##### 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 SECURITIESEXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER 0-20006
 ANCHOR BANCORP WISCONSIN INC.
 (Exact name of registrant as specified in its charter)
 Wisconsin
    
    39-1726871(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)25 West Main StreetMadison,
Wisconsin
    

53703(Address of principal executive office)
    
    (Zip Code)
 (608)
252-8700Registrants telephone number, including area code
 Not Applicable(Former name, former address, and former fiscal year, if changed since last report)
 þ o
 þ o
 o þ




---



ANCHOR BANCORP WISCONSIN INC.
INDEX  FORM 10-Q
 Page #Part I  Financial InformationItem 1 Financial Statements (Unaudited)Consolidated Balance Sheets as of September 30, 2005 and March 31, 2005
    
    
    2Consolidated Statements of Income for the Three and Six Months Ended September 30, 2005 and 2004
    
    
    3Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2005 and 2004
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Results of Operations
    
    
    24Financial Condition
    
    
    30Asset Quality
    
    
    31Liquidity & Capital Resources
    
    
    34Guarantees
    
    
    36Asset/Liability Management
    
    
    37Consent Order
    
    
    37Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4 Controls and Procedures
    
    
    38Part II  Other InformationItem 1 Legal Proceedings
    
    
    38Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3 Defaults upon Senior Securities
    
    
    39Item 4 Submission of Matters to a Vote of Security Holders
    
    
    39Item 5 Other Information
    
    
    40Item 6 Exhibits
    
    
    40Signatures
    
    
    41Certification of CEOCertification of CFOCertification of CEOCertification of CFO
  1




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##### Table of Contents



Consolidated Balance Sheets
 (Unaudited)September 30,
    
    
    March 31,2005
    
    
    2005(In Thousands, Except Share Data)AssetsCash
    
    $
    79,082
    
    
    $
    61,041Interest-bearing deposits
    
    
    122,469
    
    
    
    105,395Cash and cash equivalents
    
    
    201,551
    
    
    
    166,436Investment securities available for sale
    
    
    45,904
    
    
    
    52,055Mortgage-related securities available for sale
    
    
    270,536
    
    
    
    202,250Mortgage-related securities held to maturity (fair value of $1,267
and $1,537, respectively)
    
    
    1,242
    
    
    
    1,502Loans, less allowance for loan losses of $22,582 at September 30, 2005
and $26,444 at March 31, 2005:Held for sale
    
    
    6,957
    
    
    
    4,361Held for investment
    
    
    3,466,265
    
    
    
    3,414,608Foreclosed properties and repossessed assets, net
    
    
    2,173
    
    
    
    1,458Real estate held for development and sale
    
    
    50,447
    
    
    
    48,949Office properties and equipment
    
    
    29,672
    
    
    
    30,495Federal Home Loan Bank stockat cost
    
    
    44,923
    
    
    
    44,923Accrued interest on investments and loans and other assets
    
    
    64,844
    
    
    
    63,463Goodwill
    
    
    19,956
    
    
    
    19,956Total assets
    
    $
    4,204,470
    
    
    $
    4,050,456Liabilities and Stockholders EquityDeposits and advance payments by borrowers for taxes and insurance
    
    $
    3,032,976
    
    
    $
    2,873,533Federal Home Loan Bank and other borrowings
    
    
    794,044
    
    
    
    793,609Other liabilities
    
    
    54,950
    
    
    
    62,834Total liabilities
    
    
    3,881,970
    
    
    
    3,729,976Minority interest in real estate partnerships
    
    
    7,151
    
    
    
    9,802Commitments and contingent liabilities (Note 8)Preferred stock, $.10 par value, 5,000,000 shares
authorized, none outstanding
    
    
    
    
    
    
    Common stock, $.10 par value, 100,000,000 shares authorized,
25,363,339 shares issued, 22,080,494 and 22,319,513 shares outstanding,
respectively
    
    
    2,536
    
    
    
    2,536Additional paid-in capital
    
    
    70,471
    
    
    
    68,627Retained earnings
    
    
    325,736
    
    
    
    315,077Accumulated other comprehensive income (loss)
    
    
    (402
    )
    
    
    (708
    )Treasury stock (3,282,845 shares and 3,043,826 shares, respectively), at cost
    
    
    (75,390
    )
    
    
    (68,441
    )Unearned deferred compensation
    
    
    (7,602
    )
    
    
    (6,413
    )Total stockholders equity
    
    
    315,349
    
    
    
    310,678Total liabilities and stockholders equity
    
    $
    4,204,470
    
    
    $
    4,050,456
  2




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Consolidated Statements of Income
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(As Restated)
    
    
    
    
    
    
    (As Restated)(In Thousands, Except Per Share Data)Interest income:Loans
    
    $
    53,525
    
    
    $
    45,153
    
    
    $
    104,750
    
    
    $
    88,242Mortgage-related securities
    
    
    3,133
    
    
    
    2,075
    
    
    
    5,676
    
    
    
    4,263Investment securities
    
    
    886
    
    
    
    1,146
    
    
    
    1,903
    
    
    
    2,679Interest-bearing deposits
    
    
    1,118
    
    
    
    415
    
    
    
    1,899
    
    
    
    642Total interest income
    
    
    58,662
    
    
    
    48,789
    
    
    
    114,228
    
    
    
    95,826Interest expense:Deposits
    
    
    18,116
    
    
    
    12,028
    
    
    
    34,588
    
    
    
    23,845Notes payable and other borrowings
    
    
    7,118
    
    
    
    7,146
    
    
    
    14,067
    
    
    
    14,160Total interest expense
    
    
    25,234
    
    
    
    19,174
    
    
    
    48,655
    
    
    
    38,005Net interest income
    
    
    33,428
    
    
    
    29,615
    
    
    
    65,573
    
    
    
    57,821Provision for loan losses
    
    
    1,485
    
    
    
    300
    
    
    
    1,750
    
    
    
    750Net interest income after provision for loan losses
    
    
    31,943
    
    
    
    29,315
    
    
    
    63,823
    
    
    
    57,071Non-interest income:Real estate investment partnership revenue
    
    
    11,559
    
    
    
    15,143
    
    
    
    23,072
    
    
    
    38,879Loan servicing income
    
    
    1,090
    
    
    
    1,080
    
    
    
    2,401
    
    
    
    2,014Credit enhancement derivative income (includes interest
income of $68 and $57, respectively, for three-month
period
and $130 and $113, respectively, for the six-month period)
    
    
    406
    
    
    
    380
    
    
    
    802
    
    
    
    758Service charges on deposits
    
    
    2,357
    
    
    
    2,205
    
    
    
    4,729
    
    
    
    4,400Insurance commissions
    
    
    621
    
    
    
    611
    
    
    
    1,308
    
    
    
    1,245Net gain (loss) on sale of loans
    
    
    1,193
    
    
    
    1,043
    
    
    
    1,316
    
    
    
    (121
    )Net gain on sale of investments and mortgage-related
securities
    
    
    267
    
    
    
    529
    
    
    
    274
    
    
    
    1,397Other revenue from real estate operations
    
    
    698
    
    
    
    881
    
    
    
    1,913
    
    
    
    2,019Other
    
    
    1,651
    
    
    
    783
    
    
    
    2,806
    
    
    
    1,697Total non-interest income
    
    
    19,842
    
    
    
    22,655
    
    
    
    38,621
    
    
    
    52,288
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Consolidated Statements of Income
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(As Restated)
    
    
    
    
    
    
    (As Restated)(In Thousands, Except Per Share Data)Non-interest expense:Compensation
    
    
    11,298
    
    
    
    10,869
    
    
    
    22,170
    
    
    
    20,737Real estate investment partnership cost of sales
    
    
    10,780
    
    
    
