MUTUAL SAVINGS BANK, S-1/A, 2000-09-07

MUTUAL SAVINGS BANK
S-1/A, 2000-09-07
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 7, 2000

REGISTRATION NO. 333-39362

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

----------------
<TABLE>
<CAPTION>

WISCONSIN 6035 39-0491685
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)*
</TABLE>

4949 WEST BROWN DEER ROAD
BROWN DEER, WISCONSIN 53223
(414) 354-1500
(Address, including zip Code, and telephone number,
including area code, of Registrant's principal executive offices)

MICHAEL T. CROWLEY, JR.
MUTUAL SAVINGS BANK
4949 WEST BROWN DEER ROAD
BROWN DEER, WISCONSIN 53223
(414) 354-1500
(Name, address, including zip Code, and telephone number,
including area code, of agent for service)

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

<TABLE>
<S><C>
COPIES TO:
KENNETH V. HALLETT KENNETH R. LEHMAN
QUARLES & BRADY LLP LUSE LEHMAN GORMAN POMERENK
411 EAST WISCONSIN AVENUE & SCHICK, A PROFESSIONAL CORPORATION
MILWAUKEE, WISCONSIN 53202 5335 WISCONSIN AVENUE, N.W., SUITE 400
(414) 277-5000 WASHINGTON, D.C. 20015
(202) 274-2000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this registration statement becomes
effective.

<PAGE> 2

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act"), check the following
box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _______________

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] _______________

If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] _______________

If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ] _______________

* FEIN of Mutual Savings Bank. Bank Mutual is a corporation in formation
in a regulatory restructuring of Mutual Savings Bank, and has not yet
been assigned an employer ID number.

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==================================================================================================================
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) FEE (1)

------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $.01 par value 8,701,000 shares $10.00 $87,010,000 $22,971
------------------------------------------------------------------------------------------------------------------
Plan interests 500,000 interests (2) (2) (2)
==================================================================================================================
</TABLE>

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

(1) Estimated under Rule 457. Previously paid.
(2) The plan interests represents plan interests in the Mutual
Savings Bank Savings and Incentive Plan, a 401(k) plan. The
securities to be purchased by the 401(k) plan are included in
the amount shown for common stock. However, pursuant to Rule
457(h) of the Securities Act, no separate fee is required for
the plan interests. Pursuant to that rule, the amount being
registered has been calculated on the basis of the number of
shares of common stock that may be purchased with the current
assets of the 401(k) Plan plus a reasonable allowance for
asset growth, with each plan interest representing one share
of common stock.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================

<PAGE> 3

PROSPECTUS

PROPOSED HOLDING COMPANY FOR
MUTUAL SAVINGS BANK
UP TO 8,701,000 SHARES
OF COMMON STOCK
[BANK MUTUAL LOGO]

Bank Mutual Corporation is a new corporation that is offering shares of its
common stock for sale. Mutual Savings Bank formed Bank Mutual to own Mutual
Savings as part of a restructuring of its corporate form of organization. Bank
Mutual expects to acquire First Northern Savings Bank in a separate transaction
which will occur at the same time as the restructuring and stock offering. Our
offering begins immediately and will end at 10:00 a.m. central time, on October
16, 2000. We may extend the offering, but if we extend it beyond November 30,
2000, we will resolicit your order.

If you are a current or former depositor of Mutual Savings --

- You may have priority rights in our subscription offering to purchase
shares.

- You will not need to pay a commission to buy shares.

If you are not a depositor, but are interested in purchasing shares of our
common stock --

- You may be able to purchase shares after subscription offering orders
are filled.

- You will not need to pay a commission to buy shares.

If you are a participant in the Mutual Savings 401(k) plan --

- If you participate in the Mutual Savings Bank Savings and Investment
Plan, you may be eligible to purchase shares using your 401(k) plan
account. See the separate prospectus supplement which we are providing
to 401(k) plan participants.

The shares of common stock to be issued to the public in this offering and
in the acquisition of First Northern will represent less than half of the common
stock of Bank Mutual. More than half of the shares will be issued to Mutual
Savings Bancorp, MHC, a new company formed by Mutual Savings.

Ryan, Beck & Co., Inc. will serve as marketing agent for the offering on a
best efforts basis. Ryan, Beck is not obligated to purchase any shares. The
common stock of Bank Mutual will be listed for trading on the Nasdaq National
Market under the symbol "BKMU." Ryan, Beck intends to make a market in the
common stock.

TERMS OF THE OFFERING

<TABLE>
<CAPTION>
MINIMUM MAXIMUM
------------ ------------
<S> <C> <C>
PRICE: $10.00 PER SHARE
Number of shares............................................ 4,692,782 7,237,682
Marketing agent commissions and other expenses.............. $ 3,462,000 $ 3,813,000
Net proceeds to Bank Mutual................................. $ 43,466,000 $ 68,564,000
Net proceeds per share to Bank Mutual....................... $ 9.26 $ 9.47
</TABLE>

We may sell up to 8,701,000 shares because of regulatory considerations or
changes in market or economic conditions. If we do not sell the minimum number
of shares offered, we will promptly refund your funds. Office of Thrift
Supervision regulations require that the offering be completed by February 21,
2002.

PLEASE READ THE RISK FACTORS BEGINNING ON PAGE 19.

THESE SHARES OF STOCK ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY, ARE NOT GUARANTEED BY MUTUAL SAVINGS OR BANK MUTUAL, AND
ARE SUBJECT TO INVESTMENT AND MARKET RISK.

NEITHER OF THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

September , 2000

RYAN, BECK & CO.
<PAGE> 4

STATE MAP/LOGO

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<PAGE> 5

SUMMARY

To more fully understand the offering, you should read this entire document
carefully, including the consolidated financial statements and the notes to the
consolidated financial statements. The table of contents appears on the back
cover.

In this offering, certain current and former depositors of Mutual Savings
Bank, and other members of the public, may purchase shares of common stock of
Bank Mutual Corporation, a new corporation which will be a mid-tier holding
company for Mutual Savings and First Northern Savings Bank. This prospectus
gives you information about Bank Mutual, including related information about
Mutual Savings, First Northern and the First Northern merger. It also gives you
information about Mutual's regulatory restructuring, which includes the
formation of a mutual holding company.

In this prospectus, we also give you information about the terms of Bank
Mutual's stock offering, including purchase limitations, means of subscribing,
priorities in the offering and similar issues.

OUR RESTRUCTURING, STOCK OFFERING AND FIRST NORTHERN MERGER

Mutual Savings is restructuring into the mutual holding company form of
organization. As part of the restructuring, we formed Bank Mutual, a mid-tier
stock holding company, and Mutual Savings Bancorp, MHC, a mutual holding company
which we call the MHC. As part of the transaction, Mutual Savings will convert
from a mutual to a stock savings bank. At the conclusion of the restructuring,
Bank Mutual will own all of the stock of Mutual Savings and, in turn, will be
partially owned by the MHC.

Simultaneously with the restructuring, we will complete two other
transactions -- a merger transaction and a stock offering. As a result of the
merger transaction, Bank Mutual will own First Northern Savings, which will
continue to operate under that name. In significant part, the restructuring is
being undertaken to accommodate the First Northern merger. In the stock
offering, Bank Mutual is hereby offering for sale to the public a substantial
portion of the shares of common stock not to be issued to the MHC in the
restructuring.

The following charts show our current structure, and new structure, which
is commonly referred to as a mutual holding company structure with a mid-tier
holding company. The new structure reflects completion of the restructuring, the
offering and the First Northern merger.

[FLOWCHART]

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<PAGE> 6

--------------------------------------------------------------------------------
THE OFFERING -- QUESTIONS AND ANSWERS
--------------------------------------------------------------------------------

THE OFFERING INCLUDES A SUBSCRIPTION OFFERING AND A COMMUNITY OFFERING.

Q. HOW MUCH COMMON STOCK IS BEING ISSUED?

A. Bank Mutual is offering for sale between 4,692,782 and 7,237,682 shares of
common stock, subject to an increase to 8,701,000 shares, at a price of
$10.00 per share. The offering range is based on an independent appraisal of
the pro forma market value of the common stock, assuming completion of the
offering and the First Northern merger.

In addition to shares issued in the offering, shares will be issued in
connection with the First Northern merger. Together, the amount of shares
sold in the stock offering and issued to First Northern shareholders will
represent 49.9% of the outstanding stock of Bank Mutual. The remaining 50.1%
of the outstanding stock will be owned by Mutual Savings Bancorp, MHC.

Q. WHO MAY PURCHASE BANK MUTUAL COMMON STOCK IN THE OFFERING?

A. No one is obligated to buy stock, but eligible depositors of Mutual Savings
have priority subscription rights to subscribe for Bank Mutual common stock
during the subscription offering. Subscription rights have been granted, in
order of priority, to:

(1) depositors of Mutual Savings with aggregate deposits of $50 or
more on January 31, 1999;

(2) Bank Mutual's Employee Stock Ownership Plan;

(3) depositors with aggregate deposits of $50 or more on June 30,
2000;

(4) depositors on August 31, 2000; and

(5) directors, officers and employees of Mutual Savings who are not
eligible in one of the previous categories.

If any shares remain unsubscribed in the subscription offering, Bank Mutual
may sell shares to the public, with a preference to residents of the
counties in which Mutual Savings or First Northern Savings maintains branch
offices. The counties are listed on pages 127 and 128. The community
offering may be conducted during or after the subscription offering.

Ryan, Beck & Co., Inc. will use its best efforts to assist us in selling
our stock. Ryan, Beck is not obligated to take or purchase any shares of
common stock in the offering. See "The Restructuring and the
Offering -- the Offering."

Q. AS AN ELIGIBLE DEPOSITOR OF MUTUAL SAVINGS AT JANUARY 31, 1999, JUNE 30,
2000 OR AUGUST 31, 2000, MAY I REGISTER STOCK SHARES IN SOMEONE ELSE'S NAME?

A. No. On your Stock Order Form, you must register in the name or names of
deposit account holders at the applicable date. You may not add names of
non-account holders or depositors eligible only at a later date.

Q. ARE MY SUBSCRIPTION RIGHTS AS AN ELIGIBLE DEPOSITOR TRANSFERABLE?

A. No. If you order stock in the subscription offering, you will be required to
state that you are purchasing the stock for yourself and that you have no
agreement or understanding to sell or transfer your rights. Federal law
prohibits you from selling or giving away your subscription rights. We
intend to take legal action against anyone who sells or gives away their
subscription rights. We will not accept your order if we have reason to
believe that you sold or transferred your subscription rights. If anyone
offers to give you money to buy stock in your name, in exchange for later
transferring the stock, or if someone requests to share in proceeds upon
your future sale of Bank Mutual stock, please inform our Stock Information
Center at (800) 580-0029.

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<PAGE> 7

Q. WHAT IS THE PRICE PER SHARE IN THE OFFERING?

A. The stock is offered at $10.00 per share. All purchasers, including Mutual
Savings' directors, officers and employees, will pay the same price per
share. NO COMMISSION WILL BE CHARGED TO THOSE WHO PURCHASE STOCK IN THE
OFFERING.

Q. WILL MANAGEMENT OF MUTUAL SAVINGS PURCHASE SHARES?

A. Yes. Reflecting their commitment to our future, Mutual Savings' 11 executive
officers and directors, and their associates, expect to purchase an
aggregate of 253,000 shares in the offering.

Q. HOW DO I PURCHASE COMMON STOCK IN THE OFFERING?

A. Complete the Stock Order Form and submit it, with payment, so that it is
received by 10:00 a.m. central time, on October 16, 2000. Orders may not be
changed and are not cancelable. Payment may be made by personal check, bank
check, money order or by authorization of withdrawal from your savings or
certificate of deposit accounts at Mutual Savings. (If you wish to use IRA
funds, see the discussion below). ANY APPLICABLE PENALTY FOR EARLY
WITHDRAWAL FROM A CERTIFICATE OF DEPOSIT TO PURCHASE STOCK IN THE OFFERING
WILL BE WAIVED. Authorized withdrawals will not be made until the completion
of the offering, but the designated funds will not be available to you for
withdrawal in the interim.

Q. MAY I USE MY IRA TO PURCHASE THE COMMON STOCK?

A. Yes. However, stock shares purchased with retirement (or "tax-qualified")
funds must be held in self-directed retirement accounts. By regulation,
Mutual Savings' IRAs are not self-directed. In order to purchase shares
using funds in a Mutual Savings IRA, you will need to transfer the IRA (or
the portion necessary to pay for the shares) to an independent trustee, such
as a brokerage firm, that offers self-directed retirement accounts. BECAUSE
INDIVIDUAL SITUATIONS VARY AND PROCESSING TAKES TIME, WE RECOMMEND THAT YOU
CONTACT THE STOCK INFORMATION CENTER BY OCTOBER 6, 2000 FOR ASSISTANCE WITH
PURCHASES USING YOUR MUTUAL SAVINGS IRA OR ANOTHER RETIREMENT ACCOUNT THAT
YOU MAY HAVE. Whether you may use such funds for the purchase of shares in
the offering may depend on timing constraints and, possibly, the institution
where the funds are currently held.

Q. HOW MAY I DELIVER MY STOCK ORDER FORM?

A. Delivery may be made by (1) mailing the Stock Order Form in the Stock Order
Reply Envelope provided in your stock offering materials, (2) overnight
delivery of the Stock Order Form to the address indicated on the back of the
Stock Order Form or (3) hand-delivery to our Stock Information Center,
located at our corporate headquarters, 4949 West Brown Deer Road, Brown
Deer, Wisconsin. Please do not deliver Stock Order Forms to our branches.

Q. WHAT ARE THE MINIMUM AND MAXIMUM NUMBER OF SHARES THAT I MAY ORDER IN THE
OFFERING?

A. The minimum purchase is 25 shares. No one may purchase more than $800,000
(80,000 shares) of common stock in the subscription offering or in the
community offering. Further, no one, together with associates or persons
acting in concert, may purchase more than $1,000,000 of common stock in all
categories of the offering, combined.

We may increase or decrease either of the maximum purchase limitations at
our discretion. If we receive orders for a greater number of shares than we
are offering, we will allocate the shares that we issue; this may result in
your receiving a smaller number of shares than you ordered. For additional
information on these purchase limitations, see "The Restructuring and The
Offering -- Limitations on Common Stock Purchases."

Q. WHEN DOES THE OFFERING PERIOD END?

A. The deadline for receipt of completed Stock Order Forms is 10:00 a.m.
central time, on October 16, 2000. We may extend the offering, without
notice to you and without resoliciting your order, until November 30, 2000.
Office of Thrift Supervision regulations require that the offering be
completed by February 21, 2002.

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<PAGE> 8

Q. WILL I RECEIVE INTEREST ON STOCK PURCHASE FUNDS?

A. Yes. Funds that you submit by check or money order will be immediately
cashed and will earn interest at Mutual Savings' passbook savings rate from
the date received until the completion of the offering. At that time, a
check will be mailed to you reflecting interest earned. With respect to an
account withdrawal for the purchase of stock, interest will continue to
accrue in the account at its contractual rate until the funds are withdrawn,
at the completion of the stock offering.

Q. CAN MY LOCAL MUTUAL SAVINGS BRANCH ASSIST ME WITH PURCHASING SHARES OR
COMPLETING MY STOCK ORDER FORM?

A. No. Our branch personnel may not, by law, assist with investment-related
questions about the offering. We have established a Stock Information Center
that is staffed by registered representatives able to assist you. The Stock
Information Center can be reached at the number shown below.

Q. MAY I OBTAIN A LOAN OR LINE OF CREDIT FROM MUTUAL SAVINGS TO PAY FOR MY
STOCK?

A. No. Regulations do not allow Mutual Savings to make loans for this purpose,
but other financial institutions may be willing to make such a loan.

Q. WILL THE COMMON STOCK BE INSURED BY THE FDIC?

A. No. Bank Mutual common stock is not a deposit and cannot be insured or
guaranteed by the FDIC or any other government agency. The trading price of
common stock may fluctuate, so common stock is subject to investment risk,
including total loss of principal invested.

Q. WHEN WILL I RECEIVE MY STOCK CERTIFICATE?

A. The stock will commence trading, and stock certificates will be mailed to
investors, as soon as practicable after the offering is completed. Please be
aware that you may not be able to sell the shares that you purchased until
you have received a stock certificate.

Q. WILL DIVIDENDS BE PAID ON BANK MUTUAL STOCK?

A. We anticipate that Bank Mutual will pay an annual cash dividend of $0.28 per
share, payable quarterly at $0.07 per share, starting for the first quarter
after the completion of the offering. There can be no assurance that
dividends will be paid or that they will not subsequently be reduced or
eliminated. The Bank Mutual board of directors will make a decision
quarterly concerning whether to pay dividends and, if so, the dividend
amount.

Q. HOW MAY I PURCHASE OR SELL BANK MUTUAL STOCK SHARES IN THE FUTURE?

A. You may purchase or sell shares through your stockbroker or a discount
brokerage firm. The stock will trade on the Nasdaq National Market, under
symbol "BKMU". We cannot assure, however, that an active and liquid market
for the common stock will develop, and we cannot assure that you will be
able to sell shares at or above the $10.00 per share purchase price paid in
the offering.

ADDITIONAL QUESTIONS?
PLEASE CALL OUR STOCK INFORMATION CENTER
(800)580-0029
FROM 9:00 A.M. TO 4:00 P.M., CENTRAL TIME, MONDAY THROUGH FRIDAY

MUTUAL SAVINGS AND RELATED ENTITIES

Mutual Savings Bank

Mutual Savings is a community-oriented savings bank which emphasizes
traditional financial services to individuals and businesses within its market
areas. Our principal business is attracting retail deposits from the general
public and investing those deposits, together with funds generated from other
operations, in residential mortgage loans, consumer loans, multi-family and
commercial real estate loans, and

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<PAGE> 9

commercial business loans. We also invest in various mortgage-related securities
and investment securities. We seek to differentiate ourselves from our
competitors by:

- creating financial security for our customers in ways that continually
emphasize quality, high value and uncompromising integrity;

- providing our employees with an environment that encourages and
recognizes professional development, creativity and ambition; and

- supporting our communities in activities that improve the quality of life
for all of their residents.

Mutual Savings has 50 branches located in Wisconsin, primarily in the
southern and northwestern parts of the state, and one office in eastern
Minnesota. It serves over 80,000 households. At June 30, 2000, it had assets of
$1.8 billion, deposits of $1.3 billion and equity of $167.6 million. By asset
size, it is the largest mutual savings institution headquartered in Wisconsin,
and one of the largest mutual savings institutions in the country. Mutual
Savings has grown both through acquisitions and internal growth. Its most recent
acquisition was of the $730.7 million asset First Federal Bancshares of Eau
Claire in March 1997.

As part of this transaction, Mutual Savings is converting from a
Wisconsin-chartered mutual savings bank into a federal stock savings bank. When
we refer to Mutual Savings, we also include the federal savings bank after that
conversion.

Bank Mutual Corporation

Bank Mutual will become a holding company by owning all of the common stock
of Mutual Savings and of First Northern Savings after the restructuring. Bank
Mutual has not engaged in any business to date. The primary office of Bank
Mutual is located at 4949 West Brown Deer Road, Brown Deer, Wisconsin 53223.
Brown Deer is a suburb of Milwaukee, Wisconsin.

After the restructuring, the stock offering and the First Northern merger,
we expect Bank Mutual to be the fifth largest financial institution
headquartered in the state of Wisconsin, based on pro forma total assets of $2.7
billion at June 30, 2000.

Mutual Savings Bancorp, MHC

The MHC will own more than half of the outstanding common stock of Bank
Mutual after the restructuring. We do not expect that the MHC will engage in any
business activity other than owning a majority of the common stock of Bank
Mutual and managing dividends, if any, it receives from Bank Mutual. We expect
that the MHC initially will waive the receipt of dividends declared by Bank
Mutual.

REASONS FOR THE RESTRUCTURING

By implementing the plan of restructuring, we will be organized in the
stock form, a corporate structure used by most businesses, including many
savings banks. This structure will increase our operating flexibility, allowing
us to better compete with other financial institutions and more easily take
advantage of business opportunities. The restructuring is necessary in order to
provide Bank Mutual stock to be sold in the offering and to be used as part of
the consideration in the First Northern merger. The opportunity for the First
Northern merger is the reason we are proposing the restructuring at this time.
In effecting the restructuring, we will preserve our ability to remain
independent and community-oriented, because a majority of Bank Mutual's stock
will be controlled by the MHC, rather than being held by public shareholders.

HOW WE DETERMINED THE OFFERING RANGE AND THE $10.00 PRICE PER SHARE

The offering range is based on an independent appraisal of Mutual Savings'
pro forma market value prepared by RP Financial, LC, an appraisal firm
experienced in appraisals of savings institutions.

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<PAGE> 10

The appraisal incorporated an analysis of a peer group of publicly-traded
mutual holding company institutions that RP Financial considered to be
comparable to Mutual Savings, including an evaluation of the average and median
price-to-earnings, price-to-core earnings, price-to-book value,
price-to-tangible book value and price-to-assets ratios indicated by the market
prices of the peer group companies, with such ratios adjusted to their fully
converted equivalent basis. RP Financial applied the peer group's fully
converted pricing ratios, as adjusted for certain qualitative valuation
adjustments to account for differences between Mutual Savings and the peer
group, to Mutual Savings' pro forma earnings, core earnings, book value,
tangible book value and assets to derive the estimated pro forma market value of
Mutual Savings. RP Financial has estimated that in its opinion as of August 28,
2000 the estimated pro forma market value of Bank Mutual was between $144.5
million and $195.5 million, with a midpoint of $170.0 million.

The appraisal placed the greatest weight on the price-to-earnings
approaches to valuation, but also considered the price-to-book value approaches
and price-to-assets approach. Compared to the average fully converted pricing
ratios of the peer group, Mutual Savings' pro forma fully converted ratios at
the estimated pro forma market value indicated a discount of 5% based on the
price-to-core earnings approach, a discount of 22% based on the price-to-book
value approach, a discount of 7% based on the price-to-tangible book value
approach, and a discount of 45% based on the price-to-assets approach. The
estimated appraised value and the resulting discounts relative to the peer
group's fully converted pricing ratios took into consideration the potential
benefits of the restructuring and the merger. The appraisal also noted Mutual
Savings' fully converted pro forma price-to-book value and price-to-tangible
book value ratios reflected premiums relative to the issuance pricing of recent
conversion and mutual holding company transactions. Compared to most of the
recent conversion and mutual holding company transactions, Mutual Savings has
more assets, greater market value and anticipated liquidity in the shares, and a
more leveraged balance sheet (resulting in a lower tangible equity-to-assets
ratio), which all contributed to the premium price-to-book value and
price-to-tangible book value ratios indicated relative to the recent conversions
and mutual holding companies.

The board of directors of Mutual Savings has determined to sell shares in
the stock offering at $10.00 share. Based on that price, assuming the issuance
of 5,025,485 shares to former shareholders of First Northern, the pro forma
market value of Mutual Savings ranged between $194.8 million and $245.8 million,
with a midpoint pro forma market value of $220.2 million. This is the "estimated
valuation range." The stock issuance plan provides that total outstanding shares
must reflect the estimated valuation range and that public ownership will equal
49.9% of outstanding shares, while the MHC's ownership will equal 50.1%. Given
the 5,025,485 shares to be issued to the former shareholders of First Northern,
this results in an offering range of between 4,692,782 and 7,237,682 shares,
with a midpoint of 5,965,232 shares. Following the stock offering and First
Northern merger, shares outstanding to the public will therefore range between
9,718,267 and 12,263,167, with a midpoint of 10,990,717 shares. Total
outstanding shares, held by the MHC and public owners, will range between
19,475,485 and 24,575,485.

The appraisal was based in part upon Mutual Savings' financial condition
and operations, the financial condition and operations of First Northern, the
effect of the First Northern merger and the effect of the additional capital
Bank Mutual will raise from the sale of common stock. RP Financial's independent
appraisal will be updated at the end of the offering process before we complete
our restructuring. At that time, the estimated pro forma market value may
change, but there will be no resolicitation of subscribers if it is neither less
than the minimum nor greater than the adjusted maximum of the estimated
valuation range.

The $10.00 price per share was chosen by Mutual Savings' board of directors
because it is the price per share most commonly used in stock offerings
involving conversions and reorganizations of savings institutions.

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<PAGE> 11

OUR DIRECTORS, OFFICERS AND EMPLOYEES WILL HAVE ADDITIONAL COMPENSATION AND
BENEFIT PROGRAMS AFTER THE RESTRUCTURING

We are adding a new benefit plan for our officers and employees at no cost
to them, and will enter into new employment agreements.

- Employee Stock Ownership Plan. This plan will cover most of Mutual
Savings' employees, and may be extended to First Northern Savings' and
other employees. We will lend it money to buy up to 8% of the shares we
sell in the offering and issue in the First Northern merger, combined.
The ESOP will buy the shares either in the offering or in the open
market. The plan will allocate the stock to employees over a ten-year
period as additional compensation for their services.

- Employment Agreements. Mutual Savings has employment agreements with
Michael T. Crowley, Sr. and Michael T. Crowley, Jr., which will continue
after the restructuring. If Mutual Savings discharges either of them
without cause, or if either of them resigns because Mutual Savings does
not meet its obligations under these agreements, it must make a
termination payment. Mutual Savings is also entering into new employment
agreements with four other executive officers. The new employment
agreements will provide these officers with rights they do not currently
have to receive severance benefits in the event of their actual or
constructive discharge without cause.

- First Northern Employment Agreements. In connection with the First
Northern merger, we will assume the employment agreement of First
Northern's chief executive officer and offer to replace existing
employment agreements for the other executive officers of First Northern.
These agreements will have provisions similar to those of the Mutual
Savings employment agreements, except that Mr. Meeuwsen's agreement is
for a period of five years and the others are for three years.

We also plan to add the following stock-based benefit plans for our
directors, officers and employees in the near future:

- Stock Option Plan. Under this plan, Bank Mutual may grant officers,
directors and employees options to purchase Bank Mutual stock at a price
that is set on the date we grant the option. The price that we set will
not be less than our stock's current trading price when we grant the
options, so the options will have realizable value only if our stock
price increases. Recipients of options will have up to ten years to
exercise their options. If we implement the stock option plan more than
one year after restructuring, it may also include provisions allowing
payment upon a change in control or retirement. The OTS has proposed
regulations which would allow such a provision earlier.

- Management Recognition Plan. This plan will allow selected officers,
directors and employees to receive shares of our stock, without making
any payment, if they work for us until the end of a specified service
period or attain other performance goals. If we implement the management
recognition plan more than one year after restructuring, it may also
include provisions allowing payment upon a change in control or
retirement. The OTS has proposed regulations which would allow such a
provision earlier.

Assuming we sell 5,965,232 shares in the offering and issue 5,025,485 shares in
the First Northern merger, we expect to ask our shareholders for approval to
grant options to purchase up to 1,099,071 of our shares and make stock grants
under a management recognition plan of up to 367,895 shares under the plans
described above. We will not implement a stock option plan or management
recognition plan unless shareholders approve them. We do not expect to ask Bank
Mutual shareholders to approve these plans until at least six months after we
complete the offering. We expect to obtain the shares we would need for these
plans in the stock offering and/or through stock repurchases on the open market
afterward.

The following table presents the dollar value of the shares that we expect
to grant under the employee stock ownership plan and the contemplated management
recognition plan and of those underlying options to be granted under the stock
option plan, and the percentage of Bank Mutual's outstanding common stock

9
<PAGE> 12

that will be represented by these shares, all assuming the issuances discussed
above. We based the value of the shares for the employee stock ownership plan
and management recognition plan on a price of $10.00 per share in this offering.

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
COMMON STOCK ISSUED
VALUE OF IN THE OFFERING AND
BENEFIT PLAN SHARES TO BE GRANTED FIRST NORTHERN MERGER
------------ -------------------- ---------------------
(IN MILLIONS)
<S> <C> <C>
Employee stock ownership plan..................... $ 8.8 8%
Management recognition plan....................... 3.3 3
Stock option plan................................. --* 10
----- --
$12.1 21%
</TABLE>

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

* We expect that options will be granted at then-current market prices. The fair
value of the options will depend upon whether there is subsequent appreciation
in Bank Mutual's stock price, the amount of that appreciation and other
factors.

HOW WE INTEND TO USE THE PROCEEDS WE RAISE FROM THE OFFERING

Assuming we sell 5,965,232 shares in the offering and that we issue
5,025,485 shares to First Northern shareholders, we intend to use the net
proceeds from the offering as follows:

- $27.0 million will be used as part of the cash consideration to First
Northern shareholders in the First Northern merger, reflecting that 60%
of the consideration is paid in cash;

- $8.8 million will be loaned to the employee stock ownership plan to fund
its purchase of common stock;

- $20.2 million will be retained by Bank Mutual.

The amount of cash needed for the First Northern merger will vary between
30% and 60% of the total merger consideration. Assuming that 60% of the total
consideration is paid in cash, the total cash payment will be approximately
$75.4 million. If a higher percentage is paid in stock, the cash needs will
decrease. For example, if 50% of the total consideration is paid in cash and 50%
in stock, the total cash payment will be approximately $62.8 million. See "The
Parties -- First Northern Savings; The First Northern Merger". Bank Mutual will
obtain the additional funds to pay the balance of the purchase price, together
with the costs of the merger and required cash-out of First Northern stock
options, from Mutual Savings' and First Northern Savings' existing capital and
earnings.

Bank Mutual may use some of the net proceeds of the offering as a possible
source of funds to pay dividends to shareholders, to repurchase common stock, to
finance the possible acquisition of other financial institutions and other
businesses that are related to banking, or for other general corporate purposes.

TERMINATION

Mutual Savings' Board of Directors may terminate the restructuring at any
time. For example, it could terminate the plan of restructuring if we do not
receive regulatory approval, if conditions for the First Northern merger are not
met, or if any other condition for the restructuring is not met.

If we terminate the restructuring, any subscription funds sent to us will
be returned together with interest at Mutual Savings' passbook rate of interest
promptly after the termination. If you elected to have your subscription paid by
a withdrawal from a Mutual Savings account, the "hold" placed on your account
will be released.

10
<PAGE> 13

NO CHANGES TO DEPOSIT AND LOAN RELATIONSHIPS

The transactions we describe in this prospectus will not affect your
deposit or loan relationships with Mutual Savings or the FDIC insurance on your
accounts. The federally-chartered stock bank that will be a successor to the
state-chartered Mutual Savings will continue all Mutual Savings' accounts, loans
and similar business relationships without a change in terms.

POSSIBLE CONVERSION OF THE MHC TO STOCK FORM

In the future, the MHC may convert from mutual to capital stock form, in a
transaction commonly known as a "full conversion." If MHC were to undertake a
full conversion, we expect that Bank Mutual's public shareholders would own the
same percentage of the resulting entity as they owned prior to the full
conversion. Any full conversion would need to be conducted under laws and
regulations then in effect, which could affect what Bank Mutual shareholders
would actually receive. The board of directors has no current plan to undertake
a full conversion transaction, and we cannot assure that one will occur. For a
description of this possible full conversion, see "The Restructuring and The
Offering -- Possible Conversion of the MHC to Stock Form."

HOW YOU MAY OBTAIN ADDITIONAL INFORMATION REGARDING THE OFFERING

If you have any questions regarding the offering or the restructuring,
please call the Stock Information Center at (800) 580-0029, Monday through
Friday, between 9 a.m. and 4 p.m. central time.

FIRST NORTHERN

First Northern Savings Bank, S.A. is a Wisconsin-chartered stock savings
and loan association, with 19 branches located in northeastern Wisconsin. First
Northern Capital Corp. wholly owns First Northern Savings. At June 30, 2000,
First Northern had assets of $904.9 million, deposits of $568.6 million and
shareholders' equity of $75.6 million. The primary office of First Northern is
located at 201 North Monroe Avenue, Green Bay, Wisconsin 54305.

As part of the transactions which Mutual contemplates, Bank Mutual will
acquire First Northern Capital Corp. simultaneously with completion of this
offering. Mutual Savings and First Northern have signed a merger agreement for
that acquisition. As part of this transaction, First Northern Savings will
convert into a federally-chartered savings bank; when we refer to First Northern
Savings, we also include the federal savings bank after that conversion. After
the transaction, First Northern Savings will be wholly-owned by Bank Mutual.

Mutual Savings does not expect to complete the restructuring and stock
offering if it does not believe that it will be able to complete the First
Northern merger. We also do not expect to complete the First Northern merger if
it does not believe that it will be able to complete the restructuring and stock
offering. For further information about First Northern and the merger, see "The
Parties" and "Index to Financial Statements -- First Northern Data."

THE FIRST NORTHERN MERGER

Bank Mutual will acquire First Northern Savings in a merger transaction.
The consideration payable to First Northern shareholders will be paid partly in
cash and partly in Bank Mutual common stock. Before the merger closes, Mutual
will determine the relative proportion between cash and stock, but the stock
portion must be between 40% and 70% of the total consideration paid. The stock
percentage will be at least 40%. If shares of Bank Mutual common stock are
available after all orders have been filled in the subscription offering, Bank
Mutual may issue any amount of such available shares to former First Northern
shareholders, in lieu of cash. Under no circumstances, however, will more than
70% of the consideration in the First Northern merger be paid in shares of
common stock.

In this prospectus, unless we say otherwise, we assume that 40% of the
consideration will be Bank Mutual stock; in that case, Bank Mutual will issue
approximately 5,025,485 shares and pay approximately

11
<PAGE> 14

$75.4 million in cash. We also assume in all calculations relating to the First
Northern merger that the number of First Northern shares outstanding is the
number outstanding as of June 30, 2000. This number would change if Mutual
Savings elects a higher percentage to be paid in stock. Mutual Savings may vary
the stock percentage between 40% and 70% at its discretion. For example, it may
increase the stock percentage above 40% if shareholders of First Northern
request to receive more than 40% of the consideration in stock. For example, if
the stock percentage is 50%, Bank Mutual will issue 6,281,856 shares and pay
approximately $62.8 million in cash in the merger.

The total number of shares that Bank Mutual may issue in its stock offering
and the First Northern merger combined is limited. The limits arise out of OTS
regulatory requirements.

- Bank Mutual may not issue shares beyond the maximum of the appraisal, as
adjusted.

- The MHC must own at least a majority of the shares of Bank Mutual.

Both the number of shares to be sold by Bank Mutual in the stock offering
and the number of shares to be issued in the First Northern merger can vary
within those limits. Thus, in some circumstances, if Bank Mutual issues more
shares in one transaction, it may be limited to issuing fewer shares in the
other.

From a financial perspective, it will not make a difference to Bank Mutual
whether a share is issued in the First Northern merger or sold in the stock
offering, since the issuance of additional shares in the First Northern merger
will result in a corresponding decrease in Bank Mutual's cash requirements in
the merger. From Bank Mutual's perspective, the result is the same whether Bank
Mutual sells a share for $10.00, and then pays that $10.00 to a First Northern
shareholder, or if it issues a First Northern shareholder a share of common
stock but does not have to pay the $10.00 in cash.

The Mutual Savings' board of directors believes that the First Northern
merger is attractive for various reasons. From Mutual Savings' perspective, the
First Northern merger would:

- combine two financial institutions of complementary business focuses.

- significantly expand our presence in northeastern Wisconsin, allowing us
to enter attractive new markets through an established and attractive
operation.

- permit us to acquire this presence for fair consideration.

- allow elimination of certain duplicative costs and achievement of
potential economies of scale over time by increasing size.

- complement the restructuring by providing a productive use for some of
the offering's cash proceeds.

- obtain additional experienced and well-qualified employees.

The merger will be accounted for as a purchase. Initially after the
restructuring, Bank Mutual expects to maintain First Northern Savings as a
subsidiary separate from Mutual Savings. See "The Parties -- First Northern
Savings; The First Northern Merger."

12
<PAGE> 15

MUTUAL SAVINGS SELECTED FINANCIAL AND OTHER DATA

In the following table, Mutual Savings provides selected financial data for
its past five fiscal years. Mutual Savings derived this information from its
audited financial statements, although the table itself is not audited. The
table also includes information at June 30, 2000 and for the six months ended
June 30, 2000 and 1999, derived from Mutual Savings' unaudited financial
statements. Operating results for the interim periods do not necessarily
indicate the results of Mutual Savings that you may expect for the entire year.
The following data should be read together with Mutual Savings' consolidated
financial statements and related notes and "Management's Discussion and
Analysis" which appear in this prospectus beginning at pages F-1 and 51,
respectively.

We are presenting information for Mutual Savings rather than Bank Mutual
because Bank Mutual has not had any operations or material assets prior to this
time. In the restructuring, Bank Mutual will become the sole shareholder of
Mutual Savings immediately prior to the First Northern merger.

In 1999, non-interest expense includes a special write-off of intangible
assets of $15.6 million which Mutual deemed to be impaired. The intangible
assets resulted from the 1997 acquisition of First Federal. The effect on
results for the year was a decrease of $13.6 million. See footnote 2 to Mutual
Savings' consolidated financial statements. Also, in 1996, non-interest expense
includes a one-time FDIC Savings Association Insurance Fund ("SAIF") assessment
of $6.4 million. All SAIF insured savings associations were specially assessed
in this quarter. The effect on net income of the assessment in 1996 was a
decrease of $3.9 million.

<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, --------------------------------------------------------------
2000 1999 1998 1997 1996 1995
----------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets............... $1,759,170 $1,769,506 $1,872,862 $1,826,080 $1,169,271 $1,205,092
Loans receivable, net...... 1,127,987 1,082,795 1,037,589 1,255,082 825,131 790,713
Loans available for sale... 1,632 541 27,723 13,397 4,357 2,479
Investment securities
available for sale....... 57,461 57,763 116,534 159,208 159,513 120,081
Mortgage-related securities
available for sale....... 461,377 374,100 270,897 225,906 90,452 196,902
Total cash and cash
equivalents.............. 31,817 178,959 330,248 79,064 37,151 55,234
Federal Home Loan Bank
stock.................... 14,585 13,537 13,537 20,237 8,001 7,841
Intangible assets.......... 11,027 11,496 29,786 32,589 -- --
Foreclosed real estate,
net...................... 2,977 3,018 3,505 159 258 333
Total deposits............. 1,300,613 1,343,007 1,398,858 1,362,330 994,283 1,004,559
Total borrowings........... 264,667 242,699 270,822 270,867 -- 25,000
Total equity............... 167,588 163,820 175,743 163,052 151,294 147,031
</TABLE>

13
<PAGE> 16

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------- ------- -------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Total interest income....... $60,482 $58,653 $118,302 $125,470 $115,993 $81,674 $81,793
Total interest expense...... 37,061 38,128 75,337 80,017 72,194 49,595 50,390
------- ------- -------- -------- -------- ------- -------
Net interest income....... 23,421 20,525 42,965 45,453 43,799 32,079 31,403
Provision for loan losses... 236 203 350 637 1,065 672 597
------- ------- -------- -------- -------- ------- -------
Net interest income after
provision for loan
losses................. 23,185 20,322 42,615 44,816 42,734 31,407 30,806
------- ------- -------- -------- -------- ------- -------
Non-interest income:
Fees and service
charges................ 3,109 2,937 6,100 6,097 4,758 2,816 2,840
Gain on sale of loans,
mortgage-related
securities and
investment securities.. 43 328 655 1,025 474 333 563
Other non-interest
income................. 864 634 1,229 1,318 927 520 406
------- ------- -------- -------- -------- ------- -------
Total non-interest
income.......... 4,016 3,899 7,984 8,440 6,159 3,669 3,809
Non-interest expense:
Amortization of intangible
assets................. 469 1,355 18,290 2,738 1,941 -- --
Other non-interest
expense................ 16,217 16,590 32,989 32,783 30,145 29,904 22,790
------- ------- -------- -------- -------- ------- -------
Total non-interest
expense......... 16,686 17,945 51,279 35,521 32,086 29,904 22,790
------- ------- -------- -------- -------- ------- -------
Income before income
taxes.................. 10,515 6,276 (680) 17,735 16,807 5,172 11,825
Income tax expense.......... 4,001 2,386 3,803 6,584 6,622 1,671 4,181
------- ------- -------- -------- -------- ------- -------
Net income (loss)......... $ 6,514 $ 3,890 $ (4,483) $ 11,151 $ 10,185 $ 3,501 $ 7,644
======= ======= ======== ======== ======== ======= =======
</TABLE>

14
<PAGE> 17

<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30, AT OR FOR THE YEARS ENDED DECEMBER 31,
----------------- -----------------------------------------
2000 1999 1999 1998 1997 1996 1995
------- ------- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER
DATA:
PERFORMANCE RATIOS:
Return on average assets............ 0.74% 0.42% (0.24)% 0.60% 0.62% 0.29% 0.64%
Return on average assets excluding
amortization of intangible
assets............................ 0.79 0.54 0.63 0.73 0.72 0.29 0.64
Return on average equity............ 7.95 4.41 (2.55) 6.57 6.52 2.34 5.42
Return on average equity excluding
amortization of intangible
assets............................ 8.46 5.69 6.63 7.95 7.59 2.34 5.42
Net interest rate spread(a)......... 2.31 1.94 2.03 2.16 2.31 2.09 2.07
Net interest margin(b).............. 2.78 2.33 2.44 2.58 2.76 2.77 2.69
Non-interest income to average
assets............................ 0.46 0.42 0.43 0.46 0.37 0.31 0.32
Non-interest expense (excluding
amortization of intangible assets)
as a percent of average assets.... 1.85 1.79 1.79 1.77 1.82 1.97 1.90
Efficiency ratio(c)................. 59.11 67.92 64.75 60.83 60.34 83.65 64.72
Average interest-earning assets to
average interest-bearing
liabilities....................... 1.11x 1.09x 1.10x 1.09x 1.10x 1.16x 1.14x
CAPITAL RATIOS:
Average equity to average assets.... 9.37% 9.51% 9.56% 9.17% 9.44% 12.54% 11.72%
Equity to assets.................... 9.53 9.44 9.26 9.38 8.93 12.94 12.20
Leverage capital.................... 9.37 8.04 8.66 7.78 7.40 12.69 12.26
Total risk-based capital............ 18.69 17.60 18.51 17.02 14.80 24.58 24.04
ASSET QUALITY RATIOS:
Non-performing loans to total
loans............................. 0.20% 0.53% 0.44% 0.65% 0.84% 0.29% 0.10%
Non-performing assets to total
assets............................ 0.30 0.48 0.44 0.55 0.58 0.23 0.09
Allowance for loan losses to non-
performing loans.................. 319.14 123.21 144.54 101.86 68.65 163.31 433.21
Allowance for loan losses to non-
performing assets................. 136.33 77.62 88.79 66.98 67.62 147.46 303.94
Allowance for loan losses to total
loans............................. 0.63 0.65 0.64 0.66 0.57 0.48 0.43
OTHER DATA:
Offices............................. 51 51 51 52 53 33 33
</TABLE>

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

(a) "Net interest rate spread" means the difference between the average yield
on the average balance of interest-earning assets and the average cost of
the average balance of interest-bearing liabilities.

(b) "Net interest margin" means the net interest income divided by the average
balance of interest-earning assets.

(c) Computed using net interest income plus non-interest income as the
denominator and non-interest expense (excluding amortization of intangible
assets) as the numerator.

15
<PAGE> 18

FIRST NORTHERN SELECTED FINANCIAL AND OTHER DATA

In the following table, we provide selected financial data for First
Northern for its past five fiscal years. First Northern derived this information
from its audited financial statements, although the table itself is not audited.
The table also includes information at June 30, 2000 and for the six months
ended June 30, 2000 and 1999, derived from First Northern's unaudited financial
statements. Operating results for the interim periods do not necessarily
indicate the results of First Northern that you may expect for the entire year.
The following data should be read together with First Northern's consolidated
financial statements and related notes and First Northern "Management's
Discussion and Analysis of Financial Condition and Results of Operations" which
appear beginning on page FN-1 of this prospectus.

In 1996, non-interest expense includes a one-time SAIF assessment of $2.9
million. The effect on net income of this assessment in 1996 was a decrease of
$1.7 million. Earnings per share in 1996 were decreased by $0.19.

<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ----------------------------------------------------
2000 1999 1998 1997 1996 1995
--------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION
DATA:
Total assets................... $904,875 $839,623 $719,713 $667,696 $615,503 $553,467
Loans receivable, net.......... 795,094 736,880 631,739 593,529 553,995 500,535
Loans held for sale............ 2,083 1,085 3,075 2,119 2,532 2,989
Securities held to maturity.... 36,435 36,263 35,263 31,906 25,908 23,388
Investment securities available
for sale..................... 10,941 8,444 9,205 6,799 5,635 2,978
Mortgage-related securities
available for sale........... 5,304 5,554 996 932 1,837 2,013
Total cash and cash
equivalents.................. 11,234 12,372 7,211 964 3,563 1,274
Federal Home Loan Bank stock... 12,500 9,250 5,250 5,250 3,773 3,768
Foreclosed real estate, net.... 456 382 106 153 189 136
Total deposits................. 568,625 566,908 542,372 481,788 458,323 449,954
Total borrowings............... 247,353 185,899 91,977 103,277 77,272 21,000
Total shareholders' equity..... 75,604 76,795 76,093 73,817 70,224 72,579
Book value per share........... $ 9.03 $ 8.98 $ 8.68 $ 8.34 $ 8.00 $ 7.97
Shares outstanding, net of
treasury shares.............. 8,376 8,549 8,765 8,846 8,775 9,110
</TABLE>

16
<PAGE> 19

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Total interest income....... $30,051 $25,218 $52,770 $49,690 $46,596 $41,876 $39,025
Total interest expense...... 19,186 14,335 30,686 29,003 26,491 23,203 22,036
------- ------- ------- ------- ------- ------- -------
Net interest income....... 10,865 10,883 22,084 20,687 20,105 18,673 16,989
Provision for loan losses... 330 174 472 420 320 370 240
------- ------- ------- ------- ------- ------- -------
Net interest income after
provision for loan
losses................. 10,535 10,709 21,612 20,267 19,785 18,303 16,749
------- ------- ------- ------- ------- ------- -------
Non-interest income:
Fees and service
charges................ 1,028 850 1,829 1,735 1,791 1,548 1,403
Gain on sale of loans,
mortgage-related
securities and
investment securities.. 64 308 380 1,051 359 259 970
Other non-interest
income................. 1,012 795 1,645 1,453 1,126 879 837
------- ------- ------- ------- ------- ------- -------
Total non-interest
income.......... 2,104 1,953 3,854 4,239 3,276 2,686 3,210
Non-interest expense........ 7,694 7,156 14,564 14,071 13,374 15,939 12,651
------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 4,945 5,506 10,902 10,435 9,687 5,050 7,308
Income tax expense.......... 1,569 1,840 3,525 3,606 3,651 1,767 2,718
------- ------- ------- ------- ------- ------- -------
Net income................ $ 3,376 $ 3,666 $ 7,377 $ 6,829 $ 6,036 $ 3,283 $ 4,590
======= ======= ======= ======= ======= ======= =======
Diluted net income per
share..................... $ 0.39 $ 0.41 $ 0.83 $ 0.75 $ 0.66 $ 0.36 $ 0.49
======= ======= ======= ======= ======= ======= =======
</TABLE>

17
<PAGE> 20

<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
JUNE 30, AT OR FOR THE YEARS ENDED DECEMBER 31,
----------------- ----------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- ------ -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS AND
OTHER DATA:
PERFORMANCE RATIOS:
Return on average assets...... 0.78% 1.00% 0.96% 0.98% 0.94% 0.56% 0.83%
Return on average equity...... 8.80 9.57 9.60 9.08 8.38 4.61 6.43
Net interest rate spread...... 2.12 2.71 2.69 2.73 2.83 2.86 2.69
Net interest margin........... 2.61 3.10 3.00 3.11 3.26 3.31 3.17
Non-interest income to average
assets...................... 0.49 0.53 0.50 0.61 0.51 0.46 0.58
Non-interest expense as a
percent of average assets... 1.77 1.95 1.89 2.03 2.09 2.72 2.27
Efficiency ratio.............. 59.33 55.75 56.15 56.45 57.20 74.62 62.63
Cash dividend payout ratio.... 55.00 47.60 47.10 46.80 47.10 81.10 54.90
Average interest-earning
assets to average
interest-bearing
liabilities................. 106.30 108.10 107.56 108.71 109.87 110.90 111.60
CAPITAL RATIOS:
Average equity to average
assets...................... 8.85% 10.42% 9.99% 10.83% 11.24% 12.14% 12.82%
Equity to assets.............. 8.36 9.15 9.15 10.57 11.06 11.41 13.11
Leverage capital.............. 7.80 9.29 8.60 9.60 10.20 10.50 12.90
Total risk-based capital...... 12.60 15.01 14.00 15.70 16.70 17.80 21.90
ASSET QUALITY RATIOS:
Non-performing loans to total
loans....................... 0.03% 0.10% 0.04% 0.05% 0.08% 0.13% 0.08%
Non-performing assets to total
assets...................... 0.08 0.09 0.08 0.06 0.09 0.15 0.10
Allowance for loan losses to
non-performing loans........ 1,654.12 569.63 1,381.63 1,020.52 722.05 394.76 623.92
Allowance for loan losses to
non-performing assets....... 593.25 526.95 588.86 781.19 535.75 314.79 470.76
Allowance for loan losses to
total loans................. 0.53 0.55 0.53 0.56 0.53 0.53 0.52
OTHER DATA:
Offices....................... 19 19 19 19 19 20 20
</TABLE>

18
<PAGE> 21

RISK FACTORS

You should consider carefully the following risk factors before deciding
whether to invest in Bank Mutual's common stock.

