##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 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
    
    (IRS Employer Identification No.)incorporation or organization)
 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 June 30, 2010 (Unaudited)
and March 31, 2010
    
    
    2Unaudited Consolidated Statements of Operations for the Three
Months Ended June 30, 2010 and 2009
    
    
    3Unaudited Consolidated Statements of Changes in Stockholders
Equity for the Three Months Ended June 30, 2010 and 2009
    
    
    5Unaudited Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 2010 and 2009
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    8Item 2 Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    30Results of Operations
    
    
    36Financial Condition
    
    
    38Asset Quality
    
    
    40Liquidity & Capital Resources
    
    
    48Asset/Liability Management
    
    
    52Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    57Item 4 Controls and Procedures
    
    
    57Part II  Other InformationItem 1 Legal Proceedings
    
    
    58Item 1A Risk Factors
    
    
    58Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    58Item 3 Defaults upon Senior Securities
    
    
    58Item 4 Submission of Matters to a Vote of Security Holders
    
    
    58Item 5 Other Information
    
    
    58Item 6 Exhibits
    
    
    59Signatures
    
    
    60EX-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
 June 30,
    
    
    March 31,2010
    
    
    2010(unaudited)(In Thousands, Except Share Data)AssetsCash and due from banks
    
    $
    71,244
    
    
    $
    42,411Interest-bearing deposits
    
    
    163,138
    
    
    
    469,751Cash and cash equivalents
    
    
    234,382
    
    
    
    512,162Investment securities available for sale
    
    
    485,175
    
    
    
    416,203Investment securities held to maturity (fair value of $37
and $40, respectively)
    
    
    36
    
    
    
    39Loans, less allowance for loan losses of $166,649 at June 30, 2010
and $179,644 at March 31, 2010:Held for sale
    
    
    24,362
    
    
    
    19,484Held for investment
    
    
    3,040,398
    
    
    
    3,229,580Foreclosed properties and repossessed assets, net
    
    
    49,413
    
    
    
    55,436Real estate held for development and sale
    
    
    1,251
    
    
    
    1,304Office properties and equipment
    
    
    32,479
    
    
    
    43,558Federal Home Loan Bank stockat cost
    
    
    54,829
    
    
    
    54,829Accrued interest and other assets
    
    
    76,604
    
    
    
    83,670Total assets
    
    $
    3,998,929
    
    
    $
    4,416,265Liabilities and Stockholders EquityDepositsNon-interest bearing
    
    $
    266,626
    
    
    $
    285,374Interest bearing deposits and accrued interest
    
    
    2,958,756
    
    
    
    3,267,388Total deposits and accrued interest
    
    
    3,225,382
    
    
    
    3,552,762Other borrowed funds
    
    
    709,359
    
    
    
    796,153Other liabilities
    
    
    39,840
    
    
    
    37,237Total liabilities
    
    
    3,974,581
    
    
    
    4,386,152Commitments and contingent liabilities (Note 10)Preferred stock, $.10 par value, 5,000,000 shares authorized,
110,000 shares issued and outstanding
    
    
    83,459
    
    
    
    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
    
    
    (76,867
    )
    
    
    (61,249
    )Accumulated other comprehensive income related to AFS securities
    
    
    7,740
    
    
    
    507Accumulated other comprehensive loss related to OTTI non credit issues
    
    
    (5,267
    )
    
    
    (5,906
    )Total accumulated other comprehensive income (loss)
    
    
    2,473
    
    
    
    (5,399
    )Treasury stock (3,680,035 and 3,677,414 shares, respectively), at cost
    
    
    (90,852
    )
    
    
    (90,975
    )Deferred compensation obligation
    
    
    (5,534
    )
    
    
    (5,529
    )Total stockholders equity
    
    
    24,348
    
    
    
    30,113Total liabilities and stockholders equity
    
    $
    3,998,929
    
    
    $
    4,416,265
  2




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 Three Months Ended June 30,2010
    
    
    2009(In Thousands, Except Per Share Data)Interest income:Loans
    
    $
    40,681
    
    
    $
    53,790Investment securities and Federal Home Loan Bank stock
    
    
    3,445
    
    
    
    6,047Interest-bearing deposits
    
    
    250
    
    
    
    269Total interest income
    
    
    44,376
    
    
    
    60,106Interest expense:Deposits
    
    
    15,815
    
    
    
    24,133Other borrowed funds
    
    
    9,753
    
    
    
    11,058Total interest expense
    
    
    25,568
    
    
    
    35,191Net interest income
    
    
    18,808
    
    
    
    24,915Provision for loan losses
    
    
    8,934
    
    
    
    70,400Net interest income (loss) after provision for loan losses
    
    
    9,874
    
    
    
    (45,485
    )Non-interest income:Total other than temporary losses
    
    
    
    
    
    
    (164
    )Portion of loss recognized in other comprehensive income
    
    
    
    
    
    
    160Reclassification from other comprehensive income
    
    
    (86
    )
    
    
    (209
    )Net impairment losses recognized in earnings
    
    
    (86
    )
    
    
    (213
    )Loan servicing income (loss)
    
    
    1,153
    
    
    
    (182
    )Credit enhancement income
    
    
    253
    
    
    
    377Service charges on deposits
    
    
    3,753
    
    
    
    3,829Investment and insurance commissions
    
    
    956
    
    
    
    804Net gain on sale of loans
    
    
    1,347
    
    
    
    11,403Net gain on sale of investment securities
    
    
    112
    
    
    
    1,505Net gain on sale of branches
    
    
    4,930
    
    
    
    Other revenue from real estate partnership operations
    
    
    386
    
    
    
    911Other
    
    
    863
    
    
    
    1,186Total non-interest income
    
    
    13,667
    
    
    
    19,620
  3




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
Consolidated Statements of Operations ( Cont .)
 Three Months Ended June 30,2010
    
    
    2009(In Thousands, Except Per Share Data)Non-interest expense:Compensation
    
    $
    11,825
    
    
    $
    14,350Occupancy
    
    
    2,367
    
    
    
    2,413Federal deposit insurance premiums
    
    
    4,075
    
    
    
    5,578Furniture and equipment
    
    
    1,762
    
    
    
    2,050Data processing
    
    
    1,572
    
    
    
    1,932Marketing
    
    
    307
    
    
    
    373Other expenses from real estate partnership operations
    
    
    502
    
    
    
    1,451Foreclosed properties and repossessed assetsnet expense
    
    
    3,644
    
    
    
    3,932Mortgage servicing rights impairment (recovery)
    
    
    190
    
    
    
    (1,344
    )Foreclosure cost advance impairment
    
    
    
    
    
    
    3,708Other
    
    
    9,451
    
    
    
    4,829Total non-interest expense
    
    
    35,695
    
    
    
    39,272Loss before income taxes
    
    
    (12,154
    )
    
    
    (65,137
    )Income taxes
    
    
    
    
    
    
    Net loss
    
    
    (12,154
    )
    
    
    (65,137
    )Income attributable to non-controlling interest in real estate partnerships
    
    
    
    
    
    
    (85
    )Preferred stock dividends and discount accretion
    
    
    (3,368
    )
    
    
    (3,244
    )Net loss available to common equity of Anchor BanCorp
    
    $
    (15,522
    )
    
    $
    (68,296
    )Comprehensive loss
    
    $
    (4,282
    )
    
    $
    (63,066
    )Loss per common share:Basic
    
    $
    (0.73
    )
    
    $
    (3.23
    )Diluted
    
    
    (0.73
    )
    
    
    (3.23
    )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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,154
    )Reclassification adjustment for net gains
realized in income, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112
    )
    
    
    (112
    )Reclassification adjustment for credit portion
of other-than-temporary investments
realized in income, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    86Change in net unrealized gains (losses)
on available-for-sale securities
net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,898
    
    
    
    7,898Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,282
    )Dividend on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,505
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,505
    )Issuance of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96
    )
    
    
    123
    
    
    
    (5
    )
    
    
    
    
    
    
    22Accretion of preferred stock discount
    
    
    
    
    
    
    1,863
    
    
    
    
    
    
    
    
    
    
    
    (1,863
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at June 30, 2010
    
    $
    
    
    
    $
    83,459
    
    
    $
    2,536
    
    
    $
    109,133
    
    
    $
    (76,867
    )
    
    $
    (90,852
    )
    
    $
    (5,534
    )
    
    $
    2,473
    
    
    $
    24,348
  5




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 Three Months Ended June 30,2010
    
