Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    Management Recognition Plans
    
    
    
    
    
    
    Denominator
for diluted earnings per shareadjusted weighted-average shares and assumed conversions
    
    
    21,252
    
    
    
    21,150Basic earnings (loss) per common share
    
    $
    (0.79
    )
    
    $
    (6.94
    )Diluted earnings (loss) per common share
    
    $
    (0.79
    )
    
    $
    (6.94
    )
  Note 10  Commitments and Contingent Liabilities
   22




---



##### Table of Contents



September 30,
    
    
    March 31,2010
    
    
    2010Commitments to extend credit:
    
    $
    11,519
    
    
    $
    20,796Unused lines of credit:Home equity
    
    
    120,037
    
    
    
    142,044Credit cards
    
    
    36,078
    
    
    
    37,360Commercial
    
    
    32,793
    
    
    
    42,968Letters of credit
    
    
    21,567
    
    
    
    25,393Credit enhancement under the FederalHome Loan Bank of Chicago MortgagePartnership Finance Program
    
    
    21,602
    
    
    
    21,602IDI borrowing guarantees-unfunded
    
    
    419
    
    
    
    393
       Note 11  Fair Value of Financial Instruments
  23




---



##### Table of Contents



Cash and cash equivalents and accrued interest:
 Investment securities:
 Loans receivable:
 Federal Home Loan Bank stock:
 Deposits:
 Other Borrowed Funds:
 Off-balance-sheet instruments:
  24




---



##### Table of Contents



September 30, 2010
    
    
    March 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    148,568
    
    
    $
    148,568
    
    
    $
    512,162
    
    
    $
    512,162Investment securities available for sale
    
    
    561,086
    
    
    
    561,086
    
    
    
    416,203
    
    
    
    416,203Investment securities held to maturity
    
    
    33
    
    
    
    34
    
    
    
    39
    
    
    
    40Loans held for sale
    
    
    28,744
    
    
    
    29,499
    
    
    
    19,484
    
    
    
    19,622Loans receivable
    
    
    2,839,217
    
    
    
    2,836,528
    
    
    
    3,229,580
    
    
    
    3,278,903Federal Home Loan Bank stock
    
    
    54,829
    
    
    
    54,829
    
    
    
    54,829
    
    
    
    54,829Accrued interest receivable
    
    
    18,763
    
    
    
    18,763
    
    
    
    20,159
    
    
    
    20,159Financial liabilities:Deposits
    
    
    3,021,608
    
    
    
    3,021,592
    
    
    
    3,543,799
    
    
    
    3,513,254Other borrowed funds
    
    
    704,908
    
    
    
    724,324
    
    
    
    796,153
    
    
    
    783,326Accrued interest payableborrowings
    
    
    13,740
    
    
    
    13,740
    
    
    
    7,088
    
    
    
    7,088Accrued interest payabledeposits
    
    
    6,127
    
    
    
    6,127
    
    
    
    8,963
    
    
    
    8,963
   
    
    Level 1: Valuations for assets and liabilities traded in active exchange markets.
Valuations are obtained from readily available pricing sources for market transactions
involving identical assets or liabilities.
 
    
    Level 2: Valuations for assets and liabilities traded in less active dealer or broker
markets. Valuations are obtained from third party pricing services for identical or similar
assets or liabilities.
 
    
    Level 3: Valuations for assets and liabilities that are derived from other valuation
methodologies, including option pricing models, discounted cash flow models and similar
techniques, and not based on market exchange, dealer or broker traded transactions. Level 3
valuations incorporate certain assumptions and projections in determining the fair value
assigned to such assets.
 Fair Value on a Recurring Basis
  25




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##### Table of Contents



September 30, 2010
    
    
    Fair Value Measurements UsingQuoted Pricesin Active
    
    
    Significant Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale debt securities:U.S. Government and federal agency obligations
    
    $
    6,917
    
    
    $
    
    
    
    $
    6,917
    
    
    $
    Agency CMOs and REMICs
    
    
    450
    
    
    
    
    
    
    
    450
    
    
    
    Non-agency CMOs
    
    
    62,661
    
    
    
    
    
    
    
    
    
    
    
    62,661Residential mortgage-backed securities
    
    
    7,211
    
    
    
    
    
    
    
    7,211
    
    
    
    GNMA securities
    
    
    482,710
    
    
    
    
    
    
    
    482,710
    
    
    
    Corporate bonds
    
    
    1,103
    
    
    
    578
    
    
    
    525
    
    
    
    Available for sale equity securities:Financial services
    
    
    34
    
    
    
    34
    
    
    
    
    
    
    
    Total assets at fair value
    
    $
    561,086
    
    
    $
    612
    
    
    $
    497,813
    
    
    $
    62,661
 March 31, 2010
    
    
    Fair Value Measurements UsingQuoted Pricesin Active
    
    
    Significant Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale debt securities:U.S. Government and federal agency obligations
    
    $
    51,031
    
    
    $
    
    
    
    $
    51,031
    
    
    $
    Agency CMOs and REMICs
    
    
    1,413
    
    
    
    
    
    
    
    
    
    
    
    1,413Non-agency CMOs
    
    
    85,367
    
    
    
    
    
    
    
    
    
    
    
    85,367Residential mortgage-backed securities
    
    
    15,440
    
    
    
    
    
    
    
    
    
    
    
    15,440GNMA securities
    
    
    261,754
    
    
    
    
    
    
    
    
    
    
    
    261,754Corporate bonds
    
    
    1,097
    
    
    
    572
    
    
    
    525
    
    
    
    Available for sale equity securities:Financial services
    
    
    101
    
    
    
    101
    
    
    
    
    
    
    
    Total assets at fair value
    
    $
    416,203
    
    
    $
    673
    
    
    $
    51,556
    
    
    $
    363,974
    26




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##### Table of Contents



Year EndedSix Months Ended September 30, 2010
    
    
    March 31, 2010Residential
    
    
    
    
    
    
    InvestmentAgency CMOs and
    
    
    
    
    
    
    mortgage-backed
    
    
    
    
    
    
    SecuritiesREMICs
    
    
    Non-agency CMOs
    
    
    securities
    
    
    GNMA securities
    
    
    Available for SaleBalance at beginning of period
    
    $
    1,413
    
    
    $
    85,367
    
    
    $
    15,440
    
    
    $
    261,754
    
    
    $
    407,301Total gains (losses) (realized/unrealized)Included in earnings
    
    
    
    
    
    
    1,488
    
    
    
    (5
    )
    
    
    (1,327
    )
    
    
    7,253Included in other comprehensive income
    
    
    6
    
    
    
    1,588
    
    
    
    491
    
    
    
    6,232
    
    
    
    1,786Included in earnings as other than temporary impairment
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    
    
    
    
    (1,084
    )Purchases
    
    
    
    
    
    
    
    
    
    
    17,058
    
    
    
    92,879
    
    
    
    437,141Securitization of mortgage loans
held for sale to mortgage-related securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,878Principal repayments
    
    
    (663
    )
    
    
    (10,454
    )
    
    
    (1,395
    )
    
    
    (7,168
    )
    
    
    (104,331
    )Sales
    
    
    
    
    
    
    (15,129
    )
    
    
    
    
    
    
    
    
    
    
    (432,970
    )Transfers in and/or out of level 3
    
    
    (756
    )
    
    
    
    
    
    
    (31,589
    )
    
    
    (352,370
    )
    
    
    Balance at end of period
    
    $
    
    
    
    $
    62,661
    
    
    $
    
    
    
    $
    
    
    
    $
    363,974
  Fair Value on a Nonrecurring Basis
  September 30, 2010
    
    
    Fair Value Measurements UsingQuoted Pricesin Active
    
    
    Significant Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired loans
    
    $
    87,781
    
    
    $
    
    
    
    $
    
    
    
    $
    87,781Mortgage servicing rights
    
    
    21,474
    
    
    
    
    
    
    
    
    
    
    
    21,474Foreclosed properties and repossessed assets
    
    
    60,222
    
    
    
    
    
    
    
    
    
    
    
    60,222Total assets at fair value
    
    $
    169,477
    
    
    $
    
    
    
    $
    
    
    
    $
    169,477
 27




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##### Table of Contents



March 31, 2010
    
    
    Fair Value Measurements UsingQuoted Pricesin Active
    
    
    Significant Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired loans
    
    $
    149,802
    
    
    $
    
    
    
    $
    
    
    
    $
    149,802Loans held for sale
    
    
    4,752
    
    
    
    
    
    
    
    4,752
    
    
    
    Mortgage servicing rights
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    7,000Foreclosed properties and repossessed assets
    
    
    55,436
    
    
    
    
    
    
    
    
    
    
    
    55,436Total assets at fair value
    
    $
    216,990
    
    
    $
    
    
    
    $
    4,752
    
    
    $
    212,238
    Note 12  Income Taxes
  28




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##### Table of Contents



At September 30,
    
    
    At March 31,2010
    
    
    2010
    
    
    2009
    
    
    2008Deferred tax assets:Allowances for loan losses
    
    $
    69,141
    
    
    $
    79,035
    
    
    $
    58,442
    
    
    $
    15,081Other loss reserves
    
    
    2,059
    
    
    
    2,182
    
    
    
    4,822
    
    
    
    269Federal NOL carryforwards
    
    
    49,579
    
    
    
