##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10 - K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 Commission file number: 000-31207
 BANK MUTUAL CORPORATION
  Wisconsin
    
    39-2004336(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)4949 West Brown Deer Road, Milwaukee, Wisconsin
    
    53223(Address of principal executive offices)
    
    (Zip Code)
 (414) 354-1500
  Common Stock, $0.01 Par Value
    
    The NASDAQ Stock Market LLC(Title of each class)
    
    (Name of each exchange on which registered)
  NONE
  o þ
  o þ
  þ o
 o
  o o
  Large accelerated filer o   
    Accelerated filer þ
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
  Part of Form 10-K Into WhichDocuments Incorporated by Reference
    
    Portions of Document are IncorporatedProxy Statement for Annual Meeting of Shareholders on May 2, 2011
    
    Part III




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##### 



BANK MUTUAL CORPORATION
 FORM 10-K ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 2010
 Table of Contents
 Item
    
    
    
    PagePart I1
    
    Business
    
    
    31A
    
    Risk Factors
    
    
    251B
    
    Unresolved Staff Comments
    
    
    292
    
    Properties
    
    
    293
    
    Legal Proceedings
    
    
    294
    
    Reserved
    
    
    29Part II5
    
    Market for Registrants Common Equity, Related Stockholders Matters, and
Issuer Purchases of Equity Securities
    
    
    306
    
    Selected Financial Data
    
    
    327
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    347A
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    598
    
    Financial Statements and Supplementary Data
    
    
    639
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    1059A
    
    Controls and Procedures
    
    
    1059B
    
    Other Information
    
    
    107Part III10
    
    Directors, Executive Officers, and Corporate Governance
    
    
    10811
    
    Executive Compensation
    
    
    10812
    
    Security Ownership of Certain Beneficial Owners, Management, and
Related Stockholder Matters
    
    
    10813
    
    Certain Relationships and Related Transactions and Director Independence
    
    
    10814
    
    Principal Accountant Fees and Services
    
    
    108Part IV15
    
    Exhibits, Financial Statement Schedules
    
    
    109SIGNATURES
    
    
    110EX-10.6.CEX-10.11.B.IIEX-10.11.C.IIEX-11.E.IIEX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Part I
 Cautionary Statement
  
 Item 1. Business
  General
   3




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Market Area
    Competition
   Lending Activities
 General
 Residential Mortgage Lending
 4




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5




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6




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Consumer Loans
       Multi-family and Commercial Real Estate Loans
 7




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Construction and Development Loans
 Commercial Business Loans
 8




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Loan Approval Authority
      Asset Quality
 General
 9




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Internal Risk Ratings and Classified Assets
  Delinquent Loans
   10




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Non-Accrual Policy
 Foreclosed Properties and Repossessed Assets
    11




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Loan Charge-Offs
 Allowance for Loan Losses
    12




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Investment Activities
 General
  13




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Investment Securities
 Mortgage-Related Securities
   Deposit Liabilities
  14




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Borrowings
   Shareholders Equity
    15




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Subsidiaries
      Employees
  Regulation and Supervision
 General
  16




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Financial Services Industry Legislation and Related Actions
  Dodd-Frank Act
    Troubled Assets Relief Program
 17




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Regulation and Supervision of the Bank
 General
   Regulatory Capital Requirements
     18




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Prompt Corrective Action
 Total Capital to Risk
    
    Tier 1 Capital to Risk
    
    Tier 1 Capital toCategory:
    
    Weighted Assets
    
    Weighted Assets
    
    Total AssetsWell capitalized
    
    
    3 10
    %
    
    
    3 6
    %
    
    
    3 5
    %Adequately capitalized
    
    
    3 8
    %
    
    
    3 4
    %
    
    
    3 4
    %(1)Under capitalized
    
    
    < 8
    %
    
    
    < 4
    %
    
    
    < 4
    %(2)Significantly undercapitalized
    
    
    < 6
    %
    
    
    < 3
    %
    
    
    < 3
    %Critically undercapitalized (3)
 
 (1)
    
    3 3% if the bank receives the highest rating under the uniform system.(2)
    
    < 3% if the bank receives the highest rating under the uniform system.(3)
    
    Tangible assets to capital of equal to or less than 2%.   Dividend and Other Capital Distribution Limitations
   Qualified Thrift Lender Test
 19




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Liquidity Standards
 Federal Home Loan Bank System
   Deposit Insurance
    20




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Transactions With Affiliates
   Acquisitions and Mergers
 21




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Prohibitions Against Tying Arrangements
 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), 75%;
    
    for loans for the construction of commercial, multi-family or other non-residential
property, 80%;
    
    for loans for the construction of one- to four-family properties, 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), 85%.
  Community Reinvestment Act
  
    
    a lending test, to evaluate the institutions record of making loans in its service areas;
    
    an investment test, to evaluate the institutions record of making community
development investments; and
    
    a service test, to evaluate the institutions delivery of services through its
branches, ATMs and other offices.
  Safety and Soundness Standards
 22




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Loans to Insiders
 The Patriot Act
 
    
    Such institutions must establish anti-money laundering programs that include, at
minimum; (i) internal policies, procedures, and controls; (ii) specific designation of an
anti-money laundering compliance officer; (iii) ongoing employee training programs, and
(iv) an independent audit function to test the program.
    
    Bank regulators, may issue regulations that provide for minimum standards with respect
to customer identification at the time new accounts are opened.
    
    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.
    
    Institutions may not establish, maintain, administer or manage correspondent accounts
for foreign shell banks and are subject to recordkeeping obligations relating to foreign
bank correspondent accounts.
    
    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.
 Regulation and Supervision of the Company
 Holding Company Regulation
 23




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Federal Securities Laws
 Acquisition of Bank Mutual Corporation
 Federal and State Taxation
 Federal Taxation
  State Taxation
 24




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Item 1A. Risk Factors
  The Global Credit Market Instability and Weak Economic Conditions May Significantly Affect the
Companys Liquidity, Financial Condition, and Earnings
   The Companys Actual Loan Losses May Exceed its Allowance for Loan Losses, Which Could Have a
Material Adverse Affect on the Companys Earnings
  Further Declines in the Real Estate Values May Continue to Adversely Affect Collateral Values and
the Companys Profits
  Some of the Companys Lending Activities Are Riskier than One- to Four-Family Real Estate Loans
  25




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The Banks Ability to Pay Dividends to the Company Is Subject to Current and Potential Future
Limitations That May Affect the Companys Ability to Pay Dividends to Its Shareholders and
Repurchase Its Stock
  The Company Has Significant Goodwill That It May Need to Write Off (Expense) in the Future
  Recent and Future Legislation and Rulemaking in Response to Market and Economic Conditions May
Significantly Affect the Companys Results of Operations and Financial Condition
     26




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Changes in the Financial Condition or Future Prospects of the FHLB of Chicago May Have an
Adverse Impact on the Companys Investment in FHLB Common Stock
  The Interest Rate Environment May Have an Adverse Impact on the Companys Net Interest Income
  Changes in Market Interest Rates or Other Conditions May Have an Adverse Impact on the Fair Value
of the Companys Available-for-Sale Securities, Shareholders Equity, and Profits
  Wisconsin Tax Developments Could Reduce the Companys Net Income
   27




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Strong Competition Within the Companys Market Area May Affect Net Income
  FDIC Increases in Deposit Insurance Premiums Have Raised the Companys Expenses
  The Companys Ability to Grow May Be Limited if It Cannot Make Acquisitions
  The Company Depends on Certain Key Personnel and the Companys Business Could Be Harmed by the Loss
of Their Services
  The Company Is Subject to Security and Operational Risks Relating to the Use of Technology that
Could Damage Its Reputation and Business
   28




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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
  
 Item 4. Reserved
  29




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Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchase of Equity Securities
     2010 Stock Prices

    
    2009 Stock Prices

    
    Cash Dividends PaidHigh
    
    
    Low
    
    
    High
    
    
    Low
    
    
    2010
    
    
    20091st Quarter
    
    $
    7.21
    
    
    $
    5.98
    
    
    $
    11.56
    
    
    $
    7.06
    
    
    $
    0.07
    
    
    $
    0.092nd Quarter
    
    
    7.40
    
    
    
    5.68
    
    
    
    10.81
    
    
    
    8.60
    
    
    
    0.07
    
    
    
    0.093rd Quarter
    
    
    6.20
    
    
    
    5.05
    
    
    
    10.07
    
    
    
    8.32
    
    
    
    0.03
    
    
    
    0.094th Quarter
    
    
    5.42
    
    
    
    4.51
    
    
    
    8.84
    
    
    
    6.88
    
    
    
    0.03
    
    
    
    0.07Total
    
    $
    0.20
    
    
    $
    0.34
   30




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##### Table of Contents



Period EndingIndex
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08
    
    
    12/31/09
    
    
    12/31/10Bank Mutual Corporation
    
    
    
    100.00
    
    
    
    
    117.03
    
    
    
    
    105.18
    
    
    
    
    118.80
    
    
    
    
    74.29
    
    
    
    
    52.98NASDAQ Composite Index
    
    
    
    100.00
    
    
    
    
    109.84
    
    
    
    
    119.14
    
    
    
    
    57.41
    
    
    
    
    82.53
    
    
    
    
    97.95NASDAQ Bank Index
    
    
    
    100.00
    
    
    
    
    112.23
    
    
    
    
    88.95
    
    
    
    
    64.59
    
    
    
    
    54.35
    
    
    
    
    64.29
 31




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##### Table of Contents



Item 6. Selected Financial Data
  At December 312010
    
    2009
    
    2008
    
    2007
    
    2006(Dollars in thousands, except number of shares and per share amounts)Selected financial condition data:Total assets
    
    $
    2,591,818
    
    
    $
    3,512,064
    
    
    $
    3,489,689
    
    
    $
    3,488,046
    
    
    $
    3,451,385Loans receivable, net
    
    
    1,323,569
    
    
    
    1,506,056
    
    
    
    1,829,053
    
    
    
    1,994,556
    
    
    
    2,024,325Loans held-for-sale, net
    
    
    37,819
    
    
    
    13,534
    
    
    
    19,030
    
    
    
    7,952
    
    
    
    3,787Securities available-for-sale:Investment securities
    
    
    228,023
    
    
    
    614,104
    
    
    
    419,138
    
    
    
    99,450
    
    
    
    48,290Mortgage-related securities
    
    
    435,234
    
    
    
    866,848
    
    
    
    850,867
    
    
    
    1,099,922
    
    
    
    1,064,851Foreclosed and repossessed assets
    
    
    19,293
    
    
    
    17,689
    
    
    
    4,768
    
    
    
    3,687
    
    
    
    1,231Goodwill
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570Mortgage servicing rights
    
    
    7,769
    
    
    
    6,899
    
    
    
    3,703
    
    
    
    4,708
    
    
    
    4,653Deposit liabilities
    
    
    2,078,310
    
    
    
    2,137,508
    
    
    
    2,128,277
    
    
    
    2,093,453
    
    
    
    2,149,523Borrowings
    
    
    149,934
    
    
    
    906,979
    
    
    
    907,971
    
    
    
    912,459
    
    
    
    705,025Shareholders equity
    
    
    312,953
    
    
    
    402,477
    
    
    
    399,611
    
    
    
    430,035
    
    
    
    533,779Tangible shareholders equity (1)
    
    
    260,383
    
    
    
    349,907
    
    
    
    347,041
    
    
    
    377,465
    
    
    
    481,209Number of shares outstanding, net
of
treasury stock
    
    
    45,769,443
    
    
    
    46,165,635
    
    
    
    47,686,759
    
    
    
    49,834,756
    
    
    
    60,277,087Book value per share
    
    $
    6.84
    
    
    $
    8.72
    
    
    $
    8.38
    
    
    $
    8.63
    
    
    $
    8.86Tangible shareholders equity
per share (1)
    
    $
    5.69
    
    
    $
    7.58
    
    
    $
    7.28
    
    
    $
    7.57
    
    
    $
    7.98For the Year Ended December 312010
    
    2009
    
    2008
    
    2007
    
    2006(Dollars in thousands, except per share amounts)Selected operating data:Total interest income
    
    $
    112,569
    
    
    $
    151,814
    
    
    $
    177,556
    
    
    $
    183,001
    
    
    $
    174,404Total interest expense
    
    
    66,276
    
    
    
    83,784
    
    
    
    104,191
    
    
    
    113,771
    
    
    
    99,091Net interest income
    
    
    46,293
    
    
    
    68,030
    
    
    
    73,365
    
    
    
    69,230
    
    
    
    75,313Provision for (recovery of) loan
losses
    
    
    49,619
    
    
    
    12,413
    
    
    
    1,447
    
    
    
    (272
    )
    
    
    632Net interest
income (loss) after provision for loan losses
    
    
    (3,326
    )
    
    
    55,617
    
    
    
    71,918
    
    
    
    69,502
    
    
    
    74,681Total non-interest income
    
    
    40,603
    
    
    
    31,681
    
    
    
    17,881
    
    
    
    20,434
    
    
    
    17,019Total non-interest expense (2)
    
    
    159,825
    
    
    
    68,155
    
    
    
    63,550
    
    
    
    63,549
    
    
    
    61,295Income
(loss) before income taxes
    
    
    (122,548
    )
    
    
    19,143
    
    
    
    26,250
    
    
    
    25,995
    
    
    
    30,405Income tax expense (benefit)
    
    
    (49,909
    )
    
    
    5,418
    
    
    
    9,094
    
    
    
    8,892
    
    
    
    9,808Net income (loss) before
non-controlling interest
    
    
    (72,639
    )
    
    
    13,725
    
    
    
    17,155
    
    
    
    17,495
    
    
    
    20,597Net loss (income) attributable to
non-
controlling interest
    
    
    (1
    )
    
    
    
    
    
    
    1
    
    
    
    (392
    )
    
    
    Net income (loss)
    
    $
    (72,640
    )
    
    $
    13,725
    
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597Earnings (loss) per share-basic
    
    $
    (1.59
    )
    
    $
    0.29
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.35Earnings (loss) per share-diluted
    
    $
    (1.59
    )
    
    $
    0.29
    
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    0.34Cash dividends paid per share
    
    $
    0.20
    
    
    $
    0.34
    
    
    $
    0.36
    
    
    $
    0.33
    
    
    $
    0.29
 
 (1)
    
    This is a non-GAAP measure. Tangible shareholders equity is total shareholders equity
minus goodwill.(2)
    
    Total non-interest expense in 2010 includes $89.3 million in loss on early repayment of FHLB
borrowings. 32




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At or For the Year Ended December 312010
    
    2009
    
    2008
    
    2007
    
    2006Selected financial ratios:Net interest margin (3)
    
    
    1.47
    %
    
    
    2.09
    %
    
    
    2.21
    %
    
    
    2.09
    %
    
    
    2.27
    %Net interest rate spread
    
    
    1.26
    
    
    
    1.82
    
    
    
    1.85
    
    
    
    1.59
    
    
    
    1.74Return on average assets
    
    
    (2.12
    )
    
    
    0.39
    
    
    
    0.48
    
    
    
    0.49
    
    
    
    0.59Return on average shareholders
equity
    
    
    (18.47
    )
    
    
    3.40
    
    
    
    4.15
    
    
    
    3.57
    
    
    
    3.89Efficiency ratio (4)
    
    
    99.36
    
    
    
    73.32
    
    
    
    68.77
    
    
    
    69.92
    
    
    
    67.28Non-interest expense as a percent of
adjusted average assets (5)
    
    
    2.06
    
    
    
    1.95
    
    
    
    1.80
    
    
    
    1.81
    
    
    
    1.77Shareholders equity to total assets
    
    
    12.07
    
    
    
    11.39
    
    
    
    11.45
    
    
    
    12.33
    
    
    
    15.47Tangible shareholders equity to
adjusted total assets (6)
    
    
    10.25
    
    
    
    10.09
    
    
    
    10.07
    
    
    
    10.95
    
    
    
    14.11Selected asset quality ratios:Non-performing loans to loans
receivable, net (7)
    
    
    9.29
    %
    
    
    2.83
    %
    
    
    1.81
    %
    
    
    0.65
    %
    
    
    0.72
    %Non-performing assets to total
assets (7)
    
    
    5.49
    
    
    
    1.72
    
    
    
    1.08
    
    
    
    0.48
    
    
    
    0.46Allowance for loan losses to
non-performing loans
    
    
    39.03
    
    
    
    39.99
    
    
    
    36.89
    
    
    
    90.98
    
    
    
    86.74Allowance for loan losses to total
loans receivable, net
    
    
    3.63
    
    
    
    1.13
    
    
    
    0.67
    
    
    
    0.59
    
    
    
    0.62Charge-offs to average loans
    
    
    1.26
    
    
    
    0.45
    
    
    
    0.05
    
    
    
    0.03
    
    
    
    0.01
 
 (3)
    
    Net interest margin is calculated by dividing net interest income by average earnings
assets.(4)
    
    Efficiency ratio is calculated by dividing non-interest expense (excluding loss on early
repayment of FHLB borrowings) by the sum of net interest income and non-interest income
(excluding gains and losses on investments).(5)
    
    Ratio in 2010 excludes the impact of $89.3 million loss on early repayment of FHLB
borrowings.(6)
    
    This is a non-GAAP measure. The ratio is calculated by dividing total shareholders equity
less intangible assets (net of deferred taxes) divided by total assets less intangible assets
(net). Intangible assets consist of goodwill and other intangible assets. Deferred taxes
have been established only on other intangible assets and are immaterial in amount.(7)
    
    Non-performing loans and assets in 2010 included $38.1 million in loans (2.88% of loans
receivable and 1.47% of total assets) that are current with respect to contractual principal and
interest payments. 33




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Results of Operations
 Overview
  
    
    a one-time $89.3 million loss on early repayment of FHLB borrowings in 2010;
    
    a $37.2 million or 300% increase in provision for loan losses;
    
    a $21.7 million or 32.0% decrease in net interest income; and
    
    a $5.7 million or 882% increase in net loss on foreclosed real estate.
  
    
    a $55.3 million change in income taxes from an expense of $5.4 million in 2009 to a
benefit of $49.9 million in 2010;
    
    a $9.2 million or 136% increase in gain on investment activities; and
    
    a $3.0 million or 7.7% decrease in compensation-related expenses.
  
    
    an $11.0 million or 758% increase in provision for loan losses;
    
    a $5.3 million or 7.3% decrease in net interest income;
    
    a $2.7 million or 817% increase in regular FDIC insurance premiums;
    
    a $1.6 million non-recurring special assessment from the FDIC; and
    
    a $1.2 million or 15.4% decrease in other non-interest income.
  
    
    a $7.9 million increase in gain on investments compared to a loss in 2008;
    
    a $7.0 million or 332% increase in gain on loan sales activities;
    
    a $1.9 million decrease in income tax expense (excluding consideration of the tax
benefit, below) due to lower pre-tax income; and
    
    a $1.8 million one-time tax benefit recorded against income tax expense as a result of
a change in Wisconsin tax law.
 
 34




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Net Interest Income
   35




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Years ended December 312010
    
    2009
    
    2008Interest
    
    
    Avg.
    
    
    
    
    
    
    Interest
    
    
    Avg.
    