CHANGING INTEREST RATES MAY HURT OUR PROFITS

To be profitable, we have to earn more money in interest and fees than we
pay as interest and other expenses. Of our first mortgage loans maturing after
one year, a majority have interest rates that are fixed for the term of the
loan. While most of our deposit accounts consist of time deposit accounts with
remaining terms to maturity of less than one year, most of our loans have longer
remaining terms. If interest rates rise, which has been the case in recent
quarters, the amount of interest we pay on deposits is likely to increase more
quickly than the amount of interest we receive on our loans, mortgage-related
securities and investment securities. This would cause our profits to decrease.
Rising interest rates would likely reduce the value of our mortgage-related
securities and investment securities and may decrease demand for loans and make
it more difficult for borrowers to repay their loans. For additional information
on our exposure to interest rates, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Management of Interest Rate
Risk."

INCREASES IN MARKET INTEREST RATES ARE LIKELY TO ADVERSELY AFFECT EQUITY

As of June 30, 2000, we owned $518.8 million of securities available for
sale. Generally accepted accounting principles require that we carry these
securities at fair value on our balance sheet. Unrealized gains or losses on
these securities, reflecting the difference between the fair market value and
the amortized cost, net of its tax effect, is carried as a component of equity.
In recent quarters, rates have been rising. When market rates of interest
increase, the fair value of our securities available for sale generally
decreases and equity correspondingly decreases. When rates decrease, fair value
generally increases and equity correspondingly increases. As of June 30, 2000,
Mutual Savings' available for sale portfolio had an unrealized loss of $13.9
million, because fair value was $518.8 million and amortized cost was $532.7
million. At June 30, 2000, First Northern Savings had an unrealized gain of
$637,000 on securities available for sale.

LOW DEMAND FOR REAL ESTATE LOANS MAY LOWER OUR PROFITABILITY

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

STRONG COMPETITION WITHIN OUR MARKET AREA MAY REDUCE OUR CUSTOMER BASE

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

AFTER THE FIRST NORTHERN MERGER, WE WILL HAVE SIGNIFICANT INTANGIBLE ASSETS,
WHICH WILL HURT OUR FUTURE RESULTS

In the First Northern merger, Bank Mutual will record approximately $58.6
million in intangible assets, using June 30, 2000 information. Bank Mutual will
amortize these intangible assets over 20 years. As a result, pre-tax earnings
will be reduced by approximately $2.9 million annually. Also, at some point

19
<PAGE> 22

in the future, intangible assets may become impaired, and we would need to write
them off as a reduction to earnings. For example, in 1999 Mutual Savings wrote
off $15.6 million of "impaired" intangible assets from the 1997 acquisition of
First Federal. Even though this special write-off did not affect our cash
position, our 1999 results were reduced by this action.

WE MAY EXPAND OUR LENDING ACTIVITIES IN RISKIER AREAS

We have identified commercial real estate, commercial business and consumer
loans, including indirect auto loans, as areas for increased lending emphasis.
While increased lending diversification is expected to increase interest income,
non-residential loans carry greater risk of payment default than residential
real estate loans. As the volume of these loans increase, credit risk increases.
In the event of substantial borrower defaults, our provision for loan losses
would increase and therefore, earnings would be reduced.

First Northern's consumer loan portfolio includes $98.3 million of indirect
auto loans at June 30, 2000. Indirect auto lending is not a current business
line for Mutual Savings. Although First Northern has experienced minimal
delinquencies in its automobile loan portfolio, borrowers may be more likely to
become delinquent on an automobile loan than on a residential real estate loan.
Moreover, unlike the collateral for real estate loans, automobiles depreciate
rapidly and, in the event of default, principal loss as a percent of the loan
balance depends upon the mileage and condition of the vehicle at the time of
repossession, over which First Northern has no control. Similarly, any non-real
estate collateral securing commercial business loans may depreciate over time
and fluctuate in value.

IMPLEMENTING STOCK-BASED BENEFITS WILL INCREASE OUR FUTURE COMPENSATION EXPENSE
AND REDUCE OUR EARNINGS

We intend to adopt a stock option plan which will provide for the granting
of options to purchase common stock, to adopt a management recognition plan that
will provide for awards of common stock to our eligible officers, employees and
directors and to have an employee stock ownership plan which may purchase shares
in the restructuring. In addition, we may adopt a restoration plan that will
supplement the benefits to select executive officers under the employee stock
ownership plan and our 401(k) plan. These plans will increase our future costs
of compensating our directors and employees, reducing net earnings. The cost of
these plans will vary based on our stock price at specific points in the future.

THE MHC'S CONTROL OVER BANK MUTUAL MAY PREVENT TRANSACTIONS YOU WOULD LIKE

The MHC will be managed by generally the same directors and officers who
manage Bank Mutual. Because the MHC will own a majority of Bank Mutual's common
stock after the restructuring, the board of directors of the MHC will control
the outcome of most matters put to a vote of shareholders of Bank Mutual. We
cannot assure you that the votes cast by the MHC will be in your best interest
as a shareholder. For more information regarding your lack of voting control
over Bank Mutual, see "Mutual Savings Bancorp, MHC" and "Restrictions on
Acquisition of Bank Mutual and Mutual Savings."

MUTUAL AND FIRST NORTHERN MAY NOT INTEGRATE AS WE HOPE

We anticipate that Mutual Savings and First Northern Savings will initially
operate as separate entities. That will delay or reduce any expense reduction
which the combined companies might achieve from a combination. Similarly, if we
ultimately combine the two banks, any problems, such as customer loss or
difficulties that may result from systems conversions, will be deferred until
such time as the integration occurs. Similarly, Mutual and First Northern may
find after the merger that their operations and management philosophies will not
combine as well as they had expected, which could lead to operating
inefficiencies and complications going forward.

20
<PAGE> 23

THIS TRANSACTION IS UNIQUE, WHICH MAY AFFECT MARKET ACCEPTANCE

Our restructuring to a mutual holding company format with a mid-tier
holding company, and the simultaneous acquisition of First Northern Savings, is
an unusual transaction. We are not aware of any prior transactions in which this
type of combination has occurred simultaneously with this type of restructuring.
In addition to regulatory requirements, we do not know whether the unusual
nature of the transaction, or ownership structure after the transaction, will
have an adverse effect on the market for Bank Mutual common stock.

In particular, because many former First Northern shareholders may be
issued shares of Bank Mutual common stock in the First Northern merger, in order
to avoid a taxable transaction that would occur if they received cash, they may
be more likely to hold their Bank Mutual common stock than other types of
shareholders. Holding shares, versus selling them, could reduce market activity
for Bank Mutual common stock. Conversely, if the exchange ratio in the First
Northern merger requires some First Northern shareholders who would prefer to
receive cash to receive Bank Mutual shares, those shareholders may want to
quickly sell their Bank Mutual shares, which could create negative market
pressures and cause a drop in our share price.

RECENTLY, THE STOCK MARKET HAS BEEN VOLATILE AND MANY STOCKS HAVE NOT PERFORMED
WELL IN THE AFTERMARKET

Publicly traded stocks, including stocks of financial institutions, have
recently experienced substantial market price volatility, due, in part, to
investors' shifting perceptions of the effect on various industry sectors of
changes and potential changes in the economy. Market fluctuations, therefore,
may be unrelated to the operating performance of the issuer. The purchase price
of our common stock sold in the offering is based on the independent appraisal
by RP Financial. The appraisal is not intended, and should not be construed, as
a recommendation of any kind as to the advisability of purchasing shares of
common stock. The valuation is based on estimates and projections of a number of
matters, all of which are subject to change from time to time. After our shares
begin trading, the trading price of our common stock will be determined by the
marketplace, and may be influenced by many factors, including prevailing
interest rates, the overall performance of the economy, investor perceptions of
Bank Mutual, and the outlook for the financial institutions industry in general.
Due to possible continued market volatility, we cannot assure you that,
following the stock offering, the trading price of our common stock will be at
or above the $10.00 per share price in this stock offering. You should consider
investing in our common stock only if you have a long-term investment horizon.

Cautionary Statement Regarding Forward-Looking Information

The discussions in this prospectus which are not historical statements
contain forward-looking statements that involve risks and uncertainties.
Statements which "are not historical statements" include those in the future
tense or which use terms such as "believe," "expect" and "anticipate". Bank
Mutual's actual future results could differ in important and material ways from
those discussed. Many factors could cause or contribute to such differences.
These factors include those we discuss above in "Risk Factors." You should also
carefully read other parts of this prospectus for other factors which could
affect Bank Mutual's operations in the future. In particular, Bank Mutual's
Management's Discussion and Analyses of Financial Condition and Results of
Operations include discussions of factors affecting it.

21
<PAGE> 24

THE PARTIES

MUTUAL SAVINGS BANK

Mutual Savings is a Wisconsin-chartered mutual savings bank, founded in
1892. Mutual Savings is the largest mutual savings bank in Wisconsin, and is one
of the largest in the country, based on asset size. Our deposits are insured by
the FDIC up to legal limits. We are examined and regulated by the Wisconsin
Department of Financial Institutions and the FDIC. However, as part of the
restructuring, Mutual Savings is converting into a federally chartered savings
bank. After our conversion to a federal charter, we will be examined and
regulated by the Office of Thrift Supervision. Mutual Savings' executive offices
are located at 4949 West Brown Deer Road, Brown Deer, Wisconsin 53223 and its
telephone number is (414) 354-1500. Brown Deer is a suburb of Milwaukee,
Wisconsin.

Serving over 80,000 households, Mutual Savings offers a full range of
savings, investment, checking and lending services. Our goal is to provide
continual high-quality service to our customers.

For further information on our operations and financial condition, see
"Business of Mutual Savings Bank."

BANK MUTUAL CORPORATION

Bank Mutual is a newly organized federally-chartered corporation. Bank
Mutual has not engaged in any business to date, except in connection with the
proposed restructuring and the First Northern merger. Upon completion of the
restructuring, Bank Mutual will serve as the holding company of Mutual Savings
and First Northern Savings. A majority of the outstanding shares of Bank
Mutual's common stock will be owned by the MHC. Bank Mutual's executive offices
are located at 4949 West Brown Deer Road, Brown Deer, Wisconsin 53223 and its
telephone number is (414) 354-1500.

MUTUAL SAVINGS BANCORP, MHC

As part of our restructuring, Mutual Savings will organize Mutual Savings
Bancorp, MHC as a federally-chartered mutual savings bank holding company which
will be registered as a savings association holding company with the OTS.
Persons who had liquidation rights with respect to Mutual Savings as of the date
of the restructuring will continue to have liquidation rights solely with
respect to the MHC. Their liquidation rights in the MHC will exist as long as
they maintain a deposit account at Mutual Savings. The MHC's executive offices
are located at 4949 West Brown Deer Road, Brown Deer, Wisconsin 53223 and its
telephone number is (414) 354-1500.

The MHC's principal assets will be the shares of common stock of Bank
Mutual it receives in the restructuring and approximately $100,000 it receives
as its initial capitalization. At the present time, we expect that the MHC will
not engage in any business activity other than its investment in a majority of
the common stock of Bank Mutual and the management of any cash dividends
received from Bank Mutual. Federal law and regulations require that as long as
the MHC is in existence it must own a majority of Bank Mutual's voting stock.
Federal law, regulations and the plan of restructuring would permit the MHC to
convert to the stock form of organization at some later time, but we have no
current plans for such a conversion. For additional information regarding a
stock conversion, see "The Restructuring and The Offering -- Possible Conversion
of the MHC to Stock Form."

FIRST NORTHERN SAVINGS; THE FIRST NORTHERN MERGER

In a separate transaction which will occur at the same time as the
restructuring, Bank Mutual will acquire First Northern Capital Corp., which is
the holding company of First Northern Savings Bank, SA, in a merger transaction.
First Northern Savings is a Wisconsin-chartered savings and loan association

22
<PAGE> 25

headquartered in Green Bay, Wisconsin. First Northern Savings has 19 offices in
northeastern Wisconsin. First Northern had $904.9 million in total assets and
$568.6 million in deposits at June 30, 2000. For further information about First
Northern, including financial statements, management's discussion and analysis
and a description of its business, see "Index to Financial Statements -- First
Northern Data."

In the First Northern merger, each outstanding share of First Northern
common stock will be converted into either $15 in cash or 1.5 shares of Bank
Mutual common stock. The percent of shares converted into Bank Mutual common
stock will be between 40% and 70% of First Northern's outstanding shares; the
precise number will be chosen by Mutual Savings. The balance of the shares will
be converted into cash. The stock percentage will be at least 40%. If shares of
Bank Mutual common stock are available after all orders have been filled in the
subscription offering, Bank Mutual may issue any amount of such available shares
to former First Northern shareholders, in lieu of cash. Under no circumstances,
however, will more than 70% of the consideration in the First Northern merger be
paid in shares of common stock. Mutual Savings may do this at its discretion.
For example, Mutual Savings may increase the stock percentage above 40% if
shareholders of First Northern request to receive more than 40% of the
consideration in stock.

The following table shows how cash and stock to be used in the merger would
vary depending upon where in the range Mutual Savings determines that this
percentage will be.

<TABLE>
<CAPTION>
NUMBER OF
PERCENT CASH CASH AMOUNT PERCENT STOCK SHARES
------------ ------------- ------------- ---------
<S> <C> <C> <C>
60% $75.4 million 40% 5,025,485
50% $62.8 million 50% 6,281,856
40% $50.3 million 60% 7,538,227
30% $37.7 million 70% 8,794,598
</TABLE>

The total number of shares that Bank Mutual may issue in its stock offering
and the First Northern merger combined is limited. The limits arise out of OTS
regulatory requirements.

- Bank Mutual may not issue shares beyond the maximum of the appraisal, as
adjusted.

- The MHC must own at least a majority of the shares of Bank Mutual.

Both the number of shares to be sold by Bank Mutual in the stock offering and
the number of shares to be issued in the First Northern merger can vary within
those limits. Thus, in some circumstances, if Bank Mutual issues more shares in
one transaction, it may be limited to issuing fewer shares in the other.

For example, the sale of shares in the stock offering may preclude Bank
Mutual from increasing above 40% the percentage of shares issued as
consideration in the First Northern merger. Specifically, if Bank Mutual's
subscription offering is fully subscribed by priority subscribers, it may issue
only 40% of the First Northern merger consideration in shares because the
priority subscribers have a regulatory preference for the rest.

Conversely, the issuance of shares above the 40% minimum in the First
Northern merger may reduce the number of shares that Bank Mutual decides to sell
in a stock offering. For example, if there is a high degree of election of Bank
Mutual common stock in the First Northern merger and Mutual Savings increases
the stock percentage, Bank Mutual may decide to sell fewer shares in a community
offering due to reduced cash needs.

23
<PAGE> 26

In significant part, the restructuring is being undertaken to accommodate
the First Northern merger. The First Northern merger will not proceed if the
restructuring does not occur. Mutual Savings' board of directors believes that
the First Northern merger is attractive for various reasons. From Mutual
Savings' perspective, the First Northern merger would:

- combine two financial institutions of complementary business focuses.

- significantly expand our presence in northeastern Wisconsin, allowing us
to enter attractive new markets through an established and attractive
operation.

- permit us to acquire this presence for fair consideration.

- allow elimination of certain duplicative costs and achievement of
potential economies of scale over time by increasing size.

- complement the restructuring by providing a productive use for some of
the offering's cash proceeds.

- obtain additional experienced and well-qualified employees.

The First Northern merger remains subject to regulatory and First Northern
shareholder approval and other closing conditions. We do not intend to complete
the restructuring and the related offering if we do not expect the First
Northern merger to occur substantially simultaneously. Similarly, we do not
expect to complete the First Northern merger unless the restructuring can be
completed. The First Northern merger will be a tax-free reorganization for Bank
Mutual, Mutual Savings and First Northern.

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

The net proceeds will depend on the total number of shares of common stock
we sell in the offering, which in turn will depend on RP Financial's appraisal,
regulatory and market considerations, and the expenses incurred in connection
with the offering. Although we will not be able to determine the actual net
proceeds from the sale of the common stock until we complete the offering, we
estimate the net proceeds to be between $43.5 million and $83.0 million.

The net proceeds of the offering are not expected to be sufficient to fund
the entire cash consideration payable in the First Northern merger. The amount
of additional cash needed will depend upon the percent of First Northern shares
that are converted into cash. We expect to obtain the additional cash needed as
a transfer of funds from Mutual Savings and First Northern Savings. Please also
see "Regulatory Capital Compliance" for reductions of capital at the subsidiary
level resulting from the First Northern merger.

Bank Mutual intends to use the net proceeds from the offering as follows:

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
4,692,782 5,965,232 7,237,682 8,701,000
SHARES SHARES SHARES SHARES
--------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Offering proceeds(c)......................... $46.9 $59.7 $72.4 $87.0
Offering expenses............................ (3.4) (3.7) (3.8) (4.0)
----- ----- ----- -----
Net offering proceeds........................ 43.5 56.0 68.6 83.0
Transfers from banks(a)...................... 54.5 48.4 42.8 36.5
Identified uses of proceeds:
Cash payments in the First Northern
merger(a)(b)............................ (75.4) (75.4) (75.4) (75.4)
Loan to employee stock ownership plan(c)... (7.8) (8.8) (9.8) (11.0)
----- ----- ----- -----
Proceeds remaining for general Bank Mutual
corporate purposes(a)...................... $14.8 $20.2 $26.2 $33.1
</TABLE>

24
<PAGE> 27

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

(a) The cash portion of the purchase price in the First Northern merger will
exceed the proceeds of the stock offering. As a result it is anticipated
that Mutual Savings and First Northern Savings will transfer funds to Bank
Mutual sufficient to complete the transaction and provide working cash to
Bank Mutual. See "Regulatory Capital Compliance" for the reduction of
capital of Mutual Savings and First Northern Savings resulting from the
transaction.

(b) Assumes 40% of First Northern's shares are converted into Bank Mutual
common stock. If the stock percentage is higher, the total number of shares
sold in this offering will be lower, but correspondingly less cash will be
used to fund the cash payments in the First Northern merger, so there will
be no net difference to Bank Mutual.

(c) If the employee stock ownership plan buys shares in the market after the
restructuring instead of in the offering, the purchase price of those
shares may be less or more than the $10.00 per share offering price, which
would vary the amount of proceeds used for this purpose.

The net proceeds may vary because total shares sold and total expenses may
be more or less than our estimates. For example:

- Our expenses would increase if a syndicated community offering is used to
sell shares not purchased in the subscription offering and community
offering.

- The net proceeds will vary if the offering range is adjusted to reflect a
change, if any, in the estimated pro forma market value of Bank Mutual
resulting from the updated appraisal.

- Similarly, if greater than 40% of the consideration in the First Northern
merger is Bank Mutual common stock, a portion of the offering shares will
be provided to First Northern shareholders rather than sold to
subscribers and, therefore, the net offering proceeds will be less;
however, there will be a corresponding reduction in the amount of
proceeds needed for cash payments to First Northern shareholders.

- Payments for shares made through withdrawals from existing deposit
accounts will not result in the receipt of new funds for investment by
us, but will result in a reduction of Mutual Savings' deposits and
interest expense as funds are withdrawn from subscribers' accounts.

Bank Mutual may use the proceeds it retains from the offering:

- to pay dividends to shareholders;

- to repurchase shares of common stock issued in the offering and the First
Northern merger;

- to finance the possible acquisition of financial institutions or other
businesses that are related to banking;

- to make equity or debt investments in Mutual Savings or First Northern
Savings;

- to invest in securities; and

- for general corporate purposes.

25
<PAGE> 28

POLICY REGARDING DIVIDENDS

Bank Mutual currently plans to pay shareholders a cash dividend at an
annual rate of $0.28 per share. The dividend would be declared and payable
quarterly at a rate of $0.07 per share, starting for the first full quarter we
are a public company, but not earlier than the first quarter of 2001. The
payment of dividends will be subject to the determination of our board of
directors, which will take into account, among other factors, our financial
condition, results of operations, tax considerations, industry standards,
economic conditions and regulatory restrictions that affect the payment of
dividends by Mutual Savings and First Northern Savings to Bank Mutual. Bank
Mutual must also comply with regulations that govern the level of dividends
which may pay as well as the regulatory capital requirements of Bank Mutual as a
savings bank holding company. We cannot guarantee that we will pay dividends or
that, if paid, we will not reduce or eliminate dividends in the future.

If Bank Mutual pays dividends to its shareholders, it will be required to
pay dividends to the MHC unless the MHC elects to waive dividends. We currently
anticipate that initially the MHC will waive dividends paid by Bank Mutual. Any
decision to waive dividends will be subject to regulatory approval. If the OTS
does not permit the dividend waiver, it is possible that Bank Mutual would need
to lower the amount of dividends in order to retain sufficient capital at Bank
Mutual. See "Regulation -- MHC Regulation -- Waiver of Dividends."

As the principal assets of Bank Mutual, Mutual Savings and First Northern
Savings will provide the principal sources of funds for the payment of dividends
by Bank Mutual. Federal law provides that dividends may be paid by Mutual
Savings and First Northern Savings, as federal institutions, only out of net
income and unrestricted capital surplus. However, First Northern Savings will
not be permitted to pay dividends on its capital stock if, among other things,
its capital would be reduced below the amount required for its liquidation
account. See "The Restructuring and The Offering -- Effects of the
Restructuring -- Liquidation Rights."

Any payment of dividends by Mutual Savings or First Northern to Bank Mutual
which would be deemed to be drawn out of their bad debt reserves would require a
payment of taxes at the then-current tax rate by them on the amount of earnings
deemed to be removed from bad debt reserves for such distribution. Mutual
Savings and First Northern do not intend to make any distribution to Bank Mutual
that would create this type of a tax liability. See "Taxation."

Bank Mutual and Mutual Savings have also committed to the OTS in connection
with the reorganization, that during the one-year period following the
completion of the restructuring, Bank Mutual will not declare an extraordinary
dividend to shareholders which would be treated by recipient shareholders as a
tax-free return of capital for federal income tax purposes without prior
approval of the OTS.

26
<PAGE> 29

MARKET FOR BANK MUTUAL COMMON STOCK

Bank Mutual has not previously issued common stock, so there is no market
for the common stock. We have applied to have our common stock quoted on the
Nasdaq National Market under the symbol "BKMU" after the restructuring. We will
receive that approval before we complete our offering. Ryan, Beck has advised us
that it intends to make a market in the common stock following the
restructuring, but is under no obligation to do so. We will encourage and assist
additional market makers to make a market in our common stock.

Making a market involves maintaining bid and asked quotations and being
able, as principal, to effect transactions in reasonable quantities at those
quoted prices. Various securities laws and other regulatory requirements apply
to these activities. Additionally, the development of a liquid public market
depends on the existence of willing buyers and sellers, the presence of which is
not within our control, or that of any market maker. The number of active buyers
and sellers of the common stock at any particular time may be limited. Under
such circumstances, you could have difficulty selling your shares on short
notice and you should not view the common stock as a short-term investment. We
cannot assure you that an active and liquid trading market for the common stock
will develop or that, if it develops, it will continue, nor can we assure you
that if you purchase shares you will be able to sell them at or above $10.00 per
share.

In connection with the restructuring, Mutual Savings has obtained an
appraisal from RP Financial which it used in establishing a $10.00 per share
offering price. See "The Restructuring and the Offering -- Stock Pricing and
Number of Shares to be Issued." However, an appraisal is not a prediction of the
future market value of Bank Mutual shares.

27
<PAGE> 30

REGULATORY CAPITAL COMPLIANCE

At June 30, 2000, Mutual Savings and First Northern Savings exceeded all
regulatory capital requirements. Set forth below is a summary of the capital
computed under generally accepted accounting principles and the compliance with
regulatory capital standards at June 30, 2000, on a historical and pro forma
basis. We have assumed that the indicated number of shares were sold as of June
30, 2000 and shares were issued to First Northern shareholders in conjunction
with the merger agreement. We assumed that Mutual Savings received none of the
proceeds from the offering. We further assume that in conjunction with the
initial capitalization of Bank Mutual, that capital will be transferred to Bank
Mutual in the amounts of $44.0 million, $40.0 million, $36.0 million and $32.0
million from Mutual Savings and $10.5 million, $8.4 million, $6.8 million and
$4.5 million from First Northern Savings at the minimum, midpoint, maximum and
adjusted maximum, respectively, and that MHC is initially capitalized by a
transfer from Mutual Savings of $100,000 in all pro forma cases. Finally, we
assume that First Northern Savings' capital will be reduced by $4.2 million of
non-recurring merger-related expenses, net of income tax benefit.

After the restructuring, the stock offering and the First Northern merger,
we believe that Mutual Savings and First Northern Savings will continue to
exceed all applicable regulatory capital requirements. For a discussion of the
capital requirements applicable to Mutual Savings, see "Regulation -- Mutual
Savings and First Northern Savings Federal Regulation Following Restructuring"
<TABLE>
<CAPTION>
MUTUAL SAVINGS
------------------------------------------------------------------
PROFORMA
------------------------------------------------------------------
MINIMUM MIDPOINT
-------------------- --------------------
4,692,782 5,965,232
HISTORICAL SHARES SOLD SHARES SOLD
-------------------- -------------------- --------------------
PERCENT PERCENT PERCENT
OF OF OF
AMOUNT ASSETS(A) AMOUNT ASSETS(A) AMOUNT ASSETS(A)
-------- --------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GAAP Capital(b)............. $167,588 9.53% $123,488 7.20% $127,488 7.42%
======== ===== ======== ===== ======== =====
Tier I Leverage Capital:
Capital level............. $164,513 9.37% $120,413 7.03% $124,413 7.25%
Requirement(c)............ 70,244 4.00 68,480 4.00 68,640 4.00
-------- ----- -------- ----- -------- -----
Excess.................... $ 94,269 5.37% $ 51,933 3.03% $ 55,773 3.25%
======== ===== ======== ===== ======== =====
Tier I Risk-based Capital:
Capital level............. $164,513 17.92% $120,413 13.24% $124,413 13.67%
Requirement............... 36,727 4.00 36,727 4.00 36,727 4.00
-------- ----- -------- ----- -------- -----
Excess.................... $127,786 13.92% $ 83,686 9.24% $ 87,686 9.67%
======== ===== ======== ===== ======== =====
Total Risk-based Capital:
Capital level............. $171,598 18.69% $127,498 14.02% $131,498 14.45%
Requirement............... 73,453 8.00 73,453 8.00 73,453 8.00
-------- ----- -------- ----- -------- -----
Excess.................... $ 98,145 10.69% $ 54,045 6.02% $ 58,045 6.45%
======== ===== ======== ===== ======== =====

<CAPTION>
MUTUAL SAVINGS
-------------------------------------------
PROFORMA
-------------------------------------------
MAXIMUM ADJUSTED MAXIMUM
-------------------- --------------------
7,237,682 8,701,000
SHARES SOLD SHARES SOLD
-------------------- --------------------
PERCENT PERCENT
OF OF
AMOUNT ASSETS(A) AMOUNT ASSETS(A)
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GAAP Capital(b)............. $131,488 7.63% $135,488 7.84%
======== ===== ======== =====
Tier I Leverage Capital:
Capital level............. $128,413 7.47% $132,413 7.68%
Requirement(c)............ 68,800 4.00 68,960 4.00
-------- ----- -------- -----
Excess.................... $ 59,613 3.47% $ 63,453 3.68%
======== ===== ======== =====
Tier I Risk-based Capital:
Capital level............. $128,413 14.10% $132,413 14.52%
Requirement............... 36,727 4.00 36,727 4.00
-------- ----- -------- -----
Excess.................... $ 91,686 10.10% $ 95,686 10.52%
======== ===== ======== =====
Total Risk-based Capital:
Capital level............. $135,498 14.87% $139,498 15.30%
Requirement............... 73,453 8.00 73,453 8.00
-------- ----- -------- -----
Excess.................... $ 62,045 6.87% $ 66,045 7.30%
======== ===== ======== =====
</TABLE>

28
<PAGE> 31

REGULATORY CAPITAL COMPLIANCE -- (CONTINUED)
<TABLE>
<CAPTION>
FIRST NORTHERN SAVINGS
-----------------------------------------------------------------
PROFORMA
-----------------------------------------------------------------
MINIMUM MIDPOINT
-------------------- --------------------
4,692,782 5,965,232
HISTORICAL SHARES SOLD SHARES SOLD
------------------- -------------------- --------------------
PERCENT PERCENT PERCENT
OF OF OF
AMOUNT ASSETS(A) AMOUNT ASSETS(A) AMOUNT ASSETS(A)
------- --------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GAAP Capital(b).............. $71,480 7.90% $112,513 11.89% $114,613 12.08%
======= ===== ======== ===== ======== =====
Tier I Leverage Capital:
Capital level.............. $70,787 7.82% $ 53,269 6.00% $ 55,369 6.23%
Requirement(c)............. 36,170 4.00 35,485 4.00 35,569 4.00
------- ----- -------- ----- -------- -----
Excess..................... $34,617 3.82% $ 17,784 2.00% $ 19,800 2.23%
======= ===== ======== ===== ======== =====
Tier I Risk-based Capital:
Capital level.............. $70,787 11.87% $ 53,269 8.96% $ 55,369 9.31%
Requirement................ 23,852 4.00 23,768 4.00 23,784 4.00
------- ----- -------- ----- -------- -----
Excess..................... $46,935 7.87% $ 29,501 4.96% $ 31,585 5.31%
======= ===== ======== ===== ======== =====
Total Risk-based Capital:
Capital level.............. $74,979 12.57% $ 60,217 10.13% $ 62,317 10.48%
Requirement................ 47,703 8.00 47,535 8.00 47,569 8.00
------- ----- -------- ----- -------- -----
Excess..................... $27,276 4.57% 12,682 2.13% $ 14,748 2.48%
======= ===== ======== ===== ======== =====

<CAPTION>
FIRST NORTHERN SAVINGS
-------------------------------------------
PROFORMA
-------------------------------------------
MAXIMUM ADJUSTED MAXIMUM
-------------------- --------------------
7,237,682 8,701,000
SHARES SOLD SHARES SOLD
-------------------- --------------------
PERCENT PERCENT
OF OF
AMOUNT ASSETS(A) AMOUNT ASSETS(A)
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GAAP Capital(b).............. $116,213 12.23% $118,513 12.44%
======== ===== ======== =====
Tier I Leverage Capital:
Capital level.............. $ 56,969 6.40% $ 59,269 6.64%
Requirement(c)............. 35,633 4.00 35,725 4.00
-------- ----- -------- -----
Excess..................... $ 21,336 2.40% $ 23,544 2.64%
======== ===== ======== =====
Tier I Risk-based Capital:
Capital level.............. $ 56,969 9.58% $ 59,269 9.95%
Requirement................ 23,797 4.00 23,816 4.00
-------- ----- -------- -----
Excess..................... $ 33,172 5.58% $ 35,453 5.95%
======== ===== ======== =====
Total Risk-based Capital:
Capital level.............. $ 63,917 10.74% $ 66,217 11.12%
Requirement................ 47,594 8.00 47,631 8.00
-------- ----- -------- -----
Excess..................... $ 16,323 2.74% $ 18,586 3.12%
======== ===== ======== =====
</TABLE>

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

(a) Leverage capital levels are shown as a percentage of "average assets" and "
risk-based capital" levels are calculated on the basis of a percentage of
"risk-weighted assets", as each is defined in bank regulations.

(b) GAAP is defined as generally accepted accounting principles.

(c) The current leverage capital requirement for savings banks is 4%-5% of total
adjusted assets. For savings banks that receive the highest supervisory
ratings for safety and soundness and that are not experiencing or
anticipating significant growth, the leverage capital requirement is 3%.

29
<PAGE> 32

CAPITALIZATION

The following table presents the pro forma historical deposits, borrowings
and capitalization of Mutual Savings and First Northern at June 30, 2000, and
the pro forma consolidated deposits, borrowings and capitalization of Bank
Mutual consolidated with Mutual Savings and First Northern, including the
issuance of stock to First Northern shareholders in accordance with the merger
agreement and other assumptions set forth under "Pro Forma Data." We also show
pro forma consolidated deposits, borrowings and capitalization of Bank Mutual
after giving effect to the stock offering based upon the sale of the number of
shares shown below. A change in the number of shares sold in the offering may
materially affect the capitalization:
<TABLE>
<CAPTION>

PRO FORMA
RESTRUCTURING, COMBINED
HISTORICAL HISTORICAL FAIR VALUE CONSOLIDATED
MUTUAL FIRST AND MERGER REFLECTING
SAVINGS NORTHERN ADJUSTMENTS MERGER
---------- ---------- -------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Deposits(b)........................ $1,300,613 $568,625 $ (9) $1,869,229
========== ======== ======== ==========
Borrowings......................... $ 264,667 $247,353 $ (1,389) $ 510,631
========== ======== ======== ==========
Shareholders' equity:
Cumulative preferred stock, $.01
par value; authorized 10,000,000
shares; no shares outstanding.... -- -- -- --
Common stock, $.01 par value;
100,000,000 shares authorized;
shares to be issued in stock
offering as reflected............ $ -- $ 9,135 $ (9,084) $ 51(d)
Additional paid-in-capital......... -- 8,528 41,676 50,204
Retained earnings(e)............... 176,260 65,971 (66,071) 176,160
Accumulated other comprehensive
income........................... (8,672) 381 (381) (8,672)
Treasury stock, at cost(g)......... -- (8,411) 8,411 --
Less:
Common stock acquired by the
employee stock ownership
plan(h).......................... -- -- -- --
Common stock acquired by the
management recognition plan(i)... -- -- -- --
---------- -------- -------- ----------
Total shareholders'
equity................. $ 167,588 $ 75,604 $(25,449) $ 217,743
========== ======== ======== ==========

<CAPTION>
BANK MUTUAL -- PRO FORMA CONSOLIDATED
BASED UPON SALE AT $10.00 PER SHARE
----------------------------------------------------
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
---------- ---------- ---------- ----------
4,692,782 5,965,232 7,237,682 8,701,000
SHARES SHARES SHARES SHARES(A)
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Deposits(b)........................ $1,869,229 $1,869,229 $1,869,229 $1,869,229
========== ========== ========== ==========
Borrowings......................... $ 510,631 $ 510,631 $ 510,631 $ 510,631
========== ========== ========== ==========
Shareholders' equity:
Cumulative preferred stock, $.01
par value; authorized 10,000,000
shares; no shares outstanding.... -- -- -- --
Common stock, $.01 par value;
100,000,000 shares authorized;
shares to be issued in stock
offering as reflected............ $ 195(c) $ 220(c) $ 246(c) $ 275(c)
Additional paid-in-capital......... 137,526 146,049 154,573 164,975
Retained earnings(e)............... 132,160(f) 136,160(f) 140,160(f) 144,160(f)
Accumulated other comprehensive
income........................... (8,672) (8,672) (8,672) (8,672)
Treasury stock, at cost(g).........
Less:
Common stock acquired by the
employee stock ownership
plan(h).......................... (7,775) (8,793) (9,811) (10,981)
Common stock acquired by the
management recognition plan(i)... (2,915) (3,297) (3,679) (4,118)
---------- ---------- ---------- ----------
Total shareholders'
equity................. $ 250,519 $ 261,667 $ 272,817 $ 285,639
========== ========== ========== ==========
</TABLE>

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

30
<PAGE> 33

(a) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the offering range of up to 15% as a
result of general regulatory considerations or changes in market or general
financial and economic conditions following the commencement of the
offering.

(b) Does not reflect withdrawals from deposit accounts for the purchase of
common stock in the offering. Withdrawals from deposit accounts would
reduce pro forma deposits by the amount of such withdrawals.

(c) Reflects the sale of the indicated number of shares plus shares issued to
MHC equal to 50.1% of the total shares outstanding.

(d) Reflects the issuance of 5,025,485 Bank Mutual shares to shareholders of
First Northern at a value of $10.00 per share in accordance with the merger
agreement, using the purchase method of accounting.

(e) The retained earnings of Mutual Savings will be substantially restricted
after the offering.

(f) Reflects the reduction in retained earnings related to the initial
capitalization of Bank Mutual in the amount of $44.0 million, $40.0
million, $36.0 million and $32.0 million at the minimum, midpoint, maximum
and 15% above the maximum of the range, respectively.

(g) Assumes the cancellation of First Northern's treasury shares at the time of
the consummation of the merger.

(h) Assumes that 8% of the shares sold in connection with the offering and
issued to shareholders of First Northern will be purchased by the employee
stock ownership plan and the funds used to acquire the employee stock
ownership plan shares will be borrowed from Bank Mutual. The common stock
acquired by the employee ownership plan is reflected as a reduction of
shareholders' equity. If the employee stock ownership plan buys shares in
the market after the reorganization, the purchase price of the those shares
may be less or more that the $10.00 offering price.

(i) Assumes that, subsequent to the offering, an amount equal to 3% of the
shares of common stock issued in the offering is purchased by a management
recognition plan through open market purchases. The proposed management
recognition plan is intended to be adopted by Bank Mutual and presented for
approval of shareholders at a meeting of shareholders to be held at least
six months following completion of the offering. The common stock purchased
by the management recognition plan is reflected as a reduction of
shareholders' equity.

31
<PAGE> 34

PRO FORMA FINANCIAL DATA

PRO FORMA DATA REFLECTING THE FIRST NORTHERN MERGER

In the following tables, we provide unaudited pro forma condensed combined
financial data of Bank Mutual and subsidiaries which includes the historical
data for Mutual Savings and First Northern plus adjustments to give effect to
the First Northern merger. The data are based on an assumption that Bank Mutual
common shares are issued for 40% of First Northern shares outstanding on June
30, 2000 and cash is paid for 60% of First Northern shares outstanding on June
30, 2000. We assume that shares had been sold at the beginning of the period and
the net proceeds from the offering had been invested at the indicated rate which
represents the yield on the one-year U.S. Government securities on the indicated
date. The yield on the one-year U.S. Government securities was used rather than
the arithmetic average of the average yield on total interest-earning assets and
the average rate paid on deposits, because the yield on one-year U.S. Government
securities is believed to be more reflective of market interest rates.
Additional assumptions are discussed in the notes that follow the table.
Operating results data assumes that this transaction occurred on the first day
of each period shown, whereas financial condition data assumes that this
transaction occurred at the date indicated. The per share information is
calculated assuming the number of shares outstanding is unchanged throughout
each respective time period.

In accordance with generally accepted accounting principles the First
Northern merger will be accounted for using the purchase method. Accordingly,
the recorded assets and liabilities of Mutual Savings will be carried forward at
their recorded amounts and the historical operating results of Mutual Savings
will be unchanged for the prior periods being reported on. However, the assets
and liabilities of First Northern will be adjusted to fair value at the date of
the merger. To the extent that the purchase price, consisting of the number of
shares of Bank Mutual to be issued to former First Northern shareholders at fair
value plus cash to be paid to former First Northern shareholders, exceeds the
fair value of the net assets of First Northern at the merger date, that excess
will be reported as an intangible asset to be amortized to the consolidated
income of Bank Mutual in future periods. Further, the purchase accounting method
results in the operating results of First Northern only being included in the
consolidated income of Bank Mutual beginning from the date of the merger.

We present this pro forma data as an illustration only. It does not
necessarily indicate the financial position or financial results that would have
actually been reported if the restructuring and merger had occurred as of, or
at, the beginning of the periods presented, nor does it necessarily indicate
future financial position or results of operations. The pro forma results of
operations neither assume nor incorporate any benefits from cost savings or
synergies of operations of the combined companies. The effects of the stock
offering are reflected in "Pro Forma Data Reflecting the Stock Offering" below
and the following tables should be read in conjunction with that information.

32
<PAGE> 35

UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
JUNE 30, 2000

<TABLE>
<CAPTION>
FAIR VALUE
HISTORIC HISTORIC PRE-STOCK AND PRE-STOCK
MUTUAL FIRST OFFERING MERGER OFFERING
SAVINGS NORTHERN COMBINED ADJUSTMENTS MERGED
---------- -------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS

Cash and cash equivalents..... $ 31,817 $ 11,234 $ 43,051 $(83,960)(a)(b) $ (40,909)
Investments................... 518,838 52,680 571,518 (553)(c) 570,965
Loans, net.................... 1,129,619 797,177 1,926,796 (9,809)(c) 1,916,987
Office properties and
equipment................... 26,727 8,092 34,819 3,340(c) 38,159
Intangible assets............. 11,027 -- 11,027 58,554(c) 69,581
Other assets.................. 41,142 35,692 76,834 5,581(b)(c) 82,415
---------- -------- ---------- -------- ----------
Total assets............. $1,759,170 $904,875 $2,664,045 $(26,847) $2,637,198
========== ======== ========== ======== ==========

LIABILITIES AND EQUITY

Liabilities:
Deposits.................... $1,300,613 $568,625 $1,869,238 $ (9)(c) $1,869,229
Borrowings.................. 264,667 247,353 512,020 (1,389)(c) 510,631
Other liabilities........... 26,302 13,293 39,595 -- 39,595
---------- -------- ---------- -------- ----------
Total liabilities... 1,591,582 829,271 2,420,853 (1,398) 2,419,455
Shareholders' equity.......... 167,588 75,604 243,192 (25,449)(a)(b)(c) 217,743
---------- -------- ---------- -------- ----------
Total liabilities and
equity................. $1,759,170 $904,875 $2,664,045 $(26,847) $2,637,198
========== ======== ========== ======== ==========
</TABLE>

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

(a) Assumes that First Northern shares are exchanged for 60% cash and 40% Bank
Mutual shares based on a value of $15.00 per share for each First Northern
share outstanding. Adjusted outstanding First Northern shares used to
calculate book value per common share is 8,375,808, resulting in the
issuance of 5,025,485 shares of Bank Mutual and the payment of $75.4
million of cash to former First Northern shareholders. Also reflected is
the $100,000 capital contribution to form the MHC.

(b) Adjustment to record the effects of estimated non-recurring merger-related
charges of $8.5 million, $5.7 million net of tax effect, which will be
charged to earnings of First Northern immediately prior to the First
Northern merger and which consist of the following (in thousands):

<TABLE>
<S> <C>
Merger related professional fees*........................... $1,000
Costs of acquisition*....................................... 500
Buy-back of outstanding options............................. 5,728
Restructuring charges....................................... 500
Benefit plan accruals....................................... 750
------
8,478
Tax benefit................................................. 2,791
------
Total estimated non-recurring charges....................... $5,687
======
</TABLE>

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

* Amount not tax effected as it is not deductible for federal and state
income tax purposes.

(c) Under purchase accounting, First Northern's assets and liabilities are to
be adjusted to their estimated fair values. The estimated fair value
adjustments have been determined by Mutual based upon

33
<PAGE> 36

available information. The following sets forth the purchase accounting
adjustments made to reflect First Northern's assets and liabilities to fair
values at June 30, 2000 (in thousands):

<TABLE>
<S> <C> <C>
Historical shareholders' equity......................... $75,604
Investments............................................. (553)
Loans receivable........................................ (9,809)
Office properties and repossessed assets................ 3,340
Other assets -- loan servicing rights................... 900
Other assets -- income tax benefit...................... 1,890
Deposits................................................ 9
Borrowings.............................................. 1,389
-------
Adjusted shareholders' equity...................... 72,770
Purchase price -- cash.................................. $ 75,382
Purchase price -- stock................................. 50,255
Acquisition costs....................................... 5,687
---------
131,324
Cost in excess of net assets of business acquired....... $58,554
=======
</TABLE>

34
<PAGE> 37

UNAUDITED PRO FORMA CONDENSED
COMBINED PRE-STOCK OFFERING STATEMENTS OF INCOME

SIX MONTHS ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
RESTRUCTURING
HISTORIC HISTORIC PRE-STOCK FAIR VALUE PRE-STOCK
MUTUAL FIRST OFFERING AND MERGER OFFERING
SAVINGS NORTHERN COMBINED(A) ADJUSTMENTS MERGED
-------- -------- ----------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income................... $60,482 $30,051 $90,533 $(1,554)(b)(c) $88,979
Interest expense.................. 37,061 19,186 56,247 (233)(d) 56,014
------- ------- ------- ------- -------
Net interest income............... 23,421 10,865 34,286 (1,321) 32,965
Provision for losses on loans..... 236 330 566 -- 566
------- ------- ------- ------- -------
Net interest income after
provision for losses on loans... 23,185 10,535 33,720 (1,321) 32,399
Total non-interest income......... 4,016 2,104 6,120 (64)(e) 6,056
Total non-interest expenses....... 16,686 7,694 24,380 1,478(f)(g) 25,858
------- ------- ------- ------- -------
Income before income taxes........ 10,515 4,945 15,460 (2,863) 12,597
Income taxes...................... 4,001 1,569 5,570 (560)(h) 5,010
------- ------- ------- ------- -------
Net income........................ $ 6,514 $ 3,376 $ 9,890 $(2,303) $ 7,587
======= ======= ======= ======= =======
</TABLE>

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

(a) Reflects the historical combined earnings of Mutual Savings and First
Northern prior to the stock offering of Bank Mutual.

(b) Reflects the loss of interest revenue on $84.0 million of cash outflows
related to the First Northern merger at 6.17% (3.70% net of tax at the
40.0% effective rate), which represents the yield on the one year U.S.
treasury note as of June 30, 2000.

(c) Reflects the amortization of the fair market value adjustment of loans and
investments using the interest method over the estimated remaining life.

(d) Reflects accretion of discount related to deposits and borrowings using the
interest method over the estimated remaining life.

(e) Reflects amortization of loan servicing rights over a seven year period.

(f) Reflects additional depreciation resulting from write-up in value of office
properties over 30 years using the straight-line method.

(g) Reflects amortization of intangible assets from the First Northern merger
over a 20 year life using the straight-line method.

(h) Tax effect a 40.0% marginal tax rate of pro forma adjustments, except for
intangible amortization, which has no tax effect.

35
<PAGE> 38

YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
RESTRUCTURING
HISTORIC HISTORIC PRE-STOCK FAIR VALUE PRE-STOCK
MUTUAL FIRST OFFERING AND MERGER OFFERING
SAVINGS NORTHERN COMBINED(A) ADJUSTMENTS MERGED
-------- -------- ----------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income.................... $118,302 $52,770 $171,072 $ (2,907)(b,c) $168,165
Interest expense................... 75,337 30,686 106,023 (466)(d) 105,557
-------- ------- -------- -------- --------
Net interest income................ 42,965 22,084 65,049 (2,441) 62,608
Provision for losses on loans...... 350 472 822 -- 822
-------- ------- -------- -------- --------
Net interest income after provision
for losses on loans.............. 42,615 21,612 64,227 (2,441) 61,786
Total non-interest income.......... 7,984 3,854 11,838 (129)(e) 11,709
Total non-interest expenses........ 51,279(h) 14,564 65,843 2,896(f)(g) 68,739
-------- ------- -------- -------- --------
Income before income taxes......... (680) 10,902 10,222 (5,466) 4,756
Income taxes....................... 3,803 3,525 7,328 (1,039)(i) 6,289
-------- ------- -------- -------- --------
Net income......................... $ (4,483)(h) $ 7,377 $ 2,894 $ (4,427) $ (1,533)
======== ======= ======== ======== ========
</TABLE>

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

(a) Reflects the historical combined earnings of Mutual Savings and First
Northern prior to the stock offering of Bank Mutual.

(b) Reflects loss of interest revenue on $84.0 million of cash outflows related
to the First Northern merger at 5.93% (3.56% net of tax at 40% effective
rate), which represents the yield on the one year U.S. treasury note as of
December 31, 1999.

(c) Reflects the amortization of the fair market value adjustment on loans and
investments using the interest method over the estimated remaining life.

(d) Reflects accretion of discount related to deposits and borrowings using the
interest method over the estimated remaining life.

(e) Reflects amortization of loan servicing rights over a seven year period.

(f) Reflects additional depreciation resulting from write-up in value of office
properties over 30 years using the straight-line method.

(g) Reflects amortization of intangible assets from the First Northern merger
over a 20 year life using straight-line method.

(h) In 1999, non-interest expense includes a special write-off of intangible
assets of $15.6 million which Mutual deemed to be impaired. The intangible
assets resulted from the 1997 acquisition of First Federal. The
net-of-income tax effect on net income of the write-off in 1999 was a
decrease of $13.6 million.

(i) Tax effect at 40.0% marginal tax rate of pro forma adjustments, except for
intangible amortization, which has no tax effect.

PRO FORMA DATA REFLECTING THE STOCK OFFERING

In the following tables, we provide unaudited pro forma condensed combined
financial data of, and assumptions relating to, Bank Mutual reflecting the stock
offering. The data assumes that the First Northern merger has also occurred;
detailed effects of the First Northern merger are reflected in the pro forma
data on the preceding pages.

