<PAGE>

                       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, 2001
                                             -----------------

                        Commission file number: 000-31207

                             BANK MUTUAL CORPORATION
             (Exact name of registrant as specified in its charter)

        UNITED STATES                                39-2004336
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
incorporation or organization)

4949 WEST BROWN DEER ROAD, MILWAUKEE, WI                53223
(Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:(414) 354-1500
                                                   --------------

           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                          COMMON STOCK, $0.01 PAR VALUE

                                (Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes X       No
                                   ---        ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     As of March 1, 2002, 22,341,665 shares of Common Stock were validly issued
with 22,310,165 shares outstanding. The aggregate market value of the Common
Stock (based upon the $17.10 last sale price quotation on The Nasdaq Stock
Market(R) on March 1, 2002) held by non-affiliates (excludes a total of
13,135,943 shares reported as beneficially owned by directors and executive
officers, held by Mutual Savings Bancorp, MHC or held in the registrant's 401(k)
Savings Plan or Employee Stock Ownership Plan; does not constitute an admission
as to affiliate status) was approximately $156,879,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                              PART OF FORM 10-K INTO WHICH
           DOCUMENT                       PORTIONS OF DOCUMENT ARE INCORPORATED
           --------                       -------------------------------------
Proxy Statement for Annual Meeting of
Shareholders on May 7, 2002                              Part III


<PAGE>


                             BANK MUTUAL CORPORATION

        FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION

                      FOR THE YEAR ENDED DECEMBER 31, 2001

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM                                                                               PAGE
<S>                                                                               <C>
                                     PART I

1.   Business......................................................................3-31
2.   Properties...................................................................32-36
3.   Legal Proceedings...............................................................37
4.   Submission of Matters to a Vote of Security Holders.............................37
     Executive Officers of the Registrant.........................................37-38

                                     PART II

5.   Market for Registrant's Common Equity and Related Stockholders Matters..........39
6.   Selected Financial Data......................................................40-41
7.   Management's Discussion and Analysis of Financial
        Condition and Results of Operations.......................................42-57
7A.  Quantitative and Qualitative Disclosures About Market Risk...................58-61
8.   Financial Statements and Supplementary Data..................................62-96
9.   Changes in and Disagreements with Accountants
        on Accounting and Financial Disclosure.......................................97

                                    PART III

10.  Directors and Executive Officers of the Registrant..............................97
11.  Executive Compensation..........................................................97
12.  Security Ownership of Certain Beneficial Owners and Management..................97
13.  Certain Relationships and Related Transactions..................................97

                                     PART IV

14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.................98
     Signatures......................................................................99
</TABLE>


                                       2

<PAGE>



                                     PART 1

ITEM 1. BUSINESS

GENERAL

Bank Mutual Corporation ("Bank Mutual") is a United States corporation chartered
by the Office of Thrift Supervision ("OTS"). It was chartered on November 1,
2000, to become the mid-tier holding company in the regulatory restructuring of
Mutual Savings Bank into mutual holding company form. To accomplish the
transaction, Mutual Savings Bank adopted a plan of restructuring and, as of
November 1, 2000, converted from a mutual savings bank to a mutual holding
company form. Bank Mutual became a holder of all of the shares of Mutual Savings
Bank, which was rechartered as a federal stock savings bank. Mutual Savings
Bancorp, MHC (the "MHC"), a U.S. -chartered mutual holding company of which
Mutual Savings Bank's depositors hold all of the voting and membership rights,
owns 11,193,174 shares of common stock, or 50.1% of Bank Mutual's stock. Bank
Mutual issued 6,141,006 shares of common stock to public shareholders in the
subscription stock offering conducted in connection with the restructuring.

In addition, also on November 1, 2000, Bank Mutual acquired First Northern
Capital Corp. ("First Northern"), the parent of First Northern Savings Bank. In
this transaction, Bank Mutual issued to former First Northern shareholders
5,007,485 shares of Bank Mutual common stock and paid $75.1 million in cash. (In
this report, we refer to this transaction as the "First Northern Acquisition.")
The First Northern Acquisition was accounted for using the purchase method of
accounting; therefore, First Northern Savings Bank results and financial data
are included in Bank Mutual results of financial data only from and after the
November 1, 2000 acquisition date.

As a result of these transactions, Bank Mutual is the mid-tier holding company
for Mutual Savings Bank and First Northern Savings Bank. The following chart
shows our structure:

             DEPOSITORS
              OF MUTUAL
            SAVINGS BANK
                 |
                 |  100%
                \ /
              THE MHC                                 PUBLIC
                 |                                 SHAREHOLDERS
                 |                                      |
                 |    50.1%                     49.9%   |
                 --------------> BANK MUTUAL <-----------
                                100% |  | 100%
                                     |  |
                             ---------  --------
                             |                 |
                             |                 |
                            \ /               \ /
                           MUTUAL        FIRST NORTHERN
                        SAVINGS BANK     SAVINGS BANK


Mutual Savings Bank and First Northern Savings Bank are community oriented
financial institutions, which emphasize traditional financial services to
individuals and businesses within our market areas. Our principal business is
attracting retail deposits from the general public and investing those deposits,
together with funds generated from other operations, in residential mortgage
loans, consumer loans, commercial real estate loans, and commercial business
loans. We also invest in various mortgage-related securities and investment
securities. The principal lending is on one-to four-family, owner-occupied
homes, home equity loans and lines of credit, automobile loans, multi-family and
commercial real estate loans, and commercial business loans.

Bank Mutual's revenues are derived principally from interest on our loans and
mortgage-related securities, interest and dividends on our investment
securities, and noninterest income (including loan servicing fees, deposit
servicing fees, gains on sales of loans and commissions on insurance, security
and annuity sales). Our primary sources of funds are



                                       3

<PAGE>


deposits, borrowings, scheduled amortization and prepayments of loan principal
and mortgage-related securities, maturities and calls of investment securities
and funds provided by operations.

CAUTIONARY FACTORS

This Form 10-K contains or incorporates by reference various forward-looking
statements concerning Bank Mutual's prospects that are based on the current
expectations and beliefs of management. Forward-looking statements may also be
made by Bank Mutual from time to time in other reports and documents as well as
oral presentations. When used in written documents or oral statements, the words
"anticipate," "believe," "estimate," "expect," "objective" and similar
expressions and verbs in the future tense, are intended to identify
forward-looking statements. The statements contained herein and such future
statements involve or may involve certain assumptions, risks and uncertainties,
many of which are beyond Bank Mutual's control, that could cause Bank Mutual's
actual results and performance to differ materially from what is expected. In
addition to the assumptions and other factors referenced specifically in
connection with such statements, the following factors could impact the business
and financial prospects of Bank Mutual: general economic conditions; legislative
and regulatory initiatives; increased competition and other effects of the
deregulation and consolidation of the financial services industry; monetary and
fiscal policies of the federal government; deposit flows; disintermediation; the
cost of funds; general market rates of interest; interest rates or investment
returns on competing investments; demand for loan products; demand for financial
services; changes in accounting policies or guidelines; general economic
developments; acts of terrorism and developments in the war on terrorism; and
changes in the quality or composition of loan and investment portfolios. See
also the factors regarding future operations discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" below,
particularly those under the caption "Risk Factors."

MARKET AREA

Bank Mutual has 69 banking offices located in 28 counties in Wisconsin, in
addition to the Minnesota office. At June 30, 2001, Bank Mutual had
approximately a 2.57% share of all Wisconsin bank, savings bank, and savings
association deposits. Counties in which Bank Mutual operates include 67% of the
population of the state. Bank Mutual is the fourth largest financial institution
holding company headquartered in the state of Wisconsin, based on asset size.

The largest concentration of our offices is in the Milwaukee metropolitan area,
which includes Milwaukee, Waukesha, Ozaukee, and Washington counties. There are
18 offices in this area. The Milwaukee metro area is the largest population and
commercial base in Wisconsin, representing approximately 28% of Wisconsin's
population. The Milwaukee area has traditionally had an extensive manufacturing
economic base, which is diversifying into service and technology based
businesses.

We operate 19 banking offices in eight northeastern counties that make up 13% of
the state's population including the city of Green Bay. The greater Green Bay
area has an economic base of paper and other manufacturing, health care,
insurance and gaming, and is diversifying into technology based businesses. Two
other banking offices are located in adjacent counties.

We have four offices in the Madison area. Madison is the state capital of
Wisconsin and is the second largest metropolitan area in Wisconsin representing
approximately 8% of the state's population. Our ten other south central
Wisconsin offices are located in smaller cities that have economic
concentrations ranging from manufacturing to agriculture.

We also have offices in the northwestern part of the state, largely resulting
from the First Federal Bancshares of Eau Claire, Inc. ("First Federal")
acquisition by Mutual Savings Bank in 1997. This part of the state has medium
sized to smaller cities and towns. Industry includes medium sized and small
business, with a significant agricultural component. The counties in which the
northwest region offices are located hold 8% of the state's population. Our
Minnesota office is located near the Wisconsin state border on the eastern edge
of the Minneapolis-St. Paul metropolitan area.

COMPETITION

We face significant competition in making loans and attracting deposits.
Wisconsin has many banks, savings banks, and savings and loan associations,
which offer the same types of banking products. Wisconsin also has an extensive
tax-exempt credit union industry, whose expanded powers have resulted in
increased competition to financial institutions.



                                       4

<PAGE>


Many of our competitors have greater resources than we do. Similarly, many
competitors offer services that we do not provide. For example, neither Mutual
Savings Bank nor First Northern Savings Bank provide trust or money management
services. However, Mutual Savings Bank's subsidiary, Lake Financial and
Insurance Services, Inc. offers mutual funds and engages in the sale of tax
deferred annuities, credit life and disability insurance, and property and
casualty insurance. First Northern Savings Bank's subsidiary, Great Northern
Financial Services Corporation, offers brokerage services to the public,
including the sale of tax deferred annuities and mutual funds and engages in the
sale of credit life and disability insurance.

Most of our competition for loans traditionally has come from commercial banks,
savings banks, savings and loan associations and credit unions. Increasingly,
other types of companies, such as mortgage banking firms, finance companies,
insurance companies, and other providers of financial services also compete for
these products. For deposits, we also compete with traditional financial
institutions. However, competition for deposits now also includes mutual funds,
particularly short-term money market funds, and brokerage firms and insurance
companies. The recent increase in electronic commerce also increases competition
from institutions and other entities outside of Wisconsin.

LENDING ACTIVITIES

Loan Portfolio Composition. Bank Mutual's loan portfolio primarily consists of
one-to four-family residential mortgage loans. To a lesser degree, the loan
portfolio includes consumer loans, including home equity lines of credit and
fixed rate and adjustable rate second mortgage loans, automobile loans,
multi-family loans, commercial real estate loans and commercial business loans.

At December 31, 2001, our loan portfolio totaled $1.9 billion, of which $1.4
billion, or 74.8%, were mortgage loans. The remainder of our loans at December
31, 2001, amounting to $476.3 million, or 25.2% of total loans, consisted of
consumer loans ($415.3 million or 22.0%) and commercial business loans ($60.9
million or 3.2%).

We originate primarily adjustable rate mortgage ("ARM") loans for our own
portfolio. We also originate fixed rate mortgage loans with terms of 10 to 30
years. Most of the 20 year and longer fixed rate mortgage loans are immediately
sold into the secondary market. At times, we may also sell 15 year fixed rate
mortgage loans depending on the percentage of fixed interest rate loans in our
portfolio. We sold a large portion of our 15 year fixed rate mortgage loan
originations in 2001.

The loans that we originate are subject to federal and state laws and
regulations. The interest rates we charge on loans are affected principally by
the demand for loans, the cost and supply of money available for lending
purposes and the interest rates offered by our competitors. These factors are in
turn affected by, among other things, economic conditions, monetary policies of
the federal government, including the Federal Reserve Board, legislative tax
policies and governmental budgetary matters.



                                       5

<PAGE>



The following table presents the composition of our loan portfolio in dollar
amounts and in percentages of the total portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                 AT DECEMBER 31,
                                      -------------------------------------------------------------------
                                              2001                   2000                     1999
                                      --------------------  ----------------------   --------------------
                                                   PERCENT                 PERCENT                PERCENT
                                                      OF                     OF                     OF
                                        AMOUNT      TOTAL     AMOUNT        TOTAL      AMOUNT      TOTAL
                                      ---------     -----   ----------      ------   ---------     -----
                                                             (Dollars in thousands)
<S>                                  <C>           <C>     <C>             <C>      <C>           <C>
Mortgage loans:
   One to four-family............... $  992,126     52.46%  $1,207,912       59.56% $  743,993     67.37%
   Multi-family.....................    131,925      6.97      105,925        5.22      53,777      4.87
   Commercial real estate...........    165,556      8.75      118,636        5.85      52,375      4.74
   Construction and development.....    125,611      6.64       94,235        4.65      26,530      2.40
                                     ----------     -----   ----------       -----  ----------     -----
      Total mortgage loans..........  1,415,218     74.82   $1,526,708       75.28     876,675     79.38
                                     ----------     -----   ----------       -----  ----------     -----
Consumer loans:
   Fixed equity.....................    200,500     10.61      193,394        9.54      89,315      8.09
   Home equity lines of credit......     76,472      4.04       80,447        3.97      50,618      4.58
   Student..........................     25,410      1.34       27,076        1.34      28,371      2.57
   Home improvement.................      9,439      0.50       12,778        0.63       9,920      0.90
   Automobile.......................     77,621      4.10       99,844        4.92       5,902      0.54
   Other ...........................     25,886      1.37       27,827        1.37       4,126      0.37
                                     ----------     -----   ----------       -----  ----------     -----
      Total consumer loans..........    415,328     21.96      441,366       21.77     188,252     17.05
                                     ----------     -----   ----------       -----  ----------     -----
Commercial business loans...........     60,932      3.22       59,844        2.95      39,488      3.57
                                     ----------     -----   ----------       -----  ----------     -----
      Total loans receivable........  1,891,478    100.00%   2,027,918      100.00%  1,104,415    100.00%
Less:
   Undisbursed loan proceeds........     44,467                 37,490                  14,658
   Deferred fees and discounts......     12,245                  5,554                      14
   Allowance for loan losses........      3,611                 12,238                   6,948
                                     ----------             ----------              ----------
      Total loans receivable, net... $1,831,155             $1,972,636              $1,082,795
                                     ==========             ==========              ==========

</TABLE>

<TABLE>
<CAPTION>

                                             AT DECEMBER 31,
                                     ------------------------------------------
                                              1998                 1997
                                     -------------------- ---------------------
                                                  PERCENT               PERCENT
                                                    OF                     OF
                                        AMOUNT     TOTAL    AMOUNT        TOTAL
                                     ----------    -----  ----------      -----
                                             (Dollars in thousands)
<S>                                  <C>           <C>    <C>             <C>
Mortgage loans:
   One to four-family............... $  742,231    70.56% $  930,011       73.1%
   Multi-family.....................     53,521     5.09      68,811       5.41
   Commercial real estate...........     40,922     3.89      51,739       4.07
   Construction and development.....     21,939     2.09      24,774       1.95
                                     ----------    -----  ----------      -----
      Total mortgage loans..........    858,613    81.63   1,075,335      84.53
                                     ----------    -----  ----------      -----
Consumer loans:
   Fixed equity.....................     67,629     6.42      74,196       5.83
   Home equity lines of credit......     45,827     4.36      46,380       3.65
   Student..........................     29,634     2.82      29,425       2.31
   Home improvement.................      8,373     0.80       8,128       0.64
   Automobile.......................      8,762     0.83      14,201       1.11
   Other ...........................      4,208     0.40       5,692       0.45
                                     ----------    -----  ----------      -----
      Total consumer loans..........    164,433    15.63     178,022      13.99
                                     ----------    -----  ----------      -----
Commercial business loans...........     28,839     2.74      18,866       1.48
                                     ----------    -----  ----------      -----
      Total loans receivable........  1,051,885   100.00%  1,272,223     100.00%
Less:
   Undisbursed loan proceeds........      7,001                8,788
   Deferred fees and discounts......        440                1,158
   Allowance for loan losses........      6,855                7,195
                                     ----------           ----------
      Total loans receivable, net... $1,037,589           $1,255,082
                                     ==========           ==========
</TABLE>

At December 31, 2001, our one-to four-family first mortgage loans were pledged
as collateral under a blanket pledge to the Federal Home Loan Bank ("FHLB") of
Chicago. As of December 31, 2001, there were no other significant concentrations
of loans such as loans to a number of borrowers engaged in similar activities.
Bank Mutual's mortgage loans, fixed equity, home equity lines of credit and home
improvement loans are primarily secured by properties housing one-to
four-families which are generally located in our local lending areas in
Wisconsin.



                                       6
<PAGE>



Loan Maturity. The following table presents the contractual maturity of our
loans at December 31, 2001. The table does not include the effect of prepayments
or scheduled principal amortization.

<TABLE>
<CAPTION>
                                                          AT DECEMBER 31, 2001
                                    -------------------------------------------------------------
                                                                        COMMERCIAL
                                    MORTGAGE LOANS   CONSUMER LOANS   BUSINESS LOANS     TOTAL
                                    --------------   --------------   --------------   ----------
                                                             (IN THOUSANDS)
<S>                                 <C>                <C>              <C>            <C>
AMOUNTS DUE:

   Within one year ..............   $     43,903       $   39,313       $   27,065     $  110,281
   After one year
      One to two years ..........         22,812           29,203            9,116         61,131
      Two to three years ........         44,041           31,829           13,791         89,661
      Three to five years .......         46,240           73,032            4,665        123,937
      Five to ten years .........        201,022          177,687            1,478        380,187
      Ten to twenty years .......        512,733           64,264            4,817        581,814
      Over twenty years .........        544,467               --               --        544,467
                                    ------------       ----------       ----------     ----------
         Total due after one year      1,371,315          376,015           33,867      1,781,197
                                    ------------       ----------       ----------     ----------
         Total loans receivable .   $  1,415,218       $  415,328       $   60,932     $1,891,478
                                    ============       ==========       ==========     ==========
</TABLE>

The following table presents, as of December 31, 2001, the dollar amount of all
loans, due after December 31, 2002, and whether these loans have fixed interest
rates or adjustable interest rates.

<TABLE>
<CAPTION>
                                                                           DUE AFTER DECEMBER 31, 2002
                                                          ------------------------------------------------------------
                                                              FIXED                ADJUSTABLE                TOTAL
                                                          -------------            -----------           -------------
                                                                                 (IN THOUSANDS)
<S>                                                       <C>                      <C>                   <C>
Mortgage loans.......................................     $     596,108            $   775,207           $   1,371,315
Consumer loans.......................................           221,184                154,831                 376,015
Commercial business loans............................            29,037                  4,830                  33,867
                                                          -------------            -----------           -------------
         Total loans due after one year..............     $     846,329            $   934,868           $   1,781,197
                                                          =============            ===========           =============
</TABLE>

The following table presents our loan originations, purchases, sales and
principal payments for the periods indicated.

<TABLE>
<CAPTION>
                                                          FOR THE YEAR ENDED DECEMBER 31,
                                                       -----------  ----------   ------------
                                                           2001         2000          1999
                                                       -----------  ----------   ------------
                                                                  (IN THOUSANDS)

<S>                                                    <C>          <C>          <C>
Balance outstanding at beginning of period ........... $ 2,035,387  $1,104,956   $  1,079,608
ORIGINATIONS:
    Mortgage loans ...................................     691,466     189,706        171,071
    Consumer  loans ..................................     242,580     141,943        116,549
    Commercial business loans ........................      30,202      23,189         30,288
                                                       -----------  ----------   ------------
          Total loan  originations ...................     964,248     354,838        317,908
                                                       -----------  ----------   ------------
PURCHASES:
    One-to four-family mortgage loans ................       8,885      19,213         56,943
    First Northern loans (1) .........................           -     847,888             --
                                                       -----------  ----------   ------------
          Total loan purchases .......................       8,885     867,101         56,943
                                                       -----------  ----------   ------------
LESS:
    Principal payments and repayments:
      Mortgage loans .................................     483,298     134,317        179,673
      Consumer loans .................................     267,592      89,637         91,557
      Commercial business loans ......................      23,792      32,412         19,639
                                                       -----------  ----------   ------------
          Total principal payments ...................     774,682     256,366        290,869
                                                       -----------  ----------   ------------
    Transfers to foreclosed real estate ..............         409       2,697          1,773
                                                       -----------  ----------   ------------
    Loan sales:
      Mortgage loans .................................     307,843      32,397         56,861
      Education loans ................................       1,787          48             --
                                                       -----------  ----------   ------------
          Total loan sales ...........................     309,630      32,445         56,861
                                                       -----------  ----------   ------------
    Total loans receivable and loans held for sale.... $ 1,923,799  $2,035,387   $  1,104,956
                                                       ===========  ==========   ============
</TABLE>

(1)  First Northern loans before deductions of undisbursed loan proceeds,
     allowances for loan losses, discounts and premiums.


                                       7

<PAGE>


Residential Mortgage Lending. Our primary lending activity has been the
origination of first mortgage loans secured by one- to four-family properties,
within our primary lending area. Most of these loans are owner-occupied;
however, we do originate first mortgage loans on second homes, seasonal homes
and investment properties. In addition to our loan originations, we have
purchased one- to four-family first mortgage loans of $8.9 million in 2001,
$19.2 million in 2000 and $56.9 million in 1999. We review these loans for
compliance with our underwriting standards, and generally only invest in loans
in the midwestern United States.

We offer conventional fixed rate mortgage loans and ARM loans with maturity
dates up to 30 years. Residential mortgage loans generally are underwritten to
Federal National Mortgage Association Standards ("Fannie Mae") or Federal Home
Loan Mortgage Corporation ("Freddie Mac") guidelines. All ARM mortgage loans and
some fixed rate mortgage loans with maturities of up to 20 years are held in our
portfolio. Fixed rate mortgage loans with maturities greater than 15 years
typically are sold without recourse, servicing retained, into the secondary
market. During the past few years we have generally not charged loan origination
fees. The interest rates charged on mortgage loan originations at any given date
will vary, depending upon conditions in the local and secondary markets.

We also originate "jumbo mortgage loans" in excess of the Fannie Mae or Freddie
Mac maximum loan amount, which was $275,000 for both agencies in 2001. Effective
for 2002, the maximum loan amount increased to $300,700 for both agencies. Fixed
rate jumbo mortgage loans generally are sold servicing released without recourse
to secondary market purchasers of such loans. ARM jumbo mortgage loans are
underwritten in accordance with our underwriting guidelines and are retained in
our loan portfolio.

Mortgage loan originations are solicited from real estate brokers, builders,
existing customers, community groups and residents of the local communities
located in our primary market area through our loan origination staff. We also
advertise our mortgage loan products through local newspapers, periodicals,
internal customer communications and our website.

We currently offer loans that conform to underwriting standards that are based
on standards specified by Fannie Mae or Freddie Mac ("conforming loans") and
also originate a limited amount of non-conforming loans for our own portfolio or
for sale. Loans may be fixed rate one- to four-family mortgage loans or
adjustable rate one- to four-family mortgage loans with maturities of up to 30
years. The average size of our one- to four-family mortgage loans originated in
2001 and 2000 was approximately, $105,000, and in 1999 was $94,000. The overall
average size of our one- to four-family mortgage loans was approximately $55,000
at December 31, 2001. We are an approved seller/servicer for Fannie Mae, Freddie
Mac and the FHLB of Chicago's Mortgage Partnership Finance Program.

The focus of our residential mortgage loan portfolio is the origination of 30
year ARM loans with interest rates adjustable in one, two, three, or five years.
ARM loans typically are adjusted by a maximum of 200 basis points per adjustment
period with a lifetime cap of 6% above the origination rate for First Northern
Savings Bank and a lifetime interest rate cap of 12.9% for Mutual Savings Bank.
Monthly payments of principal and interest are adjusted when the interest rate
adjusts. We do not offer ARM loans which provide for negative amortization. The
initial rates offered on ARM loans fluctuate with general interest rate changes
and are determined by secondary market pricing, competitive conditions and our
yield requirements. We currently utilize the monthly average yield on United
States treasury securities, adjusted to a constant maturity of one year
("constant treasury maturity index") or the National Monthly Median Cost of
Funds ("NMCOF") for Savings Association Insurance Fund ("SAIF") insured
institutions as the indexes to determine the interest rate payable upon the
adjustment date of our ARM loans. Some of the ARM loans are granted with
conversion options which provide terms under which the borrower may convert the
mortgage loan to a fixed rate mortgage loan for a limited period early in the
term of the ARM loan. The terms at which the ARM loan may be converted to a
fixed rate loan are established at the date of loan origination and are set at a
level allowing us to sell the ARM loan into the secondary market upon
conversion.

ARM loans may pose credit risks different from the risks inherent in fixed rate
loans, primarily because as interest rates rise, the underlying payments from
the borrowers rise, thereby increasing the potential for payment default. At the
same time, the marketability of the underlying property may be adversely
affected by higher interest rates.

The volume and types of ARM loans we originate have been affected by the level
of market interest rates, competition, consumer preferences and the availability
of funds. Although we will continue to offer ARM loans, we cannot


                                       8

<PAGE>


guarantee that we will be able to originate a sufficient volume of ARM loans to
increase or maintain the proportion that these loans bear to our total loans.

In addition to conventional fixed rate and ARM loans, we are authorized to
originate mortgages utilizing various government programs, including programs
offered by the Federal Housing Administration, the Federal Veterans
Administration, and Guaranteed Rural Housing. We also participate in two
state-sponsored mortgage programs operated by Wisconsin Housing and Economic
Development Authority ("WHEDA") and Wisconsin Department of Veterans Affairs
("WDVA"). We originate these state-sponsored loans as an agent and assign them
to the agency immediately after closing. Servicing is retained by us on both the
WHEDA and WDVA loans.

Upon receipt of a completed mortgage loan application from a prospective
borrower, a credit report is ordered, income and other information is verified,
and if necessary, additional financial information is requested. An appraisal of
the real estate to secure the loan is required, which must be performed by a
certified appraiser approved by the board of directors. A title insurance policy
is required on all real estate first mortgage loans. Evidence of adequate hazard
insurance and flood insurance, if applicable, is required prior to closing.
Borrowers are required to make monthly payments to fund principal and interest
as well as private mortgage insurance and flood insurance, if applicable. With
some exceptions for lower loan-to-value ratio loans, borrowers also generally
are required to escrow in advance for real estate taxes and hazard insurance. We
make disbursements for these items from the escrow account as the obligations
become due.

In addition to our full documentation loan program, increasingly we process
loans as reduced documentation loans. These loans are processed under the Fannie
Mae or Freddie Mac alternative documentation program. We require applicants for
reduced documentation loans to complete a Fannie Mae or Freddie Mac loan
application and request income, assets and debt information from the borrower.
In addition to obtaining outside vendor credit reports on all borrowers, we also
look at other information to ascertain the creditworthiness of the borrower. In
most instances, we utilize the Fannie Mae's "Desktop Underwriter" or Freddie
Mac's "Loan Prospector" automated underwriting process to further reduce the
necessary documentation. For example, a simplified appraisal or inspection may
be used to verify the value of the property. All loans that are processed with
reduced documentation conform to secondary market standards and are generally
saleable.

Our Underwriting Department reviews all pertinent information prior to making a
credit decision to approve or deny an application. All recommendations to deny
are reviewed by a designated officer of Mutual Savings Bank or First Northern
Savings Bank prior to the final disposition of the loan application. Our lending
policies generally limit the maximum loan-to-value ratio on one- to four-family
mortgage loans secured by owner-occupied properties to 97% of the lesser of the
appraised value or purchase price of the property. Loans above 80% loan-to-value
ratios are subject to the availability of private mortgage insurance. Coverage
is required to reduce our exposure to less than 80% of value.

Our originations of residential mortgage loans amounted to $617.8 million in
2001, $117.6 million in 2000, and $152.7 million in 1999. A number of our
mortgage loan originations have been the result of refinancing of our existing
loans due to the relatively low interest rate levels over the past three years.
The First Northern acquisition also affected the comparison between 2001 and the
other years of 2000 and 1999. Total refinancings of our existing mortgage loans
were as follows:

<TABLE>
<CAPTION>
                                                                       PERCENTAGE OF
                                                                       MORTGAGE LOAN
PERIOD                                                   AMOUNT        ORIGINATIONS
------                                                   ------        ------------
                                                            (DOLLARS IN MILLIONS)
<S>                                                   <C>                   <C>
Year ended December 31, 2001.....................      $   239.2             34.6%
Year ended December 31, 2000.....................           17.6              9.3
Year ended December 31, 1999.....................           49.4             28.9
</TABLE>

In addition to our standard mortgage and consumer credit products, we have
developed mortgage programs designed to specifically address the credit needs of
low- to moderate-income home mortgage applicants and first-time home buyers.
Among the features of the low- to moderate-income home mortgage and first-time
home buyer's programs are reduced rates, lower down payments, reduced fees and
closing costs, and generally less restrictive requirements for qualification


                                       9

<PAGE>


compared with our traditional one- to four-family mortgage loans. For instance,
certain of these programs currently provide for loans with up to 97%
loan-to-value ratios and rates which are lower than our traditional mortgage
loans.

Consumer Loans. We have been expanding our consumer loan originations because
higher yields can be obtained, there is strong consumer demand for such
products, and we have experienced relatively low delinquency and few losses on
such products. In addition, we believe that offering consumer loan products
helps to expand and create stronger ties to our existing customer base by
increasing the number of customer relationships and providing cross-marketing
opportunities. At December 31, 2001, $415.3 million, or 22.0%, of our gross loan
portfolio was in consumer loans. Consumer loan products offered within our
market areas include home equity loans, home equity lines of credit, home
improvement loans, automobile loans, recreational vehicle loans, marine loans,
deposit account loans, overdraft protection lines of credit, unsecured consumer
loans through the MasterCard and Visa credit card programs (offered through Elan
Financial Services) and federally guaranteed student loans.

Our focus in consumer lending has been the origination of home equity loans,
home improvement, home equity lines of credit and automobile loans. At December
31, 2001, we had $364.0 million or 87.6% of the consumer loan portfolio in such
loans. Underwriting procedures for the home equity and home equity lines of
credit loans include a comprehensive review of the loan application, and require
an acceptable credit rating and verification of the value of the equity in the
home and income of the borrower. The loan-to-value ratio and the total debt
ratios to income are determining factors in the underwriting process. Home
equity loan and home improvement loan originations are developed through the use
of direct mail, cross-sales to existing customers, radio advertisement, and
advertisements in local newspapers.

We make indirect automobile loans through applications taken by selected
automobile dealers on application forms approved by us. The applications are
delivered to Savings Financial Corporation ("SFC"), a 50% owned subsidiary of
First Northern Savings Bank, for underwriting. If an application is approved,
money is funded to the dealer and the loan becomes a part of the SFC automobile
portfolio. From time to time, the SFC automobile portfolio is then sold either
to the parent companies of SFC or to First Northern Savings Bank's subsidiary
First Northern Investments Inc.

We originate both fixed rate and variable rate home equity loans and home
improvement loans with combined loan-to-value ratios to 100%. Pricing on fixed
rate home equity and home improvement loans is reviewed by management, and
generally terms are in the three to fifteen year range in order to minimize
interest rate risk. During 2001 we originated approximately $98.5 million of
fixed rate home equity or home improvement loans. These loans carry a weighted
average written term of 9 years and a fixed rate ranging from 5.00% to 12.00%.
We also offer adjustable rate home equity and home improvement loans. At
December 31, 2001, $83.3 million or 29.1% of the home equity and home
improvement loan portfolio carried an adjustable rate. The adjustable rate loans
have a fixed rate for six months to three years then adjust annually or monthly
depending upon the offering, with terms of up to twenty years. Our home equity
and home improvement loans are originated in amounts which, together with the
amount of the first mortgage, do not exceed 100% of the value of the property
securing the loan. Many of our home equity and home improvement loans are
secured by a first mortgage.

Our home equity credit line loans, which totaled $76.5 million, or 18.4% of
total consumer loans at December 31, 2001, are adjustable rate loans secured by
a first or second mortgage on owner-occupied one to four-family residences
located in the state of Wisconsin. Current interest rates on home equity credit
lines are tied to the prime rate, adjust monthly and range from prime rate to
350 basis points over the prime rate, depending on the loan-to-value ratio. Home
equity line of credit loans are made for terms up to 10 years and require a
minimum monthly payment of interest only or the greater of $100 or 1 1/2% of the
month end balance. An annual fee is charged on home equity lines of credit.

At December 31, 2001, student loans amounted to $25.4 million, or 6.1% of our
consumer loan portfolio. These loans are serviced by Great Lakes Higher
Education Servicing Corporation.

Multi-family and Commercial Real Estate Loans. At December 31, 2001, our
multi-family and commercial real estate loan portfolio was $297.5 million or
15.7% of our total loans receivable. The multi-family and commercial real estate
loan portfolio consist of fixed rate, ARM and balloon loans originated at
prevailing market rates. This portfolio generally consists of loans secured by
apartment buildings, office buildings, warehouses, industrial buildings and
retail centers. These loans typically do not exceed 80% of the lesser of the
purchase price or an appraisal by an appraiser


                                       10

<PAGE>


designated by us. Balloon loans generally are amortized on a 15 to 25 year basis
with a typical loan term of 3 to 10 years.

Loans secured by multi-family and commercial real estate are granted based on
the income producing potential of the property and the financial strength of the
borrower. The net operating income, which is the income derived from the
operation of the property less all operating expenses, must be sufficient to
cover the payments relating to the outstanding debt. In most cases, we obtain
joint and several personal guarantees from the principals involved. We generally
require an assignment of rents or leases in order to be assured that the cash
flow from the project will be used to repay the debt. Appraisals on properties
securing multi-family and commercial real estate loans are performed by
independent state certified fee appraisers approved by the board of directors.
Title and hazard insurance are required as well as flood insurance, if
applicable. Environmental assessments are performed on certain multi-family and
commercial real estate loans in excess of $500,000. In addition, an annual
review is performed by us on multi-family and commercial real estate loans over
$1.0 million.

At December 31, 2001, the largest outstanding loan on a multi-family property
was $9.0 million on a 128 unit apartment project located in Brookfield,
Wisconsin. At the same date, the largest outstanding loan on a commercial real
estate property was $17.6 million on a retail/office building complex located in
Brookfield, Wisconsin. At December 31, 2001, these loans were current and
performing in accordance with their terms.

Loans secured by multi-family and commercial real estate properties are
generally larger and involve a greater degree of credit risk than one- to
four-family residential mortgage loans. Such loans typically involve large
balances to single borrowers or groups of related borrowers. Because payments on
loans secured by multi-family and commercial real estate properties are often
dependent on the successful operation or management of the properties, repayment
of such loans may be subject to adverse conditions in the real estate market or
the economy. If the cash flow from the project decreases, or if leases are not
obtained or renewed, the borrower's ability to repay the loan may be impaired.

Commercial Business Loans. At December 31, 2001, our commercial business loan
portfolio consisted of loans totaling $60.9 million or 3.2% of our total loans
receivable. The commercial loan portfolio consists of loans to businesses for
equipment purchases, working capital lines of credit, debt refinancing, SBA
loans and domestic stand-by letters of credit. Typically, these loans are
secured by business assets and personal guarantees. We offer both variable and
fixed rate loans. Approximately 29.1% of the commercial business loans have an
interest rate adjusted monthly based on the prevailing prime rate. Term loans
are generally amortized over a three to seven year period. Fixed rate loans are
priced at a margin over the yield on US Treasury issues with maturities that
correspond to the maturities of the notes. All lines of credit and term loans
with balances over $500,000 are reviewed annually. The largest commercial
business loan at December 31, 2001 had an outstanding balance of $17.5 million
and was secured by equipment and chattel paper.