    11,067
    
    
    
    19,191
    
    
    
    30,778Occupancy
    
    
    1,748
    
    
    
    1,601
    
    
    
    3,324
    
    
    
    3,305Furniture and equipment
    
    
    1,619
    
    
    
    1,603
    
    
    
    3,186
    
    
    
    2,986Data processing
    
    
    1,369
    
    
    
    1,168
    
    
    
    2,650
    
    
    
    2,444Marketing
    
    
    1,091
    
    
    
    1,009
    
    
    
    2,186
    
    
    
    2,016Other expenses from real estate partnership operations
    
    
    2,205
    
    
    
    2,569
    
    
    
    4,254
    
    
    
    5,391Other
    
    
    3,206
    
    
    
    3,114
    
    
    
    6,395
    
    
    
    5,770Total non-interest expense
    
    
    33,316
    
    
    
    33,000
    
    
    
    63,356
    
    
    
    73,427Minority interest in income of real estate
partnership operations
    
    
    102
    
    
    
    1,359
    
    
    
    1,391
    
    
    
    2,942Income before income taxes
    
    
    18,367
    
    
    
    17,611
    
    
    
    37,697
    
    
    
    32,990Income taxes
    
    
    7,589
    
    
    
    7,006
    
    
    
    15,359
    
    
    
    12,166Net income
    
    $
    10,778
    
    
    $
    10,605
    
    
    $
    22,338
    
    
    $
    20,824Earnings per share:Basic
    
    $
    0.49
    
    
    $
    0.47
    
    
    $
    1.02
    
    
    $
    0.92Diluted
    
    
    0.48
    
    
    
    0.46
    
    
    
    1.00
    
    
    
    0.90Dividends declared per share
    
    
    0.16
    
    
    
    0.13
    
    
    
    0.30
    
    
    
    0.24
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Consolidated Statements of Cash Flows
 Six Months Ended September 30,2005
    
    
    2004(As Restated)(In Thousands)Operating ActivitiesNet income
    
    $
    22,338
    
    
    $
    20,824Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    1,750
    
    
    
    750Provision for depreciation and amortization
    
    
    2,232
    
    
    
    2,203Cash paid due to origination of loans held for sale
    
    
    (460,761
    )
    
    
    (394,751
    )Cash received due to sale of loans held for sale
    
    
    458,165
    
    
    
    402,272Net (gain) loss on sales of loans
    
    
    (1,316
    )
    
    
    121Gain on sale of investments
    
    
    (274
    )
    
    
    (1,397
    )Tax benefit from stock related compensation
    
    
    1,844
    
    
    
    611Increase in accrued interest receivable
    
    
    (1,279
    )
    
    
    (668
    )(Increase) decrease in prepaid exp and other assets
    
    
    (103
    )
    
    
    5,109Increase (decrease) in accrued interest payable
    
    
    1,216
    
    
    
    (125
    )(Decrease) increase in accounts payable
    
    
    (7,785
    )
    
    
    135Other
    
    
    (4,208
    )
    
    
    5,451Net cash provided by operating activities
    
    
    11,819
    
    
    
    40,535Investing ActivitiesProceeds from sales of investment securities available for sale
    
    
    
    
    
    
    2,352Proceeds from maturities of investment securities
    
    
    63,080
    
    
    
    89,460Purchase of investment securities available for sale
    
    
    (56,893
    )
    
    
    (120,556
    )Proceeds from sale of mortgage-related securities available for sale
    
    
    7,964
    
    
    
    12,869Purchase of mortgage-related securities available for sale
    
    
    (15,000
    )
    
    
    (35,474
    )Principal collected on mortgage-related securities
    
    
    34,025
    
    
    
    36,038Decrease in FHLB stock
    
    
    
    
    
    
    22,397Net decrease in loans held for investment
    
    
    (145,786
    )
    
    
    (165,014
    )Purchases of office properties and equipment
    
    
    (1,162
    )
    
    
    (1,613
    )Sales of office properties and equipment
    
    
    
    
    
    
    210Sales of real estate
    
    
    133
    
    
    
    4,077Investment in real estate held for development and sale
    
    
    (1,811
    )
    
    
    8,416Net cash used in investing activities
    
    
    (115,450
    )
    
    
    (146,838
    )
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Consolidated Statements of Cash Flows (Contd)
 Six Months Ended September 30,2005
    
    
    2004(As Restated)(In Thousands)Financing ActivitiesIncrease in deposit accounts
    
    $
    146,176
    
    
    $
    59,648Increase in advance payments by borrowers
for taxes and insurance
    
    
    11,952
    
    
    
    12,423Proceeds from notes payable to Federal Home Loan Bank
    
    
    105,750
    
    
    
    99,900Repayment of notes payable to Federal Home Loan Bank
    
    
    (115,250
    )
    
    
    (77,200
    )Increase (decrease) in other loans payable
    
    
    9,935
    
    
    
    (8,120
    )Treasury stock purchased
    
    
    (13,653
    )
    
    
    (1,219
    )Exercise of stock options
    
    
    (18
    )
    
    
    539Cash received from employee stock purchase plan
    
    
    307
    
    
    
    406Payments of cash dividends to stockholders
    
    
    (6,453
    )
    
    
    (5,409
    )Net cash provided by financing activities
    
    
    138,746
    
    
    
    80,968Net increase (decrease) in cash and cash equivalents
    
    
    35,115
    
    
    
    (25,335
    )Cash and cash equivalents at beginning of period
    
    
    166,436
    
    
    
    198,993Cash and cash equivalents at end of period
    
    $
    201,551
    
    
    $
    173,658Supplementary cash flow information:Cash paid or credited to accounts:Interest on deposits and borrowings
    
    $
    47,439
    
    
    $
    37,880Income taxes
    
    
    18,146
    
    
    
    9,257Non-cash transactions:Transfer of mortgage loans held to maturity to held for sale
    
    
    94,129
    
    
    
    Securitization of mortgage loans held for sale to mortgage-backed
securities
    
    
    94,165
    
    
    
    
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ANCHOR BANCORP WISCONSIN INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Principles of Consolidation
  Note 2  Basis of Presentation
      7




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Six Months EndedSeptember 30,2005
    
    2004(As Restated)(In Thousands, Except Per Share Data)Net IncomeAs reported
    
    $
    22,338
    
    
    $
    20,824Pro forma
    
    
    22,206
    
    
    
    20,597Earnings per share-BasicAs reported
    
    $
    1.02
    
    
    $
    0.92Pro forma
    
    
    1.02
    
    
    
    0.91Earnings per share-DilutedAs reported
    
    $
    1.00
    
    
    $
    0.90Pro forma
    
    
    1.00
    
    
    
    0.89
   8




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9




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##### Table of Contents



Note 3  Restatement of Prior Periods Presented
      10




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##### Table of Contents



Consolidated Statements of IncomeAs PreviouslyReported
    
    Adjustments
    
    As Restated(In Thousands, Except per Share Data)Three months ended September 30, 2004Loan servicing income
    
    $
    1,039
    
    
    $
    41
    
    
    $
    1,080Credit enhancement derivative income
    
    
    
    
    
    
    380
    
    
    
    380Net gain (loss) on sale of loans
    
    
    1,592
    
    
    
    (549
    )
    
    
    1,043Total non-interest income
    
    
    22,783
    
    
    
    (128
    )
    
    
    22,655Income before taxes
    
    
    17,739
    
    
    
    (128
    )
    
    
    17,611Income taxes
    
    
    7,057
    
    
    
    (51
    )
    
    
    7,006Net income
    
    
    10,682
    
    
    
    (77
    )
    
    
    10,605Earnings per share:Basic
    
    
    0.47
    
    
    
    
    
    
    
