##### Table of Contents



UNITED
STATES 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, 2006
 Commission file number: 000-31207
 BANK MUTUAL CORPORATION
  Wisconsin
    
    39-2004336(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)4949 West Brown Deer Road, Milwaukee, WI
    
    53223(Address of principal executive offices)
    
    (Zip Code)
 (414) 354-1500
  Common Stock, $0.01 Par Value
   NONE
  o þ
  o þ
  þ o
 þ
  o þ o
  o þ
 SM
 DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K Into WhichDocument
    
    Portions of Document are IncorporatedProxy Statement for Annual Meeting ofShareholders on May 7, 2007
    
    Part III




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##### Table of Contents



BANK MUTUAL CORPORATION
 FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 2006
 TABLE OF CONTENTS
 PAGEITEMPART I1.
    
    Business
    
    3-321A.
    
    Risk Factors
    
    33-351B.
    
    Unresolved Staff Comments
    
    352.
    
    Properties
    
    36-393.
    
    Legal Proceedings
    
    404.
    
    Submission of Matters to a Vote of Security Holders
    
    40Executive Officers of the Registrant
    
    40PART II5.
    
    Market for Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
    
    41-436.
    
    Selected Financial Data
    
    44-457.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    46-627A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    63-668.
    
    Financial Statements and Supplementary Data
    
    67-1059.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    1069A.
    
    Controls and Procedures (including Managements and Independent Auditors Report on Effectiveness of Internal Control Over Financial Reporting)106-1099B.
    
    Other Information
    
    109PART III10.
    
    Directors and Executive Officers of the Registrant
    
    11011.
    
    Executive Compensation
    
    11012.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    11013.
    
    Certain Relationships and Related Transactions
    
    11014.
    
    Principal Accountant Fees and Services
    
    110PART IV15.
    
    Exhibits and Financial Statement Schedules
    
    111Signatures
    
    112List of SubsidiariesConsent of Ernst & Young LLPSection 302 CertificationSection 302 CertificationSection 906 CertificationSection 906 Certification
 2




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Part 1
 
 Item 1. Business
 General
        Cautionary Factors
  3




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Market Area
      Competition
   4




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Lending Activities
 Loan Portfolio Composition.
    5




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At December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    PercentOf
    
    
    
    
    
    
    Of
    
    
    
    
    
    
    Of
    
    
    
    
    
    
    Of
    
    
    
    
    
    
    OfAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total(Dollars in thousands)Mortgage loans:One- to four-family
    
    $
    1,123,905
    
    
    
    53.03
    %
    
    $
    1,048,881
    
    
    
    50.94
    %
    
    $
    903,498
    
    
    
    46.34
    %
    
    $
    793,247
    
    
    
    44.69
    %
    
    $
    827,648
    
    
    
    47.37
    %Multi-family
    
    
    157,768
    
    
    
    7.44
    
    
    
    155,908
    
    
    
    7.57
    
    
    
    161,641
    
    
    
    8.29
    
    
    
    124,494
    
    
    
    7.01
    
    
    
    112,189
    
    
    
    6.42Commercial real estate
    
    
    167,089
    
    
    
    7.88
    
    
    
    175,090
    
    
    
    8.50
    
    
    
    195,708
    
    
    
    10.04
    
    
    
    209,293
    
    
    
    11.79
    
    
    
    186,960
    
    
    
    10.70Construction and development
    
    
    187,323
    
    
    
    8.84
    
    
    
    155,205
    
    
    
    7.54
    
    
    
    141,394
    
    
    
    7.25
    
    
    
    122,436
    
    
    
    6.90
    
    
    
    127,174
    
    
    
    7.28Total mortgage loans
    
    
    1,636,085
    
    
    
    77.19
    
    
    
    1,535,084
    
    
    
    74.55
    
    
    
    1,402,241
    
    
    
    71.92
    
    
    
    1,249,470
    
    
    
    70.39
    
    
    
    1,253,971
    
    
    
    71.77Consumer loans:Fixed-term equity
    
    
    227,811
    
    
    
    10.75
    
    
    
    246,460
    
    
    
    11.97
    
    
    
    266,635
    
    
    
    13.67
    
    
    
    252,550
    
    
    
    14.22
    
    
    
    234,049
    
    
    
    13.40Home equity lines of credit
    
    
    91,730
    
    
    
    4.33
    
    
    
    88,266
    
    
    
    4.29
    
    
    
    88,444
    
    
    
    4.54
    
    
    
    78,567
    
    
    
    4.43
    
    
    
    77,697
    
    
    
    4.45Student
    
    
    20,404
    
    
    
    0.96
    
    
    
    19,821
    
    
    
    0.96
    
    
    
    20,519
    
    
    
    1.05
    
    
    
    20,546
    
    
    
    1.16
    
    
    
    22,636
    
    
    
    1.30Home improvement
    
    
    33,287
    
    
    
    1.57
    
    
    
    30,067
    
    
    
    1.46
    
    
    
    24,293
    
    
    
    1.25
    
    
    
    12,605
    
    
    
    0.71
    
    
    
    6,993
    
    
    
    0.40Automobile
    
    
    46,752
    
    
    
    2.21
    
    
    
    69,237
    
    
    
    3.36
    
    
    
    61,469
    
    
    
    3.15
    
    
    
    67,630
    
    
    
    3.81
    
    
    
    68,140
    
    
    
    3.90Other
    
    
    11,262
    
    
    
    0.53
    
    
    
    12,944
    
    
    
    0.63
    
    
    
    15,911
    
    
    
    0.82
    
    
    
    18,623
    
    
    
    1.05
    
    
    
    22,434
    
    
    
    1.28Total consumer loans
    
    
    431,246
    
    
    
    20.35
    
    
    
    466,795
    
    
    
    22.67
    
    
    
    477,271
    
    
    
    24.48
    
    
    
    450,521
    
    
    
    25.38
    
    
    
    431,949
    
    
    
    24.73Commercial business loans
    
    
    52,056
    
    
    
    2.46
    
    
    
    57,247
    
    
    
    2.78
    
    
    
    70,170
    
    
    
    3.60
    
    
    
    75,022
    
    
    
    4.23
    
    
    
    61,060
    
    
    
    3.50Total loans receivable
    
    
    2,119,387
    
    
    
    100.00
    %
    
    
    2,059,126
    
    
    
    100.00
    %
    
    
    1,949,682
    
    
    
    100.00
    %
    
    
    1,775,013
    
    
    
    100.00
    %
    
    
    1,746,980
    
    
    
    100.00
    %Less:Undisbursed loan proceeds
    
    
    85,897
    
    
    
    
    
    
    
    60,014
    
    
    
    
    
    
    
    60,653
    
    
    
    
    
    
    
    47,743
    
    
    
    
    
    
    
    46,048Allowance for loan losses
    
    
    12,574
    
    
    
    
    
    
    
    12,090
    
    
    
    
    
    
    
    13,923
    
    
    
    
    
    
    
    13,771
    
    
    
    
    
    
    
    12,743Deferred fees and discounts
    
    
    (3,409
    )
    
    
    
    
    
    
    (3,470
    )
    
    
    
    
    
    
    (779
    )
    
    
    
    
    
    
    1,221
    
    
    
    
    
    
    
    2,527Total loans receivable, net
    
    $
    2,024,325
    
    
    
    
    
    
    $
    1,990,492
    
    
    
    
    
    
    $
    1,875,885
    
    
    
    
    
    
    $
    1,712,278
    
    
    
    
    
    
    $
    1,685,662
  6




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Loan Maturity.
 At December 31, 2006Mortgage
    
    Consumer
    
    CommercialLoans
    
    Loans
    
    Business Loans
    
    Total(In thousands)Amounts Due:Within one year
    
    $
    62,739
    
    
    $
    38,928
    
    
    $
    15,409
    
    
    $
    117,076After one year
One to two years
    
    
    87,765
    
    
    
    24,780
    
    
    
    13,704
    
    
    
    126,249Two to three years
    
    
    64,653
    
    
    
    16,221
    
    
    
    9,225
    
    
    
    90,099Three to five years
    
    
    53,927
    
    
    
    35,196
    
    
    
    8,056
    
    
    
    97,179Five to ten years
    
    
    131,979
    
    
    
    221,925
    
    
    
    2,482
    
    
    
    356,386Ten to twenty years
    
    
    406,224
    
    
    
    92,122
    
    
    
    1,676
    
    
    
    500,022Over twenty years
    
    
    828,798
    
    
    
    2,074
    
    
    
    1,504
    
    
    
    832,376Total due after one year
    
    
    1,573,346
    
    
    
    392,318
    
    
    
    36,647
    
    
    
    2,002,311Total loans receivable
    
    $
    1,636,085
    
    
    $
    431,246
    
    
    $
    52,056
    
    
    
    2,119,387Less:Undisbursed loan proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,897Allowance for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,574Deferred loan fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,409
    )Net loans receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,024,325
  Due after December 31, 2007Fixed
    
    
    Adjustable
    
    
    Total(In thousands)Mortgage loans
    
    $
    553,011
    
    
    $
    1,020,335
    
    
    $
    1,573,346Consumer loans
    
    
    338,092
    
    
    
    54,226
    
    
    
    392,318Commercial business loans
    
    
    21,952
    
    
    
    14,695
    
    
    
    36,647Total loans due after one year
    
    $
    913,055
    
    
    $
    1,089,256
    
    
    $
    2,002,311
 7




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For the year ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Balance outstanding at beginning of period
    
    $
    2,061,438
    
    
    $
    1,954,669
    
    
    $
    1,779,069Originations:Mortgage loans
    
    
    347,296
    
    
    
    388,106
    
    
    
    479,814Consumer loans
    
    
    158,690
    
    
    
    211,629
    
    
    
    268,521Commercial business loans
    
    
    42,888
    
    
    
    43,517
    
    
    
    41,018548,874
    
    
    
    643,252
    
    
    
    789,353Purchases:One-to four-family mortgage loans
    
    
    157,399
    
    
    
    258,707
    
    
    
    148,951Less:Principal payments and repayments:Mortgage loans
    
    
    311,267
    
    
    
    372,409
    
    
    
    349,951Consumer loans
    
    
    194,239
    
    
    
    222,105
    
    
    
    241,771Commercial business loans
    
    
    48,079
    
    
    
    56,415
    
    
    
    45,395Total principal payments
    
    
    553,585
    
    
    
    650,929
    
    
    
    637,117Transfers to foreclosed properties, real estate owned
and repossessed assets
    
    
    1,429
    
    
    
    538
    
    
    
    5,045Loan sales:Mortgage loans
    
    
    89,513
    
    
    
    143,698
    
    
    
    120,067Commercial loans
    
    
    
    
    
    
    25
    
    
    
    475Total loan sales
    
    
    89,513
    
    
    
    143,723
    
    
    
    120,542Total loans receivable and loans held for sale
    
    $
    2,123,184
    
    
    $
    2,061,438
    
    
    $
    1,954,669
 Residential Mortgage Lending.
   8




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9




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Percentage ofmortgage loanAmount
    
    originations(Dollars in millions)PeriodYear ended December 31, 2006
    
    $
    58.7
    
    
    
    16.9
    %Year ended December 31, 2005
    
    
    86.5
    
    
    
    22.3Year ended December 31, 2004
    
    
    121.8
    
    
    
    37.0
  Consumer Loans.
   10




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1 2
  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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13




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Asset Quality
  Delinquent Loans and Foreclosed Assets.
    14




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At December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in thousands)Non-accrual mortgage loans
    
    $
    11,504
    
    
    $
    2,214
    
    
    $
    1,485
    
    
    $
    2,894
    
    
    $
    1,399Non-accrual consumer loans
    
    
    803
    
    
    
    616
    
    
    
    619
    
    
    
    961
    
    
    
    527Non-accrual commercial business loans
    
    
    1,625
    
    
    
    2,517
    
    
    
    3,579
    
    
    
    5,433
    
    
    
    5,357Accruing loans delinquent 90 days or more
    
    
    565
    
    
    
    487
    
    
    
    586
    
    
    
    1,084
    
    
    
    1,108Total non-performing loans
    
    $
    14,497
    
    
    
    5,834
    
    
    
    6,269
    
    
    
    10,372
    
    
    
    8,391Foreclosed properties, real estate owned
and repossessed assets, net
    
    
    1,231
    
    
    
    708
    
    
    
    1,621
    
    
    
    630
    
    
    
    750Total non-performing assets
    
    $
    15,728
    
    
    $
    6,542
    
    
    $
    7,890
    
    
    $
    11,002
    
    
    $
    9,141Non-performing loans to total loans
    
    
    0.72
    %
    
    
    0.29
    %
    
    
    0.33
    %
    
    
    0.61
    %
    
    
    0.50
    %Non-performing assets to total assets
    
    
    0.46
    %
    
    
    0.19
    %
    
    
    0.23
    %
    
    
    0.35
    %
    
    
    0.32
    %Interest income that would have been
recognized if non-accrual loans had been
current
    
    $
    652
    
    
    $
    1,159
    
    
    $
    831
    
    
    $
    384
    
    
    $
    375
       15




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##### Table of Contents



Charge-offs.
 Allowance for Loan Losses.
 At or for the Years Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Balance at beginning of period
    
    $
    12,090
    
    
    $
    13,923
    
    
    $
    13,771
    
    
    $
    12,743
    
    
    $
    12,245Provision for loan losses
    
    
    632
    
    
    
    541
    
    
    
    1,330
    
    
    
    1,304
    
    
    
    760Charge-offs:Mortgage loans
    
    
    (44
    )
    
    
    
    
    
    
    (64
    )
    
    
    (67
    )
    
    
    (14
    )Consumer loans
    
    
    (271
    )
    
    
    (327
    )
    
    
    (373
    )
    
    
    (415
    )
    
    
    (428
    )Commercial business loans
    
    
    (52
    )
    
    
    (2,104
    )
    
    
    (816
    )
    
    
    (19
    )
    
    
    (39
    )Total charge-offs
    
    
    (367
    )
    
    
    (2,431
    )
    
    
    (1,253
    )
    
    
    (501
    )
    
    
    (481
    )Recoveries:Mortgage loans
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    113
    
    
    
    66Consumer loans
    
    
    81
    
    
    
    49
    
    
    
    66
    
    
    
    107
    
    
    
    40Commercial business loans
    
    
    138
    
    
    
    8
    
    
    
    
    
    
    
    5
    
    
    
    113Total recoveries
    
    
    219
    
    
    
    57
    
    
    
    75
    
    
    
    225
    
    
    
    219Net (charge-offs) recoveries
    
    
    (148
    )
    
    
    (2,374
    )
    
    
    (1,178
    )
    
    
    (276
    )
    
    
    (262
    )Balance at end of period
    
    $
    12,574
    
    
    $
    12,090
    
    
    $
    13,923
    
    
    $
    13,771
    
    
    $
    12,743Net charge-offs to average loans
    
    
    (0.01
    )%
    
    
    (0.12
    )%
    
    
    (0.07
    )%
    
    
    (0.02
    )%
    
    
    (0.01
    )%Allowance for loan losses to total
loans
    
    
    0.62
    %
    
    
    0.61
    %
    
    
    0.74
    %
    
    
    0.80
    %
    
    
    0.76
    %Allowance for loan losses to
non-performing loans
    
    
    86.74
    %
    
    
    207.23
    %
    
    
    222.09
    %
    
    
    132.77
    %
    
    
    151.87
    %
   
    
    One- to four-family residential mortgage loans
    
    Consumer
    
    Multi-family and commercial real estate
    
    Commercial business
 16




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Non-performing and Delinquent Loans.
    17




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##### Table of Contents



At December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Percentage
    
    
    
    
    
    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 TotalLoan Category
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans(Dollars in thousands)Mortgage loansOne- to four-family
    
    $
    3,531
    
    
    
    53.03
    %
    
    $
    3,294
    
    
    
    50.94
    %
    
    $
    2,488
    
    
    
    46.34
    %
    
    $
    4,001
    
    
    
    44.69
    %
    
    $
    4,701
    
    
    
    47.37
    %Other
    
    
    3,049
    
    
    
    24.16
    
    
    
    2,424
    
    
    
    23.61
    
    
    
    3,222
    
    
    
    25.58
    
    
    
    3,150
    
    
    
    25.70
    
    
    
    3,160
    
    
    
    24.40Total mortgage loans
    
    
    6,580
    
    
    
    77.19
    
    
    
    5,718
    
    
    
    74.55
    
    
    
    5,710
    
    
    
    71.92
    
    
    
    7,151
    
    
    
    70.39
    
    
    
    7,861
    
    
    
    71.77Home equity lines
    
    
    496
    
    
    
    4.33
    
    
    
    483
    
    
    
    4.29
    
    
    
    663
    
    
    
    4.54
    
    
    
    481
    
    
    
    4.43
    
    
    
    496
    
    
    
    4.45Consumer
    
    
    2,060
    
    
    
    16.02
    
    
    
    2,118
    
    
    
    18.38
    
    
    
    2,929
    
    
    
    19.94
    
    
    
    2,398
    
    
    
    20.95
    
    
    
    2,380
    
    
    
    20.28Commercial business loans
    
    
    3,438
    
    
    
    2.46
    
    
    
    3,696
    
    
    
    2.78
    
    
    
    4,416
    
    
    
    3.60
    
    
    
    3,741
    
    
    
    4.23
    
    
    
    1,507
    
    
    
    3.50Unallocated
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    205
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    499
    
    
    
    Total allowance for
loan losses
    
    $
    12,574
    
    
    
    100.00
    %
    
    $
    12,090
    
    
    
    100.00
    %
    
    $
    13,923
    
    
    
    100.00
    %
    
    $
    13,771
    
    
    
    100.00
    %
    
    $
    12,743
    
    
    
    100.00
    %
 Investment Activities
 Investment Securities.
     Mortgage-related Securities.
 18




---



##### Table of Contents



For the Year Ended December 31,2006
    
    2005
    
    2004(In thousands)Investment securities available-for-sale:Carrying value at beginning of period
    
    $
    63,361
    
    
    $
    68,753
    
    
    $
    67,854Purchases
    
    
    264
    
    
    
    56,921
    
    
    
    26,480Sales
    
    
    (9
    )
    
    
    (11
    )
    
    
    Calls
    
    
    
    
    
    
    
    
    
    
    Maturities
    
    
    (14,720
    )
    
    
    (60,780
    )
    
    
    (27,000
    )Principal payments
    
    
    
    
    
    
    
    
    
    
    Premium amortization and discount accretion, net
    
    
    
    
    
    
    104
    
    
    
    20(Decrease) increase in unrealized gains
    
    
    (606
    )
    
    
    (1,626
    )
    
    
    1,399Net increase (decrease) in investment securities
    
    
    (15,071
    )
    
    
    (5,392
    )
    
    
    899Carrying value at end of period
    
    $
    48,290
    
    
    $
    63,361
    
    
    $
    68,753Mortgage-related securities available-for-sale:Carrying value at beginning of period
    
    $
    1,087,816
    
    
    $
    1,266,224
    
    
    $
    1,053,349Purchases
    
    
    198,460
    
    
    
    193,857
    
    
    
    523,334Principal payments
    
    
    (224,693
    )
    
    
    (352,866
    )
    
    
    (302,848
    )Premium amortization and discount accretion, net
    
    
    826
    
    
    
    (248
    )
    
    
    (375
    )Increase (decrease) in unrealized gains
    
    
    2,442
    
    
    
    (19,151
    )
    
    
    (7,236
    )Net increase in mortgage-related securities
    
    
    (22,965
    )
    
    
    (178,408
    )
    
    
    212,875Carrying value at end of period
    
    $
    1,064,851
    
    
    $
    1,087,816
    
    
    $
    1,266,224
 19




---



##### Table of Contents



At December 31,2006
    
    2005
    
    2004Carrying/
    
    Carrying/
    
    Carrying/Fair Value
    
    Fair Value
    
    Fair Value(Dollars in thousands)Money market investmentsInterest-earning deposits
    
    $
    1,022
    
    
    $
    27,872
    
    
    $
    707Federal funds sold
    
    
    
    
    
    
    
    
    
    
    Total money market investments
    
    $
    1,022
    
    
    $
    27,872
    
    
    $
    707Investment securities available-for-saleMutual funds
    
    $
    46,592
    
    
    $
    46,408
    
    
    $
    45,390United States government and federal agency obligations.
    