LOAN APPROVAL AUTHORITY

Currently, Mutual Savings Bank and First Northern Savings Bank have somewhat
different underwriting approval limits and authority. Both Mutual Savings Bank
and First Northern Savings Bank are in the process of reviewing their approval
limits through a combined "best practices" committee. This best practices
committee is reviewing, in 2002, approval limits as well as a loan processing
documentation system. As a result of the different loan approval authority, the
following is a summary of each respective policy.

Mutual Savings Bank.

For one- to four- family residential loans sold into the secondary market, our
underwriters are authorized by the board of directors to approve loans processed
through the Fannie Mae "Desktop Underwriter" automated underwriting system up to
$300,700. For one-to four-family residential loans held in portfolio, our
underwriters are authorized by the board of directors to approve loans processed
through the Fannie Mae "Desktop Underwriter" automated underwriting system up to
$150,000, provided the loan-to-value ratio is 75% or less and the loan meets
other specific underwriting criteria. All other loans in excess of $80,000 must
be approved by a senior officer.



                                       11
<PAGE>


Consumer loan underwriters have individual loan approval authorities ranging
from $15,000 to $50,000. Loan applications exceeding $50,000 must be approved by
a senior officer. All home equity loans where the loan-to-value ratio exceeds
80% and/or where the normal underwriting standards are not met must be approved
by a senior officer.

The executive committee of the Bank's board of directors reviews on a monthly
basis all loans made, and the board ratifies actions taken by the committee.

Multi-family and commercial loan proposals and multi-family and commercial
construction loan proposals are subject to approval of the executive committee
of the board. All loan decisions are subject to ratification by the board at
their monthly meetings.

Any commercial business loan less than $50,000 may be approved by the department
head or a senior officer, and any two of those individuals may approve loans in
the amount of $50,000 to $100,000. All commercial business loans in the amount
of $100,000 or more are approved by the executive committee of the board of
directors and ratified by the board at their next meeting.

First Northern Savings Bank

For one-to-four family residential loans, First Northern Savings Bank
underwriters are authorized by the board of directors to approve loans processed
through Freddie Mac "Loan Prospector" software up to $300,700. Loans in excess
of $300,700 and less than $500,000 are reviewed by a management loan committee
comprised of three senior management officers. Loans in excess of $500,000 will
be reviewed by a board of directors loan committee or the entire board of
directors.

Consumer loan underwriters have individual loan authority ranging from $10,000
to $150,000. Loan applications exceeding the $150,000 limit but less than
$250,000 are reviewed by a consumer loan committee comprised of three senior
management officers. Any two of the three members of the consumer loan committee
are needed to approve a loan. Loans exceeding the $250,000 limit will be
reviewed by a board loan committee or the entire board of directors.

Multi-family and commercial loans generally are reviewed by our management
and/or board loan committee.

Generally, commercial business loans less than $100,000 are approved by the head
of the commercial lending department. Loans in excess of $100,000 but less than
$500,000 are reviewed by a commercial loan committee comprised of four senior
management officers. Three of the four committee members constitute a quorum and
two out of the three members need to give their approval of the loan. Loans in
excess of $500,000 are reviewed by a board loan committee or the entire board of
directors.

ASSET QUALITY

One of our key operating objectives has been and continues to be to maintain a
high level of asset quality. Through a variety of strategies, including, but not
limited to, borrower workout arrangements and aggressive marketing of foreclosed
properties and repossessed assets, we have been proactive in addressing problem
and non-performing assets. These strategies, as well as our emphasis on quality
loan underwriting, our maintenance of sound credit standards for new loan
originations and relatively favorable economic and real estate market conditions
have resulted in historically low delinquency ratios and, in recent years, a
reduction in non-performing assets. These factors have helped strengthen our
financial condition.

Delinquent Loans and Foreclosed Assets. When a borrower fails to make required
payments on a loan, we take a number of steps to induce the borrower to cure the
delinquency and restore the loan to a current status. In the case of one-to-four
family mortgage loans, our loan servicing department is responsible for
collection procedures from the 15th day of delinquency through the completion of
foreclosure. Specific procedures include a late charge notice being sent at the
time a payment is over 15 days past due with a second notice (in the form of a
billing coupon) being sent before the payment becomes 30 days past due. Once the
account is 30 days past due, we attempt telephone contact with the borrower.
Letters are sent if contact has not been established by the 45th day of
delinquency. On the 60th day of delinquency, attempts at telephone contact
continue and stronger letters, including foreclosure notices, are sent. If
telephone contact cannot be made, we send our property inspector or a loan
officer to the property.


                                       12

<PAGE>


When contact is made with the borrower, we attempt to obtain full payment or
work out a repayment schedule to avoid foreclosure. All properties are inspected
prior to foreclosure approval. Most borrowers pay before the deadline given and
it is not necessary to start foreclosure action. If it is, action starts when
the loan is between the 90th and 120th day of delinquency. We normally seek the
shortest redemption period possible. If we obtain the property at the
foreclosure sale, we hold the properties as real estate owned. They are marketed
after a market evaluation is obtained and any PMI claims are filed. The
collection procedures and guidelines as outlined by Fannie Mae, Freddie Mac,
Federal Housing Administration (FHA), Veterans Administration (VA), Department
of Veterans Affairs (DVA), Wisconsin Housing and Economic Development Authority
(WHEDA) and Guaranteed Rural Housing are followed.

The collection procedures for consumer loans, excluding student loans and
indirect consumer loans, include our sending periodic late notices to a borrower
once a loan is 5 to 15 days past due depending upon the grace period associated
with a loan. We attempt to make direct contact with a borrower once a loan
becomes 30 days past due. Supervisory personnel review loans 60 days or more
delinquent on a regular basis. If collection activity is unsuccessful after 90
days, we may pursue legal remedies ourselves or refer the matter to our legal
counsel for further collection effort or charge-off a loan. Loans we deem to be
uncollectible are proposed for charge off. Charge-offs of consumer loans require
the approval of our consumer loan manager, a senior officer or a management
committee. All student loans are serviced by the Great Lakes Higher Education
Servicing Corporation or the Student Loan Marketing Association ("Sallie Mae")
which guarantees their servicing to comply with all Department of Education
Guidelines. Our student loan portfolio is guaranteed by the Great Lakes Higher
Education Guaranty Corporation, which is reinsured by the U.S. Department of
Education.

The collection procedures for multi-family, commercial real estate and
commercial business loans include sending periodic late notices to a borrower
once a loan is past due. We attempt to make direct contact with a borrower once
a loan becomes 15 days past due. A loan servicing manager or a manager of
multi-family and commercial real estate loans reviews loans 15 days or more
delinquent on a regular basis. The commercial banking manager reviews loans 10
days or more delinquent on a regular basis. If collection activity is
unsuccessful, we may refer the matter to our legal counsel for further
collection effort. Within 90 days, loans we deem to be uncollectible are
proposed for repossession or foreclosure and charge-off. This action requires
the approval of our board of directors.

Our policies require that management continuously monitor the status of the loan
portfolio and report to the board of directors on a monthly basis. These reports
include information on delinquent loans and foreclosed real estate.

The following table presents information regarding non-accrual mortgage,
consumer and other loans, commercial business loans. accruing loans delinquent
90 days or more, and foreclosed properties and repossessed assets as of the
dates indicated.

<TABLE>
<CAPTION>
                                                                          AT DECEMBER 31,
                                                  ------------------------------------------------------------
                                                    2001          2000         1999         1998         1997
                                                  --------     --------     --------    ---------    ---------
                                                          (DOLLARS IN THOUSANDS)

<S>                                               <C>          <C>          <C>         <C>          <C>
Non-accrual mortgage loans ...................    $  1,814     $    730     $  3,372    $   2,793    $   8,936
Non-accrual consumer loans ...................         444          383          283          320          732
Non-accrual commercial business loans ........         346          750           --           --           --
Accruing loans delinquent 90 days or more ....         936        1,258        1,152        3,617          813
                                                  --------     --------     --------    ---------    ---------
        Total non-performing loans ...........       3,540        3,121        4,807        6,730       10,481
Foreclosed properties and repossessed
   assets, net ...............................         383        2,281        3,018        3,505          159
                                                  --------     --------     --------    ---------    ---------
        Total non-performing assets...........    $  3,923     $  5,402     $  7,825    $  10,235    $  10,640
                                                  ========     ========     ========    =========    =========
Non-performing loans to total loans ..........        0.19%        0.16%        0.44%        0.65%        0.84%
Non-performing assets to total asset .........        0.14         0.19         0.44         0.55         0.58
Interest income that would have been
   recognized if non-accrual loans
     had been current ........................    $    139     $     77     $    245    $     185    $     894
                                                  ========     ========     ========    =========    =========
</TABLE>

Included in non-accrual mortgage loans at December 31, 1997 are loans with a
carrying value of $5.2 million which were considered to be impaired and which
resulted from the acquisition of First Federal. There was no specific reserve
related to these or any other loans, at that date or at any date presented.
There are no significant loans, which were considered to be impaired as defined
in Statement of Financial Accounting Standards No. 114 at December 31, 2001,
2000, 1999, 1998, or 1997. The average balance of impaired loans was $3.9
million and $5.0 million in the years


                                       13

<PAGE>


ended December 31, 1998 and 1997, respectively, and $0 for all other periods
presented. No interest income was recognized on any loan while in an impaired
state.

At December 31, 2001, there were $3.2 million of performing loans to borrowers
where available information causes management to have doubts as to the ability
of such borrowers to comply with the present loan repayment terms and would
indicate that such loans have the potential to be included as non-accrual, past
due or impaired (as defined in SFAS No. 114) in the future periods. However, no
loss is anticipated at this time.

There are no restructured loans at the dates presented.

With the exception of mortgage loans insured or guaranteed by the FHA, VA or
Guaranteed Rural Housing, we stop accruing income on loans when interest or
principal payments are greater than 90 days in arrears or earlier when the
timely collectibility of such interest or principal is doubtful. We designate
loans on which we stop accruing income as non-accrual loans and we reverse
outstanding interest that we previously credited to income. We may recognize
income in the period that we collect it when the ultimate collectibility of
principal is no longer in doubt. We return a non-accrual loan to accrual status
when factors indicating doubtful collection no longer exist. We had $2.6 million
and $1.9 million of non-accrual loans at December 31, 2001 and 2000,
respectively. Interest income that would have been recognized had such loans
been performing in accordance with their contractual terms totaled approximately
$139,000 and $77,200 for the year December 31, 2001 and 2000, respectively. A
total of approximately $85,000 and $110,000 of interest income was actually
recorded on such loans in 2001 and 2000, respectively.

All commercial real estate loans which are greater than 90 days past due are
considered to be potentially impaired. Impaired loans are individually assessed
to determine whether a loan's carrying value is in excess of the fair value of
the collateral or the present value of the loan's cash flows discounted at the
loan's effective interest rate.

Foreclosed real estate consists of property we acquired through foreclosure or
deed in lieu of foreclosure. Foreclosed real estate properties are initially
recorded at the lower of the recorded investment in the loan or fair value.
Thereafter, we carry foreclosed real estate at fair value less estimated selling
costs. Foreclosed real estate is inspected periodically. Additional outside
appraisals are obtained if we consider that appropriate. Additional write-downs
may occur if the property value deteriorates. These additional write-downs are
charged directly to current operations.

Allowance for Loan Losses. The following table presents the activity in our
allowance for loan losses at or for the periods indicated.

<TABLE>
<CAPTION>
                                                       AT OR FOR THE YEARS ENDED DECEMBER 31,
                                     --------------------------------------------------------------------
                                       2001           2000           1999           1998           1997
                                     --------       --------       --------       --------       --------
                                                               (DOLLARS IN THOUSANDS)
<S>                                  <C>            <C>            <C>            <C>            <C>
Balance at beginning
  of period ....................     $ 12,238       $  6,948       $  6,855       $  7,195       $  3,921
Provision for loan losses ......          723            423            350            637          1,065
Purchase of
   First Northern  (2000) and
      First Federal (1997) .....           --          5,028             --             --          2,449
Charge-offs:
   Mortgage loans ..............          (65)           (38)          (152)          (997)          (624)
   Consumer loans ..............         (337)          (156)          (189)          (223)          (127)
   Commercial business loans ...         (415)            --             --             --             --
                                     --------       --------       --------       --------       --------
      Total charge-offs ........         (817)          (194)          (341)        (1,220)          (751)
Recoveries:
   Mortgage loans ..............           26              1             40            206            479
   Consumer loans ..............           57             32             44             37             32
   Commercial business loans ...           18             --             --             --             --
                                     --------       --------       --------       --------       --------
      Total recoveries .........          101             33             84            243            511
                                     --------       --------       --------       --------       --------
   Net charge-offs .............         (716)          (161)          (257)          (977)          (240)
                                     --------       --------       --------       --------       --------
Balance at end of period .......     $ 12,245       $ 12,238       $  6,948       $  6,855       $  7,195
                                     ========       ========       ========       ========       ========
Net charge-offs to average loans         0.04%          0.01%          0.02%          0.08%          0.02%
Allowance for loan losses
  to total loans ...............         0.67           0.62           0.64           0.66           0.57
Allowance for loan losses to
  non-performing loans .........       345.90         392.12         144.54         101.86          68.65
</TABLE>

The allowance for loan losses has been determined in accordance with generally
accepted accounting principles. We are responsible for the timely and periodic
determination of the amount of the allowance required. We believe that our


                                       14

<PAGE>


allowance for loan losses is adequate to cover specifically identifiable loan
losses, as well as estimated losses inherent in our portfolio for which certain
losses are probable but not specifically identifiable.

Loan loss allowances are reviewed monthly. General allowances are maintained by
the following categories for performing loans to provide for unidentified
inherent losses in the portfolios:

     --   One-to-four family
     --   Consumer
     --   Multi-family and commercial real estate
     --   Commercial business

Allowance goals have been established by an internal risk evaluation by loan
category. Various factors are taken into consideration, including: historical
loss experience, economic factors and other factors, that, in management's
judgement would affect the collectibility of the portfolio as of the evaluation
date. Adjustments to the allowance for loan losses are charged against
operations as provision for loan losses, to maintain allowances at the desired
levels.

The appropriateness of the allowance is reviewed by senior management based upon
its evaluation of then-existing economic and business conditions affecting the
key lending areas of Bank Mutual. Other outside factors such as credit quality
trends, collateral values, loan volumes and concentrations, specific industry
conditions within portfolio segments and recent loss experience in particular
segments of the portfolio that existed as of the balance sheet date and the
impact that such conditions were believed to have had on the collectibility of
the loan are also considered. Our board of directors also reviews the loan loss
allowances compared to the relative size of the portfolio on at least a
quarterly basis.

Delinquent and Non-performing loans. One-to four-family loans delinquent more
than 90 days, multi-family and commercial real estate loans more than 60 days,
consumer loans more than 90 days and commercial business loans more than 60 days
are reviewed and analyzed by senior officers on an individual basis. Any
potential loss is charged against the allowance by establishing a corresponding
specific allowance for that loan from the general allowance. In such an event,
the loan is then reduced by the amount of the specific allowance and a
corresponding amount is charged off to the allowance for losses on loans.

By following careful underwriting guidelines, we have historically maintained
low levels of non-performing loans to total loans. Our ratio of non-performing
loans to total loans at December 31, 1996 was 0.29%. It increased after the
acquisition of First Federal to a level of 0.84% at December 31, 1997. However,
at December 31, 2001, the level dropped to 0.19% as a result of careful
underwriting and management's emphasis to reduce non-performing loans.

We believe the primary risks inherent in our portfolio are possible increases in
interest rates, a possible decline in the economy, generally, and a possible
decline in real estate market values. Any one or a combination of these events
may adversely affect our loan portfolio resulting in increased delinquencies and
loan losses. Accordingly, and because of the increased concentration of consumer
loans, we have taken steps to increase our level of loan loss allowances over
the last 5 years. At December 31, 2001, the allowance for loan losses as a
percentage of total loans was 0.67% compared with 0.48% at December 31, 1996.
Furthermore, the increase in the allowance for loan losses each year from 1997
to 2001 reflects our strategy of resolving non-performing loans while providing
adequate allowances for inherent losses in the portfolio and identifying
potential losses in a timely manner, as well as providing an adequate allowance
to reflect changes in the components of the portfolio during that period.

Although we believe that we have established and maintained the allowance for
loan losses at adequate levels, future additions may be necessary if economic
and other conditions in the future differ substantially from the current
operating environment. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review our loan and foreclosed
real estate portfolios and the related allowance for loan losses and valuation
allowance for foreclosed real estate. One or more of these agencies,
specifically the OTS or the Federal Deposit Insurance Corporation ("FDIC"), may
require us to increase the allowance for loan losses or the valuation allowance
for foreclosed real estate based on their judgements of information available to
them at the time of their examination, thereby adversely affecting our results
of operations.



                                       15
<PAGE>


See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Comparison of Operating Results for the years ended December 31,
2001 and 2000--Provision for Loan Losses." The following tables represent our
allocation of allowance for loan losses by loan category on the dates indicated:

<TABLE>
<CAPTION>
                                                                         AT DECEMBER 31,
                             ---------------------------------------------------------------------------------------------
                                    2001               2000               1999              1998                1997
                             -----------------  ------------------  ----------------- -----------------  ------------------
                                    PERCENTAGE          PERCENTAGE         PERCENTAGE        PERCENTAGE         PERCENTAGE
                                        OF                  OF                 OF                OF                  OF
                                      LOANS IN           LOANS IN           LOANS IN          LOANS IN            LOANS IN
                                      CATEGORY           CATEGORY           CATEGORY          CATEGORY            CATEGORY
                                      TO TOTAL           TO TOTAL           TO TOTAL          TO TOTAL            TO TOTAL
LOAN CATEGORY                AMOUNT    LOANS    AMOUNT     LOANS    AMOUNT    LOANS   AMOUNT    LOANS    AMOUNT     LOANS
-------------                ------    -----    ------     -----    ------    -----   ------    -----    ------     -----
                                                                    (Dollars in thousands)
<S>                          <C>        <C>      <C>        <C>     <C>        <C>     <C>      <C>      <C>        <C>
Mortgage loans
  One-to four-family.....    $ 5,608    52.46%   $6,279     59.56%  $ 4,736    67.37%  $5,189   70.56%   $4,978     73.10%
  Other..................      2,875    22.36     2,173     15.72       822    12.01      596   11.07     1,198     11.43
                             -------    -----    ------     -----   -------    -----   ------   -----    ------     -----
    Total  mortgage loans      8,483    74.82     8,452     75.28     5,558     79.38   5,785   81.63     6,176     84.53
Home equity lines........      1,803     4.04       519      3.97       253     4.58      229    4.36       231      3.65
Consumer.................      1,007    17.92     2,483     17.80       617    12.47      439   11.27       505     10.34
Commercial business loans        952     3.22       784      2.95       520     3.57      402    2.74       283      1.48
Unallocated..............         --       --        --      0.00        --     0.00       --    0.00        --      0.00
                             -------    -----    ------     -----   -------    -----   ------   -----    ------     -----
    Total allowance for
      loan losses........    $12,245   100.00%  $12,238    100.00%  $ 6,948   100.00%  $6,855  100.00%   $7,195    100.00%
                             =======   ======   =======    ======   =======   ======   ======  ======    ======    ======
</TABLE>

INVESTMENT ACTIVITIES

Investment Securities. Each Savings Bank's board of directors reviews and
approves its investment policy on an annual basis. Senior officers, as
authorized by the board of directors, implement this policy. Each Savings Bank's
board of directors reviews its investment activity on a monthly basis.

Our investment objectives are to meet legal liquidity requirements, generate a
favorable return on investments without undue compromise to our other business
objectives and our levels of interest rate risk, credit risk and investment
portfolio concentrations. Federally chartered savings banks have authority to
invest in various types of assets, including U.S. Treasury obligations,
securities of various federal agencies, State and Municipal obligations,
mortgage-related securities, mortgage derivative securities, certain time
deposits of insured banks and savings institutions, certain bankers'
acceptances, repurchase agreements, loans of federal funds, and, subject to
certain limits, corporate debt and equity securities, commercial paper and
mutual funds.

Mutual Savings Bank's investment policy allows participation in hedging
strategies or the use of financial futures, options or forward commitments or
interest rate swaps but only with prior approval of the board of directors. We
did not have any such hedging transactions in place at December 31, 2001. Our
investment policy prohibits the purchase of non-investment grade bonds. Our
investment policy also provides that we will not engage in any practice that the
Federal Financial Institutions Examination Council considers to be an unsuitable
investment practice. In addition, the policy provides that we shall attempt to
maintain primary liquidity consisting of investments in cash, cash in banks,
federal funds purchased and securities with remaining maturities of less than
six months in an amount equal to 4.0% of average daily deposits. At December 31,
2001, Mutual Savings Bank's and First Northern Savings Bank's primary liquidity
ratio was 13.3%, and 6.5%, respectively. For information regarding the carrying
values, yields and maturities of our investment securities and mortgage-related
securities, see "--Carrying Values, Yields and Maturities."

We classify securities as trading, held-to-maturity, or available-for-sale at
the date of purchase. At December 31, 2001, all investment securities are
classified as available-for-sale. These securities are carried at fair value
with the change in fair value recorded as a component of shareholders' equity.

Mortgage-related Securities. Most of our mortgage-related securities are
directly or indirectly insured or guaranteed by Government National Mortgage
Association ("GNMA"), Freddie Mac or Fannie Mae. The rest of the securities are
private placement collateralized mortgage obligations (CMOs). Private placement
CMOs carry higher credit risks and


                                       16

<PAGE>


higher yields than CMOs insured or guaranteed by agencies of the U.S.
Government. We classify our entire mortgage-related securities portfolio as
available-for-sale.

At December 31, 2001, mortgage-related securities available-for-sale totaled
$521.1 million, or 17.9% of total assets. At December 31, 2001, the
mortgage-related securities portfolio had a weighted average yield of 6.23%. Of
the mortgage-related securities we held at December 31, 2001, $465.0 million, or
89.2%, had fixed rates and $56.1 million, or 10.8%, had adjustable-rates.
Mortgage-related securities at December 31, 2001 included real estate mortgage
investment conduits (REMICs), which are securities derived by reallocating cash
flows from mortgage pass-through securities or from pools of mortgage loans held
by a trust. REMICs are a form of, and are often referred to as CMOs.

Our CMOs have fixed and variable coupon rates ranging from 2.88% to 7.25% and a
weighted average yield of 5.65% at December 31, 2001. At December 31, 2001, CMOs
totaled $272.1 million, which constituted 52.2% of the mortgage-related
securities portfolio, or 9.4% of total assets. Our CMOs had an expected average
life of 5.3 years at December 31, 2001. For a further discussion of our
investment policies, including those for mortgage-related securities, see
"--Investment Securities." Purchases of mortgage-related securities may decline
in the future to offset any significant increase in demand for one- to
four-family mortgage loans and other loans.

Mortgage-related securities generally yield less than the loans that underlie
such securities because of the cost of payment guarantees or credit enhancements
that reduce credit risk. However, mortgage-related securities are more liquid
than individual mortgage loans. In general, mortgage-related securities issued
or guaranteed by GNMA, Freddie Mac and Fannie Mae are weighted at no more than
20% for risk-based capital purposes, compared to the 50% risk weighting assigned
to most non-securitized residential mortgage loans.

While mortgage-related securities carry a reduced credit risk as compared to
whole loans, they remain subject to the risk of a fluctuating interest rate
environment. Along with other factors, such as the geographic distribution of
the underlying mortgage loans, changes in interest rates may alter the
prepayment rate of those mortgage loans and affect both the prepayment rates and
value of mortgage-related securities.



                                       17
<PAGE>



The following table presents our investment securities and mortgage-related
securities activities for the periods indicated.

<TABLE>
<CAPTION>
                                                          FOR THE YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------
                                                        2001           2000           1999
                                                     ---------      ---------      ---------
                                                                 (IN THOUSANDS)

<S>                                                  <C>            <C>            <C>
INVESTMENT SECURITIES AVAILABLE-FOR-SALE:

Carrying value at beginning of period ..........     $  94,129      $  57,763      $ 116,534
                                                     ---------      ---------      ---------
Purchases ......................................       174,938         47,509         21,481
Purchase of First Northern .....................            --         39,320             --
Calls ..........................................       (14,000)            --             --
Transfer from mutual funds to CMO ..............            --             --        (14,047)
Maturities .....................................      (163,178)       (52,160)       (65,000)
Sales ..........................................            --             --             --
Principal payments .............................          (563)           (13)            --
Premium amortization and discount accretion, net           503            (15)          (182)
Decrease (increase) in unrealized gains ........         1,230          1,725         (1,023)
                                                     ---------      ---------      ---------
Net increase (decrease) in investment securities        (1,070)        36,366        (58,771)
                                                     ---------      ---------      ---------
Carrying value at end of period ................     $  93,059      $  94,129      $  57,763
                                                     =========      =========      =========

MORTGAGE-RELATED SECURITIES AVAILABLE-FOR-SALE:
Carrying value at beginning of period ..........     $ 464,873      $ 374,100      $ 270,897
                                                     ---------      ---------      ---------
Purchases ......................................       176,658        120,690        213,504
Transfer from mutual funds to CMO ..............            --             --         14,047
Purchase of First Northern .....................            --         13,569             --
Sales ..........................................            --             --        (53,682)
Principal payments .............................      (128,256)       (52,467)       (60,367)
Premium amortization and discount accretion, net           723            501            262
Decrease (increase) in unrealized gains ........         7,086          8,480        (10,561)
                                                     ---------      ---------      ---------
Net increase in mortgage-related securities ....        56,211         90,773        103,203
                                                     ---------      ---------      ---------
Carrying value at end of period ................     $ 521,084      $ 464,873      $ 374,100
                                                     =========      =========      =========
</TABLE>



                                       18

<PAGE>



The following table presents the fair value of our money market investments,
investment securities and mortgage-related securities portfolios at the dates
indicated. It also presents the coupon type for the mortgage-related securities
portfolio. For all securities and for all periods presented, the carrying value
is equal to fair value.

<TABLE>
<CAPTION>
                                                                                AT DECEMBER 31,
                                                                 ------------------------------------------
                                                                     2001             2000         1999
                                                                   CARRYING/        CARRYING/    CARRYING/
                                                                  FAIR VALUE       FAIR VALUE   FAIR VALUE
                                                                 -------------    -----------   -----------
                                                                             (DOLLARS IN THOUSANDS)
<S>                                                              <C>              <C>           <C>
MONEY MARKET INVESTMENTS

   Interest-earning deposits................................     $      35,337    $    15,097   $   132,592
   Federal funds sold.......................................           175,000         20,000        25,000
                                                                 -------------    -----------   -----------
      Total money market investments........................     $     210,337    $    35,097   $   157,592
                                                                 =============    ===========   ===========
INVESTMENT SECURITIES AVAILABLE-FOR-SALE

   Mutual funds.............................................     $      32,982    $    31,080   $    28,537
   United States government and federal agency obligations..            41,319         60,397        29,175
   Corporate issue securities...............................            17,189            999            --
   Freddie Mac stock........................................             1,569          1,653            --
   Asset-backed securities..................................                --             --            51
                                                                 -------------    -----------   -----------
      Total investment securities available-for-sale........     $      93,059    $    94,129   $    57,763
                                                                 =============    ===========   ===========
MORTGAGE-RELATED SECURITIES AVAILABLE-FOR-
   SALE BY ISSUER:

   Freddie Mac..............................................     $     161,895    $    70,106   $    70,216
   Fannie Mae...............................................           328,630        377,027       285,384
   Private placement CMO's..................................            28,783         15,489        17,927
   GNMA.....................................................             1,776          2,251           573
                                                                 -------------    -----------   -----------
      Total mortgage-related securities.....................     $     521,084    $   464,873   $   374,100
                                                                 =============    ===========   ===========

TOTAL INVESTMENT PORTFOLIO..................................     $     824,480    $   594,099   $   589,455
                                                                 =============    ===========   ===========
</TABLE>

Carrying Values, Yields and Maturities. The table below presents information
regarding the carrying values, weighted average yields and contractual
maturities of our investment securities and mortgage-related securities at
December 31, 2001. Mortgage-related securities are presented by issuer and by
coupon type.

<TABLE>
<CAPTION>

                                                                         AT DECEMBER 31, 2001
                                            -----------------------------------------------------------------------
                                                                           MORE THAN ONE         MORE THAN FIVE
                                               ONE YEAR OR LESS          YEAR TO FIVE YEARS    YEARS TO TEN YEARS
                                            ---------------------       -------------------    --------------------
                                                          WEIGHTED                 WEIGHTED                WEIGHTED
                                            CARRYING      AVERAGE        CARRYING   AVERAGE    CARRYING     AVERAGE
                                              VALUE         YIELD         VALUE       YIELD      VALUE       YIELD
                                            ---------       -----       ---------     -----    ---------     -----
                                                                       (DOLLARS IN THOUSANDS)
<S>                                         <C>             <C>         <C>         <C>        <C>          <C>
INVESTMENT SECURITIES AVAILABLE-FOR-SALE:

Mutual funds.............................   $  32,982       4.06%       $      --       --     $      --        --
United States government and agencies....      12,119       6.72           29,200     6.02%           --        --
Corporate issues.........................       7,673       4.17            9,516     6.11            --        --
Freddie Mac stock........................       1,569       1.33               --       --            --        --
                                            ---------       ----        ---------     ----     ---------      ----
    Total investment securities..........   $  54,343       4.59        $  38,716     6.04     $      --        --
                                            =========       ====        =========     ====     =========      ====
MORTGAGE-RELATED SECURITIES
  AVAILABLE-FOR-SALE:
BY ISSUER:
  GNMA pass-through certificates.........   $      --         --        $     187     7.93     $      96      8.50%
  Fannie Mae pass-through certificates...           4       7.67               --       --         7,775      5.88
  Freddie Mach pass- through certificates         320       6.94              605     7.15         2,703      5.80
  Private CMO's..........................          --         --               --       --           495      6.00
  Freddie Mac, Fannie Mae and GNMA-REMICs          --         --               --       --         6,884      5.45
                                            ---------       ----        ---------     ----     ---------      ----
     Total mortgage-related securities...   $     324       6.95        $     792     7.34     $  17,953      5.72
                                            =========       ====        =========     ====     =========      ====
BY COUPON TYPE:
Adjustable rate..........................   $      --         --        $      --       --     $    4394      5.85
Fixed rate...............................         324       6.95              792     7.34        13,560      5.68
                                            ---------       ----        ---------     ----     ---------      ----
     Total mortgage-related securities...   $     324       6.95        $     792     7.34     $  17,954      5.72
                                            =========       ====        =========     ====     =========      ====
Total investment and mortgage-related
  securities portfolio...................   $  54,667       4.61%       $  39,508     6.07%    $  17,953      5.72%
                                            =========       ====        =========     ====     =========      ====
</TABLE>

<TABLE>
<CAPTION>

                                                       AT DECEMBER 31, 2001
                                            ----------------------------------------------

                                            MORE THAN TEN YEARS             TOTAL
                                            ---------------------   ----------------------
                                                         WEIGHTED                 WEIGHTED
                                             CARRYING    AVERAGE    CARRYING      AVERAGE
                                              VALUE       YIELD       VALUE        YIELD
                                            ----------    -----      ---------     -----
                                                      (DOLLARS IN THOUSANDS)
<S>                                         <C>          <C>        <C>            <C>
INVESTMENT SECURITIES AVAILABLE-FOR-SALE:

Mutual funds.............................   $       --       --      $  32,982      4.06%
United States government and agencies....           --       --         41,319      6.22
Corporate issues.........................           --       --         17,189      5.25
Freddie Mac stock........................           --       --          1,569      1.33
                                            ----------     ----      ---------      ----
    Total investment securities..........   $       --       --      $  93,059      5.19
                                            ==========     ====      =========      ====
MORTGAGE-RELATED SECURITIES
  AVAILABLE-FOR-SALE:
BY ISSUER:
  GNMA pass-through certificates.........   $    1,493     7.23%     $   1,776      7.37
  Fannie Mae pass-through certificates...      228,093     6.85        235,872      6.82
  Freddie Mach pass- through certificates        7,699     6.45         11,327      6.35
  Private CMO's..........................       28,288     6.30         28,783      6.29
  Freddie Mac, Fannie Mae and GNMA-REMICs      236,442     5.63        243,326      5.62
                                            ----------     ----      ---------      ----
     Total mortgage-related securities...   $  502,015     6.24      $ 521,084      6.23
                                            ==========     ====      =========      ====
BY COUPON TYPE:
Adjustable rate..........................   $   51,704     5.19      $  56,098      5.24
Fixed rate...............................      450,311     6.37        464,986      6.35
                                            ----------     ----      ---------      ----
     Total mortgage-related securities...   $  502,015     6.25      $ 521,084      6.23
                                            ==========     ====      =========      ====
Total investment and mortgage-related
  securities portfolio...................   $  502,015     6.25%     $ 614,143      6.08%
                                            ==========     ====      =========      ====
</TABLE>


                                       19

<PAGE>



DEPOSITS

We offer a variety of deposit accounts having a range of interest rates and
terms. We currently offer regular savings accounts (consisting of passbook and
statement savings accounts), interest-bearing demand accounts,
non-interest-bearing demand accounts, money market accounts, and time deposits.
We also offer IRA and Keogh time deposit accounts.

Deposit flows are influenced significantly by general and local economic
conditions, changes in prevailing interest rates, pricing of deposits and
competition. Our deposits are primarily obtained from areas surrounding our 70
bank offices and we rely primarily on paying competitive rates, service, and
long-standing relationships with customers to attract and retain these deposits.
We do use brokers to obtain wholesale deposits to a limited extent. At December
31, 2001, we had approximately $16.0 million of brokered wholesale deposits.

When we determine our deposit rates, we consider local competition, U.S.
Treasury securities offerings and the rates charged on other sources of funds.
Core deposits (defined as regular savings accounts, money market accounts and
demand accounts) represented 37.5% of total deposits on December 31,2001. At
December 31, 2001, time deposits with remaining terms to maturity of less than
one year amounted to $934.4 million. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Analysis of Net Interest
Income."

The following table presents our deposit activity for the periods indicated:

<TABLE>
<CAPTION>
                                                                                  FOR THE YEAR ENDED DECEMBER 31,
                                                                      --------------------------------------------------
                                                                            2001               2000             1999
                                                                      ---------------    ----------------  -------------
                                                                                      (DOLLARS IN THOUSANDS)
<S>                                                                   <C>                <C>               <C>
Total deposits at beginning of period............................     $     1,894,820    $      1,343,007  $   1,398,858
Net withdrawals..................................................             115,105             (85,790)      (110,285)
Acquisition of First Northern....................................                  --             578,588             --
Interest credited, net of penalties..............................              80,515              59,015         54,434
                                                                      ---------------    ----------------  -------------
Total deposits at end of period..................................     $     2,090,440    $      1,894,820  $   1,343,007
                                                                      ===============    ================  =============
Net increase (decrease)..........................................     $       195,620    $        551,813  $     (55,851)
                                                                      ===============    ================  =============
Percentage increase (decrease)...................................              10.32%              41.09%        (3.99)%
</TABLE>

At December 31, 2001, we had $145.0 million in time deposits with balances of
$100,000 and over maturing as follows:

<TABLE>
<CAPTION>
MATURITY PERIOD                                                                               AMOUNT
                                                                                        -----------------
                                                                                          (IN THOUSANDS)
<S>                                                                                     <C>
Three months or less............................................................        $          54,941
Over three months through six months............................................                   23,706
Over six months through 12 months...............................................                   31,602
Over 12 months through 24 months................................................                   24,817
Over 24 months through 36 months................................................                    6,517
Over 36 months..................................................................                    3,372
                                                                                        -----------------
Total...........................................................................        $         144,955
                                                                                        =================
</TABLE>





                                       20

<PAGE>




The following table presents the distribution of our deposit accounts at the
dates indicated by dollar amount and percent of portfolio, and the weighted
average nominal interest rate on each category of deposits.