    
    
    
    
    
    Interest
    
    
    Avg.Average
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/Balance
    

    Paid
    

    Cost
    

    Balance
    

    Paid
    

    Cost
    

    Balance
    

    Paid
    

    Cost(Dollars in thousands)Assets:Interest-earning assets:Loans receivable, net (1)
    
    $
    1,478,433
    
    
    $
    79,266
    
    
    
    5.36
    %
    
    $
    1,688,906
    
    
    $
    95,802
    
    
    
    5.67
    %
    
    $
    1,892,397
    
    
    $
    113,635
    
    
    
    6.00
    %Mortgage-related securities
    
    
    589,070
    
    
    
    17,445
    
    
    
    2.96
    
    
    
    946,142
    
    
    
    37,734
    
    
    
    3.99
    
    
    
    959,574
    
    
    
    45,535
    
    
    
    4.75Investment securities (2)
    
    
    840,424
    
    
    
    15,428
    
    
    
    1.84
    
    
    
    458,311
    
    
    
    18,199
    
    
    
    3.97
    
    
    
    344,533
    
    
    
    16,041
    
    
    
    4.66Interest-earning deposits
    
    
    250,909
    
    
    
    430
    
    
    
    0.17
    
    
    
    162,864
    
    
    
    79
    
    
    
    0.05
    
    
    
    54,666
    
    
    
    764
    
    
    
    1.40Federal funds sold
    
    
    
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    
    
    
    
    0.00
    
    
    
    71,934
    
    
    
    1,581
    
    
    
    2.20Total interest-earning assets
    
    
    3,158,836
    
    
    
    112,569
    
    
    
    3.56
    
    
    
    3,256,223
    
    
    
    151,814
    
    
    
    4.66
    
    
    
    3,323,104
    
    
    
    177,556
    
    
    
    5.34Non-interest-earning assets
    
    
    266,270
    
    
    
    
    
    
    
    
    
    
    
    236,158
    
    
    
    
    
    
    
    
    
    
    
    214,682Total average assets
    
    $
    3,425,106
    
    
    
    
    
    
    
    
    
    
    $
    3,492,381
    
    
    
    
    
    
    
    
    
    
    $
    3,537,786Liabilities and equity:Interest-bearing liabilities:Savings deposits
    
    $
    208,544
    
    
    
    104
    
    
    
    0.05
    
    
    $
    199,012
    
    
    
    181
    
    
    
    0.09
    
    
    $
    190,271
    
    
    
    609
    
    
    
    0.32Money market accounts
    
    
    347,906
    
    
    
    2,075
    
    
    
    0.60
    
    
    
    330,506
    
    
    
    2,795
    
    
    
    0.85
    
    
    
    336,208
    
    
    
    8,245
    
    
    
    2.45Interest-bearing demand accounts
    
    
    200,292
    
    
    
    107
    
    
    
    0.05
    
    
    
    184,077
    
    
    
    121
    
    
    
    0.07
    
    
    
    170,700
    
    
    
    376
    
    
    
    0.22Certificates of deposit
    
    
    1,234,411
    
    
    
    26,320
    
    
    
    2.13
    
    
    
    1,304,814
    
    
    
    41,471
    
    
    
    3.18
    
    
    
    1,358,021
    
    
    
    55,459
    
    
    
    4.08Total deposit liabilities
    
    
    1,991,153
    
    
    
    28,606
    
    
    
    1.44
    
    
    
    2,018,409
    
    
    
    44,568
    
    
    
    2.21
    
    
    
    2,055,200
    
    
    
    64,689
    
    
    
    3.15Advance payment by borrowers for
taxes and insurance
    
    
    19,606
    
    
    
    6
    
    
    
    0.03
    
    
    
    19,172
    
    
    
    11
    
    
    
    0.06
    
    
    
    18,549
    
    
    
    18
    
    
    
    0.10Borrowings
    
    
    871,212
    
    
    
    37,664
    
    
    
    4.32
    
    
    
    907,443
    
    
    
    39,205
    
    
    
    4.32
    
    
    
    910,542
    
    
    
    39,484
    
    
    
    4.34Total interest-bearing liabilities
    
    
    2,881,971
    
    
    
    66,276
    
    
    
    2.30
    
    
    
    2,945,024
    
    
    
    83,784
    
    
    
    2.84
    
    
    
    2,984,291
    
    
    
    104,191
    
    
    
    3.49Non-interest-bearing liabilities:Non-interest-bearing deposits
    
    
    96,370
    
    
    
    
    
    
    
    
    
    
    
    91,147
    
    
    
    
    
    
    
    
    
    
    
    89,590Other non-interest-bearing liabilities
    
    
    53,506
    
    
    
    
    
    
    
    
    
    
    
    52,412
    
    
    
    
    
    
    
    
    
    
    
    50,268Total non-interest-bearing
liabilities
    
    
    149,876
    
    
    
    
    
    
    
    
    
    
    
    143,559
    
    
    
    
    
    
    
    
    
    
    
    139,858Total liabilities
    
    
    3,031,847
    
    
    
    
    
    
    
    
    
    
    
    3,008,583
    
    
    
    
    
    
    
    
    
    
    
    3,124,149Total equity
    
    
    393,259
    
    
    
    
    
    
    
    
    
    
    
    403,798
    
    
    
    
    
    
    
    
    
    
    
    413,637Total average liabilities and equity
    
    $
    3,425,106
    
    
    
    
    
    
    
    
    
    
    $
    3,492,381
    
    
    
    
    
    
    
    
    
    
    $
    3,537,786Net interest income and net interest
rate spread
    
    
    
    
    
    $
    46,293
    
    
    
    1.26
    %
    
    
    
    
    
    $
    68,030
    
    
    
    1.82
    %
    
    
    
    
    
    $
    73,365
    
    
    
    1.85
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    1.47
    %
    
    
    
    
    
    
    
    
    
    
    2.09
    %
    
    
    
    
    
    
    
    
    
    
    2.21
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    1.10
    x
    
    
    
    
    
    
    
    
    
    
    1.11
    x
    
    
    
    
    
    
    
    
    
    
    1.11
    x
 
 (1)
    
    For the purposes of these computations, non-accruing loans and loans held-for-sale are
included in the average loans outstanding.(2)
    
    FHLB of Chicago stock is included in investment securities. 36




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##### Table of Contents



Year Ended December 31, 2010,Compared to Year Ended December 31, 2009Increase (Decrease)Volume
    
    Rate
    
    Net(Dollars in thousands)Interest-earning assets:Loans receivable
    
    $
    (11,499
    )
    
    $
    (5,037
    )
    
    $
    (16,536
    )Mortgage-related securities
    
    
    (12,038
    )
    
    
    (8,251
    )
    
    
    (20,289
    )Investment securities
    
    
    10,218
    
    
    
    (12,989
    )
    
    
    (2,771
    )Interest-earning deposits
    
    
    64
    
    
    
    287
    
    
    
    351Total interest-earning assets
    
    
    (13,255
    )
    
    
    (25,990
    )
    
    
    (39,245
    )Interest-bearing liabilities:Savings deposits
    
    
    7
    
    
    
    (84
    )
    
    
    (77
    )Money market deposits
    
    
    141
    
    
    
    (861
    )
    
    
    (720
    )Interest-bearing demand deposits
    
    
    10
    
    
    
    (24
    )
    
    
    (14
    )Certificates of deposit
    
    
    (2,135
    )
    
    
    (13,016
    )
    
    
    (15,151
    )Advance payment by borrowers for taxes and
insurance
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Borrowings
    
    
    (1,565
    )
    
    
    24
    
    
    
    (1,541
    )Total interest-bearing liabilities
    
    
    (3,542
    )
    
    
    (13,966
    )
    
    
    (17,508
    )Net change in net interest income
    
    $
    (9,713
    )
    
    $
    (12,024
    )
    
    $
    (21,737
    )
 Year Ended December 31, 2009,Compared to Year Ended December 31, 2008Increase (Decrease)Volume
    
    Rate
    
    Net(Dollars in thousands)Interest-earning assets:Loans receivable
    
    $
    (11,815
    )
    
    $
    (6,018
    )
    
    $
    (17,833
    )Mortgage-related securities
    
    
    (602
    )
    
    
    (7,199
    )
    
    
    (7,801
    )Investment securities
    
    
    4,760
    
    
    
    (2,602
    )
    
    
    2,158Interest-earning deposits
    
    
    533
    
    
    
    (1,218
    )
    
    
    (685
    )Federal funds sold
    
    
    (791
    )
    
    
    (790
    )
    
    
    (1,581
    )Total interest-earning assets
    
    
    (7,915
    )
    
    
    (17,827
    )
    
    
    (25,742
    )Interest-bearing liabilities:Savings deposits
    
    
    29
    
    
    
    (457
    )
    
    
    (428
    )Money market deposits
    
    
    (138
    )
    
    
    (5,312
    )
    
    
    (5,450
    )Interest-bearing demand deposits
    
    
    27
    
    
    
    (282
    )
    
    
    (255
    )Certificates of deposit
    
    
    (2,099
    )
    
    
    (11,889
    )
    
    
    (13,988
    )Advance payment by borrowers for taxes and
insurance
    
    
    1
    
    
    
    (8
    )
    
    
    (7
    )Borrowings
    
    
    (134
    )
    
    
    (145
    )
    
    
    (279
    )Total interest-bearing liabilities
    
    
    (2,314
    )
    
    
    (18,093
    )
    
    
    (20,407
    )Net change in net interest income
    
    $
    (5,601
    )
    
    $
    266
    
    
    $
    (5,335
    )
 Provision for Loan Losses
 37




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##### Table of Contents



Non-Interest Income
   38




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##### Table of Contents



For the Year Ended December 312010
    
    2009
    
    2008(Dollars in thousands)Gross servicing fees
    
    $
    2,584
    
    
    $
    2,193
    
    
    $
    1,843MSR amortization
    
    
    (3,277
    )
    
    
    (3,023
    )
    
    
    (1,587
    )MSR valuation (loss) recovery
    
    
    281
    
    
    
    535
    
    
    
    (822
    )Loan servicing revenue, net
    
    
    (412
    )
    
    
    (295
    )
    
    
    (566
    )Other loan fee income
    
    
    515
    
    
    
    479
    
    
    
    578Loan-related fees and servicing revenue, net
    
    $
    103
    
    
    $
    184
    
    
    $
    12
     39




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##### Table of Contents



Non-Interest Expense
      40




---



##### Table of Contents



Income Tax Expense (Benefit)
 41




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##### Table of Contents



Financial Condition
 Overview
 Securities Available-for-Sale
  At December 312010
    
    2009
    
    2008Carrying/
    
    Carrying/
    
    Carrying/Fair Value
    
    Fair Value
    
    Fair Value(Dollars in thousands)Investment securities:Mutual funds
    
    $
    22,055
    
    
    $
    22,312
    
    
    $
    39,603United States government and federal agency obligations.
    
    
    205,968
    
    
    
    591,792
    
    
    
    379,535Total investment securities available-for-sale
    
    
    228,023
    
    
    
    614,104
    
    
    
    419,138Mortgage-related securities:Freddie Mac
    
    
    314,067
    
    
    
    295,188
    
    
    
    282,237Fannie Mae
    
    
    30,810
    
    
    
    224,758
    
    
    
    413,364Private-label CMOs
    
    
    87,602
    
    
    
    111,782
    
    
    
    128,559Ginnie Mae
    
    
    2,755
    
    
    
    235,120
    
    
    
    26,707Total mortgage-related securities
    
    
    435,234
    
    
    
    866,848
    
    
    
    850,867Total securities available-for-sale
    
    $
    663,258
    
    
    $
    1,480,952
    
    
    $
    1,270,005
 42




---



##### Table of Contents



For the Year Ended December 312010
    
    2009
    
    2008(Dollars in thousands)Investment securities available-for-sale:Carrying value at beginning of period
    
    $
    614,104
    
    
    $
    419,138
    
    
    $
    99,450Purchases
    
    
    3,118,204
    
    
    
    689,075
    
    
    
    351,202Sales
    
    
    (709
    )
    
    
    (18,087
    )
    
    
    (8,358
    )Calls
    
    
    (3,506,718
    )
    
    
    (467,902
    )
    
    
    (29,992
    )Discount accretion (premium amortization), net
    
    
    314
    
    
    
    406
    
    
    
    (34
    )Increase (decrease) in net unrealized loss
    
    
    2,828
    
    
    
    (8,526
    )
    
    
    6,870Net increase in investment securities
    
    
    (386,080
    )
    
    
    194,966
    
    
    
    319,688Carrying value at end of period
    
    $
    228,024
    
    
    $
    614,104
    
    
    $
    419,138Mortgage-related securities available-for-sale:Carrying value at beginning of period
    
    $
    866,848
    
    
    $
    850,867
    
    
    $
    1,099,922Purchases
    
    
    819,675
    
    
    
    779,170
    
    
    
    345,842Sales
    
    
    (1,058,055
    )
    
    
    (468,794
    )
    
    
    (385,167
    )Principal repayments
    
    
    (187,664
    )
    
    
    (318,225
    )
    
    
    (195,479
    )Discount accretion (premium amortization), net
    
    
    (2,383
    )
    
    
    (2,445
    )
    
    
    1,516Increase (decrease) in net unrealized loss
    
    
    (3,187
    )
    
    
    26,275
    
    
    
    (15,767
    )Net increase (decrease) in mortgage-related securities
    
    
    (431,614
    )
    
    
    15,981
    
    
    
    (249,055
    )Carrying value at end of period
    
    $
    435,234
    
    
    $
    866,848
    
    
    $
    850,867
  More than One Year
    
    More than FiveOne Year or Less
    
    to Five Years
    
    Years to Ten Years
    
    More than Ten Years
    
    TotalWeighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedCarrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    AverageValue
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield(Dollars in thousands)Investment securities:Mutual funds (1)
    
    $
    22,054
    
    
    
    3.05
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    22,054
    
    
    
    3.05
    %US government and agencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    158,115
    
    
    
    2.42
    %
    
    $
    47,855
    
    
    
    2.74
    %
    
    
    205,970
    
    
    
    2.49Total investment securities
    
    $
    22,054
    
    
    
    3.05
    %
    
    
    
    
    
    
    
    
    
    $
    158,115
    
    
    
    2.42
    %
    
    $
    47,855
    
    
    
    2.74
    %
    
    $
    228,024
    
    
    
    2.55
    %Mortgage-related securities by issuer:Ginnie Mae pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    58
    
    
    
    6.74
    %
    
    $
    58
    
    
    
    6.74
    %Fannie Mae pass-through
certificates
    
    $
    5
    
    
    
    5.83
    %
    
    $
    3,214
    
    
    
    6.92
    %
    
    $
    384
    
    
    
    6.48
    %
    
    
    7
    
    
    
    9.16
    
    
    
    3,610
    
    
    
    6.88Freddie Mac pass-through
certificates
    
    
    7
    
    
    
    5.59
    
    
    
    23
    
    
    
    6.01
    
    
    
    17,603
    
    
    
    2.61
    
    
    
    
    
    
    
    
    
    
    
    17,633
    
    
    
    2.61Private-label CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,648
    
    
    
    5.15
    
    
    
    48,953
    
    
    
    3.64
    
    
    
    87,601
    
    
    
    4.28Freddie Mac, Fannie Mae, and
Ginnie Mae REMICs
    
    
    
    
    
    
    
    
    
    
    11,232
    
    
    
    1.42
    
    
    
    56,091
    
    
    
    2.39
    
    
    
    259,009
    
    
    
    2.97
    
    
    
    326,332
    
    
    
    2.81Total mortgage-related securities
    
    $
    12
    
    
    
    5.69
    %
    
    $
    14,469
    
    
    
    2.57
    %
    
    $
    112,726
    
    
    
    3.37
    %
    
    $
    308,027
    
    
    
    3.08
    
    
    $
    435,234
    
    
    
    3.13
    %Mortgage-related securities by coupon:Adjustable rate coupon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    40,680
    
    
    
    3.25
    %
    
    $
    40,680
    
    
    
    3.25
    %Fixed rate coupon
    
    $
    12
    
    
    
    5.69
    %
    
    $
    14,469
    
    
    
    2.57
    %
    
    $
    112,726
    
    
    
    3.37
    %
    
    
    267,347
    
    
    
    3.05
    
    
    
    394,554
    
    
    
    3.12Total mortgage-related securities
    
    $
    12
    
    
    
    5.69
    %
    
    $
    14,469
    
    
    
    2.57
    %
    
    $
    112,726
    
    
    
    3.37
    %
    
    $
    308,027
    
    
    
    3.08
    %
    
    $
    435,234
    
    
    
    3.13
    %Total investment and mortgage-related
securities portfolio
    
    $
    22,066
    
    
    
    3.06
    %
    
    $
    14,469
    
    
    
    2.57
    %
    
    $
    270,841
    
    
    
    2.81
    %
    
    $
    355,882
    
    
    
    3.03
    %
    
    $
    663,257
    
    
    
    2.93
    %
 
 (1)
    
    The weighted average yield has not been adjusted for the impairments recorded in 2009, 2008,
and 2007. Refer to Results of OperationsNon-Interest Income, above, for additional
discussion.  43




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##### Table of Contents



December 31, 2010
    
    December 31, 2009Net
    
    
    
    
    
    NetCarrying
    
    Unrealized
    
    Carrying
    
    UnrealizedValue
    
    Gain (Loss)
    
    Value
    
    Gain (Loss)(Dollars in thousands)Credit rating (1):AAA/Aaa
    
    $
    12,876
    
    
    $
    322
    
    
    $
    22,959
    
    
    $
    (341
    )AA/Aa
    
    
    8,600
    
    
    
    (84
    )
    
    
    9,980
    
    
    
    (483
    )A
    
    
    19,249
    
    
    
    (1,155
    )
    
    
    31,377
    
    
    
    (3,260
    )BBB/Baa
    
    
    11,142
    
    
    
    (242
    )
    
    
    15,769
    
    
    
    (2,151
    )Less than investment grade (2)
    
    
    35,735
    
    
    
    (1,981
    )
    
    
    31,697
    
    
    
    (2,763
    )Total private-label CMOs
    
    $
    87,602
    
    
    $
    (3,139
    )
    
    $
    111,782
    
    
    $
    (8,998
    )
 
 (1)
    
    In instances of split-ratings, each security has been classified according to its lowest
rating.(2)
    
    Securities rated less than investment grade are adversely classified as substandard in
accordance with federal guidelines (refer to Item 1. BusinessAsset Quality).  Loans Held-for-Sale
 For the year ended December 312010
    
    
    2009
    
    
    2008(Dollars in thousands)Balance outstanding at beginning of period
    
    $
    13,534
    
    
    $
    19,030
    
    
    $
    7,952Origination of loans intended for sale (1)
    
    
    434,388
    
    
    
    578,312
    
    
    
    139,387Principal balance of loans sold
    
    
    (409,369
    )
    
    
    (583,966
    )
    
    
    (128,725
    )Change in net unrealized gains or losses (2)
    
    
    (734
    )
    
    
    158
    
    
    
    416Total loans held-for-sale
    
    $
    37,819
    
    
    $
    13,534
    
    
    $
    19,030
 
 (1)
    
    Excludes one- to four-family loans originated for the Companys loan portfolio.(2)
    
    Refer to Note 1. Basis of Presentation in Item 8. Financial Statements and
Supplementary Data.  Loans Receivable
 44




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##### Table of Contents



45




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##### Table of Contents



At December 312010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total(Dollars in thousands)Mortgage loans:Permanent mortgage loans:One- to four-family
    
    $
    531,874
    
    
    
    37.87
    %
    
    $
    644,852
    
    
    
    41.45
    %
    
    $
    867,810
    
    
    
    45.82
    %
    
    $
    1,042,019
    
    
    
    50.29
    %
    
    $
    1,102,943
    
    
    
    52.04
    %Multi-family
    
    
    247,210
    
    
    
    17.60
    
    
    
    200,222
    
    
    
    12.87
    
    
    
    199,709
    
    
    
    10.54
    
    
    
    216,147
    
    
    
    10.43
    
    
    
    160,205
    
    
    
