885322--6/29/2010--ANCHOR_BANCORP_WISCONSIN

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{loss, insurance, financial}

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The soundness of other financial institutions could negatively affect us. Regulation by federal and state agencies could adversely affect our business, revenue, and profit margins. Competition in the financial services industry is intense and could result in losing business or reducing margins. We continually encounter technological change. Risks Related to Our Business We experienced a net loss in fiscal 2010 directly attributable to a substantial deterioration in our commercial real estate, land and construction loan portfolio and the resulting increase in our provision for loan losses. Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. The Bank may be subject to a federal conservatorship or receivership if it cannot comply with the Cease and Desist Order, the Capital Restoration Plan, the Memorandum of Understanding, or if its condition continues to deteriorate. Our business is subject to liquidity risk, and changes in our source of funds may adversely affect our performance and financial condition by increasing our cost of funds. Concern of our customers over deposit insurance may cause a decrease in deposits. Our liquidity is largely dependent upon our ability to receive dividends from our subsidiary bank, which accounts for most of our revenue and could affect our ability to pay dividends, and we may be unable to enhance liquidity from other sources. Additional increases in our level of non-performing assets would have an adverse effect on our financial condition and results of operations. Future sales or other dilution of the Corporation s equity may adversely affect the market price of the Corporation s common stock. Holders of our common stock have no preemptive rights and are subject to potential dilution. On June 26, 2009, the Corporation and the Bank each consented to the issuance of an Order to Cease and Desist by the Office of Thrift Supervision. If we do not raise additional capital, we may not be in compliance with the capital requirements of the Bank s Cease and Desist Order, which could have a material adverse effect upon us. Anchor Bancorp and the Bank are no longer considered adequately capitalized for regulatory purposes, which causes us to incur increased premiums for deposit insurance, limits the Bank s ability to gather brokered deposits, and will trigger acceleration of certain of our brokered deposits. Our allowance for losses on loans and leases may not be adequate to cover probable losses. Future Federal Deposit Insurance Corporation assessments will hurt our earnings. If our investment in the common stock of the Federal Home Loan Bank of Chicago is other than temporarily impaired, our financial condition and results of operations could be materially impaired. We are not paying dividends on our common stock and are deferring distributions on our preferred stock, and are otherwise restricted from paying cash dividends on our common stock. The failure to resume paying dividends may adversely affect us. Maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services. We may fail to meet continued listing requirements with NASDAQ. Continued deterioration in the real estate markets or other segments of our loan portfolio could lead to additional losses, which could have a material negative effect on our financial condition and results of operations. Significant legal actions could subject us to substantial uninsured liabilities. While we attempt to manage the risk from changes in market interest rates, interest rate risk management techniques are not exact. In addition, we may not be able to economically hedge our interest rate risk. A rapid or substantial increase or decrease in interest rates could adversely affect our net interest income and results of operations. An interruption in or breach in security of our information systems may result in a loss of customer business. Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business. We are exposed to risk of environmental liabilities with respect to properties to which it takes title. Risks Related to Our Credit Agreement We are party to a credit agreement that requires us to observe certain covenants that limit our flexibility in operating our business. We must pay in full the outstanding balance under the Credit Agreement by the earlier of May 31, 2011 or the receipt of net proceeds of a financing transaction from the sale of equity securities. Risks Related to Recent Branch Sales We may fail to complete the proposed sale of four branches to Nicolet National Bank of Green Bay or realize the anticipated benefits of the disposition. Risks Related to Recent Market, Legislative and Regulatory Events The TARP CPP and the ARRA impose certain executive compensation and corporate governance requirements that may adversely affect us and our business, including our ability to recruit and retain qualified employees. TARP lending goals may not be attainable. The Company and the Bank are subject to extensive regulation, supervision and examination by federal banking authorities. There can be no assurance that enacted legislation or any proposed federal programs will stabilize the U.S. financial system and such legislation and programs may adversely affect us. The fiscal and monetary policies of the federal government and its agencies could have a material adverse effect on our earnings. Management s ability to retain key officers and employees may change. We are subject to various reporting requirements that increase compliance costs, and failure to comply timely could adversely affect our reputation and the value of our common stock. Non-compliance with USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions, and curtail expansion opportunities

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885322--6/29/2010--ANCHOR_BANCORP_WISCONSIN_INC