    35,102
    
    
    
    
    
    
    
    State NOL carryforwards
    
    
    12,764
    
    
    
    10,794
    
    
    
    3,604
    
    
    
    631Unrealized gains/(losses)
    
    
    (1,122
    )
    
    
    2,131
    
    
    
    2,695
    
    
    
    (738
    )Other
    
    
    6,499
    
    
    
    6,947
    
    
    
    11,773
    
    
    
    9,045Total deferred tax assets
    
    
    138,920
    
    
    
    136,191
    
    
    
    81,336
    
    
    
    24,288Valuation allowance
    
    
    (122,014
    )
    
    
    (118,600
    )
    
    
    (49,981
    )
    
    
    (997
    )Adjusted deferred tax assets
    
    
    16,906
    
    
    
    17,591
    
    
    
    31,355
    
    
    
    23,291Deferred tax liabilities:FHLB stock dividends
    
    
    (3,976
    )
    
    
    (3,976
    )
    
    
    (3,997
    )
    
    
    (4,022
    )Mortgage servicing rights
    
    
    (9,033
    )
    
    
    (9,312
    )
    
    
    (6,094
    )
    
    
    (4,888
    )Purchase accounting
    
    
    (332
    )
    
    
    (2,933
    )
    
    
    (3,348
    )
    
    
    (4,713
    )Other
    
    
    (3,565
    )
    
    
    (1,370
    )
    
    
    (1,714
    )
    
    
    (1,513
    )Total deferred tax liabilities
    
    
    (16,906
    )
    
    
    (17,591
    )
    
    
    (15,153
    )
    
    
    (15,136
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    16,202
    
    
    $
    8,155
    Note 13  Credit Agreement
  29




---



##### Table of Contents




    
    Any event which, either of itself or with the lapse of time or the giving of notice or
both, would constitute a Default under the Credit Agreement;
 
    
    A default or an event of default under any other material agreement to which the
Corporation or Bank is a party; or
 
    
    Any pending or threatened litigation or certain administrative proceedings.
  
    
    The Bank shall maintain a Tier 1 Leverage Ratio of not less than (i) 3.75% at all times
during the period from April 29, 2010 through May 31, 2010, (ii) 3.85% at all times during
the period from June 1, 2010 through August 31, 2010, (iii) 3.90% at all times during the
period from September 1, 2010 through November 30, 2010 and (iv) 3.95% at all times
thereafter.
 
    
    The Bank shall maintain a Total Risk Based Capital ratio of not less than (i) 7.10% at
all times during the period from April 29, 2010 through May 31, 2010, (ii) 7.35% at all
times during the period from June 1, 2010 through August 31, 2010, (iii) 7.60% at all times
during the period from September 1, 2010 through November 30, 2010 and (iv) 7.65% at all
times thereafter.
 
    
    The ratio of Non-Performing Loans to Gross Loans shall not exceed (i) 14.50% at any time
during the period from April 29, 2010 through May 31, 2010, (ii) 13.00% at any time during
the period from June 1, 2010 through September 30, 2010, (iii) 12.50% at any time during
the period from October 1, 2010 through November 30, 2010, (iv) 12.00% at any time during
the period from December 1, 2010 through March 31, 2010, (v) 11.00% at any time during the
period from April 1, 2011 through April 30, 2011 and (vi) 10.00% at all times thereafter.
   30




---



##### Table of Contents



Note 14  Temporary Liquidity Guarantee Program
  Note 15  Capital Purchase Program
  Note 16  Branch Sales
   31




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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
 Approval of Capital Restoration Plan
    
    
    Sale of Branches- In July 2010, the Bank completed the sale of its four
Green Bay branches to Nicolet National Bank. In connection with those sales, Nicolet
acquired approximately $105 million in deposits. These sales, along with an earlier
sale of eleven branches in Northwestern Wisconsin to Royal Credit Union completed on
June 25, 2010, are a key part of the Banks plan to improve its capital ratios by
reducing the size of its balance sheet, thereby reducing its capital needs.
 
    
    Loan Sales- During the quarter, the Bank sold a portion of its student
loan portfolio in order to improve net interest margin. Earnings were also generated
through the sale of mortgage loans in the secondary market on a flow basis where
current interest rates favorably impacted the gain on sale.
 
    
    Expense Reduction- Second quarter expense levels reflect a full quarter of
savings resulting from comprehensive business reviews conducted earlier in the year in
order to reduce staffing, overhead and other operating expenses.
 
    
    Investment Securities- In July, the Bank repositioned its investment
securities portfolio and realized approximately $6.8 million of non-recurring gains.
 
    
    Increased Margin from Repricing of Deposits- The Bank repriced certain
deposit products to better align with current market conditions, which resulted in
improved margins.
  Other Highlights
 
    
    Credit Quality The Corporation has seen early stage delinquencies beginning to
stabilize in the second quarter of fiscal 2011. At September 30, 2010, non-performing
loans decreased $43.9 million since March 31, 2010.
 32




---



##### Table of Contents




    
    Strengthened Management Team- During the quarter, the Corporation enhanced its
resources in the areas of Credit Risk, Financial Reporting and Treasury.
 
    
    Discussions with Potential Investors- The Corporation continues to be engaged,
along with our advisor Sandler ONeill and Partners, in active discussions with
potential investors for additional capital infusion.
 Recent Market and Industry Developments
    Financial Highlights
  
    
    Diluted loss per common share decreased to $(0.05) for the quarter ended September 30,
2010 compared to $(3.71) per share for the quarter ended September 30, 2009, primarily due
to a $50.2 million decrease in the provision for credit losses and a $10.0 million decrease
in non-interest expense;
 
    
    The interest rate spread increased to 2.56% for the quarter ended September 30, 2010
compared to 1.62% for the quarter ended September 30, 2009;
 
    
    Loans receivable decreased $381.1 million, or 11.7%, since March 31, 2010 primarily due
to scheduled pay-offs and amortization, the sale of branches which resulted in a decrease
of $86.6 million, the transfer of $31.9 million to foreclosed properties as well as the
sale of $24 million in student loans;
 
    
    Deposits and accrued interest decreased $525.0 million, or 14.8%, since March 31, 2010
primarily due to the sale of branches;
 
    
    Book value per common share was $(3.91) at September 30, 2010 compared to $(3.68) at
March 31, 2010 and $(1.70) at September 30, 2009;
 
    
    Total non-performing assets (consisting of loans past due more than ninety days, loans
past due less than ninety days but placed on non-accrual status due to anticipated probable
loss, non-accrual troubled debt restructurings and foreclosed properties and repossessed
assets) decreased $39.0 million, or 9.2%, to $385.5 million at September 30, 2010 from
$424.5 million at March 31, 2010. Total non-performing loans (consisting of loans past due
more than 90 days, loans less than 90 days delinquent but placed on non-accrual status due
to anticipated probable loss and non-accrual troubled debt restructurings) decreased
 33




---



##### Table of Contents



$43.9 million, or 11.9% to $325.2 million at September 30, 2010 from $369.1 million at March
31, 2010; and
 
    
    Provision for credit losses decreased $50.2 million, or 82.5%, to $10.7 million
for the three months ended September 30, 2010 from $60.9 million for the three months ended
September 30, 2009 and increased $1.8 million, or 19.5%, from $8.9 million for the three
months ended June 30, 2010. The Corporation made significant risk management enhancements
starting in the three and six month periods ending September 30, 2009. These enhancements
included the following: established standard discount rates applied to collateral types;
identified all related entities associated with existing impaired loans to ensure that the
impairment analysis represents a more accurate and thorough picture of the total borrowing
relationship; changed the criteria for evaluating impaired loans using the collateral
methodology for a more accurate assessment; collateral is now evaluated on a loan by loan
basis rather than from a total collateral pool perspective; and determined the appropriate
amount of the loan to be charged off versus to be put into a specific reserve. These
enhancements led to a significant increase in the provision for loan losses in the prior
year.
 34




---



##### Table of Contents



Three Months Ended(Dollars in thousands - except per share amounts)
    
    9/30/2010
    
    
    6/30/2010
    
    
    3/31/2010
    
    
    12/31/2009Operations Data:Net interest income
    
    $
    22,318
    
    
    $
    18,808
    
    
    $
    18,624
    
    
    $
    22,333Provision for credit losses
    
    
    10,674
    
    
    
    8,934
    
    
    
    20,170
    
    
    
    10,456Net gain on sale of loans
    
    
    9,216
    
    
    
    1,347
    
    
    
    3,314
    
    
    
    2,805Real estate investment partnership revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other non-interest income
    
    
    14,504
    
    
    
    12,320
    
    
    
    7,192
    
    
    
    12,816Real estate investment partnership cost of sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other non-interest expense
    
    
    34,112
    
    
    
    35,695
    
    
    
    37,093
    
    
    
    37,695Income (loss) before income tax expense (benefit)
    
    
    1,252
    
    
    
    (12,154
    )
    
    
    (28,133
    )
    
    
    (10,197
    )Income tax expense (benefit)
    
    
    14
    
    
    
    
    
    
    
    (1,503
    )
    
    
    3Net income (loss)
    
    
    1,238
    
    
    
    (12,154
    )
    
    
    (26,630
    )
    
    
    (10,200
    )(Income) loss attributable to non-controlling
interest in real estate partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock dividends and discount accretion
    