    7.56Commercial real estate
    
    
    248,253
    
    
    
    17.68
    
    
    
    262,855
    
    
    
    16.90
    
    
    
    222,462
    
    
    
    11.74
    
    
    
    189,209
    
    
    
    9.13
    
    
    
    161,586
    
    
    
    7.62Total permanent mortgages
    
    
    1,027,337
    
    
    
    73.15
    
    
    
    1,107,929
    
    
    
    71.22
    
    
    
    1,289,981
    
    
    
    68.10
    
    
    
    1,447,375
    
    
    
    69.85
    
    
    
    1,424,744
    
    
    
    67.22Construction and development:One- to four-family
    
    
    13,479
    
    
    
    0.96
    
    
    
    11,441
    
    
    
    0.74
    
    
    
    17,517
    
    
    
    0.92
    
    
    
    35,040
    
    
    
    1.69
    
    
    
    53,861
    
    
    
    2.54Multi-family
    
    
    19,308
    
    
    
    1.37
    
    
    
    52,323
    
    
    
    3.36
    
    
    
    74,208
    
    
    
    3.92
    
    
    
    58,712
    
    
    
    2.83
    
    
    
    91,063
    
    
    
    4.30Commercial real estate
    
    
    24,939
    
    
    
    1.78
    
    
    
    27,040
    
    
    
    1.74
    
    
    
    82,795
    
    
    
    4.37
    
    
    
    58,026
    
    
    
    2.80
    
    
    
    13,479
    
    
    
    0.64Land
    
    
    25,764
    
    
    
    1.83
    
    
    
    33,758
    
    
    
    2.17
    
    
    
    43,601
    
    
    
    2.30
    
    
    
    43,872
    
    
    
    2.12
    
    
    
    58,074
    
    
    
    2.74Total construction and
development loans
    
    
    83,490
    
    
    
    5.94
    
    
    
    124,562
    
    
    
    8.01
    
    
    
    218,121
    
    
    
    11.51
    
    
    
    195,650
    
    
    
    9.44
    
    
    
    216,477
    
    
    
    10.22Total mortgage loans
    
    
    1,110,827
    
    
    
    79.09
    
    
    
    1,232,491
    
    
    
    79.23
    
    
    
    1,508,102
    
    
    
    79.61
    
    
    
    1,643,025
    
    
    
    79.29
    
    
    
    1,641,221
    
    
    
    77.44Consumer loans:Fixed term home equity
    
    
    103,619
    
    
    
    7.38
    
    
    
    124,519
    
    
    
    8.00
    
    
    
    173,104
    
    
    
    9.14
    
    
    
    199,161
    
    
    
    9.62
    
    
    
    227,811
    
    
    
    10.75Home equity lines of credit
    
    
    87,383
    
    
    
    6.24
    
    
    
    88,796
    
    
    
    5.71
    
    
    
    86,962
    
    
    
    4.59
    
    
    
    90,631
    
    
    
    4.37
    
    
    
    91,730
    
    
    
    4.33Student
    
    
    17,695
    
    
    
    1.25
    
    
    
    19,793
    
    
    
    1.27
    
    
    
    21,469
    
    
    
    1.13
    
    
    
    21,845
    
    
    
    1.05
    
    
    
    20,404
    
    
    
    0.96Home improvement
    
    
    24,551
    
    
    
    1.76
    
    
    
    28,441
    
    
    
    1.83
    
    
    
    36,023
    
    
    
    1.90
    
    
    
    33,604
    
    
    
    1.62
    
    
    
    33,287
    
    
    
    1.57Automobile
    
    
    2,814
    
    
    
    0.20
    
    
    
    4,077
    
    
    
    0.26
    
    
    
    11,775
    
    
    
    0.62
    
    
    
    24,878
    
    
    
    1.20
    
    
    
    46,752
    
    
    
    2.21Other
    
    
    7,436
    
    
    
    0.52
    
    
    
    9,871
    
    
    
    0.63
    
    
    
    8,740
    
    
    
    0.46
    
    
    
    9,439
    
    
    
    0.46
    
    
    
    11,262
    
    
    
    0.53Total consumer loans
    
    
    243,498
    
    
    
    17.35
    
    
    
    275,497
    
    
    
    17.71
    
    
    
    338,073
    
    
    
    17.84
    
    
    
    379,558
    
    
    
    18.32
    
    
    
    431,246
    
    
    
    20.35Commercial business loans
    
    
    50,123
    
    
    
    3.56
    
    
    
    47,708
    
    
    
    3.07
    
    
    
    48,277
    
    
    
    2.55
    
    
    
    49,635
    
    
    
    2.40
    
    
    
    46,920
    
    
    
    2.21Gross loans receivable
    
    
    1,404,448
    
    
    
    100.00
    %
    
    
    1,555,696
    
    
    
    100.00
    %
    
    
    1,894,452
    
    
    
    100.00
    %
    
    
    2,072,218
    
    
    
    100.00
    %
    
    
    2,119,387
    
    
    
    100.00
    %Undisbursed loan proceeds
    
    
    (32,345
    )
    
    
    
    
    
    
    (32,690
    )
    
    
    
    
    
    
    (54,187
    )
    
    
    
    
    
    
    (68,457
    )
    
    
    
    
    
    
    (85,897
    )Allowance for loan losses
    
    
    (47,985
    )
    
    
    
    
    
    
    (17,028
    )
    
    
    
    
    
    
    (12,208
    )
    
    
    
    
    
    
    (11,774
    )
    
    
    
    
    
    
    (12,574
    )Deferred fees and costs, net
    
    
    (549
    )
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    996
    
    
    
    
    
    
    
    2,569
    
    
    
    
    
    
    
    3,409Total loans receivable, net
    
    $
    1,323,569
    
    
    
    
    
    
    $
    1,506,056
    
    
    
    
    
    
    $
    1,829,053
    
    
    
    
    
    
    $
    1,994,556
    
    
    
    
    
    
    $
    2,024,325
 46




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##### Table of Contents



For the year ended December 312010
    
    2009
    
    2008(Dollars in thousands)Balance outstanding at beginning of period
    
    $
    1,506,056
    
    
    $
    1,829,053
    
    
    $
    1,994,556Originations:One- to four-family loans (1)
    
    
    44,929
    
    
    
    47,466
    
    
    
    34,164Multi-family loans
    
    
    25,091
    
    
    
    10,889
    
    
    
    40,177Commercial real estate loans
    
    
    22,068
    
    
    
    42,505
    
    
    
    96,407Construction and development loans
    
    
    29,029
    
    
    
    15,720
    
    
    
    101,818Total mortgage loan originations
    
    
    121,117
    
    
    
    116,580
    
    
    
    272,566Consumer loans
    
    
    78,198
    
    
    
    76,854
    
    
    
    108,584Commercial business loans
    
    
    34,530
    
    
    
    22,617
    
    
    
    30,090Total originations
    
    
    233,845
    
    
    
    216,051
    
    
    
    411,240Purchases of one- to four-family mortgage loans
    
    
    
    
    
    
    2,658
    
    
    
    26,138Principal payments and repayments:Mortgage loans
    
    
    (216,214
    )
    
    
    (358,705
    )
    
    
    (422,728
    )Consumer loans
    
    
    (110,197
    )
    
    
    (139,430
    )
    
    
    (150,069
    )Commercial business loans
    
    
    (36,574
    )
    
    
    (35,609
    )
    
    
    (38,628
    )Total principal payments and repayments
    
    
    (362,985
    )
    
    
    (533,744
    )
    
    
    (611,425
    )Transfers to foreclosed properties, real
estate owned,
and repossessed assets
    
    
    (22,108
    )
    
    
    (23,721
    )
    
    
    (3,719
    )Net change in undisbursed loan proceeds,
allowance
for loan losses, and deferred fees and costs
    
    
    (31,239
    )
    
    
    15,759
    
    
    
    12,263Total loans receivable, net
    
    $
    1,322,569
    
    
    $
    1,506,056
    
    
    $
    1,829,053
 
 (1)
    
    Excludes one- to four-family loans originated for sale.  At December 31, 2010Construction andCommercial
    
    DevelopmentBusiness Loans
    
    Loans
    
    Total(Dollars in thousands)Amounts due:Within one year or less
    
    $
    17,172
    
    
    $
    31,313
    
    
    $
    48,485After one year through five years
    
    
    30,057
    
    
    
    25,893
    
    
    
    55,950After five years
    
    
    2,894
    
    
    
    26,284
    
    
    
    29,178Total due after one year
    
    
    32,951
    
    
    
    52,177
    
    
    
    85,128Total commercial and construction loans
    
    $
    50,123
    
    
    $
    83,490
    
    
    $
    133,613
  Due After One YearFixed Rate
    
    Adjustable Rate
    
    Total(Dollars in thousands)Commercial business loans
    
    $
    17,932
    
    
    $
    15,019
    
    
    $
    32,951Construction and development loans
    
    
    20,805
    
    
    
    31,372
    
    
    
    52,177Total loans due after one year
    
    $
    38,737
    
    
    $
    46,391
    
    
    $
    85,128
 Foreclosed Properties and Repossessed Assets
 47




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##### Table of Contents



Goodwill
  Mortgage Servicing Rights
 Other Assets
 At December 312010
    
    2009(Dollars in thousands)Accrued interest receivable:Mortgage-related securities
    
    $
    1,432
    
    
    $
    4,651Investment securities
    
    
    511
    
    
    
    1,875Loans receivable
    
    
    5,506
    
    
    
    6,795Total accrued interest receivable
    
    
    7,449
    
    
    
    13,321Bank owned life insurance
    
    
    55,600
    
    
    
    53,295Premises and equipment
    
    
    51,165
    
    
    
    51,715Federal Home Loan Bank stock, at cost
    
    
    46,092
    
    
    
    46,092Prepaid FDIC insurance premiums
    
    
    8,694
    
    
    
    12,521Current and deferred income taxes
    
    
    63,639
    
    
    
    6,149Other assets
    
    
    22,070
    
    
    
    23,613Total other assets
    
    $
    254,709
    
    
    $
    206,706
 48




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##### Table of Contents



Deposit Liabilities
 49




---



##### Table of Contents



At December 312010
    
    2009
    
    2008Percent
    
    Weighted
    
    
    
    
    
    Percent
    
    Weighted
    
    
    
    
    
    Percent
    
    Weightedof Total
    
    Average
    
    
    
    
    
    of Total
    
    Average
    
    
    
    
    
    of Total
    
    AverageDeposit
    
    Nominal
    
    
    
    
    
    Deposit
    
    Nominal
    
    
    
    
    
    Deposit
    
    NominalAmount
    
    Liabilities
    
    Rate
    
    Amount
    
    Liabilities
    
    Rate
    
    Amount
    
    Liabilities
    
    Rate(Dollars in thousands)Regular savings
    
    $
    210,334
    
    
    
    10.12
    %
    
    
    0.04
    %
    
    $
    196,983
    
    
    
    9.22
    %
    
    
    0.06
    %
    
    $
    185,003
    
    
    
    8.68
    %
    
    
    0.19
    %Interest-bearing demand
    
    
    219,136
    
    
    
    10.54
    
    
    
    0.02
    
    
    
    211,448
    
    
    
    9.89
    
    
    
    0.04
    
    
    
    180,269
    
    
    
    8.46
    
    
    
    0.11Money market savings
    
    
    423,923
    
    
    
    20.40
    
    
    
    0.57
    
    
    
    345,144
    
    
    
    16.14
    
    
    
    0.58
    
    
    
    340,631
    
    
    
    16.00
    
    
    
    1.57Non-interest bearing demand
    
    
    94,446
    
    
    
    4.54
    
    
    
    0.00
    
    
    
    94,619
    
    
    
    4.43
    
    
    
    0.00
    
    
    
    89,106
    
    
    
    4.18
    
    
    
    0.00Total demand accounts
    
    
    947,839
    
    
    
    45.60
    
    
    
    0.27
    
    
    
    848,194
    
    
    
    39.68
    
    
    
    0.26
    
    
    
    795,009
    
    
    
    37.32
    
    
    
    0.74Certificates of deposit:With original maturities of:Three months or less
    
    
    12,922
    
    
    
    0.62
    
    
    
    0.25
    
    
    
    17,645
    
    
    
    0.83
    
    
    
    0.63
    
    
    
    19,791
    
    
    
    0.93
    
    
    
    1.78Over three to 12 months
    
    
    194,458
    
    
    
    9.36
    
    
    
    0.94
    
    
    
    239,660
    
    
    
    11.21
    
    
    
    1.60
    
    
    
    337,054
    
    
    
    15.84
    
    
    
    2.99Over 12 to 24 months
    
    
    663,576
    
    
    
    31.93
    
    
    
    1.60
    
    
    
    812,154
    
    
    
    37.99
    
    
    
    2.62
    
    
    
    731,884
    
    
    
    34.40
    
    
    
    4.04Over 24 to 36 months
    
    
    92,268
    
    
    
    4.44
    
    
    
    2.10
    
    
    
    46,550
    
    
    
    2.18
    
    
    
    2.39
    
    
    
    46,320
    
    
    
    2.18
    
    
    
    2.58Over 36 to 48 months
    
    
    5,137
    
    
    
    0.25
    
    
    
    4.36
    
    
    
    5,126
    
    
    
    0.24
    
    
    
    4.38
    
    
    
    6,583
    
    
    
    0.31
    
    
    
    4.30Over 48 to 60 months
    
    
    162,110
    
    
    
    7.81
    
    
    
    3.81
    
    
    
    168,179
    
    
    
    7.87
    
    
    
    3.99
    
    
    
    191,636
    
    
    
    9.02
    
    
    
    4.25Over 60 months
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00Total certificates of deposit
    
    
    1,130,471
    
    
    
    54.40
    
    
    
    1.84
    
    
    
    1,289,314
    
    
    
    60.32
    
    
    
    2.58
    
    
    
    1,333,268
    
    
    
    62.68
    
    
    
    3.72Total deposit liabilities
    
    $
    2,078,310
    
    
    
    100.00
    %
    
    
    1.12
    %
    
    $
    2,137,508
    
    
    
    100.00
    %
    
    
    1.66
    %
    
    $
    2,128,277
    
    
    
    100.00
    %
    
    
    2.61
    %
  Amount(In thousands)Maturing in:Three months or less
    
    $
    59,355Over three months through six months
    
    
    64,988Over six months through 12 months
    
    
    85,852Over 12 months through 24 months
    
    
    29,885Over 24 months through 36 months
    
    
    33,488Over 36 months
    
    
    9,482Total certificates of deposits greater than $100,000
    
    $
    283,050
  For the Year Ended December 312010
    
    2009
    
    2008(Dollars in thousands)Total deposit liabilities at beginning of period
    
    $
    2,137,508
    
    
    $
    2,128,277
    
    
    $
    2,112,968Net withdrawals
    
    
    (85,039
    )
    
    
    (31,341
    )
    
    
    (58,499
    )Interest credited, net of penalties
    
    
    25,841
    
    
    
    40,572
    
    
    
    73,808Total deposit liabilities at end of period
    
    $
    2,078,310
    
    
    $
    2,137,508
    
    
    $
    2,128,277
 Borrowings
 50




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##### Table of Contents



At or For the Year Ended December 312010
    
    2009
    
    2008
    
    2007
    
    2006(Dollars in thousands)Balance outstanding at end of year:FHLB term advances
    
    $
    149,934
    
    
    $
    906,979
    
    
    $
    907,971
    
    
    $
    912,459
    
    
    $
    705,025Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average interest rate at end of year:FHLB term advances
    
    
    4.79
    %
    
    
    4.26
    %
    
    
    4.26
    %
    
    
    4.27
    %
    
    
    4.46
    %Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Maximum amount outstanding during the year:FHLB term advances
    
    $
    149,934
    
    
    $
    907,971
    
    
    $
    912,459
    
    
    $
    921,781
    
    
    $
    841,835Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    52,100
    
    
    
    38,000Other borrowings
    
    
    
    
    
    
    
    
    
    
    1,103
    
    
    
    
    
    
    
    Average amount outstanding during the year:FHLB term advances
    
    $
    871,212
    
    
    $
    907,443
    
    
    $
    910,517
    
    
    $
    865,540
    
    
    $
    782,619Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    3,570
    
    
    
    3,242Other borrowings
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Weighted average interest rate during the year:FHLB term advances
    
    
    4.32
    %
    
    
    4.32
    %
    
    
    4.34
    %
    
    
    4.34
    %
    
    
    3.86
    %Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    3.75
    %
    
    
    5.56
    %
    
    
    5.40
    %Other borrowings
    
    
    
    
    
    
    
    
    
    
    1.92
    %
    
    
    
    
    
    
    
 Other Liabilities
 Shareholders Equity
   51




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##### Table of Contents



Asset Quality
 At December 312010
    
    2009
    
    2008
    
    2007
    
    2006(Dollars in thousands)Non-accrual mortgage loans:One- to four-family
    
    $
    18,684
    
    
    $
    12,126
    
    
    $
    8,185
    
    
    $
    2,446
    
    
    $
    1,594Multi-family
    
    
    31,660
    
    
    
    3,357
    
    
    
    13,255
    
    
    
    3,702
    
    
    
    6,621Commercial real estate
    
    
    41,244
    
    
    
    18,840
    
    
    
    5,573
    
    
    
    2,056
    
    
    
    476Construction and development
    
    
    26,563
    
    
    
    4,859
    
    
    
    2,847
    
    
    
    3,047
    
    
    
    2,813Total non-accrual mortgage loans
    
    
    118,151
    
    
    
    39,182
    
    
    
    29,860
    
    
    
    11,251
    
    
    
    11,504Non-accrual consumer loans:Secured by real estate
    
    
    1,369
    
    
    
    1,433
    
    
    
    759
    
    
    
    585
    
    
    
    407Other consumer loans
    
    
    275
    
    
    
    212
    
    
    
    400
    
    
    
    345
    
    
    
    396Total non-accrual consumer loans
    
    
    1,644
    
    
    
    1,645
    
    
    
    1,159
    
    
    
    930
    
    
    
    803Non-accrual commercial business loans
    
    
    2,779
    
    
    
    923
    
    
    
    1,494
    
    
    
    159
    
    
    
    1,625Total non-accrual loans
    
    
    122,574
    
    
    
    41,750
    
    
    
    32,513
    
    
    
    12,340
    
    
    
    13,932Accruing loans delinquent 90 days or more (1)
    
    
    373
    
    
    
    834
    
    
    
    576
    
    
    
    602
    
    
    
    565Total non-performing loans
    
    
    122,947
    
    
    
    42,584
    
    
    
    33,089
    
    
    
    12,942
    
    
    
    14,497Foreclosed real estate and repossessed assets
    
    
    19,293
    
    
    
    17,689
    
    
    
    4,768
    
    
    
    3,687
    
    
    
    1,231Total non-performing assets
    
    $
    142,240
    
    
    $
    60,273
    
    
    $
    37,857
    
    
    $
    16,629
    
    
    $
    15,728Non-performing loans to total loans
    
    
    9.29
    %
    
    
    2.83
    %
    
    
    1.81
    %
    
    
    0.65
    %
    
    
    0.72
    %Non-performing assets to total assets
    
    
    5.49
    %
    
    
    1.72
    %
    
    
    1.08
    %
    
    
    0.48
    %
    
    
    0.46
    %Interest income that would have been
recognized if non-accrual loans had been
current
    
    $
    4,734
    
    
    $
    2,671
    
    
    $
    2,519
    
    
    $
    1,002
    
    
    $
    652
 
 (1)
    
    Consists of student loans that are guaranteed under programs sponsored by the U.S. government.   52