    
    2009(In Thousands)Operating ActivitiesNet loss
    
    $
    (12,154
    )
    
    $
    (65,137
    )Adjustments to reconcile net loss to net
cash provided by operating activities:Provision for loan losses
    
    
    8,934
    
    
    
    70,400Provision for OREO losses
    
    
    3,051
    
    
    
    2,254Provision for depreciation and amortization
    
    
    1,192
    
    
    
    1,315Amortization and accretion of investment securities, net
    
    
    1,126
    
    
    
    (20
    )Mortgage servicing rights impairment (recovery)
    
    
    190
    
    
    
    (1,344
    )Foreclosure cost advance impairment
    
    
    
    
    
    
    3,708Cash paid due to origination of loans held for sale
    
    
    (140,297
    )
    
    
    (648,235
    )Cash received due to sale of loans held for sale
    
    
    136,766
    
    
    
    706,262Net gain on sales of loans
    
    
    (1,347
    )
    
    
    (11,403
    )Net gain on sale of investment securities
    
    
    (112
    )
    
    
    (1,505
    )Gain on sale of foreclosed properties
    
    
    (1,162
    )
    
    
    (483
    )Gain on sale of branches
    
    
    (4,930
    )
    
    
    Net impairment losses recognized in earnings
    
    
    86
    
    
    
    213Stock-based compensation expense
    
    
    22
    
    
    
    1Decrease in accrued interest receivable
    
    
    690
    
    
    
    2,257(Increase) decrease in prepaid expense and other assets
    
    
    11,116
    
    
    
    (3,125
    )Increase in accrued interest payable on deposits
    
    
    1,176
    
    
    
    3,032Increase (decrease) in other liabilities
    
    
    (867
    )
    
    
    1,213Net cash provided by operating activities
    
    
    3,480
    
    
    
    59,403Investing ActivitiesProceeds from sales securities
    
    
    4,315
    
    
    
    46,641Proceeds from maturities of securities
    
    
    42,000
    
    
    
    33,465Purchase of securities
    
    
    (123,037
    )
    
    
    (116,481
    )Principal collected on securities
    
    
    14,526
    
    
    
    28,932Net decrease in loans held for investment
    
    
    170,017
    
    
    
    128,910Purchases of office properties and equipment
    
    
    (60
    )
    
    
    (1,240
    )Sales of office properties and equipment
    
    
    9,947
    
    
    
    132Proceeds from sale of foreclosed properties
    
    
    14,365
    
    
    
    7,187Investment in real estate held for development and sale
    
    
    53
    
    
    
    (177
    )Net cash provided by investing activities
    
    
    132,126
    
    
    
    127,369
  6




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##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Contd)
 Three Months Ended June 30,2010
    
    
    2009(In Thousands)Financing ActivitiesIncrease (decrease) in deposit accounts
    
    $
    (328,780
    )
    
    $
    61,047Increase in advance payments by borrowers
for taxes and insurance
    
    
    3,694
    
    
    
    Proceeds from borrowed funds
    
    
    
    
    
    
    257Repayment of borrowed funds
    
    
    (88,300
    )
    
    
    (37,600
    )Net cash provided by (used in) financing activities
    
    
    (413,386
    )
    
    
    23,704Net increase (decrease) in cash and cash equivalents
    
    
    (277,780
    )
    
    
    210,476Cash and cash equivalents at beginning of period
    
    
    512,162
    
    
    
    433,826Cash and cash equivalents at end of period
    
    $
    234,382
    
    
    $
    644,302Supplementary cash flow information:Cash paid or credited to accounts:Interest on deposits and borrowings
    
    $
    24,392
    
    
    $
    31,289Income taxes
    
    
    
    
    
    
    (7,007
    )Non-cash transactions:Transfer of loans to foreclosed properties
    
    
    10,231
    
    
    
    6,543Securitization 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
       Going Concern
  9




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##### Table of Contents



Branch Sales
  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



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.
 FASB ASC Topic 860, Transfers and Servicing.
 11




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##### Table of Contents



Note 5  Investment Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    (Losses)
    
    
    Fair ValueAt June 30, 2010:Available-for-sale:U.S. government and federal agency obligations
    
    $
    22,127
    
    
    $
    136
    
    
    $
    
    
    
    $
    22,263Corporate stock and other
    
    
    1,176
    
    
    
    77
    
    
    
    (124
    )
    
    
    1,129Agency CMOs and REMICs
    
    
    729
    
    
    
    27
    
    
    
    
    
    
    
    756Non-agency CMOs
    
    
    81,762
    
    
    
    760
    
    
    
    (5,454
    )
    
    
    77,068Residential mortgage-backed securities
    
    
    30,566
    
    
    
    1,023
    
    
    
    
    
    
    
    31,589GNMA securities
    
    
    346,342
    
    
    
    6,407
    
    
    
    (379
    )
    
    
    352,370$
    482,702
    
    
    $
    8,430
    
    
    $
    (5,957
    )
    
    $
    485,175Held-to-maturity:Residential mortgage-backed securities
    
    $
    36
    
    
    $
    1
    
    
    $
    
    
    
    $
    37$
    36
    
    
    $
    1
    
    
    $
    
    
    
    $
    37At 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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##### Table of Contents



At June 30, 2010Less 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
    
    $
    14
    
    
    $
    (50
    )
    
    $
    13
    
    
    $
    (74
    )
    
    $
    27
    
    
    $
    (124
    )Non-agency CMOs
    
    
    2,950
    
    
    
    (13
    )
    
    
    37,534
    
    
    
    (5,441
    )
    
    
    40,484
    
    
    
    (5,454
    )GNMA securities
    
    
    16,105
    
    
    
    (379
    )
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    (379
    )$
    19,069
    
    
    $
    (442
    )
    
    $
    37,547
    
    
    $
    (5,515
    )
    
    $
    56,616
    
    
    $
    (5,957
    )
 At March 31, 2010Less 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




---



##### Table of Contents



Total OTTI
    
    
    Total OTTITotal Fair
    
    
    Total
    
    
    Related to
    
    
    Related toValue
    
    
    OTTI
    
    
    Credit Loss
    
    
    Other Factors(in thousands)Total OTTI Non-Agency CMOsRating:AAA
    
    $
    3,382
    
    
    $
    
    
    
    $
    
    
    
    $
    AA
    
    
    2,357
    
    
    
    
    
    
    
    
    
    
    
    A
    
    
    1,605
    
    
    
    
    
    
    
    
    
    
    
    BB and below
    
    
    25,879
    
    
    
    
    
    
    
    (86
    )
    
    
    Total Non-
Agency CMOs
    
    $
    33,223
    
    
    $
    
    
    
    $
    (86
    )
    
    $
    
 14




---



##### Table of Contents



Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009Beginning balance of the amount of OTTI related to credit losses
    
    $
    1,889
    
    
    $
    805The credit portion of other-than-temporary-impairment not previously recognized
    
    
    
    
    
    
    4Additional increases to the amount related to the credit loss
for which OTTI was
previously recognized
    
    
    86
    
    
    
    209Ending balance of the amount of OTTI related to credit losses
    
    $
    1,975
    
    
    $
    1,018
  Three Months EndedJune 30,2010
    
    
    2009(in thousands)Proceeds from sales
    
    $
    4,315
    
    
    $
    46,641Gross gains on sales
    
    $
    112
    
    
    $
    1,507Gross losses on sales
    
    
    
    
    
    
    (2
    )Net gain on sales
    
    $
    112
    
    
    $
    1,505
   15




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##### Table of Contents



After 1
    
    
    After 5Year
    
    
    YearsWithin 1
    
    
    through 5
    
    
    through 10
    
    
    Over TenYear
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Total(Dollars In Thousands)Available-for-sale, at fair value:U.S. government and federal
agency obligations
    
    $
    13,100
    
    
    $
    4,134
    
    
    $
    
    
    
    $
    5,029
    
    
    $
    22,263Corporate stock and other
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    1,104
    
    
    
    1,129Agency CMOs and REMICs
    
    
    
    
    
    
    
    
    
    
    316
    
    
    
    440
    
    
    
    756Non-agency CMOs
    
    
    
    
    
    
    1,963
    
    
    
    15,392
    
    
    
    59,713
    
    
    
    77,068Residential mortgage-backed securities
    
    
    602
    
    
    
    774
    
    
    
    6,744
    
    
    
    23,469
    
    
    
    31,589GNMA secrurities
    
    
    
    
    
    
    
    
    
    
    778
    
    
    
    351,592
    
    
    