    
    
    
    
    
    14,585
    
    
    
    19,831Stock in federal agencies
    
    
    1,698
    
    
    
    2,368
    
    
    
    3,532Total investment securities available-for-sale
    
    $
    48,290
    
    
    $
    63,361
    
    
    $
    68,753Mortgage-related securities available-for-sale by issuer:Freddie Mac
    
    $
    441,404
    
    
    $
    493,305
    
    
    $
    631,024Fannie Mae
    
    
    373,394
    
    
    
    409,636
    
    
    
    542,803Private placement CMOs
    
    
    207,902
    
    
    
    122,302
    
    
    
    9,928GNMA
    
    
    42,151
    
    
    
    62,573
    
    
    
    82,469Total mortgage-related securities
    
    $
    1,064,851
    
    
    $
    1,087,816
    
    
    $
    1,266,224Total investment portfolio
    
    $
    1,114,163
    
    
    $
    1,179,049
    
    
    $
    1,335,684
 20




---



##### Table of Contents



Carrying Values, Yields and Maturities.
 At December 31, 2006More 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
available-for-sale:Mutual funds
    
    $
    46,592
    
    
    
    4.95
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    46,592
    
    
    
    4.95
    %Stock in Federal Agencies
    
    
    1,698
    
    
    
    3.41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,698
    
    
    
    3.41Total investment securities
    
    $
    48,290
    
    
    
    4.90
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    48,290
    
    
    
    4.90Mortgage-related securities
available-for-sale:By issuer:GNMA pass-through
certificates
    
    $
    
    
    
    
    
    
    
    $
    10
    
    
    
    8.50
    
    
    $
    
    
    
    
    
    
    
    $
    673
    
    
    
    4.75
    
    
    $
    683
    
    
    
    4.81Fannie Mae pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    7,544
    
    
    
    4.66
    
    
    
    27,401
    
    
    
    5.67
    
    
    
    38,773
    
    
    
    4.31
    
    
    
    73,718
    
    
    
    4.85Freddie Mac pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    442
    
    
    
    5.74
    
    
    
    8,478
    
    
    
    5.29
    
    
    
    746
    
    
    
    6.62
    
    
    
    9,666
    
    
    
    5.41Private CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207,902
    
    
    
    5.08
    
    
    
    207,902
    
    
    
    5.08Freddie Mac, Fannie Mae and
GNMA-REMICs
    
    
    
    
    
    
    
    
    
    
    14,932
    
    
    
    4.76
    
    
    
    129,851
    
    
    
    3.89
    
    
    
    628,099
    
    
    
    4.38
    
    
    
    772,882
    
    
    
    4.31Total mortgage-related
securities
    
    $
    
    
    
    
    
    
    
    $
    22,928
    
    
    
    4.75
    
    
    $
    165,730
    
    
    
    4.25
    
    
    $
    876,193
    
    
    
    4.54
    
    
    $
    1,064,851
    
    
    
    4.50By coupon type:Adjustable rate
    
    $
    
    
    
    
    
    
    
    $
    349
    
    
    
    5.23
    
    
    $
    
    
    
    
    
    
    
    $
    124,391
    
    
    
    4.50
    
    
    $
    124,740
    
    
    
    4.50Fixed rate
    
    
    
    
    
    
    
    
    
    
    22,579
    
    
    
    4.74
    
    
    
    165,730
    
    
    
    4.25
    
    
    
    751,802
    
    
    
    4.55
    
    
    
    940,111
    
    
    
    4.50Total mortgage-related
securities
    
    $
    
    
    
    
    
    
    
    $
    22,928
    
    
    
    4.75
    %
    
    $
    165,730
    
    
    
    4.25
    %
    
    $
    876,193
    
    
    
    4.54
    %
    
    $
    1,064,851
    
    
    
    4.30
    %Total investment and
mortgage-related securities
portfolio
    
    $
    48,290
    
    
    
    4.90
    %
    
    $
    22,928
    
    
    
    4.75
    %
    
    $
    165,730
    
    
    
    4.25
    %
    
    $
    876,193
    
    
    
    4.54
    %
    
    $
    1,113,141
    
    
    
    4.52
    %
 Deposits
    21




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##### Table of Contents



For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Total deposits at beginning of period
    
    $
    2,086,822
    
    
    $
    1,982,881
    
    
    $
    2,052,290Net deposits (withdrawals)
    
    
    9,292
    
    
    
    59,571
    
    
    
    (112,771
    )Interest credited, net of penalties
    
    
    62,527
    
    
    
    44,370
    
    
    
    43,362Total deposits at end of period
    
    $
    2,158,641
    
    
    $
    2,086,822
    
    
    $
    1,982,881Net increase (decrease)
    
    $
    71,819
    
    
    $
    103,941
    
    
    $
    (69,409
    )Percentage increase (decrease)
    
    
    3.44
    %
    
    
    5.24
    %
    
    
    (3.38
    %)
  Maturity Period
    
    Amount(In thousands)Three months or less
    
    $
    90,035Over three months through six months
    
    
    82,963Over six months through 12 months
    
    
    60,936Over 12 months through 24 months
    
    
    8,274Over 24 months through 36 months
    
    
    14,041Over 36 months
    
    
    3,542Total
    
    $
    259,791
  At December 31,2006
    
    
    
    
    
    
    
    
    
    2005
    
    
    
    
    
    
    
    
    
    2004Weighted
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    WeightedPercent
    
    average
    
    
    
    
    
    Percent
    
    average
    
    
    
    
    
    Percent
    
    averageof total
    
    nominal
    
    
    
    
    
    of total
    
    nominal
    
    
    
    
    
    of total
    
    nominalAmount
    
    deposits
    
    rate
    
    Amount
    
    deposits
    
    rate
    
    Amount
    
    deposits
    
    rate(Dollars in thousands)Savings
    
    $
    200,016
    
    
    
    9.27
    %
    
    
    0.45
    %
    
    $
    224,408
    
    
    
    10.75
    %
    
    
    0.43
    %
    
    $
    247,439
    
    
    
    12.48
    %
    
    
    0.43
    %Interest-bearing demand
    
    
    174,206
    
    
    
    8.07
    
    
    
    0.21
    
    
    
    174,620
    
    
    
    8.37
    
    
    
    0.21
    
    
    
    171,565
    
    
    
    8.65
    
    
    
    0.22Money market
    
    
    248,542
    
    
    
    11.51
    
    
    
    3.00
    
    
    
    271,418
    
    
    
    13.01
    
    
    
    2.88
    
    
    
    309,531
    
    
    
    15.61
    
    
    
    0.97Non-interest bearing demand
    
    
    104,821
    
    
    
    4.86
    
    
    
    0.00
    
    
    
    110,583
    
    
    
    5.30
    
    
    
    0.00
    
    
    
    111,855
    
    
    
    5.64
    
    
    
    0.00Total
    
    
    727,585
    
    
    
    33.71
    
    
    
    1.20
    
    
    
    781,029
    
    
    
    37.43
    
    
    
    1.17
    
    
    
    840,390
    
    
    
    42.38
    
    
    
    0.53Certificates:Time deposits with original
maturities of:Three months or less
    
    
    64,486
    
    
    
    2.99
    
    
    
    4.76
    
    
    
    111,068
    
    
    
    5.32
    
    
    
    3.91
    
    
    
    86,259
    
    
    
    4.35
    
    
    
    1.28Over three months to twelve months
    
    
    628,952
    
    
    
    29.14
    
    
    
    5.11
    
    
    
    280,756
    
    
    
    13.45
    
    
    
    3.73
    
    
    
    114,032
    
    
    
    5.75
    
    
    
    1.45Over twelve months to
twenty-four months
    
    
    323,869
    
    
    
    15.00
    
    
    
    4.14
    
    
    
    345,578
    
    
    
    16.56
    
    
    
    3.51
    
    
    
    199,174
    
    
    
    10.04
    
    
    
    2.25Over twenty-four months to
thirty-six months
    
    
    98,005
    
    
    
    4.54
    
    
    
    4.18
    
    
    
    187,215
    
    
    
    8.97
    
    
    
    3.38
    
    
    
    209,038
    
    
    
    10.54
    
    
    
    3.12Over thirty-six months to
forty-eight months
    
    
    7,155
    
    
    
    0.33
    
    
    
    3.38
    
    
    
    45,616
    
    
    
    2.19
    
    
    
    3.97
    
    
    
    204,096
    
    
    
    10.29
    
    
    
    4.29Over forty-eight months to sixty
months
    
    
    308,589
    
    
    
    14.29
    
    
    
    4.66
    
    
    
    335,560
    
    
    
    16.08
    
    
    
    4.70
    
    
    
    329,855
    
    
    
    16.65
    
    
    
    4.84Over sixty months
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    37
    
    
    
    0.00
    
    
    
    7.19Total time deposits
    
    
    1,431,056
    
    
    
    66.29
    
    
    
    4.71
    
    
    
    1,305,793
    
    
    
    62.58
    
    
    
    3.89
    
    
    
    1,142,491
    
    
    
    57.62
    
    
    
    3.37Total deposits
    
    $
    2,158,641
    
    
    
    100.00
    %
    
    
    3.52
    
    
    $
    2,086,822
    
    
    
    100.00
    %
    
    
    2.87
    %
    
    $
    1,982,881
    
    
    
    100.00
    %
    
    
    2.17
    %
 22




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##### Table of Contents



Borrowings
   At or For the Year Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in thousands)Balance outstanding at end of year:Notes payable to FHLB
    
    $
    705,025
    
    
    $
    765,796
    
    
    $
    623,925
    
    
    $
    299,491
    
    
    $
    332,299Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    137,600
    
    
    
    
    
    
    
    Other borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,679Weighted average interest rate at end of year:Notes payable to FHLB
    
    
    4.46
    %
    
    
    3.58
    %
    
    
    2.89
    %
    
    
    5.52
    %
    
    
    5.57
    %Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    2.47
    %
    
    
    
    
    
    
    Other borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.99
    %Maximum amount outstanding during the year:Notes payable to FHLB
    
    $
    841,835
    
    
    $
    909,920
    
    
    $
    623,925
    
    
    $
    332,398
    
    
    $
    445,414Overnight borrowings from FHLB
    
    
    38,000
    
    
    
    186,000
    
    
    
    289,800
    
    
    
    15,000
    
    
    
    5,480Other borrowings
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    22,679
    
    
    
    19,835Average amount outstanding during the year:Notes payable to FHLB
    
    $
    782,619
    
    
    $
    811,937
    
    
    $
    325,861
    
    
    $
    318,942
    
    
    $
    395,351Overnight borrowings from FHLB
    
    
    3,242
    
    
    
    50,712
    
    
    
    75,106
    
    
    
    72
    
    
    
    25Other borrowings
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    430
    
    
    
    3,309Weighted average interest rate during the year:Fixed interest rate notes payable to FHLB
    
    
    3.86
    %
    
    
    3.25
    %
    
    
    5.23
    %
    
    
    5.61
    %
    
    
    5.68
    %Overnight borrowings from FHLB
    
    
    5.40
    %
    
    
    2.95
    %
    
    
    2.03
    %
    
    
    1.38
    %
    
    
    1.53
    %Other borrowings
    
    
    
    
    
    
    3.04
    %
    
    
    
    
    
    
    0.98
    %
    
    
    1.45
    %
  Average Balance Sheet and Rate Yield Analysis
  Average Equity to Average Assets
  23




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##### Table of Contents



Cash Dividends
  Subsidiaries
      Employees
  24




---



##### Table of Contents



Regulation
  General
    Federal Regulation of the Bank
 General.
   Regulatory Capital Requirements
   25




---



##### Table of Contents



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




---



##### Table of Contents



Deposit Insurance
   Transactions with Affiliates
  Acquisitions and Mergers
 Prohibitions Against Tying Arrangements
 27




---



##### Table of Contents



Customer Privacy
 Uniform Real Estate Lending Standards
  
    
    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), the supervisory limit is 75%;
    
    for loans for the construction of commercial, multi-family or other non-residential property, the supervisory limit is 80%;
    
    for loans for the construction of one- to four-family properties, the supervisory 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), the limit is 85%.
  Community Reinvestment Act
  
    
    a lending test, to evaluate the institutions record of making loans in its service areas;
    
    affordable housing, and programs benefiting low or moderate income individuals and businesses; and
    
    a service test, to evaluate the institutions delivery of services through its
branches, ATMs and other offices.
 28




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##### Table of Contents



Safety and Soundness Standards
 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%*Under capitalized
    
    < 8%
    
    < 4%
    
    < 4%*Significantly undercapitalized
    
    < 6%
    
    < 3%
    
    < 3%Critically undercapitalized
    
    Tangible assets to
capital of < 2%
 
 *
    
    3% if the bank receives the highest rating under the uniform system  
    
    an amount equal to five percent of the banks total assets at the time it became undercapitalized; and
    
    the amount that is necessary (or would have been necessary) to bring the bank into compliance with all capital standards
applicable with respect to such bank as of the time it fails to comply with the plan.
   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



Bank Mutual Corporation Regulation
 Holding Company Regulation
    Federal Securities Laws
  Sarbanes-Oxley Act of 2002
  Acquisition of Bank Mutual Corporation
  31




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##### Table of Contents



Federal and State Taxation
 Federal Taxation.
   State Taxation
 32




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##### Table of Contents



Item 1A. Risk Factors .
  The Current Interest Rate Environment Is Having an Adverse Impact on Our Net Interest Income
    Increases in Market Interest Rates Are Also Likely to Adversely Affect Equity
  If Our Allowance for Loan Losses Is Not Sufficient to Cover Actual Loan Losses, Our Earnings Could Decrease
    33




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##### Table of Contents



Softness in the Real Estate Market May Affect Collateral Values and our Results.
  Some of Our Lending Activities Are in Riskier Credits than Traditional Real Estate Loans
  Low Demand for Real Estate Loans May Lower Our Profitability
  Wisconsin Tax Developments Could Reduce Our Net Income
   Economic Conditions and World Events Could Affect Our Earnings
   Strong Competition Within Our Market Area May Reduce Our Customer Base
  34




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##### Table of Contents



Our Ability to Grow May Be Limited if We Cannot Make Acquisitions
  We Have Significant Intangible Assets Which We May Need to Write Off (Expense) in the Future
  We Are Subject to Security and Operational Risks Relating to Our Use of Technology that Could
Damage Our Reputation and Our Business
   
 Item 1B. Unresolved Staff Comments
  35




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##### Table of Contents



Item 2. Properties
  OriginalDate
    
    Leased
    
    
    
    
    Original Date
    
    LeasedLeased or
    
    or
    
    
    
    
    Leased or
    
    orLocation
    
    Acquired
    
    Owned*
    
    
    Location
    
    Acquired
    
    Owned*Executive Office:4949 West Brown Deer Road
    
    1991
    
    OwnedBrown Deer, WI 53223Southeast Region:Milwaukee Metro Area:Bayshore Town Center
    
    1971
    
    Leased
    
    Brookfield
    
    1973**
    
    Owned5784 N. Port Washington Road
    
    
    
    
    (2018
    )
    
    17100 W. Capitol DriveGlendale, WI 53217
    
    
    
    
    
    
    