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53




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##### Table of Contents



At or for the Years Ended December 312010
    
    2009
    
    2008
    
    2007
    
    2006(Dollars in thousands)Balance at beginning of period
    
    $
    17,028
    
    
    $
    12,208
    
    
    $
    11,774
    
    
    $
    12,574
    
    
    $
    12,090Provision for (recovery of) loan losses
    
    
    49,619
    
    
    
    12,413
    
    
    
    1,447
    
    
    
    (272
    )
    
    
    632Charge-offs:One- to four-family
    
    
    (528
    )
    
    
    (397
    )
    
    
    (167
    )
    
    
    
    
    
    
    (44
    )Multi-family
    
    
    (140
    )
    
    
    (4,523
    )
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    (11,621
    )
    
    
    (1,989
    )
    
    
    (446
    )
    
    
    (178
    )
    
    
    Construction and development
    
    
    (3,515
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    (776
    )
    
    
    (527
    )
    
    
    (411
    )
    
    
    (412
    )
    
    
    (271
    )Commercial business
    
    
    (2,140
    )
    
    
    (210
    )
    
    
    (34
    )
    
    
    (33
    )
    
    
    (52
    )Total charge-offs
    
    
    (18,720
    )
    
    
    (7,646
    )
    
    
    (1,058
    )
    
    
    (623
    )
    
    
    (367
    )Recoveries:One- to four-family
    
    
    20
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    1
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    37
    
    
    
    33
    
    
    
    45
    
    
    
    95
    
    
    
    81Commercial business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138Total recoveries
    
    
    58
    
    
    
    53
    
    
    
    45
    
    
    
    95
    
    
    
    219Net charge-offs
    
    
    (18,662
    )
    
    
    (7,593
    )
    
    
    (1,013
    )
    
    
    (528
    )
    
    
    (148
    )Balance at end of period
    
    $
    47,985
    
    
    $
    17,028
    
    
    $
    12,208
    
    
    $
    11,774
    
    
    $
    12,574Net charge-offs to average loans
    
    
    1.26
    %
    
    
    0.45
    %
    
    
    0.05
    %
    
    
    0.03
    %
    
    
    0.01
    %Allowance for loan losses to total loans
    
    
    3.63
    %
    
    
    1.13
    %
    
    
    0.67
    %
    
    
    0.59
    %
    
    
    0.62
    %Allowance for loan losses to
non-performing loans
    
    
    39.03
    %
    
    
    39.99
    %
    
    
    36.89
    %
    
    
    90.98
    %
    
    
    86.74
    %
    54




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##### Table of Contents



At December 312010
    
    2009
    
    2008
    
    2007
    
    2006Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentagein Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in CategoryAmount
    
    to Total
    
    Amount
    
    to Total
    
    Amount
    
    to Total
    
    Amount
    
    to Total
    
    Amount
    
    to Total(Dollars in thousands)Loan category:Mortgage loans:One- to four-family
    
    $
    3,726
    
    
    
    7.76
    %
    
    $
    2,806
    
    
    
    16.47
    %
    
    $
    3,038
    
    
    
    24.89
    %
    
    $
    3,324
    
    
    
    28.23
    %
    
    $
    3,531
    
    
    
    28.08
    %Multi-family
    
    
    9,265
    
    
    
    19.31
    
    
    
    3,167
    
    
    
    18.60
    
    
    
    4,197
    
    
    
    34.38
    
    
    
    2,375
    
    
    
    20.17
    
    
    
    1,336
    
    
    
    10.63Commercial real estate
    
    
    21,885
    
    
    
    45.61
    
    
    
    5,715
    
    
    
    33.56
    
    
    
    1,113
    
    
    
    9.12
    
    
    
    1,265
    
    
    
    10.74
    
    
    
    1,213
    
    
    
    9.65Construction/development
    
    
    10,141
    
    
    
    21.13
    
    
    
    1,172
    
    
    
    6.88
    
    
    
    400
    
    
    
    3.28
    
    
    
    400
    
    
    
    3.40
    
    
    
    500
    
    
    
    3.98Total mortgage loans
    
    
    45,017
    
    
    
    93.81
    
    
    
    12,860
    
    
    
    75.52
    
    
    
    8,748
    
    
    
    71.66
    
    
    
    7,364
    
    
    
    62.54
    
    
    
    6,580
    
    
    
    52.33Consumer
    
    
    1,427
    
    
    
    2.97
    
    
    
    2,243
    
    
    
    13.17
    
    
    
    2,125
    
    
    
    17.41
    
    
    
    2,266
    
    
    
    19.25
    
    
    
    2,556
    
    
    
    20.33Commercial business
    
    
    1,541
    
    
    
    3.21
    
    
    
    1,925
    
    
    
    11.31
    
    
    
    1,335
    
    
    
    10.94
    
    
    
    2,144
    
    
    
    18.21
    
    
    
    3,438
    
    
    
    27.34Total allowance for loan losses
    
    $
    47,985
    
    
    
    100.00
    %
    
    $
    17,028
    
    
    
    100.00
    %
    
    $
    12,208
    
    
    
    100.00
    %
    
    $
    11,774
    
    
    
    100.00
    %
    
    $
    12,574
    
    
    
    100.00
    %
 Critical Accounting Policies
  Allowance for Loan Losses
  Other-Than-Temporary Impairment
 Goodwill
 55




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##### Table of Contents



Income Taxes
  Contractual Obligations, Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements
   Payments Due InOne to
    
    Three to
    
    OverOne Year
    
    Three
    
    Five
    
    FiveOr Less
    
    Years
    
    Years
    
    Years
    
    Total(Dollars in thousands)Deposit liabilities without a
stated maturity (1)
    
    $
    947,839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    947,839Certificates of deposit (1)
    
    
    825,661
    
    
    $
    260,830
    
    
    $
    43,980
    
    
    
    
    
    
    
    1,130,471Borrowed funds (1) (2)
    
    
    
    
    
    
    100,249
    
    
    
    
    
    
    $
    49,685
    
    
    
    149,934Operating leases
    
    
    822
    
    
    
    1,284
    
    
    
    1,176
    
    
    
    2,200
    
    
    
    5,482Purchase obligations
    
    
    1,680
    
    
    
    3,360
    
    
    
    3,360
    
    
    
    6,300
    
    
    
    14,700Deferred retirement plans and
deferred compensation plans
    
    
    1,111
    
    
    
    2,160
    
    
    
    2,551
    
    
    
    7,814
    
    
    
    13,635
 
 (1)
    
    Excludes interest to be paid in the periods indicated.(2)
    
    Includes $100.0 million of borrowings that contain redemption features that permit the FHLB
of Chicago to redeem the advances at its option on a quarterly basis.   56




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##### Table of Contents



Payments Due InOne to
    
    Three to
    
    OverOne Year
    
    Three
    
    Five
    
    FiveOr Less
    
    Years
    
    Years
    
    Years
    
    Total(Dollars in thousands)Commitments to extend credit:Commercial real estate
    
    $
    1,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,035Residential real estate
    
    
    74,089
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,089Revolving home equity
and credit card lines
    
    
    146,381
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,381Standby letters of credit
    
    
    288
    
    
    $
    41
    
    
    
    
    
    
    $
    10
    
    
    
    339Commercial letters of credit
    
    
    20,856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,856Unused commercial lines
of credit
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    462Net commitments to sell
mortgage loans
    
    
    (49,854
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,854
    )
  57




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##### Table of Contents



Quarterly Financial Information
  2010 Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(Dollars in thousands, except per share amounts)Interest income
    
    $
    31,992
    
    
    $
    29,586
    
    
    $
    28,441
    
    
    $
    22,551Interest expense
    
    
    17,877
    
    
    
    17,191
    
    
    
    16,730
    
    
    
    14,478Net interest income
    
    
    14,115
    
    
    
    12,395
    
    
    
    11,711
    
    
    
    8,073Provision for loan losses
    
    
    3,366
    
    
    
    6,150
    
    
    
    6,163
    
    
    
    33,940Net income (loss) after
provision for loan losses
    
    
    10,749
    
    
    
    6,245
    
    
    
    5,548
    
    
    
    (25,867
    )Total non-interest income
    
    
    8,968
    
    
    
    12,390
    
    
    
    12,963
    
    
    
    6,282Total non-interest expense (1)
    
    
    16,562
    
    
    
    17,742
    
    
    
    17,278
    
    
    
    108,243Income (loss) before taxes
    
    
    3,155
    
    
    
    893
    
    
    
    1,233
    
    
    
    127,828Income tax expense (benefit)
    
    
    1,051
    
    
    
    162
    
    
    
    307
    
    
    
    (51,430
    )Net income (loss) before
non-controlling interest
    
    
    2,104
    
    
    
    731
    
    
    
    926
    
    
    
    (76,398
    )Net (income) loss attributable
to
non-controlling interest
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Net income (loss)
    
    $
    2,103
    
    
    $
    731
    
    
    $
    926
    
    
    $
    (76,399
    )Earnings (loss) per share-basic
    
    $
    0.05
    
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    (1.68
    )Earnings
(loss) per share-diluted
    
    $
    0.05
    
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    (1.68
    )Cash dividend paid per share
    
    $
    0.07
    
    
    $
    0.07
    
    
    $
    0.03
    
    
    $
    0.03
 2009 Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31Interest income
    
    $
    41,986
    
    
    $
    39,166
    
    
    $
    35,727
    
    
    $
    34,934Interest expense
    
    
    22,793
    
    
    
    21,301
    
    
    
    20,403
    
    
    
    19,286Net interest income
    
    
    19,193
    
    
    
    17,865
    
    
    
    15,324
    
    
    
    15,648Provision for loan losses
    
    
    3,161
    
    
    
    472
    
    
    
    5,189
    
    
    
    3,591Net income
after provision for loan losses
    
    
    16,032
    
    
    
    17,393
    
    
    
    10,135
    
    
    
    12,057Total non-interest income
    
    
    9,285
    
    
    
    7,552
    
    
    
    8,613
    
    
    
    5,536Total non-interest expense
    
    
    16,459
    
    
    
    18,576
    
    
    
    16,731
    
    
    
    15,694Income before taxes
    
    
    8,858
    
    
    
    6,369
    
    
    
    2,017
    
    
    
    1,899Income taxes
    
    
    1,669
    
    
    
    2,553
    
    
    
    772
    
    
    
    424Net income before non-controlling interest
    
    
    7,189
    
    
    
    3,816
    
    
    
    1,245
    
    
    
    1,475Net loss attributable to non-controlling interest
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    Net income
    
    $
    7,188
    
    
    $
    3,817
    
    
    $
    1,245
    
    
    $
    1,475Earnings per share-basic
    
    $
    0.15
    
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    0.03Earnings per share-diluted
    
    $
    0.15
    
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    0.03Cash dividend paid per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.07
 
 (1)
    
    Non-interest expense in the quarter ended December 31, 2010, included $89.3 million loss on
early repayment of FHLB borrowings. 58




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
     
    
    maintain earnings and capital within self-imposed parameters over a range of possible
interest rate environments;
    
    coordinate interest rate risk policies and procedures with other elements of the
Companys business plan, all within the context of the current business environment and
regulatory capital and liquidity requirements; and
    
    manage interest rate risk in a manner consistent with the approved guidelines and
policies set by the Companys board of directors.
  
    
    emphasizing the origination of adjustable rate and certain 15-year fixed rate mortgage
loans for portfolio, and selling certain 15, 20, and 30 year fixed rate mortgage loans in
the secondary market;
    
    maintaining a significant level of investment securities and mortgage-related securities
with a weighted average life of less than eight years or with interest rates that reprice
in less than five years; and
    
    managing deposits and borrowings to provide stable funding.
  Gap Analysis
 59




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##### Table of Contents




    
    Investment securitiesbased upon contractual maturities and if applicable, call dates.
$40.0 million in investment securities with maturities beyond one year have been classified
as due within one year based on their call dates. These investments may not be called
prior to their stated maturities. $165.8 million in investment securities with call dates
within one year have been classified as due beyond one year according to their stated
maturities. These investments may be called prior to their stated maturities.
    
    Mortgage-related securitiesbased upon known repricing dates (if applicable) and an
independent outside source for determining estimated prepayment speeds. Actual cash flows
may differ substantially from these assumptions.
    
    Loansbased upon contractual maturities, repricing date, if applicable, scheduled
repayments of principal, and projected prepayments of principal based upon the Companys
historical experience or anticipated prepayments. Actual cash flows may differ
substantially from these assumptions.
    
    Deposit liabilitiesbased upon contractual maturities and the Companys historical
decay rates. Actual cash flows may differ from these assumptions.
    
    Borrowingsbased upon final maturity. However, $100.0 million of borrowings
classified as due beyond one year contain a redemption option which has not been reflected
in the analysis. These borrowings could be redeemed at the option of the lender prior to
their stated maturity (refer to Financial ConditionBorrowings, above).
 60




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##### Table of Contents



At December 31, 2010Within
    
    Three to
    
    More than
    
    More thanThree
    
    Twelve
    
    1 Year to
    
    3 Years -
    
    Over 5Months
    
    Months
    
    2 Years
    
    5 Years
    
    Years
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable:Mortgage loans:Permanent:Fixed
    
    $
    81,954
    
    
    $
    125,403
    
    
    $
    147,038
    
    
    $
    70,765
    
    
    $
    81,398
    
    
    $
    506,558Adjustable
    
    
    84,731
    
    
    
    257,946
    
    
    
    155,594
    
    
    
    12,722
    
    
    
    191
    
    
    
    511,184Construction:Fixed
    
    
    5,904
    
    
    
    2,975
    
    
    
    2,321
    
    
    
    2,264
    
    
    
    9,934
    
    
    
    23,398Adjustable
    
    
    11,666
    
    
    
    163
    
    
    
    1,032
    
    
    
    2,953
    
    
    
    
    
    
    
    15,814Consumer loans
    
    
    109,220
    
    
    
    39,350
    
    
    
    51,110
    
    
    
    22,302
    
    
    
    19,981
    
    
    
    241,963Commercial business loans
    
    
    28,492
    
    
    
    10,353
    
    
    
    9,052
    
    
    
    288
    
    
    
    18
    
    
    
    48,203Interest-earning deposits
    
    
    184,439
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184,439Investment securities
    
    
    20,837
    
    
    
    40,000
    
    
    
    160,825
    
    
    
    5,000
    
    
    
    
    
    
    
    226,662Mortgage-related securities:Fixed
    
    
    30,788
    
    
    
    60,745
    
    
    
    124,868
    
    
    
    77,278
    
    
    
    101,142
    
    
    
    394,821Adjustable
    
    
    44,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,083Other interest-earning assets
    
    
    46,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,092Total interest-earning assets
    
    
    648,206
    
    
    
    536,935
    
    
    
    651,840
    
    
    
    193,572
    
    
    
    212,664
    
    
    
    2,243,217Non-interest-bearing and interest-bearing liabilities:Non-interest-bearing demand accounts
    
    
    52
    
    
    
    157
    
    
    
    416
    
    
    
    414
    
    
    
    86,087
    
    
    
    87,126Interest-bearing liabilities:Deposit liabilities:Interest-bearing demand accounts
    
    
    136
    
    
    
    407
    
    
    
    1,082
    
    
    
    1,077
    
    
    
    223,754
    
    
    
    226,456Regular savings accounts
    
    
    450
    
    
    
    1,333
    
    
    
    3,436
    
    
    
    3,272
    
    
    
    201,844
    
    
    
    210,335Money market accounts
    
    
    423,923
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    423,923Certificates of deposit
    
    
    291,969
    
    
    
    598,857
    
    
    
    195,664
    
    
    
    43,980
    
    
    
    
    
    
    
    1,130,470Advance payments by borrowers
for taxes and insurance
    
    
    
    
    
    
    2,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,697Borrowings
    
    
    272
    
    
    
    828
    
    
    
    102,572
    
    
    
    2,594
    
    
    
    43,668
    
    
    
    149,934Total interest-bearing liabilities
    
    
    716,802
    
    
    
    604,279
    
    
    
    303,170
    
    
    
    51,337
    
    
    
    555,353
    
    
    
    2,230,941Interest rate sensitivity gap
    
    $
    (68,596
    )
    
    $
    (67,344
    )
    
    $
    348,670
    
    
    $
    142,235
    
    
    $
    (342,689
    )
    
    $
    12,276Cumulative interest rate sensitivity gap
    
    $
    (68,596
    )
    
    $
    (135,940
    )
    
    $
    212,730
    
    
    $
    354,965
    
    
    $
    12,276Cumulative interest rate sensitivity gap
as a percent of total assets
    
    
    (2.65
    )%
    
    
    (5.24
    )%
    
    
    8.21
    %
    
    
    13.70
    %
    
    
    0.47
    %Cumulative interest-earning assets as a
percentage of interest-bearing
liabilities
    
    
    90.43
    %
    
    
    89.71
    %
    
    
    113.10
    %
    
    
    121.18
    %
    
    
    100.55
    %
   61




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##### Table of Contents



Present Value of Equity
  Present Value of Equityas Percent ofChange in
    
    Present Value of Equity

    
    Present Value of AssetsInterest Rates
    
    Dollar
    
    Dollar
    
    Percent
    
    Present Value
    
    Percent(Basis Points)
    
    Amount
    
    Change
    
    Change
    
    Ratio
    
    Change(Dollars in thousands)+400
    
    $
    251,885
    
    
    $
    (145,657
    )
    
    
    (36.6
    )%
    
    
    10.50
    %
    
    
    (31.3
    )%+300
    
    
    291,969
    
    
    
    (105,573
    )
    
    
    (26.6
    )
    
    
    11.92
    
    
    
    (22.1
    )+200
    
    
    331,076
    
    
    
    (66,466
    )
    
    
    (16.7
    )
    
    
    13.23
    
    
    
    (13.5
    )+100
    
    
    366,090
    
    
    
    (31,452
    )
    
    
    (7.9
    )
    
    
    14.34
    
    
    
    (6.2
    )0
    
    
    397,542
    
    
    
    
    
    
    
    0.0
    
    
    
    15.29
    
    
    
    0.0-100
    
    
    397,579
    
    
    
    37
    
    
    
    0.0
    
    
    
    15.06
    
    
    
    (1.5
    )
   62




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  
      
 63




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Financial Condition
 December 312010
    
    2009(Dollars in Thousands)AssetsCash and due from banks
    
    $
    48,393
    
    
    $
    37,696Interest-earning deposits in banks
    
    
    184,439
    
    
    
    189,962Cash and cash equivalents
    
    
    232,832
    
    
    
    227,658Securities available-for-sale, at fair value:Investment securities
    
    
    228,023
    
    
    
    614,104Mortgage-related securities
    
    
    435,234
    
    
    
    866,848Loans held-for-sale, net
    
    
    37,819
    
    
    
    13,534Loans receivable, net
    
    
    1,323,569
    
    
    
    1,506,056Foreclosed properties and repossessed assets
    
    
    19,293
    
    
    
    17,689Goodwill
    
    
    52,570
    
    
    
    52,570Mortgage servicing rights, net
    
    
    7,769
    
    
    
    6,899Other assets
    
    
    254,709
    
    
    
    206,706Total assets
    
    $
    2,591,818
    
    
    $
    3,512,064Liabilities and equityLiabilities:Deposit liabilities
    
    $
    2,078,310
    
    
    $
    2,137,508Borrowings
    
    
    149,934
    
    
    
    906,979Advance payments by borrowers for taxes and insurance
    
    
    2,697
    
    
    
    2,508Other liabilities
    
    
    44,999
    
    
    
    59,668Total liabilities
    
    
    2,275,940
    
    
    
    3,106,663Equity:Preferred stock$0.01 par value:Authorized20,000,000 shares in 2010 and 2009Issued and outstandingnone in 2010 and 2009
    