    352,370Total
    
    $
    13,727
    
    
    $
    6,871
    
    
    $
    23,230
    
    
    $
    441,347
    
    
    $
    485,175Held-to-maturity, at fair value:Residential mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    37
    
    
    $
    
    
    
    $
    37Total
    
    $
    
    
    
    $
    
    
    
    $
    37
    
    
    $
    
    
    
    $
    37$
    13,727
    
    
    $
    6,871
    
    
    $
    23,267
    
    
    $
    441,347
    
    
    $
    485,212Held-to-maturity, at cost:Residential mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    36
    
    
    $
    
    
    
    $
    36
 16




---



##### Table of Contents



Note 6  Loans Receivable
  June 30,
    
    
    March 31,2010
    
    
    2010First mortgage loans:Single-family residential
    
    $
    721,697
    
    
    $
    765,312Multi-family residential
    
    
    585,293
    
    
    
    614,930Commercial real estate
    
    
    791,954
    
    
    
    842,905Construction
    
    
    98,480
    
    
    
    108,486Land
    
    
    222,120
    
    
    
    231,3302,419,544
    
    
    
    2,562,963Second mortgage loans
    
    
    314,264
    
    
    
    352,795Education loans
    
    
    325,696
    
    
    
    331,475Commercial business loans and leases
    
    
    148,670
    
    
    
    164,329Credit card and other consumer loans
    
    
    22,520
    
    
    
    24,9903,230,694
    
    
    
    3,436,552Contras to loans:Undisbursed loan proceeds*
    
    
    (19,672
    )
    
    
    (23,334
    )Allowance for loan losses
    
    
    (166,649
    )
    
    
    (179,644
    )Unearned loan fees
    
    
    (3,888
    )
    
    
    (3,898
    )Net discount on loans purchased
    
    
    (6
    )
    
    
    (8
    )Unearned interest
    
    
    (81
    )
    
    
    (88
    )(190,296
    )
    
    
    (206,972
    )$
    3,040,398
    
    
    $
    3,229,580
 
 *
    
    Undisbursed loan proceeds are funds to be disbursed upon a draw request approved by the
Bank.  Three Months Ended June 30,2010
    
    
    2009(Dollars In Thousands)Allowance at beginning of period
    
    $
    179,644
    
    
    $
    137,165Provision
    
    
    8,934
    
    
    
    70,400Charge-offs
    
    
    (22,193
    )
    
    
    (69,174
    )Recoveries
    
    
    264
    
    
    
    1,064Allowance at end of period
    
    $
    166,649
    
    
    $
    139,455
  17




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##### Table of Contents



At June 30,
    
    
    At March 31,2010
    
    
    2010
    
    
    2009
    
    
    2008(In Thousands)Impaired loans with specific
reserve required
    
    $
    200,090
    
    
    $
    210,422
    
    
    $
    124,179
    
    
    $
    52,866Impaired loans without a
specific reserve
    
    
    235,094
    
    
    
    238,541
    
    
    
    103,635
    
    
    
    51,192Total impaired loans
    
    
    435,184
    
    
    
    448,963
    
    
    
    227,814
    
    
    
    104,058Less:Specific valuation allowance
    
    
    (59,846
    )
    
    
    (60,620
    )
    
    
    (30,799
    )
    
    
    (17,639
    )$
    375,338
    
    
    $
    388,343
    
    
    $
    197,015
    
    
    $
    86,419Average impaired loans
    
    $
    406,059
    
    
    $
    364,585
    
    
    $
    194,923
    
    
    $
    67,138Interest income recognized
on impaired loans
    
    $
    1,881
    
    
    $
    11,939
    
    
    $
    9,484
    
    
    $
    107Loans and troubled debt restructurings
on non-accrual status
    
    $
    372,611
    
    
    $
    369,072
    
    
    $
    227,814
    
    
    $
    104,058Troubled debt restructurings  accrual
    
    $
    62,573
    
    
    $
    79,891
    
    
    $
    
    
    
    $
    Troubled debt restructurings  non-accrual
    
    $
    62,923
    
    
    $
    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
   For the three months ended
    
    
    For the year endedJune 30,
    
    
    March 31,2010
    
    
    2010Balance at beginning of period
    
    $
    55,436
    
    
    $
    52,563Additions
    
    
    10,231
    
    
    
    61,090Capitalized improvements
    
    
    
    
    
    
    Valuations/write-offs
    
    
    (3,051
    )
    
    
    (18,129
    )Net gain on sale
    
    
    1,162
    
    
    
    632Sales
    
    
    (14,365
    )
    
    
    (40,720
    )Balance at end of period
    
    $
    49,413
    
    
    $
    55,436
  19




---



##### 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 June 30, 2010Tier 1 capital
(to adjusted tangible assets)
    
    $
    163,103
    
    
    
    4.08
    %
    
    $
    120,055
    
    
    
    3.00
    %
    
    $
    200,091
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    197,045
    
    
    
    7.63
    
    
    
    206,609
    
    
    
    8.00
    
    
    
    258,262
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    163,103
    
    
    
    4.08
    
    
    
    60,027
    
    
    
    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
   June 30,
    
    
    March 31,2010
    
    
    2010(In Thousands)Stockholders equity of the Bank
    
    $
    166,103
    
    
    $
    165,043Less: Intangible assets
    
    
    
    
    
    
    (4,092
    )Disallowed servicing assets
    
    
    (527
    )
    
    
    (1,418
    )Accumulated other comprehensive income
    
    
    (2,473
    )
    
    
    5,399Tier 1 and tangible capital
    
    
    163,103
    
    
    
    164,932Plus: Allowable general valuation allowances
    
    
    33,942
    
    
    
    36,130Risk-based capital
    
    $
    197,045
    
    
    $
    201,062
 20




---



##### Table of Contents



Note 9  Earnings Per Share
  Three Months Ended June 30,2010
    
    
    2009(in thousands)Numerator:Numerator for basic and diluted earnings
per shareincome (loss) available to common
stockholders
    
    $
    (15,522
    )
    
    $
    (68,296
    )Denominator:Denominator for basic earnings per
shareweighted-average shares
    
    
    21,251
    
    
    
    21,145Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    Management Recognition Plans
    
    
    
    
    
    
    Denominator for diluted earnings per
shareadjusted weighted-average
shares and assumed conversions
    
    
    21,251
    
    
    
    21,145Basic loss per common share
    
    $
    (0.73
    )
    
    $
    (3.23
    )Diluted loss per common share
    
    $
    (0.73
    )
    
    $
    (3.23
    )
  Note 10  Commitments and Contingent Liabilities
  21




---



##### Table of Contents



June 30,
    
    
    March 31,2010
    
    
    2010Commitments to extend credit:
    
    $
    22,915
    
    
    $
    20,796Unused lines of credit:Home equity
    
    
    124,071
    
    
    
    142,044Credit cards
    
    
    37,136
    
    
    
    37,360Commercial
    
    
    39,990
    
    
    
    42,968Letters of credit
    
    
    18,629
    
    
    
    25,393Credit enhancement under the FederalHome Loan Bank of Chicago MortgagePartnership Finance Program
    
    
    21,602
    
    
    
    21,602IDI borrowing guarantees-unfunded
    
    
    408
    
    
    
    393
      Note 11  Fair Value of Financial Instruments
  22




---



##### 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:
 23




---



##### Table of Contents



June 30, 2010
    
    
    March 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    234,382
    
    
    $
    234,382
    
    
    $
    512,162
    
    
    $
    512,162Investment securities available for sale
    
    
    485,175
    
    
    
    485,175
    
    
    
    416,203
    
    
    
    416,203Investment securities held to maturity
    
    
    36
    
    
    
    37
    
    
    
    39
    
    
    
    40Loans held for sale
    
    
    24,362
    
    
    
    25,086
    
    
    
    19,484
    
    
    
    19,622Loans receivable
    
    
    3,040,398
    
    
    
    3,142,997
    
    
    
    3,229,580
    
    
    
    3,278,903Federal Home Loan Bank stock
    
    
    54,829
    
    
    
    54,829
    
    
    
    54,829
    
    
    
    54,829Accrued interest receivable
    
    
    19,468
    
    
    
    19,468
    
    
    
    20,159
    
    
    
    20,159Financial liabilities:Deposits
    
    
    3,218,713
    
    
    
    3,209,331
    
    
    
    3,543,799
    
    
    
    3,513,254Other borrowed funds
    
    
    709,359
    
    
    
    704,187
    
    
    
