##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 Commission file number: 000-31207
 BANK MUTUAL CORPORATION
  Wisconsin
    
    39-2004336(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)4949 West Brown Deer Road, Milwaukee, Wisconsin
    
    53223(Address of principal executive offices)
    
    (Zip Code)
 (414) 354-1500
  Common Stock, $0.01 Par Value
    
    The NASDAQ Stock Market LLC(Title of each class)
    
    (Name of each exchange on which registered)
  NONE
  o þ
  o þ
  þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ
  DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K Into WhichDocument
    
    Portions of Document are IncorporatedCurrent Report on Form 8-K dated March 7, 2008
    
    Part IIProxy Statement for Annual Meeting ofShareholders on May 4, 2009
    
    Part III




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##### 



BANK MUTUAL CORPORATION
 FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
 FOR THE YEAR ENDED DECEMBER 31, 2008
 TABLE OF CONTENTS
 ITEM
    
    
    
    PAGEPART I1.
    
    Business
    
    
    31A.
    
    Risk Factors
    
    
    331B.
    
    Unresolved Staff Comments
    
    
    372.
    
    Properties
    
    
    373.
    
    Legal Proceedings
    
    
    374.
    
    Submission of Matters to a Vote of Security Holders
    
    
    37PART II5.
    
    Market for Registrants Common Equity, Related Stockholders
Matters, and
Issuer Purchases of Equity Securities
    
    
    386.
    
    Selected Financial Data
    
    
    407.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    427A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    558.
    
    Financial Statements and Supplementary Data
    
    
    599.
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    979A.
    
    Controls and Procedures
    
    
    979B.
    
    Other Information
    
    
    99PART III10.
    
    Directors, Executive Officers, and Corporate Governance
    
    
    10011.
    
    Executive Compensation
    
    
    10012.
    
    Security Ownership of Certain Beneficial Owners, Management,
And Related Stockholder Matters
    
    
    10013.
    
    Certain Relationships and Related Transactions and
Director Independence
    
    
    10014.
    
    Principal Accountant Fees and Services
    
    
    100PART IV15.
    
    Exhibits, Financial Statement Schedules
    
    
    101SIGNATURES
    
    
    
    
    102EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2
  
 2




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##### Table of Contents



Part I
 
 Item 1. Business
 General
    Cautionary Statement
  3




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##### Table of Contents



Market Area
      Competition
    4




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##### Table of Contents



Lending Activities
 Loan Portfolio Composition
  
 5




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##### Table of Contents



At December 312008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total(Dollars in thousands)Mortgage loans:Permanent mortgage loans:One- to four-family
    
    $
    881,288
    
    
    
    46.51
    %
    
    $
    1,059,307
    
    
    
    51.12
    %
    
    $
    1,123,905
    
    
    
    53.03
    %
    
    $
    1,048,881
    
    
    
    50.94
    %
    
    $
    903,498
    
    
    
    46.34
    %Multi-family
    
    
    190,497
    
    
    
    10.06
    
    
    
    206,640
    
    
    
    9.97
    
    
    
    157,768
    
    
    
    7.44
    
    
    
    155,908
    
    
    
    7.57
    
    
    
    161,641
    
    
    
    8.29Commercial real estate
    
    
    275,802
    
    
    
    14.56
    
    
    
    202,528
    
    
    
    9.77
    
    
    
    167,089
    
    
    
    7.88
    
    
    
    175,090
    
    
    
    8.50
    
    
    
    195,708
    
    
    
    10.04Total permanent mortgages
    
    
    1,347,587
    
    
    
    71.13
    
    
    
    1,468,475
    
    
    
    70.86
    
    
    
    1,448,762
    
    
    
    68.35
    
    
    
    1,379,879
    
    
    
    67.01
    
    
    
    1,260,847
    
    
    
    64.67Construction and development:One- to four-family
    
    
    17,349
    
    
    
    0.92
    
    
    
    35,040
    
    
    
    1.69
    
    
    
    53,861
    
    
    
    2.54
    
    
    
    71,247
    
    
    
    3.46
    
    
    
    47,130
    
    
    
    2.42Multi-family
    
    
    71,208
    
    
    
    3.76
    
    
    
    58,712
    
    
    
    2.83
    
    
    
    90,955
    
    
    
    4.29
    
    
    
    30,240
    
    
    
    1.47
    
    
    
    48,163
    
    
    
    2.47Commercial real estate
    
    
    70,612
    
    
    
    3.73
    
    
    
    76,649
    
    
    
    3.70
    
    
    
    42,507
    
    
    
    2.01
    
    
    
    53,718
    
    
    
    2.61
    
    
    
    46,101
    
    
    
    2.36Total construction and
development loans
    
    
    159,169
    
    
    
    8.41
    
    
    
    170,401
    
    
    
    8.22
    
    
    
    187,323
    
    
    
    8.84
    
    
    
    155,205
    
    
    
    7.54
    
    
    
    141,394
    
    
    
    7.25Total mortgage loans
    
    
    1,506,756
    
    
    
    79.54
    
    
    
    1,638,876
    
    
    
    79.08
    
    
    
    1,636,085
    
    
    
    77.19
    
    
    
    1,535,084
    
    
    
    74.55
    
    
    
    1,402,241
    
    
    
    71.92Consumer loans:Fixed-term equity
    
    
    173,104
    
    
    
    9.14
    
    
    
    199,161
    
    
    
    9.62
    
    
    
    227,811
    
    
    
    10.75
    
    
    
    246,460
    
    
    
    11.97
    
    
    
    266,635
    
    
    
    13.67Home equity lines of credit
    
    
    86,962
    
    
    
    4.59
    
    
    
    90,631
    
    
    
    4.37
    
    
    
    91,730
    
    
    
    4.33
    
    
    
    88,266
    
    
    
    4.29
    
    
    
    88,444
    
    
    
    4.54Student
    
    
    21,469
    
    
    
    1.13
    
    
    
    21,845
    
    
    
    1.05
    
    
    
    20,404
    
    
    
    0.96
    
    
    
    19,821
    
    
    
    0.96
    
    
    
    20,519
    
    
    
    1.05Home improvement
    
    
    36,023
    
    
    
    1.90
    
    
    
    33,604
    
    
    
    1.62
    
    
    
    33,287
    
    
    
    1.57
    
    
    
    30,067
    
    
    
    1.46
    
    
    
    24,293
    
    
    
    1.25Automobile
    
    
    11,775
    
    
    
    0.62
    
    
    
    24,878
    
    
    
    1.20
    
    
    
    46,752
    
    
    
    2.21
    
    
    
    69,237
    
    
    
    3.36
    
    
    
    61,469
    
    
    
    3.15Other
    
    
    8,740
    
    
    
    0.46
    
    
    
    9,439
    
    
    
    0.46
    
    
    
    11,262
    
    
    
    0.53
    
    
    
    12,944
    
    
    
    0.63
    
    
    
    15,911
    
    
    
    0.82Total consumer loans
    
    
    338,073
    
    
    
    17.84
    
    
    
    379,558
    
    
    
    18.32
    
    
    
    431,246
    
    
    
    20.35
    
    
    
    466,795
    
    
    
    22.67
    
    
    
    477,271
    
    
    
    24.48Commercial business loans
    
    
    49,623
    
    
    
    2.62
    
    
    
    53,784
    
    
    
    2.60
    
    
    
    52,056
    
    
    
    2.46
    
    
    
    57,247
    
    
    
    2.78
    
    
    
    70,170
    
    
    
    3.60Gross loans receivable
    
    
    1,894,452
    
    
    
    100.00
    %
    
    
    2,072,218
    
    
    
    100.00
    %
    
    
    2,119,387
    
    
    
    100.00
    %
    
    
    2,059,126
    
    
    
    100.00
    %
    
    
    1,949,682
    
    
    
    100.00
    %Undisbursed loan proceeds
    
    
    (54,187
    )
    
    
    
    
    
    
    (68,457
    )
    
    
    
    
    
    
    (85,897
    )
    
    
    
    
    
    
    (60,014
    )
    
    
    
    
    
    
    (60,653
    )Allowance for loan losses
    
    
    (12,208
    )
    
    
    
    
    
    
    (11,774
    )
    
    
    
    
    
    
    (12,574
    )
    
    
    
    
    
    
    (12,090
    )
    
    
    
    
    
    
    (13,923
    )Deferred costs and discounts, net
    
    
    996
    
    
    
    
    
    
    
    2,569
    
    
    
    
    
    
    
    3,409
    
    
    
    
    
    
    
    3,470
    
    
    
    
    
    
    
    779Total loans receivable, net
    
    $
    1,829,053
    
    
    
    
    
    
    $
    1,994,556
    
    
    
    
    
    
    $
    2,024,325
    
    
    
    
    
    
    $
    1,990,492
    
    
    
    
    
    
    $
    1,875,885
 6




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##### Table of Contents



Selected Loan Maturities
 At December 31, 2008Construction andCommercial
    
    DevelopmentBusiness Loans
    
    Loans
    
    Total(Dollars in thousands)Amounts due:Within one year or less
    
    $
    15,276
    
    
    $
    24,593
    
    
    $
    39,869After one year through five years
    
    
    29,420
    
    
    
    72,282
    
    
    
    101,702After five years
    
    
    4,927
    
    
    
    62,294
    
    
    
    67,221Total due after one year
    
    
    34,347
    
    
    
    134,576
    
    
    
    168,923Total commercial and construction loans
    
    $
    49,623
    
    
    $
    159,169
    
    
    $
    208,792
  Due After One YearAdjustableFixed Rate
    
    Rate
    
    Total(Dollars in thousands)Commercial business loans
    
    $
    26,085
    
    
    $
    8,262
    
    
    $
    34,347Construction and development loans
    
    
    78,579
    
    
    
    55,997
    
    
    
    134,576Total loans due after one year
    
    $
    104,664
    
    
    $
    64,259
    
    
    $
    168,923
 Loan Activity
 For the year ended December 312008
    
    2007
    
    2006(Dollars in thousands)Balance outstanding at beginning of period
    
    $
    2,080,170
    
    
    $
    2,123,184
    
    
    $
    2,061,438Originations:Mortgage loans
    
    
    407,576
    
    
    
    396,227
    
    
    
    347,296Consumer loans
    
    
    108,584
    
    
    
    119,319
    
    
    
    158,690Commercial business loans
    
    
    34,467
    
    
    
    45,862
    
    
    
    42,888Total originations
    
    
    550,627
    
    
    
    561,408
    
    
    
    548,874Purchases of one- to four-family mortgage loans
    
    
    26,138
    
    
    
    76,619
    
    
    
    157,399Less principal payments and repayments:Mortgage loans
    
    
    422,209
    
    
    
    359,323
    
    
    
    311,267Consumer loans
    
    
    150,069
    
    
    
    171,007
    
    
    
    194,239Commercial business loans
    
    
    38,628
    
    
    
    44,134
    
    
    
    48,079Total principal payments and repayments
    
    
    610,906
    
    
    
    574,464
    
    
    
    553,585Less transfers to foreclosed properties, real estate
owned, and repossessed assets
    
    
    3,719
    
    
    
    3,724
    
    
    
    1,429Less sales of one- to four-family mortgage loans
    
    
    128,828
    
    
    
    102,853
    
    
    
    89,513Total loans receivable and loans held-for-sale
    
    $
    1,913,482
    
    
    $
    2,080,170
    
    
    $
    2,123,184
 7




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##### Table of Contents



Residential Mortgage Lending
      8




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##### Table of Contents



9




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##### Table of Contents



Consumer Loans
    10




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##### Table of Contents



Multi-family and Commercial Real Estate Loans
   11




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##### Table of Contents



Construction and Development Loans
 Commercial Business Loans
 Loan Approval Authority
  12




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##### Table of Contents



Asset Quality
  Delinquent Loans and Foreclosed Assets
  13




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##### Table of Contents



14




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##### Table of Contents



At December 312008
    
    2007
    
    2006
    
    2005
    
    2004(Dollars in thousands)Non-accrual mortgage loans
    
    $
    29,860
    
    
    $
    11,251
    
    
    $
    11,504
    
    
    $
    2,214
    
    
    $
    1,485Non-accrual consumer loans
    
    
    1,159
    
    
    
    930
    
    
    
    803
    
    
    
    616
    
    
    
    619Non-accrual commercial business loans
    
    
    1,494
    
    
    
    159
    
    
    
    1,625
    
    
    
    2,517
    
    
    
    3,579Accruing loans delinquent 90 days or more
    
    
    576
    
    
    
    602
    
    
    
    565
    
    
    
    487
    
    
    
    586Total non-performing loans
    
    
    33,089
    
    
    $
    12,942
    
    
    $
    14,497
    
    
    
    5,834
    
    
    
    6,269Foreclosed properties, real estate owned
and repossessed assets, net
    
    
    4,768
    
    
    
    3,687
    
    
    
    1,231
    
    
    
    708
    
    
    
    1,621Total non-performing assets
    
    $
    37,857
    
    
    $
    16,629
    
    
    $
    15,728
    
    
    $
    6,542
    
    
    $
    7,890Non-performing loans to total loans
    
    
    1.81
    %
    
    
    0.65
    %
    
    
    0.72
    %
    
    
    0.29
    %
    
    
    0.33
    %Non-performing assets to total assets
    
    
    1.08
    %
    
    
    0.48
    %
    
    
    0.46
    %
    
    
    0.19
    %
    
    
    0.23
    %Interest income that would have been
recognized if non-accrual loans had been
current
    
    $
    2,519
    
    
    $
    1,002
    
    
    $
    652
    
    
    $
    1,159
    
    
    $
    831
      15




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##### Table of Contents



Charge-offs
 Allowance for Loan Losses
 At or for the Years Ended December 312008
    
    2007
    
    2006
    
    2005
    
    2004(Dollars in thousands)Balance at beginning of period
    
    $
    11,774
    
    
    $
    12,574
    
    
    $
    12,090
    
    
    $
    13,923
    
    
    $
    13,771Provision for (recovery of) loan losses
    
    
    1,447
    
    
    
    (272
    )
    
    
    632
    
    
    
    541
    
    
    
    1,330Charge-offs:Mortgage loans
    
    
    (613
    )
    
    
    (178
    )
    
    
    (44
    )
    
    
    
    
    
    
    (64
    )Consumer loans
    
    
    (411
    )
    
    
    (412
    )
    
    
    (271
    )
    
    
    (327
    )
    
    
    (373
    )Commercial business loans
    
    
    (34
    )
    
    
    (33
    )
    
    
    (52
    )
    
    
    (2,104
    )
    
    
    (816
    )Total charge-offs
    
    
    (1,058
    )
    
    
    (623
    )
    
    
    (367
    )
    
    
    (2,431
    )
    
    
    (1,253
    )Recoveries:Mortgage loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Consumer loans
    
    
    45
    
    
    
    95
    
    
    
    81
    
    
    
    49
    
    
    
    66Commercial business loans
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    8
    
    
    
    Total recoveries
    
    
    45
    
    
    
    95
    
    
    
    219
    
    
    
    57
    
    
    
    75Net charge-offs recoveries
    
    
    (1,013
    )
    
    
    (528
    )
    
    
    (148
    )
    
    
    (2,374
    )
    
    
    (1,178
    )Balance at end of period
    
    $
    12,208
    
    
    $
    11,774
    
    
    $
    12,574
    
    
    $
    12,090
    
    
    $
    13,923Net charge-offs to average loans
    
    
    0.05
    %
    
    
    0.03
    %
    
    
    0.01
    %
    
    
    0.12
    %
    
    
    0.07
    %Allowance for loan losses to total loans
    
    
    0.67
    %
    
    
    0.59
    %
    
    
    0.62
    %
    
    
    0.61
    %
    
    
    0.74
    %Allowance for loan losses to
non-performing loans
    
    
    36.89
    %
    
    
    90.98
    %
    
    
    86.74
    %
    
    
    207.23
    %
    
    
    222.09
    %
     16




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##### Table of Contents



At December 312008
    
    2007
    
    2006
    
    2005
    
    2004Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentageof Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loansin Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Categoryto Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to TotalAmount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans(Dollars in thousands)Loan category:Mortgage loans:One- to four-family
    
    $
    3,038
    
    
    
    47.43
    %
    
    $
    3,324
    
    
    
    51.12
    %
    
    $
    3,531
    
    
    
    53.03
    %
    
    $
    3,294
    
    
    
    50.94
    %
    
    $
    2,488
    
    
    
    46.34
    %Other mortgage loans
    
    
    5,710
    
    
    
    32.11
    
    
    
    4,040
    
    
    
    27.96
    
    
    
    3,049
    
    
    
    24.16
    
    
    
    2,424
    
    
    
    23.61
    
    
    
    3,222
    
    
    
    25.58Total mortgage loans
    
    
    8,748
    
    
    
    79.54
    
    
    
    7,364
    
    
    
    79.08
    
    
    
    6,580
    
    
    
    77.19
    
    
    
    5,718
    
    
    
    74.55
    
    
    
    5,710
    
    
    
    71.92Home equity lines
    
    
    473
    
    
    
    4.59
    
    
    
    496
    
    
    
    4.37
    
    
    
    496
    
    
    
    4.33
    
    
    
    483
    
    
    
    4.29
    
    
    
    663
    
    
    
    4.54Consumer
    
    
    1,652
    
    
    