    
    
    
    
    
    Common stock$0.01 par value:Authorized200,000,000 shares in 2010 and 2009Issued78,783,849 shares in 2010 and 2009Outstanding45,769,443 shares in 2010 and 46,165,635 in 2009
    
    
    788
    
    
    
    788Additional paid-in capital
    
    
    494,377
    
    
    
    499,376Retained earnings
    
    
    191,238
    
    
    
    272,518Unearned ESOP shares
    
    
    
    
    
    
    (347
    )Accumulated other comprehensive loss
    
    
    (6,897
    )
    
    
    (2,406
    )Treasury stock33,014,406 shares in 2010 and 32,618,214 in 2009
    
    
    (366,553
    )
    
    
    (367,452
    )Total shareholders equity
    
    
    312,953
    
    
    
    402,477Non-controlling interest in real estate partnership
    
    
    2,925
    
    
    
    2,924Total equity including non-controlling interest
    
    
    315,878
    
    
    
    405,401Total liabilities and equity
    
    $
    2,591,818
    
    
    $
    3,512,064
  64




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Income
 Year ended December 312010
    
    2009
    
    2008(Dollars in Thousands, Except Per Share Data)Interest income:Loans
    
    $
    79,266
    
    
    $
    95,802
    
    
    $
    113,635Investment securities
    
    
    15,428
    
    
    
    18,199
    
    
    
    16,041Mortgage-related securities
    
    
    17,445
    
    
    
    37,734
    
    
    
    45,535Interest-earning deposits
    
    
    430
    
    
    
    79
    
    
    
    2,345Total interest income
    
    
    112,569
    
    
    
    151,814
    
    
    
    177,556Interest expense:Deposit liabilities
    
    
    28,606
    
    
    
    44,568
    
    
    
    64,689Borrowings
    
    
    37,664
    
    
    
    39,205
    
    
    
    39,484Advance payments by borrowers for taxes and insurance
    
    
    6
    
    
    
    11
    
    
    
    18Total interest expense
    
    
    66,276
    
    
    
    83,784
    
    
    
    104,191Net interest income
    
    
    46,293
    
    
    
    68,030
    
    
    
    73,365Provision for loan losses
    
    
    49,619
    
    
    
    12,413
    
    
    
    1,447Net interest income (loss) after provision for loan losses
    
    
    (3,326
    )
    
    
    55,617
    
    
    
    71,918Non-interest income:Service charges on deposits
    
    
    6,126
    
    
    
    6,408
    
    
    
    6,688Brokerage and insurance commissions
    
    
    3,067
    
    
    
    2,785
    
    
    
    2,626Loan related fees and servicing revenue, net
    
    
    103
    
    
    
    184
    
    
    
    12Gain on loan sales activities, net
    
    
    8,571
    
    
    
    9,110
    
    
    
    2,109Gain (loss) on investments, net
    
    
    15,966
    
    
    
    6,758
    
    
    
    (1,166
    )Loss on real estate held for investment
    
    
    (700
    )
    
    
    
    
    
    
    Other non-interest income
    
    
    7,470
    
    
    
    6,436
    
    
    
    7,612Total non-interest income
    
    
    40,603
    
    
    
    31,681
    
    
    
    17,881Non-interest expense:Compensation, payroll taxes, and other employee benefits
    
    
    36,009
    
    
    
    39,077
    
    
    
    38,538Occupancy and equipment
    
    
    11,221
    
    
    
    11,760
    
    
    
    11,614Federal insurance premiums and special assessments
    
    
    4,069
    
    
    
    4,597
    
    
    
    332Loss on foreclosed real estate, net
    
    
    6,346
    
    
    
    646
    
    
    
    155Loss on early repayment of FHLB borrowings
    
    
    89,348
    
    
    
    
    
    
    
    Other non-interest expense
    
    
    12,832
    
    
    
    12,075
    
    
    
    12,911Total non-interest expense
    
    
    159,825
    
    
    
    68,155
    
    
    
    63,550Income (loss) before income taxes
    
    
    (122,548
    )
    
    
    19,143
    
    
    
    26,249Income tax expense (benefit)
    
    
    (49,909
    )
    
    
    5,418
    
    
    
    9,094Net income (loss) before non-controlling interest
    
    
    (72,639
    )
    
    
    13,725
    
    
    
    17,155Net (income) loss attributable to non-controlling interests
    
    
    (1
    )
    
    
    
    
    
    
    1Net income (loss)
    
    $
    (72,640
    )
    
    $
    13,725
    
    
    $
    17,156Per share data:Earnings (loss) per sharebasic
    
    $
    (1.59
    )
    
    $
    0.29
    
    
    $
    0.36Earnings (loss) per sharediluted
    
    $
    (1.59
    )
    
    $
    0.29
    
    
    $
    0.35Cash dividends per share paid
    
    $
    0.20
    
    
    $
    0.34
    
    
    $
    0.36
  65




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Equity
 Non-ControllingAdditional
    
    
    
    
    
    
    Unearned
    
    
    Accumulated Other
    
    
    
    
    
    
    Interest inCommon
    
    
    Paid-In
    
    
    Retained
    
    
    ESOP
    
    
    Comprehensive
    
    
    Treasury
    
    
    Real EstateStock
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Stock
    
    
    Partnership
    
    
    TotalBalance at December 31, 2007
    
    $
    788
    
    
    $
    498,408
    
    
    $
    273,330
    
    
    $
    (2,166
    )
    
    $
    (6,069
    )
    
    $
    (334,256
    )
    
    $
    2,910
    
    
    $
    432,945Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    17,156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,156Net Income attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Other comprehensive income:Change in net unrealized loss on securities
available-for-sale, net of deferred
income taxes of $(3,430)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,633
    )
    
    
    
    
    
    
    
    
    
    
    (6,633
    )Reclassification adjustment for gain on
securities included in income, net of
income taxes of $468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    698
    
    
    
    
    
    
    
    
    
    
    
    698Pension liability, net of deferred income
taxes of $(2,491)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,392
    )
    
    
    
    
    
    
    
    
    
    
    (4,392
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,828Impact of change in measurement date for
qualified and supplemental pension plans
    
    
    
    
    
    
    
    
    
    
    (218
    )
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (226
    )Capital contribution to real estate partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,927
    )
    
    
    
    
    
    
    (29,927
    )Issuance of management recognition plan shares
    
    
    
    
    
    
    (403
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,696
    
    
    
    
    
    
    
    919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,615Exercise of stock options
    
    
    
    
    
    
    (4,489
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,181
    
    
    
    
    
    
    
    3,692Share based payments
    
    
    
    
    
    
    2,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254
    )
    
    
    
    
    
    
    2,035Cash dividends ($0.36 per share)
    
    
    
    
    
    
    
    
    
    
    (16,442
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,442
    )Balance at December 31, 2008
    
    $
    788
    
    
    $
    498,501
    
    
    $
    273,826
    
    
    $
    (1,247
    )
    
    $
    (16,404
    )
    
    $
    (355,853
    )
    
    $
    2,924
    
    
    $
    402,535Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    13,725
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,725Net Income attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income:Change in net unrealized loss on securities
available-for-sale, net of deferred
income taxes of $8,847
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,660
    
    
    
    
    
    
    
    
    
    
    
    15,660Reclassification adjustment for gain on
securities included in income, net of
income taxes of $(2,710)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,048
    )
    
    
    
    
    
    
    
    
    
    
    (4,048
    )Pension asset, net of deferred income
taxes of $1,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,386
    
    
    
    
    
    
    
    
    
    
    
    2,386Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,723Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,397
    )
    
    
    
    
    
    
    (14,397
    )Committed ESOP shares
    
    
    
    
    
    
    1,969
    
    
    
    
    
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,869Exercise of stock options
    
    
    
    
    
    
    (1,966
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,798
    
    
    
    
    
    
    
    832Share based payments
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872Cash dividends ($0.34 per share)
    
    
    
    
    
    
    
    
    
    
    (15,033
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,033
    )Balance at December 31, 2009
    
    $
    788
    
    
    $
    499,376
    
    
    $
    272,518
    
    
    $
    (347
    )
    
    $
    (2,406
    )
    
    $
    (367,452
    )
    
    $
    2,924
    
    
    $
    405,401
 66




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Equity (continued)
 Non-ControllingAdditional
    
    
    
    
    
    
    Unearned
    
    
    Accumulated Other
    
    
    
    
    
    
    Interest inCommon
    
    
    Paid-In
    
    
    Retained
    
    
    ESOP
    
    
    Comprehensive
    
    
    Treasury
    
    
    Real EstateStock
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Stock
    
    
    Partnership
    
    
    TotalBalance at December 31, 2009
    
    $
    788
    
    
    $
    499,376
    
    
    $
    272,518
    
    
    $
    (347
    )
    
    $
    (2,406
    )
    
    $
    (367,452
    )
    
    $
    2,924
    
    
    $
    405,401Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    (72,640
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,640
    )Net income attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Other comprehensive loss:Change in net unrealized loss on securities
available-for-sale, net of deferred
income taxes of $6,259
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,347
    
    
    
    
    
    
    
    
    
    
    
    9,347Reclassification adjustment for gain on
securities included in income, net of
income taxes of $(6,403)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,563
    )
    
    
    
    
    
    
    
    
    
    
    (9,563
    )Pension asset, net of deferred income
taxes of $(2,850)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,275
    )
    
    
    
    
    
    
    
    
    
    
    (4,275
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77,130
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,029
    )
    
    
    
    
    
    
    (5,029
    )Issuance of management recognition plan shares
    
    
    
    
    
    
    (332
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    332
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    408
    
    
    
    
    
    
    
    347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    755Exercise of stock options
    
    
    
    
    
    
    (5,212
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,596
    
    
    
    
    
    
    
    384Share based payments
    
    
    
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137Cash dividends ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    (8,640
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,640
    )Balance at December 31, 2010
    
    $
    788
    
    
    $
    494,377
    
    
    $
    191,238
    
    
    
    
    
    
    $
    (6,897
    )
    
    $
    (366,553
    )
    
    $
    2,925
    
    
    $
    315,878
  67




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 312010
    
    2009
    
    2008(Dollars in Thousands)Operating activities:Net income (loss)
    
    $
    (72,640
    )
    
    $
    13,725
    
    
    $
    17,156Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Net provision for loan losses
    
    
    49,619
    
    
    
    12,413
    
    
    
    1,447Provision for depreciation
    
    
    2,600
    
    
    
    2,567
    
    
    
    2,469Amortization of other intangible assets
    
    
    405
    
    
    
    405
    
    
    
    618Amortization of mortgage servicing rights
    
    
    3,277
    
    
    
    3,023
    
    
    
    1,587Increase (decrease) in valuation on MSRs
    
    
    (281
    )
    
    
    (535
    )
    
    
    822Minority interest in real estate investment partnership
    
    
    1
    
    
    
    
    
    
    
    1Stock-based compensation expense
    
    
    891
    
    
    
    3,741
    
    
    
    5,650Net amortization on securities
    
    
    2,068
    
    
    
    2,039
    
    
    
    (1,482
    )Loans originated for sale
    
    
    (433,218
    )
    
    
    (578,312
    )
    
    
    (139,387
    )Proceeds from loan sales
    
    
    413,638
    
    
    
    587,234
    
    
    
    129,014Net gain on sale of available-for-sale securities
    
    
    (15,966
    )
    
    
    (7,589
    )
    
    
    (7,192
    )Other than temporary impairment of available-for-sale
securities
    
    
    
    
    
    
    831
    
    
    
    8,358Loss on foreclosed real estate, net
    
    
    6,346
    
    
    
    646
    
    
    
    155Loss on real estate held for investment
    
    
    700
    
    
    
    
    
    
    
    Gain on sales of loans originated for sale
    
    
    (8,571
    )
    
    
    (9,110
    )
    
    
    (2,109
    )Loss on early repayment of FHLB borrowings
    
    
    89,348
    
    
    
    
    
    
    
    Deferred tax benefit
    
    
    (32,075
    )
    
    
    (1,863
    )
    
    
    (6,270
    )Decrease (increase) in accrued interest receivable
    
    
    5,872
    
    
    
    3,212
    
    
    
    (1,908
    )Increase in other assets
    
    
    (16,914
    )
    
    
    (11,170
    )
    
    
    (3,337
    )Increase (decrease) in other liabilities
    
    
    (18,944
    )
    
    
    13,077
    
    
    
    (54
    )Net cash provided (used) by operating activities
    
    
    (23,844
    )
    
    
    34,334
    
    
    
    5,538Investing activities:Proceeds from maturities of investment securities
    
    
    3,506,718
    
    
    
    467,902
    
    
    
    29,992Purchases of investment securities
    
    
    (3,118,204
    )
    
    
    (689,075
    )
    
    
    (351,202
    )Purchases of mortgage-related securities
    
    
    (819,675
    )
    
    
    (779,170
    )
    
    
    (345,842
    )Principal repayments on mortgage-related securities
    
    
    187,664
    
    
    
    318,225
    
    
    
    195,479Proceeds from sale of mortgage-related securities
    
    
    1,074,730
    
    
    
    493,639
    
    
    
    392,358Net decrease in loans receivable
    
    
    112,261
    
    
    
    286,863
    
    
    
    160,877Proceeds from sale of foreclosed properties
    
    
    6,259
    
    
    
    3,949
    
    
    
    2,100Net purchases of premises and equipment
    
    
    (2,049
    )
    
    
    (2,122
    )
    
    
    (3,145
    )Net cash provided by investing activities
    
    
    947,704
    
    
    
    100,211
    
    
    
    80,618
 68




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows (continued)
 Year ended December 312010
    
    2009
    
    2008(Dollars in Thousands)Financing activities:Net cash inflows (outflows) from deposit liabilities
    
    $
    (59,198
    )
    
    $
    9,231
    
    
    $
    34,825Repayments on long-term borrowings including loss on early
prepayment
    
    
    (846,393
    )
    
    
    (992
    )
    
    
    (4,488
    )Net increase in advance payments by borrowers for taxes and
insurance
    
    
    189
    
    
    
    579
    
    
    
    114Proceeds from exercise of stock options
    
    
    359
    
    
    
    556
    
    
    
    3,313Excess tax benefit from exercise of stock options
    
    
    26
    
    
    
    276
    
    
    
    379Cash dividends
    
    
    (8,640
    )
    
    
    (15,033
    )
    
    
    (16,442
    )Capital contribution to real estate partnership
    
    
    
    
    
    
    
    
    
    
    14Purchase of treasury stock
    
    
    (5,029
    )
    
    
    (14,397
    )
    
    
    (29,927
    )Net cash used in financing activities
    
    
    (918,686
    )
    
    
    (19,780
    )
    
    
    (12,212
    )Increase in cash and cash equivalents
    
    
    5,174
    
    
    
    114,765
    
    
    
    73,944Cash and cash equivalents at beginning of year
    
    
    227,658
    
    
    
    112,893
    
    
    
    38,949Cash and cash equivalents at end of year
    
    $
    232,832
    
    
    $
    227,658
    
    
    $
    112,893Supplemental information:Cash paid in period for:Interest on deposits and borrowings
    
    $
    68,070
    
    
    $
    84,927
    
    
    $
    121,660Income taxes
    
    
    5,062
    
    
    
    9,112
    
    
    
    10,704Non-cash transactions:Loans transferred to foreclosed properties and
repossessed assets
    
    
    22,407
    
    
    
    23,721
    
    
    
    3,179Due from (to) brokers for securities sales (purchases)
    
    
    
    
    
    
    (20,000
    )
    
    
    
  69




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies
 Business
   Principles of Consolidation
   Cash and Cash Equivalents
  Federal Home Loan Bank Stock
  Securities Available-for-Sale
   70




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
   Loans Receivable and Loans Held-for-Sale
   Accrued Interest on Loans
  Allowance for Loan Losses and Impaired Loans
  71




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
       Mortgage Servicing Rights
  72




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
  Mortgage Banking Loan Commitments
   Foreclosed Properties and Repossessed Assets
  Premises and Equipment
  Goodwill
  73




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
  Life Insurance Policies
  Income Taxes
  Earnings (Loss) Per Share
  Pension Costs
   Segment Information
  74




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Recent Accounting Changes
       75




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
    76




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale
  December 31, 2010Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueInvestment securities:U.S. government and federal obligations
    
    $
    205,825
    
    
    $
    395
    
    
    $
    (252
    )
    
    $
    205,968Mutual funds
    
    
    20,837
    
    
    
    1,218
    
    
    
    
    
    
    
    22,055Total investment securities
    
    
    226,662
    
    
    
    1,613
    
    
    
    (252
    )
    
    
    228,023Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    314,858
    
    
    
    105
    
    
    
    (896
    )
    
    
    314,067Federal National Mortgage Association
    
    
    30,594
    
    
    
    293
    
    
    
    (77
    )
    
    
    30,810Private-label CMOs
    
    
    90,741
    
    
    
    682
    
    
    
    (3,821
    )
    
    
    87,602Government National Mortgage Association
    
    
    2,711
    
    
    
    44
    
    
    
    
    
    
    
    2,755Total mortgage-related securities
    
    
    438,904
    
    
    
    1,124
    
    
    
    (4,794
    )
    
    
    435,234Total securities available-for-sale
    
    $
    665,566
    
    
    $
    2,737
    
    
    $
    (5,046
    )
    
    $
    663,257
 December 31, 2009Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueInvestment securities:U.S. government and federal obligations
    
    $
    594,024
    
    
    $
    128
    
    
    $
    (2,360
    )
    
    $
    591,792Mutual funds
    
    
    21,546
    
    
    
    831
    
    
    
    (65
    )
    
    
    22,312Total investment securities
    
    
    615,570
    
    
    
    959
    
    
    
    (2,425
    )
    
    
    614,104Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    291,318
    
    
    
    4,180
    
    
    
    (310
    )
    
    
    295,188Federal National Mortgage Association
    
    
    220,437
    
    
    
    5,044
    
    
    
    (723
    )
    
    
    224,758Private-label CMOs
    
    
    120,780
    
    
    
    104
    
    
    
    (9,102
    )
    
    
    111,782Government National Mortgage Association
    
    
    234,796
    
    
    
    1,512
    
    
    
    (1,188
    )
    
    
    235,120Total mortgage-related securities
    
    
    867,331
    
    
    
    10,840
    
    
    
    (11,323
    )
    
    
    866,848Total securities available-for-sale
    
    $
    1,482,901
    
    
    $
    11,799
    
    
    $
    (13,748
    )
    
    $
    1,480,952
 77




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale (continued)
  Less Than 12 Months
    
    Greater Than 12 Monthsin an Unrealized Loss Position
    
    in an Unrealized Loss Position
    
    Gross
    
    TotalUnrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    EstimatedLoss
    
    of
    
    Fair
    
    Loss
    
    of
    
    Fair
    
    Loss
    
    FairAmount
    
    Securities
    
    Value
    
    Amount
    
    Securities
    
    Value
    
    Amount
    
    ValueInvestment securities:U.S. government and federal
obligations
    
    $
    252
    
    
    
    4
    
    
    $
    49,749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    252
    
    
    $
    49,749Total investment securities
    
    
    252
    
    
    
    4
    
    
    
    49,749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    252
    
    
    
    49,749Mortgage-related securities:Federal Home Loan Mortgage
Corporation
    
    
    880
    
    
    
    7
    
    
    
    187,848
    
    
    $
    16
    
    
    
    2
    
    
    $
    11,688
    
    
    
    896
    
    
    
    199,536Federal National Mortgage
Association
    
    
    77
    
    
    
    5
    
    
    
    26,372
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    26,372Private-label CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,821
    
    
    
    21
    
    
    