<TABLE>
<CAPTION>
                                                                                     AT DECEMBER 31,
                                                   -------------------------------------------------------------------------------
                                                                       2001                                   2000
                                                   -------------------------------------     -------------------------------------
                                                                                WEIGHTED                                  WEIGHTED
                                                                     PERCENT     AVERAGE                     PERCENT      AVERAGE
                                                                     OF TOTAL    NOMINAL                     OF TOTAL     NOMINAL
                                                      AMOUNT         DEPOSITS     RATE         AMOUNT        DEPOSITS      RATE
                                                      ------         --------     ----         ------        --------      ----
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                <C>                <C>         <C>        <C>               <C>         <C>
Savings.....................................       $   214,859        10.28%      1.19%      $  200,915        10.60%      2.40%
Interest-bearing demand.....................           137,317         6.57       0.64          133,975         7.07       1.12
Money market................................           335,946        16.07       2.08          290,947        15.35       5.41
Non-interest bearing demand.................            96,362         4.61       0.00           87,079         4.60       0.00
                                                   -----------        -----       ----       ----------        -----       ----
      Total.................................           784,484        37.53       1.33          712,916        37.62       3.09
                                                   -----------        -----       ----       ----------        -----       ----
Certificates:
  Time deposits with original maturities of:
    Three months or less....................            95,946         4.59       2.68          150,613         7.95       6.03
    Over three months to twelve months......           187,960         8.99       3.94          260,978        13.78       5.87
    Over twelve months to twenty-four months           713,413        34.12       5.43          563,858        29.76       6.25
    Over twenty-four months to thirty-six months       208,859         9.99       5.79          137,810         7.27       6.15
    Over thirty-six months to forty-eight months        29,998         1.44       5.50            7,587         0.40       5.66
    Over forty-eight months to sixty months.            67,717         3.24       5.80           58,909         3.11       6.01
    Over sixty months.......................             2,063         0.10       6.41            2,149         0.11       6.48
                                                   -----------        -----       ----       ----------        -----       ----
      Total time deposits...................         1,305,956        62.47       5.09        1,181,904        62.38       6.11
                                                   -----------        -----       ----       ----------        -----       ----
      Total deposits........................       $ 2,090,440       100.00%      3.68%       1,894,820       100.00%      4.98%
                                                   ===========       ======       ====        =========       ======       ====
</TABLE>

<TABLE>
<CAPTION>
                                                             AT DECEMBER 31,
                                                   ----------------------------------
                                                                  1999
                                                   ----------------------------------
                                                                             WEIGHTED
                                                                  PERCENT    AVERAGE
                                                                 OF TOTAL    NOMINAL
                                                      AMOUNT      DEPOSITS    RATE
                                                      ------      --------    ----
                                                          (DOLLARS IN THOUSANDS)
<S>                                                <C>              <C>       <C>
Savings.....................................       $   151,447      11.28%    2.41%
Interest-bearing demand.....................            89,685       6.68     1.05
Money market................................           231,174      17.21     4.90
Non-interest bearing demand.................            42,596       3.17     0.00
                                                   -----------      -----     ----
      Total.................................           514,902      38.34     3.09
                                                   -----------      -----     ----
Certificates:
  Time deposits with original maturities of:
    Three months or less....................            80,781       6.01     5.07
    Over three months to twelve months......           198,154      14.76     4.90
    Over twelve months to twenty-four months           401,053      29.87     5.37
    Over twenty-four months to thirty-six months        73,729       5.49     5.62
    Over thirty-six months to forty-eight months         5,819       0.43     5.73
    Over forty-eight months to sixty months.            66,124       4.92     5.94
    Over sixty months.......................             2,445       0.18     6.35
                                                   -----------      -----     ----
      Total time deposits...................           828,105      61.66     5.31
                                                   -----------      -----     ----
      Total deposits........................       $ 1,343,007     100.00%    4.46%
                                                   ===========     ======     ====
</TABLE>

BORROWINGS

We borrow funds to finance our lending and investing activities. Substantially
all of our borrowings take the form of advances from the FHLB of Chicago. At
December 31, 2001 we had borrowings totaling $139.7 million with maturities of
less than one year, and $205.0 million of borrowings with longer stated terms
but which are callable by the FHLB of Chicago. We have pledged certain loans as
blanket collateral for these advances and future advances. The FHLB of Chicago
offers a variety of borrowing options with fixed or variable rates, flexible
repayment options, and fixed or callable terms. We choose the rate, repayment
option, and term to fit the purpose of the borrowing. See "Notes to Consolidated
Financial Statements--Note 6. Borrowings."

The following table sets forth certain information regarding borrowings by Bank
Mutual at the end of and during the periods indicated:

<TABLE>
<CAPTION>
                                                    AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                    -------------------------------------
                                                       2001         2000          1999
                                                    --------      --------      ---------
                                                         (DOLLARS IN THOUSANDS)
<S>                                                 <C>           <C>           <C>
Balance outstanding at end of year:
   Notes payable to FHLB ......................     $442,175      $546,489      $242,699
   Overnight borrowings from FHLB .............           --        20,225            --
   Other borrowings ...........................       23,335           910            --
Weighted average interest rate at end of year:

   Notes payable to FHLB ......................         5.75%         6.31%         5.91%
   Overnight borrowings from FHLB .............           --          6.85%           --
   Other borrowings ...........................         1.39%         5.74%           --
Maximum amount outstanding during the year:
   Notes payable to FHLB ......................     $547,653      $546,760      $270,739
   Overnight borrowings from FHLB .............       39,275       120,900            --
   Other borrowings ...........................       60,720         2,820            82
Average amount outstanding during the year:

   Notes payable to FHLB ......................     $491,248      $289,032      $262,979
   Overnight borrowings from FHLB .............        6,348        20,145            --
   Other borrowings ...........................        5,285            84            40
Weighted average interest rate during the year:

   Fixed interest rate notes payable to FHLB ..         5.91%         6.56%         5.30%
   Overnight borrowings from FHLB .............         5.74%         6.56%           --
   Other borrowings ...........................         3.38%         6.29%        10.30%
</TABLE>







                                       21
<PAGE>


Borrowings decreased to $465.4 million at December 31, 2001, as compared to
$567.6 million at December 31, 2000, primarily as a result of the proceeds of
loan sales and deposit growth. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Comparisons of Financial
Condition at December 31, 2001 and 2000."


AVERAGE BALANCE SHEET AND RATE YIELD ANALYSIS

See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."


AVERAGE EQUITY TO AVERAGE ASSETS

The ratio of average equity to average assets measures a financial institution's
financial strength. At December 31, 2001, 2000, 1999, 1998 and 1997 our average
equity to average assets ratio was 10.4%, 9.7%, 9.6%, 9.2%, and 9.4%,
respectively.


CASH DIVIDENDS

We paid cash dividends of $0.28 per share in 2001. We did not pay any cash
dividends in 2000. We also increased the cash dividend paid in the first quarter
of 2002 to $0.08 per share or a 14.3% increase when compared to the $0.07 per
share paid in the first quarter of 2001. The MHC has waived dividend payments
for 2002 and 2001.


SUBSIDIARIES

Lake Financial and Insurance Service, Inc., a wholly owned subsidiary of Mutual
Savings Bank, provides investment and insurance services to both Mutual Savings
Bank's customers and the general public. Investment services include tax
deferred and tax free investments, mutual funds, and government securities.
Personal insurance, business insurance, life and disability insurance and
mortgage protection products are also offered by Lake Financial.

Mutual Investment Corporation, a wholly owned subsidiary of Mutual Savings Bank,
owns and manages much of Mutual Savings Bank's Investment portfolio.

MC Development LTD, a wholly owned subsidiary of Mutual Savings Bank, is
involved in land development and sales. It owns two parcels of undeveloped land
consisting of 15 acres in Brown Deer, Wisconsin and 318 acres in Oconomowoc,
Wisconsin. See "Properties."

Great Northern Financial Savings Corp. ("GNFSC"), a wholly owned subsidiary of
First Northern Savings Bank engages in the sale of credit life and disability
insurance, and offers brokerage services to the public, including the sale of
tax deferred annuities and mutual funds.

First Northern Investment Inc. ("FNII"), a wholly owned subsidiary of First
Northern Savings Bank, owns and manages much of First Northern Savings Bank's
investments and SFC's indirect automobile loans.

SFC, 50% owned by First Northern Savings Bank and 50% owned by another financial
institution, originates, sells, and services the indirect automobile loans. SFC
sells the loans on a regular basis to FNII or First Northern Savings Bank, but
retains the servicing of the loans.

In addition, First Northern Savings Bank has two and Mutual Savings Bank has
three wholly owned subsidiaries that are inactive but will continue to be wholly
owned subsidiaries for possible future use in a related or other area.


EMPLOYEES

At December 31, 2001, Bank Mutual employed 693 full time and 136 part time
employees. Management considers its relations with its employees to be good.


                                       22

<PAGE>


REGULATION

Set forth below is a brief description of certain laws and regulations that
relate to the regulation of Mutual Savings Bank, First Northern Savings Bank,
Bank Mutual, and the MHC.


GENERAL

Mutual Savings Bank and First Northern Savings Bank (together, the "Banks") are
federally chartered stock savings banks whose primary regulator is the OTS. The
FDIC under the SAIF insures their deposit accounts up to applicable limits. The
Banks are currently subject to extensive regulation, examination and supervision
by the OTS as their chartering agency, and by the FDIC as their deposit insurer.
The Banks must file reports with the OTS and the FDIC concerning their
activities and financial condition, and must obtain regulatory approval prior to
entering into certain transactions, such as mergers with, or acquisitions of,
other depository institutions and opening or acquiring branch offices.

The OTS currently conducts periodic examinations to assess the Banks' compliance
with various regulatory requirements. In addition, the FDIC has the right to
perform examinations of the Banks should the OTS or the FDIC determine the Banks
are in a weakened financial condition or a failure is foreseeable. This
regulation and supervision establishes a comprehensive framework of activities
in which a savings bank can engage and is intended primarily for the protection
of the deposit insurance fund and depositors. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes.

Bank Mutual, as a federal stock corporation in a mutual holding company
structure, is deemed a federal stock holding company within the meaning of
Section 10(o) of the Home Owners' Loan Act. Bank Mutual is required to register
and file reports with the OTS and is subject to regulation and examination by
the OTS. Bank Mutual is also required to file certain reports with, and
otherwise comply with, the rules and regulations of the Securities and Exchange
Commission ("SEC") under the federal securities laws. The MHC is a federal
mutual holding company within the meaning of Section 10(o) of the Home Owners'
Loan Act. As such, the MHC has registered with the OTS and is subject to OTS
examination and supervision as well as certain reporting requirements.

Any change in these laws and regulations, whether by the OTS, the FDIC, the SEC,
or through legislation, could have a material adverse impact on Mutual Savings
Bank, First Northern Savings Bank, Bank Mutual, and the MHC and their operations
and shareholders.

Certain of the laws and regulations applicable to the Banks, Bank Mutual, and
the MHC are summarized below. These summaries do not purport to be complete and
are qualified in their entirety by reference to such laws and regulations.


MUTUAL SAVINGS BANK AND FIRST NORTHERN SAVINGS BANK
FEDERAL REGULATION

General. As federally chartered, SAIF-insured savings banks, the Banks are
subject to extensive regulation by the OTS and the FDIC. Lending activities and
other investments must comply with federal statutory and regulatory
requirements. This federal regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the SAIF, the FDIC and depositors. This
regulatory structure gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination
policies, including policies regarding the classification of assets and the
establishment of adequate loan loss reserves.

The OTS regularly examines the Banks and issues a report on its examination
findings to their boards of directors. The Banks' relationships with their
depositors and borrowers are also regulated by federal law, especially in such
matters as the ownership of savings accounts and the form and content of the
Banks' mortgage documents.


                                       23

<PAGE>

The Banks must file reports with the OTS and the FDIC concerning their
activities and financial condition, and must obtain regulatory approvals prior
to entering into transactions such as mergers with or acquisitions of other
financial institutions. Any change in such regulations, whether by the OTS, the
FDIC or the United States Congress, could have a material adverse impact on the
Banks and their operations.

Regulatory Capital Requirements. OTS capital regulations require savings
institutions such as the Banks to meet three capital standards. The minimum
standards are tangible capital equal to 1.5% of adjusted total assets, core
capital equal to at least 3% of adjusted total assets, and risk-based capital
equal to 8% of total risk-weighted assets. These capital standards are in
addition to the capital standards promulgated by the FDIC under its prompt
corrective action regulations, as described below under the heading "Prompt
Corrective Action."

Tangible capital is defined as core capital less all intangible assets and
certain mortgage servicing rights. Core capital is defined as common
shareholders' equity, noncumulative perpetual preferred stock, related surplus
and minority interests in the equity accounts of fully consolidated
subsidiaries, nonwithdrawable accounts and pledged deposits of mutual savings
associations and qualifying supervisory goodwill, less nonqualifying intangible
assets, mortgage servicing rights and investments in certain non-includable
subsidiaries.

The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital of at least 8% of risk-weighted assets.
Risk-based capital is comprised of core and supplementary capital. The
components of supplementary capital include, among other items, cumulative
perpetual preferred stock, perpetual subordinated debt, mandatory convertible
subordinated debt, intermediate-term preferred stock, and the portion of the
allowance for loan losses not designated for specific loan losses. The portion
of the allowance for loan and lease losses includible in supplementary capital
is limited to a maximum of 1.25% of risk-weighted assets. Overall, supplementary
capital is limited to 100% of core capital. A savings association must calculate
its risk-weighted assets by multiplying each asset and off-balance sheet item by
various risk factors as determined by the OTS, which range from 0% for cash to
100% for delinquent loans, property acquired through foreclosure, commercial
loans, and other assets.

OTS rules require a deduction from capital for institutions that have
unacceptable levels of interest rate risk. The OTS calculates the sensitivity of
an institution's net portfolio value based on data submitted by the institution
in a schedule to its quarterly Thrift Financial Report and using the interest
rate risk measurement model adopted by the OTS. The amount of the interest rate
risk component, if any, is deducted from an institution's total capital in order
to determine if it meets its risk-based capital requirement.

Dividend and Other Capital Distribution Limitations. The OTS imposes various
restrictions or requirements on the ability of savings institutions to make
capital distributions, including dividend payments.

The OTS rules regarding capital distributions, which were substantially updated
effective April 1, 1999, define the term "capital distribution" as a
distribution of cash or other property to a savings association's owners, made
on account of their ownership. The definition specifically excludes dividends
consisting only of a savings association's shares or rights to purchase shares,
and payments that a mutual savings association is required to make under the
terms of a deposit instrument.

Under the revised OTS rules, capital distributions also include a savings
association's payment to repurchase, redeem, retire, or otherwise acquire any of
its shares or other ownership interests, any payment to repurchase, redeem or
otherwise acquire debt instruments included in its total capital, and any
extension of credit to finance an affiliate's acquisition of those shares or
interests. Additionally, a capital distribution includes any direct or indirect
payment of cash or other property to owners or affiliates made in connection
with a corporate restructuring. The revised rule also defines as a capital
distribution any transaction the OTS or the FDIC determines, by order or
regulation, to be in substance a distribution of capital. Because more than one
year has passed since the Bank Mutual formation, under the revised rules Bank
Mutual generally no longer needs specific OTS approval to repurchase its shares:
however, share repurchases still must be made in a prudent manner and amount
under a "safety and soundness" analysis.

A final category of capital distribution under the revised OTS rules is any
other distribution charged against a savings association's capital accounts if
the savings association would not be well capitalized following the
distribution. As such, the revised capital distribution rules of the OTS do not
apply to capital distributions by wholly owned operating subsidiaries of savings
associations. This is true because generally, for reporting purposes, the
accounts of a


                                       24

<PAGE>

wholly-owned subsidiary are consolidated with those of the parent savings
association and any distributions by such subsidiary would not affect the
capital levels of the parent savings association.

For regulatory capital purposes, where the consolidated subsidiary is not wholly
owned, the balance sheet account "minority interests in the equity accounts of
subsidiaries that are fully consolidated" may be included in Tier 1 capital and
total capital if certain conditions are met. Distributions by such consolidated
subsidiaries to shareholders other than the savings association reduce the cited
balance sheet account and, therefore, reduce capital. Consequently,
distributions by subsidiaries that are not wholly owned by the savings
association are subject to the revised OTS capital distribution rules if the
savings association will not be well capitalized following the distribution.

The revised OTS rule generally requires all savings associations to file a
notice or an application for approval before making a capital distribution. A
savings association must file an application if the association is not eligible
for expedited treatment under the application processing rules of the OTS, the
total amount of all capital distributions, including the proposed capital
distribution, for the applicable calendar year would exceed an amount equal to
the savings association's net income for that year to date plus the savings
association's retained net income for the preceding two years, or the proposed
distribution would violate a prohibition contained in any applicable statute,
regulation, or agreement between the savings association and the OTS, or the
FDIC, or a condition imposed on the savings association in an OTS-approved
application or notice.

A savings association must file a notice whenever an application is not required
under the above standards and any of the following criteria is satisfied:

     o    the savings association will not be at least adequately capitalized
          following the capital distribution; or

     o    the capital distribution would reduce the amount of, or retire any
          part of the savings association's common or preferred stock, or retire
          any part of debt instruments such as notes or debentures included in
          the savings association's capital; or

     o    the savings association is a subsidiary of a savings and loan holding
          company.

If neither the savings association nor the proposed capital distribution meet
any of the criteria listed in the previous paragraph, the savings association is
not required to file a notice or an application before making a capital
distribution.

Under the revised rule, the OTS will review a savings association's notice or
application and may disapprove a notice or deny an application if the OTS makes
any of the following determinations:

     o    the savings association will be undercapitalized, significantly
          undercapitalized, or critically undercapitalized under the prompt
          corrective action regulations of the FDIC, as adopted by the OTS,
          following the capital distribution;

     o    the proposed capital distribution raises safety and soundness
          concerns; or

     o    the proposed capital distribution violates a prohibition contained in
          any statute, regulation, agreement between the savings association and
          the OTS (or the FDIC), or a condition imposed on the savings
          association in an OTS-approved application or notice.

See the section entitled "MHC Regulation - Waiver of Dividends" below for a
discussion of the specific regulatory requirements relating to the MHC's
determination to waive dividends from Bank Mutual in fiscal years 2001 and 2002.

Qualified Thrift Lender Test. Federal savings associations must meet a qualified
thrift lender test or they become subject to operating restrictions. Until
recently, the chief restriction was the elimination of borrowing rights from the
savings association's Federal Home Loan Bank. However, with passage of the
Gramm-Leach-Bliley Financial Modernization Act of 1999 by Congress, the failure
to maintain qualified thrift lender status will not affect the Banks' borrowing
rights with the FHLB of Chicago. Notwithstanding these changes, the Banks
anticipate that they will maintain an appropriate level of investments
consisting primarily of residential mortgages, mortgage-backed securities


                                       25

<PAGE>

and other mortgage-related investments, and otherwise qualify as qualified
thrift lenders. The required percentage of these mortgage-related investments is
65% of portfolio assets. Portfolio assets are all assets minus goodwill and
other intangible assets, property used by the institution in conducting its
business and liquid assets equal to 20% of total assets. Compliance with the
qualified thrift lender test is determined on a monthly basis in nine out of
every twelve months.

Liquidity Standard. Each federal savings institution is required to maintain
sufficient liquidity to ensure its safe and sound operations.

Federal Home Loan Bank System. The Banks are members of the FHLB of Chicago,
which is one of 12 regional Federal Home Loan Banks. Each Federal Home Loan Bank
serves as a reserve or central bank for its members within its assigned region.
It is funded primarily from funds deposited by financial institutions and
proceeds derived from the sale of consolidated obligations of the Federal Home
Loan Bank System. It makes loans to members pursuant to policies and procedures
established by the board of directors of the Federal Home Loan Bank.

As members, each of the Banks is required to purchase and maintain stock in the
FHLB of Chicago in an amount equal to the greatest of $500, 1% of its aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year, or 20% of its outstanding advances.
The Banks currently are in compliance with this requirement. The FHLB of Chicago
also imposes various limitations on advances made to member banks, which
limitations relate to the amount and type of collateral, the amounts of
advances, and other items.

Under the Gramm-Leach-Bliley Act, the Banks are voluntary members of the FHLB of
Chicago. The Banks could withdraw or reduce their stock ownership in the FHLB of
Chicago, although they have no current intention to do so. The FHLB of Chicago
provides funds for programs to resolve the problems created by troubled savings
institutions. The FHLB of Chicago also contributes to affordable housing
programs through direct loans, interest subsidies on advances, and grants
targeted for community investment and low- and moderate-income housing projects.
These contributions have adversely affected the level of dividends paid by the
FHLB of Chicago and could continue to do so in the future.

Federal Reserve System. The Federal Reserve System requires all depository
institutions to maintain non-interest-bearing reserves at specified levels
against their checking, NOW, and Super NOW checking accounts and non-personal
time deposits. Savings institutions have authority to borrow from the Federal
Reserve System "discount window," but Federal Reserve System policy generally
requires savings institutions to exhaust all other sources before borrowing from
the Federal Reserve System.

Deposit Insurance. The deposit accounts held by the Banks are insured by the
SAIF to a maximum of $100,000 as permitted by law. Insurance on deposits may be
terminated by the FDIC if it finds that either of the Banks has engaged in
unsafe or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC or the OTS as the Banks' primary regulator. The
management of the Banks does not know of any practice, condition, or violation
that might lead to termination of the Banks' deposit insurance.

Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), the FDIC established a system for setting deposit insurance premiums
based upon the risks a particular bank or savings association posed to its
deposit insurance funds. Under the risk-based deposit insurance assessment
system, the FDIC assigns an institution to one of three capital categories based
on the institution's financial information, as of the reporting period ending
six months before the assessment period. The three capital categories are (i)
well capitalized, (ii) adequately capitalized and (iii) undercapitalized. The
FDIC also assigns an institution to one of three supervisory subcategories
within each capital group. With respect to the capital ratios, institutions are
classified as well capitalized, adequately capitalized or undercapitalized using
ratios that are substantially similar to the prompt corrective action capital
ratios discussed below. The FDIC also assigns an institution to a supervisory
subgroup based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information that the FDIC determines
to be relevant to the institution's financial condition and the risk posed to
the deposit insurance funds (which may include, if applicable, information
provided by the institution's state supervisor).


                                       26

<PAGE>

An institution's assessment rate depends on the capital category and supervisory
category to which it is assigned. Under the final risk-based assessment system,
there are nine assessment risk classifications (i.e., combinations of capital
groups and supervisory subgroups) to which different assessment rates are
applied. Assessment rates for deposit insurance currently range from 0 basis
points to 27 basis points. The capital and supervisory subgroup to which an
institution is assigned by the FDIC is confidential and may not be disclosed. A
bank's rate of deposit insurance assessments will depend upon the category and
subcategory to which the bank is assigned by the FDIC. Any increase in insurance
assessments could have an adverse effect on the earnings of insured
institutions, including Mutual Savings Bank and First Northern Savings Bank.

Transactions with Affiliates. Sections 23A and 23B of the Federal Reserve Act
govern transactions between an insured federal savings bank, such as the Banks,
and any of their affiliates. An affiliate of a bank is any company or entity
that controls, is controlled by or is under common control with the bank. A
subsidiary of a bank that is not also a depository institution or a "financial
subsidiary" under The Gramm-Leach-Bliley Act is not treated as an affiliate of
the bank for the purposes of Sections 23A and 23B; however, the OTS has the
discretion to treat subsidiaries of a savings institution as affiliates on a
case-by-case basis. Sections 23A and 23B limit the extent to which a bank or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such bank's capital stock and surplus, and limit all such
transactions with all affiliates to an amount equal to 20% of such capital stock
and surplus. The statutory sections also require that all such transactions be
on terms that are consistent with safe and sound banking practices. The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of guarantees and other similar types of transactions. Further, most loans by a
bank to any of its affiliates must be secured by collateral in amounts ranging
from 100 to 130 percent of the loan amounts. In addition, any covered
transaction by a bank with an affiliate and any purchase of assets or services
by a bank from an affiliate must be on terms that are substantially the same, or
at least as favorable, to the bank as those that would be provided to a
non-affiliate.

On May 2, 2001, the Federal Reserve Board published for comment proposed
Regulation W. Regulation W would comprehensively implement and interpret
Sections 23A and 23B. The Federal Reserve Board has not completed its rulemaking
process, or adopted proposed Regulation W as a final rule, as of the date of
this report.

Acquisitions and Mergers. Under the federal Bank Merger Act, any merger of
either of the Banks with or into another institution would require the approval
of the OTS, or the primary federal regulator of the resulting entity if it is
not an OTS-regulated institution. Among other things, this means that if the
Banks are combined by a merger of one into the other, that transaction would
require the approval of the OTS. See also "Acquisition of Bank Mutual" below for
a discussion of factors relating to acquisitions of Bank Mutual.

Prohibitions Against Tying Arrangements. Banks are subject to the prohibitions
of 12 U.S.C. Section 1972 on certain tying arrangements. A depository
institution is prohibited, subject to certain exceptions, from extending credit
to or offering any other service, or fixing or varying the consideration for
such extension of credit or service, on the condition that the customer obtain
some additional service from the institution or certain of its affiliates or not
obtain services of a competitor of the institution.

Uniform Real Estate Lending Standards. Pursuant to FDICIA, the federal banking
agencies adopted uniform regulations prescribing standards for extensions of
credit that are secured by liens on interests in real estate or made for the
purpose of financing the construction of a building or other improvements to
real estate. Under the joint regulations adopted by the federal banking
agencies, all insured depository institutions must adopt and maintain written
policies that establish appropriate limits and standards for extensions of
credit that are secured by liens or interests in real estate or are made for the
purpose of financing permanent improvements to real estate. These policies must
establish loan portfolio diversification standards, prudent underwriting
standards (including loan-to-value limits) that are clear and measurable, loan
administration procedures, and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of the
Interagency Guidelines for Real Estate Lending Policies that have been adopted
by the federal bank regulators.

The Interagency Guidelines, among other things, require a depository institution
to establish internal loan-to-value limits for real estate loans that are not in
excess of the following supervisory limits:

     o    for loans secured by raw land, the supervisory loan-to-value limit is
          65% of the value of the collateral;


                                       27

<PAGE>

     o    for land development loans (i.e., loans for the purpose of improving
          unimproved property prior to the erection of structures), the
          supervisory limit is 75%;

     o    for loans for the construction of commercial, multi-family or other
          non-residential property, the supervisory limit is 80%;

     o    for loans for the construction of one- to four-family properties, the
          supervisory limit is 85%; and

     o    for loans secured by other improved property (e.g., farmland,
          completed commercial property and other income-producing property,
          including non-owner occupied, one- to four-family property), the limit
          is 85%.

Although no supervisory loan-to-value limit has been established for
owner-occupied, one- to four-family and home equity loans, the Interagency
Guidelines state that for any such loan with a loan-to-value ratio that equals
or exceeds 90% at origination, an institution should require appropriate credit
enhancement in the form of either mortgage insurance or readily marketable
collateral.

Community Reinvestment Act. Under the Community Reinvestment Act ("CRA"), any
insured depository institution, including the Banks, has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community. The CRA requires the OTS, in connection
with its examination of a savings bank, to assess the depository institution's
record of meeting the credit needs of its community and to take such record into
account in its evaluation of certain applications by such institution, including
applications for additional branches and acquisitions.

Among other things, current CRA regulations replace the prior process-based
assessment factors with a new evaluation system that would rate an institution
based on its actual performance in meeting community needs. In particular, the
new evaluation system focuses on three tests:

     o    a lending test, to evaluate the institution's record of making loans
          in its service areas;

     o    an investment test, to evaluate the institution's record of investing
          in community development projects, affordable housing, and programs
          benefiting low or moderate income individuals and businesses; and

     o    a service test, to evaluate the institution's delivery of services
          through its branches, ATMs and other offices.

The CRA requires the OTS, in the case of the Banks, to provide a written
evaluation of a savings association's CRA performance utilizing a four-tiered
descriptive rating system and requires public disclosure of an association's CRA
rating. Mutual Savings Bank and First Northern Savings Bank each received at
least "satisfactory" overall ratings in their most recent CRA examinations.

Safety and Soundness Standards. Pursuant to the requirements of FDICIA, as
amended by the Riegle Community Development and Regulatory Improvement Act of
1994, each federal banking agency, including the OTS, has adopted guidelines
establishing general standards relating to internal controls, information and
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, asset quality, earnings and compensation, fees and
benefits. In general, the guidelines require, among other things, appropriate
systems and practices to identify and manage the risks and exposures specified
in the guidelines. The guidelines prohibit excessive compensation as an unsafe
and unsound practice and describe compensation as excessive when the amounts
paid are unreasonable or disproportionate to the services performed by an
executive officer, employee, director, or principal shareholder.

Prompt Corrective Action. FDICIA also established a system of prompt corrective
action to resolve the problems of undercapitalized institutions. The OTS, as
well as the other federal banking regulators, adopted the FDIC's regulations


                                       28

<PAGE>

governing the supervisory actions that may be taken against undercapitalized
institutions. The FDIC's regulations establish and define five capital
categories, in the absence of a specific capital directive, as follows:

<TABLE>
<CAPTION>
                                          Total Capital to             Tier 1 Capital to             Tier 1 Capital
       Category                         Risk Weighted Assets         Risk Weighted Assets            to Total Assets
       --------                      --------------------------    -------------------------    -------------------------
<S>                                  <C>                           <C>                          <C>
Well capitalized                     greater than or equals 10%    greater than or equals 6%    greater than or equals 5%
Adequately capitalized               greater than or equals  8%    greater than or equals 4%    greater than or equals 4%*
Under capitalized                                  less than 8%                 less than 4%                  less than 4%*
Significantly undercapitalized                     less than 6%                 less than 3%                  less than 3%
Critically undercapitalized         Tangible assets to capital of less than or equals 2%
</TABLE>
---------------
*3% if the bank receives the highest rating under the uniform system


The severity of the action authorized or required to be taken under the prompt
corrective action regulations increases as a bank's capital decreases within the
three undercapitalized categories. All banks are prohibited from paying
dividends or other capital distributions or paying management fees to any
controlling person if, following such distribution, the bank would be
undercapitalized. The FDIC or the OTS, in the case of the Banks, is required to
monitor closely the condition of an undercapitalized bank and to restrict the
growth of its assets. An undercapitalized bank is required to file a capital
restoration plan within 45 days of the date the bank receives notice that it is
within any of the three undercapitalized categories, and the plan must be
guaranteed by any parent holding company. The aggregate liability of a parent
holding company is limited to the lesser of:

     o    an amount equal to five percent of the bank's total assets at the time
          it became "undercapitalized"; and

     o    the amount that is necessary (or would have been necessary) to bring
          the bank into compliance with all capital standards applicable with
          respect to such bank as of the time it fails to comply with the plan.

If a bank fails to submit an acceptable plan, it is treated as if it were
"significantly undercapitalized." Banks that are significantly or critically
undercapitalized are subject to a wider range of regulatory requirements and
restrictions.

The FDIC has a broad range of grounds under which it may appoint a receiver or
conservator for an insured depository bank. If one or more grounds exist for
appointing a conservator or receiver for a bank, the FDIC may require the bank
to issue additional debt or stock, sell assets, be acquired by a depository bank
holding company or combine with another depository bank. Under FDICIA, the FDIC
is required to appoint a receiver or a conservator for a critically
undercapitalized bank within 90 days after the bank becomes critically
undercapitalized or to take such other action that would better achieve the
purposes of the prompt corrective action provisions. Such alternative action can
be renewed for successive 90-day periods. However, if the bank continues to be
critically undercapitalized on average during the quarter that begins 270 days
after it first became critically undercapitalized, a receiver must be appointed,
unless the FDIC makes certain findings that the bank is viable.

Loans to a Bank's Insiders. A bank's loans to its executive officers, directors,
any owner of more than 10% of its stock (each, an insider) and any of certain
entities affiliated with any such person (an insider's related interest) are
subject to the conditions and limitations imposed by Section 22(h) of the
Federal Reserve Act and the Federal Reserve Board's Regulation O thereunder.
Under these restrictions, the aggregate amount of the loans to any insider and
the insider's related interests may not exceed the loans-to-one-borrower limit
applicable to national banks, which is comparable to the loans-to-one-borrower
limit applicable to the Banks' loans. All loans by a bank to all insiders and
insiders' related interests in the aggregate may not exceed the bank's
unimpaired capital and unimpaired surplus. With certain exceptions, loans to an
executive officer, other than loans for the education of the officer's children
and certain loans secured by the officer's residence, may not exceed the greater
of $25,000 or 2.5% of the bank's unimpaired capital and unimpaired surplus, but
in no event more than $100,000. Regulation O also requires that any proposed
loan to an insider or a related interest of that insider be approved in advance
by a majority of the board of directors of the bank, with any interested
director not participating in the voting, if such loan, when aggregated with any
existing loans to that insider and the insider's related interests, would exceed
either $500,000 or the greater of $25,000 or 5% of the bank's unimpaired capital
and surplus. Generally, such loans must be made on substantially the same terms
as, and follow


                                       29

<PAGE>

credit underwriting procedures that are no less stringent than, those that are
prevailing at the time for comparable transactions with other persons and must
not present more than a normal risk of collectability.

An exception is made for extensions of credit made pursuant to a benefit or
compensation plan of a bank that is widely available to employees of the bank
and that does not give any preference to insiders of the bank over other
employees of the bank.


MHC REGULATION

General. The MHC, which owns a majority of Bank Mutual's stock, is a federal
mutual holding company within the meaning of Section 10(o) of the Home Owners'
Loan Act. As such, the MHC has registered with the OTS and is subject to OTS
examination and supervision as well as reporting requirements. In addition, the
OTS has enforcement authority over the MHC and its non-savings institution
subsidiaries. Thus, the regulation of the MHC affects Bank Mutual. Among other
things, this authority permits the OTS to restrict or prohibit activities that
are determined to be a serious risk to the financial safety, soundness or
stability of a subsidiary savings bank.

Permitted Activities. A mutual holding company (directly or, under certain
circumstances, through a subsidiary such as Bank Mutual) is permitted to, among
other things:

     o    invest in the stock of a savings institution;

     o    acquire a mutual institution through the merger of such institution
          into a savings institution subsidiary of such mutual holding company
          or an interim savings institution of such mutual holding company;

     o    merge with or acquire another mutual holding company, one of whose
          subsidiaries is a savings institution;

     o    acquire non-controlling amounts of the stock of savings institutions
          and savings institution holding companies, subject to various
          restrictions;

     o    invest in a corporation the capital stock of which is available for
          purchase by a savings institution under federal law or under the law
          of any state where the subsidiary savings institution or institutions
          have their home offices;

     o    furnish or perform management services for a savings institution
          subsidiary;

     o    hold, manage or liquidate assets owned or acquired from a savings
          institution subsidiary;

     o    hold or manage properties used or occupied by a savings institution
          subsidiary; and

     o    act as a trustee under deed or trust.

As a result of the Gramm-Leach-Bliley Act, the activities of a mutual holding
company were expanded, but are generally limited to those of a financial nature,
permitting securities and insurance activities as well as affiliations with
financial companies such as insurance and securities firms. To engage in these
expanded financial activities, a holding company must meet certain eligibility
requirements and elect to be treated as a "financial holding company." Neither
the MHC nor Bank Mutual has elected to be treated as a financial holding
company.

