##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 Commission file number: 000-31207
 BANK MUTUAL CORPORATION
  Wisconsin
    
    39-2004336(State or other jurisdiction
ofincorporation or organization)
    
    (I.R.S. Employer Identification No.)4949 West Brown Deer Road, Milwaukee, WI
    
    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
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
 SM
 DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K Into WhichDocument
    
    Portions of Document are IncorporatedCurrent Report on Form 8-K dated August 24, 2007
    
    Item 9Proxy Statement for Annual Meeting of 
Shareholders on May 6, 2008
    
    Part III




---



##### 



BANK MUTUAL CORPORATION
 FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 2007
 TABLE OF CONTENTS
 ITEM
    
    
    
    PAGEPART I1.
    
    Business
    
    3-321A.
    
    Risk Factors
    
    33-351B.
    
    Unresolved Staff Comments.
    
    352.
    
    Properties
    
    36-393.
    
    Legal Proceedings
    
    404.
    
    Submission of Matters to a Vote of Security Holders
    
    40Executive Officers of the Registrant
    
    40PART II5.
    
    Market for Registrants Common Equity, Related Stockholders Matters and  Issuer Purchases of Equity Securities
    
    41-436.
    
    Selected Financial Data
    
    44-457.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    46-617A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    62-658.
    
    Financial Statements and Supplementary Data
    
    66-1039.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    1049A.
    

Controls and Procedures (including Managements and Independent Auditors
Report on Effectiveness of Internal Control Over Financial
Reporting)
    
    104-1069B.
    
    Other Information
    
    107PART III10.
    
    Directors and Executive Officers of the Registrant
    
    10811.
    
    Executive Compensation
    
    10812.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    10813.
    
    Certain Relationships and Related Transactions and Director Independence
    
    10814.
    
    Principal Accountant Fees and Services
    
    108PART IV15.
    
    Exhibits, Financial Statement Schedules
    
    109Signatures
    
    110List of SubsidiariesConsent of Ernst & Young LLPSection 302 Certification by the Chairman, President and Chief Executive OfficerSection 302 Certification by the Chief Financial OfficerSection 906 Certification by the Chairman, President and Chief Executive OfficerSection 906 Certification by the Chief Financial Officer
  2




---



##### Table of Contents



Part 1
 
 Item 1. Business
 General
      Cautionary Factors
  3




---



##### Table of Contents



Market Area
      Competition
    4




---



##### Table of Contents



Lending Activities
 Loan Portfolio Composition.
    5




---



##### Table of Contents



At December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    PercentOf
    
    
    
    
    
    
    Of
    
    
    
    
    
    
    Of
    
    
    
    
    
    
    Of
    
    
    
    
    
    
    OfAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total(Dollars in thousands)Mortgage loans:One- to four-family
    
    $
    1,059,307
    
    
    
    51.12
    %
    
    $
    1,123,905
    
    
    
    53.03
    %
    
    $
    1,048,881
    
    
    
    50.94
    %
    
    $
    903,498
    
    
    
    46.34
    %
    
    $
    793,247
    
    
    
    44.69
    %Multi-family
    
    
    206,640
    
    
    
    9.97
    
    
    
    157,768
    
    
    
    7.44
    
    
    
    155,908
    
    
    
    7.57
    
    
    
    161,641
    
    
    
    8.29
    
    
    
    124,494
    
    
    
    7.01Commercial real estate
    
    
    202,528
    
    
    
    9.77
    
    
    
    167,089
    
    
    
    7.88
    
    
    
    175,090
    
    
    
    8.50
    
    
    
    195,708
    
    
    
    10.04
    
    
    
    209,293
    
    
    
    11.79Construction and development
    
    
    170,401
    
    
    
    8.22
    
    
    
    187,323
    
    
    
    8.84
    
    
    
    155,205
    
    
    
    7.54
    
    
    
    141,394
    
    
    
    7.25
    
    
    
    122,436
    
    
    
    6.90Total mortgage loans
    
    
    1,638,876
    
    
    
    79.08
    
    
    
    1,636,085
    
    
    
    77.19
    
    
    
    1,535,084
    
    
    
    74.55
    
    
    
    1,402,241
    
    
    
    71.92
    
    
    
    1,249,470
    
    
    
    70.39Consumer loans:Fixed-term equity
    
    
    199,161
    
    
    
    9.62
    
    
    
    227,811
    
    
    
    10.75
    
    
    
    246,460
    
    
    
    11.97
    
    
    
    266,635
    
    
    
    13.67
    
    
    
    252,550
    
    
    
    14.22Home equity lines of credit
    
    
    90,631
    
    
    
    4.37
    
    
    
    91,730
    
    
    
    4.33
    
    
    
    88,266
    
    
    
    4.29
    
    
    
    88,444
    
    
    
    4.54
    
    
    
    78,567
    
    
    
    4.43Student
    
    
    21,845
    
    
    
    1.05
    
    
    
    20,404
    
    
    
    0.96
    
    
    
    19,821
    
    
    
    0.96
    
    
    
    20,519
    
    
    
    1.05
    
    
    
    20,546
    
    
    
    1.16Home improvement
    
    
    33,604
    
    
    
    1.62
    
    
    
    33,287
    
    
    
    1.57
    
    
    
    30,067
    
    
    
    1.46
    
    
    
    24,293
    
    
    
    1.25
    
    
    
    12,605
    
    
    
    0.71Automobile
    
    
    24,878
    
    
    
    1.20
    
    
    
    46,752
    
    
    
    2.21
    
    
    
    69,237
    
    
    
    3.36
    
    
    
    61,469
    
    
    
    3.15
    
    
    
    67,630
    
    
    
    3.81Other
    
    
    9,439
    
    
    
    0.46
    
    
    
    11,262
    
    
    
    0.53
    
    
    
    12,944
    
    
    
    0.63
    
    
    
    15,911
    
    
    
    0.82
    
    
    
    18,623
    
    
    
    1.05Total consumer loans
    
    
    379,558
    
    
    
    18.32
    
    
    
    431,246
    
    
    
    20.35
    
    
    
    466,795
    
    
    
    22.67
    
    
    
    477,271
    
    
    
    24.48
    
    
    
    450,521
    
    
    
    25.38Commercial business loans
    
    
    53,784
    
    
    
    2.60
    
    
    
    52,056
    
    
    
    2.46
    
    
    
    57,247
    
    
    
    2.78
    
    
    
    70,170
    
    
    
    3.60
    
    
    
    75,022
    
    
    
    4.23Total loans receivable
    
    
    2,072,218
    
    
    
    100.00
    %
    
    
    2,119,387
    
    
    
    100.00
    %
    
    
    2,059,126
    
    
    
    100.00
    %
    
    
    1,949,682
    
    
    
    100.00
    %
    
    
    1,775,013
    
    
    
    100.00
    %Less:Undisbursed loan proceeds
    
    
    68,457
    
    
    
    
    
    
    
    85,897
    
    
    
    
    
    
    
    60,014
    
    
    
    
    
    
    
    60,653
    
    
    
    
    
    
    
    47,743Allowance for loan losses
    
    
    11,774
    
    
    
    
    
    
    
    12,574
    
    
    
    
    
    
    
    12,090
    
    
    
    
    
    
    
    13,923
    
    
    
    
    
    
    
    13,771Deferred fees and discounts
    
    
    (2,569
    )
    
    
    
    
    
    
    (3,409
    )
    
    
    
    
    
    
    (3,470
    )
    
    
    
    
    
    
    (779
    )
    
    
    
    
    
    
    1,221Total loans receivable, net
    
    $
    1,994,556
    
    
    
    
    
    
    $
    2,024,325
    
    
    
    
    
    
    $
    1,990,492
    
    
    
    
    
    
    $
    1,875,885
    
    
    
    
    
    
    $
    1,712,278
  6




---



##### Table of Contents



Loan Maturity.
 At December 31, 2007Mortgage
    
    Consumer
    
    CommercialLoans
    
    Loans
    
    Business Loans
    
    Total(In thousands)Amounts Due:Within one year
    
    $
    97,059
    
    
    $
    27,317
    
    
    $
    20,588
    
    
    $
    144,964After one year
One to two years
    
    
    91,129
    
    
    
    13,723
    
    
    
    7,276
    
    
    
    112,128Two to three years
    
    
    94,751
    
    
    
    10,113
    
    
    
    10,829
    
    
    
    115,693Three to five years
    
    
    43,237
    
    
    
    40,009
    
    
    
    9,937
    
    
    
    93,183Five to ten years
    
    
    189,829
    
    
    
    190,487
    
    
    
    2,439
    
    
    
    382,755Ten to twenty years
    
    
    353,582
    
    
    
    95,556
    
    
    
    2,715
    
    
    
    451,853Over twenty years
    
    
    769,289
    
    
    
    2,353
    
    
    
    
    
    
    
    771,642Total due after one year
    
    
    1,541,817
    
    
    
    352,241
    
    
    
    33,196
    
    
    
    1,927,254Total loans receivable
    
    $
    1,638,876
    
    
    $
    379,558
    
    
    $
    53,784
    
    
    
    2,072,218Less:Undisbursed loan proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,457Allowance for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,774Deferred loan fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,569
    )Net loans receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,994,556
  Due after December 31, 2008Fixed
    
    Adjustable
    
    Total(In thousands)Mortgage loans
    
    $
    570,757
    
    
    $
    971,060
    
    
    $
    1,541,817Consumer loans
    
    
    303,779
    
    
    
    48,462
    
    
    
    352,241Commercial business loans
    
    
    25,084
    
    
    
    8,112
    
    
    
    33,196Total loans due after one year
    
    $
    899,620
    
    
    $
    1,027,634
    
    
    $
    1,927,254
 7




---



##### Table of Contents



For the year ended December 31,2007
    
    2006
    
    2005(In thousands)Balance outstanding at beginning of period
    
    $
    2,123,184
    
    
    $
    2,061,438
    
    
    $
    1,954,669Originations:Mortgage loans
    
    
    396,227
    
    
    
    347,296
    
    
    
    388,106Consumer loans
    
    
    119,319
    
    
    
    158,690
    
    
    
    211,629Commercial business loans
    
    
    45,862
    
    
    
    42,888
    
    
    
    43,517561,408
    
    
    
    548,874
    
    
    
    643,252Purchases:One-to four-family mortgage loans
    
    
    76,619
    
    
    
    157,399
    
    
    
    258,707Less:Principal payments and repayments:Mortgage loans
    
    
    359,323
    
    
    
    311,267
    
    
    
    372,409Consumer loans
    
    
    171,007
    
    
    
    194,239
    
    
    
    222,105Commercial business loans
    
    
    44,134
    
    
    
    48,079
    
    
    
    56,415Total principal payments
    
    
    574,464
    
    
    
    553,585
    
    
    
    650,929Transfers to foreclosed properties, real estate owned
and repossessed assets
    
    
    3,724
    
    
    
    1,429
    
    
    
    538Loan sales:Mortgage loans
    
    
    102,853
    
    
    
    89,513
    
    
    
    143,698Commercial loans
    
    
    
    
    
    
    
    
    
    
    25Total loan sales
    
    
    102,853
    
    
    
    89,513
    
    
    
    143,723Total loans receivable and loans held for sale
    
    $
    2,080,170
    
    
    $
    2,123,184
    
    
    $
    2,061,438
 Residential Mortgage Lending.
    8




---



##### Table of Contents



9




---



##### Table of Contents



Percentage ofmortgage loanAmount
    
    originations(Dollars in millions)PeriodYear ended December 31, 2007
    
    $
    59.9
    
    
    
    15.1
    %Year ended December 31, 2006
    
    
    58.7
    
    
    
    16.9Year ended December 31, 2005
    
    
    86.5
    
    
    
    22.3
  Consumer Loans.
   10




---



##### Table of Contents



Multi-family and Commercial Real Estate Loans.
    11




---



##### Table of Contents



Construction and Development Loans.
 Commercial Business Loans.
 Loan Approval Authority
     12




---



##### Table of Contents



13




---



##### Table of Contents



Asset Quality
  Delinquent Loans and Foreclosed Assets.
    14




---



##### Table of Contents



At December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(Dollars in thousands)Non-accrual mortgage loans
    
    $
    11,251
    
    
    $
    11,504
    
    
    $
    2,214
    
    
    $
    1,485
    
    
    $
    2,894Non-accrual consumer loans
    
    
    930
    
    
    
    803
    
    
    
    616
    
    
    
    619
    
    
    
    961Non-accrual commercial business loans
    
    
    159
    
    
    
    1,625
    
    
    
    2,517
    
    
    
    3,579
    
    
    
    5,433Accruing loans delinquent 90 days or more
    
    
    602
    
    
    
    565
    
    
    
    487
    
    
    
    586
    
    
    
    1,084Total non-performing loans
    
    $
    12,942
    
    
    $
    14,497
    
    
    
    5,834
    
    
    
    6,269
    
    
    
    10,372Foreclosed properties, real estate owned
and repossessed assets, net
    
    
    3,687
    
    
    
    1,231
    
    
    
    708
    
    
    
    1,621
    
    
    
    630Total non-performing assets
    
    $
    16,629
    
    
    $
    15,728
    
    
    $
    6,542
    
    
    $
    7,890
    
    
    $
    11,002Non-performing loans to total loans
    
    
    0.65
    %
    
    
    0.72
    %
    
    
    0.29
    %
    
    
    0.33
    %
    
    
    0.61
    %Non-performing assets to total assets
    
    
    0.48
    %
    
    
    0.46
    %
    
    
    0.19
    %
    
    
    0.23
    %
    
    
    0.35
    %Interest income that would have been
recognized if non-accrual loans had been
current
    
    $
    1,002
    
    
    $
    652
    
    
    $
    1,159
    
    
    $
    831
    
    
    $
    384
       15




---



##### Table of Contents



Charge-offs.
 Allowance for Loan Losses.
 At or for the Years Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(Dollars in thousands)Balance at beginning of period
    
    $
    12,574
    
    
    $
    12,090
    
    
    $
    13,923
    
    
    $
    13,771
    
    
    $
    12,743Provision for (recovery of) loan
losses
    
    
    (272
    )
    
    
    632
    
    
    
    541
    
    
    
    1,330
    
    
    
    1,304Charge-offs:Mortgage loans
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    (64
    )
    
    
    (67
    )Consumer loans
    
    
    (412
    )
    
    
    (271
    )
    
    
    (327
    )
    
    
    (373
    )
    
    
    (415
    )Commercial business loans
    
    
    (211
    )
    
    
    (52
    )
    
    
    (2,104
    )
    
    
    (816
    )
    
    
    (19
    )Total charge-offs
    
    
    (623
    )
    
    
    (367
    )
    
    
    (2,431
    )
    
    
    (1,253
    )
    
    
    (501
    )Recoveries:Mortgage loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    113Consumer loans
    
    
    95
    
    
    
    81
    
    
    
    49
    
    
    
    66
    
    
    
    107Commercial business loans
    
    
    
    
    
    
    138
    
    
    
    8
    
    
    
    
    
    
    
    5Total recoveries
    
    
    95
    
    
    
    219
    
    
    
    57
    
    
    
    75
    
    
    
    225Net charge-offs recoveries
    
    
    (528
    )
    
    
    (148
    )
    
    
    (2,374
    )
    
    
    (1,178
    )
    
    
    (276
    )Balance at end of period
    
    $
    11,774
    
    
    $
    12,574
    
    
    $
    12,090
    
    
    $
    13,923
    
    
    $
    13,771Net charge-offs to average loans
    
    
    0.03
    %
    
    
    0.01
    %
    
    
    0.12
    %
    
    
    0.07
    %
    
    
    0.02
    %Allowance for loan losses to
total loans
    
    
    0.59
    %
    
    
    0.62
    %
    
    
    0.61
    %
    
    
    0.74
    %
    
    
    0.80
    %Allowance for loan losses to
non-performing loans
    
    
    90.98
    %
    
    
    86.74
    %
    
    
    207.23
    %
    
    
    222.09
    %
    
    
    132.77
    %
   
    
    One- to four-family residential mortgage loans
    
    Consumer
    
    Multi-family and commercial real estate
    
    Commercial business
 16




---



##### Table of Contents



Non-performing and Delinquent Loans.
    At December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentageof Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loans
    
    
    
    
    
    of Loansin Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Category
    
    
    
    
    
    in Categoryto Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to Total
    
    
    
    
    
    to TotalLoan Category
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans
    
    Amount
    
    Loans(Dollars in thousands)Mortgage loansOne- to four-family
    
    $
    3,324
    
    
    
    51.12
    %
    
    $
    3,531
    
    
    
    53.03
    %
    
    $
    3,294
    
    
    
    50.94
    %
    
    $
    2,488
    
    
    
    46.34
    %
    
    $
    4,001
    
    
    
    44.69
    %Other
    
    
    4,040
    
    
    
    27.96
    
    
    
    3,049
    
    
    
    24.16
    
    
    
    2,424
    
    
    
    23.61
    
    
    
    3,222
    
    
    
    25.58
    
    
    
    3,150
    
    
    
    25.70Total mortgage loans
    
    
    7,364
    
    
    
    79.08
    
    
    
    6,580
    
    
    
    77.19
    
    
    
    5,718
    
    
    
    74.55
    
    
    
    5,710
    
    
    
    71.92
    
    
    
    7,151
    
    
    
    70.39Home equity lines
    
    
    496
    
    
    
    4.37
    
    
    
    496
    
    
    
    4.33
    
    
    
    483
    
    
    
    4.29
    
    
    
    663
    
    
    
    4.54
    
    
    
    481
    
    
    
    4.43Consumer
    
    
    1,770
    
    
    
    13.95
    
    
    
    2,060
    
    
    
    16.02
    
    
    
    2,118
    
    
    
    18.38
    
    
    
    2,929
    
    
    
    19.94
    
    
    
    2,398
    
    
    
    20.95Commercial business loans
    
    
    2,144
    
    
    
    2.60
    
    
    
    3,438
    
    
    
    2.46
    
    
    
    3,696
    
    
    
    2.78
    
    
    
    4,416
    
    
    
    3.60
    
    
    
    3,741
    
    
    
    4.23Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    205
    
    
    
    
    
    
    
    
    
    
    
    Total allowance for
loan losses
    
    $
    11,774
    
    
    
    100.00
    %
    
    $
    12,574
    
    
    
    100.00
    %
    
    $
    12,090
    
    
    
    100.00
    %
    
    $
    13,923
    
    
    
    100.00
    %
    
    $
    13,771
    
    
    
    100.00
    %
 17




---



##### Table of Contents



Investment Activities
 Investment Securities.
     Mortgage-related Securities.
   18




---



##### Table of Contents



For the Year Ended December 31,2007
    
    2006
    
    2005(In thousands)Investment securities available-for-sale:Carrying value at beginning of period
    
    $
    48,290
    
    
    $
    63,361
    
    
    $
    68,753Purchases
    
    
    51,270
    
    
    
    264
    
    
    
    56,921Sales
    
    
    (1,228
    )
    
    
    (9
    )
    
    
    (11
    )Maturities
    
    
    
    
    
    
    (14,720
    )
    
    
    (60,780
    )Premium amortization and discount accretion, net
    
    
    1
    
    
    
    
    
    
    
    104(Decrease) increase in unrealized gains
    
    
    1,117
    
    
    
    (606
    )
    
    
    (1,626
    )Net increase (decrease) in investment securities
    
    
    51,160
    
    
    
    (15,071
    )
    
    
    (5,392
    )Carrying value at end of period
    
    $
    99,450
    
    
    $
    48,290
    
    
    $
    63,361Mortgage-related securities available-for-sale:Carrying value at beginning of period
    
    $
    1,064,851
    
    
    $
    1,087,816
    
    
    $
    1,266,224Purchases
    
    
    247,428
    
    
    
    198,460
    
    
    
    193,857Principal payments
    
    
    (227,041
    )
    
    
    (224,693
    )
    
    
    (352,866
    )Premium amortization and discount accretion, net
    
    
    1,893
    
    
    
    826
    
    
    
    (248
    )Increase (decrease) in unrealized gains
    
    
    12,791
    
    
    
    2,442
    
    
    
    (19,151
    )Net increase in mortgage-related securities
    
    
    35,071
    
    
    
    (22,965
    )
    
    
    (178,408
    )Carrying value at end of period
    
    $
    1,099,922
    
    
    $
    1,064,851
    
    
    $
    1,087,816
 19




---



##### Table of Contents



At December 31,2007
    
    2006
    
    2005Carrying/
    
    Carrying/
    
    Carrying/Fair Value
    
    Fair Value
    
    Fair Value(Dollars in thousands)Money market investmentsInterest-earning deposits
    
    $
    2,714
    
    
    $
    1,022
    
    
    $
    27,872Total money market investments
    
    $
    2,714
    
    
    $
    1,022
    
    
    $
    27,872Investment securities available-for-saleMutual funds
    
    $
    46,550
    
    
    $
    46,592
    
    
    $
    46,408United States government and federal agency obligations.
    
