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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, 2009
 Commission file number: 000-31207
 BANK MUTUAL CORPORATION
 
 Wisconsin
    
    39-2004336(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 4949 West Brown Deer Road, Milwaukee, Wisconsin
    
    53223(Address of principal executive offices)
    
    (Zip Code)
 (414) 354-1500
  Common Stock, $0.01 Par Value
    
    The NASDAQ Stock Market LLC(Title of each class)
    
    (Name of each exchange on which registered)
  NONE
  o þ
  o þ
  þ o
 o
  o o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o  o þ
  Part of Form 10-K Into WhichDocuments Incorporated by Reference
    
    Portions of Document are IncorporatedProxy Statement for Annual Meeting of Shareholders on May 3, 2010
    
    Part III




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##### 



BANK MUTUAL CORPORATION
 FORM 10-K ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 2009
 Table of Contents
 Item
    
    
    
    PagePart I1
    
    Business
    
    31A
    
    Risk Factors
    
    241B
    
    Unresolved Staff Comments
    
    282
    
    Properties
    
    283
    
    Legal Proceedings
    
    284
    
    Reserved
    
    28Part II5
    
    Market for Registrants Common Equity, Related Stockholders Matters, and
Issuer Purchases of Equity Securities
    
    296
    
    Selected Financial Data
    
    317
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    337A
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    578
    
    Financial Statements and Supplementary Data
    
    629
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    1009A
    
    Controls and Procedures
    
    1009B
    
    Other Information
    
    102Part III10
    
    Directors, Executive Officers, and Corporate Governance
    
    10311
    
    Executive Compensation
    
    10312
    
    Security Ownership of Certain Beneficial Owners, Management, and
Related Stockholder Matters
    
    10313
    
    Certain Relationships and Related Transactions and Director Independence
    
    10314
    
    Principal Accountant Fees and Services
    
    103Part IV15
    
    Exhibits, Financial Statement Schedules
    
    104SIGNATURES
    
    
    
    105EX-10.2EX-10.11EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2
  2




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Part I
 Cautionary Statement
  
 Item 1. Business
  General
   3




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Market Area
    Competition
   Lending Activities
 General
 Residential Mortgage Lending
 4




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5




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6




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Consumer Loans
        7




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Multi-family and Commercial Real Estate Loans
    Construction and Development Loans
 Commercial Business Loans
 8




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Loan Approval Authority
      Asset Quality
 General
 9




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Delinquent Loans
     Non-Accrual Policy
 10




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Foreclosed Properties and Repossessed Assets
     Loan Charge-Offs
 Allowance for Loan Losses
  11




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12




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Investment Activities
 General
   Investment Securities
 Mortgage-Related Securities
 13




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Deposit Liabilities
   Borrowings
  Shareholders Equity
  14




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Subsidiaries
      15




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Employees
  Regulation and Supervision
 General
   Recent Financial Stability Legislation and Other Proposals
     16




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Regulation and Supervision of the Bank
 General
   Regulatory Capital Requirements
     Prompt Corrective Action
 17




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Total Capital to Risk
    
    Tier 1 Capital to Risk
    
    Tier 1 Capital toCategory:
    
    Weighted Assets
    
    Weighted Assets
    
    Total AssetsWell capitalized
    
    
    3 10
    %
    
    
    3 6
    %
    
    
    3 5
    %Adequately capitalized
    
    
    3 8
    %
    
    
    3 4
    %
    
    
    3 4
    %(1)Under capitalized
    
    
    < 8
    %
    
    
    < 4
    %
    
    
    < 4
    %(2)Significantly undercapitalized
    
    
    < 6
    %
    
    
    < 3
    %
    
    
    < 3
    %Critically undercapitalized (3)
 
 (1)
    
    3 3% if the bank receives the highest rating under the uniform system.(2)
    
    < 3% if the bank receives the highest rating under the uniform system.(3)
    
    Tangible assets to capital of if equal to or less than 2%.   Dividend and Other Capital Distribution Limitations
    18




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Qualified Thrift Lender Test
 Liquidity Standards
 Federal Home Loan Bank System
   Deposit Insurance
    19




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Transactions With Affiliates
  Acquisitions and Mergers
 Prohibitions Against Tying Arrangements
 Uniform Real Estate Lending Standards
 20




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
    
    for loans secured by raw land, the supervisory loan-to-value limit is 65% of the value
of the collateral;
    
    for land development loans (i.e., loans for the purpose of improving unimproved
property prior to the erection of structures), 75%;
    
    for loans for the construction of commercial, multi-family or other non-residential
property, 80%;
    
    for loans for the construction of one- to four-family properties, 85%; and
    
    for loans secured by other improved property (e.g., farmland, completed commercial
property and other income-producing property, including non-owner occupied, one- to
four-family property), 85%.
  Community Reinvestment Act
  
    
    a lending test, to evaluate the institutions record of making loans in its service areas;
    
    an investment test, to evaluate the institutions record of making community
development investments; and
    
    a service test, to evaluate the institutions delivery of services through its
branches, ATMs and other offices.
  Safety and Soundness Standards
 Loans to Insiders
 21




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The Patriot Act
 
    
    Such institutions must establish anti-money laundering programs that include, at
minimum; (i) internal policies, procedures, and controls; (ii) specific designation of an
anti-money laundering compliance officer; (iii) ongoing employee training programs, and
(iv) an independent audit function to test the program.
    
    Bank regulators, may issue regulations that provide for minimum standards with respect
to customer identification at the time new accounts are opened.
    
    Institutions that establish, maintain, or manage private banking accounts or
correspondent accounts in the United States for non-United States persons or their
representatives (including foreign individuals visiting the United States) must establish
appropriate, specific, and, where necessary, enhanced due diligence policies, procedures,
and controls designed to detect and report money laundering.
    
    Institutions may not establish, maintain, administer or manage correspondent accounts
for foreign shell banks and are subject to recordkeeping obligations relating to foreign
bank correspondent accounts.
    
    Bank regulators are directed to consider a holding companys effectiveness in combating
money laundering when ruling on Federal Reserve Act and bank merger applications.
 Regulation and Supervision of the Company
 Holding Company Regulation
   Federal Securities Laws
 22




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Acquisition of Bank Mutual Corporation
 Federal and State Taxation
 Federal Taxation
  State Taxation
 23




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Item 1A. Risk Factors
  The Global Credit Market Instability and Weak Economic Conditions May Significantly Affect the
Companys Liquidity, Financial Condition, and Earnings
   If the Companys Allowance for Loan Losses Is Not Sufficient to Cover Actual Loan Losses, the
Companys Earnings Could Decrease
  Further Declines in the Real Estate Values May Continue to Adversely Affect Collateral Values and
the Companys Profits
  Some of the Companys Lending Activities Are in Credits that are Riskier than One- to Four-Family
Real Estate Loans
  24




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Recent and Future Legislation and Rulemaking in Response to Market and Economic Conditions May
Significantly Affect the Companys Results of Operations and Financial Condition
     The Banks Ability to Pay Dividends to the Company Is Subject to Limitations That May Affect the
Companys Ability to Pay Dividends to Its Shareholders and Repurchase Its Stock
  Changes in the Financial Condition or Future Prospects of the FHLB of Chicago May Have an
Adverse Impact on the Companys Investment in FHLB Common Stock
  The Interest Rate Environment May Have an Adverse Impact on the Companys Net Interest Income
  25




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Changes in Market Interest Rates or Other Conditions May Have an Adverse Impact on the Fair Value
of the Companys Available-for-Sale Securities, Shareholders Equity, and Profits
   Wisconsin Tax Developments Could Reduce the Companys Net Income
     26




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Strong Competition Within the Companys Market Area May Affect Net Income
  FDIC Increases in Deposit Insurance Premiums Have Raised the Companys Expenses
  The Companys Ability to Grow May Be Limited if It Cannot Make Acquisitions
  The Company Has Significant Intangible Assets That It May Need to Write Off (Expense) in the Future
  The Company Depends on Certain Key Personnel and the Companys Business Could Be Harmed by the Loss
of Their Services
  The Company Is Subject to Security and Operational Risks Relating to the Use of Technology that
Could Damage Its Reputation and Business
  27




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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
  
 Item 4. Reserved
  28




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Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchase of Equity Securities
     2009 Stock Prices
    
    
    2008 Stock Prices
    
    
    Cash Dividends PaidHigh
    
    
    Low
    
    
    High
    
    
    Low
    
    
    2009
    
    
    20081st Quarter
    
    $
    11.56
    
    
    $
    7.06
    
    
    $
    12.32
    
    
    $
    10.05
    
    
    $
    0.09
    
    
    $
    0.092nd Quarter
    
    
    10.81
    
    
    
    8.60
    
    
    
    11.51
    
    
    
    10.04
    
    
    
    0.09
    
    
    
    0.093rd Quarter
    
    
    10.07
    
    
    
    8.32
    
    
    
    14.25
    
    
    
    9.60
    
    
    
    0.09
    
    
    
    0.094th Quarter
    
    
    8.84
    
    
    
    6.88
    
    
    
    12.00
    
    
    
    8.62
    
    
    
    0.07
    
    
    
    0.09Total
    
    $
    0.34
    
    
    $
    0.36
   Total Number
    
    Maximum Number ofTotal Number

    
    Average
    
    of Shares Purchased as
    
    Shares That Mayof Shares
    
    Price Paid
    
    Part of Publicly
    
    Yet be PurchasedPeriod
    
    Purchased
    
    per Share
    
    Announced Plans
    
    Under the PlanOctober 1 to 31, 2009
    
    
    85,400
    
    
    $
    7.21
    
    
    
    85,400
    
    
    
    57,700November 1 to 30, 2009
    
    
    294,545
    
    
    
    6.97
    
    
    
    267,400
    
    
    
    790,300
    (1)December 1 to 31, 2009
    
    
    99,500
    
    
    
    7.01
    
    
    
    99,500
    
    
    
    690,800
    (2)Total purchased
    
    
    479,445
    
    
    $
    7.02
    
    
    
    452,300
 
 (1)
    
    Reflects the impact of 1.0 million shares approved for repurchase by the Companys board of
directors on November 3, 2009.(2)
    
    Since February 8, 2010, no shares remained to be repurchased under the authorization approved
on November 3, 2009.  29




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Period EndingIndex
    
    12/31/04
    
    12/31/05
    
    12/31/06
    
    12/31/07
    
    12/31/08
    
    12/31/09Bank Mutual Corporation
    
    
    100.00
    
    
    
    89.07
    
    
    
    104.24
    
    
    
    93.69
    
    
    
    105.81
    
    
    
    66.17NASDAQ Composite Index
    
    
    100.00
    
    
    
    102.14
    
    
    
    112.19
    
    
    
    121.68
    
    
    
    58.64
    
    
    
    84.28NASDAQ Bank Index
    
    
    100.00
    
    
    
    97.69
    
    
    
    109.64
    
    
    
    86.90
    
    
    
    63.36
    
    
    
    53.09
 30




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Item 6. Selected Financial Data
  At December 312009
    
    2008
    
    2007
    
    2006
    
    2005(Dollars in thousands, except number of shares and per share amounts)Selected financial condition data:Total assets
    
    $
    3,512,064
    
    
    $
    3,489,689
    
    
    $
    3,488,046
    
    
    $
    3,451,385
    
    
    $
    3,431,377Loans receivable, net
    
    
    1,506,056
    
    
    
    1,829,053
    
    
    
    1,994,556
    
    
    
    2,024,325
    
    
    
    1,990,492Loans held-for-sale, net
    
    
    13,534
    
    
    
    19,030
    
    
    
    7,952
    
    
    
    3,787
    
    
    
    2,312Securities available-for-sale:Investment securities
    
    
    614,104
    
    
    
    419,138
    
    
    
    99,450
    
    
    
    48,290
    
    
    
    63,361Mortgage-related securities
    
    
    866,848
    
    
    
    850,867
    
    
    
    1,099,922
    
    
    
    1,064,851
    
    
    
    1,087,816Foreclosed and repossessed assets
    
    
    17,689
    
    
    
    4,768
    
    
    
    3,687
    
    
    
    1,231
    
    
    
    708Goodwill
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570Mortgage servicing rights
    
    
    6,899
    
    
    
    3,703
    
    
    
    4,708
    
    
    
    4,653
    
    
    
    4,771Other intangible assets
    
    
    1,405
    
    
    
    1,809
    
    
    
    2,428
    
    
    
    3,089
    
    
    
    3,750Deposit liabilities
    
    
    2,137,508
    
    
    
    2,128,277
    
    
    
    2,093,453
    
    
    
    2,149,523
    
    
    
    2,084,351Borrowings
    
    
    906,979
    
    
    
    907,971
    
    
    
    912,459
    
    
    
    705,025
    
    
    
    765,796Shareholders equity
    
    
    402,477
    
    
    
    399,611
    
    
    
    430,035
    
    
    
    533,779
    
    
    
    544,374Tangible shareholders equity (1)
    
    
    349,067
    
    
    
    345,959
    
    
    
    346,011
    
    
    
    379,359
    
    
    
    489,557Number of shares outstanding, net of
treasury stock
    
    
    46,165,635
    
    
    
    47,686,759
    
    
    
    49,834,756
    
    
    
    60,277,087
    
    
    
    62,325,268Book value per share
    
    $
    8.72
    
    
    $
    8.38
    
    
    $
    8.63
    
    
    $
    8.86
    
    
    $
    8.73Tangible shareholders equity
per share (1)
    
    $
    7.56
    
    
    $
    7.25
    
    
    $
    7.55
    
    
    $
    7.95
    
    
    $
    7.85
 For the Year Ended December 312009
    
    2008
    
    2007
    
    2006
    
    2005(Dollars in thousands, except per share amounts)Selected operating data:Total interest income
    
    $
    151,814
    
    
    $
    177,556
    
    
    $
    183,001
    
    
    $
    174,404
    
    
    $
    164,871Total interest expense
    
    
    83,784
    
    
    
    104,191
    
    
    
    113,771
    
    
    
    99,091
    
    
    
    77,231Net interest income
    
    
    68,030
    
    
    
    73,365
    
    
    
    69,230
    
    
    
    75,313
    
    
    
    87,640Provision for (recovery of) loan
losses
    
    
    12,413
    
    
    
    1,447
    
    
    
    (272
    )
    
    
    632
    
    
    
    541Net interest income after provision for loan losses
    
    
    55,617
    
    
    
    71,918
    
    
    
    69,502
    
    
    
    74,681
    
    
    
    87,099Total non-interest income
    
    
    30,985
    
    
    
    17,708
    
    
    
    20,428
    
    
    
    17,035
    
    
    
    16,780Total non-interest expense
    
    
    67,459
    
    
    
    63,377
    
    
    
    63,543
    
    
    
    61,311
    
    
    
    60,837Income before income taxes
    
    
    19,143
    
    
    
    26,250
    
    
    
    25,995
    
    
    
    30,405
    
    
    
    43,042Income tax expense
    
    
    5,418
    
    
    
    9,094
    
    
    
    8,892
    
    
    
    9,808
    
    
    
    15,016Net income before non-controlling
interest
    
    
    13,725
    
    
    
    17,155
    
    
    
    17,495
    
    
    
    20,597
    
    
    
    28,026Net loss (income) attributable to non-controlling interest
    
    
    
    
    
    
    1
    
    
    
    (392
    )
    
    
    
    
    
    
    Net income
    
    $
    13,725
    
    
    $
    17,156
    
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026Earnings per share-basic
    
    $
    0.29
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    0.44Earnings per share-diluted
    
    $
    0.29
    
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    0.34
    
    
    $
    0.43Cash dividends paid per share
    
    $
    0.34
    
    
    $
    0.36
    
    
    $
    0.33
    
    
    $
    0.29
    
    
    $
    0.25
 
 (1)
    
    This is a non-GAAP measure. Tangible shareholders equity is total shareholders equity
minus goodwill and other intangible assets (net of deferred taxes, which are immaterial). 31




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At or For the Year Ended December 312009
    
    2008
    
    2007
    
    2006
    
    2005Selected financial ratios:Net interest margin (2)
    
    
    2.09
    %
    
    
    2.21
    %
    
    
    2.09
    %
    
    
    2.27
    %
    
    
    2.64
    %Net interest rate spread
    
    
    1.82
    
    
    
    1.85
    
    
    
    1.59
    
    
    
    1.74
    
    
    
    2.17Return on average assets
    
    
    0.39
    
    
    
    0.48
    
    
    
    0.49
    
    
    
    0.59
    
    
    
    0.80Return on average shareholders
equity
    
    
    3.40
    
    
    
    4.15
    
    
    
    3.57
    
    
    
    3.89
    
    
    
    4.84Efficiency ratio (3)
    
    
    73.12
    
    
    
    68.71
    
    
    
    69.92
    
    
    
    66.89
    
    
    
    59.28Non-interest expense as a percent of
adjusted average assets
    
    
    1.93
    
    
    
    1.79
    
    
    
    1.81
    
    
    
    1.77
    
    
    
    1.74Shareholders equity to total assets
    
    
    11.39
    
    
    
    11.45
    
    
    
    12.33
    
    
    
    15.47
    
    
    
    15.86Tangible shareholders equity to
adjusted total assets (4)
    
    
    10.09
    
    
    
    10.07
    
    
    
    10.95
    
    
    
    14.11
    
    
    
    14.50Selected asset quality ratios:Non-performing loans to loans
receivable, net
    
    
    2.83
    %
    
    
    1.81
    %
    
    
    0.65
    %
    
    
    0.72
    %
    
    
    0.29
    %Non-performing assets to total assets
    
    
    1.72
    
    
    
    1.08
    
    
    
    0.48
    
    
    
    0.46
    
    
    
    0.19Allowance for loan losses to
non-performing loans
    
    
    39.99
    
    
    
    36.89
    
    
    
    90.98
    
    
    
    86.74
    
    
    
    207.23Allowance for loan losses to total
loans receivable, net
    
    
    1.13
    
    
    
    0.67
    
    
    
    0.59
    
    
    
    0.62
    
    
    
    0.61Charge-offs to average loans
    
    
    0.45
    
    
    
    0.05
    
    
    
    0.03
    
    
    
    0.01
    
    
    
    0.12
 
 (2)
    
    Net interest margin is calculated by dividing net interest income by average earnings
assets.(3)
    
    Efficiency ratio is calculated by dividing non-interest expense by the sum of net interest
income and non-interest income.(4)
    
    This is a non-GAAP measure. The ratio is calculated by dividing total shareholders equity
less intangible assets (net of deferred taxes) divided by total assets less intangible assets
(net). Intangible assets consist of goodwill and other intangible assets. Deferred taxes
have been established only on other intangible assets and are immaterial in amount. 32




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Results of Operations
 Overview
  
    
    an $11.0 million or 758% increase in provision for loan losses;
    
    a $5.3 million or 7.3% decrease in net interest income;
    
    a $2.7 million or 817% increase in regular FDIC insurance premiums;
    
    a $1.6 million non-recurring special assessment from the FDIC; and
    
    a $1.2 million or 15.4% decrease in other non-interest income.
  
    
    a $7.9 million increase in gain on investments compared to a loss in 2008;
    
    a $7.0 million or 332% increase in gain on loan sales activities;
    
    a $1.9 million decrease in income tax expense (excluding consideration of the tax
benefit, below) due to lower pre-tax income; and
    
    a $1.8 million one-time tax benefit recorded against income tax expense as a result of
a change in Wisconsin tax law.
  
    
    a $1.7 million increase in provision for loan losses compared to a recovery in 2007;
    
    a $1.0 million or over 100% decrease in net loan related fees and servicing revenue;
    
    a $881,000 or 10.4% decrease in other non-interest income; and
    
    a net gain of $585,000 on the sale of undeveloped land in 2007 compared to no gain or
loss in 2008.
  Net Interest Income
 33




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Years ended December 312009
    
    
    2008
    
    
    2007Interest
    
    
    Avg.
    