    58,669
    
    
    
    3,821
    
    
    
    58,669Total mortgage-related
securities
    
    
    957
    
    
    
    12
    
    
    
    214,220
    
    
    
    3,837
    
    
    
    23
    
    
    
    70,357
    
    
    
    4,794
    
    
    
    284,577Total
    
    $
    1,209
    
    
    
    16
    
    
    $
    263,969
    
    
    $
    3,837
    
    
    
    23
    
    
    $
    70,357
    
    
    $
    5,046
    
    
    $
    334,326
  Less Than 12 Months
    
    Greater Than 12 Monthsin an Unrealized Loss Position
    
    in an Unrealized Loss Position
    
    Gross
    
    TotalUnrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    EstimatedLoss
    
    of
    
    Fair
    
    Loss
    
    of
    
    Fair
    
    Loss
    
    FairAmount
    
    Securities
    
    Value
    
    Amount
    
    Securities
    
    Value
    
    Amount
    
    ValueInvestment securities:U.S. government and federal
obligations
    
    $
    2,360
    
    
    
    24
    
    
    $
    441,714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,360
    
    
    $
    442,714Mutual funds
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    65
    
    
    
    1
    
    
    $
    644
    
    
    
    65
    
    
    
    644Total investment securities
    
    
    2,360
    
    
    
    24
    
    
    
    441,714
    
    
    
    65
    
    
    
    1
    
    
    
    644
    
    
    
    2,425
    
    
    
    442,358Mortgage-related securities:Federal Home Loan Mortgage
Corporation
    
    
    122
    
    
    
    3
    
    
    
    49,961
    
    
    
    188
    
    
    
    5
    
    
    
    6,073
    
    
    
    310
    
    
    
    56,034Federal National Mortgage
Association
    
    
    668
    
    
    
    5
    
    
    
    35,848
    
    
    
    55
    
    
    
    1
    
    
    
    1,490
    
    
    
    723
    
    
    
    37,338Government National Mortgage
Association
    
    
    1,106
    
    
    
    5
    
    
    
    84,135
    
    
    
    82
    
    
    
    3
    
    
    
    7,039
    
    
    
    1,188
    
    
    
    91,174Private-label CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,102
    
    
    
    25
    
    
    
    88,860
    
    
    
    9,102
    
    
    
    88,860Total mortgage-related
securities
    
    
    1,896
    
    
    
    13
    
    
    
    169,944
    
    
    
    9,427
    
    
    
    34
    
    
    
    103,462
    
    
    
    11,323
    
    
    
    273,406Total
    
    $
    4,256
    
    
    
    37
    
    
    $
    611,658
    
    
    $
    9,492
    
    
    
    35
    
    
    $
    104,106
    
    
    $
    13,748
    
    
    $
    715,764
 78




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale (continued)
      Amortized
    
    FairCost
    
    ValueDue in one year or less
    
    
    
    
    
    
    Due after one year through five years
    
    
    
    
    
    
    Due after five years through ten years
    
    $
    157,825
    
    
    $
    158,114Due after ten years
    
    
    48,000
    
    
    
    47,855Mutual funds
    
    
    20,837
    
    
    
    22,054Mortgage-related securities
    
    
    438,904
    
    
    
    435,234Total securities available for sale
    
    $
    665,566
    
    
    $
    663,257
 79




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale (continued)
  2010
    
    2009
    
    2008Change in unrealized holding gain (loss):Unrealized net gains (losses)
    
    $
    (359
    )
    
    $
    17,749
    
    
    $
    (8,897
    )Related tax expense (benefit)
    
    
    (143
    )
    
    
    6,137
    
    
    
    (2,962
    )Change in other comprehensive income
    
    $
    (216
    )
    
    $
    11,612
    
    
    $
    (5,935
    )
  3. Loans Receivable
  December 312010
    
    2009Permanent mortgage loans:One- to four-family
    
    $
    531,874
    
    
    $
    644,852Multi-family
    
    
    247,210
    
    
    
    200,222Commercial real estate
    
    
    248,253
    
    
    
    262,855Total permanent mortgages
    
    
    1,027,337
    
    
    
    1,107,929Construction and development loans:One- to four-family
    
    
    13,479
    
    
    
    11,441Multi-family
    
    
    19,308
    
    
    
    52,323Commercial real estate
    
    
    24,939
    
    
    
    27,040Land
    
    
    25,764
    
    
    
    33,758Total construction and development
    
    
    83,490
    
    
    
    124,562Total mortgage loans
    
    
    1,110,827
    
    
    
    1,232,491Consumer loans:Fixed term home equity
    
    
    103,619
    
    
    
    124,519Home equity lines of credit
    
    
    87,383
    
    
    
    88,796Student
    
    
    17,695
    
    
    
    19,793Home improvement
    
    
    24,551
    
    
    
    28,441Automobile
    
    
    2,814
    
    
    
    4,077Other
    
    
    7,436
    
    
    
    9,871Total consumer loans
    
    
    243,498
    
    
    
    275,497Commercial business loans
    
    
    50,123
    
    
    
    47,708Gross loans receivable
    
    
    1,404,448
    
    
    
    1,555,696Undisbursed loan proceeds
    
    
    (32,345
    )
    
    
    (32,690
    )Allowance for loan losses
    
    
    (47,985
    )
    
    
    (17,028
    )Deferred fees and costs, net
    
    
    (549
    )
    
    
    78Total loans receivable, net
    
    $
    1,323,569
    
    
    $
    1,506,056
  80




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
    Year Ended December 312010
    
    2009
    
    2008Balance at beginning of period
    
    $
    17,028
    
    
    $
    12,208
    
    
    $
    11,774Provision for loan losses
    
    
    49,619
    
    
    
    12,413
    
    
    
    1,447Charge-offs:One- to four-family
    
    
    (528
    )
    
    
    (397
    )
    
    
    (167
    )Multi-family
    
    
    (140
    )
    
    
    (4,523
    )
    
    
    Commercial real estate
    
    
    (11,621
    )
    
    
    (1,989
    )
    
    
    (446
    )Construction and development
    
    
    (3,515
    )
    
    
    
    
    
    
    Consumer
    
    
    (776
    )
    
    
    (527
    )
    
    
    (411
    )Commercial business
    
    
    (2,140
    )
    
    
    (210
    )
    
    
    (34
    )Total charge-offs
    
    
    (18,720
    )
    
    
    (7,646
    )
    
    
    (1,058
    )Recoveries:One- to four-family
    
    
    20
    
    
    
    1
    
    
    
    Commercial real estate
    
    
    1
    
    
    
    19
    
    
    
    Consumer
    
    
    37
    
    
    
    33
    
    
    
    45Total recoveries
    
    
    58
    
    
    
    53
    
    
    
    45Net charge-offs
    
    
    (18,662
    )
    
    
    (7,593
    )
    
    
    (1,013
    )Balance at end of period
    
    $
    47,985
    
    
    $
    17,028
    
    
    $
    12,208
 81




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
  One- to
    
    
    
    
    
    
    
    
    
    
    ConstructionFour-
    
    
    Multi-
    
    
    Commercial
    
    
    and
    
    
    
    
    
    
    CommercialFamily
    
    
    Family
    
    
    Real Estate
    
    
    Development
    
    
    Consumer
    
    
    Business
    
    
    TotalAllowance for loan losses:Beginning balance
    
    $
    2,806
    
    
    $
    3,167
    
    
    $
    5,715
    
    
    $
    1,172
    
    
    $
    2,243
    
    
    $
    1,925
    
    
    $
    17,028Provision
    
    
    1,428
    
    
    
    6,238
    
    
    
    27,790
    
    
    
    12,484
    
    
    
    (77
    )
    
    
    1,756
    
    
    
    49,619Charge-offs
    
    
    (528
    )
    
    
    (140
    )
    
    
    (11,621
    )
    
    
    (3,515
    )
    
    
    (776
    )
    
    
    (2,140
    )
    
    
    (18,720
    )Recoveries
    
    
    20
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    58Ending balance
    
    $
    3,726
    
    
    $
    9,265
    
    
    $
    21,885
    
    
    $
    10,141
    
    
    $
    1,427
    
    
    $
    1,541
    
    
    $
    47,985Loss allowance individually
evaluated for impairment
    
    $
    1,122
    
    
    $
    7,134
    
    
    $
    12,853
    
    
    $
    9,384
    
    
    $
    641
    
    
    $
    437
    
    
    $
    31,571Loss allowance collectively
evaluated for impairment
    
    $
    2,604
    
    
    $
    2,131
    
    
    $
    9,032
    
    
    $
    757
    
    
    $
    786
    
    
    $
    1,104
    
    
    $
    16,414Loan receivable balances at
December 31, 2010:Loans individually evaluated
for impairment
    
    $
    18,972
    
    
    $
    40,675
    
    
    $
    55,849
    
    
    $
    27,607
    
    
    $
    1,763
    
    
    $
    4,799
    
    
    $
    149,665Loans collectively evaluated
for impairment
    
    
    505,100
    
    
    
    206,034
    
    
    
    189,536
    
    
    
    34,442
    
    
    
    241,673
    
    
    
    45,653
    
    
    
    1,222,438Total loans receivable
    
    $
    524,072
    
    
    $
    246,709
    
    
    $
    245,385
    
    
    $
    62,049
    
    
    $
    243,336
    
    
    $
    50,452
    
    
    $
    1,372,103
  82




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
  Loans
    
    Unpaid
    
    Related
    
    Average Loan
    
    InterestReceivable
    
    Principal
    
    Allowance
    
    Receivable
    
    IncomeBalance, Net
    
    Balance
    
    for Loss
    
    Balance, Net
    
    RecognizedImpaired loans with an allowance recorded:One- to four-family
    
    $
    5,301
    
    
    $
    5,301
    
    
    $
    1,182
    
    
    $
    5,411
    
    
    $
    21Multi-family
    
    
    31,461
    
    
    
    31,461
    
    
    
    6,834
    
    
    
    14,431
    
    
    
    460Commercial real estate:Office
    
    
    11,190
    
    
    
    11,190
    
    
    
    4,938
    
    
    
    4,208
    
    
    
    Retail/wholesale/mixed
    
    
    16,205
    
    
    
    16,205
    
    
    
    7,310
    
    
    
    5,404
    
    
    
    45Industrial/warehouse
    
    
    1,419
    
    
    
    1,419
    
    
    
    305
    
    
    
    416
    
    
    
    19Other
    
    
    714
    
    
    
    714
    
    
    
    300
    
    
    
    143
    
    
    
    Total commercial real estate
    
    
    29,528
    
    
    
    29,528
    
    
    
    12,853
    
    
    
    10,171
    
    
    
    64Construction and development:One- to four-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Multi-family
    
    
    4,440
    
    
    
    4,440
    
    
    
    568
    
    
    
    888
    
    
    
    Commercial real estate
    
    
    8,923
    
    
    
    8,923
    
    
    
    4,791
    
    
    
    1,785
    
    
    
    Land
    
    
    5,477
    
    
    
    5,477
    
    
    
    3,965
    
    
    
    4,896
    
    
    
    Total construction and development
    
    
    18,840
    
    
    
    18,840
    
    
    
    9,324
    
    
    
    7,569
    
    
    
    Consumer:Home equity
    
    
    543
    
    
    
    543
    
    
    
    513
    
    
    
    544
    
    
    
    19Student
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    176
    
    
    
    176
    
    
    
    128
    
    
    
    177
    
    
    
    5Total consumer
    
    
    719
    
    
    
    719
    
    
    
    641
    
    
    
    721
    
    
    
    24Commercial business:Term loans
Term loans
    
    
    1,712
    
    
    
    1,712
    
    
    
    568
    
    
    
    746
    
    
    
    Lines of credit
    
    
    400
    
    
    
    400
    
    
    
    169
    
    
    
    80
    
    
    
    Total commercial business
    
    
    2,112
    
    
    
    2,112
    
    
    
    737
    
    
    
    826
    
    
    
    Total with an allowance recorded
    
    $
    87,961
    
    
    $
    87,961
    
    
    $
    31,571
    
    
    $
    39,129
    
    
    $
    569Impaired loans with no allowance recorded:One- to four-family
    
    $
    13,381
    
    
    $
    13,526
    
    
    
    
    
    
    $
    9,383
    
    
    $
    14Multi-family
    
    
    6,328
    
    
    
    6,468
    
    
    
    
    
    
    
    3,759
    
    
    
    Commercial real estate:Office
    
    
    725
    
    
    
    725
    
    
    
    
    
    
    
    145
    
    
    
    Retail/wholesale/mixed
    
    
    10,513
    
    
    
    16,150
    
    
    
    
    
    
    
    6,908
    
    
    
    Industrial/warehouse
    
    
    687
    
    
    
    927
    
    
    
    
    
    
    
    597
    
    
    
    Other
    
    
    1,794
    
    
    
    2,632
    
    
    
    
    
    
    
    2,599
    
    
    
    Total commercial real estate
    
    
    13,719
    
    
    
    20,434
    
    
    
    
    
    
    
    10,249
    
    
    
    Construction and development:One- to four-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Multi-family
    
    
    100
    
    
    
    100
    
    
    
    
    
    
    
    20
    
    
    
    Commercial real estate
    
    
    3,818
    
    
    
    3,818
    
    
    
    
    
    
    
    764
    
    
    
    Land
    
    
    3,812
    
    
    
    7,187
    
    
    
    
    
    
    
    4,336
    
    
    
    Total construction and development
    
    
    7,730
    
    
    
    11,105
    
    
    
    
    
    
    
    5,120
    
    
    
    Consumer:Home equity
    
    
    826
    
    
    
    826
    
    
    
    
    
    
    
    852
    
    
    
    21Student
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    99
    
    
    
    99
    
    
    
    
    
    
    
    17
    
    
    
    3Total consumer
    
    
    925
    
    
    
    925
    
    
    
    
    
    
    
    869
    
    
    
    24Commercial business:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Term loans
    
    
    1,138
    
    
    
    1,819
    
    
    
    
    
    
    
    1,206
    
    
    
    Lines of credit
    
    
    16
    
    
    
    667
    
    
    
    
    
    
    
    472
    
    
    
    Total commercial business
    
    
    1,332
    
    
    
    2,486
    
    
    
    
    
    
    
    1,678
    
    
    
    Total with no allowance recorded
    
    $
    43,414
    
    
    $
    54,944
    
    
    
    
    
    
    $
    31,058
    
    
    $
    38
 83




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
  SpecialPass
    
    Watch
    
    Mention
    
    Substandard
    
    TotalOne- to four-family
    
    $
    505,100
    
    
    
    
    
    
    
    
    
    
    $
    18,972
    
    
    $
    524,072Multi-family
    
    
    164,177
    
    
    $
    27,521
    
    
    $
    6,429
    
    
    
    48,582
    
    
    
    246,709Commercial real estate:Office
    
    
    67,764
    
    
    
    5,089
    
    
    
    
    
    
    
    13,014
    
    
    
    85,867Retail/wholesale/mixed use
    
    
    63,254
    
    
    
    22,888
    
    
    
    545
    
    
    
    28,119
    
    
    
    114,806Industrial/warehouse
    
    
    25,400
    
    
    
    3,488
    
    
    
    
    
    
    
    3,446
    
    
    
    32,334Other
    
    
    5,503
    
    
    
    4,062
    
    
    
    502
    
    
    
    2,311
    
    
    
    12,378Total commercial real estate
    
    
    161,921
    
    
    
    35,527
    
    
    
    1,047
    
    
    
    46,890
    
    
    
    245,385Construction and development:One- to four-family
    
    
    6,382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,382Multi-family
    
    
    5,556
    
    
    
    
    
    
    
    
    
    
    
    4,609
    
    
    
    10,165Commercial real estate
    
    
    6,267
    
    
    
    
    
    
    
    
    
    
    
    13,740
    
    
    
    20,007Land
    
    
    14,095
    
    
    
    203
    
    
    
    887
    
    
    
    10,310
    
    
    
    25,495Total construction/development
    
    
    32,300
    
    
    
    203
    
    
    
    887
    
    
    
    28,659
    
    
    
    62,049Consumer:Home equity
    
    
    214,132
    
    
    
    
    
    
    
    
    
    
    
    1,421
    
    
    
    215,553Student
    
    
    17,695
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,695Other
    
    
    9,846
    
    
    
    
    
    
    
    
    
    
    
    342
    
    
    
    10,188Total consumer
    
    
    241,673
    
    
    
    
    
    
    
    
    
    
    
    1,763
    
    
    
    243,436Commercial business:Term loans
    
    
    20,322
    
    
    
    1,314
    
    
    
    403
    
    
    
    3,155
    
    
    
    25,194Lines of credit
    
    
    20,991
    
    
    
    2,527
    
    
    
    96
    
    
    
    1,644
    
    
    
    25,258Total commercial business
    
    
    41,313
    
    
    
    3,841
    
    
    
    499
    
    
    
    4,799
    
    
    
    50,452Total
    
    $
    1,146,484
    
    
    $
    67,092
    
    
    $
    8,862
    
    
    $
    149,665
    
    
    $
    1,372,103
   84




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
  Past Due Status
    
    
    
    
    
    
    
    
    
    Total30-59
    
    60-89
    
    > 90
    
    Total
    
    Total
    
    Total
    
    Non-Days
    
    Days
    
    Days
    
    Past Due
    
    Current
    
    Loans
    
    AccrualOne- to four-family
    
    $
    6,704
    
    
    $
    3,256
    
    
    $
    18,684
    
    
    $
    28,644
    
    
    $
    495,428
    
    
    $
    524,072
    
    
    $
    18,684Multi-family
    
    
    6,847
    
    
    
    10,337
    
    
    
    14,557
    
    
    
    31,741
    
    
    
    214,968
    
    
    
    246,709
    
    
    
    31,660Commercial real estate:Office
    
    
    1,936
    
    
    
    1,072
    
    
    
    3,081
    
    
    
    6,089
    
    
    
    79,778
    
    
    
    85,867
    
    
    
    11,915Retail/wholesale/mixed
    
    
    2,164
    
    
    
    1,364
    
    
    
    12,870
    
    
    
    16,398
    
    
    
    99,460
    
    
    
    115,858
    
    
    
    25,695Industrial/warehouse
    
    
    
    
    
    
    
    
    
    
    853
    
    
    
    853
    
    
    
    31,481
    
    
    
    32,334
    
    
    
    2,107Other
    
    
    
    
    
    
    
    
    
    
    1,527
    
    
    
    1,527
    
    
    
    9,799
    
    
    
    11,326
    
    
    
    1,527Total commercial
real estate
    
    
    4,100
    
    
    
    2,436
    
    
    
    18,331
    
    
    
    24,867
    
    
    
    220,518
    
    
    
    245,385
    
    
    
    41,244Construction and
development:One- to four-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,382
    
    
    
    6,382
    
    
    
    Multi-family
    
    
    
    
    
    
    4,441
    
    
    
    
    
    
    
    4,441
    
    
    
    5,724
    
    
    
    10,165
    
    
    
    4,540Commercial real estate
    
    
    2,975
    
    
    
    843
    
    
    
    
    
    
    
    3,818
    
    
    
    16,189
    
    
    
    20,007
    
    
    
    12,741Land
    
    
    112
    
    
    
    
    
    
    
    9,282
    
    
    
    9,394
    
    
    
    16,101
    
    
    
    25,495
    
    
    
    9,282Total construction
    
    
    3,087
    
    
    
    5,284
    
    
    
    9,282
    
    
    
    17,653
    
    
    
    44,396
    
    
    
    62,049
    
    
    
    26,563Consumer:Home equity
    
    
    855
    
    
    
    400
    
    
    
    1,369
    
    
    
    2,624
    
    
    