    
    52,036
    
    
    
    
    
    
    
    14,585Stock in federal agencies
    
    
    864
    
    
    
    1,698
    
    
    
    2,368Total investment securities available-for-sale
    
    $
    99,450
    
    
    $
    48,290
    
    
    $
    63,361Mortgage-related securities available-for-sale by issuer:Freddie Mac
    
    $
    524,898
    
    
    $
    441,404
    
    
    $
    493,305Fannie Mae
    
    
    363,337
    
    
    
    373,394
    
    
    
    409,636Private placement CMOs
    
    
    180,638
    
    
    
    207,902
    
    
    
    122,302GNMA
    
    
    31,049
    
    
    
    42,151
    
    
    
    62,573Total mortgage-related securities
    
    $
    1,099,922
    
    
    $
    1,064,851
    
    
    $
    1,087,816Total investment portfolio
    
    $
    1,202,086
    
    
    $
    1,114,163
    
    
    $
    1,179,049
 20




---



##### Table of Contents



Carrying Values, Yields and Maturities.
 At December 31, 2007More than One Year
    
    
    More than FiveOne Year or Less
    
    
    to Five Years
    
    
    Years to Ten Years
    
    
    More than Ten Years
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedCarrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    AverageValue
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield(Dollars in thousands)Investment securities
available-for-sale:Mutual funds(1)
    
    $
    46,550
    
    
    
    4.84
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    46,550
    
    
    
    4.84
    %US government and agencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,919
    
    
    
    5.98
    
    
    
    15,117
    
    
    
    6.00
    
    
    
    52,036
    
    
    
    5.98Stock in Federal Agencies
    
    
    864
    
    
    
    1.78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    864
    
    
    
    1.78Total investment securities
    
    $
    47,414
    
    
    
    4.78
    
    
    $
    
    
    
    
    
    
    
    $
    36,919
    
    
    
    5.98
    
    
    $
    15,117
    
    
    
    
    
    
    $
    99,450
    
    
    
    5.41Mortgage-related securities
available-for-sale:By issuer:GNMA pass-through
certificates
    
    $
    3
    
    
    
    8.50
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    390
    
    
    
    4.53
    
    
    $
    393
    
    
    
    4.56Fannie Mae pass-through
certificates
    
    
    93
    
    
    
    5.87
    
    
    
    7,559
    
    
    
    4.97
    
    
    
    19,766
    
    
    
    5.55
    
    
    
    57,357
    
    
    
    4.81
    
    
    
    84,775
    
    
    
    5.00Freddie Mac pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    248
    
    
    
    5.74
    
    
    
    6,628
    
    
    
    5.20
    
    
    
    8,757
    
    
    
    5.26
    
    
    
    15,633
    
    
    
    5.24Private CMOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180,638
    
    
    
    4.93
    
    
    
    180,638
    
    
    
    4.93Freddie Mac, Fannie Mae and
GNMA-REMICs
    
    
    112
    
    
    
    6.11
    
    
    
    10,917
    
    
    
    4.58
    
    
    
    123,568
    
    
    
    4.01
    
    
    
    683,886
    
    
    
    4.76
    
    
    
    818,483
    
    
    
    4.64Total mortgage-related
securities
    
    $
    208
    
    
    
    6.04
    
    
    $
    18,724
    
    
    
    4.76
    
    
    $
    149,962
    
    
    
    4.27
    
    
    $
    931,028
    
    
    
    4.80
    
    
    $
    1,099,922
    
    
    
    4.73By coupon type:Adjustable rate
    
    $
    112
    
    
    
    6.11
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    105,871
    
    
    
    4.56
    
    
    $
    105,983
    
    
    
    4.56Fixed rate
    
    
    96
    
    
    
    5.95
    
    
    
    18,724
    
    
    
    4.76
    
    
    
    149,962
    
    
    
    4.27
    
    
    
    825,157
    
    
    
    4.83
    
    
    
    993,939
    
    
    
    4.74Total mortgage-related
securities
    
    $
    208
    
    
    
    6.04
    
    
    $
    18,724
    
    
    
    4.76
    %
    
    $
    149,962
    
    
    
    4.27
    %
    
    $
    931,028
    
    
    
    4.80
    %
    
    $
    1,099,922
    
    
    
    4.73
    %Total investment and
mortgage-related securities
portfolio
    
    $
    47,622
    
    
    
    4.79
    %
    
    $
    18,724
    
    
    
    4.76
    %
    
    $
    186,881
    
    
    
    4.60
    %
    
    $
    946,145
    
    
    
    4.82
    %
    
    $
    1,199,372
    
    
    
    4.78
    %
 
 (1)
    
    The weighted average yield has not been adjusted for the impairment recorded in 2007. Deposits
    21




---



##### Table of Contents



For the Year Ended December 31,2007
    
    2006
    
    2005(Dollars in thousands)Total deposits at beginning of period
    
    $
    2,158,641
    
    
    $
    2,086,822
    
    
    $
    1,982,881Net deposits (withdrawals)
    
    
    (110,709
    )
    
    
    9,292
    
    
    
    59,571Interest credited, net of penalties
    
    
    65,036
    
    
    
    62,527
    
    
    
    44,370Total deposits at end of period
    
    $
    2,112,968
    
    
    $
    2,158,641
    
    
    $
    2,086,822Net increase (decrease)
    
    $
    (45,673
    )
    
    $
    71,819
    
    
    $
    103,941Percentage increase (decrease)
    
    
    (2.12
    )%
    
    
    3.44
    %
    
    
    5.24
    %
  Maturity Period
    
    Amount(In thousands)Three months or less
    
    $
    93,823Over three months through six months
    
    
    63,096Over six months through 12 months
    
    
    63,386Over 12 months through 24 months
    
    
    48,804Over 24 months through 36 months
    
    
    2,408Over 36 months
    
    
    2,902Total
    
    $
    274,419
  At December 31,2007
    
    
    
    
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    2005Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedPercent
    
    
    average
    
    
    
    
    
    
    Percent
    
    
    average
    
    
    
    
    
    
    Percent
    
    
    averageof total
    
    
    nominal
    
    
    
    
    
    
    of total
    
    
    nominal
    
    
    
    
    
    
    of total
    
    
    nominalAmount
    
    
    deposits
    
    
    rate
    
    
    Amount
    
    
    deposits
    
    
    rate
    
    
    Amount
    
    
    deposits
    
    
    rate(Dollars in thousands)Savings
    
    $
    183,756
    
    
    
    8.70
    %
    
    
    0.45
    %
    
    $
    200,016
    
    
    
    9.27
    %
    
    
    0.45
    %
    
    $
    224,408
    
    
    
    10.75
    %
    
    
    0.43
    %Interest-bearing demand
    
    
    170,986
    
    
    
    8.09
    
    
    
    0.21
    
    
    
    174,206
    
    
    
    8.07
    
    
    
    0.21
    
    
    
    174,620
    
    
    
    8.37
    
    
    
    0.21Money market
    
    
    280,442
    
    
    
    13.27
    
    
    
    3.03
    
    
    
    248,542
    
    
    
    11.51
    
    
    
    3.00
    
    
    
    271,418
    
    
    
    13.01
    
    
    
    2.88Non-interest bearing demand
    
    
    97,506
    
    
    
    4.61
    
    
    
    0.00
    
    
    
    104,821
    
    
    
    4.86
    
    
    
    0.00
    
    
    
    110,583
    
    
    
    5.30
    
    
    
    0.00Total
    
    
    732,690
    
    
    
    34.67
    
    
    
    1.32
    
    
    
    727,585
    
    
    
    33.71
    
    
    
    1.20
    
    
    
    781,029
    
    
    
    37.43
    
    
    
    1.17Certificates:Time deposits with original
maturities of:Three months or less
    
    
    45,835
    
    
    
    2.17
    
    
    
    3.97
    
    
    
    64,486
    
    
    
    2.99
    
    
    
    4.76
    
    
    
    111,068
    
    
    
    5.32
    
    
    
    3.91Over three months to twelve months
    
    
    911,821
    
    
    
    43.15
    
    
    
    5.06
    
    
    
    628,952
    
    
    
    29.14
    
    
    
    5.11
    
    
    
    280,756
    
    
    
    13.45
    
    
    
    3.73Over twelve months to
twenty-four months
    
    
    238,986
    
    
    
    11.31
    
    
    
    4.61
    
    
    
    323,869
    
    
    
    15.00
    
    
    
    4.14
    
    
    
    345,578
    
    
    
    16.56
    
    
    
    3.51Over twenty-four months to
thirty-six months
    
    
    58,515
    
    
    
    2.77
    
    
    
    3.51
    
    
    
    98,005
    
    
    
    4.54
    
    
    
    4.18
    
    
    
    187,215
    
    
    
    8.97
    
    
    
    3.38Over thirty-six months to
forty-eight months
    
    
    4,963
    
    
    
    0.23
    
    
    
    3.68
    
    
    
    7,155
    
    
    
    0.33
    
    
    
    3.38
    
    
    
    45,616
    
    
    
    2.19
    
    
    
    3.97Over
forty-eight months to sixty months
    
    
    120,158
    
    
    
    5.70
    
    
    
    4.12
    
    
    
    308,589
    
    
    
    14.29
    
    
    
    4.66
    
    
    
    335,560
    
    
    
    16.08
    
    
    
    4.70Over sixty months
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    0.00Total time deposits
    
    
    1,380,278
    
    
    
    65.33
    
    
    
    4.79
    
    
    
    1,431,056
    
    
    
    66.29
    
    
    
    4.71
    
    
    
    1,305,793
    
    
    
    62.58
    
    
    
    3.89Total deposits
    
    $
    2,112,968
    
    
    
    100.00
    %
    
    
    3.59
    %
    
    $
    2,158,641
    
    
    
    100.00
    %
    
    
    3.52
    
    
    $
    2,086,822
    
    
    
    100.00
    %
    
    
    2.87
    %
 22




---



##### Table of Contents



Borrowings
   At or For the Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(Dollars in thousands)Balance outstanding at end of year:Notes payable to FHLB
    
    $
    912,459
    
    
    $
    705,025
    
    
    $
    765,796
    
    
    $
    623,925
    
    
    $
    299,491Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137,600
    
    
    
    Weighted average interest rate at end of year:Notes payable to FHLB
    
    
    4.27
    %
    
    
    4.46
    %
    
    
    3.58
    %
    
    
    2.89
    %
    
    
    5.52
    %Overnight borrowings from FHLB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.47
    %
    
    
    Maximum amount outstanding during the year:Notes payable to FHLB
    
    $
    921,781
    
    
    $
    841,835
    
    
    $
    909,920
    
    
    $
    623,925
    
    
    $
    332,398Overnight borrowings from FHLB
    
    
    52,100
    
    
    
    38,000
    
    
    
    186,000
    
    
    
    289,800
    
    
    
    15,000Other borrowings
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    22,679Average amount outstanding during the year:Notes payable to FHLB
    
    $
    865,540
    
    
    $
    782,619
    
    
    $
    811,937
    
    
    $
    325,861
    
    
    $
    318,942Overnight borrowings from FHLB
    
    
    3,570
    
    
    
    3,242
    
    
    
    50,712
    
    
    
    75,106
    
    
    
    72Other borrowings
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    430Weighted average interest rate during the year:Fixed interest rate notes payable to FHLB
    
    
    4.34
    %
    
    
    3.86
    %
    
    
    3.25
    %
    
    
    5.23
    %
    
    
    5.61
    %Overnight borrowings from FHLB
    
    
    5.56
    %
    
    
    5.40
    %
    
    
    2.95
    %
    
    
    2.03
    %
    
    
    1.38
    %Other borrowings
    
    
    
    
    
    
    
    
    
    
    3.04
    %
    
    
    
    
    
    
    0.98
    %
  Average Balance Sheet and Rate Yield Analysis
  Average Equity to Average Assets
  23




---



##### Table of Contents



Cash Dividends
  Subsidiaries
      Employees
  24




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



Federal Reserve System
 Deposit Insurance
    Transactions with Affiliates
  27




---



##### Table of Contents



Acquisitions and Mergers
 Prohibitions Against Tying Arrangements
 Customer Privacy
 Uniform Real Estate Lending Standards
  
    
    for loans secured by raw land, the supervisory loan-to-value limit is 65% of the value
of the collateral;
    
    for land development loans (i.e., loans for the purpose of improving unimproved
property prior to the erection of structures), that limit is 75%;
    
    for loans for the construction of commercial, multi-family or other non-residential
property, that limit is 80%;
    
    for loans for the construction of one- to four-family properties, that limit is 85%; and
    
    for loans secured by other improved property (e.g., farmland, completed commercial
property and other income-producing property, including non-owner occupied, one- to
four-family property), that limit is 85%.
  Community Reinvestment Act
 28




---



##### Table of Contents




    
    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
 Prompt Corrective Action
 Total Capital to Risk
    
    Tier 1 Capital to Risk
    
    Tier 1 Capital toCategory
    
    Weighted Assets
    
    Weighted Assets
    
    Total AssetsWell capitalized
    
    3  10%
    
    3  6%
    
    3  5%Adequately capitalized
    
    3  8%
    
    3  4%
    
    3 4%*Under capitalized
    
    < 8%
    
    < 4%
    
    < 4%*Significantly undercapitalized
    
    < 6%
    
    < 3%
    
    < 3%Critically undercapitalized
    
    Tangible assets tocapital of < 2%
 
 *
    
    3% if the bank receives the highest rating under the uniform system.  
    
    an amount equal to 5% of the banks total assets at the time it became
undercapitalized; and
    
    the amount that is necessary (or would have been necessary) to bring the bank into
compliance with all capital standards applicable with respect to such bank as of the time
it fails to comply with the plan.
 29




---



##### Table of Contents



Loans to Insiders
  The Patriot Act
  
    
    All financial institutions must establish anti-money laundering programs that include,
at minimum; (a) internal policies, procedures, and controls; (b) specific designation of an
anti-money laundering compliance officer; (c) ongoing employee training programs, and (d)
an independent audit function to test the anti-money laundering program.
    
    The Secretary of the Treasury, in conjunction with other bank regulators, may issue
regulations that provide for minimum standards with respect to customer identification at
the time new accounts are opened.
 30




---



##### Table of Contents




    
    Financial institutions that establish, maintain, or manage private banking accounts or
correspondent accounts in the United States for non-United States persons or their
representatives (including foreign individuals visiting the United States) must establish
appropriate, specific, and, where necessary, enhanced due diligence policies, procedures,
and controls designed to detect and report money laundering.
    
    Financial institutions are prohibited from establishing, maintaining, administering or
managing correspondent accounts for foreign shell banks (foreign banks that do not have a
physical presence in any country), and will be subject to certain recordkeeping obligations
with respect to correspondent accounts of foreign banks.
    