    13.25
    
    
    
    1,770
    
    
    
    13.95
    
    
    
    2,060
    
    
    
    16.02
    
    
    
    2,118
    
    
    
    18.38
    
    
    
    2,929
    
    
    
    19.94Commercial loans
    
    
    1,335
    
    
    
    2.62
    
    
    
    2,144
    
    
    
    2.60
    
    
    
    3,438
    
    
    
    2.46
    
    
    
    3,771
    
    
    
    2.78
    
    
    
    4,621
    
    
    
    3.60Total allowance for
loan losses
    
    $
    12,208
    
    
    
    100.00
    %
    
    $
    11,774
    
    
    
    100.00
    %
    
    $
    12,574
    
    
    
    100.00
    %
    
    $
    12,090
    
    
    
    100.00
    %
    
    $
    13,923
    
    
    
    100.00
    %
 Investment Activities
 General
   17




---



##### Table of Contents



Investment Securities
  Mortgage-related Securities
   18




---



##### Table of Contents



Securities Carrying Values, Yields, Maturities, and Activities
 More than One Year
    
    More than FiveOne Year or Less
    
    to Five Years
    
    Years to Ten Years
    
    More than Ten Years
    
    TotalWeighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedCarrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    AverageValue
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield(Dollars in thousands)Investment securities:Mutual funds (1)
    
    $
    39,603
    
    
    
    3.69
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    39,603
    
    
    
    3.69
    %US government and agencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,427
    
    
    
    6.06
    
    
    
    293,108
    
    
    
    5.56
    
    
    
    379,535
    
    
    
    5.67Total investment securities
    
    $
    39,603
    
    
    
    3.69
    
    
    $
    
    
    
    
    
    
    
    $
    86,427
    
    
    
    6.06
    
    
    $
    293,108
    
    
    
    5.56
    
    
    $
    419,138
    
    
    
    5.49Mortgage-related
securities by issuer:Ginnie Mae pass-through
certificates
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    297
    
    
    
    5.42
    
    
    $
    297
    
    
    
    5.42Fannie Mae pass-through
certificates
    
    
    1
    
    
    
    6.00
    
    
    
    9,263
    
    
    
    4.94
    
    
    
    12,261
    
    
    
    5.74
    
    
    
    207,894
    
    
    
    5.49
    
    
    
    229,419
    
    
    
    5.49Freddie Mac
pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    5.72
    
    
    
    15
    
    
    
    7.83
    
    
    
    9,803
    
    
    
    5.55
    
    
    
    9,988
    
    
    
    5.56Private label CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,631
    
    
    
    5.35
    
    
    
    122,925
    
    
    
    4.97
    
    
    
    128,556
    
    
    
    4.99Freddie Mac, Fannie
Mae, and Ginnie Mae
REMICs
    
    
    
    
    
    
    
    
    
    
    9,839
    
    
    
    4.20
    
    
    
    188,815
    
    
    
    4.24
    
    
    
    283,953
    
    
    
    4.56
    
    
    
    482,607
    
    
    
    4.43Total
mortgage-related
securities
    
    $
    1
    
    
    
    6.00
    
    
    $
    19,272
    
    
    
    4.57
    
    
    $
    206,722
    
    
    
    4.36
    
    
    $
    624,872
    
    
    
    4.99
    
    
    $
    850,867
    
    
    
    4.81By coupon type:Adjustable rate
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    101
    
    
    
    6.43
    
    
    $
    69,562
    
    
    
    4.48
    
    
    $
    69,663
    
    
    
    4.48Fixed rate
    
    
    1
    
    
    
    6.00
    
    
    
    19,272
    
    
    
    4.57
    
    
    
    206,621
    
    
    
    4.36
    
    
    
    555,310
    
    
    
    5.05
    
    
    
    781,204
    
    
    
    4.86Total
mortgage-related
securities
    
    $
    1
    
    
    
    6.00
    %
    
    $
    19,272
    
    
    
    4.57
    %
    
    $
    206,722
    
    
    
    4.36
    %
    
    $
    624,872
    
    
    
    4.99
    %
    
    $
    850,867
    
    
    
    4.81
    %Total investment and
mortgage-related
securities portfolio
    
    $
    39,604
    
    
    
    3.69
    %
    
    $
    19,272
    
    
    
    4.57
    %
    
    $
    293,149
    
    
    
    4.86
    %
    
    $
    917,980
    
    
    
    5.17
    %
    
    $
    1,270,005
    
    
    
    5.04
    %
 
 (1)
    
    The weighted average yield has not been adjusted for the impairments recorded in 2008
and 2007.  At December 312008
    
    2007
    
    2006Carrying/
    
    Carrying/
    
    Carrying/Fair Value
    
    Fair Value
    
    Fair Value(Dollars in thousands)Investment securities:Mutual funds
    
    $
    39,603
    
    
    $
    46,550
    
    
    $
    46,592United States government and federal agency obligations
    
    
    379,535
    
    
    
    52,036
    
    
    
    Stock in federal agencies
    
    
    
    
    
    
    864
    
    
    
    1,698Total investment securities available-for-sale
    
    
    419,138
    
    
    
    99,450
    
    
    
    48,290Mortgage-related securities:Freddie Mac
    
    
    282,237
    
    
    
    524,898
    
    
    
    441,404Fannie Mae
    
    
    413,364
    
    
    
    363,337
    
    
    
    373,394Private label CMOs
    
    
    128,559
    
    
    
    180,638
    
    
    
    207,902Ginnie Mae
    
    
    26,707
    
    
    
    31,049
    
    
    
    42,151Total mortgage-related securities
    
    
    850,867
    
    
    
    1,099,922
    
    
    
    1,064,851Total securities available-for-sale
    
    $
    1,270,005
    
    
    $
    1,199,372
    
    
    $
    1,113,141
 19




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##### Table of Contents



For the Year Ended December 312008
    
    2007
    
    2006(Dollars in thousands)Investment securities available-for-sale:Carrying value at beginning of period
    
    $
    99,450
    
    
    $
    48,290
    
    
    $
    63,361Purchases
    
    
    351,202
    
    
    
    51,270
    
    
    
    264Sales
    
    
    (8,358
    )
    
    
    (1,228
    )
    
    
    (9
    )Calls
    
    
    (29,992
    )
    
    
    
    
    
    
    Maturities
    
    
    
    
    
    
    
    
    
    
    (14,720
    )Premium amortization and discount accretion, net
    
    
    (34
    )
    
    
    1
    
    
    
    Increase (decrease) in unrealized gains
    
    
    6,870
    
    
    
    1,117
    
    
    
    (606
    )Net increase (decrease) in investment securities
    
    
    319,688
    
    
    
    51,160
    
    
    
    (15,071
    )Carrying value at end of period
    
    $
    419,138
    
    
    $
    99,450
    
    
    $
    48,290Mortgage-related securities available-for-sale:Carrying value at beginning of period
    
    $
    1,099,922
    
    
    $
    1,064,851
    
    
    $
    1,087,816Purchases
    
    
    345,842
    
    
    
    247,428
    
    
    
    198,460Sales
    
    
    (385,167
    )
    
    
    
    
    
    
    Principal payments
    
    
    (195,480
    )
    
    
    (227,041
    )
    
    
    (224,693
    )Premium amortization and discount accretion, net
    
    
    1,516
    
    
    
    1,893
    
    
    
    826Increase (decrease) in unrealized gains
    
    
    (15,767
    )
    
    
    12,791
    
    
    
    2,442Net increase in mortgage-related securities
    
    
    (249,055
    )
    
    
    35,071
    
    
    
    (22,965
    )Carrying value at end of period
    
    $
    850,867
    
    
    $
    1,099,922
    
    
    $
    1,064,851
 Deposit Liabilities
    20




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##### Table of Contents



At December 312008
    
    2007
    
    2006Percent
    
    Weighted
    
    
    
    
    
    Percent
    
    Weighted
    
    
    
    
    
    Percent
    
    Weightedof Total
    
    Average
    
    
    
    
    
    of Total
    
    Average
    
    
    
    
    
    of Total
    
    AverageDeposit
    
    Nominal
    
    
    
    
    
    Deposit
    
    Nominal
    
    
    
    
    
    Deposit
    
    NominalAmount
    
    Liabilities
    
    Rate
    
    Amount
    
    Liabilities
    
    Rate
    
    Amount
    
    Liabilities
    
    Rate(Dollars in thousands)Regular savings
    
    $
    185,003
    
    
    
    8.68
    %
    
    
    0.19
    %
    
    $
    183,756
    
    
    
    8.70
    %
    
    
    0.45
    %
    
    $
    200,016
    
    
    
    9.27
    %
    
    
    0.45
    %Interest-bearing demand
    
    
    180,278
    
    
    
    8.46
    
    
    
    0.11
    
    
    
    170,986
    
    
    
    8.09
    
    
    
    0.21
    
    
    
    174,206
    
    
    
    8.07
    
    
    
    0.21Money market savings
    
    
    340,827
    
    
    
    16.00
    
    
    
    1.57
    
    
    
    280,442
    
    
    
    13.27
    
    
    
    3.03
    
    
    
    248,542
    
    
    
    11.51
    
    
    
    3.00Non-interest bearing demand
    
    
    89,106
    
    
    
    4.18
    
    
    
    0.00
    
    
    
    97,506
    
    
    
    4.61
    
    
    
    0.00
    
    
    
    104,821
    
    
    
    4.86
    
    
    
    0.00Total demand accounts
    
    
    795,214
    
    
    
    37.32
    
    
    
    0.74
    
    
    
    732,690
    
    
    
    34.67
    
    
    
    1.32
    
    
    
    727,585
    
    
    
    33.71
    
    
    
    1.20Certificates of deposit:With original maturities of:Three months or less
    
    
    19,819
    
    
    
    0.93
    
    
    
    1.78
    
    
    
    45,835
    
    
    
    2.17
    
    
    
    3.97
    
    
    
    64,486
    
    
    
    2.99
    
    
    
    4.76Over three to 12 months
    
    
    337,525
    
    
    
    15.84
    
    
    
    2.99
    
    
    
    911,821
    
    
    
    43.15
    
    
    
    5.06
    
    
    
    628,952
    
    
    
    29.14
    
    
    
    5.11Over 12 to 24 months
    
    
    732,908
    
    
    
    34.40
    
    
    
    4.04
    
    
    
    238,986
    
    
    
    11.31
    
    
    
    4.61
    
    
    
    323,869
    
    
    
    15.00
    
    
    
    4.14Over 24 to 36 months
    
    
    46,385
    
    
    
    2.18
    
    
    
    2.58
    
    
    
    58,515
    
    
    
    2.77
    
    
    
    3.51
    
    
    
    98,005
    
    
    
    4.54
    
    
    
    4.18Over 36 to 48 months
    
    
    6,592
    
    
    
    0.31
    
    
    
    4.30
    
    
    
    4,963
    
    
    
    0.23
    
    
    
    3.68
    
    
    
    7,155
    
    
    
    0.33
    
    
    
    3.38Over 48 to 60 months
    
    
    191,905
    
    
    
    9.02
    
    
    
    4.25
    
    
    
    120,158
    
    
    
    5.70
    
    
    
    4.12
    
    
    
    308,589
    
    
    
    14.29
    
    
    
    4.66Over 60 months
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00Total certificates of deposit
    
    
    1,335,134
    
    
    
    62.68
    
    
    
    3.72
    
    
    
    1,380,278
    
    
    
    65.33
    
    
    
    4.79
    
    
    
    1,431,056
    
    
    
    66.29
    
    
    
    4.71Total deposit liabilities
    
    $
    2,130,348
    
    
    
    100.00
    %
    
    
    2.61
    %
    
    $
    2,112,968
    
    
    
    100.00
    %
    
    
    3.59
    %
    
    $
    2,158,641
    
    
    
    100.00
    %
    
    
    3.52
  Amount(In thousands)Maturing in:Three months or less
    
    $
    64,211Over three months through six months
    
    
    61,103Over six months through 12 months
    
    
    88,387Over 12 months through 24 months
    
    
    52,642Over 24 months through 36 months
    
    
    5,282Over 36 months
    
    
    21,964Total certificates of deposits greater than $100,000
    
    $
    293,589
  For the Year Ended December 312008
    
    2007
    
    2006(Dollars in thousands)Total deposit liabilities at beginning of period
    
    $
    2,112,968
    
    
    $
    2,158,641
    
    
    $
    2,086,822Net deposits (withdrawals)
    
    
    (56,428
    )
    
    
    (110,709
    )
    
    
    9,292Interest credited, net of penalties
    
    
    73,808
    
    
    
    65,036
    
    
    
    62,527Total deposit liabilities at end of period
    
    $
    2,130,348
    
    
    $
    2,112,968
    
    
    $
    2,158,641Net increase (decrease)
    
    $
    17,380
    
    
    $
    (45,673
    )
    
    $
    71,819Percentage increase (decrease)
    
    
    0.82
    %
    
    
    (2.12
    )%
    
    
    3.44
    %
 Borrowings
  21




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##### Table of Contents



At or For the Year Ended December 312008
    
    2007
    
    2006
    
    2005
    
    2004(Dollars in thousands)Balance outstanding at end of year:FHLB term advances
    
    $
    907,971
    
    
    $
    912,459
    
    
    $
    705,025
    
    
    $
    765,796
    
    
    $
    623,925Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137,600Weighted average interest rate at end of year:FHLB term advances
    
    
    4.26
    %
    
    
    4.27
    %
    
    
    4.46
    %
    
    
    3.58
    %
    
    
    2.89
    %Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.47
    %Maximum amount outstanding during the year:FHLB term advances
    
    $
    912,459
    
    
    $
    921,781
    
    
    $
    841,835
    
    
    $
    909,920
    
    
    $
    623,925Overnight borrowings from FHLB
    
    
    5,000
    
    
    
    52,100
    
    
    
    38,000
    
    
    
    186,000
    
    
    
    289,800Other borrowings
    
    
    1,103
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    Average amount outstanding during the year:FHLB term advances
    
    $
    910,517
    
    
    $
    865,540
    
    
    $
    782,619
    
    
    $
    811,937
    
    
    $
    325,861Overnight borrowings from FHLB
    
    
    22
    
    
    
    3,570
    
    
    
    3,242
    
    
    
    50,712
    
    
    
    75,106Other borrowings
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Weighted average interest rate during the year:FHLB term advances
    
    
    4.34
    %
    
    
    4.34
    %
    
    
    3.86
    %
    
    
    3.25
    %
    
    
    5.23
    %Overnight borrowings from FHLB
    
    
    3.75
    %
    
    
    5.56
    %
    
    
    5.40
    %
    
    
    2.95
    %
    
    
    2.03
    %Other borrowings
    
    
    1.92
    %
    
    
    
    
    
    
    
    
    
    
    3.04
    %
    
    
    
   Shareholders Equity
    22




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##### Table of Contents



Subsidiaries
      Employees
  23




---



##### Table of Contents



Regulation and Supervision
 General
       Regulation and Supervision of the Bank
 General
  24




---



##### Table of Contents



Regulatory Capital Requirements
    Prompt Corrective Action
 Total Capital to Risk
    
    Tier 1 Capital to Risk
    
    Tier 1 Capital toCategory:
    
    Weighted Assets
    
    Weighted Assets
    
    Total AssetsWell capitalized
    
    
    > 10
    %
    
    
    > 6
    %
    
    
    > 5
    %Adequately capitalized
    
    
    > 8
    %
    
    
    > 4
    %
    
    
    > 4
    %(1)Under capitalized
    
    
    < 8
    %
    
    
    < 4
    %
    
    
    < 4
    %(2)Significantly undercapitalized
    
    
    < 6
    %
    
    
    < 3
    %
    
    
    < 3
    %Critically undercapitalized (3)
 
 (1)
    
    > 3% if the bank receives the highest rating under the uniform system.(2)
    
    < 3% if the bank receives the highest rating under the uniform system.(3)
    
    Tangible assets to capital of if equal to or less than 2%.  25




---



##### Table of Contents



Dividend and Other Capital Distribution Limitations
    Qualified Thrift Lender Test
 Liquidity Standard
 Federal Home Loan Bank System
 26




---



##### Table of Contents



Federal Reserve System
 Deposit Insurance
    27




---



##### Table of Contents



Transactions with Affiliates
  Acquisitions and Mergers
 Prohibitions Against Tying Arrangements
 Customer Privacy
 Uniform Real Estate Lending Standards
 28




---



##### Table of Contents




    
    for loans secured by raw land, the supervisory loan-to-value limit is 65% of the value
of the collateral;
    
    for land development loans (i.e., loans for the purpose of improving unimproved
property prior to the erection of structures), that limit is 75%;
    
    for loans for the construction of commercial, multi-family or other non-residential
property, that limit is 80%;
    
    for loans for the construction of one- to four-family properties, that limit is 85%; and
    
    for loans secured by other improved property (e.g., farmland, completed commercial
property and other income-producing property, including non-owner occupied, one- to
four-family property), that limit is 85%.
  Community Reinvestment Act
  
    
    a lending test, to evaluate the institutions record of making loans in its service areas;
    
    an investment test, to evaluate the institutions record of making community
development investments; and
    
    a service test, to evaluate the institutions delivery of services through its
branches, ATMs and other offices.
  Safety and Soundness Standards
 29




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##### Table of Contents



Loans to Insiders
  The Patriot Act
  
    
    All financial institutions must establish anti-money laundering programs that include,
at minimum; (a) internal policies, procedures, and controls; (b) specific designation of an
anti-money laundering compliance officer; (c) ongoing employee training programs, and (d)
an independent audit function to test the anti-money laundering program.
    
