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Regulatory Order Puts Pressure on Anchor

The Office of Thrift Supervision took further action against the Madison, Wisconsin thrift.



) -- A "prompt corrective action directive" from the Office of Thrift Supervision (OTS) may have set the clock ticking for additional regulatory actions against

AnchorBank, FSB


The order was entered into with the cooperation of the bank on August 31, and highlighted the thrift's noncompliance with an earlier regulatory order.

AnchorBank, FSB was included among


Bank Watch List

of undercapitalized institutions, based on second-quarter regulatory data provided by SNL Financial.

The thrift is the main subsidiary of

Anchor BanCorp Wisconsin


, which -- along with the subsidiary -- entered into a cease and desist order with the OTS back in June 2009, under which Anchor Bank, FSB was required to meet and maintain a core capital ratio of at least 7% and a total risk-based capital ratio of at least 11% by September 30, 2009. These ratios were required to be at least 8% and 12% by December 31, 2009.

While the OTS did not provide access to the new directive, it did emphasize that the cease and desist order remained in effect.

The core capital ratio is another name for the Tier 1 leverage ratio. Most banks and thrifts are required to maintain core capital ratio of at least 5% and a total risk-based capital ratio of at least 10% to be considered

well capitalized

. The ratios need to be 4% and 8% for most banks and thrifts to be considered adequately capitalized, although regulators have raised minimum capital requirements for hundreds of institutions during the credit crisis.

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Anchor BanCorp Wisconsin and AnchorBank, FSB have been unable to raise sufficient capital to comply with the cease and desist order. The thrift's core capital ratio was 4.08% and the total risk-based capital ratio was 7.63% as of June 30, after the thrift posted a net loss of $6.8 million for the second quarter.

AnchorBank, FSB had $4 billion in total assets as of June 30. Nonperfomring assets -- including loans past due 90 days or more or in nonaccrual status and repossessed real estate - comprised 11.24% of total assets as of June 30, increasing from 10.29% the previous quarter and 4.20% a year earlier. In comparison, the aggregate second-quarter "noncurrent assets" ratio reported for all U.S. banks and thrifts by the Federal Deposit Insurance Corporation was 3.31%.

While the thrift subsidiary has posted net losses totaling $106 million over the past year as it built-up its loan loss reserves, actual loan losses have been light so far. The annualized ratio of net charge-offs to average loans for the second quarter was just 0.11% and has remained below 1% through the crisis.

A call to Anchor BanCorp Wisconsin's senior management requesting comment on the OTS's actions was not immediately returned.


Written by Philip van Doorn in Jupiter, Fla.


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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.