    Bank regulators are directed to consider a holding companys effectiveness in combating
money laundering when ruling on Federal Reserve Act and bank merger applications.
 Bank Mutual Corporation Regulation
 Holding Company Regulation
    Federal Securities Laws
  Sarbanes-Oxley Act of 2002
  31




---



##### Table of Contents



Acquisition of Bank Mutual Corporation
  Federal and State Taxation
 Federal Taxation.
   State Taxation
 32




---



##### Table of Contents



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




---



##### Table of Contents



Softness in the Real Estate Market May Affect Collateral Values and Our Results.
  Some of Our Lending Activities Are in Riskier Credits than One-to Four- Family Real Estate Loans
  Low Demand for Real Estate Loans May Lower Our Profitability
  Wisconsin Tax Developments Could Reduce Our Net Income
   Economic Conditions and World Events Could Affect Our Earnings
   34




---



##### Table of Contents



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




---



##### Table of Contents



Item 2. Properties
  OriginalDate
    
    Leased
    
    
    
    
    Original Date
    
    LeasedLeased or
    
    or
    
    
    
    
    Leased or
    
    orLocation
    
    Acquired
    
    Owned*
    
    
    Location
    
    Acquired
    
    Owned*Executive Office:4949 West Brown Deer Road
    
    1991
    
    OwnedBrown Deer, WI 53223Southeast Region:Milwaukee Metro Area:Bayshore Town Center
    
    1971
    
    Leased
    
    Brookfield
    
    1973**
    
    Owned5784 N. Port Washington Road
    
    
    
    
    (2018
    )
    
    17100 W. Capitol DriveGlendale, WI 53217
    
    
    
    
    
    
    
    Brookfield, WI 53005Brookfield Square
    
    1975
    
    Leased
    
    Brown Deer
    
    1979
    
    Owned400 N. Moorland Road
    
    
    
    
    (2016
    )
    
    4801 W. Brown Deer RoadBrookfield, WI 53005
    
    
    
    
    
    
    
    Brown Deer, WI 53223Capitol Drive
    
    1976
    
    Owned
    
    Cedarburg
    
    1978**
    
    Leased8050 W. Capitol Drive
    
    
    
    
    
    
    
    W62 N248 Washington Avenue
    
    
    
    
    (2008
    )Milwaukee, WI 53222
    
    
    
    
    
    
    
    Cedarburg, WI 53012Downtown
    
    1955
    
    Owned
    
    Grafton
    
    1978
    
    Owned510 E. Wisconsin Avenue
    
    
    
    
    
    
    
    2030 Wisconsin AvenueMilwaukee, WI 53202
    
    
    
    
    
    
    
    Grafton, WI 53024Howell Avenue
    
    1977
    
    Owned
    
    Mayfair Mall
    
    2001
    
    Leased3847 S. Howell Avenue
    
    
    
    
    
    
    
    2600 N. Mayfair Road
    
    
    
    
    (2011
    )Milwaukee, WI 53207
    
    
    
    
    
    
    
    Wauwatosa, WI 53226Menomonee Falls
    
    2003
    
    Owned
    
    Mequon
    
    1970**
    
    OwnedW178 N9379 Water Tower Place
    
    
    
    
    
    
    
    11249 N. Port Washington RoadMenomonee Falls, WI.53051
    
    
    
    
    
    
    
    Mequon, WI 53092Oak Creek
    
    1972
    
    Owned
    
    Oklahoma Avenue
    
    1982
    
    Owned8780 S. Howell Avenue
    
    
    
    
    
    
    
    6801 W. Oklahoma AvenueOak Creek, WI 53154
    
    
    
    
    
    
    
    Milwaukee, WI 53219Sherman Park
    
    1950**
    
    Owned
    
    Southgate
    
    1967
    
    Owned4812 W. Burleigh Street
    
    
    
    
    
    
    
    3340 S. 27th StreetMilwaukee, WI 53210
    
    
    
    
    
    
    
    Milwaukee, WI 53215Southridge Mall
    
    1978
    
    Leased
    
    Thiensville
    
    1960**
    
    Owned5300 S. 76th Street
    
    
    
    
    (2009
    )
    
    208 N. Main StreetGreendale, WI 53129
    
    
    
    
    
    
    
    Thiensville, WI 53092Waukesha  Grandview Plaza
    
    2005
    
    Owned
    
    Waukesha  Meadowbrook
    
    2006
    
    Owned1870 Meadow Lane
    
    
    
    
    
    
    
    3212 Fiddlers Creek DrivePewaukee, WI 53072
    
    
    
    
    
    
    
    Waukesha, WI 53188West Allis
    
    1976
    
    Owned
    
    West Bend
    
    2006
    
    Owned10296 W. National Avenue
    
    
    
    
    
    
    
    1526 S. Main StreetWest Allis, WI 53227
    
    
    
    
    
    
    
    West Bend, WI 53095Racine/Kenosha Area:Kenosha
    
    2007
    
    Owned
    
    Racine  Douglas Avenue
    
    2005
    
    Owned6310 South Green Bay Rd.
    
    
    
    
    
    
    
    5133 Douglas Ave.Kenosha, WI 53142
    
    
    
    
    
    
    
    Racine, WI 53402Racine  Regency Mall
    
    2005
    
    Owned3039 S. Green Bay RoadRacine, WI 53406
 36




---



##### Table of Contents



OriginalDate
    
    Leased
    
    
    
    
    Original Date
    
    LeasedLeased or
    
    Or
    
    
    
    
    Leased or
    
    orLocation
    
    Acquired
    
    Owned
    
    
    Location
    
    Acquired
    
    OwnedAdditional Southeast Locations:Madison Area:Downtown
    
    1980
    
    Leased
    
    West
    
    1982
    
    Leased23 S. Pinckney Street
    
    
    
    
    (2008
    )
    
    5521 Odana Road
    
    
    
    
    (2011
    )Madison, WI 53703
    
    
    
    
    
    
    
    Madison, WI 53719Middleton
    
    1978
    
    Owned
    
    Monona
    
    1981
    
    Owned6209 Century Avenue
    
    
    
    
    
    
    
    5320 Monona DriveMiddleton, WI 53562
    
    
    
    
    
    
    
    Monona, WI 53716Sheboygan Area:Sheboygan
    
    1973
    
    Owned
    
    Sheboygan Motor Bank
    
    1984
    
    Owned801 N. 8th Street
    
    
    
    
    
    
    
    730 N. 9th StreetSheboygan, WI 53081
    
    
    
    
    
    
    
    Sheboygan, WI 53081Beaver Dam:
    
    1975
    
    Owned
    
    Beloit:
    
    1971
    
    Leased130 W. Maple Avenue
    
    
    
    
    
    
    
    3 Beloit Mall Shopping Center
    
    
    
    
    (2012
    )Beaver Dam, WI 53916
    
    
    
    
    
    
    
    Beloit, WI 53511Berlin:
    
    1973
    
    Owned
    
    Fond du Lac:
    
    2000
    
    Owned103 E. Huron Street
    
    
    
    
    
    
    
    W6606A Highway 23Berlin, WI 54923
    
    
    
    
    
    
    
    Fond du Lac, WI 54937Janesville:
    
    1973
    
    Owned
    
    Portage:
    
    1976
    
    Owned2111 Holiday Drive
    
    
    
    
    
    
    
    145 E. Cook StreetJanesville, WI 53545
    
    
    
    
    
    
    
    Portage, WI 53901Northeast Region:Greater Green Bay Area:201 N. Monroe Avenue
    
    1975**
    
    Owned
    
    2255 University Avenue
    
    1970**
    
    OwnedGreen Bay, WI 54301-4995
    
    
    
    
    
    
    
    Green Bay, WI 54308-80462357 S. Oneida Street
    
    1971**
    
    Owned
    
    2603 Glendale Avenue
    
    1986**
    
    OwnedGreen Bay, WI 54304-5286
    
    
    
    
    
    
    
    Green Bay, WI  54313-68232370 East Mason Street
    
    1985**
    
    Owned
    
    2424 West Mason Street
    
    1992**
    
    OwnedGreen Bay, WI 54302-3347
    
    
    
    
    
    
    
    Green Bay, WI 54303-4711749 Main Avenue
    
    1972**
    
    Owned
    
    330 North Broadway
    
    1979**
    
    OwnedDe Pere, WI 54115-5190
    
    
    
    
    
    
    
    De Pere, WI  54115-5250201 West Walnut St. (Operations Center)
    
    1999**
    
    LeasedGreen Bay, WI 54303
    
    
    
    
    (2009
    )Fox Valley Area:Appleton
    
    1985
    
    Leased
    
    Neenah
    
    1974
    
    Owned4323 W. Wisconsin Avenue
    
    
    
    
    (2009
    )
    
    101 W. Wisconsin AvenueFox River Mall
    
    
    
    
    
    
    
    Neenah, WI 54956Appleton, WI 54913Marinette Area:
    
    
    
    
    
    
    
    Pine Tree Mall
    
    1978**
    
    Leased830 Pierce Avenue
    
    1972**
    
    Owned
    
    2314 Roosevelt Road
    
    
    
    
    (2008
    )Marinette, WI 54143-0318
    
    
    
    
    
    
    
    Marinette, WI  54143-0345Brillion:
    
    
    
    
    
    
    
    Crivitz:314 N. Main Street
    
    1973**
    
    Owned
    
    315 Highway 141
    
    1985**
    
    OwnedBrillion, WI 54110-1198
    
    
    
    
    
    
    
    Crivitz, WI   54114-0340Hortonville:
    
    
    
    
    
    
    
    Kiel:209 South Nash Street
    
    1979**
    
    Owned
    
    622 Fremont Street
    
    1970**
    
    OwnedHortonville, WI 54944
    
    
    
    
    
    
    
    Kiel, WI   53042-1321
 37




---



##### Table of Contents



OriginalDate
    
    Leased
    
    
    
    
    Original Date
    
    LeasedLeased or
    
    Or
    
    
    
    
    Leased or
    
    OrLocation
    
    Acquired
    
    Owned*
    
    
    Location
    
    Acquired
    
    Owned*Additional Northeast Location:New Holstein:
    
    
    
    
    
    
    
    New London:2205 Wisconsin Avenue
    
    1976**
    
    Owned
    
    101 Park Street
    
    1969**
    
    OwnedNew Holstein, WI 53061-1291
    
    
    
    
    
    
    
    New London, WI 54961Peshtigo:
    
    
    
    
    
    
    
    Shawano:616 French Street
    
    1975**
    
    Owned
    
    835 E. Green Bay Avenue
    
    1981**
    
    OwnedPeshtigo, WI 54157-0193
    
    
    
    
    
    
    
    Shawano, WI  54166-0396Sturgeon Bay:1227 Egg Harbor Road
    
    1978**
    
    OwnedSturgeon Bay, WI 54235-0068Northwest Region:Eau Claire:Downtown
    
    1968**
    
    Owned
    
    Mall
    
    1972**
    
    Owned319 E. Grand Avenue
    
    
    
    
    
    
    
    2812 Mall DriveEau Claire, WI 54701
    
    
    
    
    
    
    
    Eau Claire, WI 54701Gordys Country Market
    
    1996**
    
    Leased
    
    North Clairemont
    
    2007
    
    Owned2717 Birch Street
    
    
    
    
    (2010
    )
    
    3250 N. Clairemont Ave.Eau Claire, WI 54703
    
    
    
    
    
    
    
    Eau Claire, WI 54703Pinehurst
    
    1986**
    
    Owned2722 Eddy
Lane
Eau Claire, WI 54703Chippewa Falls Area:Downtown
    
    1975**
    
    Owned
    
    Falls PickN Save
    
    1995**
    
    Leased35 W. Columbia
    
    
    
    
    
    
    
    303 Prairie View Road
    
    
    
    
    (2010
    )Chippewa Falls, WI 54729
    
    
    
    
    
    
    
    Chippewa Falls, WI 54729Menomonie Area:Downtown
    
    1967**
    
    Owned
    
    North
    
    1978**
    
    Owned717 Main Street
    
    
    
    
    
    
    
    2409 Hills Ct. N.EMenomonie, WI 54751
    
    
    
    
    
    
    
    Menomonie, WI 54751Barron:
    
    1995**
    
    Owned
    
    Bloomer:
    
    1995**
    
    Owned1512 E. Division Ave. (Hwy. 8)
    
    
    
    
    
    
    
    1203 17th AvenueBarron, WI 54812
    
    
    
    
    
    
    
    Bloomer, WI 54724Cornell:
    
    1980**
    
    Leased
    
    Ellsworth:
    
    1975**
    
    Owned422 Main Street
    
    
    
    (month to
    
    385 W. Main StreetCornell, WI 54732
    
    
    
    month)
    
    Ellsworth, WI 54011Hayward:
    
    1984**
    
    Owned
    
    Hudson:
    
    1979**
    
    Owned10562 Kansas Avenue
    
    
    
    
    
    
    
    2000 Crestview DriveHayward, WI 54843
    
    
    
    
    
    
    
    Hudson, WI 54016Rice Lake:
    
    1979**
    
    Owned
    
    Spooner:
    
    1995**
    
    Owned2850 Pioneer Avenue
    
    
    
    
    
    
    
    500 Front StreetRice Lake, WI 54868
    
    
    
    
    
    
    
    Spooner, WI 54801St. Croix Falls:
    
    1980**
    
    Owned
    
    Stanley:
    
    1978**
    
    Owned144 Washington Street N
    
    
    
    
    
    
    
    118 N. BroadwaySt. Croix Falls, WI 54024
    
    
    
    
    
    
    
    Stanley, WI 54768Woodbury, Minnesota:8420 City Centre Drive
    
    1995**
    
    OwnedWoodbury, MN 55125
 
 *
    
    If a leased property, the chart also shows year of lease expiration.**
    
    Date originally opened by an institution which was acquired by the Bank. 38




---



##### Table of Contents



39




---



##### Table of Contents



Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Executive Officers of the Registrant
  ExecutiveOfficerName and Age
    
    Offices and Positions with Bank Mutual Corporation and the Bank*
    
    Since (1)Michael T. Crowley, Jr., 65
    
    Chairman, President and Chief Executive Officer of Bank Mutual
Corporation and the Bank (2)
    
    
    1968Eugene H. Maurer, Jr., 62
    
    Senior Vice President, Secretary and Interim Chief Financial
Officer since 2008 of Bank Mutual Corporation, Senior Vice
President, Chief Financial Officer, Treasurer and Secretary of
the Bank (3)
    
    
    1982Marlene M. Scholz, 62
    
    Senior Vice President and principal accounting officer of Bank
Mutual Corporation; Senior Vice President and Controller of the
Bank
    
    
    1981P. Terry Anderegg, 57
    
    Senior Vice PresidentRetail Operations of the Bank (4)
    
    
    1993Christopher J. Callen, 64
    
    Senior Vice PresidentLending of the Bank (4)
    
    
    1998
 
 *
    
    Excluding directorships and excluding positions with Bank subsidiaries. Those positions do
not constitute a substantial part of the officers duties.(1)
    
    Indicates date when individual first held an executive officer position with the Bank. Each
of these persons, other than Mr. Anderegg and Mr. Callen, became a Bank Mutual Corporation
executive officer in 2000 and, except as indicated, has held these positions since that
time.(2)
    
    Michael Crowley, Jr. became president of Bank Mutual Corporation in 2003 and Chairman of the
Bank in 2005.(3)
    
    Mr. Maurer became Interim Chief Financial Officer of Bank Mutual Corporation in January 2008
upon the retirement of Rick B. Colberg.(4)
    
    This position has been considered to be an executive officer position of Bank Mutual
Corporation since 2003, as a result of the merger of the subsidiary banks. 40




---



##### Table of Contents



Part II
 
 Item 5. Market for Registrants Common Equity Related Stockholder Matters and Issuer
Purchase of Equity Securities
 SM
    SM
 
 2007
    
    2006High
    
    Low
    
    High
    
    Low1st Quarter
    
    $
    12.37
    
    
    $
    10.94
    
    
    $
    12.00
    
    
    $
    10.512nd Quarter
    
    $
    12.04
    
    
    $
    10.93
    
    
    $
    12.45
    
    
    $
    11.003rd Quarter
    
    $
    12.24
    
    
    $
    10.25
    
    
    $
    12.76
    
    
    $
    11.754th Quarter
    
    $
    12.25
    
    
    $
    9.68
    
    
    $
    12.71
    
    
    $
    12.71
  2007
    
    
    20061st Quarter
    
    $
    0.080
    
    
    $
    0.0702ndQuarter
    
    $
    0.080
    
    
    $
    0.0703rd Quarter
    
    $
    0.085
    
    
    $
    0.0754th Quarter
    
    $
    0.085
    
    
    $
    0.075$
    0.330
    
    
    $
    0.290
   41




---



##### Table of Contents



Total number
    
    Maximum number ofof shares purchased
    
    shares that may beTotal number
    
    Average
    
    as part of publicly
    
    purchased under theof shares
    
    price paid
    
    announced plans or
    
    recent plans orPeriod
    
    purchased
    
    per share
    
    programs
    
    programs*October 1 to 31, 2007
    
    
    712,534
    
    
    $
    11.08
    
    
    
    703,736
    
    
    
    126,864November 1 to 30, 2007
    
    
    1,134,864
    
    
    
    10.36
    
    
    
    1,134,864
    
    
    
    1,992,000December 1 to 31, 2007
    
    
    1,754,900
    
    
    
    10.20
    
    
    
    1,754,900
    
    
    
    2,237,100Total
    
    
    3,602,298
    
    
    $
    10.43
    
    
    
    3,593,500
 
 *
    
    At period end.    42




---



##### Table of Contents



PERFORMANCE
    GRAPH
    Bank
    Mutual Corporation
  Total
    Return Performance
  
  Period EndingIndex

12/31/02

12/31/03

12/31/04

12/31/05

12/31/06

12/31/07Bank Mutual Corporation


100.00



183.13



198.85



177.15



207.42



186.37NASDAQ US Stock Market Index


100.00



150.01



162.89



165.13



180.85



198.60SNL Midwest Thrift Index


100.00



138.93



153.42



149.92



170.16



143.72




---



##### Table of Contents



Item 6 . Selected Financial Data
 Selected Financial Highlights
  At December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(In thousands except number of shares and per share amounts)Selected Financial Condition Data:Total assets
    
    $
    3,488,046
    
    
    $
    3,451,385
    
    
    $
    3,431,377
    
    
    $
    3,445,299
    
    
    $
    3,108,527Loans receivable, net
    
    
    1,994,556
    
    
    
    2,024,325
    
    
    
    1,990,492
    
    
    
    1,875,885
    
    
    
    1,712,278Loans held for sale
    
    
    7,952
    
    
    
    3,787
    
    
    
    2,312
    
    
    
    4,987
    
    
    
    4,056Securities available-for-sale, at fair value:Investment securities
    
    
    99,450
    
    
    
    48,290
    
    
    
    63,361
    
    
    
    68,753
    
    
    
    67,854Mortgage-related securities
    
    
    1,099,922
    
    
    
    1,064,851
    
    
    
    1,087,816
    
    
    
    1,266,224
    
    
    
    1,053,349Foreclosed properties and repossessed assets
    
    
    3,687
    
    
    
    1,231
    
    
    
    708
    
    
    
    1,621
    
    
    
    630Goodwill
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570
    
    
    
    52,570Other intangible assets
    
    
    2,428
    
    
    
    3,089
    
    
    
    3,750
    
    
    
    4,412
    
    
    
    5,073Mortgage servicing rights
    
    
    4,708
    
    
    
    4,653
    
    
    
    4,771
    
    
    
    4,542
    
    
    
    4,698Deposits
    
    
    2,112,968
    
    
    
    2,158,641
    
    
    
    2,086,822
    
    
    
    1,982,881
    
    
    
    2,052,290Borrowings
    
    
    912,459
    
    
    
    705,025
    
    
    
    765,796
    
    
    
    761,525
    
    
    
    299,491Shareholders equity
    
    
    430,035
    
    
    
    533,779
    
    
    
    544,374
    
    
    
    670,454
    
    
    