    The Secretary of the Treasury, in conjunction with other bank regulators, may issue
regulations that provide for minimum standards with respect to customer identification at
the time new accounts are opened.
    
    Financial institutions that establish, maintain, or manage private banking accounts or
correspondent accounts in the United States for non-United States persons or their
representatives (including foreign individuals visiting the United States) must establish
appropriate, specific, and, where necessary, enhanced due diligence policies, procedures,
and controls designed to detect and report money laundering.
    
    Financial institutions are prohibited from establishing, maintaining, administering or
managing correspondent accounts for foreign shell banks (foreign banks that do not have a
physical presence in any country), and will be subject to certain recordkeeping obligations
with respect to correspondent accounts of foreign banks.
    
    Bank regulators are directed to consider a holding companys effectiveness in combating
money laundering when ruling on Federal Reserve Act and bank merger applications.
 
 30




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##### Table of Contents



Regulation and Supervision of the Company
 Holding Company Regulation
   Federal Securities Laws
 Sarbanes-Oxley Act
  Acquisition of Bank Mutual Corporation
 Federal and State Taxation
 Federal Taxation
 31




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##### Table of Contents



State Taxation
 32




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##### Table of Contents



Item 1A. Risk Factors
  The Interest Rate Environment May Have an Adverse Impact on the Companys Net Interest Income
   Changes in Market Interest Rates or Other Conditions May Have an Adverse Impact on the Fair Value
of the Companys Available-for-Sale Securities, Shareholders Equity, and Profits
   Changes in the Financial Condition or Future Prospects of the FHLB of Chicago May Have an Adverse
Impact on the Companys Investment in FHLB Common Stock
  If the Companys Allowance for Loan Losses Is Not Sufficient to Cover Actual Loan Losses, the
Companys Earnings Could Decrease
  33




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##### Table of Contents



Softness in the Real Estate Market May Adversely Affect Collateral Values and the Companys Profits
  Some of the Companys Lending Activities Are in Credits that are Riskier than One- to Four-Family
Real Estate Loans
  Wisconsin Tax Developments Could Reduce the Companys Net Income
     34




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##### Table of Contents



The Global Credit Market Crisis and Deteriorating Economic Conditions May Significantly Affect the
Companys Liquidity, Financial Condition, and Earnings
   Recent and Future Legislation and Rulemaking in Response to Market and Economic Conditions May
Significantly Affect the Companys Results of Operations and Financial Condition
    35




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##### Table of Contents



Strong Competition Within the Companys Market Area May Affect Net Income
  The Companys Ability to Grow May Be Limited if It Cannot Make Acquisitions
  The Company Has Significant Intangible Assets Which It May Need to Write Off (Expense) in the
Future
  The Company is Subject to Security and Operational Risks Relating to the Use of Technology that
Could Damage Its Reputation and Business
   36




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##### Table of Contents



Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  37




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##### Table of Contents



Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchase of Equity Securities
     2008 Stock Prices
    
    
    2007 Stock Prices
    
    
    Cash Dividends PaidHigh
    
    
    Low
    
    
    High
    
    
    Low
    
    
    2008
    
    
    20071st Quarter
    
    $
    12.32
    
    
    $
    10.05
    
    
    $
    12.37
    
    
    $
    10.94
    
    
    $
    0.090
    
    
    $
    0.0802nd Quarter
    
    $
    11.51
    
    
    $
    10.04
    
    
    $
    12.04
    
    
    $
    10.93
    
    
    $
    0.090
    
    
    $
    0.0803rd Quarter
    
    $
    14.25
    
    
    $
    9.60
    
    
    $
    12.24
    
    
    $
    10.25
    
    
    $
    0.090
    
    
    $
    0.0854th Quarter
    
    $
    12.00
    
    
    $
    8.62
    
    
    $
    12.25
    
    
    $
    9.68
    
    
    $
    0.090
    
    
    $
    0.085$
    0.360
    
    
    $
    0.330
   Total Number
    
    Maximum Number ofTotal Number
    
    Average
    
    of Shares Purchased
    
    Shares That May Yetof Shares
    
    Price Paid
    
    as Part of Publicly
    
    be Purchased UnderPeriod
    
    Purchased
    
    per Share
    
    Announced Plans
    
    the PlanOctober 1 to 31, 2008
    
    
    97,865
    
    
    $
    10.53
    
    
    
    88,500
    
    
    
    56,300November 1 to 30, 2008
    
    
    317,900
    
    
    
    10.21
    
    
    
    317,900
    
    
    
    738,400
    (1)December 1 to 31, 2008
    
    
    314,199
    
    
    
    9.75
    
    
    
    312,000
    
    
    
    426,400
    (2)Total purchased
    
    
    729,964
    
    
    $
    10.05
    
    
    
    718,400
 
 (1)
    
    Reflects the impact of 1.0 million shares approved for repurchase by the Companys board of
directors on November 7, 2008 (the 2008 Plan).(2)
    
    Subsequent to December 31, 2008, the Company completed its repurchases under the 2008 Plan
and announced the establishment in the 2009 Stock Repurchase Plan for an additional 1.0
million shares (the 2009 Plan). As of February 27, 2009, the Company had the remaining
authority to repurchase 866,600 shares pursuant to the 2009 Plan.  38




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##### Table of Contents



Period EndingIndex
    
    
    12/31/03
    
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08Bank Mutual Corporation
    
    
    
    100.00
    
    
    
    
    108.58
    
    
    
    
    96.73
    
    
    
    
    113.26
    
    
    
    
    101.77
    
    
    
    
    114.70NASDAQ Composite Index
    
    
    
    100.00
    
    
    
    
    108.59
    
    
    
    
    110.08
    
    
    
    
    120.56
    
    
    
    
    132.39
    
    
    
    
    78.72NASDAQ Bank Index
    
    
    
    100.00
    
    
    
    
    114.44
    
    
    
    
    111.80
    
    
    
    
    125.47
    
    
    
    
    99.45
    
    
    
    
    72.51SNL Midwest Thrift
    
    
    
    100.00
    
    
    
    
    110.43
    
    
    
    
    107.91
    
    
    
    
    122.48
    
    
    
    
    103.45
    
    
    
    
    91.93
  39




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##### Table of Contents



Item 6. Selected Financial Data
  At December 312008
    
    2007
    
    2006
    
    2005
    
    2004(Dollars in thousands, except number of shares and per share amounts)Selected Financial Condition Data:Total assets
    
    $
    3,489,689
    
    
    $
    3,488,046
    
    
    $
    3,451,385
    
    
    $
    3,431,377
    
    
    $
    3,445,299Loans receivable, net
    
    
    1,829,053
    
    
    
    1,994,556
    
    
    
    2,024,325
    
    
    
    1,990,492
    
    
    
    1,875,885Loans held-for-sale
    
    
    19,030
    
    
    
    7,952
    
    
    
    3,787
    
    
    
    2,312
    
    
    
    4,987Securities available-for-sale:Investment securities
    
    
    419,138
    
    
    
    99,450
    
    
    
    48,290
    
    
    
    63,361
    
    
    
    68,753Mortgage-related securities
    
    
    850,867
    
    
    
    1,099,922
    
    
    
    1,064,851
    
    
    
    1,087,816
    
    
    
    1,266,224Foreclosed and repossessed assets
    
    
    4,768
    
    
    
    3,687
    
    
    
    1,231
    
    
    
    708
    
    
    
    1,621Goodwill
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570Other intangible assets
    
    
    1,809
    
    
    
    2,428
    
    
    
    3,089
    
    
    
    3,750
    
    
    
    4,412Mortgage servicing rights
    
    
    3,703
    
    
    
    4,708
    
    
    
    4,653
    
    
    
    4,771
    
    
    
    4,542Deposit liabilities
    
    
    2,130,348
    
    
    
    2,112,968
    
    
    
    2,158,641
    
    
    
    2,086,822
    
    
    
    1,982,881Borrowings
    
    
    907,971
    
    
    
    912,459
    
    
    
    705,025
    
    
    
    765,796
    
    
    
    761,525Shareholders equity
    
    
    399,611
    
    
    
    430,035
    
    
    
    533,779
    
    
    
    544,374
    
    
    
    670,454Tangible shareholders equity
    
    
    342,256
    
    
    
    371,303
    
    
    
    474,706
    
    
    
    484,786
    
    
    
    610,698Number of shares outstanding  net
of treasury stock
    
    
    47,626,759
    
    
    
    49,834,756
    
    
    
    60,277,087
    
    
    
    62,325,268
    
    
    
    73,485,113Book value per share
    
    
    8.38
    
    
    
    8.63
    
    
    
    8.86
    
    
    
    8.73
    
    
    
    9.12Tangible book value per share
    
    
    7.18
    
    
    
    7.45
    
    
    
    7.88
    
    
    
    7.78
    
    
    
    8.31
 For the Year Ended December 312008
    
    2007
    
    2006
    
    2005
    
    2004(Dollars in thousands, except per share amounts)Selected Operating Data:Total interest income
    
    $
    177,556
    
    
    $
    183,001
    
    
    $
    174,404
    
    
    $
    164,871
    
    
    $
    149,771Total interest expense
    
    
    104,191
    
    
    
    113,771
    
    
    
    99,091
    
    
    
    77,231
    
    
    
    58,498Net interest income
    
    
    73,365
    
    
    
    69,230
    
    
    
    75,313
    
    
    
    87,640
    
    
    
    91,273Provision for (recovery of) loan
losses
    
    
    1,447
    
    
    
    (272
    )
    
    
    632
    
    
    
    541
    
    
    
    1,330Net interest
income after provision
for loan losses
    
    
    71,918
    
    
    
    69,502
    
    
    
    74,681
    
    
    
    87,099
    
    
    
    89,943Total non-interest income
    
    
    17,708
    
    
    
    20,428
    
    
    
    17,035
    
    
    
    16,780
    
    
    
    15,325Total non-interest expense
    
    
    63,377
    
    
    
    63,543
    
    
    
    61,311
    
    
    
    60,837
    
    
    
    60,082Minority interest in income (loss) of
real estate operations
    
    
    (1
    )
    
    
    392
    
    
    
    
    
    
    
    
    
    
    
    Income before income taxes
    
    
    26,250
    
    
    
    25,995
    
    
    
    30,405
    
    
    
    43,042
    
    
    
    45,186Income tax expense
    
    
    9,094
    
    
    
    8,892
    
    
    
    9,808
    
    
    
    15,016
    
    
    
    15,632Net income
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554Earnings per share-basic
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    0.44
    
    
    $
    0.39Earnings per share-diluted
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    0.34
    
    
    $
    0.43
    
    
    $
    0.38Cash dividends paid per share
    
    $
    0.36
    
    
    $
    0.33
    
    
    $
    0.29
    
    
    $
    0.25
    
    
    $
    0.18
 40




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##### Table of Contents



At or For the Year Ended December 312008
    
    2007
    
    2006
    
    2005
    
    2004Selected Financial Ratios:Net interest margin (1)
    
    
    2.21
    %
    
    
    2.09
    %
    
    
    2.27
    %
    
    
    2.64
    %
    
    
    3.03
    %Net interest rate spread
    
    
    1.85
    
    
    
    1.59
    
    
    
    1.73
    
    
    
    2.17
    
    
    
    2.47Return on average assets
    
    
    0.49
    
    
    
    0.49
    
    
    
    0.59
    
    
    
    0.80
    
    
    
    0.93Return on average shareholders
equity
    
    
    4.15
    
    
    
    3.57
    
    
    
    3.89
    
    
    
    4.84
    
    
    
    4.10Return on average tangible
shareholders equity (2)
    
    
    4.83
    
    
    
    4.07
    
    
    
    4.38
    
    
    
    5.39
    
    
    
    4.47Efficiency ratio, excluding
amortization of goodwill (3)
    
    
    68.71
    
    
    
    69.92
    
    
    
    66.89
    
    
    
    59.28
    
    
    
    56.65Non-interest expense (excluding
amortization of goodwill) as a
percent of adjusted average assets
    
    
    1.79
    
    
    
    1.81
    
    
    
    1.77
    
    
    
    1.74
    
    
    
    1.88Shareholders equity to total assets
    
    
    11.45
    
    
    
    12.33
    
    
    
    15.47
    
    
    
    15.86
    
    
    
    19.46Tangible shareholders equity to
adjusted total assets (4)
    
    
    9.97
    
    
    
    10.83
    
    
    
    13.99
    
    
    
    14.38
    
    
    
    18.04Selected Asset Quality Ratios:Non-performing loans to loans
receivable, net
    
    
    1.81
    %
    
    
    0.65
    %
    
    
    0.72
    %
    
    
    0.29
    %
    
    
    0.33
    %Non-performing assets to total assets
    
    
    1.08
    
    
    
    0.48
    
    
    
    0.46
    
    
    
    0.19
    
    
    
    0.23Allowance for loan losses to
non-performing loans
    
    
    36.89
    
    
    
    90.98
    
    
    
    86.74
    
    
    
    207.23
    
    
    
    222.09Allowance for loan losses to total
loans receivable, net
    
    
    0.67
    
    
    
    0.59
    
    
    
    0.62
    
    
    
    0.61
    
    
    
    0.74Charge-offs to average loans
    
    
    0.05
    
    
    
    0.03
    
    
    
    0.01
    
    
    
    0.12
    
    
    
    0.07
 
 (1)
    
    Net interest margin is calculated by dividing net interest income by average earnings assets.(2)
    
    This ratio is calculated by dividing net income by total shareholders equity minus goodwill,
other intangible assets net of deferred taxes and mortgage servicing rights.(3)
    
    Efficiency ratio is calculated by dividing non-interest expense by the sum of net interest
income and non-interest income.(4)
    
    The ratio is calculated by dividing total shareholders equity minus goodwill, other
intangible assets net of deferred taxes and mortgage servicing rights by the sum of total
assets minus goodwill, other intangible assets net of deferred taxes and mortgage servicing
rights. 41




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Financial Condition
 Overview
 Cash and cash equivalents
 Securities Available-for-Sale
   Loans Held-for-Sale
 42




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##### Table of Contents



Loans Receivable
  Goodwill
 Other Intangible Assets
 Mortgage Servicing Rights
 Other Assets
 At December 312008
    
    2007(Dollars in thousands)Accrued interest receivable:Mortgage-related securities
    
    $
    6,669
    
    
    $
    4,463Investment securities
    
    
    1,734
    
    
    
    687Loans receivable
    
    
    8,130
    
    
    
    9,475Total accrued interest receivable
    
    
    16,533
    
    
    
    14,625Foreclosed properties and repossessed assets
    
    
    4,768
    
    
    
    3,687Premises and equipment
    
    
    52,209
    
    
    
    51,628Federal Home Loan Bank stock, at cost
    
    
    46,092
    
    
    
    46,092Bank owned life insurance
    
    
    51,261
    
    
    
    48,871Prepaid and other assets
    
    
    29,763
    
    
    
    22,608Total other assets
    
    $
    200,626
    
    
    $
    187,511
  43




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##### Table of Contents



Deposit Liabilities
 Borrowings
 Other Liabilities
 Shareholders Equity
  44




---



##### Table of Contents



Results of Operations
 Overview
  
    
    a $6.9 million impairment loss on a mutual fund that invests in mortgage-related
securities;
    
    a $1.4 million impairment loss related to Freddie Mac common stock;
    
    a $1.3 million loss provision on a loan secured by a completed condominium development
project; and,
    
    an $822,000 valuation allowance for impairment of mortgage servicing rights.
   
    
    a $1.3 million recovery of a loss provision on a commercial business loan;
    
    a $685,000 one-time adjustment to the amortization of certain deferred costs; and,
    
    a net gain of $585,000 on the sale of undeveloped land.
   Net Interest Income
  45




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##### Table of Contents



Years ended December 312008
    
    
    2007
    
    
    2006Interest
    
    
    Avg.
    
    
    
    
    
    
    Interest
    
    
    Avg.
    