In accordance with generally accepted accounting principles, the
restructuring will be accounted for at historical cost in a manner similar to
pooling of interest accounting in accordance with generally accepted accounting
principles. Accordingly, the carrying value of Mutual Savings' assets,
liabilities and equity will

36
<PAGE> 39

not be affected by the restructuring and will be reflected in the successor
stock savings bank's financial statements based upon their historical amounts.

We present this pro forma data as an illustration only. It does not
necessarily indicate the financial position or financial results that would have
actually been reported if the restructuring and merger had occurred as of, or
at, the beginning of the periods presented, nor do they necessarily indicate
future financial position or results of operations. The pro forma results of
operations neither assume nor incorporate any benefits from cost savings or
synergies of operations of the combined companies.

BANK MUTUAL CORPORATION
STOCK OFFERING
AT OR FOR THE SIX MONTHS ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
4,692,782 5,965,232 7,237,682 8,701,000
SHARES AT SHARES AT SHARES AT SHARES AT
$10.00 $10.00 $10.00 $10.00
PER SHARE PER SHARE PER SHARE PER SHARE(A)
----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Gross proceeds............................ $ 46,928 $ 59,652 $ 72,377 $ 87,010
Less marketing fees and other issuance
expenses................................ (3,462) (3,638) (3,813) (4,015)
----------- ----------- ----------- -----------
Estimated net proceeds.................... 43,466 56,014 68,564 82,995
Less: Common stock acquired by ESOP....... (7,775) (8,793) (9,811) (10,981)
Less: Common stock to be acquired by
MRP..................................... (2,915) (3,297) (3,679) (4,118)
----------- ----------- ----------- -----------
Estimated adjusted net proceeds(b)........ $ 32,776 $ 43,925 $ 55,074 $ 67,896
=========== =========== =========== ===========
Combined net income:
Historical combined(c).................. $ 7,587 $ 7,587 $ 7,587 $ 7,587
Interest income(d)...................... 607 813 1,019 1,257
ESOP(e)................................. (233) (264) (294) (329)
MRP(f).................................. (175) (198) (221) (247)
----------- ----------- ----------- -----------
Pro forma income.......................... $ 7,786 $ 7,938 $ 8,091 $ 8,267
=========== =========== =========== ===========
Earnings per share:
Historical combined(c).................. $ 0.41 $ 0.36 $ 0.33 $ 0.29
Interest income(d)...................... 0.03 0.04 0.04 0.05
ESOP(e)................................. (0.01) (0.01) (0.01) (0.01)
MRP(f).................................. (0.01) (0.01) (0.01) (0.01)
----------- ----------- ----------- -----------
Pro forma basic and diluted earnings per
share(g)(h)(j).......................... $ 0.42 $ 0.38 $ 0.35 $ 0.32
=========== =========== =========== ===========
Pro forma basic P/E ratio(g)(h)........... 11.9x 13.2x 14.3x 15.6x
=========== =========== =========== ===========
Number of shares used in calculating net
income per share(j)..................... 18,440,490 20,854,973 23,269,458 26,046,114
=========== =========== =========== ===========
Shareholders' equity:
Historical combined(i).................. $ 217,743 $ 217,743 $ 217,743 $ 217,743
Estimated net proceeds.................. 43,466 56,014 68,564 82,995
Less: Common stock acquired by ESOP(e).. (7,775) (8,793) (9,811) (10,981)
Less: Common stock to be acquired by
MRP(f)............................... (2,915) (3,297) (3,679) (4,118)
----------- ----------- ----------- -----------
Pro forma shareholders' equity(k)......... $ 250,519 $ 261,668 $ 272,817 $ 285,639
</TABLE>

37
<PAGE> 40

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

(b) Estimated adjusted proceeds consist of the estimated net stock offering
proceeds, minus (i) the proceeds attributable to the purchase by Mutual
Savings' employee stock ownership plan and (ii) the value of the shares to
be purchased by Mutual Savings' recognition plan after the restructuring
and stock offering, subject to shareholder approval, at an assumed purchase
price of $10.00 per share. Marketing fees and other issuance expenses
consist of legal, accounting, printing and other fixed costs totaling
$2,875,000 plus variable marketing fees based on 1.50% of gross proceeds
less shares to be acquired by the ESOP.

(c) Reflects the combined historical net earnings of Mutual Savings and First
Northern for the six months ended June 30, 2000, adjusted for the merger.

(d) Consists of interest earned on net proceeds from the sale of minority
ownership of Bank Mutual at 6.17%, (3.70% net of income tax at 40.0%
effective rate) which represents the one year U. S. treasury note rate at
June 30, 2000.

(e) Bank Mutual assumes that 8% of the shares of common stock issued in the
restructuring, stock offering and merger will be purchased by the employee
stock ownership plan (771,461, 879,257, 981,053 and 1,098,119 shares at the
minimum, midpoint, maximum and adjusted maximum, respectively). Bank Mutual
also assumes that the funds used to acquire such shares will be borrowed by
the employee stock ownership plan from Bank Mutual. Mutual Savings intends
to make quarterly contributions to the employee stock ownership plan over a
ten-year period in an amount at least equal to the principle and interest
requirements of the debt. The pro forma earnings assumes (i) that the loan
to the employee stock ownership plan is payable over ten years in equal
installments of principle with the employee stock ownership plan shares
having an average fair value of $10.00 per share; (ii) that the loan to the
employee stock ownership plan bears interest at the Mutual Savings' prime
interest rate; (iii) that the employee stock ownership plan expense for the
period is equivalent to the principal payment for the period and are made
throughout the period (the interest expense paid by the Mutual Savings and
the interest income recognized by the Bank Mutual on the ESOP debt are
eliminated in consolidation); (iv) 38,873, 43,963, 49,053 and 54,906 shares
are committed to be released with respect to the six months ended June 30,
2000, at the minimum, midpoint, maximum and adjusted maximum, respectively;
(v) only the employee stock ownership plan shares committed to be released
during the period are considered outstanding for the purposes of the
earnings per share

38
<PAGE> 41

calculations based on the average shares to be released during the year;
and (f) the effective tax rate is 40.0% for the period.

(f) Bank Mutual assumes that 3% of the shares of common stock issued in the
stock offering and merger will be purchased by the recognition plan
(291,548, 329,722, 367,895 and 411,795 shares at the minimum, midpoint,
maximum and adjusted maximum respectively), assuming that: (a) shareholder
approval of the recognition plan is received; (b) the shares were acquired
by the recognition plan at the beginning of the period presented in open
market purchases at $10.00 per share; (c) the amortized expense for the six
months ended June 30, 2000 is 5% (based on a five year amortization using
the straight line method) of the amount contributed which is equal to the
vested portion of the shares based on the average shares to be vested
during the year; and (d) the effective tax rate applicable to such employee
compensation expense is 40.0%. Unvested shares under the recognition plan
are excluded from the basic earnings per share calculation and included in
the diluted earnings per share calculation only if they are dilutive under
the treasury stock method. Bank Mutual assumes that 20% of the recognition
plan shares vest annually and that 29,155, 32,972, 36,790 and 41,180 shares
vest for the period ended June 30, 2000 at the minimum, midpoint, maximum
and adjusted maximum, respectively.

(g) Net income or loss and stockholders' equity include current period
amortization or end of period unamortized balances, respectively, of
intangible assets resulting from the proposed Merger and previous business
combinations involving Mutual Savings. The following table presents the net
income or loss and stockholders equity, and related per share amounts,
excluding amortization or balances of these intangible assets;

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Pro forma tangible shareholders'
equity per share................... $ 9.29 $ 8.72 $ 8.27 $ 7.85
Pro forma price to tangible book
value ratio........................ 107.64% 114.68% 120.92% 127.39%
Pro forma basic earnings per share
before amortization of intangible
assets............................. $ 0.53 $ 0.47 $ 0.43 $ 0.39
Pro forma basic P/E ratio before
amortization of intangible
assets............................. 9.4x 10.6x 11.6x 12.8x
</TABLE>

(h) Assuming Bank Mutual were to fully convert, resulting in additional
estimated adjusted net proceeds at the minimum, midpoint, maximum and
adjusted maximum of $91.1 million, $102.8 million, $114.0 million and
$126.3 million, respectively, which were invested at 6.17% (3.70% net of
income tax at 40.0% effective rate), which represents the one year U. S.
treasury note rate as of March 31, 2000, less tax effects, and all other
assumptions noted above remained unchanged, the following ratios and
amounts would result;

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
------- -------- ------- --------
<S> <C> <C> <C> <C>
Pro forma shareholders' equity per share..... $17.54 $16.52 $15.72 $14.98
Pro forma tangible shareholders' equity per
share...................................... $13.97 $13.36 $12.89 $12.45
Pro forma price to book value ratio.......... 57.01% 60.53% 63.61% 66.76%
Pro forma price to tangible book value
ratio...................................... 71.58% 74.85% 77.58% 80.32%
Pro forma basic earnings per share........... $ 0.52 $ 0.47 $ 0.44 $ 0.41
Pro forma basic earnings per share before
amortization of intangible assets.......... $ 0.62 $ 0.57 $ 0.53 $ 0.48
Pro forma basic P/E ratio.................... 9.6x 10.6x 11.4x 12.2x
Pro forma basic P/E ratio before amortization
of intangible assets....................... 8.1x 8.8x 9.4x 10.4x
</TABLE>

Management does not have plans for a full conversion in the immediate
future, and we cannot assure that one will occur in the future.

39
<PAGE> 42

(i) Consists of equity of Mutual Savings at June 30, 2000 plus capital of
$50,254,850 issued to former shareholders assuming 40% of the shares are
exchanged less $100,000 of initial capitalization of MHC.

(j) Basic earnings per share calculations are determined by (i) starting with
the number of shares assumed to be sold in the conversion and stock
offering excluding shares to be acquired by the ESOP and recognition plan,
(ii) adding the number of shares to be issued to shareholders of First
Northern, (iii) adding the number of shares to be issued to MHC, (iv)
adding the average employee stock ownership plan shares that have been
committed for release during the period, and (v) adding the average
recognition plan shares assumed vested during the period. The unvested
recognition plan shares are deemed to be for future services and not
dilutive under the treasury stock method. Book value per share calculations
are determined by (i) starting with the number of shares assumed to be sold
in the stock offering (ii) adding the number of shares to be issued to
First Northern shareholders and (iii) adding the number of shares to be
issued to MHC. Set forth below is a reconciliation of the number of shares
used in making the earnings per share and book value per share
calculations:

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares issued in stock offering...... 4,692,782 5,965,232 7,237,682 8,701,000
Shares issued to First Northern
shareholders....................... 5,025,485 5,025,485 5,025,485 5,025,485
Shares issued to MHC................. 9,757,218 11,034,768 12,312,318 13,781,500
---------- ---------- ---------- ----------
Total shares outstanding and used in
calculating book value per share... 19,475,485 22,025,485 24,575,485 27,507,985
Less shares sold to employee stock
ownership plan..................... (777,461) (879,257) (981,053) (1,098,119)
Less recognition plan shares......... (291,548) (329,722) (367,895) (411,795)
Plus average employee stock ownership
plan shares assumed committed to be
released........................... 19,437 21,981 24,526 27,453
Plus average recognition plan shares
assumed vested..................... 14,577 16,486 18,395 20,590
---------- ---------- ---------- ----------
Number of shares used in calculating
basic and diluted earnings per
share.............................. 18,440,490 20,854,973 23,269,458 26,046,114
========== ========== ========== ==========
</TABLE>

(k) The retained earnings of Mutual Savings will be substantially restricted
after the restructuring. See "The Restructuring and the Offering -- Effects
of the Restructuring -- Liquidation Rights." Pro forma shareholders' equity
and pro forma shareholders' equity per share do not give effect to the
liquidation account or the bad debt reserves established by Mutual Savings
or First Northern Savings for federal income tax purposes in the event of a
liquidation.

40
<PAGE> 43

BANK MUTUAL CORPORATION
STOCK OFFERING
AT OR FOR THE YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
4,692,782 5,965,232 7,237,682 8,701,000
SHARES AT SHARES AT SHARES AT SHARES AT
$10.00 $10.00 $10.00 $10.00
PER SHARE PER SHARE PER SHARE PER SHARE(A)
----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Gross proceeds............................ $ 46,928 $ 59,652 $ 72,377 $ 87,010
Less marketing fees and other issuance
expenses................................ (3,462) (3,638) (3,813) (4,015)
----------- ----------- ----------- -----------
Estimated net proceeds.................... 43,466 56,014 68,564 82,995
Less: Common stock acquired by ESOP....... (7,775) (8,793) (9,811) (10,981)
Less: Common stock to be acquired by
MRP..................................... (2,915) (3,297) (3,679) (4,118)
----------- ----------- ----------- -----------
Estimated adjusted net proceeds(b)........ $ 32,776 $ 43,925 $ 55,074 $ 67,896
=========== =========== =========== ===========
Combined net income (loss):
Historical combined(c).................. $ (1,533) $ (1,533) $ (1,533) $ (1,533)
Interest income(d)...................... 1,166 1,563 1,960 2,416
ESOP(e)................................. (467) (528) (589) (659)
MRP(f).................................. (350) (396) (441) (494)
----------- ----------- ----------- -----------
Pro forma income (loss)................... $ (1,184) $ (894) $ (603) $ (270)
=========== =========== =========== ===========
Earnings (loss) per share:
Historical combined(c).................. $ (0.08) $ (0.07) $ (0.07) $ (0.06)
Interest income(d)...................... 0.06 0.07 0.08 0.09
ESOP(e)................................. (0.03) (0.03) (0.03) (0.03)
MRP(f).................................. (0.01) (0.01) (0.01) (0.01)
----------- ----------- ----------- -----------
Pro forma basic earnings (loss) per
share(g)(h)............................. $ (0.06) $ (0.04) $ (0.03) $ (0.01)
=========== =========== =========== ===========
Pro forma basic P/E ratio(g)(h)........... NM NM NM NM
=========== =========== =========== ===========
Number of shares used in calculating net
income per share(j)..................... 18,474,504 20,893,441 23,312,380 26,094,157
=========== =========== =========== ===========
Shareholders' equity:
Historical combined(i).................. $ 207,441 $ 207,441 $ 207,441 $ 207,441
Estimated net proceeds.................. 43,466 56,014 68,564 82,995
Less: Common stock acquired by ESOP(e).. (7,775) (8,793) (9,811) (10,981)
Less: Common stock to be acquired by
MRP(f)............................... (2,915) (3,297) (3,679) (4,118)
----------- ----------- ----------- -----------
Pro forma shareholders' equity(k)......... $ 240,217 $ 251,366 $ 262,515 $ 275,337
=========== =========== =========== ===========
Shareholders' equity per share:
Historical combined(i).................. $ 10.65 $ 9.42 $ 8.44 $ 7.54
Estimated net proceeds.................. 2.23 2.54 2.79 3.02
Less: Common stock acquired by ESOP(e).. (0.40) (0.40) (0.40) (0.40)
Less: Common stock to be acquired by
MRP(f)............................... (0.15) (0.15) (0.15) (0.15)
----------- ----------- ----------- -----------
Pro forma shareholders' equity per
share(g)(h)(j).......................... $ 12.33 $ 11.41 $ 10.68 $ 10.01
=========== =========== =========== ===========
Pro forma price to book value
ratio(g)(h)............................. 81.10% 87.64% 93.63% 99.90%
=========== =========== =========== ===========
Number of shares used in equity per share
calculations(j)......................... 19,475,485 22,025,485 24,575,485 27,507,985
=========== =========== =========== ===========
</TABLE>

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

41
<PAGE> 44

(a) Assumes an increase in the number of shares due to a 15% increase in the
maximum of the offering range to reflect changes in market and financial
conditions before the restructuring and stock offering is completed or to
fill the order of the employee stock ownership plan.
(b) Estimated adjusted proceeds consist of the estimated net stock offering
proceeds, minus (i) the proceeds attributable to the purchase by Mutual
Savings' employee stock ownership plan and (ii) the value of the shares to
be purchased by Mutual Savings' recognition plan after the restructuring
and stock offering, subject to shareholder approval, at an assumed purchase
price of $10.00 per share. Marketing fees and other issuance expenses
consist of legal, accounting, printing and other fixed costs totaling
$2,875,050 plus variable marketing fees based on 1.50% of gross proceeds
less shares to be acquired by the ESOP.
(c) Reflects the combined historical net earnings of Mutual Savings and First
Northern for the year ended December 31, 1999, adjusted for the merger.
(d) Consists of interest earned on net proceeds from the sale of minority
ownership of the Company at 5.93% (3.56% net of income tax at 40.0%
effective rate), which represents the one year U.S. treasury note rate as
of December 31, 1999.
(e) Bank Mutual assumes that 8% of the shares of common stock issued in the
restructuring, the stock offering and the merger will be purchased by the
employee stock ownership plan (777,461, 879,257, 981,053 and 1,098,119
shares at the minimum, midpoint, maximum and adjusted maximum,
respectively). Bank Mutual also assumes that the funds used to acquire such
shares will be borrowed by the employee stock ownership plan from Bank
Mutual. Mutual Savings intends to make quarterly contributions to the
employee stock ownership plan over a ten-year period in an amount at least
equal to the principle and interest requirements of the debt. The pro forma
earnings assumes (i) that the loan to the employee stock ownership plan is
payable over ten years in equal installments of principle with the employee
stock ownership plan shares having an average fair value of $10.00 per
share; (ii) that the loan to the employee stock ownership plan bears
interest at the Mutual Savings' prime interest rate; (iii) that the
employee stock ownership plan expense for the period is equivalent to the
principal payment for the period and is made throughout the period (the
interest expense paid by the Mutual Savings and the interest income
recognized by Bank Mutual on the ESOP debt are eliminated in
consolidation); (iv) that 77,746, 87,926, 98,105 and 109,812 shares were
committed to be released with respect to the year ended December 31, 1999,
at the minimum, midpoint, maximum and adjusted maximum, respectively; (v)
only the employee stock ownership plan shares committed to be released
during the period are considered outstanding for the purposes of the
earnings per share calculations based on the average shares to be released
during the year; and (vi) the effective tax rate is 40.0% for the period.
(f) Bank Mutual assumes that 3% of the shares of common stock issued in the
stock offering and merger will be purchased by the recognition plan
(291,548, 329,722, 367,895 and 411,795 shares at the minimum, midpoint,
maximum and adjusted maximum, respectively), assuming that: (a) shareholder
approval of the recognition plan is received; (b) the shares were acquired
by the recognition plan at the beginning of the period presented in open
market purchases at $10.00 per share; (c) the amortized expense for the
year ended December 31, 1999 is 20% (based on a five year amortization
using the straight line method) of the amount contributed which is equal to
the vested portion of the shares based on the average shares to be vested
during the year; and (d) the effective tax rate applicable to such employee
compensation expense is 40.0%. Unvested shares under the recognition plan
are excluded from the basic earnings per share calculation and included in
the diluted earnings per share calculation only if they are dilutive under
the treasury stock method. Bank Mutual assumes that 20% of the recognition
plan shares vest annually and that 58,310, 65,944, 73,579 and 82,359 shares
vested for the year ended December 31, 1999 at the minimum, midpoint,
maximum and adjusted maximum, respectively.
(g) Net income or loss and stockholders' equity include current period
amortization or end of period unamortized balances, respectively, of
intangible assets resulting from the proposed Merger and previous business
combinations involving Mutual Savings. The following table presents the net
income

42
<PAGE> 45

or loss and stockholders equity, and related per share amounts, excluding
amortization or balances of these intangible assets;

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Pro forma tangible shareholders' equity per
share.......................................... $ 8.80 $ 8.29 $ 7.88 $ 7.51
Pro forma price to tangible book value ratio..... 113.64% 120.63% 126.90% 133.16%
Pro forma basic earnings per share before
amortization of intangible assets.............. $ 0.96 $ 0.87 $ 0.79 $ 0.72
Pro forma basic P/E ratio before amortization of
intangible assets.............................. 10.4x 11.5x 12.7x 13.9x
</TABLE>

(h) Assuming Bank Mutual were to fully convert, resulting in additional
estimated adjusted net proceeds at the minimum, midpoint, maximum and
adjusted maximum of $91.0 million, $102.2 million, $113.3 million and
$126.2 million, respectively, which were invested at 5.93%, (3.56% net of
income tax at 40.0% effective rate), which represents the one year U.S.
treasury note rate as of December 31, 1999, less tax effects, and all other
assumptions noted above remained unchanged, the following ratios and
amounts would result;

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
------- -------- ------- --------
<S> <C> <C> <C> <C>
Pro forma shareholders' equity per share......... $17.01 $16.06 $15.30 $14.60
Pro forma tangible shareholders' equity per
share.......................................... $13.47 $12.93 $12.50 $12.10
Pro forma price to book value ratio.............. 58.79% 62.27% 65.36% 68.49%
Pro forma price to tangible book value ratio..... 74.24% 77.34% 80.00% 82.64%
Pro forma basic earnings per share............... $ 0.09 $ 0.11 $ 0.12 $ 0.14
Pro forma basic earnings per share before
amortization of intangible assets.............. $ 1.15 $ 1.05 $ 0.97 $ 0.89
Pro forma basic P/E ratio........................ N/M N/M N/M N/M
Pro forma basic P/E ratio before amortization of
intangible assets.............................. 8.7x 9.5x 10.3x 11.2x
</TABLE>

Management does not have plans for a full conversion in the immediate
future, and we cannot assure that one will occur in the future.

(i) Consists of equity of Mutual Savings at December 31, 1999 plus capital of
$50,254,850 issued to former shareholders' assuming 40% of the shares are
exchanged less $100,000 of initial capitalization of MHC.

(j) Basic earnings per share calculations are determined by (i) starting with
the number of shares assumed to be sold in the conversion and stock
offering, excluding shares to be acquired by the ESOP and recognition plan,
(ii) adding the number of shares to be issued to shareholders of First
Northern, (iii) adding the number of shares to be issued to MHC, (iv)
adding the average employee stock ownership plan shares that have been
committed for release during the period, and (v) adding the average
recognition plan shares assumed vested during the period. The unvested
recognition plan shares were deemed to be for future services and not
dilutive under the treasury stock method. Book value per share calculations
are determined by (i) starting with the number of shares assumed to be sold
in the stock offering, (ii) adding the number of shares to be issued to
First Northern

43
<PAGE> 46

shareholders and (iii) adding the number of shares to be issued to MHC. Set
forth below is a reconciliation of the number of shares used in making the
per share calculations:

<TABLE>
<CAPTION>
ADJUSTED
MINIMUM MIDPOINT MAXIMUM MAXIMUM
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares issued in stock offering...... 4,692,782 5,965,232 7,237,682 8,701,000
Shares issued to First Northern
shareholders....................... 5,025,485 5,025,485 5,025,485 5,025,485
Shares issued to MHC................. 9,757,218 11,034,768 12,312,318 13,781,500
---------- ---------- ---------- ----------
Total shares outstanding and used in
calculating book value per share... 19,475,485 22,025,485 24,575,485 27,507,985
Less shares sold to employee stock
ownership plan..................... (777,461) (879,257) (981,053) (1,098,119)
Less recognition plan shares......... (291,548) (329,722) (367,895) (411,795)
Plus average employee stock ownership
plan shares assumed committed to be
released........................... 38,873 43,963 49,053 54,906
Plus average recognition plan shares
assumed vested..................... 29,155 32,972 36,790 41,179
---------- ---------- ---------- ----------
Number of shares used in calculating
basic and diluted earnings per
share.............................. 18,474,504 20,893,441 23,312,380 26,094,157
========== ========== ========== ==========
</TABLE>

44
<PAGE> 47

MUTUAL SAVINGS' OPERATING STRATEGY

Mutual Savings' operating strategy is to succeed as a well-capitalized,
profitable community-oriented bank. We seek to accomplish this goal by

- maintaining a community orientation and providing quality customer
service;

- expanding our market area;

- continuing our commitment to residential lending, while diversifying our
portfolio;

- managing credit risk;

- promoting core deposit accounts;

- limiting exposure to interest rate risk; and

- controlling expenses.

First Northern's operating strategy is similar to Mutual Savings' strategy.
Although the two banks initially will operate separately after the
restructuring, their business philosophies will continue to be complementary.
See "Certain Effects of the First Northern Merger on Bank Mutual."

The following are operating strategy highlights.

Customer Service -- Products and Delivery Systems

Mutual Savings provides convenient, quality service to customers. We
leverage our branch network by emphasizing a sales culture and providing
training and software to help our staff identify products that will benefit
their customers. We offer a variety of customer conveniences, such as ATMs,
24-hour telebanking and a telephone "call center" to address customer questions.
We offer investment and insurance services in order to attract new customers and
build on existing relationships. First Northern Savings offers similar customer
services. Both banks expect to establish internet banking services for retail
and business customers.

Statewide Franchise

Our business plan includes building a state-wide banking organization. To
that end, we acquired First Federal Savings of Eau Claire in 1997, which gained
us access to favorable markets in western Wisconsin. With the addition of First
Northern, Bank Mutual will have $2.7 billion in assets and a substantial
presence in prosperous, growing northeastern Wisconsin markets.

Lending Portfolio

Historically, Mutual Savings has concentrated on residential lending. At
June 30, 2000, 63.74% of our loan portfolio consisted of one-to-four family
residential mortgage loans. Consumer loans, consisting primarily of home equity
loans and lines of credit, comprised 18.54% of the portfolio. The remainder of
the portfolio included multi-family, construction and commercial real estate
mortgage loans, and commercial business loans. At June 30, 2000,
one-to-four-family residential mortgage loans comprised 59.84% of First
Northern's portfolio, while consumer loans accounted for 25.70% of the
portfolio.

Portfolio Diversification and Business Banking

Though residential loans pose less credit risk than other types of loans,
we have increased our emphasis on non-residential lending in order to expand
business opportunities and achieve the higher yields and shorter terms of such
loans. Consumer loans comprised 9.72% of Mutual Savings' loan portfolio at
December 31, 1995 and had grown to 18.54% of the portfolio at June 30, 2000. In
1999, we hired experienced business bankers to expand our commercial business
lending and related services, such as

45
<PAGE> 48

deposit products. We enhanced our commercial real estate capabilities by hiring
additional experienced lenders.

First Northern has also been expanding its consumer loan portfolio and, in
recent years, established a niche in indirect auto lending. Auto loans comprised
almost 47% of its consumer loans at June 30, 2000. In 1999, First Northern
Savings commenced commercial business lending. We believe that the attractive
branch systems of both banks will facilitate continued expansion of consumer,
commercial real estate and commercial business lending, while continuing to
support a strong residential lending presence.

Asset Quality

Though we have diversified the loan portfolio, we remain committed to
conservative loan underwriting and credit review. Additionally, our investments
are comprised of highly-rated securities. As a result of these practices and a
stable economy, at June 30, 2000, our ratio of non-performing assets to total
assets was 0.30%, and our ratio of allowance for losses to non-performing assets
was 136.33%. These ratios are favorable compared to most savings institutions.
At June 30, 2000, First Northern reported a ratio of non-performing assets to
total assets of 0.08% and a ratio of allowance for losses to non-performing
assets of 593.3%.

Core Deposits

We promote core deposits, such as savings and checking accounts, because
they are generally a lower cost and more stable source of funds than time
deposits. Additionally, unlike time deposits, they generate fee income. Over the
past several years, we steadily increased our percentage of core deposits, which
at June 30, 2000, accounted for 38.8% of Mutual Savings' deposits. At that date,
37.7% of First Northern's deposits were core deposits.

Interest Rate Risk

We seek a balance between maximizing yield and limiting interest rate risk,
which is the risk that earnings will be reduced if market interest rates
fluctuate. Financial institutions face such risk because liabilities generally
have shorter terms to repricing than loans. To limit this risk, we sell most
long-term fixed rate loans that we originate, while keeping in our portfolio the
shorter term and adjustable-rate loans. Additionally, we invest in
adjustable-rate and short-term securities. First Northern follows a similar
policy.

Cost Control

Controlling overhead expense is important to profitability. One of our
goals is to maintain a reasonable efficiency ratio, which is calculated as
non-interest expense (excluding amortization of intangible assets) divided by
the sum of net interest income plus non-interest income. This ratio was an
annualized 59.62% at June 30, 2000. For First Northern, this ratio was 59.33%.

Capital Strength

By following the above business practices, Mutual Savings is financially
strong. Our equity to assets ratio was 9.53% at June 30, 2000. At that date,
First Northern's ratio was 8.36%.

Profitable Core Operations

Our core earnings primarily consists of net interest income, operating
expenses and non-interest income. Our business practices have resulted in Mutual
Savings achieving increasing core earnings over the last several years. In 1999,
we recorded a charge, unrelated to core operations, which reduced our results by
$13.6 million. The charge was a special write-off of impaired intangible assets
related to the acquisition of First Federal. Excluding the amortization of
intangible assets, Mutual Savings' return on average assets for 1999 was 0.63%.
Mutual's annualized return on assets, excluding amortization of intangible
assets, was 0.79% at June 30, 2000. For First Northern, these returns were 0.96%
and 0.78%, respectively.

46
<PAGE> 49

CERTAIN EFFECTS OF THE FIRST NORTHERN MERGER ON BANK MUTUAL

On a pro forma basis at June 30, 2000, assuming completion of the First
Northern merger, the restructuring and the stock offering, Bank Mutual would
have had total assets of $2.7 billion, total deposits of $1.9 billion, net loans
of $1.9 billion and total shareholders' equity of $261.7 million. For further
pro forma information, see "Pro Forma Data."

Management of Mutual Savings believes that the First Northern merger will
be advantageous to our competitive posture, joining two banks with contiguous
market areas and compatible business philosophies and product mix. The merger
will permit us to expand into growing northeastern Wisconsin markets at a fair
consideration and in a more efficient manner than establishing new branches.
Initially, the two banks will continue to operate separately. There is no
current intention to combine the two banks, although business plans could change
in the future.

We consider the experienced, forward-looking management of First Northern
to be a benefit of the merger. First Northern's CEO and three other board
members will join the board of Bank Mutual. It is anticipated that the merger
will allow the banks to eliminate certain duplicative costs and to achieve
potential economies of scale over time through the increased size and
efficiencies of the combined entity. Similarly, the increased size and
geographical market area should, over time, allow us to expand products and
services and take advantage of greater cross-selling opportunities.

GEOGRAPHIC EXPANSION

Mutual Savings and First Northern Savings currently operate in markets that
are, for the most part, contiguous and complementary to each other. Most of
Mutual Savings' offices are located in the southeastern, south central and
western part of Wisconsin. While Mutual has a relatively small presence in
northeastern Wisconsin, all of First Northern Savings' offices are located in
that area of the state. In particular, First Northern has a substantial presence
in the Fox River Valley region, and also includes surrounding rural and vacation
areas. The Fox River Valley region is anchored by the cities of Green Bay, where
First Northern has its headquarters and a substantial presence, and Appleton,
where Mutual Savings has its offices in the area. See "Business of Mutual
Savings Bank -- Market Area." The First Northern acquisition would substantially
increase Mutual's presence in the northeastern part of the state, while Mutual
Savings expects that it would also retain its current offices in the region
after the First Northern merger.

We believe that the northeastern part of Wisconsin is an attractive area
for growth. It is the third largest population concentration in the state, and
includes a variety of commercial, industrial, service and recreational
businesses.

IMPACT ON DEPOSITS

Mutual Savings and First Northern Savings have relatively similar deposit
mixes and interest rates paid on those deposits.

47
<PAGE> 50

The following table presents the distribution of Mutual Savings' and First
Northern Savings' deposit accounts at June 30, 2000 by dollar amount and percent
of portfolio, and the weighted average interest rate on each category of
deposits.

<TABLE>
<CAPTION>
MUTUAL SAVINGS FIRST NORTHERN SAVINGS
-------------------------------- ------------------------------
WEIGHTED WEIGHTED
PERCENT AVERAGE PERCENT AVERAGE
OF TOTAL NOMINAL OF TOTAL NOMINAL
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
---------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Savings........................... $ 148,406 11.41% 2.43% $ 72,253 12.71% 2.40%
Interest-bearing demand........... 86,133 6.62 1.05 40,709 7.16 1.12
Money market...................... 220,721 16.97 5.27 70,817 12.45 4.97
Non-interest bearing demand....... 49,002 3.77 0.00 30,819 5.42 0.00
---------- ------ ---- -------- ------ ----
Total........................ 504,262 38.77 3.20 214,598 37.74 2.66
---------- ------ -------- ------
Certificates:
Time deposits with original
maturities of:
Three months or less............ 60,721 4.67 5.02 21,758 3.83 6.10
Over three months to twelve
months....................... 141,737 10.90 5.07 75,557 13.29 5.85
Over twelve months to
twenty-four months........... 399,933 30.75 5.74 169,544 29.80 5.86
Over twenty-four months to
thirty-six months............ 128,303 9.86 6.16 53,885 9.48 5.90
Over thirty-six months to
forty-eight months........... 4,249 0.33 5.72 27,340 4.81 5.98
Over forty-eight months to sixty
months....................... 59,109 4.54 5.88 5,943 1.05 5.58
Over sixty months............... 2,299 0.18 6.36 -- -- --
---------- ------ ---- -------- ------ ----
Total time deposits.......... 796,351 61.23 5.65 354,027 62.26 5.88
---------- ------ ---- -------- ------ ----
Total deposits............... $1,300,613 100.00% 4.70% $568,625 100.00% 4.66%
========== ====== ======== ======
</TABLE>

In addition to having a similar deposit mix, Mutual Savings and First
Northern Savings offer similar, although not identical, deposit products. Even
though Mutual Savings and First Northern Savings are expected to initially
operate as separate financial institutions, we expect that certain deposit
products which currently are offered by only one of the savings banks may now be
offered by both. Thus, both Mutual Savings and First Northern Savings will have
the benefit of the other's experience.

We expect that customer retention will be maximized because both the
institutions anticipate keeping open all branch offices after the merger, under
the existing names. Because the two companies have relatively similar deposit
and pricing strategies, we do not expect that changes, if any, which may be made
by First Northern Savings will cause a significant deposit run off.

48
<PAGE> 51

IMPACT ON LOAN PORTFOLIO

Mutual Savings' and First Northern Savings' loan products and lending
operations are relatively similar, although Mutual Savings has a higher
percentage of first mortgage loans than First Northern Savings, and First
Northern Savings has a higher percentage of consumer loans. The following table
presents the composition of Mutual Savings' and First Northern Savings' loan
portfolios in dollar amounts and in percentages of the total portfolios at June
30, 2000. We have used several different categories in this table than we have
used in the other tables in this prospectus to help illustrate the comparison
between the two institutions.

<TABLE>
<CAPTION>
MUTUAL SAVINGS FIRST NORTHERN SAVINGS
------------------------------- -----------------------------
PERCENT WEIGHTED PERCENT WEIGHTED
OF AVERAGE OF AVERAGE
AMOUNT TOTAL RATE AMOUNT TOTAL RATE
---------- ------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four family.......... $ 733,958 63.74% $489,180 59.84%
Multi-family................ 65,105 5.65 37,843 4.63
Commercial real estate...... 65,267 5.67 22,727 2.78
Construction and
development............... 30,840 2.68 47,004 5.75
---------- ------ -------- ------
Total first mortgage real
estate loans........... $ 895,170 77.74% 7.34% $596,754 73.00% 7.13%
---------- ------ -------- ------
Consumer and other loans:
Consumer loans:
Fixed equity................ $ 108,811 9.45% 8.19% $ 67,485 8.26% 8.29%
Home equity lines of
credit.................... 55,371 4.81 8.33 20,987 2.57 10.07
Education................... 27,698 2.41 8.83 * -- --
Automobile.................. 5,609 0.49 8.64 98,326 12.03 7.40
Home improvement............ 12,134 1.05 8.20 ** -- --
Other....................... 3,827 0.33 8.86 23,207 2.84 9.18
---------- ------ ---- -------- ------ -----
Total consumer loans...... 213,450 18.54 8.33 210,005 25.70 8.15%
---------- ------ ---- -------- ------ -----
Commercial business loans... 42,815 3.72 8.06 10,661 1.30 9.17
---------- ------ ---- -------- ------ -----
Total consumer and other
loans.................. 256,265 22.26 8.29 220,666 27.00 8.20
---------- ------ ---- -------- ------ -----
Total loans receivable.... $1,151,435 100.00% 7.55% $817,420 100.00% 7.43%
========== ========
Less:
Undisbursed loan proceeds... 16,368 17,667
Deferred fees and
discounts................. (5) 4,218
Allowance for losses........ 7,085 441
---------- --------
Total loans receivable,
net.................... $1,127,987 $795,094
========== ========
Non-performing loans as a
percent of total loans...... 0.20% 0.03%
Non-performing assets as a
percent of total assets..... 0.30% 0.08%
</TABLE>

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

* First Northern Savings generally makes student loans for resale rather than
retaining them in its portfolio.

** First Northern Savings does not separately categorize home improvement loans.
However, these loans are included in "fixed equity" and "home equity lines of
credit."

First Northern Savings has a higher level of consumer loans than Mutual
Savings, particularly of automobile loans. Most of these are indirect automobile
loans originated by First Northern through a joint venture with another
financial institution. First Northern Savings has experienced minimal
delinquencies under this program; Bank Mutual expects to continue the program
after the First Northern merger. First

49
<PAGE> 52

Northern Savings' "other" consumer loans include loans secured by boats and
recreational vehicles as a consequence of the vacation and recreational regions
which are served by First Northern.

The weighted average interest rates on Mutual Savings' and First Northern
Savings' loans is generally consistent by loan type, with several exceptions.
The average rate on First Northern Savings' home equity lines of credit is
higher than Mutual Savings', primarily as a result of the lower average credit
line. Conversely, the weighted average rate on First Northern's automobile loans
is lower than Mutual Savings'. That difference results both because First
Northern's joint venture company absorbs losses on this portfolio, which are
then reflected at First Northern in the net yield rather than as written off
assets, and as a result of the more aggressive automobile loan pricing by that
joint venture.

Both First Northern's and Mutual Savings' non-performing loan and asset
ratios reflect strong asset quality.

We believe that, over time, the First Northern merger will provide
additional lending opportunities to the combined enterprise. Mutual Savings
intends to augment its consumer lending with programs currently offered by First
Northern Savings. Similarly, we believe that the expanded customer and
geographical base will provide further opportunities for commercial real estate
and commercial business lending in which Mutual Savings and First Northern
Savings intend to expand. We also expect to minimize customer disruption to
First Northern Savings' customers by retaining First Northern Savings as a
separate entity, whose local loan officers will retain authority to make most
credit decisions in its market area. Also, a larger institution will be better
able to diversify its portfolio since it has a larger customer base, can more
readily hire experienced staff, and leverage greater resources.

50
<PAGE> 53

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis reflects Mutual Savings' consolidated
financial statements and other relevant statistical data and is intended to
enhance your understanding of our financial condition and results of operations.
You should read the information in this section in conjunction with Mutual
Savings' consolidated financial statements and accompanying notes to
consolidated financial statements beginning on page F-1 of this prospectus, and
the other statistical data provided elsewhere in this prospectus.

GENERAL

Mutual Savings' results of operations depend primarily on net interest
income. Net interest income is the difference between the interest income on
interest-earning assets, which for Mutual Savings primarily are loans and
mortgage-related and investment securities, and interest expense on
interest-bearing liabilities, which for Mutual Savings primarily are deposits
and borrowings. Our results of operations are also affected by our provision for
loan losses, non-interest income, and non-interest expense. Non-interest income
consists mainly of service fees and charges, gains on sales of loans held for
sale and insurance, securities and annuity commissions. Non-interest expense
consists primarily of salaries and employee benefits, occupancy expenses and
other general and administrative expenses, and amortization of intangible
assets.

Our results of operations may also be affected significantly by general and
local economic and competitive conditions, particularly changes in market
interest rates, government policies, and actions of regulatory authorities.
Future changes in applicable law, regulations or government policies may
materially impact us. Additionally, our lending activity is concentrated in
loans secured by real estate located in Wisconsin and/or to Wisconsin borrowers.
Accordingly, our results of operations are affected by regional market and
economic conditions.

FIRST NORTHERN MERGER

Mutual Savings and First Northern have signed an agreement under which Bank
Mutual will acquire First Northern Savings. In many respects, both organizations
have similar businesses and business philosophies. However, the acquisition will
be significant for Bank Mutual. We have highlighted material differences which
we have identified in "Certain Effects of the First Northern Merger on Bank
Mutual." Please also see the financial information of First Northern identified
in "Index to Financial Statements."

MANAGEMENT STRATEGY

Mutual Savings' operating strategy is to succeed as a well-capitalized,
profitable community bank. We seek to accomplish this goal by:

- maintaining a community orientation and providing quality customer
service;

- expanding our market area;

- continuing our commitment to residential lending, while diversifying our
portfolio;

- managing credit risk;

- promoting core deposit accounts;

- limiting exposure to interest rate risk; and

- controlling expenses.

51
<PAGE> 54

MANAGEMENT OF INTEREST RATE RISK

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

We have attempted to reduce our interest rate risk by emphasizing the
origination of ARM loans and by selling a majority of our longer-than-15 year
fixed rate mortgage loan originations. During the past few years we have
retained 15-year fixed rate mortgage loans in our portfolio. It is our opinion
that the enhanced yield and cash flows offered by this product offset the amount
of interest rate risk that is assumed. For the year ended December 31, 1999, we
originated $96.4 million of fixed rate one- to four-family first mortgage loans,
or 63.1% of total one-to-four family first mortgage originations, of which $57.4
million were sold with servicing retained. In managing our investment
securities, we invested varying amounts up to $250 million in overnight Federal
Funds during 1999 which resulted in an average monthly yield ranging from 4.728%
to 5.514%. In December of 1999 we purchased $100 million of 7% FNMA 15-year
mortgage-backed securities at a yield of 7.003% and in January 2000 we purchased
another $100 million of 7% FNMA 15-year mortgage-backed securities at a yield of
7.077%. We have fixed rate investments having a weighted average remaining life
of 82 months at June 30, 2000. While these strategies have reduced income, we
believe that reducing our exposure to interest rate fluctuations will enhance
long-term profitability.

For the first six months of 2000, we originated $12.3 million of fixed
rate, one-to-four family first mortgage loans, or 22.7% of total one-to-four
family first mortgage originations, of which we sold $4.9 million with servicing
retained. As interest rates have risen, more borrowers have selected adjustable
loans.

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

During 1998 and early 1999, we operated in a low interest rate environment.
In that environment we experienced both increased interest rate competition
related to loan originations and above-average prepayment rates related to
mortgage loans and mortgage-related securities, as borrowers refinanced
higher-rate loans. As a result we had to invest our excess liquidity in short
term low-yielding investments. This had an adverse impact on our profitability.
As interest rates began to rise later in 1999, we began to re-deploy our excess
liquidity into higher yielding investments.

Due to the nature of our operations, we are not directly subject to foreign
currency exchange or commodity price risk. Instead, our real estate loan
portfolio, concentrated in Wisconsin, is subject to risks associated with the
local economy. We did not engage in any hedging transactions that use derivative
instruments (such as interest rate swaps and caps) during 1999 and did not have
any such hedging transactions in place at June 30, 2000. In the future, we may,
with approval of our board of directors, engage in hedging transactions
utilizing derivative instruments.

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

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

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

52
<PAGE> 55

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

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

To achieve the objectives of managing interest rate risk, our
Asset/Liability committee meets periodically to discuss and monitor the market
interest rate environment and provides reports to the board of directors
monthly. This committee is chaired by the President and is comprised of members
of Mutual Savings' senior management.

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

- emphasizing the origination of adjustable-rate and 15-year fixed rate
real estate loans for portfolio, and selling 30-year fixed rate 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.

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

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

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

At June 30, 2000, based on the assumptions below, our interest-bearing
liabilities maturing or repricing within one year exceeded our interest-earning
assets maturing or repricing within the same period by $345.6 million. This
represented a negative cumulative one-year interest rate sensitivity gap of
(19.6%), and a ratio of interest-earning assets maturing or repricing within one
year to interest-bearing liabilities maturing or repricing within one year of
62.0%. The cumulative gap ratio is significantly affected by $200.0 million of
long-term FHLB borrowings repricing in May and June 2001.

53
<PAGE> 56

The following table presents the amounts of our interest-earning assets and
interest-bearing liabilities outstanding at June 30, 2000, which we anticipate
to reprice or mature in each of the future time periods shown. Except as stated
below, we determined the amounts of assets and liabilities shown which reprice
or mature during a particular period in accordance with the earlier of the term
to repricing or the contractual maturity of the asset or liability. The
information presented in the following table is also based on the following
assumptions:

1. We assumed the following repayment rates applied to outstanding
balances applied to the beginning of the period:

<TABLE>
<S> <C>
Mortgage loans: 14.7%
Consumer loans: 50.8%
Commercial loans: 36.8%
</TABLE>

2. Anticipated cash flows for mortgage-related securities were
obtained from an independent outside source.

3. We reported federal agency securities with call options, that we
believed would be called, at the earlier of the next call date or
contractual maturity date.

4. We reported savings, money market accounts and interest-bearing
demand accounts that had no stated maturity using decay rates. The decay
rates were calculated using an average of the Mutual Savings' most recent
12 months experience.

5. FHLB advances are reported at the earlier of call date or final
maturity.

However, changes in interest rates could affect the loan and investment
prepayment assumptions and deposit decay rates used in our analysis.

The repayment assumption used for mortgage loans in (1) above was adjusted
from recent history due to the current rise in interest rates. In a rising rate
environment, prepayments on mortgage loans slow down significantly as mortgage
loan customers retain their low interest rate loans. Deposit decay rates, as
reflected in items (4) above, are based on Mutual Savings' recent history.
Deposit decay rates, prepayment rates and anticipated call dates can have a
significant impact on the estimated interest rate sensitivity gap. While we
believe that our assumptions are reasonable, they may not be indicative of
actual future deposit decay activity, loan and mortgage-related securities
prepayments, and the actual timing of federal agency calls.

54
<PAGE> 57

<TABLE>
<CAPTION>
AT JUNE 30, 2000
-----------------------------------------------------------------------------------
THREE TO MORE THAN ONE MORE THAN
WITHIN THREE TWELVE YEAR TO THREE THREE YEARS TO OVER
MONTHS MONTHS YEARS FIVE YEARS FIVE YEARS TOTAL
------------ --------- ------------- -------------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Mortgage loans:
Fixed.................. $ 15,532 $ 44,562 $ 104,028 $ 80,985 $183,635 $ 428,742
Adjustable............. 68,213 133,138 105,155 104,184 33,922 444,612
Other loans............... 62,354 64,638 129,273 -- -- 256,265
Securities:
Interest earning
deposits............... 42,138 -- -- -- -- 42,138
Non-mortgage.............. 3,543 -- 5,270 19,349 -- 28,162
Mortgage-related fixed.... 14,471 38,748 104,377 89,001 152,072 398,669
Mortgage-related
adjustable............. 62,708 -- -- -- -- 62,708
Other interest-earning
assets.................... 14,585 -- -- -- -- 14,585
-------- --------- --------- -------- -------- ----------
Total
interest-earning
assets.......... 283,544 281,086 448,103 293,519 369,629 1,675,881
-------- --------- --------- -------- -------- ----------
Interest-bearing
liabilities:
Deposits:
Interest-bearing NOW
accounts............. 893 2,479 5,982 5,231 71,548 86,133
Savings accounts....... 8,597 22,876 44,254 27,446 45,233 148,406
Money market
accounts............. 11,762 30,536 61,340 40,252 76,831 220,721
Time deposits.......... 231,946 323,963 219,472 20,970 -- 796,351
Advance payments by
borrowers for taxes and
insurance................. -- 13,012 -- -- -- 13,012
-------- --------- --------- -------- -------- ----------
Other borrowings............ 64,147 200,000 520 -- -- 264,667
-------- --------- --------- -------- -------- ----------
Total
interest-bearing
liabilities..... 317,345 592,866 331,568 93,899 193,612 1,529,290
======== ========= ========= ======== ======== ==========
Interest rate sensitivity
gap....................... $(33,801) $(311,780) $ 116,535 $199,620 $176,017 $ 146,591
======== ========= ========= ======== ======== ==========
Cumulative interest rate
sensitivity gap........... $(33,801) $(345,581) $(229,046) $(29,426) $146,591
======== ========= ========= ======== ========
Cumulative interest rate
sensitivity gap as a
percentage total assets... (1.92)% (19.64)% (13.02)% (1.67)% 8.33%
Cumulative interest-earning
assets as a percentage of
interest bearing
liabilities............... 89.35% 62.03% 81.55% 97.80% 109.59%
</TABLE>

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

55
<PAGE> 58

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

The following table presents the estimated present value of equity over a
range of interest rate change scenarios at June 30, 2000. The present value
ratio shown in the table is the present value of equity as a percent of the
present value of total assets in each of the different rate environments. For
purposes of this table, we have made assumptions such as prepayment rates and
decay rates similar to those used for the gap analysis table.