    
    (2,401
    )
    
    
    (3,368
    )
    
    
    (3,211
    )
    
    
    (3,228
    )Net loss available to common equity of
Anchor BanCorp
    
    
    (1,163
    )
    
    
    (15,522
    )
    
    
    (29,841
    )
    
    
    (13,428
    )Selected Financial Ratios(1):Yield on earning assets
    
    
    4.80
    %
    
    
    4.37
    %
    
    
    4.56
    %
    
    
    4.92
    %Cost of funds
    
    
    2.24
    
    
    
    2.42
    
    
    
    2.69
    
    
    
    2.79Interest rate spread
    
    
    2.56
    
    
    
    1.95
    
    
    
    1.87
    
    
    
    2.13Net interest margin
    
    
    2.45
    
    
    
    1.85
    
    
    
    1.77
    
    
    
    2.05Return on average assets
    
    
    0.13
    
    
    
    (1.13
    )
    
    
    (2.40
    )
    
    
    (0.89
    )Return on average equity
    
    
    20.30
    
    
    
    (184.75
    )
    
    
    (232.27
    )
    
    
    (64.05
    )Average equity to average assets
    
    
    0.63
    
    
    
    0.61
    
    
    
    1.03
    
    
    
    1.39Non-interest expense to average assets
    
    
    3.51
    
    
    
    3.33
    
    
    
    3.34
    
    
    
    3.30Per Share:Basic loss per common share
    
    $
    (0.05
    )
    
    $
    (0.73
    )
    
    $
    (1.40
    )
    
    $
    (0.63
    )Diluted loss per common share
    
    
    (0.05
    )
    
    
    (0.73
    )
    
    
    (1.40
    )
    
    
    (0.63
    )Dividends per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Book value per common share
    
    
    (3.91
    )
    
    
    (3.95
    )
    
    
    (3.68
    )
    
    
    (2.66
    )Financial Condition:Total assets
    
    $
    3,803,853
    
    
    $
    3,998,929
    
    
    $
    4,416,265
    
    
    $
    4,453,975Loans receivable, netHeld for sale
    
    
    28,744
    
    
    
    24,362
    
    
    
    19,484
    
    
    
    35,640Held for investment
    
    
    2,839,217
    
    
    
    3,040,398
    
    
    
    3,229,580
    
    
    
    3,383,246Deposits and accrued interest
    
    
    3,027,735
    
    
    
    3,225,382
    
    
    
    3,552,762
    
    
    
    3,598,185Other borrowed funds
    
    
    704,908
    
    
    
    709,359
    
    
    
    796,153
    
    
    
    759,479Stockholders equity
    
    
    25,270
    
    
    
    24,348
    
    
    
    30,113
    
    
    
    52,243Allowance for loan losses
    
    
    156,186
    
    
    
    166,649
    
    
    
    179,644
    
    
    
    164,494Non-performing assets(2)
    
    
    385,464
    
    
    
    422,024
    
    
    
    424,508
    
    
    
    344,362
 
 (1)
    
    Annualized when appropriate.(2)
    
    Non-performing assets consist of loans past due more than ninety days, loans past
due less than ninety days but
placed on non-accrual status due to anticipated probable loss, non-accrual troubled debt
restructurings
and other assets owned by the Bank. 35




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##### Table of Contents



Three Months Ended(Dollars in thousands - except per share amounts)
    
    9/30/2009
    
    
    6/30/2009
    
    
    3/31/2009
    
    
    12/31/2008Operations Data:Net interest income
    
    $
    18,939
    
    
    $
    24,915
    
    
    $
    28,708
    
    
    $
    32,707Provision for credit losses
    
    
    60,900
    
    
    
    70,400
    
    
    
    56,385
    
    
    
    92,970Net gain (loss) on sale of loans
    
    
    1,062
    
    
    
    11,403
    
    
    
    7,858
    
    
    
    (228
    )Real estate investment partnership revenue
    
    
    
    
    
    
    
    
    
    
    310
    
    
    
    1,836Other non-interest income
    
    
    9,796
    
    
    
    8,217
    
    
    
    7,794
    
    
    
    7,905Real estate investment partnership cost of sales
    
    
    
    
    
    
    
    
    
    
    545
    
    
    
    1,191Other non-interest expense
    
    
    43,992
    
    
    
    39,272
    
    
    
    49,755
    
    
    
    117,066Loss before income tax expense (benefit)
    
    
    (75,095
    )
    
    
    (65,137
    )
    
    
    (62,015
    )
    
    
    (169,007
    )Income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    (16,147
    )
    
    
    (1,899
    )Net loss
    
    
    (75,095
    )
    
    
    (65,137
    )
    
    
    (45,868
    )
    
    
    (167,108
    )(Income) loss attributable to non-controlling interest in real estate partnerships
    
    
    85
    
    
    
    (85
    )
    
    
    (246
    )
    
    
    150Preferred stock dividends and discount accretion
    
    
    (3,228
    )
    
    
    (3,244
    )
    
    
    (2,172
    )
    
    
    Net loss available to common equity of
Anchor BanCorp
    
    
    (78,408
    )
    
    
    (68,296
    )
    
    
    (47,794
    )
    
    
    (167,258
    )Selected Financial Ratios(1):Yield on earning assets
    
    
    4.62
    %
    
    
    4.80
    %
    
    
    5.22
    %
    
    
    5.69
    %Cost of funds
    
    
    3.00
    
    
    
    2.79
    
    
    
    2.72
    
    
    
    2.81Interest rate spread
    
    
    1.62
    
    
    
    2.01
    
    
    
    2.50
    
    
    
    2.88Net interest margin
    
    
    1.58
    
    
    
    1.99
    
    
    
    2.45
    
    
    
    2.88Return on average assets
    
    
    (5.97
    )
    
    
    (4.92
    )
    
    
    (3.62
    )
    
    
    (13.72
    )Return on average equity
    
    
    (242.30
    )
    
    
    (132.26
    )
    
    
    (84.21
    )
    
    
    (242.66
    )Average equity to average assets
    
    
    2.46
    
    
    
    3.72
    
    
    
    4.30
    
    
    
    5.66Non-interest expense to average assets
    
    
    3.49
    
    
    
    2.97
    
    
    
    4.00
    
    
    
    9.70Per Share:Basic earnings (loss) per common share
    
    $
    (3.71
    )
    
    $
    (3.23
    )
    
    $
    (2.26
    )
    
    $
    (7.96
    )Diluted earnings (loss) per common share
    
    
    (3.71
    )
    
    
    (3.23
    )
    
    
    (2.26
    )
    
    
    (7.96
    )Dividends per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Book value per common share
    
    
    (1.70
    )
    
    
    1.71
    
    
    
    4.70
    
    
    
    6.80Financial Condition:Total assets
    
    $
    4,634,619
    
    
    $
    5,236,909
    
    
    $
    5,272,110
    
    
    $
    4,798,847Loans receivable, netHeld for sale
    
    
    28,904
    
    
    
    115,340
    
    
    
    161,964
    
    
    
    32,139Held for investment
    
    
    3,506,464
    
    
    
    3,641,708
    
    
    
    3,896,439
    
    
    
    3,948,065Deposits and accrued interest
    
    
    3,739,997
    
    
    
    3,987,906
    
    
    
    3,923,827
    
    
    
    3,413,449Other borrowed funds
    
    
    759,479
    
    
    
    1,041,049
    
    
    
    1,078,392
    
    
    
    1,152,112Stockholders equity
    
    
    73,370
    
    
    
    146,918
    
    
    
    211,365
    
    
    
    146,662Allowance for loan losses
    
    
    170,664
    
    
    
    139,455
    
    
    
    137,165
    
    
    
    122,571Non-performing assets(2)
    
    
    453,510
    
    
    
    190,381
    
    
    
    280,377
    
    
    
    410,695
 
 (1)
    
    Annualized when appropriate.(2)
    
    Non-performing assets consist of loans past due more than ninety days, loans past
due less than ninety days but
placed on non-accrual status due to anticipated probable loss, non-accrual troubled debt
restructurings
and other assets owned by the Bank. 36




---



##### Table of Contents



RESULTS OF OPERATIONS
 Overview
  Net Interest Income
     37




---



##### Table of Contents



Provision for Credit Losses
  Average Interest-Earning Assets, Average Interest-Bearing Liabilities and Interest Rate Spread
  38




---



##### Table of Contents



Three Months Ended September 30,2010
    
    
    2009Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost(1)
    
    
    Balance
    
    
    Interest
    
    
    Cost(1)(Dollars In Thousands)Interest-Earning AssetsMortgage loans
    
    $
    2,221,212
    
    
    $
    30,211
    
    
    
    5.44
    %
    
    $
    2,710,901
    
    
    $
    37,162
    
    
    
    5.48
    %Consumer loans
    
    
    638,247
    
    
    
    8,110
    
    
    
    5.08
    
    
    
    751,664
    
    
    
    9,583
    
    
    
    5.10Commercial business loans
    
    
    107,125
    
    
    
    1,828
    
    
    
    6.83
    
    
    
    181,521
    
    
    
    2,806
    
    
    
    6.18Total loans receivable (2) (3)
    
    
    2,966,584
    
    
    
    40,149
    
    
    
    5.41
    
    
    
    3,644,086
    
    
    