    Brookfield, WI 53005Brookfield Square
    
    1975
    
    Leased
    
    Brown Deer
    
    1979
    
    Owned400 N. Moorland Road
    
    
    
    
    (2016
    )
    
    4801 W. Brown Deer RoadBrookfield, WI 53005
    
    
    
    
    
    
    
    Brown Deer, WI 53223Capitol Drive
    
    1976
    
    Owned
    
    Cedarburg
    
    1978**
    
    Leased8050 W. Capitol Drive
    
    
    
    
    
    
    
    W62 N248 Washington Avenue
    
    
    
    
    (2006
    )Milwaukee, WI 53222
    
    
    
    
    
    
    
    Cedarburg, WI 53012Downtown
    
    1955
    
    Owned
    
    Grafton
    
    1978
    
    Owned510 E. Wisconsin Avenue
    
    
    
    
    
    
    
    2030 Wisconsin AvenueMilwaukee, WI 53202
    
    
    
    
    
    
    
    Grafton, WI 53024Howell Avenue
    
    1977
    
    Owned
    
    Mayfair Mall
    
    2001
    
    Leased3847 S. Howell Avenue
    
    
    
    
    
    
    
    2600 N. Mayfair Road
    
    
    
    
    (2011
    )Milwaukee, WI 53207
    
    
    
    
    
    
    
    Wauwatosa, WI 53226Menomonee Falls
    
    2003
    
    Owned
    
    Mequon
    
    1970**
    
    OwnedW178 N9379 Water Tower Place
    
    
    
    
    
    
    
    11249 N. Port Washington RoadMenomonee Falls, WI.53051
    
    
    
    
    
    
    
    Mequon, WI 53092Oak Creek
    
    1972
    
    Owned
    
    Oklahoma Avenue
    
    1982
    
    Owned8780 S. Howell Avenue
    
    
    
    
    
    
    
    6801 W. Oklahoma AvenueOak Creek, WI 53154
    
    
    
    
    
    
    
    Milwaukee, WI 53219Sherman Park
    
    1950**
    
    Owned
    
    Southgate
    
    1967
    
    Owned4812 W. Burleigh Street
    
    
    
    
    
    
    
    3340 S. 27th StreetMilwaukee, WI 53210
    
    
    
    
    
    
    
    Milwaukee, WI 53215Southridge Mall
    
    1978
    
    Leased
    
    Thiensville
    
    1960**
    
    Owned5300 S. 76th Street
    
    
    
    
    (2008
    )
    
    208 N. Main StreetGreendale, WI 53129
    
    
    
    
    
    
    
    Thiensville, WI 53092Waukesha  Grandview Plaza
    
    2005
    
    Owned
    
    Waukesha  Meadowbrook
    
    2006
    
    Owned1870 Meadow Lane
    
    
    
    
    
    
    
    3212 Fiddlers Creek DrivePewaukee, WI 53072
    
    
    
    
    
    
    
    Waukesha, WI 53188West Allis
    
    1976
    
    Owned
    
    West Bend
    
    2006
    
    Owned10296 W. National Avenue
    
    
    
    
    
    
    
    1526 S. Main StreetWest Allis, WI 53227
    
    
    
    
    
    
    
    West Bend, WI 53095Racine/Kenosha Area:Kenosha
    
    2007
    
    Owned
    
    Racine  Douglas Avenue
    
    2005
    
    Owned6310 South Green Bay Rd.
    
    
    
    
    
    
    
    5133 Douglas Ave.Kenosha, WI 53142
    
    
    
    
    
    
    
    Racine, WI 53402Racine  Regency Mall
    
    2005
    
    Owned3039 S. Green Bay RoadRacine, WI 53406
 36




---



##### Table of Contents



Original Date
    
    Leased
    
    
    
    
    Original Date
    
    LeasedLeased or
    
    Or
    
    
    
    
    Leased or
    
    orLocation
    
    Acquired
    
    Owned*
    
    
    Location
    
    Acquired
    
    Owned*Additional Southeast Locations:Madison Area:Downtown
    
    1980
    
    Leased
    
    West
    
    1982
    
    Leased23 S. Pinckney Street
    
    
    
    
    (2008
    )
    
    5521 Odana Road
    
    
    
    
    (2011
    )Madison, WI 53703
    
    
    
    
    
    
    
    Madison, WI 53719Middleton
    
    1978
    
    Owned
    
    Monona
    
    1981
    
    Owned6209 Century Avenue
    
    
    
    
    
    
    
    5320 Monona DriveMiddleton, WI 53562
    
    
    
    
    
    
    
    Monona, WI 53716Sheboygan Area:Sheboygan
    
    1973
    
    Owned
    
    Sheboygan Motor Bank
    
    1984
    
    Owned801 N. 8th Street
    
    
    
    
    
    
    
    730 N. 9th StreetSheboygan, WI 53081
    
    
    
    
    
    
    
    Sheboygan, WI 53081Beaver Dam:
    
    1975
    
    Owned
    
    Beloit:
    
    1971
    
    Leased130 W. Maple Avenue
    
    
    
    
    
    
    
    3 Beloit Mall Shopping Center
    
    
    
    
    (2012
    )Beaver Dam, WI 53916
    
    
    
    
    
    
    
    Beloit, WI 53511Berlin:
    
    1973
    
    Owned
    
    Fond du Lac:
    
    2000
    
    Owned103 E. Huron Street
    
    
    
    
    
    
    
    W6606A Highway 23Berlin, WI 54923
    
    
    
    
    
    
    
    Fond du Lac, WI 54937Janesville:
    
    1973
    
    Owned
    
    Portage:
    
    1976
    
    Owned2111 Holiday Drive
    
    
    
    
    
    
    
    145 E. Cook StreetJanesville, WI 53545
    
    
    
    
    
    
    
    Portage, WI 53901Northeast Region:Greater Green Bay Area:201 N. Monroe Avenue
    
    1975**
    
    Owned
    
    2255 University Avenue
    
    1970**
    
    OwnedGreen Bay, WI 54301-4995
    
    
    
    
    
    
    
    Green Bay, WI 54308-80462357 S. Oneida Street
    
    1971**
    
    Owned
    
    2603 Glendale Avenue
    
    1986**
    
    OwnedGreen Bay, WI 54304-5286
    
    
    
    
    
    
    
    Green Bay, WI 54313-68232370 East Mason Street
    
    1985**
    
    Owned
    
    2424 West Mason Street
    
    1992**
    
    OwnedGreen Bay, WI 54302-3347
    
    
    
    
    
    
    
    Green Bay, WI 54303-4711749 Main Avenue
    
    1972**
    
    Owned
    
    330 North Broadway
    
    1979**
    
    OwnedDe Pere, WI 54115-5190
    
    
    
    
    
    
    
    De Pere, WI 54115-5250201 West Walnut St. (Operations Center)
    
    1999**
    
    LeasedGreen Bay, WI 54303
    
    
    
    
    (2009
    )Fox Valley Area:Appleton
    
    1985
    
    Leased
    
    Neenah
    
    1974
    
    Owned4323 W. Wisconsin Avenue
    
    
    
    
    (2009
    )
    
    101 W. Wisconsin AvenueFox River Mall
    
    
    
    
    
    
    
    Neenah, WI 54956Appleton, WI 54913Marinette Area:830 Pierce Avenue
    
    1972**
    
    Owned
    
    Pine Tree Mall
    
    1978**
    
    LeasedMarinette, WI 54143-0318
    
    
    
    
    
    
    
    2314 Roosevelt Road
    
    
    
    
    (2008
    )Marinette, WI 54143-0345Brillion:
    
    
    
    
    
    
    
    Crivitz:314 N. Main Street
    
    1973**
    
    Owned
    
    315 Highway 141
    
    1985**
    
    OwnedBrillion, WI 54110-1198
    
    
    
    
    
    
    
    Crivitz, WI 54114-0340Hortonville:
    
    
    
    
    
    
    
    Kiel:209 South Nash Street
    
    1979**
    
    Owned
    
    622 Fremont Street
    
    1970**
    
    OwnedHortonville, WI 54944
    
    
    
    
    
    
    
    Kiel, WI 53042-1321
 37




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##### Table of Contents



Original Date
    
    Leased
    
    
    
    
    Original Date
    
    LeasedLeased or
    
    Or
    
    
    
    
    Leased or
    
    OrLocation
    
    Acquired
    
    Owned*
    
    
    Location
    
    Acquired
    
    Owned*Additional Northeast Location:New Holstein:
    
    
    
    
    
    
    
    New London:2205 Wisconsin Avenue
    
    1976**
    
    Owned
    
    101 Park Street
    
    1969**
    
    OwnedNew Holstein, WI 53061-1291
    
    
    
    
    
    
    
    New London, WI 54961Peshtigo:
    
    
    
    
    
    
    
    Shawano:616 French Street
    
    1975**
    
    Owned
    
    835 E. Green Bay Avenue
    
    1981**
    
    OwnedPeshtigo, WI 54157-0193
    
    
    
    
    
    
    
    Shawano, WI 54166-0396Sturgeon Bay:1227 Egg Harbor Road
    
    1978**
    
    OwnedSturgeon Bay, WI 54235-0068Northwest Region:Eau Claire:Downtown
    
    1968**
    
    Owned
    
    Mall
    
    1972**
    
    Owned319 E. Grand Avenue
    
    
    
    
    
    
    
    2812 Mall DriveEau Claire, WI 54701
    
    
    
    
    
    
    
    Eau Claire, WI 54701Gordys Country Market
    
    1996**
    
    Leased
    
    Pinehurst
    
    1986**
    
    Owned2717 Birch Street
    
    
    
    
    (2010
    )
    
    2722 Eddy LaneEau Claire, WI 54703
    
    
    
    
    
    
    
    Eau Claire, WI 54703Chippewa Falls Area:Downtown
    
    1975**
    
    Owned
    
    Falls Pick'N Save
    
    1995**
    
    Leased35 W. Columbia
    
    
    
    
    
    
    
    303 Prairie View Road
    
    
    
    
    (2010
    )Chippewa Falls, WI 54729
    
    
    
    
    
    
    
    Chippewa Falls, WI 54729Menomonie Area:Downtown
    
    1967**
    
    Owned
    
    North
    
    1978**
    
    Owned717 Main Street
    
    
    
    
    
    
    
    2409 Hills Ct. N.EMenomonie, WI 54751
    
    
    
    
    
    
    
    Menomonie, WI 54751Barron:
    
    1995**
    
    Owned
    
    Bloomer:
    
    1995**
    
    Owned1512 E. Division Ave. (Hwy. 8)
    
    
    
    
    
    
    
    1203 17th AvenueBarron, WI 54812
    
    
    
    
    
    
    
    Bloomer, WI 54724Cornell:
    
    1980**
    
    Leased
    
    Ellsworth:
    
    1975**
    
    Owned422 Main Street
    
    
    
    (month to
    
    385 W. Main StreetCornell, WI 54732
    
    
    
    month)
    
    Ellsworth, WI 54011Hayward:
    
    1984**
    
    Owned
    
    Hudson:
    
    1979**
    
    Owned10562 Kansas Avenue
    
    
    
    
    
    
    
    2000 Crestview DriveHayward, WI 54843
    
    
    
    
    
    
    
    Hudson, WI 54016Rice Lake:
    
    1979**
    
    Owned
    
    Spooner:
    
    1995**
    
    Owned2850 Pioneer Avenue
    
    
    
    
    
    
    
    500 Front StreetRice Lake, WI 54868
    
    
    
    
    
    
    
    Spooner, WI 54801St. Croix Falls:
    
    1980**
    
    Owned
    
    Stanley:
    
    1978**
    
    Owned144 Washington Street N
    
    
    
    
    
    
    
    118 N. BroadwaySt. Croix Falls, WI 54024
    
    
    
    
    
    
    
    Stanley, WI 54768Woodbury, Minnesota:8420 City Centre Drive
    
    1995**
    
    OwnedWoodbury, MN 55125
 
 *
    
    If a leased property, the chart also shows year of lease expiration.**
    
    Date originally opened by an institution which was acquired by the Bank.  
 38




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##### Table of Contents



39




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##### Table of Contents



Item 3.
Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Executive Officers of the Registrant
  ExecutiveOfficerName and Age
    
    Offices and Positions with Bank Mutual Corporation and the Bank*
    
    Since (1)Michael T. Crowley, Jr., 64
    
    Chairman, President and Chief
Executive Officer of Bank Mutual Corporation and the Bank (2)
    
    1968Eugene H. Maurer, Jr., 61
    
    Senior Vice President and Secretary of Bank Mutual Corporation; Senior Vice President, Chief Financial Officer, Treasurer and Secretary of the Bank
    
    1982Rick B. Colberg, 54
    
    Chief Financial Officer of Bank Mutual Corporation; Vice President of the Bank (3)
    
    1980Marlene M. Scholz, 61
    
    Senior Vice President and principal accounting officer of Bank Mutual Corporation;
Senior Vice President and Controller of the Bank
    
    1981P. Terry Anderegg, 56
    
    Senior Vice PresidentRetail Operations of the Bank (4)
    
    1993Christopher J. Callen, 63
    
    Senior Vice PresidentLending of the Bank (4)
    
    1998
 
 *
    
    Excluding directorships and excluding positions with Bank subsidiaries. Those positions do
not constitute a substantial part of the officers duties.(1)
    
    Indicates date when individual first held an executive officer position with the Bank or
First Northern Savings. Each of these persons, other than Mr. Anderegg and Mr. Callen, became
a Bank Mutual Corporation executive officer in 2000 and, except as indicated, has held these
positions since that time.(2)
    
    Michael Crowley, Jr. became president of Bank Mutual Corporation in 2003 and Chairman of the
Bank in 2005.(3)
    
    Rick Colberg is the chief financial officer of Bank Mutual Corporation. He is also Vice
President of the Bank since 2003, when First Northern Savings merged into it. Previously he
was senior vice president, chief financial officer, and treasurer of First Northern Savings.(4)
    
    This position has been considered to be an executive officer position of Bank Mutual
Corporation since 2003, as a result of the merger of the subsidiary banks. 40




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##### Table of Contents



Part II
 
 Item 5.
    
    Market for Registrants Common Equity and Related Stockholder Matters and
Issuer Purchase of Equity Securities
 SM
    SM
 
 2006
    
    2005
    
    2004High
    
    Low
    
    High
    
    Low
    
    High
    
    Low1st Quarter
    
    $
    12.00
    
    
    $
    10.51
    
    
    $
    12.35
    
    
    $
    11.50
    
    
    $
    11.55
    
    
    $
    10.902nd Quarter
    
    $
    12.45
    
    
    $
    11.00
    
    
    $
    12.10
    
    
    $
    10.31
    
    
    $
    11.35
    
    
    $
    9.653rd Quarter
    
    $
    12.76
    
    
    $
    11.75
    
    
    $
    11.55
    
    
    $
    10.35
    
    
    $
    12.40
    
    
    $
    10.504th Quarter
    
    $
    12.71
    
    
    $
    12.71
    
    
    $
    10.95
    
    
    $
    10.00
    
    
    $
    12.59
    
    
    $
    11.80
  2006
    
    
    2005
    
    
    20041st Quarter
    
    $
    0.070
    
    
    $
    0.060
    
    
    $
    0.0402ndQuarter
    
    $
    0.070
    
    
    $
    0.060
    
    
    $
    0.0403rd Quarter
    
    $
    0.075
    
    
    $
    0.065
    
    
    $
    0.0504th Quarter
    
    $
    0.075
    
    
    $
    0.065
    
    
    $
    0.050$
    0.290
    
    
    $
    0.250
    
    
    $
    0.180
   41




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##### Table of Contents



Total number
    
    Maximum number ofof shares purchased
    
    shares that may beTotal number
    
    Average
    
    as part of publicly
    
    purchased under theof shares
    
    price paid
    
    announced plans or
    
    recent plans orPeriod
    
    purchased
    
    per share
    
    programs
    
    programs*October 1 to 31, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,130,548November 1 to 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,130,548December 1 to 31, 2006
    
    
    74,959
    
    
    
    11.98
    
    
    
    73,000
    
    
    
    2,057,548Total
    
    
    74,959
    
    
    $
    11.98
    
    
    
    73,000
 
 *
    
    At period end.
   42




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##### Table of Contents



PERFORMANCE
    GRAPH
    Bank
    Mutual Corporation
  Total Return Performance
  
  Period EndingIndex

12/31/01

12/31/02

12/31/03

12/31/04

12/31/05

12/31/06Bank Mutual Corporation


100.00



154.04



282.11



306.32



272.89



319.51NASDAQ Composite


100.00



68.76



103.67



113.16



115.57



127.58SNL Midwest Thrift Index


100.00



128.91



179.09



197.78



193.27



219.35




---



##### Table of Contents



Item 6 . Selected Financial Data
 Selected Financial Highlights
   At December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands except number of shares and per share amounts)Selected Financial Condition Data:Total assets
    
    $
    3,451,385
    
    
    $
    3,431,377
    
    
    $
    3,445,299
    
    
    $
    3,108,527
    
    
    $
    2,843,328Loans receivable, net
    
    
    2,024,325
    
    
    
    1,990,492
    
    
    
    1,875,885
    
    
    
    1,712,278
    
    
    
    1,685,662Loans held for sale
    
    
    3,787
    
    
    
    2,312
    
    
    
    4,987
    
    
    
    4,056
    
    
    
    46,971Securities available-for-sale, at fair value:Investment securities
    
    
    48,290
    
    
    
    63,361
    
    
    
    68,753
    
    
    
    67,854
    
    
    
    73,226Mortgage-related securities
    
    
    1,064,851
    
    
    
    1,087,816
    
    
    
    1,266,224
    
    
    
    1,053,349
    
    
    
    618,123Foreclosed properties and repossessed assets
    
    
    1,231
    
    
    
    708
    
    
    
    1,621
    
    
    
    630
    
    
    