    796,153
    
    
    
    783,326Accrued interest payableborrowings
    
    
    10,558
    
    
    
    10,558
    
    
    
    7,088
    
    
    
    7,088Accrued interest payabledeposits
    
    
    6,669
    
    
    
    6,669
    
    
    
    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
  24




---



##### Table of Contents



June 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
    
    $
    22,263
    
    
    $
    
    
    
    $
    22,263
    
    
    $
    Agency CMOs and REMICs
    
    
    756
    
    
    
    
    
    
    
    756
    
    
    
    Non-agency CMOs
    
    
    77,068
    
    
    
    
    
    
    
    
    
    
    
    77,068Residential mortgage-backed securities
    
    
    31,589
    
    
    
    
    
    
    
    31,589
    
    
    
    GNMA securities
    
    
    352,370
    
    
    
    
    
    
    
    352,370
    
    
    
    Corporate bonds
    
    
    1,102
    
    
    
    577
    
    
    
    525
    
    
    
    Available for sale equity securities:Financial services
    
    
    27
    
    
    
    27
    
    
    
    
    
    
    
    Total assets at fair value
    
    $
    485,175
    
    
    $
    604
    
    
    $
    407,503
    
    
    $
    77,068
 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
   25




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##### Table of Contents



Year EndedThree Months Ended June 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
    
    
    
    
    
    
    320
    
    
    
    (5
    )
    
    
    (1,327
    )
    
    
    7,253Included in other comprehensive income
    
    
    6
    
    
    
    1,079
    
    
    
    491
    
    
    
    6,232
    
    
    
    1,786Included in earnings as other than temporary impairment
    
    
    
    
    
    
    (86
    )
    
    
    
    
    
    
    
    
    
    
    (1,084
    )Purchases
    
    
    
    
    
    
    
    
    
    
    17,058
    
    
    
    92,879
    
    
    
    437,141Securitization of mortgage loans
held for sale to mortgage-related securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,878Principal repayments
    
    
    (663
    )
    
    
    (5,297
    )
    
    
    (1,395
    )
    
    
    (7,168
    )
    
    
    (104,331
    )Sales
    
    
    
    
    
    
    (4,315
    )
    
    
    
    
    
    
    
    
    
    
    (432,970
    )Transfers in and/or out of level 3
    
    
    (756
    )
    
    
    
    
    
    
    (31,589
    )
    
    
    (352,370
    )
    
    
    Balance at end of period
    
    $
    
    
    
    $
    77,068
    
    
    $
    
    
    
    $
    
    
    
    $
    363,974
    Fair Value on a Nonrecurring Basis
  26




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##### Table of Contents



June 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
    
    $
    140,244
    
    
    $
    
    
    
    $
    
    
    
    $
    140,244Mortgage servicing rights
    
    
    20,919
    
    
    
    
    
    
    
    
    
    
    
    20,919Foreclosed properties and repossessed assets
    
    
    49,413
    
    
    
    
    
    
    
    
    
    
    
    49,413Total assets at fair value
    
    $
    210,576
    
    
    $
    
    
    
    $
    
    
    
    $
    210,576
 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
    27




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##### Table of Contents



Note 12  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.
    
    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.
  28




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##### Table of Contents



Note 13  Capital Purchase Program
  Note 14  Branch Sales
   29




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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 loss per common share decreased to $(0.73) for the quarter ended June 30, 2010
compared to $(3.23) per share for the quarter ended June 30, 2009, primarily due to a $61.5
million decrease in the provision for loan losses and a $3.6 million decrease in
non-interest expense;
    
    The interest rate spread decreased to 1.95% for the quarter ended June 30, 2010 compared
to 2.01% for the quarter ended June 30, 2009;
    
    Loans receivable decreased $184.3 million, or 5.7%, since March 31, 2010;
    
    Deposits and accrued interest decreased $327.4 million, or 9.2%, since March 31, 2010;
    
    Book value per common share was $(3.95) at June 30, 2010 compared to $(3.68) at March
31, 2010 and $1.71 at June 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 other assets owned by the Bank)
decreased $2.5 million, or 0.6%, to $422.0 million at June 30, 2010 from $424.5 million at
March 31, 2010, and 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) increased $3.5
million, or 1.0% to $372.6 million at June 30, 2010 from $369.1 million at March 31, 2010;
and
    
    Provision for loan losses decreased $61.5 million, or 87.3%, to $8.9 million for the
three months ended June 30, 2010 from $70.4 million for the three months ended June 30,
2009 and $11.2 million, or 55.7%, from $20.2 million for the three months ended March 31,
2010.
 30




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##### Table of Contents



Three Months Ended(Dollars in thousands - except per share amounts)
    
    6/30/2010
    
    
    3/31/2010
    
    
    12/31/2009
    
    
    9/30/2009Operations Data:Net interest income
    
    $
    18,808
    
    
    $
    18,624
    
    
    $
    22,333
    
    
    $
    18,939Provision for loan losses
    
    
    8,934
    
    
    
    20,170
    
    
    
    10,456
    
    
    
    60,900Net gain on sale of loans
    
    
    1,347
    
    
    
    3,314
    
    
    
    2,805
    
    
    
    1,062Real estate investment partnership revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other non-interest income
    
    
    12,320
    
    
    
    7,192
    
    
    
    12,816
    
    
    
    9,796Real estate investment partnership cost of sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other non-interest expense
    
    
    35,695
    
    
    
    37,093
    
    
    
    37,695
    
    
    
    43,992Loss before income tax expense (benefit)
    
    
    (12,154
    )
    
    
    (28,133
    )
    
    
    (10,197
    )
    
    
    (75,095
    )Income tax expense (benefit)
    
    
    
    
    
    
    (1,503
    )
    
    
    3
    
    
    
    Net loss
    
    
    (12,154
    )
    
    
    (26,630
    )
    
    
    (10,200
    )
    
    
    (75,095
    )(Income) loss attributable to non-controlling
interest in real estate partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Preferred stock dividends and discount accretion
    
    
    (3,368
    )
    
    
    (3,211
    )
    
    
    (3,228
    )
    
    
    (3,228
    )Net loss
available to common equity of Anchor BanCorp
    
    
    (15,522
    )
    
    
    (29,841
    )
    
    
    (13,428
    )
    
    
    (78,408
    )Selected Financial Ratios(1):Yield on earning assets
    
    
    4.37
    %
    
    
    4.56
    %
    
    
    4.92
    %
    
    
    4.62
    %Cost of funds
    
    
    2.42
    
    
    
    2.69
    
    
    
    2.79
    
    
    
    3.00Interest rate spread
    
    
    1.95
    
    
    
    1.87
    
    
    
    2.13
    
    
    
    1.62Net interest margin
    
    
    1.85
    
    
    
    1.77
    
    
    
    2.05
    
    
    
    1.58Return on average assets
    
    
    (1.13
    )
    
    
    (2.40
    )
    
    
    (0.89
    )
    
    
    (5.97
    )Return on average equity
    
    
    (184.75
    )
    
    
    (232.27
    )
    
    
    (64.05
    )
    
    
    (242.30
    )Average equity to average assets
    
    
    0.61
    
    
    
    1.03
    
    
    
    1.39
    
    
    
    2.46Non-interest expense to average assets
    
    
    3.33
    
    
    
    3.34
    
    
    
    3.30
    
    
    
    3.49Per Share:Basic loss per common share
    
    $
    (0.73
    )
    
    $
    (1.40
    )
    
    $
    (0.63
    )
    
    $
    (3.71
    )Diluted loss per common share
    
    
    (0.73
    )
    
    
    (1.40
    )
    
    
    (0.63
    )
    
    
    (3.71
    )Dividends per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Book value per common share
    
    
    (3.95
    )
    
    
    (3.68
    )
    
    
    (2.66
    )
    
    
    (1.70
    )Financial Condition:Total assets
    
    $
    3,998,929
    
    
    $
    4,416,265
    
    
    $
    4,453,975
    
    
    $
    4,634,619Loans receivable, netHeld for sale
    
    
    24,362
    
    
    
    19,484
    
    
    
    35,640
    
    
    
    28,904Held for investment
    
    
    3,040,398
    
    
    
    3,229,580
    
    
    
    3,383,246
    
    
    
    3,506,464Deposits and accrued interest
    
    
    3,225,382
    
    
    
    3,552,762
    
    
    
    3,598,185
    
    
    
    3,739,997Other borrowed funds
    
    
    709,359
    
    
    