<TABLE>
<CAPTION>
PRESENT VALUE OF EQUITY
AS PERCENT OF
PRESENT VALUE OF EQUITY PRESENT VALUE OF ASSETS
--------------------------------- -----------------------
CHANGE IN DOLLAR DOLLAR PERCENT PRESENT VALUE PERCENT
INTEREST RATES AMOUNT CHANGE CHANGE RATIO CHANGE
-------------- ---------- ---------- ------- ------------- -------
(BASIS POINTS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
+200 $179,628 $(35,609) (16.54)% 10.79% (12.77)%
+100 199,970 (15,267) (7.09)% 11.75% (5.01)%
0 215,237 -- 0.00% 12.37% 0.00%
-100 215,458 221 0.10% 12.14% (1.86)%
-200 194,345 (20,892) (9.71)% 10.77% (12.93)%
</TABLE>

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

56
<PAGE> 59

ANALYSIS OF NET INTEREST INCOME

Net interest income represents the difference between the interest income
we earn on our interest-earning assets, primarily loans, mortgage-related
securities and investment securities, and the expense we pay on interest-bearing
liabilities, primarily time deposits and borrowings. Net interest income depends
on our volume of interest-earning assets and interest-bearing liabilities and
the interest rates we earned or paid on them.

Average Balance Sheet. The following tables present certain information
regarding Mutual Savings' financial condition and net interest income for the
six months ended June 30, 2000 and 1999, and the years 1999, 1998 and 1997. The
table presents the average yield on interest-earning assets and the average cost
of interest-bearing liabilities for the periods indicated. We derived the yields
and costs by dividing income or expense by the average balance of
interest-earnings assets or interest-bearing liabilities respectively, for the
periods shown. We derived average balances from daily balances over the periods
indicated. Interest income includes fees which we considered adjustments to
yields.

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------
2000 1999
-------------------------------------------- -------------------------------
AVERAGE INTEREST AVERAGE INTEREST
ACTUAL OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE BALANCE PAID RATE BALANCE PAID RATE
---------- ----------- -------- ------ ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
INTEREST-EARNING ASSETS:
Loans receivable(1)............................. $1,129,619 $1,110,535 $41,403 7.46% $1,060,985 $39,737 7.49%
Mortgage-related securities..................... 461,377 467,792 15,860 6.78% 269,913 8,503 6.30%
Investment securities and interest-earning
deposits...................................... 70,300 91,831 2,725 5.93% 417,858 9,985 4.78%
Federal Home Loan Bank stock.................... 14,585 13,938 494 7.09% 13,537 428 6.32%
---------- ---------- ------- ----- ---------- ------- -----
Total interest-earning assets................. 1,675,881 1,684,096 60,482 7.18% 1,762,293 58,653 6.66%
------- -------
Non-interest-earning assets...................... 83,289 65,069 93,368
Total assets.................................. $1,759,170 $1,749,165 $1,855,661
========== ========== ==========
LIABILITIES AND EQUITY:
INTEREST-BEARING LIABILITIES:
Savings deposits................................ $ 148,406 $ 150,204 $ 1,786 2.38% $ 166,484 $ 1,981 2.38%
Money market accounts........................... 220,721 226,724 5,656 4.99% 181,965 4,315 4.74%
Interest-bearing demand accounts................ 86,133 86,807 452 1.04% 90,097 472 1.05%
Time deposits................................... 796,351 804,525 21,845 5.43% 898,492 24,217 5.39%
---------- ---------- ------- ----- ---------- ------- -----
Total deposits................................ 1,251,611 1,268,260 29,739 4.69% 1,337,038 30,985 4.63%
Escrows......................................... 13,012 7,369 90 2.44% 7,415 98 2.64%
Borrowings...................................... 264,667 246,234 7,232 5.87% 270,800 7,045 5.20%
---------- ---------- ------- ----- ---------- ------- -----
Total interest-bearing liabilities............ 1,529,290 1,521,863 37,061 4.87% 1,615,253 38,128 4.72%
---------- ---------- ------- ----- ---------- ------- -----
NON-INTEREST-BEARING LIABILITIES
Non-interest-bearing deposits................... 49,002 44,292 41,861
Other non-interest-bearing liabilities.......... 13,290 19,095 22,053
---------- ---------- ----------
Total non-interest-bearing liabilities........ 62,292 63,387 63,914
---------- ---------- ----------
Total liabilities............................. 1,591,582 1,585,250 1,679,167
Equity.......................................... 167,588 163,915 176,494
---------- ---------- ----------
Total liabilities and equity.................. $1,759,170 $1,749,165 $1,855,661
========== ========== ==========
Net interest income/net interest rate spread..... $23,421 2.31% $20,525 1.94%
======= =======
Net interest-earning assets/net interest
margin.......................................... $ 162,233 2.78% $ 147,040 2.33%
========== ===== ========== =====
Average interest-earnings assets to average
interest-bearing liabilities.................... 1.11x 1.09x
</TABLE>

-------------------------
(1) Nonaccrual loans were included in their respective categories.

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<PAGE> 60

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1999 1998 1997
------------------------------- ------------------------------- -------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/
BALANCE PAID COST BALANCE PAID COST BALANCE PAID COST
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
INTEREST-EARNING ASSETS:
Loans receivable(1)........ $1,069,568 $ 79,623 7.44% $1,159,786 $ 90,092 7.77% $1,212,945 $ 93,628 7.72%
Mortgage-related
securities............... 290,772 18,479 6.36% 238,338 15,664 6.57% 159,259 10,250 6.44%
Investment securities and
interest-earning
deposits................. 383,630 19,294 5.03% 347,115 18,681 5.38% 193,665 10,940 5.65%
Federal Home Loan Bank
stock.................... 13,537 906 6.69% 15,640 1,033 6.60% 18,206 1,175 6.45%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest-earning
assets................. 1,757,507 118,302 6.73% 1,760,879 125,470 7.12% 1,584,075 115,993 7.32%
Non-interest-earning
assets..................... 80,369 89,137 70,376
---------- ---------- ----------
Total assets............. $1,837,876 $1,850,016 $1,654,451
========== ========== ==========
LIABILITIES AND EQUITY:
INTEREST-BEARING
LIABILITIES:
Savings deposits........... $ 163,102 $ 3,885 2.38% $ 168,965 $ 4,268 2.53% $ 168,998 $ 4,696 2.78%
Money market accounts...... 203,924 9,796 4.80% 141,860 6,571 4.63% 119,283 5,458 4.58%
Interest-bearing demand
accounts................. 89,139 940 1.05% 90,211 1,070 1.19% 83,127 1,137 1.37%
Time deposits.............. 872,824 46,470 5.32% 927,241 53,327 5.75% 863,534 49,626 5.75%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total deposits........... 1,328,989 61,091 4.60% 1,328,277 65,236 4.91% 1,234,942 60,917 4.93%
Escrows.................... 12,227 313 2.56% 13,143 344 2.62% 15,674 380 2.42%
Borrowings................. 263,400 13,933 5.29% 270,838 14,437 5.33% 191,346 10,897 5.69%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest-bearing
liabilities............ 1,604,616 75,337 4.70% 1,612,258 80,017 4.96% 1,441,962 72,194 5.01%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
NON-INTEREST-BEARING
LIABILITIES
Non-interest-bearing
deposits................. 43,402 39,714 31,969
Other non-interest-bearing
liabilities.............. 14,098 28,307 24,260
---------- ---------- ----------
Total
non-interest-bearing
liabilities............ 57,500 68,021 56,229
---------- ---------- ----------
Total liabilities........ 1,662,116 1,680,279 1,498,191
Equity..................... 175,760 169,737 156,260
---------- ---------- ----------
Total liabilities and
equity................. $1,837,876 $1,850,016 $1,654,451
========== ========== ==========
Net interest income/net
interest rate spread....... $ 42,965 2.03% $ 45,453 2.16% $ 43,799 2.31%
======== ======== ========
Net interest-earning
assets/net interest
margin..................... $ 152,891 2.44% $ 148,621 2.58% $ 142,113 2.76%
========== ==== ========== ==========
Average interest-earnings
assets to average
interest-bearing
liabilities................ 1.10x 1.09x 1.10x
</TABLE>

-------------------------
(1) Nonaccrual loans were included in their respective categories.

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<PAGE> 61

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

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

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

(3) the net change.

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO 1999
------------------------------
INCREASE (DECREASE) DUE TO
------------------------------
VOLUME RATE NET
--------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable............................................ $ 1,848 $ (182) $ 1,666
Mortgage-related securities................................. 6,664 693 7,357
Investment securities....................................... (9,229) 1,969 (7,260)
Federal Home Loan Bank Stock................................ 13 53 66
-------- ------ -------
Total............................................. (704) 2,533 1,829
-------- ------ -------
INTEREST-BEARING LIABILITIES:
Savings deposits............................................ $ (194) $ (1) $ (195)
Money market accounts....................................... 1,107 234 1,341
Interest bearing demand accounts............................ (17) (3) (20)
Time deposits............................................... (2,550) 178 (2,372)
Escrows..................................................... (1) (7) (8)
Borrowings.................................................. (673) 860 187
-------- ------ -------
Total............................................. (2,328) 1,261 (1,067)
-------- ------ -------
Net change in net interest income........................... $ 1,624 $1,272 $ 2,896
======== ====== =======
</TABLE>

59
<PAGE> 62

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1999 COMPARED TO 1998 1998 COMPARED TO 1997
---------------------------- ---------------------------
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
---------------------------- ---------------------------
VOLUME RATE NET VOLUME RATE NET
------- ------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable........................ $(6,818) $(3,651) $(10,469) $(4,126) $ 590 $(3,536)
Mortgage-related securities............. 3,347 (532) 2,815 5,192 222 5,414
Investment securities................... 1,885 (1,272) 613 8,280 (539) 7,741
Federal Home Loan Bank Stock............ (141) 14 (127) (169) 27 (142)
------- ------- -------- ------- ------- -------
Total......................... (1,727) (5,441) (7,168) 9,177 300 9,477
------- ------- -------- ------- ------- -------
INTEREST-BEARING LIABILITIES:
Savings deposits........................ (145) (238) (383) (1) (427) (428)
Money market accounts................... 2,973 252 3,225 1,045 68 1,113
Interest bearing demand accounts........ (13) (117) (130) 92 (159) (67)
Time deposits........................... (3,028) (3,829) (6,857) 3,664 37 3,701
Escrows................................. (23) (8) (31) (65) 29 (36)
Borrowings.............................. (394) (110) (504) 4,276 (736) 3,540
------- ------- -------- ------- ------- -------
Total......................... (630) (4,050) (4,680) 9,011 (1,188) 7,823
------- ------- -------- ------- ------- -------
Net change in net interest income....... $(1,097) $(1,391) $ (2,488) $ 166 $ 1,488 $ 1,654
======= ======= ======== ======= ======= =======
</TABLE>

COMPARISONS OF FINANCIAL CONDITION

At June 30, 2000 and December 31, 1999

Mutual Savings' total assets decreased $10.3 million, or 0.6% at June 30,
2000 to $1.76 billion from $1.77 billion at December 31, 1999.

At June 30, 2000, loans increased $45.2 million, or 4.2%. Investment
securities available for sale were stable, showing a slight reduction of
$302,000, or 0.5%. Mortgage-related securities increased $87.3 million, or
23.3%, to $461.4 million at June 30, 2000 from $374.1 million at December 31,
1999. The change in loans reflects an increase of $18.5 million in first
mortgage loans and an increase of $28.5 million in consumer loans and other
loans. Loan originations were supplemented by the purchase of mortgage-related
securities. Cash and cash equivalents decreased from $179.0 million to $31.8
million There was a shift of funds from total cash and cash equivalents to
higher-yielding loans and securities. Cash was also used to manage the deposit
outflow during the six months ended June 30, 2000.

The reduction in total assets was the result of a reduction of $42.4
million, or 3.2%, in total deposits to $1.30 billion at June 30, 2000 from $1.34
billion at December 31, 1999. Interest-bearing deposits decreased $48.8 million
or 3.8%, to $1.25 billion at June 30, 2000. Non-interest-bearing deposits
increased $6.4 million, or 15.0% during the same period. Interest-bearing
deposit changes reflect competition from the equity and bond markets, as well as
increased competition for funds from traditional financial institutions.
Non-interest-bearing deposit changes reflect normal fluctuations in demand type
accounts and an increase in retail customer demand deposits at the end of the
quarter.

FHLB borrowings increased $22.0 million or 9.1% to $264.7 million at June
30, 2000 from $242.7 million at December 31, 1999. The borrowings were used as
an alternative funding source.

Equity increased $3.8 million, or 2.3%, to $167.6 million at June 30, 2000,
from $163.8 million at December 31, 1999. The increase resulted from net income
of $6.5 million for the six months ended June 30, 2000, partially offset by a
$2.7 million increase in unrealized loss on securities available for sale,
primarily resulting from increasing market interest rates.

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<PAGE> 63

At December 31, 1999 and 1998

Mutual Savings' total assets decreased $103.4 million, or 5.5%, to $1.77
billion at December 31, 1999 from $1.87 billion at December 31, 1998.

At December 31, 1999, loans increased $45.2 million, or 4.3%, to $1.08
billion, while investment securities available for sale decreased $58.8 million,
or 50.4%, to $57.8 million. Mortgage-related securities available for sale
increased $103.2 million, or 38.1%, to $374.1 million at December 31, 1999 from
$270.9 million at December 31, 1998. The changes in the first two categories
reflect our strategy of diversifying our loan originations to increase our
portfolio of home equity, multi-family and commercial real estate and commercial
business loans, by utilizing funds generated by maturing investments. Our
strategy of reinvesting short term investments into higher yielding mortgage
related securities is reflected in the increase in mortgage-related securities
and the decrease in cash and cash equivalents by $151.3 million or 45.8%, to
$179.0 million. The special $15.6 million write-off of intangible assets also
contributed to the reduction in assets.

Total deposits decreased by $55.9 million, or 4.0% to $1.343 billion at
December 31, 1999, compared with $1.399 billion at December 31, 1998. Total time
deposits were $828.1 million at December 31, 1999, a decrease of 10.9% from
$929.4 million at December 31, 1998. This runoff is a reflection of our interest
rate risk strategy of replacing high cost deposits with lower cost sources of
funds when possible. This reduction in time deposits was partially offset by an
increase in money market deposits which increased by $71.8 million or 45.0% to
$231.2 million at December 31, 1999, compared with $159.4 million at December
31, 1998. Remaining deposits, comprised of savings, interest and
non-interest-bearing demand deposits decreased $26.4 million or 8.5% to $283.7
million at December 31, 1999 from $310.1 million at December 31, 1998. Also,
borrowings decreased $28.1 million or 10.4% to $242.7 million at December 31,
1999 from $270.8 million at December 31, 1998. This reduction in borrowings
reflects our strategy of managing net interest margin.

Equity decreased $11.9 million, or 6.8%, to $163.8 million at December 31,
1999, from $175.7 million at December 31, 1998, primarily due to the $4.5
million net loss for 1999 and a $7.4 million unrealized loss on securities
available for sale.

COMPARISONS OF OPERATING RESULTS

Six Months Ended June 30, 2000 and 1999

General. Net income for the six months ended June 30, 2000 was $6.5 million
compared with $3.9 million for the six months ended June 30, 1999. The $2.6
million, or 67.5% increase is primarily attributable to a $2.9 million increase
in net interest income and a $886,000 decrease in the amortization of intangible
assets, which was offset in part by a $1.6 million increase in income taxes.

Net Interest Income. Net interest income increased $2.9 million, or 14.1%,
to $23.4 million for the first six months of 2000 compared with $20.5 million
for the first six months of 1999. On an annualized basis, our net interest
spread increased to 2.31% for the six months ended June 30, 2000 from 1.94% for
the comparable six months of 1999. Additionally, our annualized net interest
margin increased to 2.78% from 2.33%.

Interest Income. Total interest income increased $1.8 million, or 3.1% to
$60.5 million for the six months ended June 30, 2000 compared with $58.7 million
for the six months ended June 30, 1999. Interest on loans increased $1.7 million
or 4.2%, to $41.4 million. Interest on investments decreased $7.2 million, or
69.1%, to $3.2 million, and interest on mortgage-related securities increased
$7.4 million, or 86.5%, to $15.9 million for the six months ended June 30, 2000
compared with the corresponding prior year period.

The average balance of total interest-earning assets decreased $78.2
million or 4.4% to $1.7 billion for the six months ended June 30, 2000 compared
with $1.8 billion for the corresponding period of the prior year. This decrease
consisted of a $49.6 million or 4.7% increase in the average balance of loans, a

61
<PAGE> 64

$326.0 million, or 78.0% decrease to $91.8 million in the average balance of
investment securities and a $197.9 million, or 73.3% increase to $467.8 million
in the average balance of mortgage-related investments. These changes reflect
our strategy of emphasizing consumer loans and re-deploying excess liquidity
into higher earning mortgage-related investments.

For the six months ended June 30, 2000, the impact on interest income from
the decrease in the average balance of total interest-earning assets was offset
by a 52 basis point increase in the annualized average yield on total
interest-earning assets to 7.18% compared with 6.66% for the corresponding six
months in the prior year. The re-deployment of lower yielding investments into
higher earning mortgage-related investments and the increased production of
consumer loans resulted in the higher yield of our interest-earning assets for
the six months ended June 30, 2000.

Interest Expense. Interest expense on deposits decreased $1.2 million, or
4.0%, to $29.7 million for the first six months of 2000 from $31.0 million for
the first six months of 1999. Interest on time deposits, which accounted for
73.5% of interest on deposits for the six months ended June 30, 2000, decreased
$2.4 million, or 9.8%, to $21.8 million from the corresponding period of the
prior year. Interest expense on borrowings increased $187,000, or 2.7%, to $7.2
million for the six months ended June 30, 2000 compared to $7.0 million for the
same period for the prior year.

The average balance of total interest-bearing liabilities decreased $93.4
million, or 5.8%, to $1.52 billion for the six months ended June 30, 2000
compared with $1.62 billion for the corresponding six months of the prior year.
We experienced a decrease of $68.8 million to $1.27 billion in the average
balance of deposits and a decrease of $24.6 million to $246.2 million in
borrowings. The impact on interest expense from the decrease in the average
balance of total interest-bearing liabilities was partially offset, however, by
a 15 basis point increase in the average cost of total interest-bearing
liabilities to 4.87% compared with 4.72% for the first six months of 1999. The
annualized average cost of deposits increased six basis points to 4.69% compared
with 4.63% for the first six months of 1999, reflecting the rising costs of term
deposits. The annualized average cost of borrowings increased 67 basis points to
5.87% for the first six months of 2000, compared with 5.20% for the
corresponding period of the prior year. The increased cost of borrowings
reflects the upward pricing of our borrowings as a result of the higher interest
rate environment.

Provision for Loan Losses. Our provision for losses was $236,000 for the
first six months of 2000 and $203,000 for the corresponding period of the prior
year. The allowance for loan losses at June 30, 2000 was $7.1 million, or 319.1%
of non-performing loans. Non-performing loans at June 30, 2000 were $2.2 million
compared with $5.6 million at June 30, 1999. Future provisions for loan losses
will continue to be based upon our assessment of the overall loan portfolio and
the underlying collateral, trends in non-performing loans, current economic
conditions and other relevant factors in order to maintain the allowance for
loan losses at adequate levels to provide for estimated future losses.

Non-Interest Income. Total non-interest income, consisting of service fees,
gain on sale of loans and other income, decreased 0.3%, or $117,000, to $4.02
million for the first six months of 2000 from $3.9 million for the same period
of the previous year. The decrease in non-interest income is primarily
attributable to a decrease in gain on the sale of loans of $393,000 offset by
the receipt of an IRS settlement which had been previously accrued. That
settlement included interest of $168,000 which was included in other
non-interest income in 2000. Gain on the sale of loans decreased as a result of
a lesser demand for longer-term fixed-rate mortgages due to the higher interest
rate environment. Deposit and loan fees increased $172,000 or 5.9% to $3.1
million for the six months ended June 30, 2000 compared with $2.9 million for
the same period of the previous year.

Non-Interest Expense. Total non-interest expense, consisting primarily of
salaries and employee benefits, occupancy expense, other operating expenses and
amortization of intangible assets, decreased $1.3 million, to $16.7 million, for
the six months ended June 30, 2000 compared with $18.0 million for the six
months ended June 30, 1999. Also, deposit insurance premiums decreased by
$274,000. This was principally because amortization of intangible assets
decreased $886,000 to $469,000, for the six months ended June 30, 2000 compared
with $1.4 million for the comparable six months of 1999.
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<PAGE> 65

Our efficiency ratio, excluding amortization of intangible assets, for the
first six months of 2000 was 59.1% compared with 67.9% for the corresponding
period in 1999. Our non-interest expense (excluding amortization of intangible
assets) to average assets ratio was 1.85% for the six months ended June 30, 2000
and 1.79% for the six months ended June 30, 1999.

Income Taxes. Income tax expense increased $1.6 million, or 67.7%, to $4.0
million for the six months ended June 30, 2000 compared with $2.4 million for
the six months ended June 30, 1999, due to an increase in income before tax
expense. The effective tax rate was 38.05% and 38.02% for the six months ended
June 30, 2000 and 1999, respectively.

Years Ended December 31, 1999 and 1998

General. Net loss was $4.5 million for 1999, a decrease of $15.7 million,
or 140.2%, compared with net income of $11.2 million for 1998. The decrease was
primarily attributable to a $2.5 million decrease in net interest income and a
$15.6 million increase in amortization of intangible assets, offset in part by a
$2.8 million decrease in income tax expense.

We purchased First Federal Bancshares of Eau Claire in 1997 and used the
purchase method of accounting in that transaction. Purchase accounting resulted
in the creation of goodwill and other intangible assets which we amortize on our
financial statements over a period of time. Our amortization of intangible
assets increased in 1999 primarily because we accelerated the write off of some
of the intangible assets which resulted from our purchase of First Federal. We
regularly evaluate our intangible assets to determine whether any special action
needs to be taken. As part of that evaluation, we determined the cash flows that
we expected in future years from the acquired operations and then calculated the
present value of that cash flows. In the case of First Federal, factors such as
changes in the market area, the departure of former officers and the composition
of the loan portfolio affected our future expectations. When we made this
calculation, we determined that the intangible assets from the First Federal
acquisition were overvalued by $15.6 million. Therefore, we wrote off that
amount against the intangible assets in the fourth quarter of 1999. That
write-down, net of a tax benefit of $2.0 million, substantially affected our
1999 results. We do not expect to take special write-downs on a regular basis.
For further information, see footnote 2 to Mutual Savings' consolidated
financial statements.

Net Interest Income. Net interest income for 1999 decreased $2.5 million,
or 5.5%, to $43.0 million for 1999 compared with $45.5 million for 1998. Net
interest rate spread, the difference between the average yield on the average
balance of interest-earning assets and the average cost of the average balance
of interest-bearing liabilities, decreased 13 basis points to 2.03% for 1999
from 2.16% for the prior year. Net interest margin, represented by net interest
income divided by the average balance of interest-earning assets, decreased 14
basis points to 2.44% for 1999 compared with 2.58% for 1998. These decreases
were primarily due to the investment of proceeds from the repayment and sale of
mortgage loans in short-term, lower-yielding investments as market rates
declined.

Interest Income. Total interest income decreased $7.2 million, or 5.7%, to
$118.3 million for 1999 compared with $125.5 million for 1998. Interest and fees
on loans accounted decreased from $90.1 million for 1998 to $79.6 million for
1999. Interest and dividends on investment securities available for sale
increased $486,000, or 2.5%, to $20.2 million for 1999 compared with $19.7
million for 1998. Interest on mortgage-related securities available for sale
increased $2.8 million, or 17.8%, to $18.5 million for 1999 compared with $15.7
million for 1998.

We experienced a $3.4 million, or 0.2%, decrease in the average balance of
total interest-earning assets. However, the mix of our earning assets changed
more significantly. The average balance of loans decreased $90.2 million, or
7.8%, to $1.07 billion for 1999 compared with $1.16 billion for 1998. This
decrease primarily reflects decreased origination and the large repayments of
adjustable rate loans refinanced with 30 year fixed rate loans which were
subsequently sold. The average balance of mortgage-related securities increased
$52.4 million, or 22.0%, to $290.8 million for 1999 compared with $238.3 million
for 1998. The average balance of investment securities increased $36.5 million,
or 10.5%, to

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<PAGE> 66

$383.6 million for 1999 compared with $347.1 million for 1998. These increases
reflect our continued strategy of using our investments to increase interest
income while managing interest rate risk.

The primary reason for the decrease in interest income was a 40 basis point
decrease in the average yield on interest-earning assets to 6.73% for 1999 from
7.12% for 1998. The average yield on loans decreased 33 basis points to 7.44%
for 1999 compared with 7.77% for the prior year. The average yield on
mortgage-related securities decreased 21 basis points to 6.36% for 1999 compared
with 6.57% for 1998. The average yield on investment securities decreased 35
basis points. to 5.03% for 1999 compared with 5.38% for 1998. The lower interest
rate environment along with the relatively flat yield curve that prevailed
during 1999 and the end of 1998 resulted in the downward repricing of our
interest rate-sensitive assets. In addition, the average yield on our assets was
affected by the refinancing of many of our existing loans to fixed rate mortgage
loans which were subsequently sold. The proceeds of loan repayments and loan
sales were invested in lower-yielding investment securities and mortgage-related
securities.

Interest Expense. Interest expense on deposits decreased $4.1 million, or
6.3%, to $61.1 million for 1999 compared with $65.2 million for 1998. Interest
expense on time deposits decreased $6.9 million, or 12.9% to $46.5 million for
1999, down from $53.3 million for 1998. Interest expense on savings accounts
decreased $383,000 or 9.0% to $3.9 million for 1999 compared to $4.3 million for
1998. Interest expense on money market accounts increased $3.2 million or 48.5%
to $9.8 million for 1999 compared to $6.6 million for 1998. Interest expense on
borrowings decreased $504,000, or 3.5%, to $13.9 million compared to $14.4
million in 1998.

The 5.8% overall decrease in interest expense was primarily attributable to
a decrease of 26 basis points in the average cost of interest-bearing
liabilities This decrease reflects a lower interest rate environment and our
strategy of funding assets through competitive pricing of our deposit products
and allowing higher costing time deposits to run off when adverse market
conditions exist.

Provision for Loan Losses. During 1999 we provided $350,000 for loan
losses, compared to $637,000 for 1998. Net loan charge-offs were approximately
$257,000 for 1999, compared to $977,000 in 1998. The allowance for loan losses,
which is established through a provision for loan losses charged against income
was $6.9 million at both December 31, 1999 and December 31, 1998.

Non-interest Income. Non-interest income, consisting of service fees,
brokerage commissions, gain on sale of loans and other income, decreased
$456,000, or 5.4%, to $8.0 million for 1999 compared with $8.4 million for 1998.
Various factors contributed to the change, primarily a $598,000 increase in
brokerage commissions, a $648,000 decrease in loan fees and service charges due
to decreased loan originations, and a $528,000 decrease in gains on sales of
loans due to decreased loan sales.

Non-interest Expense. Non-interest expense increased $15.8 million, or
44.5%, to $51.3 million during 1999 compared with $35.5 million for the prior
year. Amortization of intangible assets made up 98.7% of the increase in
non-interest expense. An increase in amortization of intangible assets of $15.6
million, or 578%, to $18.3 million in 1999 compared to $2.7 million in 1998, was
a result of the special write-off of intangible assets from the 1997 First
Federal acquisition. The remaining increase was $206,000 or 0.6% to $33.0
million in 1999, compared to $32.8 million in 1998 for other non-interest
expense items, excluding amortization of intangible assets.

Our efficiency ratio was 64.8% for 1999 compared with 60.8% for 1998. The
increase in the efficiency ratio reflects lower interest income as a result of
our high volume of lower yielding short-term investment securities rather than
an increase in operating expenses. The ratio of non-interest expense, excluding
amortization of intangible assets, to average assets was 1.79% for 1999 and
1.77% for 1998.

Income Taxes. Income tax expense decreased $2.8 million or 42.4% to $3.8
million for 1999 compared to $6.6 million for 1998. Income tax expense in 1999
is significantly impacted by the non-deductibility of a substantial portion of
the amortization of intangible assets. Excluding this amortization, our
effective tax rate for 1999 was 38.9% compared to 37.1% in 1998.

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Years Ended December 31, 1998 and 1997

General. Net income was $11.2 million for 1998, an increase of $1.0
million, or 9.8%, compared with net income of $10.2 million for 1997. The
increase was primarily attributable to a $1.7 million increase in net interest
income, a reduction in provision for loan losses of $428,000, and an increase of
$2.3 million in total non-interest income offset by an increase in total
non-interest expense of $3.4 million.

Net Interest Income. Net interest income for 1998 increased $1.7 million,
or 3.9%, to $45.5 million compared with $43.8 million for 1997. Net interest
income was increased by the full year of earning assets from the purchase of
First Federal. However, this increase was offset by a decrease in net interest
rate spread by 15 basis points to 2.16% for 1998 from 2.31% for the prior year.
Net interest margin decreased 18 basis points to 2.58% for 1998 compared with
2.76% for 1997. This reduction was caused by the investment of proceeds from
loan sales and repayments, including significant refinancings into lower-
yielding investments. Borrowed funds were utilized in 1998 to enhance net
interest income by using the proceeds to invest in mortgage-related securities
with a positive spread. This partially offset the negative effect from reduction
of the loan portfolio.

Interest Income. Total interest income increased $9.5 million, or 8.2%, to
$125.5 million for 1998 compared with $116.0 million for 1997. Interest on
mortgage-related securities increased 52.4% to $15.7 million for 1998 compared
with $10.3 million for 1997. Interest and fees on loans decreased $3.5 million,
or 3.7%, to $90.1 million for 1998, compared with $93.6 million for the prior
year. Additionally, interest and dividends on investment securities available
for sale increased $7.6 million, or 62.8%, to $19.7 million for 1998 from $12.1
million for 1997.

The increase in total interest income was primarily due to a $176.8
million, or 11.2%, increase in the average balance of total interest-earning
assets to $1.76 billion for 1998 compared with $1.58 billion for 1997. This
growth reflects the impact of the purchase of First Federal which occurred in
April 1997 and which was accounted for as a purchase. We purchased $539.7
million of loans in the acquisition. Growth in assets was funded by deposit
growth and by an increase in Federal Home Loan Bank borrowings, both of which
were also the result of the purchase of First Federal. The average balance of
net loans, however, decreased $53.2 million, or 4.4%, to $1.16 billion for 1998
compared with $1.21 billion for 1997, while the average balance of
mortgage-related securities increased $79.1 million, or 49.7%, to $238.3 million
for 1998 compared with $159.3 million for 1997. In addition, the average balance
of investment securities increased by $153.5 million, or 79.2%, to $347.1
million in 1998 compared with $193.7 million in 1997. In 1998, we experienced a
run off in mortgage loans. This was the result of customer loan prepayments.
Some ARM loans were refinanced to 30-year fixed rate mortgages. As part of our
interest rate risk strategy, these loans were subsequently sold.

The average yield on interest-earning assets decreased to 7.12% for 1998
compared with 7.32% for 1997. The average yield on loans increased five basis
points, to 7.77% for 1998 from 7.72% for the prior year. The average yield on
mortgage-related securities increased 13 basis points to 6.57% for 1998 from
6.44% for 1997. The average yield on investment securities decreased 27 basis
points to 5.38% for 1998 from 5.65% for 1997.

Interest Expense. Total interest expense increased $7.8 million or 10.8% to
$80.0 million in 1998 compared to $72.2 million in 1997. Interest expense on
deposits increased $4.3 million, or 7.1%, to $65.2 million for 1998 compared
with $60.9 million for 1997. Interest expense on time deposits, which accounted
for 81.5% of interest expense on deposits, increased $3.7 million, or 7.5%, to
$53.3 million for 1998 from $49.6 million for 1997. Interest expense on savings,
money market accounts and interest-bearing demand accounts increased $618,000,
or 5.5% to $11.9 million for 1998 compared to $11.3 million for 1998. Interest
expense on borrowings increased $3.5 million or 32.1% to $14.4 million in 1998
compared to $10.9 million in 1997.

The overall increase in interest expense on deposits was primarily
attributable to an increase of $170.3 million, or 11.8%, in the average balance
of total interest-bearing liabilities to $1.6 billion for 1998 compared with
$1.4 billion for 1997. The increase reflects a full year of balances resulting
from the

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<PAGE> 68

purchase of First Federal in April, 1997. The increase in interest-bearing
liabilities occurred in three major areas: money market accounts increased $22.6
million, or 18.9%, to $141.9 million in 1998 compared to $119.3 million in 1997;
time deposits increased $63.7 million or 7.4% to $927.2 million in 1998 compared
with $863.5 million in 1997; and Federal Home Loan Bank borrowings increased
$79.5 million, or 41.5% to $270.8 in 1998 compared to $191.3 for 1997.

The average cost of total interest-bearing liabilities decreased to 4.96%
for 1998 compared with 5.01% for 1997.

Provision For Loan Losses. During 1998 and 1997, we provided $637,000 and
$1.1 million, respectively, for loan losses. Net loan charge-offs were $1.0
million for 1998 and $240,000 for 1997. This resulted in the allowance for loan
losses decreasing $340,000, or 4.7%, to $6.9 million at December 31, 1998, from
$7.2 million at December 31, 1997. The decrease in the provision reflects the
lower level of non-performing loans in 1998 as compared to 1997. The reduction
in total allowances was more than offset by the reduction in the loan portfolio.
Therefore, at December 31, 1998, the allowance for loan losses as a percentage
of loans was 0.66% compared with 0.57% at December 31, 1997. The allowance for
loan losses was 101.9% of non-performing loans at December 31, 1998, compared
with 68.7% at December 31, 1997.

Non-Interest Income. Total non-interest income for 1998 was $8.4 million,
an increase of $2.3 million, or 35.5%, from $6.2 million for 1997. The overall
increase is partially due to 1998 including a full year of income resulting from
the purchase of First Federal compared to 1997, which included nine months of
income from the purchase. We experienced a 9.0% increase in fees on deposit
accounts to $2.6 million in 1998 compared with $2.4 million in 1997. Brokerage
commissions increased $244,000, or 24.8%, increasing to $1.2 million for 1998
compared to $1.0 million in 1997. Loan fees and service charges increased
$889,000, or 115.0% to $1.7 million in 1998 compared with $773,000 in 1997. Gain
on sale of loans, due to increase volume in loan sales, increased $539,000, or
110.9%, to $1.0 million in 1998 compared with $486,000 in 1997. Other income
increased $391,000 or 42.2% to $1.3 million in 1998 compared to $927,000 in
1997.

Non-Interest Expense. Total non-interest expense increased $3.4 million, or
10.6%, to $35.5 million during 1998 compared with $32.1 million for the prior
year. The overall increase is partially due to 1998 including a full year of
expenses resulting from the purchase of First Federal compared to 1997 which
included 9 months of expense. Salaries and employee benefits increased $1.3
million, or 8.5%, to $16.6 million for 1998 compared with $15.3 million for
1997. Net occupancy expense increased $292,000 or 5.5% to $5.6 million in 1998
compared with $5.3 million in 1997. Other operating expense increased $1.2
million or 23.5% to $6.3 million in 1998 compared with $5.1 million in 1997.
Amortization of intangible assets constituted 23.5% of the $3.4 million increase
in non-interest expense. The amortization of intangible assets related to the
First Federal acquisition was recorded for nine months during 1997 and for the
full year in 1998. Amortization amounted to $2.7 million in 1998 compared with
$1.9 million in 1997.

The ratio of non-interest expense to average assets, excluding amortization
of intangible assets, was 1.77% for 1998 and 1.82% for 1997. Our efficiency
ratio, which excludes amortization of intangible assets, was 60.8% for 1998
compared with 60.3% for 1997.

Income Taxes. Income tax expense decreased $38,000, or 0.6%, to $6.58
million for 1998 compared with $6.62 million for 1997, resulting in effective
tax rates of 37.1% and 39.4% for 1998 and 1997, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The term "liquidity" refers to our ability to generate adequate amounts of
cash to fund loan originations, loan purchases, deposit withdrawals and
operating expenses. Our primary sources of funds are deposits, scheduled
amortization and prepayments of loan principal and mortgage-related securities,
maturities and calls of investment securities, borrowings from the Federal Home
Loan Bank (the "FHLB") of Chicago and funds provided by our operations.

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<PAGE> 69

Loan repayments and maturing investment securities are a relatively
predictable source of funds. However, deposit flows, calls of investment
securities and prepayments of loans and mortgage-related securities are strongly
influenced by interest rates, general and local economic conditions and
competition in the marketplace. These factors reduce the predictability of the
timing of these sources of funds.

Our primary investing activities are the origination and purchase of one-to
four-family real estate loans, multi-family and commercial real estate loans,
home equity loans, other consumer loans, commercial business loans, the purchase
of mortgage-related securities, and to a lesser extent, the purchase of
investment securities. During 1999 we originated and purchased loans of
approximately $374.9 million and during 1998 we originated and purchased loans
of approximately $428.3 million. Purchases of mortgage-related securities were
$213.5 million for 1999 and $119.5 million for 1998, while purchases of
investment securities were $21.5 million for 1999 and $381.9 million for 1998.
In the first six months of 2000, we originated and purchased loans of $169.6
million, and purchased $115.4 million in mortgage-related securities and $19.7
million in investment securities.

These investing activities were funded by principal payments on mortgage
loans and mortgage-related securities, calls and maturities on investment
securities, borrowings and funds provided by our operating activities. Principal
repayments on loans and mortgage-related securities totaled $350.7 million
during 1999, compared to $587.0 million during 1998. Maturities and calls of
investment securities totaled $65.0 million during 1999 and $429.3 million
during 1998. Sales of loans and mortgage-related securities provided cash flows
of $111.1 million during 1999 and $116.8 million during 1998.

At June 30, 2000, Mutual Savings had outstanding loan commitments to
borrowers of approximately $27.8 million, unused commercial lines of credit of
approximately $1.5 million and available home equity and overdraft lines of
credit of approximately $70.0 million. There were no outstanding commitments to
purchase securities at June 30, 2000. Total deposits decreased $42.4 million in
the first six months of 2000, decreased $55.9 million during 1999 and increased
$36.5 million during 1998. Deposit flows are affected by the level of interest
rates, the interest rates and products offered by competitors and other factors.
Time deposit accounts scheduled to mature within one year were $539.2 million at
June 30, 2000. We are committed to maintaining a strong liquidity position;
therefore, we monitor our liquidity position on a daily basis. We anticipate
that we will have sufficient funds to meet current funding commitments.

At June 30, 2000, we exceeded each of the applicable regulatory capital
requirements. Our leverage (tier 1) capital was $164.5 million, or 9.37%, at
June 30, 2000. In order to be classified as "well-capitalized" by the FDIC we
were required to have leverage (tier 1) capital of 5.00%. To be classified as a
well-capitalized bank by the FDIC, we must also have a risk-based total capital
ratio of 10.00%. At June 30, 2000, we had a risk-based total capital ratio of
18.69%. See "Regulation -- Mutual Savings Federal Regulation Prior to
Restructuring -- Capital Requirements" for a discussion of the regulatory
capital requirements applicable to Mutual Savings and see "Regulatory Capital
Compliance" for information regarding the impact of the offering on our capital
position.

It is anticipated that the restructuring and First Northern merger
transactions will result in a decrease in the capital of both Mutual Savings and
First Northern: See "Capitalization." Following the transactions, however, the
banks are expected to satisfy the FDIC criteria to be categorized as
"well-capitalized."

We do not anticipate any material capital expenditures, nor do we have any
balloon or other payments due on any long-term obligations or any off-balance
sheet items other than the commitments and unused lines of credit noted above.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." Under SFAS No. 123, an entity
may elect to recognize stock-based compensation expense based on the fair value
of the awards, or they may elect to account for stock-based compensation under
APB Opinion No. 25, "Accounting for Stock Issued to Employees." If an entity
elects to account for stock-based compensation under APB No. 25, it is not
required to recognize expense

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<PAGE> 70

based on the fair value of the awards. However, the entity must disclose in the
financial statements the effects of SFAS No. 123, as if the recognition
provisions of SFAS No. 123 were adopted.

Currently, Mutual Savings does not provide stock-based compensation to its
employees. Upon completion of the restructuring, subject to shareholder
approval, we will establish certain stock-based compensation plans. If
established, we have evaluated the alternatives available under the provisions
of SFAS No. 123 and currently expect that we will not adopt the recognition
provisions of the statement, but will provide the required footnote disclosures.
Therefore, we do not expect that the adoption of SFAS No. 123 will have a
material impact on our financial position or results of operations.

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." This
statement established standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. SFAS No. 128 simplifies the standards for computing EPS previously
found in APB Opinion No. 15, "Earnings Per Share," and makes them more
comparable with international EPS standards.

Mutual Savings, as a mutual savings bank, does not have common stock
authorized, issued or outstanding and we do not calculate or present EPS. Upon
completion of the restructuring, we will calculate and present EPS in accordance
with SFAS No. 128.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.

SFAS No. 133, as amended, is effective for all quarters of those years
beginning after June 15, 2000. This statement may not be applied retroactively
to financial statements of prior periods. As Mutual Savings does not utilize
derivatives, we do not expect that our adoption of SFAS No. 133 will have a
material impact on our financial position or results of operations.

IMPACT OF INFLATION AND CHANGING PRICES

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

BUSINESS OF MUTUAL SAVINGS BANK

GENERAL

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

Mutual Savings' revenues are derived principally from interest on our loans
and mortgage-related securities, interest and dividends on our investment
securities, and commissions on non-interest income (including loan servicing
fees, deposit servicing fees, gains on sales of loans held for sale and
insurance,

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<PAGE> 71

securities and annuity sales). Our primary sources of funds are deposits,
borrowings, scheduled amortization and prepayments of loan principal and
mortgage-related securities, maturities and calls of investment securities and
funds provided by operations.

Mutual Savings and First Northern have signed an agreement under which Bank
Mutual will acquire First Northern Savings. In many respects, both organizations
have similar businesses and business philosophies. However, the acquisition will
be significant for Bank Mutual. We have highlighted material differences which
have been identified by the parties in "Certain Effects of the First Northern
Merger on Bank Mutual." Please also see the financial information of First
Northern identified in "Index to Financial Statements."

MARKET AREA

Mutual Savings conducts its operations from 50 banking offices located in
21 counties throughout most of the state of Wisconsin, and one office in
Minnesota. At June 30, 1999 Mutual Savings had a 1.73% share of all Wisconsin
bank, savings bank and savings association deposits. The counties in which
Mutual Savings operates include 57% of the population of the state, which
provides us with access to a large base of potential customers. The markets in
which Mutual Savings operates vary, which provides diversity of opportunities
for Mutual Savings.

As a result of the First Northern merger, we will significantly expand our
presence. Together, Mutual Savings and First Northern Savings will then have 69
banking offices located in 28 counties in Wisconsin, in addition to the
Minnesota office. At June 30, 1999, the combined enterprise would have had a
2.42% share of all Wisconsin bank, savings bank and savings association
deposits. Counties in which Bank Mutual subsidiaries will operate will include
66% of the population of the state. On a pro forma basis, at June 30, 2000, Bank
Mutual would have been the fifth largest financial institution headquartered in
the state of Wisconsin, based on asset size.

The largest concentration of Mutual Savings' offices is in the Milwaukee
metropolitan area which includes Milwaukee, Waukesha, Ozaukee and Washington
counties. There are 18 offices in this area. The Milwaukee metro area is the
largest population and commercial base in Wisconsin, representing approximately
28% of Wisconsin's population. The Milwaukee area has traditionally had an
extensive manufacturing economic base, which is diversifying into service and
technology based businesses. The Milwaukee metropolitan area grew at an average
annual rate of approximately 4.85% in population during the 1990s.

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

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

Recently, Mutual Savings targeted the northeastern part of Wisconsin for a
larger presence. Mutual Savings believes it will be able to accomplish this
growth through the First Northern merger because First Northern Savings'
operations are located in this part of the state. First Northern operates 19
offices in eight northeastern counties that make up 12% of the state's
population. Mutual Savings currently has a relatively small presence in this
area of the state.

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<PAGE> 72

COMPETITION

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

Many of Mutual Savings' competitors have greater resources than Mutual
Savings does. Similarly, many competitors offer services that Mutual Savings and
First Northern Savings do not provide. For example, neither Mutual Savings nor
First Northern Savings provide trust or money management services. However,
Mutual Savings has an affiliate, Lake Financial and Insurance Services, Inc.
that offers securities, annuity and property and casualty insurance services.

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

LENDING ACTIVITIES

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

At June 30, 2000, our loan portfolio totaled $1.2 billion, of which $895.2
million, or 77.7%, were first mortgage loans. Included in that total were $894.3
million of loans due after one year, of which 51.2% were adjustable rate
mortgage or ARM loans and 48.8% were fixed-rate loans with a weighted average
remaining maturity of 147 months. The remainder of our loans at June 30, 2000,
amounting to $256.3 million, or 22.3% of total loans, consisted of consumer
loans ($213.5 million or 18.5%) and commercial business loans ($42.8 million or
3.7%).

We originate primarily ARM loans and up to 15 year fully amortizing fixed
rate loans for our own portfolio. We also offer longer term fixed rate
residential mortgages, most of which are immediately sold into the secondary
market.

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

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<PAGE> 73

The following table presents the composition of our loan portfolio in
dollar amounts and in percentages of the total portfolio at the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
-------------------- ------------------------------------------------------------------
2000 1999 1998 1997
-------------------- -------------------- -------------------- --------------------
PERCENT PERCENT PERCENT PERCENT
OF OF OF OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
---------- ------- ---------- ------- ---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One to four-family.............. $ 733,958 63.74% $ 743,993 67.37% $ 742,231 70.56% $ 930,011 73.1%
Multi-family.................... 65,105 5.65 53,777 4.87 53,521 5.09 68,811 5.41
Commercial...................... 65,267 5.67 52,375 4.74 40,922 3.89 51,739 4.07
Construction and development.... 30,840 2.68 26,530 2.40 21,939 2.09 24,774 1.95
---------- ------ ---------- ------ ---------- ------ ---------- ------
Total first mortgage real
estate loans............ $ 895,170 77.74 876,675 79.38 858,613 81.63 1,075,335 84.53
---------- ------ ---------- ------ ---------- ------ ---------- ------
Consumer and other loans:
Consumer loans:
Fixed equity.................. 108,811 9.45 89,315 8.09 67,629 6.42 74,196 5.83
Home equity lines of credit... 55,371 4.81 50,618 4.58 45,827 4.36 46,380 3.65
Student....................... 27,698 2.41 28,371 2.57 29,634 2.82 29,425 2.31
Home improvement.............. 12,134 1.05 9,920 0.90 8,373 0.80 8,128 0.64
Other......................... 9,436 0.82 10,028 0.91 12,970 1.23 19,893 1.56
---------- ------ ---------- ------ ---------- ------ ---------- ------
Total consumer loans...... 213,450 18.54 188,252 17.05 164,433 15.63 178,022 13.99
---------- ------ ---------- ------ ---------- ------ ---------- ------
Commercial business loans....... 42,815 3.72 39,488 3.57 28,839 2.74 18,866 1.48
---------- ------ ---------- ------ ---------- ------ ---------- ------
Total consumer and other
loans................... 256,265 22.26 227,740 20.62 193,272 18.37 196,888 15.47
---------- ------ ---------- ------ ---------- ------ ---------- ------
Total loans receivable.... 1,151,435 100.00% 1,104,415 100.00% 1,051,885 100.00% 1,272,223 100.00%
Less:
Undisbursed loan proceeds......... 16,368 14,658 7,001 8,788
Deferred fees and discounts....... (5) 14 440 1,158
Allowance for losses.............. 7,085 6,948 6,855 7,195
---------- ---------- ---------- ----------
Total loans receivable,
net..................... $1,127,987 $1,082,795 $1,037,589 $1,255,082
========== ========== ========== ==========
Total loans receivable.... $1,151,435 $1,104,415 $1,051,885 $1,272,223
Loans available for sale.......... 1,632 541 27,723 13,397
---------- ---------- ---------- ----------
Total loans receivable and
loans available for
sale.................... $1,153,067 $1,104,956 $1,079,608 $1,285,620
========== ========== ========== ==========

<CAPTION>
AT DECEMBER 31,
---------------------------------------
1996 1995
------------------ ------------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
First mortgage loans:
One to four-family.............. $577,612 68.39% $566,990 70.1%
Multi-family.................... 74,446 8.81 74,024 9.15
Commercial...................... 49,624 5.88 48,390 5.98
Construction and development.... 22,082 2.61 23,496 2.91
-------- ------ -------- ------
Total first mortgage real
estate loans............ 723,764 85.69 712,900 88.14
-------- ------ -------- ------
Consumer and other loans:
Consumer loans:
Fixed equity.................. 40,150 4.74 29,849 3.69
Home equity lines of credit... 33,245 3.94 27,440 3.39
Student....................... 9,428 1.12 9,757 1.21
Home improvement.............. 6,411 0.76 6,039 0.75
Other......................... 6,355 0.75 5,512 0.68
-------- ------ -------- ------
Total consumer loans...... 95,589 11.32 78,597 9.72
-------- ------ -------- ------
Commercial business loans....... 25,231 2.99 17,281 2.14
-------- ------ -------- ------
Total consumer and other
loans................... 120,820 14.31 95,878 11.86
-------- ------ -------- ------
Total loans receivable.... 844,584 100.00% 808,778 100.00%
Less:
Undisbursed loan proceeds......... 14,563 13,271
Deferred fees and discounts....... 969 1,402
Allowance for losses.............. 3,921 3,392
-------- --------
Total loans receivable,
net..................... $825,131 $790,713
======== ========
Total loans receivable.... $844,584 $808,778
Loans available for sale.......... 4,357 2,479
-------- --------
Total loans receivable and
loans available for
sale.................... $848,941 $811,257
======== ========
</TABLE>

At June 30, 2000, our one-to-four family first mortgage loans were pledged
as collateral under a blanket pledge to the Federal Home Loan Bank of Chicago.
As of June 30, 2000 and December 31, 1999 there were no other significant
concentrations of loans such as loans to a number of borrowers engaged in
similar activities. Mutual Savings' first mortgage loans, fixed equity, home
equity lines of credit and home improvement loans are primarily secured by
properties housing one to four families which are generally located in the
bank's local lending areas in Wisconsin.

