##### 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 December 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER 0-20006
 ANCHOR BANCORP WISCONSIN INC.
 (Exact name of registrant as specified in its charter)
 Wisconsin
    
    39-1726871(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer Identification No.)
 25 West Main Street 
Madison, Wisconsin
    
    53703(Address of principal executive office)
    
    (Zip Code)
  
  
  þ o
  o þ o
  o þ




---



##### 



ANCHOR BANCORP WISCONSIN INC.
INDEX  FORM 10-Q
 Page #Part I  Financial InformationItem 1
    
    Financial Statements (Unaudited)Consolidated Balance Sheets as of December 31, 2007
and March 31, 2007
    
    
    2Consolidated Statements of Income for the Three and Nine
Months Ended December 31, 2007 and 2006
    
    
    3Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 2007 and 2006
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    20Results of Operations
    
    
    25Financial Condition
    
    
    30Asset Quality
    
    
    31Liquidity & Capital Resources
    
    
    34Guarantees
    
    
    36Asset/Liability Management
    
    
    37Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4
    
    Controls and Procedures
    
    
    38Part II  Other InformationItem 1
    
    Legal Proceedings
    
    
    38Item 1A
    
    Risk Factors
    
    
    38Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3
    
    Defaults upon Senior Securities
    
    
    39Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    39Item 5
    
    Other Information
    
    
    39Item 6
    
    Exhibits
    
    
    39Signatures
    
    
    41Certification of Chief Executive OfficerCertification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer




---



##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
Consolidated Balance Sheets
 December 31,
    
    
    March 31,2007
    
    
    2007(In Thousands, Except Share Data)AssetsCash
    
    $
    70,638
    
    
    $
    77,951Interest-bearing deposits
    
    
    49,464
    
    
    
    44,087Cash and cash equivalents
    
    
    120,102
    
    
    
    122,038Investment securities available for sale
    
    
    146,496
    
    
    
    73,545Mortgage-related securities available for sale
    
    
    270,528
    
    
    
    247,971Mortgage-related securities held to maturity (fair value of $62
and $68, respectively)
    
    
    62
    
    
    
    68Loans, less allowance for loan losses of $28,761 at December 31, 2007
and $20,517 at March 31, 2007:Held for sale
    
    
    6,170
    
    
    
    4,474Held for investment
    
    
    3,941,891
    
    
    
    3,874,049Foreclosed properties and repossessed assets, net
    
    
    7,620
    
    
    
    7,411Real estate held for development and sale
    
    
    59,170
    
    
    
    60,303Office properties and equipment
    
    
    32,360
    
    
    
    32,034Federal Home Loan Bank stockat cost
    
    
    52,526
    
    
    
    41,361Accrued interest on investments, loans and other assets
    
    
    68,892
    
    
    
    56,475Goodwill
    
    
    19,956
    
    
    
    19,956Total assets
    
    $
    4,725,773
    
    
    $
    4,539,685Liabilities and Stockholders EquityDepositsNon-interest bearing
    
    $
    217,094
    
    
    $
    241,234Interest bearing
    
    
    2,928,457
    
    
    
    3,007,012Total deposits
    
    
    3,145,551
    
    
    
    3,248,246Short-term borrowings
    
    
    543,265
    
    
    
    472,400Long-term borrowings
    
    
    607,649
    
    
    
    428,077Other liabilities
    
    
    82,027
    
    
    
    46,610Total liabilities
    
    
    4,378,492
    
    
    
    4,195,333Minority interest in real estate partnerships
    
    
    6,197
    
    
    
    7,486Commitments and contingent liabilities (Note 9)Preferred stock, $.10 par value, 5,000,000 shares
authorized, none outstanding
    
    
    
    
    
    
    Common stock, $.10 par value, 100,000,000 shares authorized,
25,363,339 shares issued, 21,337,957 and 21,669,094 shares outstanding,
respectively
    
    
    2,536
    
    
    
    2,536Additional paid-in capital
    
    
    72,140
    
    
    
    72,122Retained earnings
    
    
    372,807
    
    
    
    359,570Accumulated other comprehensive income (loss)
    
    
    339
    
    
    
    (542
    )Treasury stock (4,025,382 and 3,694,245 shares, respectively), at cost
    
    
    (101,372
    )
    
    
    (91,751
    )Deferred compensation obligation
    
    
    (5,366
    )
    
    
    (5,069
    )Total stockholders equity
    
    
    341,084
    
    
    
    336,866Total liabilities and stockholders equity
    
    $
    4,725,773
    
    
    $
    4,539,685
  2




---



##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
Consolidated Statements of Income
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(In Thousands, Except Per Share Data)Interest income:Loans
    
    $
    68,732
    
    
    $
    67,265
    
    
    $
    206,477
    
    
    $
    194,779Mortgage-related securities
    
    
    3,143
    
    
    
    3,112
    
    
    
    9,177
    
    
    
    9,078Investment securities
    
    
    1,060
    
    
    
    1,386
    
    
    
    3,619
    
    
    
    3,583Interest-bearing deposits
    
    
    1,102
    
    
    
    814
    
    
    
    2,134
    
    
    
    1,884Total interest income
    
    
    74,037
    
    
    
    72,577
    
    
    
    221,407
    
    
    
    209,324Interest expense:Deposits
    
    
    31,036
    
    
    
    30,746
    
    
    
    93,906
    
    
    
    84,720Short-term borrowings
    
    
    8,048
    
    
    
    4,220
    
    
    
    23,180
    
    
    
    10,032Long-term borrowings
    
    
    3,615
    
    
    
    5,082
    
    
    
    10,382
    
    
    
    16,360Total interest expense
    
    
    42,699
    
    
    
    40,048
    
    
    
    127,468
    
    
    
    111,112Net interest income
    
    
    31,338
    
    
    
    32,529
    
    
    
    93,939
    
    
    
    98,212Provision for loan losses
    
    
    7,792
    
    
    
    3,375
    
    
    
    12,158
    
    
    
    7,205Net interest income after provision for loan losses
    
    
    23,546
    
    
    
    29,154
    
    
    
    81,781
    
    
    
    91,007Non-interest income:Real estate investment partnership revenue
    
    
    1,012
    
    
    
    8,009
    
    
    
    8,166
    
    
    
    16,126Loan servicing income
    
    
    1,380
    
    
    
    1,155
    
    
    
    4,235
    
    
    
    3,569Credit enhancement income
    
    
    426
    
    
    
    418
    
    
    
    1,271
    
    
    
    1,252Service charges on deposits
    
    
    3,191
    
    
    
    2,684
    
    
    
    9,430
    
    
    
    7,629Investment and insurance commissions
    
    
    1,016
    
    
    
    1,002
    
    
    
    3,056
    
    
    
    2,800Net gain on sale of loans
    
    
    1,468
    
    
    
    776
    
    
    
    3,869
    
    
    
    2,995Net gain (loss) on sale of investments and mortgage-related securities
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    (283
    )Other revenue from real estate partnership operations
    
    
    2,750
    
    
    
    863
    
    
    
    4,965
    
    
    
    4,585Other
    
    
    667
    
    
    
    1,209
    
    
    
    2,481
    
    
    
    3,806Total non-interest income
    
    
    11,910
    
    
    
    16,116
    
    
    
    37,488
    
    
    
    42,479
 3




---



##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
Consolidated Statements of Income
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(In Thousands, Except Per Share Data)Non-interest expense:Compensation
    
    $
    11,358
    
    
    $
    11,340
    
    
    $
    33,929
    
    
    $
    33,645Real estate investment partnership cost of sales
    
    
    932
    
    
    
    7,115
    
    
    
    7,941
    
    
    
    14,454Occupancy
    
    
    1,882
    
    
    
    1,904
    
    
    
    5,756
    
    
    
    5,888Furniture and equipment
    
    
    1,626
    
    
    
    1,418
    
    
    
    4,650
    
    
    
    4,465Data processing
    
    
    1,510
    
    
    
    1,445
    
    
    
    4,518
    
    
    
    4,505Marketing
    
    
    1,086
    
    
    