    796,153
    
    
    
    759,479
    
    
    
    759,479Stockholders equity
    
    
    24,348
    
    
    
    30,113
    
    
    
    52,243
    
    
    
    73,370Allowance for loan losses
    
    
    166,649
    
    
    
    179,644
    
    
    
    164,494
    
    
    
    170,664Non-performing assets(2)
    
    
    422,024
    
    
    
    424,508
    
    
    
    344,362
    
    
    
    453,510
 
 (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. 31




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##### Table of Contents



Three Months Ended(Dollars in thousands - except per share amounts)
    
    6/30/2009
    
    
    3/31/2009
    
    
    12/31/2008
    
    
    9/30/2008Operations Data:Net interest income
    
    $
    24,915
    
    
    $
    28,708
    
    
    $
    32,707
    
    
    $
    29,954Provision for loan losses
    
    
    70,400
    
    
    
    56,385
    
    
    
    92,970
    
    
    
    46,964Net gain (loss) on sale of loans
    
    
    11,403
    
    
    
    7,858
    
    
    
    (228
    )
    
    
    808Real estate investment partnership revenue
    
    
    
    
    
    
    310
    
    
    
    1,836
    
    
    
    Other non-interest income
    
    
    8,217
    
    
    
    7,794
    
    
    
    7,905
    
    
    
    7,439Real estate investment partnership cost of sales
    
    
    
    
    
    
    545
    
    
    
    1,191
    
    
    
    Other non-interest expense
    
    
    39,272
    
    
    
    49,755
    
    
    
    117,066
    
    
    
    30,167Loss before income tax expense (benefit)
    
    
    (65,137
    )
    
    
    (62,015
    )
    
    
    (169,007
    )
    
    
    (38,930
    )Income tax expense (benefit)
    
    
    
    
    
    
    (16,147
    )
    
    
    (1,899
    )
    
    
    (15,618
    )Net loss
    
    
    (65,137
    )
    
    
    (45,868
    )
    
    
    (167,108
    )
    
    
    (23,312
    )(Income) loss attributable to non-controlling
interest in real estate partnerships
    
    
    (85
    )
    
    
    (246
    )
    
    
    150
    
    
    
    (13
    )Preferred stock dividends and discount accretion
    
    
    (3,244
    )
    
    
    (2,172
    )
    
    
    
    
    
    
    Net loss
available to common equity of Anchor BanCorp
    
    
    (68,296
    )
    
    
    (47,794
    )
    
    
    (167,258
    )
    
    
    (23,299
    )Selected Financial Ratios(1):Yield on earning assets
    
    
    4.80
    %
    
    
    5.22
    %
    
    
    5.69
    %
    
    
    5.59
    %Cost of funds
    
    
    2.79
    
    
    
    2.72
    
    
    
    2.81
    
    
    
    3.00Interest rate spread
    
    
    2.01
    
    
    
    2.50
    
    
    
    2.88
    
    
    
    2.59Net interest margin
    
    
    1.99
    
    
    
    2.45
    
    
    
    2.88
    
    
    
    2.62Return on average assets
    
    
    (4.92
    )
    
    
    (3.62
    )
    
    
    (13.72
    )
    
    
    (1.89
    )Return on average equity
    
    
    (132.26
    )
    
    
    (84.21
    )
    
    
    (242.66
    )
    
    
    (27.69
    )Average equity to average assets
    
    
    3.72
    
    
    
    4.30
    
    
    
    5.66
    
    
    
    6.84Non-interest expense to average assets
    
    
    2.97
    
    
    
    4.00
    
    
    
    9.70
    
    
    
    2.45Per Share:Basic earnings (loss) per common share
    
    $
    (3.23
    )
    
    $
    (2.26
    )
    
    $
    (7.96
    )
    
    $
    (1.11
    )Diluted earnings (loss) per common share
    
    
    (3.23
    )
    
    
    (2.26
    )
    
    
    (7.96
    )
    
    
    (1.11
    )Dividends per common share
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    0.10Book value per common share
    
    
    1.71
    
    
    
    4.70
    
    
    
    6.80
    
    
    
    14.76Financial Condition:Total assets
    
    $
    5,236,909
    
    
    $
    5,272,110
    
    
    $
    4,798,847
    
    
    $
    4,928,074Loans receivable, netHeld for sale
    
    
    115,340
    
    
    
    161,964
    
    
    
    32,139
    
    
    
    4,099Held for investment
    
    
    3,641,708
    
    
    
    3,896,439
    
    
    
    3,948,065
    
    
    
    4,069,369Deposits and accrued interest
    
    
    3,987,906
    
    
    
    3,923,827
    
    
    
    3,413,449
    
    
    
    3,349,335Other borrowed funds
    
    
    1,041,049
    
    
    
    1,078,392
    
    
    
    1,152,112
    
    
    
    1,210,562Stockholders equity
    
    
    146,918
    
    
    
    211,365
    
    
    
    146,662
    
    
    
    317,501Allowance for loan losses
    
    
    139,455
    
    
    
    137,165
    
    
    
    122,571
    
    
    
    64,614Non-performing assets(2)
    
    
    190,381
    
    
    
    280,377
    
    
    
    410,695
    
    
    
    184,754
 
 (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. 32




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##### Table of Contents



Critical Accounting Policies
  
    
    Declines in the fair value of held-to-maturity and available-for-sale securities below
their amortized cost that are deemed to be other than temporary due to credit loss are
reflected in earnings as realized losses. In estimating other-than-temporary impairment
losses on debt securities, management considers many factors which include: (1) the length
of time and the extent to which the fair value has been less than cost, (2) the financial
condition and near-term prospects of the issuer, and (3) the intent and ability of the
Corporation to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value. To determine if an other-than-temporary
impairment exists on a debt security, the Corporation first determines if (a) it intends to
sell the security or (b) it is more likely than not that it will be required to sell the
security before its anticipated recovery. If either of the conditions are met, the
Corporation will recognize an other-than-temporary impairment in earnings equal to the
difference between the fair value of the security and its adjusted cost. If neither of the
conditions are met, the Corporation determines (a) the amount of the impairment related to
credit loss and (b) the amount of the impairment due to all other factors. The difference
between the present values of the cash flows expected to be collected and the amortized
cost basis is the credit loss. The credit loss is the amount of the other-than-temporary
impairment that is recognized in earnings and is a reduction to the cost basis of the
security. The amount of total impairment related to all other factors is included in other
comprehensive income (loss).
    
    The allowance for loan losses is a valuation allowance for probable and inherent losses
incurred in the loan portfolio. The allowance is comprised of both a specific component
and a general component. Specific allowances are provided on impaired loans pursuant to
accounting standards. The general allowance is based on historical loss experience,
adjusted for qualitative and environmental factors pursuant to ASC 450-2 Loss
Contingencies and other related regulatory guidance. At least quarterly, we review the
assumptions and methodology related to the general allowance in an effort to update and
refine the estimate.In determining the general allowance we have segregated the loan portfolio by collateral
type. By doing so we are better able to identify trends in borrower behavior and loss
severity. For each collateral type, we compute a historical loss factor. In determining
the appropriate period of activity to use in computing the historical loss factor we look at
trends in quarterly net charge-off ratios. It is our intention to utilize a period of
activity that we believe to be most reflective of current experience. Changes in the
historical period are made when there is a distinct change in the trend of net charge-off
experience. Given the changes in the credit market that have occurred in fiscal years 2009
and 2010, management reviewed each stratas historical losses by quarter for any trends that
would indicate a shorter look back period would be more representative.In addition to the historical loss factor, we consider the impact of the following
qualitative factors: changes in lending policies, procedures and practices, economic and
industry trends and conditions, experience, ability and depth of lending management, level
of and trends in past dues and delinquent loans, changes in the quality of the loan review
system, changes in the value of the underlying collateral for collateral dependent loans,
changes in credit concentrations, portfolio size and other external factors such as legal
and regulatory. In determining the impact, if any, of an individual qualitative factor, we
compare the current underlying facts and circumstances surrounding a particular factor with
those in the historical periods, adjusting the historical loss factor in a directionally
consistent manner with changes in the qualitative factor. We will continue to analyze the
qualitative factors on a quarterly basis, adjusting the historical loss factor both up and
down, to a factor we believe is appropriate for the probable and inherent risk of loss in
our portfolio.Specific allowances are determined as a result of our loan review process. When a loan is
identified as impaired it is evaluated for loss using either the fair value of collateral
less selling costs or a discounted cash flow analysis as a determinant of fair value. If
fair value exceeds the Banks carrying value of the
 33