    0.47Diluted
    
    
    0.46
    
    
    
    
    
    
    
    0.46
 Consolidated Statements of IncomeAs PreviouslyReported
    
    Adjustments
    
    As Restated(In Thousands, Except per Share Data)Six months ended September 30, 2004Loan servicing income
    
    $
    1,518
    
    
    $
    496
    
    
    $
    2,014Credit enhancement derivative income
    
    
    
    
    
    
    758
    
    
    
    758Net gain (loss) on sale of loans
    
    
    1,891
    
    
    
    (2,012
    )
    
    
    (121
    )Total non-interest income
    
    
    53,046
    
    
    
    (758
    )
    
    
    52,288Income before taxes
    
    
    33,748
    
    
    
    (758
    )
    
    
    32,990Income taxes
    
    
    12,469
    
    
    
    (303
    )
    
    
    12,166Net income
    
    
    21,279
    
    
    
    (455
    )
    
    
    20,824Earnings per share:Basic
    
    
    0.94
    
    
    
    (0.02
    )
    
    
    0.92Diluted
    
    
    0.92
    
    
    
    (0.02
    )
    
    
    0.90
 Note 4  Goodwill and Other Intangible Assets
  September 30,
    
    
    March 31,2005
    
    
    2005(In Thousands)Mortgage servicing rights at beginning of period
    
    $
    6,950
    
    
    $
    6,773Additions
    
    
    1,403
    
    
    
    2,949Amortization
    
    
    (1,245
    )
    
    
    (2,772
    )Mortgage servicing rights before valuation allowance at end of period
    
    
    7,108
    
    
    
    6,950Valuation allowance
    
    
    (600
    )
    
    
    (515
    )Net mortgage servicing rights at end of period
    
    $
    6,508
    
    
    $
    6,435
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Mortgage
    
    CoreServicing
    
    DepositRights
    
    Premium
    
    Total(In Thousands)Quarter ended September 30, 2005 (actual)
    
    $
    765
    
    
    $
    114
    
    
    $
    879Estimate for the year ended March 31,2006
    
    
    2,490
    
    
    
    
    
    
    
    2,4902007
    
    
    2,490
    
    
    
    
    
    
    
    2,4902008
    
    
    2,128
    
    
    
    
    
    
    
    2,1282009
    
    
    
    
    
    
    
    
    
    
    $
    7,108
    
    
    $
    
    
    
    $
    7,108
 Note 5  Stockholders Equity
   12




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Note 6  Earnings Per Share
  13




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Three Months Ended September 30,2005
    
    
    2004(As Restated)Numerator:Net income
    
    $
    10,777,921
    
    
    $
    10,604,899Numerator for basic and diluted earnings
per shareincome available to common
stockholders
    
    $
    10,777,921
    
    
    $
    10,604,899Denominator:Denominator for basic earnings per
shareweighted-average shares
    
    
    21,841,708
    
    
    
    22,671,470Effect of dilutive securities:Employee stock options
    
    
    393,456
    
    
    
    447,303Management Recognition Plans
    
    
    
    
    
    
    5,071Denominator for diluted earnings per
shareadjusted weighted-average
shares and assumed conversions
    
    
    22,235,164
    
    
    
    23,123,844Basic earnings per share
    
    $
    0.49
    
    
    $
    0.47Diluted earnings per share
    
    $
    0.48
    
    
    $
    0.46
 Six Months Ended September 30,2005
    
    
    2004(As Restated)Numerator:Net income
    
    $
    22,338,079
    
    
    $
    20,823,857Numerator for basic and diluted earnings
per shareincome available to common
stockholders
    
    $
    22,338,079
    
    
    $
    20,823,857Denominator:Denominator for basic earnings per
shareweighted-average shares
    
    
    21,815,021
    
    
    
    22,634,407Effect of dilutive securities:Employee stock options
    
    
    410,665
    
    
    
    461,082Management Recognition Plans
    
    
    2,539
    
    
    
    5,072Denominator for diluted earnings per
shareadjusted weighted-average
shares and assumed conversions
    
    
    22,228,225
    
    
    
    23,100,561Basic earnings per share
    
    $
    1.02
    
    
    $
    0.92Diluted earnings per share
    
    $
    1.00
    
    
    $
    0.90
 14




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Note 7  Segment Information
  Community Banking:
 Real Estate Investments:
  15




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##### Table of Contents



Three Months Ended September 30, 2005(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    93
    
    
    $
    58,962
    
    
    $
    (393
    )
    
    $
    58,662Interest expense
    
    
    391
    
    
    
    25,236
    
    
    
    (393
    )
    
    
    25,234Net interest income (loss)
    
    
    (298
    )
    
    
    33,726
    
    
    
    
    
    
    
    33,428Provision for loan losses
    
    
    
    
    
    
    1,485
    
    
    
    
    
    
    
    1,485Net interest income (loss) after provision for loan losses
    
    
    (298
    )
    
    
    32,241
    
    
    
    
    
    
    
    31,943Real estate investment partnership revenue
    
    
    11,559
    
    
    
    
    
    
    
    
    
    
    
    11,559Other revenue from real estate operations
    
    
    698
    
    
    
    
    
    
    
    
    
    
    
    698Other income
    
    
    
    
    
    
    7,615
    
    
    
    (30
    )
    
    
    7,585Real estate investment partnership cost of sales
    
    
    (10,780
    )
    
    
    
    
    
    
    
    
    
    
    (10,780
    )Other expense from real estate partnership operations
    
    
    (2,235
    )
    
    
    
    
    
    
    30
    
    
    
    (2,205
    )Minority interest in income of real estate partnerships
    
    
    (102
    )
    
    
    
    
    
    
    
    
    
    
    (102
    )Other expense
    
    
    
    
    
    
    (20,331
    )
    
    
    
    
    
    
    (20,331
    )Income (loss) before income taxes
    
    
    (1,158
    )
    
    
    19,525
    
    
    
    
    
    
    
    18,367Income tax expense (benefit)
    
    
    (259
    )
    
    
    7,848
    
    
    
    
    
    
    
    7,589Net income (loss)
    
    $
    (899
    )
    
    $
    11,677
    
    
    $
    
    
    
    $
    10,778Total Assets
    
    $
    73,678
    
    
    $
    4,130,792
    
    
    $
    
    
    
    $
    4,204,470
 Three Months Ended September 30, 2004 (As Restated)(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    57
    
    
    $
    49,181
    
    
    $
    (449
    )
    
    $
    48,789Interest expense
    
    
    501
    
    
    
    19,122
    
    
    
    (449
    )
    
    
    19,174Net interest income(loss)
    
    
    (444
    )
    
    
    30,059
    
    
    
    
    
    
    
    29,615Provision for loan losses
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    300Net interest income (loss) after provision for loan
losses
    
    
    (444
    )
    
    
    29,759
    
    
    
    
    
    
    
    29,315Real estate investment partnership revenue
    
    
    15,143
    
    
    
    
    
    
    
    
    
    
    
    15,143Other revenue from real estate operations
    
    
    881
    
    
    
    
    
    
    
    
    
    
    
    881Other income
    
    
    
    
    
    
    6,691
    
    
    
    (60
    )
    
    
    6,631Real estate investment partnership cost of sales
    
    
    (11,067
    )
    
    
    
    
    
    
    
    
    
    
    (11,067
    )Other expense from real estate partnership operations
    
    
    (2,569
    )
    
    
    
    
    
    
    
    
    
    
    (2,569
    )Minority interest in income of real estate partnerships
    
    
    (1,359
    )
    
    
    
    
    
    
    
    
    
    
    (1,359
    )Other expense
    
    
    
    
    
    
    (19,424
    )
    
    
    60
    
    
    