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<PAGE> 74

Loan Maturity. The following table presents the contractual maturity of our
loans at June 30, 2000. The table does not include the effect of prepayments or
scheduled principal amortization. Prepayments and scheduled principal
amortization on first mortgage loans totaled $60.5 million for the first six
months of 2000, $179.7 million for fiscal 1999, $389.1 million for fiscal 1998
and $237.1 million for fiscal 1997.

<TABLE>
<CAPTION>
AT JUNE 30, 2000
------------------------------------------
FIRST MORTGAGE CONSUMER AND
LOANS OTHER LOANS TOTAL
-------------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
AMOUNTS DUE:
Within one year..................................... $ 876 $ 24,057 $ 24,933
-------- -------- ----------
After one year
One to two years................................. 4,460 16,576 21,036
Two to three years............................... 11,919 19,258 31,177
Three to five years.............................. 17,944 35,609 53,553
Five to ten years................................ 141,978 103,609 245,587
Ten to twenty years.............................. 377,695 57,156 434,851
Over twenty years................................ 340,298 -- 340,298
-------- -------- ----------
Total due after one year.................... 894,294 232,208 1,126,502
-------- -------- ----------
Total loans................................. $895,170 $256,265 1,151,435
======== ========
LESS:
Undisbursed loan proceeds........................... 16,368
Deferred loan fees.................................. (5)
Allowance for loan losses........................... 7,085
----------
Net loans........................................ $1,127,987
==========
</TABLE>

The following table presents, as of June 30, 2000, the dollar amount of all
loans, due after June 30, 2001, and whether these loans have fixed interest
rates or adjustable interest rates.

<TABLE>
<CAPTION>
DUE AFTER JUNE 30, 2001
----------------------------------
FIXED ADJUSTABLE TOTAL
-------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
First mortgage loans........................................ $436,399 $457,895 $ 894,294
Consumer and other loans.................................... 119,954 112,254 232,208
-------- -------- ----------
Total loans due after one year.................... $556,353 $570,149 $1,126,502
======== ======== ==========
</TABLE>

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<PAGE> 75

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------- ------------------------------------
2000 1999 1999 1998 1997
----------- ----------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance outstanding at beginning of
period............................. $1,104,956 $1,079,608 $1,079,608 $1,285,620 $ 848,941
---------- ---------- ---------- ---------- ----------
ORIGINATIONS
First mortgage loans............... 71,545 109,345 171,071 309,606 170,268
Consumer and other loans........... 82,635 72,554 146,837 118,711 96,871
---------- ---------- ---------- ---------- ----------
Total originations......... 154,180 181,899 317,908 428,317 267,139
---------- ---------- ---------- ---------- ----------
PURCHASES
One-to four-family first mortgage
loans........................... 15,425 45,356 56,943 -- 1,034
Acquisition of First Federal....... -- -- -- -- 539,655
---------- ---------- ---------- ---------- ----------
Total purchases............ 15,425 45,356 56,943 -- 540,689
---------- ---------- ---------- ---------- ----------
LESS:
Principal payments:
First mortgage loans............ 60,477 108,265 179,673 389,149 237,123
Consumer and other loans........ 54,404 58,953 111,196 120,460 90,856
---------- ---------- ---------- ---------- ----------
Total principal payments... 114,881 167,218 290,869 509,609 327,979
---------- ---------- ---------- ---------- ----------
Transfers to foreclosed real
estate.......................... 1,673 951 1,773 7,975 178
---------- ---------- ---------- ---------- ----------
Loan sales -- first mortgage
loans........................... 4,940 46,680 56,861 116,745 42,992
---------- ---------- ---------- ---------- ----------
Balance outstanding at end of
period.......................... $1,153,067 $1,092,014 $1,104,956 $1,079,608 $1,285,620
========== ========== ========== ========== ==========
</TABLE>

Residential Mortgage Lending. Our primary lending activity has been the
origination of first mortgage loans secured by one- to four-family properties,
within our primary lending area, that are owner-occupied. At June 30, 2000,
$734.0 million or 63.7% of our gross loan portfolio consisted of loans secured
by one- to four-family residential properties. In addition to our loan
originations, we have purchased one- to four-family first mortgage loans of
$15.4 million in the first six months of 2000 and $56.9 million in the year
1999. Mutual reviews these loans for compliance with its underwriting standards,
and generally only invests in loans in the midwestern United States.

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

We also originate "jumbo loans" in excess of the FNMA maximum loan amount,
which currently is $252,700. Fixed rate jumbo loans generally are sold servicing
released without recourse to secondary market purchasers of such loans. ARM
jumbo loans are underwritten in accordance with our underwriting guidelines and
are retained in our loan portfolio.

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

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<PAGE> 76

We currently offer loans that conform to underwriting standards that are
based on standards specified by FNMA ("conforming loans") and also originate a
limited amount of non-conforming loans for our own portfolio or for sale. Loans
may be fixed-rate one- to four-family mortgage loans or adjustable-rate one- to
four-family mortgage loans with maturities of up to 30 years. The average size
of our one- to four-family mortgage loans originated in 1999 was approximately
$94,000, and in the first six months of 2000 was $107,000. The overall average
size of our one- to four-family first mortgage loans was approximately $59,000
at June 30, 2000. We are an approved seller/servicer for FNMA and an approved
servicer for the Federal Home Loan Mortgage Corporation (FHLMC).

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

ARM loans may pose credit risks different from the risks inherent in fixed
rate loans, primarily because as interest rates rise, the underlying payments
from the borrowers rise, thereby increasing the potential for payment default.
At the same time, the marketability of the underlying property may be adversely
affected by higher interest rates. In order to minimize the risk associated with
ARM loans, borrowers under the one year ARM programs generally are qualified at
no less than the maximum adjusted rate at the first adjustment.

The volume and types of ARM loans we originate have been affected by the
level of market interest rates, competition, consumer preferences and the
availability of funds. During the past three years, we experienced a decreased
demand for ARM loans, versus fixed rate loans, due to the continued low interest
rate environment. Although we will continue to offer ARM loans, we cannot
guarantee that we will be able to originate a sufficient volume of ARM loans to
increase or maintain the proportion that these loans bear to our total loans.

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

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

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<PAGE> 77

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

Our Underwriting Department reviews all pertinent information prior to
making a credit decision to approve or deny an application. All recommendations
to deny are reviewed by a designated officer of Mutual prior to the final
disposition of the loan application. Our lending policies generally limit the
maximum loan-to-value ratio on one- to four-family mortgage loans secured by
owner-occupied properties to 95% of the lesser of the appraised value or
purchase price of the property. Loans above 80% loan-to-value ratios are subject
to the availability of private mortgage insurance. Coverage is required to
reduce our exposure to less than 80% of value.

Our originations of residential first mortgage loans amounted to $152.7
million in 1999, $288.5 million in 1998 and $163.5 million in 1997, and $54.4
million in the first six months of 2000. A significant number of our first
mortgage loan originations have been the result of refinancing of our existing
loans due to the relatively low interest rate levels over the past three years.
Total refinancings of our existing first mortgage loans were as follows:

<TABLE>
<CAPTION>
PERCENTAGE
OF FIRST
MORTGAGE LOAN
PERIOD AMOUNT ORIGINATIONS
------ ------ -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Six months ended June 30, 2000.............................. $ 6.0 8.4%
Year ended December 31, 1999................................ 49.4 28.9
Year ended December 31, 1998................................ 178.4 57.6
Year ended December 31, 1997................................ 57.3 33.6
</TABLE>

In addition to our standard mortgage and consumer credit products, we have
developed mortgage programs designed to specifically address the credit needs of
low- to moderate-income home mortgage applicants and first-time home buyers.
Among the features of the low- to moderate-income home mortgage and first-time
home buyer's programs are reduced rates, lower down payments, reduced fees and
closing costs, and generally less restrictive requirements for qualification
compared with our traditional one- to four-family mortgage loans. For instance,
certain of these programs currently provide for loans with up to 97%
loan-to-value ratios and rates which are lower than our traditional mortgage
loans.

Consumer Loans. We have been expanding our consumer loan portfolio because
higher yields can be obtained, there is strong consumer demand for such
products, and we have experienced relatively low delinquency and few losses on
such products. In addition, we believe that offering consumer loan products
helps to expand and create stronger ties to our existing customer base by
increasing the number of customer relationships and providing cross-marketing
opportunities. At June 30, 2000, $213.5 million, or 18.5%, of our gross loan
portfolio was in consumer loans. Consumer loan products offered within our
market areas include home equity loans, home equity lines of credit, and to a
lesser extent, automobile loans, recreational vehicle loans, marine loans,
deposit account loans, overdraft protection lines of credit, unsecured consumer
loans through the Mastercard and Visa credit card programs (offered through Elan
Financial Services) and federally guaranteed student loans.

Our focus in consumer lending has been the origination of home equity
loans, home equity lines of credit and home improvement loans. At June 30, 2000,
we had $176.3 million or 82.6% of the consumer loan portfolio in such loans.
Underwriting procedures for these loans include a comprehensive review of the

75
<PAGE> 78

loan application, and require an acceptable credit rating and verification of
the value of the equity in the home and income of the borrower. The
loan-to-value ratio and debt ratios to income are determining factors in the
underwriting process. Home equity loan and home improvement loan originations
are developed through the use of direct mail, cross-sales to existing customers,
and advertisements in local newspapers.

We originate both fixed rate and variable rate home equity loans and home
improvement loans with combined loan-to-value ratios to 100%. Loans above 80%
combined loan to value ratios are subject to the availability of private
mortgage insurance. Pricing on fixed rate home equity and home improvement loans
is reviewed by senior management, and generally terms are in the three to
fifteen year range in order to minimize interest rate risk. During the six
months ended June 30, 2000 we originated approximately $31.4 million of fixed
rate loans. These loans carry a weighted average written term of 8 years and a
fixed rate ranging from 7.25% to 11.75%. We also offer variable rate home equity
and home improvement loans. At June 30, 2000, $33.7 million or 27.9% of the home
equity and home improvement loan portfolio carried a variable rate. The variable
rate loans have a fixed rate for three years then adjust annually, with terms of
up to twenty years. Our home equity and home improvement loans are originated in
amounts which, together with the amount of the first mortgage, do not exceed
100% of the value of the property securing the loan.

Our home equity credit line loans, which totaled $55.4 million, or 25.9% of
total consumer loans at June 30, 2000, are adjustable-rate loans secured by a
first or second mortgage on owner-occupied one to four-family residences located
in the state of Wisconsin. Current interest rates on home equity credit lines
are tied to the prime rate, adjust monthly and range from 100 to 150 basis
points over the prime rate, depending on the loan-to-value ratio. Home equity
line of credit loans are made for terms up to 10 years and require a minimum
monthly payment of the greater of $100 or 1 1/2% of the month end balance. An
annual fee is charged on home equity lines of credit.

At June 30, 2000, student loans amounted to $27.7 million, or 13.0% of our
consumer loan portfolio. These loans are serviced by Great Lakes Higher
Education Servicing Corporation.

Consumer loans may entail greater credit risk than residential mortgage
loans. At June 30, 2000, $1.0 million or approximately 0.46% of the consumer
loan portfolio was 90 days or more delinquent. Although the level of
delinquencies in our consumer loan portfolio generally has been low, there can
be no assurance that delinquencies will not increase in the future.

Multi-family and Commercial Real Estate Loans. At June 30, 2000 our
multi-family and commercial real estate loan portfolio consisted of 156 loans
totaling $130.4 million or 11.3% of our gross loan portfolio. The multi-family
and commercial real estate loan portfolio consist of fixed rate, ARM and balloon
loans originated at prevailing market rates. This portfolio generally consists
of mortgages secured by apartment buildings, office buildings, warehouses,
industrial buildings and retail centers. ARM loans of this type are currently
being originated at 175 to 250 basis points above the rate on U.S. Treasury
securities for comparable maturities. These loans typically do not exceed 80% of
the lesser of the purchase price or an appraisal by an appraiser designated by
us. Balloon loans generally are amortized on a 15 to 25 year basis with a
typical loan term of three to ten years.

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

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<PAGE> 79

At June 30, 2000, the largest outstanding loan on a multi-family property
was $9.0 million on a 128 unit apartment project located in Brookfield,
Wisconsin. At the same date, the largest outstanding loan on a commercial real
estate property was $6.9 million on two office buildings located in Milwaukee,
Wisconsin. At June 30, 2000, these loans were current and performing in
accordance with their terms.

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

Commercial Business Loans. At June 30, 2000, our commercial business loan
portfolio consisted of loans totaling $42.8 million or 3.7% of our gross loan
portfolio. The commercial loan portfolio consists of loans to businesses for
equipment purchases, working capital lines of credit, debt refinancing, SBA
loans and domestic stand-by letters of credit. Typically, these loans are
secured by business assets and personal guarantees. We offer both variable and
fixed rate loans. Approximately 16.0% of the commercial business loans have an
interest rate adjusted monthly based on the prevailing prime rate. Term loans
are generally amortized over a three to seven year period. Fixed rates are
priced at a margin over the yield on US Treasury issues with maturities that
correspond to the maturities of the notes. All lines of credit and term loans
with balances over $500,000 are reviewed annually. The largest commercial
business loan at June 30, 2000 had an outstanding balance of $16.9 million and
was secured by equipment and chattel paper. All payments under commercial
business loans were current as of June 30, 2000.

Loan Approval Authority. For one- to four- family residential loans sold
into the secondary market, our underwriters are authorized by the board of
directors to approve loans processed through the FNMA "Desktop Underwriter"
automated underwriting system up to $252,700. For one-to four-family residential
loans held in portfolio, our underwriters are authorized by the board of
directors to approve loans processed through the FNMA "Desktop Underwriter"
automated underwriting system up to $150,000, provided the loan-to-value ratio
is 75% of less and the loan meets other specific underwriting criteria. All
other loans in excess of $80,000 must be approved by a senior officer.

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

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

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

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

Asset Quality

One of our key operating objectives has been and continues to be to
maintain a high level of asset quality. Through a variety of strategies,
including, but not limited to, borrower workout arrangements and aggressive
marketing of owned properties, we have been proactive in addressing problem and
non-performing assets. These strategies, as well as our emphasis on quality
mortgage underwriting, our maintenance of sound credit standards for new loan
originations and relatively favorable economic and real

77
<PAGE> 80

estate market conditions have resulted in historically low delinquency ratios
and, in recent years, a reduction in non-performing assets. These factors have
helped strengthen our financial condition.

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

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

The collection procedures for consumer loans, excluding student loans,
include our sending periodic late notices to a borrower once a loan is 15 days
past due. We attempt to make direct contact with a borrower once a loan becomes
30 days past due. Supervisory personnel in our Consumer Loan Collection
Department review loans 60 days or more delinquent on a regular basis. If
collection activity is unsuccessful after 90 days, we may charge-off a loan or
refer the matter to our legal counsel for further collection effort. Loans we
deem to be uncollectible are proposed for chargeoff by our Collection
Department. Charge-offs of consumer loans require the approval of our Consumer
Loan Manager and a senior officer. All student loans are serviced by Great Lakes
Higher Education Servicing Corporation which guarantees their servicing to
comply with all Department of Education Guidelines. Our student loan portfolio
is guaranteed by the Great Lakes Higher Education Guaranty Corporation, which is
reinsured by the U.S. Department of Education.

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

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

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<PAGE> 81

foreclosed real estate. The following table presents information regarding loans
delinquent for 60 days or longer (Dollars in thousands):

<TABLE>
<CAPTION>
JUNE 30, 2000 JUNE 30, 1999
------------------------------------------- -----------------------------------------
60-89 DAYS 90 DAYS OR MORE 60-89 DAYS 90 DAYS OR MORE
-------------------- -------------------- -------------------- ------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
NO. OF BALANCE NO. OF BALANCE NO. OF BALANCE NO. OF BALANCE
LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS
-------- --------- -------- --------- -------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family first mortgages..... 14 $ 814 20 $ 873 21 $1,042 40 $3,351
Other first mortgages................... -- -- 5 303 -- -- 2 352
Consumer and other loans................ 106 646 247 1,007 127 462 221 1,072
-------- ------ -------- ------ -------- ------ --- ------
Total delinquent loans.............. 120 $1,460 272 $2,183 148 $1,504 263 $4,775
======== ====== ======== ====== ======== ====== === ======
Delinquent loans to total loans......... 0.13% 0.19% 0.14% 0.44%
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------
1999 1998
--------------------------------------- ---------------------------------------
60-89 DAYS 90 DAYS OR MORE 60-89 DAYS 90 DAYS OR MORE
------------------ ------------------ ------------------ ------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
NO. OF BALANCE NO. OF BALANCE NO. OF BALANCE NO. OF BALANCE
LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS
------ --------- ------ --------- ------ --------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family
first mortgages..... 19 $ 691 42 $3,542 37 $1,589 96 $5,860
Other first
mortgages........... -- -- 6 680 -- -- 1 73
Consumer and other
loans............... 112 495 215 969 121 660 221 881
---- ------ --- ------ --- ------ --- ------
Total delinquent
loans........... 131 $1,186 263 $5,191 158 $2,249 318 $6,814
==== ====== === ====== === ====== === ======
Delinquent loans to
total loans......... 0.11% 0.47% 0.21% 0.63%

<CAPTION>
DECEMBER 31,
---------------------------------------
1997
---------------------------------------
60-89 DAYS 90 DAYS OR MORE
------------------ ------------------
PRINCIPAL PRINCIPAL
NO. OF BALANCE NO. OF BALANCE
LOANS OF LOANS LOANS OF LOANS
------ --------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
One- to four-family
first mortgages..... 31 $1,427 70 $ 4,880
Other first
mortgages........... -- -- 2 3,965
Consumer and other
loans............... 146 707 297 1,469
--- ------ --- -------
Total delinquent
loans........... 177 $2,134 369 $10,314
=== ====== === =======
Delinquent loans to
total loans......... 0.17% 0.80%
</TABLE>

Our $2.2 million in loans delinquent 90 days or more at June 30, 2000 were
comprised primarily of 20 one- to four-family first mortgage loans (including
FHA/VA first mortgage loans) with an average principal balance of approximately
$44,000 and 247 consumer and other loans with an average balance of $4,000. The
largest non-performing asset at June 30, 2000 was a high-rise condominium in
Bloomington, Minnesota. The property is carried as foreclosed real estate in the
amount of $1.4 million. First Federal originally made a construction and
development loan on the building which contains forty-nine residential units and
three commercial units. Mutual Savings obtained title to the property in 1998.
As of June 30, 2000, twelve residential units remained to be sold. Mutual
Savings does not anticipate further loss. Non-performing assets totaled $5.2
million at June 30, 2000, and $7.8 million at December 31, 1999, compared with
$10.2 million at December 31, 1998. The following table presents information
regarding non-accrual mortgage and consumer and other loans, accruing loans
delinquent 90 days or more, and foreclosed real estate as of the dates
indicated.

<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, --------------------------------------------
2000 1999 1998 1997 1996 1995
--------- ------ ------- ------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual first mortgage loans...... $1,214 $3,372 $ 2,793 $ 8,936 $2,149 $ 624
Non-accrual consumer and other
loans............................... 277 283 320 732 94 31
Accruing loans delinquent 90 days or
more................................ 729 1,152 3,617 813 158 128
------ ------ ------- ------- ------ ------
Total non-performing
loans..................... 2,220 4,807 6,730 10,481 2,401 783
Foreclosed real estate, net........... 2,977 3,018 3,505 159 258 333
------ ------ ------- ------- ------ ------
Total non-performing
assets.................... $5,197 $7,825 $10,235 $10,640 $2,659 $1,116
====== ====== ======= ======= ====== ======
Non-performing loans to total loans... 0.20% 0.44% 0.65% 0.84% 0.29% 0.10%
Non-performing assets to total
assets.............................. 0.30 0.44 0.55 0.58 0.23 0.09
</TABLE>

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<PAGE> 82

Included in non-accrual first mortgage loans at December 31, 1997 are loans
with a carrying value of $5.2 million which were considered to be impaired and
which resulted from the acquisition of First Federal. There was no specific
reserve related to these, or any other, loans at that date or at any date
presented. There are no loans which were considered to be impaired at June 30,
2000 or December 31, 1999, 1998, 1996 or 1995. The average balance of impaired
loans was $3.9 million and $5.0 million in the years ended December 31, 1998 and
1997, respectively, and $0 for all other periods presented. No interest income
was recognized on any loan while in an impaired state.

At June 30, 2000, there were $971,323 of loans to borrowers where available
information causes management to have serious doubts as to the ability of such
borrowers to comply with the present loan repayment terms and would indicate
that such loans were likely to be included as non-accrual, past due or impaired
(as defined in SFAS No. 114). However, no loss is anticipated at this time.

Mutual Savings has not had restructured loans at the dates presented.

With the exception of first mortgage loans insured or guaranteed by the
FHA, VA or Guaranteed Rural Housing (formerly FmHA), we stop accruing income on
loans when interest or principal payments are greater than 90 days in arrears or
earlier when the timely collectibility of such interest or principal is
doubtful. We designate loans on which we stop accruing income as non-accrual
loans and we reverse outstanding interest that we previously credited to income.
We may recognize income in the period that we collect it when the ultimate
collectibility of principal is no longer in doubt. We return a non-accrual loan
to accrual status when factors indicating doubtful collection no longer exist.
Mutual Savings had $1.5 million and $3.7 million of non-accrual loans at June
30, 2000 and December 31, 1999, respectively. Interest income that would have
been recognized had such loans been performing in accordance with their
contractual terms totaled approximately $161,000 and $245,000 for the six months
ended June 30, 2000 and the year ended December 31, 1999, respectively. A total
of approximately $8,000 and $102,000 interest income was actually recorded on
such loans in the six months ended June 30, 2000 and the year ended December 31,
1999.

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

At June 30, 2000 and December 31, 1999 and 1998, we had no loans classified
as impaired as defined in SFAS No. 114.

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

80
<PAGE> 83

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

<TABLE>
<CAPTION>
AT, OR
FOR THE
SIX MONTHS
ENDED, AT OR FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------
2000 1999 1998 1997 1996 1995
---------- ------- ------- ------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period........ $ 6,948 $ 6,855 $ 7,195 $3,921 $ 3,392 $ 2,942
------- ------- ------- ------ ------- -------
Provision for loan losses............. 236 350 637 1065 672 597
Other additions: purchase of First
Federal............................. -- -- -- 2449 -- --
------- ------- ------- ------ ------- -------
Charge-offs:
First mortgage loans................ 36 152 997 624 80 109
Consumer and other loans............ 78 189 223 127 77 51
------- ------- ------- ------ ------- -------
Total charge-offs................. 114 341 1220 751 157 160
Recoveries:
First mortgage loans................ 0 (40) (206) (479) -- --
Consumer and other loans............ (15) (44) (37) (32) (14) (13)
------- ------- ------- ------ ------- -------
Total recoveries.................. (15) (84) (243) (511) (14) (13)
------- ------- ------- ------ ------- -------
Net charge-offs..................... 99 257 977 240 143 147
------- ------- ------- ------ ------- -------
Balance at end of period.............. $ 7,085 $ 6,948 $ 6,855 $7,195 $ 3,921 $ 3,392
======= ======= ======= ====== ======= =======
Net charge-offs to average loans...... 0.01% 0.02% 0.08% 0.02% 0.02% 0.02%
Allowance for loan losses to total
loans............................... 0.63 0.64 0.66 0.57 0.48 0.43
Allowance for loan losses to
non-performing loans................ 319.14 144.54 101.86 68.65 163.31 433.21
</TABLE>

The allowance for loan losses has been determined in accordance with
generally accepted accounting principles, under which we are required to
maintain adequate allowances for loan losses. We are responsible for the timely
and periodic determination of the amount of the allowance required. We believe
that our allowance for loan losses is adequate to cover specifically
identifiable loan losses, as well as estimated losses inherent in our portfolio
for which certain losses are probable but not specifically identifiable.

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

- One-to-four family

- Consumer

- Multi-family and commercial real estate

- Commercial business

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

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

81
<PAGE> 84

directors also reviews the loan loss allowances compared to the relative size of
the portfolio on a monthly basis.

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

By following careful underwriting guidelines, Mutual Savings has
historically maintained low levels of non-performing loans to total loans. Our
ratio of non-performing loans to total loans at December 31, 1995 was 0.10%. It
increased after the acquisition of First Federal to a level of 0.84% at December
31, 1997. However, at December 31, 1999 the level dropped to 0.44%, and dropped
further to 0.20% at June 30, 2000.

We believe the primary risks inherent in our portfolio are possible
increases in interest rates, a possible decline in the economy, generally, and a
possible decline in real estate market values. Any one or a combination of these
events may adversely affect our loan portfolio resulting in increased
delinquencies and loan losses. Accordingly, and because of the increased
concentration of consumer loans, we have taken steps to increase our level of
loan loss allowances over the last 5 years. At June 30, 2000, the allowance for
loan losses as a percentage of total loans was .63% compared with 0.43% at
December 31, 1995. Furthermore, the increase in the allowance for loan losses
each year from 1995 to 1999 reflects our strategy of resolving non-performing
loans while providing adequate allowances for inherent losses in the portfolio
and identifying potential losses in a timely manner, as well as providing an
adequate allowance to reflect changes in the components of the portfolio during
that period.

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

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Comparison of Operating Results for the six months
ended June 30, 2000, and the Years ended

82
<PAGE> 85

December 31, 1999 and 1998 -- Provision for Loan Losses." The following tables
represent our allocation of allowance for loan losses by loan category on the
dates indicated:

<TABLE>
<CAPTION>
AT JUNE 30, 2000
-------------------
PERCENTAGE
OF
LOANS IN
CATEGORY
TO TOTAL
LOAN CATEGORY AMOUNT LOANS
------------- ------ ----------
(IN THOUSANDS)
<S> <C> <C>
First mortgage loans
One-to four-family........................................ $4,624 63.74%
Other..................................................... 900 14.00%
------ ------
Total first mortgage loans........................ 5,524 77.74%
Commercial.................................................. 554 3.72%
Home equity lines........................................... 277 4.81%
Consumer & other............................................ 730 13.73%
Unallocated................................................. -- 0.00%
------ ------
Total allowance for loan losses................... $7,085 100.00%
====== ======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------- -------------------- -------------------- --------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF OF OF OF
LOANS IN LOANS IN LOANS IN LOANS IN
CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL
LOAN CATEGORY AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First mortgage loans
One-to four-family...... $4,736 67.37% $5,189 70.56% $4,978 73.10% $2,644 68.39%
Other................... 822 12.01% 596 11.07% 1,198 11.43% 595 17.30%
------- ------ ------- ------ ------- ------ ------- ------
Total first
mortgage
loans........... 5,558 79.38% 5,785 81.63% 6,176 84.53% 3,239 85.69%
Commercial................ 520 3.57% 402 2.74% 283 1.48% 252 2.99%
Home equity lines......... 253 4.58% 229 4.36% 231 3.65% 166 3.94%
Consumer & other.......... 617 12.47% 439 11.27% 505 10.34% 264 7.38%
Unallocated............... -- 0.00% -- 0.00% -- 0.00% -- 0.00%
------- ------ ------- ------ ------- ------ ------- ------
Total allowance
for loan
losses.......... $6,948 100.00% $6,855 100.00% $7,195 100.00% $3,921 100.00%
======= ====== ======= ====== ======= ====== ======= ======

<CAPTION>
AT DECEMBER 31,
--------------------
1995
--------------------
PERCENTAGE
OF
LOANS IN
CATEGORY
TO TOTAL
LOAN CATEGORY AMOUNT LOANS
------------- ------- ----------
(IN THOUSANDS)
<S> <C> <C>
First mortgage loans
One-to four-family...... $2,346 70.10%
Other................... 530 18.04%
------- ------
Total first
mortgage
loans........... 2,876 88.14%
Commercial................ 173 2.14%
Home equity lines......... 137 3.39%
Consumer & other.......... 206 6.33%
Unallocated............... -- 0.00%
------- ------
Total allowance
for loan
losses.......... $3,392 100.00%
======= ======
</TABLE>

INVESTMENT ACTIVITIES

Investment Securities. The board of directors reviews and approves our
investment policy on an annual basis. Senior officers, as authorized by the
board of directors, implement this policy. The board of directors reviews our
investment activity on a monthly basis.

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

Our investment policy allows participation in hedging strategies or the use
of financial futures, options or forward commitments or interest rate swaps but
only with prior approval of the board of directors and

83
<PAGE> 86

the State of Wisconsin, Department of Financial Institutions. We did not have
any such hedging transactions in place at June 30, 2000. Our investment policy
prohibits the purchase of non-investment grade bonds. Our investment policy also
provides that we will not engage in any practice that the Federal Financial
Institutions Examination Council considers to be an unsuitable investment
practice. In addition, the policy provides that we shall attempt to maintain
primary liquidity consisting of investments in cash, cash in banks, federal
funds purchased and securities with remaining maturities of less than six months
in an amount equal to 4.0% of average daily deposits. At June 30, 2000, our
primary liquidity ratio was 4.04%. For information regarding the carrying
values, yields and maturities of our investment securities and mortgage-related
securities, see "-- Carrying Values, Yields and Maturities."

We classify securities as trading, held to maturity, or available for sale
at the date of purchase. We currently do not have any held to maturity
securities, but if we did, they would be reported at cost, adjusted for
amortization of premium and accretion of discount. Available for sale securities
are reported at fair market value. We currently have no securities classified as
trading.

Mortgage-related Securities. Most of our mortgage-related securities are
directly or indirectly insured or guaranteed by GNMA, FHLMC or FNMA. The rest of
the securities are private collateralized mortgage obligations (CMO's). Private
collateralized mortgage obligations carry higher credit risks and higher yields
than collateralized mortgage obligations insured or guaranteed by agencies of
the U.S. Government. We classify our entire mortgage-related securities
portfolio as available for sale.

At June 30, 2000, mortgage-related securities available for sale totaled
$461.4 million, or 26.2% of total assets. At June 30, 2000, the mortgage-related
securities portfolio had a weighted average yield of 6.79%. Of the
mortgage-related securities we held at June 30, 2000, $398.7 million, or 86.4%,
had fixed rates and $62.7 million, or 13.6%, had adjustable-rates.
Mortgage-related securities at June 30, 2000 included real estate mortgage
investment conduits (REMICs), which are securities derived by reallocating cash
flows from mortgage pass-through securities or from pools of mortgage loans held
by a trust. REMICS are a form of, and are often referred to as CMO's.

Our REMICs have fixed and variable coupon rates ranging from 5.25% to 8.09%
and a weighted average yield of 6.76% at June 30, 2000. At June 30, 2000, REMICs
and CMOs totaled $135.0 million, which constituted 29.2% of the mortgage-related
securities portfolio, or 7.7% of total assets. Our REMICs had an expected
average life of 8.7 years at June 30, 2000. For a further discussion of our
investment policies, including those for mortgage-related securities, see
"-- Investment Securities." Purchases of mortgage-related securities may decline
in the future to offset any significant increase in demand for one-to
four-family mortgage loans and other loans.

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

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

84
<PAGE> 87

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------- --------------------------------
2000 1999 1999 1998 1997
----------- ----------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE FOR
SALE:
Carrying value at beginning of
period.............................. $ 57,763 $116,534 $116,534 $ 159,208 $ 159,513
-------- -------- -------- --------- ---------
Purchases............................. 19,675 20,728 21,481 381,899 376,634
Acquisition of First Federal.......... -- -- -- 36,457
Calls................................. -- (5,000) (50,393) (5,015)
Transfer from mutual funds to CMO..... -- (14,047) (14,047) -- --
Maturities............................ (20,000) (60,070) (65,000) (378,944) (409,346)
Sales................................. -- -- -- -- --
Premium amortization and discount
accretion, net...................... (57) (72) (182) 4,629 246
Decrease (increase) in unrealized
gains............................... 80 (525) (1,023) 135 719
-------- -------- -------- --------- ---------
Net decrease in investment
securities.......................... (302) (58,986) (58,771) (42,674) (305)
-------- -------- -------- --------- ---------
Carrying value at end of period....... $ 57,461 $ 57,548 $ 57,763 $ 116,534 $ 159,208
======== ======== ======== ========= =========
MORTGAGE-RELATED SECURITIES AVAILABLE
FOR SALE:
Carrying value at beginning of
period.............................. $374,100 $270,897 $270,897 $ 225,906 $ 90,452
-------- -------- -------- --------- ---------
Purchases............................. 115,412 34,123 213,504 119,548 72,071
Transfer from mutual funds to CMO..... -- 14,047 14,047 -- --
Acquisition of First Federal.......... -- -- -- -- 124,940
Sales................................. -- -- (53,682) -- (3,822)
Principal payments.................... (23,765) (35,602) (60,367) (77,407) (59,514)
Premium amortization and discount
accretion, net...................... 232 90 262 613 74
Decrease (increase) in unrealized
gains............................... (4,602) (5,768) (10,561) 2,237 1,705
-------- -------- -------- --------- ---------
Net increase in mortgage-related
securities.......................... 87,277 6,890 103,203 44,991 135,454
-------- -------- -------- --------- ---------
Carrying value at end of period....... $461,377 $277,787 $374,100 $ 270,897 $ 225,906
======== ======== ======== ========= =========
</TABLE>

85
<PAGE> 88

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

<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ------------------------------------
2000 1999 1998 1997
---------- ---------- ---------- ----------
CARRYING/ CARRYING/ CARRYING/ CARRYING/
FAIR VALUE FAIR VALUE FAIR VALUE FAIR VALUE
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
MONEY MARKET INVESTMENTS
Interest-earning deposits........................ $ 12,839 $132,592 $262,714 $ 41,305
Federal funds sold............................... -- 25,000 45,000 15,000
-------- -------- -------- --------
Total money market investments........... $ 12,839 $157,592 $307,714 $ 56,305
======== ======== ======== ========
INVESTMENT SECURITIES AVAILABLE-FOR-SALE
Mutual funds..................................... $ 29,299 $ 28,537 $ 40,885 $ 39,888
United States government and agencies............ 28,162 29,175 75,421 118,598
Asset-backed securities.......................... -- 51 228 722
-------- -------- -------- --------
Total investment securities available for
sale................................... $ 57,461 $ 57,763 $116,534 $159,208
======== ======== ======== ========
MORTGAGE-RELATED SECURITIES AVAILABLE FOR SALE BY
ISSUER:
Federal Home Loan Mortgage Corporation........... $ 65,004 $ 70,216 $ 43,717 $ 29,073
Federal National Mortgage Association............ 379,403 285,384 194,353 136,510
Private placement CMO's.......................... 16,472 17,927 31,994 59,118
Government National Mortgage Association......... 498 573 833 1,205
-------- -------- -------- --------
Total mortgage-related securities........ $461,377 $374,100 $270,897 $225,906
======== ======== ======== ========
BY COUPON TYPE:
Adjustable-rate.................................. $ 62,708 $ 59,506 $ 51,877 $ 51,704
Fixed-rate....................................... 398,669 314,594 219,020 174,202
-------- -------- -------- --------
Total mortgage-related securities........ $461,377 $374,100 $270,897 $225,906
======== ======== ======== ========
TOTAL INVESTMENT PORTFOLIO......................... $531,677 $589,455 $695,145 $441,419
======== ======== ======== ========
</TABLE>

86
<PAGE> 89

Carrying Values, Yields and Maturities. The table below presents
information regarding the carrying values, weighted average yields and
contractual maturities of our investment securities and mortgage-related
securities at June 30, 2000. Mortgage-related securities are presented by issuer
and by coupon type.
<TABLE>
<CAPTION>
AT JUNE 30, 2000
---------------------------------------------------------------
MORE THAN ONE MORE THAN FIVE
ONE YEAR OR LESS YEAR TO FIVE YEARS YEARS TO TEN YEARS
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES
AVAILABLE FOR SALE:
Mutual funds............. $29,299 6.29% $ -- $ -- --%
United States government
and agencies........... 3,543 6.41% 24,619 5.97%
------- ------- -------
Total investment
securities..... $32,842 6.30% $24,619 5.97% $ --
======= ======= =======
MORTGAGE-RELATED
SECURITIES AVAILABLE
FOR SALE:
BY ISSUER:
GNMA pass-through
certificates......... $ 3 7.85% $ 54 7.61% $ 441 8.19%
FNMA pass-through
certificates......... -- -- 88 7.62% 6,584 5.88%
Private CMOs........... -- -- -- -- 1,588 6.17%
FHLMC pass-through
certificates......... 2 9.36% 120 8.11% 26 9.22%
FHLMC, FNMA and
GNMA-REMICs.......... -- -- -- -- 5,046 6.39%
------- ------- -------
Total mortgage-
related
securities..... $ 5 8.45% $ 262 7.84% $13,685 6.18%
======= ======= =======
BY COUPON TYPE:
Adjustable-rate.......... $ -- -- $ -- -- $ 4,782 6.44%
Fixed-rate............... 5 8.45% 262 7.84% 8,903 6.04%
------- ------- -------
Total mortgage-
related
securities..... $ 5 8.45% $ 262 7.84% $13,685 6.18%
======= ======= =======
Total investment and
mortgage-related
securities portfolio... $32,847 6.30% $24,881 5.99% $13,685 6.18%
======= ======= =======

<CAPTION>
AT JUNE 30, 2000
-----------------------------------------

MORE THAN TEN YEARS TOTAL
------------------- -------------------
WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES
AVAILABLE FOR SALE:
Mutual funds............. $ -- --% $ 29,299 6.29%
United States government
and agencies........... 28,162 6.03%
-------- --------
Total investment
securities..... $ -- $ 57,461 6.16%
======== ========
MORTGAGE-RELATED
SECURITIES AVAILABLE
FOR SALE:
BY ISSUER:
GNMA pass-through
certificates......... $ -- -- $ 498 8.13%
FNMA pass-through
certificates......... 307,306 6.86% 313,978 6.84%
Private CMOs........... 14,884 6.93% 16,472 6.86%
FHLMC pass-through
certificates......... 11,760 6.29% 11,908 6.32%
FHLMC, FNMA and
GNMA-REMICs.......... 113,475 6.72% 118,521 6.70%
-------- --------
Total mortgage-
related
securities..... $447,425 6.81% $461,377 6.79%
======== ========
BY COUPON TYPE:
Adjustable-rate.......... $ 57,926 7.06% $ 62,708 7.01%
Fixed-rate............... 389,499 6.78% 398,669 6.76%
-------- --------
Total mortgage-
related
securities..... $447,425 6.81% $461,377 6.79%
======== ========
Total investment and
mortgage-related
securities portfolio... $447,425 6.81% $518,838 6.72%
======== ========
</TABLE>

SOURCES OF FUNDS

General. Deposits, scheduled amortization and prepayments of loan principal
and mortgage-related securities, maturities and calls of investments securities,
Federal Home Loan Bank borrowings and funds provided by operations are our
primary sources of funds for use in lending, investing and for other general
purposes. We currently do not use reverse repurchase agreements as sources of
funds. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

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

Deposit flows are influenced significantly by general and local economic
conditions, changes in prevailing interest rates, pricing of deposits and
competition. Our deposits are primarily obtained from

87
<PAGE> 90

areas surrounding our offices and we rely primarily on paying competitive rates,
service and long-standing relationships with customers to attract and retain
these deposits. We do not use brokers to obtain deposits.

When we determine our deposit rates, we consider local competition, U.S.
Treasury securities offerings and the rates charged on other sources of funds.
Core deposits (defined as regular savings deposits, money market accounts and
demand accounts) represented 38.8% of total deposits on June 30, 2000. At June
30, 2000, time deposits with remaining terms to maturity of less than one year
amounted to $539.2 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Analysis of Net Interest
Income" for information relating to the average balances and costs of our
deposit accounts for the six months ended June 30, 2000 and 1999, and the years
ended December 31, 1999, 1998 and 1997.

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

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
MARCH 31,
------------------------
2000 1999
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total deposits at beginning of period..................... $1,343,007 $1,398,858
Net withdrawals........................................... (69,556) (39,529)
Interest credited, net of penalties....................... 27,162 27,990
---------- ----------
Total deposits at end of period........................... $1,300,613 $1,387,319
========== ==========
Net increase (decrease)................................... $ (42,394) $ (11,539)
========== ==========
Percentage increase (decrease)............................ (3.16)% (0.82)%
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total deposits at beginning of period............ $1,398,858 $1,362,330 $ 994,283
Net withdrawals.................................. (110,285) (20,851) (62,748)
Acquisition of First Federal..................... -- -- 376,700
Interest credited, net of penalties.............. 54,434 57,379 54,095
---------- ---------- ----------
Total deposits at end of period.................. $1,343,007 $1,398,858 $1,362,330
========== ========== ==========
Net increase (decrease).......................... $ (55,851) $ 36,528 $ 368,047
========== ========== ==========
Percentage increase (decrease)................... (3.99)% 2.68% 37.02%
</TABLE>

At June 30, 2000, we had $63.8 million in time deposits with balances of
$100,000 and over maturing as follows:

<TABLE>
<CAPTION>
MATURITY PERIOD AMOUNT
--------------- ------
(IN THOUSANDS)
<S> <C>
Three months or less........................................ $17,168
Over three months through six months........................ 7,487
Over six months through 12 months........................... 19,532
Over 12 months through 24 months............................ 14,625
Over 24 months through 36 months............................ 4,193
Over 36 months.............................................. 782
-------
Total....................................................... $63,787
=======
</TABLE>

88
<PAGE> 91

The following table presents the distribution of our deposit accounts at
the dates indicated by dollar amount and percent of portfolio, and the weighted
average nominal interest rate on each category of deposits.
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------
AT JUNE 30, 2000 1999 1998
-------------------------------- -------------------------------- ---------------------
WEIGHTED WEIGHTED
PERCENT AVERAGE PERCENT AVERAGE PERCENT
OF TOTAL NOMINAL OF TOTAL NOMINAL OF TOTAL
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE AMOUNT DEPOSITS
---------- -------- -------- ---------- -------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Savings.......................... $ 148,406 11.41% 2.43% $ 151,447 11.28% 2.41% $ 166,316 11.89%
Interest-bearing demand.......... 86,133 6.62% 1.05% 89,685 6.68% 1.05% 100,753 7.20%
Money market..................... 220,721 16.97% 5.27% 231,174 17.21% 4.90% 159,361 11.39%
Non-interest bearing demand...... 49,002 3.77% 0.00% 42,596 3.17% 0.00% 43,031 3.08%
---------- ------ ---------- ------ ---------- ------
Total.................... 504,262 38.77% 3.20% 514,902 38.34% 3.09% 469,461 33.56%
---------- ------ ---------- ------ ---------- ------
Certificates:
Time deposits with original
maturities of:
Three months or less......... 60,721 4.67% 5.01% 80,781 6.01% 5.07% 82,097 5.87%
Over three months to twelve
months..................... 141,737 10.90% 5.07% 198,154 14.76% 4.90% 160,681 11.49%
Over twelve months to
twenty-four months......... 399,933 30.75% 5.74% 401,053 29.87% 5.37% 517,495 36.99%
Over twenty-four months to
thirty-six months.......... 128,303 9.86% 6.16% 73,729 5.49% 5.62% 82,755 5.92%
Over thirty-six months to
forty-eight months......... 4,249 0.33% 5.72% 5,819 0.43% 5.73% 3,973 0.28%
Over forty-eight months to
sixty months............... 59,109 4.54% 5.88% 66,124 4.92% 5.94% 79,861 5.71%
Over sixty months............ 2,299 0.18% 6.36% 2,445 0.18% 6.35% 2,535 0.18%
---------- ------ ---------- ------ ---------- ------
Total time deposits...... 796,351 61.23% 5.65% 828,105 61.66% 5.31% 929,397 66.44%
---------- ------ ---------- ------ ---------- ------
Total deposits........... $1,300,613 100.00% 4.70% $1,343,007 100.00% 4.46% $1,398,858 100.00%
========== ====== ========== ====== ========== ======

<CAPTION>
AT DECEMBER 31,
-------------------------------------------
1998 1997
-------- --------------------------------
WEIGHTED WEIGHTED
AVERAGE PERCENT AVERAGE
NOMINAL OF TOTAL NOMINAL
RATE AMOUNT DEPOSITS RATE
-------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Savings.......................... 2.41% $ 169,530 12.44% 2.85%
Interest-bearing demand.......... 1.05% 95,310 7.00% 1.41%
Money market..................... 4.61% 134,451 9.87% 4.64%
Non-interest bearing demand...... 0.00% 35,868 2.63% 0.00%
---------- ------
Total.................... 2.64% 435,159 31.94% 2.85%
---------- ------
Certificates:
Time deposits with original
maturities of:
Three months or less......... 5.00% 59,205 4.35% 5.29%
Over three months to twelve
months..................... 5.17% 204,864 15.04% 5.52%
Over twelve months to
twenty-four months......... 5.83% 433,152 31.79% 6.01%
Over twenty-four months to
thirty-six months.......... 5.46% 113,969 8.37% 5.77%
Over thirty-six months to
forty-eight months......... 5.73% 4,813 0.35% 5.84%
Over forty-eight months to
sixty months............... 5.98% 107,885 7.92% 5.93%
Over sixty months............ 6.34% 3,283 0.24% 6.21%
---------- ------
Total time deposits...... 5.63% 927,171 68.06% 5.82%
---------- ------
Total deposits........... 4.62% $1,362,330 100.00% 4.87%
========== ======
</TABLE>

89
<PAGE> 92

The following table presents, by rate category, the amount of our time
deposit accounts outstanding at June 30, 2000 and December 31, 1999, 1998 and
1997.

<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ------------------------------
2000 1999 1998 1997
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Time deposit accounts:
3.99% or less...................................... $ 118 $ 232 $ 113 $ 366
4.00%-4.99%........................................ 118,794 231,747 79,861 3,909
5.00%-5.99%........................................ 433,073 530,748 590,164 541,854
6.00%-6.99%........................................ 241,541 63,808 257,491 378,791
7.00% or greater................................... 2,825 1,570 1,768 2,251
-------- -------- -------- --------
Total.................................... $796,351 $828,105 $929,397 $927,171
======== ======== ======== ========
</TABLE>

The following table presents, by rate category, the remaining period to
maturity of time deposit accounts outstanding as of June 30, 2000.

<TABLE>
<CAPTION>
PERIOD TO MATURITY FROM JUNE 30, 2000
------------------------------------------------------------------------------------------
OVER SIX OVER ONE OVER TWO
WITHIN OVER THREE TO MONTHS TO TWO TO THREE OVER THREE
THREE MONTHS SIX MONTHS TO ONE YEAR YEARS YEARS YEARS TOTAL
------------ ------------- ----------- ---------- -------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Time deposit
accounts:
3.99% or less........ $ 116 $ -- $ 1 $ 1 $ -- $ -- $ 118
4.00%-4.99%.......... 59,939 31,876 19,534 6,886 383 176 118,794
5.00%-5.99%.......... 135,852 56,568 155,194 55,972 15,429 14,058 433,073
6.00%-6.99%.......... 6,978 4,673 68,443 126,537 30,129 4,781 241,541
7.00% or greater..... 5 -- 14 747 80 1,979 2,825
-------- -------- -------- -------- ------- ------- --------
Total...... $202,890 $ 93,117 $243,186 $190,143 $46,021 $20,994 $796,351
======== ======== ======== ======== ======= ======= ========
</TABLE>

Borrowings. We borrow funds to finance our lending and investing
activities. Substantially all of our borrowings take the form of advances from
the Federal Home Loan Bank of Chicago. At June 30, 2000 we had borrowings
totaling $31.1 million with maturities of less than one year. We have pledged
certain loans receivable as blanket collateral for these advances and future
advances. The Federal Home Loan Bank offers a variety of borrowing options with
fixed or variable rates, flexible repayment options and fixed or callable terms.
We choose the rate, repayment option and term to fit the purpose of the
borrowing.

OTHER FINANCIAL SERVICES

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

SUBSIDIARY ACTIVITIES

In addition to Lake Financial and Insurance Services, Inc., described
above, we have two active wholly-owned subsidiaries: Mutual Investment
Corporation and M C Development Ltd. Mutual Investment Corporation owns and
manages much of our investment portfolio. Mutual Savings has funded this
separate subsidiary to enhance the return on the portfolio. M C Development Ltd.
is involved in land development and sales. It owns two parcels of undeveloped
land consisting of 15 acres in Brown Deer, WI and 318 acres in Oconomowoc,
Wisconsin. See "Properties."

