Significant Transactions

Sale of Bank Headquarters

In February 2014, the Bank entered into a purchase agreement with an unrelated third party to sell the Bank’s main office building located at 25 West Main Street, Madison, Wisconsin, the adjacent surface parking lot immediately behind the main office building at 115 South Carroll Street and the 261-stall parking ramp located at 126 South Carroll Street. The transaction closed on December 19, 2014 and a $1.4 million gain was recognized on the parcels that were not included in the subsequent lease between the Bank and the buyer. The Bank entered into a nine year lease to rent a portion of the office building to house the branch located in the building and for additional office space. The remaining gain of $6.4 million, related to the space sold and leased back, was deferred and is being amortized into income over the remaining term of the lease.

Sale of Branches

The Bank sold its Richland Center branch, which was a leased facility in rural Wisconsin, on December 31, 2014. The sale consisted of selected loans, furniture and equipment and deposits. The amount of deposits sold was $16.6 million and a gain of $1.0 million was recorded on the sale.

The Bank sold its Viroqua branch operations on May 15, 2015. The sale consisted of selected loans and deposits. In addition, the sale included the building, furniture and equipment. As part of the sale, a lease on the land was terminated. Total deposits sold were $11.2 million and generated a gain on the sale of the branch operations of $448,000.

The Bank sold its Winneconne branch operations on September 25, 2015. The sale consisted of selected loans and deposits. In addition, the sale included the building, furniture and equipment. Total deposits sold were $11.9 million and generated a gain on the sale of the branch operations of $538,000. A gain of $294,000 was also recorded on the sale of the branch building.

Purchase of New Building

In January 2015, the Bank completed the purchase of a new building located on the east side of Madison at a purchase price of $4.0 million. This facility, which houses the Bank’s support departments, became operational during the second quarter of 2015.

Operational Efficiency Measures

The Bank completed several actions during the third quarter of 2015 to address and improve overall operational efficiency. Management anticipates that these actions will result in an annual net cost savings related to reduced compensation, occupancy and other operating costs of approximately $5.4 million. These actions included:

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Offering a Voluntary Separation Plan ("VSP") to eligible employees. The VSP was designed to provide eligible employees with a variety of benefits, including additional compensation, subsidized COBRA health benefits and optional job placement services. The program was offered to a group of 140 of the Bank’s 705 employees and 78 employees accepted the VSP with agreed-upon exit dates through September 30, 2015.

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Consolidating six retail bank branches in the Wisconsin communities of Appleton, Menasha, Oshkosh, Janesville, Franklin and Madison. Customers continue to have convenient and uninterrupted access to their deposit, lending and investment accounts at surrounding Bank locations in each of these markets, as well as access to online banking, ATMs and the Bank’s Contact Center. A total of 21 full- and part-time positions not eligible for the VSP were eliminated through the six branch consolidation.

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Creating a new Universal Banker staffing model in the Bank’s branch delivery system to address consumer shift towards digital products and services which resulted in lower transaction volumes. The Universal Banker can perform most branch transactions for customers resulting in improved customer service. The Universal Bank staffing model has a core of employees who can process teller transactions, open new accounts and provide customer service. This core group of employees is further supported with one or more customer service associates.

As a result of these operational efficiency measures, the Bank incurred one-time costs of $3.8 million, composed primarily of employment severance and asset disposition costs. A gain of $1.4 million was recorded for the sale of the Appleton Fox River Drive branch building.

Deferred Tax Asset Valuation

During September 2009, the Company established a full deferred tax asset valuation allowance covering its federal and state tax loss carryforwards. As a result of management’s ongoing, periodic assessments of the deferred tax asset position, the Company determined that it is more likely than not it will be able to realize its deferred tax asset, including its entire federal tax loss carryforwards and a significant portion of its state tax loss carryforwards, with the exception of $4.2 million pertaining to certain multi state loss carryforwards, including states in which the Company no longer does business. Therefore, the Company reversed substantially all the deferred tax asset valuation allowance which resulted in the recognition of a $108.9 million income tax benefit, net of current tax provision.