    (19,364
    )Income before income taxes
    
    
    585
    
    
    
    17,026
    
    
    
    
    
    
    
    17,611Income tax expense
    
    
    205
    
    
    
    6,801
    
    
    
    
    
    
    
    7,006Net income
    
    $
    380
    
    
    $
    10,225
    
    
    $
    
    
    
    $
    10,605Total Assets
    
    $
    74,447
    
    
    $
    3,835,514
    
    
    $
    
    
    
    $
    3,909,961
 16




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##### Table of Contents



Six Months Ended September 30,2005(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    163
    
    
    $
    114,829
    
    
    $
    (764
    )
    
    $
    114,228Interest expense
    
    
    761
    
    
    
    48,658
    
    
    
    (764
    )
    
    
    48,655Net interest income (loss)
    
    
    (598
    )
    
    
    66,171
    
    
    
    
    
    
    
    65,573Provision for loan losses
    
    
    
    
    
    
    1,750
    
    
    
    
    
    
    
    1,750Net interest income (loss) after provision for loan
losses
    
    
    (598
    )
    
    
    64,421
    
    
    
    
    
    
    
    63,823Real estate investment partnership revenue
    
    
    23,072
    
    
    
    
    
    
    
    
    
    
    
    23,072Other revenue from real estate operations
    
    
    1,913
    
    
    
    
    
    
    
    
    
    
    
    1,913Other income
    
    
    
    
    
    
    13,696
    
    
    
    (60
    )
    
    
    13,636Real estate investment partnership cost of sales
    
    
    (19,191
    )
    
    
    
    
    
    
    
    
    
    
    (19,191
    )Other expense from real estate partnership operations
    
    
    (4,314
    )
    
    
    
    
    
    
    60
    
    
    
    (4,254
    )Minority interest in income of real estate partnerships
    
    
    (1,391
    )
    
    
    
    
    
    
    
    
    
    
    (1,391
    )Other expense
    
    
    
    
    
    
    (39,911
    )
    
    
    
    
    
    
    (39,911
    )Income (loss) before income taxes
    
    
    (509
    )
    
    
    38,206
    
    
    
    
    
    
    
    37,697Income tax expense
    
    
    32
    
    
    
    15,327
    
    
    
    
    
    
    
    15,359Net income (loss)
    
    $
    (541
    )
    
    $
    22,879
    
    
    $
    
    
    
    $
    22,338Total Assets
    
    $
    73,678
    
    
    $
    4,130,792
    
    
    $
    
    
    
    $
    4,204,470
 Six Months Ended September 30, 2004 (As Restated)(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    187
    
    
    $
    96,142
    
    
    $
    (504
    )
    
    $
    95,825Interest expense
    
    
    639
    
    
    
    37,869
    
    
    
    (504
    )
    
    
    38,004Net interest income(loss)
    
    
    (452
    )
    
    
    58,273
    
    
    
    
    
    
    
    57,821Provision for loan losses
    
    
    
    
    
    
    750
    
    
    
    
    
    
    
    750Net interest income (loss) after provision for loan
losses
    
    
    (452
    )
    
    
    57,523
    
    
    
    
    
    
    
    57,071Real estate investment partnership revenue
    
    
    38,879
    
    
    
    
    
    
    
    
    
    
    
    38,879Other revenue from real estate operations
    
    
    2,019
    
    
    
    
    
    
    
    
    
    
    
    2,019Other income
    
    
    
    
    
    
    11,449
    
    
    
    (60
    )
    
    
    11,389Real estate investment partnership cost of sales
    
    
    (30,778
    )
    
    
    
    
    
    
    
    
    
    
    (30,778
    )Other expense from real estate partnership operations
    
    
    (5,451
    )
    
    
    
    
    
    
    60
    
    
    
    (5,391
    )Minority interest in income of real estate partnerships
    
    
    (2,942
    )
    
    
    
    
    
    
    
    
    
    
    (2,942
    )Other expense
    
    
    
    
    
    
    (37,258
    )
    
    
    
    
    
    
    (37,258
    )Income before income taxes
    
    
    1,275
    
    
    
    31,714
    
    
    
    
    
    
    
    32,989Income tax expense
    
    
    534
    
    
    
    11,631
    
    
    
    
    
    
    
    12,165Net income
    
    $
    741
    
    
    $
    20,083
    
    
    $
    
    
    
    $
    20,824Total Assets
    
    $
    74,447
    
    
    $
    3,835,514
    
    
    $
    
    
    
    $
    3,909,961
 17




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##### Table of Contents



Note 8  Commitments and Contingent Liabilities
   September 30,
    
    March 31,2005
    
    2005Commitments to extend credit:
    
    $
    96,052
    
    
    $
    132,607Unused lines of credit:Home equity
    
    
    94,903
    
    
    
    93,270Credit cards
    
    
    39,747
    
    
    
    36,621Commercial
    
    
    128,323
    
    
    
    129,861Letters of credit
    
    
    82,070
    
    
    
    51,485Loans sold with recourse
    
    
    
    
    
    
    257Credit enhancement under the FederalHome Loan Bank of Chicago MortgagePartnership Finance Program
    
    
    16,538
    
    
    
    14,258Real estate investment segment
borrowings
    
    
    17,719
    
    
    
    12,653
    18




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##### Table of Contents



Note 9  Regulatory Action
   Note 10  Subsequent Events
  19




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC.
 
 ITEM
2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND 
RESULTS OF OPERATIONS
   Executive Overview
  
    
    Diluted earnings per share increased to $0.48 for the quarter ended September 30, 2005
compared to $0.46 per share for the quarter ended September 30, 2004;
    
    The net interest margin increased to 3.40% for the quarter ended September 30, 2005
compared to 3.25% for the quarter ended September 30, 2004; and
    
    Loans receivable have increased $234.3 million or 7.24% since September 30, 2004 and
have increased $54.3 million or 1.59% since March 31, 2005.
    
    Deposits grew $351.2 million or 13.1% since September 30, 2004 and $159.4 million or 5.55% since
March 31, 2005.
    
    Book value per share was $14.28 at September 30, 2005 compared to $13.55 at September
30, 2004.
  20




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##### Table of Contents



Three Months Ended12/31/2004(Dollars in thousands - except per share amounts)
    
    9/30/2005
    
    6/30/2005
    
    3/31/2005
    
    (As Restated)Operations Data:Net interest income
    
    $
    33,428
    
    
    $
    32,145
    
    
    $
    31,231
    
    
    $
    31,651Provision for loan losses
    
    
    1,485
    
    
    
    265
    
    
    
    165
    
    
    
    664Net gain on sale of loans
    
    
    1,193
    
    
    
    123
    
    
    
    763
    
    
    
    1,001Real estate investment partnership revenue
    
    
    11,559
    
    
    
    11,513
    
    
    
    51,112
    
    
    
    16,104Other non-interest income
    
    
    7,090
    
    
    
    7,143
    
    
    
    7,838
    
    
    
    5,758Real estate investment partnership cost of sales
    
    
    10,780
    
    
    
    8,411
    
    
    
    30,966
    
    
    
    13,131Other non-interest expense
    
    
    22,536
    
    
    
    21,630
    
    
    
    24,682
    
    
    
    20,368Minority interest in income of
real estate partnership operations
    
    
    102
    
    
    
    1,288
    
    
    
    8,582
    
    
    
    2,023Income before income taxes
    
    
    18,367
    
    
    
    19,330
    
    
    
    26,549
    
    
    
    18,328Income taxes
    
    
    7,589
    
    
    
    7,770
    
    
    
    9,748
    
    
    
    7,618Net income
    
    
    10,778
    
    
    
    11,560
    
    
    
    16,801
    
    
    
