Anchor BanCorp Wisconsin Inc. (OTC Market: ABCW.PK) today announced a net loss available to common equity of $15.3 million, or $0.72 per common share, for the three months ended December 31, 2011. This compares to a net loss available to common equity of $19.6 million, or $0.92 per common share, and $15.4 million, or $0.72 per common share, for the three months ended September 30, 2011, and December 31, 2010, respectively. For the nine months ended December 31, 2011, net loss available to common equity was $43.0 million, compared to $32.8 million for the same period in the prior year.
Financial Highlights
•AnchorBank fsb (the "Bank) remains adequately capitalized for the sixth consecutive quarter.
•Net loss available to common equity narrowed in the third quarter of 2011 compared to the preceding quarter ending September 30, 2011, and the year ago quarter ending December 31, 2010.
•Net charge-offs were down 10.0 percent in the third quarter of 2011 compared to the preceding quarter and down 22.5 percent compared to third quarter of 2010.
•Gross mortgage banking revenue totaled $5.4 million for the current quarter reflecting a 118.3% increase in residential mortgage origination volume over the preceding quarter.
•Total assets decreased by $333.3 million, or 9.8 percent to $3.1 billion at December 31, 2011, compared to March 31, 2011.
Capital Ratios
December 31, 2011
(Dollars in thousands) December 31, September 30, March 31, Increase (decrease) vs.
2011 2011 2011 9/30/11 3/31/11
Tier 1 (core) capital $125,811 $133,307 $145,807 ($7,496) ($19,996)
Adjusted total assets 3,064,805 3,200,704 3,422,303 (135,899) (357,498)
Tier 1 capital ratio 4.11% 4.16% 4.26% -0.05% -0.15%
Risk-based capital $150,518 $159,125 $174,453 ($8,607) ($23,935)
Risk weighted assets 1,864,639 1,952,984 2,170,197 (88,345) (305,558)
Risk-based capital ratio 8.07% 8.15% 8.04% -0.08% 0.03%
The Bank's Tier 1 (core) capital and Risk-based capital ratios of 4.11 percent and 8.07 percent at December 31, 2011, decreased by 5 and 8 basis points, respectively compared to September 30, 2011. The ratios were lower despite the decreases in assets (Adjusted total assets and Risk weighted assets), as Tier 1 capital and Risk-based capital fell proportionately more than assets due to net losses in the third quarter of 2011.
Under regulatory requirements, a bank must have a Tier 1 (core) capital ratio of 4.0 percent or greater and a total Risk-based capital ratio of 8.0 percent or greater to be considered adequately capitalized. "Although the Bank's capital ratios decreased slightly from the previous quarter, we are encouraged by our sixth consecutive quarter of capital ratios above the threshold to be considered adequately capitalized," stated Chris Bauer, President and Chief Executive Officer of the Corporation and the Bank.
The Corporation, as the holding company of the Bank, continues to be burdened with significant senior debt and preferred stock obligations:
•The Corporation currently owes $116.3 million to various lenders led by U.S. Bank under its credit agreement that matures November 30, 2012. The Corporation also has accrued but unpaid interest and fees totaling $36.3 million associated with this obligation that is due and payable at maturity.
•The Corporation issued $110 million in preferred stock in 2009 to the United States Treasury pursuant to the Treasury's Capital Purchase Program ("CPP"). As permitted under the CPP program, the Corporation has deferred 11 quarterly preferred stock dividend payments to the Treasury totaling $17.2 million.
•While the Bank has substantial liquidity, it is currently precluded by its regulators from paying dividends to the Corporation for purposes of repayment of the foregoing obligations.
The Corporation has engaged and continues to work with Sandler O'Neill & Partners, L.P. as its financial advisor to assist in capital raising efforts to address its capital needs.
Financial Results
Financial results for the third quarter ended December 31, 2011, include:
•The net interest margin fell to 2.19 percent for the three months ended December 31, 2011, from 2.53 percent for the same period in the previous year. The decrease was primarily due to a rate increase on the $116.3 million Credit Agreement of 300 basis points to 15 percent per annum effective in May 2011, and sales of higher yielding investment securities executed in September 2011.
•The provision for credit losses of $8.4 million decreased $13.0 million, or 60.9 percent from $21.4 million in the same period a year ago largely due to a lower required general allowance for losses on non-impaired loans attributable to improved credit metrics which are used in part to establish this reserve.