    750Goodwill
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570Other intangible assets
    
    
    3,089
    
    
    
    3,750
    
    
    
    4,412
    
    
    
    5,073
    
    
    
    5,734Mortgage servicing rights
    
    
    4,653
    
    
    
    4,771
    
    
    
    4,542
    
    
    
    4,698
    
    
    
    3,060Deposits
    
    
    2,158,641
    
    
    
    2,086,822
    
    
    
    1,982,881
    
    
    
    2,052,290
    
    
    
    2,126,655Borrowings
    
    
    705,025
    
    
    
    765,796
    
    
    
    761,525
    
    
    
    299,491
    
    
    
    354,978Shareholders equity
    
    
    533,779
    
    
    
    544,374
    
    
    
    670,454
    
    
    
    731,080
    
    
    
    323,075Tangible shareholders equity
    
    
    474,706
    
    
    
    484,786
    
    
    
    610,698
    
    
    
    670,771
    
    
    
    264,011Number of shares outstanding  net of
treasury
stock(1)
    
    
    60,277,087
    
    
    
    62,325,268
    
    
    
    73,485,113
    
    
    
    78,775,779
    
    
    
    79,802,950Book value per share(1)
    
    
    8.86
    
    
    
    8.73
    
    
    
    9.12
    
    
    
    9.28
    
    
    
    4.05Tangible book value per share(1)
    
    
    7.88
    
    
    
    7.78
    
    
    
    8.31
    
    
    
    8.51
    
    
    
    3.31
 44




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##### Table of Contents



For the Year Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands except per share amount)Selected Operating Data:Total interest income
    
    $
    173,871
    
    
    $
    164,210
    
    
    $
    148,921
    
    
    $
    141,070
    
    
    $
    165,432Total interest expense
    
    
    99,091
    
    
    
    77,231
    
    
    
    58,498
    
    
    
    69,482
    
    
    
    87,678Net interest income
    
    
    74,780
    
    
    
    86,979
    
    
    
    90,423
    
    
    
    71,588
    
    
    
    77,754Provision for loan losses
    
    
    632
    
    
    
    541
    
    
    
    1,330
    
    
    
    1,304
    
    
    
    760Net interest income after provision for
loan losses
    
    
    74,148
    
    
    
    86,438
    
    
    
    89,093
    
    
    
    70,284
    
    
    
    76,994Total noninterest income
    
    
    17,568
    
    
    
    17,441
    
    
    
    16,175
    
    
    
    19,618
    
    
    
    16,676Noninterest expense:Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of other intangible assets
    
    
    661
    
    
    
    661
    
    
    
    661
    
    
    
    661
    
    
    
    662Total noninterest expense
    
    
    61,311
    
    
    
    60,837
    
    
    
    60,082
    
    
    
    55,608
    
    
    
    54,169Income before income taxes
    
    
    30,405
    
    
    
    43,042
    
    
    
    45,186
    
    
    
    34,294
    
    
    
    39,501Income tax expense
    
    
    9,808
    
    
    
    15,016
    
    
    
    15,632
    
    
    
    11,695
    
    
    
    12,956Net income
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554
    
    
    $
    22,599
    
    
    $
    26,545Earnings per share-basic(1)
    
    $
    0.35
    
    
    $
    0.44
    
    
    $
    0.39
    
    
    $
    0.30
    
    
    $
    0.34Earnings per share-diluted(1)
    
    $
    0.34
    
    
    $
    0.43
    
    
    $
    0.38
    
    
    $
    0.29
    
    
    $
    0.34Cash dividends paid per share(1)
    
    $
    0.29
    
    
    $
    0.25
    
    
    $
    0.18
    
    
    $
    0.12
    
    
    $
    0.093
 At or for the Year Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Selected Financial Ratios:Net interest margin (2)
    
    
    2.25
    %
    
    
    2.62
    %
    
    
    3.00
    %
    
    
    2.58
    %
    
    
    2.88
    %Net interest rate spread
    
    
    1.72
    
    
    
    2.15
    
    
    
    2.44
    
    
    
    2.17
    
    
    
    2.52Return on average assets
    
    
    0.59
    
    
    
    0.80
    
    
    
    0.93
    
    
    
    0.76
    
    
    
    0.92Return on average shareholders equity
    
    
    3.89
    
    
    
    4.84
    
    
    
    4.10
    
    
    
    5.45
    
    
    
    8.44Efficiency ratio, excluding amortization
of goodwill (3)(4)
    
    
    66.39
    
    
    
    58.26
    
    
    
    56.36
    
    
    
    60.97
    
    
    
    57.36Noninterest expense (excluding
amortization
of goodwill) as a percent of adjusted
average assets(3)
    
    
    1.77
    
    
    
    1.74
    
    
    
    1.88
    
    
    
    1.88
    
    
    
    1.88Shareholders equity to total assets
    
    
    15.47
    
    
    
    15.86
    
    
    
    19.46
    
    
    
    23.52
    
    
    
    11.36Tangible shareholders equity to adjusted
total assets (5)
    
    
    13.99
    
    
    
    14.38
    
    
    
    18.04
    
    
    
    22.01
    
    
    
    9.48Selected Asset Quality Ratios:Non-performing loans to loans
receivable, net
    
    
    0.72
    %
    
    
    0.29
    %
    
    
    0.33
    %
    
    
    0.61
    %
    
    
    0.50
    %Non-performing assets to total assets
    
    
    0.46
    
    
    
    0.19
    
    
    
    0.23
    
    
    
    0.35
    
    
    
    0.32Allowance for loan losses to
non-performing loans
    
    
    86.74
    
    
    
    207.23
    
    
    
    222.09
    
    
    
    132.77
    
    
    
    151.87Allowance for loan losses to
non-performing assets
    
    
    79.95
    
    
    
    184.81
    
    
    
    176.46
    
    
    
    125.17
    
    
    
    139.40Allowance for loan losses to total loans
receivable, net
    
    
    0.62
    
    
    
    0.61
    
    
    
    0.74
    
    
    
    0.80
    
    
    
    0.76Charge-offs to average loans
    
    
    0.01
    
    
    
    0.12
    
    
    
    0.07
    
    
    
    0.02
    
    
    
    0.01
 
 (1)
    
    Per share and share information prior to October 29, 2003 has been adjusted to reflect
the full conversion transaction and related 3.6686-for-one share exchange on that date.(2)
    
    Net interest margin is calculated by dividing net interest income by average earnings
assets.(3)
    
    In 2002, accounting rules concerning the amortization of goodwill changed. These
ratios are being presented excluding goodwill so as to make them comparable among the
years presented.(4)
    
    Efficiency ratio is calculated by dividing noninterest expense by the sum of net
interest income and noninterest income.(5)
    
    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. 45




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
  Comparisons of Financial Condition at December 31, 2006 and 2005
 Assets
      During the year ended December 31,2006
    
    2005(In thousands)Originations:Mortgage loans
    
    $
    347,296
    
    
    $
    388,106Consumer loans
    
    
    158,690
    
    
    
    211,629Commercial business loans
    
    
    42,888
    
    
    
    43,517Total loans originated
    
    
    548,874
    
    
    
    643,252Purchases:Mortgage loans
    
    
    157,399
    
    
    
    258,707Total loans originated and purchased
    
    $
    706,273
    
    
    $
    901,959
  46




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47




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At December 31,2006
    
    2005(In thousands)Accrued Interest:Mortgage-related securities
    
    $
    4,207
    
    
    $
    4,014Investment securities
    
    
    12
    
    
    
    117Loans receivable
    
    
    9,288
    
    
    
    7,589Total accrued interest
    
    
    13,507
    
    
    
    11,720Foreclosed properties and repossessed assets
    
    
    1,231
    
    
    
    708Premises and equipment
    
    
    50,515
    
    
    
    47,588Federal Home Loan Bank stock, at cost
    
    
    45,876
    
    
    
    48,537Bank owned life insurance
    
    
    46,430
    
    
    
    20,359Prepaid and other
    
    
    46,801
    
    
    
    27,978$
    204,360
    
    
    $
    156,890
     48




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##### Table of Contents



Liabilities
  th
 Shareholders Equity
      49




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##### Table of Contents



Average Balance Sheet and Yield/Rate Analysis
  AVERAGE BALANCE SHEET, INTEREST AND RATE PAIDYears ended December 31,2006
    
    2005
    
    2004Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost(Dollars in thousands)Assets:Interest-Earning Assets (1):Loans receivable, net
    
    $
    2,042,534
    
    
    $
    118,175
    
    
    
    5.79
    %
    
    $
    1,970,990
    
    
    $
    107,553
    
    
    
    5.46
    %
    
    $
    1,799,670
    
    
    $
    97,330
    
    
    
    5.41
    %Mortgage-related securities
    
    
    1,134,822
    
    
    
    50,017
    
    
    
    4.41
    
    
    
    1,217,647
    
    
    
    51,721
    
    
    
    4.25
    
    
    
    1,090,363
    
    
    
    47,431
    
    
    
    4.35Investment securities (2)
    
    
    101,987
    
    
    
    3,762
    
    
    
    3.69
    
    
    
    113,670
    
    
    
    4,168
    
    
    
    3.67
    
    
    
    104,681
    
    
    
    3,956
    
    
    
    3.78Interest-earning deposits
    
    
    10,882
    
    
    
    483
    
    
    
    4.44
    
    
    
    11,796
    
    
    
    356
    
    
    
    3.02
    
    
    
    11,834
    
    
    
    128
    
    
    
    1.08Federal funds
    
    
    28,581
    
    
    
    1,434
    
    
    
    5.02
    
    
    
    10,623
    
    
    
    412
    
    
    
    3.88
    
    
    
    5,546
    
    
    
    76
    
    
    
    1.37Total interest-earning assets
    
    
    3,318,806
    
    
    
    173,871
    
    
    
    5.24
    
    
    
    3,324,726
    
    
    
    164,210
    
    
    
    4.94
    
    
    
    3,012,094
    
    
    
    148,921
    
    
    
    4.95Noninterest-earning assets
    
    
    146,649
    
    
    
    
    
    
    
    
    
    
    
    161,927
    
    
    
    
    
    
    
    
    
    
    
    175,491Total average assets
    
    $
    3,465,455
    
    
    
    
    
    
    
    
    
    
    $
    3,486,653
    
    
    
    
    
    
    
    
    
    
    $
    3,187,585Liabilities and Equity:Interest-Bearing Liabilities:Savings deposits
    
    $
    215,525
    
    
    
    923
    
    
    
    0.43
    
    
    $
    244,954
    
    
    
    1,048
    
    
    
    0.43
    
    
    $
    253,321
    
    
    
    1,084
    
    
    
    0.43Money market accounts
    
    
    258,307
    
    
    
    7,620
    
    
    
    2.95
    
    
    
    283,958
    
    
    
    5,548
    
    
    
    1.95
    
    
    
    335,553
    
    
    
    3,301
    
    
    
    0.98Interest-bearing
demand accounts
    
    
    163,446
    
    
    
    351
    
    
    
    0.21
    
    
    
    168,962
    
    
    
    369
    
    
    
    0.22
    
    
    
    164,588
    
    
    
    359
    
    
    
    0.22Time deposits
    
    
    1,368,166
    
    
    
    59,818
    
    
    
    4.37
    
    
    
    1,191,364
    
    
    
    42,371
    
    
    
    3.56
    
    
    
    1,139,368
    
    
    
    37,373
    
    
    
    3.28Total deposits
    
    
    2,005,444
    
    
    
    68,712
    
    
    
    3.43
    
    
    
    1,889,238
    
    
    
    49,336
    
    
    
    2.61
    
    
    
    1,892,830
    
    
    
    42,117
    
    
    
    2.23Advance payment by borrowers
for taxes and insurance
    
    
    19,588
    
    
    
    24
    
    
    
    0.12
    
    
    
    19,412
    
    
    
    26
    
    
    
    0.13
    
    
    
    19,759
    
    
    
    36
    
    
    
    0.18Borrowings
    
    
    785,861
    
    
    
    30,355
    
    
    
    3.86
    
    
    
    862,649
    
    
    
    27,869
    
    
    
    3.23
    
    
    
    414,600
    
    
    
    16,345
    
    
    
    3.94Total interest-bearing
liabilities
    
    
    2,810,893
    
    
    
    99,091
    
    
    
    3.52
    
    
    
    2,771,299
    
    
    
    77,231
    
    
    
    2.79
    
    
    
    2,327,189
    
    
    
    58,498
    
    
    
    2.51Noninterest-Bearing LiabilitiesNoninterest-bearing deposits
    
    
    96,308
    
    
    
    
    
    
    
    
    
    
    
    103,762
    
    
    
    
    
    
    
    
    
    
    
    106,224Other noninterest-
bearing liabilities
    
    
    29,364
    
    
    
    
    
    
    
    
    
    
    
    32,369
    
    
    
    
    
    
    
    
    
    
    
    33,638Total noninterest-
bearing liabilities
    
    
    125,672
    
    
    
    
    
    
    
    
    
    
    
    136,131
    
    
    
    
    
    
    
    
    
    
    
    139,862Total liabilities
    
    
    2,936,565
    
    
    
    
    
    
    
    
    
    
    
    2,907,430
    
    
    
    
    
    
    
    
    
    
    
    2,467,051Equity
    
    
    529,890
    
    
    
    
    
    
    
    
    
    
    
    579,223
    
    
    
    
    
    
    
    
    
    
    
    720,534Total average liabilities
and equity
    
    $
    3,465,455
    
    
    
    
    
    
    
    
    
    
    $
    3,486,653
    
    
    
    
    
    
    
    
    
    
    $
    3,187,585Net interest income and net
interest rate spread (3)
    
    
    
    
    
    $
    74,780
    
    
    
    1.72
    
    
    
    
    
    
    $
    86,979
    
    
    
    2.15
    
    
    
    
    
    
    $
    90,423
    
    
    
    2.44Net interest-earning assets
and net interest margin(4)
    
    
    507,913
    
    
    
    
    
    
    
    2.25
    %
    
    $
    553,427
    
    
    
    
    
    
    
    2.62
    %
    
    $
    684,905
    
    
    
    
    
    
    
    3.00
    %Average interest-earnings
assets to average interest-
bearing liabilities
    
    
    1.18
    x
    
    
    
    
    
    
    
    
    
    
    1.20
    x
    
    
    
    
    
    
    
    
    
    
    1.29
    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 stock is included in investment securities dollars outstanding and yields.(3)
    
    Interest rate spread is the difference between the average yield on interest-earning assets
and the average cost on interest-bearing liabilities.(4)
    
    Net interest margin is determined by dividing net interest income by total interest-earning
assets. 
 50




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Rate/Volume Analysis
  (1)
    
    changes attributable to changes in volume (change in volume multiplied by prior
rate);(2)
    
    changes attributable to change in rate (changes in rate multiplied by prior
volume); and(3)
    
    the net change.
  Year Ended December 31,2006 Compared to 2005Increase (Decrease) Due ToVolume (1)
    
    Rate (2)
    
    Net (3)(In thousands)Interest-earning assets:Loans receivable
    
    $
    3,971
    
    
    $
    6,651
    
    
    $
    10,622Mortgage-related securities
    
    
    (3,605
    )
    
    
    1,901
    
    
    
    (1,704
    )Investment securities
    
    
    (431
    )
    
    
    25
    
    
    
    (406
    )Interest-earning deposits
    
    
    (30
    )
    
    
    157
    
    
    
    127Federal funds
    
    
    902
    
    
    
    120
    
    
    
    1,022Total
    
    
    807
    
    
    
    8,854
    
    
    
    9,661Interest-bearing liabilities:Savings deposits
    
    
    (125
    )
    
    
    
    
    
    
    (125
    )Money market deposits
    
    
    (538
    )
    
    
    2,610
    
    
    
    2,072Interest-bearing demand deposits
    
    
    (12
    )
    
    
    (6
    )
    
    
    (18
    )Time deposits
    
    
    6,859
    
    
    
    10,588
    
    
    
    17,447Advance payment by borrowers for
taxes and insurance
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Borrowings
    
    
    (2,632
    )
    
    
    5,118
    
    
    
    2,486Total
    
    
    3,552
    
    
    
    18,308
    
    
    
    21,860Net change in net interest income
    
    $
    (2,745
    )
    
    $
    (9,454
    )
    
    $
    (12,199
    )
 Year Ended December 31,2005 Compared to 2004Increase (Decrease) Due ToVolume (1)
    
    Rate (2)
    
    Net (3)(In thousands)Interest-earning assets:Loans receivable
    
    $
    9,315
    
    
    $
    908
    
    
    $
    10,223Mortgage-related securities
    
    
    5,431
    
    
    
    (1,141
    )
    
    
    4,290Investment securities
    
    
    333
    
    
    
    (121
    )
    
    
    212Interest-earning deposits
    
    
    
    
    
    
    228
    
    
    
    228Federal funds
    
    
    113
    
    
    
    223
    
    
    
    336Total
    
    
    15,192
    
    
    
    97
    
    
    
    15,289Interest-bearing liabilities:Savings deposits
    
    
    (36
    )
    
    
    
    
    
    
    (36
    )Money market deposits
    
    
    (573
    )
    
    
    2,820
    
    
    
    2,247Interest-bearing demand deposits
    
    
    10
    
    
    
    
    
    
    
    10Time deposits
    
    
    1,756
    
    
    
    3,242
    
    
    
    4,998Advance payment by borrowers for
taxes and insurance
    
    
    (1
    )
    
    
    (9
    )
    
    
    (10
    )Borrowings
    
    
    14,927
    
    
    
    (3,403
    )
    
    
    11,524Total
    
    
    16,083
    
    
    
    2,650
    
    
    
    18,733Net change in net interest income
    
    $
    (891
    )
    
    $
    (2,553
    )
    
