Anchor BanCorp Wisconsin (ABCW) in Madison narrowed its quarterly loss as its credit trends continued to improve.

The $2.8 billion-asset company reported Thursday a loss of $3.4 million for its fiscal first quarter, compared to a loss of $8.2 million a year earlier.

Although Anchor's credit trends were positive, "considerable effort remains to be expended resolving troubled loans and the disposition of foreclosed properties," Chris Bauer, the company's president and chief executive, said in a press release. The favorable trends from credit were partially offset by costs associated with carrying a high level of foreclosed properties, Bauer said.

Other real estate owned fell 6% from a year earlier, to $84 million. Net chargeoffs fell 67% from a quarter earlier and 47% from a year earlier, to $7.9 million. This was the first time that quarterly net chargeoffs were below $10 million since the quarter that ended March 31, 2010. 

Nonperforming loans fell more than 27% from a year earlier, to $189 million. Anchor's loan-loss provision fell more than 50% from a year earlier, to $1.7 million.

Noninterest income rose about 47% from a year earlier, to $13.5 million. The increase was primarily due to $5.8 million of gains from the sale of mortgage loans. Noninterest expense fell about 1% from a year earlier, to $31.6 million, largely because of a decline is costs tied to other real estate owned.

Investment and insurance commissions were relatively flat from a year earlier, at $1 million.

Although the quarterly results were improved, Anchor warned that it was still burdened by a significant amount of debt and preferred stock obligations. It currently owes $116.3 million to various lenders led by U.S. Bancorp's U.S. Bank in addition to accrued but unpaid interest and fees totaling $45.8 million associated with the obligation. The amount was originally due in March 2009 but has been extended to November.

Anchor also issued $110 million in preferred stock in January 2009 to the Treasury Department under the Troubled Asset Relief Program. It has deferred 13 quarterly preferred stock dividend payments to the department totaling $20.4 million, including interest.

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