    
    
    
    
    
    Interest
    
    
    Avg.Average
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost(Dollars in thousands)Assets:Interest-earning assets:Loans receivable, net (1)
    
    $
    1,892,397
    
    
    $
    113,635
    
    
    
    6.00
    %
    
    $
    2,016,225
    
    
    $
    123,141
    
    
    
    6.11
    %
    
    $
    2,042,534
    
    
    $
    118,708
    
    
    
    5.81
    %Mortgage-related securities
    
    
    959,574
    
    
    
    45,535
    
    
    
    4.75
    
    
    
    1,130,780
    
    
    
    52,518
    
    
    
    4.64
    
    
    
    1,134,822
    
    
    
    50,017
    
    
    
    4.41Investment securities (2)
    
    
    344,533
    
    
    
    16,041
    
    
    
    4.66
    
    
    
    118,625
    
    
    
    4,871
    
    
    
    4.11
    
    
    
    101,987
    
    
    
    3,762
    
    
    
    3.69Interest-earning deposits
    
    
    54,666
    
    
    
    764
    
    
    
    1.40
    
    
    
    9,186
    
    
    
    430
    
    
    
    4.68
    
    
    
    10,882
    
    
    
    483
    
    
    
    4.44Federal funds sold
    
    
    71,934
    
    
    
    1,581
    
    
    
    2.20
    
    
    
    39,596
    
    
    
    2,041
    
    
    
    5.15
    
    
    
    28,581
    
    
    
    1,434
    
    
    
    5.02Total interest-earning assets
    
    
    3,323,104
    
    
    
    177,556
    
    
    
    5.34
    
    
    
    3,314,412
    
    
    
    183,001
    
    
    
    5.52
    
    
    
    3,318,806
    
    
    
    174,404
    
    
    
    5.25Non-interest-earning assets
    
    
    214,682
    
    
    
    
    
    
    
    
    
    
    
    197,212
    
    
    
    
    
    
    
    
    
    
    
    146,649Total average assets
    
    
    3,537,786
    
    
    
    
    
    
    
    
    
    
    
    3,511,624
    
    
    
    
    
    
    
    
    
    
    $
    3,465,455Liabilities and equity:Interest-bearing liabilities:Savings deposits
    
    
    190,271
    
    
    
    609
    
    
    
    0.32
    
    
    $
    194,887
    
    
    
    924
    
    
    
    0.47
    
    
    $
    215,525
    
    
    
    923
    
    
    
    0.43Money market accounts
    
    
    336,208
    
    
    
    8,245
    
    
    
    2.45
    
    
    
    267,338
    
    
    
    8,500
    
    
    
    3.18
    
    
    
    258,307
    
    
    
    7,620
    
    
    
    2.95Interest-bearing demand
accounts
    
    
    170,700
    
    
    
    376
    
    
    
    0.22
    
    
    
    161,652
    
    
    
    351
    
    
    
    0.22
    
    
    
    163,446
    
    
    
    351
    
    
    
    0.21Certificates of deposit
    
    
    1,358,021
    
    
    
    55,459
    
    
    
    4.08
    
    
    
    1,381,480
    
    
    
    66,236
    
    
    
    4.79
    
    
    
    1,368,166
    
    
    
    59,818
    
    
    
    4.37Total deposit liabilities
    
    
    2,055,200
    
    
    
    64,689
    
    
    
    3.15
    
    
    
    2,005,357
    
    
    
    76,011
    
    
    
    3.79
    
    
    
    2,005,444
    
    
    
    68,712
    
    
    
    3.43Advance payment by borrowers
for taxes and insurance
    
    
    18,549
    
    
    
    18
    
    
    
    0.10
    
    
    
    19,493
    
    
    
    22
    
    
    
    0.11
    
    
    
    19,588
    
    
    
    24
    
    
    
    0.12Borrowings
    
    
    910,542
    
    
    
    39,484
    
    
    
    4.34
    
    
    
    869,110
    
    
    
    37,738
    
    
    
    4.34
    
    
    
    785,861
    
    
    
    30,355
    
    
    
    3.86Total interest-bearing
liabilities
    
    
    2,984,291
    
    
    
    104,191
    
    
    
    3.49
    
    
    
    2,893,960
    
    
    
    113,771
    
    
    
    3.93
    
    
    
    2,810,893
    
    
    
    99,091
    
    
    
    3.52Non-interest-Bearing LiabilitiesNon-interest-bearing deposits
    
    
    89,590
    
    
    
    
    
    
    
    
    
    
    
    92,810
    
    
    
    
    
    
    
    
    
    
    
    96,308Other non-interest-bearing
liabilities
    
    
    50,268
    
    
    
    
    
    
    
    
    
    
    
    45,853
    
    
    
    
    
    
    
    
    
    
    
    29,364Total non-interest-bearing
liabilities
    
    
    139,858
    
    
    
    
    
    
    
    
    
    
    
    138,663
    
    
    
    
    
    
    
    
    
    
    
    125,672Total liabilities
    
    
    3,124,149
    
    
    
    
    
    
    
    
    
    
    
    3,032,623
    
    
    
    
    
    
    
    
    
    
    
    2,936,565Shareholders equity
    
    
    413,637
    
    
    
    
    
    
    
    
    
    
    
    479,000
    
    
    
    
    
    
    
    
    
    
    
    528,890Total average liabilities and
equity
    
    $
    3,537,786
    
    
    
    
    
    
    
    
    
    
    $
    3,511,624
    
    
    
    
    
    
    
    
    
    
    $
    3,465,455Net interest income and net
interest rate spread
    
    
    
    
    
    $
    73,365
    
    
    
    1.85
    
    
    
    
    
    
    $
    69,230
    
    
    
    1.59
    
    
    
    
    
    
    $
    75,313
    
    
    
    1.73Net interest-earning assets
and net interest margin
    
    $
    338,813
    
    
    
    
    
    
    
    2.21
    %
    
    $
    420,452
    
    
    
    
    
    
    
    2.09
    %
    
    $
    507,913
    
    
    
    
    
    
    
    2.27
    %Average interest-earnings
assets to average interest-
bearing liabilities
    
    
    1.11
    x
    
    
    
    
    
    
    
    
    
    
    1.15
    x
    
    
    
    
    
    
    
    
    
    
    1.18
    x
 
 (1)
    
    For the purposes of these computations, non-accruing loans and loans held-for-sale are
included in the average loans outstanding.(2)
    
    FHLB of Chicago stock is included in investment securities dollars outstanding and yields. 
 46




---



##### Table of Contents



Year Ended December 31, 2008, Compared to 2007Increase (Decrease)Volume
    
    Rate
    
    Net(Dollars in thousands)Interest-earning assets:Loans receivable
    
    $
    (7,368
    )
    
    $
    (2,138
    )
    
    $
    (9,506
    )Mortgage-related securities
    
    
    (8,153
    )
    
    
    1,170
    
    
    
    (6,983
    )Investment securities
    
    
    10,444
    
    
    
    726
    
    
    
    11,170Interest-earning deposits
    
    
    822
    
    
    
    (488
    )
    
    
    334Federal funds sold
    
    
    1,106
    
    
    
    (1,566
    )
    
    
    (460
    )Total interest-earning assets
    
    
    (3,149
    )
    
    
    (2,296
    )
    
    
    (5,445
    )Interest-bearing liabilities:Savings deposits
    
    
    (22
    )
    
    
    (293
    )
    
    
    (315
    )Money market deposits
    
    
    1,924
    
    
    
    (2,179
    )
    
    
    (255
    )Interest-bearing demand deposits
    
    
    20
    
    
    
    5
    
    
    
    25Certificates of deposit
    
    
    (1,108
    )
    
    
    (9,669
    )
    
    
    (10,777
    )Advance payment by borrowers for taxes and
insurance
    
    
    (1
    )
    
    
    (3
    )
    
    
    (4
    )Borrowings
    
    
    1,798
    
    
    
    (52
    )
    
    
    1,746Total interest-bearing liabilities
    
    
    2,611
    
    
    
    (12,191
    )
    
    
    (9,580
    )Net change in net interest income
    
    $
    (5,760
    )
    
    $
    9,895
    
    
    $
    4,135
 Year Ended December 31, 2007, Compared to 2006Increase (Decrease)Volume
    
    Rate
    
    Net(Dollars in thousands)Interest-earning assets:Loans receivable
    
    $
    (1,632
    )
    
    $
    6,065
    
    
    $
    4,433Mortgage-related securities
    
    
    (101
    )
    
    
    2,602
    
    
    
    2,501Investment securities
    
    
    655
    
    
    
    454
    
    
    
    1,109Interest-earning deposits
    
    
    (78
    )
    
    
    25
    
    
    
    (53
    )Federal funds sold
    
    
    567
    
    
    
    40
    
    
    
    607Total interest-earning assets
    
    
    (589
    )
    
    
    9,186
    
    
    
    8,597Interest-bearing liabilities:Savings deposits
    
    
    (81
    )
    
    
    82
    
    
    
    1Money market deposits
    
    
    272
    
    
    
    608
    
    
    
    880Interest-bearing demand deposits
    
    
    (4
    )
    
    
    4
    
    
    
    Certificates of deposit
    
    
    587
    
    
    
    5,831
    
    
    
    6,418Advance payment by borrowers for taxes and
insurance
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Borrowings
    
    
    3,397
    
    
    
    3,986
    
    
    
    7,383Total interest-bearing liabilities
    
    
    4,171
    
    
    
    10,509
    
    
    
    14,680Net change in net interest income
    
    $
    (4,760
    )
    
    $
    (1,323
    )
    
    $
    (6,083
    )
 47




---



##### Table of Contents



Provision for (Recovery of) Loan Losses
       Non-Interest Income
 48




---



##### Table of Contents



49




---



##### Table of Contents



Non-Interest Expense
     Income Tax Expense
  50




---



##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses
 Mortgage Servicing Rights
 Other-Than-Temporary Impairment
 Goodwill
 Income Taxes
 51




---



##### Table of Contents



Contractual Obligations, Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements
   Payments Due InOne to
    
    Three to
    
    OverOne Year
    
    Three
    
    Five
    
    FiveOr Less
    
    Years
    
    Years
    
    Years
    
    Total(Dollars in thousands)Deposit liabilities without a
stated maturity (1)
    
    $
    795,214
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    795,214Certificates of deposit (1)
    
    
    960,205
    
    
    
    269,226
    
    
    
    105,703
    
    
    
    
    
    
    
    1,335,134Borrowed funds (2)
    
    
    
    
    
    
    
    
    
    
    100,278
    
    
    
    807,693
    
    
    
    907,971Operating leases
    
    
    1,196
    
    
    
    1,740
    
    
    
    1,300
    
    
    
    3,540
    
    
    
    7,776Purchase obligations
    
    
    2,160
    
    
    
    720
    
    
    
    
    
    
    
    
    
    
    
    2,880Deferred retirement plans and
deferred compensation plans
    
    
    644
    
    
    
    2,028
    
    
    
    1,947
    
    
    
    9,235
    
    
    
    13,854
 
 (1)
    
    Excludes interest to be paid in the periods indicated.(2)
    
    Includes $866.0 million of borrowings that contain quarterly call features after an initial
locked interest rate period of 6 months to 2 years.   52




---



##### Table of Contents



Payments Due InOne to
    
    Three to
    
    OverOne Year
    
    Three
    
    Five
    
    FiveOr Less
    
    Years
    
    Years
    
    Years
    
    Total(Dollars in thousands)Commitments to extend credit:Commercial real estate
    
    $
    8,823
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    8,823Residential real estate
    
    
    34,453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,453Revolving home equity
and credit card lines
    
    
    153,568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153,568Standby letters of credit
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    60Commercial letters of credit
    
    
    21,760
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,760Unused commercial lines
of credit
    
    
    994
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    994Net commitments to sell
mortgage loans
    
    
    72,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,653
  53




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##### Table of Contents



Quarterly Financial Information
  Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(Dollars in thousands, except per share amounts)2008Interest income
    
    $
    45,268
    
    
    $
    44,075
    
    
    $
    44,225
    
    
    $
    43,988Interest expense
    
    
    28,239
    
    
    
    25,980
    
    
    
    25,643
    
    
    
    24,329Net interest income
    
    
    17,029
    
    
    
    18,095
    
    
    
    18,582
    
    
    
    19,659Provision for loan losses
    
    
    156
    
    
    
    67
    
    
    
    1,135
    
    
    
    89Net income after provision
for loan losses
    
    
    16,873
    
    
    
    18,028
    
    
    
    17,447
    
    
    
    19,570Total non-interest income
    
    
    6,290
    
    
    
    4,059
    
    
    
    843
    
    
    
    6,516Total non-interest expense
    
    
    15,600
    
    
    
    15,727
    
    
    
    16,022
    
    
    
    16,028Minority interest in income
(loss) of real estate operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Income before income taxes
    
    
    7,563
    
    
    
    6,360
    
    
    
    2,268
    
    
    
    10,059Income taxes
    
    
    2,501
    
    
    
    2,081
    
    
    
    645
    
    
    
    3,867Net income
    
    $
    5,062
    
    
    $
    4,279
    
    
    $
    1,623
    
    
    $
    6,192Earnings per share  Basic
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.03
    
    
    $
    0.13Earnings per share  Diluted
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    0.03
    
    
    $
    0.13Cash dividend paid per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.092007Interest income
    
    $
    44,508
    
    
    $
    45,846
    
    
    $
    46,107
    
    
    $
    46,540Interest expense
    
    
    27,336
    
    
    
    28,476
    
    
    
    28,920
    
    
    
    29,039Net interest income
    
    
    17,172
    
    
    
    17,370
    
    
    
    17,187
    
    
    
    17,501Provision for loan losses
    
    
    (929
    )
    
    
    51
    
    
    
    388
    
    
    
    218Net income after provision
for loan losses
    
    
    18,101
    
    
    
    17,319
    
    
    
    16,799
    
    
    
    17,283Total non-interest income
    
    
    4,852
    
    
    
    6,499
    
    
    
    4,854
    
    
    
    4,223Total non-interest expense
    
    
    15,876
    
    
    
    16,385
    
    
    
    16,007
    
    
    
    15,275Minority interest in income
of real estate operations
    
    
    
    
    
    
    391
    
    
    
    
    
    
    
    1Income before income taxes
    
    
    7,077
    
    
    
    7,042
    
    
    
    5,646
    
    
    
    6,230Income taxes
    
    
    2,370
    
    
    
    2,439
    
    
    
    1,923
    
    
    
    2,160Net income
    
    $
    4,707
    
    
    $
    4,603
    
    
    $
    3,723
    
    
    $
    4,070Earnings per share  Basic
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.08Earnings per share  Diluted
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.08Cash dividend paid per share
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.085
    
    
    $
    0.085
 54




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
      
    
    maintain earnings and capital within self-imposed parameters over a range of possible
interest rate environments;
    
    coordinate interest rate risk policies and procedures with other elements of the
Companys business plan, all within the context of the current business environment and
regulatory capital and liquidity requirements; and
    
    manage interest rate risk in a manner consistent with the approved guidelines and
policies set by the Companys board of directors.
   
    
    emphasizing the origination of adjustable rate and certain 15-year fixed rate mortgage
loans for portfolio, and selling certain 15, 20, and 30 year fixed rate mortgage loans in
the secondary market;
    
    maintaining a significant level of investment securities and mortgage-related securities
with a weighted average life of less than eight years or with interest rates that reprice
in less than five years; and
    
    managing deposits and borrowings to provide stable funding.
  Gap Analysis
 55




---



##### Table of Contents




    
    Investment securities  based upon contractual maturities and if applicable, call dates.
    
    Mortgage-related securities  based upon an independent outside source for determining
cashflows (prepayment speeds).
    
    Loans  based upon contractual maturities, repricing date, if applicable, scheduled
repayments of principal, and projected prepayments of principal based upon the Companys
historical experience or anticipated prepayments.
    
    Deposit liabilities  based upon contractual maturities and the Companys historical
decay rates.
    