    731,080Tangible shareholders equity
    
    
    371,303
    
    
    
    474,706
    
    
    
    484,786
    
    
    
    610,698
    
    
    
    670,771Number of shares outstanding  net of
treasury
stock
    
    
    49,834,756
    
    
    
    60,277,087
    
    
    
    62,325,268
    
    
    
    73,485,113
    
    
    
    78,775,779Book value per share
    
    
    8.63
    
    
    
    8.86
    
    
    
    8.73
    
    
    
    9.12
    
    
    
    9.28Tangible book value per share
    
    
    7.45
    
    
    
    7.88
    
    
    
    7.78
    
    
    
    8.31
    
    
    
    8.51
 44




---



##### Table of Contents



For the Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(In thousands except per share amount)Selected Operating Data:Total interest income
    
    $
    182,468
    
    
    $
    173,871
    
    
    $
    164,210
    
    
    $
    148,921
    
    
    $
    141,070Total interest expense
    
    
    113,771
    
    
    
    99,091
    
    
    
    77,231
    
    
    
    58,498
    
    
    
    69,482Net interest income
    
    
    68,697
    
    
    
    74,780
    
    
    
    86,979
    
    
    
    90,423
    
    
    
    71,588Provision for loan losses
    
    
    (272
    )
    
    
    632
    
    
    
    541
    
    
    
    1,330
    
    
    
    1,304Net interest income after provision
for loan losses
    
    
    68,969
    
    
    
    74,148
    
    
    
    86,438
    
    
    
    89,093
    
    
    
    70,284Total noninterest income
    
    
    20,961
    
    
    
    17,568
    
    
    
    17,441
    
    
    
    16,175
    
    
    
    19,618Noninterest expense:Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of other intangible assets
    
    
    661
    
    
    
    661
    
    
    
    661
    
    
    
    661
    
    
    
    661Total noninterest expense
    
    
    63,543
    
    
    
    61,311
    
    
    
    60,837
    
    
    
    60,082
    
    
    
    55,608Minority interest income in real estate
operations
    
    
    392
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income before income taxes
    
    
    25,995
    
    
    
    30,405
    
    
    
    43,042
    
    
    
    45,186
    
    
    
    34,294Income tax expense
    
    
    8,892
    
    
    
    9,808
    
    
    
    15,016
    
    
    
    15,632
    
    
    
    11,695Net income
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026
    
    
    $
    29,554
    
    
    $
    22,599Earnings per share-basic
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    0.44
    
    
    $
    0.39
    
    
    $
    0.30Earnings per share-diluted
    
    $
    0.31
    
    
    $
    0.34
    
    
    $
    0.43
    
    
    $
    0.38
    
    
    $
    0.29Cash dividends paid per share
    
    $
    0.33
    
    
    $
    0.29
    
    
    $
    0.25
    
    
    $
    0.18
    
    
    $
    0.12
 At or for the Year Ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003Selected Financial Ratios:Net interest margin (1)
    
    
    2.07
    %
    
    
    2.25
    %
    
    
    2.62
    %
    
    
    3.00
    %
    
    
    2.58
    %Net interest rate spread
    
    
    1.57
    
    
    
    1.72
    
    
    
    2.15
    
    
    
    2.44
    
    
    
    2.17Return on average assets
    
    
    0.49
    
    
    
    0.59
    
    
    
    0.80
    
    
    
    0.93
    
    
    
    0.76Return on average shareholders equity
    
    
    3.57
    
    
    
    3.89
    
    
    
    4.84
    
    
    
    4.10
    
    
    
    5.45Return on average tangible
shareholders equity(2)
    
    
    4.07
    
    
    
    4.38
    
    
    
    5.39
    
    
    
    4.47
    
    
    
    6.30Efficiency ratio, excluding
amortization of goodwill
(3)
    
    
    70.87
    
    
    
    66.39
    
    
    
    58.26
    
    
    
    56.36
    
    
    
    60.97Noninterest expense (excluding
amortization of goodwill) as a
percent of adjusted
average assets
    
    
    1.81
    
    
    
    1.77
    
    
    
    1.74
    
    
    
    1.88
    
    
    
    1.88Shareholders equity to total assets
    
    
    12.33
    
    
    
    15.47
    
    
    
    15.86
    
    
    
    19.46
    
    
    
    23.52Tangible shareholders equity to
adjusted total assets (4)
    
    
    10.83
    
    
    
    13.99
    
    
    
    14.38
    
    
    
    18.04
    
    
    
    22.01Selected Asset Quality Ratios:Non-performing loans to loans
receivable, net
    
    
    0.65
    %
    
    
    0.72
    %
    
    
    0.29
    %
    
    
    0.33
    %
    
    
    0.61
    %Non-performing assets to total assets
    
    
    0.48
    
    
    
    0.46
    
    
    
    0.19
    
    
    
    0.23
    
    
    
    0.35Allowance for loan losses to
non-performing loans
    
    
    90.98
    
    
    
    86.74
    
    
    
    207.23
    
    
    
    222.09
    
    
    
    132.77Allowance for loan losses to
non-performing assets
    
    
    70.80
    
    
    
    79.95
    
    
    
    184.81
    
    
    
    176.46
    
    
    
    125.17Allowance for loan losses to total
loans receivable, net
    
    
    0.59
    
    
    
    0.62
    
    
    
    0.61
    
    
    
    0.74
    
    
    
    0.80Charge-offs to average loans
    
    
    0.03
    
    
    
    0.01
    
    
    
    0.12
    
    
    
    0.07
    
    
    
    0.02
 
 (1)
    
    Net interest margin is calculated by dividing net interest income by average earnings
assets.(2)
    
    This ratio is calculated by dividing net income by total shareholders equity minus
goodwill, other intangible assets net of deferred taxes and mortgage servicing rights.(3)
    
    Efficiency ratio is calculated by dividing noninterest expense by the sum of net
interest income and noninterest income.(4)
    
    The ratio is calculated by dividing total shareholders equity minus goodwill, other
intangible assets net of deferred taxes and mortgage servicing rights by the sum of total
assets minus goodwill, other intangible assets net of deferred taxes and mortgage servicing
rights. 45




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Overview
  Comparisons of Financial Condition at December 31, 2007 and 2006
 Assets
      During the year ended December 31,2007
    
    2006(In thousands)Originations:Mortgage loansOne- to four- family
    
    $
    195,923
    
    
    $
    208,524Multi-family and commercial real estate
    
    
    200,304
    
    
    
    138,772Consumer loans
    
    
    119,319
    
    
    
    158,690Commercial business loans
    
    
    45,862
    
    
    
    42,888Total loans originated
    
    
    561,408
    
    
    
    548,874Purchases:Mortgage loans
    
    
    76,619
    
    
    
    157,399Total loans originated and purchased
    
    $
    638,027
    
    
    $
    706,273
  46




---



##### Table of Contents



47




---



##### Table of Contents



At December 31,2007
    
    2006(In thousands)Accrued Interest:Mortgage-related securities
    
    $
    4,463
    
    
    $
    4,207Investment securities
    
    
    687
    
    
    
    12Loans receivable
    
    
    9,475
    
    
    
    9,288Total accrued interest
    
    
    14,625
    
    
    
    13,507Foreclosed properties and repossessed assets
    
    
    3,687
    
    
    
    1,231Premises and equipment
    
    
    51,628
    
    
    
    50,515Federal Home Loan Bank stock, at cost
    
    
    46,092
    
    
    
    45,876Bank owned life insurance
    
    
    48,871
    
    
    
    46,430Prepaid and other
    
    
    22,608
    
    
    
    46,801$
    187,511
    
    
    $
    204,360
      48




---



##### Table of Contents



Liabilities
   Shareholders Equity
      49




---



##### Table of Contents



Average Balance Sheet and Yield/Rate Analysis
  AVERAGE BALANCE SHEET, INTEREST AND RATE PAIDYears ended December 31,2007
    
    
    2006
    
    
    2005Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/
    
    
    Average
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost
    
    
    Balance
    
    
    Paid
    
    
    Cost(Dollars in thousands)Assets:Interest-Earning Assets (1):Loans receivable, net
    
    $
    2,016,225
    
    
    $
    122,608
    
    
    
    6.08
    %
    
    $
    2,042,534
    
    
    $
    118,175
    
    
    
    5.79
    %
    
    $
    1,970,990
    
    
    $
    107,553
    
    
    
    5.46
    %Mortgage-related securities
    
    
    1,130,780
    
    
    
    52,518
    
    
    
    4.64
    
    
    
    1,134,822
    
    
    
    50,017
    
    
    
    4.41
    
    
    
    1,217,647
    
    
    
    51,721
    
    
    
    4.25Investment securities (2)
    
    
    118,625
    
    
    
    4,871
    
    
    
    4.11
    
    
    
    101,987
    
    
    
    3,762
    
    
    
    3.69
    
    
    
    113,670
    
    
    
    4,168
    
    
    
    3.67Interest-earning deposits
    
    
    9,186
    
    
    
    430
    
    
    
    4.68
    
    
    
    10,882
    
    
    
    483
    
    
    
    4.44
    
    
    
    11,796
    
    
    
    356
    
    
    
    3.02Federal funds
    
    
    39,596
    
    
    
    2,041
    
    
    
    5.15
    
    
    
    28,581
    
    
    
    1,434
    
    
    
    5.02
    
    
    
    10,623
    
    
    
    412
    
    
    
    3.88Total interest-earning assets
    
    
    3,314,412
    
    
    
    182,468
    
    
    
    5.50
    
    
    
    3,318,806
    
    
    
    173,871
    
    
    
    5.24
    
    
    
    3,324,726
    
    
    
    164,210
    
    
    
    4.94Noninterest-earning assets
    
    
    197,212
    
    
    
    
    
    
    
    
    
    
    
    146,649
    
    
    
    
    
    
    
    
    
    
    
    161,927Total average assets
    
    
    3,511,624
    
    
    
    
    
    
    
    
    
    
    $
    3,465,455
    
    
    
    
    
    
    
    
    
    
    $
    3,486,653Liabilities and Equity:Interest-Bearing Liabilities:Savings deposits
    
    $
    194,887
    
    
    
    924
    
    
    
    0.47
    
    
    $
    215,525
    
    
    
    923
    
    
    
    0.43
    
    
    $
    244,954
    
    
    
    1,048
    
    
    
    0.43Money market accounts
    
    
    267,338
    
    
    
    8,500
    
    
    
    3.18
    
    
    
    258,307
    
    
    
    7,620
    
    
    
    2.95
    
    
    
    283,958
    
    
    
    5,548
    
    
    
    1.95Interest-bearing
demand accounts
    
    
    161,652
    
    
    
    351
    
    
    
    0.22
    
    
    
    163,446
    
    
    
    351
    
    
    
    0.21
    
    
    
    168,962
    
    
    
    369
    
    
    
    0.22Time deposits
    
    
    1,381,480
    
    
    
    66,236
    
    
    
    4.79
    
    
    
    1,368,166
    
    
    
    59,818
    
    
    
    4.37
    
    
    
    1,191,364
    
    
    
    42,371
    
    
    
    3.56Total deposits
    
    
    2,005,357
    
    
    
    76,011
    
    
    
    3.79
    
    
    
    2,005,444
    
    
    
    68,712
    
    
    
    3.43
    
    
    
    1,889,238
    
    
    
    49,336
    
    
    
    2.61Advance payment by borrowers
for taxes and insurance
    
    
    19,493
    
    
    
    22
    
    
    
    0.11
    
    
    
    19,588
    
    
    
    24
    
    
    
    0.12
    
    
    
    19,412
    
    
    
    26
    
    
    
    0.13Borrowings
    
    
    869,110
    
    
    
    37,738
    
    
    
    4.34
    
    
    
    785,861
    
    
    
    30,355
    
    
    
    3.86
    
    
    
    862,649
    
    
    
    27,869
    
    
    
    3.23Total interest-bearing
liabilities
    
    
    2,893,960
    
    
    
    113,771
    
    
    
    3.93
    
    
    
    2,810,893
    
    
    
    99,091
    
    
    
    3.52
    
    
    
    2,771,299
    
    
    
    77,231
    
    
    
    2.79Noninterest-Bearing LiabilitiesNoninterest-bearing deposits
    
    
    92,810
    
    
    
    
    
    
    
    
    
    
    
    96,308
    
    
    
    
    
    
    
    
    
    
    
    103,762Other noninterest-
bearing liabilities
    
    
    45,854
    
    
    
    
    
    
    
    
    
    
    
    29,364
    
    
    
    
    
    
    
    
    
    
    
    32,369Total noninterest-
bearing liabilities
    
    
    138,664
    
    
    
    
    
    
    
    
    
    
    
    125,672
    
    
    
    
    
    
    
    
    
    
    
    136,131Total liabilities
    
    
    3,032,624
    
    
    
    
    
    
    
    
    
    
    
    2,936,565
    
    
    
    
    
    
    
    
    
    
    
    2,907,430Equity
    
    
    479,000
    
    
    
    
    
    
    
    
    
    
    
    528,890
    
    
    
    
    
    
    
    
    
    
    
    579,223Total average liabilities
and equity
    
    $
    3,511,624
    
    
    
    
    
    
    
    
    
    
    $
    3,465,455
    
    
    
    
    
    
    
    
    
    
    $
    3,486,653Net interest income and net
interest rate spread (3)
    
    
    
    
    
    $
    68,697
    
    
    
    1.57
    
    
    
    
    
    
    $
    74,780
    
    
    
    1.72
    
    
    
    
    
    
    $
    86,979
    
    
    
    2.15Net interest-earning assets
and net interest margin(4)
    
    $
    420,452
    
    
    
    
    
    
    
    2.07
    %
    
    $
    507,913
    
    
    
    
    
    
    
    2.25
    %
    
    $
    553,427
    
    
    
    
    
    
    
    2.62
    %Average interest-earnings
assets to average interest-
bearing liabilities
    
    
    1.15
    x
    
    
    
    
    
    
    
    
    
    
    1.18
    x
    
    
    
    
    
    
    
    
    
    
    1.20
    x
 
 (1)
    
    For the purposes of these computations, non-accruing loans and loans held for sale are
included in the average loans outstanding.(2)
    
    FHLB stock is included in investment securities dollars outstanding and yields.(3)
    
    Interest rate spread is the difference between the average yield on interest-earning assets
and the average cost on interest-bearing liabilities.(4)
    
    Net interest margin is determined by dividing net interest income by total interest-earning
assets. 
 50




---



##### Table of Contents



Rate/Volume Analysis
  (1)
    
    changes attributable to changes in volume (change in volume multiplied by prior
rate);(2)
    
    changes attributable to change in rate (changes in rate multiplied by prior
volume); and(3)
    
    the net change.
  Year Ended December 31,2007 Compared to 2006Increase (Decrease) Due ToVolume (1)
    
    Rate (2)
    
    Net (3)(In thousands)Interest-earning assets:Loans receivable
    
    $
    (1,430
    )
    
    $
    5,863
    
    
    $
    4,433Mortgage-related securities
    
    
    (101
    )
    
    
    2,602
    
    
    
    2,501Investment securities
    
    
    655
    
    
    
    454
    
    
    
    1,109Interest-earning deposits
    
    
    (78
    )
    
    
    25
    
    
    
    (53
    )Federal funds
    
    
    567
    
    
    
    40
    
    
    
    607Total
    
    
    (387
    )
    
    
    8,984
    
    
    
    8,597Interest-bearing liabilities:Savings deposits
    
    
    (81
    )
    
    
    82
    
    
    
    1Money market deposits
    
    
    272
    
    
    
    608
    
    
    
    880Interest-bearing demand deposits
    
    
    (4
    )
    
    
    4
    
    
    
    Time deposits
    
    
    587
    
    
    
    5,831
    
    
    
    6,418Advance payment by borrowers for
taxes and insurance
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Borrowings
    
    
    3,397
    
    
    
    3,986
    
    
    
    7,383Total
    
    
    4,171
    
    
    
    10,509
    
    
    
    14,680Net change in net interest income
    
    $
    (4,558
    )
    
    $
    (1,525
    )
    
    $
    (6,083
    )
 Year Ended December 31,2006 Compared to 2005Increase (Decrease) Due ToVolume (1)
    
    Rate (2)
    
    Net (3)(In thousands)Interest-earning assets:Loans receivable
    
    $
    3,971
    
    
    $
    6,651
    
    
    $
    10,622Mortgage-related securities
    
    
    (3,605
    )
    
    
    1,901
    
    
    
    (1,704
    )Investment securities
    
    
    (431
    )
    
    
    25
    
    
    
    (406
    )Interest-earning deposits
    
    
    (30
    )
    
    
    157
    
    
    
    127Federal funds
    
    
    902
    
    
    
    120
    
    
    
    1,022Total
    
    
    807
    
    
    
    8,854
    
    
    
    9,661Interest-bearing liabilities:Savings deposits
    
    
    (125
    )
    
    
    
    
    
    
    (125
    )Money market deposits
    
    
    (538
    )
    
    
    2,610
    
    
    
    2,072Interest-bearing demand deposits
    
    
    (12
    )
    
    
    (6
    )
    
    
    (18
    )Time deposits
    
    
    6,859
    
    
    
    10,588
    
    
    
    17,447Advance payment by borrowers for
taxes and insurance
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Borrowings
    
    
    (2,632
    )
    
    
    5,118
    
    
    
    2,486Total
    
    
    3,552
    
    
    
    18,308
    
    
    
    21,860Net change in net interest income
    
    $
    (2,745
    )
    
    $
    (9,454
    )
    
    $
    (12,199
    )
 51




---



##### Table of Contents



Comparisons of Operating Results for Years Ended December 31, 2007 and 2006
 General
  Net Interest Income
   Total Interest Income
      Total Interest Expense
  52




---



##### Table of Contents



Provision for (Recovery of) Loan Losses
    Noninterest Income
     53




---



##### Table of Contents



Noninterest Expense
     Income Taxes
    54




---



##### Table of Contents



55




---



##### Table of Contents



Comparisons of Operating Results for Years Ended December 31, 2006 and 2005
 General
  Net Interest Income
   Total Interest Income
      Total Interest Expense
   56




---



##### Table of Contents



Provision for Loan Losses
   Noninterest Income
        Noninterest Expense
  57




---



##### 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(In thousands)Deposits without a stated
maturity (a)
    
    $
    732,690
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    732,690Certificates of deposits (a)
    
    
    1,076,140
    
    
    
    288,536
    
    
    
    15,602
    
    
    
    
    
    
    
    1,380,278Borrowed funds (b)
    
    
    1,025
    
    
    
    
    
    
    
    100,000
    
    
    
    811,434
    
    
    
    912,459Operating leases
    
    
    1,270
    
    
    
    1,504
    
    
    
    824
    
    
    
    1,297
    
    
    
    4,895Purchase obligations
    
    
    2,160
    
    
    
    2,880
    
    
    
    
    
    
    
    
    
    
    
    5,040Deferred retirement plans and
deferred compensation plans
    
    
    649
    
    
    
    2,030
    
    
    
    2,594
    
    
    
    9,108
    
    
    
    14,381
 
 (a)
    
    Excludes interest to be paid in the periods indicated.(b)
    
    Includes $866.0 million of borrowings that contain quarterly call features after an
initial locked interest rate period of 6 months to 2 years.  58




---



##### Table of Contents



Payments Due InOne to
    
    Three to
    
    OverOne Year
    
    Three
    
    Five
    
    FiveOr Less
    
    Years
    
    Years
    
    Years
    
    Total(In thousands)Commitments to extend credit:Commercial
    
    $
    9,320
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    9,320Residential real estate
    
    
    28,520
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,520Revolving home equity
and credit card lines
    
    
    153,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153,553Standby letters of credit
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    135Commercial letters of credit
    
    
    20,167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,167Unused commercial lines
of credit
    
    
    6,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,131Net commitments to sell
mortgage loans
    
    
    10,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,469
  Impact of Inflation and Changing Prices
  Critical Accounting Policies
  
    
    Establishing the amount of the allowance for loan losses requires the use of our
judgment. The allowance for loan losses is maintained at a level believed adequate by
management to absorb losses inherent in the loan portfolio and is based on the size and
current risk characteristics of the loan portfolio, an assessment of individual problem
loans and actual loss experience, current economic events in specific industries and
geographical areas, including unemployment levels, and other pertinent factors, including
regulatory guidance and general economic conditions. Determination of the allowance is
inherently subjective as it requires significant estimates, including the amounts and
timing of expected future cash flows on impaired loans, estimated losses on pools of
homogeneous loans based on historical loss experience, and consideration of current
economic trends, all of which may be susceptible to significant change. Loan losses are
charged off against the allowance, while recoveries of amounts previously charged off are
credited to the allowance. A provision for loan losses is charged to operations based on
managements periodic evaluation of the factors previously mentioned, as well as other
pertinent factors. Evaluations are conducted at least
 59




---



##### Table of Contents



quarterly and more often if deemed necessary. If we misjudge a major component and
experience a loss, it will likely affect our earnings. Developments affecting loans can also
cause the allowance to vary significantly between quarters. We consistently challenge
ourselves in the review of the risk components to identify any changes in trends and their
cause.
    