    1,152
    
    
    
    3,256
    
    
    
    3,463Other expenses from real estate partnership operations
    
    
    2,894
    
    
    
    1,878
    
    
    
    6,776
    
    
    
    6,635Other
    
    
    3,824
    
    
    
    3,306
    
    
    
    10,501
    
    
    
    9,856Total non-interest expense
    
    
    25,112
    
    
    
    29,558
    
    
    
    77,327
    
    
    
    82,911Minority interest in income (loss) of real estate partnership operations
    
    
    (81
    )
    
    
    (31
    )
    
    
    (359
    )
    
    
    332Income before income taxes
    
    
    10,425
    
    
    
    15,743
    
    
    
    42,301
    
    
    
    50,243Income taxes
    
    
    4,096
    
    
    
    5,308
    
    
    
    16,812
    
    
    
    19,500Net income
    
    $
    6,329
    
    
    $
    10,435
    
    
    $
    25,489
    
    
    $
    30,743Earnings per share:Basic
    
    $
    0.30
    
    
    $
    0.49
    
    
    $
    1.22
    
    
    $
    1.43Diluted
    
    
    0.30
    
    
    
    0.48
    
    
    
    1.21
    
    
    
    1.42Dividends declared per share
    
    
    0.18
    
    
    
    0.17
    
    
    
    0.53
    
    
    
    0.50
  4




---



##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
 Nine Months Ended December 31,2007
    
    
    2006(In Thousands)Operating ActivitiesNet income
    
    $
    25,489
    
    
    $
    30,743Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    12,158
    
    
    
    7,205Provision for depreciation and amortization
    
    
    3,096
    
    
    
    3,075Cash paid due to origination of loans held for sale
    
    
    (354,519
    )
    
    
    (303,102
    )Cash received due to sale of loans held for sale
    
    
    356,692
    
    
    
    307,136Net gain on sales of loans
    
    
    (3,869
    )
    
    
    (2,995
    )(Gain) loss on sale of investments
    
    
    (15
    )
    
    
    283Increase in accrued interest receivable
    
    
    (1,748
    )
    
    
    (3,641
    )Increase in prepaid expense and other assets
    
    
    (10,669
    )
    
    
    (485
    )Increase in accrued interest payable
    
    
    3,414
    
    
    
    1,279Increase in other liabilities
    
    
    34,214
    
    
    
    34,915Other
    
    
    (11,385
    )
    
    
    (8,354
    )Net cash provided by operating activities
    
    
    52,858
    
    
    
    66,059Investing ActivitiesProceeds from sales of investment securities available for sale
    
    
    10,174
    
    
    
    65Proceeds from maturities of investment securities
    
    
    206,055
    
    
    
    157,520Purchase of investment securities available for sale
    
    
    (288,736
    )
    
    
    (148,688
    )Purchase of mortgage-related securities available for sale
    
    
    (63,142
    )
    
    
    (47,779
    )Principal collected on mortgage-related securities
    
    
    42,577
    
    
    
    38,749FHLB Stock Redemption
    
    
    
    
    
    
    5,134FHLB Stock Purchase
    
    
    (11,165
    )
    
    
    Net increase in loans held for investment
    
    
    (71,711
    )
    
    
    (223,111
    )Purchases of office properties and equipment
    
    
    (3,147
    )
    
    
    (3,701
    )Sales of office properties and equipment
    
    
    41
    
    
    
    161Investment in real estate held for development and sale
    
    
    881
    
    
    
    (7,546
    )Net cash used in investing activities
    
    
    (178,173
    )
    
    
    (229,196
    )
 5




---



##### Table of Contents



ANCHOR BANCORP WISCONSIN INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Contd)
 Nine Months Ended December 31,2007
    
    
    2006(In Thousands)Financing Activities(Decrease) increase in deposit accounts
    
    $
    (98,327
    )
    
    $
    205,295Decrease in advance payments by borrowers
for taxes and insurance
    
    
    (6,579
    )
    
    
    (6,304
    )Increase in short-term borrowings
    
    
    70,865
    
    
    
    148,200Proceeds from long-term borrowings
    
    
    502,405
    
    
    
    10,806Repayment of long-term borrowings
    
    
    (322,833
    )
    
    
    (179,648
    )Treasury stock purchased
    
    
    (12,556
    )
    
    
    (7,930
    )Exercise of stock options
    
    
    793
    
    
    
    1,056Cash received from employee stock purchase plan
    
    
    727
    
    
    
    182Tax benefit from stock related compensation
    
    
    18
    
    
    
    766Payments of cash dividends to stockholders
    
    
    (11,134
    )
    
    
    (10,726
    )Net cash provided by financing activities
    
    
    123,379
    
    
    
    161,697Net decrease in cash and cash equivalents
    
    
    (1,936
    )
    
    
    (1,440
    )Cash and cash equivalents at beginning of period
    
    
    122,038
    
    
    
    152,544Cash and cash equivalents at end of period
    
    $
    120,102
    
    
    $
    151,104Supplementary cash flow information:Cash paid or credited to accounts:Interest on deposits and borrowings
    
    $
    124,054
    
    
    $
    109,833Income taxes
    
    
    21,184
    
    
    
    26,690
  6




---



##### Table of Contents



ANCHOR BANCORP WISCONSIN INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Principles of Consolidation
  Note 2  Basis of Presentation
       7




---



##### Table of Contents



Note 3  Business Combination
    Cash and cash equivalents
    
    $
    15,708Investment securities
    
    
    64,689Loans, net of allowance
    
    
    280,803Office properties and equipment
    
    
    12,959Goodwill
    
    
    50,361Core deposit intangible
    
    
    5,517Other assets
    
    
    8,041Deposits
    
    
    (305,450
    )Borrowings
    
    
    (22,566
    )Other liabilities
    
    
    (4,062
    )Net assets acquired
    
    $
    106,000
   8




---



##### Table of Contents



Note 4  Stock-Based Compensation
   Nine Months Ended December 31, 2007WeightedAverageOptions
    
    
    PriceOutstanding at beginning of period
    
    
    837,296
    
    
    $
    19.82Granted
    
    
    
    
    
    
    Exercised
    
    
    (69,682
    )
    
    
    14.47Forfeited
    
    
    (11,740
    )
    
    
    12.99Outstanding at end of period
    
    
    755,874
    
    
    $
    20.41Options exercisable at December 31, 2007
    
    
    755,874
    
    
    $
    20.41
  Options Outstanding
    
    Exercisable OptionsWeighted-AverageRemaining
    
    Weighted-
    
    
    
    
    
    Weighted-Contractual
    
    Average
    
    
    
    
    
    AverageRange of Exercise Prices
    
    Shares
    
    Life (Years)
    
    Exercise Price
    
    Shares
    
    Exercise Price$15.06  $15.70
    
    
    261,700
    
    
    
    3.14
    
    
    $
    15.32
    
    
    
    261,700
    
    
    $
    15.32$16.12  $22.07
    
    
    259,834
    
    
    
    2.32
    
    
    
    20.70
    
    
    
    259,834
    
    
    
    20.70$23.77  $31.95
    
    
    234,340
    
    
    
    6.01
    
    
    
    25.79
    
    
    
    234,340
    
    
    
    25.79755,874
    
    
    
    3.75
    
    
    
    20.41
    
    
    
    755,874
    
    
    
    20.41
  9




---



##### Table of Contents



Nine Months Ended December 31, 2007Number of
    
    
    WeightedRestricted Stock
    
    
    AverageShares
    
    
    PriceBalance at beginning of period
    
    
    66,600
    
    
    $
    29.62Restricted stock granted
    
    
    32,700
    
    
    
    22.85Restricted stock vested
    
    
    (12,900
    )
    
    
    29.14Restriced stock forfeited
    
    
    
    
    
    
    Balance at end of period
    
    
    86,400
    
    
    $
    27.69
 Note 5  Goodwill and Other Intangible Assets
       10




---



##### Table of Contents



Residential
    
    
    Other(In Thousands)Mortgage servicing rights as of March 31, 2006
    
    $
    5,735
    
    
    $
    1,324Additions
    
    
    2,464
    
    
    