    $
    (3,444
    )
 51




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##### Table of Contents



Comparisons of Operating Results for Years Ended December 31, 2006 and 2005
 General
  Net Interest Income
   Total Interest Income
      Total Interest Expense
   52




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Provision for Loan Losses
    Noninterest Income
      53




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##### Table of Contents



Noninterest Expense
     Income Taxes
     54




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55




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##### Table of Contents



Comparisons of Operating Results for Years Ended December 31, 2005 and 2004
 General
  Net Interest Income
   Total Interest Income
      Interest Expense
  56




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Provision for Loan Losses
   Noninterest Income
          57




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##### Table of Contents



Noninterest Expense
     Income Taxes
  Liquidity and Capital Resources
     58




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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(In thousands)Deposits without a stated
maturity (a)
    
    $
    727,585
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    727,585Certificates of deposits (a)
    
    
    1,243,485
    
    
    
    157,496
    
    
    
    30,075
    
    
    
    
    
    
    
    1,431,056Borrowed funds (a)
    
    
    279,650
    
    
    
    1,025
    
    
    
    
    
    
    
    424,350
    (b)
    
    
    705,025Operating leases
    
    
    1,171
    
    
    
    1,691
    
    
    
    965
    
    
    
    1,308
    
    
    
    5,135Purchase obligations
    
    
    2,160
    
    
    
    4,320
    
    
    
    720
    
    
    
    
    
    
    
    7,200Deferred retirement plans and
deferred compensation plans
    
    
    689
    
    
    
    2,055
    
    
    
    2,645
    
    
    
    9,603
    
    
    
    14,992
 
 (a)
    
    Excludes interest to be paid in the periods indicated.(b)
    
    Contains $370.0 million of borrowings that after an initial locked interest rate period
of 6 months to 2 years, contain quarterly call features.  59




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Payments Due InOne to
    
    Three to
    
    OverOne Year
    
    Three
    
    Five
    
    FiveOr Less
    
    Years
    
    Years
    
    Years
    
    Total(In thousands)Commitments to extend credit:Commercial
    
    $
    17,334
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    17,334Residential real estate
    
    
    25,888
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,888Revolving home equity
and credit card lines
    
    
    156,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156,378Standby letters of credit
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125Commercial letters of credit
    
    
    25,941
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,941Unused commercial lines
of credit
    
    
    4,258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,258Net commitments to sell
mortgage loans
    
    
    10,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,031
  Impact of Inflation and Changing Prices
  Significant Accounting Policies
  
    
    Establishing the amount of the allowance for loan losses requires the use of our
judgment. The allowance for loan losses is maintained at a level believed adequate by
management to absorb losses inherent in the loan portfolio and is based on the size and
current risk characteristics of the loan portfolio, an assessment of individual problem
loans and actual loss experience, current economic events in specific industries and
geographical areas, including unemployment levels, and other pertinent factors, including
regulatory guidance and general economic conditions. Determination of the allowance is
inherently subjective as it requires significant estimates, including the amounts and
timing of expected future cash flows on impaired loans, estimated losses on pools of
homogeneous loans based on historical loss experience, and consideration of current
economic trends, all of which may be susceptible to significant change. Loan losses are
charged off against the allowance, while recoveries of amounts previously charged off are
credited to the allowance. A provision for loan losses is charged to operations based on
managements periodic evaluation of the factors previously mentioned, as well as other
pertinent factors. Evaluations are conducted at least quarterly and more often if deemed
necessary. If we misjudge a major component and experience a loss, it will likely affect
our earnings. Developments affecting loans can also cause the allowance to vary
 60




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##### Table of Contents



significantly between quarters. We consistently challenge ourselves in the review of the
risk components to identify any changes in trends and their cause.
    
    Another valuation that requires our judgment relates to mortgage servicing rights.
Mortgage servicing rights are recorded as an asset when loans are sold with servicing
rights retained. The total cost of loans sold is bifurcated between the loan balance and
the servicing asset based on their relative fair values. The capitalized value of mortgage
servicing rights is amortized in proportion to, and over the period of, estimated net
future servicing revenue. Mortgage servicing rights are carried at the lower of the
initial carrying value, adjusted for amortization, or estimated fair value. The carrying
values are periodically evaluated for impairment. For purposes of measuring impairment,
the servicing rights are stratified into pools based on term and interest rate. Impairment
represents the excess of the remaining capitalized cost of a stratified pool over its fair
value, and is recorded through a valuation allowance. The fair value of each servicing
rights pool is calculated based on the present value of estimated future cash flows using a
discount rate, given current market conditions. Estimates of fair value include
assumptions about prepayment speeds, interest rates and other factors which are subject to
change over time. Changes in these underlying assumptions could cause the fair value of
mortgage servicing rights, and the related valuation allowance, if any, to change
significantly in the future.
    
    We also use our judgment in the valuation of other intangible assets (core deposit base
intangibles). Core deposit base intangible assets have been recorded for core deposits
(defined as checking, money market and savings deposits) that have been acquired in
acquisitions that were accounted for as purchase business combinations. The core deposit
base intangible assets have been recorded using the assumption that they provide a more
favorable source of funding than more expensive wholesale borrowings. An intangible asset
has been recorded for the present value of the difference between the expected interest to
be incurred on these deposits and interest expense that would be expected if these deposits
were replaced by wholesale borrowings, over the expected lives of the core deposits. We
currently estimate the underlying core deposits have lives of seven to fifteen years. If
we find these deposits have a shorter life, we will have to write down the asset by
expensing the amount that is impaired.
    
    We review goodwill at least annually for impairment, which requires the use of our
judgment. Goodwill has been recorded as a result of two acquisitions in which the purchase
price exceeded the fair value of tangible net assets acquired. If goodwill is determined
to be impaired, it would be expensed in the period in which it became impaired.
    
    The assessment of our tax assets and liabilities involves the use of estimates,
assumptions, interpretations, and judgments concerning certain accounting pronouncements
and federal and state tax codes. There can be no assurance that future events, such as
court decisions, regulatory actions or interpretations, or changes in positions of federal
and state taxing authorities will not differ from managements current assessment. The
impact of these matters could be significant to the consolidated results of operations and
reported earnings.
 
 61




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##### Table of Contents



Quarterly Financial Information
  Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(In thousands, except per share amounts)2006Interest income
    
    $
    41,638
    
    
    $
    43,618
    
    
    $
    44,498
    
    
    $
    44,117Interest expense
    
    
    22,230
    
    
    
    24,105
    
    
    
    25,591
    
    
    
    27,165Net interest income
    
    
    19,408
    
    
    
    19,513
    
    
    
    18,907
    
    
    
    16,952Provision for loan losses
    
    
    63
    
    
    
    56
    
    
    
    178
    
    
    
    335Net income after provision
for loan losses
    
    
    19,345
    
    
    
    19,457
    
    
    
    18,729
    
    
    
    16,617Total noninterest income
    
    
    4,376
    
    
    
    4,117
    
    
    
    4,629
    
    
    
    4,446Total noninterest expense
    
    
    15,463
    
    
    
    15,090
    
    
    
    15,429
    
    
    
    15,329Income before income taxes
    
    
    8,258
    
    
    
    8,484
    
    
    
    7,929
    
    
    
    5,734Income taxes
    
    
    2,892
    
    
    
    3,005
    
    
    
    2,814
    
    
    
    1,097Net income
    
    $
    5,366
    
    
    $
    5,479
    
    
    $
    5,115
    
    
    $
    4,637Earnings per share  Basic
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.08Earnings per share  Diluted
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.08Cash dividend paid per share
    
    $
    0.07
    
    
    $
    0.07
    
    
    $
    0.075
    
    
    $
    0.0752005Interest income
    
    $
    39,958
    
    
    $
    40,968
    
    
    $
    41,591
    
    
    $
    41,693Interest expense
    
    
    16,806
    
    
    
    18,650
    
    
    
    20,332
    
    
    
    21,443Net interest income
    
    
    23,152
    
    
    
    22,318
    
    
    
    21,259
    
    
    
    20,250Provision for loan losses
    
    
    117
    
    
    
    270
    
    
    
    92
    
    
    
    62Net income after provision
for loan losses
    
    
    23,035
    
    
    
    22,048
    
    
    
    21,167
    
    
    
    20,188Total noninterest income
    
    
    4,921
    
    
    
    3,787
    
    
    
    4,376
    
    
    
    4,357Total noninterest expense
    
    
    15,990
    
    
    
    14,887
    
    
    
    15,012
    
    
    
    14,948Income before income taxes
    
    
    11,966
    
    
    
    10,948
    
    
    
    10,531
    
    
    
    9,597Income taxes
    
    
    4,077
    
    
    
    3,750
    
    
    
    3,619
    
    
    
    3,570Net income
    
    $
    7,889
    
    
    $
    7,198
    
    
    $
    6,912
    
    
    $
    6,027Earnings per share  Basic
    
    $
    0.12
    
    
    $
    0.12
    
    
    $
    0.11
    
    
    $
    0.10Earnings per share  Diluted
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.10Cash dividend paid per share
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.065
    
    
    $
    0.065
 Recent Accounting Developments
  62




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Management of Interest Rate 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 our business plan, all within the context of the current
business environment and our regulatory capital and liquidity
requirements; and
    
    manage interest rate risk in a manner consistent with the approved
guidelines and policies set by our board of directors.
   
    
    emphasizing the origination of adjustable-rate and certain 15-year
fixed rate mortgage loans for our portfolio, and selling certain 15,
20, and 30 year fixed rate mortgage loans;
    
    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.
  63




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Gap Analysis.
    i)
    
    Investment securities  based upon contractual maturities and if applicable, call dates.ii)
    
    Mortgage-related securities  based upon an independent outside source for determining cash
flows (prepayment speeds).iii)
    
    Loans  based upon contractual maturities, repricing date, if applicable, scheduled
repayments of principal and projected prepayments of principal based upon our historical
experience or anticipated prepayments.iv)
    
    Deposits  based upon contractual maturities and our historical decay rates.
 64




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##### Table of Contents



v)
    
    Borrowings  based upon the earlier of call date or final maturity.
 At December 31, 2006Within
    
    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:Fixed
    
    $
    37,294
    
    
    $
    90,144
    
    
    $
    204,764
    
    
    $
    97,578
    
    
    $
    132,446
    
    
    $
    562,226Adjustable
    
    
    104,853
    
    
    
    351,829
    
    
    
    349,546
    
    
    
    181,563
    
    
    
    3,968
    
    
    
    991,759Consumer loans
    
    
    89,150
    
    
    
    116,516
    
    
    
    150,032
    
    
    
    48,119
    
    
    
    27,429
    
    
    
    431,246Commercial and industrial loans
    
    
    9,161
    
    
    
    18,239
    
    
    
    20,480
    
    
    
    3,591
    
    
    
    585
    
    
    
    52,056Interest-earning deposits
    
    
    1,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,022Investment securities
    
    
    49,218
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,218Mortgage-related securities:Fixed
    
    
    70,310
    
    
    
    206,750
    
    
    
    355,931
    
    
    
    150,424
    
    
    
    178,315
    
    
    
    961,730Adjustable
    
    
    126,903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,903Other interest-earning assets
    
    
    45,876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,876Total interest-earning assets
    
    
    533,787
    
    
    
    783,478
    
    
    
    1,080,753
    
    
    
    481,275
    
    
    
    342,743
    
    
    
    3,222,036Noninterest-bearing and interest-
bearing liabilities:Noninterest-bearing demand
accounts
    
    
    4,768
    
    
    
    13,041
    
    
    
    27,054
    
    
    
    18,641
    
    
    
    41,317
    
    
    
    104,821Interest-bearing liabilities:Deposits:Interest-bearing demand accounts
    
    
    7,925
    
    
    
    21,676
    
    
    
    44,966
    
    
    
    30,983
    
    
    
    68,641
    
    
    
    174,191Savings accounts
    
    
    10,574
    
    
    
    28,323
    
    
    
    55,775
    
    
    
    35,840
    
    
    
    69,504
    
    
    
    200,016Money market accounts
    
    
    248,233
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248,233Time deposits
    
    
    515,682
    
    
    
    752,549
    
    
    
    124,139
    
    
    
    29,892
    
    
    
    
    
    
    
    1,422,262Advance payments by borrowers
for taxes and insurance
    
    
    
    
    
    
    2,199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,199Borrowings
    
    
    325,205
    
    
    
    125,288
    
    
    
    202,964
    
    
    
    2,158
    
    
    
    49,410
    
    
    
    705,025Total interest-bearing
liabilities
    
    
    1,112,387
    
    
    
    943,076
    
    
    
    454,898
    
    
    
    117,514
    
    
    
    228,872
    
    
    
    2,856,747Interest rate sensitivity gap
    
    $
    (578,600
    )
    
    $
    (159,598
    )
    
    $
    625,855
    
    
    $
    363,761
    
    
    $
    113,871
    
    
    $
    365,289Cumulative interest rate
sensitivity gap
    
    $
    (578,600
    )
    
    $
    (738,198
    )
    
    $
    (112,343
    )
    
    $
    251,418
    
    
    $
    365,289Cumulative interest rate sensitivity
gap as a percentage total assets
    
    
    (16.76
    )%
    
    
    (21.38
    )%
    
    
    (3.25
    )%
    
    
    7.28
    %
    
    
    10.58
    %Cumulative interest-earning assets
as a percentage of interest
bearing liabilities
    
    
    47.99
    %
    
    
    64.09
    %
    
    
    95.52
    %
    
    
    109.57
    %
    
    
    112.79
    %
  65




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Present Value of Equity
   Present Value of Equityas Percent ofPresent Value of Equity
    
    Present Value of AssetsChange in
    
    Dollar
    
    Dollar
    
    Percent
    
    Present Value
    
    PercentInterest Rates
    
    Amount
    
    Change
    
    Change
    
    Ratio
    
    Change(Basis Points)
    
    (Dollars in thousands)+300
    
    $
    344,290
    
    
    $
    (223,767
    )
    
    
    (39.40
    )%
    
    
    11.04
    %
    
    
    (34.20
    )%+200
    
    
    421,959
    
    
    
    (146,098
    )
    
    
    (25.70
    )
    
    
    13.15
    
    
    
    (21.60
    )+100
    
    
    494,793
    
    
    
    (73,264
    )
    
    
    (12.90
    )
    
    
    15.01
    
    
    
    (10.50
    )0
    
    
    568,057
    
    
    
    
    
    
    
    
    
    
    
    16.77
    
    
    
    -100
    
    
    605,801
    
    
    
    37,744
    
    
    
    6.60
    
    
    
    17.55
    
    
    
    4.60-200
    
    
    599,015
    
    
    
    30,958
    
    
    
    5.40
    
    
    
    17.10
    
    
    
    2.00-300
    
    
    574,995
    
    
    
    6,938
    
    
    
    1.20
    
    
    
    16.23
    
    
    
    (3.30
    )
  66




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Item 8. Financial Statements and Supplementary Data
   
    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
   
 67




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Bank Mutual corporation and Subsidiaries
 Consolidated Statements of Financial Condition
 December 312006
    
    2005(In Thousands)AssetsCash and due from banks
    
    $
    44,438
    
    
    $
    41,543Interest-earning deposits
    
    
    1,022
    
    
    
    27,872Cash and cash equivalents
    
    
    45,460
    
    
    
    69,415Securities available-for-sale, at fair value:Investment securities
    
    
    48,290
    
    
    
    63,361Mortgage-related securities
    
    
    1,064,851
    
    
    
    1,087,816Loans held for sale
    
    
    3,787
    
    
    
    2,312Loans receivable, net
    
    
    2,024,325
    
    
    
    1,990,492Goodwill
    
    
    52,570
    
    
    
    52,570Other intangible assets
    
    
    3,089
    
    
    
    3,750Mortgage servicing rights
    
    
    4,653
    
    
    
    4,771Other assets
    
    
    204,360
    
    
    
    156,890$
    3,451,385
    
    
    $
    3,431,377Liabilities and shareholders equityLiabilities:Deposits
    
    $
    2,158,641
    
    
    $
    2,086,822Borrowings
    
    
    705,025
    
    
    
    765,796Advance payments by borrowers for taxes and insurance
    
    
    2,199
    
    
    
    2,529Other liabilities
    
    
    49,223
    
    
    
    29,5132,915,088
    
    
    
    2,884,660Minority interest in real estate development
    
    
    2,518
    
    
    
    2,343Shareholders equity:Preferred stock  $.01 par value:Authorized 20,000,000 shares in 2006 and 2005Issued and outstanding  none in 2006 and 2005
    
    
    
    
    
    
    Common stock  $.01 par value:Authorized 200,000,000 shares in 2006 and 2005Issued  78,783,849 shares in 2006 and 2005Outstanding  60,277,087 shares in 2006 and 62,325,268 in 2005
    
    
    788
    
    
    
    788Additional paid-in capital
    
    
    496,302
    
    
    
    497,589Retained earnings
    
    
    273,454
    
    
    
    269,913Unearned ESOP shares
    
    
    (3,066
    )
    
    
    (3,966
    )Accumulated other comprehensive income
    
    
    (15,426
    )
    
    
    (17,346
    )Unearned deferred compensation
    
    
    
    
    
    
    (6,955
    )Treasury
stock  18,506,762 shares in 2006 and 16,458,581 in 2005
    
    
    (218,273
    )
    
    
    (195,649
    )Total shareholders equity
    
    
    533,779
    
    
    
    544,374$
    3,451,385
    
    
    $
    3,431,377
 See accompanying notes to consolidated financial statements.
 68




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Income
 Year ended December 312006
    
    2005
    
    2004(In Thousands, Except Per Share Amounts)Interest income:Loans
    
    $
    118,175
    
    
    $
    107,553
    
    
    $
    97,330Investment securities
    
    
    3,762
    
    
    
    4,168
    
    
    