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<PAGE> 93

PROPERTIES

Mutual Savings conducts its business through its executive office and 51
banking offices, which had an aggregate net book value of $24.2 million as of
December 31, 1999. The following table shows the location of Mutual Savings'
offices, whether they are owned or leased, and the expiration date of the leases
for the leased offices.

<TABLE>
<CAPTION>
ORIGINAL DATE LEASED
LEASED OR OR DATE OF LEASE
LOCATION ACQUIRED OWNED EXPIRATION
-------- -------------- ------ -------------
<S> <C> <C> <C>
EXECUTIVE OFFICE:
4949 West Brown Deer Road....................... 1991 Owned
Brown Deer, WI 53223
MILWAUKEE METRO AREA:
Bayshore Mall................................... 1971 Leased 2009
5900 N. Port Washington Road
Glendale, WI 53217
Brookfield...................................... 1973* Owned
17100 W. Capitol Drive
Brookfield, WI 53005
Brookfield Square............................... 1975 Leased 2006
400 N. Moorland Road
Brookfield, WI 53005
Brown Deer...................................... 1979 Owned
4801 W. Brown Deer Road
Brown Deer, WI 53223
Capitol Drive................................... 1976 Owned
8050 W. Capitol Drive
Milwaukee, WI 53222
Cedarburg....................................... 1978* Leased 2006
W62 N248 Washington Avenue
Cedarburg, WI 53012
Downtown........................................ 1955 Owned
510 E. Wisconsin Avenue
Milwaukee, WI 53202
Grafton......................................... 1978 Owned
2030 Wisconsin Avenue
Grafton, WI 53024
Howell Avenue................................... 1977 Owned
3847 S. Howell Avenue
Milwaukee, WI 53207
Mayfair Mall.................................... 1959* Leased 2001
2500 N. Mayfair Road
Wauwatosa, WI 53226
Mequon.......................................... 1970* Owned
11249 N. Port Washington Road
Mequon, WI 53092
Oak Creek....................................... 1972 Owned
8780 S. Howell Avenue
Oak Creek, WI 53154
</TABLE>

91
<PAGE> 94

<TABLE>
<CAPTION>
ORIGINAL DATE LEASED
LEASED OR OR DATE OF LEASE
LOCATION ACQUIRED OWNED EXPIRATION
-------- -------------- ------ -------------
<S> <C> <C> <C>
Oklahoma Avenue................................. 1982 Owned
6801 W. Oklahoma Avenue
Milwaukee, WI 53219
Sherman Park.................................... 1950* Owned
4812 W. Burleigh Street
Milwaukee, WI 53210
Southgate....................................... 1967 Owned
3340 S. 27th Street
Milwaukee, WI 53215
Southridge Mall................................. 1978 Leased 2002
5300 S. 76th Street
Greendale, WI 53219
Thiensville..................................... 1960* Owned
208 N. Main Street
Thiensville, WI 53092
West Allis...................................... 1976 Owned
10296 W. National Avenue
West Allis, WI 53227
MADISON AREA:
Downtown........................................ 1980 Leased 2003
23 S. Pinckney Street
Madison, WI 53703
West............................................ 1982 Leased 2011
5521 Odana Road
Madison, WI 53719
Middleton....................................... 1978 Owned
6209 Century Avenue
Middleton, WI 53562
Monona.......................................... 1981 Owned
5320 Monona Drive
Monona, WI 53716
FOX VALLEY AREA:
Appleton........................................ 1985 Leased 2004
4323 W. Wisconsin Avenue
Fox River Mall
Appleton, WI 54915
Neenah.......................................... 1974 Owned
101 W. Wisconsin Avenue
Neenah, WI 54956
JANESVILLE:....................................... 1973 Owned
2111 Holiday Drive
Janesville, WI 53545
SHEBOYGAN AREA:
Sheboygan....................................... 1973 Owned
801 N. 8th Street
Sheboygan, WI 53081
</TABLE>

92
<PAGE> 95

<TABLE>
<CAPTION>
ORIGINAL DATE LEASED
LEASED OR OR DATE OF LEASE
LOCATION ACQUIRED OWNED EXPIRATION
-------- -------------- ------ -------------
<S> <C> <C> <C>
Sheboygan Motor Bank.............................. 1984 Owned
730 N. 9th Street
Sheboygan, WI 53081
BEAVER DAM:....................................... 1975 Owned
130 W. Maple Avenue
Beaver Dam, WI 53916
BELOIT:........................................... 1971 Leased 2012
3 Beloit Mall Shopping Center
Beloit, WI 53511
BERLIN:........................................... 1973 Owned
103 E. Huron Street
Berlin, WI 54923
FOND DU LAC:...................................... 1973 Leased 2001
Forest Mall Shopping Center
Fond du Lac, WI 54935
PORTAGE:.......................................... 1976 Owned
145 E. Cook Street
Portage, WI 53901
EAU CLAIRE:
Downtown........................................ 1968* Owned
319 E. Grand Avenue
Eau Claire, WI 54701
Mall............................................ 1972* Owned
2812 Mall Drive
Eau Claire, WI 54701
Cub Foods....................................... 1996* Leased 2005
2717 Birch Street
Eau Claire, WI 54703
Pinehurst....................................... 1986* Owned
2722 Eddy Lane
Eau Claire, WI 54703
CHIPPEWA FALLS AREA:
Downtown........................................ 1975* Owned
35 W. Columbia
Chippewa Falls, WI 54729
Falls Pick'N Save............................... 1995* Leased 2005
303 Prairie View Road
Chippewa Falls, WI 54729
MENOMONIE AREA:
Downtown........................................ 1967* Owned
717 Main Street
Menomonie, WI 54751
North........................................... 1978* Owned
2409 Hils Ct. N.E
Menomonie, WI 54751
</TABLE>

93
<PAGE> 96

<TABLE>
<CAPTION>
ORIGINAL DATE LEASED
LEASED OR OR DATE OF LEASE
LOCATION ACQUIRED OWNED EXPIRATION
-------- -------------- ------ -------------
<S> <C> <C> <C>
RICE LAKE:........................................ 1979* Owned
2850 Pioneer Avenue
Rice Lake, WI 54868
BARRON:........................................... 1995* Owned
1512 E. Division Ave. (Hwy. 8)
Barron, WI 54812
BLOOMER:.......................................... 1995* Owned
1203 17th Avenue
Bloomer, WI 54724
CORNELL:.......................................... 1980* Leased month
422 Main Street to
Cornell, WI 54732 month
ELLSWORTH:........................................ 1975* Owned
385 W. Main Street
Ellsworth, WI 54011
HAYWARD:.......................................... 1984* Owned
10562 Kansas Avenue
Hayward, WI 54843
HUDSON:........................................... 1979* Owned
2000 Crestview Drive
Hudson, WI 54016
SPOONER:.......................................... 1995* Owned
500 Front Street
Spooner, WI 54801
ST. CROIX FALLS:.................................. 1980* Owned
144 Washington Street N
St. Croix Falls, WI 54024
STANLEY:.......................................... 1978* Owned
118 N. Broadway
Stanley, WI 54768
WOODBURY, MINNESOTA:.............................. 1995* Owned
8420 City Centre Drive
Woodbury, MN 55125
</TABLE>

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

* Date originally opened by an acquired institution

In addition, Mutual Savings owns two parcels of undeveloped land through
its MC Development subsidiary. The 15 acre Brown Deer parcel is comprised of
four lots consisting of 2.9 to 4.3 acres and was part of a larger property that
was acquired in 1988 to accommodate the construction of a new corporate
headquarters building. Each of the lots is available for sale and is designed to
accommodate 60,000 to 75,000 square foot office buildings. The net book value of
the four lots is $1,590,000. The 318 acre Oconomowoc parcel was held by an
acquired institution that obtained it through a foreclosure. It is located in an
area of the City of Oconomowoc that has seen considerable residential
development. All of the necessary utilities are available to the property and it
will be marketed for residential development in a manner that will attempt to
maximize its potential value. The parcel has a net book value of $345,000.

94
<PAGE> 97

LEGAL PROCEEDINGS

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

PERSONNEL

As of June 30, 2000, Mutual Savings had 483 full-time employees and 107
part-time employees. The employees are not represented by a collective
bargaining unit and we consider our relationship with our employees to be good.

MANAGEMENT

MANAGEMENT STRUCTURE

Bank Mutual's directors and executive officers initially will be persons
who are now directors or executive officers of Mutual Savings or First Northern
Savings. We expect that Bank Mutual will continue to have directors and
executive officers who have similar positions with Mutual Savings or First
Northern Savings unless and until there is a business reason to establish
separate management structures.

Under Mutual Savings' current form of organization, it is governed by a
board of directors which is chosen by its depositors. After the restructuring,
Mutual Savings will be governed by a board of directors elected by Bank Mutual
as its sole shareholder. In turn, the board of directors of Bank Mutual will be
chosen by its shareholders. Because the MHC will then own a majority of the
shares of Bank Mutual and because cumulative voting for directors will not be
permitted, the MHC will be in a position to elect all of the directors of Bank
Mutual. The directors of the MHC will be chosen by the deposits of Mutual
Savings. Initially, the board of directors of the MHC will be the same as the
board of directors of Bank Mutual.

COMPOSITION OF BOARDS OF DIRECTORS

Upon the restructuring, Bank Mutual will have a board of directors
consisting of eleven directors. Each director will belong to one of three
classes, which classes will have staggered three-year terms of office. The
classes will be nearly as equal as possible. At each of Bank Mutual's annual
meetings of shareholders, shareholders will elect directors to fill the seats of
the directors whose terms expire in that year and any other vacant seats.

The seven current directors of Mutual Savings will be initial directors of
the MHC and Bank Mutual. Under the First Northern merger agreement, Mutual
Savings has committed that four of the six directors of First Northern will be
elected to Bank Mutual and the MHC Board of Directors. Mutual Savings intends to
elect Michael D. Meeuwsen, the CEO of First Northern, as one of these directors;
the other three have not yet been chosen but will be designated by Mutual
Savings prior to the First Northern merger.

MUTUAL SAVINGS' CURRENT DIRECTORS

The following table presents the following information: the names of Mutual
Savings' directors, all of whom will be initial directors of Bank Mutual and the
MHC; their ages on August 15, 2000; their position(s) with Mutual Savings; the
years when they began serving as directors of Mutual Savings; and

95
<PAGE> 98

when their terms of office as directors of Bank Mutual and the MHC will expire.
All of these persons will have begun service as Bank Mutual directors in 2000.

<TABLE>
<CAPTION>
MUTUAL BANK
SAVINGS MUTUAL
DIRECTOR TERM TO
NAME AGE POSITION(S) WITH MUTUAL SAVINGS SINCE EXPIRE
---- --- ------------------------------- -------- -------
<S> <C> <C> <C> <C>
Michael T. Crowley, Sr.(1)................ 87 Chairman and Director 1960 2001
Michael T. Crowley, Jr.(1)................ 57 President, CEO and Director 1970 2003
Thomas H. Buestrin........................ 64 Director 1995 2003
Raymond W. Dwyer, Jr. .................... 77 Director 1957 2001
Herbert W. Isermann....................... 83 Director 1982 2002
William J. Mielke......................... 53 Director 1988 2003
David J. Rolfs............................ 78 Director 1984 2002
</TABLE>

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

(1) Mr. Crowley, Sr. is the father of Mr. Crowley, Jr.

Mutual Savings expects that Michael D. Meeuwsen, First Northern's CEO, will
be one of the four First Northern director designees; his term will expire in
2003. Mutual Savings has not yet determined the other three designees. Once
these directors are added, Bank Mutual will have 11 directors.

OUR DIRECTORS' BACKGROUNDS

The business experience of each of Mutual Savings' directors is as follows:

Michael T. Crowley, Jr. is the president and chief executive officer of
Mutual Savings. He has served in those capacities since 1983 and 1985,
respectively. He also serves as a director of various Mutual Savings'
subsidiaries. Mr. Crowley, Jr. also is chairman and director of TYME
Corporation, an ATM network of which Mutual Savings is a member.

Michael T. Crowley, Sr. is chairman of the board and director of Mutual
Savings.

Thomas H. Buestrin is a real estate investor, property manager and real
estate developer with the firm of Buestrin, Allen & Associates Ltd. Mr. Buestrin
is president of that firm.

Raymond W. Dwyer, Jr. is retired. Prior to his retirement, he was a
practicing architect with R.W. Dwyer Architects.

William J. Mielke is a civil engineer with the firm Ruekert & Mielke Inc.
Mr. Mielke is president and CEO of that firm.

Herbert W. Isermann is retired. Prior to his retirement, he served as a
vice president of Winding Roofing Company, a roofing contracting firm.

David J. Rolfs is retired. Prior to his retirement, he was employed as
president of ABCO Dealers Inc., in the health care industry.

Michael D. Meeuwsen, age 46, is the president and chief executive officer
of First Northern and of First Northern Savings. Under the First Northern merger
agreement, Mr. Meeuwsen also will be elected as an additional director of Mutual
Savings upon the First Northern merger.

Unless we give prior experience, each of these individuals has held the
identified current position for at least five years.

MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES

Mutual Savings' board of directors currently meets on a monthly basis and
may hold additional special meetings. During 1999, Mutual Savings board held 12
regular meetings. Going forward, Bank

96
<PAGE> 99

Mutual expects that its, and the MHC's, board will meet four times a year, with
special meetings as needed.

The board of directors of Bank Mutual will maintain Executive, Audit and
Compensation Committees. The Executive Committee will exercise the powers of the
board between its meetings. The Audit Committee will review the annual audit
prepared by the independent accountants, recommend the appointment of
accountants and receive reports from the internal audit department. It will
consist solely of independent directors. The Compensation Committee will provide
advice and recommendations to the Board of Directors in the areas of employee
salaries and benefit programs. It also will consist of independent directors.
Committee membership has not yet been determined.

The Bank Mutual bylaws provide that the board of directors as a whole will
act as the Nominating Committee. As such, the board will consider appropriate
nominees for any vacancy on the Bank Mutual board of directors, and shareholders
should forward any nominations to the board.

DIRECTOR COMPENSATION

Meeting Fees. Mutual Savings pays an annual retainer fee to each of its
non-management directors. Each of the directors receives a fee for attendance at
each board meeting. Each non-management director receives a fee for attendance
at each meeting of a committee of which the director is a member. Under an
arrangement pre-dating the establishment of the current payment structure, Mr.
Dwyer receives a fee for directors' and Executive Committee meetings for each
month regardless of attendance.

The following table sets forth the retainer and meeting fees in effect for
both 2000 and 1999:

<TABLE>
<S> <C>
Annual Retainer:........................................... $10,000
Meeting Fees:
Board.................................................... $ 1,000
Executive Committee...................................... $ 700
Audit Committee.......................................... none
Advertising Committee.................................... $ 150
Finance Committee........................................ $ 150
</TABLE>

Deferred Compensation. Mutual Savings also maintains a deferred
compensation plan for each of its non-management directors. Directors who have
provided at least five years of service to Mutual Savings will be paid $1,000
per month for 10 years after their retirement from the Mutual Savings' board.
All of the existing directors' benefits have vested. In the event a director
dies prior to completion of these payments, payments will go to the director's
heirs. Mutual Savings has funded these arrangements through "rabbi trust"
arrangements, and based on actuarial analyses believes these obligations are
adequately funded.

Bank Mutual. Going forward, the MHC and Bank Mutual will establish new
compensation packages for their directors. It is expected that the boards of
both entities will meet on the same day; there will not be duplicate payments
for board meetings held on the same day.

97
<PAGE> 100

EXECUTIVE OFFICERS

The following table gives information about each of the executive officers
of Mutual Savings and the anticipated executive officers of Bank Mutual and the
MHC.

<TABLE>
<CAPTION>
AGE AT POSITION WITH POSITION WITH POSITION WITH
NAME 8/15/00 MUTUAL SAVINGS BANK MUTUAL THE MHC
---- ------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Michael T. Crowley, Jr......... 57 President and Chief Chairman and Chief President and Chief
Executive Officer Executive Officer Executive Officer
Michael D. Meeuwsen............ 46 -- President and Chief Executive Vice
Operating Officer President and Chief
Operating Officer
Michael T. Crowley, Sr......... 87 Chairman of the Board -- Chairman
Eugene H. Maurer, Jr........... 54 Senior Vice Senior Vice President Senior Vice
President, and Secretary President, Secretary
Secretary-Treasurer, and CFO
and Chief Financial
Officer
P. Terry Anderegg.............. 50 Senior Vice -- --
President-Retail
Banking
Christopher Callen............. 57 Senior Vice -- --
President-Lending
Rick B. Colberg................ 48 -- Chief Financial --
Officer
Marlene M. Scholz.............. 55 Senior Vice Senior Vice President Senior Vice President
President-Controller
</TABLE>

The business experience of each of these executive officers is as follows.
Unless we give prior experience, each of these individuals has held the
identified current position for at least five years.

Michael D. Meeuwsen is the president and chief executive officer of First
Northern and of First Northern Savings.

Michael T. Crowley, Sr. is chairman of the board and director of Mutual
Savings.

Eugene H. Maurer, Jr. is the Senior Vice President and Secretary-Treasurer
of Mutual Savings. In that capacity, he is the principal financial officer of
Mutual Savings. Mr. Maurer also serves as an officer of several Mutual Savings'
subsidiaries.

P. Terry Anderegg is the Senior Vice President-Retail Banking of Mutual
Savings.

Christopher J. Callen is the Senior Vice President-Lending of Mutual
Savings. Prior to assuming that position in 1998, Mr. Callen was a banking
executive for Firstar Corporation for many years, and a self-employed consultant
of the banking industry from 1996 to 1998.

Rick B. Colberg is the Chief Financial Officer of First Northern and First
Northern Savings.

Marlene M. Scholz is the Senior Vice President-Controller of Mutual
Savings. In that capacity, she is Mutual Savings' principal accounting officer.
Ms. Scholz also serves as an officer of several Mutual Savings' subsidiaries.

98
<PAGE> 101

EXECUTIVE OFFICER COMPENSATION

Summary Compensation Table. The following table provides information about
the compensation paid for 1999 to Mutual Savings' chief executive officer and to
the four other most highly compensated executive officers whose total annual
salary and bonus for 1999 was at least $100,000.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------------------------
ALL OTHER
NAME AND SALARY BONUS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3)
------------------ ---- ------- ------ ------------
<S> <C> <C> <C> <C>
Michael T. Crowley, Jr. .................... 1999 573,556 -- 1,600
President and Chief 1998 573,556 16,485 1,600
Executive Officer 1997 547,060 40,408 1,613
Michael T. Crowley, Sr. .................... 1999 238,052 -- 1,280
Chairman 1998 238,052 6,780 1,447
1997 227,052 6,192 1,978
Donald T. Tietz(4).......................... 1999 198,040 -- --
Senior Executive Vice President -- 1998 207,040 -- 25,206
Northwest Region 1997 195,616 -- 38,841
Eugene H. Maurer, Jr........................ 1999 139,465 -- 1,435
Senior Vice President, Secretary/ 1998 133,965 4,018 1,382
Treasurer and Chief Financial Officer 1997 128,765 6,235 1,327
P. Terry Anderegg........................... 1999 139,265 -- 1,433
Senior Vice President -- 1998 133,765 4,012 1,362
Retail Banking 1997 128,565 7,468 1,346
</TABLE>

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

(1) Mutual Savings provides its executive officers with certain non-cash
benefits and perquisites. Management of Mutual Savings believes that the
aggregate value of these benefits for 1999 did not, in the case of any
executive officer, exceed $50,000 or 10% of the aggregate salary and annual
bonus reported for him in the Summary Compensation Table.

(2) Reflects payments earned during the year, and paid during the subsequent
year, under Mutual Savings' Management Incentive Plan, a non-qualified
performance based compensation plan.

(3) Includes the following components for 1999: employer contributions to the
Mutual Savings Bank Savings and Investment Plan, a qualified retirement plan
under section 401(k) of the IRS regulations, -- Mr. Crowley, Jr. $1,600; Mr.
Crowley, Sr. $1,280; Mr. Maurer $1,435; and Mr. Anderegg $1,433. Mr. Tietz'
prior year's amounts represented employer contributions to the First Federal
Bank of Eau Claire, F.S.B. Deferred Compensation Plan, a non-qualified
deferred compensation plan.

(4) Mr. Tietz retired on March 31, 2000.

DEFINED BENEFIT RETIREMENT PLANS

Mutual Savings maintains a qualified defined benefit pension plan that
covers substantially all employees who are age 21 or over and who have at least
one year of service. Pension benefits are based on the participant's average
annual compensation (salary and bonus) and years of credited service. Years of
credited service in the qualified defined benefit pension plan begin at date of
participation in the plan. Benefits are determined in the form of a ten year
certain and life annuity.

Designated officers of Mutual Savings also participate in a non-qualified
defined benefit pension plan. This non-qualified plan provides monthly
supplemental benefits to participants which will be paid out of

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<PAGE> 102

unsecured corporate assets, or the rabbi trust established for this plan. The
amount of the non-qualified plan benefit in the form of a ten year certain and
life annuity is determined below:

- an amount calculated under Mutual Savings' qualified defined benefit
pension plan without regard to the limitations imposed by the Internal
Revenue Code on benefit or compensation amounts and without regard to
certain limitations on years of service; minus

- the pension benefit accrued in the qualified defined benefit pension
plan.

The following table shows the estimated annual benefits payable in ten year
certain and life annuity form for participants retiring on their normal
retirement date at age 65 with various combinations of years of service and
average annual compensation under the qualified defined benefit plan plus, for
those officers eligible to participate, the non-qualified plan. At June 30,
2000, accrued years of service for officers named in the summary compensation
table were: Mr. Crowley, Sr. -- 66 years; Mr. Crowley, Jr. -- 32 years; Mr.
Maurer -- 18 years; and Mr. Anderegg -- 6 years. Mr. Tietz had been covered by
the prior retirement plan of First Federal; accrued benefits under the Mutual
Savings plan were minimal.

<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE(1)
AVERAGE ---------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40
------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 28,300 $ 37,700 $ 49,700 $ 61,600 $ 73,500 $ 83,600
150,000 44,000 58,600 77,000 95,400 113,800 128,900
200,000 59,600 79,500 104,400 129,300 154,200 174,300
250,000 75,300 100,400 131,800 163,100 194,500 219,600
300,000 91,000 121,300 159,200 197,000 234,800 265,000
350,000 106,700 142,200 186,500 230,800 275,100 310,300
400,000 122,300 163,100 213,900 264,700 315,500 355,700
450,000 138,000 184,000 241,300 298,500 355,800 401,000
500,000 153,700 204,900 268,700 332,400 396,100 446,400
550,000 169,400 225,800 296,000 366,200 436,400 491,700
600,000 185,000 246,700 323,400 400,100 476,800 537,100
650,000 200,700 267,600 350,800 433,900 517,100 582,400
700,000 216,400 288,500 378,200 467,800 557,400 627,800
750,000 232,100 309,400 405,500 501,600 597,700 673,100
</TABLE>

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

(1) Years of service in the non-qualified defined benefit pension plan begin at
date of hire. As of December 31, 1999, Mr. Crowley, Sr. has more than 66
years of service with Mutual Savings. The amount of his total annual accrued
benefit as of December 31, 1999 was approximately $308,000.

EMPLOYMENT AGREEMENTS

Mutual Savings has employment agreements with Messrs. Crowley Sr. and Jr.
and intends to enter into employment agreements with its other executive
officers and with two executive officers of Mutual Savings who will not be
executive officers of Bank Mutual. The initial terms of the employment
agreements will be three years. For Messrs. Crowley, each year the agreement may
be extended so that the agreement remains for three years upon agreement of Mr.
Crowley and by affirmative action of Mutual Savings' board of directors. For the
other executives, the end of the initial three year term and on each anniversary
date thereafter, the employment term may be extended for an additional year upon
agreement of the executive and by affirmative action taken by Mutual Saving's
Board of Directors. Under the employment agreements, each executive officer will
be entitled to a base salary which is reviewed annually based upon individual
performance and Mutual Saving's financial results, as well as benefits and
perquisites, in accordance with Mutual Saving's policies.

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The following table is information as to the initial annual salary amounts
for each of the executive officers named above in the compensation table. These
amounts may be changed in subsequent years.

<TABLE>
<CAPTION>
EXECUTIVE OFFICERS ANNUAL SALARY
------------------ -------------
<S> <C>
Michael T. Crowley, Jr. ................................ $595,000
Michael T. Crowley, Sr. ................................ $240,000
Eugene H. Maurer........................................ $145,000
P. Terry Anderegg....................................... $145,000
</TABLE>

The employment agreements can be terminated at the election of the
executive officer or Mutual Savings at the expiration of the term, at any time
for cause, upon the occurrence of certain events specified by federal statute or
regulation, or as a result of the executive officer's retirement, disability or
death. Each employment agreement can also be voluntarily terminated without
cause by the executive officer or Mutual Savings. Each executive officer may
also terminate his employment agreement under certain circumstances following a
change in control.

Upon termination of an executive's employment at their election at the
expiration of the term of the employment agreements, the executive is entitled
to receive unpaid compensation for the period of employment plus accrued but
unused vacation time. Upon termination of employment at the election of Mutual
Savings at the expiration of the terms, the executives are entitled to receive
the same compensation as if they had voluntarily terminated at the end of the
term as well as an amount equal to 100% of their annual base salary at the date
of termination and certain benefits for a period of twelve months thereafter.

Upon each executive's death or retirement at age 65, the executive or the
executive's personal representative will receive his earned but unpaid base
salary and incentive compensation prorated to the end of the calendar month in
which such termination occurs and compensation for accrued but unused vacation
time. If the executive officer terminates employment voluntarily or is
terminated by Mutual Savings for cause, the executive shall not be entitled to
any compensation or benefits for any period after the date of termination.

If during the term Mutual Savings terminates an executive officer without
cause or the employment agreement is terminated by the executive officer for
cause, the executive would be entitled to receive 100% of base salary at the
time of termination through the end of a severance period. If the termination
occurs within the initial three year term of employment, the severance period
will be through the end of the initial three year term of employment, but not
less than one year, and if the termination shall occur after the expiration of
the initial three year term, the severance period will be one year. In the case
of Messrs. Crowley, the period is extended to 12 months beyond the current term
of employment, but not more than 36 months. Also, the executive officer would
continue to receive certain insurance and other benefits until twelve months
after the end of the term of employment. Mutual Savings must also pay to each
executive officer an additional lump sum cash payment in an amount equal to the
product of Mutual Savings' annual aggregate contributions for the benefit of the
executive officer to all qualified retirement plans in the year preceding
termination and the number of years in the severance period.

Under each employment agreement, the executive officer may also terminate
employment following a change in control of Mutual Savings, as defined in the
employment agreements under certain circumstances, including a reduction in
compensation or responsibilities. Upon any such termination as a result of a
change in control, each executive officer has a right to receive payments and
benefits as if a termination by Mutual Savings without cause had occurred.
However, under no circumstances may the aggregate amount of all severance
payments and termination benefits, computed on a present value basis, exceed an
amount which would cause the payments to be characterized as parachute payments
within the meaning of Section 280G(b)(2) of the Internal Revenue Code. That
section generally defines parachute payments to include any severance payments
and termination benefits which, on a present value basis, equal or exceed three
times the executive officer's average annual total compensation over a five-year
period immediately preceding the change in control.

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<PAGE> 104

OTHER COMPENSATION AGREEMENTS

Crowley Sr. Deferred Compensation Agreement. Mutual Savings has had a
deferred compensation arrangement with Mr. Crowley, Sr. for over 20 years under
which Mutual Savings agreed to defer a portion of Mr. Crowley's compensation in
exchange for compensation payments at the later date. The exact provisions have
been modified from time to time, most recently in a 1998 agreement. To fund this
obligation, Mutual Savings purchased a life insurance policy on the life of Mr.
Crowley, Sr. The policy is now fully paid.

Upon Mr. Crowley, Sr.'s retirement, he will receive a life income in
monthly installments, with a minimum of 240 monthly installments. The monthly
installments will be equal to the amount that would be payable to Mutual Savings
under the life insurance policy if Mutual Savings were to exercise a settlement
option under the policy for monthly life income, with a 240 month period
certain, with payments commencing as of the date of Mr. Crowley's retirement. If
Mr. Crowley were to die before retirement or receipt of 240 certain monthly
payments, the amounts otherwise payable to him will be paid in equal shares to
his two children (including Mr. Crowley, Jr.) or to their survivors.

Under certain circumstances, Mutual Savings may elect to make a lump sum or
other type of payment to Mr. Crowley or his heirs. Those payments would be based
upon other forms of payment which may be available under the life insurance
policy.

BENEFIT PLANS

Employee Stock Ownership Plan. This plan is a tax-qualified plan that
covers substantially all salaried employees who have at least one year of
service and have attained age 21 and will take effect at the completion of the
restructuring.

Bank Mutual intends to lend this plan enough money to purchase 8% of the
Bank Mutual shares issued to persons other than the MHC. The plan may purchase
all or part of these shares from Bank Mutual to the extent that shares are
available after filling the subscriptions of eligible account holders.
Alternatively, the plan may purchase all or part of these shares in private
transactions or on the open market after completion of the restructuring to the
extent that shares are available for purchase on reasonable terms. We have not
determined whether that purchase would be made directly from Bank Mutual in the
offering, or after completion of the restructuring. We expect to make that
determination immediately before the expiration date for submitting orders in
the offering. For this reason, we cannot assure you that the employee stock
ownership plan will purchase shares in the offering after the restructuring, or
that such purchases will occur during any particular time period or at any
particular price.

Although contributions to this plan will be discretionary, Mutual intends
to contribute enough money each year to make the required principal and interest
payments on the loan from Bank Mutual. It is expected that this loan will be for
a term of ten years and will call for level annual payments of principal. It is
anticipated that payments will be made quarterly and will include interest at
the prime rate. The plan will initially pledge the shares it purchases as
collateral for the loan and hold them in a suspense account.

The plan will not distribute the pledged shares immediately. Instead, it
will release a portion of the pledged shares annually. Assuming we complete the
restructuring before December 31, 2000, if the plan repays its loan as scheduled
over a 10-year term, we expect that 2.5% of the shares will be released in 2000,
10% of the shares will be released annually in 2001 through 2009, and the
remaining 7.5% of the shares will be released in 2010. The plan will allocate
the shares released each year among the accounts of participants in proportion
to their base salary for the year. For example, if a participant's base salary
for a year represents 1% of the total base salaries of all participants for the
year, the plan would allocate to that participant 1% of the shares released for
the year.

Participants will direct the voting of shares allocated to their individual
accounts. Shares in the suspense account will usually be voted in a way that
mirrors the votes which participants cast for shares in their individual
accounts.

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<PAGE> 105

This plan may purchase additional shares in the future, and may do so using
borrowed funds, cash dividends, periodic employer contributions or other cash
flow.

Restoration Plan. Mutual Savings is also implementing a "restoration plan"
to compensate selected executive officers for any benefits under the ESOP and
the Mutual Savings Bank Savings and Investment Plan which they are unable to
receive because of limitations under the Internal Revenue Code (the "Code") on
contributions and benefits. The Code limits the salary deferrals that an
employee may contribute to the Savings Plan and also restricts the amount of
tax-qualified plan benefits that can be received by plan participants.

The restoration plan will permit eligible officers to defer compensation
which they are unable to contribute to the Savings Plan because of the Internal
Revenue Code limits. In addition, the restoration plan will provide benefits for
eligible officers based upon the allocations they would have received in the
ESOP and Savings Plan in the absence of the Code limitations. Under the Code,
only the first $170,000 of compensation may be considered in determining
benefits under tax-qualified plans (subject to annual cost-of-living
adjustments).

For example, under the ESOP, only the first $170,000 of earnings are
considered in determining ESOP benefits. Under the restoration plan, an
executive officer would receive an amount equal to the benefit that the officer
would have received under the ESOP in the absence of the compensation limit.
Therefore, if an executive officer had total compensation of $250,000, the
officer would receive an award equal to the average allocation percentage under
the ESOP for the $80,000 of compensation in excess of the Code limit.

Payments under the restoration plan would be made in cash. The are tax
deductible by the employer, but are included in the taxable compensation of the
officer receiving such a payment. The restoration plan would initially cover
Messrs. Crowley Sr. and Jr.

FUTURE STOCK BENEFIT PLANS

Stock Option Plan. Bank Mutual intends to implement a stock option plan for
Bank Mutual's directors, officers and employees after the restructuring.
Applicable regulations prohibit us from implementing this plan until six months
after the restructuring. If we implement this plan within one year after the
restructuring, applicable regulations require that we first obtain the approval
of the holders of a majority of the outstanding shares of Bank Mutual that are
not owned by the MHC. We have not decided whether we will implement this plan
before or after the one-year anniversary of the restructuring.

We expect to adopt a stock option plan that will authorize the Compensation
Committee to grant options to purchase up to 10% of the shares issued in the
restructuring and the First Northern merger, over a period of 10 years. The
Committee will decide which eligible participants will receive options and what
the terms of those options will be. However, no stock option will permit its
recipient to purchase shares at a price that is less than the fair market value
of a share on the date the option is granted, and no option will have a term
that is longer than 10 years.

If we implement a stock option plan before the first anniversary of the
restructuring, applicable regulations will require that we observe the following
restrictions:

- We must limit the total number of shares that are optioned to outside
directors to 30% of the shares authorized for the plan.

- We must also limit the number of options granted to any one outside
director to 5% of the shares authorized for the plan and the number of
shares that are optioned to any executive officer to 25% of the shares
that are authorized for the plan.

- We must not permit the options to become vested at a more rapid rate than
20% per year beginning on the first anniversary of shareholder approval
of the plan.

- We must not permit accelerated vesting for any reason other than death or
disability.

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<PAGE> 106

After the first anniversary of the restructuring, we may amend the plan to
change or remove these restrictions. If we adopt a stock option plan within one
year after the restructuring, we expect to later amend the plan, subject to
shareholder approval, to remove these restrictions and to provide for
accelerated vesting in cases of retirement and change of control. We expect that
any other amendment to this plan, whether adopted before or after the first
anniversary of the plan's initial effective date will be subject to shareholder
approval if it would change the class of people eligible to receive benefits,
change the price they must pay for stock which they acquire under the plan, or
increase the number of shares available under the plan or increase the maximum
amount of stock that may be acquired by any one person under the plan.

We expect the stock option plan will permit the Committee to grant either
incentive stock options that qualify for special federal income tax treatment or
non-qualified stock options that do not qualify for special treatment. Incentive
stock options may be granted only to employees and will not create federal
income tax consequences when they are granted. If they are exercised during
employment or within three months after termination of employment, the exercise
will not create federal income tax consequences either. When the shares acquired
on exercise of an incentive stock option are resold, the seller must pay federal
income taxes on the amount by which the sales price exceeds the purchase price.
This amount will be taxed at capital gains rates if the sale occurs at least two
years after the option was granted and at least one year after the option was
exercised. Otherwise, it is taxed as ordinary income.

Non-qualified stock options may be granted to either employees or
non-employees such as directors, consultants and other service providers.
Incentive stock options that are exercised more than three months after
termination of employment are treated as non-qualified stock options.
Non-qualified stock options will not create federal income tax consequences when
they are granted. When they are exercised, federal income taxes must be paid on
the amount by which the fair market value of the shares acquired by exercising
the option exceeds the exercise price. When the shares acquired on exercise of a
non-qualified stock option are resold, the seller must pay federal income taxes
on the amount by which the sales price exceeds the purchase price plus the
amount included in ordinary income when the option was exercised. This amount
will be taxed at capital gains rates, which will vary depending upon the time
that has elapsed since the exercise of the option.

When a non-qualified stock option is exercised, we may be allowed a federal
income tax deduction for the same amount that the option holder includes in his
or her ordinary income. When an incentive stock option is exercised, there is no
tax deduction unless the shares acquired are resold sooner than two years after
the option was granted or one year after the option was exercised.

Management Recognition Plan. We intend to implement a management
recognition plan for our directors and officers after the restructuring.
Applicable regulations prohibit us from implementing this plan until six months
after the restructuring. If we implement this plan within one year after the
restructuring, the regulations require that we first obtain the approval of the
holders of a majority of the outstanding shares of Bank Mutual that are not held
by the MHC. We have not decided whether we will implement this plan before or
after the one-year anniversary of the restructuring. We expect to adopt a
management recognition plan that will authorize the Compensation Committee to
make restricted stock awards of up to 3% of the shares issued to investors other
than the MHC. The Compensation Committee will decide which directors and
officers will receive restricted stock and what the terms of those awards will
be. If we implement a management recognition plan before the first anniversary
of the restructuring, applicable regulations will require that we observe the
following restrictions:

- We must limit the total number of shares that are awarded to outside
directors to 30% of the shares authorized for the plan.

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<PAGE> 107

- We must also limit the number of shares that are awarded to any one
outside director to 5% of the shares authorized for the plan and the
number of shares that are awarded to any executive officer to 25% of the
shares that are authorized for the plan.

- We must not permit the awards to become vested at a more rapid rate than
20% per year beginning on the first anniversary of shareholder approval
of the plan.

- We must not permit accelerated vesting for any reason other than death or
disability.

After the first anniversary of the restructuring, we may amend the plan to
change or remove these restrictions. If we adopt a management recognition plan
within one year after the restructuring, we expect to amend the plan later,
subject to shareholder approval, to remove these restrictions and to provide for
accelerated vesting in cases of retirement and change of control. We expect that
any other amendment to this plan, whether adopted before or after the first
anniversary of the plan's initial effective date, will be subject to shareholder
approval if it would change the class of people eligible to receive benefits,
change the price they must pay for stock which they acquire under the plan, or
increase the number of shares available under the plan or increase the maximum
amount of stock that may be acquired by any one person under the plan.

We may obtain the shares needed for this plan by issuing additional shares
or through stock repurchases. Because we cannot issue new shares that would
reduce the MHC's ownership position to less than a majority of Bank Mutual's
outstanding shares, we expect to obtain most or all of the shares for this plan
through stock repurchases, to minimize dilution. Restricted stock awards under
this plan may feature employment restrictions that require continued employment
for a period of time for the award to be vested. They may feature restrictions
that require the achievement of specified corporate or individual performance
goals for the award to be vested. Or, they may feature a combination of
employment and performance restrictions. Awards are not vested unless the
specified employment restrictions and performance goals are met. However,
pending vesting, the award recipient may have voting and dividend rights. When
an award becomes vested, the recipient must include the current fair market
value of the vested shares in his income for federal income tax purposes. Bank
Mutual and Mutual Savings may be allowed a federal income tax deduction in the
same amount. Depending on the nature of the restrictions attached to the
restricted stock award, Bank Mutual and Mutual Savings may have to recognize a
compensation expense for accounting purposes ratably over the vesting period or
in a single charge when the performance conditions are satisfied.

LIMITATIONS ON FEDERAL TAX DEDUCTIONS FOR EXECUTIVE OFFICER COMPENSATION

As a private entity, Mutual Savings has been subject to federal tax rules
which permit it to claim a federal income tax deduction for a reasonable
allowance for salaries or other compensation for personal services actually
rendered. Following the restructuring, federal tax laws may limit this deduction
to $1 million each tax year for each executive officer named in the summary
compensation table in Bank Mutual's proxy statement for that year. This limit
will not apply to non-taxable compensation under various broad-based retirement
and fringe benefit plans, to compensation that is "qualified performance-based
compensation" under applicable law or to compensation that is paid in
satisfaction of commitments that arose before the restructuring. Bank Mutual and
Mutual Savings expect that the Compensation Committee will take this deduction
limitation into account with other relevant factors in establishing the
compensation levels of their executive officers and in setting the terms of
compensation programs. However, there is no assurance that all compensation paid
to our executive officers will be deductible for federal income tax purposes. To
the extent that compensation paid to any executive officer is not deductible,
the net after-tax cost of providing the compensation will be higher and the net
after-tax earnings of Bank Mutual and Mutual Savings will be reduced.

CERTAIN TRANSACTIONS WITH MEMBERS OF OUR BOARD OF DIRECTORS AND EXECUTIVE
OFFICERS
Mutual Savings has had, and expects to continue to have, regular business
dealings with its officers and directors, as well as their associates in firms
which they serve in various capacities. Consistent with

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<PAGE> 108

applicable law, Mutual's policy is that transactions with its directors and
executive officers be on terms that are no more beneficial to the director or
executive officer than Mutual Savings would provide to unaffiliated third
parties. Directors and executive officers, and their associates, regularly
deposit funds with Mutual Savings; the deposits are on terms and conditions
offered to other depositors.

To help prevent any inadvertent violations of its policy, Mutual Savings
discourages lending transactions between Mutual Savings and its insiders, but
loans are occasionally made. Certain of the directors and executive officers
have been indebted to Mutual Savings for loans made in the ordinary course of
business. All such loans have been on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons. These loans do not involve more than the normal
risk of collectibility or present other unfavorable futures.

PROPOSED PURCHASES OF COMMON STOCK BY MANAGEMENT

The following table presents, for each member of Mutual Savings' board of
directors and executive officers, the amount of stock they wish to purchase in
the offering. We have assumed that a sufficient number of shares will be
available to satisfy their subscriptions. The amounts include shares that may be
purchased through individual retirement accounts and by associates of members of
our Board of Directors and executive officers.

The table does not reflect the number of shares which management may
acquire under the employee stock ownership plan or any non tax-qualified
stock-based benefit plan, nor as a result of issuance of Bank Mutual common
stock in the First Northern merger. We are not aware of any First Northern stock
ownership by Mutual Savings' officers and directors.

None of the members of our board of directors or executive officers expect
to purchase more than 1% of Bank Mutual's common stock. Collectively, the
current members of the board of directors and executive officers and their
associates expect to purchase a total of 253,000 shares, or 4.2% of shares sold
in the offering, assuming the sale of 5,965,232 shares of common stock.

<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AMOUNT OF SHARES
---- ---------- ---------
<S> <C> <C>
Michael T. Crowley, Sr. ................................. $ 100,000 10,000
Michael T. Crowley, Jr.(a)............................... $1,200,000 120,000
Thomas H. Buestrin....................................... $ 150,000 15,000
R.W. Dwyer, Jr. ......................................... $ 20,000 2,000
Herbert W. Isermann...................................... $ 25,000 2,500
William J. Mielke........................................ $ 500,000 50,000
David J. Rolfs........................................... $ 155,000 15,500
Eugene H. Maurer, Jr. ................................... $ 100,000 10,000
P. Terry Anderegg........................................ $ 100,000 10,000
Christopher Callen....................................... $ 100,000 10,000
Marlene M. Scholz........................................ $ 80,000 8,000
</TABLE>

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

(a) Mr. Crowley, Jr. and his associates may purchase more than 100,000 shares
because he held funds in the Mutual CD fund of Mutual Savings 401(k) plan
on the January 31, 1999 eligibility record date. Therefore, his intended
subscription for 20,000 shares through the 401(k) plan is not counted
against the purchase limits imposed under the stock issuance plan.

In addition, four of the current directors of First Northern will become
directors of Bank Mutual. The six First Northern directors currently own a total
of approximately 630,000 outstanding shares of First Northern common stock. Only
four out of the six persons will become directors of Bank Mutual, and we cannot
assure that all of their current First Northern shares will be converted into
Bank Mutual shares in the First Northern merger. However, we expect that the
four persons chosen as directors will elect to receive at least some shares of
Bank Mutual common stock in the First Northern merger, thus increasing
management ownership going forward.

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<PAGE> 109

REGULATION

Set forth below is a brief description of certain laws and regulations
which relate to the regulation of Mutual Savings, before and after the
restructuring, and Bank Mutual, the MHC and First Northern Savings thereafter.
The description does not purport to be complete and is qualified in its entirety
by reference to the applicable laws and regulations.

GENERAL

Mutual Savings is a Wisconsin chartered mutual savings bank, and its
deposit accounts are insured up to applicable limits by the Federal Deposit
Insurance Corporation under the Savings Association Insurance Fund. Mutual
Savings currently is subject to extensive regulation, examination and
supervision by the Division of Savings Institutions of the Wisconsin Department
of Financial Institutions (the "Division") as its chartering agency, and by the
FDIC as the deposit insurer. Mutual Savings must file reports with the Division
and the FDIC concerning its activities and financial condition, and it must
obtain regulatory approval prior to entering into certain transactions, such as
mergers with, or acquisitions of, other depository institutions and opening or
acquiring branch offices.

The Division and the FDIC currently conduct periodic examinations to assess
Mutual Savings' compliance with various regulatory requirements. This regulation
and supervision establishes a comprehensive framework of activities in which a
savings bank can engage and is intended primarily for the protection of the
deposit insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes.

Following the restructuring, in which Mutual Savings and First Northern
Savings will convert to federally-chartered stock savings banks, and the Office
of Thrift Supervision (OTS) will become the primary regulator of both banks. The
FDIC will remain responsible for supervisory and enforcement activities and
examination policies with respect to the deposit insurance fund. Following the
restructuring, the Division will no longer be responsible for regulation or
supervision of Mutual Savings or First Northern Savings.

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

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

Certain of the laws and regulations applicable to Mutual Savings, Bank
Mutual, the MHC and First Northern Savings are summarized below or elsewhere in
this prospectus. These summaries do not purport to be complete and are qualified
in their entirety by reference to such laws and regulations.

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<PAGE> 110

MUTUAL SAVINGS
STATE REGULATION PRIOR TO RESTRUCTURING

Activity Powers. Mutual Savings derives its lending, investment and other
activity powers primarily from the applicable provisions of Chapter 214 of the
Wisconsin Statutes and its related regulations. Under these laws and
regulations, savings banks, including Mutual Savings, generally may invest in:

(i) real estate mortgages;

(ii) consumer and commercial loans;

(iii) specific types of debt securities, including certain corporate
debt securities and obligations of federal, state and local governments and
agencies;

(iv) certain types of corporate equity securities; and

(v) certain other assets.

A savings bank may also exercise trust powers upon approval of the Division.
Wisconsin savings banks may also exercise any power or offer any financially
related product or service that any other provider of financial products or
services may undertake in Wisconsin, unless the Division determines otherwise.
The exercise of these lending, investment and activity powers are limited by
federal law and the related regulations. See "-- Federal Regulation Prior to
Restructuring -- Activity Restrictions on State-chartered Banks" below.

Loans-to-One-Borrower Limitations. With certain specified exceptions, a
Wisconsin chartered savings bank may not make loans or extend credit to a single
borrower and to entities related to the borrower in an aggregate amount that
would exceed 15% of the bank's capital funds. A savings bank may lend an
additional 10% of the bank's capital funds if secured by collateral meeting the
requirements of Wisconsin laws and regulations. Mutual Savings currently
complies with applicable loans-to-one borrower limitations.

Minimum Capital Requirements. Under regulations of the Division, Wisconsin
savings banks must at all times maintain a net worth ratio in an amount not less
than 6.0%. For purposes of the regulation, the term "net worth ratio" means the
ratio, expressed as a percentage, the numerator of which is the result of
subtracting the savings bank's liabilities from its assets and adding to that
number unallocated, general loan loss reserves, but not loss reserves for
specific, identified losses, and the denominator of which is the savings bank's
assets. As of June 30, 2000, Mutual Savings' net worth ratio was 9.53%.

Examination and Enforcement. The Division may examine Mutual Savings
whenever it deems an examination advisable. The Division examines Mutual Savings
at least every 18 months. The Division may remove from a savings bank any
employee, agent or person affiliated with the savings bank if the Division finds
that the person has directly or indirectly violated any state or federal law,
regulation, rule or order regarding the operations of the savings bank or has
breached fiduciary or professional responsibilities to the savings bank.

MUTUAL SAVINGS
FEDERAL REGULATION PRIOR TO RESTRUCTURING

Capital Requirements. FDIC regulations require savings banks, such as
Mutual Savings, to maintain minimum levels of capital. The FDIC regulations
define two tiers, or classes, of capital.

Tier 1 capital is comprised of the sum of common shareholders' equity
(excluding the net unrealized appreciation or depreciation, net of tax, from
available-for-sale securities), non-cumulative perpetual preferred stock, any
related surplus, and minority interests in consolidated subsidiaries, minus all
intangible assets (other than qualifying servicing rights), and any net
unrealized loss on marketable equity securities.

The components of Tier 2 capital currently include cumulative perpetual
preferred stock, certain perpetual preferred stock for which the dividend rate
may be reset periodically, mandatory convertible securities, subordinated debt,
intermediate preferred stock and allowance for possible loan losses.

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Allowance for possible loan losses includible in Tier 2 capital is limited to a
maximum of 1.25% of risk-weighted assets. Overall, the amount of Tier 2 capital
that may be included in total capital cannot exceed 100% of Tier 1 capital.

The FDIC regulations establish a minimum leverage capital requirement for
banks in the strongest financial and managerial condition, with a rating of 1
(the highest examination rating of the FDIC for savings banks) under the Uniform
Financial Institutions Rating System, and that are not experiencing or
anticipating significant growth, of not less than a ratio of 3.0% of Tier 1
capital to total assets. For all other savings banks, the minimum leverage
capital requirement is 4.0%, unless a higher leverage capital ratio is warranted
by the particular circumstances or risk profile of the depository institution.