    456Amortization
    
    
    (1,835
    )
    
    
    (733
    )Mortgage servicing rights before valuation allowance at end of period
    
    
    6,364
    
    
    
    1,047Valuation allowance
    
    
    (709
    )
    
    
    Net mortgage servicing rights as of March 31, 2007
    
    $
    5,655
    
    
    $
    1,047Fair market value at the end of the period
    
    $
    10,489
    
    
    $
    1,673Key assumptions:Weighted average discount
    
    
    11.23
    %
    
    
    18.65
    %Weighted average prepayment speed assumption
    
    
    13.43
    %
    
    
    12.90
    %Mortgage servicing rights as of March 31, 2007
    
    $
    6,364
    
    
    $
    1,047Additions
    
    
    2,687
    
    
    
    484Amortization
    
    
    (955
    )
    
    
    (240
    )Reclassification
    
    
    (135
    )
    
    
    135Mortgage servicing rights before valuation allowance at end of period
    
    
    7,961
    
    
    
    1,426Valuation allowance
    
    
    
    
    
    
    Net mortgage servicing rights as of December 31, 2007
    
    $
    7,961
    
    
    $
    1,426Fair market value at the end of the period
    
    $
    11,776
    
    
    $
    2,047Key assumptions:Weighted average discount
    
    
    11.22
    %
    
    
    18.69
    %Weighted average prepayment speed assumption
    
    
    16.55
    %
    
    
    11.16
    %
  11




---



##### Table of Contents



Residential
    
    
    Other(In Thousands)Quarter ended December 31, 2007 (actual)
    
    $
    374
    
    
    $
    82Estimate for the year ended March 31,2008
    
    $
    1,273
    
    
    $
    3202009
    
    
    1,273
    
    
    
    3202010
    
    
    1,273
    
    
    
    3202011
    
    
    1,273
    
    
    
    320Thereafter
    
    
    2,869
    
    
    
    146$
    7,961
    
    
    $
    1,426
 Note 6  Stockholders Equity
    12




---



##### Table of Contents



Note 7  Earnings Per Share
  13




---



##### Table of Contents



Three Months Ended December 31,2007
    
    
    2006Numerator:Net income
    
    $
    6,329,095
    
    
    $
    10,435,100Numerator for basic and diluted earnings
per shareincome available to common
stockholders
    
    $
    6,329,095
    
    
    $
    10,435,100Denominator:Denominator for basic earnings per
shareweighted-average shares
    
    
    20,823,434
    
    
    
    21,346,065Effect of dilutive securities:Employee stock options
    
    
    108,040
    
    
    
    268,287Denominator for diluted earnings per
shareadjusted weighted-average
shares and assumed conversions
    
    
    20,931,474
    
    
    
    21,614,352Basic earnings per share
    
    $
    0.30
    
    
    $
    0.49Diluted earnings per share
    
    $
    0.30
    
    
    $
    0.48
 Nine Months Ended December 31,2007
    
    
    2006Numerator:Net income
    
    $
    25,488,856
    
    
    $
    30,742,722Numerator for basic and diluted earnings
per shareincome available to common
stockholders
    
    $
    25,488,856
    
    
    $
    30,742,722Denominator:Denominator for basic earnings per
shareweighted-average shares
    
    
    20,941,736
    
    
    
    21,429,886Effect of dilutive securities:Employee stock options
    
    
    141,524
    
    
    
    292,944Denominator for diluted earnings per
shareadjusted weighted-average
shares and assumed conversions
    
    
    21,083,260
    
    
    
    21,722,830Basic earnings per share
    
    $
    1.22
    
    
    $
    1.43Diluted earnings per share
    
    $
    1.21
    
    
    $
    1.42
 14




---



##### Table of Contents



Note 8  Segment Information
  Community Banking:
 Real Estate Investments:
   15




---



##### Table of Contents



Three Months Ended December 31, 2007(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    120
    
    
    $
    74,442
    
    
    $
    (525
    )
    
    $
    74,037Interest expense
    
    
    493
    
    
    
    42,731
    
    
    
    (525
    )
    
    
    42,699Net interest income (loss)
    
    
    (373
    )
    
    
    31,711
    
    
    
    
    
    
    
    31,338Provision for loan losses
    
    
    
    
    
    
    7,792
    
    
    
    
    
    
    
    7,792Net interest income (loss) after provision for loan losses
    
    
    (373
    )
    
    
    23,919
    
    
    
    
    
    
    
    23,546Real estate investment partnership revenue
    
    
    1,012
    
    
    
    
    
    
    
    
    
    
    
    1,012Other revenue from real estate operations
    
    
    2,750
    
    
    
    
    
    
    
    
    
    
    
    2,750Other income
    
    
    
    
    
    
    8,178
    
    
    
    (30
    )
    
    
    8,148Real estate investment partnership cost of sales
    
    
    (932
    )
    
    
    
    
    
    
    
    
    
    
    (932
    )Other expense from real estate partnership operations
    
    
    (2,924
    )
    
    
    
    
    
    
    30
    
    
    
    (2,894
    )Minority interest in loss of real estate partnerships
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    81Other expense
    
    
    
    
    
    
    (21,286
    )
    
    
    
    
    
    
    (21,286
    )Income (loss) before income taxes
    
    
    (386
    )
    
    
    10,811
    
    
    
    
    
    
    
    10,425Income tax expense (benefit)
    
    
    (201
    )
    
    
    4,297
    
    
    
    
    
    
    
    4,096Net income (loss)
    
    $
    (185
    )
    
    $
    6,514
    
    
    $
    
    
    
    $
    6,329Total assets at end of period
    
    $
    73,363
    
    
    $
    4,652,410
    
    
    $
    
    
    
    $
    4,725,773
 Three Months Ended December 31, 2006(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    88
    
    
    $
    73,005
    
    
    $
    (516
    )
    
    $
    72,577Interest expense
    
    
    508
    
    
    
    40,056
    
    
    
    (516
    )
    
    
    40,048Net interest income (loss)
    
    
    (420
    )
    
    
    32,949
    
    
    
    
    
    
    
    32,529Provision for loan losses
    
    
    
    
    
    
    3,375
    
    
    
    
    
    
    
    3,375Net interest income (loss) after provision for loan losses
    
    
    (420
    )
    
    
    29,574
    
    
    
    
    
    
    
    29,154Real estate investment partnership revenue
    
    
    8,009
    
    
    
    
    
    
    
    
    
    
    
    8,009Other revenue from real estate operations
    
    
    863
    
    
    
    
    
    
    
    
    
    
    
    863Other income
    
    
    
    
    
    
    7,274
    
    
    
    (30
    )
    
    
    7,244Real estate investment partnership cost of sales
    
    
    (7,115
    )
    
    
    
    
    
    
    
    
    
    
    (7,115
    )Other expense from real estate partnership operations
    
    
    (1,908
    )
    
    
    
    
    
    
    30
    
    
    
    (1,878
    )Minority interest in loss of real estate partnerships
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    31Other expense
    
    
    
    
    
    
    (20,565
    )
    
    
    
    
    
    
    (20,565
    )Income (loss) before income taxes
    
    
    (540
    )
    
    
    16,283
    
    
    
    
    
    
    
    15,743Income tax expense (benefit)
    
    
    (238
    )
    
    
    5,546
    
    
    
    
    
    
    
    5,308Net income (loss)
    
    $
    (302
    )
    
    $
    10,737
    
    
    $
    
    
    
    $
    10,435Total assets at end of period
    
    $
    75,561
    
    
    $
    4,430,335
    
    
    $
    
    
    
    $
    4,505,896
 16




---



##### Table of Contents



Nine Months Ended December 31, 2007(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    310
    
    
    $
    222,635
    
    
    $
    (1,538
    )
    
    $
    221,407Interest expense
    
    
    1,406
    
    
    
    127,600
    
    
    
    (1,538
    )
    
    
    127,468Net interest income (loss)
    
    
    (1,096
    )
    