    3,956Mortgage-related securities
    
    
    50,017
    
    
    
    51,721
    
    
    
    47,431Interest-earning deposits
    
    
    1,917
    
    
    
    768
    
    
    
    204Total interest income
    
    
    173,871
    
    
    
    164,210
    
    
    
    148,921Interest expense:Deposits
    
    
    68,712
    
    
    
    49,336
    
    
    
    42,117Borrowings
    
    
    30,355
    
    
    
    27,869
    
    
    
    16,345Advance payments by borrowers for taxes and insurance
    
    
    24
    
    
    
    26
    
    
    
    36Total interest expense
    
    
    99,091
    
    
    
    77,231
    
    
    
    58,498Net interest income
    
    
    74,780
    
    
    
    86,979
    
    
    
    90,423Provision for loan losses
    
    
    632
    
    
    
    541
    
    
    
    1,330Net interest income after provision for loan losses
    
    
    74,148
    
    
    
    86,438
    
    
    
    89,093Noninterest income:Service charges on deposits
    
    
    6,085
    
    
    
    4,810
    
    
    
    4,630Brokerage and insurance commissions
    
    
    2,400
    
    
    
    2,470
    
    
    
    2,875Loan related fees and servicing revenue
    
    
    1,550
    
    
    
    1,364
    
    
    
    1,590Gain on sales of loans
    
    
    1,132
    
    
    
    1,863
    
    
    
    1,569Gain on sales of securities
    
    
    694
    
    
    
    1,785
    
    
    
    537Gain on sale of real estate
    
    
    
    
    
    
    
    
    
    
    2,009Loss on retirement of debt
    
    
    
    
    
    
    
    
    
    
    (1,737
    )Other
    
    
    5,707
    
    
    
    5,149
    
    
    
    4,702Total noninterest income
    
    
    17,568
    
    
    
    17,441
    
    
    
    16,175Noninterest expenses:Compensation, payroll taxes and other employee benefits
    
    
    37,468
    
    
    
    37,673
    
    
    
    36,214Occupancy and equipment
    
    
    10,539
    
    
    
    10,581
    
    
    
    10,982Amortization of other intangible assets
    
    
    661
    
    
    
    661
    
    
    
    661Other
    
    
    12,643
    
    
    
    11,922
    
    
    
    12,225Total noninterest expenses
    
    
    61,311
    
    
    
    60,837
    
    
    
    60,082Income before income taxes
    
    
    30,405
    
    
    
    43,042
    
    
    
    45,186Income taxes
    
    
    9,808
    
    
    
    15,016
    
    
    
    15,632Net income
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554Per share data:Earnings per share  basic
    
    $
    0.35
    
    
    $
    0.44
    
    
    $
    0.39Earnings per share  diluted
    
    $
    0.34
    
    
    $
    0.43
    
    
    $
    0.38Cash dividends per share paid
    
    $
    0.29
    
    
    $
    0.25
    
    
    $
    0.18
 See accompanying notes to consolidated financial statements.
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Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Changes in Shareholders Equity
 Additional
    
    
    
    
    
    UnearnedCommon
    
    Paid-In
    
    Retained
    
    ESOPStock
    
    Capital
    
    Earnings
    
    Shares(In Thousands, Except Per Share Amounts)Balances at January 1, 2004
    
    $
    788
    
    
    $
    495,990
    
    
    $
    241,958
    
    
    $
    (5,766
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    29,554
    
    
    
    Other comprehensive incomeChange in net unrealized gain (loss) on
securities available-for-sale, net of
deferred income tax liability of $2,036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability, net of deferred
income tax benefit of $800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of management recognition plan shares
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    Committed ESOP Shares
    
    
    
    
    
    
    2,800
    
    
    
    
    
    
    
    901Exercise of stock options
    
    
    
    
    
    
    (2,910
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends ($0.18 per share)
    
    
    
    
    
    
    
    
    
    
    (13,402
    )
    
    
    Balances at December 31, 2004
    
    $
    788
    
    
    $
    495,858
    
    
    $
    258,110
    
    
    $
    (4,865
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    28,026
    
    
    
    Other comprehensive incomeChange in net unrealized gain (loss) on
securities available-for-sale, net of
deferred income tax liability of $7,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability, net of deferred
income tax benefit of $411
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,748
    
    
    
    
    
    
    
    899Exercise of stock options
    
    
    
    
    
    
    (1,017
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends ($0.25 per share)
    
    
    
    
    
    
    
    
    
    
    (16,223
    )
    
    
    Balances at December 31, 2005
    
    $
    788
    
    
    $
    497,589
    
    
    $
    269,913
    
    
    $
    (3,966
    )Impact of adoption of SAB No. 108
    
    
    
    
    
    
    
    
    
    
    (1,101
    )
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    20,597
    
    
    
    Other comprehensive incomeChange in net unrealized gain (loss) on
securities available-for-sale, net of
deferred income tax benefit of $622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension asset, net of deferred income tax
liability of $457
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,977
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    
    
    
    
    (2,557
    )
    
    
    
    
    
    
    Share based payments
    
    
    
    
    
    
    5,248
    
    
    
    
    
    
    
    900Impact of adoption of SFAS No. 123R
    
    
    
    
    
    
    (6,955
    )
    
    
    
    
    
    
    Cash dividends ($0.29 per share)
    
    
    
    
    
    
    
    
    
    
    (15,955
    )
    
    
    Balances at December 31, 2006
    
    $
    788
    
    
    $
    496,302
    
    
    $
    273,454
    
    
    $
    (3,066
    )
 70




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Changes in Shareholders Equity
 Accumulated Other
    
    UnearnedComprehensive
    
    Deferred
    
    TreasuryIncome (Loss)
    
    Compensation
    
    Stock
    
    Total(In Thousands, Except Per Share Amounts)Balances at January 1, 2004
    
    $
    149
    
    
    $
    (2,039
    )
    
    $
    
    
    
    $
    731,080Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,554Other comprehensive incomeChange in net unrealized gain (loss) on
securities available-for-sale, net of
deferred income tax liability of $2,036
    
    
    (3,801
    )
    
    
    
    
    
    
    
    
    
    
    (3,801
    )Minimum pension liability, net of deferred
income tax benefit of $800
    
    
    (1,192
    )
    
    
    
    
    
    
    
    
    
    
    (1,192
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,561Purchase of shares for the ESOP
    
    
    
    
    
    
    
    
    
    
    (78,859
    )
    
    
    (78,859
    )Issuance of management recognition plan shares
    
    
    
    
    
    
    (10,193
    )
    
    
    10,215
    
    
    
    Committed ESOP Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,701Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    4,127
    
    
    
    1,217Amortization of deferred compensation
    
    
    
    
    
    
    2,156
    
    
    
    
    
    
    
    2,156Cash dividends ($0.18 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,402
    )Balances at December 31, 2004
    
    $
    (4,844
    )
    
    $
    (10,076
    )
    
    $
    (64,517
    )
    
    $
    670,454Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,026Other comprehensive incomeChange in net unrealized gain (loss) on
securities available-for-sale, net of
deferred income tax liability of $7,663
    
    
    (13,116
    )
    
    
    
    
    
    
    
    
    
    
    (13,116
    )Minimum pension liability, net of deferred
income tax benefit of $411
    
    
    614
    
    
    
    
    
    
    
    
    
    
    
    614Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,524Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (134,542
    )
    
    
    (134,542
    )Committed ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,647Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    3,410
    
    
    
    2,393Amortization of deferred compensation
    
    
    
    
    
    
    3,121
    
    
    
    
    
    
    
    3,121Cash dividends ($0.25 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,223
    )Balances at December 31, 2005
    
    $
    (17,346
    )
    
    $
    (6,955
    )
    
    $
    (195,649
    )
    
    $
    544,374Impact of adoption of SAB No. 108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,101
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,597Other comprehensive incomeChange in net unrealized gain (loss) on
securities available-for-sale, net of
deferred income tax benefit of $622
    
    
    1,214
    
    
    
    
    
    
    
    
    
    
    
    1,214Pension asset, net of deferred income
tax liability of $457
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    706Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,517Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (27,828
    )
    
    
    (27,828
    )Committed ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,977Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    5,249
    
    
    
    2,692Share based payments
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    6,103Impact of adoption of SFAS No. 123R
    
    
    
    
    
    
    6,955
    
    
    
    
    
    
    
    Cash dividends ($0.29 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,955
    )Balance at December 31, 2006
    
    $
    (15,426
    )
    
    $
    
    
    
    $
    (218,273
    )
    
    $
    533,779
 71




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 312006
    
    2005
    
    2004(In Thousands)Operating activities:Net income
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554Adjustments to reconcile net income to net cash provided
by operating activities:Provision for loan losses
    
    
    632
    
    
    
    541
    
    
    
    1,330Provision for depreciation
    
    
    2,644
    
    
    
    2,699
    
    
    
    3,253Amortization of other intangible assets
    
    
    661
    
    
    
    661
    
    
    
    661Net decrease (increase) in mortgage servicing rights
    
    
    118
    
    
    
    (228
    )
    
    
    156Amortization of cost of stock benefit plans
    
    
    9,080
    
    
    
    6,768
    
    
    
    5,857Net (discount) premium amortization on securities
    
    
    (826
    )
    
    
    144
    
    
    
    355Net increase in Federal Home Loan Bank stock
    
    
    
    
    
    
    (10,351
    )
    
    
    (2,688
    )Loans originated for sale
    
    
    (90,988
    )
    
    
    (141,048
    )
    
    
    (121,473
    )Proceeds from loan sales
    
    
    90,645
    
    
    
    145,586
    
    
    
    122,111Net gain on sale of available-for-sale securities
    
    
    (694
    )
    
    
    (1,785
    )
    
    
    (537
    )Gain on sales of loans originated for sale
    
    
    (1,132
    )
    
    
    (1,863
    )
    
    
    (1,569
    )Gain on sale of investment real estate
    
    
    
    
    
    
    
    
    
    
    (2,009
    )Gain on sale of real estate owned
    
    
    (33
    )
    
    
    (44
    )
    
    
    (19
    )Adoption of SAB 108
    
    
    (1,101
    )
    
    
    
    
    
    
    Increase in other liabilities
    
    
    26,616
    
    
    
    14,049
    
    
    
    5,166Increase in other assets
    
    
    (44,682
    )
    
    
    (12,941
    )
    
    
    (14,633
    )Increase in accrued interest receivable
    
    
    (1,787
    )
    
    
    (369
    )
    
    
    (530
    )Net cash provided by operating activities
    
    
    9,750
    
    
    
    29,845
    
    
    
    24,985Investing activities:Net purchases of investments in mutual funds
    
    
    (264
    )
    
    
    (1,493
    )
    
    
    (968
    )Proceeds from maturities of investment securities
    
    
    14,721
    
    
    
    60,780
    
    
    
    27,000Purchases of investment securities
    
    
    
    
    
    
    (55,428
    )
    
    
    (25,512
    )Purchases of mortgage-related securities
    
    
    (198,460
    )
    
    
    (193,857
    )
    
    
    (523,334
    )Principal repayments on mortgage-related securities
    
    
    224,693
    
    
    
    352,866
    
    
    
    302,848Proceeds from sale of investment securities
    
    
    702
    
    
    
    1,804
    
    
    
    537Net increase in loans receivable
    
    
    (35,894
    )
    
    
    (115,686
    )
    
    
    (159,892
    )Redemption of FHLB stock
    
    
    2,661
    
    
    
    
    
    
    
    Proceeds from sale of investment real estate
    
    
    
    
    
    
    
    
    
    
    2,182Proceeds from sale of foreclosed properties
    
    
    737
    
    
    
    1,341
    
    
    
    3,223Net purchases of premises and equipment
    
    
    (5,581
    )
    
    
    (6,345
    )
    
    
    (2,029
    )Net cash provided (used) by investing activities
    
    
    3,315
    
    
    
    43,982
    
    
    
    (375,945
    )
 72




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 312006
    
    2005
    
    2004(In Thousands)Financing activities:Net increase (decrease) in deposits
    
    $
    65,172
    
    
    $
    102,381
    
    
    $
    (68,767
    )Net (decrease) increase in short-term borrowings
    
    
    (25,000
    )
    
    
    (87,600
    )
    
    
    287,600Proceeds from long-term borrowings
    
    
    398,075
    
    
    
    110,232
    
    
    
    406,446Repayments on long-term borrowings
    
    
    (433,846
    )
    
    
    (18,361
    )
    
    
    (232,012
    )Net decrease in advance payments by borrowers
for taxes and insurance
    
    
    (330
    )
    
    
    (267
    )
    
    
    (191
    )Proceeds from exercise of stock options
    
    
    1,940
    
    
    
    2,393
    
    
    
    1,217Excess tax benefit from exercise of stock options
    
    
    752
    
    
    
    
    
    
    
    Cash dividends
    
    
    (15,955
    )
    
    
    (16,223
    )
    
    
    (13,402
    )Purchase of treasury stock
    
    
    (27,828
    )
    
    
    (134,542
    )
    
    
    (78,859
    )Net cash (used) provided by financing activities
    
    
    (37,020
    )
    
    
    (41,987
    )
    
    
    302,032(Decrease) increase in cash and cash equivalents
    
    
    (23,955
    )
    
    
    31,840
    
    
    
    (48,928
    )Cash and cash equivalents at beginning of year
    
    
    69,415
    
    
    
    37,575
    
    
    
    86,503Cash and cash equivalents at end of year
    
    $
    45,460
    
    
    $
    69,415
    
    
    $
    37,575Supplemental information:Interest paid on deposits and borrowings
    
    $
    92,022
    
    
    $
    75,100
    
    
    $
    58,719Income taxes paid
    
    
    10,786
    
    
    
    13,040
    
    
    
    13,881Loans transferred to foreclosed properties
and repossessed assets
    
    
    1,429
    
    
    
    538
    
    
    
    5,045Issuance of management recognition plan shares
    
    
    
    
    
    
    
    
    
    
    10,193
 73




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (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
  Investment and Mortgage-Related Securities Available-for-Sale
 
 74




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (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
 
 75




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (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
 
 76




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (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
  
 77




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Segment Information
  Stock Compensation
    
 78




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
  For the Year Ended December 312006
    
    
    2005
    
    
    2004Stock
    
    
    Weighted
    
    
    Stock
    
    
    Weighted
    
    
    Stock
    
    
    WeightedOptions
    
    
    Avg. Cost
    
    
    Options
    
    
    Avg. Cost
    
    
    Options
    
    
    Avg. CostOutstanding at beginning
of year
    
    
    4,919,051
    
    
    $
    6.8170
    
    
    
    5,276,953
    
    
    $
    6.5760
    
    
    
    3,298,590
    
    
    $
    3.2056Granted
    
    
    50,000
    
    
    $
    12.2340
    
    
    
    
    
    
    
    
    
    
    
    2,382,000
    
    
    $
    10.6730Exercised
    
    
    436,813
    
    
    $
    4.7236
    
    
    
    354,702
    
    
    $
    3.2056
    
    
    
    403,637
    
    
    $
    3.2056Forfeited
    
    
    7,000
    
    
    $
    10.6730
    
    
    
    3,200
    
    
    $
    10.6730
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    4,525,238
    
    
    $
    7.0730
    
    
    
    4,919,051
    
    
    $
    6.8170
    
    
    
    5,276,953
    
    
    $
    6.5760
 At December 31, 2006Unexercisable Stock Options
    
    Exercisable Stock OptionsRemainingPrice
    
    Shares
    
    Contractual Life
    
    Shares
    
    Exercise Price$3.2056
    
    
    
    
    
    

    
    
    
    
    2,192,238
    
    
    $
    3.2056$10.6730
    
    
    1,372,200
    
    
    7.4 years
    
    
    910,800
    
    
    $
    10.6730$12.2340
    
    
    50,000
    
    
    9.5 years
    
    
    
    
    
    
    
  2006
    
    2005
    
    2004Risk-free interest rate
    
    
    4.81  5.30
    %
    
    
    4.81  5.30
    %
    
    
    4.81  5.30
    %Dividend yield
    
    
    2.00
    %
    
    
    2.00
    %
    
    
    2.00
    %Expected stock volatility
    
    
    12.40  26.30
    %
    
    
    22.40  26.30
    %
    
    
    22.40  26.30
    %Expected years until exercise
    
    
    3.00  7.25
    
    
    
    4.00  8.25
    
    
    
    5.00  9.25
 
 79




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
    Year Ended December 312005
    
    2004Net income:As reported
    
    $
    28,026
    
    
    $
    29,554Pro forma
    
    $
    27,086
    
    
    $
    28,689Basic earnings per share:As reported
    
    $
    0.44
    
    
    $
    0.39Pro forma
    
    $
    0.43
    
    
    $
    0.38Diluted earnings per share:As reported
    
    $
    0.43
    
    
    $
    0.38Pro forma
    
    $
    0.42
    
    
    $
    0.37
 Recent Accounting Changes
 The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments
 80




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Accounting for Debt and Equity Securities, The Equity Method of Accounting for
Investments in Common Stock.
       81




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 
 Reclassifications
  82




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 2. Securities, Available-for-Sale
  Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueAt December 31, 2006:Investment securities:Mutual funds
    
    $
    47,775
    
    
    $
    
    
    
    $
    (1,183
    )
    
    $
    46,592Stock in federal agencies
    
    
    1,442
    
    
    
    256
    
    
    
    
    
    
    
    1,698Total investment securities
    
    
    49,217
    
    
    
    256
    
    
    
    (1,183
    )
    
    
    48,290Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    453,452
    
    
    
    89
    
    
    
    (12,137
    )
    
    
    441,404Federal National Mortgage Association
    
    
    382,197
    
    
    
    779
    
    
    
    (9,582
    )
    
    
    373,394Private placement CMOs
    
    
    209,659
    
    
    
    182
    
    
    
    (1,939
    )
    