Waiver of Dividends. It has been the policy of a number of mutual holding
companies to waive the receipt of dividends declared by their savings
institution subsidiaries or mid-tier stock holding companies. Under OTS
regulations, the MHC may waive dividends from Bank Mutual only if the MHC
provides the OTS with written notice of its intent to waive its rights to
receive dividends 30 days prior to the proposed date of payment of the dividend
and the OTS does not object to such waiver. The OTS will not object to the
waiver if the following two determinations are made:

     o    the waiver would not be detrimental to the safe and sound operation of
          the savings association; and

     o    the board of directors of the MHC expressly determines that waiver of
          the dividend by the MHC is consistent with the directors' fiduciary
          duties to the mutual members of the MHC.

Pursuant to these procedures, the MHC has waived dividends declared by Bank
Mutual for fiscal years 2002 and 2001. The management of the MHC believes that
this is consistent with fiduciary duties owed to members of the MHC based on,
among other reasons, certain adverse tax consequences that would result from
payment of the dividend to the MHC. In addition, management believes that
capital held in Bank Mutual will be as productive, if not more productive, than
capital held at the MHC level.


                                       30

<PAGE>

BANK MUTUAL REGULATION

Bank Mutual, as a federal stock corporation in a mutual holding company
structure, is deemed, and must register as, a federal mutual holding company
within the meaning of Section 10(o) of the Home Owners' Loan Act. Bank Mutual
has so registered, files reports with the OTS and is subject to regulation and
examination by the OTS. In addition, the OTS has enforcement authority over Bank
Mutual and any nonsavings institution subsidiary. The OTS can restrict or
prohibit activities that it determines to be a serious risk to Bank Mutual. This
OTS regulation is intended primarily for the protection of the Banks' depositors
and not for the benefit of Bank Mutual's shareholders.

Bank Mutual is also subject to the regulation and supervision of the SEC and is
required to file certain reports with, and otherwise comply with, the rules and
regulations of the SEC.


ACQUISITION OF BANK MUTUAL

Under federal law, no person may acquire control of the MHC, Bank Mutual, Mutual
Savings Bank, or First Northern Savings Bank without first obtaining, as
summarized below, the approval of such acquisition of control by the OTS (or
another federal banking regulator). Bank Mutual is majority-owned by the MHC;
the MHC is a mutual institution in which proxies have generally been given to
its board of directors. This ownership and regulatory structure would make a
change in control of these entities difficult without the concurrence of the
board of directors of the MHC.

Under the federal Change in Bank Control Act and the Savings and Loan Holding
Company Act, any person, including a company, or group acting in concert,
seeking to acquire 10% or more of the outstanding shares of Bank Mutual must
file a notice with the OTS. In addition, any person or group acting in concert
seeking to acquire more than 25% of the outstanding shares of Bank Mutual's
common stock will be required to obtain the prior approval of the OTS. Under
regulations, the OTS generally has 60 days within which to act on such
applications, taking into consideration certain factors, including the financial
and managerial resources of the acquiror, the convenience and needs of the
communities served by Bank Mutual and the Banks, and the antitrust effects of
the acquisition.


FEDERAL AND STATE TAXATION

Federal Taxation. Bank Mutual and its subsidiaries file a calendar year
consolidated federal income tax return, reporting income and expenses using the
accrual method of accounting,

Bad Debt Reserves. The Small Business Job Protection Act of 1996 (the "Job
Protection Act") repealed the "reserve method" of accounting for bad debts by
most thrift institutions effective for the taxable years beginning after 1995.
Larger thrift institutions such as Mutual Savings Bank and First Northern
Savings Bank are now required to use the "specific charge-off method." The Job
Protection Act also granted partial relief from reserve recapture provisions,
which are triggered by the change in method. This legislation did not have a
material impact on Bank Mutual's financial condition or results of operations.

The federal income tax returns for Bank Mutual's subsidiaries have been examined
and audited or closed without audit by the IRS for tax years through 1998.

Depending on the composition of its items of income and expense Bank Mutual may
be subject to alternative minimum tax ("AMT") to the extent AMT exceeds the
regular tax liability. AMT is calculated at 20% of alternative minimum taxable
income ("AMTI"). AMTI equals regular taxable income increased by certain tax
preferences, including depreciation deductions in excess of allowable AMT
amounts, certain tax-exempt interest income and 75% of the excess of adjusted
current earnings ("ACE") over AMTI. ACE equals AMTI adjusted for certain items,
primarily accelerated depreciation and tax-exempt interest. The payment of AMT
would create a tax credit, which can be carried forward indefinitely to reduce
the regular tax liability in future years.

State Taxation. Under current law, the state of Wisconsin imposes a corporate
franchise tax of 7.9% on the separate taxable incomes of the members of Bank
Mutual's consolidated income tax group except its Nevada subsidiaries.
Presently, the income of the Nevada subsidiaries is only subject to taxation in
Nevada, which currently does not impose a corporate income or franchise tax.


                                       31

<PAGE>

ITEM 2. PROPERTIES

Bank Mutual and its subsidiaries conducts its business through its executive
office and 70 banking offices, which had an aggregate net book value of $39.0
million as of December 31, 2001. The following table shows the location of Bank
Mutual's offices, whether they are owned or leased, and the expiration date of
the leases for the leased offices.

<TABLE>
<CAPTION>
                                          ORIGINAL DATE   LEASED
                                            LEASED OR       OR     DATE OF LEASE
LOCATION                                     ACQUIRED      OWNED    EXPIRATION
--------                                  -------------   ------   -------------
<S>                                          <C>          <C>         <C>
EXECUTIVE OFFICE:
   4949 West Brown Deer Road.............    1991         Owned
   Brown Deer, WI 53223

MILWAUKEE METRO AREA:
   Bayshore Mall.........................    1971         Leased      2009
   5900 N. Port Washington Road
   Glendale, WI 53217

   Brookfield............................    1973*        Owned
   17100 W. Capitol Drive
   Brookfield, WI 53005

   Brookfield Square.....................    1975         Leased      2006
   400 N. Moorland Road
   Brookfield, WI 53005

   Brown Deer............................    1979         Owned
   4801 W. Brown Deer Road
   Brown Deer, WI 53223

   Capitol Drive.........................    1976         Owned
   8050 W. Capitol Drive
   Milwaukee, WI 53222

   Cedarburg.............................    1978*        Leased      2006
   W62 N248 Washington Avenue
   Cedarburg, WI 53012

   Downtown..............................    1955         Owned
   510 E. Wisconsin Avenue
   Milwaukee, WI 53202

   Grafton...............................    1978         Owned
   2030 Wisconsin Avenue
   Grafton, WI 53024

   Howell Avenue.........................    1977         Owned
   3847 S. Howell Avenue
   Milwaukee, WI 53207

   Mayfair Mall..........................    2001         Leased      2011
   2600 N. Mayfair Road
   Wauwatosa, WI 53226

   Mequon................................    1970*        Owned
   11249 N. Port Washington Road
   Mequon, WI 53092

   Oak Creek.............................    1972         Owned
   8780 S. Howell Avenue
   Oak Creek, WI 53154

   Oklahoma Avenue.......................    1982         Owned
   6801 W. Oklahoma Avenue
   Milwaukee, WI 53219
</TABLE>


                                       32

<PAGE>

<TABLE>
<CAPTION>
                                          ORIGINAL DATE   LEASED
                                            LEASED OR       OR     DATE OF LEASE
LOCATION                                     ACQUIRED      OWNED    EXPIRATION
--------                                  -------------   ------   -------------
<S>                                          <C>          <C>         <C>
   Sherman Park..........................    1950*        Owned
   4812 W. Burleigh Street
   Milwaukee, WI 53210

   Southgate.............................    1967         Owned
   3340 S. 27th Street
   Milwaukee, WI 53215

   Southridge Mall.......................    1978         Leased      2004
   5300 S. 76th Street
   Greendale, WI 53129

   Thiensville...........................    1960*        Owned
   208 N. Main Street
   Thiensville, WI 53092

   West Allis............................    1976         Owned
   10296 W. National Avenue
   West Allis, WI 53227

MADISON AREA:
   Downtown..............................    1980         Leased      2003
   23 S. Pinckney Street
   Madison, WI 53703

   West..................................    1982         Leased      2011
   5521 Odana Road
   Madison, WI 53719

   Middleton.............................    1978         Owned
   6209 Century Avenue
   Middleton, WI 53562

   Monona................................    1981         Owned
   5320 Monona Drive
   Monona, WI 53716

FOX VALLEY AREA:
   Appleton..............................    1985         Leased      2004
   4323 W. Wisconsin Avenue
   Fox River Mall
   Appleton, WI 54915

   Neenah................................    1974         Owned
   101 W. Wisconsin Avenue
   Neenah, WI 54956

JANESVILLE:..............................    1973         Owned
   2111 Holiday Drive
   Janesville, WI 53545

SHEBOYGAN AREA:
   Sheboygan.............................    1973         Owned
   801 N. 8th Street
   Sheboygan, WI 53081

   Sheboygan Motor Bank..................    1984         Owned
   730 N. 9th Street
   Sheboygan, WI 53081
</TABLE>

                                       33

<PAGE>

<TABLE>
<CAPTION>
                                          ORIGINAL DATE   LEASED
                                            LEASED OR       OR     DATE OF LEASE
LOCATION                                     ACQUIRED      OWNED    EXPIRATION
--------                                  -------------   ------   -------------
<S>                                          <C>          <C>         <C>
BEAVER DAM:..............................    1975         Owned
   130 W. Maple Avenue
   Beaver Dam, WI 53916

BELOIT:..................................    1971         Leased      2012
   3 Beloit Mall Shopping Center
   Beloit, WI 53511

BERLIN:..................................    1973         Owned
   103 E. Huron Street
   Berlin, WI 54923

FOND DU LAC:.............................    2000         Owned
   W6606A Highway 23
   Fond du Lac, WI 54937

PORTAGE:.................................    1976         Owned
   145 E. Cook Street
   Portage, WI 53901

EAU CLAIRE:
   Downtown..............................    1968*        Owned
   319 E. Grand Avenue
   Eau Claire, WI 54701

   Mall..................................    1972*        Owned
   2812 Mall Drive
   Eau Claire, WI 54701

   Cub Foods.............................    1996*        Leased      2005
   2717 Birch Street
   Eau Claire, WI 54703

   Pinehurst.............................    1986*        Owned
   2722 Eddy Lane
   Eau Claire, WI 54703

CHIPPEWA FALLS AREA:
   Downtown..............................    1975*        Owned
   35 W. Columbia
   Chippewa Falls, WI 54729

   Falls Pick'N Save.....................    1995*        Leased      2005
   303 Prairie View Road
   Chippewa Falls, WI 54729

MENOMONIE AREA:
   Downtown..............................    1967*        Owned
   717 Main Street
   Menomonie, WI 54751

   North.................................    1978*        Owned
   2409 Hils Ct. N.E
   Menomonie, WI 54751

RICE LAKE:...............................    1979*        Owned
   2850 Pioneer Avenue
   Rice Lake, WI 54868
</TABLE>

                                       34

<PAGE>

<TABLE>
<CAPTION>
                                          ORIGINAL DATE   LEASED
                                            LEASED OR       OR     DATE OF LEASE
LOCATION                                     ACQUIRED      OWNED    EXPIRATION
--------                                  -------------   ------   -------------
<S>                                          <C>          <C>         <C>
BARRON:...................................   1995*        Owned
   1512 E. Division Ave. (Hwy. 8)
   Barron, WI 54812

BLOOMER:..................................   1995*        Owned
   1203 17th Avenue
   Bloomer, WI 54724

CORNELL:..................................   1980*        Leased  month to month
422 Main Street
Cornell, WI 54732

ELLSWORTH:................................   1975*        Owned
   385 W. Main Street
   Ellsworth, WI 54011

HAYWARD:..................................   1984*        Owned
   10562 Kansas Avenue
   Hayward, WI 54843

HUDSON:...................................   1979*        Owned
   2000 Crestview Drive
   Hudson, WI 54016

SPOONER:..................................   1995*        Owned
   500 Front Street
   Spooner, WI 54801

ST. CROIX FALLS:..........................   1980*        Owned
   144 Washington Street N
   St. Croix Falls, WI 54024

STANLEY:..................................   1978*        Owned
   118 N. Broadway
   Stanley, WI 54768

GREATER GREEN BAY AREA:
   201 N. Monroe Avenue...................   1975*        Owned
   Green Bay, WI  54301-4995

   2255 University Avenue.................   1970*        Owned
   Green Bay, WI 54308-8046

   2357 S. Oneida Street..................   1971*        Owned
   Green Bay, WI  54304-5286

   2603 Glendale Avenue...................   1986*        Owned
   Green Bay, WI  54313-6823

   2370 East Mason Street.................   1985*        Owned
   Green Bay, WI 54302-3347

   2424 West Mason Street.................   1992*        Owned
   Green Bay, WI 54303-4711

   201 West Walnut St. (Operations Center)   1999*        Leased      2004
   Green Bay, WI 54303

   330 North Broadway.....................   1979*        Owned
   De Pere, WI  54115-5250

   749 Main Avenue........................   1972*        Owned
   De Pere, WI  54115-5190
</TABLE>

                                       35

<PAGE>

<TABLE>
<CAPTION>
                                          ORIGINAL DATE   LEASED
                                            LEASED OR       OR     DATE OF LEASE
LOCATION                                     ACQUIRED      OWNED    EXPIRATION
--------                                  -------------   ------   -------------
<S>                                          <C>          <C>         <C>
MARINETTE AREA:
   830 Pierce Avenue.....................    1972*        Owned
   Marinette, WI  54143-0318

   Pine Tree Mall........................    1978*        Leased      2003
   2314 Roosevelt Road
   Marinette, WI  54143-0345

PESHTIGO:
   616 French Street.....................    1975*        Owned
   Peshtigo, WI  54157-0193

CRIVITZ:
   315 Highway 141.......................    1985*        Owned
   Crivitz, WI   54114-0340

SHAWANO:
   835 E. Green Bay Avenue...............    1981*        Owned
   Shawano, WI  54166-0396

NEW LONDON:
   101 Park Street.......................    1969*        Owned
   New London, WI 54961

HORTONVILLE:
   209 South Nash Street.................    1979*        Owned
   Hortonville, WI  54944

BRILLION:
   314 N. Main Street....................    1973*        Owned
   Brillion, WI  54110-1198

NEW HOLSTEIN:
   2205 Wisconsin Avenue.................    1976*        Owned
   New Holstein,  WI  53061-1291

KIEL:
   622 Fremont Street....................    1970*        Owned
   Kiel, WI   53042-1321

STURGEON BAY:
   1227 Egg Harbor Road..................    1978*        Owned
   Sturgeon Bay, WI  54235-0068

WOODBURY, MINNESOTA:.....................    1995*        Owned
   8420 City Centre Drive
   Woodbury, MN 55125
</TABLE>
---------------
*    Date originally opened by an acquired institution


In addition, Mutual Savings Bank owns two parcels of undeveloped land through
its MC Development subsidiary. The 15 acre Brown Deer parcel is comprised of
four lots consisting of 2.9 to 4.3 acres and was part of a larger property that
was acquired in 1988 to accommodate the construction of a new corporate
headquarters building. Each of the lots is available for sale and is designed to
accommodate 60,000 to 75,000 square foot office buildings. The net book value of
the four lots is $1.6 million. The 318 acre Oconomowoc parcel was held by an
acquired institution that obtained it through a foreclosure. It is located in an
area of the City of Oconomowoc that has seen considerable residential
development. All of the necessary utilities are available to the property and it
will be marketed for residential development in a manner that will attempt to
maximize its potential value. The parcel has a net book value of $345,000.


                                       36

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

Bank Mutual is not involved in any pending legal proceedings other than routine
legal proceedings occurring in the ordinary course of business. We believe that
these routine legal proceedings, in the aggregate, are immaterial to our
financial condition and results of operations.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.


EXECUTIVE OFFICERS OF THE REGISTRANT

The following table contains certain information regarding those persons who
have been determined, by Bank Mutual's board of directors, to be Bank Mutual
executive officers.

<TABLE>
<CAPTION>
                                             OFFICES AND POSITIONS
                                         WITH BANK MUTUAL CORPORATION         PRESENT OFFICE
NAME                          AGE            AND ITS SUBSIDIARIES             HELD SINCE(1)
----                          ---    -------------------------------------    --------------
<S>                           <C>    <C>                                         <C>
Michael T. Crowley, Jr.       59     Chairman and Chief Executive                1983(2)
                                     Officer of Bank Mutual;
                                     Director, President and
                                     Chief Executive Officer of
                                     Mutual Savings Bank;
                                     Director of First Northern
                                     Savings Bank.

Michael D.  Meeuwsen          48     Director, President and Chief               1989(3)
                                     Operating Officer of Bank
                                     Mutual; Director, President and Chief
                                     Executive Officer of First Northern
                                     Savings Bank; Director of
                                     Mutual Savings Bank.


Eugene H. Maurer, Jr.         56     Senior Vice President and Secretary of      1982(4)
                                     Bank Mutual; Senior Vice
                                     President, Chief Financial
                                     Officer, Treasurer and
                                     Secretary of Mutual Savings
                                     Bank.

Rick B.  Colberg              49     Chief Financial Officer of Bank Mutual;     1980(5)
                                     Senior Vice President, Chief Financial
                                     Officer and Treasurer of First
                                     Northern Savings Bank.

Marlene M. Scholz             56     Senior Vice President of Bank Mutual;       1981(6)
                                     Senior Vice President and Controller of
                                     Mutual Savings Bank.
</TABLE>
---------------
(1)  Indicates date when individual first held office with Mutual Savings Bank
     or First Northern Savings Bank. Each of these persons became a Bank Mutual
     executive officer in 2000.

(2)  Michael T. Crowley, Jr. is the president and chief executive officer of
     Mutual Savings Bank. He has served in those capacities since 1983 and 1985,
     respectively. He also serves as a director of various Mutual Savings Bank'
     subsidiaries. Mr. Crowley, Jr. also is a director of PULSE ATM Association,
     an ATM network of which Mutual Savings Bank and First Northern Savings Bank
     are members.


                                       37

<PAGE>

(3)  Michael D. Meeuwsen is the president and chief executive officer of First
     Northern Savings Bank. He has served as president since 1989 and chief
     executive officer since 1989. He also serves as a director of the Federal
     Home Loan Bank of Chicago.

(4)  Eugene H. Maurer, Jr. is the senior vice president, secretary-treasurer and
     chief financial officer of Mutual Savings Bank. He has held those positions
     since 1982 and has served as the principal financial officer of Mutual
     Savings Bank. Mr. Maurer also serves as an officer of several Mutual
     Savings Bank' subsidiaries.

(5)  Rick B. Colberg is senior vice president, chief financial officer, and
     treasurer of First Northern Savings Bank. He has served as chief financial
     officer since 1980, treasurer since 1982 and senior vice president since
     1997. He serves as the principal financial officer of Bank Mutual and First
     Northern Savings Bank and as an officer and director of some of First
     Northern Savings Bank subsidiaries.

(6)  Marlene M. Scholz is senior vice president and controller of Mutual Savings
     Bank. She has served in that position since 1981 and serves as Mutual
     Savings Bank's principal accounting officer. Ms. Scholz also serves as an
     officer of several Mutual Savings Bank's subsidiaries.







                                       38

<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The common stock of Bank Mutual Corporation is traded on The Nasdaq Stock
Market(R) under the symbol "BKMU."

As of March 15, 2002, there were 22,310,165 shares of common stock outstanding
and approximately 4,406 shareholders of record of the common stock. Bank Mutual
became a publicly held corporation on November 1, 2000 and we did not pay a cash
dividend in 2000. We paid a cash dividend of $0.28 per share in 2001 except for
shares owned by MHC, which waived dividends for 2001. We increased our cash
dividend to $0.08 per share to shareholders of record on February 20, 2002 and
was paid March 4, 2002.

We anticipate that we will continue to pay quarterly cash dividends on our
common stock, although there can be no assurance that payment of such dividends
will continue or that they will not be reduced. The payment of dividends in the
future is discretionary with our board of directors and will depend on our
operating results and financial condition, regulatory limitations, tax
considerations and other factors. For 2001 and 2002, the MHC has waived
dividends from Bank Mutual.

Interest on deposits will be paid prior to payment of dividends on Bank Mutual's
common stock. Earnings appropriated to bad debt reserves and deducted for
federal income tax purposes cannot be used to pay cash dividends without the
payment of federal income taxes on the amounts removed from the reserves for
such purpose at the then current income tax rate.

Our common stock began trading on The Nasdaq Stock Market(R) on November 2,
2000. The high and low trading prices from that date through December 31, 2001
by quarter, were as follows:


                        COMMON STOCK TRADING PRICE RANGE
                           (High and Low Sales Price)

<TABLE>
<CAPTION>
                                           2001                    2000
                                    ------------------      ------------------
                                     High         Low        High         Low
                                    ------      ------      ------      ------
<S>                                 <C>         <C>         <C>         <C>
1st Quarter                         $11.72      $ 9.44         n/a         n/a
2nd Quarter                         $14.31      $10.25         n/a         n/a
3rd Quarter                         $18.00      $13.60         n/a         n/a
4th Quarter                         $17.04      $14.85      $10.25*      $7.75*
</TABLE>
--------------
* The price is the high and low sales price from November 1, 2000 (date of
  restructuring) to December 31, 2000.


During the first two months of 2002, Bank Mutual's common stock sales price
ranged between $17.28 to $15.23 per share, and closed on March 1, 2002 at $17.10
per share.


                                       39

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

SELECTED FINANCIAL HIGHLIGHTS

The following table provides selected financial data for Bank Mutual for its
past five fiscal years. The data is derived from Bank Mutual's (and Mutual
Savings') audited financial statements, although the table itself is not
audited. The following data should be read together with Bank Mutual's
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" later in this
report.

On November 1, 2000, Mutual Savings Bank converted from a mutual to stock form
of organization, completing a restructuring that resulted in the creation of
Bank Mutual as its publicly-held holding company. The transactions included Bank
Mutual's stock offering and Bank Mutual's related acquisition of First Northern.
Under the purchase accounting method, First Northern's results are included from
the date of acquisition and results prior to those dates are those of Mutual
Savings Bank.

<TABLE>
<CAPTION>
                                                                           AT DECEMBER 31,
                                                ----------------------------------------------------------------------
                                                   2001          2000          1999             1998          1997
                                                -----------   -----------   -----------      -----------   -----------
                                                     (IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
<S>                                             <C>           <C>           <C>              <C>           <C>
SELECTED FINANCIAL CONDITION DATA:
Assets ......................................   $ 2,905,790   $ 2,789,532   $ 1,769,506      $ 1,872,862   $ 1,826,080
Loans receivable, net .......................     1,831,155     1,972,636     1,082,795        1,037,589     1,255,082
Loans held for sale .........................        32,321         7,469           541           27,723        13,397
Securities available-for-sale, at fair value:
   Investment securities ....................        93,059        94,129        57,763          116,534       159,208
   Mortgage-related securities ..............       521,084       464,873       374,100          270,897       225,906
Foreclosed properties and repossessed assets            382         2,281         3,018            3,505           159
Goodwill ....................................        52,570        55,967         8,254(2)        21,162        20,858
Other intangible assets .....................         6,396         7,057         3,242(2)         8,624         9,503
Deposits ....................................     2,090,440     1,894,820     1,343,007        1,398,858     1,362,330
Borrowings ..................................       465,360       567,624       242,699          270,822       270,867
Shareholders' equity ........................       304,098       284,397       163,820          175,743       163,052
Tangible shareholders' equity ...............       247,737       224,199       153,624          149,415       136,502
Shares outstanding ..........................    22,337,165    22,341,665           n/a              n/a           n/a
Book value per share ........................         13.61         12.73           n/a              n/a           n/a
Tangible book value per share ...............         11.09         10.04           n/a              n/a           n/a
</TABLE>

<TABLE>
<CAPTION>
                                                      FOR THE YEAR ENDED DECEMBER 31,
                                       ---------------------------------------------------------------
                                          2001         2000         1999(2)       1998       1997(2)
                                       ----------   ----------     ---------    ----------   ---------
                                                             (IN THOUSANDS EXCEPT PER SHARE AMOUNT)
<S>                                    <C>          <C>            <C>          <C>          <C>
SELECTED OPERATING DATA:
Total interest income ..............   $ 190,986    $ 135,711      $ 118,302    $ 125,470    $ 115,993
Total interest expense .............     119,372       84,980         75,337       80,017       72,194
                                       ---------    ---------      ---------    ---------    ---------
   Net interest income .............      71,614       50,731         42,965       45,453       43,799
Provision for loan losses ..........         723          423            350          637        1,065
                                       ---------    ---------      ---------    ---------    ---------
   Net interest income after
     provision for loan losses .....      70,891       50,308         42,615       44,816       42,734
                                       ---------    ---------      ---------    ---------    ---------
Total noninterest income ...........      16,480        9,250          7,984        8,440        6,159
                                       ---------    ---------      ---------    ---------    ---------
Noninterest expense:
   Amortization of goodwill ........       3,098        1,066         12,908        1,749        1,265
   Amortization of intangible assets         662          331          5,382          989          676
   Other noninterest expense .......      51,244       34,747         32,989       32,783       30,145
                                       ---------    ---------      ---------    ---------    ---------
     Total noninterest expense .....      55,004       36,144         51,279       35,521       32,086
                                       ---------    ---------      ---------    ---------    ---------
   Income before income taxes ......      32,367       23,414           (680)      17,735       16,807
Income tax expense .................      12,084        8,709          3,803        6,584        6,622
                                       ---------    ---------      ---------    ---------    ---------
   Net income (loss) ...............   $  20,283    $  14,705      $  (4,483)   $  11,151    $  10,185
                                       =========    =========      =========    =========    =========
Earnings per share-basic ...........   $    0.95    $    0.15(1)         n/a          n/a          n/a
Earnings per share-diluted .........   $    0.94    $    0.15(1)         n/a          n/a          n/a
Cash dividends paid per share ......   $    0.28          n/a            n/a          n/a          n/a
</TABLE>

                                       40

<PAGE>

<TABLE>
<CAPTION>
                                                                     AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                               -------------------------------------------------
                                                                2001       2000       1999       1998      1997
                                                               ------     ------     ------     ------    ------
<S>                                                            <C>        <C>        <C>        <C>       <C>
SELECTED FINANCIAL RATIOS:
Net interest margin .....................................        2.67%      2.76%      2.44%      2.58%     2.76%
Average net interest rate spread ........................        2.22       2.26       2.03       2.16      2.31
Return on average assets ................................        0.71       0.76      (0.24)      0.60      0.62
Return on assets, excluding goodwill
   and other intangible assets ..........................        0.85       0.84       0.64       0.74      0.73
Return on average shareholders' equity ..................        6.85       7.86      (2.55)      6.57      6.52
Return on average shareholders' equity excluding
   goodwill and other intangible assets .................       10.01       9.47       7.71       6.16      6.25
Efficiency ratio, excluding amortization of goodwill
   and other intangible assets ..........................       58.65      58.34      65.20      61.56     61.66
Noninterest expense (excluding amortization of
   goodwill and other intangible assets) as a
   percent of adjusted average assets ...................        1.83       1.82       1.82       1.80      1.84
Shareholders' equity to total assets ....................       10.47      10.20       9.26       9.38      8.93
Tangible shareholders' equity to adjusted assets ........        8.69       8.21       8.73       8.09      7.59

SELECTED ASSET QUALITY RATIOS:
Non-performing loans to loans receivable, net ...........        0.19%      0.16%      0.44%      0.65%     0.84%
Non-performing assets to total assets ...................        0.14       0.19       0.44       0.55      0.58
Allowance for loan losses to non-performing loans .......      345.90     392.12     144.54     101.86     68.65
Allowance for loan losses to non-performing assets 312.13      226.55      88.79      66.98      67.62
Allowance for loan losses to total loans ................        0.67       0.62       0.64       0.66      0.57
Charge-offs to average loans ............................        0.04       0.01       0.02       0.08      0.02
</TABLE>
--------------
(1)  From date of restructuring (November 1, 2000) to December 31, 2000 based
     upon 21,570,803 weighted-average shares outstanding. No shares were
     outstanding prior to November 1, 2000.

(2)  Mutual Savings Bank acquired First Federal on March 31, 1997. Because the
     transaction was accounted for using the purchase method of accounting,
     First Federal's results are included only from the date of acquisition. In
     1999, Bank Mutual's non-interest expense included a special write-off of
     intangible assets of $15.6 million, resulting from the acquisition of First
     Federal, which Mutual Savings Bank deemed to be impaired.


                                       41

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

Bank Mutual is a United States corporation chartered by the OTS. It was
chartered on November 1, 2000, to become the mid-tier holding company in the
regulatory restructuring of Mutual Savings Bank into mutual holding company
form. To accomplish the transaction, Mutual Savings Bank adopted a plan of
restructuring and as of November 1, 2000, converted from a mutual savings bank
to a mutual holding company. Bank Mutual became a holder of all of the shares of
Mutual Savings Bank, which was rechartered as a federal stock savings bank.
Mutual Savings Bancorp, MHC, a U.S.-chartered mutual holding company of which
Mutual Savings Bank's depositors hold all of the voting and membership rights,
owns 11,193,174 shares, or 50.1% of Bank Mutual's common stock.

Bank Mutual issued 6,141,006 shares of common stock to public shareholders in
the subscription stock offering conducted in connection with the restructuring.
Net proceeds to Bank Mutual were $58.3 million. Expenses related to the offering
totaled $3.1 million and $0.6 million was loaned by Bank Mutual to Bank Mutual's
Employee Stock Ownership Plan ("ESOP") to purchase 60,910 shares of common
stock.

On November 1, 2000, Bank Mutual acquired First Northern, the parent of First
Northern Savings Bank. In the First Northern Acquisition, Bank Mutual issued to
former First Northern shareholders 5,007,485 shares of Bank Mutual common stock
and paid $75.1 million in cash. The First Northern Acquisition was accounted for
using the purchase method of accounting; therefore, First Northern results and
financial data are included in Bank Mutual results and financial data only from
and after the November 1, 2000 acquisition date. Prior to that date, the data
are those of Mutual Savings Bank. The First Northern Acquisition substantially
affects the comparison of the financial condition of Bank Mutual at December 31,
2000 and 1999, and the comparisons of results of operations among all three
years.

In connection with the following discussion, see "Cautionary Statements" in Item
1 of this document regarding forward-looking statements and factors that could
impact the business and financial prospects of Bank Mutual.


SIGNIFICANT ACCOUNTING POLICIES

There are a number of accounting policies that we established which require us
to use our judgement. Some of the more significant policies are as follows:

     o    Establishing the amount of the allowance for loan losses requires the
          use of our judgement. We evaluate our assets at least quarterly, and
          review their risk components as a part of that evaluation. See "Notes
          to Consolidated Financial Statements - Note 1. Summary of Significant
          Accounting Policies - Allowance for Loan Losses" for a discussion of
          the risk components. If we misjudge a major component and experience a
          loss, it will likely affect our earnings. We consistently challenge
          ourselves in the review of the risk components to identify any changes
          in trends and their cause.

     o    Another valuation that requires our judgement relates to mortgage
          servicing rights. Essentially, mortgage servicing rights are
          established on loans (primarily mortgage loans) that we originate and
          sell. We allocate a portion of a loan's book basis to mortgage
          servicing rights when a loan is sold, based upon its relative fair
          value. The fair value of mortgage servicing rights is the present
          value of estimated future net cash flows from the servicing
          relationship using current market assumptions for prepayments,
          servicing costs and other factors. As the loans are repaid and net
          servicing revenue is earned, mortgage servicing rights are amortized
          into expense. Net servicing revenues are expected to exceed this
          amortization expense. However, if our actual prepayment experience
          exceeds what we originally anticipated, net servicing revenues may be
          less than expected and mortgage servicing rights may be impaired. This
          impairment would be recorded as a charge to earnings.

     o    We also use our judgement in the valuation of other intangible assets
          (core deposit based intangibles). Core deposit based intangible assets
          have been recorded for core deposits (defined as transaction accounts
          such as checking, money market and savings deposits) that have been
          acquired in acquisitions that were accounted for as purchase business
          combinations. The core deposit based intangible assets have been
          recorded using the assumption that they provide a more favorable
          source of funding than more expensive wholesale borrowings. An
          intangible asset has been recorded for the present value of the
          difference between the


                                       42

<PAGE>

          expected interest to be incurred on these deposits and interest
          expense that would be expected if these deposits were replaced by
          wholesale borrowings, over the expected lives of the core deposits. We
          currently estimate the underlying core deposits have lives of seven to
          fifteen years. If we find these deposits have a shorter life, we will
          have to write down the asset by expensing the amount that is impaired.


COMPARISONS OF FINANCIAL CONDITION AT DECEMBER 31, 2001 AND 2000

Bank Mutual's total assets increased $116.3 million, or 4.2%, to $2.91 billion
at December 31, 2001, from $2.79 billion at December 31, 2000. The increase in
assets was the result of increased federal funds sold, interest-earning deposits
and securities, which were funded primarily from the growth in deposits. These
and other factors affecting the total assets are discussed in more detail below.

Federal funds sold rose substantially to a total of $175.0 million at December
31, 2001 from $20.0 million at the end of the previous year. This increase was
primarily the result of cash from sales of fixed rate mortgage loans and deposit
growth being invested in federal funds. Bank Mutual anticipates that it will
reinvest these short-term funds into loans, investment securities and
mortgage-related securities in 2002. However, Bank Mutual's ability to reinvest
these funds in higher-yielding assets will depend on other factors such as loan
demand and the availability of objective investment opportunities, and assumes
that these funds will not be needed for other corporate purposes such as deposit
withdrawals. Interest-earning deposits also increased primarily due to similar
factors.

Investment securities available-for-sale decreased $1.1 million as a result of
maturing investments which were reinvested into federal funds sold.

Mortgage-related securities increased $56.2 million in 2001 primarily as the
result of the investment of cash generated from loan sales and deposit growth.
In addition, throughout 2001, mortgage-related securities experienced a
historically high rate of prepayments due to repayments and prepayments of the
underlying mortgages. A majority of the cash from these prepayments was
reinvested in mortgage-related securities. The effect of these purchases was to
reduce the average yield on the mortgage-related portfolio to 6.46% at December
31, 2001, from 6.79% at December 31, 2000. See Item 1 hereof for further
information as to our investment portfolio; the caption "Investment Activities"
is incorporated herein by reference.

The following table sets forth our mortgage, consumer and commercial loan
originations and purchases:

<TABLE>
<CAPTION>
                                              DURING THE YEAR ENDED DECEMBER 31,
                                              ----------------------------------
                                                 2001                    2000
                                              ----------              ----------
                                                        (IN THOUSANDS)
<S>                                           <C>                     <C>
Originations:
   Mortgage loans .........................   $  691,466              $  189,706
   Consumer loans .........................      242,580                 141,943
   Commercial business loans ..............       30,202                  23,189
                                              ----------              ----------
      Total loans originated ..............      964,248                 354,838

Purchases:
   Mortgage loans .........................        8,885                  19,213
   First Northern loans (1) ...............           --                 847,888
                                              ----------              ----------
      Total loans purchased ...............        8,885                 867,101
                                              ----------              ----------

Total loans originated and purchased ......   $  973,133              $1,221,939
                                              ==========              ==========
</TABLE>
--------------
(1)  First Northern loans, at November 1, 2000, before deductions of undisbursed
     loan proceeds, allowance for loan losses, discounts and premiums.


Loan originations increased $609.4 million in 2001 primarily as a result of
historically low interest rates which prompted consumers to refinance their
loans and as a result of the First Northern Acquisition. Existing higher
interest rate fixed rate mortgage loans and adjustable rate mortgage loans were
refinanced primarily into lower interest rate fixed rate mortgage loans. These
fixed rate mortgage loans were sold in the secondary market. Consumer loan
originations also increased substantially due to the First Northern Acquisition
and as consumers


                                       43

<PAGE>

consolidated debts or refinanced their existing debt. A majority of the consumer
loan originations were second mortgage loans. Commercial loan originations
increased as a result of our emphasis on commercial lending. We anticipate that
we will continue our emphasis on consumer and commercial loan originations as it
aids in our interest rate risk management and provides for higher yields,
although at somewhat more risk than traditional mortgage products.