    49,551
    
    
    
    5.44Investment securities (4)
    
    
    383,396
    
    
    
    3,421
    
    
    
    3.57
    
    
    
    501,888
    
    
    
    5,473
    
    
    
    4.36Interest-bearing deposits
    
    
    235,067
    
    
    
    126
    
    
    
    0.21
    
    
    
    589,944
    
    
    
    361
    
    
    
    0.24Federal Home Loan Bank stock
    
    
    54,829
    
    
    
    
    
    
    
    0.00
    
    
    
    54,829
    
    
    
    
    
    
    
    0.00Total interest-earning assets
    
    
    3,639,876
    
    
    
    43,696
    
    
    
    4.80
    
    
    
    4,790,747
    
    
    
    55,385
    
    
    
    4.62Non-interest-earning assets
    
    
    243,972
    
    
    
    
    
    
    
    
    
    
    
    248,255Total assets
    
    $
    3,883,848
    
    
    
    
    
    
    
    
    
    
    $
    5,039,002Interest-Bearing LiabilitiesDemand deposits
    
    $
    883,170
    
    
    
    704
    
    
    
    0.32
    
    
    $
    946,206
    
    
    
    1,337
    
    
    
    0.57Regular passbook savings
    
    
    237,126
    
    
    
    132
    
    
    
    0.22
    
    
    
    247,344
    
    
    
    181
    
    
    
    0.29Certificates of deposit
    
    
    1,989,952
    
    
    
    12,404
    
    
    
    2.49
    
    
    
    2,677,319
    
    
    
    21,522
    
    
    
    3.22Total deposits
    
    
    3,110,248
    
    
    
    13,240
    
    
    
    1.70
    
    
    
    3,870,869
    
    
    
    23,040
    
    
    
    2.38Other borrowed funds
    
    
    707,539
    
    
    
    8,138
    
    
    
    4.60
    
    
    
    992,841
    
    
    
    13,406
    
    
    
    5.40Total interest-bearing liabilities
    
    
    3,817,787
    
    
    
    21,378
    
    
    
    2.24
    
    
    
    4,863,710
    
    
    
    36,446
    
    
    
    3.00Non-interest-bearing liabilities
    
    
    41,672
    
    
    
    
    
    
    
    
    
    
    
    51,182Total liabilities
    
    
    3,859,459
    
    
    
    
    
    
    
    
    
    
    
    4,914,892Stockholders equity
    
    
    24,389
    
    
    
    
    
    
    
    
    
    
    
    124,110Total liabilities and stockholders equity
    
    $
    3,883,848
    
    
    
    
    
    
    
    
    
    
    $
    5,039,002Net interest income/interest
rate spread (5)
    
    
    
    
    
    $
    22,318
    
    
    
    2.56
    %
    
    
    
    
    
    $
    18,939
    
    
    
    1.62
    %Net interest-earning assets
    
    $
    (177,911
    )
    
    
    
    
    
    
    
    
    
    $
    (72,963
    )Net interest margin (6)
    
    
    
    
    
    
    
    
    
    
    2.45
    %
    
    
    
    
    
    
    
    
    
    
    1.58
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    0.95
    
    
    
    
    
    
    
    
    
    
    
    0.98
 
 (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 weighted-average yield
on interest-earning assets and the weighted-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. 39




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##### Table of Contents



Six Months Ended September 30,2010
    
    
    2009Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost(1)
    
    
    Balance
    
    
    Interest
    
    
    Cost(1)(Dollars In Thousands)Interest-Earning AssetsMortgage loans
    
    $
    2,290,582
    
    
    $
    59,998
    
    
    
    5.24
    %
    
    $
    2,840,976
    
    
    $
    77,351
    
    
    
    5.45
    %Consumer loans
    
    
    666,625
    
    
    
    16,912
    
    
    
    5.07
    
    
    
    777,095
    
    
    
    20,329
    
    
    
    5.23Commercial business loans
    
    
    117,119
    
    
    
    3,920
    
    
    
    6.69
    
    
    
    195,663
    
    
    
    5,661
    
    
    
    5.79Total loans receivable (2) (3)
    
    
    3,074,326
    
    
    
    80,830
    
    
    
    5.26
    
    
    
    3,813,734
    
    
    
    103,341
    
    
    
    5.42Investment securities (4)
    
    
    393,889
    
    
    
    6,866
    
    
    
    3.49
    
    
    
    493,757
    
    
    
    11,520
    
    
    
    4.67Interest-bearing deposits
    
    
    326,709
    
    
    
    376
    
    
    
    0.23
    
    
    
    536,895
    
    
    
    630
    
    
    
    0.23Federal Home Loan Bank stock
    
    
    54,829
    
    
    
    
    
    
    
    0.00
    
    
    
    54,829
    
    
    
    
    
    
    
    0.00Total interest-earning assets
    
    
    3,849,753
    
    
    
    88,072
    
    
    
    4.58
    
    
    
    4,899,215
    
    
    
    115,491
    
    
    
    4.71Non-interest-earning assets
    
    
    237,208
    
    
    
    
    
    
    
    
    
    
    
    264,805Total assets
    
    $
    4,086,961
    
    
    
    
    
    
    
    
    
    
    $
    5,164,020Interest-Bearing LiabilitiesDemand deposits
    
    $
    922,353
    
    
    
    1,796
    
    
    
    0.39
    
    
    $
    945,169
    
    
    
    2,703
    
    
    
    0.57Regular passbook savings
    
    
    247,698
    
    
    
    291
    
    
    
    0.23
    
    
    
    243,794
    
    
    
    347
    
    
    
    0.28Certificates of deposit
    
    
    2,130,577
    
    
    
    26,968
    
    
    
    2.53
    
    
    
    2,734,413
    
    
    
    44,123
    
    
    
    3.23Total deposits and accrued interest
    
    
    3,300,628
    
    
    
    29,055
    
    
    
    1.76
    
    
    
    3,923,376
    
    
    
    47,173
    
    
    
    2.40Other borrowed funds
    
    
    721,302
    
    
    
    17,891
    
    
    
    4.96
    
    
    
    1,027,005
    
    
    
    24,464
    
    
    
    4.76Total interest-bearing liabilities
    
    
    4,021,930
    
    
    
    46,946
    
    
    
    2.33
    
    
    
    4,950,381
    
    
    
    71,637
    
    
    
    2.89Non-interest-bearing liabilities
    
    
    39,535
    
    
    
    
    
    
    
    
    
    
    
    51,281Total liabilities
    
    
    4,061,465
    
    
    
    
    
    
    
    
    
    
    
    5,001,662Stockholders equity
    
    
    25,496
    
    
    
    
    
    
    
    
    
    
    
    162,358Total liabilities and stockholders equity
    
    $
    4,086,961
    
    
    
    
    
    
    
    
    
    
    $
    5,164,020Net interest income/interest rate
spread (5)
    
    
    
    
    
    $
    41,126
    
    
    
    2.25
    %
    
    
    
    
    
    $
    43,854
    
    
    
    1.82
    %Net interest-earning assets
    
    $
    (172,177
    )
    
    
    
    
    
    
    
    
    
    $
    (51,166
    )Net interest margin (6)
    
    
    
    
    
    
    
    
    
    
    2.14
    %
    
    
    
    
    
    
    
    
    
    
    1.79
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    0.96
    
    
    
    
    
    
    
    
    
    
    
    0.99
 
 (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 weighted-average yield
on interest-earning assets and the weighted-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. 40




---



##### Table of Contents



Non-Interest Income
   Non-Interest Expense
   41




---



##### Table of Contents



Income Taxes
  
 FINANCIAL CONDITION
       42




---



##### Table of Contents



REGULATORY DEVELOPMENTS
 Temporary Liquidity Guarantee Program
  43




---



##### Table of Contents



Emergency Economic Stabilization Act of 2008
  
    
    Capital Purchase Program (CPP). Pursuant to this program, UST, on behalf of the US
government, purchased preferred stock, along with warrants to purchase common stock, from
certain financial institutions, including bank holding companies, savings and loan holding
companies and banks or savings associations not controlled by a holding company. The
investment has a dividend rate of 5% per year, until the fifth anniversary of Treasurys
investment and a dividend of 9% thereafter. During the time UST holds securities issued
pursuant to this program, participating financial institutions will be required to comply with
certain provisions regarding executive compensation and corporate governance. Participation
in CPP also imposes certain restrictions upon an institutions dividends to common
shareholders and stock repurchase activities. The Corporation elected to participate in the
CPP and received $110 million pursuant to the program.
 
    
    Temporary Liquidity Guarantee Program (TLGP). TLGP includes both (i) a debt guarantee
component, whereby the FDIC will guarantee until June 30, 2012, the senior unsecured debt
issued by eligible financial institutions between October 14, 2008 and October 31, 2009; and
(ii) an account transaction guarantee component, whereby the FDIC will insure 100% of
non-interest bearing deposit transaction accounts held at eligible financial institutions,
such as payment processing accounts, payroll accounts and working capital accounts through
December 31, 2009. The deadline for opting out of TLGP was December 5, 2008. The Corporation
elected not to opt out of TLGP.
 