Negative Provision for Loan Losses

The allowance for loan losses is maintained at a level believed appropriate by management to absorb probable and estimable losses inherent in the loan portfolio and is based on: the size and current risk characteristics of the loan portfolio; an assessment of individual impaired loans; actual and anticipated loss experience; and current economic events in specific industries and geographical areas. These economic events include unemployment levels, regulatory guidance and general economic conditions. Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience and consideration of current economic trends, all of which may be susceptible to significant change. Therefore, the allowance for loan losses accounts for elements of imprecision and estimation risk inherent in the calculation.

During the year ended December 31, 2015, after a review of the factors listed above, the Company determined its levels of allowance were no longer warranted. The impact to the allowance for loan losses for the year ended December 31, 2015, was a $29.5 million negative provision for loan losses.

Initial Public Offering

In October 2014, the Company completed its initial public offering (the “IPO”) in which the Company issued and sold 250,000 shares of common stock at a public offering price of $26.00 per share. The Company also granted the underwriters a 30-day option to purchase up to 55,794 additional shares of common stock to cover any over-allotments which was executed for the full amount on October 30, 2014. The Company received net proceeds, which includes the proceeds from the over-allotments, of $5.6 million after deducting underwriting discounts and commissions of $517,000 and other offering expenses totaling $1.8 million. The underwriting discounts, commissions and other offering expenses were deducted against additional paid-in capital and were not included in operating expense of the Company. The Company’s shares are now listed on the Nasdaq Global Market under the symbol “ABCW.” Common shares outstanding at December 31, 2015 were 9,597,392.

Bankruptcy Proceedings and Emergence from Chapter 11

The Company experienced significant operating losses beginning in 2009, significant levels of criticized assets, depleted levels of capital and difficulty in raising additional capital necessary to stabilize the Bank as required by banking regulators, primarily due to the economic downturn that began in 2008. As a result, in 2009 both the Company and the Bank became subject to Orders to Cease and Desist. Also, the Company owed $183.5 million under a credit facility, which the Company was unable to repay. The Company issued $110 million of Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “TARP Preferred Stock”) and warrants to purchase common stock (the “TARP Warrant) to the United States Department of the Treasury (the “Treasury”) as part of the Troubled Asset Relief Program (“TARP”) in 2009. In order to facilitate the restructuring and the recapitalization of the Bank, on August 12, 2013 (the “Petition Date”), the Company filed a voluntary petition for relief (the “Chapter 11 Case”) under the provisions of Chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq., in the United States Bankruptcy Court for the Western District of Wisconsin (the “Bankruptcy Court”) to implement a “pre-packaged” plan of reorganization (the “Plan of Reorganization”).

Plan of Reorganization

Pursuant to the Plan of Reorganization, the following transactions (collectively, the “Recapitalization”) were consummated on September 27, 2013 (the “Effective Date”)


•	Delaware Conversion and Reverse Stock Split

Pursuant to the Plan of Reorganization, on September 25, 2013, the Company (i) converted from a Wisconsin Corporation to a Delaware Corporation in accordance with Section 265 of the Delaware General Company Law and (ii) filed a Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Amended Charter”), to, among other things, declassify the Board, increase the number of authorized shares of common stock and adopt certain restrictions on acquisitions and dispositions of securities. The Amended Charter provides for (a) $2,000,000,000 shares of authorized common stock, par value $0.01 per share (the “Common Stock”), and (b) 1,000,000 shares of authorized preferred stock, par value $0.01 per share. A reverse stock split was effected and a subsequent amendment to the corporate charter was filed on October 2, 2013 providing for 11,900,000 shares of authorized common stock, par value $0.01 per share and 100,000 shares of authorized preferred stock, par value $0.01.


•	Private Placements

In connection with the Plan of Reorganization, the Company entered into stock purchase agreements (the “Investor SPAs”) with investors for the purchase and sale of 1,750,000,000 shares of our common stock (adjusted to 8,750,000 shares on October 2, 2013 as a result of the Reverse Stock Split) at a pre-Reverse Stock Split purchase price of $0.10 per share (implying a $20.00 per share price after giving effect to the Reverse Stock Split) and received gross proceeds of $175.0 million (the “Private Placements”) and incurred transaction costs of $14.4 million. The investors were certain of our officers and directors and institutional investors.


