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Business Description Anchor Mutual Savings Bank is a Washington chartered mutual savings bank and upon completion of the conversion will be the wholly-owned subsidiary of Anchor Bancorp. Anchor Bank was organized in 1907 as a Washington state chartered savings and loan association, converted to a federal mutual savings and loan association in 1935, and converted to a Washington state chartered mutual savings bank in 1990. As a mutual savings bank, Anchor Mutual Savings Bank has a board of trustees that oversees its activities. Following the conversion, Anchor Mutual Savings Bank’s existing board of trustees will continue as a board of directors. Also in connection with the conversion, Anchor Mutual Savings Bank is changing its name to “Anchor Bank.” For purposes of this prospectus, references herein to the board of directors also include the board of trustees of Anchor Mutual Savings Bank in its present mutual form, and references to Anchor Bank also include the institution in its present mutual form. Anchor Bank is a community-based savings bank primarily serving Western Washington through our 15 full-service banking offices (including five Wal-Mart store locations) and one loan production office located within Grays Harbor, Thurston, Lewis, Pierce, Mason and Clark counties, Washington. We are in the business of attracting deposits from the public and utilizing those deposits to originate loans. We offer a wide range of loan products to meet the demands of our customers , however , at June 30, 2010, 89.5% of our loans were collateralized by real estate . Historically, lending activities have been primarily directed toward the origination of one- to four-family residential construction, commercial real estate and consumer loans. Since 1990, we have also offered commercial real estate loans and multi-family loans primarily in Western Washington. To an increasing extent in recent years, lending activities have also included the origination of residential construction loans through brokers, in particular within the Portland, Oregon metropolitan area and increased reliance on non-deposit sources of funds. Anchor Bank is a member of the Federal Home Loan Bank System and its deposits are insured by the FDIC up to applicable limits. Anchor Bank is subject to comprehensive regulation, examination and supervision by the DFI, and the FDIC. At June 30, 2010, we had total assets of $544.8 million, deposits of $355.8 million and equity of $44.7 million. Anchor Bank maintains a website at www.anchornetbank.com. Upon completion of the subscription offering on December 13, 2010, the website will provide an update on the status of the offering. The information on our website is not part of this prospectus. For the years ended June 30, 2010, 2009 and 2008, Anchor Bank recorded net income of $420,000, a net loss of $20.3 million and net income of $786,000, respectively. As a result of the losses in the years ended June 30, 2010 and 2009, there were tax benefits; our loss before tax benefit in the years ended June 30, 2010 and 2009 was $2.5 million and $23.2 million, respectively. For the year ended June 30, 2008, we recorded net income before tax benefit of $784,000. For the years ended June 30, 2007 and 2006 Anchor Bank recorded net income of $3.8 million and $3.9 million, respectively. Since the latter half of 2007, depressed economic conditions have prevailed in portions of the United States, including our market area of Western Washington and the Portland, Oregon metropolitan area, which have experienced substantial home price declines, lower levels of existing home sale activity, increased foreclosures and above average unemployment rates. Based on information from the Washington Center for Real Estate Research, for the quarter ended March 31, 2010, the median home price in our six-county market area was $183,000, a 24% decline compared to the quarter ended September 30, 2007. In addition, existing home sales in our six-county market area for the quarter ended March 31, 2010 declined by 41% compared to the quarter ended September 30, 2007. Using data from the FDIC, foreclosures as a percentage of all mortgage loans in the State of Washington increased from approximately 0.32% as of September 2007 to approximately 0.59% as of September 2009 and increased to 0.83% for June 2010. According to the Department of Labor, the average unemployment rate in the counties in our market area averaged 10.6% during June 2010, an increase from an average of 5.1% during September 2007. These unemployment rates are higher than the national unemployment rates of 9.5% and 4.5%, as of June 2010 and September 2007, respectively. For additional information regarding the economic conditions of our market area. As a result, we have experienced a decline in the values of real estate collateral supporting our construction real estate and land acquisition and development loans, and experienced increased loan delinquencies and defaults. From June 30, 2007 to June 30, 2009, non-performing assets to total assets increased from 0.8% to 9.7% of assets. At June 30, 2010, non-performing assets totaled $35.2 million, or 6.5% of total assets, including $19.8 million in non-accruing loans delinquent for 90 days or more, $886,000 of accruing loans that were past maturity and $14.6 million in real estate owned assets. In addition, at June 30, 2010, Anchor Bank had $13.5 million in troubled debt restructurings and $7.8 million in loans delinquent from 30 to 89 days. At June 30, 2010, our construction loan portfolio accounted for 71.6% of our non-accruing and accruing loans contractually past due 90 days or more on such date. ----- The principal executive offices of Anchor Bancorp are located at 601 Woodland Square Loop SE, Lacey, Washington 98503 and its telephone number is (360) 491-2250. Anchor Bank maintains a website at www.anchornetbank.com.