The FDIC regulations also require that savings banks meet a risk-based
capital standard. The risk-based capital standard requires the maintenance of a
ratio of total capital (which is defined as the sum of Tier 1 capital and Tier 2
capital) to risk-weighted assets of at least 8% and a ratio of Tier 1 capital to
risk-weighted assets of at least 4%. In determining the amount of risk-weighted
assets, all assets, plus certain off balance sheet items, are multiplied by a
risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in
the type of asset or item.

The federal banking agencies, including the FDIC, have also adopted
regulations to require an assessment of an institution's exposure to declines in
the economic value of a bank's capital due to changes in interest rates when
assessing the bank's capital adequacy. Under such a risk assessment, examiners
will evaluate a bank's capital for interest rate risk on a case-by-case basis,
with consideration of both quantitative and qualitative factors. According to
the agencies, applicable considerations include the quality of the bank's
interest rate risk management process, the overall financial condition of the
bank and the level of other risks at the bank for which capital is needed.
Institutions with significant interest rate risk may be required to hold
additional capital. The agencies have also issued a joint policy statement
providing guidance on interest rate risk management, including a discussion of
the critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy.

On June 30, 2000 Mutual Savings exceeded the minimum capital adequacy
requirements; see "Capitalization."

Activity Restrictions on State-chartered Banks. Section 24 of the Federal
Deposit Insurance Act, as amended (FDIA), which was added by the Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA), generally limits the
activities and investments of state-chartered FDIC insured banks and their
subsidiaries to those permissible for federally chartered national banks and
their subsidiaries, unless such activities and investments are specifically
exempted by Section 24 or consented to by the FDIC.

Regulations promulgated by the FDIC under Section 24 allow state-chartered
savings banks to engage in certain activities upon notice to the FDIC, if such
activities are conducted in a majority-owned subsidiary and meet certain other
regulatory conditions. Pursuant to these regulations, Mutual Savings currently
owns, through a subsidiary, four lots adjacent to its headquarters in Brown
Deer, Wisconsin and 318 acres of undeveloped land in Oconomowoc, Wisconsin.

Before making a new investment or engaging in a new activity not
permissible for a national bank or otherwise permissible under Section 24 of the
FDIC regulations thereunder, an insured bank must seek approval from the FDIC to
make such investment or engage in such activity. The FDIC will not approve the
activity unless the bank meets its minimum capital requirements and the FDIC
determines that the activity does not present a significant risk to the FDIC
insurance funds.

Enforcement. The FDIC has extensive enforcement authority over insured
state savings banks, including Mutual Savings. This enforcement authority
includes, among other things, the ability to assess civil money penalties, to
issue cease and desist orders and to remove directors and officers. In general,
these enforcement actions may be initiated in response to violations of laws and
regulations and to unsafe or unsound practices.

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The FDIC is required, with certain exceptions, to appoint a receiver or
conservator for an insured state savings bank if that bank is "critically
undercapitalized." For this purpose, "critically undercapitalized" means having
a ratio of tangible capital to total assets of less than 2%. The FDIC may also
appoint a conservator or receiver for a state bank on the basis of the
institution's financial condition or upon the occurrence of certain events,
including:

- insolvency, whereby the assets of the bank are less than its liabilities
to depositors and others;

- substantial dissipation of assets or earnings through violations of law
or unsafe or unsound practices;

- existence of an unsafe or unsound condition to transact business;

- likelihood that the bank will be unable to meet the demands of its
depositors or to pay its obligations in the normal course of business;
and

- insufficient capital, or the incurring or likely incurring of losses that
will deplete substantially all of the institution's capital with no
reasonable prospect of replenishment of capital without federal
assistance.

Deposit Insurance. The deposit accounts held by Mutual Savings are insured
by the SAIF to a maximum of $100,000 as permitted by law. Insurance on deposits
may be terminated by the FDIC if it finds the Mutual Savings has engaged in
unsafe or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC or the OTS as Mutual Savings' primary regulator.

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

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

Under the FDIA, the FDIC may terminate the insurance of an institution's
deposits upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC. The management of Mutual Savings does not know of any practice, condition,
or violation that might lead to termination of its deposit insurance.

Transactions with Affiliates. Transactions between an insured state savings
bank, such as Mutual Savings, and any of its affiliates are governed by Sections
23A and 23B of the Federal Reserve Act. An affiliate of a bank is any company or
entity that controls, is controlled by or is under common control with

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the bank. Currently, a subsidiary of a bank that is not also a depository
institution is not treated as an affiliate of the bank for the purposes of
Sections 23A and 23B; however, the Federal Reserve Board has proposed treating
any subsidiary of a bank that is engaged in activities not permissible for bank
holding companies under the Bank Holding Company Act of 1956 ("BHCA"), as an
affiliate for purposes of Section 23A and 23B. Sections 23A and 23B limit the
extent to which the bank or its subsidiaries may engage in "covered
transactions" with any one affiliate to an amount equal to 10% of such bank's
capital stock and surplus, and limit all such transactions with all affiliates
to an amount equal to 20% of such capital stock and surplus. The statutory
sections also require that all such transactions be on terms that are consistent
with safe and sound banking practices. The term "covered transaction" includes
the making of loans, purchase of assets, issuance of guarantees and other
similar types of transactions. Further, most loans by a bank to any of its
affiliates must be secured by collateral in amounts ranging from 100 to 130
percent of the loan amounts. In addition, any covered transaction by a bank with
an affiliate and any purchase of assets or services by a bank from an affiliate
must be on terms that are substantially the same, or at least as favorable, to
the bank as those that would be provided to a non-affiliate.

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

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

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

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

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

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

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

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

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

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

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

- 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 investing in
community development projects, affordable housing, and programs
benefitting low or moderate income individuals and businesses; and

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

The CRA requires the FDIC to provide a written evaluation of an
institution's CRA performance utilizing a four-tiered descriptive rating system
and requires public disclosure of an institution's CRA rating. Mutual Savings
received a "satisfactory" overall rating in its most recent CRA examination.

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

In addition, the FDIC adopted regulations to require a bank that is given
notice by the FDIC that it is not satisfying any of such safety and soundness
standards to submit a compliance plan to the FDIC. If, after being so notified,
a bank fails to submit an acceptable compliance plan or fails in any material
respect to implement an accepted compliance plan, the FDIC may issue an order
directing corrective and other actions of the types to which a significantly
undercapitalized institution is subject under the "prompt corrective action"
provisions of FDICIA. If a bank fails to comply with such an order, the FDIC may
seek to enforce such an order in judicial proceedings and to impose civil
monetary penalties.

Prompt Corrective Action. FDICIA also established a system of prompt
corrective action to resolve the problems of undercapitalized institutions. The
FDIC, as well as the other federal banking regulators, adopted regulations
governing the supervisory actions that may be taken against undercapitalized
institutions. The regulations establish five categories, consisting of "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." The FDIC's regulations
define the five capital categories as follows: Generally, an institution will be
treated as "well capitalized" if its ratio of total capital to risk-weighted
assets is at least 10%, its ratio of Tier 1 capital to risk-weighted assets is
at least 6%, its ratio of Tier 1 capital to total assets is at least 5%, and it
is not subject to any order or directive by the FDIC to meet a specific capital
level. An institution will be treated as "adequately capitalized" if its ratio
of total capital to risk-weighted assets is at least 8%, its ratio

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of Tier 1 capital to risk-weighted assets is at least 4%, and its ratio of Tier
1 capital to total assets is at least 4% (3% if the bank receives the highest
rating under the Uniform Financial Institutions Rating System) and it is not a
well-capitalized institution. An institution that has total risk-based capital
of less than 8%, Tier 1 risk-based-capital of less than 4% or a leverage ratio
that is less than 4% (or less than 3% if the institution is rated a composite
"1" under the Uniform Financial Institutions Rating System) would be considered
to be "undercapitalized." An institution that has total risk-based capital of
less than 6%, Tier 1 capital of less than 3% or a leverage ratio that is less
than 3% would be considered to be "significantly undercapitalized," and an
institution that has a tangible capital to assets ratio equal to or less than 2%
would be deemed to be "critically undercapitalized."

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

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

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

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

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

Loans to a Bank's Insiders. A bank's loans to its executive officers,
directors, any owner of 10% or more of its stock (each, an insider) and any of
certain entities affiliated with any such person (an insider's related interest)
are subject to the conditions and limitations imposed by Section 22(h) of the
Federal Reserve Act and the Federal Reserve Board's Regulation O thereunder.
Under these restrictions, the aggregate amount of the loans to any insider and
the insider's related interests may not exceed the loans-to-one-borrower limit
applicable to national banks, which is comparable to the loans-to-one-borrower
limit applicable to Mutual Savings' loans. See "-- Loans-to-One Borrower
Limitations." All loans by a bank to all insiders and insiders' related
interests in the aggregate may not exceed the bank's unimpaired capital and
unimpaired surplus. With certain exceptions, loans to an executive officer,
other than loans for the education of the officer's children and certain loans
secured by the officer's residence, may not exceed the lesser of $100,000 or the
greater of $25,000 or 2.5% of the bank's capital and unimpaired surplus.
Regulation O also requires that any proposed loan to an insider or a related
interest of that insider be approved in advance by a majority of the board of
directors of the bank, with any interested director not participating in the
voting, if such loan, when aggregated with any existing loans to that insider
and the

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insider's related interests, would exceed either $500,000 or the greater of
$25,000 or 5% of the bank's unimpaired capital and surplus. Generally, such
loans must be made on substantially the same terms as, and follow credit
underwriting procedures that are not less stringent than, those that are
prevailing at the time for comparable transactions with other persons.

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

MUTUAL SAVINGS AND FIRST NORTHERN SAVINGS
FEDERAL REGULATION FOLLOWING RESTRUCTURING

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

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

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

Regulation of the Banks following the restructuring will be comparable in
many respects to the regulation of Mutual Savings prior to the restructuring
described above with several key differences. Because of their conversion to a
federal savings bank charter, the Banks will no longer be subject to the
regulation or supervision of the Division. In addition, because of this charter
conversion, the OTS will become their primary federal regulator. Set forth below
are several material differences in the federal regulation and supervision of
the Banks after the restructuring as compared to its regulation before the
restructuring as described above.

Regulatory Capital Requirements. OTS capital regulations require savings
institutions to meet three capital standards. The standards are tangible capital
equal to 1.5% of adjusted total assets, core capital equal to at least 3% of
total adjusted assets, and risk-based capital equal to 8% of total risk-weighted
assets. Mutual Savings' pro forma capital ratios are set forth under "Regulatory
Capital Compliance."

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

The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital of 8% of risk-weighted assets.
Risk-based capital is comprised of core and supplementary capital. The
components of supplementary capital include, among other items, cumulative
perpetual preferred stock, perpetual subordinated debt, mandatory convertible
subordinated debt, intermediate-term preferred stock, and the portion of the
allowance for loan losses not designated for specific loan losses. The portion
of the allowance for loan and lease losses includible in supplementary capital
is limited to a maximum of

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1.25% of risk-weighted assets. Overall, supplementary capital is limited to 100%
of core capital. A savings association must calculate its risk-weighted assets
by multiplying each asset and off-balance sheet item by various risk factors as
determined by the OTS, which range from 0% for cash to 100% for delinquent
loans, property acquired through foreclosure, commercial loans, and other
assets.

OTS rules require a deduction from capital for institutions which have
unacceptable levels of interest rate risk. The OTS calculates the sensitivity of
an institution's net portfolio value based on data submitted by the institution
in a schedule to its quarterly Thrift Financial Report and using the interest
rate risk measurement model adopted by the OTS. The amount of the interest rate
risk component, if any, is deducted from an institution's total capital in order
to determine if it meets its risk-based capital requirement. Federal savings
institutions with less than $300 million in assets and a risk-based capital
ratio above 12% are exempt from filing the interest rate risk schedule. However,
the OTS may require any exempt institution to file such schedule on a quarterly
basis and may be subject to an additional capital requirement based on its level
of interest rate risk as compared to its peers.

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

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

Under the revised OTS rules, capital distributions also include a savings
association's payment to repurchase, redeem, retire, or otherwise acquire any of
its shares or other ownership interests, any payment to repurchase, redeem or
otherwise acquire debt instruments included in its total capital, and any
extension of credit to finance an affiliate's acquisition of those shares or
interests. Additionally, a capital distribution includes any direct or indirect
payment of cash or other property to owners or affiliates made in connection
with a corporate restructuring. The revised rule also defines as a capital
distribution any transaction the OTS or the FDIC determines, by order or
regulation, to be in substance a distribution of capital.

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

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

The revised OTS rule requires all savings associations to file a notice or
an application for approval before making a capital distribution. A savings
association must file an application if the association is not eligible for
expedited treatment under the application processing rules of the OTS or the
total amount of all capital distributions, including the proposed capital
distribution, for the applicable calendar year would exceed an amount equal to
the savings association's net income for that year to date plus the savings
association's retained net income for the preceding two years.

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

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

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

- the proposed distribution would violate a prohibition contained in any
applicable statute, regulation, or agreement between the savings
association and the OTS, or the FDIC, or a condition imposed on the
savings association in an OTS-approved application or notice; or

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

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

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

- The savings association will be undercapitalized, significantly
undercapitalized, or critically undercapitalized under the prompt
corrective action regulations of the OTS following the capital
distribution;

- The proposed capital distribution raises safety and soundness concerns;
or

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

Qualified Thrift Lender Test. Federal savings associations must meet a
qualified thrift lender test or they become subject to operating restrictions.
Until recently, the chief restriction was the elimination of borrowing rights
from the Federal Home Loan Bank. However, with passage of the Gramm-Leach-Bliley
Financial Modernization Act of 1999 by Congress, the failure to maintain
qualified thrift lender status will not affect borrowing rights with the Federal
Home Loan Bank. Notwithstanding these changes, Mutual Savings anticipates that
it will maintain an appropriate level of investments consisting primarily of
residential mortgages, mortgage-backed securities and other mortgage-related
investment, and otherwise qualify as a qualified thrift lender. The required
percentage of these mortgage-related investments is 65% of portfolio assets.
Portfolio assets are all assets minus intangible assets, property used by the
institution in conducting its business and liquid assets equal to 10% of total
assets. Compliance with the qualified thrift lender test is determined on a
monthly basis in nine out of every twelve months.

Transactions With Affiliates. Generally, federal banking law requires that
transactions between a savings institution or its subsidiaries and its
affiliates must be on terms as favorable to the savings institution as
comparable transactions with non-affiliates. In addition, some transactions can
be restricted to an aggregate percentage of the savings institution's capital.
Collateral in specified amounts must usually be provided by affiliates in order
to receive loans from the savings institution. In addition, a savings
institution may not extend credit to any affiliate engaged in activities not
permissible for a bank holding company or acquire the securities of any
affiliate that is not a subsidiary. The OTS has the discretion to treat
subsidiaries of savings institution as affiliates on a case-by-case basis. For a
more complete discussion of these restrictions, see "Mutual Savings -- Federal
Regulation Prior to Restructuring -- Transactions with Affiliates" above.

Liquidity Requirements. All federal savings institutions are required to
maintain an average daily balance of liquid assets equal to a percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. Depending on economic conditions and

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savings flows of all savings institutions, the OTS can vary the liquidity
requirement from time to time between 4% and 10%. Monetary penalties may be
imposed on institutions for liquidity requirement violations.

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

As a member, we are required to purchase and maintain stock in the Federal
Home Loan Bank of Chicago in an amount equal to at least 1% of our aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year, or 20% of our outstanding advances,
whichever is larger. Mutual Savings and First Northern Savings currently are in
compliance with this requirement and will be in compliance following the
restructuring. The Federal Home Loan Bank imposes various limitations on
advances such as limiting the amount of real estate related collateral to 30% of
a member's capital and limiting total advances to a member.

Under the recently enacted Gramm-Leach-Bliley Financial Modernization Act
of 1999, Mutual Savings and First Northern Savings are voluntary members of the
Federal Home Loan Bank of Chicago. The banks could withdraw or significantly
reduce their stock ownership in the Federal Home Loan Bank of Chicago, although
they have no current intention to do so. In the past, the Federal Home Loan
Banks provided funds for programs to resolve the problems created by troubled
savings institutions and also contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. These contributions have
adversely affected the level of Federal Home Loan Bank dividends paid and could
continue to do so in the future.

Federal Reserve System. The Federal Reserve System requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their checking, NOW, and Super NOW checking accounts and non-personal
time deposits. The balances maintained to meet the reserve requirements imposed
by the Federal Reserve System may be used to satisfy the OTS liquidity
requirements. Savings institutions have authority to borrow from the Federal
Reserve System "discount window," but Federal Reserve System policy generally
requires savings institutions to exhaust all other sources before borrowing from
the Federal Reserve System.

MHC REGULATION

General. Upon completion of the restructuring, MHC will become a federal
mutual holding company within the meaning of Section 10(o) of the Home Owners'
Loan Act. As such, MHC will be required to register with and be subject to OTS
examination and supervision as well as reporting requirements. In addition, the
OTS will have enforcement authority over the MHC and its non-savings institution
subsidiaries. Among other things, this authority permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to the financial
safety, soundness or stability of a subsidiary savings bank.

Permitted Activities. A mutual holding company is permitted to, among other
things:

- invest in the stock of a savings institution;

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

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

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

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

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

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

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

- act as a trustee under deed or trust.

As a result of the Gramm-Leach-Bliley Financial Modernization Act of 1999,
the activities of a newly formed mutual holding company were expanded, but are
generally limited to those of a financial nature, permitting securities and
insurance activities as well as affiliations with financial companies such as
insurance and securities firms.

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

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

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

Initially following the restructuring, the MHC expects to waive dividends
declared by Bank Mutual. The proposed management of the MHC believes this is
consistent with fiduciary duties owed to members of the MHC; among other
reasons, certain adverse tax consequences that would result from payment of the
dividend to the MHC. In addition, management believes that capital held in Bank
Mutual will be as productive, if not more productive, than capital held at the
MHC level.

If the MHC waives any dividend from Bank Mutual, then Bank Mutual would pay
such dividend only to its public shareholders. The MHC's decision as to whether
to waive a particular dividend will depend on a number of factors, including its
capital needs, the investment alternatives available to the MHC as compared to
those available to Bank Mutual, and the possibility of regulatory approvals.

BANK MUTUAL REGULATION

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

Bank Mutual will also be subject to the regulation and supervision of the
SEC and will be required to file certain reports with, and otherwise comply
with, the rules and regulations of the SEC. Certain of the SEC's rules and
regulations are designed to protect you, as Bank Mutual's shareholders.

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ACQUISITION OF BANK MUTUAL

Under federal law, no person may acquire control of Bank Mutual, Mutual
Savings, or First Northern Savings without first obtaining, as summarized below,
the approval of such acquisition of control by the OTS (or another federal
banking regulator).

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

TAXATION

General. The following discussion is intended only as a summary and does
not purport to be a comprehensive description of the federal tax rules
applicable to Mutual Savings, the MHC or Bank Mutual. In addition, this
discussion does not consider the effect of foreign, state and local taxes. For
federal income tax purposes, Mutual Savings reports its income on the basis of a
taxable year ending December 31, uses the accrual method of accounting, and is
generally subject to federal income taxation in the same manner as other
corporations. Following the restructuring, Bank Mutual, Mutual Savings and First
Northern Savings will constitute an affiliated group of corporations and,
therefore, will be eligible to report their income on a consolidated basis.
Because the MHC will own less than 80% of the common stock of Bank Mutual, it
will not be a member of that affiliated group and will report its income on a
separate return. See also Note 12 "Income Taxes" to the Mutual Savings
Consolidated Financial Statements. For Mutual Savings, the IRS has not examined
any returns that are currently open for review. The IRS has reviewed and closed
the final return for First Federal for the period ended March 31, 1997.

Corporate Alternative Minimum Tax. The Internal Revenue Code of 1986, as
amended, imposes a tax on alternative minimum taxable income ("AMTI") at a rate
of 20%. Only 90% of AMTI can be offset by net operating loss carryovers of which
Mutual Savings currently has none. AMTI is also adjusted by determining the tax
treatment of certain items in a manner that negates the deferral of income
resulting from the regular tax treatment of those items. Thus, Mutual Savings'
AMTI is increased by an amount equal to 75% of the amount by which Mutual
Savings' adjusted current earnings exceeds it AMTI, determined without regard to
this adjustment and prior to reduction for net operating losses.

Elimination of Dividends; Dividends Received Deduction. Bank Mutual may
exclude from its income 100% of dividends received from Mutual Savings and First
Northern as a member of the same affiliated group of corporations. Because,
following the restructuring, the MHC will not be a member of the affiliated
group, it will not qualify for such 100% dividends exclusion, but will be
entitled to deduct 80% of the dividends it receives from Bank Mutual so long as
it owns more than 20% of the common stock of Bank Mutual.

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THE RESTRUCTURING AND THE OFFERING

GENERAL

Under the plan of restructuring, Mutual Savings will reorganize from a
Wisconsin-chartered mutual savings bank into a holding company structure in
which Mutual Savings' depositors will hold all of the voting and liquidation
rights in the MHC, which in turn will own a majority interest in Bank Mutual, a
mid-tier holding company. The remaining interest in Bank Mutual will be held by
public shareholders. Bank Mutual will wholly-own Mutual Savings, which will
convert from mutual form into a federally-chartered stock savings bank.

The plan of restructuring and the related plan of stock issuance remain
subject to final regulatory approval by the Office of Thrift Supervision. The
plan of restructuring also requires approval of the members of Mutual Savings.
After we receive all the required regulatory approvals and member approval, we
will complete the restructuring which we describe in this prospectus.

We anticipate that the offering will be completed contemporaneously with or
immediately following the restructuring. We also intend to complete the First
Northern merger contemporaneously with or immediately following the
restructuring. Mutual Savings does not anticipate that it will complete the
restructuring if the offering and the First Northern merger cannot be completed.

Mutual Savings' board of directors initially approved Mutual Savings' plan
of restructuring on February 21, 2000. The board adopted the plan unanimously.
The plan of restructuring subsequently has been amended, also with unanimous
board approval, and when we refer to the plan of restructuring, it includes
amendments. For purposes of this discussion, we use "Stock Bank" to refer to
Mutual Savings in the post-restructuring stock form. References to Mutual
Savings include Mutual Savings in its current mutual form or in its
post-restructuring stock form, as indicated by the context.

DESCRIPTION OF THE RESTRUCTURING

Immediately prior to these transactions, Mutual Savings will have converted
to a federally-chartered mutual savings bank. Thereafter, a newly-formed,
federally-chartered, stock savings bank will merge with and into Mutual Savings.
The resulting Stock Bank will be a continuation of Mutual Savings. All of Mutual
Savings' interest in and to all property will vest in the Stock Bank, without
any further act. The Stock Bank will continue to have and be responsible for all
the rights, liabilities and obligations of Mutual Savings.

The MHC and Bank Mutual will not retain any assets of Mutual Savings that
are required by the Stock Bank in order to satisfy capital and reserve
requirements of federal law. All assets, rights, obligations and liabilities of
Mutual Savings that are not expressly retained by the MHC or Bank Mutual shall
be transferred to the Stock Bank. Mutual Savings will apply to the OTS to
allocate up to $100,000 in capital at the MHC level in connection with the
restructuring. In addition, Mutual Savings will contribute approximately $40.0
million to the initial capital of Bank Mutual, assuming the midpoint of the
offering range. This contributed capital, together with a substantial part of
the proceeds of the offering and funds from First Northern, will be used to pay
a portion of the consideration to First Northern shareholders in the First
Northern merger. Bank Mutual may distribute additional capital to the MHC
following the restructuring, subject to OTS regulations governing capital
distributions.

EFFECTS OF THE RESTRUCTURING

General. The Stock Bank will be authorized to exercise any and all powers
and rights of, and shall be subject to all limitations applicable to, stock
savings banks chartered under federal law. The initial board of directors of the
Stock Bank will be comprised of the existing directors of Mutual Savings, plus
Michael Meeuwsen, the chief executive officer of First Northern. Thereafter,
Bank Mutual, as the holder of shares of the Stock Bank's voting stock will elect
the Stock Bank's board of directors. We expect that

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present management of Mutual Savings will continue as the management of the
Stock Bank following the restructuring.

The restructuring will not affect Mutual Savings' present business of
accepting deposits and investing its funds in loans and other investments
permitted by law, except that all those functions will be assumed by the Stock
Bank. The restructuring will not result in any change in the existing services
provided to depositors and borrowers, or in its existing offices, management and
staff. The Stock Bank will be subject to regulation, supervision and examination
by the OTS and the FDIC.

Deposits and Loans. The Stock Bank will be owned by Bank Mutual. However,
the voting, ownership and liquidation rights of members of Mutual Savings will
become the rights of members of the MHC, subject to the conditions below.
Members of Mutual Savings at the effective date will automatically become the
members of the MHC. Each deposit account in Mutual Savings will then become a
deposit account in the Stock Bank in the same amount and upon the same terms and
conditions, except that each depositor will have ownership and membership rights
with respect to the MHC rather than the Stock Bank. All insured deposit accounts
of Mutual Savings that are transferred to the Stock Bank will continue to be
federally insured up to the legal maximum by the FDIC in the same manner as
prior to the restructuring. Any new deposit accounts established with the Stock
Bank after the restructuring will create membership and liquidation rights in
the MHC and will be federally insured up to the legal maximum by the FDIC. First
Northern depositors will not be members of the MHC.

All loans and other borrowings from Mutual Savings will retain the same
status with the Stock Bank after the restructuring as they had with Mutual
Savings immediately prior to it. Borrowers are not members of Mutual Savings and
will not have membership rights in the MHC.

Voting Rights. As a Wisconsin-chartered mutual savings bank, Mutual Savings
has no authority to issue capital stock and, thus, no shareholders. Control of
Mutual Savings in its mutual form is vested in the board of directors. After the
restructuring, the members of the board of directors of Mutual Savings, together
with four First Northern directors, will become the directors of MHC and Bank
Mutual. They will be elected in three-year staggered terms. The affairs of the
Stock Bank will be directed by its board of directors, and all voting rights as
to the Stock Bank will be vested exclusively in Bank Mutual, the holder of its
outstanding voting stock. The Stock Bank and Bank Mutual may issue any amount of
non-voting stock to persons other than the MHC.

Following the restructuring, Bank Mutual will have the power to issue
shares of common stock to persons other than the MHC. But so long as the MHC is
in existence, the MHC will be required to own at least a majority of the voting
stock of Bank Mutual. Because of its majority ownership interest in Bank Mutual,
and Bank Mutual's ownership of the Stock Bank, the MHC generally will be able to
elect all directors of Bank Mutual and generally will be able to control the
outcome of most matters presented to the shareholders of Mutual Savings and Bank
Mutual for vote.

As a federally chartered mutual holding company, the MHC will have no
authorized capital stock and, thus, no shareholders. The MHC will be controlled
by members (that is, the depositors) of Stock Bank, and most members have
granted proxies in favor of Mutual's management. The revocable proxies that
members of Mutual Savings have granted to the board of directors of Mutual
Savings, which confer on the board general authority to cast a member's vote on
matters presented to the members, will cover the member's votes as a member of
the MHC, and the authority shall be conferred on the board of directors of the
MHC. In addition, all persons who become depositors of the Stock Bank following
the restructuring will have membership rights with respect to the MHC. Borrowers
are not members of Mutual Savings and, thus, will not receive membership rights
in the MHC.

Liquidation Rights. Prior to the restructuring, holders of deposit accounts
in Mutual Savings would be entitled to distribution of any assets of Mutual
Savings remaining after the claims of such depositors and all other creditors
are satisfied. Following the restructuring, the holders of the common stock,
including the MHC, would be entitled to any assets remaining upon a liquidation.
Except through their

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liquidation interests in the MHC, discussed below, holders of deposit accounts
in Mutual Savings would have no interest in those assets.

In the event of a liquidation of the MHC following consummation of the
restructuring, holders of deposit accounts in Mutual Savings would be entitled,
pro rata to the value of their accounts, to distribution of any assets of the
MHC remaining after the claims of all creditors of the MHC are satisfied.
Shareholders of Bank Mutual will have no liquidation or other rights with
respect to the MHC in their capacities as such. There currently are no plans to
liquidate the Stock Bank or the MHC in the future.

Subscription and Preemptive Rights. Under OTS regulations, depositors of
Mutual Savings are entitled to priority subscription rights to purchase shares
of capital stock of the MHC in the event that the MHC converts from mutual to
stock form subsequent to the restructuring. Holders of the capital stock of Bank
Mutual shall not be entitled to preemptive rights with respect to any shares of
Bank Mutual that may be issued.

POSSIBLE CONVERSION OF THE MHC TO STOCK FORM

It is possible that, at some point in the future, we would make a "full
conversion" from the mutual to the stock form of organization. Mutual Savings'
plan of restructuring includes provisions which would govern treatment of
various constituencies' interests in such a full conversion.

The plan of restructuring includes provisions intended to protect Bank
Mutual shareholders. In general, the provisions provide that Bank Mutual
shareholders would generally receive, in any subsequent full conversion, the
percentage of ownership in a successor entity as they would hold in Bank Mutual
just prior to that conversion.

Under current OTS regulations, in the event of a full conversion,
depositors would have a first right to purchase any shares offered for sale by a
successor entity. The process for the offer and sale of any such shares would be
similar to the offering contemplated by the plan of restructuring, although
eligibility dates and purchase amounts, among other things, could differ. In
addition, the plan of restructuring provides that, in a full conversion, a first
priority for eligible account holders on January 31, 1999 with the same account
number and account title at the future eligibility date will be granted. These
account holders would have a right, before that of other depositors, to purchase
shares of any successor entity.

Bank Mutual cannot assure that there will be any subsequent full conversion
or when one might occur. Also, any full conversion will be subject to OTS or
other governmental regulations as then in effect. Those regulations may affect
the treatment of Mutual Savings' depositors and Bank Mutual shareholders in any
full conversion. We also expect that such a conversion would require the
approval of the MHC's members.

FEDERAL TAX CONSEQUENCES OF THE RESTRUCTURING

The following is a discussion of the material federal income tax
consequences of the restructuring of Mutual Savings. This discussion does not
address all tax consequences of the restructuring. In addition, no information
is provided with respect to the tax consequences of the restructuring under
applicable foreign, state or local laws.

The restructuring will be accomplished as follows:

(a) Mutual Savings will convert from a state-chartered savings bank to
a federal savings bank.

(b) Mutual Savings will form the MHC, a federally-chartered mutual
holding company which will be subject to regulation by OTS. The MHC will
form a transitory federal stock savings bank ("Transitory"). Mutual Savings
has owned all of the shares of Bank Mutual and will contribute those shares
to the MHC. The MHC will thereupon own all of the stock of both Bank Mutual
and Transitory.

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(c) Mutual Savings will convert to a federal stock savings bank. The
depositors of Mutual Savings will receive deposit accounts in Stock Bank
with the same terms and conditions as their deposit accounts in Mutual
Savings.

(d) Transitory will merge into Stock Bank in a transaction in which
the MHC will receive all of the stock of Stock Bank. Stock Bank will be the
surviving corporation in the merger.

(e) The MHC will transfer the stock of Stock Bank to Bank Mutual so
that Bank Mutual will hold all of the stock of Stock Bank, and the MHC will
initially own 100% of the shares of common stock of Bank Mutual. The former
depositors of Mutual Savings will hold all of the liquidation interests and
voting rights in the MHC, for so long as, and to the extent, they continue
to maintain their qualifying deposits with Stock Bank.

(f) Simultaneously with the First Northern merger, Bank Mutual will
issue shares of its stock to the public and the Bank Mutual employee
benefit plans for cash in the subscription offering at the price to
purchasers at $10 per share.

(g) The initially issued stock of Stock Bank, which will be
constructively received by the former Mutual Savings' depositors when
Mutual Savings becomes a stock savings bank under step (c) above, will be
issued to the MHC in exchange for liquidation interests in the MHC which
will be held by Mutual Savings' depositors.

In addition, as a result of the First Northern merger, Bank Mutual will be
the sole shareholder of First Northern Savings.

Bank Mutual will concurrently offer for sale shares of its common stock
pursuant to the plan of restructuring. The amount of Bank Mutual common stock to
be offered to the public will be determined so that the total Bank Mutual issued
to First Northern shareholders in the First Northern Merger, the public, and
reserved for options or the other compensation programs for directors and
employees of Bank Mutual and its subsidiaries will constitute less than 49.9% of
the total common stock of Bank Mutual. The balance of the common stock of Bank
Mutual will be owned by the MHC. As a result of these transactions:

- Mutual Savings and First Northern Savings will be a wholly owned
subsidiary of Bank Mutual;

- Bank Mutual will be a majority owned subsidiary of the MHC; and

- the depositors of Mutual Savings will hold liquidation interests in the
MHC.

Under this structure:

- the conversion(s) of Mutual Savings from a state-chartered mutual savings
bank to a federal savings bank, and then to a federal stock savings bank,
is intended to be a reorganization, or reorganizations, under Section
368(a)(1)(F) of the Code;

- the exchange of the shares of Mutual Savings' initial common stock deemed
constructively received by depositors for liquidation interests and
voting rights in the MHC is intended to be part of a tax-free exchange
under Section 351 of the Code; and

- the First Northern merger is intended to be a reorganization under
Section 368(a)(1)(A) of the Code.

Under the plan of restructuring, consummation of the restructuring is
conditioned upon, among other things, the prior receipt by Mutual Savings of
either a private letter ruling from the IRS or an opinion of Mutual Savings'
counsel as to the federal income tax consequences of the restructuring to Mutual
Savings (in both its mutual and stock form), the MHC, Bank Mutual and the
eligible account holders and supplemental account holders. In Rev. Proc. 2000-3,
2000-1 I.R.B. 103, the IRS announced that it will not rule on whether a
transaction qualifies as a tax-free reorganization under Section 368(a)(1)(F) of
the Code or as a tax-free exchange of stock for stock in the formation of a
holding company under

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Section 351 of the Code, but that it will rule on significant subissues that
must be resolved to determine whether the transaction qualifies under either of
these Code sections.

Based in part upon certain representations of Mutual Savings and First
Northern and customary assumptions, Quarles & Brady LLP, Mutual's counsel, will
issue its opinion regarding certain federal income tax consequences of the
restructuring. Mutual Savings has requested a private letter ruling from the IRS
regarding certain significant subissues associated with the restructuring.

In the following discussion, "Mutual Bank" refers to Mutual Savings before
the restructuring and "Stock Bank" refers to Mutual Savings after the
restructuring. With regard to the restructuring, Quarles & Brady has issued its
opinion to the effect that:

(1) the conversion(s) of Mutual Savings from a state-chartered mutual
savings bank to a federal savings bank, and then to a federal stock savings
bank, will constitute a reorganization, or reorganizations, under Section
368(a)(1)(F) of the Code, and Mutual Savings (in either its status as
Mutual Bank or Stock Bank) will not recognize gain or loss as a result of
the conversion(s);

(2) the basis of each asset of Mutual Bank received by Stock Bank in
the reorganization will be the same as Mutual Bank's basis for such asset
immediately prior to the reorganization;

(3) the holding period of each asset of Mutual Bank received by Stock
Bank in the reorganization will include the period during which such asset
was held by Mutual Bank prior to the reorganization;

(4) Mutual Bank's depositors will recognize no gain or loss upon their
constructive receipt of shares of Stock Bank common stock solely in
exchange for their interests (i.e., liquidation interests and voting
rights) in Mutual Bank;

(5) no gain or loss will be recognized by the depositors of Mutual
Savings (formerly Mutual Bank) upon the transfer to the MHC of shares of
Stock Bank common stock they constructively receive in the reorganization
in exchange for interests (i.e., liquidation interests and voting rights)
in the MHC;

(6) no gain or loss will be recognized by depositors of Mutual Bank
upon the issuance to them of deposits in Stock Bank in the same dollar
amount as their deposits in the Mutual Bank;

(7) no gain or loss will be recognized by those that purchase shares
of Bank Mutual in the subscription offering upon the transfer of cash to
Bank Mutual in exchange for shares of common stock of Bank Mutual; and

(8) no gain or loss will be recognized by Bank Mutual upon the
issuance of shares of Bank Mutual in exchange for cash in the subscription
offering.

The opinion of Quarles & Brady is not binding upon the Internal Revenue
Service or any court. Accordingly, we cannot assure you that the Internal
Revenue Service will not contest the conclusions expressed in Quarles & Brady's
opinion, or, if it does so, that a court will not agree with the IRS' position.

ACCOUNTING CONSEQUENCES

The restructuring will be accounted for at historical cost in a manner
similar to pooling of interest accounting in accordance with generally accepted
accounting principles. Accordingly, the carrying value of Mutual Savings'
assets, liabilities and equity will not be affected by the restructuring and
will be reflected in the Stock Bank's financial statements at their historical
amounts.

The First Northern merger will be accounted for as a purchase in accordance
with generally accepted accounting principles. Accordingly, the assets and
liabilities of First Northern will be initially carried on all applicable
financial statements at fair value as of the merger date and the excess of the
purchase price over the fair value of the net assets will be recorded as an
intangible asset to be amortized in future periods.

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CONDITIONS TO THE RESTRUCTURING

The restructuring is subject to the receipt of all required regulatory
approvals, including various approvals of the OTS. We cannot assure that we will
receive all regulatory approvals. Receipt of such approvals from the OTS will
not constitute a recommendation or endorsement of the plan of restructuring or
the related stock issuance plan by the OTS. Completion also is subject to
approval by a majority of the total number of votes entitled to be cast by
members of Mutual Savings at the special meeting called for voting on the plan
of restructuring. We must also receive rulings by the IRS and/or opinions of
Mutual Savings' attorneys with respect to the tax consequences of the
restructuring. See "Federal and State Tax Consequences of the Restructuring."

AMENDMENT OR TERMINATION OF THE PLAN OF RESTRUCTURING

The terms of the plan of restructuring may be amended by the board of
directors of Mutual Savings as a result of comments from regulatory authorities
or otherwise prior to the solicitation of proxies from the members, and at any
time thereafter with the concurrence of the OTS. The board of directors may
terminate the plan at any time prior to the special meeting and at any time
thereafter with the concurrence of the OTS. In its discretion, the board of
directors may modify or terminate the plan of restructuring upon the order of
the regulatory authorities or to conform to new mandatory regulations of the
OTS, without a resolicitation of proxies or another meeting of the members, if
the OTS concurs that such resolicitation is not required. However, any material
amendment of the terms of the plan of restructuring that relate to the
restructuring that occurs after the special meeting requires a resolicitation of
members. The plan of restructuring will be terminated if not completed within 24
months from the date upon which the members of Mutual Savings approve it, and
such period may not be extended by Mutual Savings.

The related stock issuance plan also may be amended or terminated. Unless
an extension is granted by the OTS, the stock issuance plan shall be terminated
if not completed within 90 days of the date of approval of the stock issuance
plan by the OTS.

THE OFFERING

Contemporaneously with the restructuring, Bank Mutual is offering shares of
its common stock to persons other than the MHC. Bank Mutual is offering between
a minimum of 4,692,782 shares and a maximum of 7,237,682 shares of common stock
in the offering, subject to adjustment to up to 8,701,000 shares in the event
the estimated pro forma market value of the common stock has increased at the
conclusion of the offering. The shares sold in the offering will be in addition
to shares which will be issued by Bank Mutual in the First Northern merger. Bank
Mutual may cancel the offering at any time, and orders for common stock that
have been submitted prior thereto are subject to cancellation under such
circumstances.

As described in more detail below, non-transferable rights to subscribe for
the common stock in the subscription offering have been granted to certain
persons according to certain preference categories. Subject to the prior rights
of holders of subscription rights and the requirements of the First Northern
merger, Mutual Savings may also offer shares of common stock in a community
offering to certain members of the general public. Mutual Savings may reject, in
whole or in part, orders received in the community offering in its sole
discretion.

Expiration Date for the Subscription Offering. The subscription offering
will expire at 10:00 a.m., central time, on October 16, 2000, unless we extend
this period for up to 45 days. We may further extend this period for additional
60 day periods with the approval of the OTS. Subscription rights which have not
been exercised prior to the expiration date, as extended, will become void. If
an extension beyond November 30, 2000 is granted, Mutual Savings will resolicit
subscribers, notifying them of the extension of time and of their rights to
change or cancel their orders. Each subsequent extension may not exceed 60 days,
and all extensions, in the aggregate, may not last beyond February 21, 2002.

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If all shares have not been subscribed for by the expiration date, as
extended, all funds delivered to Mutual Savings will be returned promptly with
interest at our passbook savings rate and all deposit account withdrawal
authorizations will be canceled.

Subscription Offering. We have granted subscription rights under the stock
issuance plan to the following persons, the eligible subscribers, in the
following order of priority:

(1) Eligible Account Holders -- depositors with aggregate account
balances of $50 or more on deposit ("qualifying deposit") at Mutual Savings
as of January 31, 1999;

(2) the Mutual employee stock ownership plan, the "ESOP";

(3) Supplemental Eligible Account Holders -- depositors, other than
officers or directors of Mutual Savings or any of their associates, with a
qualifying deposit, as of June 30, 2000;

(4) Other Members -- depositors as of August 31, 2000, the voting
record date, who are not Eligible Account Holders or Supplemental Eligible
Holders; and

(5) directors, officers and employees of Mutual Savings who do not
qualify in earlier priorities.

Subscription rights are non-transferable and have been granted to eligible
subscribers without charge. The priorities are in accordance with OTS
regulations. No one is required to purchase any shares of common stock in the
subscription offering. All subscriptions received will be subject to the
availability of common stock after satisfaction of subscriptions of all eligible
subscribers having prior rights in the subscription offering and to the maximum
purchase limitations and other terms and conditions set forth in the stock
issuance plan. See "Limitations on Common Stock Purchases." We will make
reasonable attempts to provide a prospectus and related offering materials to
holders of subscription rights. However, the subscription offering and all
subscription rights will expire on the expiration date, whether or not we have
been able to locate each person entitled to subscription rights.

Priority 1: Eligible Account Holders. Each eligible account holder will
receive, as first priority, non-transferable rights to subscribe for common
stock in an amount of up to $800,000, or 80,000 shares.

If there are not sufficient shares available to satisfy all subscriptions
by eligible account holders, shares first will be allocated to permit each
subscribing eligible account holder to purchase the lesser of 100 shares or the
number of shares subscribed for. Thereafter, unallocated shares will be
allocated among the remaining eligible account holders with unfilled
subscriptions proportionate to the amount of their qualifying deposits.

The subscription rights of eligible account holders who are also directors
or officers of Mutual Savings or their associates will be subordinated to the
subscription rights of other eligible account holders to the extent attributable
to increased deposits in the one-year period preceding January 31, 1999.

Priority 2: The Employee Stock Ownership Plan. On a second priority basis
the Mutual ESOP will receive non-transferable subscription rights to purchase up
to 8% of the common stock to be issued in the offering and the First Northern
merger. As a tax-qualified employee benefit plan, the ESOP expects to purchase
8% of those shares. Subscriptions by the ESOP will not be aggregated with shares
of common stock purchased by any other participants in the offering, including
subscriptions of any of Mutual Savings' directors, officers or employees. We
have not yet determined whether the ESOP will subscribe for shares in the
offering or purchase shares in private transactions or on the open market after
completion of the offering.

Priority 3: Supplemental Eligible Account Holders. To the extent that there
are shares remaining, shares will be made available to supplemental eligible
account holders. Subject to that allocation, each supplemental account holder
will receive non-transferable rights to subscribe for common stock in an amount
of up to $800,000, or 80,000 shares.

If there are not sufficient shares available to satisfy all subscriptions
by supplemental eligible account holders, available shares first will be
allocated among subscribing supplemental eligible account holders to

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permit each supplemental eligible account holder to purchase the lesser of 100
shares or the number of shares subscribed for. Thereafter, unallocated shares
will be allocated among the remaining supplemental eligible account holders with
unfilled subscriptions proportionate to the amount of their qualifying deposits.

Priority 4: Other Members. To the extent that there are shares remaining,
shares will be made available to other members. Each will receive
non-transferable rights to subscribe for common stock in an amount of up to
$800,000, or 80,000 shares. If there are not sufficient shares available to
satisfy all subscriptions by other members, available shares first will be
allocated in the same manner as for supplemental eligible account holders.

Priority 5: Employees, Officers and Directors. On a fifth priority basis,
each employee, officer and director of Mutual Savings at the time of the
offering who is not eligible in the preceding priority categories shall receive
non-transferable subscription rights to subscribe for common stock in an amount
up to $800,000, or 80,000 shares.

Persons in Non-qualified States or Foreign Countries. We will make
reasonable efforts to comply with the securities laws of all states in the
United States in which persons entitled to subscribe for stock pursuant to the
stock issuance plan reside. However, we are not required to offer stock in the
subscription offering to any person who resides in a foreign country.

Subscriptions through the Mutual 401(k) Plan. The Mutual Savings 401(k)
plan was itself a depositor on the January 31, 1999 eligibility record date.
Therefore, participants in the 401(k) plan for whose benefit the deposits were
held on January 31, 1999, June 30, 2000 or the voting record date may separately
subscribe through the 401(k) plan. Other Mutual Savings employees who
individually qualify to purchase in the subscription offering may also subscribe
through the 401(k) plan based upon their individual priority.

Participants in the 401(k) plan's Mutual CD fund on January 31, 1999, June
30, 2000 or the voting record date may subscribe through the 401(k) plan without
those subscriptions being counted against their individual purchase limits under
the stock issuance plan. Other Mutual Savings employees who otherwise qualify to
purchase in the subscription offering may also subscribe through the 401(k) plan
but their subscriptions through the 401(k) plan will be included in their
personal limits.

First Northern Merger. In connection with the First Northern merger, Bank
Mutual will issue shares to the First Northern shareholders as part of the
consideration for that transaction. Bank Mutual will issue to First Northern
shareholders at least the minimum number of shares needed to complete that
merger, and those shares will not be part of the stock offering. In addition, in
the event that shares remain available after the subscription offering, Bank
Mutual may set aside those shares and issue them in the First Northern merger,
rather than including them in the community offering or syndicated community
offering.

Community Offering. If there are shares available after satisfaction of all
subscriptions in the subscription offering, and any shares set aside for First
Northern shareholders, the remaining shares of the common stock may be offered
in a community offering to the public, with a preference to persons who are
residents of the counties where Mutual Savings or First Northern Savings
maintain an office. No individual who purchases common stock in the community
offering may subscribe for more than $800,000, or 80,000 shares.

MUTUAL SAVINGS RESERVES THE RIGHT TO ACCEPT OR REJECT, IN WHOLE OR IN PART,
ANY OR ALL ORDERS IN THE COMMUNITY OFFERING, EITHER AT THE TIME OF RECEIPT OF AN
ORDER OR AS SOON AS PRACTICABLE FOLLOWING THE TERMINATION OF THE OFFERING. IF A
PART OF YOUR ORDER IS REJECTED, YOU MAY NOT CANCEL THE REMAINDER OF YOUR ORDER.

The counties in which Mutual Savings or First Northern Savings maintain
offices are Milwaukee, Barron, Brown, Calumet, Chippewa, Columbia, Dane, Dodge,
Door, Dunn, Eau Claire, Fond du Lac, Green Lake, Manitowoc, Marinette,
Outagamie, Ozaukee, Pierce, Polk, Rock, St. Croix, Sawyer,

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Shawano, Sheboygan, Washburn, Waukesha, Waupaca and Winnebago Counties in
Wisconsin, and Washington County in Minnesota.

"Residents" include persons who occupy a dwelling within these counties and
have established an ongoing physical presence in it, together with an indication
that such presence is not merely transitory in nature. To the extent the person
is a corporation or other business entity, the principal place of business or
headquarters shall be in these counties. We may utilize depositor or loan
records or such other evidence to make a determination as to whether a person is
a resident. In all cases, the determination of resident status will be made by
us in our sole discretion. Allocation of shares if an oversubscription occurs
will give preference to persons residing in the counties listed above, and will
be made in an equitable manner determined by us.

The community offering, if any, may commence concurrently with, during or
subsequent to the subscription offering and shall terminate no later than 45
days after the expiration of the subscription offering, unless extended by
Mutual Savings, with the approval of the OTS, if necessary. We may terminate the
community offering as soon as we have received orders in sufficient amount for
us to issue at least the minimum number of shares required to be issued,
4,692,782 shares.

Syndicated Community Offering. If any stock remains unsold in the
subscription and community offerings, we expect to use the services of
broker-dealers to sell such shares on a best efforts basis in a syndicated
community offering to be managed by Ryan, Beck. A syndicated community offering
may be conducted instead of or in addition to a community offering. It is
contemplated that no person may purchase more than $800,000, or 80,000 shares,
of common stock in the syndicated community offering.

Neither Ryan, Beck nor any registered broker-dealer shall have any
obligation to take or purchase any shares of the common stock in the syndicated
community offering. However, Ryan, Beck has agreed to use its best efforts in
the sale of shares in any syndicated community offering. The syndicated
community offering may commence during the community offering, if any, or after
the community offering is terminated. We may terminate the syndicated community
offering at any time, but it must terminate no more than 45 days following the
expiration of the subscription offering, unless extended by Mutual Savings with
the approval of the OTS.