    
    95,035
    
    
    
    
    
    
    
    93,939Provision for loan losses
    
    
    
    
    
    
    12,158
    
    
    
    
    
    
    
    12,158Net interest income (loss) after provision for loan losses
    
    
    (1,096
    )
    
    
    82,877
    
    
    
    
    
    
    
    81,781Real estate investment partnership revenue
    
    
    8,166
    
    
    
    
    
    
    
    
    
    
    
    8,166Other revenue from real estate operations
    
    
    4,965
    
    
    
    
    
    
    
    
    
    
    
    4,965Other income
    
    
    
    
    
    
    24,446
    
    
    
    (89
    )
    
    
    24,357Real estate investment partnership cost of sales
    
    
    (7,941
    )
    
    
    
    
    
    
    
    
    
    
    (7,941
    )Other expense from real estate partnership operations
    
    
    (6,865
    )
    
    
    
    
    
    
    89
    
    
    
    (6,776
    )Minority interest in loss of real estate partnerships
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    359Other expense
    
    
    
    
    
    
    (62,610
    )
    
    
    
    
    
    
    (62,610
    )Income (loss) before income taxes
    
    
    (2,412
    )
    
    
    44,713
    
    
    
    
    
    
    
    42,301Income tax expense (benefit)
    
    
    (1,195
    )
    
    
    18,007
    
    
    
    
    
    
    
    16,812Net income (loss)
    
    $
    (1,217
    )
    
    $
    26,706
    
    
    $
    
    
    
    $
    25,489Total assets at end of period
    
    $
    73,363
    
    
    $
    4,652,410
    
    
    $
    
    
    
    $
    4,725,773
 Nine Months Ended December 31, 2006(In Thousands)ConsolidatedReal Estate
    
    
    Community
    
    
    Intersegment
    
    
    FinancialInvestments
    
    
    Banking
    
    
    Eliminations
    
    
    StatementsInterest income
    
    $
    279
    
    
    $
    210,523
    
    
    $
    (1,478
    )
    
    $
    209,324Interest expense
    
    
    1,439
    
    
    
    111,151
    
    
    
    (1,478
    )
    
    
    111,112Net interest income (loss)
    
    
    (1,160
    )
    
    
    99,372
    
    
    
    
    
    
    
    98,212Provision for loan losses
    
    
    
    
    
    
    7,205
    
    
    
    
    
    
    
    7,205Net interest income (loss) after provision for loan losses
    
    
    (1,160
    )
    
    
    92,167
    
    
    
    
    
    
    
    91,007Real estate investment partnership revenue
    
    
    16,126
    
    
    
    
    
    
    
    
    
    
    
    16,126Other revenue from real estate operations
    
    
    4,585
    
    
    
    
    
    
    
    
    
    
    
    4,585Other income
    
    
    
    
    
    
    21,857
    
    
    
    (89
    )
    
    
    21,768Real estate investment partnership cost of sales
    
    
    (14,454
    )
    
    
    
    
    
    
    
    
    
    
    (14,454
    )Other expense from real estate partnership operations
    
    
    (6,724
    )
    
    
    
    
    
    
    89
    
    
    
    (6,635
    )Minority interest in income of real estate partnerships
    
    
    (332
    )
    
    
    
    
    
    
    
    
    
    
    (332
    )Other expense
    
    
    
    
    
    
    (61,822
    )
    
    
    
    
    
    
    (61,822
    )Income (loss) before income taxes
    
    
    (1,959
    )
    
    
    52,202
    
    
    
    
    
    
    
    50,243Income tax expense (benefit)
    
    
    (637
    )
    
    
    20,137
    
    
    
    
    
    
    
    19,500Net income (loss)
    
    $
    (1,322
    )
    
    $
    32,065
    
    
    $
    
    
    
    $
    30,743Total assets at end of period
    
    $
    75,561
    
    
    $
    4,430,335
    
    
    $
    
    
    
    $
    4,505,896
 17




---



##### Table of Contents



Note 9  Commitments and Contingent Liabilities
   December 31,
    
    March 31,2007
    
    2007Commitments to extend credit:
    
    $
    75,855
    
    
    $
    91,081Unused lines of credit:Home equity
    
    
    95,768
    
    
    
    91,630Credit cards
    
    
    36,862
    
    
    
    40,799Commercial
    
    
    121,622
    
    
    
    125,560Letters of credit
    
    
    50,538
    
    
    
    59,910Credit enhancement under the FederalHome Loan Bank of Chicago MortgagePartnership Finance Program
    
    
    22,023
    
    
    
    20,902Real estate investment segment borrowing guarantees unfunded
    
    
    3,828
    
    
    
    18,555Other financial guarantees
    
    
    669
    
    
    
    900
     18




---



##### Table of Contents



Note 10  Subsequent Events
  19




---



##### Table of Contents



ANCHOR BANCORP WISCONSIN INC.
ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Executive Overview
  
    
    Diluted earnings per share decreased to $0.30 for the quarter ended December 31, 2007
compared to $0.48 per share for the quarter ended December 31, 2006, primarily due to a
$4.4 million increase in the provision for loan losses as well as a $1.2 million decrease
in net interest income;
    
    The interest rate spread decreased to 2.67% for the quarter ended December 31, 2007
compared to 2.89% for the quarter ended December 31, 2006;
    
    Loans receivable increased $69.5 million, or 1.79%, since March 31, 2007;
    
    Deposits declined $102.7 million, or 3.16%, since March 31, 2007;
    
    Book value per share was $15.98 at December 31, 2007 compared to $15.55 at March 31,
2007 and $15.45 at December 31, 2006; and
    
    Total non-performing assets increased $32.6 million to $87.0 million at December 31,
2007 from March 31, 2007 and total non-accrual loans increased $32.3 million to $79.4
million at December 31, 2007 from March 31, 2007. In addition, loans 30-89 days
delinquent increased $24.4 million from March 31, 2007 to December 31, 2007, which may
result in further increases in non-performing loans and the provision for loan losses in
future periods.
 20




---



##### Table of Contents




    
    Real estate investment partnership revenue declined $7.9 million from $16.1 million for
the nine months ended December 31, 2006 to $8.2 million for the nine months ended December
31, 2007. Real estate investment partnership cost of sales declined $6.6 million from
$14.5 million to $7.9 million during the same respective periods. These decreases were due
to the decline in the number of sales
at the real estate partnership level. Net loss from the real estate investment segment
decreased from $1.3 million to $1.2 million for the nine months ended December 31, 2006 and
2007, respectively. The partnerships currently have approximately 43 single family housing
units and approximately 100 individual lots for sale. Management anticipates continued
lower sales activity for the remainder of the fiscal year.
 21




---



##### Table of Contents



(Dollars in thousands  except per share amounts)
    
    Three Months Ended12/31/2007
    
    
    9/30/2007
    
    
    6/30/2007
    
    
    3/31/2007Operations Data:Net interest income
    
    $
    31,338
    
    
    $
    31,584
    
    
    $
    31,017
    
    
    $
    29,834Provision for loan losses
    
    
    7,792
    
    
    
    2,095
    
    
    
    2,271
    
    
    
    4,050Net gain on sale of loans
    
    
    1,468
    
    
    
    814
    
    
    
    1,587
    
    
    
    465Real estate investment partnership revenue
    
    
    1,012
    
    
    
    2,428
    
    
    
    4,726
    
    
    
    2,851Other non-interest income
    
    
    9,430
    
    
    
    7,696
    
    
    
    8,327
    
    
    
    8,205Real estate investment partnership cost of sales
    
    
    932
    
    
    
    2,669
    
    
    
    4,340
    
    
    
    3,153Other non-interest expense
    
    
    24,180
    
    
    
    22,659
    
    
    
    22,547
    
    
    
    21,410Minority interest in loss of
real estate partnership operations
    
    
    (81
    )
    
    
    (203
    )
    
    
    (75
    )
    
    
    (573
    )Income before income taxes
    
    
    10,425
    
    
    
    15,302
    
    
    
    16,574
    
    
    