    
    
    
    
    
    Interest
    
    
    Avg.
    
    
    
    
    
    
    Interest
    
    
    Avg.Average
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost(Dollars in thousands)Assets:Interest-earning assets:Loans receivable, net (1)
    
    $
    1,688,906
    
    
    $
    95,802
    
    
    
    5.67
    %
    
    $
    1,892,397
    
    
    $
    113,635
    
    
    
    6.00
    %
    
    $
    2,016,225
    
    
    $
    123,141
    
    
    
    6.11
    %Mortgage-related securities
    
    
    946,142
    
    
    
    37,734
    
    
    
    3.99
    
    
    
    959,574
    
    
    
    45,535
    
    
    
    4.75
    
    
    
    1,130,780
    
    
    
    52,518
    
    
    
    4.64Investment securities (2)
    
    
    458,311
    
    
    
    18,199
    
    
    
    3.97
    
    
    
    344,533
    
    
    
    16,041
    
    
    
    4.66
    
    
    
    118,625
    
    
    
    4,871
    
    
    
    4.11Interest-earning deposits
    
    
    162,864
    
    
    
    79
    
    
    
    0.05
    
    
    
    54,666
    
    
    
    764
    
    
    
    1.40
    
    
    
    9,186
    
    
    
    430
    
    
    
    4.68Federal funds sold
    
    
    
    
    
    
    
    
    
    
    0.00
    
    
    
    71,934
    
    
    
    1,581
    
    
    
    2.20
    
    
    
    39,596
    
    
    
    2,041
    
    
    
    5.15Total interest-earning assets
    
    
    3,256,223
    
    
    
    151,814
    
    
    
    4.66
    
    
    
    3,323,104
    
    
    
    177,556
    
    
    
    5.34
    
    
    
    3,314,412
    
    
    
    183,001
    
    
    
    5.52Non-interest-earning assets
    
    
    236,158
    
    
    
    
    
    
    
    
    
    
    
    214,682
    
    
    
    
    
    
    
    
    
    
    
    197,212Total average assets
    
    $
    3,492,381
    
    
    
    
    
    
    
    
    
    
    $
    3,537,786
    
    
    
    
    
    
    
    
    
    
    $
    3,511,624Liabilities and equity:Interest-bearing liabilities:Savings deposits
    
    $
    199,012
    
    
    
    181
    
    
    
    0.09
    
    
    $
    190,271
    
    
    
    609
    
    
    
    0.32
    
    
    $
    194,887
    
    
    
    924
    
    
    
    0.47Money market accounts
    
    
    330,506
    
    
    
    2,795
    
    
    
    0.85
    
    
    
    336,208
    
    
    
    8,245
    
    
    
    2.45
    
    
    
    267,338
    
    
    
    8,500
    
    
    
    3.18Interest-bearing demand accounts
    
    
    184,077
    
    
    
    121
    
    
    
    0.07
    
    
    
    170,700
    
    
    
    376
    
    
    
    0.22
    
    
    
    161,652
    
    
    
    351
    
    
    
    0.22Certificates of deposit
    
    
    1,304,814
    
    
    
    41,471
    
    
    
    3.18
    
    
    
    1,358,021
    
    
    
    55,459
    
    
    
    4.08
    
    
    
    1,381,480
    
    
    
    66,236
    
    
    
    4.79Total deposit liabilities
    
    
    2,018,409
    
    
    
    44,568
    
    
    
    2.21
    
    
    
    2,055,200
    
    
    
    64,689
    
    
    
    3.15
    
    
    
    2,005,357
    
    
    
    76,011
    
    
    
    3.79Advance payment by borrowers for
taxes and insurance
    
    
    19,172
    
    
    
    11
    
    
    
    0.06
    
    
    
    18,549
    
    
    
    18
    
    
    
    0.10
    
    
    
    19,493
    
    
    
    22
    
    
    
    0.11Borrowings
    
    
    907,443
    
    
    
    39,205
    
    
    
    4.32
    
    
    
    910,542
    
    
    
    39,484
    
    
    
    4.34
    
    
    
    869,110
    
    
    
    37,738
    
    
    
    4.34Total interest-bearing liabilities
    
    
    2,945,024
    
    
    
    83,784
    
    
    
    2.84
    
    
    
    2,984,291
    
    
    
    104,191
    
    
    
    3.49
    
    
    
    2,893,960
    
    
    
    113,771
    
    
    
    3.93Non-interest-bearing liabilities:Non-interest-bearing deposits
    
    
    91,147
    
    
    
    
    
    
    
    
    
    
    
    89,590
    
    
    
    
    
    
    
    
    
    
    
    92,810Other non-interest-bearing liabilities
    
    
    52,412
    
    
    
    
    
    
    
    
    
    
    
    50,268
    
    
    
    
    
    
    
    
    
    
    
    45,853Total non-interest-bearing liabilities
    
    
    143,559
    
    
    
    
    
    
    
    
    
    
    
    139,858
    
    
    
    
    
    
    
    
    
    
    
    138,663Total liabilities
    
    
    3,008,583
    
    
    
    
    
    
    
    
    
    
    
    3,124,149
    
    
    
    
    
    
    
    
    
    
    
    3,032,623Total equity
    
    
    403,798
    
    
    
    
    
    
    
    
    
    
    
    413,637
    
    
    
    
    
    
    
    
    
    
    
    479,000Total average liabilities and equity
    
    $
    3,492,381
    
    
    
    
    
    
    
    
    
    
    $
    3,537,786
    
    
    
    
    
    
    
    
    
    
    $
    3,511,624Net interest income and net interest
rate spread
    
    
    
    
    
    $
    68,030
    
    
    
    1.82
    %
    
    
    
    
    
    $
    73,365
    
    
    
    1.85
    %
    
    
    
    
    
    $
    69,230
    
    
    
    1.59
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.09
    %
    
    
    
    
    
    
    
    
    
    
    2.21
    %
    
    
    
    
    
    
    
    
    
    
    2.09
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    1.11
    x
    
    
    
    
    
    
    
    
    
    
    1.11
    x
    
    
    
    
    
    
    
    
    
    
    1.15
    x
 
 (1)
    
    For the purposes of these computations, non-accruing loans and loans held-for-sale are
included in the average loans outstanding.(2)
    
    FHLB of Chicago stock is included in investment securities. 35




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##### Table of Contents



Year Ended December 31, 2009,Compared to Year Ended December 31, 2008Increase (Decrease)Volume
    
    Rate
    
    Net(Dollars in thousands)Interest-earning assets:Loans receivable
    
    $
    (11,815
    )
    
    $
    (6,018
    )
    
    $
    (17,833
    )Mortgage-related securities
    
    
    (602
    )
    
    
    (7,199
    )
    
    
    (7,801
    )Investment securities
    
    
    4,760
    
    
    
    (2,602
    )
    
    
    2,158Interest-earning deposits
    
    
    533
    
    
    
    (1,218
    )
    
    
    (685
    )Federal funds sold
    
    
    (791
    )
    
    
    (790
    )
    
    
    (1,581
    )Total interest-earning assets
    
    
    (7,915
    )
    
    
    (17,827
    )
    
    
    (25,742
    )Interest-bearing liabilities:Savings deposits
    
    
    29
    
    
    
    (457
    )
    
    
    (428
    )Money market deposits
    
    
    (138
    )
    
    
    (5,312
    )
    
    
    (5,450
    )Interest-bearing demand deposits
    
    
    27
    
    
    
    (282
    )
    
    
    (255
    )Certificates of deposit
    
    
    (2,099
    )
    
    
    (11,889
    )
    
    
    (13,988
    )Advance payment by borrowers for taxes and
insurance
    
    
    1
    
    
    
    (8
    )
    
    
    (7
    )Borrowings
    
    
    (134
    )
    
    
    (145
    )
    
    
    (279
    )Total interest-bearing liabilities
    
    
    (2,314
    )
    
    
    (18,093
    )
    
    
    (20,407
    )Net change in net interest income
    
    $
    (5,601
    )
    
    $
    266
    
    
    $
    (5,335
    )
 Year Ended December 31, 2008,Compared to Year Ended December 31, 2007Increase (Decrease)Volume
    
    Rate
    
    Net(Dollars in thousands)Interest-earning assets:Loans receivable
    
    $
    (7,368
    )
    
    $
    (2,138
    )
    
    $
    (9,506
    )Mortgage-related securities
    
    
    (8,153
    )
    
    
    1,170
    
    
    
    (6,983
    )Investment securities
    
    
    10,444
    
    
    
    726
    
    
    
    11,170Interest-earning deposits
    
    
    822
    
    
    
    (488
    )
    
    
    334Federal funds sold
    
    
    1,106
    
    
    
    (1,566
    )
    
    
    (460
    )Total interest-earning assets
    
    
    (3,149
    )
    
    
    (2,296
    )
    
    
    (5,445
    )Interest-bearing liabilities:Savings deposits
    
    
    (22
    )
    
    
    (293
    )
    
    
    (315
    )Money market deposits
    
    
    1,924
    
    
    
    (2,179
    )
    
    
    (255
    )Interest-bearing demand deposits
    
    
    20
    
    
    
    5
    
    
    
    25Certificates of deposit
    
    
    (1,108
    )
    
    
    (9,669
    )
    
    
    (10,777
    )Advance payment by borrowers for taxes and
insurance
    
    
    (1
    )
    
    
    (3
    )
    
    
    (4
    )Borrowings
    
    
    1,798
    
    
    
    (52
    )
    
    
    1,746Total interest-bearing liabilities
    
    
    2,611
    
    
    
    (12,191
    )
    
    
    (9,580
    )Net change in net interest income
    
    $
    (5,760
    )
    
    $
    9,895
    
    
    $
    4,135
 Provision for (Recovery of) Loan Losses
 36




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##### Table of Contents



Non-Interest Income
    37




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##### Table of Contents



38




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##### Table of Contents



Non-Interest Expense
        Net (Income) Loss Attributable to Non-Controlling Interest
 39




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##### Table of Contents



Income Tax Expense
  Financial Condition
 Overview
 Cash and cash equivalents
 Securities Available-for-Sale
 40




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##### Table of Contents



At December 312009
    
    2008
    
    2007Carrying/
    
    Carrying/
    
    Carrying/Fair Value
    
    Fair Value
    
    Fair Value(Dollars in thousands)Investment securities:Mutual funds (1)
    
    $
    22,312
    
    
    $
    39,603
    
    
    $
    46,550United States government and federal agency obligations.
    
    
    591,792
    
    
    
    379,535
    
    
    
    52,036Stock in federal agencies
    
    
    
    
    
    
    
    
    
    
    864Total investment securities available-for-sale
    
    
    614,104
    
    
    
    419,138
    
    
    
    99,450Mortgage-related securities:Freddie Mac
    
    
    295,188
    
    
    
    282,237
    
    
    
    524,898Fannie Mae
    
    
    224,758
    
    
    
    413,364
    
    
    
    363,337Private-label CMOs
    
    
    111,782
    
    
    
    128,559
    
    
    
    180,638Ginnie Mae
    
    
    235,120
    
    
    
    26,707
    
    
    
    31,049Total mortgage-related securities
    
    
    866,848
    
    
    
    850,867
    
    
    
    1,099,922Total securities available-for-sale
    
    $
    1,480,952
    
    
    $
    1,270,005
    
    
    $
    1,199,372
 
 (1)
    
    Refer to Results of OperationsNon-Interest Income, above, for additional discussion
related to the Companys investment in mutual funds.  For the Year Ended December 312009
    
    2008
    
    2007(Dollars in thousands)Investment securities available-for-sale:Carrying value at beginning of period
    
    $
    419,138
    
    
    $
    99,450
    
    
    $
    48,290Purchases
    
    
    689,075
    
    
    
    351,202
    
    
    
    51,270Sales
    
    
    (18,087
    )
    
    
    (8,358
    )
    
    
    (1,228
    )Calls
    
    
    (467,902
    )
    
    
    (29,992
    )
    
    
    Discount accretion (premium amortization), net
    
    
    406
    
    
    
    (34
    )
    
    
    1Increase (decrease) in net unrealized loss
    
    
    (8,526
    )
    
    
    6,870
    
    
    
    1,117Net increase in investment securities
    
    
    194,966
    
    
    
    319,688
    
    
    
    51,160Carrying value at end of period
    
    $
    614,104
    
    
    $
    419,138
    
    
    $
    99,450Mortgage-related securities available-for-sale:Carrying value at beginning of period
    
    $
    850,867
    
    
    $
    1,099,922
    
    
    $
    1,064,851Purchases
    
    
    779,170
    
    
    
    345,842
    
    
    
    247,428Sales
    
    
    (468,794
    )
    
    
    (385,167
    )
    
    
    Principal repayments
    
    
    (318,225
    )
    
    
    (195,479
    )
    
    
    (227,041
    )Discount accretion (premium amortization), net
    
    
    (2,445
    )
    
    
    1,516
    
    
    
    1,893Increase (decrease) in net unrealized loss
    
    
    26,275
    
    
    
    (15,767
    )
    
    
    12,791Net increase (decrease) in mortgage-related securities
    
    
    15,981
    
    
    
    (249,055
    )
    
    
    35,071Carrying value at end of period
    
    $
    866,848
    
    
    $
    850,867
    
    
    $
    1,099,922
 41




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##### Table of Contents



More than One Year
    
    More than FiveOne Year or Less
    
    to Five Years
    
    Years to Ten Years
    
    More than Ten Years
    
    TotalWeighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedCarrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    Average
    
    Carrying
    
    AverageValue
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield
    
    Value
    
    Yield(Dollars in thousands)Investment securities:Mutual funds (1)
    
    $
    22,312
    
    
    
    3.85
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    39,603
    
    
    
    3.69
    %US government and agencies
    
    
    
    
    
    
    
    
    
    $
    341,447
    
    
    
    2.60
    %
    
    $
    99,429
    
    
    
    2.26
    %
    
    $
    150,916
    
    
    
    4.07
    %
    
    
    591,792
    
    
    
    2.92Total investment securities
    
    $
    22,312
    
    
    
    3.85
    %
    
    $
    341,447
    
    
    
    2.60
    %
    
    $
    99,429
    
    
    
    2.26
    %
    
    $
    150,916
    
    
    
    4.07
    %
    
    $
    614,104
    
    
    
    2.95
    %Mortgage-related securities by issuer:Ginnie Mae pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    253
    
    
    
    4.68
    %
    
    $
    253
    
    
    
    4.68
    %Fannie Mae pass-through
certificates
    
    
    
    
    
    
    
    
    
    $
    13,150
    
    
    
    5.14
    %
    
    $
    2,955
    
    
    
    6.68
    %
    
    
    84,993
    
    
    
    3.12
    
    
    
    101,098
    
    
    
    3.48Freddie Mac pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    94
    
    
    
    5.72
    
    
    
    416
    
    
    
    6.51
    
    
    
    135,155
    
    
    
    2.79
    
    
    
    135,665
    
    
    
    2.80Private label CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,569
    
    
    
    5.15
    
    
    
    79,213
    
    
    
    4.65
    
    
    
    111,782
    
    
    
    4.78Freddie Mac, Fannie Mae, and
Ginnie Mae REMICs
    
    
    
    
    
    
    
    
    
    
    46,021
    
    
    
    1.69
    
    
    
    64,735
    
    
    
    4.63
    
    
    
    407,294
    
    
    
    3.72
    
    
    
    518,050
    
    
    
    3.65Total mortgage-related securities
    
    
    
    
    
    
    
    
    
    $
    59,265
    
    
    
    2.46
    %
    
    $
    100,675
    
    
    
    4.87
    %
    
    $
    706,908
    
    
    
    3.58
    %
    
    $
    866,848
    
    
    
    3.65
    %Mortgage-related securities by coupon:Adjustable rate coupon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    76
    
    
    
    5.94
    %
    
    $
    257,832
    
    
    
    3.07
    %
    
    $
    257,908
    
    
    