    Another valuation that requires our judgment relates to mortgage servicing rights.
Mortgage servicing rights are recorded as an asset when loans are sold with servicing
rights retained. The total cost of loans sold is bifurcated between the loan balance and
the servicing asset based on their relative fair values. The capitalized value of mortgage
servicing rights is amortized in proportion to, and over the period of, estimated net
future servicing revenue. Mortgage servicing rights are carried at the lower of the
initial carrying value, adjusted for amortization, or estimated fair value. The carrying
values are periodically evaluated for impairment. For purposes of measuring impairment,
the servicing rights are stratified into pools based on term and interest rate. Impairment
represents the excess of the remaining capitalized cost of a stratified pool over its fair
value, and is recorded through a valuation allowance. The fair value of each servicing
rights pool is calculated based on the present value of estimated future cash flows using a
discount rate, given current market conditions. Estimates of fair value include
assumptions about prepayment speeds, interest rates and other factors which are subject to
change over time. Changes in these underlying assumptions could cause the fair value of
mortgage servicing rights, and the related valuation allowance, if any, to change
significantly in the future.
    
    We also use our judgment in the valuation of other intangible assets (core deposit base
intangibles). Core deposit base intangible assets have been recorded for core deposits
(defined as checking, money market and savings deposits) that have been acquired in
acquisitions that were accounted for as purchase business combinations. The core deposit
base intangible assets have been recorded using the assumption that they provide a more
favorable source of funding than more expensive wholesale borrowings. An intangible asset
has been recorded for the present value of the difference between the expected interest to
be incurred on these deposits and interest expense that would be expected if these deposits
were replaced by wholesale borrowings, over the expected lives of the core deposits. We
currently estimate the underlying core deposits have lives of seven to fifteen years. If
we find these deposits have a shorter life, we will have to write down the asset by
expensing the amount that is impaired.
    
    We review goodwill at least annually for impairment, which requires the use of our
judgment. Goodwill has been recorded as a result of two acquisitions in which the purchase
price exceeded the fair value of tangible net assets acquired. If goodwill is determined
to be impaired, it would be expensed in the period in which it became impaired.
    
    The assessment of our tax assets and liabilities involves the use of estimates,
assumptions, interpretations, and judgments concerning certain accounting pronouncements
and federal and state tax codes. There can be no assurance that future events, such as
court decisions, regulatory actions or interpretations, or changes in positions of federal
and state taxing authorities will not differ from managements current assessment. The
impact of these matters could be significant to the consolidated results of operations and
reported earnings.
 60




---



##### Table of Contents



Quarterly Financial Information
  Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(In thousands, except per share amounts)2007Interest income
    
    $
    44,415
    
    
    $
    45,716
    
    
    $
    45,958
    
    
    $
    46,379Interest expense
    
    
    27,336
    
    
    
    28,476
    
    
    
    28,920
    
    
    
    29,039Net interest income
    
    
    17,079
    
    
    
    17,240
    
    
    
    17,038
    
    
    
    17,340Provision for loan losses
    
    
    (929
    )
    
    
    51
    
    
    
    388
    
    
    
    218Net income after provision
for loan losses
    
    
    18,008
    
    
    
    17,189
    
    
    
    16,650
    
    
    
    17,122Total noninterest income
    
    
    4,945
    
    
    
    6,630
    
    
    
    5,003
    
    
    
    4,384Total noninterest expense
    
    
    15,876
    
    
    
    16,386
    
    
    
    16,007
    
    
    
    15,275Minority interest in income
of real estate operations
    
    
    
    
    
    
    391
    
    
    
    
    
    
    
    1Income before income taxes
    
    
    7,077
    
    
    
    7,042
    
    
    
    5,646
    
    
    
    6,230Income taxes
    
    
    2,370
    
    
    
    2,439
    
    
    
    1,923
    
    
    
    2,160Net income
    
    $
    4,707
    
    
    $
    4,603
    
    
    $
    3,723
    
    
    $
    4,070Earnings per share  Basic
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.08Earnings per share  Diluted
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.08Cash dividend paid per share
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.085
    
    
    $
    0.0852006Interest income
    
    $
    41,638
    
    
    $
    43,618
    
    
    $
    44,498
    
    
    $
    44,117Interest expense
    
    
    22,230
    
    
    
    24,105
    
    
    
    25,591
    
    
    
    27,165Net interest income
    
    
    19,408
    
    
    
    19,513
    
    
    
    18,907
    
    
    
    16,952Provision for loan losses
    
    
    63
    
    
    
    56
    
    
    
    178
    
    
    
    335Net income after provision
for loan losses
    
    
    19,345
    
    
    
    19,457
    
    
    
    18,729
    
    
    
    16,617Total noninterest income
    
    
    4,376
    
    
    
    4,117
    
    
    
    4,629
    
    
    
    4,446Total noninterest expense
    
    
    15,463
    
    
    
    15,090
    
    
    
    15,429
    
    
    
    15,329Income before income taxes
    
    
    8,258
    
    
    
    8,484
    
    
    
    7,929
    
    
    
    5,734Income taxes
    
    
    2,892
    
    
    
    3,005
    
    
    
    2,814
    
    
    
    1,097Net income
    
    $
    5,366
    
    
    $
    5,479
    
    
    $
    5,115
    
    
    $
    4,637Earnings per share  Basic
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.08Earnings per share  Diluted
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.08Cash dividend paid per share
    
    $
    0.07
    
    
    $
    0.07
    
    
    $
    0.075
    
    
    $
    0.075
 Recent Accounting Developments
  61




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Management of Interest Rate Risk
      
    
    maintain earnings and capital within self-imposed parameters over a
range of possible interest rate environments;
    
    coordinate interest rate risk policies and procedures with other
elements of our business plan, all within the context of the current
business environment and our regulatory capital and liquidity
requirements; and
    
    manage interest rate risk in a manner consistent with the approved
guidelines and policies set by our board of directors.
   
    
    emphasizing the origination of adjustable rate and certain 15-year
fixed rate mortgage loans for our portfolio, and selling certain 15,
20, and 30 year fixed rate mortgage loans;
    
    maintaining a significant level of investment securities and
mortgage-related securities with a weighted average life of less than
eight years or with interest rates that reprice in less than five
years; and
    
    managing deposits and borrowings to provide stable funding.
  62




---



##### Table of Contents



Gap Analysis.
    i)
    
    Investment securities  based upon contractual maturities and if applicable, call dates.ii)
    
    Mortgage-related securities  based upon an independent outside source for determining cash
flows (prepayment speeds).iii)
    
    Loans  based upon contractual maturities, repricing date, if applicable, scheduled
repayments of principal and projected prepayments of principal based upon our historical
experience or anticipated prepayments.iv)
    
    Deposits  based upon contractual maturities and our historical decay rates.v)
    
    Borrowings  based upon the earlier of call date or final maturity.
 63




---



##### Table of Contents



At December 31, 2007Within
    
    Three to
    
    More Than
    
    More Than
    
    OverThree
    
    Twelve
    
    One Year -
    
    Three Years -
    
    FiveMonths
    
    Months
    
    Three Years
    
    Five Years
    
    Years
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable:Mortgage loans:Fixed
    
    $
    56,513
    
    
    $
    127,148
    
    
    $
    227,712
    
    
    $
    89,811
    
    
    $
    105,844
    
    
    $
    607,028Adjustable
    
    
    153,334
    
    
    
    388,305
    
    
    
    350,096
    
    
    
    68,148
    
    
    
    308
    
    
    
    960,191Consumer loans
    
    
    70,868
    
    
    
    82,151
    
    
    
    131,920
    
    
    
    50,417
    
    
    
    43,581
    
    
    
    378,937Commercial and industrial loans
    
    
    31,359
    
    
    
    21,031
    
    
    
    1,025
    
    
    
    26
    
    
    
    184
    
    
    
    53,625Interest-earning deposits
    
    
    2,714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,714Investment securities
    
    
    47,990
    
    
    
    37,000
    
    
    
    14,270
    
    
    
    
    
    
    
    
    
    
    
    99,260Mortgage-related securities:Fixed
    
    
    87,154
    
    
    
    227,647
    
    
    
    335,180
    
    
    
    156,994
    
    
    
    197,151
    
    
    
    1,004,126Adjustable
    
    
    106,787
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,787Other interest-earning assets
    
    
    46,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,092Total interest-earning assets
    
    
    602,811
    
    
    
    883,282
    
    
    
    1,060,203
    
    
    
    365,396
    
    
    
    347,068
    
    
    
    3,258,760Noninterest-bearing and interest-
bearing liabilities:Noninterest-bearing demand
accounts
    
    
    4,605
    
    
    
    12,551
    
    
    
    25,786
    
    
    
    17,509
    
    
    
    37,055
    
    
    
    97,506Interest-bearing liabilities:Deposits:Interest-bearing demand accounts
    
    
    8,076
    
    
    
    22,012
    
    
    
    45,224
    
    
    
    30,708
    
    
    
    64,952
    
    
    
    170,972Savings accounts
    
    
    9,113
    
    
    
    24,699
    
    
    
    50,016
    
    
    
    33,257
    
    
    
    66,671
    
    
    
    183,756Money market accounts
    
    
    280,097
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280,097Time deposits
    
    
    453,134
    
    
    
    625,447
    
    
    
    267,155
    
    
    
    15,386
    
    
    
    
    
    
    
    1,361,122Advance payments by borrowers
for taxes and insurance
    
    
    
    
    
    
    1,815
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,815Borrowings
    
    
    1,261
    
    
    
    738
    
    
    
    603,120
    
    
    
    102,347
    
    
    
    204,993
    
    
    
    912,459Total interest-bearing
liabilities
    
    
    756,286
    
    
    
    687,262
    
    
    
    991,301
    
    
    
    199,207
    
    
    
    373,671
    
    
    
    3,007,727Interest rate sensitivity gap
    
    $
    (153,475
    )
    
    $
    196,020
    
    
    $
    68,902
    
    
    $
    166,189
    
    
    $
    (26,603
    )
    
    $
    251,033Cumulative interest rate
sensitivity gap
    
    $
    (153,475
    )
    
    $
    42,545
    
    
    $
    111,447
    
    
    $
    277,636
    
    
    $
    251,033Cumulative interest rate sensitivity
gap as a percentage total assets
    
    
    (4.40
    )%
    
    
    1.22
    %
    
    
    3.20
    %
    
    
    7.96
    %
    
    
    7.20
    %Cumulative interest-earning assets
as a percentage of interest
bearing liabilities
    
    
    79.71
    %
    
    
    102.95
    %
    
    
    104.58
    %
    
    
    110.54
    %
    
    
    108.35
    %
  64




---



##### Table of Contents



Present Value of Equity
   Present Value of Equityas Percent ofPresent Value of Equity
    
    Present Value of AssetsChange in
    
    Dollar
    
    Dollar
    
    Percent
    
    Present Value
    
    PercentInterest Rates
    
    Amount
    
    Change
    
    Change
    
    Ratio
    
    Change(Basis Points)
    
    (Dollars in thousands)+300
    
    $
    304,780
    
    
    $
    (187,459
    )
    
    
    (38.1
    )%
    
    
    9.29
    %
    
    
    (33.2
    )%+200
    
    
    382,698
    
    
    
    (109,541
    )
    
    
    (22.3
    )
    
    
    11.35
    
    
    
    (18.4
    )+100
    
    
    452,235
    
    
    
    (40,004
    )
    
    
    (8.1
    )
    
    
    13.08
    
    
    
    (5.9
    )0
    
    
    492,239
    
    
    
    
    
    
    
    
    
    
    
    13.91
    
    
    
    -100
    
    
    412,960
    
    
    
    (79,279
    )
    
    
    (16.1
    )
    
    
    11.53
    
    
    
    (17.1
    )-200
    
    
    345,583
    
    
    
    (146,656
    )
    
    
    (29.8
    )
    
    
    9.55
    
    
    
    (31.3
    )-300
    
    
    267,760
    
    
    
    (224,479
    )
    
    
    (45.6
    )
    
    
    7.33
    
    
    
    (47.3
    )
  65




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
   
    Share Based Payments Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements
   
 66




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Financial Condition
 December 312007
    
    
    2006(In Thousands)AssetsCash and due from banks
    
    $
    36,235
    
    
    $
    44,438Interest-earning deposits
    
    
    2,714
    
    
    
    1,022Cash and cash equivalents
    
    
    38,949
    
    
    
    45,460Securities available-for-sale, at fair value:Investment securities
    
    
    99,450
    
    
    
    48,290Mortgage-related securities
    
    
    1,099,922
    
    
    
    1,064,851Loans held for sale
    
    
    7,952
    
    
    
    3,787Loans receivable, net
    
    
    1,994,556
    
    
    
    2,024,325Goodwill
    
    
    52,570
    
    
    
    52,570Other intangible assets
    
    
    2,428
    
    
    
    3,089Mortgage servicing rights
    
    
    4,708
    
    
    
    4,653Other assets
    
    
    187,511
    
    
    
    204,360$
    3,488,046
    
    
    $
    3,451,385Liabilities and shareholders equityLiabilities:Deposits
    
    $
    2,112,968
    
    
    $
    2,158,641Borrowings
    
    
    912,459
    
    
    
    705,025Advance payments by borrowers for taxes and insurance
    
    
    1,815
    
    
    
    2,199Other liabilities
    
    
    27,859
    
    
    
    49,2233,055,101
    
    
    
    2,915,088Minority interest in real estate development
    
    
    2,910
    
    
    
    2,518Shareholders equity:Preferred stock  $.01 par value:Authorized 20,000,000 shares in 2007 and 2006Issued and outstanding  none in 2007 and 2006
    
    
    
    
    
    
    Common stock  $.01 par value:Authorized 200,000,000 shares in 2007 and 2006Issued  78,783,849 shares in 2007 and 2006Outstanding  49,834,756 shares in 2007 and 60,277,087 in 2006
    
    
    788
    
    
    
    788Additional paid-in capital
    
    
    498,408
    
    
    
    496,302Retained earnings
    
    
    273,330
    
    
    
    273,454Unearned ESOP shares
    
    
    (2,166
    )
    
    
    (3,066
    )Accumulated other comprehensive income
    
    
    (6,069
    )
    
    
    (15,426
    )Treasury stock  28,949,093 shares in 2007 and 18,506,762 in 2006
    
    
    (334,256
    )
    
    
    (218,273
    )Total shareholders equity
    
    
    430,035
    
    
    
    533,779$
    3,488,046
    
    
    $
    3,451,385
 See accompanying notes to consolidated financial statements.
 67




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Income
 Year ended December 312007
    
    
    2006
    
    
    2005(In Thousands, Except Per Share Amounts)Interest income:Loans
    
    $
    122,608
    
    
    $
    118,175
    
    
    $
    107,553Investment securities
    
    
    4,871
    
    
    
    3,762
    
    
    
    4,168Mortgage-related securities
    
    
    52,518
    
    
    
    50,017
    
    
    
    51,721Interest-earning deposits
    
    
    2,471
    
    
    
    1,917
    
    
    
    768Total interest income
    
    
    182,468
    
    
    
    173,871
    
    
    
    164,210Interest expense:Deposits
    
    
    76,011
    
    
    
    68,712
    
    
    
    49,336Borrowings
    
    
    37,738
    
    
    
    30,355
    
    
    
    27,869Advance payments by borrowers for taxes and insurance
    
    
    22
    
    
    
    24
    
    
    
    26Total interest expense
    
    
    113,771
    
    
    
    99,091
    
    
    
    77,231Net interest income
    
    
    68,697
    
    
    
    74,780
    
    
    
    86,979Provision for (recovery of) loan losses
    
    
    (272
    )
    
    
    632
    
    
    
    541Net interest income after provision for loan losses
    
    
    68,969
    
    
    
    74,148
    
    
    
    86,438Noninterest income:Service charges on deposits
    
    
    6,612
    
    
    
    6,085
    
    
    
    4,810Brokerage and insurance commissions
    
    
    2,617
    
    
    
    2,400
    
    
    
    2,470Loan related fees and servicing revenue
    
    
    1,560
    
    
    