•Total non-interest income totaled $9.5 million, down $2.2 million or 18.8 percent, compared to the same period in the previous year. The decrease was primarily due to lower loan servicing income reflecting an increase in the amortization rate of the mortgage servicing rights asset caused by the historically low interest rate environment during the quarter ending December 31, 2011, and the resultant mortgage refinance activity. Security gains of $20,000 in the current quarter compared to $1.2 million in the year ago quarter ending December 31, 2010, also contributed to this unfavorable variance.
•Total non-interest expense increased by $4.4 million or 17.6 percent, compared to the comparable period a year ago largely due to higher loss provisions on repossessed property.
Credit Quality
(Dollars in thousands) December 31, 2011
December 31, September 30, December 31, Increase (decrease) vs.
Quarterly Financial Results 2011 2011 2010 9/30/11 12/31/10
Provision for credit losses $8,380 $17,115 $21,412 ($8,735) ($13,032)
Net charge-offs 15,848 17,608 20,439 (1,760) (4,591)
Key Metrics (at period end)
Loans < 90 days delinquent 46,655 70,927 68,946 (24,272) (22,291)
Non-performing loans (NPL) 261,152 256,502 310,832 4,650 (49,680)
Foreclosed properties 86,925 92,970 69,241 (6,045) 17,684
Non-performing assets 348,077 349,472 380,073 (1,395) (31,996)
Allowance for loan loss to NPL 50.13% 53.94% 50.65% -3.81% -0.52%
Credit related metrics continue to trend favorably as both net charge-offs in the quarter ending December 31, 2011, and loans less than 90 days past due at quarter end are lower compared to the preceding quarter and a year ago quarter. The impact of these trends contributed significantly to the lower provision for credit losses in the current quarter. Despite the decrease in provision for credit losses, the allowance for loan loss remains above 50 percent of non-performing loans at December 31, 2011. The level of non-performing assets (non-performing loans plus foreclosed properties) has also improved as the December 31, 2011, balance of $348.1 million is $1.4 million and $32.0 million lower than the preceding quarter and year ago quarter reported amounts, respectively.
Bauer added, "Although we are glad to see some favorable credit trends, much work remains to be done regarding troubled loans and to dispose of foreclosed properties. We continue to work aggressively to resolve the issues that remain in the credit portfolios. The positive trends emerging on the credit front are partially offset as we continue to be negatively impacted by ongoing costs associated with carrying foreclosed properties on the Bank's balance sheet. The elevated level of foreclosed properties compared to this time last year has a direct negative impact on the expenses related to foreclosed properties and repossessed assets due to the high cost of carrying these assets." Total foreclosed properties and repossessed assets were $86.9 million at December 31, 2011, down from $93.0 million at September 30, 2011, but an increase of $17.7 million compared to $69.2 million at December 31, 2010.
Mortgage Banking
(In thousands) For the Quarter Ending: December 31, 2011
December 31, September 30, December 31, Increase (decrease) vs.
2011 2011 2010 9/30/11 12/31/10
Gross revenue
Loan servicing income, net ($1,571) $478 ($416) ($2,049) ($1,155)
Credit enhancement income 5 16 116 (11) (111)
Gain on sale of mortgages 6,018 3,994 5,601 2,024 417
OMSR (impairment) / recovery 985 (5,069) 1,611 6,054 (626)
Residential mortgage banking revenue $5,437 ($581) $6,912 $6,018 ($1,475)
Key Metrics
Origination volume (closed loans) $412,800 $189,100 $288,600 $223,700 $124,200
Serviced loan portfolio 2,833,049 2,787,281 2,919,400 45,768 (86,351)
Residential mortgage banking revenue totaled $5.4 million for the quarter ending December 31, 2011, compared to a loss of $0.6 million in the preceding quarter and revenue of $6.9 million in the year ago quarter. Revenues in the quarter ending September 30, 2011, were unfavorably impacted by a $5.1 million impairment charge on the capitalized mortgage servicing rights asset due to lower interest rates and the resultant mortgage refinance activity. However, the low interest rate environment in the past several quarters, as well as the Bank's marketing efforts, contributed to an increase of $223.7 million in mortgage origination volume in the current quarter compared to the preceding quarter ending September 30, 2011, resulting in a $2.0 million increase in the gain on sale of mortgages.
Commenting on residential mortgage activity, Bauer added, "Residential mortgages have been a focus over the past several months as customer demand, sparked by lower mortgage rates, resulted in significantly higher revenues, while also providing an opportunity to increase product penetration rates for existing customers and to offer other products and services to customers new to the Bank