    3.07
    %Fixed rate coupon
    
    
    
    
    
    
    
    
    
    $
    59,265
    
    
    
    2.46
    %
    
    
    100,599
    
    
    
    4.87
    
    
    
    449,076
    
    
    
    3.88
    
    
    
    608,940
    
    
    
    3.90Total mortgage-related securities
    
    
    
    
    
    
    
    
    
    $
    59,265
    
    
    
    2.46
    %
    
    $
    100,675
    
    
    
    3.57
    %
    
    $
    706,908
    
    
    
    3.66
    %
    
    $
    866,848
    
    
    
    3.65
    %Total investment and mortgage-related
securities portfolio
    
    $
    22,312
    
    
    
    3.85
    %
    
    $
    400,712
    
    
    
    2.58
    %
    
    $
    200,104
    
    
    
    3.57
    %
    
    $
    857,824
    
    
    
    3.66
    %
    
    $
    1,480,952
    
    
    
    3.36
    %
 
 (1)
    
    The weighted average yield has not been adjusted for the impairments recorded in 2009, 2008,
and 2007. Refer to Results of OperationsNon-Interest Income, above, for additional
discussion.  December 31, 2009
    
    December 31, 2008Carrying
    
    Unrealized
    
    Carrying
    
    UnrealizedValue
    
    Loss, Net
    
    Value
    
    Loss, Net(Dollars in thousands)Credit rating (1):AAA/Aaa
    
    $
    22,959
    
    
    $
    341
    
    
    $
    116,023
    
    
    $
    23,219AA/Aa
    
    
    9,980
    
    
    
    483
    
    
    
    12,536
    
    
    
    5,928A
    
    
    31,377
    
    
    
    3,260
    
    
    
    
    
    
    
    BBB/Baa
    
    
    15,769
    
    
    
    2,151
    
    
    
    
    
    
    
    Less than investment grade
    
    
    31,697
    
    
    
    2,763
    
    
    
    
    
    
    
    Total private-label CMOs
    
    $
    111,782
    
    
    $
    8,998
    
    
    $
    128,559
    
    
    $
    29,147
 
 (1)
    
    In instances of split-ratings, each security has been classified according to its lowest
rating.  42




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##### Table of Contents



Loans Held-for-Sale
 For the year ended December 312009
    
    2008
    
    2007(Dollars in thousands)Balance outstanding at beginning of period
    
    $
    19,030
    
    
    $
    7,952
    
    
    $
    3,787Origination of loans intended for sale (1)
    
    
    578,312
    
    
    
    139,387
    
    
    
    107,045Principal balance of loans sold
    
    
    (583,966
    )
    
    
    (128,725
    )
    
    
    (102,853
    )Change in net unrealized gains or losses (2)
    
    
    158
    
    
    
    416
    
    
    
    (27
    )Total loans held-for-sale
    
    $
    13,534
    
    
    $
    19,030
    
    
    $
    7,952
 
 (1)
    
    Excludes one- to four-family loans originated for the Companys loan portfolio.(2)
    
    Refer to Note 1. Basis of Presentation in Item 8. Financial Statements and
Supplementary Data.  Loans Receivable
    43




---



##### Table of Contents



At December 312009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total(Dollars in thousands)Mortgage loans:Permanent mortgage loans:One- to four-family
    
    $
    656,018
    
    
    
    42.17
    %
    
    $
    881,288
    
    
    
    46.51
    %
    
    $
    1,059,307
    
    
    
    51.12
    %
    
    $
    1,123,905
    
    
    
    53.03
    %
    
    $
    1,048,881
    
    
    
    50.94
    %Multi-family
    
    
    190,377
    
    
    
    12.24
    
    
    
    190,497
    
    
    
    10.06
    
    
    
    206,640
    
    
    
    9.97
    
    
    
    157,768
    
    
    
    7.44
    
    
    
    155,908
    
    
    
    7.57Commercial real estate
    
    
    285,764
    
    
    
    18.37
    
    
    
    275,802
    
    
    
    14.56
    
    
    
    202,528
    
    
    
    9.77
    
    
    
    167,089
    
    
    
    7.88
    
    
    
    175,090
    
    
    
    8.50Total permanent mortgages
    
    
    1,132,159
    
    
    
    72.78
    
    
    
    1,347,587
    
    
    
    71.13
    
    
    
    1,468,475
    
    
    
    70.86
    
    
    
    1,448,762
    
    
    
    68.35
    
    
    
    1,379,879
    
    
    
    67.01Construction and development:One- to four-family
    
    
    11,441
    
    
    
    0.74
    
    
    
    17,349
    
    
    
    0.92
    
    
    
    35,040
    
    
    
    1.69
    
    
    
    53,861
    
    
    
    2.54
    
    
    
    71,247
    
    
    
    3.46Multi-family
    
    
    52,323
    
    
    
    3.36
    
    
    
    71,208
    
    
    
    3.76
    
    
    
    58,712
    
    
    
    2.83
    
    
    
    90,955
    
    
    
    4.29
    
    
    
    30,240
    
    
    
    1.47Commercial real estate
    
    
    32,109
    
    
    
    2.06
    
    
    
    70,612
    
    
    
    3.73
    
    
    
    76,649
    
    
    
    3.70
    
    
    
    42,507
    
    
    
    2.01
    
    
    
    53,718
    
    
    
    2.61Total construction and
development loans
    
    
    95,873
    
    
    
    6.16
    
    
    
    159,169
    
    
    
    8.41
    
    
    
    170,401
    
    
    
    8.22
    
    
    
    187,323
    
    
    
    8.84
    
    
    
    155,205
    
    
    
    7.54Total mortgage loans
    
    
    1,228,032
    
    
    
    78.94
    
    
    
    1,506,756
    
    
    
    79.54
    
    
    
    1,638,876
    
    
    
    79.08
    
    
    
    1,636,085
    
    
    
    77.19
    
    
    
    1,535,084
    
    
    
    74.55Consumer loans:Fixed term home equity
    
    
    124,519
    
    
    
    8.01
    
    
    
    173,104
    
    
    
    9.14
    
    
    
    199,161
    
    
    
    9.62
    
    
    
    227,811
    
    
    
    10.75
    
    
    
    246,460
    
    
    
    11.97Home equity lines of credit
    
    
    88,796
    
    
    
    5.71
    
    
    
    86,962
    
    
    
    4.59
    
    
    
    90,631
    
    
    
    4.37
    
    
    
    91,730
    
    
    
    4.33
    
    
    
    88,266
    
    
    
    4.29Student
    
    
    19,793
    
    
    
    1.27
    
    
    
    21,469
    
    
    
    1.13
    
    
    
    21,845
    
    
    
    1.05
    
    
    
    20,404
    
    
    
    0.96
    
    
    
    19,821
    
    
    
    0.96Home improvement
    
    
    28,441
    
    
    
    1.83
    
    
    
    36,023
    
    
    
    1.90
    
    
    
    33,604
    
    
    
    1.62
    
    
    
    33,287
    
    
    
    1.57
    
    
    
    30,067
    
    
    
    1.46Automobile
    
    
    4,077
    
    
    
    0.26
    
    
    
    11,775
    
    
    
    0.62
    
    
    
    24,878
    
    
    
    1.20
    
    
    
    46,752
    
    
    
    2.21
    
    
    
    69,237
    
    
    
    3.36Other
    
    
    9,871
    
    
    
    0.63
    
    
    
    8,740
    
    
    
    0.46
    
    
    
    9,439
    
    
    
    0.46
    
    
    
    11,262
    
    
    
    0.53
    
    
    
    12,944
    
    
    
    0.63Total consumer loans
    
    
    275,497
    
    
    
    17.71
    
    
    
    338,073
    
    
    
    17.84
    
    
    
    379,558
    
    
    
    18.32
    
    
    
    431,246
    
    
    
    20.35
    
    
    
    466,795
    
    
    
    22.67Commercial business loans
    
    
    52,167
    
    
    
    3.35
    
    
    
    49,623
    
    
    
    2.62
    
    
    
    53,784
    
    
    
    2.60
    
    
    
    52,056
    
    
    
    2.46
    
    
    
    57,247
    
    
    
    2.78Gross loans receivable
    
    
    1,555,696
    
    
    
    100.00
    %
    
    
    1,894,452
    
    
    
    100.00
    %
    
    
    2,072,218
    
    
    
    100.00
    %
    
    
    2,119,387
    
    
    
    100.00
    %
    
    
    2,059,126
    
    
    
    100.00
    %Undisbursed loan proceeds
    
    
    (32,690
    )
    
    
    
    
    
    
    (54,187
    )
    
    
    
    
    
    
    (68,457
    )
    
    
    
    
    
    
    (85,897
    )
    
    
    
    
    
    
    (60,014
    )Allowance for loan losses
    
    
    (17,028
    )
    
    
    
    
    
    
    (12,208
    )
    
    
    
    
    
    
    (11,774
    )
    
    
    
    
    
    
    (12,574
    )
    
    
    
    
    
    
    (12,090
    )Deferred fees and costs, net
    
    
    78
    
    
    
    
    
    
    
    996
    
    
    
    
    
    
    
    2,569
    
    
    
    
    
    
    
    3,409
    
    
    
    
    
    
    
    3,470Total loans receivable, net
    
    $
    1,506,056
    
    
    
    
    
    
    $
    1,829,053
    
    
    
    
    
    
    $
    1,994,556
    
    
    
    
    
    
    $
    2,024,325
    
    
    
    
    
    
    $
    1,990,492
 44




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##### Table of Contents



For the year ended December 312009
    
    2008
    
    2007(Dollars in thousands)Balance outstanding at beginning of period
    
    $
    1,829,053
    
    
    $
    1,994,556
    
    
    $
    2,024,325Originations:One- to four-family loans (1)
    
    
    61,368
    
    
    
    58,998
    
    
    
    88,878Multi-family loans
    
    
    11,689
    
    
    
    78,613
    
    
    
    58,701Commercial real estate loans
    
    
    28,138
    
    
    
    130,578
    
    
    
    141,603Total mortgage loan originations
    
    
    101,195
    
    
    
    268,189
    
    
    
    289,182Consumer loans
    
    
    76,854
    
    
    
    108,584
    
    
    
    119,319Commercial business loans
    
    
    38,002
    
    
    
    34,467
    
    
    
    45,862Total originations
    
    
    216,051
    
    
    
    411,240
    
    
    
    454,363Purchases of one- to four-family mortgage loans
    
    
    2,658
    
    
    
    26,138
    
    
    
    76,619Principal payments and repayments:Mortgage loans
    
    
    (358,705
    )
    
    
    (422,728
    )
    
    
    (359,296
    )Consumer loans
    
    
    (139,430
    )
    
    
    (150,069
    )
    
    
    (171,007
    )Commercial business loans
    
    
    (35,609
    )
    
    
    (38,628
    )
    
    
    (44,134
    )Total principal payments and repayments
    
    
    (533,744
    )
    
    
    (611,425
    )
    
    
    (574,437
    )Transfers to foreclosed properties, real
estate owned,
and repossessed assets
    
    
    (23,721
    )
    
    
    (3,719
    )
    
    
    (3,724
    )Net change in undisbursed loan proceeds,
allowance
for loan losses, and deferred fees and costs
    
    
    15,759
    
    
    
    12,263
    
    
    
    17,410Total loans receivable, net
    
    $
    1,506,056
    
    
    $
    1,829,053
    
    
    $
    1,944,556
 
 (1)
    
    Excludes one- to four-family loans originated for sale.  At December 31, 2009Construction andCommercial
    
    DevelopmentBusiness Loans
    
    Loans
    
    Total(Dollars in thousands)Amounts due:Within one year or less
    
    $
    19,007
    
    
    $
    56,740
    
    
    $
    75,747After one year through five years
    
    
    29,215
    
    
    
    14,214
    
    
    
    43,429After five years
    
    
    3,945
    
    
    
    24,919
    
    
    
    28,864Total due after one year
    
    
    33,160
    
    
    
    39,133
    
    
    
    72,293Total commercial and construction loans
    
    $
    52,167
    
    
    $
    95,873
    
    
    $
    148,040
  Due After One YearAdjustableFixed Rate
    
    Rate
    
    Total(Dollars in thousands)Commercial business loans
    
    $
    23,329
    
    
    $
    9,680
    
    
    $
    33,009Construction and development loans
    
    
    20,393
    
    
    
    18,740
    
    
    
    39,133Total loans due after one year
    
    $
    43,722
    
    
    $
    28,420
    
    
    $
    72,142
 45




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##### Table of Contents



Goodwill
  Other Intangible Assets
 Mortgage Servicing Rights
 Other Assets
 At December 312009
    
    2008(Dollars in thousands)Accrued interest receivable:Mortgage-related securities
    
    $
    4,651
    
    
    $
    6,669Investment securities
    
    
    1,875
    
    
    
    1,734Loans receivable
    
    
    6,795
    
    
    
    8,130Total accrued interest receivable
    
    
    13,321
    
    
    
    16,533Bank owned life insurance
    
    
    53,295
    
    
    
    51,261Premises and equipment
    
    
    51,715
    
    
    
    52,209Federal Home Loan Bank stock, at cost
    
    
    46,092
    
    
    
    46,092Foreclosed properties and repossessed assets
    
    
    17,689
    
    
    
    4,768Prepaid FDIC insurance premiums
    
    
    12,521
    
    
    
    Other assets
    
    
    28,357
    
    
    
    29,763Total other assets
    
    $
    222,990
    
    
    $
    200,626
  46




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##### Table of Contents



Deposit Liabilities
 47




---



##### Table of Contents



At December 312009
    
    2008
    
    2007Percent
    
    Weighted
    
    
    
    
    
    Percent
    
    Weighted
    
    
    
    
    
    Percent
    
    Weightedof Total
    
    Average
    
    
    
    
    
    of Total
    
    Average
    
    
    
    
    
    of Total
    
    AverageDeposit
    
    Nominal
    
    
    
    
    
    Deposit
    
    Nominal
    
    
    
    
    
    Deposit
    
    NominalAmount
    
    Liabilities
    
    Rate
    
    Amount
    
    Liabilities
    
    Rate
    
    Amount
    
    Liabilities
    
    Rate(Dollars in thousands)Regular savings
    
    $
    196,983
    
    
    
    9.22
    %
    
    
    0.06
    %
    
    $
    185,003
    
    
    
    8.68
    %
    
    
    0.19
    %
    
    $
    183,756
    
    
    
    8.70
    %
    
    
    0.45
    %Interest-bearing demand
    
    
    211,448
    
    
    
    9.89
    
    
    
    0.04
    
    
    
    180,269
    
    
    
    8.46
    
    
    
    0.11
    
    
    
    170,971
    
    
    
    8.09
    
    
    
    0.21Money market savings
    
    
    345,144
    
    
    
    16.14
    
    
    
    0.58
    
    
    
    340,631
    
    
    
    16.00
    
    
    
    1.57
    
    
    
    280,097
    
    
    
    13.27
    
    
    
    3.03Non-interest bearing demand
    
    
    94,619
    
    
    
    4.43
    
    
    
    0.00
    
    
    
    89,106
    
    
    
    4.18
    
    
    
    0.00
    
    
    
    97,506
    
    
    
    4.61
    
    
    
    0.00Total demand accounts
    
    
    848,194
    
    
    
    39.68
    
    
    
    0.26
    
    
    
    795,009
    
    
    
    37.32
    
    
    
    0.74
    
    
    
    732,330
    
    
    
    34.67
    
    
    
    1.32Certificates of deposit:With original maturities of:Three months or less
    
    
    17,645
    
    
    
    0.83
    
    
    
    0.63
    
    
    
    19,791
    
    
    
    0.93
    
    
    
    1.78
    
    
    
    45,199
    
    
    
    2.17
    
    
    
    3.97Over three to 12 months
    
    
    239,660
    
    
    
    11.21
    
    
    
    1.60
    
    
    
    337,054
    
    
    
    15.84
    
    
    
    2.99
    
    
    
    899,167
    
    
    
    43.15
    
    
    
    5.06Over 12 to 24 months
    
    
    812,154
    
    
    
    37.99
    
    
    
    2.62
    
    
    
    731,884
    
    
    
    34.40
    
    
    
    4.04
    
    
    
    235,670
    
    
    
    11.31
    
    
    
    4.61Over 24 to 36 months
    
    
    46,550
    
    
    
    2.18
    
    
    
    2.39
    
    
    
    46,320
    
    
    
    2.18
    
    
    
    2.58
    
    
    
    57,703
    
    
    
    2.77
    
    
    
    3.51Over 36 to48 months
    
    
    5,126
    
    
    
    0.24
    
    
    
    4.38
    
    
    
    6,583
    
    
    
    0.31
    
    
    
    4.30
    
    
    
    4,895
    
    
    
    0.23
    
    
    
    3.68Over 48 to 60 months
    
    
    168,179
    
    
    
    7.87
    
    
    
    3.99
    
    
    
    191,636
    
    
    
    9.02
    
    
    
    4.25
    
    
    
    118,489
    
    
    
    5.70
    
    
    
    4.12Over 60months
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00Total certificates of deposit
    
    
    1,289,314
    
    
    
    60.32
    
    
    
    2.58
    
    
    
    1,333,268
    
    
    
    62.68
    
    
    
    3.72
    
    
    
    1,361,123
    
    
    
    65.33
    
    
    
    4.79Total deposit liabilities
    
    $
    2,137,508
    
    
    
    100.00
    %
    
    
    1.66
    %
    
    $
    2,128,277
    
    
    
    100.00
    %
    
    
    2.61
    %
    
    $
    2,093,453
    
    
    
    100.00
    %
    
    
    3.59
    %
  Amount(In thousands)Maturing in:Three months or less
    
    $
    71,260Over three months through six months
    
    
    59,508Over six months through 12 months
    
    
    118,830Over 12 months through 24 months
    
    
    30,519Over 24 months through 36 months
    
    
    4,028Over 36 months
    
    
    28,908Total certificates of deposits greater than $100,000
    
    $
    313,053
  For the Year Ended December 312009
    
    2008
    
    2007(Dollars in thousands)Total deposit liabilities at beginning of period
    
    $
    2,128,277
    
    
    $
    2,112,968
    
    
    $
    2,149,523Net withdrawals
    
    
    (31,341
    )
    
