Anchor BanCorp Wisconsin Announces Prepayment of $150 Million of FHLB Advances

Dec 27 - Anchor BanCorp Wisconsin Inc. (OTC Market:ABCW), the holding company for AnchorBank, fsb., has completed the prepayment of $150 million of Federal Home Loan Bank advances. The borrowings extinguished were floating-rate advances with maturities in 2015 and had a current weighted average rate of 1.41 percent. The repayment of the FHLB advances triggered a pre-payment penalty of $3.5 million.

Chris Bauer, president and CEO of the corporation and the bank, said: "As stated in our second quarter 2012 earnings release, we have been implementing strategies to increase bank profitability. Given the economic environment, using excess cash at the bank level to reduce total funding cost is an opportunity to enhance the bank's profitability by increasing net interest margin going forward. Even though the bank's cash position has been reduced by $150 million, the bank's balance sheet remains strong as we continue to maintain a high degree of liquidity."

Results of the Transaction

• Eliminates estimated annualized interest cost of approximately $2.1 million on $150 million of paid off advances, reducing the bank's overall cost of funds going forward.
• Reduces cash on hand, which earns only modest returns in the current interest rate environment.
• The FHLB advance pre-payment penalty of $3.5 million, or $0.17 per share, will be recouped by a higher net interest rate margin going forward.
• The Tier 1 leverage ratio adjusted for the pre-payment of the FHLB advances increases 14 basis points to 4.77 percent from 4.63 percent reported at Sept. 30, 2012. The adjusted ratio only takes into account the reduction in FHLB advances and the prepayment fee.
• Better positions the bank to compete in the current rate environment while maintaining a flexible liquidity position for future opportunities.
• The bank's interest rate risk profile is relatively unchanged.

While the pre-payment of FHLB advances will increase the Tier 1 leverage ratio at 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 of loan principal to various lenders led by U.S. Bank under a credit agreement that matures June 30, 2013. In addition, accrued but unpaid interest and fees at Nov. 30, 2012, totaling $53.9 million associated with this obligation are also due and payable at maturity.
• The corporation issued $110 million in preferred stock in January 2009 to the United States Treasury pursuant to the Treasury's Capital Purchase Program. As permitted under the CPP program, the corporation has deferred 15 quarterly preferred stock dividend payments to the Treasury, which has resulted in total unpaid dividends at Nov. 30, 2012, of $23.1 million, including compounding.
• 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 continues to work with Sandler O'Neill & Partners, L.P. as its financial adviser in efforts to address its capital needs.

About Anchor BanCorp Wisconsin Inc.
Anchor BanCorp Wisconsin Inc.'s stock is traded in the over-the-counter market under the symbol ABCW. The bank has 55 offices located in Wisconsin.