    13,315Income taxes
    
    
    4,096
    
    
    
    6,028
    
    
    
    6,688
    
    
    
    5,086Net income
    
    
    6,329
    
    
    
    9,274
    
    
    
    9,886
    
    
    
    8,229Selected Financial Ratios(1):Yield on earning assets
    
    
    6.68
    %
    
    
    6.90
    %
    
    
    6.80
    %
    
    
    6.73
    %Cost of funds
    
    
    4.01
    
    
    
    4.13
    
    
    
    4.05
    
    
    
    4.08Interest rate spread
    
    
    2.67
    
    
    
    2.77
    
    
    
    2.75
    
    
    
    2.65Net interest margin
    
    
    2.83
    
    
    
    2.92
    
    
    
    2.90
    
    
    
    2.81Return on average assets
    
    
    0.54
    
    
    
    0.82
    
    
    
    0.88
    
    
    
    0.74Return on average equity
    
    
    7.44
    
    
    
    11.07
    
    
    
    11.77
    
    
    
    9.72Average equity to average assets
    
    
    7.31
    
    
    
    7.37
    
    
    
    7.49
    
    
    
    7.61Non-interest expense to average assets
    
    
    2.16
    
    
    
    2.23
    
    
    
    2.40
    
    
    
    2.21Per Share:Basic earnings per share
    
    $
    0.30
    
    
    $
    0.44
    
    
    $
    0.47
    
    
    $
    0.39Diluted earnings per share
    
    
    0.30
    
    
    
    0.44
    
    
    
    0.46
    
    
    
    0.38Dividends per share
    
    
    0.18
    
    
    
    0.18
    
    
    
    0.17
    
    
    
    0.17Book value per share
    
    
    15.98
    
    
    
    15.88
    
    
    
    15.54
    
    
    
    15.55Financial Condition:Total assets
    
    $
    4,725,773
    
    
    $
    4,611,526
    
    
    $
    4,532,758
    
    
    $
    4,539,685Loans receivable, netHeld for sale
    
    
    6,170
    
    
    
    5,403
    
    
    
    9,062
    
    
    
    4,474Held for investment
    
    
    3,941,891
    
    
    
    3,944,980
    
    
    
    3,890,053
    
    
    
    3,874,049Deposits
    
    
    3,145,551
    
    
    
    3,178,588
    
    
    
    3,248,964
    
    
    
    3,248,246Borrowings
    
    
    1,150,914
    
    
    
    1,039,540
    
    
    
    891,016
    
    
    
    900,477Stockholders equity
    
    
    341,084
    
    
    
    338,907
    
    
    
    331,593
    
    
    
    336,866Allowance for loan losses
    
    
    28,761
    
    
    
    22,002
    
    
    
    22,220
    
    
    
    20,517Non-performing assets
    
    
    87,002
    
    
    
    63,078
    
    
    
    53,180
    
    
    
    54,452
 
 (1)
    
    Annualized when appropriate. 22




---



##### Table of Contents



(Dollars in thousands  except per share amounts)
    
    Three Months Ended12/31/2006
    
    
    9/30/2006
    
    
    6/30/2006
    
    
    3/31/2006Operations Data:Net interest income
    
    $
    32,529
    
    
    $
    32,838
    
    
    $
    32,845
    
    
    $
    33,294Provision for loan losses
    
    
    3,375
    
    
    
    2,625
    
    
    
    1,205
    
    
    
    1,450Net gain on sale of loans
    
    
    776
    
    
    
    1,349
    
    
    
    869
    
    
    
    1,348Real estate investment partnership revenue
    
    
    8,009
    
    
    
    3,631
    
    
    
    4,486
    
    
    
    4,524Other non-interest income
    
    
    7,331
    
    
    
    8,075
    
    
    
    7,952
    
    
    
    8,063Real estate investment partnership cost of sales
    
    
    7,115
    
    
    
    3,486
    
    
    
    3,853
    
    
    
    3,791Other non-interest expense
    
    
    22,443
    
    
    
    23,427
    
    
    
    22,586
    
    
    
    22,534Minority interest in income (loss) of
real estate partnership operations
    
    
    (31
    )
    
    
    (75
    )
    
    
    438
    
    
    
    29Income before income taxes
    
    
    15,743
    
    
    
    16,430
    
    
    
    18,070
    
    
    
    19,425Income taxes
    
    
    5,308
    
    
    
    6,769
    
    
    
    7,423
    
    
    
    7,973Net income
    
    
    10,435
    
    
    
    9,661
    
    
    
    10,647
    
    
    
    11,452Selected Financial Ratios(1):Yield on earning assets
    
    
    6.81
    %
    
    
    6.76
    %
    
    
    6.52
    %
    
    
    6.34
    %Cost of funds
    
    
    3.92
    
    
    
    3.75
    
    
    
    3.43
    
    
    
    3.11Interest rate spread
    
    
    2.89
    
    
    
    3.01
    
    
    
    3.09
    
    
    
    3.23Net interest margin
    
    
    3.05
    
    
    
    3.15
    
    
    
    3.23
    
    
    
    3.35Return on average assets
    
    
    0.93
    
    
    
    0.88
    
    
    
    1.00
    
    
    
    1.10Return on average equity
    
    
    12.51
    
    
    
    11.72
    
    
    
    13.14
    
    
    
    14.46Average equity to average assets
    
    
    7.45
    
    
    
    7.53
    
    
    
    7.60
    
    
    
    7.59Non-interest expense to average assets
    
    
    2.64
    
    
    
    2.46
    
    
    
    2.48
    
    
    
    2.52Per Share:Basic earnings per share
    
    $
    0.49
    
    
    $
    0.45
    
    
    $
    0.50
    
    
    $
    0.54Diluted earnings per share
    
    
    0.48
    
    
    
    0.44
    
    
    
    0.49
    
    
    
    0.53Dividends per share
    
    
    0.17
    
    
    
    0.17
    
    
    
    0.16
    
    
    
    0.16Book value per share
    
    
    15.45
    
    
    
    15.18
    
    
    
    14.91
    
    
    
    14.69Financial Condition:Total assets
    
    $
    4,505,896
    
    
    $
    4,481,586
    
    
    $
    4,356,921
    
    
    $
    4,275,140Loans receivable, netHeld for sale
    
    
    4,470
    
    
    
    5,393
    
    
    
    4,118
    
    
    
    5,509Held for investment
    
    
    3,834,381
    
    
    
    3,794,039
    
    
    
    3,709,745
    
    
    
    3,614,265Deposits
    
    
    3,240,540
    
    
    
    3,223,759
    
    
    
    3,177,220
    
    
    
    3,040,217Borrowings
    
    
    841,219
    
    
    
    875,014
    
    
    
    791,098
    
    
    
    861,861Stockholders equity
    
    
    336,522
    
    
    
    330,774
    
    
    
    326,495
    
    
    
    321,025Allowance for loan losses
    
    
    20,031
    
    
    
    18,393
    
    
    
    15,636
    
    
    
    15,570Non-performing assets
    
    
    39,484
    
    
    
    22,506
    
    
    
    18,836
    
    
    
    15,721
 
 (1)
    
    Annualized when appropriate. 23




---



##### Table of Contents



Significant Accounting Policies
  
    
    The allowance for loan losses is maintained at a level believed adequate by management to
absorb probable and estimable losses inherent in the loan portfolio and is based on the size
and current risk characteristics of the loan portfolio; an assessment of individual problem
loans; actual and anticipated loss experience; and current economic events in specific
industries and geographical areas. These economic events include unemployment levels,
regulatory guidance, and general economic conditions. Determination of the allowance is
inherently subjective as it requires significant estimates, including the amounts and timing
of expected future cash flows on impaired loans, estimated losses on pools of homogeneous
loans based on historical loss experience, and consideration of current economic trends, all
of which may be susceptible to significant change. Loan losses are charged off against the
allowance, while recoveries of amounts previously charged off are credited to the allowance.
A provision for loan losses is charged to operating expense based on managements periodic
evaluation of the factors previously mentioned as well as other pertinent factors.Allowances are established for expected losses resulting from analysis developed through credit
allocations on individual loans and are based on a regular analysis of impaired loans where the
internal credit rating is at or below a predetermined classification. A loan is considered
impaired when it is probable that the Corporation will be unable to collect all contractual
principal and interest due according to the terms of the loan agreement. Loans subject to
impairment are defined as non-accrual and restructured loans exclusive of smaller homogeneous
loans such as home equity, installment, and 1-4 family residential loans. The fair value of the
loans is determined based on the present value of expected future cash flows discounted at the
loans effective interest rate, the market price of the loan, or the fair value of the
underlying collateral less costs to sell, if the loan is collateral dependent.
    