    212,929
    
    
    
    215,553
    
    
    
    1,369Student
    
    
    485
    
    
    
    140
    
    
    
    373
    
    
    
    998
    
    
    
    16,697
    
    
    
    17,695
    
    
    
    Other
    
    
    183
    
    
    
    96
    
    
    
    275
    
    
    
    554
    
    
    
    9,634
    
    
    
    10,188
    
    
    
    275Total consumer
    
    
    1,523
    
    
    
    636
    
    
    
    2,017
    
    
    
    4,176
    
    
    
    239,260
    
    
    
    243,436
    
    
    
    1,644Commercial business:Term loans
    
    
    150
    
    
    
    246
    
    
    
    1,992
    
    
    
    2,388
    
    
    
    22,806
    
    
    
    25,194
    
    
    
    2,185Lines of credit
    
    
    523
    
    
    
    
    
    
    
    194
    
    
    
    717
    
    
    
    24,541
    
    
    
    25,258
    
    
    
    594Total commercial
    
    
    673
    
    
    
    246
    
    
    
    2,186
    
    
    
    3,105
    
    
    
    47,347
    
    
    
    50,452
    
    
    
    2,779Total
    
    $
    22,934
    
    
    $
    22,195
    
    
    $
    65,057
    
    
    $
    110,186
    
    
    $
    1,261,917
    
    
    $
    1,372,103
    
    
    $
    122,574
  85




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 4. Mortgage Servicing Rights
  2010
    
    2009
    
    2008Mortgage servicing rights at beginning of year
    
    $
    7,186
    
    
    $
    4,525
    
    
    $
    4,708Additions
    
    
    3,866
    
    
    
    5,684
    
    
    
    1,404Amortization
    
    
    (3,277
    )
    
    
    (3,023
    )
    
    
    (1,587
    )Mortgage servicing rights at end of year
    
    
    7,775
    
    
    
    7,186
    
    
    
    4,525Valuation allowance
    
    
    (6
    )
    
    
    (287
    )
    
    
    (822
    )Mortgage servicing rights at end of year
    
    $
    7,769
    
    
    $
    6,899
    
    
    $
    3,703
  2011
    
    $
    1,3152012
    
    
    1,2092013
    
    
    1,1452014
    
    
    1,0942015
    
    
    1,054Thereafter
    
    
    1,952Total
    
    $
    7,769
  86




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 5. Other Assets
  December 312010
    
    2009Accrued interest:Mortgage-related securities
    
    $
    1,432
    
    
    $
    4,651Investment securities
    
    
    511
    
    
    
    1,875Loans receivable
    
    
    5,506
    
    
    
    6,795Total accrued interest
    
    
    7,449
    
    
    
    13,321Bank owned life insurance
    
    
    55,600
    
    
    
    53,295Premises and equipment, net
    
    
    51,165
    
    
    
    51,715Federal Home Loan Bank stock, at cost
    
    
    46,092
    
    
    
    46,092Prepaid FDIC insurance premiums
    
    
    8,694
    
    
    
    12,521Other assets
    
    
    85,709
    
    
    
    29,762Total other assets
    
    $
    254,709
    
    
    $
    206,706
  December 312010
    
    2009Land and land improvements
    
    $
    17,578
    
    
    $
    17,523Office buildings
    
    
    52,116
    
    
    
    51,376Furniture and equipment
    
    
    18,648
    
    
    
    18,448Leasehold improvements
    
    
    1,213
    
    
    
    1,189Total cost
    
    
    89,555
    
    
    
    88,536Accumulated depreciation and amortization
    
    
    (38,390
    )
    
    
    (36,821
    )Total premises and equipment, net
    
    $
    51,165
    
    
    $
    51,715
   Amount2011
    
    $
    8222012
    
    
    6742013
    
    
    6102014
    
    
    5882015
    
    
    588Thereafter
    
    
    2,200Total
    
    $
    5,482
  87




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 6. Deposits Liabilities
  December 312010
    
    2009Checking accounts:Non-interest-bearing
    
    $
    94,446
    
    
    $
    94,619Interest-bearing
    
    
    219,136
    
    
    
    211,448Total checking accounts
    
    
    313,582
    
    
    
    306,067Money market accounts
    
    
    423,923
    
    
    
    345,144Regular savings accounts
    
    
    210,334
    
    
    
    196,983Certificate of deposits:Due within one year
    
    
    825,661
    
    
    
    992,752After one but within two years
    
    
    126,710
    
    
    
    145,385After two but within three years
    
    
    134,120
    
    
    
    23,370After three but within four years
    
    
    29,890
    
    
    
    98,274After four but within five years
    
    
    14,090
    
    
    
    29,533After five years
    
    
    
    
    
    
    Total certificates of deposit
    
    
    1,130,471
    
    
    
    1,289,314Total deposit liabilities
    
    $
    2,078,310
    
    
    $
    2,137,508
   Year Ended December 312010
    
    2009
    
    2008Interest-bearing checking accounts
    
    $
    107
    
    
    $
    121
    
    
    $
    376Money market accounts
    
    
    2,075
    
    
    
    2,795
    
    
    
    8,245Regular savings accounts
    
    
    104
    
    
    
    181
    
    
    
    609Certificate of deposits
    
    
    26,320
    
    
    
    41,471
    
    
    
    55,459Total interest expense on deposit liabilities
    
    $
    28,606
    
    
    $
    44,568
    
    
    $
    64,689
 88




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 7. Borrowings
  December 31, 2010
    
    
    December 31, 2009Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateFederal Home Loan Bank advances maturing in:2012
    
    $
    100,000
    
    
    
    4.52
    %
    
    $
    100,000
    
    
    
    4.52
    %2013
    
    
    249
    
    
    
    4.17
    
    
    
    264
    
    
    
    4.17Thereafter
    
    
    49,685
    
    
    
    5.22
    
    
    
    806,715
    
    
    
    4.23Total borrowings
    
    $
    149,934
    
    
    
    4.79
    %
    
    $
    906,979
    
    
    
    4.26
    %
    8. Shareholders Equity
   89




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 8. Shareholders Equity (continued)
  To Be Well CapitalizedUnder PromptFor Capital
    
    Corrective ActionActual
    
    Adequacy Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2010:Total capital
    
    $
    245,628
    
    
    
    17.86
    %
    
    $
    110,044
    
    
    
    8.00
    %
    
    $
    137,555
    
    
    
    10.00
    %(to risk-weighted assets)Tier 1 capital
    
    
    228,434
    
    
    
    16.61
    
    
    
    55,022
    
    
    
    4.00
    
    
    
    82,533
    
    
    
    6.00(to risk-weighted assets)Tier 1 capital
    
    
    228,434
    
    
    
    9.12
    
    
    
    100,215
    
    
    
    4.00
    
    
    
    125,268
    
    
    
    5.00(to adjusted total assets)As of December 31, 2009:Total capital
    
    $
    348,741
    
    
    
    20.86
    %
    
    $
    133,772
    
    
    
    8.00
    %
    
    $
    167,215
    
    
    
    10.00
    %(to risk-weighted assets)Tier 1 capital
    
    
    339,847
    
    
    
    20.32
    
    
    
    66,886
    
    
    
    4.00
    
    
    
    100,329
    
    
    
    6.00(to risk-weighted assets)Tier 1 capital
    
    
    339,847
    
    
    
    9.84
    
    
    
    138,158
    
    
    
    4.00
    
    
    
    172,697
    
    
    
    5.00(to adjusted total assets)
  December 31, 2010Risk-
    
    Tier IBased
    
    (Core)Capital
    
    CapitalStockholders equity according to the Banks records
    
    $
    311,279
    
    
    $
    311,279Net unrealized loss on securities available for sale, net of taxes
    
    
    1,383
    
    
    
    1,383Additional minimum pension asset, net of taxes
    
    
    5,514
    
    
    
    5,514Goodwill and intangibles
    
    
    (53,569
    )
    
    
    (53,569
    )Investment in non-includable subsidiaries
    
    
    (3,273
    )
    
    
    (3,273
    )Disallowed deferred tax assets
    
    
    (32,900
    )
    
    
    (32,900
    )Allowance for loan losses
    
    
    17,194
    
    
    
    Regulatory capital
    
    $
    245,628
    
    
    $
    228,434
  December 312010
    
    2009Net unrealized loss on securities available-for-sale
    
    $
    (1,383
    )
    
    $
    (1,167
    )Additional minimum pension asset
    
    
    (5,514
    )
    
    
    (1,239
    )Accumulated other comprehensive income (loss)
    
    $
    (6,897
    )
    
    $
    (2,406
    )
 90




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 9. Earnings (Loss) Per Share
  Year Ended December 312010
    
    2009
    
    2008Basic earnings (loss) per share:Net income (loss)
    
    $
    (72,640
    )
    
    $
    13,725
    
    
    $
    17,156Weighted average shares outstanding
    
    
    45,529,126
    
    
    
    46,177,189
    
    
    
    47,212,574Allocated ESOP shares during the period
    
    
    63,068
    
    
    
    327,251
    
    
    
    327,250Vested MRP shares during the period
    
    
    4,276
    
    
    
    61,455
    
    
    
    186,636Basic shares outstanding
    
    
    45,596,490
    
    
    
    46,565,895
    
    
    
    47,726,460Basic earnings (loss) per share
    
    $
    (1.59
    )
    
    $
    0.29
    
    
    $
    0.36Diluted earnings (loss) per share:Net income (loss)
    
    $
    (72,640
    )
    
    $
    13,725
    
    
    $
    17,156Weighted average shares outstanding used
in basic earnings (loss) per share
    
    
    45,569,490
    
    
    
    46,565,895
    
    
    
    47,726,460Net dilutive effect of:Stock option shares
    
    
    
    
    
    
    612,584
    
    
    
    898,416Non-vested MRP shares
    
    
    
    
    
    
    
    
    
    
    4,363Diluted shares outstanding
    
    
    45,569,490
    
    
    
    47,178,479
    
    
    
    48,629,239Diluted earnings (loss) per share
    
    $
    (1.59
    )
    
    $
    0.29
    
    
    $
    0.35
  10. Employee Benefit Plans
   91




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  Qualified
    
    SupplementalPension Plan
    
    Pension Plan2010
    
    2009
    
    2010
    
    2009Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    35,032
    
    
    $
    30,389
    
    
    $
    7,448
    
    
    $
    7,233Service cost
    
    
    1,939
    
    
    
    1,765
    
    
    
    
    
    
    
    197Interest cost
    
    
    2,023
    
    
    
    1,821
    
    
    
    426
    
    
    
    430Actuarial loss (gain)
    
    
    5,372
    
    
    
    1,801
    
    
    
    382
    
    
    
    (115
    )Benefits paid
    
    
    (962
    )
    
    
    (744
    )
    
    
    (297
    )
    
    
    (297
    )Benefit obligation at end of year
    
    $
    43,404
    
    
    $
    35,032
    
    
    $
    7,959
    
    
    $
    7,448Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    35,634
    
    
    $
    24,943
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    986
    
    
    
    6,435
    
    
    
    
    
    
    
    Employer contributions
    
    
    5,000
    
    
    
    5,000
    
    
    $
    297
    
    
    $
    297Benefits paid
    
    
    (962
    )
    
    
    (744
    )
    
    
    (297
    
    
    
    (297
    )Fair value of plan assets at end of year
    
    
    40,658
    
    
    
    35,634
    
    
    
    
    
    
    
    Funded status at the end of the year
    
    $
    (2,746
    )
    
    $
    602
    
    
    $
    (7,959
    )
    
    $
    (7,448
    )
     2010
    
    2009Discount rate
    
    
    5.32
    %
    
    
    5.84
    %Rate of increase in compensation levels
    
    
    3.50
    %
    
    
    3.50
    %Expected long-term rate of return on plan assets (qualified plan)
    
    
    6.50
    %
    
    
    6.50
    %
 92




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  2010
    
    2009
    
    2008Discount rate
    
    
    5.84
    %
    
    
    6.07
    %
    
    
    6.25
    %Rate of increase in compensation levels
    
    
    3.50
    %
    
    
    3.50
    %
    
    
    3.50
    %Expected long-term rate of return on plan assets (qualified plan)
    
    
    6.50
    %
    
    
    7.00
    %
    
    
    7.00
    %
   2010
    
    2009
    
    2008Qualified pension plan:Interest cost
    
    $
    2,023
    
    
    $
    1,821
    
    
    $
    1,657Service cost
    
    
    1,939
    
    
    
    1,764
    
    
    
    1,743Expected return on plan assets
    
    
    (2,291
    )
    
    
    (1,719
    )
    
    
    (1,953
    )Amortization of unrecognized prior service cost
    
    
    
    
    
    
    
    
    
    
    23Amortization of net loss
    
    
    
    
    
    
    558
    
    
    
    Net periodic cost
    
    $
    1,671
    
    
    $
    2,424
    
    
    $
    1,470Supplemental pension plan:Interest cost
    
    $
    426
    
    
    $
    430
    
    
    $
    421Service cost
    
    
    
    
    
    
    196
    
    
    
    184Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    Net periodic cost
    
    $
    426
    
    
    $
    626
    
    
    $
    605
  Qualified
    
    SupplementalPlan
    
    Plan
    
    Total2011
    
    $
    1,282
    
    
    $
    297
    
    
    $
    1,5792012
    
    
    1,522
    
    
    
    956
    
    
    
    2,4782013
    
    
    1,921
    
    
    
    956
    
    
    
    2,8772014
    
    
    2,168
    
    
    
    956
    
    
    
    3,1242015
    
    
    2,460
    
    
    
    717
    
    
    
    3,1772016  2020
    
    
    16,202
    
    
    
    3,381
    
    
    
    19,583Total
    
    $
    25,555
    
    
    $
    7,263
    
    
    $
    32,818
 93




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  Fair Value HierarchyAmount
    
    Level 1
    
    Level 2
    
    Level 3Asset category:Money market fund
    
    $
    262
    
    
    
    
    
    
    $
    262
    
    
    
    Equity security
    
    
    1,022
    
    
    $
    1,022
    
    
    
    
    
    
    
    Immediate participation guarantee contract
    
    
    39,374
    
    
    
    
    
    
    
    
    
    
    $
    39,374Total
    
    $
    40,658
    
    
    $
    1,022
    
    
    $
    262
    
    
    $
    39,374
    AmountFair value at December 31, 2009
    
    $
    34,312Actual return on plan assets
    
    
    1,024Employer contribution
    
    
    5,000Benefits paid
    
    
    (962
    )Fair value at December 31, 2010
    
    $
    39,374
  94




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 11. Stock-Based Benefit Plans
      2010
    
    2009
    
    2008Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedStock
    
    Average
    
    Stock
    
    Average
    
    Stock
    
    AverageOptions
    
    Exercise
    
    Options
    
    Exercise
    
    Options
    
    ExerciseOutstanding at beginning of year
    
    
    3,129,398
    
    
    $
    8.1823
    
    
    
    3,445,967
    
    
    $
    7.8763
    
    
    
    4,090,628
    
    
    $
    7.3650Granted
    
    
    120,000
    
    
    
    5.7733
    
    
    
    
    
    
    
    
    
    
    
    82,000
    
    
    
    11.6870Exercised
    
    
    (576,934
    )
    
    
    3.2056
    
    
    
    (246,769
    )
    
    
    3.2056
    
    
    
    (667,461
    )
    
    
    4.9956Forfeited
    
    
    (210,000
    )
    
    
    10.673
    
    
    
    (69,800
    )
    
    
    10.6707
    
    
    
    (59,200
    )
    
    
    10.6730Outstanding at end of year
    
    
    2,462,464
    
    
    $
    9.0184
    
    
    
    3,129,398
    
    
    $
    8.1823
    
    
    
    3,445,967
    
    
    $
    7.8763
 95




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 11. Stock-Based Benefit Plans (continued)
  Remaining
    
    
    Non-Vested Options
    
    
    Vested OptionsContractual
    
    
    Stock
    
    
    Intrinsic
    
    
    Stock
    
    
    IntrinsicLife
    
    
    Options
    
    
    Value
    
    
    Options
    
    
    ValueExercise price:$  3.2056
    
    0.3 years
    
    
    
    
    
    
    
    
    
    
    488,464
    
    
    $
    769$10.6730
    
    3.3 years
    
    
    
    
    
    
    
    
    
    
    1,722,000
    
    
    
    $12.2340
    
    5.5 years
    
    
    10,000
    
    
    
    
    
    
    
    40,000
    
    
    
    $11.1600
    
    7.3 years
    
    
    19,200
    
    
    
    
    
    
    
    12,800
    
    
    
    $12.0250
    
    7.6 years
    
    
    30,000
    
    
    
    
    
    
    
    20,000
    
    
    
    $  7.2260
    
    9.3 years
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    $  4.7400
    
    10.0 years
    
    
    70,000
    
    
    
    
    
    
    
    
    
    
    
    3Total
    
    
    
    
    
    
    179,200
    
    
    
    
    
    
    
    2,283,264
    
    
    $
    772Weighted average remaining contractual life
    
    8.9 years
    
    
    
    
    2.8 yearsWeighted average exercise price
    
    
    
    $
    7.7576
    
    
    
    
    
    
    $
    9.1174
    96




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 11. Stock-Based Benefit Plans (continued)
  2010
    
    2009
    
    2008Shares allocated to participants in fiscal year
    
    
    126,175
    
    
    
    327,251
    
    
    
    327,250Unallocated and unearned shares
    
    
    
    
    
    
    126,175
    
    
    
    453,426Fair value of unearned ESOP shares
    
    
    
    
    
    $
    874
    
    
    $
    5,233
  12. Income Taxes
   Year Ended December 312010
    
    2009
    
    2008Current income tax expense (benefit):Federal
    
    $
    (17,924
    )
    
    $
    7,193
    
    
    $
    15,281State
    
    
    90
    
    
    
    88
    
    
    
    83Current income tax expense (benefit)
    
    
    (17,834
    )
    
    
    7,281
    
    
    
    15,364Deferred income tax expense (benefit):Federal
    
    
    (22,388
    )
    
    
    210
    
    
    
    (6,267
    )State
    
    
    (9,687
    )
    
    
    (2,073
    )
    
    
    (3
    )Deferred income tax expense (benefit)
    
    
    (32,075
    )
    
    
    (1,863
    )
    
    
    (6,270
    )Income tax expense (benefit)
    
    $
    (49,909
    )
    
    $
    5,418
    
    
    $
    9,094
  Year Ended December 312010
    
    2009
    
    2008Income (loss) before provision for income taxes
    
    $
    (122,548
    )
    
    $
    19,143
    
    
    $
    26,249Tax expense (benefit) at federal statutory rate
    
    $
    (42,892
    )
    
    $
    6,700
    
    
    $
    9,188Increase (decrease) in taxes resulting from:State income taxes, net of federal tax benefit
    
    
    (6,269
    )
    
    
    510
    
    
    
    52Bank owned life insurance
    
    
    (842
    )
    
    
    (751
    )
    
    
    (873
    )Reversal of valuation allowance, net of federal benefit
    
    
    
    
    
    
    (1,800
    )
    
    
    Executive compensation in excess of Section 162(m) limit
    
    
    
    
    
    
    141
    
    
    
    143Tax return and other reserve adjustments
    
    
    47
    
    
    
    230
    
    
    
    492Other
    
    
    47
    
    
    
    388
    
    
    
    92Income tax expense (benefit)
    
    $
    (49,909
    )
    
    $
    5,418
    
    
    $
    9,094
 97




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 12. Income Taxes (continued)
  December 312010
    
    2009Deferred tax assets:Loan loss reserves
    
    $
    19,261
    
    
    $
    6,834Federal net operating losses and AMT credits
    
    
    12,441
    
    
    