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##### Table of Contents



loan no loss is anticipated and no specific reserve is established. However, if the Banks
carrying value of the loan is greater than fair value a specific reserve is established. In
either situation, loans identified as impaired are excluded from the calculation of the
general reserve.We regularly obtain updated appraisals for real estate collateral dependent loans for which
we deem it appropriate to assess whether or not a specific asset is impaired. Loans having
unpaid principal balance of $500,000 or less and considered to be include in a homogenous
pool of assets do not require an impairment analysis therefore updated appraisals are not
obtained until the foreclosure or sheriff sale occurs. Due to certain limitations,
including, but not limited to, the availability of qualified appraisers, the time necessary
to complete acceptable appraisals, the availability of comparable market data and
information, and other considerations, in certain instances current appraisals are not
readily available. The fair value of such loans for which current and acceptable appraisals
are not available is approximately $74.4 million based on the Corporations best estimate of
fair value, discounted at various rates depending on the collateral type.Collateral dependent loans are considered to be non-performing at such time that they become
ninety days past due or a probable loss is expected. At the time a loan is determined to be
non-performing it is downgraded per the Corporations loan rating system, it is placed on
non-accrual, and an allowance consistent with the Corporations historical experience for
similar substandard loans is established. Within ninety days of this determination a
comprehensive analysis of the loans is completed, including ordering new appraisals, where
necessary, and an adjustment to the estimated allowance is recognized to reflect the fair
value of the loan based on the underlying collateral or the discounted cash flows. Until
such date at which an updated appraisal is obtained, when deemed necessary, the Corporation
applies discounts to the existing appraisals in estimating the fair value of collateral.
These discounts are 25 percent on commercial real estate and 35 percent on unimproved land
if the appraisal is over one year old. These discount percentages are based on actual
experience over the past nine month period. If the appraisal is within one year, the
Corporation applies a discount of 15 percent. The Corporation believes these discounts
reflect market factors, the locations in which the collateral is located and the estimated
cost to dispose.We consider the allowance for loan losses at June 30, 2010 to be at an acceptable level.
Although we believe that we have established and maintained the allowance for loan losses at
an adequate level, changes may be necessary if future economic and other conditions differ
substantially from the current environment. Although we use the best information available,
the level of the allowance for loan losses remains an estimate that is subject to
significant judgment and short-term change.
    
    Real estate acquired by foreclosure or by deed in lieu of foreclosure and other
repossessed assets, upon initial recognition, is recorded at fair value, less estimated
selling expenses. Each parcel of real estate owned is appraised within six months of the
time of acquisition of such property and periodically thereafter. At the date of
foreclosure any write down to fair value less estimated selling costs is charged to the
allowance for loan losses. Costs relating to the development and improvement of the
property are capitalized; holding period costs and subsequent changes to the valuation
allowance are charged to expense. Foreclosed properties and repossessed assets are
re-measured at fair value after initial recognition through the use of a valuation
allowance on foreclosed assets. The value may be adjusted based on a new appraisal or as a
result of an adjustment to the sale price of the property.
    
    Mortgage servicing rights are established on loans that are originated and subsequently
sold with servicing retained. A portion of the loans book basis is allocated to mortgage
servicing rights at the time of sale. The fair value of mortgage servicing rights is the
present value of estimated future net cash flows from the servicing relationship using
current market participant assumptions for prepayments or defaults, 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 or defaults exceed
what was originally anticipated, net servicing revenues may be less than expected and
mortgage servicing rights may be impaired. Mortgage servicing rights are carried at the
lower of amortized cost or fair value.
 34




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
    
    The Corporation provides for federal income taxes with a deferred tax liability or
deferred tax asset computed by applying the current statutory tax rates to net taxable or
deductible differences between the tax basis of an asset or liability and its reported
amount in the consolidated financial statements that will result in taxable or deductible
amounts in future periods. The Corporation regularly reviews the carrying amount of its
deferred tax assets to determine if the establishment of a valuation allowance is
necessary. If based on the available evidence, it is more likely than not that all or a
portion of the Corporations deferred tax assets will not be realized in future periods, a
deferred tax valuation allowance would be established. Consideration is given to various
positive and negative factors that could affect the realization of the deferred tax assets.In evaluating this available evidence, management considers, among other things, historical
financial performance, expectation of future earnings, the ability to carry back losses to
recoup taxes previously paid, length of statutory carry forward periods, experience with
operating loss and tax credit carry forwards not expiring unused, tax planning strategies
and timing of reversals of temporary differences. Significant judgment is required in
assessing future earning trends and the timing of reversals of temporary differences. The
Corporations evaluation is based on current tax laws as well as managements expectations
of future performance.As a result of its evaluation, the Corporation has recorded a full valuation allowance on
its net deferred tax asset.
 35




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RESULTS OF OPERATIONS
 General.
 Net Interest Income.
    Provision for Loan Losses.
 36




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Average Interest-Earning Assets, Average Interest-Bearing Liabilities and Interest Rate
Spread.
 Three Months Ended June 30,2010
    
    
    2009Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost(1)
    
    
    Balance
    
    
    Interest
    
    
    Cost(1)(Dollars In Thousands)Interest-Earning AssetsMortgage loans
    
    $
    2,360,715
    
    
    $
    29,787
    
    
    
    5.05
    %
    
    $
    2,972,040
    
    
    $
    40,188
    
    
    
    5.41
    %Consumer loans
    
    
    695,056
    
    
    
    8,803
    
    
    
    5.07
    
    
    
    802,808
    
    
    
    10,747
    
    
    
    5.35Commercial business loans
    
    
    127,223
    
    
    
    2,091
    
    
    
    6.57
    
    
    
    213,526
    
    
    
    2,855
    
    
    
    5.35Total loans receivable (2) (3)
    
    
    3,182,994
    
    
    
    40,681
    
    
    
    5.11
    
    
    
    3,988,374
    
    
    
    53,790
    
    
    
    5.39Investment securities (4)
    
    
    404,497
    
    
    
    3,445
    
    
    
    3.41
    
    
    
    485,538
    
    
    
    6,047
    
    
    
    4.98Interest-bearing deposits
    
    
    419,357
    
    
    
    250
    
    
    
    0.24
    
    
    
    483,263
    
    
    
    269
    
    
    
    0.22Federal Home Loan Bank stock
    
    
    54,829
    
    
    
    
    
    
    
    0.00
    
    
    
    54,829
    
    
    
    
    
    
    
    0.00Total interest-earning assets
    
    
    4,061,677
    
    
    
    44,376
    
    
    
    4.37
    
    
    
    5,012,004
    
    
    
    60,106
    
    
    
    4.80Non-interest-earning assets
    
    
    230,328
    
    
    
    
    
    
    
    
    
    
    
    274,127Total assets
    
    $
    4,292,005
    
    
    
    
    
    
    
    
    
    
    $
    5,286,131Interest-Bearing LiabilitiesDemand deposits
    
    $
    961,967
    
    
    
    1,093
    
    
    
    0.45
    
    
    $
    944,120
    
    
    
    1,366
    
    
    
    0.58Regular passbook savings
    
    
    258,386
    
    
    
    159
    
    
    
    0.25
    
    
    
    240,204
    
    
    
    165
    
    
    
    0.27Certificates of deposit
    
    
    2,272,748
    
    
    
    14,563
    
    
    
    2.56
    
    
    
    2,792,135
    
    
    
    22,602
    
    
    
    3.24Total deposits
    
    
    3,493,101
    
    
    
    15,815
    
    
    
    1.81
    
    
    
    3,976,459
    
    
    
    24,133
    
    
    
    2.43Other borrowed funds
    
    
    735,216
    
    
    
    9,753
    
    
    
    5.31
    
    
    
    1,061,545
    
    
    
    11,058
    
    
    
    4.17Total interest-bearing liabilities
    
    
    4,228,317
    
    
    
    25,568
    
    
    
    2.42
    
    
    
    5,038,004
    
    
    
    35,191
    
    
    
    2.79Non-interest-bearing liabilities
    
    
    37,373
    
    
    
    
    
    
    
    
    
    
    
    51,381Total liabilities
    
    
    4,265,690
    
    
    
    
    
    
    
    
    
    
    
    5,089,385Stockholders equity
    
    
    26,315
    
    
    
    
    
    
    
    
    
    
    
    196,746Total liabilities and stockholders equity
    
    $
    4,292,005
    
    
    
    
    
    
    
    
    
    
    $
    5,286,131Net interest income/interest rate spread (5)
    
    
    
    
    
    $
    18,808
    
    
    
    1.95
    %
    
    
    
    
    
    $
    24,915
    
    
    
    2.01
    %Net interest-earning assets
    
    $
    (166,640
    )
    
    
    
    
    
    
    
    
    
    $
    (26,000
    )Net interest margin (6)
    
    
    
    
    
    
    
    
    
    
    1.85
    %
    
    
    
    
    
    
    
    
    
    
    1.99
    %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. 37




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Non-Interest Income.
 Non-Interest Expense.
 Income Taxes.
 