    
    (58,499
    )
    
    
    (121,106
    )Interest credited, net of penalties
    
    
    40,572
    
    
    
    73,808
    
    
    
    65,036Total deposit liabilities at end of period
    
    $
    2,137,508
    
    
    $
    2,128,277
    
    
    $
    2,093,453
 Borrowings
 48




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##### Table of Contents



At or For the Year Ended December 312009
    
    2008
    
    2007
    
    2006
    
    2005(Dollars in thousands)Balance outstanding at end of year:FHLB term advances
    
    $
    906,979
    
    
    $
    907,971
    
    
    $
    912,459
    
    
    $
    705,025
    
    
    $
    765,796Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average interest rate at end of year:FHLB term advances
    
    
    4.26
    %
    
    
    4.26
    %
    
    
    4.27
    %
    
    
    4.46
    %
    
    
    3.58
    %Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Maximum amount outstanding during the year:FHLB term advances
    
    $
    907,971
    
    
    $
    912,459
    
    
    $
    921,781
    
    
    $
    841,835
    
    
    $
    909,920Overnight borrowings from FHLB
    
    
    
    
    
    
    5,000
    
    
    
    52,100
    
    
    
    38,000
    
    
    
    186,000Other borrowings
    
    
    
    
    
    
    1,103
    
    
    
    
    
    
    
    
    
    
    
    500Average amount outstanding during the year:FHLB term advances
    
    $
    907,443
    
    
    $
    910,517
    
    
    $
    865,540
    
    
    $
    782,619
    
    
    $
    811,937Overnight borrowings from FHLB
    
    
    
    
    
    
    22
    
    
    
    3,570
    
    
    
    3,242
    
    
    
    50,712Other borrowings
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    1Weighted average interest rate during the year:FHLB term advances
    
    
    4.32
    %
    
    
    4.34
    %
    
    
    4.34
    %
    
    
    3.86
    %
    
    
    3.25
    %Overnight borrowings from FHLB
    
    
    
    
    
    
    3.75
    %
    
    
    5.56
    %
    
    
    5.40
    %
    
    
    2.95
    %Other borrowings
    
    
    
    
    
    
    1.92
    %
    
    
    
    
    
    
    
    
    
    
    3.04
    %
 Other Liabilities
 Shareholders Equity
    49




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##### Table of Contents



Asset Quality
 At December 312009
    
    2008
    
    2007
    
    2006
    
    2005(Dollars in thousands)Non-accrual mortgage loans:One- to four-family
    
    $
    12,126
    
    
    $
    8,185
    
    
    $
    2,446
    
    
    $
    1,594
    
    
    $
    1,764Multi-family
    
    
    3,357
    
    
    
    13,255
    
    
    
    3,702
    
    
    
    6,621
    
    
    
    Commercial real estate
    
    
    23,699
    
    
    
    8,420
    
    
    
    5,103
    
    
    
    3,289
    
    
    
    450Construction and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-accrual mortgage loans
    
    
    39,182
    
    
    
    29,860
    
    
    
    11,251
    
    
    
    11,504
    
    
    
    2,214Non-accrual consumer loans:Secured by real estate
    
    
    1,433
    
    
    
    759
    
    
    
    585
    
    
    
    407
    
    
    
    322Other consumer loans
    
    
    212
    
    
    
    400
    
    
    
    345
    
    
    
    396
    
    
    
    294Total non-accrual consumer loans
    
    
    1,645
    
    
    
    1,159
    
    
    
    930
    
    
    
    803
    
    
    
    616Non-accrual commercial business loans
    
    
    923
    
    
    
    1,494
    
    
    
    159
    
    
    
    1,625
    
    
    
    2,517Total non-accrual loans
    
    
    41,750
    
    
    
    32,513
    
    
    
    12,340
    
    
    
    13,932
    
    
    
    5,347Accruing loans delinquent 90 days or more
    
    
    834
    
    
    
    576
    
    
    
    602
    
    
    
    565
    
    
    
    487Total non-performing loans
    
    
    42,584
    
    
    
    33,089
    
    
    
    12,942
    
    
    
    14,497
    
    
    
    5,834Foreclosed real estate and repossessed assets
    
    
    17,689
    
    
    
    4,768
    
    
    
    3,687
    
    
    
    1,231
    
    
    
    708Total non-performing assets
    
    $
    60,273
    
    
    $
    37,857
    
    
    $
    16,629
    
    
    $
    15,728
    
    
    $
    6,542Non-performing loans to total loans
    
    
    2.83
    %
    
    
    1.81
    %
    
    
    0.65
    %
    
    
    0.72
    %
    
    
    0.29
    %Non-performing assets to total assets
    
    
    1.72
    %
    
    
    1.08
    %
    
    
    0.48
    %
    
    
    0.46
    %
    
    
    0.19
    %Interest income that would have been
recognized if non-accrual loans had been
current
    
    $
    2,671
    
    
    $
    2,519
    
    
    $
    1,002
    
    
    $
    652
    
    
    $
    1,159
      50




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51




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##### Table of Contents



At or for the Years Ended December 312009
    
    2008
    
    2007
    
    2006
    
    2005(Dollars in thousands)Balance at beginning of period
    
    $
    12,208
    
    
    $
    11,774
    
    
    $
    12,574
    
    
    $
    12,090
    
    
    $
    13,923Provision for (recovery of) loan losses
    
    
    12,413
    
    
    
    1,447
    
    
    
    (272
    )
    
    
    632
    
    
    
    541Charge-offs:Mortgage loans
    
    
    (5,829
    )
    
    
    (613
    )
    
    
    (178
    )
    
    
    (44
    )
    
    
    Consumer loans
    
    
    (526
    )
    
    
    (411
    )
    
    
    (412
    )
    
    
    (271
    )
    
    
    (327
    )Commercial business loans
    
    
    (1,291
    )
    
    
    (34
    )
    
    
    (33
    )
    
    
    (52
    )
    
    
    (2,104
    )Total charge-offs
    
    
    (7,646
    )
    
    
    (1,058
    )
    
    
    (623
    )
    
    
    (367
    )
    
    
    (2,431
    )Recoveries:Mortgage loans
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer loans
    
    
    33
    
    
    
    45
    
    
    
    95
    
    
    
    81
    
    
    
    49Commercial business loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    8Total recoveries
    
    
    53
    
    
    
    45
    
    
    
    95
    
    
    
    219
    
    
    
    57Net charge-offs recoveries
    
    
    (7,593
    )
    
    
    (1,013
    )
    
    
    (528
    )
    
    
    (148
    )
    
    
    (2,374
    )Balance at end of period
    
    $
    17,028
    
    
    $
    12,208
    
    
    $
    11,774
    
    
    $
    12,574
    
    
    $
    12,090Net charge-offs to average loans
    
    
    0.45
    %
    
    
    0.05
    %
    
    
    0.03
    %
    
    
    0.01
    %
    
    
    0.12
    %Allowance for loan losses to total loans
    
    
    1.13
    %
    
    
    0.67
    %
    
    
    0.59
    %
    
    
    0.62
    %
    
    
    0.61
    %Allowance for loan losses to
non-performing loans
    
    
    39.99
    %
    
    
    36.89
    %
    
    
    90.98
    %
    
    
    86.74
    %
    
    
    207.23
    %
    52




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##### Table of Contents



At December 312009
    
    2008
    
    2007
    
    2006
    
    2005Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentageof Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loansin Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Categoryto Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to TotalAmount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans(Dollars in thousands)Loan category:Mortgage loans:One- to four-family
    
    $
    2,823
    
    
    
    16.58
    %
    
    $
    3,038
    
    
    
    47.43
    %
    
    $
    3,324
    
    
    
    51.12
    %
    
    $
    3,531
    
    
    
    53.03
    %
    
    $
    3,294
    
    
    
    50.94
    %Other mortgage loans
    
    
    10,036
    
    
    
    58.94
    
    
    
    5,710
    
    
    
    32.11
    
    
    
    4,040
    
    
    
    27.96
    
    
    
    3,049
    
    
    
    24.16
    
    
    
    2,424
    
    
    
    23.61Total mortgage loans
    
    
    12,859
    
    
    
    75.52
    
    
    
    8,748
    
    
    
    79.54
    
    
    
    7,364
    
    
    
    79.08
    
    
    
    6,580
    
    
    
    77.19
    
    
    
    5,718
    
    
    
    74.55Home equity lines
    
    
    1,425
    
    
    
    8.37
    
    
    
    473
    
    
    
    4.59
    
    
    
    496
    
    
    
    4.37
    
    
    
    496
    
    
    
    4.33
    
    
    
    483
    
    
    
    4.29Other consumer
    
    
    819
    
    
    
    4.81
    
    
    
    1,652
    
    
    
    13.25
    
    
    
    1,770
    
    
    
    13.95
    
    
    
    2,060
    
    
    
    16.02
    
    
    
    2,118
    
    
    
    18.38Commercial loans
    
    
    1,925
    
    
    
    11.30
    
    
    
    1,335
    
    
    
    2.62
    
    
    
    2,144
    
    
    
    2.60
    
    
    
    3,438
    
    
    
    2.46
    
    
    
    3,771
    
    
    
    2.78Total allowance for
loan losses
    
    $
    17,028
    
    
    
    100.00
    %
    
    $
    12,208
    
    
    
    100.00
    %
    
    $
    11,774
    
    
    
    100.00
    %
    
    $
    12,574
    
    
    
    100.00
    %
    
    $
    12,090
    
    
    
    100.00
    %
 Critical Accounting Policies
  Allowance for Loan Losses
 Other-Than-Temporary Impairment
 Goodwill
 53




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##### Table of Contents



Income Taxes
  Contractual Obligations, Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements
   Payments Due InOne to
    
    Three to
    
    OverOne Year
    
    Three
    
    Five
    
    FiveOr Less
    
    Years
    
    Years
    
    Years
    
    Total(Dollars in thousands)Deposit liabilities without a
stated maturity (1)
    
    $
    848,194
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    848,194Certificates of deposit (1)
    
    
    992,752
    
    
    $
    168,755
    
    
    $
    127,807
    
    
    
    
    
    
    
    1,289,314Borrowed funds (1) (2)
    
    
    
    
    
    
    100,000
    
    
    
    264
    
    
    $
    806,715
    
    
    
    906,979Operating leases
    
    
    974
    
    
    
    1,444
    
    
    
    1,212
    
    
    
    2,898
    
    
    
    6,528Purchase obligations
    
    
    1,680
    
    
    
    3,360
    
    
    
    3,360
    
    
    
    8,395
    
    
    
    16,795Deferred retirement plans and
deferred compensation plans
    
    
    664
    
    
    
    2,191
    
    
    
    2,667
    
    
    
    8,733
    
    
    
    14,255
 
 (1)
    
    Excludes interest to be paid in the periods indicated.(2)
    
    Includes $856.0 million of borrowings that contain redemption features that permit the FHLB
of Chicago to redeem the advances at its option on a quarterly basis.   54




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##### Table of Contents



Payments Due InOne to
    
    Three to
    
    OverOne Year
    
    Three
    
    Five
    
    FiveOr Less
    
    Years
    
    Years
    
    Years
    
    Total(Dollars in thousands)Commitments to extend credit:Commercial real estate
    
    $
    2,163
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,163Residential real estate
    
    
    35,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,792Revolving home equity
and credit card lines
    
    
    150,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,424Standby letters of credit
    
    
    60
    
    
    
    
    
    
    $
    41
    
    
    $
    10
    
    
    
    111Commercial letters of credit
    
    
    18,904
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,904Unused commercial lines
of credit
    
    
    524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    524Net commitments to sell
mortgage loans
    
    
    (27,668
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,668
    )
  55




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##### Table of Contents



Quarterly Financial Information
  Quarter Ended2009
    
    March 31
    
    June 30
    
    September 30
    
    December 31(Dollars in thousands, except per share amounts)Interest income
    
    $
    41,986
    
    
    $
    39,166
    
    
    $
    35,727
    
    
    $
    34,934Interest expense
    
    
    22,793
    
    
    
    21,301
    
    
    
    20,403
    
    
    
    19,286Net interest income
    
    
    19,193
    
    
    
    17,865
    
    
    
    15,324
    
    
    
    15,648Provision for loan losses
    
    
    3,161
    
    
    
    472
    
    
    
    5,189
    
    
    
    3,591Net income after provision
for loan losses
    
    
    16,032
    
    
    
    17,393
    
    
    
    10,135
    
    
    
    12,057Total non-interest income
    
    
    9,285
    
    
    
    7,552
    
    
    
    8,613
    
    
    
    5,536Total non-interest expense
    
    
    16,459
    
    
    
    18,576
    
    
    
    16,731
    
    
    
    15,694Income before income taxes
    
    
    8,858
    
    
    
    6,369
    
    
    
    2,017
    
    
    
    1,899Income taxes
    
    
    1,669
    
    
    
    2,553
    
    
    
    772
    
    
    
    424Net income before non-
controlling interest
    
    
    7,189
    
    
    
    3,816
    
    
    
    1,245
    
    
    
    1,475Net (income) loss
attributable to
non-controlling interest
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    Net income
    
    $
    7,188
    
    
    $
    3,817
    
    
    $
    1,245
    
    
    $
    1,475Earnings per share-basic
    
    $
    0.15
    
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    0.03Earnings per share-diluted
    
    $
    0.15
    
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    0.03Cash dividend paid per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.07Quarter Ended2008
    
    March 31
    
    June 30
    
    September 30
    
    December 31Interest income
    
    $
    45,268
    
    
    $
    44,075
    
    
    $
    44,225
    
    
    $
    43,988Interest expense
    
    
    28,239
    
    
    
    25,980
    
    
    
    25,643
    
    
    
    24,329Net interest income
    
    
    17,029
    
    
    
    18,095
    
    
    
    18,582
    
    
    
    19,659Provision for loan losses
    
    
    156
    
    
    
    67
    
    
    
    1,135
    
    
    
    89Net income after provision
for loan losses
    
    
    16,873
    
    
    
    18,028
    
    
    
    17,447
    
    
    
    19,570Total non-interest income
    
    
    6,290
    
    
    
    4,059
    
    
    
    843
    
    
    
    6,516Total non-interest expense
    
    
    15,601
    
    
    
    15,727
    
    
    
    16,022
    
    
    
    16,028Income before income taxes
    
    
    7,562
    
    
    
    6,360
    
    
    
    2,268
    
    
    
    10,058Income taxes
    
    
    2,501
    
    
    
    2,081
    
    
    
    645
    
    
    
    3,867Net income before non-
controlling interest
    
    
    5,061
    
    
    
    4,279
    
    
    
    1,623
    
    
    
    6,191Net loss attributable to non-
controlling interest
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Net income
    
    $
    5,062
    
    
    $
    4,279
    
    
    $
    1,623
    
    
    $
    6,192Earnings per share-basic
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.03
    
    
    $
    0.13Earnings per share-diluted
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    0.03
    
    
    $
    0.13Cash dividend paid per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
 56




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
     
    
    maintain earnings and capital within self-imposed parameters over a range of possible
interest rate environments;
    
    coordinate interest rate risk policies and procedures with other elements of the
Companys business plan, all within the context of the current business environment and
regulatory capital and liquidity requirements; and
    
    manage interest rate risk in a manner consistent with the approved guidelines and
policies set by the Companys board of directors.
  
    
    emphasizing the origination of adjustable rate and certain 15-year fixed rate mortgage
loans for portfolio, and selling certain 15, 20, and 30 year fixed rate mortgage loans in
the secondary market;
    
    maintaining a significant level of investment securities and mortgage-related securities
with a weighted average life of less than eight years or with interest rates that reprice
in less than five years; and
    
    managing deposits and borrowings to provide stable funding.
  Gap Analysis
 57




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##### Table of Contents




    
    Investment securitiesbased upon contractual maturities and if applicable, call dates.
$177.8 million in investment securities with maturities beyond one year have been
classified as due within one year based on their call dates. These investments may not be
called prior to their stated maturities. $396.3 million in investment securities with call
dates within one year have been classified as due beyond one year according to their stated
maturities. These investments may be called prior to their stated maturities.
    
    Mortgage-related securitiesbased upon known repricing dates (if applicable) and an
independent outside source for determining estimated prepayment speeds. Actual cash flows
may differ substantially from these assumptions.
    
    Loansbased upon contractual maturities, repricing date, if applicable, scheduled
repayments of principal, and projected prepayments of principal based upon the Companys
historical experience or anticipated prepayments. Actual cash flows may differ
substantially from these assumptions.
    
    Deposit liabilitiesbased upon contractual maturities and the Companys historical
decay rates. Actual cash flows may differ from these assumptions.
    