    10,710Selected Financial Ratios(1):Yield on earning assets
    
    
    5.97
    %
    
    
    5.73
    %
    
    
    5.56
    %
    
    
    5.51
    %Cost of funds
    
    
    2.68
    
    
    
    2.53
    
    
    
    2.37
    
    
    
    2.22Interest rate spread
    
    
    3.29
    
    
    
    3.20
    
    
    
    3.19
    
    
    
    3.29Net interest margin
    
    
    3.40
    
    
    
    3.32
    
    
    
    3.29
    
    
    
    3.40Return on average assets
    
    
    1.04
    
    
    
    1.14
    
    
    
    1.68
    
    
    
    1.09Return on average equity
    
    
    13.62
    
    
    
    14.70
    
    
    
    21.44
    
    
    
    13.64Average equity to average assets
    
    
    7.66
    
    
    
    7.75
    
    
    
    7.82
    
    
    
    8.01Non-interest expense to average assets
    
    
    3.22
    
    
    
    2.96
    
    
    
    5.56
    
    
    
    3.42Per Share:Basic earnings per share
    
    $
    0.49
    
    
    $
    0.53
    
    
    $
    0.75
    
    
    $
    0.47Diluted earnings per share
    
    
    0.48
    
    
    
    0.52
    
    
    
    0.74
    
    
    
    0.46Dividends per share
    
    
    0.16
    
    
    
    0.14
    
    
    
    0.13
    
    
    
    0.13Book value per share
    
    
    14.28
    
    
    
    14.22
    
    
    
    13.92
    
    
    
    13.77Financial Condition:Total assets
    
    $
    4,204,470
    
    
    $
    4,136,822
    
    
    $
    4,050,456
    
    
    $
    3,929,881Loans receivable, netHeld for sale
    
    
    6,957
    
    
    
    6,313
    
    
    
    4,361
    
    
    
    11,816Held for investment
    
    
    3,466,265
    
    
    
    3,383,250
    
    
    
    3,414,608
    
    
    
    3,292,339Deposits
    
    
    3,032,976
    
    
    
    2,960,468
    
    
    
    2,873,533
    
    
    
    2,705,495Borrowings
    
    
    794,044
    
    
    
    798,927
    
    
    
    793,609
    
    
    
    826,928Stockholders equity
    
    
    315,349
    
    
    
    315,416
    
    
    
    310,678
    
    
    
    316,243Allowance for loan losses
    
    
    22,582
    
    
    
    26,532
    
    
    
    26,444
    
    
    
    27,526Non-performing assets
    
    
    16,201
    
    
    
    17,030
    
    
    
    15,908
    
    
    
    21,029
 
 (1)
 Annualized when appropriate. 21




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##### Table of Contents



Three Months Ended9/30/2004
    
    6/30/2004
    
    3/31/2004
    
    12/31/2003(Dollars in thousands - except per share amounts)
    
    (As Restated)
    
    (As Restated)
    
    (As Restated)
    
    (As Restated)Operations Data:Net interest income
    
    $
    29,615
    
    
    $
    28,206
    
    
    $
    26,823
    
    
    $
    27,490Provision for loan losses
    
    
    300
    
    
    
    450
    
    
    
    600
    
    
    
    450Net gain (loss) on sale of loans
    
    
    1,043
    
    
    
    (1,164
    )
    
    
    1,569
    
    
    
    1,052Real estate investment partnership revenue
    
    
    15,143
    
    
    
    23,736
    
    
    
    35,852
    
    
    
    11,856Other non-interest income
    
    
    6,469
    
    
    
    7,061
    
    
    
    10,922
    
    
    
    4,281Real estate investment partnership cost of sales
    
    
    11,067
    
    
    
    19,711
    
    
    
    26,411
    
    
    
    7,787Other non-interest expense
    
    
    21,933
    
    
    
    20,717
    
    
    
    26,102
    
    
    
    18,954Minority interest in income of
real estate partnership operations
    
    
    1,359
    
    
    
    1,582
    
    
    
    2,585
    
    
    
    1,478Income before income taxes
    
    
    17,611
    
    
    
    15,379
    
    
    
    19,468
    
    
    
    16,010Income taxes
    
    
    7,006
    
    
    
    5,160
    
    
    
    7,446
    
    
    
    6,112Net income
    
    
    10,605
    
    
    
    10,219
    
    
    
    12,022
    
    
    
    9,898Selected Financial Ratios(1):Yield on earning assets
    
    
    5.35
    %
    
    
    5.22
    %
    
    
    5.21
    %
    
    
    5.49
    %Cost of funds
    
    
    2.22
    
    
    
    2.17
    
    
    
    2.26
    
    
    
    2.39Interest rate spread
    
    
    3.13
    
    
    
    3.05
    
    
    
    2.95
    
    
    
    3.10Net interest margin
    
    
    3.25
    
    
    
    3.13
    
    
    
    3.03
    
    
    
    3.19Return on average assets
    
    
    1.11
    
    
    
    1.07
    
    
    
    1.28
    
    
    
    1.08Return on average equity
    
    
    13.78
    
    
    
    13.60
    
    
    
    16.10
    
    
    
    13.45Average equity to average assets
    
    
    8.09
    
    
    
    7.86
    
    
    
    7.96
    
    
    
    8.07Non-interest expense to average assets
    
    
    3.47
    
    
    
    4.23
    
    
    
    5.60
    
    
    
    2.93Per Share:Basic earnings per share
    
    $
    0.47
    
    
    $
    0.45
    
    
    $
    0.53
    
    
    $
    0.44Diluted earnings per share
    
    
    0.46
    
    
    
    0.44
    
    
    
    0.52
    
    
    
    0.43Dividends per share
    
    
    0.13
    
    
    
    0.11
    
    
    
    0.11
    
    
    
    0.11Book value per share
    
    
    13.55
    
    
    
    13.20
    
    
    
    12.97
    
    
    
    13.08Financial Condition:Total assets
    
    $
    3,909,961
    
    
    $
    3,835,434
    
    
    $
    3,806,545
    
    
    $
    3,661,819Loans receivable, netHeld for sale
    
    
    7,057
    
    
    
    11,032
    
    
    
    14,578
    
    
    
    14,448Held for investment
    
    
    3,231,826
    
    
    
    3,162,136
    
    
    
    3,066,812
    
    
    
    3,019,819Deposits
    
    
    2,681,757
    
    
    
    2,663,376
    
    
    
    2,609,686
    
    
    
    2,553,267Borrowings
    
    
    846,139
    
    
    
    807,614
    
    
    
    831,559
    
    
    
    750,729Stockholders equity
    
    
    312,063
    
    
    
    303,496
    
    
    
    297,707
    
    
    
    299,589Allowance for loan losses
    
    
    28,213
    
    
    
    28,535
    
    
    
    28,607
    
    
    
    28,899Non-performing assets
    
    
    21,187
    
    
    
    19,009
    
    
    
    17,343
    
    
    
    14,617
 
 (1)
    
    Annualized when appropriate. 22




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##### Table of Contents



Significant Accounting Policies
  

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

    
    Goodwill is reviewed at least annually for impairment, which
requires judgment. Goodwill has been recorded as a result of an
acquisition in which purchase price exceeded fair value of net
assets acquired. The price paid for the acquisition is analyzed
and compared to a number of current indices. If goodwill is
determined to be impaired, it would be expensed in the period in
which it became impaired.
  23




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##### Table of Contents



Restatement
      
 RESULTS OF OPERATIONS
 General.
 24




---



##### Table of Contents



Net Interest Income.
   Provision for Loan Losses.
 Average Interest-Earning Assets, Average Interest-Bearing Liabilities and Interest Rate
Spread.
 25




---



##### Table of Contents



26




---



##### Table of Contents



Three Months Ended September 30,2005
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost(1)
    