    
    Temporary increase in deposit insurance coverage. Pursuant to the EESA, the FDIC temporarily
raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per
depositor. The EESA provides that the basic deposit insurance limit will return to $100,000
after December 31, 2013.
 The American Recovery and Reinvestment Act of 2009
  
 
 
 44




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##### Table of Contents




 
 
 
   Dodd-Frank Act
  OTS Order to Cease and Desist
   45




---



##### Table of Contents



Capital Restoration Plan
   46




---



##### Table of Contents



RISK MANAGEMENT
  Risk Management Philosophy
  Risk Management Principles
  
    
    Designed to only take risks consistent with the Banks strategy and within its
capability to manage,
 
    
    Practice disciplined capital and liquidity management,
 
    
    Help ensure that risks and earnings volatility are appropriately understood
and measured,
 
    
    Avoid excessive concentrations, and
 
    
    Help support external stakeholder confidence.
  
 Credit
Risk Management
     47




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##### Table of Contents



Non-Performing Loans
  September 30, 2010
    
    
    March 31, 2010Percent of
    
    
    
    
    
    
    
    
    
    
    Percent ofNon-
    
    
    
    
    
    
    
    
    
    
    Non-Non-
    
    
    Performing
    
    
    Percent of
    
    
    Non-
    
    
    Performing
    
    
    Percent ofPerforming
    
    
    Loans
    
    
    Total Loans
    
    
    Performing
    
    
    Loans
    
    
    Total Loans(Dollars in Thousands)Single-family residential
    
    $
    62,405
    
    
    
    19.2
    %
    
    
    2.06
    %
    
    $
    52,765
    
    
    
    14.3
    %
    
    
    1.54
    %Multi-family residential
    
    
    51,179
    
    
    
    15.7
    %
    
    
    1.69
    %
    
    
    60,485
    
    
    
    16.4
    %
    
    
    1.76
    %Commercial real estate
    
    
    99,179
    
    
    
    30.5
    %
    
    
    3.28
    %
    
    
    131,730
    
    
    
    35.7
    %
    
    
    3.83
    %Construction and land
    
    
    89,421
    
    
    
    27.5
    %
    
    
    2.96
    %
    
    
    97,240
    
    
    
    26.3
    %
    
    
    2.83
    %Consumer
    
    
    6,108
    
    
    
    1.9
    %
    
    
    0.20
    %
    
    
    5,154
    
    
    
    1.4
    %
    
    
    0.15
    %Commercial business
    
    
    16,950
    
    
    
    5.2
    %
    
    
    0.55
    %
    
    
    21,698
    
    
    
    5.9
    %
    
    
    0.63
    %Total Non-Performing Loans
    
    $
    325,242
    
    
    
    100.0
    %
    
    
    10.76
    %
    
    $
    369,072
    
    
    
    100.0
    %
    
    
    10.74
    %
  Non-performingNon-performing
    
    
    
    
    
    
    Transferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    loan balance
    
    
    Remainingloan balance
    
    
    
    
    
    
    to Accrual
    
    
    Transferred
    
    
    
    
    
    
    
    
    
    
    September 30,
    
    
    balance of
    
    
    ALLLLoan Category
    
    April 1, 2010
    
    
    Additions
    
    
    Status
    
    
    to OREO
    
    
    Paid Down
    
    
    Charged Off
    
    
    2010
    
    
    loans
    
    
    AllocatedSingle-family residential
    
    $
    52,765
    
    
    $
    46,436
    
    
    $
    (21,411
    )
    
    $
    (5,198
    )
    
    $
    (2,991
    )
    
    $
    (7,196
    )
    
    $
    62,405
    
    
    $
    622,572
    
    
    $
    16,599Multi-family residential
    
    
    60,485
    
    
    
    26,037
    
    
    
    (21,698
    )
    
    
    (1,299
    )
    
    
    (7,809
    )
    
    
    (4,537
    )
    
    
    51,179
    
    
    
    498,872
    
    
    
    25,223Commercial
real estate
    
    
    131,730
    
    
    
    38,087
    
    
    
    (28,817
    )
    
    
    (13,023
    )
    
    
    (8,436
    )
    
    
    (20,362
    )
    
    
    99,179
    
    
    
    647,918
    
    
    
    64,596Construction
and land
    
    
    97,240
    
    
    
    24,497
    
    
    
    (12,001
    )
    
    
    (3,683
    )
    
    
    (11,739
    )
    
    
    (4,893
    )
    
    
    89,421
    
    
    
    212,674
    
    
    
    22,011Consumer
    
    
    5,154
    
    
    
    4,360
    
    
    
    (1,721
    )
    
    
    (191
    )
    
    
    (557
    )
    
    
    (937
    )
    
    
    6,108
    
    
    
    608,672
    
    
    
    2,528Commercial business
    
    
    21,698
    
    
    
    10,556
    
    
    
    (7,890
    )
    
    
    
    
    
    
    (3,796
    )
    
    
    (3,618
    )
    
    
    16,950
    
    
    
    107,247
    
    
    
    25,229Total
    
    $
    369,072
    
    
    $
    149,973
    
    
    $
    (93,538
    )
    
    $
    (23,394
    )
    
    $
    (35,328
    )
    
    $
    (41,543
    )
    
    $
    325,242
    
    
    $
    2,697,955
    
    
    $
    156,186
   48




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##### Table of Contents



Non-Performing Assets
  At September 30,
    
    
    At March 31,2010
    
    
    2010(Dollars in thousands)Total non-accrual loans
    
    $
    302,316
    
    
    $
    324,494Troubled debt restructurings  non-accrual (2)
    
    
    22,926
    
    
    
    44,578Other real estate owned (OREO)
    
    
    60,222
    
    
    
    55,436Total non-performing assets
    
    $
    385,464
    
    
    $
    424,508Total non-performing loans to total loans (1)
    
    
    10.76
    %
    
    
    10.74
    %Total non-performing assets to total assets
    
    
    10.13
    
    
    
    9.61Allowance for loan losses to total loans (1)
    
    
    5.17
    
    
    
    5.23Allowance for loan losses to total non-performing loans
    
    
    48.02
    
    
    
    48.67Allowance
for loan and foreclosure losses to total non-performing assets
    
    
    44.43
    
    
    
    46.16
 
 (1)
    
    Total loans are gross loans receivable before the reduction for loans in
process, unearned interest and loan fees and the allowance from loans losses.(2)
    
    Troubled debt restructurings  non-accrual represent non-accrual loans that were
modified in a troubled debt restructuring less than six months prior to the period end date or have
not performed in accordance with the modified terms for at least six months.  Past due 90 daysand Still
    
    
    Total Non-
    
    
    Other Real
    
    
    Total Non-Accruing
    
    
    performing
    
    
    Estate Owned
    
    
    performingNon-accrual
    
    
    Interest
    
    
    Loans
    
    
    (OREO)
    
    
    AssetsBalance at April 1, 2010
    
    $
    369,072
    
    
    $
    
    
    
    $
    369,072
    
    
    $
    55,436
    
    
    $
    424,508Additions
    
    
    149,973
    
    
    
    
    
    
    
    149,973
    
    
    
    9,033
    
    
    
    159,006Transfers:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonaccrual to OREO
    
    
    (23,394
    )
    
    
    
    
    
    
    (23,394
    )
    
    
    23,394
    
    
    
    Returned to accrual status
    
    
    (93,538
    )
    
    
    
    
    
    
    (93,538
    )
    
    
    
    
    
    
    (93,538
    )Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,920
    )
    
    
    (18,920
    )Charge-offs/Loss
    
    
    (41,543
    )
    
    
    
    
    
    
    (41,543
    )
    
    
    (8,721
    )
    
    
    (50,264
    )Payments
    
    
    (35,328
    )
    
    
    
    
    
    
    (35,328
    )
    
    
    
    
    
    
    (35,328
    )Balance at September 30, 2010
    
    $
    325,242
    
    
    $
    
    
    
    $
    325,242
    
    
    $
    60,222
    
    
    $
    385,464
  49




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##### Table of Contents



1.
    
    Realignment of the corporate structure to ensure that risk is adequately and
appropriately identified, mitigated and where possible, eliminated through the:
 
    
    Development of a risk management framework.
 
    
    Appointment of a Chief Risk Officer responsible for overseeing all
aspects of corporate risk management.
 
    
    Creation of a Special Assets Group
responsible for all adversely classified assets with the goal to reduce losses.
 2.
    
    Creation and implementation of a new loan risk rating system using qualitative
metrics to identify loans with potential risk so they could be properly classified and
monitored.
 3.
    
    Implementation of a new enhanced impairment analysis to evaluate all classified
loans.
 4.
    
    Introduction of a new Allowance for Loan and Lease Policy that improves the
timeliness of specific reserves taken for the allowance for loan and lease calculation.
 5.
    
    Analysis of the population of recent appraisals received and developed a
specific reserve amount to capture the probable deterioration in value.
 6.
    
    Establishment of an independent underwriting group that evaluates the total
borrowing relationship using a global cash flow methodology.
 7.
    
    Proactive monitoring of matured and delinquent loans.
 8.
    
    Proactive review of the performing (non-impaired) portfolio.
 9.
    
    Development of resolution plan on all adversely classified assets.
 10.
    