    Borrowingsbased upon final maturity. However, $856.0 million of borrowings
classified as due beyond one year contain a redemption option which has not been reflected
in the analysis. These borrowings could be redeemed at the option of the lender prior to
their stated maturity (refer to Financial ConditionBorrowings, above).
 58




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##### Table of Contents



At December 31, 2009Within
    
    Three to
    
    More than
    
    More thanThree
    
    Twelve
    
    1 Year to
    
    3 Years 
    
    Over 5Months
    
    Months
    
    2 Years
    
    5 Years
    
    Years
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable:Mortgage loans:Permanent:Fixed
    
    $
    46,078
    
    
    $
    112,801
    
    
    $
    173,621
    
    
    $
    87,722
    
    
    $
    103,030
    
    
    $
    523,252Adjustable
    
    
    82,353
    
    
    
    277,815
    
    
    
    197,222
    
    
    
    34,157
    
    
    
    243
    
    
    
    591,790Construction:Fixed
    
    
    8,543
    
    
    
    9,063
    
    
    
    6,949
    
    
    
    351
    
    
    
    4,331
    
    
    
    29,237Adjustable
    
    
    22,531
    
    
    
    6,661
    
    
    
    
    
    
    
    12,707
    
    
    
    
    
    
    
    41,899Consumer loans
    
    
    102,124
    
    
    
    51,772
    
    
    
    66,410
    
    
    
    29,094
    
    
    
    24,731
    
    
    
    274,131Commercial business loans
    
    
    20,187
    
    
    
    15,991
    
    
    
    14,531
    
    
    
    497
    
    
    
    38
    
    
    
    51,244Interest-earning deposits
    
    
    189,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189,962Investment securities
    
    
    21,545
    
    
    
    177,800
    
    
    
    94,884
    
    
    
    225,350
    
    
    
    95,991
    
    
    
    615,570Mortgage-related securities:Fixed
    
    
    29,009
    
    
    
    75,065
    
    
    
    123,040
    
    
    
    120,663
    
    
    
    257,087
    
    
    
    604,864Adjustable
    
    
    114,724
    
    
    
    147,743
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262,467Other interest-earning assets
    
    
    46,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,092Total interest-earning assets
    
    
    683,148
    
    
    
    874,711
    
    
    
    676,657
    
    
    
    510,541
    
    
    
    485,451
    
    
    
    3,230,508Non-interest-bearing and interest-bearing liabilities:Non-interest-bearing demand accounts
    
    
    303
    
    
    
    902
    
    
    
    2,361
    
    
    
    2,300
    
    
    
    85,919
    
    
    
    91,785Interest-bearing liabilities:Deposit liabilities:Interest-bearing demand accounts
    
    
    706
    
    
    
    2,105
    
    
    
    5,513
    
    
    
    5,369
    
    
    
    200,590
    
    
    
    214,283Regular savings accounts
    
    
    1,053
    
    
    
    3,109
    
    
    
    7,934
    
    
    
    7,448
    
    
    
    177,439
    
    
    
    196,983Money market accounts
    
    
    345,144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    345,144Certificates of deposit
    
    
    315,766
    
    
    
    699,380
    
    
    
    146,360
    
    
    
    127,807
    
    
    
    
    
    
    
    1,289,313Advance payments by borrowers
for taxes and insurance
    
    
    
    
    
    
    2,508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,508Borrowings
    
    
    258
    
    
    
    786
    
    
    
    102,254
    
    
    
    2,680
    
    
    
    801,001
    
    
    
    906,979Total interest-bearing liabilities
    
    
    663,230
    
    
    
    708,790
    
    
    
    264,422
    
    
    
    145,604
    
    
    
    1,264,949
    
    
    
    3,046,995Interest rate sensitivity gap
    
    $
    19,918
    
    
    $
    165,921
    
    
    $
    412,235
    
    
    $
    364,937
    
    
    $
    (779,498
    )
    
    $
    183,513Cumulative interest rate sensitivity gap
    
    $
    19,918
    
    
    $
    185,839
    
    
    $
    598,074
    
    
    $
    963,011
    
    
    $
    183,513Cumulative interest rate sensitivity gap
as a percent of total assets
    
    
    0.57
    %
    
    
    5.29
    %
    
    
    17.03
    %
    
    
    27.42
    %
    
    
    5.23
    %Cumulative interest-earning assets as a
percentage of interest-bearing
liabilities
    
    
    103.00
    %
    
    
    113.54
    %
    
    
    136.55
    %
    
    
    154.04
    %
    
    
    106.02
    %
   59




---



##### Table of Contents



Present Value of Equity
  Present Value of Equityas Percent ofChange in
    
    Present Value of Equity
    
    Present Value of AssetsInterest Rates
    
    Dollar
    
    Dollar
    
    Percent
    
    Present Value
    
    Percent(Basis Points)
    
    Amount
    
    Change
    
    Change
    
    Ratio
    
    Change(Dollars in thousands)+300
    
    $
    379,148
    
    
    $
    (147,605
    )
    
    
    (28.0
    )%
    
    
    11.20
    %
    
    
    (22.4
    )%+200
    
    
    435,625
    
    
    
    (91,128
    )
    
    
    (17.3
    )
    
    
    12.54
    
    
    
    (13.1
    )+100
    
    
    485,394
    
    
    
    (41,359
    )
    
    
    (7.9
    )
    
    
    13.63
    
    
    
    (5.6
    )0
    
    
    526,753
    
    
    
    
    
    
    
    
    
    
    
    14.43
    
    
    
    -100
    
    
    496,638
    
    
    
    (30,115
    )
    
    
    (5.7
    )
    
    
    13.43
    
    
    
    (6.9
    )
   60




---



##### Table of Contents



61




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  
      
 62




---



##### Table of Contents



63




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Financial Condition
 December 312009
    
    2008(Dollars in Thousands)AssetsCash and due from banks
    
    $
    37,696
    
    
    $
    41,017Interest-earning deposits in banks
    
    
    189,962
    
    
    
    71,876Cash and cash equivalents
    
    
    227,658
    
    
    
    112,893Securities available-for-sale, at fair value:Investment securities
    
    
    614,104
    
    
    
    419,138Mortgage-related securities
    
    
    866,848
    
    
    
    850,867Loans held-for-sale, net
    
    
    13,534
    
    
    
    19,030Loans receivable, net
    
    
    1,506,056
    
    
    
    1,829,053Goodwill
    
    
    52,570
    
    
    
    52,570Mortgage servicing rights, net
    
    
    6,899
    
    
    
    3,703Other intangible assets, net
    
    
    1,405
    
    
    
    1,809Other assets
    
    
    222,990
    
    
    
    200,626Total assets
    
    $
    3,512,064
    
    
    $
    3,489,689Liabilities and equityLiabilities:Deposit liabilities
    
    $
    2,137,508
    
    
    $
    2,128,277Borrowings
    
    
    906,979
    
    
    
    907,971Advance payments by borrowers for taxes and insurance
    
    
    2,508
    
    
    
    1,929Other liabilities
    
    
    59,668
    
    
    
    48,977Total liabilities
    
    
    3,106,663
    
    
    
    3,087,154Equity:Preferred stock$0.01 par value:Authorized 20,000,000 shares in 2009 and 2008
Issued and outstandingnone in 2009 and 2008
    
    
    
    
    
    
    Common stock  $0.01 par value:Authorized 200,000,000 shares in 2009 and 2008
Issued78,783,849 shares in 2009 and 2008
Outstanding46,165,635 shares in 2009 and 47,686,759 in 2008
    
    
    788
    
    
    
    788Additional paid-in capital
    
    
    499,376
    
    
    
    498,501Retained earnings
    
    
    272,518
    
    
    
    273,826Unearned ESOP shares
    
    
    (347
    )
    
    
    (1,247
    )Accumulated other comprehensive loss
    
    
    (2,406
    )
    
    
    (16,404
    )Treasury stock32,618,214 shares in 2009 and 31,097,090 in 2008
    
    
    (367,452
    )
    
    
    (355,853
    )Total shareholders equity
    
    
    402,477
    
    
    
    399,611Non-controlling interest in real estate partnership
    
    
    2,924
    
    
    
    2,924Total equity including non-controlling interest
    
    
    405,401
    
    
    
    402,535Total liabilities and equity
    
    $
    3,512,064
    
    
    $
    3,489,689
  64




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Income
 Year ended December 312009
    
    2008
    
    2007(Dollars in Thousands, Except Per Share Data)Interest income:Loans
    
    $
    95,802
    
    
    $
    113,635
    
    
    $
    123,141Investment securities
    
    
    18,199
    
    
    
    16,041
    
    
    
    4,871Mortgage-related securities
    
    
    37,734
    
    
    
    45,535
    
    
    
    52,518Interest-earning deposits
    
    
    79
    
    
    
    2,345
    
    
    
    2,471Total interest income
    
    
    151,814
    
    
    
    177,556
    
    
    
    183,001Interest expense:Deposit liabilities
    
    
    44,568
    
    
    
    64,689
    
    
    
    76,011Borrowings
    
    
    39,205
    
    
    
    39,484
    
    
    
    37,738Advance payments by borrowers for taxes and insurance
    
    
    11
    
    
    
    18
    
    
    
    22Total interest expense
    
    
    83,784
    
    
    
    104,191
    
    
    
    113,771Net interest income
    
    
    68,030
    
    
    
    73,365
    
    
    
    69,230Provision for (recovery of) loan losses
    
    
    12,413
    
    
    
    1,447
    
    
    
    (272
    )Net interest income after provision for loan losses
    
    
    55,617
    
    
    
    71,918
    
    
    
    69,502Non-interest income:Service charges on deposits
    
    
    6,408
    
    
    
    6,688
    
    
    
    6,612Brokerage and insurance commissions
    
    
    2,785
    
    
    
    2,626
    
    
    
    2,617Loan related fees and servicing revenue, net
    
    
    130
    
    
    
    (6
    )
    
    
    1,026Gain on loan sales activities, net
    
    
    9,110
    
    
    
    2,109
    
    
    
    1,478Gain (loss) on investments, net
    
    
    6,758
    
    
    
    (1,166
    )
    
    
    (1,228
    )Gain (loss) on foreclosed real estate, net
    
    
    (642
    )
    
    
    (155
    )
    
    
    8Real estate investment partnership income
    
    
    
    
    
    
    
    
    
    
    1,422Other non-interest income
    
    
    6,436
    
    
    
    7,612
    
    
    
    8,493Total non-interest income
    
    
    30,985
    
    
    
    17,708
    
    
    
    20,428Non-interest expense:Compensation, payroll taxes, and other employee benefits
    
    
    39,077
    
    
    
    38,538
    
    
    
    38,234Occupancy and equipment
    
    
    11,760
    
    
    
    11,614
    
    
    
    11,277Federal insurance premiums and special assessments
    
    
    4,597
    
    
    
    332
    
    
    
    258Amortization of other intangible assets
    
    
    405
    
    
    
    618
    
    
    
    661Real estate investment partnership cost of sales
    
    
    
    
    
    
    
    
    
    
    645Other non-interest expense
    
    
    11,620
    
    
    
    12,275
    
    
    
    12,468Total non-interest expense
    
    
    67,459
    
    
    
    63,377
    
    
    
    63,543Income before income taxes
    
    
    19,143
    
    
    
    26,249
    
    
    
    26,387Income tax expense
    
    
    5,418
    
    
    
    9,094
    
    
    
    8,892Net income before non-controlling interest
    
    
    13,725
    
    
    
    17,155
    
    
    
    17,495Net (income) loss attributable to non-controlling interests
    
    
    
    
    
    
    1
    
    
    
    (392
    )Net income
    
    $
    13,725
    
    
    $
    17,156
    
    
    $
    17,103Per share data:Earnings per sharebasic
    
    $
    0.29
    
    
    $
    0.36
    
    
    $
    0.32Earnings per sharediluted
    
    $
    0.29
    
    
    $
    0.35
    
    
    $
    0.31Cash dividends per share paid
    
    $
    0.34
    
    
    $
    0.36
    
    
    $
    0.33
  65




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Equity
 Non-ControllingAdditional
    
    
    
    
    
    
    Unearned
    
    
    Accumulated Other
    
    
    
    
    
    
    Interest inCommon
    
    
    Paid-In
    
    
    Retained
    
    
    ESOP
    
    
    Comprehensive
    
    
    Treasury
    
    
    Real EstateStock
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Stock
    
    
    Partnership
    
    
    TotalBalance at December 31, 2006
    
    $
    788
    
    
    $
    496,302
    
    
    $
    273,454
    
    
    $
    (3,066
    )
    
    $
    (15,426
    )
    
    $
    (218,273
    )
    
    $
    2,518
    
    
    $
    536,297Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    17,103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,103Net Income attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    392
    
    
    
    392Other comprehensive income:Change in net unrealized loss on securities
available-for-sale, net of deferred
income taxes of $4,707
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,973
    
    
    
    
    
    
    
    
    
    
    
    7,973Reclassification adjustment for gain on
securities included in income, net of
income taxes of $492
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    736
    
    
    
    
    
    
    
    
    
    
    
    736Pension asset, net of deferred income
taxes of $349
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    648
    
    
    
    
    
    
    
    
    
    
    
    648Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,852Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120,687
    )
    
    
    
    
    
    
    (120,687
    )Committed ESOP shares
    
    
    
    
    
    
    2,829
    
    
    
    
    
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,729Exercise of stock options
    
    
    
    
    
    
    (3,001
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,830
    
    
    
    
    
    
    
    1,829Share based payments
    
    
    
    
    
    
    2,278
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126
    )
    
    
    
    
    
    
    2,152Cash dividends ($0.33 per share)
    
    
    
    
    
    
    
    
    
    
    (17,227
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,227
    )Balance at December 31, 2007
    
    $
    788
    
    
    $
    498,408
    
    
    $
    273,330
    
    
    $
    (2,166
    )
    
    $
    (6,069
    )
    
    $
    (334,256
    )
    
    $
    2,910
    
    
    $
    432,945Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    17,156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,156Net Income attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Other comprehensive income:Change in net unrealized loss on securities
available-for-sale, net of deferred
income taxes of $(3,430)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,633
    )
    
    
    
    
    
    
    
    
    
    
    (6,633
    )Reclassification adjustment for gain on
securities included in income, net of
income taxes of $468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    698
    
    
    
    
    
    
    
    
    
    
    
    698Pension liability, net of deferred income
taxes of $(2,491)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,392
    )
    
    
    
    
    
    
    
    
    
    
    (4,392
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,828Impact of change in measurement date for
qualified and supplemental pension plans
    
    
    
    
    
    
    
    
    
    
    (218
    )
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (226
    )Capital contribution to real estate partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,927
    )
    
    
    
    
    
    
    (29,927
    )Issuance of management recognition plan shares
    
    
    
    
    
    
    (403
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,696
    
    
    
    
    
    
    
    919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,615Exercise of stock options
    
    
    
    
    
    
    (4,489
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,181
    
    
    
    
    
    
    
    3,692Share based payments
    
    
    
    
    
    
    2,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254
    )
    
    
    
    
    
    
    2,035Cash dividends ($0.36 per share)
    
    
    
    
    
    
    
    
    
    
    (16,442
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,442
    )Balance at December 31, 2008
    
    $
    788
    
    
    $
    498,501
    
    
    $
    273,826
    
    
    $
    (1,247
    )
    
    $
    (16,404
    )
    
    $
    (355,853
    )
    
    $
    2,924
    
    
    $
    402,535
 66




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Equity (continued)
 Non-ControllingAdditional
    
    
    
    
    
    
    Unearned
    
    
    Accumulated Other
    
    
    
    
    
    
    Interest inCommon
    
    
    Paid-In
    
    
    Retained
    
    
    ESOP
    
    
    Comprehensive
    
    
    Treasury
    
    
    Real EstateStock
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Stock
    
    
    Partnership
    
    
    TotalBalance at December 31, 2008
    
    $
    788
    
    
    $
    498,501
    
    
    $
    273,826
    
    
    $
    (1,247
    )
    
    $
    (16,404
    )
    
    $
    (355,853
    )
    
    $
    2,924
    
    
    $
    402,535Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    13,725
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,725Net income attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income:Change in net unrealized loss on securities
available-for-sale, net of deferred
income taxes of $8,847
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,660
    
    
    
    
    
    
    
    
    
    
    
    15,660Reclassification adjustment for gain on
securities included in income, net of
income taxes of $(2,710)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,048
    )
    
    
    
    
    
    
    
    
    
    
    (4,048
    )Pension asset, net of deferred income
taxes of $1,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,386
    
    
    
    
    
    
    
    
    
    
    
    2,386Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,723Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,397
    )
    
    
    
    
    
    
    (14,397
    )Committed ESOP shares
    
    
    
    
    
    
    1,969
    
    
    
    
    
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,869Exercise of stock options
    
    
    
    
    
    
    (1,966
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,798
    
    
    
    
    
    
    
    832Share based payments
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872Cash dividends ($0.34 per share)
    
    
    
    
    
    
    
    
    
    
    (15,033
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,033
    )Balance at December 31, 2009
    
    $
    788
    
    
    $
    499,376
    
    
    $
    272,518
    
    
    $
    (347
    )
    
    $
    (2,406
    )
    
    $
    (367,452
    )
    
    $
    2,924
    
    
    $
    405,401
  67




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 312009
    
    2008
    
    2007(Dollars in Thousands)Operating activities:Net income
    
    $
    13,725
    
    
    $
    17,156
    
    
    $
    17,103Adjustments to reconcile net income to net cash provided by
operating activities:Net provision for (recovery of) loan losses
    
    
    12,413
    
    
    
    1,447
    
    
    
    (272
    )Provision for depreciation
    
    
    2,567
    
    
    
    2,469
    
    
    
    2,620Amortization of other intangible assets
    
    
    405
    
    
    
    618
    
    
    
    661Amortization of mortgage servicing rights
    
    
    3,023
    
    
    
    1,587
    
    
    
    1,191Increase (decrease) in valuation on MSRs
    
    
    (535
    )
    
    
    822
    
    
    
    Minority interest in real estate investment partnership
    
    
    
    
    
    
    1
    
    
    
    392Stock-based compensation expense
    
    
    3,741
    
    
    
    5,650
    
    
    
    5,881Net amortization on securities
    
    
    2,039
    
    
    
    (1,482
    )
    
    
    (1,894
    )Loans originated for sale
    
    
    (578,312
    )
    
    
    (139,387
    )
    
    
    (107,045
    )Proceeds from loan sales
    
    
    587,234
    
    
    
    129,014
    
    
    
    103,112Net gain on sale of available-for-sale securities
    
    
    (7,589
    )
    
    
    (7,192
    )
    
    
    Other than
temporary impairment of available-for-sale securities
    
    
    831
    
    
    
    8,358
    
    
    
    1,228Net gain from real estate investment partnership
    
    
    
    
    
    
    
    
    
    
    (777
    )Gain on sales of loans originated for sale
    
    
    (9,110
    )
    