Total loans receivable-net decreased $141.5 million as a result of our sale of
$309.6 million of single family mortgage loans. We sell a majority of our fixed
rate mortgage loan originations to reduce our interest rate risk. Within the
total loan portfolio, our multi-family portfolio grew $26.0 million; our
commercial real estate portfolio increased $46.9 million; the construction and
development portfolio increased $31.4 million; and the commercial business loan
portfolio increased $1.1 million. We believe these loan portfolios grew as a
result of our emphasis on these types of loans to meet a need in our market
areas. Our one-to-four- family portfolio decreased by $215.8 million primarily
as a result of customer refinancings and subsequent loan sales. For further
information on our loans, see "Asset Quality" in Item 1 hereof, which is
incorporated herein by reference.

Presently, goodwill is being amortized over a 20 year life. However, the
Financial Accounting Standards Board ("FASB") has released a "Business
Combinations and Intangible Assets - Accounting for Goodwill" pronouncement
which will significantly impact how we account for goodwill. The FASB
pronouncement eliminates amortization of goodwill and requires an annual
analysis for impairment. After December 31, 2001, if goodwill is found to be
impaired, it would be expensed in the period in which it became impaired. A
similar impairment occurred in 1999 with respect to $15.6 million of intangible
assets resulting from the 1997 acquisition of First Federal. Other intangible
assets will continue to be amortized.

Other assets are primarily comprised of the following:

<TABLE>
<CAPTION>
                                                     AT DECEMBER 31,
                                                  ---------------------
                                                    2001         2000
                                                  --------     --------
                                                      (IN THOUSANDS)
<S>                                               <C>          <C>
Accrued Interest:
   Mortgage-related securities ................   $  2,431     $  2,394
   Investment securities ......................      1,721        1,749
   Loans receivable ...........................      9,436       11,692
                                                  --------     --------
         Total accrued interest ...............     13,588       15,835

Foreclosed properties and repossessed assets ..        382        2,281
Premises and equipment ........................     43,187       43,846
Federal Home Loan Bank stock, at cost .........     31,233       28,926
Life insurance policies .......................     15,938       15,400
Mortgage servicing rights .....................      4,251        3,442
Other .........................................      8,714       11,949
                                                  --------     --------
                                                  $117,293     $121,679
                                                  ========     ========
</TABLE>


Our foreclosed properties and repossessed assets decreased $1.9 million to $0.4
million at December 31, 2001 primarily as a result of the sale of a large
foreclosed property. We believe that we continue to have good quality assets and
the homes, boats, recreational vehicles and other items that have been
repossessed, are small in dollar amount in comparison to the size of our loan
portfolio.

Premises and equipment decreased slightly in 2001 primarily as a result of their
depreciation. As we previously discussed, we began to implement a new PC based
teller system; however, this implementation began in late 2001 and we anticipate
that the rest of the system will be purchased and installed in 2002. Further, we
are continuing our search for a new loan processing software system and
anticipate that the software may be purchased in 2002. The effect of both of
these events will be to increase our equipment depreciation expense in future
periods.

FHLB of Chicago stock increased $2.3 million primarily as a result of increased
borrowings early in 2001 and stock dividends paid by the FHLB of Chicago. As we
grow our interest-earning assets, we may need to borrow additional amounts from
the FHLB of Chicago. The FHLB of Chicago requires the ownership of FHLB of
Chicago stock to increase as borrowings increase. The FHLB of Chicago has
targeted a rate of return for their stock of 1% over the 1


                                       44

<PAGE>

year constant maturity Treasury note yield. Historically, the FHLB of Chicago
stock has met or exceeded its targeted returns but we cannot assure that will
continue. See "Notes to Consolidated Financial Statements - Note 6. Borrowings."

Life insurance policies or bank owned life insurance ("BOLI") is an asset that
is used to partially offset the future cost of employee benefits. BOLI is
long-term life insurance on the lives of certain current and past employees
where the insurance policy benefits and ownership are retained by us. The cash
value accumulation on BOLI is permanently tax deferred if the policy is held to
the participant's death.

Mortgage servicing rights are created when loans are sold with rights to service
the loans retained by us. The anticipated servicing fees and income less costs
to service the loans, are present valued over the estimated life of the loan and
is recorded as an asset at the date of the loan sales. This mortgage servicing
rights asset is then amortized against income in proportion to and over the
expected period of net servicing income. Mortgage servicing rights increased
$0.8 million in 2001 primarily as a result of the sales of fixed rate mortgage
loans.

Deposits increased $195.6 million in the year 2001. We believe the stock market
decline in 2001 and world events throughout 2001 have made some consumers
re-evaluate their investment objectives and, hence, their investment portfolios.
As a result of this re-evaluation, more investors have included a greater
percentage of insured deposits within their investment mix. We also believe that
deposit growth (or shrinkage) in 2002 and future periods will depend, in
significant part, on the performance of other investment alternatives and world
events.

Our borrowings decreased $102.3 million in 2001 as a result of the cash received
from loan sales and the increase in deposits. We anticipate that we will
continue to pay off maturing borrowings in 2002 as a result of our cash
position, although our ability to make those payments will depend upon our
actual future results and our future financial needs.

Most of our borrowings are from the Federal Home Loan Bank of Chicago. Of these
amounts, approximately $205.0 million were callable by the FHLB at December 31,
2001. We reflect them in our financial statements as due in 2004, which is their
stated maturity date, because we have received indications from the FHLB that
other borrowings would be available if the borrowings are called earlier.

Shareholders' equity increased $19.7 million as a result of the net income and
increased comprehensive income in 2001. Our shareholders' equity to total asset
ratio at December 31, 2001 was 10.5% as compared to 10.2% at December 31, 2000.
We began a stock repurchase program in 2001 and as of December 31, 2001, we had
repurchased 333,500 shares at an average cost of $14.75 per share. We used
329,000 of the 333,500 shares repurchased to institute a restricted stock awards
program under the Bank Mutual Corporation 2001 Stock Incentive Plan, which
shareholders approved in May 2001. See "Notes to Consolidated Financial
Statements - Note 9. Stock-Based Benefit Plans."

We paid a cash dividend of $0.28 per share in 2001. The dividend payout was
14.1% since Mutual Savings Bancorp, MHC elected to waive cash dividends in 2001
on its 11,193,174 shares of Bank Mutual.


                                       45
<PAGE>

AVERAGE BALANCE SHEET AND YIELD/RATE ANALYSIS

The following table presents, for the periods indicated, the total dollar amount
of interest income from average interest-earning assets, the resultant yields,
and the interest expense on average interest-bearing liabilities, expressed both
in dollars and rates. No tax equivalent adjustments were made since we do not
have any tax exempt investments. Average balances are derived from average daily
balances. The yield on securities available-for-sale is included in investment
securities and mortgage-related securities and yields are calculated on the
historical basis. The yields and rates are established by dividing income or
expense dollars by the average balance of the asset or liability.

<TABLE>
<CAPTION>
                                                         AVERAGE BALANCE SHEET, INTEREST AND RATE PAID
                               -------------------------------------------------------------------------------------------------
                                                                    YEARS ENDED DECEMBER 31,
                               -------------------------------------------------------------------------------------------------
                                             2001                             2000                             1999
                               -------------------------------  -------------------------------  -------------------------------
                                            INTEREST   AVERAGE               INTEREST   AVERAGE               INTEREST   AVERAGE
                                AVERAGE      EARNED/    YIELD/   AVERAGE      EARNED/    YIELD/   AVERAGE      EARNED     YIELD
                                BALANCE       PAID       COST    BALANCE       PAID       COST    BALANCE       PAID       COST
                               ----------  ----------  -------  ----------  ----------  -------  ----------  ----------  -------
                                                                (DOLLARS IN THOUSANDS)
<S>                            <C>         <C>          <C>     <C>         <C>          <C>     <C>          <C>         <C>
ASSETS:
INTEREST-EARNING ASSETS (1):
  Loans receivable, net .....  $1,932,281  $  147,558   7.64%   $1,263,100  $   96,511   7.64%    1,069,568   $  79,623   7.44%
  Mortgage-related securities     480,856      31,042   6.46       466,924      31,725   6.79       290,772      18,479   6.36
  Investment securities .....     145,889       8,212   5.63        74,396       5,412   7.27        82,452       4,518   5.03
  Interest-earning deposits .      29,485         994   3.37        12,735         791   6.21       116,295       5,539   4.76
  Federal funds .............      96,142       3,180   3.31        20,708       1,272   6.14       198,420      10,143   5.11
                               ----------  ----------   ----    ----------  ----------   ----    ----------  ----------   ----
    Total interest-earning
     assets .................   2,684,653     190,986   7.11     1,837,863     135,711   7.38     1,757,507     118,302   6.73
Noninterest-earning assets...     175,079                           91,401                           80,369
                               ----------                       ----------                       ----------
    Total average assets.....  $2,859,732                       $1,929,264                       $1,837,876
                               ==========                       ==========                       ==========

LIABILITIES AND EQUITY:
INTEREST-BEARING LIABILITIES:
  Savings deposits...........  $  209,020  $    3,902   1.87    $  157,516       3,837   2.44    $  163,102       3,885   2.38
  Money market accounts......     318,211      12,200   3.83       233,549      12,208   5.23       203,924       9,796   4.80
  Interest-bearing
    demand accounts..........     128,435       1,208   0.94        96,432         992   1.03        89,139         940   1.05
  Time deposits..............   1,262,584      71,974   5.70       849,328      48,750   5.74       872,824      46,470   5.32
                               ----------  ----------   ----    ----------  ----------   ----     ---------   ---------   ----
    Total deposits...........   1,918,250      89,284   4.65     1,336,825      65,787   4.92     1,328,989      61,091   4.60
  Advance payment by borrowers
    for taxes and insurance..      22,307         399   1.79        14,047         332   2.36        12,227         313   2.56
  Borrowings.................     502,881      29,689   5.90       309,746      18,861   6.09       263,400      13,933   5.29
                               ----------  ----------   ----    ----------  ----------   ----    ----------   ---------   ----
    Total interest-
       bearing liabilities...   2,443,438     119,372   4.89     1,660,618      84,980   5.12     1,604,616      75,337   4.70
                               ----------  ----------   ----    ----------  ----------   ----    ----------   ---------   ----

NONINTEREST-BEARING LIABILITIES
  Noninterest-bearing
    deposits.................      82,368                           50,959                           43,402
  Other noninterest-
    bearing liabilities......      37,626                           30,706                           14,098
                               ----------                        ---------                       ----------
    Total noninterest-
    bearing liabilities......     119,994                           81,655                           57,500
                               ----------                        ---------                       ----------
    Total liabilities........   2,563,432                        1,742,283                        1,662,116
  Equity.....................     296,299                          186,981                          175,760
                               ----------                        ---------                       ----------
    Total average liabilities
       and equity............  $2,859,732                       $1,929,264                       $1,837,876
                               ==========                       ==========                       ==========
Net interest income and net
    interest rate spread (2).              $   71,614   2.22                $   50,731   2.26                 $  42,965   2.03
                                           ==========                       ==========                        =========
Net interest-earning
    assets and net interest
        margin (3)...........  $  241,215               2.67%   $  177,245               2.76%   $  152,891               2.44%
                               ==========               ====    ==========               ====    ==========               ====
Average interest-earnings
  assets to average interest-
  bearing liabilities........        1.10x                            1.11x                            1.10x
</TABLE>
---------------
(1)  For the purposes of these computations, non-accruing loans and loans held
     for sale are included in the average loans outstanding.


                                       46

<PAGE>

(2)  Interest rate spread is the difference between the average yield on
     interest-earning assets and the average rate on interest-bearing
     liabilities.

(3)  Net interest margin is determined by dividing net interest income by total
     interest-earning assets.


Rate/Volume Analysis. The following table presents the extent to which changes
in interest rates and changes in the volume of interest-earning assets and
interest-bearing liabilities have affected our interest income and interest
expense during the periods indicated. Information is provided in each category
with respect to:

     (1)  changes attributable to changes in volume (change in volume multiplied
          by prior rate);

     (2)  changes attributable to change in rate (changes in rate multiplied by
          prior volume); and

     (3)  the net change.

The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                     2001 COMPARED TO 2000
                                                  INCREASE (DECREASE) DUE TO
                                               -------------------------------
                                                VOLUME      RATE         NET
                                               --------   --------    --------
                                                        (IN THOUSANDS)
<S>                                            <C>         <C>         <C>
INTEREST-EARNING ASSETS:
Loans receivable ............................  $ 51,047    $     --    $ 51,047
Mortgage-related securities .................       886      (1,569)       (683)
Investment securities .......................     4,243      (1,443)      2,800
Interest-earning deposits ...................       687        (484)        203
Federal funds ...............................     2,734        (826)      1,908
                                               --------    --------    --------
      Total .................................    59,597      (4,322)     55,275
                                               --------    --------    --------
INTEREST-BEARING LIABILITIES:
Savings deposits ............................     1,085      (1,020)         65
Money market deposits .......................     3,765      (3,773)         (8)
Interest-bearing demand deposits ............       309         (93)        216
Time deposits ...............................    23,566        (342)     23,224
Advance payment by borrowers for taxes
   and insurance.............................       161         (94)         67
Borrowings ..................................    11,434        (606)     10,828
                                               --------    --------    --------
      Total..................................    40,320      (5,928)     34,392
                                               --------    --------    --------
Net change in net interest income ...........  $ 19,277    $  1,606    $ 20,883
                                               ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                     2000 COMPARED TO 1999
                                                  INCREASE (DECREASE) DUE TO
                                               -------------------------------
                                                VOLUME      RATE         NET
                                               --------   --------    --------
                                                        (IN THOUSANDS)
<S>                                            <C>         <C>         <C>
INTEREST-EARNING ASSETS:
Loans receivable ............................  $ 14,739    $  2,149    $ 16,888
Mortgage-related securities .................    11,889       1,357      13,246
Investment securities .......................      (475)      1,369         894
Interest-earning deposits ...................    (6,051)      1,303      (4,748)
Federal funds ...............................   (10,579)      1,708      (8,871)
                                               --------    --------    --------
      Total .................................     9,523       7,886      17,409
                                               --------    --------    --------
INTEREST-BEARING LIABILITIES:
Savings deposits ............................      (135)         87         (48)
Money market deposits .......................     1,501         911       2,412
Interest-bearing demand deposits ............        75         (23)         52
Time deposits ...............................    (1,276)      3,556       2,280
Advance payment by borrowers for taxes
   and insurance.............................        44         (25)         19
Borrowings ..................................     2,651       2,277       4,928
                                               --------    --------    --------
         Total ..............................     2,860       6,783       9,643
                                               --------    --------    --------
Net change in net interest income ...........  $  6,663    $  1,103    $  7,766
                                               ========    ========    ========
</TABLE>

                                       47

<PAGE>


COMPARISONS OF OPERATING RESULTS FOR YEARS ENDED DECEMBER 31, 2001 AND 2000

GENERAL

Net income for the year ended December 31, 2001 was $20.3 million as compared to
$14.7 million of the year ended December 31. 2000. The increase is primarily a
result of including a full year of operations of First Northern Savings Bank in
2001 and historically low interest rates, which produced record mortgage loan
originations and sales.


NET INTEREST INCOME

Net interest income for 2001 increased $20.9 million, or 41.2%, to $71.6 million
for 2001 as compared to $50.7 million for 2000. Net interest income increased
primarily as a result of the First Northern Acquisition and growth in interest
earning assets. The net interest margin for 2001 was 2.67%, as compared to 2.76%
in 2000. Interest rates were substantially affected by Federal Reserve actions
during 2001. The net interest margin was compressed throughout 2000 as a result
of market interest rates moving upward as the Federal Reserve moved to increase
interest rates early in the year to slow the pace of the economic expansion.
However, the Federal Reserve quickly reversed its restrictive growth mode,
beginning in early 2001, by reducing interest rates throughout 2001. Reduced
interests rates have historically improved the Banks' net interest margin, as
the Banks are generally able to reduce the interest rates paid on
interest-bearing liabilities more quickly than interest rates charged on
interest-earning assets. That was mitigated somewhat during 2001 by the high
level of mortgage refinancing activity in which higher interest rate loans were
paid off. Also, if the dollar amount of the loan portfolio continues to decrease
and short-term investments increase, the net interest margin may compress.


TOTAL INTEREST INCOME

Total interest income increased $55.3 million, or 40.7%, to $191.0 million for
2001 as compared to $135.7 million for 2000. The increase in total interest
income was primarily the result of the First Northern Acquisition and growth in
federal funds sold and securities.

Interest income on loans rose substantially in 2001 primarily from the First
Northern Acquisition. Our loan originations were strong in 2001, especially
fixed interest rate mortgage loans; however, we sell the majority of our fixed
rate mortgage loans to the secondary market. We sell fixed rate mortgage loans
to reduce our interest rate risk. In addition to respond to the lower interest
rate environment, we allowed some customers with our adjustable interest rate
mortgage loans to reduce their interest rate for a fee, before the expiration of
their initial lock-in period or next adjustment date. These actions, along with
our continued emphasis on multi-family and commercial loan originations,
stabilized our average yield at 7.64% for 2001.

Interest on investments increased $2.8 million as a result of the full years
results from the First Northern Acquisition and the increase in securities in
2001.

Interest on mortgage-related securities decreased $0.7 million in 2001 although
the average balances of mortgage-related securities for 2001 increased $13.9
million. The average yield on mortgage-related securities in 2001 decreased to
6.46% from 6.79% in 2000. This decrease in yield was the result of prepayments
of higher yielding mortgage-related securities and the reinvestment of those
dollars and additional money into lower-yielding mortgage-related securities.

Interest income on interest-earning deposits increased $2.1 million in 2001 as a
result of additional dollars invested throughout 2001. As deposits and loan
sales increased, the additional cash was invested in short-term investments.
However, as market interest rates decreased (as a result of the Federal
Reserve's actions) the yield on these investments also decreased.


                                       48

<PAGE>

TOTAL INTEREST EXPENSE

Interest expense on deposits increased $23.5 million, or 35.7%, to $89.3 million
in 2001 compared to $65.8 million in 2000. This increase was the result of the
effect of the First Northern Acquisition over the full year and growth in
deposits. We believe the growth in deposits was the result of the uncertainties
in the stock market and world events. At the same time, market interest rates
were being decreased as a result of Federal Reserve actions thereby reducing the
average cost of deposits to 4.65% for 2001 as compared to 4.92% for 2000. If the
stock market value would rise and world events stabilize, we believe some of the
deposits we acquired in 2001 may be withdrawn to fund customer investments in
the stock market.

Borrowing expense increased $10.8 million, or 57.4%, to $29.7 million in 2001 as
compared to $18.9 million in 2000. This increase is a result of the full year
affect of the First Northern Acquisition partially offset by the reduction in
borrowings. Most of the borrowings are with FHLB of Chicago and have fixed
interest rates and terms. As these borrowings mature, we anticipate using the
short-term investments to pay the borrowings off. See "Notes to Consolidated
Financial Statements - Note 6. Borrowings."


PROVISION FOR LOAN LOSSES

We provided $723,000 for loan losses in 2001 as compared to $423,000 in 2000.
The provision was increased in 2001 as a result of the change in the loan
portfolio mix (reduction in one-to-four family loans and an increase in
comparatively riskier multi-family and commercial loans) and charge-offs, as
well as the weakening of the economy. The allowance for loan losses at December
31, 2001 was $12.2 million or 345.9% of non-performing loans and 312.1% of
non-performing assets. The loan loss allowance to total loans is 0.67% as
compared to 0.62% at December 31, 2000. Future provisions for loan losses will
continue to be based upon our assessment of the overall loan portfolio and the
underlying collateral, trends in non-performing loans, current economic
conditions and other relevant factors in order to maintain the allowance for
loan losses at adequate levels to provide for estimated future losses. The
establishment of the amount of the loan loss allowance inherently involves
judgements by management as to the adequacy of the allowance, which ultimately
may or may not be correct. Higher rates of loan defaults than anticipated would
likely result in a need to increase provisions in future years. Also, as
multi-family and commercial loan portfolios increase, additional provisions
would likely be added to the loan loss allowances.


NONINTEREST INCOME

Total noninterest income increased $7.2 million, or 78.2%, to $16.5 million in
2001 as compared to $9.3 million in 2000. The increase is primarily the result
of the First Northern Acquisition and a significant increase in gains on the
sales of loans.

Service charges on deposits and brokerage and insurance commissions increased
$1.6 million and $0.7 million, respectively, as a result of the First Northern
Acquisition and increased sales of tax-deferred annuity products.

Loan related fees increased $0.1 million primarily as a result of two factors.
First, fees collected on adjustable rate mortgage loans that had their interest
rates reduced before their initial lock-in period had expired or before their
next interest adjustment date. The fee varied with the option the customer
chose. Second, fees collected from our fixed rate modification program which
allowed fixed rate mortgage loan customers to negotiate a lower fixed rate
without the cost of a complete refinance of their existing mortgage loan.

Gains on the sales of loans increased $3.7 million to $4.0 million in 2001 as
compared to $0.3 million in 2000. This substantial increase was the result of
low market interest rates, which spurred significant refinancings and a large
number of fixed rate mortgage loans to be originated. We sell most of these
fixed rate mortgage loans to the secondary market to reduce our interest rate
risk. We anticipate that loan sales, and related fee income, will be
substantially less in 2002 as compared to 2001 if interest rates stabilize or
rise from December 31, 2001 levels.

Other noninterest income increased $1.1 million or 35.2% to $4.3 million in 2001
as compared to $3.2 million in 2000. The increase is primarily the result of the
First Northern Acquisition, a settlement of a life insurance policy and other
miscellaneous fees.


                                       49

<PAGE>

NONINTEREST EXPENSE

Total noninterest expense increased $18.9 million to $55.0 million in 2001 as
compared to $36.1 million in 2000. The increase was primarily the result of the
acquisition of First Northern and its first full year of operations, the
implementation of stock-based benefit plans and normal increased cost of
operations.

Compensation expense increased $9.5 million or 49.6% to $28.7 million in 2001 as
compared to $19.2 million in 2000. The increase was the result of: (i) the
acquisition of First Northern and its first full year of operations; (ii) the
$1.5 million in expense associated with the employee stock ownership plan; (iii)
the implementation of a restricted stock awards plan resulting in $387,000 of
expense in 2001; (iv) increased health care costs; and (v) incentive payouts to
loan originators for the high volume of loan originations. The costs associated
with stock awards are likely to increase in 2002 because 2001 results included
only seven months of expense relating to awards of 205,000 shares granted in May
2001, and two months of expense relating to the award of 125,000 shares in
November. Assuming no further grants or forfeitures, we expect those factors to
add approximately $500,000 in expense in 2002 as compared to 2001.

Occupancy and equipment expense increased $3.0 million primarily from the
acquisition of First Northern and its first full year of operations with Bank
Mutual. Also, we recently began to replace our existing teller platform
equipment with new PCs however; we still are in the process of accomplishing
this objective. In addition, we anticipate that we will purchase a new loan
origination/documentation system in mid to late 2002. We currently do not know
the cost of this system as it depends upon the precise options chosen. The
effect of both of these events will be to increase our equipment expense.

Bank Mutual has announced that it expects to combine Mutual Savings Bank and
First Northern Savings Bank in 2003. This schedule remains subject to change and
refinement. Bank Mutual does not expect significant cost savings resulting from
the combined operations in 2002 or 2003.

The amortization of goodwill and the amortization of other intangible assets
increased substantially in 2001 as compared to 2000. The $2.0 million increase
in the amortization of goodwill and the $331,000 increase in the amortization of
other intangibles were the result of the increased amortization from the
goodwill and other intangible assets created from the acquisition of First
Northern in November 2000. The amortization of goodwill will be significantly
changed in 2002 as a result of SFAS No. 142. While other intangibles will
continue to be amortized, goodwill will no longer be amortized over a stated
period of time but rather it will remain on the statement of financial condition
and periodically be tested for impairment. If goodwill is found to be impaired,
the impaired amount will be expensed to current operations, which would likely
substantially negatively affect the results in any period in which such an
impairment was determined. Assuming no impairment of goodwill during the period,
annual amortization expense is expected to decrease by approximately $3.1
million per year. See "Notes to Consolidated Financial Statements -- Note 1.
Summary of Significant Accounting Policies -- Pending Accounting Changes."

Our efficiency ratio excluding the amortization of goodwill and other intangible
assets was 58.7% in 2001 as compared to 58.3% in 2000.


INCOME TAXES

Income tax expense increased $3.4 million to $12.1 million in 2001 as compared
to $8.7 million in 2000. The increase was the result of increased taxable
income. The effective income tax rate in 2001 was 37.3% as compared to 37.2% in
2000.


                                       50

<PAGE>

COMPARISONS OF OPERATING RESULTS FOR YEARS ENDED DECEMBER 31, 2000 AND 1999

GENERAL

The First Northern Acquisition also substantially affects the comparison of
operating results for the years ended December 31, 2000 and 1999. Results of
First Northern Savings Bank are included in Bank Mutual only from and after the
November 1, 2000 date of the acquisition.

Net income for the year ended December 31, 2000, was $14.7 million as compared
to a loss of $4.5 million for the year ended December 31, 1999. The increase was
primarily the result of the elimination of the $15.6 million charge in 1999
related to the impairment of intangible assets from the 1997 acquisition of
First Federal. In 1999, $15.6 million of intangible assets from that acquisition
were determined to be impaired and therefore expensed.


NET INTEREST INCOME

Net interest income for 2000 increased $7.8 million, or 18.1%, to $50.7 million
for 2000 as compared to $43.0 million for 1999. Net interest income increased as
a result of the net increase in interest-earning assets and net interest margin.


TOTAL INTEREST INCOME

Total interest income increased $17.4 million, or 14.7%, to $135.7 million for
2000 as compared to $118.3 million for 1999. The increase in total interest
income was primarily attributed to the First Northern Acquisition, and growth in
our loan portfolio and mortgage-related securities.

We continued to emphasize loan growth in 2000 especially our multi-family and
commercial real estate mortgage loans, consumer loans and commercial and
industrial loans. The loan growth along with an increase in the yield on average
loans increasing to 7.64% from 7.44% and the First Northern Acquisition resulted
in an increase in our interest income on loans of $16.9 million or 21.2%.

Interest on investments increased $894,000 to $5.4 million in 2000 as compared
to $4.5 million in 1999. Average investment securities decreased $8.1 million in
2000 as compared to 1999; however, the average yield on investments increased to
7.27% from 5.03%. Average investment securities decreased as a result of
maturing investment securities being reinvested in mortgage-related securities
and loans.

Interest on mortgage-related securities increased $13.2 million to $31.7 million
in 2000 as compared to $18.5 million in 1999. The increase was primarily the
result of reinvesting interest-earning deposits and maturing investment
securities into mortgage-related securities and the addition of mortgage-related
securities from the First Northern Acquisition. We used our interest-earning
deposits to purchase mortgage-related securities since mortgage-related
securities have historically provided for a higher yield than interest-earning
deposits. The average yield on mortgage-related securities was 6.79% for 2000 as
compared to 6.36% for 1999.

Interest income on interest-earning deposits decreased $13.6 million to $2.1
million in 2000 as compared to $15.7 million in 1999. The decrease was the
result of our reinvestment of interest-earning deposits into mortgage-related
securities.


TOTAL INTEREST EXPENSE

Interest expense on deposits increased $4.7 million, or 7.7%, to $65.8 million
for 2000 as compared to $61.1 million for 1999. The increase in interest expense
on deposits was the result of the First Northern Acquisition and increased
average cost of deposits. Average total deposits increased $7.8 million
primarily as a result of the First Northern Acquisition which was partially
offset by our decision not to match competitors' highest deposit interest rate
offerings in anticipation of upcoming lower market interest rates. In addition,
renewing deposits and/or new deposits were at interest rates that were higher
interest rates than the average cost of existing deposits. The average cost of
deposits increased to 4.92% in 2000 as compared to 4.60% in 1999.


                                       51

<PAGE>

Interest expense on borrowings increased $4.9 million, or 35.4%, to $18.9
million in 2000 as compared to $13.9 million in 1999. Average borrowings
outstanding in 2000 increased $46.3 million as a result of the First Northern
Acquisition. In addition, the cost of borrowing throughout 2000 increased to
6.09% as compared to 5.29% in 1999. This increased cost of borrowings was the
result of increased rates on borrowing early in 2000 and the increased dollar
amount of borrowings from the First Northern Acquisition.


PROVISION FOR LOAN LOSSES

We provided $423,000 for loan losses in 2000 as compared to $350,000 in 1999. In
addition, the allowance for loan losses includes the effect of adding First
Northern's $5.0 million at the time of the First Northern Acquisition. The
allowance for loan losses at December 31, 2000, was $12.2 million or 392.1% of
non-performing loans and 226.6% of non-performing assets. The loan loss
allowance to total loans ratio was 0.62% at December 31, 2000, as compared to
0.64% at December 31, 1999.


NONINTEREST INCOME

Total noninterest income increased $1.3 million, or 15.9%, to $9.3 million in
2000 as compared to $8.0 million in 1999. The increase was the result of
increased service charges on deposits, brokerage and insurance commissions, and
other interest income.

The increase of $303,000 in service charges on deposits was primarily the result
of the First Northern Acquisition, which increased the number of checking
accounts. Checking accounts are the predominant source of service charges.

Brokerage and insurance commissions increased $111,000, or 6.1%, to $1.9 million
in 2000 as compared to $1.8 million in 1999. The First Northern Acquisition
provided the majority of the increase.

Gains on the sale of loans decreased to $301,000 in 2000 as compared to $497,000
in 1999. The decrease was the result of reduced loan sales ($32.4 million) in
2000 as compared to 1999 ($56.9 million). Higher market interest rates on fixed
rate mortgage loans for most of 2000 resulted in reduced fixed rate mortgage
loan originations and hence, reduced loan sales.

Other noninterest income increased $1.4 million, or 74.6%, to $3.2 million in
2000 as compared to $1.8 million in 1999. The increase is primarily the result
of the First Northern Acquisition, a gain on the sale of real estate owned and
miscellaneous other fees.


NONINTEREST EXPENSE

Total noninterest expense decreased $15.1 million to $36.1 million in 2000 as
compared to $51.3 million in 1999. The decrease was the result of a decrease in
the amortization of goodwill and intangible assets of $16.9 million. 1999
included the recognition of $15.6 million impairment of goodwill and other
intangible assets from the First Federal acquisition in 1997.

The compensation expense increase of $2.0 million was primarily the result of
the First Northern Acquisition, normal increases to compensation and related
costs and increased health care costs. In connection with the Mutual Savings
restructuring, Bank Mutual established an employee stock ownership plan;
however, contributions were not yet allocated in 2000 and expense under the plan
had not yet begun.

Occupancy and equipment expense increased $329,000 primarily from the First
Northern Acquisition and the purchase of new equipment.

The amortization of goodwill and the amortization of other intangible assets
decreased substantially in 2000 as compared to 1999. This $11.8 million decrease
in goodwill amortization and $5.1 million decrease in other intangibles asset
amortization was primarily the result of the determination in 1999 of the
impairment and subsequent write down of goodwill and other intangible assets and
then the resulting lower annual amortization of


                                       52

<PAGE>

the remaining intangibles. That was offset somewhat, however, by the effect of
two months of amortization of intangible assets resulting from the First
Northern Acquisition. See "Notes to Consolidated Financial Statements - Note 2.
Business Combination."

Our efficiency ratio excluding the amortization of goodwill and other intangible
assets was 58.3% in 2000 as compared to 65.2% in 1999. This decrease was the
result of higher interest income resulting from the reinvestment of short-term
investments into higher yielding mortgage-related securities rather than a
reduction in noninterest expenses.


INCOME TAXES

Income tax expense increased $4.9 million to $8.7 million in 2000 as compared to
$3.8 million in 1999. The increase was the result of increased taxable income.
Income taxes for 1999 were significantly impacted by the non-deductibility of
the write down of goodwill. The effective income tax rate in 2000 was 37.2% as
compared to 38.9% in 1999 (excluding amortization of goodwill and other
intangible assets).


LIQUIDITY AND CAPITAL RESOURCES

The term "liquidity" refers to our ability to generate adequate amounts of cash
to fund loan originations, loan purchases, deposit withdrawals, and operating
expenses. Our primary sources of funds are deposits, scheduled amortization, and
prepayments of loan principal and mortgage-related securities, maturities and
calls of investment securities, borrowings from the FHLB of Chicago and funds
provided by our operations. Historically, these sources of funds have been
adequate to maintain liquidity, with the Banks borrowing correspondingly more in
periods in which their operations generate less cash. In the event these sources
of liquidity would become inadequate, Bank Mutual believes that it could access
the wholesale deposit market, although there can be no assurances that of
liquidity would be available if needed.

Loan repayments and maturing investment securities are a relatively predictable
source of funds. However, deposit flows, calls of investment securities and
prepayments of loans and mortgage-related securities are strongly influenced by
interest rates, general and local economic conditions and competition in the
marketplace. For example, during 2001, loan prepayments increased significantly
because of the reduced interest rate environment; another very different
interest rate environment could lead to a significantly different result. These
factors reduce the predictability of the timing of these sources of funds.

Our primary investing activities are the origination and purchase of one-to
four-family real estate loans, multi-family and commercial real estate loans,
home equity loans, other consumer loans, commercial business loans, the purchase
of mortgage-related securities, and to a lesser extent, the purchase of
investment securities.

These investing activities were funded by principal payments on mortgage loans
and mortgage-related securities, calls and maturities on investment securities,
borrowings, deposit growth, and funds provided by our operating activities.

At December 31, 2001, Bank Mutual had:

     o    outstanding loan commitments to borrowers of approximately $41.1
          million

     o    unused commercial lines of credit of approximately $21.4 million

     o    available home equity, overdraft lines of credit and unused credit
          card lines of credit of approximately $130.3 million.

There were no outstanding commitments to purchase securities at December 31,
2001. We are committed to maintaining a strong liquidity position; therefore, we
monitor our liquidity position on a daily basis. Based upon our historical
experience and available sources of liquidity, we anticipate that we will have
sufficient funds to meet current funding commitments. See also "Management of
Interest Rate Risk - Gap Analysis" in Item 7A hereof, which is incorporated
herein by reference, which discusses maturities, and "Notes to Consolidated
Financial Statements-Note 4. Other Assets," which includes a summary of future
lease obligations.

At December 31, 2001, we exceeded each of the applicable regulatory capital
requirements for both savings bank subsidiaries. In order to be classified as
"well-capitalized" by the FDIC we are required to have leverage (tier 1) capital
of at least 5.00%. To be classified as a well-capitalized bank by the FDIC, we
must also have a risk-based total capital ratio of at least 10.00%. At December
31, 2001, Mutual Savings Bank had a risk-based total capital ratio of 15.46% and


                                       53

<PAGE>

First Northern Savings Bank had a risked-based total capital ratio of 13.50%.
See "Notes to Consolidated Financial Statements -- Note 7. Shareholders'
Equity."

In connection with the Mutual Savings restructuring, Bank Mutual issued 6.1
million shares of its common stock in a subscription offering for net cash
proceeds of $58.3 million. Bank Mutual used proceeds of this offering, together
with retained earnings of Mutual Savings Bank and First Northern Savings Bank,
to fund the $75.1 million cash consideration payable in the First Northern
Acquisition. The issuance of additional shares of Bank Mutual common stock
represented the balance of the consideration in the First Northern Acquisition.
Because OTS regulations require that the MHC own at least a majority of the
outstanding shares of Bank Mutual, and currently 49.9% of Bank Mutual's common
shares are owned by persons other than the MHC, the future issuance of Bank
Mutual common stock is not expected to be a significant source of capital
resources for Bank Mutual as long as the mutual holding company structure
remains in place.