    Introduction of a portfolio management team.
  50




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##### Table of Contents



Loan Delinquencies
  At September 30,
    
    
    At March 31,2010
    
    
    2010
    
    
    2009
    
    
    2008(In Thousands)30 to 59 days
    
    $
    25,630
    
    
    $
    53,105
    
    
    $
    64,862
    
    
    $
    66,61760 to 89 days
    
    
    18,742
    
    
    
    53,864
    
    
    
    29,858
    
    
    
    12,928Total
    
    $
    44,372
    
    
    $
    106,969
    
    
    $
    94,720
    
    
    $
    79,545
  Impaired Loans
  At September 30,
    
    
    At March 31,2010
    
    
    2010
    
    
    2009
    
    
    2008(In Thousands)Impaired loans with specific
reserve required
    
    $
    134,767
    
    
    $
    210,422
    
    
    $
    124,179
    
    
    $
    52,866Impaired loans without a
specific reserve
    
    
    256,063
    
    
    
    238,541
    
    
    
    103,635
    
    
    
    51,192Total impaired loans
    
    
    390,830
    
    
    
    448,963
    
    
    
    227,814
    
    
    
    104,058Less:Specific valuation allowance
    
    
    (46,986
    )
    
    
    (60,620
    )
    
    
    (30,799
    )
    
    
    (17,639
    )$
    343,844
    
    
    $
    388,343
    
    
    $
    197,015
    
    
    $
    86,419Average impaired loans
    
    $
    424,695
    
    
    $
    364,585
    
    
    $
    194,923
    
    
    $
    67,138Interest income recognized
on impaired loans
    
    $
    3,453
    
    
    $
    11,939
    
    
    $
    9,484
    
    
    $
    107Loans and troubled debt restructurings
on non-accrual status
    
    $
    325,242
    
    
    $
    369,072
    
    
    $
    227,814
    
    
    $
    104,058Troubled debt restructurings  accrual
    
    $
    65,588
    
    
    $
    79,891
    
    
    $
    
    
    
    $
    Troubled debt restructurings  non-accrual
    
    $
    22,926
    
    
    $
    44,578
    
    
    $
    61,460
    
    
    $
    400Loans past due ninety days or more and
still accruing
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 51




---



##### Table of Contents



Allowances for Loan and Lease Losses
     52




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars In Thousands)Allowance at beginning of period
    
    $
    166,649
    
    
    $
    139,455
    
    
    $
    179,644
    
    
    $
    137,165Charge-offs:Single-Family Residential
    
    
    (3,308
    )
    
    
    (2,546
    )
    
    
    (7,273
    )
    
    
    (4,166
    )Multi-Family Residential
    
    
    (3,793
    )
    
    
    (6,292
    )
    
    
    (4,695
    )
    
    
    (10,837
    )Commercial Real Estate
    
    
    (9,133
    )
    
    
    (3,469
    )
    
    
    (21,817
    )
    
    
    (25,820
    )Construction and Land
    
    
    (3,349
    )
    
    
    (12,441
    )
    
    
    (5,299
    )
    
    
    (38,689
    )Consumer
    
    
    (977
    )
    
    
    (559
    )
    
    
    (1,715
    )
    
    
    (1,235
    )Commercial business
    
    
    (2,037
    )
    
    
    (5,181
    )
    
    
    (3,991
    )
    
    
    (18,914
    )Total charge-offs
    
    
    (22,597
    )
    
    
    (30,488
    )
    
    
    (44,790
    )
    
    
    (99,661
    )Recoveries:Single-Family Residential
    
    
    161
    
    
    
    11
    
    
    
    217
    
    
    
    23Multi-Family Residential
    
    
    43
    
    
    
    121
    
    
    
    43
    
    
    
    124Commercial Real Estate
    
    
    1,304
    
    
    
    519
    
    
    
    1,342
    
    
    
    622Construction and Land
    
    
    328
    
    
    
    
    
    
    
    328
    
    
    
    107Consumer
    
    
    126
    
    
    
    8
    
    
    
    142
    
    
    
    25Commercial business
    
    
    584
    
    
    
    138
    
    
    
    738
    
    
    
    959Total recoveries
    
    
    2,546
    
    
    
    797
    
    
    
    2,810
    
    
    
    1,860Net (charge-offs) recoveries
    
    
    (20,051
    )
    
    
    (29,691
    )
    
    
    (41,980
    )
    
    
    (97,801
    )Provision for loan losses
    
    
    9,588
    
    
    
    60,900
    
    
    
    18,522
    
    
    
    131,300Allowance at end of period
    
    $
    156,186
    
    
    $
    170,664
    
    
    $
    156,186
    
    
    $
    170,664Net charge-offs to average loans
    
    
    (2.70
    )%
    
    
    (3.26
    )%
    
    
    (2.73
    )%
    
    
    (5.13
    )%
   53




---



##### Table of Contents



As of September 30, 2010
    
    
    As of March 31, 2010% of
    
    
    
    
    
    
    % ofLoan
    
    
    
    
    
    
    LoanType to
    
    
    
    
    
    
    Type toTotal
    
    
    
    
    
    
    TotalLoans
    
    
    

    
    
    Loans(Dollars in Thousands)Allowance allocation:Single-family residential
    
    $
    16,599
    
    
    
    22.66
    %
    
    $
    20,960
    
    
    
    22.27
    %Multi-family residential
    
    
    25,223
    
    
    
    18.19
    %
    
    
    26,471
    
    
    
    17.89
    %Commercial real estate
    
    
    64,596
    
    
    
    24.71
    %
    
    
    75,379
    
    
    
    24.53
    %Construction and land
    
    
    22,011
    
    
    
    9.99
    %
    
    
    23,908
    
    
    
    9.89
    %Consumer
    
    
    2,528
    
    
    
    20.34
    %
    
    
    2,650
    
    
    
    20.64
    %Commercial business
    
    
    25,229
    
    
    
    4.11
    %
    
    
    30,276
    
    
    
    4.78
    %Total allowance for
loan losses
    
    $
    156,186
    
    
    
    100.00
    %
    
    $
    179,644
    
    
    
    100.00
    %Allowance category as a
percent of total allowance:Single-family residential
    
    
    10.63
    %
    
    
    
    
    
    
    11.67
    %Multi-family residential
    
    
    16.15
    %
    
    
    
    
    
    
    14.74
    %Commercial real estate
    
    
    41.36
    %
    
    
    
    
    
    
    41.96
    %Construction and land
    
    
    14.09
    %
    
    
    
    
    
    
    13.31
    %Consumer
    
    
    1.62
    %
    
    
    
    
    
    
    1.48
    %Commercial business
    
    
    16.15
    %
    
    
    
    
    
    
    16.86
    %Total
allowance for loan losses
    
    
    100.00
    %
    
    
    
    
    
    
    100.00
    %
  Foreclosed Properties and Repossessed Assets
  54




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##### Table of Contents



MostRecentRecorded
    
    
    Date
    
    
    AppraisalBalance
    
    
    Placed in
    
    
    or EvaluationDescription
    
    Location
    
    (in millions)
    
    
    OREO
    
    
    DateConstruction company/equipment
    
    Southern Wisconsin
    
    $
    2.7
    
    
    
    1/29/2009
    
    
    
    N/APartially constructed
condominium and retail complex
    
    Southern Wisconsin
    
    
    9.9
    
    
    
    12/31/2008
    
    
    
    9/24/2010Retail centers/commercial
buildings/condos/single-family homes/vacant lots
    
    Northcentral Wisconsin
    
    
    4.5
    
    
    
    9/30/2010
    
    
    
    2/8/2010Commercial building/vacant land
    
    Northeast Wisconsin
    
    
    1.2
    
    
    
    12/29/2009
    
    
    
    9/1/2009Partially constructed
condominium project
    
    Central Wisconsin
    
    
    4.2
    
    
    
    3/31/2009
    
    
    
    9/23/2010Property secured by CBRF
    
    Northeast Wisconsin
    
    
    3.7
    
    
    
    12/31/2008
    
    
    
    3/1/2009Commercial building/shopping
center
    
    Southern Wisconsin
    
    
    1.6
    
    
    
    9/30/2010
    
    
    
    8/12/2010Condo units/vacant land
    
    Northeast Wisconsin
    
    
    2.7
    
    
    
    7/28/2010
    
    
    
    9/1/2010Single-family and multi-family
rental properties
    
    Central Wisconsin
    
    
    1.3
    
    
    
    9/30/2010
    
    
    
    6/29/2010Commercial building/single
family properties/vacant land
    
    Southern Wisconsin
    
    
    3.1
    
    
    
    8/27/2010
    
    
    
    9/16/2008Commercial building
    
    Northeast Wisconsin
    
    
    1.4
    
    
    
    9/30/2010
    
    
    
    5/8/2010Several single family properties
    
    Minnesota
    
    
    2.2
    
    
    
    9/16/2008
    
    
    
    11/1/2009Commercial/various properties
    
    Central Wisconsin
    
    
    2.5
    
    
    
    11/3/2009
    
    
    
    4/1/2009Several duplexes and single
family properties
    
    Central Wisconsin
    
    
    1.3
    
    
    
    3/29/2010
    
    
    
    8/1/2009Vacant commercial building
    
    Northwest Wisconsin
    
    
    1.1
    
    
    
    3/30/2010
    
    
    
    1/9/2010Retail/office building
    
    Central Wisconsin
    
    
    3.4
    
    
    
    1/22/2010
    
    
    
    5/6/2009Condo units with additional land
    
    Central Wisconsin
    
    
    6.1
    
    
    