    
    (2,109
    )
    
    
    (1,478
    )Increase (decrease) in other liabilities
    
    
    13,077
    
    
    
    (54
    )
    
    
    (15,518
    )Decrease (increase) in other assets
    
    
    (12,387
    )
    
    
    (9,452
    )
    
    
    21,415Decrease (increase) in accrued interest receivable
    
    
    3,212
    
    
    
    (1,908
    )
    
    
    (1,118
    )Net cash provided by operating activities
    
    
    34,334
    
    
    
    5,538
    
    
    
    25,501Investing activities:Proceeds from maturities of investment securities
    
    
    467,902
    
    
    
    29,992
    
    
    
    Purchases of investment securities
    
    
    (689,075
    )
    
    
    (351,202
    )
    
    
    (51,270
    )Purchases of mortgage-related securities
    
    
    (779,170
    )
    
    
    (345,842
    )
    
    
    (247,428
    )Principal repayments on mortgage-related securities
    
    
    318,225
    
    
    
    195,479
    
    
    
    227,041Proceeds from sale of investment securities
    
    
    493,639
    
    
    
    392,358
    
    
    
    Net decrease in loans receivable
    
    
    286,863
    
    
    
    160,877
    
    
    
    26,317Proceeds from real estate investment partnership
    
    
    
    
    
    
    
    
    
    
    1,422Purchase of Federal Home Loan Bank stock
    
    
    
    
    
    
    
    
    
    
    (216
    )Proceeds from sale of foreclosed properties
    
    
    3,949
    
    
    
    2,100
    
    
    
    949Net purchases of premises and equipment
    
    
    (2,122
    )
    
    
    (3,145
    )
    
    
    (3,722
    )Net cash provided by (used in) investing activities
    
    
    100,211
    
    
    
    80,618
    
    
    
    (46,907
    )
 68




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows (continued)
 Year ended December 312009
    
    2008
    
    2007(Dollars in Thousands)Financing activities:Net cash inflows (outflows) from deposit liabilities
    
    $
    9,231
    
    
    $
    34,825
    
    
    $
    (56,070
    )Net decrease in short-term borrowings
    
    
    
    
    
    
    
    
    
    
    (175,000
    )Proceeds from long-term borrowings
    
    
    
    
    
    
    
    
    
    
    657,950Repayments on long-term borrowings
    
    
    (992
    )
    
    
    (4,488
    )
    
    
    (275,516
    )Net increase
(decrease) in advance payments by borrowers for taxes and insurance
    
    
    579
    
    
    
    114
    
    
    
    (384
    )Proceeds from exercise of stock options
    
    
    556
    
    
    
    3,313
    
    
    
    1,396Excess tax benefit from exercise of stock options
    
    
    276
    
    
    
    379
    
    
    
    433Cash dividends
    
    
    (15,033
    )
    
    
    (16,442
    )
    
    
    (17,227
    )Capital contribution to real estate partnership
    
    
    
    
    
    
    14
    
    
    
    Purchase of treasury stock
    
    
    (14,397
    )
    
    
    (29,927
    )
    
    
    (120,687
    )Net cash provided by (used in) financing activities
    
    
    (19,780
    )
    
    
    (12,212
    )
    
    
    14,895Increase (decrease) in cash and cash equivalents
    
    
    114,765
    
    
    
    73,944
    
    
    
    (6,511
    )Cash and cash equivalents at beginning of year
    
    
    112,893
    
    
    
    38,949
    
    
    
    45,460Cash and cash equivalents at end of year
    
    $
    227,658
    
    
    $
    112,893
    
    
    $
    38,949Supplemental information:Interest paid on deposits and borrowings
    
    $
    84,927
    
    
    $
    121,660
    
    
    $
    102,744Income taxes paid
    
    
    9,112
    
    
    
    10,704
    
    
    
    8,187Loans transferred to foreclosed and repossessed assets
    
    
    23,721
    
    
    
    3,179
    
    
    
    3,724
  69




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies
 Business
   Principles of Consolidation
   Cash and Cash Equivalents
  Federal Home Loan Bank Stock
  Securities Available-for-Sale
   70




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
   Loans Held-for-Sale
  Loans Receivable and Related Interest Income
  Loan Fees and Related Costs
  Allowance for Loan Losses
  71




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
  Mortgage Servicing Rights
  Mortgage Banking Loan Commitments
   Foreclosed Properties and Repossessed Assets
  Premises and Equipment
  72




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Goodwill and Other Intangible Assets
  Life Insurance Policies
  Income Taxes
  Earnings Per Share
  Pension Costs
   73




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Segment Information
  Recent Accounting Changes
       74




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
      Reclassifications
  75




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale
  December 31, 2009Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueInvestment securities:U.S. government and federal obligations
    
    $
    594,024
    
    
    $
    128
    
    
    $
    (2,360
    )
    
    $
    591,792Mutual funds
    
    
    21,546
    
    
    
    831
    
    
    
    (65
    )
    
    
    22,312Total investment securities
    
    
    615,570
    
    
    
    959
    
    
    
    (2,425
    )
    
    
    614,104Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    291,318
    
    
    
    4,180
    
    
    
    (310
    )
    
    
    295,188Federal National Mortgage Association
    
    
    220,437
    
    
    
    5,044
    
    
    
    (723
    )
    
    
    224,758Private label CMOs
    
    
    120,780
    
    
    
    104
    
    
    
    (9,102
    )
    
    
    111,782Government National Mortgage Association
    
    
    234,796
    
    
    
    1,512
    
    
    
    (1,188
    )
    
    
    235,120Total mortgage-related securities
    
    
    867,331
    
    
    
    10,840
    
    
    
    (11,323
    )
    
    
    866,848Total securities available-for-sale
    
    $
    1,482,901
    
    
    $
    11,799
    
    
    $
    (13,748
    )
    
    $
    1,480,952
 December 31, 2008Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueInvestment securities:U.S. government and federal obligations
    
    $
    372,446
    
    
    $
    7,089
    
    
    
    
    
    
    $
    379,535Mutual funds
    
    
    39,632
    
    
    
    36
    
    
    $
    (65
    )
    
    
    39,603Total investment securities
    
    
    412,078
    
    
    
    7,125
    
    
    
    (65
    )
    
    
    419,138Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    281,652
    
    
    
    1,367
    
    
    
    (782
    )
    
    
    282,237Federal National Mortgage Association
    
    
    411,528
    
    
    
    2,534
    
    
    
    (698
    )
    
    
    413,364Private label CMOs
    
    
    157,706
    
    
    
    
    
    
    
    (29,147
    )
    
    
    128,559Government National Mortgage Association
    
    
    26,739
    
    
    
    208
    
    
    
    (240
    )
    
    
    26,707Total mortgage-related securities
    
    
    877,625
    
    
    
    4,109
    
    
    
    (30,867
    )
    
    
    850,867Total securities available-for-sale
    
    $
    1,289,703
    
    
    $
    11,234
    
    
    $
    (30,932
    )
    
    $
    1,270,005
 76




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale (continued)
  Less Than 12 Months
    
    Greater Than 12 Monthsin an Unrealized Loss Position
    
    in an Unrealized Loss Position
    
    Gross
    
    TotalUnrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    EstimatedLoss
    
    of
    
    Fair
    
    Loss
    
    of
    
    Fair
    
    Loss
    
    FairAmount
    
    Securities
    
    Value
    
    Amount
    
    Securities
    
    Value
    
    Amount
    
    ValueInvestment securities:U.S. government and federal obligations
    
    $
    (2,360
    )
    
    
    24
    
    
    $
    441,714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,360
    )
    
    $
    442,714Mutual funds
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (65
    )
    
    
    1
    
    
    $
    644
    
    
    
    (65
    )
    
    
    644Total investment securities
    
    
    (2,360
    )
    
    
    24
    
    
    
    441,714
    
    
    
    (65
    )
    
    
    1
    
    
    
    644
    
    
    
    (2,425
    )
    
    
    442,358Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    (122
    )
    
    
    3
    
    
    
    49,961
    
    
    
    (188
    )
    
    
    5
    
    
    
    6,073
    
    
    
    (310
    )
    
    
    56,034Federal National Mortgage Association
    
    
    (668
    )
    
    
    5
    
    
    
    35,848
    
    
    
    (55
    )
    
    
    1
    
    
    
    1,490
    
    
    
    (723
    )
    
    
    37,338Government National Mortgage Association
    
    
    (1,106
    )
    
    
    5
    
    
    
    84,135
    
    
    
    (82
    )
    
    
    3
    
    
    
    7,039
    
    
    
    (1,188
    )
    
    
    91,174Private label CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,102
    )
    
    
    25
    
    
    
    88,860
    
    
    
    (9,102
    )
    
    
    88,860Total mortgage-related securities
    
    
    (1,896
    )
    
    
    13
    
    
    
    169,944
    
    
    
    (9,427
    )
    
    
    34
    
    
    
    103,462
    
    
    
    (11,323
    )
    
    
    273,406Total
    
    $
    (4,256
    )
    
    
    37
    
    
    $
    611,658
    
    
    $
    (9,492
    )
    
    
    35
    
    
    $
    104,106
    
    
    $
    (13,748
    )
    
    $
    715,764
  Less Than 12 Months
    
    Greater Than 12 Monthsin an Unrealized Loss Position
    
    in an Unrealized Loss Position
    
    Gross
    
    TotalUnrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    EstimatedLoss
    
    of
    
    Fair
    
    Loss
    
    of
    
    Fair
    
    Loss
    
    FairAmount
    
    Securities
    
    Value
    
    Amount
    
    Securities
    
    Value
    
    Amount
    
    ValueInvestment securities:Mutual funds
    
    $
    (65
    )
    
    
    1
    
    
    $
    643
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (65
    )
    
    $
    643Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (782
    )
    
    
    38
    
    
    $
    94,959
    
    
    
    (782
    )
    
    
    94,959Federal National Mortgage Association
    
    
    (192
    )
    
    
    8
    
    
    
    12,537
    
    
    
    (506
    )
    
    
    40
    
    
    
    96,429
    
    
    
    (698
    )
    
    
    108,966Government National Mortgage Association
    
    
    (4
    )
    
    
    1
    
    
    
    218
    
    
    
    (236
    )
    
    
    6
    
    
    
    14,825
    
    
    
    (240
    )
    
    
    15,043Private label CMOs
    
    
    (6,078
    )
    
    
    11
    
    
    
    56,594
    
    
    
    (23,069
    )
    
    
    18
    
    
    
    71,963
    
    
    
    (29,147
    )
    
    
    128,557Total mortgage-related securities
    
    
    (6,274
    )
    
    
    20
    
    
    
    69,349
    
    
    
    (24,593
    )
    
    
    102
    
    
    
    278,176
    
    
    
    (30,867
    )
    
    
    347,525Total
    
    $
    (6,339
    )
    
    
    21
    
    
    $
    69,992
    
    
    $
    (24,593
    )
    
    
    102
    
    
    $
    278,176
    
    
    $
    (30,932
    )
    
    $
    348,168
  77




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale (continued)
      Amortized
    
    FairCost
    
    ValueDue in one year or less
    
    
    
    
    
    
    Due after one year through five years
    
    $
    342,350
    
    
    $
    341,447Due after five years through ten years
    
    
    99,706
    
    
    
    99,429Due after ten years
    
    
    151,969
    
    
    
    150,916Mutual funds
    
    
    21,545
    
    
    
    22,312Mortgage-related securities
    
    
    867,331
    
    
    
    866,848Total securities available for sale
    
    $
    1,482,901
    
    
    $
    1,480,952
 78




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 2. Securities Available-for-Sale (continued)
  2009
    
    2008
    
    2007Change in unrealized holding gain (loss):Unrealized net gains (losses)
    
    $
    17,749
    
    
    $
    (8,897
    )
    
    $
    13,908Related tax expense (benefit)
    
    
    6,137
    
    
    
    (2,962
    )
    
    
    5,199Change in other comprehensive income
    
    $
    11,612
    
    
    $
    (5,935
    )
    
    $
    8,709
  3. Loans Receivable
  December 312009
    
    2008Permanent mortgage loans:One- to four-family
    
    $
    656,018
    
    
    $
    881,288Multi-family
    
    
    190,377
    
    
    
    190,497Commercial real estate
    
    
    285,764
    
    
    
    275,802Total permanent mortgages
    
    
    1,132,159
    
    
    
    1,347,587Construction and development loans:One- to four-family
    
    
    11,441
    
    
    
    17,349Multi-family
    
    
    52,323
    
    
    
    71,208Commercial real estate
    
    
    32,109
    
    
    
    70,612Total construction and development
    
    
    95,873
    
    
    
    159,169Total mortgage loans
    
    
    1,228,032
    
    
    
    1,506,756Consumer loans:Fixed term home equity
    
    
    124,519
    
    
    
    173,104Home equity lines of credit
    
    
    88,796
    
    
    
    86,962Student
    
    
    19,793
    
    
    
    21,469Home improvement
    
    
    28,441
    
    
    
    36,023Automobile
    
    
    4,077
    
    
    
    11,775Other
    
    
    9,871
    
    
    
    8,740Total consumer loans
    
    
    275,497
    
    
    
    338,073Commercial business loans
    
    
    52,167
    
    
    
    49,623Gross loans receivable
    
    
    1,555,696
    
    
    
    1,894,452Undisbursed loan proceeds
    
    
    (32,690
    )
    
    
    (54,187
    )Allowance for loan losses
    
    
    (17,028
    )
    
    
    (12,208
    )Deferred fees and costs, net
    
    
    78
    
    
    
    996Total loans receivable, net
    
    $
    1,506,056
    
    
    $
    1,829,053
  79




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
   Year Ended December 312009
    
    2008
    
    2007Balance at beginning of period
    
    $
    12,208
    
    
    $
    11,774
    
    
    $
    12,574Provision for (recovery of) loan losses
    
    
    12,413
    
    
    
    1,447
    
    
    
    (272
    )Charge-offs:Mortgage loans
    
    
    (5,829
    )
    
    
    (613
    )
    
    
    (178
    )Consumer loans
    
    
    (526
    )
    
    
    (411
    )
    
    
    (412
    )Commercial business loans
    
    
    (1,291
    )
    
    
    (34
    )
    
    
    (33
    )Total charge-offs
    
    
    (7,646
    )
    
    
    (1,058
    )
    
    
    (623
    )Recoveries:Mortgage loans
    
    
    20
    
    
    
    
    
    
    
    Consumer loans
    
    
    33
    
    
    
    45
    
    
    
    95Total recoveries
    
    
    53
    
    
    
    45
    
    
    
    95Net charge-offs
    
    
    (7,593
    )
    
    
    (1,013
    )
    
    
    (528
    )Balance at end of period
    
    $
    17,028
    
    
    $
    12,208
    
    
    $
    11,774
   December 312009
    
    2008Impaired loans for which an allowance has been provided
    
    $
    16,299
    
    
    $
    16,535Impaired loans for which no allowance has been provided
    
    
    26,285
    
    
    
    16,554Total loans determined to be impaired
    
    $
    42,584
    
    
    $
    33,089Allowance for loan losses related to impaired loans
    
    $
    6,033
    
    
    $
    3,351
 Year Ended December 312009
    
    2008
    
    2007Average recorded investment in impaired loans
    
    $
    40,172
    
    
    $
    21,396
    
    
    $
    19,746Cash basis interest income recognized from impaired loans
    
    $
    196
    
    
    $
    117
    
    
    $
    853
 4. Goodwill, Other Intangible Assets, and Mortgage Servicing Rights
   80




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 4. Goodwill, Other Intangible Assets, and Mortgage Servicing Rights (continued)
  2009
    
    2008
    
    2007Mortgage servicing rights at beginning of year
    
    $
    4,525
    
    
    $
    4,708
    
    
    $
    4,653Additions
    
    
    5,684
    
    
    
    1,404
    
    
    
    1,246Amortization
    
    
    (3,023
    )
    
    
    (1,587
    )
    
    
    (1,191
    )Mortgage servicing rights at end of year
    
    
    7,186
    
    
    
    4,525
    
    
    
    4,708Valuation allowance
    
    
    (287
    )
    
    
    (822
    )
    
    
    Mortgage servicing rights at end of year
    
    $
    6,899
    
    
    $
    3,703
    
    
    $
    4,708
  MortgageServicing
    
    Deposit BaseRights
    
    Intangibles
    
    TotalTwelve months ended December 31, 2009
    
    $
    3,023
    
    
    $
    405
    
    
    $
    3,428Estimate for year ending December 31:2010
    
    $
    1,268
    
    
    $
    405
    
    
    $
    1,6732011
    
    
    1,154
    
    
    
    405
    
    
    
    1,5592012
    
    
    1,006
    
    
    
    199
    
    
    
    1,2052013
    
    
    912
    
    
    
    140
    
    
    
    1,0522014
    
    
    838
    
    
    
    140
    
    
    
    978Thereafter
    
    
    1,721
    
    
    
    116
    
    
    
    1,837Total
    
    $
    6,899
    
    
    $
    1,405
    
    
    $
    8,304
  81




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 5. Other Assets
  December 312009
    
    2008Accrued interest:Mortgage-related securities
    
    $
    4,651
    
    
    $
    6,669Investment securities
    
    
    1,875
    
    
    
    1,734Loans receivable
    
    
    6,795
    
    
    
    8,130Total accrued interest
    
    
    13,321
    
    
    
    16,533Bank owned life insurance
    
    
    53,295
    
    
    
    51,261Premises and equipment, net
    
    
    51,715
    
    
    
    52,209Federal Home Loan Bank stock, at cost
    
    
    46,092
    
    
    
    46,092Foreclosed properties and repossessed assets
    
    
    17,689
    
    
    
    4,768Prepaid FDIC insurance premiums
    
    
    12,521
    
    
    
    Other assets
    
    
    28,357
    
    
    