    1,550
    
    
    
    1,364Gain on sales of loans
    
    
    1,478
    
    
    
    1,132
    
    
    
    1,863Gains (losses) on investments
    
    
    (1,228
    )
    
    
    694
    
    
    
    1,785Real estate investment partnership income
    
    
    1,422
    
    
    
    
    
    
    
    Other
    
    
    8,500
    
    
    
    5,707
    
    
    
    5,149Total noninterest income
    
    
    20,961
    
    
    
    17,568
    
    
    
    17,441Noninterest expenses:Compensation, payroll taxes and other employee benefits
    
    
    38,234
    
    
    
    37,468
    
    
    
    37,673Occupancy and equipment
    
    
    11,277
    
    
    
    10,539
    
    
    
    10,581Amortization of other intangible assets
    
    
    661
    
    
    
    661
    
    
    
    661Real estate investment partnership cost of sales
    
    
    645
    
    
    
    
    
    
    
    Other
    
    
    12,726
    
    
    
    12,643
    
    
    
    11,922Total noninterest expenses
    
    
    63,543
    
    
    
    61,311
    
    
    
    60,837Minority interest in income of real estate operations
    
    
    392
    
    
    
    
    
    
    
    Income before income taxes
    
    
    25,995
    
    
    
    30,405
    
    
    
    43,042Income taxes
    
    
    8,892
    
    
    
    9,808
    
    
    
    15,016Net income
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026Per share data:Earnings per share  basic
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    0.44Earnings per share  diluted
    
    $
    0.31
    
    
    $
    0.34
    
    
    $
    0.43Cash dividends per share paid
    
    $
    0.33
    
    
    $
    0.29
    
    
    $
    0.25
 See accompanying notes to consolidated financial statements.
 68




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Changes in Shareholders Equity
 Additional
    
    
    
    
    
    UnearnedCommon
    
    Paid-In
    
    Retained
    
    ESOPStock
    
    Capital
    
    Earnings
    
    Shares(In Thousands, Except Per Share Amounts)Balances at January 1, 2005
    
    $
    788
    
    
    $
    495,858
    
    
    $
    258,110
    
    
    $
    (4,865
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    28,026
    
    
    
    Other comprehensive incomeNet unrealized loss on
securities available-for-sale,
net of deferred income tax
liability of $7,663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability, net
of deferred income tax benefit
of $411
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,748
    
    
    
    
    
    
    
    899Exercise of stock options
    
    
    
    
    
    
    (1,017
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends ($0.25 per share)
    
    
    
    
    
    
    
    
    
    
    (16,223
    )
    
    
    Balances at December 31, 2005
    
    $
    788
    
    
    $
    497,589
    
    
    $
    269,913
    
    
    $
    (3,966
    )Impact of adoption of SAB No. 108
    
    
    
    
    
    
    
    
    
    
    (1,101
    )
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    20,597
    
    
    
    Other comprehensive incomeNet unrealized gain on
securities available-for-sale,
net of deferred income tax
benefit of $622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension asset, net of deferred
income tax liability of $457
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,977
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    
    
    
    
    (2,557
    )
    
    
    
    
    
    
    Share based payments
    
    
    
    
    
    
    5,248
    
    
    
    
    
    
    
    900Impact of adoption of SFAS No. 123R
    
    
    
    
    
    
    (6,955
    )
    
    
    
    
    
    
    Cash dividends ($0.29 per share)
    
    
    
    
    
    
    
    
    
    
    (15,955
    )
    
    
    Balance at December 31, 2006
    
    $
    788
    
    
    $
    496,302
    
    
    $
    273,454
    
    
    $
    (3,066
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    17,103
    
    
    
    Other comprehensive incomeNet unrealized gain on
securities available-for-sale,
net of deferred income tax
liability of $5,199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension asset, net of deferred
income tax liability of $349
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive incomePurchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Committed ESOP shares
    
    
    
    
    
    
    2,843
    
    
    
    
    
    
    
    900Exercise of stock options
    
    
    
    
    
    
    (3,001
    )
    
    
    
    
    
    
    Share based payments
    
    
    
    
    
    
    2,264
    
    
    
    
    
    
    
    Cash dividends ($0.33 per share)
    
    
    
    
    
    
    
    
    
    
    (17,227
    )
    
    
    Balance at December 31, 2007
    
    $
    788
    
    
    $
    498,408
    
    
    $
    273,330
    
    
    $
    (2,166
    )
 69




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated
Statements of Changes in Shareholders Equity
 Accumulated Other
    
    UnearnedComprehensive
    
    Deferred
    
    TreasuryIncome (Loss)
    
    Compensation
    
    Stock
    
    Total(In Thousands, Except Per Share Amounts)Balances at January 1, 2005
    
    $
    (4,844
    )
    
    $
    (10,076
    )
    
    $
    (64,517
    )
    
    $
    670,454Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,026Other comprehensive incomeNet unrealized loss on
securities available-for-sale, net of
deferred income tax liability of $7,663
    
    
    (13,116
    )
    
    
    
    
    
    
    
    
    
    
    (13,116
    )Minimum pension liability, net of deferred
income tax benefit of $411
    
    
    614
    
    
    
    
    
    
    
    
    
    
    
    614Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,524Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (134,542
    )
    
    
    (134,542
    )Committed ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,647Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    3,410
    
    
    
    2,393Amortization of deferred compensation
    
    
    
    
    
    
    3,121
    
    
    
    
    
    
    
    3,121Cash dividends ($0.25 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,223
    )Balances at December 31, 2005
    
    $
    (17,346
    )
    
    $
    (6,955
    )
    
    $
    (195,649
    )
    
    $
    544,374Impact of adoption of SAB No. 108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,101
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,597Other comprehensive incomeNet unrealized gain on
securities available-for-sale, net of
deferred income tax benefit of $622
    
    
    1,214
    
    
    
    
    
    
    
    
    
    
    
    1,214Pension asset, net of deferred income
tax liability of $457
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    706Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,517Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (27,828
    )
    
    
    (27,828
    )Committed ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,977Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    5,249
    
    
    
    2,692Share based payments
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    6,103Impact of adoption of SFAS No. 123R
    
    
    
    
    
    
    6,955
    
    
    
    
    
    
    
    Cash dividends ($0.29 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,955
    )Balance at December 31, 2006
    
    $
    (15,426
    )
    
    $
    
    
    
    $
    (218,273
    )
    
    $
    533,779Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,103Other comprehensive incomeNet unrealized gain on securities
available-for-sale, net of deferred
income tax liability of $5,199
    
    
    8,709
    
    
    
    
    
    
    
    
    
    
    
    8,709Pension asset, net of deferred income
tax liability of $349
    
    
    648
    
    
    
    
    
    
    
    
    
    
    
    648Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,460Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (120,687
    )
    
    
    (120,687
    )Committed ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,743Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    4,830
    
    
    
    1,829Share based payments
    
    
    
    
    
    
    
    
    
    
    (126
    )
    
    
    2,138Cash dividends ($0.33 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,227
    )Balance at December 31, 2007
    
    $
    (6,069
    )
    
    $
    
    
    
    $
    (334,256
    )
    
    $
    430,035
 70




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 312007
    
    2006
    
    2005(In Thousands)Operating activities:Net income
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026Adjustments to reconcile net income to net cash provided by
operating activities:Net (recovery of) provision for loan losses
    
    
    (272
    )
    
    
    632
    
    
    
    541Provision for depreciation
    
    
    2,620
    
    
    
    2,644
    
    
    
    2,699Amortization of other intangible assets
    
    
    661
    
    
    
    661
    
    
    
    661Net decrease (increase) in mortgage servicing rights
    
    
    (55
    )
    
    
    118
    
    
    
    (228
    )Minority interest in real estate investment partnership
    
    
    391
    
    
    
    
    
    
    
    Amortization of cost of stock benefit plans
    
    
    5,881
    
    
    
    9,080
    
    
    
    6,768Net (discount) premium amortization on securities
    
    
    (1,894
    )
    
    
    (826
    )
    
    
    144Net increase in Federal Home Loan Bank stock
    
    
    
    
    
    
    
    
    
    
    (10,351
    )Loans originated for sale
    
    
    (107,018
    )
    
    
    (90,988
    )
    
    
    (141,048
    )Net gain from real estate investment partnershipProceeds from loan sales
    
    
    104,331
    
    
    
    90,645
    
    
    
    145,586Net gain on sale of available-for-sale securities
    
    
    
    
    
    
    (694
    )
    
    
    (1,785
    )Other than
temporary impairment of available-for-sale securities
    
    
    1,228
    
    
    
    
    
    
    
    Net gain from real estate investment partnership
    
    
    (777
    )
    
    
    
    
    
    
    Gain on sales of loans originated for sale
    
    
    (1,478
    )
    
    
    (1,132
    )
    
    
    (1,863
    )Gain on sale of real estate owned
    
    
    
    
    
    
    (33
    )
    
    
    (44
    )Adoption of SAB 108
    
    
    
    
    
    
    (1,101
    )
    
    
    (Decrease) increase in other liabilities
    
    
    (15,517
    )
    
    
    26,616
    
    
    
    14,049Decrease (increase) in other assets
    
    
    21,415
    
    
    
    (44,682
    )
    
    
    (12,941
    )Increase in accrued interest receivable
    
    
    (1,118
    )
    
    
    (1,787
    )
    
    
    (369
    )Net cash provided by operating activities
    
    
    25,501
    
    
    
    9,750
    
    
    
    29,845Investing activities:Net purchases of investments in mutual funds
    
    
    
    
    
    
    (264
    )
    
    
    (1,493
    )Proceeds from maturities of investment securities
    
    
    
    
    
    
    14,721
    
    
    
    60,780Purchases of investment securities
    
    
    (51,270
    )
    
    
    
    
    
    
    (55,428
    )Purchases of mortgage-related securities
    
    
    (247,428
    )
    
    
    (198,460
    )
    
    
    (193,857
    )Principal repayments on mortgage-related securities
    
    
    227,041
    
    
    
    224,693
    
    
    
    352,866Proceeds from sale of investment securities
    
    
    
    
    
    
    702
    
    
    
    1,804Net decrease (increase) in loans receivable
    
    
    26,317
    
    
    
    (35,894
    )
    
    
    (115,686
    )Proceeds from real estate investment partnership
    
    
    1,422
    
    
    
    
    
    
    
    Purchase of Federal Home Loan Bank stock
    
    
    (216
    )
    
    
    
    
    
    
    Redemption of FHLB stock
    
    
    
    
    
    
    2,661
    
    
    
    Proceeds from sale of foreclosed properties
    
    
    949
    
    
    
    737
    
    
    
    1,341Net purchases of premises and equipment
    
    
    (3,722
    )
    
    
    (5,581
    )
    
    
    (6,345
    )Net cash (used in) provided by investing activities
    
    
    (46,907
    )
    
    
    3,315
    
    
    
    43,982
 71




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 312007
    
    2006
    
    2005(In Thousands)Financing activities:Net (decrease) increase in deposits
    
    
    (56,070
    )
    
    $
    65,172
    
    
    $
    102,381Net decrease in short-term borrowings
    
    
    (175,000
    )
    
    
    (25,000
    )
    
    
    (87,600
    )Proceeds from long-term borrowings
    
    
    657,950
    
    
    
    398,075
    
    
    
    110,232Repayments on long-term borrowings
    
    
    (275,516
    )
    
    
    (433,846
    )
    
    
    (18,361
    )Net decrease
in advance payments by borrowers for taxes and insurance
    
    
    (384
    )
    
    
    (330
    )
    
    
    (267
    )Proceeds from exercise of stock options
    
    
    1,396
    
    
    
    1,940
    
    
    
    2,393Excess tax benefit from exercise of stock options
    
    
    433
    
    
    
    752
    
    
    
    Cash dividends
    
    
    (17,227
    )
    
    
    (15,955
    )
    
    
    (16,223
    )Purchase of treasury stock
    
    
    (120,687
    )
    
    
    (27,828
    )
    
    
    (134,542
    )Net cash provided by (used in) by financing activities
    
    
    14,895
    
    
    
    (37,020
    )
    
    
    (41,987
    )(Decrease) increase in cash and cash equivalents
    
    
    (6,511
    )
    
    
    (23,955
    )
    
    
    31,840Cash and cash equivalents at beginning of year
    
    
    45,460
    
    
    
    69,415
    
    
    
    37,575Cash and cash equivalents at end of year
    
    $
    38,949
    
    
    $
    45,460
    
    
    $
    69,415Supplemental information:Interest paid on deposits and borrowings
    
    $
    102,744
    
    
    $
    92,022
    
    
    $
    75,100Income taxes paid
    
    
    8,187
    
    
    
    10,786
    
    
    
    13,040Loans transferred to foreclosed properties and
repossessed assets
    
    
    3,724
    
    
    
    1,429
    
    
    
    538
 72




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies
 Business
   Principles of Consolidation
   Cash and Cash Equivalents
  Federal Home Loan Bank Stock
  Investment and Mortgage-Related Securities Available-for-Sale
  73




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (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
  74




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (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
  75




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Premises and Equipment
  Goodwill and Other Intangible Assets
  Life Insurance Policies
  Income Taxes
  Earnings Per Share
  76




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
 Pension Costs
   Segment Information
  Stock Compensation
     77




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
  For the Year Ended December 312007
    
    2006
    
    2005Stock
    
    Weighted
    
    Stock
    
    Weighted
    
    Stock
    
    WeightedOptions
    
    Avg. Cost
    
    Options
    
    Avg. Cost
    
    Options
    
    Avg. CostOutstanding
at beginning of year
    
    
    4,525,238
    
    
    $
    7.0730
    
    
    
    4,919,051
    
    
    $
    6.8170
    
    
    
    5,276,953
    
    
    $
    6.5760Granted
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    $
    12.2340
    
    
    
    
    
    
    
    Exercised
    
    
    402,610
    
    
    $
    3.7620
    
    
    
    436,813
    
    
    $
    4.7236
    
    
    
    354,702
    
    
    $
    3.2056Forfeited
    
    
    32,000
    
    
    $
    10.6730
    
    
    
    7,000
    
    
    $
    10.6730
    
    
    
    3,200
    
    
    $
    10.6730Outstanding at end of year
    
    
    4,090,628
    
    
    $
    7.3650
    
    
    
    4,525,238
    
    
    $
    7.0730
    
    
    
    4,919,051
    
    
    $
    6.8170
 At December 31, 2007Unexercisable Stock Options
    
    Exercisable Stock OptionsRemainingPrice
    
    Shares
    
    Contractual Life
    
    Shares
    
    Exercise Price$3.2056
    
    
    
    
    
    
    
    
    
    
    1,819,928
    
    
    $
    3.2056$10.6730
    
    
    886,000
    
    
    6.4 years
    
    
    1,335,000
    
    
    $
    10.6730$12.2340
    
    
    40,000
    
    
    8.5 years
    
    
    10,000
    
    
    $
    12.2340
  2006Risk-free interest rate
    
    
    5.04
    %Dividend yield
    
    
    2.00
    %Expected stock volatility
    
    
    12.40
    %Expected years until exercise
    
    
    7.50
  78




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
    Year Ended December 312005Net income:As reported
    
    $
    28,026Pro forma
    
    $
    27,086Basic earnings per share:As reported
    
    $
    0.44Pro forma
    
    $
    0.43Diluted earnings per share:As reported
    
    $
    0.43Pro forma
    
    $
    0.42
 Recent Accounting Changes
  79




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 1. Summary of Significant Accounting Policies (continued)
     
 Reclassifications
  80




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 2. Securities, Available-for-Sale
  Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueAt December 31, 2007:Investment securities:Mutual funds
    
    $
    46,548
    
    
    $
    2
    
    
    $
    
    
    
    $
    46,550U.S. government and federal obligations
    
    
    51,270
    
    
    
    766
    
    
    
    
    
    
    
    52,036Stock in federal agencies
    
    
    1,442
    
    
    
    44
    
    
    
    (622
    )
    
    
    864Total investment securities
    
    
    99,260
    
    
    
    812
    
    
    
    (622
    )
    
    
    99,450Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    529,622
    
    
    
    2,660
    
    
    
    (7,384
    )
    
    
    524,898Federal National Mortgage Association
    
    
    368,104
    
    
    
    1,240
    
    
    
    (6,007
    )
    
    
    363,337Private placement CMOs
    
    
    181,401
    
    
    
    309
    
    
    
    (1,072
    )
    
    
    180,638Government National Mortgage Association
    
    
    31,786
    
    
    
    8
    
    
    
    (745
    )
    
    
    31,049Total mortgage-related securities
    
    
    1,110,913
    
    
    
    4,217
    
    
    
    (15,208
    )
    
    
    1,099,922Total
    
    $
    1,210,173
    
    
    $
    5,029
    
    
    $
    (15,830
    )
    
    $
    1,199,372
  Less than 12 months
    
    Greater than 12 monthsIn an unrealized loss position
    
    In an unrealized loss positionTotal
    
    TotalUnrealized
    
    
    
    
    
    
    
    
    
    Unrealized
    
    Number
    
    Estimated
    
    Unrealized
    
    EstimatedLoss
    
    Number
    
    Estimated
    
    Loss
    
    of
    
    Fair
    
    Loss
    
    FairAmount
    
    of Securities
    
    Fair Value
    
    Amount
    
    Securities
    
    Value
    
    Amount
    
    ValueInvestment securities:Stock in federal agencies
    
    $
    (622
    )
    
    
    1
    
    
    $
    818
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    (622
    )
    
    $
    818Total investment securities
    
    
    (622
    )
    
    
    1
    
    
    
    818
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (622
    )
    
    
    818Mortgage-related securities:Federal Home Loan Mortgage
Corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,384
    )
    
    
    106
    
    
    
    323,393
    
    
    
    (7,384
    )
    
    
    323,393Federal National Mortgage
Association
    
    
    (142
    )
    
    
    2
    
    
    
    24,575
    
    
    
    (5,865
    )
    
    
    80
    
    
    
    227,448
    
    
    
    (6,007
    )
    
    
    252,023Government National Mortgage
Association
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (745
    )
    
    
    10
    
    
    
    30,656
    
    
    
    (745
    )
    
    
    30,656Private placement CMOs
    
    
    (253
    )
    
    
    2
    
    
    
    15,892
    
    
    
    (819
    )
    
    
    16
    
    
    
    92,050
    
    
    
    (1,072
    )
    
    
    107,942Total mortgage-related
securities
    
    
    (395
    )
    
    
    4
    
    
    
    40,467
    
    
    
    (14,813
    )
    
    
    212
    
    
    
    673,547
    
    
    
    (15,208
    )
    