    Valuation of mortgage servicing rights requires the use of judgment. Mortgage servicing
rights are established on loans that are originated and subsequently sold with servicing
rights retained. A portion of the loans book basis is allocated to mortgage servicing rights
when a loan is sold. The fair value of mortgage servicing rights is the present value of
estimated future net cash flows from the servicing relationship using current market
assumptions for prepayments, servicing costs and other factors. As the loans are repaid and
net servicing revenue is earned, mortgage servicing rights are amortized into expense. Net
servicing revenues are expected to exceed this amortization expense. However, if actual
prepayment experience exceeds what was originally anticipated, net servicing revenues may be
less than expected and mortgage servicing rights may be impaired.
    
    Goodwill is reviewed at least annually for impairment, which requires judgment. Goodwill
has been recorded as a result of an acquisition in which purchase price exceeded fair value of
net assets acquired. The price paid for the acquisition is analyzed and compared to a number
of current indices. If goodwill is determined to be impaired, it would be expensed in the
period in which it became impaired.
 24




---



##### Table of Contents



RESULTS OF OPERATIONS
 General.
 Net Interest Income.
   25




---



##### Table of Contents



Provision for Loan Losses.
 Average Interest-Earning Assets, Average Interest-Bearing Liabilities and Interest Rate
Spread.
 26




---



##### Table of Contents



Three Months Ended December 31,2007
    
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost(1)
    
    
    Balance
    
    
    Interest
    
    
    Cost(1)(Dollars In Thousands)Interest-Earning AssetsMortgage loans
    
    $
    3,050,053
    
    
    $
    52,246
    
    
    
    6.85
    %
    
    $
    2,967,524
    
    
    $
    50,906
    
    
    
    6.86
    %Consumer loans
    
    
    664,010
    
    
    
    12,118
    
    
    
    7.30
    
    
    
    629,809
    
    
    
    11,810
    
    
    
    7.50Commercial business loans
    
    
    236,975
    
    
    
    4,368
    
    
    
    7.37
    
    
    
    218,092
    
    
    
    4,549
    
    
    
    8.34Total loans receivable (2) (3)
    
    
    3,951,038
    
    
    
    68,732
    
    
    
    6.96
    
    
    
    3,815,425
    
    
    
    67,265
    
    
    
    7.05Mortgage-related securities (4)
    
    
    246,591
    
    
    
    3,143
    
    
    
    5.10
    
    
    
    259,449
    
    
    
    3,112
    
    
    
    4.80Investment securities (4)
    
    
    129,023
    
    
    
    1,060
    
    
    
    3.29
    
    
    
    86,813
    
    
    
    1,061
    
    
    
    4.89Interest-bearing deposits
    
    
    61,128
    
    
    
    1,102
    
    
    
    7.21
    
    
    
    60,382
    
    
    
    814
    
    
    
    5.39Federal Home Loan Bank stock
    
    
    48,279
    
    
    
    
    
    
    
    0.00
    
    
    
    41,327
    
    
    
    325
    
    
    
    3.15Total interest-earning assets
    
    
    4,436,059
    
    
    
    74,037
    
    
    
    6.68
    
    
    
    4,263,396
    
    
    
    72,577
    
    
    
    6.81Non-interest-earning assets
    
    
    220,387
    
    
    
    
    
    
    
    
    
    
    
    211,173Total assets
    
    $
    4,656,446
    
    
    
    
    
    
    
    
    
    
    $
    4,474,569Interest-Bearing LiabilitiesDemand deposits
    
    $
    955,174
    
    
    
    5,174
    
    
    
    2.17
    
    
    $
    927,042
    
    
    
    5,664
    
    
    
    2.44Regular passbook savings
    
    
    192,614
    
    
    
    226
    
    
    
    0.47
    
    
    
    204,235
    
    
    
    236
    
    
    
    0.46Certificates of deposit
    
    
    2,070,000
    
    
    
    25,636
    
    
    
    4.95
    
    
    
    2,114,254
    
    
    
    24,846
    
    
    
    4.70Total deposits
    
    
    3,217,788
    
    
    
    31,036
    
    
    
    3.86
    
    
    
    3,245,531
    
    
    
    30,746
    
    
    
    3.79Short-term borrowings
    
    
    672,177
    
    
    
    8,048
    
    
    
    4.79
    
    
    
    303,040
    
    
    
    4,220
    
    
    
    5.57Long-term borrowings
    
    
    371,489
    
    
    
    3,615
    
    
    
    3.89
    
    
    
    542,657
    
    
    
    5,082
    
    
    
    3.75Total interest-bearing liabilities
    
    
    4,261,454
    
    
    
    42,699
    
    
    
    4.01
    
    
    
    4,091,228
    
    
    
    40,048
    
    
    
    3.92Non-interest-bearing liabilities
    
    
    54,535
    
    
    
    
    
    
    
    
    
    
    
    49,770Total liabilities
    
    
    4,315,989
    
    
    
    
    
    
    
    
    
    
    
    4,140,998Stockholders equity
    
    
    340,457
    
    
    
    
    
    
    
    
    
    
    
    333,571Total liabilities and stockholders equity
    
    $
    4,656,446
    
    
    
    
    
    
    
    
    
    
    $
    4,474,569Net interest income/interest rate spread (5)
    
    
    
    
    
    $
    31,338
    
    
    
    2.67
    %
    
    
    
    
    
    $
    32,529
    
    
    
    2.89
    %Net interest-earning assets
    
    $
    174,605
    
    
    
    
    
    
    
    
    
    
    $
    172,168Net interest margin (6)
    
    
    
    
    
    
    
    
    
    
    2.83
    %
    
    
    
    
    
    
    
    
    
    
    3.05
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    1.04
    
    
    
    
    
    
    
    
    
    
    
    1.04
 
 (1)
    
    Annualized(2)
    
    For the purpose of these computations, non-accrual loans are included in the daily average loan amounts
outstanding.(3)
    
    Interest earned on loans includes loan fees (which are not material in amount) and interest income which has
been received from borrowers whose loans were removed from non-accrual status during the period indicated.(4)
    
    Average balances of securities available-for-sale are based on amortized cost.(5)
    
    Interest rate spread represents the difference between the 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. 27




---



##### Table of Contents



Nine Months Ended December 31,2007
    
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost(1)
    
    
    Balance
    
    
    Interest
    
    
    Cost(1)(Dollars In Thousands)Interest-Earning AssetsMortgage loans
    
    $
    3,031,122
    
    
    $
    156,378
    
    
    
    6.88
    %
    
    $
    2,912,886
    
    
    $
    147,146
    
    
    
    6.74
    %Consumer loans
    
    
    651,202
    
    
    
    36,035
    
    
    
    7.38
    
    
    
    626,945
    
    
    
    34,282
    
    
    
    7.29Commercial business loans
    
    
    235,986
    
    
    
    14,064
    
    
    
    7.95
    
    
    
    210,968
    
    
    
    13,351
    
    
    
    8.44Total loans receivable (2) (3)
    
    
    3,918,310
    
    
    
    206,477
    
    
    
    7.03
    
    
    
    3,750,799
    
    
    
    194,779
    
    
    
    6.92Mortgage-related securities (4)
    
    
    244,251
    
    
    
    9,177
    
    
    
    5.01
    
    
    
    254,837
    
    
    
    9,078
    
    
    
    4.75Investment securities (4)
    
    
    99,908
    
    
    