    29,763Total other assets
    
    $
    222,990
    
    
    $
    200,626
  December 312009
    
    2008Land and land improvements
    
    $
    17,523
    
    
    $
    17,300Office buildings
    
    
    51,376
    
    
    
    50,177Furniture and equipment
    
    
    18,448
    
    
    
    18,701Leasehold improvements
    
    
    1,189
    
    
    
    1,298Total cost
    
    
    88,536
    
    
    
    87,476Less accumulated depreciation and amortization
    
    
    36,821
    
    
    
    35,267Total premises and equipment, net
    
    $
    51,715
    
    
    $
    52,209
   Amount2010
    
    $
    9742011
    
    
    7702012
    
    
    6742013
    
    
    6242014
    
    
    588Thereafter
    
    
    2,898Total
    
    $
    6,528
  82




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 6. Deposits Liabilities
  December 312009
    
    2008Checking accounts:Non-interest-bearing
    
    $
    94,619
    
    
    $
    89,106Interest-bearing
    
    
    211,448
    
    
    
    180,269Total checking accounts
    
    
    306,067
    
    
    
    269,375Money market accounts
    
    
    345,144
    
    
    
    340,631Regular savings accounts
    
    
    196,983
    
    
    
    185,003Certificate of deposits:Due within one year
    
    
    992,752
    
    
    
    958,863After one but within two years
    
    
    145,385
    
    
    
    243,104After two but within three years
    
    
    23,370
    
    
    
    25,746After three but within four years
    
    
    98,274
    
    
    
    13,723After four but within five years
    
    
    29,533
    
    
    
    91,832After five years
    
    
    
    
    
    
    Total certificates of deposit
    
    
    1,289,314
    
    
    
    1,333,268Total deposit liabilities
    
    $
    2,137,508
    
    
    $
    2,128,277
   Year Ended December 312009
    
    2008
    
    2007Interest-bearing checking accounts
    
    $
    121
    
    
    $
    376
    
    
    $
    351Money market accounts
    
    
    2,795
    
    
    
    8,245
    
    
    
    8,500Regular savings accounts
    
    
    181
    
    
    
    609
    
    
    
    924Certificate of deposits
    
    
    41,471
    
    
    
    55,459
    
    
    
    66,236Total interest expense on deposit liabilities
    
    $
    44,568
    
    
    $
    64,689
    
    
    $
    76,011
 7. Borrowings
  December 31, 2009
    
    
    December 31, 2008Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateFederal Home Loan
Bank advances
maturing in:2012
    
    $
    100,000
    
    
    
    4.52
    %
    
    $
    100,000
    
    
    
    4.52
    %2013
    
    
    264
    
    
    
    4.17
    
    
    
    278
    
    
    
    4.17Thereafter
    
    
    806,715
    
    
    
    4.23
    
    
    
    807,693
    
    
    
    4.23Total borrowings
    
    $
    906,979
    
    
    
    4.26
    %
    
    $
    907,971
    
    
    
    4.26
    %
  83




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 7. Borrowings (continued)
   8. Shareholders Equity
   84




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 8. Shareholders Equity (continued)
  To Be Well CapitalizedUnder PromptFor Capital
    
    Corrective ActionActual
    
    Adequacy Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2009:Total capital
(to risk-weighted assets)
    
    $
    348,741
    
    
    
    20.86
    %
    
    $
    133,772
    
    
    
    8.00
    %
    
    $
    167,215
    
    
    
    10.00
    %Tier 1 capital
(to risk-weighted assets)
    
    
    339,847
    
    
    
    20.32
    
    
    
    66,886
    
    
    
    4.00
    
    
    
    100,329
    
    
    
    6.00Tier 1 capital
(to adjusted total assets)
    
    
    339,847
    
    
    
    9.84
    
    
    
    138,158
    
    
    
    4.00
    
    
    
    172,697
    
    
    
    5.00As of December 31, 2008:Total capital
(to risk-weighted assets)
    
    $
    349,928
    
    
    
    20.61
    %
    
    $
    135,856
    
    
    
    8.00
    %
    
    $
    169,820
    
    
    
    10.00
    %Tier 1 capital
(to risk-weighted assets)
    
    
    337,720
    
    
    
    19.89
    
    
    
    67,928
    
    
    
    4.00
    
    
    
    101,892
    
    
    
    6.00Tier 1 capital
(to adjusted total assets)
    
    
    337,720
    
    
    
    9.79
    
    
    
    138,028
    
    
    
    4.00
    
    
    
    172,536
    
    
    
    5.00
  December 31, 2009Risk-
    
    Tier IBased
    
    (Core)Capital
    
    CapitalStockholders equity according to the Banks records
    
    $
    394,594
    
    
    $
    394,594Net unrealized loss on securities available for sale, net of taxes
    
    
    1,167
    
    
    
    1,167Additional minimum pension asset, net of taxes
    
    
    1,239
    
    
    
    1,239Goodwill and intangibles
    
    
    (53,410
    )
    
    
    (53,410
    )Investment in non-includable subsidiaries
    
    
    (3,743
    )
    
    
    (3,743
    )Allowance for loan losses
    
    
    8,894
    
    
    
    Regulatory capital
    
    $
    348,741
    
    
    $
    339,847
  December 312009
    
    2008Net unrealized loss on securities available-for-sale
    
    $
    (1,167
    )
    
    $
    (12,779
    )Additional minimum pension asset
    
    
    (1,239
    )
    
    
    (3,625
    )Accumulated other comprehensive income (loss)
    
    $
    (2,406
    )
    
    $
    (16,404
    )
 85




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 9. Earnings Per Share
  Year Ended December 312009
    
    2008
    
    2007Basic earnings per share:Net income
    
    $
    13,725
    
    
    $
    17,156
    
    
    $
    17,103Weighted average shares outstanding
    
    
    46,177,189
    
    
    
    47,212,574
    
    
    
    53,593,140Allocated ESOP shares during the period
    
    
    327,251
    
    
    
    327,250
    
    
    
    327,251Vested MRP shares during the period
    
    
    61,455
    
    
    
    186,636
    
    
    
    189,252Basic shares outstanding
    
    
    46,565,895
    
    
    
    47,726,460
    
    
    
    54,109,643Basic earnings per share
    
    $
    0.29
    
    
    $
    0.36
    
    
    $
    0.32Diluted earnings per share:Net income
    
    $
    13,725
    
    
    $
    17,156
    
    
    $
    17,103Weighted average shares outstanding used
in basic earnings per share
    
    
    46,565,895
    
    
    
    47,726,460
    
    
    
    54,109,643Net dilutive effect of:Stock option shares
    
    
    612,584
    
    
    
    898,416
    
    
    
    1,267,200Non-vested MRP shares
    
    
    
    
    
    
    4,363
    
    
    
    20,947Diluted shares outstanding
    
    
    47,178,479
    
    
    
    48,629,239
    
    
    
    55,397,790Diluted earnings per share
    
    $
    0.29
    
    
    $
    0.35
    
    
    $
    0.31
  10. Employee Benefit Plans
    86




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
   Qualified
    
    SupplementalPension Plan
    
    Pension Plan2009
    
    2008
    
    2009
    
    2008Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    30,389
    
    
    $
    26,863
    
    
    $
    7,233
    
    
    $
    6,880Service cost
    
    
    1,765
    
    
    
    2,033
    
    
    
    197
    
    
    
    215Interest cost
    
    
    1,821
    
    
    
    1,934
    
    
    
    430
    
    
    
    491Actuarial loss (gain)
    
    
    1,801
    
    
    
    329
    
    
    
    (115
    )
    
    
    (6
    )Benefits paid
    
    
    (744
    )
    
    
    (770
    )
    
    
    (297
    )
    
    
    (347
    )Benefit obligation at end of year
    
    $
    35,032
    
    
    $
    30,389
    
    
    $
    7,448
    
    
    $
    7,233Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    24,943
    
    
    $
    28,237
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    6,435
    
    
    
    (4,146
    )
    
    
    
    
    
    
    Employer contributions
    
    
    5,000
    
    
    
    1,622
    
    
    $
    297
    
    
    $
    347Benefits paid
    
    
    (744
    )
    
    
    (770
    )
    
    
    (297
    )
    
    
    (347
    )Fair value of plan assets at end of year
    
    
    35,634
    
    
    
    24,943
    
    
    
    
    
    
    
    Funded status at the end of the year
    
    $
    602
    
    
    $
    (5,446
    )
    
    $
    (7,448
    )
    
    $
    (7,233
    )
     2009
    
    2008Discount rate
    
    
    5.84
    %
    
    
    6.07
    %Rate of increase in compensation levels
    
    
    3.50
    %
    
    
    3.50
    %Expected long-term rate of return on plan assets (qualified plan)
    
    
    6.50
    %
    
    
    7.00
    %
 87




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  2009
    
    2008
    
    2007Discount rate
    
    
    6.07
    %
    
    
    6.25
    %
    
    
    6.00
    %Rate of increase in compensation levels
    
    
    3.50
    %
    
    
    3.50
    %
    
    
    3.50
    %Expected long-term rate of return on plan assets (qualified plan)
    
    
    7.00
    %
    
    
    7.00
    %
    
    
    7.00
    %
   2009
    
    2008
    
    2007Qualified pension plan:Service cost
    
    $
    1,764
    
    
    $
    1,743
    
    
    $
    1,789Interest cost
    
    
    1,821
    
    
    
    1,657
    
    
    
    1,471Expected return on plan assets
    
    
    (1,719
    )
    
    
    (1,953
    )
    
    
    (1,796
    )Amortization of unrecognized prior service cost
    
    
    
    
    
    
    23
    
    
    
    30Amortization of net loss
    
    
    558
    
    
    
    
    
    
    
    Net periodic cost
    
    $
    2,424
    
    
    $
    1,470
    
    
    $
    1,494Supplemental pension plan:Service cost
    
    $
    196
    
    
    $
    184
    
    
    $
    173Interest cost
    
    
    430
    
    
    
    421
    
    
    
    393Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    55Net periodic cost
    
    $
    626
    
    
    $
    605
    
    
    $
    621
  Qualified
    
    SupplementalPlan
    
    Plan
    
    Total2009
    
    $
    1,060
    
    
    $
    297
    
    
    $
    1,3572011
    
    
    1,296
    
    
    
    760
    
    
    
    2,0562012
    
    
    1,524
    
    
    
    760
    
    
    
    2,2842012
    
    
    1,864
    
    
    
    760
    
    
    
    2,6242014
    
    
    2,095
    
    
    
    760
    
    
    
    2,8552015 - 2019
    
    
    13,992
    
    
    
    2,411
    
    
    
    16,403Total
    
    $
    21,831
    
    
    $
    5,748
    
    
    $
    27,579
 88




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  Fair Value HierarchyAmount
    
    Level 1
    
    Level 2
    
    Level 3Asset category:Money market fund
    
    $
    232
    
    
    
    
    
    
    $
    232
    
    
    
    Equity security
    
    
    1,090
    
    
    $
    1,090
    
    
    
    
    
    
    
    Immediate participation guarantee contract
    
    
    34,312
    
    
    
    
    
    
    
    
    
    
    $
    34,312Total
    
    $
    35,634
    
    
    $
    1,090
    
    
    $
    232
    
    
    $
    34,312
    AmountFair value at December 31, 2008
    
    $
    23,739Actual return on plan assets
    
    
    6,317Employer contribution
    
    
    5,000Benefits paid
    
    
    (744
    )Fair value at December 31, 2009
    
    $
    34,312
  89




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 11. Stock-Based Benefit Plans
      2009
    
    2008
    
    2007Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedStock
    
    Average
    
    Stock
    
    Average
    
    Stock
    
    AverageOptions
    
    Exercise
    
    Options
    
    Exercise
    
    Options
    
    ExerciseOutstanding at beginning of year
    
    
    3,445,967
    
    
    $
    7.8763
    
    
    
    4,090,628
    
    
    $
    7.3650
    
    
    
    4,525,238
    
    
    $
    7.0730Granted
    
    
    
    
    
    
    
    
    
    
    82,000
    
    
    
    11.6870
    
    
    
    
    
    
    
    Exercised
    
    
    (246,769
    )
    
    
    3.2056
    
    
    
    (667,461
    )
    
    
    4.9956
    
    
    
    (402,610
    )
    
    
    3.7620Forfeited
    
    
    (69,800
    )
    
    
    10.6707
    
    
    
    (59,200
    )
    
    
    10.6730
    
    
    
    (32,000
    )
    
    
    10.6730Outstanding at end of year
    
    
    3,129,398
    
    
    $
    8.1823
    
    
    
    3,445,967
    
    
    $
    7.8763
    
    
    
    4,090,628
    
    
    $
    7.3250
  Remaining
    
    Non-Vested Options
    
    Vested OptionsContractual
    
    Stock
    
    
    Intrinsic
    
    
    Stock
    
    
    IntrinsicLife
    
    Options
    
    
    Value
    
    
    Options
    
    
    ValueExercise price:$3.2056
    
    1.3 years
    
    
    
    
    
    
    
    
    
    
    1,065,398
    
    
    $
    3,968$10.6730
    
    4.3 years
    
    
    
    
    
    
    
    
    
    
    1,932,000
    
    
    
    $12.2340
    
    6.5 years
    
    
    20,000
    
    
    
    
    
    
    
    30,000
    
    
    
    $11.1600
    
    8.3 years
    
    
    25,600
    
    
    
    
    
    
    
    6,400
    
    
    
    $12.0250
    
    8.6 years
    
    
    40,000
    
    
    
    
    
    
    
    10,000
    
    
    
    Total
    
    
    
    
    85,600
    
    
    
    
    
    
    
    3,043,798
    
    
    $
    3,968Weighted average remaining contractual life
    
    8.0 years
    
    
    
    
    
    

    3.3 yearsWeighted average exercise price
    
    
    
    $
    11.8151
    
    
    
    
    
    
    $
    8.0801
 90




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 11. Stock-Based Benefit Plans (continued)
     2009
    
    2008
    
    2007Shares allocated to participants in fiscal year
    
    
    327,251
    
    
    
    327,250
    
    
    
    327,251Unallocated and unearned shares
    
    
    126,175
    
    
    
    453,426
    
    
    
    780,677Fair value of unearned ESOP shares
    
    $
    874
    
    
    $
    5,233
    
    
    $
    8,252
  12. Income Taxes
  91




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 12. Income Taxes (continued)
  Year Ended December 312009
    
    2008
    
    2007Current income tax expense:Federal
    
    $
    7,193
    
    
    $
    15,281
    
    
    $
    9,566State
    
    
    88
    
    
    
    83
    
    
    
    121Current income tax expense
    
    
    7,281
    
    
    
    15,364
    
    
    
    9,687Deferred income tax expense (benefit):Federal
    
    
    210
    
    
    
    (6,267
    )
    
    
    (788
    )State
    
    
    (2,073
    )
    
    
    (3
    )
    
    
    (7
    )Deferred income tax expense
    
    
    (1,863
    )
    
    
    (6,270
    )
    
    
    (795
    )Income tax expense
    
    $
    5,418
    
    
    $
    9,094
    
    
    $
    8,892
  Year Ended December 312009
    
    2008
    
    2007Income before provision for income taxes
    
    $
    19,143
    
    
    $
    26,249
    
    
    $
    26,387Tax expense at federal statutory rate
    
    $
    6,700
    
    
    $
    9,188
    
    
    $
    9,235Increase (decrease) in taxes resulting from:State income taxes, net of federal tax benefit
    
    
    510
    
    
    
    52
    
    
    
    74Bank owned life insurance
    
    
    (751
    )
    
    
    (873
    )
    
    
    (887
    )Executive compensation in excess of Section 162(m) limit
    
    
    141
    
    
    
    143
    
    
    
    117Reversal of valuation allowance, net of federal benefit
    
    
    (1,800
    )
    
    
    
    
    
    
    Tax return and other reserve adjustments
    
    
    230
    
    
    
    492
    
    
    
    464Other
    
    
    388
    
    
    
    92
    
    
    
    (111
    )Income tax expense
    
    $
    5,418
    
    
    $
    9,094
    
    
    $
    8,892
 92




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 12. Income Taxes (continued)
  December 312009
    
    2008Deferred tax assets:State net operating losses
    
    $
    778
    
    
    $
    1,424Loan loss reserves
    
    
    6,834
    
    
    
    4,887Pension
    
    
    5,644
    
    
    
    5,196Deferred compensation
    
    
    1,553
    
    
    
    1,637Restricted stock amortization
    
    
    312
    
    
    
    741Unrealized loss on investment securities
    
    
    782
    
    
    
    6,919Other-than-temporary impairment of investment securities
    
    
    3,599
    
    
    
    3,279Other
    
    
    388
    
    
    
    839Total deferred tax assets
    
    
    19,890
    
    
    
    24,922Valuation allowance
    
    
    (135
    )
    
    
    (2,021
    )Total deferred tax assets, net of valuation allowance
    
    
    19,755
    
    
    
    22,901Deferred tax liabilities:Property and equipment depreciation
    
    
    1,001
    
    
    
    854FHLB stock dividends
    
    
    5,130
    
    
    
    5,130Deferred loan fees
    
    
    260
    
    
    
    258Purchase accounting adjustments
    
    
    3,656
    
    
    
    3,895Mortgage servicing rights
    
    
    2,769
    
    
    
    1,816Other
    
    
    347
    
    
    
    82Total deferred tax liabilities
    
    
    13,163
    
    
    
    12,035Net deferred tax asset
    
    $
    6,592
    
    
    $
    10,866
   93




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 13. Financial Instruments with Off-Balance-Sheet Risk
    December 312009
    
    2008Unused consumer lines of credit
    
    $
    150,424
    
    
    $
    153,568Unused commercial lines of credit
    
    
    18,904
    
    
    
    21,760Commitments to extend credit:Fixed rate
    
    
    35,769
    
    
    
    22,690Adjustable rate
    
    
    2,185
    
    
    
    20,585Undisbursed commercial loans
    
    
    524
    
    
    