    
    714,014Total
    
    $
    (1,017
    )
    
    
    5
    
    
    $
    41,285
    
    
    $
    (14,813
    )
    
    
    212
    
    
    $
    673,547
    
    
    $
    (15,830
    )
    
    $
    714,832
  81




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 2. Securities, Available-for-Sale (continued)
 Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    ValueAt December 31, 2006:Investment securities:Mutual funds
    
    $
    47,775
    
    
    $
    
    
    
    $
    (1,183
    )
    
    $
    46,592Stock in federal agencies
    
    
    1,442
    
    
    
    256
    
    
    
    
    
    
    
    1,698Total investment securities
    
    
    49,217
    
    
    
    256
    
    
    
    (1,183
    )
    
    
    48,290Mortgage-related securities:Federal Home Loan Mortgage Corporation
    
    
    453,452
    
    
    
    89
    
    
    
    (12,137
    )
    
    
    441,404Federal National Mortgage Association
    
    
    382,197
    
    
    
    779
    
    
    
    (9,582
    )
    
    
    373,394Private Placement CMOs
    
    
    209,659
    
    
    
    182
    
    
    
    (1,939
    )
    
    
    207,902Government National Mortgage Association
    
    
    43,325
    
    
    
    7
    
    
    
    (1,181
    )
    
    
    42,151Total mortgage-related securities
    
    
    1,088,633
    
    
    
    1,057
    
    
    
    (24,839
    )
    
    
    1,064,851Total
    
    $
    1,137,850
    
    
    $
    1,313
    
    
    $
    (26,022
    )
    
    $
    1,113,141
  Amortized
    
    FairCost
    
    ValueDue in one year or less
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    
    
    
    
    Due after five years through ten years
    
    
    36,270
    
    
    
    36,919Due after ten years
    
    
    15,000
    
    
    
    15,117Mutual funds
    
    
    46,548
    
    
    
    46,550Stock in federal agencies
    
    
    1,442
    
    
    
    864Mortgage-related securities
    
    
    1,110,913
    
    
    
    1,099,922$
    1,210,173
    
    
    $
    1,199,372
  2007
    
    2006
    
    2005Change in unrealized holding gain
(loss) on available-for-sale
securities during the periodUnrealized net gains (losses)
    
    $
    13,908
    
    
    $
    1,836
    
    
    $
    (20,779
    )Related tax expense (benefit)
    
    
    5,199
    
    
    
    622
    
    
    
    (7,663
    )Change in other comprehensive income
    
    $
    8,709
    
    
    $
    1,214
    
    
    $
    (13,116
    )
 82




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 2. Securities, Available-for-Sale (continued)
  3. Loans Receivable
  December 312007
    
    2006Mortgage loans:One-to-four family
    
    $
    1,059,307
    
    
    $
    1,123,905Multifamily
    
    
    206,640
    
    
    
    157,768Commercial real estate
    
    
    202,528
    
    
    
    167,089Construction and development
    
    
    170,401
    
    
    
    187,323Total mortgage real estate loans
    
    
    1,638,876
    
    
    
    1,636,085Consumer and other loans:Fixed equity
    
    
    199,161
    
    
    
    227,811Home equity lines of credit
    
    
    90,631
    
    
    
    91,730Student
    
    
    21,845
    
    
    
    20,404Home improvement
    
    
    33,604
    
    
    
    33,287Automobile
    
    
    24,878
    
    
    
    46,752Other
    
    
    9,439
    
    
    
    11,262Total consumer and other loans
    
    
    379,558
    
    
    
    431,246Total commercial business loans
    
    
    53,784
    
    
    
    52,056Total loans receivable
    
    
    2,072,218
    
    
    
    2,119,387Less:Undisbursed loan proceeds
    
    
    68,457
    
    
    
    85,897Allowance for loan losses
    
    
    11,774
    
    
    
    12,574Unearned loan fees and discounts
    
    
    (2,569
    )
    
    
    (3,409
    )77,662
    
    
    
    95,062Total loans receivable  net
    
    $
    1,994,556
    
    
    $
    2,024,325
   Year ended December 312007
    
    2006
    
    2005Balance at beginning of year
    
    $
    12,574
    
    
    $
    12,090
    
    
    $
    13,923Provisions (recoveries of provisions)
    
    
    (272
    )
    
    
    632
    
    
    
    541Charge-offs
    
    
    (623
    )
    
    
    (367
    )
    
    
    (2,431
    )Recoveries
    
    
    95
    
    
    
    219
    
    
    
    57Balance at end of year
    
    $
    11,774
    
    
    $
    12,574
    
    
    $
    12,090
  83




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 3. Loans Receivable (continued)
  December 312007
    
    2006Impaired loans for which an allowance has been provided
    
    $
    15,957
    
    
    $
    14,920Impaired loans for which no allowance has been provided
    
    
    4,286
    
    
    
    2,338Total loans determined to be impaired
    
    
    20,243
    
    
    $
    17,258Allowance for loan losses related to impaired loans
    
    $
    1,715
    
    
    $
    2,672
 Year ended December 312007
    
    2006
    
    2005Average recorded investment in impaired loans
    
    $
    19,746
    
    
    $
    6,507
    
    
    $
    10,141Cash basis interest income recognized from impaired loans
    
    $
    853
    
    
    $
    179
    
    
    $
    233
 4. Goodwill, Other Intangible Assets and Mortgage Servicing Rights
    2007
    
    2006
    
    2005Mortgage servicing rights at beginning of year
    
    $
    4,653
    
    
    $
    4,771
    
    
    $
    4,542Additions
    
    
    1,246
    
    
    
    1,040
    
    
    
    1,777Amortization
    
    
    (1,191
    )
    
    
    (1,158
    )
    
    
    (1,548
    )Mortgage servicing rights at end of year
    
    
    4,708
    
    
    
    4,653
    
    
    
    4,771Valuation allowance
    
    
    
    
    
    
    
    
    
    
    Balance
    
    $
    4,708
    
    
    $
    4,653
    
    
    $
    4,771
  84




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 4. Goodwill, Other Intangible Assets and Mortgage Servicing Rights (continued)
   MortgageServicing
    
    Deposit BaseRights
    
    Intangibles
    
    TotalTwelve months ended December 31, 2007 (actual)
    
    $
    1,191
    
    
    $
    661
    
    
    $
    1,852Estimate for year ending December 31,2008
    
    $
    935
    
    
    $
    618
    
    
    $
    1,5532009
    
    
    934
    
    
    
    405
    
    
    
    1,3392010
    
    
    926
    
    
    
    405
    
    
    
    1,3312011
    
    
    748
    
    
    
    405
    
    
    
    1,1532012
    
    
    523
    
    
    
    199
    
    
    
    722Thereafter
    
    
    642
    
    
    
    396
    
    
    
    1,038$
    4,708
    
    
    $
    2,428
    
    
    $
    7,136
 5. Other Assets
  December 312007
    
    2006Accrued interest:Mortgage-related securities
    
    $
    4,463
    
    
    $
    4,207Investment securities
    
    
    687
    
    
    
    12Loans receivable
    
    
    9,475
    
    
    
    9,288Total accrued interest
    
    
    14,625
    
    
    
    13,507Foreclosed properties and repossessed assets
    
    
    3,687
    
    
    
    1,231Premises and equipment
    
    
    51,628
    
    
    
    50,515Federal Home Loan Bank stock, at cost
    
    
    46,092
    
    
    
    45,876Bank owned life insurance
    
    
    48,871
    
    
    
    46,430Prepaid and other
    
    
    22,608
    
    
    
    46,801$
    187,511
    
    
    $
    204,360
 85




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 5. Other Assets (continued)
  December 312007
    
    2006Acquired by foreclosure or in lieu of foreclosure
    
    $
    3,666
    
    
    $
    1,222Repossessed collateral
    
    
    21
    
    
    
    9$
    3,687
    
    
    $
    1,231
  December 312007
    
    2006Land and land improvements
    
    $
    16,374
    
    
    $
    15,577Office buildings
    
    
    48,933
    
    
    
    47,405Furniture and equipment
    
    
    18,190
    
    
    
    17,643Leasehold improvements
    
    
    1,294
    
    
    
    94484,791
    
    
    
    81,569Less accumulated depreciation and amortization
    
    
    33,163
    
    
    
    31,054$
    51,628
    
    
    $
    50,515
   2008
    
    $
    1,2702009
    
    
    8612010
    
    
    6442011
    
    
    4602012
    
    
    363Thereafter
    
    
    1,297Total
    
    $
    4,895
  86




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 6. Deposits
  December 312007
    
    2006Checking accounts:Noninterest-bearing
    
    $
    97,506
    
    
    $
    104,821Interest-bearing
    
    
    170,986
    
    
    
    174,206268,492
    
    
    
    279,027Money market accounts
    
    
    280,442
    
    
    
    248,542Savings accounts
    
    
    183,756
    
    
    
    200,016Certificate accounts:Due within one year
    
    
    1,076,140
    
    
    
    1,243,485After one but within two years
    
    
    261,556
    
    
    
    82,273After two but within three years
    
    
    26,980
    
    
    
    75,223After three but within four years
    
    
    8,971
    
    
    
    20,889After four but within five years
    
    
    6,631
    
    
    
    9,186After five years
    
    
    
    
    
    
    1,380,278
    
    
    
    1,431,056$
    2,112,968
    
    
    $
    2,158,641
   Year ended December 312007
    
    2006
    
    2005Interest-bearing checking accounts
    
    $
    351
    
    
    $
    351
    
    
    $
    369Money market accounts
    
    
    8,500
    
    
    
    7,620
    
    
    
    5,548Savings accounts
    
    
    924
    
    
    
    923
    
    
    
    1,048Certificate accounts
    
    
    66,236
    
    
    
    59,818
    
    
    
    42,371$
    76,011
    
    
    $
    68,712
    
    
    $
    49,336
 87




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 7. Borrowings
  December 312007
    
    
    2006Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateFederal Home Loan Bank
advances maturing:2007
    
    $
    
    
    
    
    
    
    
    $
    279,650
    
    
    
    4.79
    %2008
    
    
    1,025
    
    
    
    5.90
    %
    
    
    1,025
    
    
    
    5.902009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012
    
    
    100,000
    
    
    
    4.52
    
    
    
    
    
    
    
    Thereafter
    
    
    811,434
    
    
    
    4.24
    
    
    
    424,350
    
    
    
    4.24Open-line of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    912,459
    
    
    
    
    
    
    $
    705,025
   8. Shareholders Equity
  88




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 8. Shareholders Equity (continued)
  To Be WellCapitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioBank MutualAs of December 31, 2007:Total capital
(to risk-weighted assets)
    
    $
    337,154
    
    
    
    19.93
    %
    
    $
    135,334
    
    
    
    8.00
    %
    
    $
    169,167
    
    
    
    10.00
    %Tier 1 capital
(to risk-weighted assets)
    
    
    325,380
    
    
    
    19.23
    
    
    
    67,667
    
    
    
    4.00
    
    
    
    101,500
    
    
    
    6.00Tier 1 capital
(to average assets)
    
    
    325,380
    
    
    
    9.47
    
    
    
    137,378
    
    
    
    4.00
    
    
    
    171,723
    
    
    
    5.00Bank MutualAs of December 31, 2006:Total capital
(to risk-weighted assets)
    
    $
    421,112
    
    
    
    24.27
    %
    
    $
    138,817
    
    
    
    8.00
    %
    
    $
    173,521
    
    
    
    10.00
    %Tier 1 capital
(to risk-weighted assets)
    
    
    408,538
    
    
    
    23.54
    
    
    
    69,408
    
    
    
    4.00
    
    
    
    104,113
    
    
    
    6.00Tier 1 capital
(to average assets)
    
    
    408,538
    
    
    
    11.97
    
    
    
    136,559
    
    
    
    4.00
    
    
    
    170,699
    
    
    
    5.00
  89




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 8. Shareholders Equity (continued)
  Bank MutualRisk-
    
    Tier IBased
    
    (Core)Capital
    
    CapitalAs of December 31, 2007:Equity per bank records
    
    $
    377,428
    
    
    $
    377,428Unrealized gains on investments
    
    
    6,844
    
    
    
    6,844FAS 158 adjustment reversal
    
    
    (775
    )
    
    
    (775
    )Goodwill and intangibles
    
    
    (54,023
    )
    
    
    (54,023
    )Investment in nonincludable subsidiaries
    
    
    (3,811
    )
    
    
    (3,811
    )Disallowed servicing assets
    
    
    (283
    )
    
    
    (283
    )Allowance for loan losses
    
    
    11,774
    
    
    
    Regulatory capital
    
    $
    337,154
    
    
    $
    325,380
  At December 312007
    
    2006Net unrealized loss on securities available-for-sale
    
    $
    (6,844
    )
    
    $
    (15,553
    )Additional minimum pension asset
    
    
    775
    
    
    
    127$
    (6,069
    )
    
    $
    (15,426
    )
 90




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 9. Earnings Per Share
  Year ended December 312007
    
    2006
    
    2005Basic earnings per shareNet income
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026Weighted average shares outstanding
    
    
    53,593,140
    
    
    
    58,710,159
    
    
    
    62,238,425Allocated ESOP shares during the period
    
    
    327,251
    
    
    
    327,493
    
    
    
    327,194Vested MRP shares during the period
    
    
    189,252
    
    
    
    277,996
    
    
    
    428,30554,109,643
    
    
    
    59,315,648
    
    
    
    62,993,924Basic earnings per share
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    0.44Diluted earnings per shareNet income
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026Weighted average shares outstanding used
in basic earnings per share
    
    
    54,109,643
    
    
    
    59,315,648
    
    
    
    62,993,924Net dilutive effect of:Stock option shares
    
    
    1,267,200
    
    
    
    1,625,082
    
    
    
    1,747,484Unvested MRP shares
    
    
    20,947
    
    
    
    58,881
    
    
    
    135,00955,397,790
    
    
    
    60,999,611
    
    
    
    64,876,417Diluted earnings per share
    
    $
    0.31
    
    
    $
    0.34
    
    
    $
    0.43
 10. Employee Benefit Plans
 Bank Mutual Corporation
   91




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
 Adoption of Statement No. 158
   Qualified
    
    
    SupplementalPlan
    
    
    Plan
    
    
    TotalPrior service cost
    
    $
    18
    
    
    $
    
    
    
    $
    18Unrecognized net gain
    
    
    (198
    )
    
    
    (398
    )
    
    
    (596
    )$
    (180
    )
    
    $
    (398
    )
    
    $
    (578
    )
  Qualified
    
    
    SupplementalPlan
    
    
    Plan
    
    
    TotalPrior service cost
    
    $
    18
    
    
    
    
    
    
    $
    18
  92




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  Qualified
    
    SupplementalPension Plan
    
    Pension Plan2007
    
    2006
    
    2007
    
    2006Change in Benefit ObligationBenefit obligation at beginning of year
    
    $
    24,831
    
    
    $
    23,682
    
    
    $
    6,696
    
    
    $
    6,694Service cost
    
    
    1,789
    
    
    
    1,888
    
    
    
    173
    
    
    
    170Interest cost
    
    
    1,471
    
    
    
    1,289
    
    
    
    393
    
    
    
    360Actuarial loss (gain)
    
    
    (586
    )
    
    
    (1,387
    )
    
    
    (85
    )
    
    
    (230
    )Benefits paid
    
    
    (642
    )
    
    
    (641
    )
    
    
    (297
    )
    
    
    (298
    )Benefit obligation at end of year
    
    $
    26,863
    
    
    $
    24,831
    
    
    $
    6,880
    
    
    $
    6,696Change in Plan AssetsFair value of plan assets at beginning of year
    
    $
    25,965
    
    
    $
    25,558
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    2,024
    
    
    
    1,048
    
    
    
    
    
    
    
    Employer contributions
    
    
    890
    
    
    
    
    
    
    
    297
    
    
    
    297Benefits paid
    
    
    (642
    )
    
    
    (641
    )
    
    
    (297
    )
    
    
    (297
    )Fair value of plan assets at end of year
    
    
    28,237
    
    
    
    25,965
    
    
    
    
    
    
    
    Funded status at the end of the year
    
    $
    1,374
    
    
    $
    1,134
    
    
    $
    (6,880
    )
    
    $
    (6,696
    )
 Accumulated Benefit Obligations
  2007
    
    2006Weighted-average assumptions used in cost calculations:Discount rate
    
    
    6.25
    %
    
    
    6.00
    %Rate of increase in compensation levels
    
    
    3.50
    %
    
    
    3.50
    %Expected long-term rate of return on plan assets
    
    
    7.00
    %
    
    
    7.00
    %
  93




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
  2007
    
    2006
    
    2005Qualified Pension PlanService cost
    
    $
    1,789
    
    
    $
    1,887
    
    
    $
    1,779Interest cost
    
    
    1,471
    
    
    
    1,289
    
    
    
    1,236Actual return on plan assets
    
    
    (2,024
    )
    
    
    (1,048
    )
    
    
    (797
    )Amortization of prior service cost
    
    
    30
    
    
    
    30
    
    
    
    (1,121
    )Asset gain (loss)
    
    
    228
    
    
    
    (724
    )
    
    
    (926
    )Net periodic cost
    
    $
    1,494
    
    
    $
    1,434
    
    
    $
    171Supplemental Pension PlanService cost
    
    $
    173
    
    
    $
    170
    
    
    $
    159Interest cost
    
    
    393
    
    
    
    360
    
    
    
    367Amortization of prior service cost
    
    
    55
    
    
    
    70
    
    
    
    1,244Amortization of gain from prior period
    
    
    
    
    
    
    
    
    
    
    261Net periodic cost
    
    $
    621
    
    
    $
    600
    
    
    $
    2,031
   Qualified
    
    SupplementalPlan
    
    Plan
    
    Total2008
    
    $
    852
    
    
    $
    762
    
    
    $
    1,6142009
    
    
    1,031
    
    
    
    762
    
    
    
    1,7932010
    
    
    1,201
    
    
    
    762
    
    
    
    1,9632011
    
    
    1,368
    
    
    
    762
    
    
    
    2,1302012
    
    
    1,537
    
    
    
    762
    
    
    
    2,2992013  2017
    
    
    11,222
    
    
    
    2,952
    
    
    
    14,174$
    17,211
    
    
    $
    6,762
    
    
    $
    23,973
  At October 312007
    
    2006Asset Category-Qualified PlanEquity securities
    
    
    10.2
    %
    
    
    7.7
    %Immediate participation guarantee contracts
    
    
    89.8
    
    
    