    
    Balance
    
    
    Interest
    
    
    Cost(1)(As Restated)(Dollars In Thousands)INTEREST-EARNING ASSETSMortgage loans
    
    $
    2,621,049
    
    
    $
    40,060
    
    
    
    6.11
    %
    
    $
    2,462,223
    
    
    $
    34,437
    
    
    
    5.59
    %Consumer loans
    
    
    613,061
    
    
    
    9,974
    
    
    
    6.51
    
    
    
    558,793
    
    
    
    8,336
    
    
    
    5.97Commercial business loans
    
    
    192,983
    
    
    
    3,491
    
    
    
    7.24
    
    
    
    168,266
    
    
    
    2,380
    
    
    
    5.66Total loans receivable (2) (3)
    
    
    3,427,093
    
    
    
    53,525
    
    
    
    6.25
    
    
    
    3,189,282
    
    
    
    45,153
    
    
    
    5.66Mortgage-related securities (4)
    
    
    285,066
    
    
    
    3,133
    
    
    
    4.40
    
    
    
    206,656
    
    
    
    2,075
    
    
    
    4.02Investment securities (4)
    
    
    35,106
    
    
    
    326
    
    
    
    3.71
    
    
    
    52,117
    
    
    
    277
    
    
    
    2.13Interest-bearing deposits
    
    
    136,967
    
    
    
    1,118
    
    
    
    3.27
    
    
    
    135,425
    
    
    
    415
    
    
    
    1.23Federal Home Loan Bank stock
    
    
    44,923
    
    
    
    560
    
    
    
    4.99
    
    
    
    64,474
    
    
    
    869
    
    
    
    5.39Total interest-earning assets
    
    
    3,929,155
    
    
    
    58,662
    
    
    
    5.97
    
    
    
    3,647,954
    
    
    
    48,789
    
    
    
    5.35Non-interest-earning assets
    
    
    203,215
    
    
    
    
    
    
    
    
    
    
    
    156,881Total assets
    
    $
    4,132,370
    
    
    
    
    
    
    
    
    
    
    $
    3,804,835INTEREST-BEARING LIABILITIESDemand deposits
    
    $
    782,949
    
    
    
    2,552
    
    
    
    1.30
    
    
    $
    736,356
    
    
    
    949
    
    
    
    0.52Regular passbook savings
    
    
    242,112
    
    
    
    270
    
    
    
    0.45
    
    
    
    258,353
    
    
    
    285
    
    
    
    0.44Certificates of deposit
    
    
    1,946,466
    
    
    
    15,294
    
    
    
    3.14
    
    
    
    1,681,790
    
    
    
    10,794
    
    
    
    2.57Total deposits
    
    
    2,971,527
    
    
    
    18,116
    
    
    
    2.44
    
    
    
    2,676,499
    
    
    
    12,028
    
    
    
    1.80Notes payable and other borrowings
    
    
    793,871
    
    
    
    7,118
    
    
    
    3.59
    
    
    
    774,676
    
    
    
    7,146
    
    
    
    3.69Total interest-bearing liabilities
    
    
    3,765,398
    
    
    
    25,234
    
    
    
    2.68
    
    
    
    3,451,175
    
    
    
    19,174
    
    
    
    2.22Non-interest-bearing liabilities
    
    
    50,411
    
    
    
    
    
    
    
    
    
    
    
    45,880Total liabilities
    
    
    3,815,809
    
    
    
    
    
    
    
    
    
    
    
    3,497,055Stockholders equity
    
    
    316,561
    
    
    
    
    
    
    
    
    
    
    
    307,780Total liabilities and stockholders equity
    
    $
    4,132,370
    
    
    
    
    
    
    
    
    
    
    $
    3,804,835Net interest income/interest rate spread (5)
    
    
    
    
    
    $
    33,428
    
    
    
    3.29
    %
    
    
    
    
    
    $
    29,615
    
    
    
    3.13
    %Net interest-earning assets
    
    $
    163,757
    
    
    
    
    
    
    
    
    
    
    $
    196,779Net interest margin (6)
    
    
    
    
    
    
    
    
    
    
    3.40
    %
    
    
    
    
    
    
    
    
    
    
    3.25
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    1.04
    
    
    
    
    
    
    
    
    
    
    
    1.06
 
 (1)
    
    Annualized(2)
    
    For the purpose of these computations, non-accrual loans are included in the daily
average loan amounts
outstanding.(3)
    
    Interest earned on loans includes loan fees (which are not material in amount) and
interest income which has
been received from borrowers whose loans were removed from non-accrual status during the period
indicated.(4)
    
    Average balances of securities available-for-sale are based on amortized cost.(5)
    
    Interest rate spread represents the difference between the average yield on
interest-earning assets and the
average cost of interest-bearing liabilities and is represented on a fully tax equivalent basis.(6)
    
    Net interest margin represents net interest income as a percentage of average
interest-earning assets. 27




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##### Table of Contents



Six Months Ended September 30,2005
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost(1)
    
    
    Balance
    
    
    Interest
    
    
    Cost(1)(As Restated)(Dollars In Thousands)INTEREST-EARNING ASSETSMortgage loans
    
    $
    2,633,591
    
    
    $
    78,713
    
    
    
    5.98
    %
    
    $
    2,443,776
    
    
    $
    67,313
    
    
    
    5.51
    %Consumer loans
    
    
    604,086
    
    
    
    19,356
    
    
    
    6.41
    
    
    
    552,821
    
    
    
    16,328
    
    
    
    5.91Commercial business loans
    
    
    191,945
    
    
    
    6,681
    
    
    
    6.96
    
    
    
    164,661
    
    
    
    4,601
    
    
    
    5.59Total loans receivable (2) (3)
    
    
    3,429,622
    
    
    
    104,750
    
    
    
    6.11
    
    
    
    3,161,258
    
    
    
    88,242
    
    
    
    5.58Mortgage-related securities (4)
    
    
    261,430
    
    
    
    5,676
    
    
    
    4.34
    
    
    
    212,940
    
    
    
    4,263
    
    
    
    4.00Investment securities (4)
    
    
    41,959
    
    
    
    734
    
    
    
    3.50
    
    
    
    56,832
    
    
    
    547
    
    
    
    1.92Interest-bearing deposits
    
    
    125,254
    
    
    
    1,899
    
    
    
    3.03
    
    
    
    118,873
    
    
    
    642
    
    
    
    1.08Federal Home Loan Bank stock
    
    
    44,923
    
    
    
    1,169
    
    
    
    5.20
    
    
    
    76,119
    
    
    
    2,132
    
    
    
    5.60Total interest-earning assets
    
    
    3,903,188
    
    
    
    114,228
    
    
    
    5.85
    
    
    
    3,626,022
    
    
    
    95,826
    
    
    
    5.29Non-interest-earning assets
    
    
    193,307
    
    
    
    
    
    
    
    
    
    
    
    187,745Total assets
    
    $
    4,096,495
    
    
    
    
    
    
    
    
    
    
    $
    3,813,767INTEREST-BEARING LIABILITIESDemand deposits
    
    $
    771,215
    
    
    
    4,756
    
    
    
    1.23
    
    
    $
    736,597
    
    
    
    1,703
    
    
    
    0.46Regular passbook savings
    
    
    240,879
    
    
    
    526
    
    
    
    0.44
    
    
    
    253,329
    
    
    
    547
    
    
    
    0.43Certificates of deposit
    
    
    1,931,755
    
    
    
    29,306
    
    
    
    3.03
    
    
    
    1,676,896
    
    
    
    21,595
    
    
    
    2.58Total deposits
    
    
    2,943,849
    
    
    
    34,588
    
    
    
    2.35
    
    
    