    3/31/2010
    
    
    
    8/1/2008Condo units
    
    Northwest Wisconsin
    
    
    2.5
    
    
    
    5/28/2010
    
    
    
    5/1/2008Other properties individually
less than $1 million
    
    
    
    
    19.9Valuation allowance on OREO
    
    
    
    
    (15.1
    )$
    60.2
   
 LIQUIDITY RISK MANAGEMENT
  55




---



##### Table of Contents



Liquidity and Capital Resources
     56




---



##### Table of Contents



57




---



##### 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 September 30, 2010Tier 1 capital
(to adjusted tangible assets)
    
    $
    165,824
    
    
    
    4.36
    %
    
    $
    114,105
    
    
    
    3.00
    %
    
    $
    190,175
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    197,727
    
    
    
    8.14
    
    
    
    194,233
    
    
    
    8.00
    
    
    
    242,792
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    165,824
    
    
    
    4.36
    
    
    
    57,053
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/AAt March 31, 2010:Tier 1 capital
(to adjusted tangible assets)
    
    $
    164,932
    
    
    
    3.73
    %
    
    $
    132,696
    
    
    
    3.00
    %
    
    $
    221,159
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    201,062
    
    
    
    7.32
    
    
    
    219,751
    
    
    
    8.00
    
    
    
    274,689
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    164,932
    
    
    
    3.73
    
    
    
    66,348
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
  September 30,
    
    
    March 31,2010
    
    
    2010(In Thousands)Stockholders equity of the Bank
    
    $
    170,369
    
    
    $
    165,043Less: Intangible assets
    
    
    
    
    
    
    (4,092
    )Disallowed servicing assets
    
    
    (1,858
    )
    
    
    (1,418
    )Accumulated other comprehensive income
    
    
    (2,687
    )
    
    
    5,399Tier 1 and tangible capital
    
    
    165,824
    
    
    
    164,932Plus: Allowable general valuation allowances
    
    
    31,903
    
    
    
    36,130Risk-based capital
    
    $
    197,727
    
    
    $
    201,062
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Credit Agreement
     
    
    Any event which, either of itself or with the lapse of time or the giving of notice or
both, would constitute a Default under the Credit Agreement;
    
    A default or an event of default under any other material agreement to which the
Corporation or Bank is a party; or
    
    Any pending or threatened litigation or certain administrative proceedings.
  
    
    The Bank shall maintain a Tier 1 Leverage Ratio of not less than (i) 3.75% at all times
during the period from April 29, 2010 through May 31, 2010, (ii) 3.85% at all times during
the period from June 1, 2010 through August 31, 2010, (iii) 3.90% at all times during the
period from September 1, 2010 through November 30, 2010 and (iv) 3.95% at all times
thereafter.
    
    The Bank shall maintain a Total Risk Based Capital ratio of not less than (i) 7.10% at
all times during the period from April 29, 2010 through May 31, 2010, (ii) 7.35% at all
times during the period from June 1,
2010 through August 31, 2010, (iii) 7.60% at all times during the period from September 1,
2010 through November 30, 2010 and (iv) 7.65% at all times thereafter.
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
    
    The ratio of Non-Performing Loans to Gross Loans shall not exceed (i) 14.50% at any time
during the period from April 29, 2010 through May 31, 2010, (ii) 13.00% at any time during
the period from June 1, 2010 through September 30, 2010, (iii) 12.50% at any time during
the period from October 1, 2010 through November 30, 2010, (iv) 12.00% at any time during
the period from December 1, 2010 through March 31, 2010, (v) 11.00% at any time during the
period from April 1, 2011 through April 30, 2011 and (vi) 10.00% at all times thereafter.
   MARKET RISK MANAGEMENT OVERVIEW
  
 Asset/Liability Management
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Compliance Risk Management
  Strategic and/or Reputation Risk Management
  CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
  Fair Value Measurements
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Allowances for Loan Losses
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Foreclosure
  Mortgage Servicing Rights
  Income Taxes
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Revenue Recognition
  
    
    Lending,
    
    Securities portfolio,
    
    Asset management and fund servicing,
    
    Customer deposits,
    
    Loan servicing, and
    
    Sale of loans and securities.
   FORWARD-LOOKING STATEMENTS
  (i)
    
    general economic or industry conditions could be less favorable than expected,
resulting in a deterioration in credit quality, a change in the allowance for loan and
lease losses or a reduced demand for credit or fee-based products and services;(ii)
    
    soundness of other financial institutions with which the Corporation and the Bank engage in
transactions;(iii)
    
    competitive pressures could intensify and affect our profitability, including as a
result of continued industry consolidation, the increased availability of financial
services from non-banks, technological developments or bank regulatory reform;(iv)
    
    changes in technology;(v)
    
    deterioration in commercial real estate, land and construction loan portfolios
resulting in increased loan losses;(vi)
    
    uncertainties regarding our ability to continue as a going concern;(vii)
    
    our ability to address our own liquidity problems;(viii)
    
    demand for financial services, loss of customer confidence, and customer deposit account
withdrawals;(ix)
    
    our ability to pay dividends;
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(x)
    
    changes in the quality or composition of the Banks loan and investment portfolios and
allowances for loan loss;(xi)
    
    unprecedented volatility in the market and fluctuations in the value of our common stock;(xii)
    
    dilution of existing shareholders as a result of possible future transaction;(xiii)
    
    uncertainties about the Corporation and the Banks Cease and Desist Orders with OTS;(xiv)
    
    uncertainties about our ability to raise sufficient new capital in a timely manner in
order to increase the Banks regulatory capital ratios;(xv)
    
    changes in the conditions of the securities markets, which could adversely affect,
among other things, the value or credit quality of our assets, the availability and terms
of funding necessary to meet our liquidity needs and our ability to originate loans;(xvi)
    
    increases in Federal Deposit Insurance Corporation premiums due to market developments
and regulatory changes; changes in accounting principles, policies or guidelines;(xvii)
    
    uncertainties regarding our investment in the common stock of the Federal Home Loan Bank
of Chicago;(xviii)
    
    delisting of the Corporations common stock from Nasdaq;(xix)
    
    significant unforeseen legal expenses;(xx)
    
    uncertainties about market interest rates;(xxi)
    
    security breaches of our information systems;(xxii)
    
    acts or threats of terrorism and actions taken by the United States or other governments
as a result of such acts or threats, severe weather, natural disasters, acts of war;(xxiii)
    
    environmental liability for properties to which we take title;(xxiv)
    
    expiration of Amendment No. 6 to our Amended and Restated Credit Agreement on May 31,
2011;(xxv)
    
    uncertainties about our ability to obtain regulatory approval and finalize
transactions to sell several branch locations;(xxvi)
    
    uncertainties relating to the Emergency Economic Stabilization Act or 2008, the American
Recovery and Reinvestment Act of 2009, the implementation by the U.S. Department of the
Treasury and federal banking regulators of a number of programs to address capital and
liquidity issues in the banking system and additional programs that will apply to us in the
future, all of which may have significant effects on us and the financial services
industry;(xxvii)
    
    changes in the U.S. Treasurys Capital Purchase Program;(xxviii)
    
    changes in the extensive laws, regulations and policies governing financial holding
companies and their subsidiaries;(xxix)
    
    monetary and fiscal policies of the U.S. Department of the Treasury;(xxx)
    
    implications of the Dodd-Frank Act; and(xxxi)
    
    challenges relating to recruiting and retaining key employees.
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Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk.The Corporations market rate risk has not materially changed from March 31, 2010.
See Item 7A in the Corporations Annual Report on Form 10-K for the year ended March
31, 2010. See also Asset/Liability Management in Part I, Item 2 of this report.
 
 Item 4
    
    Controls and Procedures.Internal Control over Financial ReportingIn our Annual Report on Form 10-K for the fiscal year ended March 31, 2010, the
Corporation identified a material weakness in its internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) related
to the following:The Corporations principal executive officer and principal financial officer
concluded that the Corporation did not maintain effective entity level controls to
ensure that the financial statements were prepared in accordance with generally
accepted accounting principles by the time our Annual Report on Form 10-K for the
fiscal year ended March 31, 2010 was issued. A material weakness is a deficiency,
or combination of deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement of the annual or
interim financial statements will not be prevented or detected on a timely basis.Changes in Internal Control Over Financial ReportingThere has been no change in the Corporations internal control over financial
reporting ((as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that
occurred during the Corporations most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Corporations internal
control over financial reporting.
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Part II  Other Information
 
 Item 1
    
    Legal Proceedings.The Corporation is involved in routine legal proceedings occurring in the ordinary
course of business which, in the aggregate, are believed by management of the
Corporation to be immaterial to the financial condition and results of operations of
the Corporation.
 