    92.3Total
    
    
    100.0
    %
    
    
    100.0
    %
 94




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 10. Employee Benefit Plans (continued)
 Investment Policy
  Contributions
  Bank Mutual
   11. Stock-Based Benefit Plans
   2007
    
    2006
    
    2005Shares allocated to participants in fiscal year
    
    
    327,250
    
    
    
    327,493
    
    
    
    327,194Unallocated and unearned shares
    
    
    780,677
    
    
    
    1,107,927
    
    
    
    1,435,420Fair value of unearned ESOP shares
    
    $
    8,252
    
    
    $
    13,417
    
    
    $
    15,215
 95




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 12. Income Taxes
      Year ended December 312007
    
    2006
    
    2005Current:Federal
    
    $
    9,566
    
    
    $
    11,518
    
    
    $
    13,968State
    
    
    121
    
    
    
    84
    
    
    
    969,687
    
    
    
    11,602
    
    
    
    14,064Deferred expense (benefit):Federal
    
    
    (788
    )
    
    
    (1,789
    )
    
    
    954State
    
    
    (7
    )
    
    
    (5
    )
    
    
    (2
    )(795
    )
    
    
    (1,794
    )
    
    
    952$
    8,892
    
    
    $
    9,808
    
    
    $
    15,016
  96




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 12. Income Taxes (continued)
  Year ended December 312007
    
    2006
    
    2005Income before provision for income taxes
    
    $
    25,995
    
    
    $
    30,405
    
    
    $
    43,042Tax expense at federal statutory rate
    
    $
    9,098
    
    
    $
    10,642
    
    
    $
    15,065Increase (decrease) in taxes resulting from:State income taxes  net of federal tax benefit
    
    
    74
    
    
    
    51
    
    
    
    87Bank Owned Life insurance
    
    
    (887
    )
    
    
    (399
    )
    
    
    (362
    )Executive compensation in excess of Section 162(m) limit
    
    
    117
    
    
    
    376
    
    
    
    350Incentive stock option expense
    
    
    67
    
    
    
    
    
    
    
    Tax returns and reserve adjustment for uncertain tax
provisions
    
    
    464
    
    
    
    (930
    )
    
    
    Other
    
    
    (41
    )
    
    
    68
    
    
    
    (124
    )Provision for income taxes
    
    $
    8,892
    
    
    $
    9,808
    
    
    $
    15,016
   December 312007
    
    2006Deferred tax assets:State net operating losses
    
    $
    1,814
    
    
    $
    1,376Loan loss reserves
    
    
    4,712
    
    
    
    4,904Pension
    
    
    2,789
    
    
    
    3,003Deferred compensation
    
    
    1,580
    
    
    
    1,474Restricted stock amortization
    
    
    687
    
    
    
    547Unrealized gain on investment securities
    
    
    3,957
    
    
    
    9,156Other
    
    
    951
    
    
    
    980Total deferred tax assets
    
    
    16,490
    
    
    
    21,440Valuation allowance
    
    
    (1,542
    )
    
    
    (1,013
    )Deferred tax assets, net of valuation allowance
    
    
    14,948
    
    
    
    20,427Deferred tax liabilities:Property and equipment depreciation
    
    
    420
    
    
    
    504FHLB stock dividends
    
    
    5,130
    
    
    
    5,130Deferred loan fees
    
    
    1,395
    
    
    
    1,981Purchase accounting adjustments
    
    
    4,224
    
    
    
    4,656Mortgage servicing rights
    
    
    1,890
    
    
    
    1,867Other
    
    
    74
    
    
    
    70Total deferred tax liabilities
    
    
    13,133
    
    
    
    14,208Net deferred tax asset
    
    $
    1,815
    
    
    $
    6,219
 97




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 13. Financial Instruments with Off-Balance-Sheet Risk
    December 312007
    
    2006Unused consumer lines of credit
    
    $
    153,553
    
    
    $
    156,378Unused commercial lines of credit
    
    
    20,167
    
    
    
    25,941Commitments to extend credit:Fixed rate
    
    
    21,487
    
    
    
    19,891Adjustable rate
    
    
    16,353
    
    
    
    23,330Undisbursed commercial loans
    
    
    6,131
    
    
    
    4,258
  98




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments
     Cash and Cash Equivalents
 Investment and Mortgage-Related Securities
 Loans Receivable and Loans Held-for-Sale
 Mortgage Servicing Rights
 Federal Home Loan Bank Stock
 Accrued Interest Receivable
 Deposits and Advance Payments by Borrowers for Taxes and Insurance
 99




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 14. Fair Value of Financial Instruments (continued)
 Borrowings
 December 31
    
    December 312007
    
    2006Carrying
    
    Fair
    
    Carrying
    
    FairValue
    
    Value
    
    Value
    
    ValueCash and cash equivalents
    
    $
    38,949
    
    
    $
    38,949
    
    
    $
    45,460
    
    
    $
    45,460Investment and mortgage-related securities
    
    
    1,199,372
    
    
    
    1,199,372
    
    
    
    1,113,141
    
    
    
    1,113,141Loans receivable, net
    
    
    1,994,556
    
    
    
    2,030,797
    
    
    
    2,024,325
    
    
    
    2,014,996Loans held for sale
    
    
    7,952
    
    
    
    7,952
    
    
    
    3,787
    
    
    
    3,787Mortgage servicing rights
    
    
    4,708
    
    
    
    7,701
    
    
    
    4,653
    
    
    
    7,340Federal Home Loan Bank stock
    
    
    46,092
    
    
    
    46,092
    
    
    
    45,876
    
    
    
    45,876Accrued interest receivable
    
    
    14,625
    
    
    
    14,625
    
    
    
    13,507
    
    
    
    13,507Deposits and accrued interest
    
    
    2,112,968
    
    
    
    2,069,752
    
    
    
    2,158,641
    
    
    
    2,085,299Advance payments by borrowers
    
    
    1,815
    
    
    
    1,815
    
    
    
    2,199
    
    
    
    2,199Borrowings
    
    
    912,459
    
    
    
    943,526
    
    
    
    705,025
    
    
    
    701,958
  100




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 15. Condensed Parent Company Only Financial Statements
 STATEMENT OF FINANCIAL CONDITION
 December 312007
    
    2006Assets:Cash and cash equivalents
    
    $
    25,709
    
    
    $
    58,403Investment in subsidiaries
    
    
    377,428
    
    
    
    451,299Due from subsidiaries
    
    
    24,661
    
    
    
    19,359Receivable from ESOP
    
    
    2,147
    
    
    
    3,047Other assets
    
    
    1,191
    
    
    
    1,671$
    431,136
    
    
    $
    533,779Liabilities and shareholders equity:Liabilities:Other liabilities
    
    $
    1,101
    
    
    $
    Shareholders equity:Preferred stock  $.01 par value
Authorized 20,000,000 shares in 2007 and 2006
Issued and outstanding  none in 2007 and 2006
    
    
    
    
    
    
    Common stock  $.01 par value:Authorized  200,000,000 shares in 2007 and 2006
Issued  78,783,849 shares in 2007 and 2006
Outstanding  49,834,756 in 2007 and 60,277,087 shares in 2006
    
    
    788
    
    
    
    788Additional paid-in capital
    
    
    498,408
    
    
    
    496,302Retained earnings
    
    
    273,330
    
    
    
    273,454Unearned ESOP shares
    
    
    (2,166
    )
    
    
    (3,066
    )Accumulated other comprehensive income
    
    
    (6,069
    )
    
    
    (15,426
    )Unearned deferred compensation
    
    
    
    
    
    
    Treasury stock  28,949,093 shares in 2007 and 16,506,762
shares in 2006
    
    
    (334,256
    )
    
    
    (218,273
    )Total shareholders equity
    
    
    430,035
    
    
    
    533,779$
    431,136
    
    
    $
    533,779
 101




---



##### Table of Contents



Bank Mutual Corporation and Subsidiaries
 Notes to Consolidated Financial Statements
 December 31, 2007  (Dollars in Thousands, Except Per Share Amounts)
 15. Condensed Parent Company Only Financial Statements (continued)
 STATEMENT OF INCOME
 Year ended December 312007
    
    2006
    
    2005Interest income
    
    $
    1,602
    
    
    $
    2,290
    
    
    $
    1,854Equity in earnings of subsidiaries
    
    
    16,973
    
    
    
    20,080
    
    
    
    27,754Other
    
    
    25
    
    
    
    40
    
    
    
    Total income
    
    
    18,600
    
    
    
    22,410
    
    
    
    29,608Total expenses
    
    
    1,430
    
    
    
    1,466
    
    
    
    1,399Income before provision for income taxes
    
    
    17,170
    
    
    
    20,944
    
    
    
    28,209Provision for income taxes
    
    
    67
    
    
    
    347
    
    
    
    183Net income
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026
 STATEMENT OF CASH FLOWS
 Year ended December 312007
    
    2006
    
    2005Operating activities:Net income
    
    $
    17,103
    
    
    $
    20,597
    
    
    $
    28,026Adjustment to reconcile net income to net cash provided by
(used in) operating activities:Equity in earnings of subsidiaries
    
    
    (16,973
    )
    
    
    (20,080
    )
    
    
    (27,754
    )Amortization of cost of stock benefit plans
    
    
    5,881
    
    
    
    9,080
    
    
    
    6,768Decrease in due from subsidiaries
    
    
    (5,302
    )
    
    
    (6,853
    )
    
    
    (6,114
    )Adoption of SAB No. 108
    
    
    
    
    
    
    (1,101
    )
    
    
    Change in other operating activities and liabilities
    
    
    1,582
    
    
    
    (1,207
    )
    
    
    166Net cash provided by operating activities
    
    
    2,291
    
    
    
    436
    
    
    
    1,092Investing activities:Stock proceeds invested in subsidiary
    
    
    
    
    
    
    
    
    
    
    Dividends from Company subsidiaries
    
    
    100,200
    
    
    
    21,200
    
    
    
    83,200Net cash provided by investing activities
    
    
    100,200
    
    
    
    21,200
    
    
    
    83,200Financing activities:Cash dividends
    
    
    (17,227
    )
    
    
    (15,955
    )
    
    
    (16,223
    )Purchase of treasury stock
    
    
    (120,687
    )
    
    
    (27,828
    )
    
    
    (134,542
    )Proceeds from exercise of stock options
    
    
    1,396
    
    
    
    1,940
    
    
    
    2,393Excess tax benefit from exercise of stock options
    
    
    433
    
    
    
    752
    
    
    
    Payments received on ESOP
    
    
    900
    
    
    
    900
    
    
    
    900Net cash used in financing activities
    
    
    (135,185
    )
    
    
    (40,191
    )
    
    
    (147,472
    )Decrease in cash and cash equivalents
    
    
    (32,694
    )
    
    
    (18,555
    )
    
    
    (63,180
    )Cash and cash equivalents at beginning of year
    
    
    58,403
    
    
    
    76,958
    
    
    
    140,138Cash and cash equivalents at end of year
    
    $
    25,709
    
    
    $
    58,403
    
    
    $
    76,958
 102




---



##### Table of Contents



16. Adoption of SEC Staff Accounting Bulletin No. 108 (SAB No. 108)
   103




---



##### 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:
 104




---



##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
    105




---



##### Table of Contents



Ernst & Young LLP, Report on Effectiveness of Internal Control Over Financial Reporting
  
       /s/ Ernst & Young LLP 
 106




---



##### Table of Contents



Item 9B . Other Information .
  107




---



##### Table of Contents



Part III
 
 Item 10 . Directors and Executive Officers of the Registrant
  
 Item 11 . Executive Compensation
  
 Item 12 . Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  Equity Compensation Plan Information
  Number of securitiesremaining availableNumber of securities
    
    
    
    
    
    for future issuance underto be issued upon
    
    Weighted-average
    
    equity compensationexercise of
    
    exercise price of
    
    plans (excludingoutstanding options,
    
    outstanding options,
    
    securities reflectedPlan category
    
    warrants and rights (1)
    
    warrants and rights
    
    in 1st column) (2)Equity compensation
plans approved by
security holders
    
    
    4,090,628
    
    
    $
    7.365
    
    
    
    2,361,883Equity compensation
plans not approved
by security holders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    4,090,628
    
    
    $
    7.365
    
    
    
    2,361,883
 
 (1)
    
    Represents options granted under the 2001 Plan or 2004 Stock Incentive Plan, which were
approved by Company shareholders in 2001 and 2004, respectively.(2)
    
    Represents options or restricted stock which may be granted under the 2004 Plan. No further
awards may be made under the 2001 Plan. 
 Item 13 . Certain Relationships and Related Transactions, and Director Independence
  
 Item 14 . Principal Accountant Fees and Services
  108




---



##### Table of Contents



Part IV
 
 Item 15 . Exhibits, Financial Statement Schedules
 (a)
    
    Documents filed as part of the Report:
1. and 2. Financial Statements and Financial Statement Schedules.
         (b). Exhibits. See Exhibit Index following the signature page of this report, which
is incorporated herein
by reference. Each management contract or compensatory plan or arrangement required to
be filed as
an exhibit to this report is identified in the Exhibit Index by an asterisk following
its exhibit number.
 109




---



##### Table of Contents



SIGNATURES
  BANK MUTUAL CORPORATIONMarch 7, 2008By:

/s/ Michael T. Crowley, Jr.Michael T. Crowley, Jr.Chairman, President and Chief Executive Officer 
 POWER OF ATTORNEY
  
  Signature and Title
 /s/ Michael T. Crowley, Jr.
    
    /s/ Raymond W. Dwyer, Jr.Michael T. Crowley, Jr., Chairman, President
Chief Executive Officer and Director
(Principal Executive Officer)
    
    Raymond W. Dwyer, Jr., Director/s/ Eugene H. Maurer, Jr.
    
    /s/ Thomas J. Lopina, Sr.Interim Chief Financial Officer 
(Principal Financial Officer)
    
    Thomas J. Lopina, Sr., Director/s/ Marlene M. Scholz
    
    /s/ William J. MielkeMarlene M. Scholz, Senior Vice President
(Principal Accounting Officer)
    
    William J. Mielke, Director/s/ Thomas H. Buestrin
    
    /s/ Robert B. OlsonThomas H. Buestrin, Director
    
    Robert B. Olson, Director/s/ Mark C. Herr
    
    /s/ David J. RolfsMark C. Herr, Director
    
    David J. Rolfs, Director/s/ Jelmer G. Swoboda

Jelmer G. Swoboda, Director
 
 *
    
    Each of the above signatures is affixed as of March 7, 2008. 110




---



##### Table of Contents



BANK MUTUAL CORPORATION
(Bank Mutual Corporation or the Company)**
Commission File No. 000-32107
 
 EXHIBIT INDEX
 TO
 2007 REPORT ON FORM 10-K
  Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith3(i)
    
    Restated Articles of Incorporation, as
last amended May 29, 2003, of Bank
Mutual Corporation (the Articles)
    
    Exhibit 3(i) to the
Companys Registration
Statement on Form S-1,
Registration No.
333-1056853(ii)
    
    Bylaws, as last amended May 7, 2007, of
Bank Mutual Corporation
    
    Exhibit 3.1 to the
Companys Report on Form
8-K dated May 7, 20074.1
    
    The Articles
    
    Exhibit 3(i) above10.1*
    
    Bank Mutual Corporation Savings
Restoration Plan and Bank Mutual
Corporation ESOP Restoration Plan
    
    Exhibit 10.1(b) to the
Companys Annual Report on
Form 10-K for the year
ended December 31, 2003
(2003 10-K)10.2*
    
    Mutual Savings Bank Outside Directors
Retirement Plan***
    
    Exhibit 10.2 to Bank
Mutual Corporations
Registration Statement on
Form S-1, Registration No.
333-39362 (2000 S-1)10.3*
    
    Mutual Savings Bank Executive Excess
Benefit Plan
    
    Exhibit 10.3 to 2000 S-110.4*
    
    Agreement regarding deferred
compensation dated May 16, 1988 between
Mutual Savings Bank and Michael T.
Crowley, Sr.
    
    Exhibit 10.4 to 2000 S-110.5(a)*
    
    Employment Agreement between Mutual
Savings Bank and Michael T. Crowley Jr.
dated December 21, 1993 (continuing , as
amended, through 2010)
    
    Exhibit 10.5(a) to 2000 S-110.5(b)*
    
    Amendment thereto dated February 17, 1998
    
    Exhibit 10.5(b) to 2000 S-110.6*
    
    Form of Employment Agreements of Mr.
Maurer, Ms. Scholz, Mr. Anderegg and Mr.
Callen with Mutual Savings Bank, each
dated as of January 1, 2001 (continuing
through 2008)
    
    Exhibit 10.7 to 2000 S-1
 EI-1




---



##### Table of Contents



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




---



##### Table of Contents



Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith10.11(c)*
    
    Form of Option Agreement
thereunder  Bank Mutual
Corporation Incentive Stock
Option Agreement
    
    Exhibit 10.1(c ) to the
6-30-04 10-Q10.11(d)*
    
    Form of Restricted Stock
Agreement thereunder  Bank
Mutual Corporation
Directors Management
Recognition Award
    
    Exhibit 10.1(d) to the
6-30-04 10-Q10.11(e)*
    
    Form of Restricted Stock
Agreement thereunder  Bank
Mutual Corporation Officers
Management Recognition
Award
    
    Exhibit 10.1(e) to the
6-30-04 10-Q10.12*
    
    Mutual Savings Bank/First
NorthernSavings Bank
Management Incentive

Compensation Plan
    
    Exhibit 10.12(b) to
Post-Effective Amendment No.
1 to 2000 S-121.1
    
    List of Subsidiaries
    
    
    
    X23.1
    
    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 Chief Financial Officer
of Bank Mutual Corporation
    
    
    
    X32.1
    
    Certification pursuant to
18 U.S. C. Section 1350, as
adopted pursuant to Section
906 of the Sarbanes-Oxley
Act of 2002 signed by the
Chairman, President and
Chief Executive Officer of
Bank Mutual Corporation
    
    
    
    X32.2
    
    Certification pursuant to
18 U.S. C. Section 1350, as
adopted pursuant to Section
906 of the Sarbanes-Oxley
Act of 2002 signed by the
Chief Financial Officer of
Bank Mutual Corporation
    
    
    
    X
 
 *
    
    Designates management or compensatory agreements, plans or arrangements required to be filed
as exhibits pursuant to Item 14(c) of Form 10-K**
    
    As used in this Exhibit Index, references to Bank Mutual Corporation and the Company also
include, where appropriate, Bank Mutual Corporation, a federally-chartered corporation and the
predecessor of the current registrant.***
    
    Mutual Savings Bank is now known as Bank Mutual. EI-3