Shareholders' equity is decreased by unearned ESOP shares, which represents
shares in the Bank Mutual Employee Stock Ownership Plan which had not yet been
earned by participating employees, and unearned deferred compensation, which
represents stock grants under the management recognition plan ("MRP") component
of its 2001 Stock Incentive Plan during 2001 which have not yet vested.
Shareholders' equity is increased by $6.0 million of accumulated other
comprehensive income, consisting primarily of increased market-value of
securities available-for-sale. During 2001, Bank Mutual repurchased 333,500
shares under its stock repurchase program; of these amounts, 329,000 were used
for restricted stock awards, leaving 4,500 shares held as treasury shares at
fiscal year end. Through February 28, 2002, Bank Mutual repurchased an
additional 27,000 shares, at an average repurchase price of $16.24 per share.

Cash and cash equivalents increased $186.2 million during 2001. Bank Mutual
provided $93.9 million in investing activities, primarily as a result of the
decrease in the loan portfolio caused by the sale of fixed rate mortgage loans,
offset by proceeds from the sales of investment securities and principal
repayments on mortgage related securities. The cash provided in investing
activities was combined with the cash provided by operating and financing
activities. The cash from operating activities is primarily a result of Bank
Mutual's net income for the year, and increases in non-cash expenses, offset by
net change in loans originated for sale. Cash provided by financing activities
resulted primarily from proceeds of long-term borrowings and deposit growth,
offset by repayments on long-term borrowings.


IMPACT OF INFLATION AND CHANGING PRICES

The financial statements and accompanying notes of Bank Mutual have been
prepared in accordance with generally accepted accounting principles ("GAAP").
GAAP generally requires the measurement of financial position and operating
results in terms of historical dollars without consideration for changes in the
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of our operations. Unlike
industrial companies, our assets and liabilities are primarily monetary in
nature. As a result, changes in market interest rates have a greater impact on
performance than do the effects of inflation.


                                       54

<PAGE>

RISK FACTORS

In addition to the various factors discussed above, you should consider
carefully the following risk factors when evaluating Bank Mutual's performance
and outlook.

Changing Interest Rates May Hurt Our Profits. To be profitable, we have to earn
more money in interest and fees than we pay as interest and other expenses. Of
our first mortgage loans maturing after one year, a majority have interest rates
that are fixed for the term of the loan. While most of our deposit accounts
consist of time deposit accounts with remaining terms to maturity of less than
one year, most of our loans have longer remaining terms. It is unlikely that
interest rates will continue to decline in the near future in the dramatic way
in which they did during 2001. If interest rates rise, the amount of interest we
pay on deposits is likely to increase more quickly than the amount of interest
we receive on our loans, mortgage-related securities and investment securities.
This would cause our profits to decrease. Rising interest rates would likely
reduce the value of our mortgage-related securities and investment securities
and may decrease demand for loans and make it more difficult for borrowers to
repay their loans. For additional information on our exposure to interest rates,
see "Quantitative and Qualitative Disclosures about Market Risk - Management of
Interest Rate Risk."

Increases in Market Interest Rates are Likely to Adversely Affect Equity. As of
December 31, 2001, we owned $614.1 million of securities available-for-sale.
Generally accepted accounting principles require that we carry these securities
at fair value on our balance sheet. Unrealized gains or losses on these
securities, reflecting the difference between the fair market value and the
amortized cost, net of its tax effect, are carried as a component of
shareholders' equity. When market rates of interest increase, the fair value of
our securities available-for-sale generally decreases and equity correspondingly
decreases. When rates decrease, fair value generally increases and shareholders'
equity correspondingly increases. As of December 31, 2001, Bank Mutual's
available-for-sale portfolio had an unrealized gain of $9.2 million, because
fair value was $614.1 million and amortized cost was $604.9 million. While Bank
Mutual has benefited from the substantial decrease in interest rates during
2001, continuing decreases of this magnitude are unlikely to occur in the near
future.

The Economic Recession and World Events Could Affect Our Earnings. The United
States economy, which was softening during 2000, entered into a recession during
early 2001 according to economists. The recession is generally believed to have
continued into early 2002, and it is not yet clear whether a recovery has begun
or when one will begin. When a recovery begins, we do not know how swift or
strong it will be or how long it would continue. The effects of a recession, or
a weak economy, can significantly affect our operations and profitability. For
example, higher unemployment and reduced business sales or profits can make it
more difficult for borrowers to repay their loans. Similarly, reduced income or
confidence can lead consumers to reduce their purchases, and thus reduce loan
demand. The weakness in the national and local economies have been exacerbated
by the attacks of September 11, 2001, and their aftermath. Bank Mutual, and the
economy as a whole, may be affected by future world events, such as acts of
terrorism or developments in the war on terrorism.

Low Demand for Real Estate Loans May Lower Our Profitability. Making loans
secured by real estate is our primary business and primary source of profits. If
customer demand for real estate loans decreases, our profits may decrease
because our alternative investments, primarily securities, earn less income for
us than real estate loans. Customer demand for loans secured by real estate
could be reduced by a weaker economy, an increase in unemployment, a decrease in
real estate values or an increase in interest rates.

Strong Competition Within Our Market Area May Reduce Our Customer Base. We
encounter strong competition both in attracting deposits and originating real
estate and other loans. We compete with commercial banks, savings institutions,
mortgage banking firms, credit unions, finance companies, mutual funds,
insurance companies, and brokerage and investment banking firms. Our market area
includes branches of several commercial banks that are substantially larger than
us in terms of deposits and loans. In addition, tax exempt credit unions operate
in most of our market area and aggressively price their products and services to
a large part of the population. Our profitability depends upon our continued
ability to successfully maintain or increase our market share.


                                       55

<PAGE>

We Have Significant Intangible Assets. Bank Mutual has approximately $52.6
million in goodwill and $6.4 million in other intangible assets as of December
31, 2001. As a result of SFAS No. 142, Bank Mutual will no longer amortize
goodwill but will continue to amortize the other intangible assets over seven to
fifteen years. We will periodically check goodwill and the other intangible
assets for impairment. At some point in the future, our intangible assets may
become impaired, and we would need to write them off as a reduction to earnings
in the period in which they became impaired. For example, in 1999 Bank Mutual
wrote off $15.6 million of "impaired" goodwill and intangible assets from the
1997 acquisition of First Federal. Even though this special write-off did not
affect our cash position, our 1999 results were reduced by this action. Future
periods could be similarly affected.

We Are Expanding Our Lending Activities in Riskier Areas. We have identified
commercial real estate, commercial business and consumer loans as areas for
increased lending emphasis, and our loans of these types increased both in
absolute dollars and as a percentage of our portfolio during 2001. While
increased lending diversification is expected to increase interest income,
non-residential loans carry greater risk of payment default than residential
real estate loans. As the volume of these loans increase, credit risk increases.
In the event of substantial borrower defaults, our provision for loan losses
would increase and therefore, earnings would be reduced.

Our consumer loan portfolio included $64.0 million of indirect auto loans at
December 31, 2001. Indirect auto lending was not previously a business line for
Mutual Savings prior to the First Northern Acquisition, but was begun with a
portfolio then acquired. Although First Northern has experienced minimal
delinquencies in its automobile loan portfolio, borrowers may be more likely to
become delinquent on an automobile loan than on a residential real estate loan.
Moreover, unlike the collateral for real estate loans, automobiles depreciate
rapidly and, in the event of default, principal loss as a percent of the loan
balance depends upon the mileage and condition of the vehicle at the time of
repossession, over which Bank Mutual has no control. Similarly, any non-real
estate collateral securing commercial business loans may depreciate over time
and fluctuate in value.

Stock-Based and Other Benefits Affect Our Results. We have adopted a stock
incentive plan which provided for the granting of options to purchase common
stock and for awards of common stock to our eligible officers, employees and
directors. This plan was only partially implemented during 2001, and we expect
that compensation expense under it will increase in the future. We also have an
employee stock ownership plan, and have adopted a restoration plan that will
supplement the benefits to selected executive officers under the employee stock
ownership plan and our 401(k) plan. The cost of the employee stock ownership
plan will vary based on our stock price at specific points in the future.
Additionally, we experienced a significant increase in employee health care
costs in 2001, and expect further significant increases in 2002. These expenses
will continue to affect our future earnings, as may other factors, such as
government mandates, which would further increase the cost of compensation
and/or benefits that are provided to employees.

The MHC's Control Over Bank Mutual May Prevent Transactions You Would Like. The
MHC is managed by generally the same directors and officers who manage Bank
Mutual. Because the MHC owns a majority of Bank Mutual's common stock, the board
of directors of the MHC controls the outcome of most matters put to a vote of
shareholders of Bank Mutual. We cannot assure you that the votes cast by the MHC
will be in your best interest as a shareholder.

Mutual Savings and First Northern Savings Bank May Not Integrate as We Hope.
Mutual Savings and First Northern Savings Bank are operating as separate
entities until an expected combination in 2003. When we ultimately combine the
two banks, any problems, such as customer loss or difficulties that may result
from systems conversions, will be deferred until such time as the integration
occurs. As our integration continues, we may find that the operations and
management philosophies will not combine as well as we expect, which could lead
to operating inefficiencies and complications going forward.

Systems Conversions during 2002 May Affect Our Operations. In anticipation of
the expected merger of Mutual Savings Bank and First Northern Savings Bank, Bank
Mutual began a conversion and augmentation of its technology and other operating
systems. This conversion will continue in 2002. In addition to the costs of this
conversion and the acquisition of technology and related equipment, systems
changes are inherently difficult and can cause operational difficulties. For
example, information flow and customer service can be affected. Our conversion
to these new systems also may include periods of inefficiency. In addition,
these new systems may not


                                       56

<PAGE>

function as we hope, and they (and our other technologies) are subject to rapid
obsolescence. All of these factors may affect future earnings


QUARTERLY FINANCIAL INFORMATION

The following table sets forth certain unaudited quarterly data for the periods
indicated:

<TABLE>
<CAPTION>
                                                            QUARTER ENDED
                                           -----------------------------------------------
                                           MARCH 31   JUNE 30   SEPTEMBER 30   DECEMBER 31
                                           --------   -------   ------------   -----------
                                               (In thousands, except per share amounts)

<S>                                         <C>       <C>          <C>           <C>
2001 (unaudited)
   Interest income .....................    $49,294   $48,053      $47,590       $46,049
   Interest expense ....................     31,640    30,632       29,709        27,391
                                            -------   -------      -------       -------
      Net interest income ..............     17,654    17,421       17,881        18,658
   Provision for loan losses ...........        101       109          333           180
                                            -------   -------      -------       -------
      Net income after provision
          for loan losses ..............     17,553    17,312       17,548        18,478
   Total noninterest income ............      3,349     4,160        4,025         4,946
   Total noninterest expense ...........     13,192    13,362       13,789        14,661
                                            -------   -------      -------       -------
   Income before income taxes ..........      7,710     8,110        7,784         8,763
   Income taxes (benefit) ..............      2,907     3,032        2,860         3,285
                                            -------   -------      -------       -------
   Net income (loss) ...................    $ 4,803   $ 5,078      $ 4,924       $ 5,478
                                            =======   =======      =======       =======
   Earnings per share - Basic ..........    $  0.22   $  0.24      $  0.23       $  0.26
                                            =======   =======      =======       =======
   Earnings per share - Diluted ........    $  0.22   $  0.24      $  0.23       $  0.26
                                            =======   =======      =======       =======
   Cash dividend paid ..................    $  0.07   $  0.07      $  0.07       $  0.07
                                            =======   =======      =======       =======
2000 (unaudited)
   Interest income .....................    $29,842   $30,640      $31,216       $44,013
   Interest expense ....................     18,179    18,882       19,673        28,246
                                            -------   -------      -------       -------
      Net interest income ..............     11,663    11,758       11,543        15,767
   Provision for loan losses ...........         76       160           40           147
                                            -------   -------      -------       -------
      Net income after provision
         for loan losses ...............     11,587    11,598       11,503        15,620
   Total noninterest income ............      1,830     2,186        2,183         3,051
   Total noninterest expense ...........      8,516     8,170        8,462        10,996
                                            -------   -------      -------       -------
   Income before income taxes ..........      4,901     5,614        5,224         7,675
   Income taxes ........................      1,855     2,146        1,810         2,898
                                            -------   -------      -------       -------
   Net income ..........................    $ 3,046   $ 3,468      $ 3,414       $ 4,777
                                            =======   =======      =======       =======
   Earnings per share - Basic
     and diluted........................        n/a       n/a          n/a             *
</TABLE>


     *    Since we reorganized November 1, 2000, there were no shares
          outstanding prior to that time. Earnings per share for the two months
          ended December 31, 2000 was $0.15 per share. See "Notes to
          Consolidated Financial Statements - Note 1. Summary of Significant
          Accounting Policies - Earnings Per Share." We did not pay any cash
          dividends during 2000.


RECENT ACCOUNTING DEVELOPMENTS

We discuss recent accounting changes in the "Notes to Consolidated Financial
Statement - Note 1. Summary of Significant Accounting Policies - Pending
Accounting Changes." We also discussed the effect of changes in accounting rules
relating to the amortization of goodwill above in "Comparisons Of Operating
Results For Years Ended December 31, 2001 and 2000 - Noninterest Expense."


                                       57

<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MANAGEMENT OF INTEREST RATE RISK

Bank Mutual's ability to maintain net interest income depends upon earning a
higher yield on assets than the rates we pay on deposits and borrowings.
Fluctuations in interest rates will ultimately impact both our level of income
and expense recorded on a large portion of our assets and liabilities.
Fluctuations in interest rates will also affect the market value of all
interest-earning assets, other than those which possess a short term to
maturity.

Interest rate sensitivity is a measure of the difference between amounts of
interest-earning assets and interest-bearing liabilities which either reprice or
mature during a given period of time. The difference, or the interest rate
sensitivity "gap," provides an indication of the extent to which our interest
rate spread will be affected by changes in interest rates. See "Gap Analysis"
below.

Due to the nature of our operations, we are not directly subject to foreign
currency exchange or commodity price risk. Instead, our real estate loan
portfolio, concentrated in Wisconsin, is subject to risks associated with the
local economy. We did not engage in any hedging transactions that use derivative
instruments (such as interest rate swaps and caps) during 2001 and 2000. In the
future, we may, with approval of our board of directors, engage in hedging
transactions utilizing derivative instruments.

We seek to coordinate asset and liability decisions so that, under changing
interest rate scenarios, earnings will remain within an acceptable range.

The primary objectives of our interest rate management strategy are to:

     o    maintain earnings and capital within self-imposed parameters over a
          range of possible interest rate environments;

     o    coordinate interest rate risk policies and procedures with other
          elements of our business plan, all within the context of the current
          business environment and our capital and liquidity requirements; and

     o    manage interest rate risk in a manner consistent with the approved
          guidelines and policies set by our board of directors.

To achieve the objectives of managing interest rate risk, our Asset/Liability
committees meet periodically to discuss and monitor the market interest rate
environment and provides reports to the board of directors. These committees
(one at each bank) are comprised of members of their respective senior
management.

Historically, our lending activities have emphasized one- to four-family first
and second mortgage loans. Our primary source of funds has been deposits and
borrowings, consisting primarily of time deposits and borrowings which have
substantially shorter terms to maturity than the loan portfolio. We have
employed certain strategies to manage the interest rate risk inherent in the
asset/liability mix, including:

     o    emphasizing the origination of adjustable-rate and certain 15-year
          fixed rate mortgage loans for portfolio, and selling certain 15 and 20
          year fixed rate mortgage loans and all 30-year fixed rate mortgage
          loans;

     o    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

     o    managing deposits and borrowings to provide stable funding.


                                       58

<PAGE>

We believe that the frequent repricing of our adjustable-rate mortgage loans,
the cash flows from our 15-year fixed rate real estate loans, the shorter
duration of our consumer loans, and adjustable rate features and shorter
durations of our investment securities, reduce our exposure to interest rate
fluctuations.

Gap Analysis. Repricing characteristics of assets and liabilities may be
analyzed by examining the extent to which such assets and liabilities are
"interest rate sensitive" and by monitoring a financial institution's interest
rate sensitivity "gap." An asset or liability is said to be "interest rate
sensitive" within a specific time period if it will mature or reprice within
that time period. The interest rate sensitivity gap is defined as the difference
between the amount of interest-bearing assets maturing or repricing within a
specific time period and the amount of interest-bearing liabilities maturing or
repricing within that same time period.

A gap is considered positive when the amount of interest-earning assets maturing
or repricing within a specific time period exceeds the amount of
interest-bearing liabilities maturing or repricing within that specific time
period. A gap is considered negative when the amount of interest-bearing
liabilities maturing or repricing within a specific time period exceeds the
amount of interest-earning assets maturing or repricing within the same period.
During a period of rising interest rates, a financial institution with a
negative gap position would be expected, absent the effects of other factors, to
experience a greater increase in the costs of its liabilities relative to the
yields of its assets and thus a decrease in the institution's net interest
income. An institution with a positive gap position would be expected, absent
the effect of other factors, to experience the opposite result. Conversely,
during a period of falling interest rates, a negative gap would tend to result
in an increase in net interest income while a positive gap would tend to reduce
net interest income.

At December 31, 2001, based on the assumptions below, our interest-bearing
liabilities maturing or repricing within one year exceeded our interest-earning
assets maturing or repricing within the same period by $147.0 million. This
represented a negative cumulative one-year interest rate sensitivity gap of
(5.1%), and a ratio of interest-earning assets maturing or repricing within one
year to interest-bearing liabilities maturing or repricing within one year of
90.1%.

The following table presents the amounts of our interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2001, which we
anticipate to reprice or mature in each of the future time periods shown. The
information presented in the following table is based on the following
assumptions:

     i)   Investment securities - based upon contractual maturities and if
          applicable, call dates.

     ii)  Mortgage-related securities - based upon an independent outside source
          for determining cash flows (prepayment speeds).

     iii) Loans - based upon contractual maturities, repricing date, if
          applicable, scheduled repayments of principal and projected
          prepayments of principal based upon our historical experience or
          anticipated prepayments.

     iv)  Deposits - based upon contractual maturities and our historical decay
          rates.

     v)   Borrowings - based upon the earlier of call date or final maturity;
          however, as a result of the above-market interest rate floor on $200.0
          million of FHLB of Chicago borrowings, these borrowings have been
          reclassified to their final maturity date in 2004. We had previously
          included these borrowings in prior quarterly filings in the "Within
          Three Months" column since they are quarterly callable by the FHLB of
          Chicago. We have received indications from FHLB of Chicago that they
          would replace the borrowings even if the borrowings were called.


                                       59

<PAGE>

<TABLE>
<CAPTION>
                                                                         AT DECEMBER 31, 2001
                                        -----------------------------------------------------------------------------------
                                                                      MORE THAN     MORE THAN
                                          WITHIN        THREE TO       ONE YEAR       THREE
                                          THREE          TWELVE        TO THREE      YEARS TO        OVER
                                          MONTHS         MONTHS          YEARS      FIVE YEARS    FIVE YEARS       TOTAL
                                        ----------     ----------     ----------    ----------    ----------     ----------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                     <C>            <C>            <C>           <C>           <C>            <C>
Interest-earning assets:
Loans receivable:
   Mortgage loans:
     Fixed ..........................   $   63,282     $  113,962     $  203,352    $  108,614    $  110,393     $  599,603
     Adjustable .....................      114,404        275,714        291,726       113,070         8,526        803,440
   Consumer loans ...................      122,043        131,500        137,232        16,209         8,373        415,357
   Commercial and industrial loans ..       22,370         16,309         21,108         1,145            --         60,932
Interest-earning deposits ...........      251,382             --             --            --            --        251,382
Investment securities ...............       11,222         10,324         24,700        12,775            --         59,021
Mortgage-related securities:
     Fixed ..........................       33,629         83,189        154,453       113,838        75,047        460,156
     Adjustable .....................       53,260             --             --            --            --         53,260
Other interest-earning assets .......       31,233             --             --            --            --         31,233
                                        ----------     ----------     ----------    ----------    ----------     ----------
       Total interest-earning assets       702,825        630,998        832,571       365,651       202,339      2,734,384
                                        ----------     ----------     ----------    ----------    ----------     ----------

Interest-bearing liabilities:
   Deposits:
     Interest-bearing demand accounts        1,050          3,034          7,126         5,995       120,112        137,317
     Savings accounts ...............        7,181         20,515         44,979        33,994       108,190        214,859
     Money market accounts ..........      327,329            986          2,079         1,512         4,040        335,946
     Time deposits ..................      489,322        481,210        288,602        46,778            --      1,305,912
Advance payments by borrowers for
   taxes and insurance ..............        2,654            845             --            --            --          3,499
Borrowings ..........................       92,292         54,428        285,606        25,965         7,066        465,357
                                        ----------     ----------     ----------    ----------    ----------     ----------
       Total interest-bearing
          liabilities ...............      919,828        561,018        628,392       114,244       239,408      2,462,890
                                        ----------     ----------     ----------    ----------    ----------     ----------
Interest rate sensitivity gap .......   $ (217,003)    $   69,980     $  204,179    $  251,407    $  (37,069)    $  271,494
                                        ==========     ==========     ==========    ==========    ==========     ==========

Cumulative interest rate sensitivity
   gap ..............................   $ (217,003)    $ (147,023)    $   57,156    $  308,563    $  271,494

Cumulative interest rate sensitivity
   gap as a percentage total assets .        (7.47)%        (5.06)%         1.97%        10.62%         9.34%

Cumulative interest-earning assets
   as a percentage of interest
   bearing liabilities ..............        76.41%         90.07%        102.71%       113.88%       111.02%
</TABLE>


The methods used in the previous table have some shortcomings. For example,
although certain assets and liabilities may have similar maturities or periods
to repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities may fluctuate
in advance of changes in market interest rates, while interest rates on other
types may lag behind changes in market rates. Certain assets, such as
adjustable-rate loans, have features which limit changes in interest rates on a
short-term basis and over the life of the loan. If interest rates change,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the table. Finally, the ability of borrowers to
make payments on their adjustable-rate loans may decrease if interest rates
increase.


PRESENT VALUE OF EQUITY

In addition to the gap analysis table, we also use simulation models to monitor
interest rate risk. The models report the present value of equity in different
interest rate environments, assuming an instantaneous and permanent interest
rate shock to all interest rate-sensitive assets and liabilities. The present
value of equity is the difference between the present value of expected cash
flows of interest rate-sensitive assets and liabilities. The changes in market
value of assets and liabilities due to changes in interest rates reflect the
interest rate sensitivity of those assets and liabilities as their values are
derived from the characteristics of the asset or liability (i.e., fixed rate,
adjustable-rate, caps, floors) relative to the current interest rate
environment. For example, in a rising interest rate environment the fair market
value of a fixed rate asset will decline, whereas the fair market value of an
adjustable-rate asset, depending on its repricing characteristics, may not
decline. Increases in the market value of assets will increase the present value
of equity whereas decreases in market value of assets will decrease the present
value of equity. Conversely, increases in the market value of liabilities will
decrease the present value of equity whereas decreases in the market value of
liabilities will increase the present value of equity.


                                       60

<PAGE>

The following table presents the estimated present value of equity over a range
of interest rate change scenarios at December 31, 2001. The present value ratio
shown in the table is the present value of equity as a percent of the present
value of total assets in each of the different rate environments. For purposes
of this table, we have made assumptions such as prepayment rates and decay rates
similar to those used for the gap analysis table.

<TABLE>
<CAPTION>
                                                      PRESENT VALUE OF EQUITY
                                                           AS PERCENT OF
                       PRESENT VALUE OF EQUITY        PRESENT VALUE OF ASSETS
                   -------------------------------    ------------------------
   CHANGE IN        DOLLAR      DOLLAR     PERCENT    PRESENT VALUE    PERCENT
INTEREST RATES      AMOUNT      CHANGE     CHANGE         RATIO        CHANGE
--------------     --------    --------    -------    -------------    -------
(BASIS POINTS)                     (DOLLARS IN THOUSANDS)
     <S>           <C>         <C>         <C>            <C>           <C>
     +300          $271,535    $(37,782)   (12.21)%        9.61%        (8.48)%
     +200           287,377     (21,940)    (7.09)        10.03         (4.48)
     +100           299,642      (9,675)    (3.13)        10.31         (1.81)
        0           309,317          --        --         10.50            --
     -100           315,063       5,746      1.86         10.54          0.38
     -200           324,475      15,158      4.90         10.70          1.90
     -300           363,815      54,498     17.62         11.81         12.48
</TABLE>

As in the case of the gap analysis table, the methods we used in the previous
table have some shortcomings. This type of modeling requires that we make
assumptions which may not reflect the manner in which actual yields and costs
respond to changes in market interest rates. For example, we make assumptions
regarding the acceleration rate of the prepayment speeds of higher yielding
mortgage loans. Prepayments will accelerate in a falling rate environment and
the reverse will occur in a rising rate environment. We also assume that decay
rates on core deposits will accelerate in a rising rate environment and the
reverse in a falling rate environment. The table assumes that we will take no
action in response to the changes in interest rates, when in practice rate
changes on certain products, such as savings deposits, may lag market changes.
In addition, prepayment estimates and other assumptions within the model are
subjective in nature, involve uncertainties, and therefore cannot be determined
with precision. Accordingly, although the present value of equity model may
provide an estimate of our interest rate risk at a particular point in time,
such measurements are not intended to and do not provide a precise forecast of
the effect of changes in interest rates on our present value of equity.


                                       61

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Report of Independent Auditors

Board of Directors
Bank Mutual Corporation and Subsidiaries

We have audited the accompanying consolidated statements of financial condition
of Bank Mutual Corporation (the Company) and Subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for the three years ended December 31, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company and
Subsidiaries at December 31, 2001 and 2000 and the consolidated results of their
operations and their cash flows for the three years ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.


                                                          /s/ Ernst & Young LLP

Milwaukee, Wisconsin
February 1, 2002


<PAGE>


                    Bank Mutual Corporation and Subsidiaries

                 Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>
                                                             DECEMBER 31
                                                     --------------------------
                                                         2001           2000
                                                     -----------    -----------
                                                           (In Thousands)
<S>                                                  <C>            <C>
ASSETS
Cash and due from banks ............................ $    41,574    $    30,625
Federal funds sold .................................     175,000         20,000
Interest-earning deposits ..........................      35,338         15,097
                                                     -----------    -----------
Cash and cash equivalents ..........................     251,912         65,722
Securities available-for-sale, at fair value:
   Investment securities ...........................      93,059         94,129
   Mortgage-related securities .....................     521,084        464,873
Loans held for sale ................................      32,321          7,469
Loans receivable, net ..............................   1,831,155      1,972,636
Goodwill ...........................................      52,570         55,967
Other intangible assets ............................       6,396          7,057
Other assets .......................................     117,293        121,679
                                                     -----------    -----------
                                                     $ 2,905,790    $ 2,789,532
                                                     ===========    ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Deposits ........................................ $ 2,090,440    $ 1,894,820
   Borrowings ......................................     465,360        567,624
   Advance payments by borrowers for taxes
     and insurance .................................       3,499          4,312
   Other liabilities ...............................      42,393         38,379
                                                     -----------    -----------
                                                       2,601,692      2,505,135
Commitments and contingencies (Notes 11 and 12)

Shareholders' equity:
   Preferred stock - $.01 par value:
   Authorized - 10,000,000 shares in 2001 and 2000
   Issued and outstanding - none in 2001 and 2000 ..          --             --
   Common stock - $.01 par value:
     Authorized - 100,000,000 shares in 2001 and 2000
     Issued - 22,341,665 shares in 2001 and 2000
      Outstanding - 22,337,165 shares in 2001;
      22,341,665 in 2000............................         223            223
   Additional paid-in capital ......................     108,043        108,151
   Retained earnings ...............................     201,777        184,351
   Unearned ESOP shares ............................      (7,850)        (8,971)
   Accumulated other comprehensive income ..........       6,018            643
   Unearned deferred compensation ..................      (4,047)            --
   Treasury stock - 4,500 shares in 2001;
     none in 2000 ..................................         (66)            --
                                                     -----------    -----------
Total shareholders' equity .........................     304,098        284,397
                                                     -----------    -----------
                                                     $ 2,905,790    $ 2,789,532
                                                     ===========    ===========
</TABLE>

               See accompanying notes to consolidated statements.


                                       63

<PAGE>

                    Bank Mutual Corporation and Subsidiaries

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31
                                              ---------------------------------
                                                 2001        2000        1999
                                              ---------   ---------   ---------
                                                        (In Thousands,
                                                  Except Per Share Amounts)
<S>                                           <C>         <C>         <C>
Interest income:
   Loans ...................................  $ 147,558   $  96,511   $  79,623
   Investment securities ...................      8,212       5,412       4,518
   Mortgage-related securities .............     31,042      31,725      18,479
   Interest-earning deposits ...............      4,174       2,063      15,682
                                              ---------   ---------   ---------
Total interest income ......................    190,986     135,711     118,302

Interest expense:
   Deposits ................................     89,284      65,787      61,091
   Borrowings ..............................     29,689      18,861      13,933
   Advance payments by borrowers for taxes
     and insurance..........................        399         332         313
                                              ---------   ---------   ---------
Total interest expense .....................    119,372      84,980      75,337
                                              ---------   ---------   ---------
Net interest income ........................     71,614      50,731      42,965
Provision for loan losses ..................        723         423         350
                                              ---------   ---------   ---------
Net interest income after provision
   for loan losses..........................     70,891      50,308      42,615

Noninterest income:
   Service charges on deposits .............      4,435       2,855       2,552
   Brokerage and insurance commissions .....      2,680       1,937       1,826
   Loan related fees .......................      1,081         954       1,117
   Gain on sales of loans ..................      3,955         301         497
   Gain on sales of securities .............         --          --         158
   Other ...................................      4,329       3,203       1,834
                                              ---------   ---------   ---------
Total noninterest income ...................     16,480       9,250       7,984

Noninterest expenses:
   Compensation, payroll taxes and other
     employee benefits......................     28,710      19,186      17,158
   Occupancy and equipment .................     10,257       7,208       6,879
   Amortization of goodwill ................      3,098       1,066      12,908
   Amortization of other intangible assets .        662         331       5,382
   Other ...................................     12,277       8,353       8,952
                                              ---------   ---------   ---------
Total noninterest expenses .................     55,004      36,144      51,279
                                              ---------   ---------   ---------
Income (loss) before income taxes ..........     32,367      23,414        (680)
Income taxes ...............................     12,084       8,709       3,803
                                              ---------   ---------   ---------
Net income (loss) ..........................  $  20,283   $  14,705   $  (4,483)
                                              =========   =========   =========
Per share data:
   Earnings per share - basic                     $0.95  See Note 1         N/A
                                              =========
   Earnings per share - diluted                   $0.94  See Note 1         N/A
                                              =========
   Cash dividends paid                            $0.28         N/A         N/A
                                              =========
</TABLE>

               See accompanying notes to consolidated statements.


                                       64

<PAGE>

                    Bank Mutual Corporation and Subsidiaries

           Consolidated Statements of Changes in Shareholders' Equity

<TABLE>
<CAPTION>
                                                                 Additional                Unearned
                                                     Common        Paid-In    Retained       ESOP
                                                     Stock         Capital    Earnings       Shares
                                                    ---------    ----------   ---------    ---------
                                                                     (In Thousands)
<S>                                                 <C>          <C>          <C>          <C>
Balances at January 1, 1999 .....................   $      --    $      --    $ 174,229    $      --
   Comprehensive income:
     Net loss ...................................          --           --       (4,483)          --
     Other comprehensive income
       Change in net unrealized gain (loss) on
         securities available-for-sale, net of
         deferred income tax benefit of $4,144 ..          --           --           --           --
   Total comprehensive loss
                                                    ---------    ---------    ---------    ---------
Balances at December 31, 1999 ...................          --           --      169,746           --
   Comprehensive income:
     Net income .................................          --           --       14,705           --
     Other comprehensive income
        Change in net unrealized gain (loss) on
         securities available-for-sale, net of
         deferred income tax liability of $3,636           --           --           --           --
   Total comprehensive income
   Sale of common stock .........................          61       58,238           --         (609)
   Issuance of common stock in acquisition ......          50       50,025           --           --
   Purchase of shares for the ESOP ..............          --           --           --       (8,362)
   Capitalization of Mutual Holding Company .....         112         (112)        (100)          --
                                                    ---------    ---------    ---------    ---------
Balances at December 31, 2000 ...................         223      108,151      184,351       (8,971)
   Comprehensive income:
     Net income .................................          --           --       20,283           --
     Other comprehensive income
       Change in net unrealized gain (loss) on
         securities available-for-sale, net of
         deferred income tax benefit of $2,942 ..          --           --           --           --
   Total comprehensive income
   Purchase of treasury stock ...................          --           --           --           --
   Issuance of management recognition plan shares          --         (419)          --           --
   Committed ESOP shares ........................         311        1,150
   Cash dividends ($.28 per share) ..............      (2,857)
    Purchase of ESOP shares .....................          --           --           --          (29)
                                                    ---------    ---------    ---------    ---------
Balances at December 31, 2001 ...................   $     223    $ 108,043    $ 201,777    $  (7,850)
                                                    =========    =========    =========    =========
</TABLE>

               See accompanying notes to consolidated statements.


                                       65

<PAGE>

                    Bank Mutual Corporation and Subsidiaries

     Consolidated Statements of Changes in Shareholders' Equity (continued)

<TABLE>
<CAPTION>
                                                    Accumulated Other     Unearned
                                                      Comprehensive       Deferred      Treasury
                                                      Income (Loss)     Compensation    Stock         Total
                                                    -----------------   ------------   ----------   --------
                                                                          (In Thousands)
<S>                                                      <C>              <C>           <C>         <C>
Balances at January 1, 1999 .....................        $  1,514         $     --      $     --    $175,743
   Comprehensive income:
      Net loss ..................................              --                                     (4,483)
      Other comprehensive income
        Change in net unrealized gain (loss) on
           securities available-for-sale, net of
           deferred income tax benefit of $4,144           (7,440)                                    (7,440)
                                                                                                    --------
   Total comprehensive loss .....................                                                    (11,923)
                                                         --------         --------      --------    --------
Balances at December 31, 1999 ...................          (5,926)              --            --     163,820
  Comprehensive income:
     Net income .................................              --               --            --      14,705
     Other comprehensive income
       Change in net unrealized gain (loss) on
          securities available-for-sale, net of
          deferred income tax liability of $3,636           6,569                                      6,569
                                                                                                    --------
  Total comprehensive income ....................                                                     21,274
  Sale of common stock ..........................              --                                     57,690
  Issuance of common stock in acquisition .......              --                                     50,075
  Purchase of shares for the ESOP ...............              --                                     (8,362)
  Capitalization of Mutual Holding Company ......              --                                       (100)
                                                         --------         --------      --------    --------
Balances at December 31, 2000 ...................        $    643               --            --    $284,397
  Comprehensive income:
     Net income .................................              --               --            --      20,283
     Other comprehensive income
       Change in net unrealized gain (loss) on
          securities available-for-sale, net of
          deferred income tax benefit of $2,942 .           5,375                                      5,375
                                                                                                    --------
  Total comprehensive income ....................                                                     25,658
  Purchase of treasury stock ....................              --                         (4,920)     (4,920)
  Issuance of management recognition plan shares               --           (4,047)        4,854         388
  Committed ESOP shares .........................           1,461
  Cash dividends ($.28 per share) ...............                                                     (2,857)
   Purchase of ESOP shares ......................                                                        (29)
                                                         --------         --------      --------    --------
Balance at December 31, 2001 ....................        $  6,018         $ (4,047)     $    (66)   $304,098
                                                         ========         ========      ========    ========
</TABLE>

               See accompanying notes to consolidated statements.