    3,047
    
    
    
    4.07
    
    
    
    71,811
    
    
    
    2,564
    
    
    
    4.76Interest-bearing deposits
    
    
    41,848
    
    
    
    2,134
    
    
    
    6.80
    
    
    
    47,721
    
    
    
    1,884
    
    
    
    5.26Federal Home Loan Bank stock
    
    
    44,649
    
    
    
    572
    
    
    
    1.71
    
    
    
    42,598
    
    
    
    1,019
    
    
    
    3.19Total interest-earning assets
    
    
    4,348,966
    
    
    
    221,407
    
    
    
    6.79
    
    
    
    4,167,766
    
    
    
    209,324
    
    
    
    6.70Non-interest-earning assets
    
    
    216,911
    
    
    
    
    
    
    
    
    
    
    
    206,512Total assets
    
    $
    4,565,877
    
    
    
    
    
    
    
    
    
    
    $
    4,374,278Interest-Bearing LiabilitiesDemand deposits
    
    $
    951,422
    
    
    
    16,571
    
    
    
    2.32
    
    
    $
    880,228
    
    
    
    15,499
    
    
    
    2.35Regular passbook savings
    
    
    194,053
    
    
    
    663
    
    
    
    0.46
    
    
    
    209,627
    
    
    
    721
    
    
    
    0.46Certificates of deposit
    
    
    2,075,794
    
    
    
    76,672
    
    
    
    4.92
    
    
    
    2,077,987
    
    
    
    68,500
    
    
    
    4.40Total deposits
    
    
    3,221,269
    
    
    
    93,906
    
    
    
    3.89
    
    
    
    3,167,842
    
    
    
    84,720
    
    
    
    3.57Short-term borrowings
    
    
    611,633
    
    
    
    23,180
    
    
    
    5.05
    
    
    
    241,040
    
    
    
    10,032
    
    
    
    5.55Long-term borrowings
    
    
    350,277
    
    
    
    10,382
    
    
    
    3.95
    
    
    
    593,186
    
    
    
    16,360
    
    
    
    3.68Total interest-bearing liabilities
    
    
    4,183,179
    
    
    
    127,468
    
    
    
    4.06
    
    
    
    4,002,068
    
    
    
    111,112
    
    
    
    3.70Non-interest-bearing liabilities
    
    
    45,032
    
    
    
    
    
    
    
    
    
    
    
    42,925Total liabilities
    
    
    4,228,211
    
    
    
    
    
    
    
    
    
    
    
    4,044,993Stockholders equity
    
    
    337,666
    
    
    
    
    
    
    
    
    
    
    
    329,285Total liabilities and stockholders equity
    
    $
    4,565,877
    
    
    
    
    
    
    
    
    
    
    $
    4,374,278Net interest income/interest rate spread (5)
    
    
    
    
    
    $
    93,939
    
    
    
    2.73
    %
    
    
    
    
    
    $
    98,212
    
    
    
    3.00
    %Net interest-earning assets
    
    $
    165,787
    
    
    
    
    
    
    
    
    
    
    $
    165,698Net interest margin (6)
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    1.04
    
    
    
    
    
    
    
    
    
    
    
    1.04
 
 (1)
    
    Annualized(2)
    
    For the purpose of these computations, non-accrual loans are included in the daily average loan amounts
outstanding.(3)
    
    Interest earned on loans includes loan fees (which are not material in amount) and interest income which has
been received from borrowers whose loans were removed from non-accrual status during the period indicated.(4)
    
    Average balances of securities available-for-sale are based on amortized cost.(5)
    
    Interest rate spread represents the difference between the 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. 28




---



##### Table of Contents



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




---



##### Table of Contents



FINANCIAL CONDITION
           30




---



##### Table of Contents



ASSET QUALITY
   At December 31,
    
    
    At March 31,2007
    
    
    2007
    
    
    2006
    
    
    2005(Dollars In Thousands)Non-accrual loans:Single-family residential
    
    $
    17,622
    
    
    $
    13,038
    
    
    $
    2,856
    
    
    $
    2,406Multi-family residential
    
    
    19,049
    
    
    
    17,289
    
    
    
    4,214
    
    
    
    Commercial real estate
    
    
    21,519
    
    
    
    12,030
    
    
    
    3,398
    
    
    
    4,894Construction and land
    
    
    10,422
    
    
    
    1,696
    
    
    
    
    
    
    
    Consumer
    
    
    1,307
    
    
    
    705
    
    
    
    548
    
    
    
    453Commercial business
    
    
    9,463
    
    
    
    2,283
    
    
    
    2,513
    
    
    
    6,697Total non-accrual loans
    
    
    79,382
    
    
    
    47,041
    
    
    
    13,529
    
    
    
    14,450Foreclosed properties and repossessed assets, net
    
    
    7,620
    
    
    
    7,411
    
    
    
    2,192
    
    
    
    1,458Total non-performing assets
    
    $
    87,002
    
    
    $
    54,452
    
    
    $
    15,721
    
    
    $
    15,908Performing troubled debt restructurings
    
    $
    400
    
    
    $
    400
    
    
    $
    
    
    
    $
    Total non-accrual loans to total loans(1)
    
    
    1.93
    %
    
    
    1.16
    %
    
    
    0.35
    %
    
    
    0.40
    %Total non-performing assets to total assets
    
    
    1.84
    
    
    
    1.20
    
    
    
    0.37
    
    
    
    0.39Allowance for loan losses to total loans(1)
    
    
    0.70
    
    
    
    0.50
    
    
    
    0.41
    
    
    
    0.73Allowance for loan losses to total
non-accrual loans
    
    
    36.23
    
    
    
    43.62
    
    
    
    115.09
    
    
    
    183.00Allowance for loan and foreclosure losses
to total non-performing assets
    
    
    33.08
    
    
    
    37.71
    
    
    
    100.48
    
    
    
    167.39
 
 (1)
    
    Total loans are gross loans receivable before the reduction for loans in process, unearned interest and loan fees and the
allowance for loan losses.  
    
    $1.2 million multi-family residential loan secured by duplexes and lots located in
southern Wisconsin
    
    $2.7 million multi-family residential loan secured by two multi-family properties in
central Wisconsin
    
    $4.2 million multi-family residential loan secured by a multi-family property located in
Minnesota
    
    $2.3 million commercial real estate loan secured by commercial properties located
throughout Wisconsin
    
    $1.1 million commercial real estate loan secured by a warehouse in northeast Wisconsin
    
    $2.6 million commercial real estate loan secured by condominiums in southeast Wisconsin
    
    $3.0 million commercial real estate loan secured by a sports complex in southeast
Wisconsin
    
    $1.4 million construction and land development loan secured by a property in northeast
Wisconsin
    
    $1.4 million construction and land development loan secured by condominiums in southeast
Wisconsin
    
    $3.0 million construction and land development loan secured by a retail development in
northeast Wisconsin
    
    $1.2 million commercial business loan secured by a manufacturing plant in northern
Wisconsin
    
    $2.9 million foreclosed property secured by a condominium project in Southern Wisconsin
 31




---



##### Table of Contents




    
    $2.7 million multi-family residential loan secured by two multi-family properties
located in central Wisconsin
    
    $2.3 million commercial real estate loan secured by commercial properties located
throughout Wisconsin
    
    
    Five multi-family loans to one borrower totaling $11.7 million secured by a golf course
located in central Wisconsin
    
    $10.5 million multi-family construction loan secured by a
condominium and retail project located in southeast Wisconsin (as noted above, this loan became non-accrual subsequent to December 31, 2007)
    
    $5.7 million commercial real estate loan secured by a golf course in central Wisconsin
  At December 31,
    
    
    March 31,2007
    
    
    2007
    
    
    2006
    
    
    2005(In Thousands)Impaired loans with valuation
reserve required
    
    $
    24,320
    
    
    $
    1,426
    
    
    $
    6,381
    
    
    $
    10,827Less:Specific valuation allowance
    
    
    7,384
    
    
    
    504
    
    
    
    3,111
    
    
    