    
    207,902Government National Mortgage Association
    
    
    43,325
    
    
    
    7
    
    
    
    (1,181
    )
    
    
    42,151Total mortgage-related securities
    
    
    1,088,633
    
    
    
    1,057
    
    
    
    (24,839
    )
    
    
    1,064,851Total
    
    $
    1,137,850
    
    
    $
    1,313
    
    
    $
    (26,022
    )
    
    $
    1,113,141
  Less than 12 months
    
    Greater than 12 monthsIn an unrealized loss position
    
    In an unrealized loss positionTotal
    
    TotalUnrealized
    
    
    
    
    
    
    
    
    
    Unrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    EstimatedLoss
    
    Number
    
    Estimated
    
    Loss
    
    of
    
    Fair
    
    Loss
    
    FairAmount
    
    of Securities
    
    Fair Value
    
    Amount
    
    Securities
    
    Value
    
    Amount
    
    ValueInvestment securities:Mutual funds
    
    $
    (2
    )
    
    
    1
    
    
    $
    706
    
    
    $
    (1,181
    )
    
    
    2
    
    
    $
    45,886
    
    
    $
    (1,183
    )
    
    $
    46,592Total investment securities
    
    
    (2
    )
    
    
    1
    
    
    
    706
    
    
    
    (1,181
    )
    
    
    2
    
    
    
    45,886
    
    
    
    (1,183
    )
    
    
    46,592Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    (82
    )
    
    
    2
    
    
    
    15,302
    
    
    
    (12,055
    )
    
    
    111
    
    
    
    401,030
    
    
    
    (12,137
    )
    
    
    416,332Federal National Mortgage Association
    
    
    (1
    )
    
    
    5
    
    
    
    550
    
    
    
    (9,581
    )
    
    
    81
    
    
    
    304,033
    
    
    
    (9,582
    )
    
    
    304,583Government National Mortgage Association
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,181
    )
    
    
    10
    
    
    
    41,468
    
    
    
    (1,181
    )
    
    
    41,468Private placement CMOs
    
    
    (222
    )
    
    
    7
    
    
    
    62,842
    
    
    
    (1,717
    )
    
    
    17
    
    
    
    104,253
    
    
    
    (1,939
    )
    
    
    167,095Total mortgage-related securities
    
    
    (305
    )
    
    
    14
    
    
    
    78,694
    
    
    
    (24,534
    )
    
    
    219
    
    
    
    850,784
    
    
    
    (24,839
    )
    
    
    929,478Total
    
    $
    (307
    )
    
    
    15
    
    
    $
    79,400
    
    
    $
    (25,715
    )
    
    
    221
    
    
    $
    896,670
    
    
    $
    (26,022
    )
    
    $
    976,070
  83




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 2. Securities, Available-for-Sale (continued)
 Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueAt December 31, 2005:Investment securities:U.S. government and federal agency obligations
    
    $
    14,720
    
    
    $
    
    
    
    $
    (135
    )
    
    $
    14,585Mutual funds
    
    
    47,512
    
    
    
    
    
    
    
    (1,104
    )
    
    
    46,408Stock in federal agencies
    
    
    1,450
    
    
    
    918
    
    
    
    
    
    
    
    2,368Total investment securities
    
    
    63,682
    
    
    
    918
    
    
    
    (1,239
    )
    
    
    63,361Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    506,116
    
    
    
    155
    
    
    
    (12,966
    )
    
    
    493,305Federal National Mortgage Association
    
    
    419,552
    
    
    
    915
    
    
    
    (10,831
    )
    
    
    409,636Private Placement CMOs
    
    
    124,335
    
    
    
    
    
    
    
    (2,033
    )
    
    
    122,302Government National Mortgage Association
    
    
    64,037
    
    
    
    8
    
    
    
    (1,472
    )
    
    
    62,573Total mortgage-related securities
    
    
    1,114,040
    
    
    
    1,078
    
    
    
    (27,302
    )
    
    
    1,087,816Total
    
    $
    1,177,722
    
    
    $
    1,996
    
    
    $
    (28,541
    )
    
    $
    1,151,177
  Amortized
    
    FairCost
    
    ValueDue in one year or less
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    
    
    
    
    Due after five years through ten years
    
    
    
    
    
    
    Mutual funds
    
    
    47,775
    
    
    
    46,592Stock in federal agencies
    
    
    1,442
    
    
    
    1,698Mortgage-related securities
    
    
    1,088,633
    
    
    
    1,064,851$
    1,137,850
    
    
    $
    1,113,141
  2006
    
    2005
    
    2004Change in unrealized holding gain
(loss) on available-for-sale
securities during the periodUnrealized net gains (losses)
    
    $
    1,836
    
    
    $
    (20,779
    )
    
    $
    (5,837
    )Related tax expense (benefit)
    
    
    622
    
    
    
    (7,663
    )
    
    
    (2,036
    )Change in other comprehensive income
    
    $
    1,214
    
    
    $
    (13,116
    )
    
    $
    (3,801
    )
 84




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 2. Securities, Available-for-Sale (continued)
  3. Loans Receivable
  December 312006
    
    2005Mortgage loans:One-to-four family
    
    $
    1,123,905
    
    
    $
    1,048,881Multifamily
    
    
    157,768
    
    
    
    155,908Commercial real estate
    
    
    167,089
    
    
    
    175,090Construction and development
    
    
    187,323
    
    
    
    155,205Total mortgage real estate loans
    
    
    1,636,085
    
    
    
    1,535,084Consumer and other loans:Fixed equity
    
    
    227,811
    
    
    
    246,460Home equity lines of credit
    
    
    91,730
    
    
    
    88,266Student
    
    
    20,404
    
    
    
    19,821Home improvement
    
    
    33,287
    
    
    
    30,067Automobile
    
    
    46,752
    
    
    
    69,237Other
    
    
    11,262
    
    
    
    12,944Total consumer and other loans
    
    
    431,246
    
    
    
    466,795Total commercial business loans
    
    
    52,056
    
    
    
    57,247Total loans receivable
    
    
    2,119,387
    
    
    
    2,059,126Less:Undisbursed loan proceeds
    
    
    85,897
    
    
    
    60,014Allowance for loan losses
    
    
    12,574
    
    
    
    12,090Unearned loan fees and discounts
    
    
    (3,409
    )
    
    
    (3,470
    )95,062
    
    
    
    68,634Total loans receivable  net
    
    $
    2,024,325
    
    
    $
    1,990,492
   Year ended December 312006
    
    2005
    
    2004Balance at beginning of year
    
    $
    12,090
    
    
    $
    13,923
    
    
    $
    13,771Provisions
    
    
    632
    
    
    
    541
    
    
    
    1,330Charge-offs
    
    
    (367
    )
    
    
    (2,431
    )
    
    
    (1,253
    )Recoveries
    
    
    219
    
    
    
    57
    
    
    
    75Balance at end of year
    
    $
    12,574
    
    
    $
    12,090
    
    
    $
    13,923
  85




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
  December 312006
    
    2005Impaired loans for which an allowance has been provided
    
    $
    14,920
    
    
    $
    7,280Impaired loans for which no allowance has been provided
    
    
    2,338
    
    
    
    2,430Total loans determined to be impaired
    
    $
    17,258
    
    
    $
    9,710Allowance for loan losses related to impaired loans
    
    $
    2,672
    
    
    $
    2,392
 Year ended December 312006
    
    2005
    
    2004Average recorded investment in impaired loans
    
    $
    6,507
    
    
    $
    10,141
    
    
    $
    8,706Cash basis interest income recognized from impaired loans
    
    $
    179
    
    
    $
    233
    
    
    $
    293
 4. Goodwill, Other Intangible Assets and Mortgage Servicing Rights
    2006
    
    2005
    
    2004Mortgage servicing rights at beginning of year
    
    $
    4,771
    
    
    $
    4,542
    
    
    $
    4,698Additions
    
    
    1,040
    
    
    
    1,777
    
    
    
    1,529Amortization
    
    
    (1,158
    )
    
    
    (1,548
    )
    
    
    (1,685
    )Mortgage servicing rights at end of year
    
    
    4,653
    
    
    
    4,771
    
    
    
    4,542Valuation allowance
    
    
    
    
    
    
    
    
    
    
    Balance
    
    $
    4,653
    
    
    $
    4,771
    
    
    $
    4,542
  86




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (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, 2006 (actual)
    
    $
    1,158
    
    
    $
    661
    
    
    $
    1,819Estimate for year ending December 31,2007
    
    $
    837
    
    
    $
    661
    
    
    $
    1,4982008
    
    
    837
    
    
    
    618
    
    
    
    1,4552009
    
    
    836
    
    
    
    405
    
    
    
    1,2412010
    
    
    827
    
    
    
    405
    
    
    
    1,2322011
    
    
    635
    
    
    
    405
    
    
    
    1,040Thereafter
    
    
    681
    
    
    
    595
    
    
    
    1,276$
    4,653
    
    
    $
    3,089
    
    
    $
    7,742
 5. Other Assets
  December 312006
    
    2005Accrued interest:Mortgage-related securities
    
    $
    4,207
    
    
    $
    4,014Investment securities
    
    
    12
    
    
    
    117Loans receivable
    
    
    9,288
    
    
    
    7,589Total accrued interest
    
    
    13,507
    
    
    
    11,720Foreclosed properties and repossessed assets
    
    
    1,231
    
    
    
    708Premises and equipment
    
    
    50,515
    
    
    
    47,588Federal Home Loan Bank stock, at cost
    
    
    45,876
    
    
    
    48,537Bank owned life insurance
    
    
    46,430
    
    
    
    20,359Prepaid and other
    
    
    46,801
    
    
    
    27,978$
    204,360
    
    
    $
    156,890
 87




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 5. Other Assets (continued)
  December 312006
    
    2005Acquired by foreclosure or in lieu of foreclosure
    
    $
    1,222
    
    
    $
    702Repossessed collateral
    
    
    9
    
    
    
    6$
    1,231
    
    
    $
    708
  December 312006
    
    2005Land and land improvements
    
    $
    15,577
    
    
    $
    14,451Office buildings
    
    
    47,405
    
    
    
    44,614Furniture and equipment
    
    
    17,643
    
    
    
    16,225Leasehold improvements
    
    
    944
    
    
    
    94481,569
    
    
    
    76,234Less accumulated depreciation and amortization
    
    
    31,054
    
    
    
    28,646$
    50,515
    
    
    $
    47,588
   2007
    
    $
    1,1712008
    
    
    9282009
    
    
    7632010
    
    
    5742011
    
    
    391Thereafter
    
    
    1,308Total
    
    $
    5,135
  88




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 6. Deposits
  December 312006
    
    2005Checking accounts:Noninterest-bearing
    
    $
    104,821
    
    
    $
    110,583Interest-bearing
    
    
    174,206
    
    
    
    174,620279,027
    
    
    
    285,203Money market accounts
    
    
    248,542
    
    
    
    271,418Savings accounts
    
    
    200,016
    
    
    
    224,408Certificate accounts:Due within one year
    
    
    1,243,485
    
    
    
    718,634After one but within two years
    
    
    82,273
    
    
    
    453,386After two but within three years
    
    
    75,223
    
    
    
    45,496After three but within four years
    
    
    20,889
    
    
    
    66,397After four but within five years
    
    
    9,186
    
    
    
    21,880After five years
    
    
    
    
    
    
    1,431,056
    
    
    
    1,305,793$
    2,158,641
    
    
    $
    2,086,822
   Year ended December 312006
    
    2005
    
    2004Interest-bearing checking accounts
    
    $
    351
    
    
    $
    369
    
    
    $
    359Money market accounts
    
    
    7,620
    
    
    
    5,548
    
    
    
    3,301Savings accounts
    
    
    923
    
    
    
    1,048
    
    
    
    1,084Certificate accounts
    
    
    59,818
    
    
    
    42,371
    
    
    
    37,373$
    68,712
    
    
    $
    49,336
    
    
    $
    42,117
 89




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 7. Borrowings
  December 312006
    
    
    2005Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateFederal Home Loan Bank
advances maturing:2006
    
    $
    
    
    
    
    
    
    
    $
    607,955
    
    
    
    3.35
    %2007
    
    
    279,650
    
    
    
    4.79
    %
    
    
    104,650
    
    
    
    4.082008
    
    
    1,025
    
    
    
    5.90
    
    
    
    1,025
    
    
    
    5.902009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    424,350
    
    
    
    4.24
    
    
    
    52,166
    
    
    
    5.18Open-line of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    705,025
    
    
    
    
    
    
    $
    765,796
   8. Shareholders Equity
  90




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 8. Shareholders Equity (continued)
  To Be Well CapitalizedFor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioBank MutualAs of December 31, 2006:Total capital
(to risk-weighted assets)
    
    $
    421,112
    
    
    
    24.27
    %
    
    $
    138,817
    
    
    
    8.00
    %
    
    $
    173,521
    
    
    
    10.00
    %Tier 1 capital
(to risk-weighted assets)
    
    
    408,538
    
    
    
    23.54
    
    
    
    69,408
    
    
    
    4.00
    
    
    
    104,113
    
    
    
    6.00Tier 1 capital
(to average assets)
    
    
    408,538
    
    
    
    11.97
    
    
    
    136,559
    
    
    
    4.00
    
    
    
    170,699
    
    
    
    5.00Bank MutualAs of December 31, 2005:Total capital
(to risk-weighted assets)
    
    $
    421,835
    
    
    
    24.96
    %
    
    $
    135,188
    
    
    
    8.00
    %
    
    $
    168,985
    
    
    
    10.00
    %Tier 1 capital
(to risk-weighted assets)
    
    
    409,745
    
    
    
    24.25
    
    
    
    67,594
    
    
    
    4.00
    
    
    
    101,391
    
    
    
    6.00Tier 1 capital
(to average assets)
    
    
    409,745
    
    
    
    12.07
    
    
    
    135,829
    
    
    
    4.00
    
    
    
    169,786
    
    
    
    5.00
  91




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 8. Shareholders Equity (continued)
  Bank MutualRisk-
    
    Tier IBased
    
    (Core)Capital
    
    CapitalAs of December 31, 2006:Equity per bank records
    
    $
    451,298
    
    
    $
    451,298Unrealized gains on investments
    
    
    15,553
    
    
    
    15,553FAS 158 adjustment reversal
    
    
    (127
    )
    
    
    (127
    )Goodwill and intangibles
    
    
    (54,420
    )
    
    
    (54,420
    )Investment in nonincludable subsidiaries
    
    
    (3,487
    )
    
    
    (3,487
    )Disallowed servicing assets
    
    
    (279
    )
    
    
    (279
    )Allowance for loan losses
    
    
    12,574
    
    
    
    Regulatory capital
    
    $
    421,112
    
    
    $
    408,538
 9. Earnings Per Share
  Year ended December 312006
    
    2005
    
    2004Basic earnings per shareNet income
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554Weighted average shares outstanding
    
    
    58,710,159
    
    
    
    62,238,425
    
    
    
    74,672,199Allocated ESOP shares during the period
    
    
    327,493
    
    
    
    327,194
    
    
    
    327,194Vested MRP shares during the period
    
    
    277,996
    
    
    
    428,305
    
    
    
    328,38459,315,648
    
    
    
    62,993,924
    
    
    
    75,327,777Basic earnings per share
    
    $
    0.35
    
    
    $
    0.44
    
    
    $
    0.39Diluted earnings per shareNet income
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554Weighted average shares outstanding used
in basic earnings per share
    
    
    59,315,648
    
    
    
    62,993,924
    
    
    
    75,327,777Net dilutive effect of:Stock option shares
    
    
    1,625,082
    
    
    
    1,747,484
    
    
    
    1,958,592Unvested MRP shares
    
    
    58,881
    
    
    
    135,009
    
    
    
    292,13360,999,611
    
    
    
    64,876,417
    
    
    
    77,578,502Diluted earnings per share
    
    $
    0.34
    
    
    $
    0.43
    
    
    $
    0.38
 92




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans
 Bank Mutual Corporation
   Adoption of Statement No. 158
  
 93




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
 At December 31, 2006Prior toAdopting
    
    
    
    
    
    As Reported atStatement 158
    
    Reclassifications
    
    December 31, 2006Other assets
    
    $
    206,371
    
    
    $
    (2,011)
    )
    
    $
    204,360Other liabilities
    
    
    46,506
    
    
    
    2,717
    
    
    
    49,223Accumulated other comprehensive income
    
    
    (14,720
    )
    
    
    (706
    )
    
    
    (15,426
    )
  Qualified
    
    
    SupplementalPlan
    
    
    Plan
    
    
    TotalPrior service cost
    
    $
    37
    
    
    $
    36
    
    
    $
    73Unrecognized net loss (gain)
    
    
    331
    
    
    
    (343
    )
    
    
    (12
    )$
    368
    
    
    $
    (307
    )
    
    $
    61
  Qualified
    
    
    SupplementalPlan
    
    
    Plan
    
    
    TotalPrior service cost
    
    $
    19
    
    
    $
    36
    
    
    $
    55
 94




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
   Qualified
    
    SupplementalPension Plan
    
    Pension Plan2006
    
    2005
    
    2006
    
    2005Change in Benefit ObligationBenefit obligation at beginning of year
    
    $
    23,682
    
    
    $
    20,831
    
    
    $
    6,694
    
    
    $
    6,245Service cost
    
    
    1,888
    
    
    
    1,779
    
    
    
    170
    
    
    
    158Interest cost
    
    
    1,289
    
    
    
    1,237
    
    
    
    360
    
    
    
    367Actuarial loss (gain)
    
    
    (1,387
    )
    
    
    1,522
    
    
    
    (230
    )
    
    
    (1,128
    )Amendments
    
    
    
    
    
    
    (1,175
    )
    
    
    
    
    
    
    1,175Benefits paid
    
    
    (641
    )
    