                                       66
<PAGE>
                    Bank Mutual Corporation and Subsidiaries

                      Consolidated Statements of Cash Flows



<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31
                                                                  -----------------------------------
                                                                  2001            2000           1999
                                                                 ---------     ----------      -------
                                                                            (In Thousands)
<S>                                                             <C>            <C>             <C>
OPERATING ACTIVITIES:
Net income (loss)                                               $   20,283     $   14,705      $   (4,483)
Adjustments  to reconcile net income (loss) to net cash
   provided by operating activities:

     Provision for loan losses                                         723            423             350
     Provision for depreciation                                      2,621          1,719           1,840
     Amortization of intangibles                                     3,760          1,397          18,290
     Amortization of cost of stock benefit plans                     1,849              -               -
     Net discount amortization on securities                        (1,225)          (538)           (257)
     Net change in loans held for sale                             (24,852)        (6,928)          9,434
     Gains from sales of loans originated for sale                    (618)             -               -
     Net gain on sale of available-for-sale securities                   -              -            (378)
     Gain on sale of real estate owned                                   -           (845)              -
     Purchases of trading account assets                                 -              -         (39,215)
     Proceeds from sales of trading account assets                       -              -          38,995
     Net loss on sale of trading account assets                                         -             220
     Increase (decrease) in other liabilities                          147          7,441         (11,296)
     Decrease in other assets                                        1,723          2,263           3,665
     (Increase) decrease in accrued interest receivable              2,247         (2,043)           (585)
     Other                                                               -          1,734             667
                                                                ----------     ----------      ----------

Net cash provided by operating activities                            6,658         19,328          17,247

INVESTING ACTIVITIES:
Net purchases of investments in mutual funds                        (1,652)        (1,827)         (1,481)
Proceeds from maturities of investment securities                  177,742         52,173          65,000
Purchases of investment securities                                (173,288)      (166,372)        (20,000)
Proceeds from sales of mortgage-related securities                       -              -          54,060
Purchases of mortgage-related securities                          (176,658)             -        (213,504)
Principal repayments on mortgage-related securities                128,257         52,467          60,464
Net (increase) decrease in loans receivable                        140,348        (70,589)        (29,581)
Proceeds from sale of foreclosed properties                          3,391          4,387           1,673
Net increase in Federal Home Loan Bank stock                        (2,307)        (1,639)              -
Net purchases of premises and equipment                             (1,963)        (1,597)         (1,144)
Business acquisition, net of cash and cash equivalents
                                                                         -        (71,143)              -
                                                                ----------     ----------      ----------
Net cash provided (used) by investing activities                    93,870       (204,140)        (84,513)
</TABLE>



               See accompanying notes to consolidated statements

                                       67
<PAGE>


                    Bank Mutual Corporation and Subsidiaries

                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31
                                                                  ------------------------------------------
                                                                    2001           2000              1999
                                                                  ---------     -----------       ----------
                                                                              (In Thousands)
<S>                                                                <C>           <C>              <C>
FINANCING ACTIVITIES:
Net increase (decrease) in deposits                               $ 196,545      $ (21,794)       $ (55,851)
Net increase (decrease) in short-term borrowings                      2,200        (46,792)               -
Proceeds from long-term borrowings                                   79,806        145,126                -
Repayments on long-term borrowings                                 (184,270)       (44,305)         (28,123)
Net decrease in advance payments by borrowers for taxes
   and insurance                                                       (813)        (9,888)             (49)
Proceeds from sale of stock                                               -         58,299                -
Increase in unearned ESOP shares                                        (29)        (8,971)               -
Cash dividends                                                       (2,857)             -                -
Purchase of treasury stock                                           (4,920)             -                -
Capitalization of Mutual Savings Bancorp, MHC                             -           (100)               -
                                                                  ---------      ---------        ---------
Net cash provided (used) by financing activities                     85,662         71,575          (84,023)
                                                                  ---------      ---------        ---------

Increase (decrease) in cash and cash equivalents                    186,190       (113,237)        (151,289)
Cash and cash equivalents at beginning of year                       65,722        178,959          330,248
                                                                  ---------      ---------        ---------
Cash and cash equivalents at end of year                          $ 251,912      $  65,722        $ 178,959
                                                                  =========      =========        =========


Supplemental information:
   Interest paid on deposits                                      $  90,209      $  61,045        $  61,220
   Income taxes paid                                                 12,639          9,087            6,678
   Loans transferred to foreclosed properties and
     repossessed assets                                                 410          2,697            1,773
   Loans transferred from loans held for sale to portfolio                -          5,162           17,748

   Mutual fund liquidation proceeds                                       -              -           14,047
   Issuance of management recognition plan shares                     4,435              -                -
</TABLE>

               See accompanying notes to consolidated statements

                                       68
<PAGE>


                    Bank Mutual Corporation and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2001
                (Dollars in Thousands, Except Per Share Amounts)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION


Bank Mutual Corporation (the Company or Bank Mutual) is a United States
corporation chartered by the Office of Thrift Supervision. It was chartered on
November 1, 2000, to become the mid-tier holding company in the regulatory
restructuring of Mutual Savings Bank into mutual holding company form. To
accomplish the transaction, Mutual Savings Bank adopted a plan of restructuring
and, as of November 1, 2000, converted from a mutual savings bank to a mutual
holding company. The Company became a holder of all of the shares of Mutual
Savings Bank, which was rechartered as a federal stock savings bank. Mutual
Savings Bancorp, MHC, a U.S.-chartered mutual holding company of which Mutual
Savings Bank's depositors hold all of the voting and membership rights, owns
11,193,174 shares of common stock, or 50.1% of the Company's stock at December
31, 2001.


The Company issued 6,141,006 shares of common stock to public shareholders in
the subscription stock offering conducted in connection with the restructuring.
Net proceeds to the Company were $58,299. Expenses related to the offering
totaled $3,111, and $609 was loaned by the Company to the Company's Employee
Stock Ownership Plan (ESOP) to purchase 60,910 shares of common stock. See Note
9 for further discussion of the ESOP.

Concurrent with the restructuring, the Company issued 5,007,485 shares of common
stock and cash of $75,112 for all the issued and outstanding common stock of
First Northern Capital Corp. (First Northern), the parent company of First
Northern Savings Bank.

As a result of the restructuring and the First Northern Acquisition, Mutual
Savings Bank and First Northern Savings Bank (together the "Banks") became
wholly owned subsidiaries of the Company.

BUSINESS

The Banks are federal savings banks offering a full range of financial services
to customers who are primarily located in the state of Wisconsin. The Banks are
principally engaged in the business of attracting deposits from the general
public and using such deposits to originate residential and commercial real
estate loans, consumer loans, and commercial and industrial loans.


                                       69
<PAGE>



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts and transactions of
the Company and its wholly owned subsidiaries, the Banks. Mutual Savings Bank
has the following wholly owned subsidiaries: Lake Financial and Insurance
Services, Mutual Investment Corporation and MC Development Ltd. First Northern
Savings Bank has the following wholly owned subsidiaries: First Northern
Investments Inc. and Great Northern Financial Services Corporation. Significant
intercompany accounts and transactions have been eliminated in consolidation.
First Northern Savings Bank also has a 50% owned subsidiary, Savings Financial
Corporation, which is accounted for using the equity method.

In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statement of financial condition and revenues
and expenses for the period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers federal funds sold and interest-bearing deposits that have
original maturities of three months or less to be cash equivalents.

FEDERAL HOME LOAN BANK STOCK

Stock of the Federal Home Loan Bank (FHLB) is owned due to regulatory
requirements and carried at cost which is its redeemable value.

INVESTMENT AND MORTGAGE-RELATED SECURITIES AVAILABLE-FOR-SALE

Available-for-sale securities are stated at fair value, with the unrealized
gains and losses, net of tax, reported in a separate component of equity.



                                       70
<PAGE>


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The amortized cost of securities classified as available-for-sale is adjusted
for amortization of premiums and accretion of discounts to maturity, or in the
case of mortgage-related securities, over the estimated life of the security.
Such amortization is included in interest income from investments. Interest and
dividends are included in interest income from investments. Realized gains and
losses and declines in value judged to be other-than-temporary are included in
net gain or loss on sales of securities and are based on the specific
identification method.

LOANS HELD FOR SALE

Loans held for sale, which generally consist of current production of certain
fixed-rate mortgage loans, are recorded at the lower of aggregate cost or market
value. Fees received from the borrower are deferred and recorded as an
adjustment of the carrying value.

LOANS RECEIVABLE AND RELATED INTEREST INCOME

Interest on loans is accrued and credited to income as earned. Accrual of
interest is generally discontinued either when reasonable doubt exists as to the
full, timely collection of interest or principal or when a loan becomes
contractually past due by more than 90 days with respect to interest or
principal. At that time, any accrued but uncollected interest is reversed and
additional income is recorded only to the extent that payments are received and
the collection of principal is reasonably assured. Loans are restored to accrual
status when the obligation is brought current, has performed in accordance with
the contractual terms for a reasonable period of time and the ultimate
collectibility of the total contractual principal and interest is reasonably
assured.

LOAN FEES AND RELATED COSTS

Loan origination and commitment fees and certain direct loan origination costs
are deferred and amortized as an adjustment of the related loans' yield. The
Company amortizes these amounts using the level-yield method over the
contractual life of the related loans.

ALLOWANCE FOR LOAN LOSSES

The Company evaluates impairment of loans when they warrant such review. A loan
is considered impaired when the carrying amount of the loan exceeds the present
value of the expected future cash flows, discounted at the loan's original
effective interest rate or the fair value of the underlying collateral. The
allowance is charged for an amount equal to the impairment. General valuation
allowances are based on an evaluation of the various risk components that are
inherent in the credit portfolio. The risk components that are evaluated include
past loan loss experience; the level of nonperforming and classified assets;
current economic conditions; volume, growth and composition of the loan
portfolio; adverse situations that may affect borrowers' ability to repay; the
estimated value of any underlying collateral; peer group comparisons; regulatory
guidance; and other relevant factors.


                                       71
<PAGE>

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The allowance is increased by provisions charged to earnings and reduced by
charge-offs, net of recoveries. The allowance reflects management's best
estimate of the amount necessary to provide for the unrecognized impairment of
loans, as well as other credit risks of the Banks. The allowance is based on a
risk model developed and implemented by management and approved by the Banks'
Boards of Directors.

MORTGAGE SERVICING RIGHTS

Mortgage servicing rights are recorded as an asset when loans are sold with
servicing rights retained. The cost of mortgage service rights is amortized in
proportion to, and over the period of, estimated net servicing revenues.
Impairment of mortgage servicing rights is assessed based on the fair value of
those rights. Fair values are estimated using discounted cash flows based on
current market assumptions.

FORECLOSED PROPERTIES AND REPOSSESSED ASSETS

Foreclosed properties acquired through, or in lieu of, loan foreclosure are
recorded at the lower of cost or fair value less estimated costs to sell. Costs
related to the development and improvement of property are capitalized, whereas
costs related to holding the property are expensed. Gains and losses on sales
are recognized based on the carrying value upon closing of the sale.

PREMISES AND EQUIPMENT

Land, buildings, leasehold improvements and equipment are carried at amortized
cost. Buildings and equipment are depreciated over their estimated useful lives
using the straight-line method. Leasehold improvements are amortized over the
shorter of their useful lives or lease terms. The Company reviews buildings,
leasehold improvements and equipment for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Impairment exists when the estimated undiscounted cash flows for
the property are less than its carrying value. If identified, an impairment loss
is recognized through a charge to earnings based on the fair value of the
property.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, representing the excess of purchase price over the fair value of net
assets acquired, results from acquisitions made by the Company. Goodwill is
being amortized to operating expense using the straight-line method over 20
years. Other intangible assets, primarily attributed to the customer
relationships acquired, are amortized over their estimated useful lives,
generally seven - fifteen years. The carrying amounts of goodwill, net of
$20,086 of accumulated amortization, and other intangible assets are reviewed if
facts and circumstances indicate that it may be impaired. If this review
indicates that it is not recoverable, as determined based on the estimated
undiscounted cash flows of the entity acquired over the remaining amortization
period, the carrying amount of the goodwill is reduced for the estimated
shortfall of the cash flows discounted at the average cost of capital for thrift
institutions as compared to the carrying value.


                                       72
<PAGE>



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LIFE INSURANCE POLICIES

Investments in life insurance policies owned by the Company are carried at the
amount that could be realized under the insurance contract.

INCOME TAXES

The Company files a consolidated federal income tax return and separate, or
combined, state income tax returns, depending on the state. A deferred tax asset
or liability is determined based on the enacted tax rates that will be in effect
when the differences between the financial statement carrying amounts and tax
bases of existing assets and liabilities are expected to be reported in the
Company's income tax returns. The effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the enactment date of
the change. A valuation allowance is provided for any deferred tax asset for
which it is more likely than not that the asset will not be realized. Changes in
valuation allowances are recorded as a component of income taxes.

EARNINGS PER SHARE

Basic and diluted earnings per share (EPS) are computed by dividing net income
by the weighted-average number of common shares outstanding for the period. ESOP
shares committed to be released are considered outstanding. Shares of restricted
stock which have been awarded under the management recognition plan ("MRP")
provisions of the Company's 2001 Stock Incentive Plan, whether or not vested,
are considered common stock equivalents and are included in the weighted-average
number of shares outstanding for basic EPS. If dilutive, nonvested MRP shares
are considered common stock equivalents and are included in the weighted-average
number of shares outstanding for diluted EPS. The calculation of EPS for the
period subsequent to the Mutual Savings Bank restructuring and First Northern
Savings Bank merger reflects the actual weighted-average shares outstanding for
the period November 1, 2000 to December 31, 2000, including both shares issued
in the stock offering conducted in connection with the restructuring as well as
shares issued in conjunction with the First Northern Acquisition. The
calculation of EPS for the two-month period November 1, 2000 to December 31,
2000, was $0.15 per share and is calculated based on net income for the
two-month period of $3,182 and the weighted-average shares outstanding of
21,570,803. No earnings per share are reflected for periods prior to November 1,
2000, because there were no shares outstanding prior to the restructuring.


                                       73
<PAGE>


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PENSION COSTS

The Company has both defined-benefit and defined-contribution plans. The
Company's net periodic pension cost of the defined-benefit plan consists of the
expected cost of benefits earned by employees during the current period and an
interest cost on the projected benefit obligation, reduced by the expected
earnings on assets held by the retirement plan, amortization of transitional
assets over a period of 15 years, amortization of prior service cost and by
amortization of recognized actuarial gains and losses over the estimated future
service period of existing plan participants. The costs associated with the
defined-contribution plans consist of a predetermined percentage of
compensation, which is determined by the Banks' Board of Directors.

SEGMENT INFORMATION

The Company has determined that it has one reportable segment - community
banking. The Banks offer a range of financial products and services to external
customers, including: accepting deposits from the general public; originating
residential, consumer and commercial loans; and marketing annuities and other
insurance products. Revenues for each of these products are disclosed in the
consolidated statements of income.

RECENT ACCOUNTING CHANGES

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," and SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities -- Deferral of the Effective
Date of SFAS No. 133," which delayed the implementation date of SFAS No. 133 for
one year, to fiscal years beginning after June 15, 2000, provide a comprehensive
and consistent standard for the recognition of derivatives and hedging
activities. SFAS 133 requires all derivatives to be recorded on the balance
sheet at fair value. However, special accounting is provided for certain
derivatives that meet the definition of hedges. Changes in the fair value of
derivatives that do not meet the definition of hedges are required to be
reported in earnings in the period of change. The Company and Banks do not use
derivative financial instruments such as futures, swaps, caps, floors, options
or interest or principal-only strips of similar instruments. The adoption of
SFAS No. 133 did not have a significant impact on the Company.

Additionally, SFAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" was issued in September 2000 that
replaces, in its entirety, SFAS No. 125. Although SFAS No. 140 has changed many
of the rules regarding securitizations, it continues to require an entity to
recognize the financial and servicing assets it controls and liabilities it has
incurred and to derecognize financial assets when control has been surrendered
in accordance with the criteria provided in the Statement. The adoption of this
Statement did not significantly impact the Company.


                                       74
<PAGE>


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and No. 142, "Goodwill and Other Intangible Assets,"
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and certain intangible assets are no longer amortized but are
reviewed at least annually for impairment. Separable intangible assets that are
not deemed to have an indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the SFAS. Other intangible
assets will continue to be amortized over their useful lives.

Bank Mutual will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of the SFAS is expected to result in an increase in
net income of approximately $3.1 million ($0.14 per share) per year. During
2002, Bank Mutual will perform the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. The expected increase
in net income may be subject to change.

RECLASSIFICATIONS

Certain 2000 and 1999 amounts have been reclassified to conform to the 2001
presentation.





                                       75
<PAGE>



2. SECURITIES, AVAILABLE-FOR-SALE

The amortized cost and fair value of investment securities available-for-sale
are as follows:

<TABLE>
<CAPTION>
                                                                     Gross        Gross         Estimated
                                                      Amortized    Unrealized   Unrealized        Fair
                                                        Cost         Gains        Losses          Value
                                                      ---------    ----------   ----------      ----------
<S>                                                  <C>          <C>           <C>                <C>
At December 31, 2001:
   Investment securities:
     U.S. government and federal agency
          obligations                                $  39,667    $  1,652             -        $  41,319
     Corporate issue obligations                        17,300          55      $   (166)          17,189
     Mutual funds                                       33,120          19          (157)          32,982
     Federal Home Loan Mortgage Corporation
          stock                                          1,440         129             -            1,569
                                                       -------     -------        ------         --------
   Total investment securities                          91,527       1,855          (323)         93,059
   Mortgage-related securities:
     Federal Home Loan Mortgage Corporation            162,365         948        (1,418)        161,895
     Federal National Mortgage Association             321,198       8,214          (782)        328,630
     Private Placement CMOs                             28,137         662           (16)         28,783
     Government National Mortgage Association            1,716          60             -           1,776
                                                       -------     -------        ------         --------
   Total mortgage-related securities                   513,416       9,884        (2,216)         521,084
                                                      ========     =======       =======         ========
Total                                                 $604,943     $11,739       $(2,539)        $614,143
                                                      ========     =======       =======         ========
</TABLE>

<TABLE>
<CAPTION>

                                                                     Gross        Gross        Estimated
                                                      Amortized   Unrealized    Unrealized        Fair
                                                        Cost         Gains        Losses          Value
                                                     -----------  ----------   -----------     ----------
<S>                                                  <C>           <C>         <C>              <C>
At December 31, 2000:
   Investment securities:
     U.S. government and federal agency
          obligations                                $  59,949     $   544     $     (96)       $  60,397
     Corporate issue obligations                           999           -             -              999
     Mutual funds                                       31,437           6          (363)          31,080
     Federal Home Loan Mortgage Corporation
          stock                                          1,440         213             -            1,653
                                                     ---------     -------     ---------        ---------
   Total investment securities                          93,825         763          (459)         94,129
   Mortgage-related securities:
     Federal Home Loan Mortgage Corporation             71,077         182        (1,153)         70,106
     Federal National Mortgage Association             375,300       3,252        (1,525)        377,027
     Private Placement CMOs                             15,699           7          (217)         15,489
     Government National Mortgage Association            2,216          35             -           2,251
                                                     ---------     -------     ---------        ---------
Total mortgage-related securities                      464,292       3,476        (2,895)         464,873
                                                      ========      ======       =======         ========
Total                                                 $558,117      $4,239       $(3,354)        $559,002
                                                      ========      ======       =======         ========
</TABLE>


                                       76
<PAGE>


2. SECURITIES, AVAILABLE-FOR-SALE (CONTINUED)

The amortized cost and fair values of securities by contractual maturity at
December 31, 2001, are shown below. Actual maturities may differ from
contractual maturities because issuers have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>

                                                                             Amortized          Fair
                                                                                Cost            Value
                                                                            ----------        ---------
<S>                                                                         <C>               <C>
Due in one year or less                                                     $  19,481         $  19,792
Due after one year through five years                                          37,486            38,716
Due after five years through ten years                                              -                 -
Mutual funds                                                                   33,120            32,982
Federal Home Loan Mortgage Corporation stock                                    1,440             1,569
Mortgage-related securities                                                   513,416           521,084
                                                                             --------          --------
                                                                             $604,943          $614,143
                                                                             ========          ========
</TABLE>


Total proceeds and gross realized gains and losses from sale of
available-for-sale securities for each of the three years ended December 31
were:

<TABLE>
<CAPTION>

                                                            2001               2000             1999
                                                            ----               ----            -------

<S>                                                         <C>                <C>             <C>
Proceeds                                                    $ -                $ -             $54,060
Gross gains                                                   -                  -                 378
Gross losses                                                  -                  -                   -
</TABLE>


The following table summarizes the adjustment to other comprehensive income and
the related tax effect for each of the three years ended December 31:

<TABLE>
<CAPTION>
                                                             2001             2000               1999
                                                            ------           -------           --------

<S>                                                         <C>              <C>               <C>
Unrealized holding gain (loss) on  available-for-sale
    securities arising during the period                    $8,315           $10,205           $(11,962)
Related tax (expense) benefit                               (2,940)           (3,636)             4,276
                                                            ------          --------           --------
Net after tax unrealized gain (loss)                         5,375             6,569             (7,686)
Less: Reclassification adjustment
    Realized  gain  on  sales  of  available-for-sale
     securities                                                  -                 -                378
    Related tax expense                                          -                 -               (132)
                                                            ------          --------           --------
Net after tax reclassification adjustment                        -                 -                246
                                                            ------          --------           --------
Change in other comprehensive income                        $5,375          $  6,569           $ (7,440)
                                                            ======          ========           ========
</TABLE>



                                       77
<PAGE>


2. SECURITIES, AVAILABLE-FOR-SALE (CONTINUED)

Investment securities with a fair value of approximately $21,712 and $23,100 at
December 31, 2001 and 2000, were pledged to secure deposits and for other
purposes as permitted or required by law. See also Notes 6 and 11 for additional
information regarding security pledges.

3. LOANS RECEIVABLE

Loans receivable consist of the following:

<TABLE>
<CAPTION>

                                                                                     DECEMBER 31
                                                                                ----------------------
                                                                                2001              2000
                                                                                ----              ----
<S>                                                                        <C>              <C>
Mortgage loans:
   One-to-four family                                                      $    992,126     $  1,207,912
   Multifamily                                                                  131,925          105,925
   Commercial real estate                                                       165,556          118,636
   Construction and development                                                 125,611           94,235
                                                                           ------------     ------------
Total mortgage real estate loans                                              1,415,218        1,526,708
Consumer and other loans:
   Fixed equity                                                                 200,500          193,394
   Home equity lines of credit                                                   76,472           80,447
   Student                                                                       25,410           27,076
   Home improvement                                                               9,439           12,778
   Automobile                                                                    77,621           99,844
   Other                                                                         25,886           27,827
                                                                           ------------     ------------
Total consumer and other loans                                                  415,328          441,366
Total commercial business loans                                                  60,932           59,844
                                                                           ------------     ------------
Total loans receivable                                                        1,891,478        2,027,918
Less:
   Undisbursed loan proceeds                                                     44,467           37,490
   Allowance for loan losses                                                     12,245           12,238
   Unearned loan fees and discounts                                               3,611            5,554
                                                                           ------------     ------------
                                                                                 60,323           55,282
                                                                           ------------     ------------
Total loans receivable - net                                               $  1,831,155     $  1,972,636
                                                                           ============     ============
</TABLE>


The Company's first mortgage loans and home equity lines of credit are primarily
secured by properties housing one-to-four families which are generally located
in the Company's local lending areas in Wisconsin. There are no significant
loans which are considered to be impaired at December 31, 2001 or 2000.


                                       78
<PAGE>


3. LOANS RECEIVABLE (CONTINUED)

A summary of the activity in the allowance for loan losses follows:

<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31
                                                           ------------------------------------------
                                                              2001             2000            1999
                                                           ---------         ---------       --------
<S>                                                        <C>               <C>             <C>
Balance at beginning of year                               $  12,238         $   6,948       $  6,855
Provisions                                                       723               423            350
Allowance of acquired business                                     -             5,028              -
Charge-offs                                                     (817)             (194)          (341)
Recoveries                                                       101                33             84
                                                           ---------         ---------       --------
Balance at end of year                                     $  12,245         $  12,238       $  6,948
                                                           =========         =========       ========
</TABLE>


The unpaid principal balance of loans serviced for others was $583,057, $440,207
and $287,789 at December 31, 2001, 2000 and 1999, respectively. These loans are
not reflected in the consolidated financial statements.

4. OTHER ASSETS

Other Assets are summarized as follows:

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31
                                                                           ---------------------------
                                                                             2001              2000
                                                                           ----------       ----------
<S>                                                                        <C>              <C>
Accrued interest:
   Mortgage-related securities                                             $    2,431       $    2,394
   Investment securities                                                        1,721            1,749
   Loans receivable                                                             9,436           11,692
                                                                           ----------       ----------
Total accrued interest                                                         13,588           15,835
Foreclosed properties and repossessed assets                                      382            2,281
Premises and equipment                                                         43,187           43,846
Federal Home Loan Bank stock, at cost                                          31,233           28,926
Life insurance policies                                                        15,938           15,400
Mortgage servicing rights                                                       4,251            3,442
Other                                                                           8,714           11,949
                                                                           ----------       ----------
                                                                           $  117,293       $  121,679
                                                                           ==========       ==========
</TABLE>




                                       79
<PAGE>


4. OTHER ASSETS (CONTINUED)

Foreclosed properties and repossessed assets are summarized as follows:

<TABLE>
<CAPTION>

                                                                                    DECEMBER 31
                                                                                ----------------------
                                                                                2001             2000
                                                                                -----           ------
<S>                                                                             <C>              <C>
Acquired by foreclosure or in lieu of foreclosure                               $346             $2,196
Repossessed collateral                                                            36                 85
                                                                                $382             $2,281
                                                                                ====             ======
</TABLE>


Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31
                                                                            --------------------------
                                                                              2001             2000
                                                                            ---------       ----------
<S>                                                                         <C>              <C>
Land and land improvements                                                  $  11,098        $  10,972
Office buildings                                                               38,128           37,902
Furniture and equipment                                                        15,205           13,895
Leasehold improvements                                                          1,227            1,236
                                                                            ---------        ---------
                                                                               65,658           64,005
Less allowances for depreciation and amortization                              22,471           20,159
                                                                            ---------        ---------
                                                                            $  43,187        $  43,846
                                                                            =========        =========
</TABLE>


Depreciation expense for 2001, 2000 and 1999 was $2,621, $1,719 and $1,840,
respectively.

The Banks lease various branch offices, office facilities and equipment under
noncancelable operating leases which expire on various dates through 2012.
Future minimum payments under noncancelable operating leases with initial or
remaining terms of one year or more for the years indicated are as follows at
December 31, 2001:

<TABLE>
<CAPTION>

<S>                                                                                            <C>
2002                                                                                           $1,095
2003                                                                                            1,081
2004                                                                                              750
2005                                                                                              550
2006                                                                                              486
Thereafter                                                                                      1,510
                                                                                               ------
Total                                                                                          $5,472
                                                                                               ======
</TABLE>



Rental expenses totaled $923, $628 and $609 for 2001, 2000 and 1999,
respectively.



                                       80
<PAGE>


4. OTHER ASSETS (CONTINUED)

Mortgage servicing rights of $4,251 and $3,442 and $1,430 are included in other
assets. $2,398, $2,513, and $375 were capitalized during the years ended
December 31, 2001, 2000, and 1999, respectively. Amortization of mortgage
servicing rights was $1,589, $501, and $374 for the years ended December 31,
2001, 2000, and 1999, respectively. The valuation allowance for the impairment
of mortgage servicing rights was $587, $100, and $100 for the years ended
December 31, 2001, 2000, and 1999, respectively.

5. DEPOSITS

Deposits are summarized as follows:

<TABLE>
<CAPTION>

                                                                                    DECEMBER 31
                                                                           -----------------------------
                                                                               2001             2000
                                                                           ------------     ------------
<S>                                                                        <C>              <C>
Checking accounts:
   Noninterest-bearing                                                     $     96,362     $     87,079
   Interest-bearing                                                             137,317          133,975
                                                                           ------------     ------------
                                                                                233,679          221,054
Money market accounts                                                           335,946          290,947
Savings accounts                                                                214,859          200,915
Certificate accounts:
   Due within one year                                                          934,378          802,291
   After one but within two years                                               262,910          291,359
   After two but within three years                                              57,514           56,975
   After three but within four years                                             31,406           13,243
   After four but within five years                                              19,748           18,036
   After five years                                                                   -                -
                                                                           ------------     ------------
                                                                              1,305,956        1,181,904
                                                                           ------------     ------------
                                                                           $  2,090,440     $  1,894,820
                                                                           ============     ============
</TABLE>


The aggregate amount of certificate accounts with balances of one hundred
thousand dollars or more is approximately $144,955 and $136,307 at December 31,
2001 and 2000, respectively.

Interest expense on deposits was as follows:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31
                                                           -------------------------------------------
                                                             2001             2000              1999
                                                           --------         ---------        ---------
<S>                                                        <C>              <C>              <C>
Interest-bearing checking accounts                         $  1,208         $     992        $     940
Money market accounts                                        12,200            12,208            9,796
Savings accounts                                              3,902             3,682            3,885
Certificate accounts                                         71,974            48,905           46,470
                                                           --------          --------        ---------
                                                           $ 89,284          $ 65,787        $  61,091
                                                           ========          ========        =========
</TABLE>


                                       81
<PAGE>

6. BORROWINGS

Borrowings consist of the following:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                      ----------------------------------------------------------------------
                                                   2001                                  2000
                                      --------------------------------     ---------------------------------
                                                         Weighted-                             Weighted-
                                                          Average                               Average
                                         Balance           Rate                Balance           Rate
                                      --------------- ----------------     ---------------- ----------------
<S>                                     <C>                <C>                <C>                <C>
Federal Home Loan Bank advances
   maturing:
     2001                                        -            -              $  182,914          6.58%
     2002                               $  116,339         6.21%                113,793          6.59
     2003                                   60,905         5.50                  48,806          6.23
     2004                                  231,773         5.61                 200,000          5.70
     2005                                   17,995         5.20                       -             -
     Thereafter                             15,013         5.26                     976          5.90
     Open line of credit                         -            -                  20,225          6.24
Other borrowings                            23,335         1.39                     910          5.74
                                        ----------                           ----------
                                        $  465,360                           $  567,624
                                        ==========                           ==========
</TABLE>



Advances that mature in the year 2004 consist of borrowings that are redeemable
at the option of the FHLB beginning at various times in 2001.

The Banks are required to maintain unencumbered mortgage loans in their
portfolios aggregating at least 167% of the amount of outstanding advances from
the FHLB as collateral. The Banks' borrowings at the FHLB are limited to the
lesser of 35% of total assets or 60% of the book value of certain mortgage
loans. In addition, these notes are collateralized by FHLB stock of $31,233 and
$28,926 at December 31, 2001 and 2000, respectively.

The Banks are a Treasury Tax & Loan (TT&L) depository for the Federal Reserve
Bank (FRB), and as such, it accepts TT&L deposits. The Banks are allowed to
borrow these deposits from the FRB until they are called. The interest rate is
the federal funds rate less 25 basis points. U.S. Treasury Securities with a
face value greater than or equal to the amount borrowed are pledged as a
condition of borrowing TT&L deposits. As of December 31, 2001, the TT&L deposits
were $23,335.

First Northern Savings Bank has a line of credit with two financial institutions
which total $10.0 million. At December 31, 2001 and 2000, no draws were
outstanding.



                                       82
<PAGE>



7. SHAREHOLDERS' EQUITY

The Banks are subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possible additional discretionary, actions by
regulators, that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Banks must meet specific
capital guidelines that involve quantitative measures of the Banks' assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Banks' capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.

Quantitative measures established by federal regulation to ensure adequacy
require the Banks to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier I capital (as these terms are defined in
regulations) to risk-weighted assets (as these terms are defined in
regulations), and of Tier I capital (as these terms are defined in regulations)
to average assets (as these terms are defined in regulations). Management
believes, as of December 31, 2001, that the Banks meet all capital adequacy
requirements to which they are subject.




                                       83
<PAGE>

7. SHAREHOLDERS' EQUITY (CONTINUED)

<TABLE>
<CAPTION>
                                                                                            To Be Well
                                                                                         Capitalized Under
                                                                   For Capital           Prompt Corrective
                                            Actual              Adequacy Purposes        Action Provisions
                                     ----------------------    --------------------    ----------------------
                                       Amount      Ratio        Amount     Ratio         Amount      Ratio
                                     ----------- ----------    --------- ----------    ------------ ---------
<S>                                    <C>          <C>          <C>         <C>         <C>        <C>
Mutual Savings Bank
As of December 31, 2001:
   Total capital                       $145,141     15.46%       $75,085     8.00%       $93,856    10.00%
     (to risk-weighted assets)
   Tier 1 capital                       138,300     14.74%        37,542    4.00%         56,314     6.00%
     (to risk-weighted assets)
   Tier 1 capital                       138,300      7.19%        76,955    4.00%         96,193     5.00%
     (to average assets)

First Northern Savings Bank
As of December 31, 2001:
   Total capital                        $85,851     13.50%       $50,805     8.00%       $63,507    10.00%
     (to risk-weighted assets)
   Tier 1 capital                        80,677     12.70%        25,403    4.00%         38,104     6.00%
     (to risk-weighted assets)
   Tier 1 capital                        80,677     8.55%         37,748    4.00%         47,185     5.00%
     (to average assets)


Mutual Savings Bank
As of December 31, 2000:
   Total capital                       $137,456     14. 74%      $74,625     8.00%       $93,281    10.00%
     (to risk-weighted assets)
   Tier 1 capital                       130,345     13.97%        37,312    4.00%         55,969     6.00%
     (to risk-weighted assets)
   Tier 1 capital                       130,345      7.27%        71,726    4.00%         89,658     5.00%
     (to average assets)

First Northern Savings Bank
As of December 31, 2000:
   Total capital                      $  75,571     10.97%       $55,126     8.00%       $68,908    10.00%
     (to risk-weighted assets)
   Tier 1 capital                        70,444     10.22%        27,563    4.00%         41,345     6.00%
     (to risk-weighted assets)
   Tier 1 capital                        70,444     7.44%         37,864    4.00%         47,330     5.00%
     (to average assets)
</TABLE>


                                       84
<PAGE>


7. SHAREHOLDERS' EQUITY (CONTINUED)

The Company is not aware of any conditions or events, which would change the
Banks' status as well capitalized. There are no conditions or events since that
notification that management believes have changed the Banks' category.