 FINANCIAL CONDITION
     38




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39




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##### Table of Contents



ASSET QUALITY
 Non-Performing Loans.
 June 30, 2010
    
    
    March 31, 2010Non-
    
    
    
    
    
    
    Percent of
    
    
    Non-
    
    
    
    
    
    
    Percent ofPerforming
    
    
    %
    
    
    Total Loans
    
    
    Performing
    
    
    %
    
    
    Total Loans(Dollars in Thousands)Single-family residential
    
    $
    67,472
    
    
    
    18.1
    %
    
    
    2.09
    %
    
    $
    52,765
    
    
    
    14.3
    %
    
    
    1.54
    %Multi-family residential
    
    
    60,895
    
    
    
    16.3
    %
    
    
    1.88
    %
    
    
    60,485
    
    
    
    16.4
    %
    
    
    1.76
    %Commercial real estate
    
    
    122,897
    
    
    
    33.0
    %
    
    
    3.80
    %
    
    
    131,730
    
    
    
    35.7
    %
    
    
    3.83
    %Construction and land
    
    
    94,478
    
    
    
    25.4
    %
    
    
    2.92
    %
    
    
    97,240
    
    
    
    26.3
    %
    
    
    2.83
    %Consumer
    
    
    5,502
    
    
    
    1.5
    %
    
    
    0.17
    %
    
    
    5,154
    
    
    
    1.4
    %
    
    
    0.15
    %Commercial business
    
    
    21,367
    
    
    
    5.7
    %
    
    
    0.66
    %
    
    
    21,698
    
    
    
    5.9
    %
    
    
    0.63
    %Total Non-Performing Loans
    
    $
    372,611
    
    
    
    100.0
    %
    
    
    11.52
    %
    
    $
    369,072
    
    
    
    100.0
    %
    
    
    10.74
    %
  Non-performing
    
    
    
    
    
    
    Transferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-performing
    
    
    Remainingloan balance
    
    
    
    
    
    
    to Accrual
    
    
    Transferred
    
    
    
    
    
    
    
    
    
    
    loan balance
    
    
    balance of
    
    
    ALLLLoan Category
    
    April 1, 2010
    
    
    Additions
    
    
    Status
    
    
    to OREO
    
    
    Paid Down
    
    
    Charged Off
    
    
    June 30, 2010
    
    
    loans
    
    
    AllocatedSingle-family residential
    
    $
    52,765
    
    
    $
    19,034
    
    
    $
    (33
    )
    
    $
    (1,696
    )
    
    $
    (795
    )
    
    $
    (1,803
    )
    
    $
    67,472
    
    
    $
    654,225
    
    
    $
    22,393Multi-family residential
    
    
    60,485
    
    
    
    3,157
    
    
    
    
    
    
    
    
    
    
    
    (1,906
    )
    
    
    (841
    )
    
    
    60,895
    
    
    
    524,398
    
    
    
    26,356Commercial real estate
    
    
    131,730
    
    
    
    14,166
    
    
    
    (4,013
    )
    
    
    (4,740
    )
    
    
    (2,073
    )
    
    
    (12,173
    )
    
    
    122,897
    
    
    
    669,057
    
    
    
    63,652Construction and land
    
    
    97,240
    
    
    
    8,689
    
    
    
    
    
    
    
    (1,623
    )
    
    
    (8,028
    )
    
    
    (1,800
    )
    
    
    94,478
    
    
    
    226,122
    
    
    
    22,664Consumer
    
    
    5,154
    
    
    
    348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,502
    
    
    
    656,978
    
    
    
    2,685Commercial business
    
    
    21,698
    
    
    
    3,465
    
    
    
    (756
    )
    
    
    
    
    
    
    (1,158
    )
    
    
    (1,882
    )
    
    
    21,367
    
    
    
    127,303
    
    
    
    28,899Total
    
    $
    369,072
    
    
    $
    48,859
    
    
    $
    (4,802
    )
    
    $
    (8,059
    )
    
    $
    (13,960
    )
    
    $
    (18,499
    )
    
    $
    372,611
    
    
    $
    2,858,083
    
    
    $
    166,649
  40




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##### Table of Contents



Non-Performing Assets.
 At June 30,
    
    
    At March 31,2010
    
    
    2010(Dollars in thousands)Total non-accrual loans
    
    $
    309,688
    
    
    $
    324,494Troubled debt restructurings  non-accrual (2)
    
    
    62,923
    
    
    
    44,578Other real estate owned (OREO)
    
    
    49,413
    
    
    
    55,436Total non-performing assets
    
    $
    422,024
    
    
    $
    424,508Total non-performing loans to total loans (1)
    
    
    11.53
    %
    
    
    10.74
    %Total non-performing assets to total assets
    
    
    10.55
    
    
    
    9.61Allowance for loan losses to total loans (1)
    
    
    5.16
    
    
    
    5.23Allowance for loan losses to total non-performing loans
    
    
    44.72
    
    
    
    48.67Allowance
for loan and foreclosure losses to total non-performing assets
    
    
    42.41
    
    
    
    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
    
    
    48,859
    
    
    
    
    
    
    
    48,859
    
    
    
    2,172
    
    
    
    51,031Transfers:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonaccrual to OREO
    
    
    (8,059
    )
    
    
    
    
    
    
    (8,059
    )
    
    
    8,059
    
    
    
    Returned to accrual status
    
    
    (4,802
    )
    
    
    
    
    
    
    (4,802
    )
    
    
    
    
    
    
    (4,802
    )Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,365
    )
    
    
    (14,365
    )Charge-offs/Loss
    
    
    (18,499
    )
    
    
    
    
    
    
    (18,499
    )
    
    
    (1,889
    )
    
    
    (20,388
    )Payments
    
    
    (13,960
    )
    
    
    
    
    
    
    (13,960
    )
    
    
    
    
    
    
    (13,960
    )Balance at June 30, 2010
    
    $
    372,611
    
    
    $
    
    
    
    $
    372,611
    
    
    $
    49,413
    
    
    $
    422,024
  41




---



##### Table of Contents



1.
    
    Realignment of the corporate structure to ensure that risk is adequately and
appropriately identified, mitigated and where possible, eliminated:
 
    
    Appointment of a Chief Risk Officer responsible for overseeing all
aspects of corporate risk.
    
    Creation of a Special Assets Group to properly assess potential
collateral shortfall exposure and to develop workout plans.
    
    Development of a risk management framework.
 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 classified assets.10.
    
    Introduction of a portfolio management team.
  42




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##### Table of Contents



Loan Delinquencies.
 At June 30,
    
    
    At March 31,2010
    
    
    2010
    
    
    2009
    
    
    2008(In Thousands)30 to 59 days
    
    $
    31,983
    
    
    $
    53,105
    
    
    $
    64,862
    
    
    $
    66,61760 to 89 days
    
    
    10,978
    
    
    
    53,864
    
    
    
    29,858
    
    
    
    12,928Total
    
    $
    42,961
    
    
    $
    106,969
    
    
    $
    94,720
    
    
    $
    79,545
    43




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##### Table of Contents



At June 30,
    
    
    At March 31,2010
    

    2010
    

    2009
    

    2008(In Thousands)Impaired loans with specific
reserve required
    
    $
    200,090
    
    
    $
    210,422
    
    
    $
    124,179
    
    
    $
    52,866Impaired loans without a
specific reserve
    
    
    235,094
    
    
    
    238,541
    
    
    
    103,635
    
    
    
    51,192Total impaired loans
    
    
    435,184
    
    
    
    448,963
    
    
    
    227,814
    
    
    
    104,058Less:Specific valuation allowance
    
    
    (59,846
    )
    
    
    (60,620
    )
    
    
    (30,799
    )
    