    
    (512
    )
    
    
    (298
    )
    
    
    (123
    )Benefit obligation at end of year
    
    $
    24,831
    
    
    $
    23,682
    
    
    $
    6,696
    
    
    $
    6,694Change in Plan AssetsFair value of plan assets at beginning of year
    
    $
    25,558
    
    
    $
    24,836
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    1,048
    
    
    
    797
    
    
    
    
    
    
    
    Employer contributions
    
    
    
    
    
    
    437
    
    
    
    297
    
    
    
    123Benefits paid
    
    
    (641
    )
    
    
    (512
    )
    
    
    (297
    )
    
    
    (123
    )Fair value of plan assets at end of year
    
    
    25,965
    
    
    
    25,558
    
    
    
    
    
    
    
    Funded status at the end of the year
    
    $
    1,134
    
    
    $
    1,876
    
    
    $
    (6,696
    )
    
    $
    (6,694
    )
 Accumulated Benefit Obligations
  2006
    
    2005Weighted-average assumptions used in cost calculations:Discount rate
    
    
    6.00
    %
    
    
    5.50
    %Rate of increase in compensation levels
    
    
    3.50
    %
    
    
    3.50
    %Expected long-term rate of return on plan assets
    
    
    7.00
    %
    
    
    7.00
    %
  95




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  2006
    
    2005
    
    2004Qualified Pension PlanService cost
    
    $
    1,887
    
    
    $
    1,779
    
    
    $
    1,518Interest cost
    
    
    1,289
    
    
    
    1,236
    
    
    
    1,114Actual return on plan assets
    
    
    (1,048
    )
    
    
    (797
    )
    
    
    (1,964
    )Amortization of prior service cost
    
    
    30
    
    
    
    (1,121
    )
    
    
    59Asset gain (loss)
    
    
    (724
    )
    
    
    (926
    )
    
    
    576Net periodic cost
    
    $
    1,434
    
    
    $
    171
    
    
    $
    1,303Supplemental Pension PlanService cost
    
    $
    170
    
    
    $
    159
    
    
    $
    141Interest cost
    
    
    360
    
    
    
    367
    
    
    
    280Amortization of prior service cost
    
    
    70
    
    
    
    1,244
    
    
    
    70Amortization of gain from prior period
    
    
    
    
    
    
    261
    
    
    
    Net periodic cost
    
    $
    600
    
    
    $
    2,031
    
    
    $
    491
   Qualified
    
    SupplementalPlan
    
    Plan
    
    Total2007
    
    $
    614
    
    
    $
    375
    
    
    $
    9892008
    
    
    739
    
    
    
    766
    
    
    
    1,5052009
    
    
    887
    
    
    
    766
    
    
    
    1,6532010
    
    
    1,044
    
    
    
    766
    
    
    
    1,8102011
    
    
    1,200
    
    
    
    766
    
    
    
    1,9662012  2016
    
    
    8,948
    
    
    
    3,261
    
    
    
    12,209$
    13,432
    
    
    $
    6,700
    
    
    $
    20,132
  At October 312006
    
    2005Asset Category-Qualified PlanEquity securities
    
    
    7.7
    %
    
    
    6.1
    %Immediate participation guarantee contracts
    
    
    92.3
    
    
    
    93.9Total
    
    
    100.0
    %
    
    
    100.0
    %
 96




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
 Investment Policy
  Contributions
  Bank Mutual
   11. Stock-Based Benefit Plans
   2006
    
    
    2005
    
    
    2004Shares allocated to participants in fiscal year
    
    
    327,493
    
    
    
    327,194
    
    
    
    327,194Unallocated and unearned shares
    
    
    1,107,927
    
    
    
    1,435,420
    
    
    
    1,762,614Fair value of unearned ESOP shares
    
    $
    13,417
    
    
    $
    15,215
    
    
    $
    21,451
 97




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 12. Income Taxes
  Year ended December 312006
    
    2005
    
    2004Current:Federal
    
    $
    11,518
    
    
    $
    13,968
    
    
    $
    14,269State
    
    
    84
    
    
    
    96
    
    
    
    40011,602
    
    
    
    14,064
    
    
    
    14,669Deferred expense (benefit):Federal
    
    
    (1,789
    )
    
    
    954
    
    
    
    976State
    
    
    (5
    )
    
    
    (2
    )
    
    
    (13
    )(1,794
    )
    
    
    952
    
    
    
    963$
    9,808
    
    
    $
    15,016
    
    
    $
    15,632
   Year ended December 312006
    
    2005
    
    2004Income before provision for income taxes
    
    $
    30,405
    
    
    $
    43,042
    
    
    $
    45,186Tax expense at federal statutory rate
    
    $
    10,642
    
    
    $
    15,065
    
    
    $
    15,815Increase (decrease) in taxes resulting from:State income taxes  net of federal tax benefit
    
    
    51
    
    
    
    87
    
    
    
    291Bank Owned Life insurance
    
    
    (399
    )
    
    
    (362
    )
    
    
    (382
    )Executive compensation in excess of Section 162(m) limit
    
    
    376
    
    
    
    350
    
    
    
    Tax returns and reserve adjustment for uncertain tax
provisions
    
    
    (930
    )
    
    
    
    
    
    
    Other
    
    
    68
    
    
    
    (124
    )
    
    
    (92
    )Provision for income taxes
    
    $
    9,808
    
    
    $
    15,016
    
    
    $
    15,632
 
 98




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 12. Income Taxes (continued)
  December 312006
    
    2005Deferred tax assets:State net operating losses
    
    $
    1,376
    
    
    $
    877Loan loss reserves
    
    
    4,904
    
    
    
    4,841Pension
    
    
    3,003
    
    
    
    3,621Deferred compensation
    
    
    1,474
    
    
    
    1,580Restricted stock amortization
    
    
    547
    
    
    
    Unrealized gain on investment securities
    
    
    9,156
    
    
    
    9,780Other
    
    
    980
    
    
    
    792Total deferred tax assets
    
    
    21,440
    
    
    
    21,491Valuation allowance
    
    
    (1,013
    )
    
    
    (275
    )Deferred tax assets, net of valuation allowance
    
    
    20,427
    
    
    
    21,216Deferred tax liabilities:Property and equipment depreciation
    
    
    504
    
    
    
    1,088FHLB stock dividends
    
    
    5,130
    
    
    
    5,422Deferred loan fees
    
    
    1,981
    
    
    
    2,146Purchase accounting adjustments
    
    
    4,656
    
    
    
    4,998Mortgage servicing rights
    
    
    1,867
    
    
    
    1,915Other
    
    
    70
    
    
    
    60Total deferred tax liabilities
    
    
    14,208
    
    
    
    15,629Net deferred tax asset
    
    $
    6,219
    
    
    $
    5,587
 99




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 13. Financial Instruments with Off-Balance-Sheet Risk
    December 312006
    
    2005Unused consumer lines of credit
    
    $
    156,378
    
    
    $
    153,133Unused commercial lines of credit
    
    
    25,941
    
    
    
    16,523Commitments to extend credit:Fixed rate
    
    
    19,891
    
    
    
    18,569Adjustable rate
    
    
    23,330
    
    
    
    49,380Undisbursed commercial loans
    
    
    4,258
    
    
    
    5,930
  100




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments
     Cash and Cash Equivalents
 Investment and Mortgage-Related Securities
 Loans Receivable and Loans Held-for-Sale
 Mortgage Servicing Rights
 Federal Home Loan Bank Stock
 Accrued Interest Receivable
 Deposits and Advance Payments by Borrowers for Taxes and Insurance
 101




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
 Borrowings
 December 31
    
    December 312006
    
    2005Carrying
    
    Fair
    
    Carrying
    
    FairValue
    
    Value
    
    Value
    
    ValueCash and cash equivalents
    
    $
    45,460
    
    
    $
    45,460
    
    
    $
    41,543
    
    
    $
    41,543Investment and mortgage-related securities
    
    
    1,113,141
    
    
    
    1,113,141
    
    
    
    1,151,177
    
    
    
    1,151,177Loans receivable, net
    
    
    2,024,325
    
    
    
    2,014,996
    
    
    
    1,990,492
    
    
    
    1,972,640Loans held for sale
    
    
    3,787
    
    
    
    3,787
    
    
    
    2,312
    
    
    
    2,312Mortgage servicing rights
    
    
    4,653
    
    
    
    7,340
    
    
    
    4,771
    
    
    
    7,527Federal Home Loan Bank stock
    
    
    45,876
    
    
    
    45,876
    
    
    
    48,537
    
    
    
    48,537Accrued interest receivable
    
    
    13,507
    
    
    
    13,507
    
    
    
    11,720
    
    
    
    11,720Deposits and accrued interest
    
    
    2,158,641
    
    
    
    2,085,299
    
    
    
    2,086,822
    
    
    
    2,044,991Advance payments by borrowers
    
    
    2,199
    
    
    
    2,199
    
    
    
    2,529
    
    
    
    2,529Borrowings
    
    
    705,025
    
    
    
    701,958
    
    
    
    765,796
    
    
    
    758,428
  102




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 15. Condensed Parent Company Only Financial Statements
 STATEMENT OF FINANCIAL CONDITION
 December 312006
    
    2005Assets:Cash and cash equivalents
    
    $
    58,403
    
    
    $
    76,958Investment in subsidiaries
    
    
    451,299
    
    
    
    451,600Due from subsidiaries
    
    
    19,359
    
    
    
    12,506Receivable from ESOP
    
    
    3,047
    
    
    
    3,947Other assets
    
    
    1,671
    
    
    
    6$
    533,779
    
    
    $
    545,017Liabilities and shareholders equity:Liabilities:Other liabilities
    
    $
    
    
    
    $
    643Shareholders equity:Preferred stock  $.01 par value
Authorized 20,000,000 shares in 2006 and 2005
Issued and outstanding  none in 2006 and 2005
    
    
    
    
    
    
    Common stock  $.01 par value:Authorized  200,000,000 shares in 2006 and 2005
Issued  78,783,849 shares in 2006 and 2005
Outstanding  60,277,087 in 2006 and 62,325,268 shares in 2005
    
    
    788
    
    
    
    788Additional paid-in capital
    
    
    496,302
    
    
    
    497,589Retained earnings
    
    
    273,454
    
    
    
    269,913Unearned ESOP shares
    
    
    (3,066
    )
    
    
    (3,966
    )Accumulated other comprehensive income
    
    
    (15,426
    )
    
    
    (17,346
    )Unearned deferred compensation
    
    
    
    
    
    
    (6,955
    )Treasury stock  18,506,762 shares in 2006 and 16,458,581
shares in 2004
    
    
    (218,273
    )
    
    
    (195,649
    )Total shareholders equity
    
    
    533,779
    
    
    
    544,374$
    533,779
    
    
    $
    545,017
 103




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 15. Condensed Parent Company Only Financial Statements (continued)
 STATEMENT OF INCOME
 Year ended December 312006
    
    2005
    
    2004Interest income
    
    $
    2,290
    
    
    $
    1,854
    
    
    $
    2,735Equity in earnings of subsidiaries
    
    
    20,080
    
    
    
    27,754
    
    
    
    28,394Gain on sale of investments
    
    
    
    
    
    
    
    
    
    
    537Other
    
    
    40
    
    
    
    
    
    
    
    5Total income
    
    
    22,410
    
    
    
    29,608
    
    
    
    31,671Total expenses
    
    
    1,466
    
    
    
    1,399
    
    
    
    1,335Income before provision for income taxes
    
    
    20,944
    
    
    
    28,209
    
    
    
    30,336Provision for income taxes
    
    
    347
    
    
    
    183
    
    
    
    782Net income
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554
 STATEMENT OF CASH FLOWS
 Year ended December 312006
    
    2005
    
    2004Operating activities:Net income
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554Adjustment to reconcile net income to net cash provided by
(used in) operating activities:Equity in earnings of subsidiaries
    
    
    (20,080
    )
    
    
    (27,754
    )
    
    
    (28,394
    )Amortization of cost of stock benefit plans
    
    
    9,080
    
    
    
    6,768
    
    
    
    5,857Decrease in due from subsidiaries
    
    
    (6,853
    )
    
    
    (6,114
    )
    
    
    (4,397
    )Adoption of SAB No. 108
    
    
    (1,101
    )
    
    
    
    
    
    
    Change in other operating activities and liabilities
    
    
    (1,207
    )
    
    
    166
    
    
    
    836Net cash provided in operating activities
    
    
    436
    
    
    
    1,092
    
    
    
    3,456Investing activities:Stock proceeds invested in subsidiary
    
    
    
    
    
    
    
    
    
    
    Dividends from Company subsidiaries
    
    
    21,200
    
    
    
    83,200
    
    
    
    13,600Net cash provided by investing activities
    
    
    21,200
    
    
    
    83,200
    
    
    
    13,600Financing activities:Cash dividends
    
    
    (15,955
    )
    
    
    (16,223
    )
    
    
    (13,402
    )Purchase of treasury stock
    
    
    (27,828
    )
    
    
    (134,542
    )
    
    
    (78,859
    )Proceeds from exercise of stock options
    
    
    1,940
    
    
    
    2,393
    
    
    
    1,217Excess tax benefit from exercise of stock options
    
    
    752
    
    
    
    
    
    
    
    Payments received on ESOP
    
    
    900
    
    
    
    900
    
    
    
    900Net cash used by financing activities
    
    
    (40,191
    )
    
    
    (147,472
    )
    
    
    (90,144
    )Decrease in cash and cash equivalents
    
    
    (18,555
    )
    
    
    (63,180
    )
    
    
    (73,088
    )Cash and cash equivalents at beginning of year
    
    
    76,958
    
    
    
    140,138
    
    
    
    213,226Cash and cash equivalents at end of year
    
    $
    58,403
    
    
    $
    76,958
    
    
    $
    140,138
 104




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2006  (Dollars in Thousands, Except Per Share Amounts)
 16. Adoption of SEC Staff Accounting Bulletin No. 108 (SAB No. 108)
   105




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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 :
 106




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Managements Report on Internal Control Over Financial Reporting
      107




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##### Table of Contents



Ernst & Young LLP, Report on Effectiveness of Internal Control Over Financial Reporting
  
     Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
 108




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##### Table of Contents



.
 /s/ Ernst & Young LLP 
 
 Item 9B . Other Information .
  109




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##### Table of Contents



Part III
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  Equity Compensation Plan Information
  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
    
    
    4,525,238
    
    
    $
    7.08
    
    
    
    1,773,362Equity compensation
plans not approved
by security holders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    4,525,238
    
    
    $
    7.08
    
    
    
    1,773,362
 
 (1)
    
    Represents options granted under the 2001 Plan or 2004 Stock Incentive Plan, which 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
  
 Item 14. Principal Accountant Fees and Services
  110




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##### Table of Contents



Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Documents filed as part of the Report:
1. and 2. Financial Statements and Financial Statement Schedules.
          (b). Exhibits. See Exhibit Index following the signature page of this report, which
is incorporated herein by reference. Each management contract or compensatory plan or arrangement required to
be filed as an exhibit to this report is identified in the Exhibit Index by an asterisk following its exhibit number.
 111




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##### Table of Contents



SIGNATURES
  BANK MUTUAL CORPORATIONMarch 15, 2007By:
    
    /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/ Rick B. Colberg
    
    /s/ Thomas J. Lopina, Sr.Rick B. Colberg, Chief Financial Officer
    
    Thomas J. Lopina, Sr., Director(Principal Financial Officer)/s/ Marlene M. Scholz
    
    /s/ William J. MielkeMarlene M. Scholz, Senior Vice President
    
    William J. Mielke, Director(Principal Accounting Officer)/s/ Thomas H. Buestrin
    
    /s/ Robert B. OlsonThomas H. Buestrin, Director
    
    Robert B. Olson, Director/s/ Mark C. Herr
    
    /s/ David J. RolfsMark C. Herr, Director
    
    David J. Rolfs, Director/s/ Jelmer G. SwobodaJelmer G. Swoboda, Director
 
 *
    
    Each of the above signatures is affixed as of March 15, 2007. 112




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##### Table of Contents



BANK MUTUAL CORPORATION
(Bank Mutual Corporation or the Company)**
Commission File No. 000-32107
 
 EXHIBIT INDEX
 TO
 2006 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. 333-105685
(the 2003 S-1)3(ii)
    
    Bylaws, as last amended May 29, 2003, of
Bank Mutual Corporation
    
    Exhibit 3(ii) to 2003 S-14.1
    
    The Articles
    
    Exhibit 3(i) above4.2
    
    The Plan
    
    Exhibit 2.1 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
(the 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.
(continuing , as amended, through 2009)
    
    Exhibit 10.5(a) to 2000 S-110.5(b)*
    
    Amendment thereto dated February 17, 1998
    
    Exhibit 10.5(b) to 2000 S-1
 EI-1




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##### Table of Contents



Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith10.6*
    
    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 2007)
    
    Exhibit 10.7 to 2000 S-110.7(a)*
    
    Employment Agreement between First
Northern Savings Bank and Rick B.
Colberg dated as of November 1, 2000
(continuing, as amended, through 2007)
    
    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 FNCC 1998
10-K10.9(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 First
Northern Capital Corp.s
Annual Report on Form 10-K
for the fiscal year ended
December 31, 1998 (FNCC
1998 10-K)10.10*
    
    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 20, 2004 (6-30-04
10-Q)
 EI-2




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##### Table of Contents



Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith10.11(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-Q10.11(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 S-121.1
    
    List of Subsidiaries
    
    
    
    X23.1
    
    Consent of Ernst & Young LLP
    
    
    
    X24.1
    
    Powers of Attorney
    
    Signature Page31.1
    
    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 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
 
 *
    
    Designates management or compensatory agreements, plans or arrangements required to be filed
as exhibits pursuant to Item 14(c) 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. EI-3