    994Standby letters of credit
    
    
    111
    
    
    
    60
   94




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 13. Financial Instruments with Off-Balance-Sheet Risk (continued)
  December 31, 2009
    
    
    December 31, 2008Notional
    
    
    Fair
    
    
    Notional
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueInterest rate lock commitments
    
    $
    15,433
    
    
    $
    (69
    )
    
    $
    74,298
    
    
    $
    1,025Forward commitments
    
    
    27,668
    
    
    
    375
    
    
    
    69,587
    
    
    
    (628
    )Net unrealized gain (loss)
    
    
    
    
    
    $
    (306
    )
    
    
    
    
    
    $
    397
  14. Fair Value of Financial Instruments
     Cash and Cash Equivalents
 Securities Available-for-Sale
 Loans Held-for-Sale
 Loans Receivable
 95




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
 Mortgage Servicing Rights
 Federal Home Loan Bank Stock
 Accrued Interest Receivable and Payable
 Deposit Liabilities and Advance Payments by Borrowers for Taxes and Insurance
 Borrowings
  December 31, 2009
    
    December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairValue
    
    Value
    
    Value
    
    ValueCash and cash equivalents
    
    $
    227,658
    
    
    $
    227,658
    
    
    $
    112,893
    
    
    $
    112,893Securities available-for-sale
    
    
    1,480,952
    
    
    
    1,480,952
    
    
    
    1,270,005
    
    
    
    1,270,005Loans held-for-sale
    
    
    13,534
    
    
    
    13,534
    
    
    
    19,030
    
    
    
    19,455Loans receivable, net
    
    
    1,506,056
    
    
    
    1,483,981
    
    
    
    1,829,053
    
    
    
    1,781,536Mortgage servicing rights
    
    
    6,899
    
    
    
    7,720
    
    
    
    3,703
    
    
    
    4,696Federal Home Loan Bank stock
    
    
    46,092
    
    
    
    46,092
    
    
    
    46,092
    
    
    
    46,092Accrued interest receivable
    
    
    13,321
    
    
    
    13,321
    
    
    
    16,532
    
    
    
    16,532Deposit liabilities
    
    
    2,137,508
    
    
    
    2,061,164
    
    
    
    2,130,348
    
    
    
    2,123,284Borrowings
    
    
    906,979
    
    
    
    994,300
    
    
    
    907,971
    
    
    
    1,060,896Advance payments by borrowers
    
    
    2,508
    
    
    
    2,508
    
    
    
    1,929
    
    
    
    1,929Accrued interest payable
    
    
    4,228
    
    
    
    4,228
    
    
    
    3,312
    
    
    
    3,312
   96




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
   December 31, 2009Level 1
    
    Level 2
    
    Level 3
    
    TotalLoans held-for-sale
    
    
    
    
    
    $
    13,534
    
    
    
    
    
    
    $
    13,534Securities available-for-sale:Investment securities
    
    $
    22,312
    
    
    
    591,792
    
    
    
    
    
    
    
    614,104Mortgage-related securities
    
    
    
    
    
    
    866,848
    
    
    
    
    
    
    
    866,848Total
    
    $
    22,312
    
    
    $
    1,472,174
    
    
    
    
    
    
    $
    1,494,486
 December 31, 2008Level 1
    
    Level 2
    
    Level 3
    
    TotalSecurities available-for-sale:Investment securities
    
    $
    39,603
    
    
    $
    379,535
    
    
    
    
    
    
    $
    419,138Mortgage-related securities
    
    
    
    
    
    
    850,867
    
    
    
    
    
    
    
    850,867Total
    
    $
    39,603
    
    
    $
    1,230,402
    
    
    
    
    
    
    $
    1,270,005
   97




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
  15. Condensed Parent Company Only Financial Statements
 STATEMENT OF FINANCIAL CONDITION
 December 312009
    
    2008AssetsCash and cash equivalents
    
    $
    8,787
    
    
    $
    17,235Investment in subsidiary
    
    
    391,670
    
    
    
    378,963Receivable from ESOP
    
    
    347
    
    
    
    1,247Other assets
    
    
    1,744
    
    
    
    2,166Total assets
    
    $
    402,548
    
    
    $
    399,611Liabilities and shareholders equityOther liabilities
    
    $
    71
    
    
    
    Shareholders equity:Common stock$0.01 par value:Authorized200,000,000 shares in 2009 and 2008
Issued78,783,849 shares in 2009 and 2008
Outstanding46,165,635 in 2009 and 47,686,759 shares in 2008
    
    
    788
    
    
    $
    788Additional paid-in capital
    
    
    499,376
    
    
    
    498,501Retained earnings
    
    
    272,518
    
    
    
    273,826Unearned ESOP shares
    
    
    (347
    )
    
    
    (1,247
    )Accumulated other comprehensive income
    
    
    (2,406
    )
    
    
    (16,404
    )Treasury stock32,618,214 shares in 2009 and 31,097,090 shares in 2008
    
    
    (367,452
    )
    
    
    (355,853
    )Total shareholders equity
    
    
    402,477
    
    
    
    399,611Total liabilities and shareholders equity
    
    $
    402,548
    
    
    $
    399,611
 98




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##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2009
 (Dollars in Thousands, Except Per Share Amounts)
 15. Condensed Parent Company Only Financial Statements (continued)
 STATEMENT OF INCOME
 Year ended December 312009
    
    2008
    
    2007Total income
    
    $
    207
    
    
    $
    354
    
    
    $
    1,627Total expenses
    
    
    1,077
    
    
    
    1,460
    
    
    
    1,430Income (loss) before income taxes
    
    
    (870
    )
    
    
    (1,106
    )
    
    
    197Income tax expense (benefit)
    
    
    (338
    )
    
    
    (387
    )
    
    
    67Income (loss) before equity in earnings of subsidiary
    
    
    (532
    )
    
    
    (719
    )
    
    
    130Equity in earnings of subsidiary
    
    
    14,257
    
    
    
    17,875
    
    
    
    16,973Net income
    
    $
    13,725
    
    
    $
    17,156
    
    
    $
    17,103
 STATEMENT OF CASH FLOWS
 Year ended December 312009
    
    2008
    
    2007Operating activities:Net income
    
    $
    13,725
    
    
    $
    17,156
    
    
    $
    17,103Adjustment to reconcile net income to net cash provided by
operating activities:Equity in earnings of Bank subsidiary
    
    
    (14,257
    )
    
    
    (17,875
    )
    
    
    (16,973
    )Stock-based compensation
    
    
    253
    
    
    
    248
    
    
    
    546Change in other operating activities and liabilities
    
    
    493
    
    
    
    (2,076
    )
    
    
    1,582Net cash provided (used) by operating activities
    
    
    214
    
    
    
    (2,547
    )
    
    
    2,258Investing activities:Dividends from Bank subsidiary
    
    
    19,700
    
    
    
    26,400
    
    
    
    100,200Other investing activities
    
    
    (664
    )
    
    
    (547
    )
    
    
    33Net cash provided by investing activities
    
    
    19,036
    
    
    
    25,853
    
    
    
    100,233Financing activities:Cash dividends
    
    
    (15,033
    )
    
    
    (16,442
    )
    
    
    (17,227
    )Purchase of treasury stock
    
    
    (14,397
    )
    
    
    (29,927
    )
    
    
    (120,687
    )Proceeds from exercise of stock options
    
    
    556
    
    
    
    3,313
    
    
    
    1,396Excess tax benefit from exercise of stock options
    
    
    276
    
    
    
    379
    
    
    
    433Cash received for MRP grants from Bank subsidiary
    
    
    
    
    
    
    9,997
    
    
    
    Payments received on ESOP
    
    
    900
    
    
    
    900
    
    
    
    900Net cash used in financing activities
    
    
    (27,698
    )
    
    
    (31,780
    )
    
    
    (135,185
    )Decrease in cash and cash equivalents
    
    
    (8,448
    )
    
    
    (8,474
    )
    
    
    (32,694
    )Cash and cash equivalents at beginning of year
    
    
    17,235
    
    
    
    25,709
    
    
    
    58,403Cash and cash equivalents at end of year
    
    $
    8,787
    
    
    $
    17,235
    
    
    $
    25,709
 99




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Change in Internal Control Over Financial Reporting
  Managements Report on Internal Control Over Financial Reporting
    100




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##### Table of Contents



101




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##### Table of Contents



Item 9B. Other Information
  102




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##### Table of Contents



Part III
 
 Item 10. Directors, Executive Officers, and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
   Number of securitiesremaining availableNumber of securities
    
    
    
    
    
    for future issuance underto be issued upon
    
    Weighted-average
    
    equity compensationexercise of
    
    exercise price of
    
    plans (excludingoutstanding options,
    
    outstanding options,
    
    securities reflectedPlan category
    
    warrants and rights (1)
    
    warrants and rights
    
    in 1st column) (2)Equity compensation plans
approved by security holders
    
    
    3,129,398
    
    
    $
    8.1823
    
    
    
    2,247,083Equity compensation plans
not
approved by security
holders
    
    None
    
    None
    
    None
 
 (1)
    
    Represents options granted under the 2001 Plan or 2004 Plan, which plans were approved by
Company shareholders in 2001 and 2004, respectively.(2)
    
    Represents options and restricted stock which may be granted under the 2004 Plan. No further
awards may be made under the 2001 Plan. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  103




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##### Table of Contents



Part IV
 
 Item 15. Exhibits, Financial Statement Schedules
    
    
    Reports of Deloitte & Touche LLP and Ernst & Young LLP, Independent Registered Public
Accounting Firms, on consolidated financial statements.
    
    Consolidated Statements of Financial ConditionAs of December 31, 2009 and 2008.
    
    Consolidated Statements of IncomeYears Ended December 31, 2009, 2008, and 2007.
    
    Consolidated Statements of EquityYears Ended December 31, 2009, 2008, and 2007.
    
    Consolidated Statements of Cash FlowsYears Ended December 31, 2009, 2008, and 2007.
    
    Notes to Consolidated Financial Statements.
   104




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##### Table of Contents



SIGNATURES
  March 5, 2010
    BANK MUTUAL CORPORATIONBy:
    /s/ Michael T. Crowley, Jr.Michael T. Crowley, Jr.Chairman, President and Chief Executive Officer 
 POWER OF ATTORNEY
  
  Signature and Title
 /s/ Michael T. Crowley, Jr.
    
    
    
    /s/ Mark C. HerrMichael T. Crowley, Jr., Chairman, President,
    
    
    
    Mark C. Herr, DirectorChief Executive Officer and Director(Principal Executive Officer)/s/ Michael W. Dosland
    
    
    
    /s/ Thomas J. Lopina, Sr.Michael
W. Dosland, Senior
Vice President and
    
    
    
    Thomas J. Lopina, Sr., DirectorChief Financial Officer
(Principal Financial Officer)/s/ Richard L. Schroeder
    
    
    
    /s/ William J. MielkeRichard L. Schroeder, Vice President and
    
    
    
    William J. Mielke, DirectorController (Principal Accounting Officer)/s/ David C. Boerke
    
    
    
    /s/ Robert B. OlsonDavid C. Boerke, Director
    
    
    
    Robert B. Olson, Director/s/ Richard A. Brown
    
    
    
    /s/ Jelmer G. SwobodaRichard A. Brown, Director
    
    
    
    Jelmer G. Swoboda, Director/s/ Thomas H. Buestrin

Thomas H. Buestrin, Director
 
 *
    
    Each of the above signatures is affixed as of March 5, 2010. 105




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##### Table of Contents



BANK MUTUAL CORPORATION
(Bank Mutual Corporation or the Company) **
Commission File No. 000-32107
 EXHIBIT INDEX
TO
2009 REPORT ON FORM 10-K
  Incorporated Herein by
    
    FiledExhibit
    
    Description
    
    Reference To
    
    Herewith3(i)
    
    Restated Articles of Incorporation, as
last amended May 29, 2003, of Bank
Mutual Corporation (the Articles)
    
    Exhibit 3(i) to the
Companys Registration
Statement on Form S-1,
Registration No.
333-1056853(ii)
    
    Bylaws, as last amended May 7, 2007, of
Bank Mutual Corporation
    
    Exhibit 3.1 to the
Companys Report on Form
8-K dated May 7, 20074.1
    
    The Articles
    
    Exhibit 3(i) above10.1*
    
    Bank Mutual Corporation Savings
Restoration Plan and Bank Mutual
Corporation ESOP Restoration Plan
    
    Exhibit 10.1(b) to the
Companys Annual Report on
Form 10-K for the year
ended December 31, 2003
(2003 10-K)10.2*
    
    Bank Mutual Corporation Outside
Directors Retirement Plan +
    
    
    
    X10.3*
    
    Mutual Savings Bank Executive Excess
Benefit Plan ***
    
    Exhibit 10.3 to Bank
Mutual Corporations
Registration Statement on
Form S-1, Registration No.
333-39362 (2000 S-1)10.4*
    
    Agreement regarding deferred
compensation dated May 16, 1988 between
Mutual Savings Bank and Michael T.
Crowley, Sr.
    
    Exhibit 10.4 to 2000 S-110.5(a)*
    
    Employment Agreement between Mutual
Savings Bank and Michael T. Crowley Jr.
dated December 21, 1993 (continuing , as
amended, through 2012)
    
    Exhibit 10.5(a) to 2000 S-110.5(b)*
    
    Amendment thereto dated February 17, 1998
    
    Exhibit 10.5(b) to 2000 S-110.6(a)*
    
    Form of Employment Agreements of Mr.
Maurer [terminated upon his retirement
in September 2009], Mr. Anderegg, and
Mr. Callen with Mutual Savings Bank,
each dated as of January 1, 2001
(continuing through 2010)
    
    Exhibit 10.7 to 2000 S-1
 106




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##### Table of Contents



Incorporated Herein by
    
    FiledExhibit
    
    Description
    
    Reference To
    
    Herewith10.6(b)*
    
    Form of Amendment thereto, dated as of
May 2006
    
    Exhibit 10.1 to the Companys
Quarterly Report on Form 10-Q
for the quarter ended June 30,
200610.7(a)*
    
    Employment Agreement of Mr. Dosland
with Bank Mutual dated as of August
18, 2008 (continuing through 2010)
    
    Exhibit 10.1 to the Companys
Report on Form 8-K dated
August 19, 200810.7(b)*
    
    Amendment to Employment Agreement
dated August 18, 2008, between Bank
Mutual and Michael W. Dosland
(continuing through 2010)
    
    Exhibit 10.2 to the Companys
Report on Form 8-K dated
August 19, 200810.8(a)*
    
    Non-Qualified Deferred Retirement
Plan for Directors of First Northern
Savings Bank
    
    Exhibit 10.10(a) to Bank
Mutuals Annual Report on Form
10-K for the year ended
December 31, 200010.8(b)*
    
    Amendment No. 1 thereto
    
    Exhibit 10.3.2 to First
Northern Capital Corp.s
Annual Report on Form 10-K for
the fiscal year ended December
31, 199810.9*
    
    Bank Mutual Corporation 2001 Stock
Incentive Plan, as amended May 7,
2002 (superseded, except as to
outstanding awards)
    
    Exhibit 10.1 to Bank Mutual
Corporations Quarterly Report
on Form 10-Q for the quarter
ended March 31, 200210.10(a)*
    
    Bank Mutual Corporation 2004 Stock
Incentive Plan
    
    Appendix A to Proxy Statement
for 2004 Annual Meeting of
Shareholders10.10(b)*
    
    Form of Option Agreement
thereunderBank Mutual Corporation
Director Stock Option Agreement
    
    Exhibit 10.1(b) to the
Companys Report on Form 10-Q
for the quarter ended June 30,
2004 (6/30/04 10-Q)10.10(c)*
    
    Form of Option Agreement
thereunderBank Mutual Corporation
Incentive Stock Option Agreement
    
    Exhibit 10.1(c) to the 6/30/04
10-Q10.10(d)*
    
    Form of Restricted Stock Agreement
thereunder  Bank Mutual Corporation
Directors Management Recognition
Award
    
    Exhibit 10.1(d) to the 6/30/04
10-Q10.10(e)*
    
    Form of Restricted Stock Agreement
thereunderBank Mutual Corporation
Officers Management Recognition Award
    
    Exhibit 10.1(e) to the 6/30/04
10-Q10.11*
    
    Bank Mutual Corporation Management
Incentive Compensation Plan
+
    
    
    
    X
 107




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##### Table of Contents



Incorporated Herein by
    
    FiledExhibit
    
    Description
    
    Reference To
    
    Herewith21.1
    
    List of Subsidiaries
    
    
    
    X23.1
    
    Consent of Deloitte & Touche LLP
    
    
    
    X23.2
    
    Consent of Ernst & Young LLP
    
    
    
    X24.1
    
    Powers of Attorney
    
    Signature Page of this Report31.1
    
    Sarbanes-Oxley Act Section 302
Certification signed by the
Chairman, President, and Chief
Executive Officer of Bank
Mutual Corporation
    
    
    
    X31.2
    
    Sarbanes-Oxley Act Section 302
Certification signed by the
Senior Vice President and Chief
Financial Officer of Bank
Mutual Corporation
    
    
    
    X32.1
    
    Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
signed by the Chairman,
President, and Chief Executive
Officer of Bank Mutual
Corporation
    
    
    
    X32.2
    
    Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
signed by the Chief Financial
Officer of Bank Mutual
Corporation
    
    
    
    X
 
 *
    
    Designates management or compensatory agreements, plans or arrangements required to be
filed as exhibits pursuant to Item 15(b) of Form 10-K.**
    
    As used in this Exhibit Index, references to Bank Mutual Corporation and the Company also
include, where appropriate, Bank Mutual Corporation, a federally-chartered corporation and
the predecessor of the current registrant.***
    
    Mutual Savings Bank is now known as Bank Mutual.+
    
    Includes non-material changes from prior version(s), consistent with the
compensation-related disclosures in
the Companys prior annual meeting proxy statements. 108