Anchor in Wisconsin Turns a Profit after Bankruptcy

Anchor Bancorp Wisconsin (ABCW) returned to profitability in the third quarter, after restructuring its debt through a Chapter 11 bankruptcy and getting $175 million in new capital.

The Madison-based company earned a quarterly profit of $10.3 million at the bank level, compared to a loss of $12.1 million in the same period of 2012, it announced last week.

Anchor's return to profitability follows its recapitalization in late September. Anchor got the $175 million infusion following a Chapter 11 restructuring, which allowed it to repay its creditors at a steep discount and convert $139 million in outstanding Troubled Asset Relief Program shares into common stock. Anchor recorded quarterly net earnings of $113.3 million at the holding-company level, including a $134.5 million gain on its bankruptcy-related debt extinguishment.

Improved asset quality helped lift the $2.2 billion-asset company to its third-quarter profit. It made no provision for loan losses, and its nonperforming assets decreased by 35%, to $162.9, from the year-prior period. Net chargeoffs fell 73%, to $4 million.

"[W]e still have significant work to do, including a continued effort to improve our balance sheet and troubled loan portfolio," said Chris Bauer, chief executive of Anchor's bank unit, in the news release. "The reorganization of Anchor Bancorp's capital structure and subsequent recapitalization have positioned the company for a return to health and profitability, and we look forward to continuing the momentum in 2014."

Anchor's net interest income dipped 2%, to $15.8 million. Excluding the $134.5 million gain from its bankruptcy-related debt extinguishment, Anchor's noninterest income fell 37%, to $8.2 million, on lower gains from loan sales.

Noninterest expense rose 38%, to $45.2 million, due mainly to a $16.1 million debt-prepayment penalty. Anchor incurred $1.9 million in expenses due to the bankruptcy, it said.