    2,666,822
    
    
    
    23,845
    
    
    
    1.79Notes payable and other borrowings
    
    
    789,697
    
    
    
    14,067
    
    
    
    3.56
    
    
    
    795,192
    
    
    
    14,160
    
    
    
    3.56Total interest-bearing liabilities
    
    
    3,733,546
    
    
    
    48,655
    
    
    
    2.61
    
    
    
    3,462,014
    
    
    
    38,005
    
    
    
    2.20Non-interest-bearing liabilities
    
    
    47,419
    
    
    
    
    
    
    
    
    
    
    
    47,331Total liabilities
    
    
    3,780,965
    
    
    
    
    
    
    
    
    
    
    
    3,509,345Stockholders equity
    
    
    315,530
    
    
    
    
    
    
    
    
    
    
    
    304,422Total liabilities and stockholders equity
    
    $
    4,096,495
    
    
    
    
    
    
    
    
    
    
    $
    3,813,767Net interest income/interest rate spread (5)
    
    
    
    
    
    $
    65,573
    
    
    
    3.24
    %
    
    
    
    
    
    $
    57,821
    
    
    
    3.09
    %Net interest-earning assets
    
    $
    169,642
    
    
    
    
    
    
    
    
    
    
    $
    164,008Net interest margin (6)
    
    
    
    
    
    
    
    
    
    
    3.36
    %
    
    
    
    
    
    
    
    
    
    
    3.19
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    1.05
    
    
    
    
    
    
    
    
    
    
    
    1.05
 
 (1)
    
    Annualized(2)
    
    For the purpose of these computations, non-accrual loans are included in the daily
average loan amounts
outstanding.(3)
    
    Interest earned on loans includes loan fees (which are not material in amount) and
interest income which has
been received from borrowers whose loans were removed from non-accrual status during the period
indicated.(4)
    
    Average balances of securities available-for-sale are based on amortized cost.(5)
    
    Interest rate spread represents the difference between the average yield on
interest-earning assets and the
average cost of interest-bearing liabilities and is represented on a fully tax equivalent basis.(6)
    
    Net interest margin represents net interest income as a percentage of average
interest-earning assets. 28




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##### Table of Contents



Non-Interest
Income.
 Non-Interest Expense.
 Income Taxes.
 29




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##### Table of Contents



FINANCIAL CONDITION
          30




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##### Table of Contents



ASSET QUALITY
   At September 30,
    
    
    At March 31,2005
    
    
    2005
    
    
    2004
    
    
    2003(Dollars In Thousands)Non-accrual loans:Single-family residential
    
    $
    1,639
    
    
    $
    2,406
    
    
    $
    3,247
    
    
    $
    4,510Multi-family residential
    
    
    4,268
    
    
    
    
    
    
    
    
    
    
    
    444Commercial real estate
    
    
    5,488
    
    
    
    4,894
    
    
    
    8,764
    
    
    
    1,776Construction and land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    737
    
    
    
    453
    
    
    
    642
    
    
    
    661Commercial business
    
    
    1,896
    
    
    
    6,697
    
    
    
    2,268
    
    
    
    2,678Total non-accrual loans
    
    
    14,028
    
    
    
    14,450
    
    
    
    14,921
    
    
    
    10,069Real estate held for development and sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49Foreclosed properties and repossessed assets, net
    
    
    2,173
    
    
    
    1,458
    
    
    
    2,422
    
    
    
    1,535Total non-performing assets
    
    $
    16,201
    
    
    $
    15,908
    
    
    $
    17,343
    
    
    $
    11,653Performing troubled debt restructurings
    
    $
    108
    
    
    $
    
    
    
    $
    2,649
    
    
    $
    2,590Total non-accrual loans to total loans
    
    
    0.38
    %
    
    
    0.40
    %
    
    
    0.45
    %
    
    
    0.34
    %Total non-performing assets to total assets
    
    
    0.39
    
    
    
    0.39
    
    
    
    0.46
    
    
    
    0.33Allowance for loan losses to total loans
    
    
    0.61
    
    
    
    0.73
    
    
    
    0.87
    
    
    
    1.00Allowance for loan losses to total
non-accrual loans
    
    
    160.98
    
    
    
    183.00
    
    
    
    191.72
    
    
    
    294.74Allowance for loan and foreclosure losses
to total non-performing assets
    
    
    141.04
    
    
    
    167.39
    
    
    
    165.78
    
    
    
    257.87
     31




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##### Table of Contents



At September 30,
    
    
    At March 31,2005
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands)Impaired loans with valuation
reserve required
    
    $
    14,445
    
    
    $
    10,827
    
    
    $
    17,126
    
    
    $
    8,483Less:Specific valuation allowance
    
    
    9,320
    
    
    
    7,126
    
    
    
    5,382
    
    
    
    3,717Total impaired loans
    
    $
    5,125
    
    
    $
    3,701
    
    
    $
    11,744
    
    
    $
    4,766Average impaired loans
    
    $
    8,350
    
    
    $
    11,535
    
    
    $
    6,389
    
    
    $
    6,288Interest income recognized
on impaired loans
    
    $
    156
    
    
    $
    249
    
    
    $
    710
    
    
    $
    613Interest income recognized on a cash
basis on impaired loans
    
    $
    156
    
    
    $
    249
    
    
    $
    710
    
    
    $
    613
 32




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##### Table of Contents



At September 30,
    
    
    At March 31,2005
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands)30 to 59 days
    
    $
    8,941
    
    
    $
    5,853
    
    
    $
    4,887
    
    
    $
    10,08360 to 89 days
    
    
    7,992
    
    
    
    714
    
    
    
    10,941
    
    
    
    5,612Total
    
    $
    16,933
    
    
    $
    6,567
    
    
    $
    15,828
    
    
    $
    15,695
    Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Dollars In Thousands)Allowance at beginning of period
    
    $
    26,532
    
    
    $
    28,535
    
    
    $
    26,444
    
    
    $
    28,607Charge-offs:Mortgage
    
    
    (121
    )
    
    
    (121
    )
    
    
    (144
    )
    
    
    (430
    )Consumer
    
    
    (86
    )
    
    
    (186
    )
    
    
    (288
    )
    
    
    (460
    )Commercial business
    
    
    (5,338
    )
    
    
    (393
    )
    
    
    (5,355
    )
    
    
    (398
    )Total charge-offs
    
    
    (5,545
    )
    
    
    (700
    )
    
    
    (5,787
    )
    
    
    (1,288
    )Recoveries:Mortgage
    
    
    80
    
    
    
    29
    
    
    
    81
    
    
    
    37Consumer
    
    
    27
    
    
    
    20
    
    
    
    43
    
    
    
    42Commercial business
    
    
    3
    
    
    
    29
    
    
    
    51
    
    
    
    65Total recoveries
    
    
    110
    
    
    
    78
    
    
    
    175
    
    
    
    144Net charge-offs
    
    
    (5,435
    )
    
    
    (622
    )
    
    
    (5,612
    )
    
    
    (1,144
    )Provision for loan losses
    
    
    1,485
    
    
    
    300
    
    
    
    1,750
    
    
    
    750Allowance at end of period
    
    $
    22,582
    
    
    $
    28,213
    
    
    $
    22,582
    
    
    $
    28,213Net charge-offs to average loans
    
    
    (0.63
    )%
    
    
    (0.08
    )%
    
    
    (0.33
    )%
    
    
    (0.07
    )%
 33




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
     34




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##### Table of Contents



Minimum RequiredMinimum Required
    
    to be WellFor Capital
    
    Capitalized UnderActual
    
    Adequacy Purposes
    
    OTS RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars In Thousands)As of September 30, 2005:Tier 1 capital(to adjusted tangible assets)
    