 Item 1A
    
    Risk Factors.We are subject to a number of risks which may potentially impact our business,
financial condition, results of operations and liquidity. As a financial services
institution, certain elements of risk are inherent in all of our transactions and
are present in every business decision we make. Thus, we encounter risk as part of
the normal course of our business, and we design risk management processes to help
manage these risks.The following risk factors are added to the risk factors previously disclosed in our
annual report on Form 10-K for the fiscal year ending March 31, 2010. In general,
each of these risk factors, including the ones added below, presents the risk of a
material impact on our results of operations or financial condition, in addition to
other possible consequences described therein.The impact of the recently enacted Dodd-Frank Act is still uncertain, but it may
increase our costs of doing business and could result in restrictions on certain
products and services we offer.On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform
and Consumer Protection Act (the Dodd-Frank Act) which significantly changes the
financial regulatory landscape and will affect the operating activities of financial
institutions and their holding companies as well as others. Although many of the
details of the Dodd-Frank Act and the full impact it will have on our business will
not be known for many months or years, in part because many of the provisions
require the adoption of implementing rules and regulations, we expect compliance
with the new law and its rules and regulations to result in additional operating
costs.For example, the Dodd-Frank Act requires the adoption of new capital regulations
within the next 18 months. The regulations are required to be, at a minimum, as
stringent as current capital and leverage requirements and, may limit the use of
subordinated debt or similar instruments such as trust preferred securities to meet
capital requirements. The new regulations or other regulatory actions could require
us to raise additional capital depending on our business activities, asset mix,
growth plans and results of operation. The Dodd-Frank Act also provides that certain
financial institutions will be required to conduct annual stress tests in accordance
with regulations to be adopted. The testing will require resources and increase our
compliance costs.In other provisions, the Dodd-Frank Act increases the regulation of derivatives and
hedging transactions. The regulations are expected to impose additional reporting
and monitoring requirements, require higher capital and margin requirements and
require that certain trades be executed through clearinghouses. We do not expect
these provisions to have a material impact on the Corporation.With respect to deposit insurance, the Dodd-Frank Act broadens the base for FDIC
insurance assessments which we expect will increase our FDIC insurance premiums and
permanently increases the deposit insurance limit to $250,000 per depositor. Under
the Dodd-Frank Act, the FDIC will insure the full balance of non-interest bearing
transaction accounts through January 1, 2013, replacing the TAGP at the end of
calendar 2010. The Dodd-Frank Act also repeals the
prohibition on banks payment of interest on demand deposit accounts of commercial
clients
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beginning one year from the date of enactment, and the market impact of this
change is not yet known.Another significant aspect of the Dodd-Frank Act that will affect us is the creation
of a new Bureau of Consumer Financial Protection with broad powers to supervise and
enforce consumer protection laws. The Bureau will have broad rule-making authority
for a wide range of consumer protection laws that apply to all banks, including the
authority to prohibit unfair, deceptive or abusive acts and practices.In addition, the Dodd-Frank Act calls for the dissolution of our primary regulator,
the Office of Thrift Supervision (OTS). The OTS is scheduled to cease operation as
of July 21, 2011, although that date could be delayed under certain circumstances.
At such time as the OTS goes out of existence, regulation of the Bank will be
assumed by the Office of the Controller of the Currency, with the Federal Reserve
becoming the Corporations primary regulator. The impact of this change on our
operations is not yet known.No assurance can be given as to the ultimate effect that the Dodd-Frank Act or any
of its provisions will have on our business, financial condition and results of
operations, the financial services industry or the economy.Our regional concentration makes us particularly at risk for changes in economic
conditions in our primary market.Our business is primary located in Wisconsin. Thus, we are particularly vulnerable
to adverse changes in economic conditions in Wisconsin and the Midwest more
generally.Our asset valuations include observable inputs and may include methodologies,
estimations and assumptions that are subject to differing interpretations and could
result in changes to asset valuations that may materially adversely affect our
results of operations or financial condition.We must use estimates, assumptions and judgments when financial assets and
liabilities are measured and reported at fair value. Assets and liabilities carried
at fair value inherently result in a higher degree of financial statement
volatility. Fair values and the information used to record valuation adjustments for
certain assets and liabilities are based on quoted market prices and/or other
observable inputs provided by independent third-party sources, when available. When
such third-party information is not available, we estimate fair value primarily by
using cash flows and other financial modeling techniques utilizing assumptions such
as credit quality, liquidity, interest rates and other relevant inputs. Changes in
underlying inputs, factors, assumptions or estimates in any of the areas underlying
our estimates could materially impact our future financial condition and results of
operations.During periods of market disruption, including periods of significantly rising or
high interest rates, rapidly widening credit spreads or illiquidity, it may be more
difficult to value certain of our assets if trading becomes less frequent and/or
market data becomes less observable. There may be certain asset classes that were in
active markets with significant observable data that become illiquid due to the
current financial environment. In such cases, certain asset valuations may require
more subjectivity and management judgment. As such, valuations may include inputs
and assumptions that are less observable or require greater estimation. Further,
rapidly changing and unprecedented credit and equity market conditions and interest
rates could materially impact the valuation of assets as reported within our
consolidated financial statements, and the period-to-period changes in value could
vary significantly.
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Lenders may be required to repurchase mortgage loans or indemnify mortgage loan
purchasers as a result of breaches of representations and warranties, borrower
fraud, or certain borrower defaults, which could harm our liquidity, results of
operations and financial condition.When we sell mortgage loans, whether as whole loans or pursuant to a securitization,
we are required to make customary representations and warranties to the purchaser
about the mortgage loans and the manner in which they were originated. Our whole
loan sale agreements require us to repurchase or substitute mortgage loans in the
event we breach any of these representations or warranties. In addition, we may be
required to repurchase mortgage loans as a result of borrower fraud. Likewise, we
are required to repurchase or substitute mortgage loans if we breach a
representation or warranty in connection with our securitizations. While we have
taken steps to enhance our underwriting policies and procedures, there can be no
assurance that these steps will be effective or reduce risk associated with loans
sold in the past. To date, the volume of repurchases has been insignificant. If the
level of repurchase and indemnity activity becomes material, our liquidity, results
of operations and financial condition will be adversely affected.Our liquidity is largely dependent upon our ability to receive dividends from our
subsidiary bank, which accounts for most of our revenue and could affect our ability
to pay dividends, and we may be unable to enhance liquidity from other sources.We are a separate and distinct legal entity from our subsidiaries, including the
Bank. We receive substantially all of our revenue from dividends from the Bank.
These dividends are the principal source of funds to pay dividends on our common
stock and interest and principal on our debt. Various federal and/or state laws and
regulations limit the amount of dividends that the Bank and certain of our non-bank
subsidiaries may pay us. Additionally, if our subsidiaries earnings are not
sufficient to make dividend payments to us while maintaining adequate capital
levels, our ability to make dividend payments to our preferred and common
shareholders will be negatively impacted. The Bank is currently precluded from
paying dividends to us.
 
 Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds.As of September 30, 2010, the Corporation does not have a stock repurchase plan in
place.
 
 Item 3
    
    Intentionally Left Blank
 
 Item 4
    
    Removed and Reserved.
 
 Item 5
    
    Other Information.Adoption of Shareholder Rights PlanOn November 5, 2010, the Corporation and American Stock Transfer & Trust Company, LLC entered
into a shareholder rights agreement (the Rights Agreement) designed to reduce the likelihood that
the Company will experience an ownership change (as defined under U.S. federal income tax laws)
by (i) discouraging any person or group of affiliated or associated persons from becoming a
beneficial owner of 5% or more of our Common Stock (an Acquiring Person) and (ii) discouraging
any Acquiring Person from acquiring additional shares of the Common Stock. In general, an
ownership change will occur if there is a cumulative change in the Companys ownership by 5%
shareholders (as defined under U.S. income tax laws) that exceeds 50 percentage points over a
rolling three-year period. There is no guarantee, however, that the Rights Plan will prevent the
Company from experiencing an ownership change. The purpose of the Rights Agreement is to protect
the Companys ability to use certain tax assets, such as net operating loss carryforwards and
built-in losses (the Tax Assets), to offset future income. A corporation that experiences an
ownership change will generally be subject to an annual limitation on certain of its pre-ownership
change Tax Assets in an amount generally equal to the equity value of the corporation immediately
before the ownership change subject to certain adjustments, multiplied by the long-term tax-exempt
rate. As a result, the Companys use of the Tax Assets in the future would be significantly
limited if it were to experience an ownership change.Pursuant to the Rights Agreement, the Corporations Board of Directors declared a dividend
distribution of one preferred stock purchase right for each share of common stock outstanding at
the close of business on November 22, 2010. The rights will be distributable to holders of record
of the Corporations common stock as of November 22, 2010, as well as to holders of shares of the
Corporations common stock issued after that date, but would only be exercisable in accordance with
the terms of the Rights Agreement. The adoption of the Rights Agreement has no impact on the
results of operations, consolidated balance sheet or net income (loss) per share. The rights may
be dilutive to earnings per share in the future dependent upon the results of operations and market
value of the Corporations common stock outstanding.The above summary does not purport to be complete and is qualified in its entirety by the full text
of the Rights Agreement, which was filed as Exhibit 4.3 to the Corporations Current Report on Form
8-K, filed on the date hereof. For more information on the Rights Agreement, see the Current
Report on Form 8-K and Registration Statement on Form 8-A, each filed on the date hereof and
incorporated herein by reference.
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Item 6
    
    Exhibits.The following exhibits are filed with this report:
 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 Interim Principal Accounting 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 Interim Principal Accounting 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.
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SIGNATURES
   Date:      November 5, 2010
    By:
    /s/ Chris BauerChris Bauer,President and Chief  Executive OfficerDate:      November 5, 2010
    By:
    /s/ Mark D. HaymanMark D. Hayman,Interim Principal  Accounting Officer 71