    Borrowings  based upon the earlier of call date or final maturity.
 56




---



##### Table of Contents



At December 31, 2008Within
    
    Three to
    
    More Than
    
    More Than
    
    OverThree
    
    Twelve
    
    One Year -
    
    Three Years -
    
    FiveMonths
    
    Months
    
    Three Years
    
    Five Years
    
    Years
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable:Mortgage loans:Permanent:Fixed
    
    $
    69,728
    
    
    $
    115,236
    
    
    $
    194,945
    
    
    $
    93,278
    
    
    $
    104,749
    
    
    $
    577,936Adjustable
    
    
    90,641
    
    
    
    296,280
    
    
    
    280,307
    
    
    
    94,700
    
    
    
    229
    
    
    
    762,157Construction:Fixed
    
    
    2,463
    
    
    
    1,370
    
    
    
    29,359
    
    
    
    
    
    
    
    25,188
    
    
    
    58,380Adjustable
    
    
    
    
    
    
    7,916
    
    
    
    17,760
    
    
    
    17,735
    
    
    
    
    
    
    
    43,411Consumer loans
    
    
    91,838
    
    
    
    90,663
    
    
    
    101,952
    
    
    
    33,348
    
    
    
    19,440
    
    
    
    337,241Commercial business loans
    
    
    15,670
    
    
    
    19,360
    
    
    
    12,178
    
    
    
    896
    
    
    
    25
    
    
    
    48,129Interest-earning deposits
    
    
    71,876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,876Investment securities
    
    
    219,559
    
    
    
    100,880
    
    
    
    91,639
    
    
    
    
    
    
    
    
    
    
    
    412,078Mortgage-related securities:Fixed
    
    
    81,872
    
    
    
    126,973
    
    
    
    104,769
    
    
    
    374,803
    
    
    
    97,624
    
    
    
    786,041Adjustable
    
    
    91,584
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,584Other interest-earning assets
    
    
    46,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,092Total interest-earning assets
    
    
    781,323
    
    
    
    758,678
    
    
    
    832,909
    
    
    
    614,760
    
    
    
    247,255
    
    
    
    3,234,925Non-interest-bearing and
interest-
bearing liabilities:Non-interest-bearing demand
accounts
    
    
    1,012
    
    
    
    2,967
    
    
    
    7,432
    
    
    
    6,783
    
    
    
    70,912
    
    
    
    89,106Interest-bearing liabilities:Deposit liabilities:Interest-bearing demand
accounts
    
    
    2,047
    
    
    
    6,004
    
    
    
    15,040
    
    
    
    13,726
    
    
    
    143,452
    
    
    
    180,269Regular savings accounts
    
    
    2,845
    
    
    
    8,217
    
    
    
    19,793
    
    
    
    17,113
    
    
    
    137,035
    
    
    
    185,003Money market accounts
    
    
    340,631
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    340,631Certificates of deposit
    
    
    300,005
    
    
    
    676,844
    
    
    
    250,865
    
    
    
    105,555
    
    
    
    
    
    
    
    1,333,269Advance payments by borrowers
for taxes and insurance
    
    
    
    
    
    
    1,929
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,929Borrowings
    
    
    246
    
    
    
    747
    
    
    
    2,144
    
    
    
    102,571
    
    
    
    802,263
    
    
    
    907,971Total interest-bearing
liabilities
    
    
    646,786
    
    
    
    696,708
    
    
    
    295,274
    
    
    
    245,748
    
    
    
    1,153,662
    
    
    
    3,038,178Interest rate sensitivity gap
    
    $
    134,537
    
    
    $
    61,970
    
    
    $
    537,635
    
    
    $
    369,012
    
    
    $
    (906,407
    )
    
    $
    196,747Cumulative interest rate
sensitivity gap
    
    $
    134,537
    
    
    $
    196,507
    
    
    $
    734,142
    
    
    $
    1,103,154
    
    
    $
    196,747Cumulative interest rate
sensitivity gap as a % total
assets
    
    
    3.86
    %
    
    
    5.63
    %
    
    
    21.04
    %
    
    
    31.61
    %
    
    
    5.64
    %Cumulative interest-earning
assets
as a percentage of interest
bearing liabilities
    
    
    120.80
    %
    
    
    114.63
    %
    
    
    144.80
    %
    
    
    158.54
    %
    
    
    106.48
    %
  Present Value of Equity
 57




---



##### Table of Contents



Present Value of Equityas Percent ofChange in
    
    Present Value of Equity
    
    Present Value of AssetsInterest Rates
    
    Dollar
    
    Dollar
    
    Percent
    
    Present Value
    
    Percent(Basis Points)
    
    Amount
    
    Change
    
    Change
    
    Ratio
    
    Change(Dollars in thousands)+300
    
    $
    422,921
    
    
    $
    (13,154
    )
    
    
    (3.0
    )%
    
    
    12.26
    %
    
    
    2.7
    %+200
    
    
    471,435
    
    
    
    35,360
    
    
    
    8.1
    
    
    
    13.37
    
    
    
    11.9+100
    
    
    458,868
    
    
    
    22,793
    
    
    
    5.2
    
    
    
    12.78
    
    
    
    7.00
    
    
    436,075
    
    
    
    
    
    
    
    
    
    
    
    11.94
    
    
    
    -100
    
    
    335,794
    
    
    
    (100,281
    )
    
    
    (23.0
    )
    
    
    9.18
    
    
    
    (23.1
    )
  58




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  
    Internal ControlIntegrated Framework
  
 59




---



##### Table of Contents



Share Based Payments Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements
  
 60




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Financial Condition
 December 312008
    
    2007(Dollars in Thousands)AssetsCash and due from banks
    
    $
    41,017
    
    
    $
    36,235Interest-earning deposits
    
    
    71,876
    
    
    
    2,714Cash and cash equivalents
    
    
    112,893
    
    
    
    38,949Securities available-for-sale, at fair value:Investment securities
    
    
    419,138
    
    
    
    99,450Mortgage-related securities
    
    
    850,867
    
    
    
    1,099,922Loans held-for-sale
    
    
    19,030
    
    
    
    7,952Loans receivable, net
    
    
    1,829,053
    
    
    
    1,994,556Goodwill
    
    
    52,570
    
    
    
    52,570Other intangible assets
    
    
    1,809
    
    
    
    2,428Mortgage servicing rights
    
    
    3,703
    
    
    
    4,708Other assets
    
    
    200,626
    
    
    
    187,511Total assets
    
    $
    3,489,689
    
    
    $
    3,488,046Liabilities and shareholders equityLiabilities:Deposit liabilities
    
    $
    2,130,348
    
    
    $
    2,112,968Borrowings
    
    
    907,971
    
    
    
    912,459Advance payments by borrowers for taxes and insurance
    
    
    1,929
    
    
    
    1,815Other liabilities
    
    
    46,906
    
    
    
    27,859Total liabilities
    
    
    3,087,154
    
    
    
    3,055,101Minority interest in real estate development partnership
    
    
    2,924
    
    
    
    2,910Shareholders equity:Preferred stock  $.01 par value:Authorized  20,000,000 shares in 2008 and 2007

Issued and outstanding  none in 2008 and 2007
    
    
    
    
    
    
    Common stock  $.01 par value:Authorized  200,000,000 shares in 2008 and 2007
Issued  78,783,849 shares in 2008 and 2007

Outstanding  47,686,759 shares in 2008 and 49,834,756 in 2007
    
    
    788
    
    
    
    788Additional paid-in capital
    
    
    498,501
    
    
    
    498,408Retained earnings
    
    
    273,826
    
    
    
    273,330Unearned ESOP shares
    
    
    (1,247
    )
    
    
    (2,166
    )Accumulated other comprehensive loss
    
    
    (16,404
    )
    
    
    (6,069
    )Treasury stock  31,097,090 shares in 2008 and 28,949,093 in 2007
    
    
    (355,853
    )
    
    
    (334,256
    )Total shareholders equity
    
    
    399,611
    
    
    
    430,035Total liabilities and shareholders equity
    
    $
    3,489,689
    
    
    $
    3,488,046
  61




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Income
 Year ended December 312008
    
    2007
    
    2006(Dollars in Thousands, Except Per Share Data)Interest income:Loans
    
    $
    113,635
    
    
    $
    123,141
    
    
    $
    118,708Investment securities
    
    
    16,041
    
    
    
    4,871
    
    
    
    3,762Mortgage-related securities
    
    
    45,535
    
    
    
    52,518
    
    
    
    50,017Interest-earning deposits
    
    
    2,345
    
    
    
    2,471
    
    
    
    1,917Total interest income
    
    
    177,556
    
    
    
    183,001
    
    
    
    174,404Interest expense:Deposit liabilities
    
    
    64,689
    
    
    
    76,011
    
    
    
    68,712Borrowings
    
    
    39,484
    
    
    
    37,738
    
    
    
    30,355Advance payments by borrowers for taxes and insurance
    
    
    18
    
    
    
    22
    
    
    
    24Total interest expense
    
    
    104,191
    
    
    
    113,771
    
    
    
    99,091Net interest income
    
    
    73,365
    
    
    
    69,230
    
    
    
    75,313Provision for (recovery of) loan losses
    
    
    1,447
    
    
    
    (272
    )
    
    
    632Net interest income after provision for loan losses
    
    
    71,918
    
    
    
    69,502
    
    
    
    74,681Non-interest income:Service charges on deposits
    
    
    6,688
    
    
    
    6,612
    
    
    
    6,085Brokerage and insurance commissions
    
    
    2,626
    
    
    
    2,617
    
    
    
    2,400Loan related fees and servicing revenue
    
    
    560
    
    
    
    478
    
    
    
    511Gain on sales of loans
    
    
    1,693
    
    
    
    1,478
    
    
    
    1,132Gains (losses) on investments
    
    
    (1,166
    )
    
    
    (1,228
    )
    
    
    694Real estate investment partnership income
    
    
    
    
    
    
    1,422
    
    
    
    Other
    
    
    7,307
    
    
    
    9,049
    
    
    
    6,213Total non-interest income
    
    
    17,708
    
    
    
    20,428
    
    
    
    17,035Non-interest expense:Compensation, payroll taxes and other employee benefits
    
    
    38,538
    
    
    
    38,234
    
    
    
    37,468Occupancy and equipment
    
    
    11,614
    
    
    
    11,277
    
    
    
    10,539Amortization of other intangible assets
    
    
    618
    
    
    
    661
    
    
    
    661Real estate investment partnership cost of sales
    
    
    
    
    
    
    645
    
    
    
    Other
    
    
    12,607
    
    
    
    12,726
    
    
    
    12,643Total non-interest expense
    
    
    63,377
    
    
    
    63,543
    
    
    
    61,311Minority interest in income (loss) of real estate operations
    
    
    (1
    )
    
    
    392
    
    
    
    Income before income taxes
    
    
    26,250
    
    
    
    25,995
    
    
    
    30,405Income taxes
    
    
    9,094
    
    
    
    8,892
    
    
    
    9,808Net income
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597Per share data:Earnings per
share  basic
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.35Earnings per
share  diluted
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    0.34Cash dividends per share paid
    
    $
    0.36
    
    
    $
    0.33
    
    
    $
    0.29
  62




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Changes in Shareholders Equity
 Additional
    
    
    
    
    
    UnearnedCommon
    
    Paid-In
    
    Retained
    
    ESOPStock
    
    Capital
    
    Earnings
    
    Shares(Dollars in Thousands, Except Per Share Data)Balances at January 1, 2006
    
    $
    788
    
    
    $
    497,589
    
    
    $
    269,913
    
    
    $
    (3,966
    )Impact of adoption of SAB 108
    
    
    
    
    
    
    
    
    
    
    (1,101
    )
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    20,597
    
    
    
    Other comprehensive income:Net unrealized gain on securities
available-for-sale, net of deferred
income tax expense of $622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension asset, net of deferred income
tax expense of $457
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,977
    
    
    
    
    
    
    
    900Exercise of stock options
    
    
    
    
    
    
    (2,557
    )
    
    
    
    
    
    
    Share based payments
    
    
    
    
    
    
    5,248
    
    
    
    
    
    
    
    Impact of adoption of SFAS 123(R)
    
    
    
    
    
    
    (6,955
    )
    
    
    
    
    
    
    Cash dividends ($0.29 per share)
    
    
    
    
    
    
    
    
    
    
    (15,955
    )
    
    
    Balance at December 31, 2006
    
    $
    788
    
    
    $
    496,302
    
    
    $
    273,454
    
    
    $
    (3,066
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    17,103
    
    
    
    Other comprehensive income:Net unrealized gain on securities
available-for-sale, net of deferred
income tax expense of $5,199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension asset, net of deferred income
tax expense of $349
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,843
    
    
    
    
    
    
    
    900Exercise of stock options
    
    
    
    
    
    
    (3,001
    )
    
    
    
    
    
    
    Share based payments
    
    
    
    
    
    
    2,264
    
    
    
    
    
    
    
    Cash dividends ($0.33 per share)
    
    
    
    
    
    
    
    
    
    
    (17,227
    )
    
    
    Balance at December 31, 2007
    
    $
    788
    
    
    $
    498,408
    
    
    $
    273,330
    
    
    $
    (2,166
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    17,156
    
    
    
    Other comprehensive income:Net unrealized loss on securities
available-for-sale, net of deferred
income tax benefit of $2,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension liability, net of deferred income
tax benefit of $2,365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impact of
change in measurement date in accordance with SFAS 158
    
    
    
    
    
    
    
    
    
    
    (218
    )
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of management recognition plan shares
    
    
    
    
    
    
    (403
    )
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,696
    
    
    
    
    
    
    
    919Exercise of stock options
    
    
    
    
    
    
    (4,489
    )
    
    
    
    
    
    
    Share based payments
    
    
    
    
    
    
    2,289
    
    
    
    
    
    
    
    Cash dividends ($0.36 per share)
    
    
    
    
    
    
    
    
    
    
    (16,442
    )
    
    
    Balance at December 31, 2008
    
    $
    788
    
    
    $
    498,501
    
    
    $
    273,826
    
    
    $
    (1,247
    )
  63




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Changes in Shareholders Equity
 Accumulated Other
    
    UnearnedComprehensive
    
    Deferred
    
    TreasuryIncome (Loss)
    
    Compensation
    
    Stock
    
    Total(Dollars in Thousands, Except Per Share Data)Balances at January 1, 2006
    
    $
    (17,346
    )
    
    $
    (6,955
    )
    
    $
    (195,649
    )
    
    $
    544,374Impact of adoption of SAB 108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,101
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,597Other comprehensive income:Net unrealized gain on securities
available-for-sale, net of deferred
income tax expense of $622
    
    
    1,214
    
    
    
    
    
    
    
    
    
    
    
    1,214Pension asset, net of deferred income
tax expense of $457
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    706Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,517Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (27,828
    )
    
    
    (27,828
    )Committed ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,877Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    5,249
    
    
    
    2,692Share based payments
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    5,203Impact of adoption of SFAS 123(R)
    
    
    
    
    
    
    6.955
    
    
    
    
    
    
    
    Cash dividends ($0.29 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,955
    )Balance at December 31, 2006
    
    $
    (15,426
    )
    
    
    
    
    
    $
    (218,273
    )
    
    $
    533,779Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,103Other comprehensive income:Net unrealized gain on securities
available-for-sale, net of deferred
income tax expense of $5,199
    
    
    8,709
    
    
    
    
    
    
    
    
    
    
    
    8,709Pension asset, net of deferred income
tax expense of $349
    
    
    648
    
    
    
    
    
    
    
    
    
    
    
    648Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,460Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (120,687
    )
    
    
    (120,687
    )Committed ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,743Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    4,830
    
    
    
    1,829Share based payments
    
    
    
    
    
    
    
    
    
    
    (126
    )
    
    
    2,138Cash dividends ($0.33 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,227
    )Balance at December 31, 2007
    
    $
    (6,069
    )
    
    
    
    
    
    $
    (334,256
    )
    
    $
    430,035Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,156Other comprehensive income:Net unrealized loss on securities
available-for-sale, net of deferred
income tax benefit of $2,962
    
    
    (5,935
    )
    
    
    
    
    
    
    
    
    
    
    (5,935
    )Pension liability, net of deferred income
tax benefit of $2,365
    
    
    (4,392
    )
    
    
    
    
    
    
    
    
    
    
    (4,392
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,829Impact of
change in measurement date in accordance with SFAS 158
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (226
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (29,927
    )
    
    
    (29,927
    )Issuance of management recognition plan shares
    
    
    
    
    
    
    
    
    
    
    403
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,615Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    8,181
    
    
    
    3,692Share based payments
    
    
    
    
    
    
    
    
    
    
    (254
    )
    
    
    2,035Cash dividends ($0.36 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,442
    )Balance at December 31, 2008
    
    $
    (16,404
    )
    
    
    
    
    
    $
    (355,853
    )
    
    $
    399,611
  64




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 312008
    
    2007
    
    2006(Dollars in Thousands)Operating activities:Net income
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597Adjustments to reconcile net income to net cash provided by
operating activities:Net provision for (recovery of) loan losses
    
    
    1,447
    
    
    
    (272
    )
    
    
    632Provision for depreciation
    
    
    2,469
    
    
    
    2,620
    
    
    
    2,644Amortization of other intangible assets
    
    
    618
    
    
    
    661
    
    
    
    661Amortization of mortgage servicing rights
    
    
    2,409
    
    
    
    1,191
    
    
    
    1,158Minority interest in real estate investment partnership
    
    
    1
    
    
    
    391
    
    
    
    Stock-based compensation expense
    
    
    5,650
    
    
    
    5,881
    
    
    
    9,080Net amortization on securities
    
    
    (1,482
    )
    
    
    (1,894
    )
    
    
    (826
    )Loans originated for sale
    
    
    (139,906
    )
    
    
    (107,018
    )
    
    
    (90,988
    )Proceeds from loan sales
    
    
    129,117
    
    
    
    103,085
    
    
    
    89,605Net gain on sale of available-for-sale securities
    
    
    (7,192
    )
    
    
    
    
    
    
    (694
    )Other than
temporary impairment of available-for-sale securities
    
    
    8,358
    
    
    
    1,228
    
    
    
    Net gain from real estate investment partnership
    
    
    
    
    
    
    (777
    )
    
    
    Gain on sales of loans originated for sale
    
    
    (1,693
    )
    
    
    (1,478
    )
    
    
    (1,132
    )Gain on sale of real estate owned
    
    
    
    
    
    
    
    
    
    
    (33
    )Adoption of SAB 108
    
    
    
    
    
    
    
    
    
    
    (1,101
    )Increase (decrease) in other liabilities
    
    
    (40
    )
    
    
    (15,517
    )
    
    
    26,616Decrease (increase) in other assets
    
    
    (9,452
    )
    
    
    21,415
    
    
    
    (44,682
    )Increase in accrued interest receivable
    
    
    (1,908
    )
    
    
    (1,118
    )
    
    
    (1,787
    )Net cash provided by operating activities
    
    
    5,552
    
    
    
    25,501
    
    
    
    9,750Investing activities:Net purchases of investments in mutual funds
    
    
    
    
    
    
    
    
    
    
    (264
    )Proceeds from maturities of investment securities
    
    
    29,992
    
    
    
    
    
    
    
    14,721Purchases of investment securities
    
    
    (351,202
    )
    
    
    (51,270
    )
    
    
    Purchases of mortgage-related securities
    
    
    (345,842
    )
    
    
    (247,428
    )
    
    
    (198,460
    )Principal repayments on mortgage-related securities
    
    
    195,480
    
    
    
    227,041
    
    
    
    224,693Proceeds from sale of investment securities
    
    
    392,358
    
    
    
    
    
    
    