Following are reconciliation's of the Bank's equity under generally accepted
accounting principles to capital as determined by regulators:

<TABLE>
<CAPTION>

                                             Mutual Savings Bank             First Northern Savings Bank
                                         ----------------------------     ----------------------------------
                                            Risk-         Tier I               Risk-            Tier I
                                            Based         (Core)               Based            (Core)
                                           Capital        Capital             Capital          Capital
                                         ------------- --------------     ---------------- -----------------
<S>                                         <C>           <C>                 <C>               <C>
As of December 31, 2001:
   Equity per bank records                  $154,430      $154,430            $129,928          $129,928
   Unrealized gains on investments            (5,281)       (5,281)               (894)             (894)
   Goodwill and intangibles                   (8,726)       (8,726)            (47,873)          (47,873)
   Investment in "nonincludable"
     subsidiaries                             (2,123)       (2,123)               (354)             (354)
   Disallowed servicing assets                     -             -                (130)             (130)
   Equity investments required to be
      deducted                                     -             -                (230)                -
   Allowance for loan losses                   6,841             -               5,404                 -
                                            --------      --------            --------          --------
Regulatory capital                          $145,141      $138,300            $ 85,851          $ 80,677
                                            ========      ========            ========          ========
</TABLE>

<TABLE>
<CAPTION>
                                            Risk-         Tier I               Risk-            Tier I
                                            Based         (Core)               Based            (Core)
                                           Capital        Capital             Capital          Capital
                                         ------------- --------------     ---------------- -----------------
<S>                                         <C>           <C>                 <C>               <C>
As of December 31, 2000:
   Equity per bank records                  $140,226      $140,226            $122,209          $122,209
   Unrealized gains on investments              (397)         (397)               (463)             (463)
   Goodwill and intangibles                   (9,484)       (9,484)            (50,969)          (50,969)
   Investment in "nonincludable"
     subsidiaries                                  -             -                (333)             (333)
   Allowance for loan losses                   7,111             -               5,127                 -
                                            --------      --------           ---------         ---------
Regulatory capital                          $137,456      $130,345           $  75,571         $  70,444
                                            ========      ========           =========         =========
</TABLE>


8. EMPLOYEE BENEFIT PLANS

Mutual Savings Bank

Mutual Savings Bank has a discretionary, defined-contribution savings plan (the
Savings Plan). The Savings Plan is qualified under Sections 401 and 401(k) of
the Internal Revenue Code and provides employees meeting certain minimum age and
service requirements the ability to make contributions to the Savings Plan on a
pretax basis. Mutual Savings Bank then matches a



                                       85
<PAGE>


8. EMPLOYEE BENEFIT PLANS (CONTINUED)

percentage of the employee's contributions. Matching contributions made by
Mutual Savings Bank were $89 in 2001, $76 in 2000 and $68 in 1999. Effective
December 31, 2001, First Northern Savings Bank's 401(k) Plan, described below,
was combined with the Savings Plan. Effective January 1, 2002, the Savings Plan
became a defined contribution 401(k) plan for employees of Bank Mutual and its
subsidiaries.

Mutual Savings Bank also has a defined-benefit pension plan covering employees
meeting certain minimum age and service requirements and a supplemental pension
plan for certain qualifying employees. The supplemental pension plan is funded
through a "rabbi trust" arrangement. The benefits are generally based on years
of service and the employee's compensation during the last five years of
employment. Mutual Savings Bank's funding policy is to contribute annually the
amount necessary to satisfy the requirements of the Employee Retirement Income
Security Act of 1974. In addition, as of January 1, 2002, First Northern Savings
Bank employees meeting certain minimum age and service requirements entered
Mutual Savings Bank's defined benefit plan.

The following tables set forth the defined benefit pension plan's funded status
and net periodic benefit cost:

<TABLE>
<CAPTION>
                                                                                 2001             2000
                                                                                -------         ---------
<S>                                                                            <C>              <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                                        $ 15,024         $  13,552
Service cost                                                                        803               818
Interest cost                                                                     1,096             1,032
Amendment                                                                            34                 -
Actuarial gain                                                                     (209)              (10)
Benefits paid                                                                      (313)             (368)
                                                                               --------         ---------
Benefit obligation at end of year                                              $ 16,435         $  15,024
                                                                               ========         =========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year                                 $ 16,221         $  14,219
Actual return on plan assets                                                      2,417             1,416
Employer contributions                                                              110               954
Benefits paid                                                                      (313)             (368)
                                                                               --------         ---------
Fair value of plan assets at end of year                                       $ 18,435         $  16,221
                                                                               ========         =========
FUNDED STATUS
Funded status at end of year                                                   $  2,000         $   1,197
Unrecognized net actuarial loss                                                  (2,079)             (634)
Unrecognized prior service cost                                                     720               833
Unrecognized net transition asset                                                     -               (50)
                                                                               --------         ---------
Prepaid benefit cost                                                           $    641         $   1,346
                                                                               ========         =========


Weighted-average assumptions used in cost calculations:
   Discount rate                                                                   7.50%             7.75%
   Rate of increase in compensation levels                                         5.00%             5.50%
   Expected long-term rate of return on plan assets                                7.50%             7.50%

</TABLE>




                                       86
<PAGE>


8. EMPLOYEE BENEFIT PLANS (CONTINUED)

<TABLE>
<CAPTION>

                                                             2001              2000             1999
                                                            -------           -------          ------
<S>                                                         <C>               <C>              <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost                                                $   803           $   819          $  659
Interest cost                                                 1,096             1,032             934
Expected return on plan assets                               (1,196)           (1,049)           (986)
Amortization of transition asset                                (50)              (51)            (50)
Amortization of prior service cost                              146               195             202
Recognized actuarial loss                                        16                18              54
                                                            -------           -------          ------
Total net periodic benefit cost                             $   815           $   964          $  813
                                                            =======           =======          ======
</TABLE>



Pension plan assets which consist primarily of immediate participation guarantee
contracts with an insurance company are actively managed by investment
professionals.

Mutual Savings Bank has a deferred retirement plan for non-officer directors who
have provided at least five years of service. Four of the six existing eligible
directors' benefits have vested. In the event a director dies prior to
completion of these payments, payments will go to the director's heirs. Mutual
Savings Bank has funded these arrangements through "rabbi trust" arrangements,
and based on actuarial analyses believes these obligations are adequately
funded.

First Northern Savings Bank

First Northern Savings Bank has a participatory defined-contribution 401(k)
plan. The plan covers all employees with at least one year of service and who
attained age 21. First Northern Savings Bank annually contributes 3% of an
employee's gross earnings and may fund an additional discretionary dollar amount
to the plan. First Northern Savings Bank also matches 50% of the first 4% of the
amount of each employee's contribution. In addition, each employee may
contribute amounts in excess of 4%, up to the lesser of 15% of compensation or
federal tax limits, with no First Northern Savings Bank participation. Total
expense relating to this plan for the year ended December 31, 2001 was $498 and
for the two months ended December 31, 2000, was $53. Effective December 31,
2001, the First Northern Savings Bank's participatory defined-contribution
401(k) plan was combined with Mutual Savings Bank's defined contribution 401(k)
plan and as of January 1, 2002, a new combined Bank Mutual defined contribution
401(k) Plan was established.

First Northern Savings Bank also has an unfunded deferred retirement plan for
the Bank's non-employee directors. All members of First Northern Savings Bank's
Board of Directors are eligible under the plan. Directors of predecessor
institutions who are members of an advisory board are eligible at the discretion
of First Northern Savings Bank. Currently there are four retired advisory board
members in the plan. First Northern Savings Bank also has supplemental
retirement plans for several executives. Total expense relating to these plans
for the year ended December 31, 2001 was $225 and for the two months ended
December 31, 2001, was $17.


                                       87
<PAGE>

9. STOCK-BASED BENEFIT PLANS

In conjunction with the reorganization, the Company established an ESOP for the
employees of the Company and the Banks. The ESOP is a qualifying plan under
Internal Revenue Service guidelines. It covers all full-time employees who have
attained at least 21 years of age and completed one year of service. At November
1, 2000, the ESOP borrowed $609 from the Company and purchased 60,910 shares of
common stock issued in the public offering. Subsequent to this initial purchase,
through December 31, 2000, the ESOP borrowed an additional $8,362 and purchased
an additional 828,000 shares. In January 2001, the ESOP bought an additional
2,969 shares. Expense is recognized based on the fair value (average stock
price) of shares scheduled to be released from the ESOP trust. One-tenth of the
shares are scheduled to be released each year starting in 2001, as one-tenth of
the loan is scheduled to be repaid each year. Also, additional shares may be
released as the ESOP Trust receives cash dividends from the unallocated shares
held in the Trust. In 2001, such additional shares were released. ESOP expense
for the year ended December 31, 2001 was $1,461; there was no ESOP expense
during the year ended December 31, 2000. ESOP shares not committed to be
released are not considered outstanding for the purposes of computing EPS.

The following table summarizes shares of Company common stock held by the ESOP
at December 31.

<TABLE>
<CAPTION>
                                                                                2001                2000
                                                                               -------             -------
<S>                                                                            <C>                 <C>
Shares allocated to participants                                               113,936                   -
Unallocated and unearned shares                                                777,943             888,910
Fair value of unearned ESOP shares                                             $11,887              $8,445
</TABLE>


In May 2001, Bank Mutual shareholders approved the 2001 Stock Incentive Plan,
providing for the grant of stock options for up to 1,114,849 shares and
restricted stock (MRP) awards of up to 334,454 shares. Of these, 330,000 MRP
shares were granted during the year ended December 31, 2001 to employees in
management positions of which 1,000 shares were forfeited; no shares were
granted during the year ended December 31, 2000. The outstanding MRP grants had
a fair value at the date of the grants of $4,435. The grants under the MRP are
being amortized to compensation expense as the Company's employees become vested
in the awarded shares. The amount amortized to expense was $388 for the year
ended December 31, 2001. The remaining unamortized cost of the MRP is reflected
as a reduction of shareholders' equity as unearned deferred compensation.

Options for 1,104,000 shares were granted on May 8, 2001 at an exercise price of
$11.76. Of these options, 1,094,000 shares remain outstanding at December 31,
2001, no shares are vested and 10,000 shares have been forfeited.



                                       88
<PAGE>

9. STOCK-BASED BENEFIT PLANS (CONTINUED)

The estimated fair value of each option granted is calculated using the
Black-Scholes option-pricing model. The following summarizes the weighted
average assumptions used in the model:

<TABLE>
<CAPTION>
                                                                                2001
                                                                                ----
<S>                                                                            <C>
Risk-free interest rate                                                         5.30%
Dividend yield                                                                  2.00%
Expected stock volatility                                                      26.30%
Expected years until exercise                                                    8.0
</TABLE>


The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. Option valuation models such as the Black-Scholes require the
input of highly subjective assumptions including the expected stock price
volatility. Bank Mutual's stock options have characteristics significantly
different from traded options and inasmuch, changes in the subjective input
assumptions can materially affect the fair value estimate. In management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.

Bank Mutual accounts for the stock options in accordance with ABP Option 25, as
allowed under FASB No. 123, and, therefore, no compensation cost has been
recognized in connection with stock options granted in any year. Pursuant to
FASB No. 123 disclosure requirements, pro forma net income and earnings per
share are presented below as if compensation cost for stock options was
determined under the fair value method and amortized to expense over the
options' vesting periods.

<TABLE>
<CAPTION>
                                                                       Year ended December 31
                                                                                2001
                                                                               --------
<S>                                                                             <C>
Net income:
     As reported                                                                $20,283
     Pro forma                                                                  $19,819
Basic earnings per share:
     As reported                                                                 $0.95
     Pro forma                                                                   $0.92
Diluted earnings per share:
     As reported                                                                 $0.94
     Pro forma                                                                   $0.92
</TABLE>


The pro forma amounts may not be indicative of the effect on reported net income
and earnings per share for future years as current options vest over five years.



                                       89
<PAGE>


9. STOCK-BASED BENEFIT PLANS (CONTINUED)

As a result of OTS regulatory requirements resulting from the mutual holding
company structure, Bank Mutual will need to purchase up to approximately 1.45
million shares of its common stock for issuance pursuant to awards which have
been or are made under the Stock Incentive Plan. Bank Mutual had repurchased
333,500 shares through December 31, 2001 and no specific schedule was announced
for the completion of these purchases. Because of the options' vesting schedules
under the Stock Incentive Plan, Bank Mutual would not be required to repurchase
in the near future all of the shares which the Stock Incentive Plan will
ultimately require.

10. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31
                                                          --------------------------------------------
                                                            2001              2000              1999
                                                          --------          --------           -------
<S>                                                       <C>                <C>               <C>
Current:
   Federal                                               $  10,768          $  8,732          $  6,896
   State                                                      (113)             (230)              793
                                                         ---------          --------          --------
                                                            10,655             8,502             7,689
Deferred expense (benefit):
   Federal                                                   1,125              (129)           (3,120)
   State                                                       304               335              (766)
                                                         ---------          --------          --------
                                                             1,429               206            (3,886)
                                                         ---------          --------          --------
                                                         $  12,084          $  8,708          $  3,803
                                                         =========          ========          ========
</TABLE>



For state income tax purposes, certain subsidiaries have net business loss
carryovers of $16,100 available to offset against future income. The carryovers
expire in the years 2002 through 2017 if unused.

The income tax provision differs from the provision computed at the federal
statutory corporate rate as follows:

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31
                                                                 ----------------------------------------
                                                                   2001            2000           1999
                                                                 ---------       ---------      ---------
<S>                                                             <C>             <C>            <C>
Income before provision for income taxes                        $  32,367       $  23,414      $    (680)
                                                                =========       =========      =========
Tax expense at federal statutory rate                           $  11,328       $   8,195      $    (238)
Increase (decrease) in taxes resulting from:
   State income taxes - net of federal tax benefit                    124              70             21
   Nondeductible intangible amortization                            1,177             466          3,487
   Bank Owned Life Insurance                                         (381)              -              -
   Other                                                             (164)            (23)           533
                                                                ---------       ---------      ---------
Provision for income taxes                                      $  12,084       $   8,708       $  3,803
                                                                =========       =========      =========
</TABLE>


Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.


                                       90
<PAGE>


10. INCOME TAXES (CONTINUED)

The significant components of the Company's deferred tax assets and liabilities
are summarized as follows:

<TABLE>
<CAPTION>

                                                                                   DECEMBER 31
                                                                            --------------------------
                                                                              2001              2000
                                                                            ---------          -------
<S>                                                                         <C>                <C>
Deferred tax assets:
   State net operating losses                                               $     829          $   471
   Loan loss reserves                                                           4,386            3,836
   Pension                                                                      2,140            1,902
   Deferred compensation                                                        1,350            1,404
   Other                                                                           97              786
                                                                            ---------          -------
Total deferred tax assets                                                       8,802            8,399
Valuation allowance                                                              (769)            (330)
                                                                            ---------          -------
Net Deferred tax assets                                                         8,033            8,069

Deferred tax liabilities:
   Property and equipment depreciation                                          1,189            1,121
   FHLB stock dividends                                                         2,077            1,537
   Deferred loan fees                                                             520              488
   Purchase accounting adjustments                                              6,289            5,536
   Unrealized gain on investment securities                                     3,183              242
                                                                            ---------          -------
Total deferred tax liabilities                                                 13,258            8,924
                                                                            ---------          -------
Net deferred tax asset (liability)                                          $  (5,225)         $  (855)
                                                                            =========          =======
</TABLE>



The Banks and certain predecessor banks qualified under provisions of the
Internal Revenue Code that permitted it to deduct from taxable income an
allowance for bad debts that differed from the provision for such losses charged
to income for financial reporting purposes. Accordingly, no provision for
federal income taxes has been made for approximately $64,475 of retained income
as of December 31, 2001. If, in the future, the Banks no longer qualify as a
bank for tax purposes, income taxes of approximately $25,874 would be imposed.

11. CONTINGENT LIABILITY

The Company has entered into an agreement whereby, for an initial fee and annual
fee, certain of its United States Treasury notes are pledged as collateral for
an Industrial Development Revenue Bond which was issued by a local municipality
to finance commercial real estate owned by a third party, unrelated to the
Company. Under the terms of the agreement, Mutual must maintain with a trustee
collateral with a fair market value, as defined, aggregating 135% or more of the
sum of the outstanding principal balance of the bonds plus accrued interest on
the outstanding principal. The Company continues to receive interest payments on
the collateral.

At December 31, 2001 and 2000, United States Treasury notes with outstanding
principal balances aggregating approximately $10,000 were held by the trustee as
collateral for these bonds which had an outstanding principal balance of $4,615
and $4,905 at December 31, 2001 and 2000, respectively. The third-party borrower
is current on all scheduled payments due under the bond issue, which has a
scheduled maturity of December 15, 2009.


                                       91
<PAGE>

12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments consist of commitments to extend credit and involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated statements of financial condition. The
contract amounts reflect the extent of involvement the Company has in particular
classes of financial instruments and also represents the Company's maximum
exposure to credit loss.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and generally
require payment of a fee. As some commitments expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates the collateral needed and creditworthiness
of each customer on a case by case basis. The Company generally extends credit
only on a secured basis. Collateral obtained varies, but consists principally of
one-to-four family residences.

Financial instruments whose contract amounts represent credit risk are as
follows:

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31
                                                                               -----------------------
                                                                                 2001            2000
                                                                               --------       --------
<S>                                                                            <C>            <C>
Unused consumer lines of credit                                                $130,269       $112,916
Unused commercial lines of credit                                                21,376         14,622
Commitments to extend credit:
   Fixed rate                                                                    14,979          5,012
   Adjustable rate                                                               26,164         10,034
Credit enhancement under the Federal Home Loan Bank
   of Chicago Mortgage Partnership Finance program                                   34             32
</TABLE>


Forward commitments to sell mortgage loans of $41,314 at December 31, 2001,
represent commitments obtained by the Company from a secondary market agency to
purchase mortgages from the Company. Commitments to sell loans expose the Banks
to interest rate risk if market rates of interest decrease during the commitment
period. Commitments to sell loans are made to mitigate interest rate risk on
commitments to originate loans and loans held for sale. There were no forward
commitments at December 31, 2000.

The Company participates in the FHLB Mortgage Partnership Finance Program (the
Program). In addition to entering into forward commitments to sell mortgage
loans to a secondary market agency, the Company enters into firm commitments to
deliver loans to the FHLB through the Program. Under the Program, loans are
funded by the FHLB and the Company receives an agency fee reported as a
component of gain on sale of loans. The Company had no firm commitments
outstanding to deliver loans through the Program at December 31, 2001. Once
delivered to the


                                       92
<PAGE>

12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
(CONTINUED)

Program, the Company provides a contractually agreed-upon credit enhancement and
performs servicing of the loans. Under the credit enhancement, the Company is
liable for losses on loans delivered to the Program after application of any
mortgage insurance and a contractually agreed-upon credit enhancement provided
by the Program subject to an agreed-upon maximum. The Company received a fee for
this credit enhancement. The Company does not anticipate that any credit losses
will be incurred in excess of anticipated credit enhancement fees.

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

Disclosure of fair value information about certain financial instruments,
whether or not recognized in the consolidated financial statements, for which it
is practicable to estimate the value, is summarized below. In cases where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques.

Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument.

Certain financial instruments and all nonfinancial instruments are excluded from
this disclosure. Accordingly, the aggregate fair value of amounts presented does
not represent the underlying value of the Company and is not particularly
relevant to predicting the Company's future earnings or cash flows.

The following methods and assumptions are used by the Company in estimating its
fair value disclosures of financial instruments:

Cash and Cash Equivalents: The carrying amounts reported in the statements of
financial condition for cash and cash equivalents approximate those assets' fair
values.

Investment and Mortgage-Related Securities: Fair values for these securities are
based on quoted market prices or such prices of comparable instruments.

Loans Receivable and Loans Held-for-Sale: The fair value of one-to-four family
fixed-rate mortgage loans was determined based on the current market price for
securities collateralized by similar loans. For variable rate one-to-four family
mortgage, consumer and other loans that reprice frequently and with no
significant change in credit risk, carrying values approximate fair values. The
fair value for fixed-rate commercial real estate, rental property mortgage,
consumer and other loans was estimated by projecting cash flows at market
interest rates.

Mortgage Servicing Rights: The Company has calculated the fair market value of
mortgage servicing rights for those loans that are sold with servicing rights
retained. For valuation purposes, loans are stratified by product type and,
within product type, by interest rates. The fair value of


                                       93
<PAGE>

13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

mortgage servicing rights is based upon the present value of estimated future
cash flows using current market assumptions for prepayments, servicing cost and
other factors.

Federal Home Loan Bank Stock: Federal Home Loan Bank stock is carried at cost,
which is its redeemable (fair) value, since the market for this stock is
restricted.

Accrued Interest Receivable: The carrying value of accrued interest receivable
approximates fair value.

Deposits and Advance Payments by Borrowers for Taxes and Insurance: Fair values
for deposits are estimated using a discounted cash flow calculation that applies
current market borrowing interest rates to a schedule of aggregated expected
monthly maturities on deposits. The advance payments by borrowers for taxes and
insurance are equal to their carrying amounts at the reporting date.

Borrowings: The fair value of long-term borrowings is estimated using discounted
cash flow calculations with the discount rates equal to interest rates currently
being offered for borrowings with similar terms and maturities. The carrying
value on short-term borrowings approximates fair value.

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                              ---------------------------------------------------------
                                                      2001                            2000
                                              -------------------------   -----------------------------
                                              Carrying          Fair        Carrying            Fair
                                               Value            Value         Value            Value
                                             ----------      ----------   -------------    ------------
<S>                                          <C>             <C>           <C>             <C>
Cash and cash equivalents                    $  251,912      $  251,912    $     65,722    $     65,722
Investment and mortgage-related
   securities                                   614,143         614,143         559,002         559,002
Loans receivable, net                         1,831,155       1,870,581       1,972,636       1,966,365
Loans held for sale                              32,321          32,321           7,469           7,469
Mortgage servicing rights                         4,251           4,251           3,442           3,442
Federal Home Loan Bank stock                     31,233          31,233          28,926          28,926
Accrued interest receivable                      13,588          13,588          15,835          15,835
Deposits and accrued interest                 2,090,440       2,107,022       1,894,820       1,871,707
Advance payments by borrowers                     3,499           3,499           4,312           4,312
Borrowings                                      465,360         489,484         567,624         567,100

</TABLE>

The above table does not include any amount for the value of any
off-balance-sheet items (see Note 12) since the fair value of these items is not
significant.



                                       94
<PAGE>


14. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31
                                                                            ---------------------------
                                                                               2001              2000
                                                                            ----------        ---------
<S>                                                                         <C>               <C>
ASSETS
Cash and cash equivalents                                                   $   20,241        $  21,566
Investment in subsidiaries                                                     284,358          262,435
Receivable from ESOP                                                             7,850            8,959
Other assets                                                                         1              563
                                                                            $  312,450         $293,523
                                                                            ==========        =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Due to subsidiaries                                                      $    6,948        $   8,959
   Other liabilities                                                             1,404              167
                                                                            ----------        ---------
                                                                                 8,352            9,126
Shareholders' equity Common stock - $.01 par value:
     Authorized - 100,000,000 shares
     Issued - 22,341,665 shares in 2000
     Outstanding - 22,337,165 shares in 2001 and
     22,341,665 in 2000                                                            223              223
   Additional paid-in capital                                                  108,043          108,151
   Retained earnings                                                           201,777          184,351
   Unearned ESOP shares                                                         (7,850)          (8,971)

   Accumulated other comprehensive income                                        6,018              643
   Unearned deferred compensation                                               (4,047)
   Treasury stock - 4,500 shares in 2001, none in 2000                             (66)               -
                                                                            ----------        ---------
                                                                               304,098          284,397
                                                                            ----------        ---------
                                                                            $  312,450        $ 293,523
                                                                            ==========        =========
</TABLE>


STATEMENT OF INCOME

<TABLE>
<CAPTION>

                                                                              YEAR ENDED DECEMBER 31
                                                                             -------------------------
                                                                               2001             2000
                                                                             ---------        --------
<S>                                                                          <C>              <C>
Interest income                                                              $   1,560        $    207
Equity in earnings of subsidiaries                                              19,668          14,594
Other                                                                              139               1
                                                                             ---------        --------
Total income                                                                    21,367          14,802

Total expenses                                                                     667              26
                                                                             ---------        --------
Income before provision for income taxes                                        20,700          14,776
Provision for income taxes                                                         417              71
                                                                             ---------        --------
Net income                                                                   $  20,283        $ 14,705
                                                                             =========        ========
</TABLE>



                                       95
<PAGE>


14. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31
                                                                             ---------------------------
                                                                               2001              2000
                                                                             --------          ---------
<S>                                                                          <C>               <C>
Cash flows from operating activities
   Net income                                                                $ 20,283          $ 14,705
   Adjustment to reconcile net income to net cash provided by (used
     in) operating activities:
   Equity in earnings of subsidiaries                                         (19,668)          (14,594)
   Amortization of cost of stock benefit plans                                  1,849                 -
   Decrease in due to subsidiaries                                             (2,011)                -
   Change in other operating activities and liabilities                         1,758              (396)
                                                                             --------          --------
Net cash used in operating activities                                           2,211              (285)

Cash flows from investing activities:
   Transfer from subsidiary resulting from restructuring                            -            47,635
   Business acquisition, net of cash and cash equivalents                           -           (75,112)
   Dividends from Company subsidiaries                                          3,120                 -
                                                                             --------          --------
Net cash provided by investing activities                                       3,120           (27,477)

Cash flows from financing activities:
   Sale of stock                                                                    -            58,299
   Purchase of ESOP shares                                                        (29)           (8,971)
   Cash dividends                                                              (2,857)                -
   Purchase of treasury stock                                                  (4,920)                -
   Payments received on ESOP                                                    1,150                 -
                                                                             --------          --------
Net cash provided by financing activities                                      (6,656)           49,328
                                                                             --------          --------
Increase (decrease) in cash and cash equivalents                               (1,325)           21,566
Cash and cash equivalents at beginning of year                                 21,566                 -
                                                                             --------          --------
Cash and cash equivalents at end of year                                     $ 20,241          $ 21,566
                                                                             ========          ========

</TABLE>



                                       96
<PAGE>


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

Not applicable.



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


Information in response to this item is incorporated herein by reference to
"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in Bank Mutual's definitive Proxy Statement for its Annual Meeting
of Shareholders on May 7, 2002 (the "2002 Annual Meeting Proxy Statement"). See
also "Executive Officers of the Registrant" in Part I hereof, which is
incorporated herein by reference.


ITEM 11. EXECUTIVE COMPENSATION


Information in response to this item is incorporated by reference to "Directors'
Compensation", "Executive Compensation" and "Compensation Committee Interlocks
and Insider Participation" in the 2002 Annual Meeting Proxy Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


Information in response to this item is incorporated by reference to "Security
Ownership of Certain Beneficial Owners" in the 2002 Annual Meeting Proxy
Statement.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Information in response to this item is incorporated by reference to
"Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions with Bank Mutual" in the 2002 Annual Meeting Proxy Statement.


                                       97
<PAGE>


                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)  Documents filed as part of the Report: 1. and 2. Financial Statements
          and Financial Statement Schedules.


The following consolidated financial statements of Bank Mutual Corporation and
subsidiaries are filed as part of this report under Item 8, "Financial
Statements and Supplementary Data":


     Consolidated Statements of Financial Condition - December 31, 2001 and
     2000.

     Consolidated Statements of Operations - Years Ended December 31, 2001, 2000
     and 1999.

     Consolidated Statements of Changes In Shareholders' Equity - Years Ended
     December 31, 2001, 2000 and 1999 .

     Consolidated Statements of Cash Flows - Years Ended December 31, 2001, 2000
     and 1999.


     Notes to Consolidated Financial Statements.

Report of Ernst & Young LLP, Independent Auditors.

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

     3.   Exhibits. See Exhibit Index following the signature page of this
          report, which is incorporated herein by reference. Each management
          contract or compensatory plan or arrangement required to be filed as
          an exhibit to this report is identified in the Exhibit Index by an
          asterisk following its exhibit number.

     (b) Reports on Form 8-K:


          No reports on Form 8-K were filed in the fourth quarter of 2001.


                                       98
<PAGE>


                                   SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                     BANK MUTUAL CORPORATION

March 27, 2002


                                     By:   /s/Michael T. Crowley, Jr.
                                        ----------------------------------------
                                         Michael T. Crowley, Jr.

                                         Chairman and Chief Executive Officer

                                 --------------

                                POWER OF ATTORNEY


       Each person whose signature appears below hereby authorizes Michael T.
Crowley, Jr., Michael D. Meeuwsen, and Rick B. Colberg, or any of them, as
attorneys-in-fact with full power of substitution, to execute in the name and on
behalf of such person, individually, and in each capacity stated below or
otherwise, and to file, any and all amendments to this report.

                                ----------------

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.*

                               SIGNATURE AND TITLE

<TABLE>
<CAPTION>
<S>                                                                     <C>

                 /s/Michael T. Crowley, Jr.                                    /s/Raymond W. Dwyer, Jr.
      ----------------------------------------------                    --------------------------------------
             Michael T. Crowley, Jr., Chairman,                             Raymond W. Dwyer, Jr., Director
            Chief Executive Officer and Director
               (Principal Executive Officer)



                  /s/Michael D. Meeuwsen                                       /s/Thomas J. Lopina, Sr.
       ---------------------------------------------                    --------------------------------------
              Michael D. Meeuwsen, President,                               Thomas J. Lopina, Sr., Director
           Chief Operating Officer and Director



                    /s/Rick B. Colberg                                           /s/William J. Mielke
      ----------------------------------------------                    --------------------------------------
         Rick B. Colberg, Chief Financial Officer                             William J. Mielke, Director
               (Principal Financial Officer)



                   /s/Marlene M. Scholz                                           /s/Robert B. Olson
      ----------------------------------------------                    --------------------------------------
          Marlene M. Scholz, Senior Vice President                            Robert B. Olson, Director
               (Principal Accounting Officer)



                   /s/Michael T. Crowley, Sr.                                      /s/David J. Rolfs
      ----------------------------------------------                    --------------------------------------
           Michael T. Crowley, Sr., Director                                    David J. Rolfs, Director



                    /s/Thomas H. Buestrin                                        /s/Jelmer G. Swoboda
      ----------------------------------------------                    --------------------------------------
                Thomas H. Buestrin, Director                                  Jelmer G. Swoboda, Director


                       /s/Mark C. Herr
      ----------------------------------------------
                   Mark C. Herr, Director

</TABLE>


------------------
     * Each of the above signatures is affixed as of March 27, 2002.



                                       99
<PAGE>

                                   BANK MUTUAL
                       ("Bank Mutual" or the "Registrant")
                          Commission File No. 000-32107

                                  EXHIBIT INDEX
                                       TO
                            2001 REPORT ON FORM 10-K

The following exhibits are filed with, or incorporated by reference in, this
Report on Form 10-K for the year ended December 31, 2001:

<TABLE>
<CAPTION>

                                                                      INCORPORATED HEREIN            FILED
EXHIBIT         DESCRIPTION                                             BY REFERENCE TO            HEREWITH
-------         -----------                                           --------------------         ---------
<S>             <C>                                             <C>                               <C>
2.1             Plan of Restructuring from Mutual Savings       Exhibit 2.1 to Bank Mutual's
                Bank to Mutual Holding Company of Mutual        Registration Statement on Form
                Savings Bank, as amended and restated           S-1, Registration No.
                July 31, 2000*                                  333-39362 (the "2000 S-1")

2.2             Agreement and Plan of Merger, dated as of       Exhibit A to the Proxy
                February 21, 2000, by and among Mutual          Statement/Prospectus contained
                Savings Bank, OV Corp. [assigned to Bank        in Bank Mutual's Registration
                Mutual] and First Northern Capital              Statement on Form S-4,
                Corporation*                                    Registration No. 333-39383

3(i)            Charter of Bank Mutual                          Exhibit 3(i) to 2000 S-1

3(ii)           Bylaws of Bank Mutual                           Exhibit 3(ii) to 2000 S-1

4.1             Charter of Bank Mutual                          Exhibit 3(i) to 2000 S-1

4.2             Stock Issuance Plan of Mutual Savings, as       Exhibit 4.2 to Post-Effective
                amended and restated July 31, 2000              Amendment No. 1 to 2000 S-1

4.3             Plan of Restructuring                           Exhibit 2.1 above

10.1*           Mutual Savings Bank Benefit Restoration Plan    Exhibit 10.1 to 2000 S-1

10.2*           Mutual Savings Bank Outside Directors'          Exhibit 10.2 to 2000 S-1
                Retirement Plan

10.3*           Mutual Savings Bank Executive Excess Benefit    Exhibit 10.3 to 2000 S-1
                Plan

10.4*           Agreement regarding deferred compensation       Exhibit 10.4 to 2000 S-1
                Agreement dated May 16, 1988 between Mutual
                Savings Bank and Michael T. Crowley, Jr.

10.5(a)*        Employment Agreement between Mutual Savings     Exhibit 10.5(a) to 2000 S-1
                Bank and Michael T. Crowley Jr.

10.5(b)*        Amendment thereto dated February 17, 1998       Exhibit 10.5(b) to 2000 S-1

10.6(a)*        Employment Agreement between Mutual Savings     Exhibit 10.6(a) to 2000 S-1
                Bank and Michael T. Crowley, Sr. dated
                December 31, 1993

10.6(b)*        Amendment thereto dated February 17, 1998       Exhibit 10.6(b) to 2000 S-1

10.7*           Form of Employment Agreements of Mr. Maurer     Exhibit 10.7 to 2000 S-1
                and Ms. Scholz with Mutual Savings Bank, each
                dated as of January 1, 2001
</TABLE>


                                      E-1
<PAGE>
<TABLE>
<CAPTION>

                                                                      INCORPORATED HEREIN            FILED
EXHIBIT         DESCRIPTION                                             BY REFERENCE TO            HEREWITH
-------         -----------                                           --------------------         ---------
<S>             <C>                                             <C>                               <C>
10.8(a)*        Employment Agreement between First Northern     Exhibit 10.8(a) to Bank
                Savings Bank and Michael D. Meeuwsen dated as   Mutual's Annual Report on Form
                of January 2, 1990                              10-K for the year ended
                                                                December 31, 2000 ("2000
                                                                10-K")

10.8(b)*        Amendments No. 1 thereto, dated as of           Exhibit 10.8(b) to 2000 10-K
                September 20, 1995

10.9*           Employment Agreement between First Northern     Exhibit 10.9 to 2000 10-K
                Savings Bank and Rick B. Colberg dated as of
                November 1, 2000

10.10(a)*       Non-Qualified Deferred Retirement Plan for      Exhibit 10.10(a) to 2000 10-K
                Directors of First Northern Savings Bank

10.10(b)*       Amendment No. 1 thereto                         Exhibit 10.3.2 to First
                                                                Northern Capital Corp.'s
                                                                Annual Report on Form 10-K for
                                                                the fiscal year ended December
                                                                31, 1998 ("FNCC 1998 10-K")

10.11(a)*       Form of Supplemental Retirement Agreements      Exhibit 10.11(a) to 2000 10-K
                dated as of January 1, 1994 between First
                Northern Savings Bank and each of Michael D.
                Meeuwsen and Rick B. Colberg

10.11(b)*       Form of Amendment No. 1 thereto dated as of     Exhibit 10.11(b) to 2000 10-K
                September 20, 1995

10.11(c)*       Form of Amendment No. 2 thereto, dated as of    Exhibit 10.6.4 to FNCC 1998
                October 15, 1998                                10-K

10.12(a)*       Mutual Savings Bank Management Incentive        Exhibit 10.12(a) to 2000 10-K
                Compensation Plan (superceded)

10.12(b)*       Mutual Savings Bank Management Incentive        Exhibit 10.12(b) to 2000 10-K
                Compensation Plan (MIP)

10.13*          First Northern Savings Bank Management          Exhibit 10.13 to 2000 10-K
                Incentive Compensation Plan

10.14           Bank Mutual 2001 Stock Incentive Plan           Appendix A to Bank Mutual's
                                                                definitive 2001 Annual Meeting
                                                                Proxy Statement

10.15           Agency Agreement among Mutual Savings Bank,     Exhibit 1.1 to Post-Effective
                Bank Mutual, Mutual Savings Bancorp, MHC and    Amendment No. 1 to 2000 S-1
                Ryan Beck, Incorporated dated as of September
                8, 2000

21.1            List of Subsidiaries                            Exhibit 21.1 to 2000 10-K

23.1            Consent of Ernst & Young LLP                                                           X

24.1            Powers of Attorney                              Signature Page
</TABLE>


--------------------------
*    Designates management or compensatory agreements, plans or arrangements
     required to be filed as exhibits pursuant to Item 14(c) of Form 10-K

**   Without exhibit or schedules, which will be furnished to the Commission
     upon request



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