    
    (17,639
    )$
    375,338
    
    
    $
    388,343
    
    
    $
    197,015
    
    
    $
    86,419Average impaired loans
    
    $
    406,059
    
    
    $
    364,585
    
    
    $
    194,923
    
    
    $
    67,138Interest income recognized
on impaired loans
    
    $
    1,881
    
    
    $
    11,939
    
    
    $
    9,484
    
    
    $
    107Loans and troubled debt restructurings
on non-accrual status
    
    $
    372,611
    
    
    $
    369,072
    
    
    $
    227,814
    
    
    $
    104,058Troubled debt restructurings  accrual
    
    $
    62,573
    
    
    $
    79,891
    
    
    $
    
    
    
    $
    Troubled debt restructurings  non-accrual
    
    $
    62,923
    
    
    $
    44,578
    
    
    $
    61,460
    
    
    $
    400Loans past due ninety days or more and
still accruing
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Allowances for Loan and Lease Losses.
  44




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##### Table of Contents



Three Months EndedJune 30,2010
    

    2009(Dollars In Thousands)Allowance at beginning of period
    
    $
    179,644
    
    
    $
    137,165Charge-offs:Single-Family Residential
    
    
    (3,961
    )
    
    
    (1,604
    )Multi-Family Residential
    
    
    (901
    )
    
    
    (4,233
    )Commercial Real Estate
    
    
    (12,684
    )
    
    
    (23,930
    )Construction and Land
    
    
    (1,954
    )
    
    
    (24,998
    )Consumer
    
    
    (739
    )
    
    
    (676
    )Commercial business
    
    
    (1,954
    )
    
    
    (13,733
    )Total charge-offs
    
    
    (22,193
    )
    
    
    (69,174
    )Recoveries:Single-Family Residential
    
    
    57
    
    
    
    123Multi-Family Residential
    
    
    
    
    
    
    Commercial Real Estate
    
    
    37
    
    
    
    103Construction and Land
    
    
    
    
    
    
    Consumer
    
    
    16
    
    
    
    17Commercial business
    
    
    154
    
    
    
    821Total recoveries
    
    
    264
    
    
    
    1,064Net (charge-offs) recoveries
    
    
    (21,929
    )
    
    
    (68,110
    )Provision for loan losses
    
    
    8,934
    
    
    
    70,400Allowance at end of period
    
    $
    166,649
    
    
    $
    139,455Net charge-offs to average loans
    
    
    (2.76
    )%
    
    
    (6.83
    )%
  45




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##### Table of Contents



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

    LoansDollars in Thousands
    
    
    Dollars in ThousandsAllowance allocation:Single-family residential
    
    $
    22,393
    
    
    
    22.33
    %
    
    $
    20,960
    
    
    
    22.27
    %Multi-family residential
    
    
    26,356
    
    
    
    18.12
    %
    
    
    26,471
    
    
    
    17.89
    %Commercial real estate
    
    
    63,652
    
    
    
    24.51
    %
    
    
    75,379
    
    
    
    24.53
    %Construction and land
    
    
    22,664
    
    
    
    9.93
    %
    
    
    23,908
    
    
    
    9.89
    %Consumer
    
    
    2,685
    
    
    
    20.51
    %
    
    
    2,650
    
    
    
    20.64
    %Commercial business
    
    
    28,899
    
    
    
    4.60
    %
    
    
    30,276
    
    
    
    4.78
    %Total allowance for
loan losses
    
    $
    166,649
    
    
    
    100.00
    %
    
    $
    179,644
    
    
    
    100.00
    %Allowance category as a
percent of total allowance:Single-family residential
    
    
    13.44
    %
    
    
    
    
    
    
    11.67
    %Multi-family residential
    
    
    15.81
    %
    
    
    
    
    
    
    14.74
    %Commercial real estate
    
    
    38.20
    %
    
    
    
    
    
    
    41.96
    %Construction and land
    
    
    13.60
    %
    
    
    
    
    
    
    13.31
    %Consumer
    
    
    1.61
    %
    
    
    
    
    
    
    1.48
    %Commercial business
    
    
    17.34
    %
    
    
    
    
    
    
    16.86
    %Total allowance for
loan losses
    
    
    100.00
    %
    
    
    
    
    
    
    100.00
    %
   46




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Foreclosed Properties and Repossessed Assets.
 MostRecorded
    
    
    Date
    
    
    RecentBalance
    
    
    Placed in
    
    
    AppraisalDescription
    
    Location
    
    
    (in millions)
    
    
    OREO
    
    
    DateConstruction company/equipment
    
    Southern Wisconsin
    
    $
    2.9
    
    
    
    1/29/2009
    
    
    
    N/APartially constructed condominium and retail complex
    
    Southern Wisconsin
    
    
    10.7
    
    
    
    12/31/2008
    
    
    
    11/1/2008Commercial building/vacant land
    
    Northeast Wisconsin
    
    
    1.1
    
    
    
    12/29/2009
    
    
    
    9/1/2009Partially constructed condominium project
    
    Central Wisconsin
    
    
    5.0
    
    
    
    3/31/2009
    
    
    
    1/1/2006Property secured by CBRF
    
    Northeast Wisconsin
    
    
    3.7
    
    
    
    12/31/2008
    
    
    
    3/1/2009Several single family properties
    
    Minnesota
    
    
    2.3
    
    
    
    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
    
    
    1.4
    
    
    
    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
    
    
    5.9
    
    
    
    3/31/2010
    
    
    
    8/1/2008Condo units
    
    Northwest Wisconsin
    
    
    2.5
    
    
    
    5/28/2010
    
    
    
    5/1/2008Single family homes
    
    Northwest Wisconsin
    
    
    3.2
    
    
    
    6/7/2010
    
    
    
    7/1/2007Other properties individually less than $1 million
    
    
    
    
    
    
    16.0Valuation allowance on OREO
    
    
    
    
    
    
    (12.3
    )$
    49.4
    47




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LIQUIDITY AND CAPITAL RESOURCES
       48




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49




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Minimum RequiredMinimum Required
    
    
    to be WellFor Capital
    
    
    Capitalized UnderActual
    

    Adequacy Purposes
    

    OTS RequirementsAmount
    

    Ratio
    

    Amount
    

    Ratio
    

    Amount
    

    Ratio(Dollars In Thousands)At June 30, 2010Tier 1 capital
(to adjusted tangible assets)
    
    $
    163,103
    
    
    
    4.08
    %
    
    $
    120,055
    
    
    
    3.00
    %
    
    $
    200,091
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    197,045
    
    
    
    7.63
    
    
    
    206,609
    
    
    
    8.00
    
    
    
    258,262
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    163,103
    
    
    
    4.08
    
    
    
    60,027
    
    
    
    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
  June 30,
    
    
    March 31,2010
    
    
    2010(In Thousands)Stockholders equity of the Bank
    
    $
    166,103
    
    
    $
    165,043Less: Intangible assets
    
    
    
    
    
    
    (4,092
    )Disallowed servicing assets
    
    
    (527
    )
    
    
    (1,418
    )Accumulated other comprehensive income
    
    
    (2,473
    )
    
    
    5,399Tier 1 and tangible capital
    
    
    163,103
    
    
    
    164,932Plus: Allowable general valuation allowances
    
    
    33,942
    
    
    
    36,130Risk-based capital
    
    $
    197,045
    
    
    $
    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.
    
    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.
  51




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ASSET/LIABILITY MANAGEMENT
     52




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REGULATORY DEVELOPMENTS
 Temporary Liquidity Guarantee Program
  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. We 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 June 30, 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. We 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
  53




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
 
 
 
 
 
 
   Dodd-Frank Act
  54




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OTS Order to Cease and Desist
       55




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FORWARD-LOOKING STATEMENTS
   56




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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 the 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.
 57




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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.There are a number of factors that may adversely affect the Corporations business,
financial results or stock price. Refer to Risk Factors in the Corporations
Annual Report on Form 10-K for the year ended March 31, 2010, for discussion of
these risks.Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds.As of June 30, 2010, the Corporation does not have a stock repurchase plan in place.Item 3
    
    Intentionally Left BlankItem 4
    
    Submission of Matters to a Vote of Security Holders.Not applicable.Item 5
    
    Other Information.Not applicable.
 58




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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 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.
 59




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SIGNATURES
  ANCHOR BANCORP WISCONSIN INC.Date:      August 6, 2010
    By:
    /s/ Chris BauerChris Bauer, President and Chief Executive OfficerDate:      August 6, 2010
    By:
    /s/ Dale C. RinggenbergDale C. Ringgenberg, Treasurer andChief Financial Officer 60