    702Net decrease (increase) in loans receivable
    
    
    160,877
    
    
    
    26,317
    
    
    
    (35,894
    )Proceeds from real estate investment partnership
    
    
    
    
    
    
    1,422
    
    
    
    Purchase of Federal Home Loan Bank stock
    
    
    
    
    
    
    (216
    )
    
    
    Redemption of FHLB stock
    
    
    
    
    
    
    
    
    
    
    2,661Proceeds from sale of foreclosed properties
    
    
    2,100
    
    
    
    949
    
    
    
    737Net purchases of premises and equipment
    
    
    (3,145
    )
    
    
    (3,722
    )
    
    
    (5,581
    )Net cash provided by (used in) investing activities
    
    
    80,618
    
    
    
    (46,907
    )
    
    
    3,315
  65




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 312008
    
    2007
    
    2006(Dollars in Thousands)Financing activities:Net cash inflows (outflows) from deposit liabilities
    
    $
    34,825
    
    
    $
    (56,070
    )
    
    $
    65,172Net decrease in short-term borrowings
    
    
    
    
    
    
    (175,000
    )
    
    
    (25,000
    )Proceeds from long-term borrowings
    
    
    
    
    
    
    657,950
    
    
    
    398,075Repayments on long-term borrowings
    
    
    (4,488
    )
    
    
    (275,516
    )
    
    
    (433,846
    )Net increase
(decrease) in advance payments by borrowers for taxes and insurance
    
    
    114
    
    
    
    (384
    )
    
    
    (330
    )Proceeds from exercise of stock options
    
    
    3,313
    
    
    
    1,396
    
    
    
    1,940Excess tax benefit from exercise of stock options
    
    
    379
    
    
    
    433
    
    
    
    752Cash dividends
    
    
    (16,442
    )
    
    
    (17,227
    )
    
    
    (15,955
    )Purchase of treasury stock
    
    
    (29,927
    )
    
    
    (120,687
    )
    
    
    (27,828
    )Net cash provided by (used in) financing activities
    
    
    (12,226
    )
    
    
    14,895
    
    
    
    (37,020
    )Increase (decrease) in cash and cash equivalents
    
    
    73,944
    
    
    
    (6,511
    )
    
    
    (23,955
    )Cash and cash equivalents at beginning of year
    
    
    38,949
    
    
    
    45,460
    
    
    
    69,415Cash and cash equivalents at end of year
    
    $
    112,893
    
    
    $
    38,949
    
    
    $
    45,460Supplemental information:Interest paid on deposits and borrowings
    
    $
    121,660
    
    
    $
    102,744
    
    
    $
    92,022Income taxes paid
    
    
    10,704
    
    
    
    8,187
    
    
    
    10,786Loans transferred to foreclosed properties and
repossessed assets
    
    
    3,179
    
    
    
    3,724
    
    
    
    1,429
  66




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies
 Business
   Principles of Consolidation
   Cash and Cash Equivalents
  Federal Home Loan Bank Stock
  Securities Available-for-Sale
   67




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
   Loans Held-for-Sale
  Loans Receivable and Related Interest Income
  Loan Fees and Related Costs
  Allowance for Loan Losses
  68




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Mortgage Servicing Rights
  Mortgage Banking Loan Commitments
   Foreclosed Properties and Repossessed Assets
  Premises and Equipment
  69




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Goodwill and Other Intangible Assets
  Life Insurance Policies
  Income Taxes
  Earnings Per Share
  Pension Costs
   70




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Segment Information
  Stock Compensation
     For the Year Ended December 312008
    
    
    2007
    
    
    2006Stock
    
    
    Weighted
    
    
    Stock
    
    
    Weighted
    
    
    Stock
    
    
    WeightedOptions
    
    
    Avg. Cost
    
    
    Options
    
    
    Avg. Cost
    
    
    Options
    
    
    Avg. CostOutstanding at beginning of year
    
    
    4,090,628
    
    
    $
    7.3650
    
    
    
    4,525,238
    
    
    $
    7.0730
    
    
    
    4,919,051
    
    
    $
    6.8170Granted
    
    
    82,000
    
    
    $
    11.6874
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    $
    12.2340Exercised
    
    
    (667,461
    )
    
    $
    4.9956
    
    
    
    (402,610
    )
    
    $
    3.7620
    
    
    
    (436,813
    )
    
    $
    4.7236Forfeited
    
    
    (59,200
    )
    
    $
    10.6730
    
    
    
    (32,000
    )
    
    $
    10.6730
    
    
    
    (7,000
    )
    
    $
    10.6730Outstanding at end of year
    
    
    3,445,967
    
    
    $
    7.8763
    
    
    
    4,090,628
    
    
    $
    7.3650
    
    
    
    4,525,238
    
    
    $
    7.0730
  71




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
  WeightedAvg. GrantStock
    
    Date FairOptions
    
    ValueNon-vested options at beginning of year
    
    
    906,000
    
    
    $
    3.28Granted
    
    
    82,000
    
    
    $
    1.85Vested
    
    
    (411,600
    )
    
    $
    3.30Forfeited
    
    
    (59,200
    )
    
    $
    3.30Non-vested options at end of year
    
    
    517,200
    
    
    $
    3.03
  Non-Vested
    
    
    Vested
    
    
    RemainingExercise Price
    
    Options
    
    
    Options
    
    
    Contractual Life$  3.2056
    
    
    
    
    
    
    1,312,167
    
    
    2.3 years$10.6730
    
    
    405,200
    
    
    
    1,596,600
    
    
    5.3 years$12.2340
    
    
    30,000
    
    
    
    20,000
    
    
    7.5 years$11.1600
    
    
    32,000
    
    
    
    
    
    
    9.3 years$12.0250
    
    
    50,000
    
    
    
    
    
    
    9.6 yearsTotal
    
    
    517,200
    
    
    
    2,928,667
    
    
    4.2 yearsWeighted average exercise
price
    
    $
    10.9244
    
    
    $
    7.3381
   2008
    
    2007
    
    2006Risk-free interest rate
    
    
    3.15
    %
    
    NA
    
    
    5.04
    %Dividend yield
    
    
    3.00
    %
    
    NA
    
    
    2.00
    %Expected stock volatility
    
    
    18.20
    %
    
    NA
    
    
    12.40
    %Expected years until exercise
    
    
    7.50
    
    
    NA
    
    
    7.50
  72




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
   Recent Accounting Changes
       73




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
     Reclassifications
  74




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale
  December 31, 2008Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueInvestment securities:U.S. government and federal obligations
    
    $
    372,446
    
    
    $
    7,089
    
    
    $
    
    
    
    $
    379,535Mutual funds
    
    
    39,632
    
    
    
    36
    
    
    
    (65
    )
    
    
    39,603Total investment securities
    
    
    412,078
    
    
    
    7,125
    
    
    
    (65
    )
    
    
    419,138Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    281,652
    
    
    
    1,367
    
    
    
    (782
    )
    
    
    282,237Federal National Mortgage Association
    
    
    411,528
    
    
    
    2,534
    
    
    
    (698
    )
    
    
    413,364Private label CMOs
    
    
    157,706
    
    
    
    
    
    
    
    (29,147
    )
    
    
    128,559Government National Mortgage Association
    
    
    26,739
    
    
    
    208
    
    
    
    (240
    )
    
    
    26,707Total mortgage-related securities
    
    
    877,625
    
    
    
    4,109
    
    
    
    (30,867
    )
    
    
    850,867Total securities available-for-sale
    
    $
    1,289,703
    
    
    $
    11,234
    
    
    $
    (30,932
    )
    
    $
    1,270,005
 December 31, 2007Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueInvestment securities:Mutual funds
    
    $
    46,548
    
    
    $
    2
    
    
    $
    
    
    
    $
    46,550U.S. government and federal obligations
    
    
    51,270
    
    
    
    766
    
    
    
    
    
    
    
    52,036Stock in federal agencies
    
    
    1,442
    
    
    
    44
    
    
    
    (622
    )
    
    
    864Total investment securities
    
    
    99,260
    
    
    
    812
    
    
    
    (622
    )
    
    
    99,450Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    529,622
    
    
    
    2,660
    
    
    
    (7,384
    )
    
    
    524,898Federal National Mortgage Association
    
    
    368,104
    
    
    
    1,240
    
    
    
    (6,007
    )
    
    
    363,337Private label CMOs
    
    
    181,401
    
    
    
    309
    
    
    
    (1,072
    )
    
    
    180,638Government National Mortgage Association
    
    
    31,786
    
    
    
    8
    
    
    
    (745
    )
    
    
    31,049Total mortgage-related securities
    
    
    1,110,913
    
    
    
    4,217
    
    
    
    (15,208
    )
    
    
    1,099,922Total securities available-for-sale
    
    $
    1,210,173
    
    
    $
    5,029
    
    
    $
    (15,830
    )
    
    $
    1,199,372
 75




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities, Available-for-Sale (continued)
  Less Than 12 Months
    
    Greater Than 12 Monthsin an Unrealized Loss Position
    
    in an Unrealized Loss Position
    
    Gross
    
    TotalUnrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    EstimatedLoss
    
    of
    
    Fair
    
    Loss
    
    of
    
    Fair
    
    Loss
    
    FairAmount
    
    Securities
    
    Value
    
    Amount
    
    Securities
    
    Value
    
    Amount
    
    ValueInvestment securities:Mutual funds
    
    $
    (65
    )
    
    
    1
    
    
    $
    643
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    (65
    )
    
    $
    643Mortgage-related securities:Federal Home Loan Mortgage
Corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (782
    )
    
    
    38
    
    
    
    94,959
    
    
    
    (782
    )
    
    
    94,959Federal National Mortgage
Association
    
    
    (192
    )
    
    
    8
    
    
    
    12,537
    
    
    
    (506
    )
    
    
    40
    
    
    
    96,429
    
    
    
    (698
    )
    
    
    108,966Government National Mortgage
Association
    
    
    (4
    )
    
    
    1
    
    
    
    218
    
    
    
    (236
    )
    
    
    6
    
    
    
    14,825
    
    
    
    (240
    )
    
    
    15,043Private label CMOs
    
    
    (6,078
    )
    
    
    11
    
    
    
    56,594
    
    
    
    (23,069
    )
    
    
    18
    
    
    
    71,963
    
    
    
    (29,147
    )
    
    
    128,557Total mortgage-related
securities
    
    
    (6,274
    )
    
    
    20
    
    
    
    69,349
    
    
    
    (24,593
    )
    
    
    102
    
    
    
    278,176
    
    
    
    (30,867
    )
    
    
    347,525Total
    
    $
    (6,339
    )
    
    
    21
    
    
    $
    69,992
    
    
    $
    (24,593
    )
    
    
    102
    
    
    $
    278,176
    
    
    $
    (30,932
    )
    
    $
    348,168
    Less Than 12 Months
    
    Greater Than 12 Monthsin an Unrealized Loss Position
    
    in an Unrealized Loss Position
    
    Gross
    
    TotalUnrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    EstimatedLoss
    
    of
    
    Fair
    
    Loss
    
    of
    
    Fair
    
    Loss
    
    FairAmount
    
    Securities
    
    Value
    
    Amount
    
    Securities
    
    Value
    
    Amount
    
    ValueInvestment securities:Stock in federal agencies
    
    $
    (622
    )
    
    
    1
    
    
    $
    818
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    (622
    )
    
    $
    818Mortgage-related securities:Federal Home Loan Mortgage
Corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,384
    )
    
    
    106
    
    
    
    323,393
    
    
    
    (7,384
    )
    
    
    323,393Federal National Mortgage
Association
    
    
    (142
    )
    
    
    2
    
    
    
    24,575
    
    
    
    (5,865
    )
    
    
    80
    
    
    
    227,448
    
    
    
    (6,007
    )
    
    
    252,023Government National Mortgage
Association
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (745
    )
    
    
    10
    
    
    
    30,656
    
    
    
    (745
    )
    
    
    30,656Private label CMOs
    
    
    (253
    )
    
    
    2
    
    
    
    15,892
    
    
    
    (819
    )
    
    
    16
    
    
    
    92,050
    
    
    
    (1,072
    )
    
    
    107,942Total mortgage-related
securities
    
    
    (395
    )
    
    
    4
    
    
    
    40,467
    
    
    
    (14,813
    )
    
    
    212
    
    
    
    673,547
    
    
    
    (15,208
    )
    
    
    714,014Total
    
    $
    (1,017
    )
    
    
    5
    
    
    $
    41,285
    
    
    $
    (14,813
    )
    
    
    212
    
    
    $
    673,547
    
    
    $
    (15,830
    )
    
    $
    714,832
  76




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Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities, Available-for-Sale (continued)
   Amortized
    
    FairCost
    
    ValueDue in one year or less
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    
    
    
    
    Due after five years through ten years
    
    
    85,673
    
    
    
    86,427Due after ten years
    
    
    286,773
    
    
    
    293,108Mutual funds
    
    
    39,632
    
    
    
    39,603Mortgage-related securities
    
    
    877,625
    
    
    
    850,867Total securities available for sale
    
    $
    1,289,703
    
    
    $
    1,270,005
  2008
    
    2007
    
    2006Change in unrealized holding gain (loss):Unrealized net gains (losses)
    
    $
    (8,897
    )
    
    $
    13,908
    
    
    $
    1,836Related tax expense (benefit)
    
    
    (2,962
    )
    
    
    5,199
    
    
    
    622Change in other comprehensive income
    
    $
    (5,935
    )
    
    $
    8,709
    
    
    $
    1,214
  77




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable
 December 312008
    
    2007Loans receivable consist of the following:Permanent mortgage loans:One- to four-family
    
    $
    881,288
    
    
    $
    1,059,307Multi-family
    
    
    190,497
    
    
    
    206,640Commercial real estate
    
    
    275,802
    
    
    
    202,528Total permanent mortgages
    
    
    1,347,587
    
    
    
    1,468,475Construction and development loans:One- to four-family
    
    
    17,349
    
    
    
    35,040Multi-family
    
    
    71,208
    
    
    
    58,712Commercial real estate
    
    
    70,612
    
    
    
    76,649Total construction and development
    
    
    159,169
    
    
    
    170,401Total mortgage loans
    
    
    1,506,756
    
    
    
    1,638,876Consumer loans:Fixed equity
    
    
    173,104
    
    
    
    199,161Home equity lines of credit
    
    
    86,962
    
    
    
    90,631Student
    
    
    21,469
    
    
    
    21,845Home improvement
    
    
    36,023
    
    
    
    33,604Automobile
    
    
    11,775
    
    
    
    24,878Other
    
    
    8,740
    
    
    
    9,439Total consumer loans
    
    
    338,073
    
    
    
    379,558Commercial business loans
    
    
    49,623
    
    
    
    53,784Gross loans receivable
    
    
    1,894,452
    
    
    
    2,072,218Undisbursed loan proceeds
    
    
    (54,187
    )
    
    
    (68,457
    )Allowance for loan losses
    
    
    (12,208
    )
    
    
    (11,774
    )Unearned costs and discounts, net
    
    
    996
    
    
    
    2,569Total loans receivable, net
    
    $
    1,829,053
    
    
    $
    1,994,556
   Year Ended December 312008
    
    2007
    
    2006Balance at beginning of year
    
    $
    11,774
    
    
    $
    12,574
    
    
    $
    12,090Provision for (recovery of) loan losses
    
    
    1,447
    
    
    
    (272
    )
    
    
    632Charge-offs
    
    
    (1,058
    )
    
    
    (623
    )
    
    
    (367
    )Recoveries
    
    
    45
    
    
    
    95
    
    
    
    219Balance at end of year
    
    $
    12,208
    
    
    $
    11,774
    
    
    $
    12,574
  78




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
  December 312008
    
    2007Impaired loans for which an allowance has been provided
    
    $
    16,535
    
    
    $
    15,957Impaired loans for which no allowance has been provided
    
    
    16,554
    
    
    
    4,286Total loans determined to be impaired
    
    $
    33,089
    
    
    $
    20,243Allowance for loan losses related to impaired loans
    
    $
    3,351
    
    
    $
    1,715
 Year Ended December 312008
    
    2007
    
    2006Average recorded investment in impaired loans
    
    $
    21,396
    
    
    $
    19,746
    
    
    $
    6,507Cash basis interest income recognized from impaired loans
    
    $
    117
    
    
    $
    853
    
    
    $
    179
 4. Goodwill, Other Intangible Assets, and Mortgage Servicing Rights
    2008
    
    2007
    
    2006Mortgage servicing rights at beginning of year
    
    $
    4,708
    
    
    $
    4,653
    
    
    $
    4,771Additions
    
    
    1,404
    
    
    
    1,246
    
    
    
    1,040Amortization
    
    
    (1,587
    )
    
    
    (1,191
    )
    
    
    (1,158
    )Mortgage servicing rights at end of year
    
    
    4,525
    
    
    
    4,708
    
    
    
    4,653Valuation allowance
    
    
    (822
    )
    
    
    
    
    
    
    Mortgage servicing rights at end of year
    
    $
    3,703
    
    
    $
    4,708
    
    
    $
    4,653
  79




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 4. Goodwill, Other Intangible Assets, and Mortgage Servicing Rights (continued)
  MortgageServicing
    