    7,126Total impaired loans
    
    $
    16,936
    
    
    $
    922
    
    
    $
    3,270
    
    
    $
    3,701Average impaired loans
    
    $
    5,537
    
    
    $
    2,360
    
    
    $
    3,829
    
    
    $
    11,535Interest income recognized
on impaired loans
    
    $
    2
    
    
    $
    44
    
    
    $
    208
    
    
    $
    249Interest income recognized on a cash basis
on impaired loans
    
    $
    2
    
    
    $
    44
    
    
    $
    208
    
    
    $
    249
 32




---



##### Table of Contents



At December 31,
    
    
    At March 31,2007
    
    
    2007
    
    
    2006
    
    
    2005(In Thousands)30 to 59 days
    
    $
    32,257
    
    
    $
    12,776
    
    
    $
    9,874
    
    
    $
    5,85360 to 89 days
    
    
    10,297
    
    
    
    5,414
    
    
    
    733
    
    
    
    714Total
    
    $
    42,554
    
    
    $
    18,190
    
    
    $
    10,607
    
    
    $
    6,567
    Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars In Thousands)Allowance at beginning of period
    
    $
    22,002
    
    
    $
    18,393
    
    
    $
    20,517
    
    
    $
    15,570Charge-offs:Mortgage
    
    
    (185
    )
    
    
    (360
    )
    
    
    (2,600
    )
    
    
    (985
    )Consumer
    
    
    (132
    )
    
    
    (137
    )
    
    
    (445
    )
    
    
    (297
    )Commercial business
    
    
    (763
    )
    
    
    (1,380
    )
    
    
    (1,151
    )
    
    
    (2,226
    )Total charge-offs
    
    
    (1,080
    )
    
    
    (1,877
    )
    
    
    (4,196
    )
    
    
    (3,508
    )Recoveries:Mortgage
    
    
    
    
    
    
    35
    
    
    
    84
    
    
    
    36Consumer
    
    
    5
    
    
    
    13
    
    
    
    27
    
    
    
    28Commercial business
    
    
    42
    
    
    
    92
    
    
    
    171
    
    
    
    700Total recoveries
    
    
    47
    
    
    
    140
    
    
    
    282
    
    
    
    764Net (charge-offs) recoveries
    
    
    (1,033
    )
    
    
    (1,737
    )
    
    
    (3,914
    )
    
    
    (2,744
    )Provision for loan losses
    
    
    7,792
    
    
    
    3,375
    
    
    
    12,158
    
    
    
    7,205Allowance at end of period
    
    $
    28,761
    
    
    $
    20,031
    
    
    $
    28,761
    
    
    $
    20,031Net charge-offs to average loans
    
    
    (0.10
    )%
    
    
    (0.18
    )%
    
    
    (0.13
    )%
    
    
    (0.10
    )%
 33




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
     34




---



##### Table of Contents



Minimum RequiredMinimum Required
    
    to be WellFor Capital
    
    Capitalized UnderActual
    
    Adequacy Purposes
    
    OTS RequirementsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars In Thousands)At December 31, 2007:Tier 1 capital
(to adjusted tangible assets)
    
    $
    364,570
    
    
    
    7.93
    %
    
    $
    137,964
    
    
    
    3.00
    %
    
    $
    229,940
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    393,331
    
    
    
    11.00
    
    
    
    286,030
    
    
    
    8.00
    
    
    
    357,537
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    364,570
    
    
    
    7.93
    
    
    
    68,982
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/AAt March 31, 2007:Tier 1 capital
(to adjusted tangible assets)
    
    $
    352,333
    
    
    
    7.92
    %
    
    $
    133,407
    
    
    
    3.00
    %
    
    $
    222,344
    
    
    
    5.00
    %Risk-based capital
(to risk-based assets)
    
    
    372,346
    
    
    
    10.84
    
    
    
    274,773
    
    
    
    8.00
    
    
    
    343,466
    
    
    
    10.00Tangible capital
(to tangible assets)
    
    
    352,333
    
    
    
    7.92
    
    
    
    66,703
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
  December 31,
    
    
    March 31,2007
    
    
    2007(In Thousands)Stockholders equity of the Bank
    
    $
    385,189
    
    
    $
    371,708Less: Goodwill and intangible assets
    
    
    (19,956
    )
    
    
    (19,956
    )Accumulated other comprehensive income
    
    
    (663
    )
    
    
    581Tier 1 and tangible capital
    
    
    364,570
    
    
    
    352,333Plus: Allowable general valuation allowances
    
    
    28,761
    
    
    
    20,013Risk-based capital
    
    $
    393,331
    
    
    $
    372,346
 35




---



##### Table of Contents



GUARANTEES
   Amount
    
    
    AmountSubsidiary
    
    Partnership
    
    
    Amount
    
    
    Outstanding
    
    
    Outstandingof IDI
    
    Entity
    
    
    Guaranteed
    
    
    at 12/31/07
    
    
    at 3/31/07(Dollars in thousands)Oakmont
    
    Chandler Creek
    
    $
    15,000
    
    
    $
    15,000
    
    
    $
    12,350Davsha III
    
    Indian Palms 147, LLC
    
    
    500
    
    
    
    373
    
    
    
    851Davsha V
    
    Villa Santa Rosa, LLC
    
    
    1,000
    
    
    
    873
    
    
    
    1,601Davsha VII
    
    La Vista Grande 121, LLC
    
    
    15,000
    
    
    
    11,426
    
    
    
    11,067Total
    
    
    
    
    
    $
    31,500
    
    
    $
    27,672
    
    
    $
    25,869
      36




---



##### Table of Contents



ASSET/LIABILITY MANAGEMENT
     REGULATORY DEVELOPMENTS
  FORWARD-LOOKING STATEMENTS
  37




---



##### Table of Contents



Item 3 Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4 Controls and Procedures
   
 Part II  Other Information
 
 Item 1 Legal Proceedings.
  
 Item 1A Risk Factors.
  38




---



##### Table of Contents



Item 2 Unregistered Sales of Equity Securities and Use of Proceeds.
   Total Number ofShares Purchased
    
    
    Maximum Number ofTotal Number
    
    
    Average
    
    
    as Part of Publicly
    
    
    Shares that May Yet Beof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs
    
    
    Plans or Programs(2)October 1 October 31, 2007
    
    
    60,000
    
    
    $
    27.64
    
    
    
    60,000
    
    
    
    1,572,160November 1  November 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,572,160December 1  December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,572,160Total
    
    
    60,000
    (1)
    
    $
    27.64
    
    
    
    60,000
    
    
    
    1,572,160
 
 (1)
    
    Consists of 60,000 shares purchased pursuant to a publicly announced repurchase program, and
no shares acquired from employees in payment for the exercise price of stock options granted
to them pursuant to the Corporations stock option program.(2)
    
    Effective November 3, 2006, the Board of Directors extended the current share repurchase
program of approximately 1.3 million shares of its outstanding common stock in the open market
for an additional year. In July 2007, the Board of Directors approved the repurchase of an
additional 5% of the Corporations common stock, representing approximately 1,068,000 of
outstanding shares and extended all previous share repurchase authorizations for a year. The
repurchases are authorized to be made from time to time in open-market and/or negotiated
transactions as, in the opinion of management, market conditions may warrant. The repurchased
shares will be held as treasury stock and will be available for general corporate purposes.
The Corporation utilizes various securities brokers as its agent for the stock repurchase
program. 
 Item 3 Defaults upon Senior Securities.
  
 Item 4 Submission of Matters to a Vote of Security Holders.
  
 Item 5 Other Information.
  
 Item 6 Exhibits
 39




---



##### Table of Contents



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.
 40




---



##### Table of Contents



SIGNATURES
  ANCHOR BANCORP WISCONSIN INC.Date:  February 6, 2008
    By:
    /s/ Douglas J. TimmermanDouglas J. Timmerman, Chairman of theBoard, President and Chief Executive OfficerDate:  February 6, 2008
    By:
    /s/ Dale C. RinggenbergDale C. Ringgenberg, Treasurer andChief Financial Officer 41