    $
    322,161
    
    
    
    7.83
    %
    
    $
    123,510
    
    
    
    3.00
    %
    
    $
    205,849
    
    
    
    5.00
    %Risk-based capital(to risk-based assets)
    
    
    335,426
    
    
    
    10.51
    
    
    
    255,420
    
    
    
    8.00
    
    
    
    319,275
    
    
    
    10.00Tangible capital(to tangible assets)
    
    
    322,161
    
    
    
    7.83
    
    
    
    61,755
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/AAs of March 31, 2005:Tier 1 capital(to adjusted tangible assets)
    
    $
    308,050
    
    
    
    7.77
    %
    
    $
    118,890
    
    
    
    3.00
    %
    
    $
    198,149
    
    
    
    5.00
    %Risk-based capital(to risk-based assets)
    
    
    327,368
    
    
    
    10.71
    
    
    
    244,553
    
    
    
    8.00
    
    
    
    305,691
    
    
    
    10.00Tangible capital(to tangible assets)
    
    
    308,050
    
    
    
    7.77
    
    
    
    59,445
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
  September 30,
    
    
    March 31,2005
    
    
    2005(In Thousands)Stockholders equity of the Bank
    
    $
    341,632
    
    
    $
    327,341Less: Goodwill and intangible assets
    
    
    (19,956
    )
    
    
    (20,283
    )Accumulated other comprehensive income
    
    
    485
    
    
    
    992Tier 1 and tangible capital
    
    
    322,161
    
    
    
    308,050Plus: Allowable general valuation allowances
    
    
    13,265
    
    
    
    19,318Risk based capital
    
    $
    335,426
    
    
    $
    327,368
 35




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##### Table of Contents



GUARANTEES
   Amount
    
    
    AmountSubsidiary
    
    Partnership

    
    Amount
    
    
    Outstanding
    
    
    Outstandingof IDI
    
    Entity

    
    Guaranteed
    
    
    at 9/30/05
    
    
    at 3/31/05(Dollars in thousands)Oakmont
    
    Chandler Creek
    
    $
    14,150
    
    
    $
    14,150
    
    
    $
    4,355Davsha III
    
    Indian Palms 147, LLC
    
    
    4,655
    
    
    
    3,040
    
    
    
    1,174Davsha V
    
    Villa Santa Rosa, LLC
    
    
    11,000
    
    
    
    3,209
    
    
    
    8,738Davsha VII
    
    La Vista Grande 121, LLC
    
    
    12,439
    
    
    
    4,126
    
    
    
    5,114Total
    
    
    
    
    
    $
    42,244
    
    
    $
    24,525
    
    
    $
    19,381
     36




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##### Table of Contents



ASSET/LIABILITY MANAGEMENT
     
 CONSENT ORDER
   37




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##### Table of Contents



Item 3 Quantitative and Qualitative Disclosures About Market Risk.
 The Corporations market rate risk has not materially changed from March 31, 2005.
See the Corporations Annual Report on Form 10-K for the year ended March 31, 2005.
 
 Item 4 Controls and Procedures
 The Corporations management, with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of the
Corporations disclosure controls and procedures (as defined in Exchange Act Rule
13a-15(e)) as of the end of the period covered by this report and, based on this
evaluation, the Corporations Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective.During the quarter ended September 30, 2005, the Corporation continued to take steps
to address the control deficiencies arising from the error described in Managements
Report on Internal Control Over Financial Reporting in the Companys Annual Report
on Form 10-K for the year ended March 31, 2005 (2005 Annual Report), including
adoption of the correct method of accounting for loans originated by the Corporation
through the Mortgage Partnership Finance (MPF) 100 Program of the Federal Home
Loan Bank of Chicago (FHLB) and restating the Corporations financial statements
for the affected periods. Management believes that these actions, as well as the
other corrective actions described in the Corporations 2005 Annual Report, taken as
whole, have addressed the control deficiencies arising from the error described in
the 2005 Annual Report.Other than the actions mentioned above, there has been no change in the
Corporations internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f)) 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.
 
 Part II  Other Information
 
 Item 1 Legal Proceeding.
 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.On October 31, 2005, the Office of Thrift Supervision (OTS) terminated the cease
and desist order previously issued to AnchorBank fsb (the Bank) the wholly owned
banking subsidiary of the Company. The cease and desist order was issued by the OTS
in September 2004 in connection with alleged violations of the Bank Secrecy Act
(BSA) and related regulations. Under the order, the Banks board agreed, among
other things, to take a range of actions with respect to the review and conduct of
its BSA compliance activities. The OTS terminated the cease and desist order as a
result of the remedial actions taken by the Bank with respect to BSA compliance.
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##### Table of Contents



Item 2 Unregistered Sales of Equity Securities and Use of Proceeds.
   Total Number ofShares Purchased
    
    
    Maximum Number ofTotal Number
    
    
    Average
    
    
    as Part of Publicly
    
    
    Shares that May Yet Beof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs
    
    
    Plans or Programs(2)July 1 - July 31, 2005
    
    
    59,374
    
    
    $
    30.48
    
    
    
    
    
    
    
    998,860August 1 - August 31, 2005
    
    
    107,500
    
    
    
    29.98
    
    
    
    107,200
    
    
    
    891,660September 1 - September
30, 2005
    
    
    153,000
    
    
    
    29.45
    
    
    
    153,000
    
    
    
    738,660Total
    
    
    319,874
    (1)
    
    $
    29.82
    
    
    
    260,200
    
    
    
    738,660
 
 (1)
    
    Consists of 260,200 shares purchased pursuant to a publicly announced repurchase
program, as described in Note 2, and 59,674 shares acquired from employees in payment for the
exercise price of stock options granted to them pursuant to the Corporations stock option
program.(2)
    
    Effective November 5, 2004, the Board of Directors extended the current share repurchase
program and authorized an additional share repurchase program of 5% or approximately 1.15
million shares of its outstanding common stock in the open market. The repurchases are
authorized to be made from time to time in open-market and/or negotiated transactions as, in
the opinion of management, market conditions may warrant. The repurchased shares will be held
as treasury stock and will be available for general corporate purposes. The Corporation
utilizes various securities brokers as its agent for the stock repurchase program. 
 Item 3
    
    Defaults upon Senior Securities.Not applicable.

Item 4
    
    Submission of Matters to a Vote of Security Holders.
 The Annual Meeting of Stockholders was held on September 19, 2005. There were
22,294,563 shares of common stock eligible to be voted, and 21,794,572 shares
present at the meeting by holders thereof in person or by proxy which constituted a
quorum. The following is a summary of the results of items voted upon.
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##### Table of Contents



Number of VotesFor
    
    
    WithheldElection of Directors for three-year terms
expiring in 2008:Richard A. Bergstrom
    
    
    19,091,627
    
    
    
    2,702,945Donald D. Parker
    
    
    19,012,829
    
    
    
    2,781,743James D. Smessaert
    
    
    19,098,063
    
    
    
    2,696,509
  
 Item 5

    Other Information.
 None.
 
 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 Chief Financial Officer Pursuant to Rules 13a-14 and
15d-14 of the Securities Exchange Act of 1934 and Section 302 of the
Sarbanes-Oxley Act of 2002 is included as an exhibit to this Report.Exhibit 32.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) is included herein as an
exhibit to this Report.Exhibit 32.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) is included herein as an
exhibit to this Report.
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##### Table of Contents



SIGNATURES
   Date: November 7, 2005
    By:
    /s/ Douglas J. TimmermanDouglas J. Timmerman, Chairman of theBoard, President and Chief Executive Officer Date: November 7, 2005
    By:
    /s/ Michael W. HelserMichael W. Helser, Treasurer andChief Financial Officer 41