    Deposit BaseRights
    
    Intangibles
    
    TotalTwelve months ended December 31, 2008
    
    $
    1,587
    
    
    $
    618
    
    
    $
    2,205Estimate for year ending December 31:2009
    
    $
    819
    
    
    $
    405
    
    
    $
    1,2242010
    
    
    813
    
    
    
    405
    
    
    
    1,2182011
    
    
    679
    
    
    
    405
    
    
    
    1,0842012
    
    
    507
    
    
    
    199
    
    
    
    7062013
    
    
    386
    
    
    
    140
    
    
    
    526Thereafter
    
    
    499
    
    
    
    255
    
    
    
    754Total
    
    $
    3,703
    
    
    $
    1,809
    
    
    $
    5,512
 5. Other Assets
  December 312008
    
    2007Accrued interest:Mortgage-related securities
    
    $
    6,669
    
    
    $
    4,463Investment securities
    
    
    1,734
    
    
    
    687Loans receivable
    
    
    8,130
    
    
    
    9,475Total accrued interest
    
    
    16,533
    
    
    
    14,625Foreclosed properties and repossessed assets
    
    
    4,768
    
    
    
    3,687Premises and equipment
    
    
    52,209
    
    
    
    51,628Federal Home Loan Bank stock, at cost
    
    
    46,092
    
    
    
    46,092Bank owned life insurance
    
    
    51,261
    
    
    
    48,871Prepaid and other assets
    
    
    29,763
    
    
    
    22,608Total other assets
    
    $
    200,626
    
    
    $
    187,511
  December 312008
    
    2007Land and land improvements
    
    $
    17,300
    
    
    $
    16,374Office buildings
    
    
    50,177
    
    
    
    48,933Furniture and equipment
    
    
    18,701
    
    
    
    18,190Leasehold improvements
    
    
    1,298
    
    
    
    1,294Total cost
    
    
    87,476
    
    
    
    84,791Less accumulated depreciation and amortization
    
    
    35,267
    
    
    
    33,163Total premises and equipment
    
    $
    52,209
    
    
    $
    51,628
  80




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 5. Other Assets (continued)
  2009
    
    $
    1,1962010
    
    
    9692011
    
    
    7712012
    
    
    6762013
    
    
    624Thereafter
    
    
    3,540Total
    
    $
    7,776
  6. Deposits Liabilities
  December 312008
    
    2007Checking accounts:Non-interest-bearing
    
    $
    89,106
    
    
    $
    97,506Interest-bearing
    
    
    180,278
    
    
    
    170,986Total checking accounts
    
    
    269,384
    
    
    
    268,492Money market accounts
    
    
    340,827
    
    
    
    280,442Regular savings accounts
    
    
    185,003
    
    
    
    183,756Certificate of deposits:Due within one year
    
    
    960,205
    
    
    
    1,076,140After one but within two years
    
    
    243,444
    
    
    
    261,556After two but within three years
    
    
    25,782
    
    
    
    26,980After three but within four years
    
    
    13,742
    
    
    
    8,971After four but within five years
    
    
    91,961
    
    
    
    6,631After five years
    
    
    
    
    
    
    Total certificates of deposit
    
    
    1,335,134
    
    
    
    1,380,278Total deposit liabilities
    
    $
    2,130,348
    
    
    $
    2,112,968
   Year Ended December 312008
    
    2007
    
    2006Interest-bearing checking accounts
    
    $
    376
    
    
    $
    351
    
    
    $
    351Money market accounts
    
    
    8,245
    
    
    
    8,500
    
    
    
    7,620Regular savings accounts
    
    
    609
    
    
    
    924
    
    
    
    923Certificate of deposits
    
    
    55,459
    
    
    
    66,236
    
    
    
    59,818Total interest expense on deposit liabilities
    
    $
    64,689
    
    
    $
    76,011
    
    
    $
    68,712
 81




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 7. Borrowings
  December 31, 2008
    
    
    December 31, 2007Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateFederal Home Loan
Bank advances
maturing in:2008
    
    $
    
    
    
    
    
    
    
    $
    1,025
    
    
    
    5.90
    %2012
    
    
    100,000
    
    
    
    4.52
    %
    
    
    100,000
    
    
    
    4.522013
    
    
    278
    
    
    
    4.17
    
    
    
    
    
    
    
    Thereafter
    
    
    807,693
    
    
    
    4.23
    
    
    
    811,434
    
    
    
    4.24Total borrowings
    
    $
    907,971
    
    
    
    
    
    
    $
    912,459
    8. Shareholders Equity
   82




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 8. Shareholders Equity (continued)
  To Be Well CapitalizedUnder PromptFor Capital
    
    Corrective ActionActual
    
    Adequacy Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2008:Total capital
    
    $
    349,928
    
    
    
    20.61
    %
    
    $
    135,856
    
    
    
    8.00
    %
    
    $
    169,820
    
    
    
    10.00
    %(to risk-weighted assets)Tier 1 capital
    
    
    337,720
    
    
    
    19.89
    
    
    
    67,928
    
    
    
    4.00
    
    
    
    101,892
    
    
    
    6.00(to risk-weighted assets)Tier 1 capital
    
    
    337,720
    
    
    
    9.79
    
    
    
    138,028
    
    
    
    4.00
    
    
    
    172,536
    
    
    
    5.00(to adjusted total assets)As of December 31, 2007:Total capital
    
    $
    337,154
    
    
    
    19.93
    %
    
    $
    135,334
    
    
    
    8.00
    %
    
    $
    169,167
    
    
    
    10.00
    %(to risk-weighted assets)Tier 1 capital
    
    
    325,380
    
    
    
    19.23
    
    
    
    67,667
    
    
    
    4.00
    
    
    
    101,500
    
    
    
    6.00(to risk-weighted assets)Tier 1 capital
    
    
    325,380
    
    
    
    9.47
    
    
    
    137,378
    
    
    
    4.00
    
    
    
    171,723
    
    
    
    5.00(to adjusted total assets)
  December 31, 2008Risk-
    
    Tier IBased
    
    (Core)Capital
    
    CapitalStockholders equity according to the Banks records
    
    $
    378,963
    
    
    $
    378,963Unrealized gains on investments
    
    
    12,779
    
    
    
    12,779SFAS 158 adjustment
    
    
    3,625
    
    
    
    3,625Goodwill and intangibles
    
    
    (53,652
    )
    
    
    (53,652
    )Investment in non-includable subsidiaries
    
    
    (3,773
    )
    
    
    (3,773
    )Disallowed servicing assets
    
    
    (222
    )
    
    
    (222
    )Allowance for loan losses
    
    
    12,208
    
    
    
    Regulatory capital
    
    $
    349,928
    
    
    $
    337,720
  At December 312008
    
    2007Net unrealized loss on securities available-for-sale
    
    $
    (12,779
    )
    
    $
    (6,844
    )Additional minimum pension asset
    
    
    (3,625
    )
    
    
    775Accumulated other comprehensive income (loss)
    
    
    (16,404
    )
    
    $
    (6,069
    )
 83




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 9. Earnings Per Share
  Year Ended December 312008
    
    
    2007
    
    
    2006Basic earnings per share:Net income
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597Weighted average shares outstanding
    
    
    47,212,574
    
    
    
    53,593,140
    
    
    
    58,710,159Allocated ESOP shares during the period
    
    
    327,250
    
    
    
    327,251
    
    
    
    327,493Vested MRP shares during the period
    
    
    186,636
    
    
    
    189,252
    
    
    
    277,996Basic shares outstanding
    
    
    47,726,460
    
    
    
    54,109,643
    
    
    
    59,315,648Basic earnings per share
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.35Diluted earnings per share:Net income
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597Weighted average shares outstanding used
in basic earnings per share
    
    
    47,726,460
    
    
    
    54,109,643
    
    
    
    59,315,648Net dilutive effect of:Stock option shares
    
    
    898,416
    
    
    
    1,267,200
    
    
    
    1,625,082Non-vested MRP shares
    
    
    4,363
    
    
    
    20,947
    
    
    
    58,881Diluted shares outstanding
    
    
    48,629,239
    
    
    
    55,397,790
    
    
    
    60,999,611Diluted earnings per share
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    0.34
  10. Employee Benefit Plans
    84




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
    Qualified
    
    SupplementalPension Plan
    
    Pension Plan2008
    
    2007
    
    2008
    
    2007Change in Benefit Obligation:Benefit obligation at beginning of year
    
    $
    26,863
    
    
    $
    24,831
    
    
    $
    6,880
    
    
    $
    6,696Service cost
    
    
    2,033
    
    
    
    1,789
    
    
    
    215
    
    
    
    173Interest cost
    
    
    1,934
    
    
    
    1,471
    
    
    
    491
    
    
    
    393Actuarial loss (gain)
    
    
    329
    
    
    
    (586
    )
    
    
    (6
    )
    
    
    (85
    )Benefits paid
    
    
    (770
    )
    
    
    (642
    )
    
    
    (347
    )
    
    
    (297
    )Benefit obligation at end of year
    
    $
    30,389
    
    
    $
    26,863
    
    
    $
    7,233
    
    
    $
    6,880Change in Plan Assets:Fair value of plan assets at beginning of year
    
    $
    28,237
    
    
    $
    25,965
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    (4,146
    )
    
    
    2,024
    
    
    
    
    
    
    
    Employer contributions
    
    
    1,622
    
    
    
    890
    
    
    
    347
    
    
    
    297Benefits paid
    
    
    (770
    )
    
    
    (642
    )
    
    
    (347
    )
    
    
    (297
    )Fair value of plan assets at end of year
    
    
    24,943
    
    
    
    28,237
    
    
    
    
    
    
    
    Funded status at the end of the year
    
    $
    (5,446
    )
    
    $
    1,374
    
    
    $
    (7,233
    )
    
    $
    (6,880
    )
  85




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  Qualified
    
    SupplementalPension Plan
    
    Pension Plan2008
    
    2007
    
    2008
    
    2007Prior service cost
    
    $
    
    
    
    $
    18
    
    
    $
    
    
    
    $
    Unrecognized net loss (gain)
    
    
    4,192
    
    
    
    (198
    )
    
    
    (402
    )
    
    
    (398
    )Total
    
    $
    4,192
    
    
    $
    (180
    )
    
    $
    (402
    )
    
    $
    (398
    )
    2008
    
    2007Discount rate
    
    
    6.07
    %
    
    
    6.25
    %Rate of increase in compensation levels
    
    
    3.50
    %
    
    
    3.50
    %Expected long-term rate of return on plan assets (qualified plan)
    
    
    7.00
    %
    
    
    7.00
    %
  2008
    
    2007
    
    2006Discount rate
    
    
    6.25
    %
    
    
    6.00
    %
    
    
    5.50
    %Rate of increase in compensation levels
    
    
    3.50
    %
    
    
    3.50
    %
    
    
    3.50
    %Expected long-term rate of return on plan
assets (qualified plan)
    
    
    7.00
    %
    
    
    7.00
    %
    
    
    7.00
    %
   2008
    
    2007
    
    2006Qualified Pension Plan:Service cost
    
    $
    1,743
    
    
    $
    1,789
    
    
    $
    1,887Interest cost
    
    
    1,657
    
    
    
    1,471
    
    
    
    1,289Expected return on plan assets
    
    
    (1,953
    )
    
    
    (1,796
    )
    
    
    (1,772
    )Amortization of prior service cost
    
    
    23
    
    
    
    30
    
    
    
    30Net periodic cost
    
    $
    1,470
    
    
    $
    1,494
    
    
    $
    1,434Supplemental Pension Plan:Service cost
    
    $
    184
    
    
    $
    173
    
    
    $
    170Interest cost
    
    
    421
    
    
    
    393
    
    
    
    360Amortization of prior service cost
    
    
    
    
    
    
    55
    
    
    
    70Net periodic cost
    
    $
    605
    
    
    $
    621
    
    
    $
    600
 86




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
   Qualified
    
    SupplementalPlan
    
    Plan
    
    Total2009
    
    $
    969
    
    
    $
    297
    
    
    $
    1,2662010
    
    
    1,167
    
    
    
    760
    
    
    
    1,9272011
    
    
    1,332
    
    
    
    760
    
    
    
    2,0922012
    
    
    1,518
    
    
    
    760
    
    
    
    2,2782013
    
    
    1,783
    
    
    
    760
    
    
    
    2,5432014  2018
    
    
    12,230
    
    
    
    2,666
    
    
    
    14,896$
    18,999
    
    
    $
    6,003
    
    
    $
    25,002
  December 31
    
    October 312008
    
    2007Asset Category:Equity securities
    
    
    4.8
    %
    
    
    10.2
    %Immediate participation guarantee contracts
    
    
    95.2
    
    
    
    89.8Total
    
    
    100.0
    %
    
    
    100.0
    %
    11. Stock-Based Benefit Plans
  87




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 11. Stock-Based Benefit Plans (continued)
   2008
    
    2007
    
    2006Shares allocated to participants in fiscal year
    
    
    327,251
    
    
    
    327,250
    
    
    
    327,493Unallocated and unearned shares
    
    
    453,426
    
    
    
    780,677
    
    
    
    1,107,927Fair value of unearned ESOP shares
    
    $
    5,233
    
    
    $
    8,252
    
    
    $
    13,417
 12. Income Taxes
      Year Ended December 312008
    
    2007
    
    2006Current income tax expense:Federal
    
    $
    15,281
    
    
    $
    9,566
    
    
    $
    11,518State
    
    
    83
    
    
    
    121
    
    
    
    84Current income tax expense
    
    
    15,364
    
    
    
    9,687
    
    
    
    11,602Deferred income tax expense (benefit):Federal
    
    
    (6,267
    )
    
    
    (788
    )
    
    
    (1,789
    )State
    
    
    (3
    )
    
    
    (7
    )
    
    
    (5
    )Deferred income tax expense
    
    
    (6,270
    )
    
    
    (795
    )
    
    
    (1,794
    )Income tax expense
    
    $
    9,094
    
    
    $
    8,892
    
    
    $
    9,808
 88




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 12. Income Taxes (continued)
  Year Ended December 312008
    
    2007
    
    2006Income before provision for income taxes
    
    $
    26,250
    
    
    $
    25,995
    
    
    $
    30,405Tax expense at federal statutory rate
    
    $
    9,188
    
    
    $
    9,098
    
    
    $
    10,642Increase (decrease) in taxes resulting from:State income taxes, net of federal tax benefit
    
    
    52
    
    
    
    74
    
    
    
    51Bank owned life insurance
    
    
    (873
    )
    
    
    (887
    )
    
    
    (399
    )Executive compensation in excess of Section 162(m) limit
    
    
    143
    
    
    
    117
    
    
    
    376Incentive stock option expense
    
    
    35
    
    
    
    67
    
    
    
    Tax returns and reserve adjustment
    
    
    492
    
    
    
    464
    
    
    
    (930
    )Other
    
    
    57
    
    
    
    (41
    )
    
    
    68Income tax expense
    
    $
    9,094
    
    
    $
    8,892
    
    
    $
    9,808
  December 312008
    
    2007Deferred tax assets:State net operating losses
    
    $
    1,424
    
    
    $
    1,814Loan loss reserves
    
    
    4,887
    
    
    
    4,712Pension
    
    
    5,196
    
    
    
    2,789Deferred compensation
    
    
    1,637
    
    
    
    1,580Restricted stock amortization
    
    
    741
    
    
    
    687Unrealized loss on investment securities
    
    
    6,919
    
    
    
    3,957Other-than-temporary impairment of investment securities
    
    
    3,279
    
    
    
    492Other
    
    
    839
    
    
    
    459Total deferred tax assets
    
    
    24,922
    
    
    
    16,490Valuation allowance
    
    
    (2,021
    )
    
    
    (1,542
    )Total deferred tax assets, net of valuation allowance
    
    
    22,901
    
    
    
    14,948Deferred tax liabilities:Property and equipment depreciation
    
    
    854
    
    
    
    420FHLB stock dividends
    
    
    5,130
    
    
    
    5,130Deferred loan fees
    
    
    258
    
    
    
    1,395Purchase accounting adjustments
    
    
    3,895
    
    
    
    4,224Mortgage servicing rights
    
    
    1,816
    
    
    
    1,890Other
    
    
    82
    
    
    
    74Total deferred tax liabilities
    
    
    12,035
    
    
    
    13,133Net deferred tax asset
    
    $
    10,866
    
    
    $
    1,815
  89




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts)
 12. Income Taxes (continued)
  13. Financial Instruments with Off-Balance-Sheet Risk
    December 312008
    
    2007Unused consumer lines of credit
    
    $
    153,568
    
    
    $
    153,553Unused commercial lines of credit
    
    
    21,760
    
    
    
    20,167Commitments to extend credit:Fixed rate
    
    
    22,690
    
    
    
    21,487Adjustable rate
    
    
    20,585
    
    
    
    16,353Undisbursed commercial loans
    
    
    994
    
    
    
    6,131
  14. Fair Value of Financial Instruments
   90




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
   Cash and Cash Equivalents
 Securities Available-for-Sale
 Loans Held-for-Sale
 Loans Receivable
 Mortgage Servicing Rights
 Federal Home Loan Bank Stock
 Accrued Interest Receivable and Payable
 Deposit Liabilities and Advance Payments by Borrowers for Taxes and Insurance
 Borrowings
 91




