When Anchor BanCorp Wisconsin Inc. took $110 million from the government last month, the company said that it was well capitalized and that the extra cushion would help it work with struggling borrowers.
Now the $4.8 billion-asset parent of AnchorBank is itself a struggling borrower at risk of losing its most valuable possession.
Anchor said in a Securities and Exchange Commission filing Tuesday that it must raise capital to pay off its debt to U.S. Bancorp. Anchor owes the Minneapolis company $116 million, and nearly half of that comes due March 2. Since the debt is secured by its stock in AnchorBank, U.S. Bancorp could seize the thrift.
Analysts said raising capital might be difficult considering the troubles in Anchor's loan portfolio. The Madison company warned that its ability to survive is now in jeopardy.
"We do not have sufficient cash on hand to reduce our outstanding borrowings," it said in the filing. "There can be no assurances that we will be able to raise sufficient capital."
On Wednesday, Anchor would say only that it is negotiating with U.S. Bancorp, which did not return a call seeking comment.
"We are continuing to work with them to develop an appropriate strategy to repay our loan to them in a mutually beneficial way as market conditions permit," Dale Ringgenberg, Anchor's chief financial officer, said in an interview. He would not elaborate.
Anchor also said Tuesday that it lost $167.3 million in its fiscal third quarter, which ended Dec. 31, as problem loans soared. It was the company's second consecutive quarter in the red. It earned $6.3 million, or 30 cents a share, in the year-earlier quarter.
Steve Brown, the president and chief executive of Pacific Coast Bankers' Bank in San Francisco, said bank foreclosures have been a rarity since the thrift crisis of the 1980s and early 1990s.
"Banks don't want to foreclose on any customer, and this is a customer," he said. "Bank lenders don't really want to acquire the bank."
However, Mr. Brown said, there could be an uptick in such seizures because of the economic climate. "I don't think we will see a lot, but the market is volatile so there could be a few here and there."
Daniel Cardenas, an analyst with Howe Barnes Hoefer & Arnett Inc., said that, in light of the quarterly loss and evidence of further credit deterioration, Anchor is not a prime candidate to raise capital.
"I don't think it is a strong likelihood given the way the market is," Mr. Cardenas said. "Even those that are posting substantially better credit-quality numbers are finding it extremely challenging to raise common equity right now."
Though infusions from the Treasury Department's Troubled Asset Relief Program have helped some banks attract private investors, the $110 million it received on Jan. 30 is unlikely to do the same for Anchor, Mr. Cardenas said. That is because even after the infusion, Anchor's capital ratios are thin.
At yearend the bank's core capital ratio was 5.14% and its total risk-based capital ratio was 8.08%, making it only "adequately capitalized" under regulatory definitions.
The Tarp funds plugged the hole: the company said in its SEC filing that core capital rose to 7.46% and total risk-based capital rose to 11.15% on Jan. 30.
A $120 million loan from U.S. Bancorp financed Anchor's 2007 acquisition of S&C Banco Inc. (Anchor has repaid $4 million of that.) The debt was originally due in full on Sept. 30, but U.S. Bancorp has amended the terms twice. Now the debt must be paid off by the end of this year.
The quarterly loss was driven by a $93.3 million provision for loan losses, a twelvefold increase from a year earlier, as nonperforming assets climbed 92%, to $166.3 million. The ratio of nonperforming assets to total assets was 3.47% at yearend, up from 1.84% a year earlier.
Also contributing to the loss was a $72.2 million goodwill impairment charge and a $36.5 million allowance against deferred tax assets.