EXHIBIT 99.1
For Immediate Release
ANCHOR BANCORP WISCONSIN INC.
INDEPENDENT AUDITOR WITHDRAWS PRIOR REPORTS
MADISON, WI (June 29, 2005) - Anchor BanCorp Wisconsin Inc. (NASDAQ:
ABCW) announced today that Ernst & Young LLP, the Company's independent
registered public accounting firm, has withdrawn its previously-issued audit
reports and completed interim reviews related to the Company's consolidated
financial statements for fiscal 2005, 2004 and 2003(including interim periods
therein) and prior financial statements included in annual and quarterly
reports on Forms 10-K and 10-Q filed by the Company with the SEC because of
material adjustments which were required as a result of the Company's
incorrect accounting for loans originated by the Company through the Mortgage
Partnership Finance ("MPF") 100 program of the Federal Home Loan Bank ("FHLB")
of Chicago. Ernst & Young LLP also stated that the Company has a material
weakness in its system of internal controls over financial reporting related
to the accounting for the Company's participation in the MPF 100 program. As
a result of the foregoing, the Company is unable to complete the preparation
of its consolidated financial statements for fiscal 2005 at this time and the
preliminary unaudited results for fiscal 2005 included in the Company's press
release issued on May 20, 2005 should no longer be relied upon.
The corrections which are necessary to restate the Company's financial
statements generally relate to the timing of the recognition of income from
its participation in the MPF program and do not reflect a change in the
underlying economics of the Company's participation in the MPF program, the
Company's business or its future prospects.
MPF Program
Historically, the Company has been an active participant in the MPF
program developed by the FHLB of Chicago and implemented by eight other FHLBs.
The program generally is intended to provide member institutions with an
alternative to holding fixed-rate residential mortgage loans in their loan
portfolios or selling them in the secondary market. Institutions that
participate in the MPF program originate loans that are purchased or funded by
the FHLBs. Credit risk is shared between the participating institution and
the FHLB by structuring the potential loss into several layers, with the
participating institution being liable for losses on loans delivered pursuant
to the MPF program after application of an initial layer of losses (after any
private mortgage insurance coverage) is absorbed by the FHLB, subject to an
agreed-upon maximum amount of such secondary credit enhancement which is
intended to be in an amount equivalent to a "AA" credit risk rating by a
rating agency. The participating institution receives credit enhancement fees
from the FHLB for providing this secondary credit enhancement and continuing
to manage the credit risk of the MPF loans. Participating institutions also
are paid specified servicing fees for servicing the MPF loans.
An institution participates in the MPF program either by originating
individual loans on a "flow" basis as agent for the FHLB pursuant to the MPF
100 program or by selling as principal closed loans owned by it to the FHLB
pursuant to one of the FHLB's closed-loan programs. Under applicable
guidance, loans originated on an agency basis pursuant to the MPF 100 program
are not sales of loans under Financial Accounting Standards Board ("FASB")
Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities" ("FAS 140"). In contrast, closed loans
which are sold by a participating institution to the FHLB pursuant to one of
the FHLB's closed-loan programs involve loan sales and the institution must
account for these transactions in accordance with FAS 140.
Anticipated Revisions
The Company has participated in the MPF program by originating loans on
an agency basis through the MPF 100 program, but has determined that it
incorrectly accounted for these transactions as sales of loans under FAS 140.
Accordingly, the Company will revise its income from gains on sale of loans
relating to the MPF program and make appropriate adjustments to the amount of
the related mortgage servicing rights and other items.
Although the Company has not yet completed its review, management
preliminarily estimates that the effects of the revisions to its statements of
operations will be to decrease net income by up to approximately $0.21 per
fully diluted share in the aggregate for fiscal 2003, 2004 and 2005. The
effects of the revisions in these years will be recognized in net income in
future years. The capital accounts of the Company will not be materially
affected, and the risk-based capital regulatory ratios of the Company's
subsidiary bank may even modestly increase because the Company has been
maintaining the higher amount of risk-based capital required for participation
in a closed-loan MPF program (100% of the credit enhancement obligation, not
to exceed 4% of the unpaid principal balance of the related loans), as
compared to the lower capital treatment afforded direct credit substitutes
under the MPF 100 program (8% of the credit enhancement obligation). All
estimates contained herein are subject to change until the Company completes
the preparation of its restated financial statements and they are reviewed and
audited by its independent public accountants.
The Company's Form 10-K for the fiscal year ended March 31, 2005 to be
filed with the SEC will include disclosure of the effects of the revisions to
the financial statements for each of the periods included in the audited
financial statements for the fiscal years ended March 31, 2003, 2004 and 2005
and on the unaudited quarterly results of operations for fiscal 2004 and
fiscal 2005.
Filing of Form 10-K
The Company previously filed a Form 12b-25 with the SEC to report a
delay in the filing of the Company's Form 10-K for fiscal 2005. If a
completed Form 10-K is filed within 15 days after the prescribed due date for
the Form 10-K, then the Form 10-K is deemed timely filed. Because of the
additional work necessary to restate the Company's financial statements, the
Company will not be able to file its Form 10-K for 2005 by June 29, 2005.
Therefore,
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notwithstanding the Form 12b-25 filing, the Company expects that it
will file its Form 10-K for fiscal 2005 late, but expects to be able to file
this Form 10-K in July 2005.
The Company's management and the Audit Committee of the Company's Board
of Directors have discussed the matters disclosed in this Form 8-K with Ernst
& Young LLP and are taking appropriate remedial action.
Annual Meeting
The Company also announced that in light of the decision to restate its
financial statements, it has delayed the holding of its annual meeting of
shareholders to a to-be-determined date.
This news release contains certain forward-looking statements with
respect to the financial condition, results of operations and business of
Anchor BanCorp. Forward-looking statements are subject to various factors
which could cause actual results to differ materially from these estimates.
These factors include, but are not limited to, changes in general economic
conditions, interest rates, deposit flows, loan demand, asset quality,
competition, legislation or regulation and accounting principles, policies or
guidelines, as well as other economic, competitive, governmental, regulatory
and accounting factors affecting Anchor BanCorp's operations. Investors are
encouraged to access Anchor BanCorp's periodic reports filed with the
Securities and Exchange Commission for financial and business information
regarding Anchor BanCorp, including information which could affect Anchor
BanCorp's forward-looking statements. The forward-looking statements in this
news release speak only as of the date of the release, and Anchor BanCorp
assumes no obligation to update the forward-looking statements or to update
the reasons why actual results could differ from those contained in the
forward- looking statements.
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