    State net operating losses
    
    
    5,279
    
    
    
    778Pension
    
    
    6,907
    
    
    
    4,025Other-than-temporary impairment of investment securities
    
    
    3,493
    
    
    
    3,599Non-deductible losses on foreclosed real estate
    
    
    2,421
    
    
    
    163Deferred compensation
    
    
    1,512
    
    
    
    1,553Unrealized loss on investment securities
    
    
    925
    
    
    
    782Restricted stock amortization
    
    
    135
    
    
    
    312Other
    
    
    998
    
    
    
    409Total deferred tax assets
    
    
    53,372
    
    
    
    18,455Valuation allowance
    
    
    (135
    )
    
    
    (135
    )Total deferred tax assets, net of valuation allowance
    
    
    53,237
    
    
    
    18,320Deferred tax liabilities:FHLB stock dividends
    
    
    5,130
    
    
    
    5,130Purchase accounting adjustments
    
    
    3,341
    
    
    
    3,639Mortgage servicing rights
    
    
    3,118
    
    
    
    2,769Property and equipment depreciation
    
    
    987
    
    
    
    1,001Other
    
    
    341
    
    
    
    607Total deferred tax liabilities
    
    
    12,917
    
    
    
    13,146Net deferred tax asset
    
    $
    40,320
    
    
    $
    5,174
    98




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 13. Financial Instruments with Off-Balance-Sheet Risk
    December 312010
    
    2009Unused consumer lines of credit
    
    $
    146,381
    
    
    $
    150,424Unused commercial lines of credit
    
    
    20,856
    
    
    
    18,904Commitments to extend credit:Fixed rate
    
    
    73,340
    
    
    
    35,769Adjustable rate
    
    
    1,784
    
    
    
    2,185Undisbursed commercial loans
    
    
    462
    
    
    
    524Standby letters of credit
    
    
    339
    
    
    
    111
   99




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 13. Financial Instruments with Off-Balance-Sheet Risk (continued)
  December 31, 2010
    
    
    December 31, 2009Notional
    
    
    
    
    
    
    NotionalAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueInterest rate lock commitments
    
    $
    14,003
    
    
    $
    (57
    )
    
    $
    15,433
    
    
    $
    (69
    )Forward commitments
    
    
    49,854
    
    
    
    1,531
    
    
    
    27,668
    
    
    
    375Net unrealized gain (loss)
    
    
    
    
    
    $
    1,474
    
    
    
    
    
    
    $
    (306
    )
  14. Fair Value of Financial Instruments
     Cash and Cash Equivalents
 Securities Available-for-Sale
 Loans Held-for-Sale
 Loans Receivable
 100




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
 Mortgage Servicing Rights
 Federal Home Loan Bank Stock
 Accrued Interest Receivable and Payable
 Deposit Liabilities and Advance Payments by Borrowers for Taxes and Insurance
 Borrowings
  December 31, 2010
    
    December 31, 2009Carrying
    
    Fair
    
    Carrying
    
    FairValue
    
    Value
    
    Value
    
    ValueCash and cash equivalents
    
    $
    232,832
    
    
    $
    232,832
    
    
    $
    227,658
    
    
    $
    227,658Securities available-for-sale
    
    
    663,257
    
    
    
    663,257
    
    
    
    1,480,952
    
    
    
    1,480,952Loans held-for-sale
    
    
    37,819
    
    
    
    37,819
    
    
    
    13,534
    
    
    
    13,534Loans receivable, net
    
    
    1,323,569
    
    
    
    1,213,460
    
    
    
    1,506,056
    
    
    
    1,483,981Mortgage servicing rights
    
    
    7,769
    
    
    
    9,368
    
    
    
    6,899
    
    
    
    7,720Federal Home Loan Bank stock
    
    
    46,092
    
    
    
    46,092
    
    
    
    46,092
    
    
    
    46,092Accrued interest receivable
    
    
    7,449
    
    
    
    7,449
    
    
    
    13,321
    
    
    
    13,321Deposit liabilities
    
    
    2,078,310
    
    
    
    1,967,742
    
    
    
    2,137,508
    
    
    
    2,061,164Borrowings
    
    
    149,934
    
    
    
    163,521
    
    
    
    906,979
    
    
    
    994,300Advance payments by borrowers
    
    
    2,697
    
    
    
    2,697
    
    
    
    2,508
    
    
    
    2,508Accrued interest payable
    
    
    2,428
    
    
    
    2,428
    
    
    
    4,228
    
    
    
    4,228
   101




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
   December 31, 2010Level 1
    
    Level 2
    
    Level 3
    
    TotalLoans held-for-sale
    
    
    
    
    
    $
    37,819
    
    
    
    
    
    
    $
    37,819Securities available-for-sale:Investment securities
    
    $
    22,054
    
    
    
    205,970
    
    
    
    
    
    
    
    228,024Mortgage-related securities
    
    
    
    
    
    
    435,234
    
    
    
    
    
    
    
    435,234Total
    
    $
    22,054
    
    
    $
    679,023
    
    
    
    
    
    
    $
    701,077
 December 31, 2009Level 1
    
    Level 2
    
    Level 3
    
    TotalLoans held-for-sale
    
    
    
    
    
    $
    13,534
    
    
    
    
    
    
    $
    13,534Securities available-for-sale:Investment securities
    
    $
    22,312
    
    
    
    591,792
    
    
    
    
    
    
    
    614,104Mortgage-related securities
    
    
    
    
    
    
    866,848
    
    
    
    
    
    
    
    866,848Total
    
    $
    22,312
    
    
    $
    1,472,174
    
    
    
    
    
    
    $
    1,494,486
   102




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
  15. Condensed Parent Company Only Financial Statements
 STATEMENT OF FINANCIAL CONDITION
 December 312010
    
    2009AssetsCash and cash equivalents
    
    $
    4,474
    
    
    $
    8,787Investment in subsidiary
    
    
    308,354
    
    
    
    391,670Receivable from ESOP
    
    
    
    
    
    
    347Other assets
    
    
    125
    
    
    
    1,744Total assets
    
    $
    312,953
    
    
    $
    402,548Liabilities and shareholders equityOther liabilities
    
    
    
    
    
    $
    71Shareholders equity:Common stock$0.01 par value:Authorized200,000,000 shares in 2010 and 2009Issued78,783,849 shares in 2010 and 2009Outstanding45,769,443 in 2010 and 46,165,635 shares in 2009
    
    $
    788
    
    
    
    788Additional paid-in capital
    
    
    494,377
    
    
    
    499,376Retained earnings
    
    
    191,238
    
    
    
    272,518Unearned ESOP shares
    
    
    
    
    
    
    (347
    )Accumulated other comprehensive income
    
    
    (6,897
    )
    
    
    (2,406
    )Treasury stock33,014,406 shares in 2010 and 32,618,214 shares in 2009
    
    
    (366,553
    )
    
    
    (367,452
    )Total shareholders equity
    
    
    312,953
    
    
    
    402,477Total liabilities and shareholders equity
    
    $
    312,953
    
    
    $
    402,548
 103




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2010
 (Dollars in Thousands, Except Per Share Amounts)
 15. Condensed Parent Company Only Financial Statements (continued)
 STATEMENT OF INCOME
 Year ended December 312010
    
    2009
    
    2008Total income
    
    $
    43
    
    
    $
    207
    
    
    $
    354Total expenses
    
    
    846
    
    
    
    1,077
    
    
    
    1,460Income (loss) before income taxes
    
    
    (803
    )
    
    
    (870
    )
    
    
    (1,106
    )Income tax expense (benefit)
    
    
    (313
    )
    
    
    (338
    )
    
    
    (387
    )Income (loss) before equity in earnings of subsidiary
    
    
    (490
    )
    
    
    (532
    )
    
    
    (719
    )Equity in earnings of subsidiary
    
    
    (72,150
    )
    
    
    14,257
    
    
    
    17,875Net income (loss)
    
    $
    (72,640
    )
    
    $
    13,725
    
    
    $
    17,156
 STATEMENT OF CASH FLOWS
 Year ended December 312010
    
    2009
    
    2008Operating activities:Net income (loss)
    
    $
    (72,640
    )
    
    $
    13,725
    
    
    $
    17,156Adjustment to reconcile net income (loss) to net cash
provided by operating activities:Equity in earnings of Bank subsidiary
    
    
    72,150
    
    
    
    (14,257
    )
    
    
    (17,875
    )Stock-based compensation
    
    
    39
    
    
    
    253
    
    
    
    248Change in other operating activities and liabilities
    
    
    1,547
    
    
    
    493
    
    
    
    (2,076
    )Net cash provided (used) by operating activities
    
    
    1,096
    
    
    
    214
    
    
    
    (2,547
    )Investing activities:Dividends from Bank subsidiary
    
    
    7,450
    
    
    
    19,700
    
    
    
    26,400Other investing activities
    
    
    78
    
    
    
    (664
    )
    
    
    (547
    )Net cash provided by investing activities
    
    
    7,528
    
    
    
    19,036
    
    
    
    25,853Financing activities:Cash dividends
    
    
    (8,640
    )
    
    
    (15,033
    )
    
    
    (16,442
    )Purchase of treasury stock
    
    
    (5,029
    )
    
    
    (14,397
    )
    
    
    (29,927
    )Proceeds from exercise of stock options
    
    
    359
    
    
    
    556
    
    
    
    3,313Excess tax benefit from exercise of stock options
    
    
    26
    
    
    
    276
    
    
    
    379Cash received for MRP grants from Bank subsidiary
    
    
    
    
    
    
    
    
    
    
    9,997Payments received on ESOP
    
    
    347
    
    
    
    900
    
    
    
    900Net cash used in financing activities
    
    
    (12,937
    )
    
    
    (27,698
    )
    
    
    (31,780
    )Decrease in cash and cash equivalents
    
    
    (4,313
    )
    
    
    (8,448
    )
    
    
    (8,474
    )Cash and cash equivalents at beginning of year
    
    
    8,787
    
    
    
    17,235
    
    
    
    25,709Cash and cash equivalents at end of year
    
    $
    4,474
    
    
    $
    8,787
    
    
    $
    17,235
 104




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Change in Internal Control Over Financial Reporting
  Managements Report on Internal Control Over Financial Reporting
    105




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##### Table of Contents



106




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##### Table of Contents



Item 9B. Other Information
  107




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##### Table of Contents



Part III
 
 Item 10. Directors, Executive Officers, and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
   Number of securitiesremaining availableNumber of securities
    
    
    
    for future issuance underto be issued upon
    
    Weighted-average
    
    equity compensationexercise of
    
    exercise price of
    
    plans (excludingoutstanding options,
    
    outstanding options,
    
    securities reflectedPlan category
    
    warrants and rights (1)
    
    warrants and rights
    
    in 1st column) (2)Equity compensation plans
approved by security
holders
    
    2,462,464
    
    $9.0184
    
    2,100,083Equity compensation
plans not
approved by security
holders
    
    None
    
    None
    
    None
 
 (1)
    
    Represents options granted under the 2001 Plan or 2004 Plan, which plans were approved by
Company shareholders in 2001 and 2004, respectively.(2)
    
    Represents options and restricted stock which may be granted under the 2004 Plan. No further
awards may be made under the 2001 Plan. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  108




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##### Table of Contents



Part IV
 
 Item 15. Exhibits, Financial Statement Schedules
    
    
    Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm, on the
consolidated financial statements.
    
    Consolidated Statements of Financial ConditionAs of December 31, 2010 and 2009.
    
    Consolidated Statements of IncomeYears Ended December 31, 2010, 2009, and 2008.
    
    Consolidated Statements of EquityYears Ended December 31, 2010, 2009, and 2008.
    
    Consolidated Statements of Cash FlowsYears Ended December 31, 2010, 2009, and 2008.
    
    Notes to Consolidated Financial Statements.
   109




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##### Table of Contents



SIGNATURES
  BANK MUTUAL CORPORATIONMarch 4, 2011By:
    
    /s/ Michael T. Crowley, Jr.

Michael T. Crowley, Jr.Chairman and Chief Executive Officer
 
 POWER OF ATTORNEY
  
  Signature and Title
 /s/ Michael T. Crowley, Jr.

Michael T. Crowley, Jr., Chairman,
    
    
    
    /s/ Thomas H. Buestrin

Thomas H. Buestrin, DirectorChief Executive Officer, and Director(Principal Executive Officer)/s/ David A. Baumgarten

David A. Baumgarten, President and Director
    
    
    
    /s/ Mark C. Herr

Mark C. Herr, Director/s/ Michael W. Dosland

Michael W. Dosland, Senior Vice President
and 
Chief Financial Officer (Principal
Financial Officer)
    
    
    
    /s/ Thomas J. Lopina, Sr.

Thomas J. Lopina, Sr., Director/s/ Richard L. Schroeder

Richard L. Schroeder, Vice President and
    
    
    
    /s/ William J. Mielke

William J. Mielke, DirectorController (Principal Accounting Officer)/s/ David C. Boerke

David C. Boerke, Director
    
    
    
    /s/ Robert B. Olson

Robert B. Olson, Director/s/ Richard A. Brown

Richard A. Brown, Director
    
    
    
    /s/ Jelmer G. Swoboda

Jelmer G. Swoboda, Director
 
 *
    
    Each of the above signatures is affixed as of March 4, 2011. 110




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##### Table of Contents



BANK MUTUAL CORPORATION
(Bank Mutual Corporation or the Company) **
Commission File No. 000-32107
 EXHIBIT INDEX
TO
2010 REPORT ON FORM 10-K
  Incorporated Herein by
    
    FiledExhibit
    
    Description
    
    Reference To
    
    Herewith3(i)
    
    Restated Articles of Incorporation, as
last amended May 29, 2003, of Bank
Mutual Corporation (the Articles)
    
    Exhibit 3(i) to the
Companys Registration
Statement on Form S-1,
Registration No. 333-1056853(ii)
    
    Bylaws, as last amended May 7, 2007, of
Bank Mutual Corporation
    
    Exhibit 3.1 to the
Companys Report on Form
8-K dated May 7, 20074.1
    
    The Articles
    
    Exhibit 3(i) above10.1*
    
    Bank Mutual Corporation Savings
Restoration Plan and Bank Mutual
Corporation ESOP Restoration Plan
    
    Exhibit 10.1(b) to the
Companys Annual Report on
Form 10-K for the year
ended December 31, 2003
(2003 10-K)10.2*
    
    Bank Mutual Corporation Outside
Directors Retirement Plan
    
    Exhibit 10.2 to the
Companys Annual Report on
Form 10-K for the year
ended December 31, 2009
(2009 10-K)10.3*
    
    Mutual Savings Bank Executive Excess
Benefit Plan ***
    
    Exhibit 10.3 to Bank
Mutual Corporations
Registration Statement on
Form S-1, Registration No.
333-39362 (2000 S-1)10.4*
    
    Agreement regarding deferred
compensation dated May 16, 1988 between
Mutual Savings Bank and Michael T.
Crowley, Sr.
    
    Exhibit 10.4 to 2000 S-110.5(a)*
    
    Employment Agreement between Mutual
Savings Bank and Michael T. Crowley Jr.
dated December 21, 1993 (continuing , as
amended, through 2013)
    
    Exhibit 10.5(a) to 2000 S-110.5(b)*
    
    Amendment thereto dated February 17, 1998
    
    Exhibit 10.5(b) to 2000 S-110.6(a)*
    
    Form of Employment Agreements of Mr.
Anderegg and Mr. Callen with Mutual
Savings Bank, each dated as of January
1, 2001 (superseded)
    
    Exhibit 10.7 to 2000 S-1
 111




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##### Table of Contents



Incorporated Herein by
    
    FiledExhibit
    
    Description
    
    Reference To
    
    Herewith10.6(b)*
    
    Form of Amendment thereto, dated as of
May 2006 (superseded)
    
    Exhibit 10.1 to the Companys
Quarterly Report on Form 10-Q
for the quarter ended June 30,
200610.6(c)*
    
    Form of Employment Agreement (with Messrs.
Anderegg, Dosland, Larson, and Mayne) +
    
    
    
    X10.7(a)*
    
    Employment Agreement of Mr. Dosland with
Bank Mutual dated as of August 18, 2008
(superseded)
    
    Exhibit 10.1 to the Companys
Report on Form 8-K dated August
19, 200810.7(b)*
    
    Amendment to Employment Agreement dated
August 18, 2008, between Bank Mutual and
Michael W. Dosland (superseded)
    
    Exhibit 10.2 to the Companys
Report on Form 8-K dated August
19, 200810.8*
    
    Employment Agreement of Mr. Baumgarten
with Bank Mutual dated as of April 5, 2010
(continuing through 2012)
    
    Exhibit 10.1 to the Companys
 Report on Form 8-K dated April
5, 201010.9(a)*
    
    Non-Qualified Deferred Retirement Plan for
Directors of First Northern Savings Bank
    
    Exhibit 10.10(a) to Bank
Mutuals Annual Report on Form
10-K for the year ended December
31, 200010.9(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, 199810.10*
    
    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
    
    Appendix A to Proxy Statement
for 2004 Annual Meeting of
Shareholders10.11(b)(i)*
    
    Form of Option Agreement thereunderBank
Mutual Corporation Director Stock Option
Agreement (superseded)
    
    Exhibit 10.1(b) to the Companys
Report on Form 10-Q for the
quarter ended June 30, 2004
(6/30/04 10-Q)10.11(b)(ii)*
    
    2011 updated Form of Bank Mutual
Director Stock Option Agreement ++
    
    
    
    X10.11(c)(i)*
    
    Form of Option Agreement
thereunderBank Mutual Corporation
Incentive Stock Option Agreement
(superseded)
    
    Exhibit 10.1(c ) to the 6/30/04
10-Q
 112




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##### Table of Contents



Incorporated Herein by
    
    FiledExhibit
    
    Description
    
    Reference To
    
    Herewith10.11(c)(ii)*
    
    2010 updated Bank Mutual
Corporation Incentive Stock
Option Agreement ++
    
    
    
    X10.11(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)(i)*
    
    Form of Restricted Stock
Agreement thereunderBank
Mutual Corporation Officers
Management Recognition Award
    
    Exhibit 10.1(e) to the 6/30/04
10-Q10.11(e)(ii)*
    
    2010 updated Form of Bank
Mutual Corporation Officers
Management Recognition Award ++
    
    
    
    X10.12*
    
    Bank Mutual Corporation
Management Incentive
Compensation Plan +
    
    Exhibit 10.11 to 2009 10-K21.1
    
    List of Subsidiaries
    
    
    
    X23.1
    
    Consent of Deloitte & Touche LLP
    
    
    
    X24.1
    
    Powers of Attorney
    
    Signature Page of this Report31.1
    
    Sarbanes-Oxley Act Section 302
Certification signed by the
Chairman and Chief Executive
Officer of Bank Mutual
Corporation
    
    
    
    X31.2
    
    Sarbanes-Oxley Act Section 302
Certification signed by the
Senior Vice President and Chief
Financial Officer of Bank
Mutual Corporation
    
    
    
    X32.1
    
    Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
signed by the Chairman 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 Senior Vice
President and 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 15(b) of Form 10-K.**
    
    As used in this Exhibit Index, references to Bank Mutual Corporation and the Company also
include, where appropriate, Bank Mutual Corporation, a federally-chartered corporation and
the predecessor of the current registrant.***
    
    Mutual Savings Bank is now known as Bank Mutual.+
    
    Included non-material changes from prior versions used with Messrs. Anderegg and
Dosland, consistent with the compensation-related disclosures in the Companys prior annual
meeting proxy statements.++
    
    Includes non-material changes form prior version, consistent with the 2004 Plan. 113