•	TARP Exchange

On January 30, 2009, pursuant to the Treasury’s Capital Purchase Program, the Company issued and sold to the Treasury 110,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B of the Company with an aggregate liquidation preference of $110.0 million (the “TARP Preferred Stock”). In addition, the Company issued to the Treasury a warrant (the “TARP Warrant”) to purchase up to 7,399,103 shares of our common stock, par value $0.10 per share (the “Legacy Common Stock”), at an initial per share exercise price of $2.23. Pursuant to the Plan of Reorganization, the Company, on the Effective Date (i) exchanged the TARP Preferred Stock for 60,000,000 shares of common stock (adjusted to 300,000 common shares as a result of the Reverse Stock Split) of common stock (the “Treasury Issuance”) and (ii) cancelled a warrant (the “TARP Warrant”) to purchase up to 7,399,103 shares of our pre-Reorganization common stock, par value $0.10 per share (the “Legacy Common Stock”) in its entirety (collectively, the “TARP Exchange”). The difference between the Common Stock issued and the Preferred Stock redeemed of $104.0 million was recorded as an increase directly to retained earnings. The $104.0 million represents a return from the Preferred stockholder thereby increasing the amount available to common stockholders for purposes of earnings per share.

Following the effectiveness of the Plan of Reorganization, the Treasury sold to certain institutional investors (the “Secondary Investors”) all of the shares of Common Stock delivered to the Treasury in connection with the Treasury Issuance at a purchase price equal to $0.10 per share (the “Secondary Treasury Sales”) under the securities purchase agreements, dated as of September 19, 2013, among the Treasury, the Secondary Investor and (with respect to certain provisions) the Company. In connection with the Secondary Treasury Sales, the Company entered into secondary sale purchaser agreements with the Secondary Investors pursuant to which the company made certain representations and warranties to the Investor and provided rights to the Secondary Investors similar to the rights provided to Investors under the Stock Purchase Agreements. The Treasury then sold all of the shares of common stock delivered and received gross proceeds of $6.0 million and ceased to be a stockholder.


•	Cancellation of Legacy Common Stock

On the Effective Date of the Plan of Reorganization, all shares of the outstanding Legacy Common Stock including those shares held as treasury stock and in any stock incentive plans were cancelled for no consideration.


•	Senior Debt Settlement

The aggregate amount of obligations under the Credit Agreement was approximately $183.5 million as of August 12, 2013 (including with respect to gross loans, accrued but unpaid interest thereon and all administrative and other fees or penalties). On the Effective Date the Company satisfied all of our obligations under the Credit Agreement by a cash payment to the Lenders of $49.0 million (plus expense reimbursement as contemplated by the Credit Agreement). As a result of the transaction, the Company recognized a gain on extinguishment of debt of $134.5 million. All other claims were unaffected by, and were paid in full under, the Plan of Reorganization.

Emergence Accounting

Upon emergence, we determined we did not meet the requirements to apply fresh start reporting under applicable accounting standards because we did not meet the solvency criteria of ASC Topic 852-10-45-19. The reorganization value immediately before the date of confirmation was greater than the total of all post-petition liabilities and allowed claims and, therefore, indicative of not meeting the test to require fresh start accounting under ASC Topic 852 - Reorganizations. As of the date of confirmation, the estimated enterprise value (or reorganization value) was approximately $2.2 billion. The Company utilized the equity value using the income and market approach to approximate fair value. Accordingly, the consolidated financial statements do not include fresh start reporting, whereby the Company would have to revalue all of its assets and liabilities. At the time of filing for the Chapter 11 Case, the Company identified liabilities subject to compromise of $188.3 million, which included the outstanding Credit Agreement of approximately $116.3 million, interest and fees due under the Credit Agreement of $67.2 million and $4.8 million in other liabilities.

Lifting of the Regulatory Orders

The Bank’s primary regulator is the Office of the Comptroller of the Currency (“OCC”). The Federal Reserve is the primary regulator of the Company. On June 26, 2009, the Company and the Bank each consented to the issuance of an Order to Cease and Desist (the “Company Order” and the “Bank Order,” respectively). On August 31, 2010, a Prompt and Corrective Action Directive (“PCA Directive”) was issued for the Bank. The Company Order required among other things a larger capital ratio and the submission of a capital restoration plan along with a revised business plan.

On April 2, 2014, the Bank was notified that the Bank Order and the PCA Directive were terminated. On July 31, 2014, the Company was notified that the Company Order was terminated.