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
  December 31
    
    December 312008
    
    2007Carrying
    
    Fair
    
    Carrying
    
    FairValue
    
    Value
    
    Value
    
    ValueCash and cash equivalents
    
    $
    112,893
    
    
    $
    112,893
    
    
    $
    38,949
    
    
    $
    38,949Securities available-for-sale
    
    
    1,270,005
    
    
    
    1,270,005
    
    
    
    1,199,372
    
    
    
    1,199,372Loans receivable, net
    
    
    1,829,053
    
    
    
    1,781,536
    
    
    
    1,994,556
    
    
    
    2,030,797Loans held-for-sale
    
    
    19,030
    
    
    
    19,455
    
    
    
    7,952
    
    
    
    8,026Mortgage servicing rights
    
    
    3,703
    
    
    
    4,696
    
    
    
    4,708
    
    
    
    7,701Federal Home Loan Bank stock
    
    
    46,092
    
    
    
    46,092
    
    
    
    46,092
    
    
    
    46,092Accrued interest receivable
    
    
    16,532
    
    
    
    16,532
    
    
    
    14,625
    
    
    
    14,625Deposit liabilities
    
    
    2,130,348
    
    
    
    2,123,284
    
    
    
    2,112,968
    
    
    
    2,069,752Advance payments by borrowers
    
    
    1,929
    
    
    
    1,929
    
    
    
    1,815
    
    
    
    1,815Borrowings
    
    
    907,971
    
    
    
    1,060,896
    
    
    
    912,459
    
    
    
    943,526Accrued interest payable
    
    
    3,312
    
    
    
    3,312
    
    
    
    3,335
    
    
    
    3,335
    Fair Value HierarchyLevel 1
    
    Level 2
    
    Level 3
    
    TotalSecurities available-for-sale:Investment securities
    
    $
    39,603
    
    
    $
    379,535
    
    
    
    
    
    
    $
    419,138Mortgage-related securities
    
    
    
    
    
    
    850,867
    
    
    
    
    
    
    
    850,867Total securities available for sale
    
    $
    39,603
    
    
    $
    1,230,402
    
    
    
    
    
    
    $
    1,270,005
 92




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
   93




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars in Thousands, Except Per Share Amounts
 15. Condensed Parent Company Only Financial Statements
 STATEMENT OF FINANCIAL CONDITION
 December 312008
    
    2007AssetsCash and cash equivalents
    
    $
    17,235
    
    
    $
    25,709Investment in subsidiary
    
    
    378,963
    
    
    
    377,428Due from subsidiaries
    
    
    
    
    
    
    24,661Receivable from ESOP
    
    
    1,247
    
    
    
    2,147Other assets
    
    
    2,166
    
    
    
    1,191Total assets
    
    $
    399,611
    
    
    $
    431,136Liabilities and shareholders equityOther liabilities
    
    $
    
    
    
    $
    1,101Shareholders equity:Common stock  $.01 par value:Authorized  200,000,000 shares in 2008 and 2007
Issued  78,783,849 shares in 2008 and 2007
Outstanding  47,686,759 in 2008 and 49,834,756 shares in 2007
    
    
    788
    
    
    
    788Additional paid-in capital
    
    
    498,501
    
    
    
    498,408Retained earnings
    
    
    273,826
    
    
    
    273,330Unearned ESOP shares
    
    
    (1,247
    )
    
    
    (2,166
    )Accumulated other comprehensive income
    
    
    (16,404
    )
    
    
    (6,069
    )Treasury stock  31,097,090 shares in 2008 and 28,949,093
shares in 2007
    
    
    (355,853
    )
    
    
    (334,256
    )Total shareholders equity
    
    
    399,611
    
    
    
    430,035Total liabilities and shareholders equity
    
    $
    399,611
    
    
    $
    431,136
 STATEMENT OF INCOME
 Year ended December 312008
    
    2007
    
    2006Total income
    
    $
    354
    
    
    $
    1,627
    
    
    $
    2,330Total expenses
    
    
    1,460
    
    
    
    1,430
    
    
    
    1,466Income (loss) before income taxes
    
    
    (1,106
    )
    
    
    197
    
    
    
    864Income tax expense (benefit)
    
    
    (387
    )
    
    
    67
    
    
    
    347Income (loss) before equity in earnings of subsidiary
    
    
    (719
    )
    
    
    130
    
    
    
    517Equity in earnings of subsidiary
    
    
    17,875
    
    
    
    16,973
    
    
    
    20,080Net income
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597
 94




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 15. Condensed Parent Company Only Financial Statements (continued)
 STATEMENT OF CASH FLOWS
 Year ended December 312008
    
    2007
    
    2006Operating activities:Net income
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597Adjustment to reconcile net income to net cash provided by
operating activities:Equity in earnings of Bank subsidiary
    
    
    (17,875
    )
    
    
    (16,973
    )
    
    
    (20,080
    )Stock-based compensation
    
    
    248
    
    
    
    546
    
    
    
    608Adoption of SAB 108
    
    
    
    
    
    
    
    
    
    
    (1,101
    )Change in other operating activities and liabilities
    
    
    (2,076
    )
    
    
    1,582
    
    
    
    (1,207
    )Net cash provided (used) by operating activities
    
    
    (2,547
    )
    
    
    2,258
    
    
    
    (1,183
    )Investing activities:Dividends from Bank subsidiary
    
    
    26,400
    
    
    
    100,200
    
    
    
    21,200Other investing activities
    
    
    (547
    )
    
    
    33
    
    
    
    1,619Net cash provided by investing activities
    
    
    25,853
    
    
    
    100,233
    
    
    
    22,819Financing activities:Cash dividends
    
    
    (16,442
    )
    
    
    (17,227
    )
    
    
    (15,955
    )Purchase of treasury stock
    
    
    (29,927
    )
    
    
    (120,687
    )
    
    
    (27,828
    )Proceeds from exercise of stock options
    
    
    3,313
    
    
    
    1,396
    
    
    
    1,940Excess tax benefit from exercise of stock options
    
    
    379
    
    
    
    433
    
    
    
    752Cash received for MRP grants from Bank subsidiary
    
    
    9,997
    
    
    
    
    
    
    
    Payments received on ESOP
    
    
    900
    
    
    
    900
    
    
    
    900Net cash used in financing activities
    
    
    (31,780
    )
    
    
    (135,185
    )
    
    
    (40,191
    )Decrease in cash and cash equivalents
    
    
    (8,474
    )
    
    
    (32,694
    )
    
    
    (18,555
    )Cash and cash equivalents at beginning of year
    
    
    25,709
    
    
    
    58,403
    
    
    
    76,958Cash and cash equivalents at end of year
    
    $
    17,235
    
    
    $
    25,709
    
    
    $
    58,403
 16. SEC Staff Accounting Bulletin No. 108 (SAB 108)
   95




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2008
 (Dollars
in Thousands, Except Per Share Amounts)
 17. Subsequent Event
   96




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Change in Internal Control Over Financial Reporting
  Managements Report on Internal Control Over Financial Reporting
    97




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal
Control  Integrated Framework
    Internal Control
 Integrated Framework
 .
  
 98




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##### Table of Contents



Item 9B. Other Information
  99




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##### Table of Contents



Part III
 
 Item 10. Directors, Executive Officers, and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
   Number of securitiesremaining availableNumber of securities
    
    
    
    
    
    
    for future issuance underto be issued upon
    
    
    Weighted-average
    
    
    equity compensationexercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding options,
    
    
    outstanding options,
    
    
    securities reflectedPlan category
    
    warrants and rights (1)
    
    
    warrants and rights
    
    
    in 1st column) (2)Equity compensation plans
approved by security
holders
    
    
    3,445,967
    
    
    $
    7.8763
    
    
    
    2,247,083Equity compensation
plans not
approved by security
holders
    
    None
    
    
    None
    
    
    None
 
 (1)
    
    Represents options granted under the 2001 Plan or 2004 Plan, which plans were approved by
Company shareholders in 2001 and 2004, respectively.(2)
    
    Represents options or restricted stock which may be granted under the 2004 Plan. No further
awards may be made under the 2001 Plan. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  100




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##### Table of Contents



Part IV
 
 Item 15. Exhibits, Financial Statement Schedules
  Financial Statements and Financial Statement Schedules
  
    
    Reports of Deloitte & Touche LLP and Ernst & Young LLP, Independent Registered Public
Accounting Firms, on consolidated financial statements.
    
    Consolidated Statements of Financial Condition  As of December 31, 2008 and 2007.
    
    Consolidated Statements of Income  Years Ended December 31, 2008, 2007 and 2006.
    
    Consolidated Statements of Changes In Shareholders Equity  Years Ended December 31,
2008, 2007 and 2006.
    
    Consolidated Statements of Cash Flows  Years Ended December 31, 2008, 2007 and 2006.
    
    Notes to Consolidated Financial Statements.
  Exhibits
 101




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##### Table of Contents



SIGNATURES
  BANK MUTUAL CORPORATIONMarch 4, 2009By:
    
    /s/ Michael T. Crowley, Jr.

Michael T. Crowley, Jr.Chairman, President and Chief Executive Officer
 
 POWER OF ATTORNEY
  
  Signature and Title
 /s/ Michael T. Crowley, Jr.
    
    /s/ Raymond W. Dwyer, Jr.Michael T. Crowley, Jr., Chairman, President,
    
    Raymond W. Dwyer, Jr., DirectorChief Executive Officer and Director(Principal Executive Officer)/s/ Michael W. Dosland
    
    /s/ Mark C. HerrSenior Vice President and Chief Financial Officer
    
    Mark C. Herr, Director(Principal Financial Officer)/s/ Marlene M. Scholz
    
    /s/ Thomas J. Lopina, Sr.Marlene M. Scholz, Senior Vice President and Controller
    
    Thomas J. Lopina, Sr., Director(Principal Accounting Officer)/s/ David C. Boerke
    
    /s/ William J. MielkeDavid C. Boerke, Director
    
    William J. Mielke, Director/s/ Richard A. Brown
    
    /s/ Robert B. OlsonRichard A. Brown, Director
    
    Robert B. Olson, Director/s/ Thomas H. Buestrin
    
    /s/ Jelmer G. SwobodaThomas H. Buestrin, Director
    
    Jelmer G. Swoboda, Director
 
 *
    
    Each of the above signatures is affixed as of March 4, 2009. 102




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##### Table of Contents



BANK MUTUAL CORPORATION
(Bank Mutual Corporation or the Company)**
Commission File No. 000-32107
 
 EXHIBIT INDEX
 TO
 2008 REPORT ON FORM 10-K
  Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith3(i)
    
    Restated Articles of Incorporation, as
last amended May 29, 2003, of Bank
Mutual Corporation (the Articles)
    
    Exhibit 3(i) to the
Companys Registration
Statement on Form S-1,
Registration No.
333-1056853(ii)
    
    Bylaws, as last amended May 7, 2007, of
Bank Mutual Corporation
    
    Exhibit 3.1 to the
Companys Report on Form
8-K dated May 7, 20074.1
    
    The Articles
    
    Exhibit 3(i) above10.1*
    
    Bank Mutual Corporation Savings
Restoration Plan and Bank Mutual
Corporation ESOP Restoration Plan
    
    Exhibit 10.1(b) to the
Companys Annual Report on
Form 10-K for the year
ended December 31, 2003
(2003 10-K)10.2*
    
    Mutual Savings Bank Outside Directors
Retirement Plan***
    
    Exhibit 10.2 to Bank
Mutual Corporations
Registration Statement on
Form S-1, Registration No.
333-39362 (2000 S-1)10.3*
    
    Mutual Savings Bank Executive Excess
Benefit Plan
    
    Exhibit 10.3 to 2000 S-110.4*
    
    Agreement regarding deferred
compensation dated May 16, 1988 between
Mutual Savings Bank and Michael T.
Crowley, Sr.
    
    Exhibit 10.4 to 2000 S-110.5(a)*
    
    Employment Agreement between Mutual
Savings Bank and Michael T. Crowley Jr.
dated December 21, 1993 (continuing , as
amended, through 2011)
    
    Exhibit 10.5(a) to 2000 S-110.5(b)*
    
    Amendment thereto dated February 17, 1998
    
    Exhibit 10.5(b) to 2000 S-110.6*
    
    Form of Employment Agreements of Mr.
Maurer, Ms. Scholz, Mr. Anderegg, and
Mr. Callen with Mutual Savings Bank,
each dated as of January 1, 2001
(continuing through 2009)
    
    Exhibit 10.7 to 2000 S-1
 103




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##### Table of Contents



Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith10.7(a)*
    
    Employment Agreement between
First Northern Savings Bank
and Rick B. Colberg dated as
of November 1, 2000
(continued, as amended,
through 2007) [terminated
upon his retirement in
January 2008]
    
    Exhibit 10.9 to Bank
Mutuals Annual Report on
Form 10-K for the year
ended December 31, 2000
(2000 10-K)10.7(b)*
    
    Amendment thereto, dated as of
August 2, 2002
    
    Exhibit 10.9(b) to 2003 10-K10.7(c)*
    
    Second Amendment thereto,
dated as of August 19, 2003
    
    Exhibit 10.9(c) to 2003 10-K10.8(a)*
    
    Form of Supplemental
Retirement Agreement dated as
of January 1, 1994 between
First Northern Savings Bank
and Rick B. Colberg
    
    Exhibit 10.11(a) to 2000
10-K10.8(b)*
    
    Form of Amendment No. 1
thereto dated as of September
20, 1995
    
    Exhibit 10.11(b) to 2000
10-K10.8(c)*
    
    Form of Amendment No. 2
thereto, dated as of October
15, 1998
    
    Exhibit 10.6.4 to First
Northern Capital Corp.s
Annual Report on Form 10-K
for the fiscal year ended
December 31, 1998 (FNCC
1998 
10-K)10.9(a)*
    
    Non-Qualified Deferred
Retirement Plan for Directors
of First Northern Savings
Bank
    
    Exhibit 10.10(a) to 2000
10-K10.9(b)*
    
    Amendment No. 1 thereto
    
    Exhibit 10.3.2 to FNCC 1998
10-K10.10*
    
    Bank Mutual Corporation 2001
Stock Incentive Plan, as
amended May 7, 2002
(superseded, except as to
outstanding awards)
    
    Exhibit 10.1 to Bank Mutual
Corporations Quarterly
Report on Form 10-Q for the
quarter ended March 31,
200210.11(a)*
    
    Bank Mutual Corporation 2004
Stock Incentive Plan
    
    Exhibit A to Proxy
Statement for 2004 Annual
Meeting of Shareholders10.11(b)*
    
    Form of Option Agreement
thereunder  Bank Mutual
Corporation Director Stock
Option Agreement
    
    Exhibit 10.1(b) to the
Companys Report on Form
10-Q for the quarter ended
June 30, 2004 (6-30-04
10-Q)10.11(c)*
    
    Form of Option Agreement
thereunder  Bank Mutual
Corporation Incentive Stock
Option Agreement
    
    Exhibit 10.1(c ) to the
6-30-04 10-Q10.11(d)*
    
    Form of Restricted Stock
Agreement thereunder  Bank
Mutual Corporation Directors
Management Recognition Award
    
    Exhibit 10.1(d) to the
6-30-04 10-Q
 104




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##### Table of Contents



Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith10.11(e)*
    
    Form of Restricted Stock
Agreement thereunder  Bank
Mutual Corporation Officers
Management Recognition Award
    
    Exhibit 10.1(e) to the
6-30-04 10-Q10.12*
    
    Mutual Savings Bank/First
Northern Savings Bank
Management Incentive
Compensation Plan
    
    Exhibit 10.12(b) to
Post-Effective Amendment No.
1 to 2000 S-110.13(a)*
    
    Employment Agreement of Mr.
Dosland with Bank Mutual dated
as of August 18, 2008
    
    Exhibit 10.1 to the
Companys Report on Form 8-K
dated August 19, 200810.13(b)*
    
    Amendment to Employment
Agreement dated August 18,
2008, between Bank Mutual and
Michael W. Dosland
    
    Exhibit 10.2 to the
Companys Report on Form 8-K
dated August 19, 200821.1
    
    List of Subsidiaries
    
    
    
    X23.1
    
    Consent of Deloitte & Touche LLP
    
    
    
    X23.2
    
    Consent of Ernst & Young LLP
    
    
    
    X24.1
    
    Powers of Attorney
    
    Signature Page of this Report31.1
    
    Sarbanes-Oxley Act Section 302
Certification signed by the
Chairman, President, and Chief
Executive Officer of Bank
Mutual Corporation
    
    
    
    X31.2
    
    Sarbanes-Oxley Act Section 302
Certification signed by the
Senior Vice President and Chief
Financial Officer of Bank
Mutual Corporation
    
    
    
    X32.1
    
    Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
signed by the Chairman,
President, and Chief Executive
Officer of Bank Mutual
Corporation
    
    
    
    X32.2
    
    Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
signed by the Chief Financial
Officer of Bank Mutual
Corporation
    
    
    
    X
 Notes to Exhibit Index
 
 *
    
    Designates management or compensatory agreements, plans or arrangements required to be
filed as exhibits pursuant to Item 15(b) of Form 10-K**
    
    As used in this Exhibit Index, references to Bank Mutual Corporation and the Company also
include, where appropriate, Bank Mutual Corporation, a federally-chartered corporation and
the predecessor of the current registrant.***
    
    Mutual Savings Bank is now known as Bank Mutual. 105