If for any reason a syndicated community offering cannot be effected or is
not advisable and any shares remain unsold after the subscription and community
offerings, if any, Mutual will seek to make other arrangements for the sale of
the remaining shares. These other arrangements will be subject to the approval
of the OTS and to compliance with applicable state and federal securities laws.

MUTUAL SAVINGS RESERVES THE RIGHT TO ACCEPT OR REJECT, IN WHOLE OR IN PART,
ANY OR ALL ORDERS IN THE SYNDICATED COMMUNITY OFFERING, EITHER AT THE TIME OF
RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING THE TERMINATION OF THE
OFFERING.

STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED

The plan of restructuring requires that the purchase price of the common
stock must be based on the appraised pro forma market value of the common stock,
as determined on the basis of an independent valuation. Mutual Savings and Bank
Mutual have retained RP Financial to make the independent valuation. RP
Financial's fees for its services in making such appraisal (and a business plan
relating to the restructuring and stock offering) are estimated to be $120,000,
plus expenses. Mutual Savings and Bank Mutual will indemnify RP Financial and
its employees and affiliates against losses, including any losses in connection
with claims under federal securities laws, arising out of its services as
appraiser, except where RP Financial's liability results form its negligence or
bad faith.

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RP Financial made its appraisal in reliance upon the information contained
in this prospectus, including the financial statements. RP Financial also
considered the following factors, among others:

- the present and projected operating results and financial condition of
Bank Mutual, Mutual Savings, First Northern, and the economic and
demographic conditions in Mutual Savings' and First Northern's existing
market area;

- certain historical, financial and other information relating to Mutual
Savings and First Northern;

- a comparative evaluation of the operating and financial statistics of
Mutual Savings and First Northern with those of other publicly traded
mutual holding companies;

- the aggregate size of the offering and issuance of common stock;

- the impact of the stock offering and merger on Mutual Savings' net worth
and earnings potential;

- the proposed dividend policy of Bank Mutual and Mutual Savings; and

- the trading market for securities of comparable institutions and general
conditions in the market for such securities;

In its review of the appraisal provided by RP Financial, the board of
directors of Mutual Savings reviewed the methodologies and the appropriateness
of the assumptions used by RP Financial in addition to the factors listed above,
and the board of directors believes that such assumptions were reasonable.

The appraisal incorporated an analysis of a peer group of publicly-traded
mutual holding company institutions that RP Financial considered to be
comparable to Mutual Savings, including an evaluation of the average and median
price-to-earnings, price-to-core earnings, price-to-book value,
price-to-tangible book value and price-to-assets ratios indicated by the market
prices of the peer group companies, with such ratios adjusted to their fully
converted equivalent basis. RP Financial applied the peer group's fully
converted pricing ratios, as adjusted for certain qualitative valuation
adjustments to account for differences between Mutual Savings and the peer
group, to Mutual Savings' pro forma earnings, core earnings, book value,
tangible book value and assets to derive the estimated pro forma market value of
Mutual Savings. RP Financial has estimated that in its opinion as of August 25,
2000 the estimated pro forma market value of Bank Mutual was between $144.5
million and $195.5 million, with a midpoint of $170.0 million.

The appraisal placed the greatest weight on the price-to-earnings
approaches to valuation, but also considered the price-to-book value approaches
and price-to-assets approach. Compared to the average fully converted pricing
ratios of the peer group, Mutual Savings' pro forma fully converted ratios at
the estimated pro forma market value indicated a discount of 5% based on the
price-to-core earnings approach, a discount of 22% based on the price-to-book
value approach, a discount of 7% based on the price-to-tangible book value
approach, and a discount of 45% based on the price-to-assets approach. The
estimated appraised value and the resulting discounts relative to the peer
group's fully converted pricing ratios took into consideration the potential
benefits of the restructuring and the merger. The appraisal also noted Mutual
Savings' fully converted pro forma price-to-book value and price-to-tangible
book value ratios reflected premiums relative to the issuance pricing of recent
conversion and mutual holding company transactions. Compared to the recent
conversion and mutual holding company transactions, Mutual Savings has more
assets, greater market value and anticipated liquidity in the shares, and a more
leveraged balance sheet (resulting in a lower tangible equity-to-assets ratio),
which all contributed to the premium price-to-book value and price-to-tangible
book value ratios indicated relative to the recent conversions and mutual
holding companies.

The board of directors of Mutual Savings has determined to sell shares in
the stock offering at $10.00 per share. Based on that price, assuming the
issuance of approximately 5.0 million shares to former shareholders of First
Northern, the pro forma market value of Mutual Savings ranged between $194.8
million and $245.8 million, with a midpoint pro forma market value of $220.2
million. This is the "estimated valuation range." The stock issuance plan
provides that total outstanding shares must reflect the estimated valuation
range and that public ownership will equal 49.9 percent of outstanding shares,

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while the MHC's ownership will equal 50.1 percent. Given the 5,025,485 shares to
be issued to the former shareholders of First Northern, this results in an
offering range of between 4,692,782 and 7,237,682 shares, with a midpoint of
5,965,232 shares. Following the stock offering and First Northern merger, shares
outstanding to the public will therefore range between 9,718,267 and 12,263,167,
with a midpoint of 10,990,717 shares. Total outstanding shares, held by the MHC
and public owners, will range between 19,475,485 and 24,575,485.

The appraisal was based in part upon Mutual Savings' financial condition
and operations, the financial condition and operations of First Northern, the
effect of the First Northern merger and the effect of the additional capital
Bank Mutual will raise from the sale of common stock. RP Financial's independent
appraisal will be updated at the end of the offering process, before we complete
our restructuring. At that time, the estimated pro forma market value may change
but there will be no resolicitation of subscribers if it is neither less than
the minimum nor greater than the adjusted maximum of the estimated valuation
range. The table below illustrates these relationships.

The independent valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing the common
stock. In preparing the independent valuation, RP Financial has relied upon and
assumed the accuracy and completeness of financial and statistical information
provided by Mutual Savings or First Northern. RP Financial did not independently
verify the consolidated financial statements and other information provided by
Mutual Savings or First Northern, nor did RP Financial value independently the
assets or liabilities of Mutual Savings or First Northern. The independent
valuation considers Mutual Savings only as a going concern and should not be
considered as an indication of the liquidation value of Mutual Savings.
Moreover, because such independent valuation is based on estimates and
projections of a number of matters, all of which are subject to change from time
to time, no assurance can be given that persons purchasing the common stock will
be able to sell such shares at a price equal to or greater than the $10.00 per
share purchase price in the offering. The $10.00 price per share was chosen by
Mutual Savings' board of directors because it is the price per share most
commonly used in stock offerings involving conversions and reorganizations of
savings institutions.

The maximum of the estimated valuation range may be increased up to 15% and
the number of shares of common stock to be issued in the restructuring and the
stock offering may be increased to 27,507,985 shares and 8,701,000 shares,
respectively, due to regulatory considerations, changes in the market and
general financial and economic conditions without the resolicitation of
subscribers. See "-- Limitations on Common Stock Purchases" as to the method of
distribution and allocation of additional shares that may be issued in the event
of an increase in the estimated valuation range to fill unfilled orders in the
offering.

We may not sell any shares of common stock unless RP Financial confirms to
Mutual Savings, Bank Mutual, and the OTS that, to the best of its knowledge,
nothing of a material nature has occurred which, taking into account all
relevant factors, would cause RP Financial to conclude that the aggregate value
of the common stock is incompatible with its estimate of the pro forma market
value of the common stock at the conclusion of the offering.

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If RP Financial concludes that the pro forma market value of the common
stock is either more than 15% above the maximum of the estimated valuation range
or less than the minimum of the estimated valuation range, Mutual Savings and
Bank Mutual, after consulting with the OTS, may:

(1) terminate the plan and return all funds promptly with interest at
Mutual Savings' passbook rate of interest on payments made by check, bank
check or money order;
(2) establish a new estimated valuation range and either:
(a) hold a new stock offering; or
(b) provide subscribers the opportunity to change or cancel their
orders (a "resolicitation");
(3) take such other actions as permitted by the OTS in order to
complete the restructuring.

If a resolicitation is commenced, unless an affirmative response is received
from a subscriber within a designated period of time, all funds will be promptly
returned to the subscriber as described above.

Copies of the appraisal report of RP Financial, including any amendments
thereto, setting forth the method and assumptions for such appraisal are
available for inspection at the main office of Mutual Savings.

MARKETING ARRANGEMENTS

Ryan, Beck & Co. Inc. We have engaged Ryan, Beck as financial and marketing
agent in connection with the offering of the common stock. Ryan, Beck has agreed
to use its best efforts to assist us with the solicitation of subscriptions for
shares of common stock in the offering.

Ryan, Beck will receive an advisory and administrative fee of $100,000 and
a marketing fee of 1.5% of the dollar amount of shares issued in the
subscription and community offering, excluding any shares that are used as
merger consideration. If shares which otherwise could be sold in the community
offering are set aside for use in the First Northern merger, Ryan, Beck will
also be paid a 1.5% fee, up to a maximum of $100,000, with respect to those
shares; no fee will be payable to Ryan, Beck in respect of other shares issued
in the First Northern merger in addition to the community offering. No marketing
fee will be paid related to the sale of common stock to officers, directors or
employees of Mutual Savings, or members of their immediate families or to the
ESOP. If there is a syndicated community offering, we will also pay Ryan, Beck a
management fee equal to 1.5% of the dollar amount of common stock sold in the
syndicated community offering, which fee, along with fees payable by us to any
broker-dealers including Ryan, Beck, for the shares they sell, will not exceed
5.5% of the aggregate purchase price of the common stock sold in the syndicated
community offering. Ryan, Beck will also be reimbursed for its reasonable
out-of-pocket expenses, up to $35,000 and its legal fees, up to $75,000.

Directors, Officers and Employees. Directors and officers of Mutual Savings
may participate in the solicitation of offers to purchase common stock. Other
employees of Mutual Savings may participate in the offering in ministerial
capacities or provide clerical work in effecting a sales transaction. These
other employees have been instructed not to solicit offers to purchase common
stock or provide advice regarding the purchase of common stock. Mutual Savings
will rely on Rule 3a4-1 under the Exchange Act, and sales of common stock will
be conducted within the requirements of the rule. No director, officer or
employee of Mutual Savings will be compensated in connection with his or her
participation by the payment of commissions or other remuneration based either
directly or indirectly on transactions in common stock.

PROCEDURE FOR PURCHASING SHARES IN SUBSCRIPTION AND COMMUNITY OFFERINGS

Use of Order Forms. To purchase shares in the subscription offering and the
community offering, we must receive your completed and executed order form with
the required payment for each share subscribed for, or with appropriate
authorization for withdrawal from your deposit accounts at Mutual Savings by
10:00 a.m., central time, on the indicated expiration date. You may submit your
order form by mail using the return envelope provided or by overnight courier to
the indicated address, or by bringing your order form to our stock information
center located in our corporate headquarters. Please do not deliver order forms
to our branches. Stock order forms which are not received by such time or are
executed defectively

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or are received without full payment (or correct withdrawal instructions) are
not required to be accepted. In addition, we are not obligated to accept orders
submitted on photocopied or facsimilied order forms. We have the power to waive
or permit the correction of incomplete or improperly executed forms, but do not
represent that we will do so.

Once received by us, you may not cancel or change, an executed order form
without our consent unless we conduct a resolicitation of subscribers. If
resolicitation is commenced, subscribers will have an opportunity to change or
cancel their orders. Unless an affirmative response is received from a
subscriber within a designated timeframe, all funds will be promptly returned to
the subscriber with interest at Mutual Savings' passbook savings rate and all
account withdrawal authorizations will be canceled.

To ensure that eligible account holders, supplemental eligible account
holders and other members are properly identified as to their stock purchase
eligibility, depositors must list on the stock order form all deposit accounts
as of the applicable eligibility record date, giving all names on each account
and the account numbers.

To ensure that each purchaser received a prospectus at least 48 hours prior
to the expiration date for the offering, in accordance with Rule 15c2-8 of the
Exchange Act, no prospectus will be mailed later than five days prior to such
date or hand delivered any later than two days prior to such date. Execution of
the stock order form will confirm receipt or delivery in accordance with Rule
15c2-8. Order forms will only be distributed when preceded or accompanied by a
prospectus.

Payment for Shares. You may pay for subscriptions by personal check, bank
check, money order or by authorization of withdrawal from your current deposit
accounts maintained at Mutual Savings. Interest will be paid on payments made by
check, bank check or money order at our passbook savings rate of interest from
the date payment is received until the completion or termination of the
restructuring. If payment is made by authorization of withdrawal from a deposit
account, the funds authorized to be withdrawn must be "available" in the account
at the time we receive the order. The funds will remain in the account and
continue to accrue interest at the contractual rate until completion or
termination of the restructuring, but a hold will be placed immediately on such
funds, thereby making them unavailable to the depositor.

If the certificate matures after the date of receipt of the order form but
before closing, funds will earn interest at the passbook rate from the date of
maturity until the restructuring is completed or terminated.

When the restructuring is completed, subscriber funds received or held
under withdrawal authorization will be used to purchase the shares of common
stock. The common stock issued cannot be insured by the FDIC or any other
government agency. If the restructuring is not consummated for any reason, all
funds submitted will be promptly refunded with interest as described above.

Mutual Savings will waive any applicable penalties for early withdrawal
from certificates of deposit. If the remaining balance in a certificate account
is reduced below the applicable minimal balance requirement at the time that the
funds are transferred under the authorization, the certificate will be canceled
at the time of the withdrawal, without penalty, and the remaining balance will
be converted into a statement savings account and will earn interest at the
statement savings rate.

The ESOP will not be required to pay for the shares subscribed for at the
time it subscribes. Rather, the ESOP may pay for such shares of common stock
subscribed for at the $10.00 per share purchase price upon completion of the
offering. To do that, though, the ESOP must have a loan commitment acceptable to
Mutual Savings from an unrelated financial institution or from Bank Mutual to
lend to the ESOP the aggregate purchase price of the shares for which it
subscribed. Bank Mutual intends to provide such a loan to the ESOP.

A subscriber interested in using IRA funds to purchase common stock must do
so through a self-directed individual retirement account. Mutual Savings cannot
offer self-directed accounts, so funds in a Mutual Savings IRA must be
transferred. The depositor may make a trustee-to-trustee transfer of the funds
to a trustee (such as a brokerage firm) offering a self-directed individual
retirement account

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program, with the intention that the funds will be used to purchase Bank Mutual
common stock in the offering. There will be no early withdrawal or Internal
Revenue Service interest penalties for transfers. An annual administrative fee
may be payable to the new trustee. Depositors interested in using funds in an
IRA at Mutual Savings to purchase common stock should contact the stock
information center as soon as possible for assistance. In addition, the
provisions of ERISA and IRS regulations require that officers, trustees and ten
percent shareholders who use self-directed IRA funds to purchase shares of
common stock in the subscription and community offerings make such purchase for
the exclusive benefit of the IRAs. Assistance on how to transfer IRAs maintained
at Mutual Savings can be obtained from the Stock Information Center. Depositors
interested in using funds in an IRA to purchase common stock should contact the
Stock Information Center as soon as possible.

Certificate Delivery. Certificates representing shares of common stock
purchased, and any interest or refund due, will be mailed to purchasers to the
address specified by subscribers on properly completed order forms, as soon as
practicable following completion of the offering. Any certificates returned as
undeliverable will be disposed of in accordance with applicable law. Purchasers
may not be able to sell the shares of common stock which they purchased until
certificates for the common stock are delivered to them, even though trading of
the common stock may have begun.

STOCK INFORMATION CENTER

If you have any questions regarding the offering or the restructuring,
please call the Stock Information Center at 800-580-0029, from 9:00 a.m. to 4:00
p.m., central time, Monday through Friday.

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES OF COMMON STOCK

Regulations prohibit any person with subscription rights from transferring
or entering into any agreement or understanding to transfer the legal or
beneficial ownership of the subscription rights issued under the stock issuance
plan or the shares of common stock to be issued upon their exercise. Such rights
may be exercised only by the person to whom they are granted and only for such
person's account. Each person exercising subscription rights will be required to
certify that the purchase is solely for such person's own account and there is
no agreement or understanding regarding the sale or transfer of such shares. The
regulations also prohibit any person from offering or making an announcement of
an offer or an intent to make an offer to purchase subscription rights or shares
of common stock prior to the completion of the restructuring.

We will pursue any and all legal and equitable remedies (including
forfeiture) in the event we become aware of the transfer of subscription rights
and will not honor orders known by us to involve the transfer of such rights.

LIMITATIONS ON COMMON STOCK PURCHASES

The stock issuance plan includes the following limitations on the number of
shares of common stock which may be purchased in the offering:

(1) No subscription for fewer than 25 shares will be accepted;

(2) No fractional shares will be issued;

(3) Purchasers in the subscription offering may subscribe for common
stock in an amount up to $800,000, or 80,000 shares.

(4) The tax-qualified employee benefit plans are permitted to purchase
a higher number of shares of common stock issued in the offering and the
merger. As a tax-qualified employee benefit plan, the ESOP intends to
purchase 8% of the shares of common stock issued in the offering and the
First Northern merger;

(5) The current officers and directors of Mutual Savings and their
associates, in the aggregate, excluding purchases by the tax-qualified
employee benefit plans, may purchase up to 25% of the

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shares of stock issued in the offering and the First Northern merger. Each
officer and director who does not qualify as an eligible account holder,
supplemental eligible account holder or other member will be subject to the
same purchase limitations as eligible account holders, supplemental
eligible account holders and other members;

(6) Persons purchasing shares of common stock in the community
offering or in the syndicated community offering may purchase common stock
in an amount up to $800,000, or 80,000 shares; and

(7) Except for the tax-qualified employee benefit plans, the maximum
amount of shares of common stock purchased in all categories of the
offering combined by any person, together with associates of, and groups of
persons acting in concert with, such person, shall not exceed $1,000,000,
or 100,000 shares.

Subject to any required regulatory approval and the requirements of
applicable laws and regulations, the maximum purchase amounts may be altered by
Bank Mutual, in its sole discretion and without further notice to or
solicitation of subscribers or other prospective purchasers, to the following
amounts: (i) increased, including to a level above 5% of the shares offered in
the offering, so long as orders exceeding 5% shall not in the aggregate, exceed
10% of the shares offered, or (ii) decreased to not less than 0.1% of the total
shares of stock offered in the offering and issued in the First Northern merger.
If the purchase limitations are increased, subscribers for the maximum amount in
the subscription offering and, at Mutual Savings' discretion certain other large
subscribers will be given the opportunity to increase their subscriptions up to
the then applicable limit. Requests to purchase additional shares of common
stock under this provision will be determined by and in the sole discretion of
the Board of Directors of Mutual Savings and if necessary, allocated giving
priority in accordance with the priorities set forth in the plan of stock
issuance and described in this prospectus.

If we sell more than 7,237,682 shares, the additional shares will be
allocated in accordance with the following priority:

- to fill the ESOP's subscription;

- if there is an oversubscription at the Eligible Account Holder level, to
fill unfilled subscriptions of Eligible Account Holders;

- if there is an oversubscription at the Supplemental Eligible Account
Holder level, to fill unfilled subscriptions of Supplemental Eligible
Account Holders;

- if there is an oversubscription at the Other Member level, to fill
unfilled subscriptions of Other Members;

- at Mutual's discretion, for issuance in the First Northern merger; and

- to fill unfilled subscriptions in the community offering.

We have the sole discretion to determine whether prospective purchasers are
"associates" or "acting in concert," in accordance with the terms of the stock
issuance plan. Directors and officers are not treated as associates of each
other solely by virtue of holding such positions. The term "associate" of a
person is defined to mean:

(1) any corporation or organization (other than Mutual Savings) of
which such person is a director, officer or partner or is directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities;

(2) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a
similar fiduciary capacity; provided, however, that any tax-qualified or
non-tax-qualified employee plan will not be deemed to be an associate of
any director, or officer of Mutual Savings, for purposes of aggregating
total shares that may be acquired or held by directors and officers and
their associates; and

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<PAGE> 137

(3) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or
officer of Mutual Savings or any affiliate thereof; and

"Acting in concert" means: (a) knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (b) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement
whether written or otherwise. A person or company which acts in concert with
another person or company ("other party") shall also be deemed to be acting in
concert with any person or company who is also acting in concert with that other
party, except that any tax-qualified employee stock benefit plan as defined in
12 C.F.R. sec. 563b.2(a)(39) will not be deemed to be acting in concert with its
trustee or a person who serves in a similar capacity solely for the purpose of
determining whether stock held by the trustee and stock held by the plan will be
aggregated.

We have the right in our sole discretion to reject any order submitted by a
person whose representations we believe to be false or who we otherwise believe,
either alone or acting in concert with others, is violating or circumventing, or
intends to violate or circumvent, the terms and conditions of the stock issuance
plan.

The aggregate amount of Bank Mutual voting stock outstanding owned by other
than the MHC, as long as it exists, must be less than 50%.

RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER THE RESTRUCTURING

All shares of common stock purchased in connection with the offering by an
officer or director of Mutual Savings will be subject to a restriction that the
shares not be sold for a period of one year following the date of purchase,
except in the event of the death or incompetence of such officer or director.
Each certificate for restricted shares will bear a legend giving notice of this
restriction on transfer, and instructions will be issued to the effect that the
transfer agent for Bank Mutual is to disregard any such attempted transfer. The
directors and officers of Bank Mutual and Mutual Savings will also be subject to
the federal insider trading rules and any other applicable requirements of the
federal securities laws.

Purchases of outstanding shares of common stock of Bank Mutual by directors
or officers of Bank Mutual or Mutual Savings and their associates during the
three-year period following restructuring may be made only through a broker or
dealer registered with the SEC, except with the prior written approval of the
OTS. This restriction does not apply, however, to negotiated transactions
involving more than 1% of the outstanding common stock, or purchases of common
stock made and held by an tax-qualified or non-tax-qualified employee plan of
Mutual Savings.

Bank Mutual may not, for a period of one year after the stock offering,
repurchase its stock from any person. However, during that one-year period, Bank
Mutual may make open market repurchases of up to five percent of its outstanding
capital stock received by persons other than the MHC if the repurchases comply
in full with OTS regulations.

CONDITIONS TO THE OFFERING; TERMINATION

Completion of the offering is subject to:

- consummation of the restructuring, which requires, without limitation,
the receipt of various approvals from the OTS, the approval of Mutual
Savings members and the receipt of IRS rulings and/or opinions of Mutual
Savings' attorneys as to the tax consequences of the restructuring;

- the receipt of all required federal approvals and clearances for the
issuance of common stock in the offering, including without limitation
the approval of the OTS and the SEC; and

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<PAGE> 138

- the sale in the offering, or issuance to First Northern shareholders
beyond the minimum number of shares issuable in the merger, of a minimum
of 4,692,782 shares of common stock offered.

In the event that the conditions mentioned above are not satisfied or the
restructuring is terminated, all funds received will be promptly returned with
interest at Mutual Savings' passbook rate and all withdrawal authorizations will
be canceled.

The restructuring, the offering and the First Northern merger are
interdependent. We do not expect that any transaction will occur without the
others.

RESTRICTIONS ON ACQUISITION OF BANK MUTUAL

GENERAL

The plan of restructuring provides for the conversion of Mutual Savings
from the mutual to the stock form of organization and the formation of a stock
holding company and a mutual holding company. See "The Restructuring and The
Offering -- General." Certain provisions in Bank Mutual's charter and bylaws and
in its benefit plans and agreements entered into in connection with the
restructuring, together with provisions of federal law and certain governing
regulatory restrictions, may have anti-takeover effects.

MUTUAL HOLDING COMPANY STRUCTURE

The mutual holding company structure will restrict the ability of our
shareholders to effect a change of control of management because, as long as the
MHC remains in existence as a mutual savings bank holding company, it will
control a majority of Bank Mutual's voting stock. Moreover, the directors of the
MHC initially will be the directors of Bank Mutual. The MHC will be able to
elect all of the members of the Board of Directors of Bank Mutual, and as a
general matter, will be able to control the outcome of all matters presented to
the shareholders of Bank Mutual for a vote. See "The Restructuring and The
Offering -- Possible Conversion of the MHC to Stock Form."

CHANGE IN BANK CONTROL

Federal law provides that no person, acting directly or indirectly or
through or in concert with one or more other persons, may acquire control of a
federal savings bank unless the OTS has been given 60 days prior written notice.
Federal law provides that no company may acquire control of a bank holding
company without the prior approval of the OTS. Any company that acquires control
becomes a "thrift holding company" subject to registration, examination and
regulation by the OTS.

Pursuant to federal regulations, control is conclusively deemed to have
occurred when an entity, among other things, has acquired more than 25 percent
of any class of voting stock of the institution or the ability to control the
election of a majority of the directors of an institution. Moreover, control is
presumed to have occurred, subject to rebuttal, upon the acquisition of more
than 10 percent of any class of voting stock, or of more than 25 percent of any
class of stock, of a federal savings bank, where certain enumerated control
factors are also present in the acquisition.

The OTS may prohibit an acquisition of control if:

(1) it would result in a monopoly or substantially lessen competition;

(2) the financial condition of the acquiring person might jeopardize
the financial stability of the institution; or

(3) the competence, experience or integrity of the acquiring person
indicates that it would not be in the interest of the depositors or of the
public to permit the acquisition of control by such person.

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<PAGE> 139

These restrictions do not apply to the acquisition of stock by one or more
tax-qualified employee stock benefits plans, provided that the plan or plans do
not have beneficial ownership in the aggregate of more than 25 percent of any
class of our equity security.

BANK MUTUAL'S CHARTER AND BYLAWS

General. Bank Mutual's charter and bylaws are available at Mutual's
administrative office or by writing or calling us, 4949 West Brown Deer Road,
Brown Deer, Wisconsin 53223, telephone number (414) 354-1500.

Classified Board of Directors and Related Provisions. Bank Mutual's board
of directors is divided into three classes which are as nearly equal in number
as possible. Directors serve for terms of three years. As a result, each year,
only one-third of the directors are eligible to be elected and it would take at
least two years to elect a majority of our directors.

Restrictions on Voting of Securities. The charter provides that for five
years after the restructuring any shares of common stock beneficially owned
directly or indirectly in excess of 10% by any person, other than the MHC, will
not be counted as shares entitled to vote, shall not be voted by any person or
counted as voting shares in connection with any matter submitted to shareholders
for a vote, and shall not be counted as outstanding for purposes of determining
a quorum or the affirmative vote necessary to approve any matter submitted to
the Shareholders for a vote. It is possible for such a person to have voting
authority for less than 10% of our shares, depending on how the shares are
registered.

Prohibition Against Cumulative Voting. Bank Mutual's charter does not
permit cumulative voting by shareholders in the election of directors. Therefor,
the holders of a majority of the shares voted at a meeting, thus precluding a
majority shareholder from obtaining representation on the board of directors
unless the minority shareholder is able to obtain the support of a majority. In
accordance with the law governing mutual holding companies, the MHC must remain
the majority holder of Bank Mutual's voting stock.

Additional Anti-Takeover Provisions. The provisions described above are not
the only provisions of our charter and bylaws having an anti-takeover effect.
For example, the charter authorizes the issuance of up to two million shares of
preferred stock, which conceivably would represent an additional class of stock
required to approve any proposed acquisition. This preferred stock, none of
which has been issued, together with authorized but unissued shares of the
common stock could represent additional capital required to be purchased by the
acquiror. Bank Mutual's charter authorizes the issuance of up to 100 million
shares of the common stock.

In addition to discouraging a takeover attempt which a majority of our
shareholders might determine to be in their best interest or in which our
shareholders might receive a premium over the current market prices for their
shares, the effect of these provisions may render the removal of our management
more difficult. It is possible that incumbent officers and directors might be
able to retain their positions (at least until their term of office expires)
even though a majority of our shareholders, other than the mutual holding
company, desires a change.

The provisions described above are intended to reduce Bank Mutual's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its board of directors. The
provisions of the employment agreements, the change of control agreements, the
management recognition plan and the stock option plan to be established may also
discourage takeover attempts by increasing the costs to be incurred by Bank
Mutual and its subsidiaries in the event of a takeover. See
"Management -- Employment Agreements," and "-- Future Stock Benefit
Plans -- Stock Option Plan."

Bank Mutual's board of directors believes that the provisions of the
charter, bylaws and benefit plans to be established are in the best interests of
Bank Mutual and its shareholders. An unsolicited non-negotiated proposal can
seriously disrupt the business and management of a corporation and cause it
great expense. Accordingly, the board of directors believes it is in the best
interests of Bank Mutual and its

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<PAGE> 140

shareholders to encourage potential acquirors to negotiate directly with
management and that these provisions will encourage such negotiations and
discourage non-negotiated takeover attempts. It is also the board of directors'
view that these provisions should not discourage persons from proposing a merger
or other transaction at a price that reflects the true value of Bank Mutual and
that otherwise is in the best interests of all shareholders.

DESCRIPTION OF CAPITAL STOCK OF BANK MUTUAL

Bank Mutual is authorized to issue 100 million shares of common stock, par
value $.01 per share, and ten million shares of preferred stock, $.01 par value
per share. We currently expect to issue between 19.5 million and 27.5 million
shares of common stock in the restructuring and the First Northern merger,
including between 9.7 million and 13.7 million shares to persons other than the
MHC. See "Capitalization."

Upon payment of the purchase price, shares of common stock issued in the
offering will be fully paid and non-assessable. Under the Wisconsin Business
Corporation Law, shareholders of Wisconsin-chartered corporations are liable for
claims to employees for services, not to exceed six months services in any one
case, up to the consideration which they have paid for their shares of common
stock. The Wisconsin Supreme Court has applied this statute to corporations
which are not organized in Wisconsin but are qualified to do business in the
state. While Bank Mutual believes that these provisions may not necessarily
apply to federally-chartered entities, there has not been a judicial
determination of that result.

NO PREEMPTIVE RIGHTS

The holders of Bank Mutual common stock do not have any preemptive rights
with respect to any shares issued by the company. Any subsequent stock issuance
by Bank Mutual, however, may only be effected through a stock issuance plan
approved by the OTS which would grant subscription priorities to the MHC's
members unless Bank Mutual demonstrates that a non-conforming stock issuance
would be more beneficial to it.

LIQUIDATION RIGHTS; REDEMPTION

In the event of any liquidation, dissolution or winding up of Bank Mutual,
the holders of its common stock generally would be entitled to receive, after
payment of all liabilities and any preferred stock preferences, all assets of
Bank Mutual available for distribution. Common stock is not subject to any
redemption provisions.

TREATMENT UPON FULL CONVERSION

In the event that Mutual would make a full conversion of the MHC to the
stock form of organization, the plan of restructuring includes provisions
intended to protect Bank Mutual shareholders. In general, they provide that Bank
Mutual shareholders would receive, in any subsequent full conversion, the same
percentage of ownership of a successor entity as they would hold in Bank Mutual
prior to that conversion. See "The Restructuring and the Offering -Possible
Conversion of the MHC to Stock Form."

Bank Mutual cannot assure that there will be a subsequent full conversion.
Also, any such full conversion will be subject to OTS, or other governmental
regulations as then in effect. Those regulations may affect the treatment of
Bank Mutual shareholders in any full conversion, and could have the effect of
disadvantaging Bank Mutual shareholders.

VOTING RIGHTS

Holders of Bank Mutual common stock will have one vote for each share held
by them on all matters which are presented to a shareholders' vote. There is an
exception to this rule during the first five years of Bank Mutual's existence
for persons or entities (other than the MHC) which come to acquire more than 10%
of Bank Mutual's common stock. In that case, shares in excess of 10% of Bank
Mutual's outstanding

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<PAGE> 141

common stock will not have any voting rights. See "Restrictions on Acquisition
of Bank Mutual -- Bank Mutual's Charter and Bylaws."

Bank Mutual's shareholders do not have cumulative rights in the election of
directors. Because the MHC will always own more than 50% of the voting shares of
Bank Mutual, it will control the election of directors.

BOARD OF DIRECTORS

The Bank Mutual charter and bylaws provide that its board of directors
shall consist of eleven directors. The directors are classified into three
classes, which are to be as nearly equal in size as possible. Each class is
elected for a three-year term, and one of the classes of the board of directors
is subject to election at each annual meeting of Bank Mutual shareholders.

The Bank Mutual bylaws also provide that a director may be removed only for
cause by a vote of the holders of majority of shares entitled to vote.

Vacancies on the Bank Mutual board of directors, whether by resignation of
a director or by the establishment of an increase in the number of directors,
may be filled by action of the remaining directors of Bank Mutual. However, the
directors so elected only serve until the next meeting of shareholders.

Directors of Bank Mutual must own not less than 100 shares of Bank Mutual
common stock.

SPECIAL MEETINGS OF SHAREHOLDERS

Under Bank Mutual's charter, until five years after the restructuring,
special meetings of shareholders of Bank Mutual may only be called upon the
direction of the board of directors. Thereafter, special meetings may be called
by the chairman, the president and majority of the directors, or upon the
written request of holders of not less than 10% of all the outstanding shares of
capital stock.

The Bank Mutual board of directors will act as a nominating committee for
the selecting of management nominees for election of directors. With certain
exceptions in the case of vacancies, nominating committee must deliver written
nominations to the secretary at least 20 days prior to the date of the annual
meeting. No nominations for directors except for those made by the nominating
committee will be voted upon at the annual meeting unless other nominations by
shareholders are made in writing and delivered to Bank Mutual at least five days
prior to the date of the annual meeting.

PREFERRED STOCK

The Bank Mutual charter authorizes the issuance of preferred stock, in one
or more classes with the rights and preferences of shareholders of those classes
to be determined by the board of directors. If the company were to issue shares
of preferred stock, their holders would have dividend and liquidation rights
prior to those holders of common stock, and would have such voting rights as
were determined by the board of directors.

APPROVAL OF FUNDAMENTAL TRANSACTIONS

Corporate combination transactions such as mergers, sales of substantially
all assets, or dissolution of the corporation, would require the approval of the
holders of a majority of the outstanding shares of Bank Mutual common stock.
Because the MHC would own a majority, it would control all the decisions on
these matters. Similarly, the approval of the majority of outstanding shares is
required for an amendment to the Bank Mutual certificate of incorporation. In
the event Bank Mutual had issued shares of preferred stock, preferred
shareholders may have rights to vote as a class on certain types of amendments.

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DISSENTERS' RIGHTS

Because Bank Mutual has provided that it will be subject to Wisconsin
corporate law provisions, so long as Bank Mutual has a class of securities
traded on the NASDAQ Stock Market or an exchange, its shareholders will not have
dissenters' rights in most corporate transactions.

LEGAL AND TAX OPINIONS

The legality of the issuance of the common stock being offered and certain
matters relating to the restructuring and federal taxation have been passed upon
for us by Quarles & Brady LLP, Milwaukee, Wisconsin. Certain legal matters will
be passed upon for Ryan, Beck & Co. by Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation.

EXPERTS

Ernst & Young LLP, independent auditors, have audited Mutual Savings'
consolidated financial statements at December 31, 1999 and 1998, and for each of
the three years in the period ended December 31, 1999, as set forth in their
report. We have included Mutual Savings' financial statements in the prospectus
and elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.

Wipfli Ullrich Bertelson LLP, independent auditors, have audited First
Northern's consolidated financial statements at December 31, 1999 and for the
year then ended, as set forth in their report. We have included First Northern's
financial statements for that period in the prospectus and elsewhere in the
registration statement in reliance on Wipfli Ullrich Bertelson LLP's report,
given on their authority as experts in accounting and auditing.

Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of First Northern as of December 31, 1998 and for each of
the two years in the period ended December 31, 1998. We have included those
First Northern financial statements in this prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

On September 9, 1999, the Audit Committee of the First Northern board of
directors recommended to the board the replacement of Ernst & Young LLP with
Wipfli Ullrich Bertelson LLP as First Northern's independent certified public
accountants for the year ended December 31, 1999. On September 16, 1999, the
board accepted and approved the Audit Committee's recommendation. Ernst & Young
LLP was notified of its dismissal, and Wipfli Ullrich Bertelson LLP of its
engagement, on September 22, 1999. During 1997 and 1998 and through September
22, 1999, (a) there were no disagreements with Ernst & Young LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Ernst & Young LLP, would have caused that firm to make reference
to the subject matter of the disagreement in connection with its report and (b)
there were no "reportable events" (as defined in SEC Regulation S-K Item
304(a)(1)(v)). Ernst & Young LLP's report on First Northern's financial
statements for 1997 and 1998 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope, or
accounting principles.

RP Financial has consented to the publication in this document of a summary
of its letter to Mutual Savings setting forth its opinion as to the estimated
pro forma market value of Mutual Savings in the converted form and its opinion
setting forth the value of subscription rights and to the use of its name and
statements with respect to it appearing in this document.

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REGISTRATION REQUIREMENTS

Bank Mutual's common stock is being registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended. We will be subject to the
information, proxy solicitation, insider trading restrictions, tender offer
rules, periodic reporting and other requirements of the SEC under the Exchange
Act. Bank Mutual may not deregister the common stock under the Exchange Act for
a period of at least three years following the restructuring.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

After the offering, Bank Mutual will be subject to the informational
requirements of the Exchange Act and must file reports and other information
with the SEC.

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act of 1933 with respect to the common stock offered in this
document. As permitted by the rules and regulations of the SEC, this document
does not contain all the information set forth in the registration statement.
You may examine this information without charge at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain copies of this material from the SEC at prescribed rates. You may
obtain information on the operations of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains
reports, proxy and information statements and other information regarding
registrants, including Bank Mutual, that file electronically with the SEC. The
address for this web site is "www.sec.gov."

The statements contained in this document as to the contents of any
contract or other document filed as an exhibit to the Form S-1 include
descriptions of their material terms. By their nature, though, they are brief
descriptions and are not necessarily complete; each such statement is qualified
by reference to such contract or document. Mutual Savings has filed notice of
mutual holding company reorganization with the Office of Thrift Supervision. In
addition, Mutual Savings has filed copies of that application with the FDIC.
This prospectus omits certain information contained in those applications.

You may inspect copies of RP Financial's appraisal and any amendments to it
at the main office of Mutual Savings Bank. The appraisal report is also an
exhibit to the registration statement, but was not filed electronically and is
not available on the EDGAR system.

A copy of Bank Mutual's certificate of incorporation and bylaws, as well as
those of Mutual Savings and the MHC, are available without charge from Mutual
Savings. Copies of the plan of restructuring are also available from Mutual
Savings without charge. If you have any questions regarding the offering or the
restructuring, or would like copies of these documents, please call the Stock
Information Center at (800) 580-0029, from 9:00 a.m. to 4:00 p.m., central time,
Monday through Friday. The Stock Information Center is located at Mutual
Savings' executive offices, 4949 West Brown Deer Road, Brown Deer, Wisconsin
53223.

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INDEX TO FINANCIAL STATEMENTS

MUTUAL SAVINGS BANK

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated Statements of Financial Condition at June 30,
2000 (unaudited) and December 31, 1999 and 1998........... F-2
Consolidated Statements of Income for the six months ended
June 30, 2000 and 1999 (unaudited) and for each of the
three years ended December 31, 1999, 1998 and 1997........ F-3
Consolidated Statements of Changes in Equity for the six
months ended June 30, 2000 and 1999 (unaudited) and for
each of the three years ended December 31, 1999, 1998 and
1997...................................................... F-4
Consolidated Statements for Cash Flows for the six months
ended June 30, 2000 and 1999 (unaudited) and for each of
the three years ended December 31, 1999, 1998 and 1997.... F-5
Notes to Consolidated Financial Statements.................. F-7
No additional schedules are required or included.
</TABLE>

BANK MUTUAL AND THE MHC

Financial statements of the MHC and Bank Mutual have not been provided
because they have conducted no operations and have not yet been organized.

FIRST NORTHERN DATA

Excerpts from Annual Report on Form 10-K

<TABLE>
<S> <C>
Financial Statements:
Independent Auditors' Reports............................. FN-1
Consolidated Statements of Financial Condition at December
31, 1999 and 1998...................................... FN-3
Consolidated Statements of Income for each of the three
years ended December 31, 1999, 1998 and 1997........... FN-4
Consolidated Statements of Stockholders' Equity for each
of the three years ended December 31, 1999, 1998 and
1997................................................... FN-5
Consolidated Statements for Cash Flows for each of the
three years ended December 31, 1999, 1998 and 1997..... FN-6
Notes to Consolidated Financial Statements................ FN-8
Management's Discussion and Analysis (with supplemental
information).............................................. FN-29
Business (selected portions)................................ FN-43
</TABLE>

Excerpts from Quarterly Report on Form 10-Q for the quarter ended June 30,
2000

<TABLE>
<S> <C>
Unaudited Interim Period Financial Statements:
Consolidated Statement of Financial Condition as of June
30, 2000............................................... FN-68
Consolidated Statements of Income for the three months and
the six months ended June 30, 2000 and 1999............ FN-69
Consolidated Statements of Stockholders' Equity for the
six months ended June 30, 2000 and 1999................ FN-71
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999........................... FN-72
Notes to Unaudited Interim Period Consolidated Financial
Statements............................................. FN-73
Management's Discussion and Analysis........................ FN-78
</TABLE>

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MUTUAL SAVINGS BANK

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Mutual Savings Bank

We have audited the accompanying consolidated statements of financial
condition of Mutual Savings Bank (the Bank) and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of income, changes in
equity and cash flows for the three years ended December 31, 1999. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Bank and
subsidiaries at December 31, 1999 and 1998, and the consolidated results of
their operations and their cash flows for three years ended December 31, 1999,
in conformity with accounting principles generally accepted in the United
States.

Ernst & Young LLP

Milwaukee, Wisconsin
March 7, 2000

F-1
<PAGE> 146

MUTUAL SAVINGS BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31
JUNE 30 ------------------------
2000 1999 1998
----------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.................................. $ 18,978 $ 21,367 $ 22,534
Federal funds sold....................................... -- 25,000 45,000
Interest-earning deposits................................ 12,839 132,592 262,714
---------- ---------- ----------
Cash and cash equivalents................................ 31,817 178,959 330,248
Securities available-for-sale, at fair value:
Investment securities.................................. 57,461 57,763 116,534
Mortgage-related securities............................ 461,377 374,100 270,897
Loans held for sale...................................... 1,632 541 27,723
Loans receivable, net.................................... 1,127,987 1,082,795 1,037,589
Real estate owned........................................ 4,912 4,953 5,440
Premises and equipment................................... 26,727 26,871 27,567
Federal Home Loan Bank stock, at cost.................... 14,585 13,537 13,537
Accrued interest receivable.............................. 9,602 8,620 8,035
Intangible assets........................................ 11,027 11,496 29,786
Other assets............................................. 12,043 9,871 5,506
---------- ---------- ----------
$1,759,170 $1,769,506 $1,872,862
========== ========== ==========
LIABILITIES AND EQUITY
Liabilities:
Deposits............................................... $1,300,613 $1,343,007 $1,398,858
Borrowings............................................. 264,667 242,699 270,822
Advance payments by borrowers for taxes and
insurance........................................... 13,012 1,661 1,710
Other liabilities...................................... 13,290 18,319 25,729
---------- ---------- ----------
1,591,582 1,605,686 1,697,119
Equity:
Retained earnings...................................... 176,260 169,746 174,229
Net unrealized gain (loss) on securities
available-for-sale.................................. (8,672) (5,926) 1,514
---------- ---------- ----------
167,588 163,820 175,743
Commitments and Contingencies (Notes 13 and 14)
---------- ---------- ----------
$1,759,170 $1,769,506 $1,872,862
========== ========== ==========
</TABLE>

See accompanying notes.

F-2
<PAGE> 147

MUTUAL SAVINGS BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
------------------ --------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans, including fees..................... $41,403 $39,737 $ 79,623 $ 90,092 $ 93,628
Investments............................... 3,219 10,413 20,200 19,714 12,115
Mortgage-related securities............... 15,860 8,503 18,479 15,664 10,250
------- ------- -------- -------- --------
Total interest income....................... 60,482 58,653 118,302 125,470 115,993
Interest expense:
Deposits.................................. 29,739 30,985 61,091 65,236 60,917
Borrowings................................ 7,232 7,045 13,933 14,437 10,897
Advance payments by borrowers for taxes
and insurance.......................... 90 98 313 344 380
------- ------- -------- -------- --------
Total interest expense...................... 37,061 38,128 75,337 80,017 72,194
------- ------- -------- -------- --------
Net interest income......................... 23,421 20,525 42,965 45,453 43,799
Provision for losses on loans............... 236 203 350 637 1,065
------- ------- -------- -------- --------
Net interest income after provision for
losses on loans........................... 23,185 20,322 42,615 44,816 42,734
Noninterest income:
Service charges on deposits............... 1,413 1,332 2,813 2,630 2,413
Brokerage commissions..................... 994 827 1,826 1,228 984
Servicing fees on loans sold.............. 205 229 447 577 588
Loan fees and service charges............. 497 549 1,014 1,662 773
Gain on sales of loans.................... 43 436 497 1,025 486
Gain (loss) on sales of securities........ -- (108) 158 -- (12)
Other..................................... 864 634 1,229 1,318 927
------- ------- -------- -------- --------
Total noninterest income.................... 4,016 3,899 7,984 8,440 6,159
Noninterest expenses:
Compensation, payroll taxes and other
employee benefits...................... 8,624 8,539 17,158 16,638 15,346
Occupancy................................. 2,595 2,846 5,550 5,580 5,288
Federal deposit insurance premiums........ 142 416 820 837 822
Marketing................................. 1,256 1,137 1,864 2,158 2,375
Data processing........................... 741 575 1,329 1,260 1,213
Amortization of intangibles............... 469 1,355 18,290 2,738 1,941
Other..................................... 2,859 3,077 6,268 6,310 5,101
------- ------- -------- -------- --------
Total noninterest expenses.................. 16,686 17,945 51,279 35,521 32,086
------- ------- -------- -------- --------
Income (loss) before income taxes........... 10,515 6,276 (680) 17,735 16,807
Income taxes................................ 4,001 2,386 3,803 6,584 6,622
------- ------- -------- -------- --------
Net income (loss)........................... $ 6,514 $ 3,890 $ (4,483) $ 11,151 $ 10,185
======= ======= ======== ======== ========
</TABLE>

See accompanying notes.

F-3
<PAGE> 148

MUTUAL SAVINGS BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS) ON
SECURITIES
RETAINED AVAILABLE- TOTAL
EARNINGS FOR-SALE EQUITY
-------- -------------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Balances at January 1, 1997................................ $152,893 $(1,599) $151,297
Comprehensive income:
Net income............................................ 10,185 -- 10,185
Change in net unrealized gain (loss) on securities
available-for-sale, net of deferred income tax
liability of $850................................ -- 1,573 1,573
-------- ------- --------
Total comprehensive income............................... 12,691
-------- ------- --------
Balances at December 31, 1997.............................. 163,078 (26) 163,052
Comprehensive income:
Net income............................................ 11,151 -- 11,151
Other comprehensive income:
Change in net unrealized gain (loss) on securities
available-for-sale, net of deferred income tax
liability of $832................................ -- 1,540 1,540
-------- ------- --------
Total comprehensive income............................... 12,691
-------- ------- --------
Balances at December 31, 1998.............................. 174,229 1,514 175,743
Comprehensive income:
Net loss.............................................. (4,483) (4,483)
Other comprehensive income:
Change in net unrealized gain (loss) on securities
available-for-sale, net of deferred income tax
benefit of $4,144................................ -- (7,440) (7,440)
-------- ------- --------
Total comprehensive loss................................. (11,923)
-------- ------- --------
Balances at December 31, 1999.............................. 169,746 (5,926) 163,820
Comprehensive income:
Net income (unaudited)................................ 6,514 -- 6,514
Other comprehensive income:
Change in net unrealized gain (loss) on securities
available-for-sale, net of deferred income tax
benefit of $1,774 (unaudited).................... -- (2,746) (2,746)
-------- ------- --------
Total comprehensive income (unaudited)................... -- -- 3,768
-------- ------- --------
Balances at June 30, 2000 (unaudited)...................... $176,260 $(8,672) $167,588
======== ======= ========
</TABLE>

See accompanying notes.

F-4
<PAGE> 149

MUTUAL SAVINGS BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
--------------------- -----------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income (loss)..................... $ 6,514 $ 3,890 $ (4,483) $ 11,151 $ 10,185
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Provision for losses on loans....... 236 203 350 637 1,065
Provision for depreciation.......... 790 953 1,840 2,033 1,816
Deferred income tax benefit......... 1,774 1,192 (3,886) (630) (710)
Amortization of intangibles......... 469 1,355 18,290 2,738 1,941
Net discount amortization on
securities....................... (175) (18) (80) (5,242) (318)
Loans originated for sale........... (6,031) (45,405) (47,427) (131,082) (52,006)
Proceeds from sales of loans
originated for sale.............. 4,983 47,116 57,358 117,770 43,478
Net gain on sales of loans.......... (43) (436) (497) (1,025) (486)
Net (gain) loss on sale of
available-for-sale securities.... -- -- (378) -- 12
Purchases of trading account
assets........................... -- (24,827) (39,215) (5,066) --
Proceeds from sales of trading
account assets................... -- 24,719 38,995 5,067 --
Net loss on sale of trading
account assets................... -- 108 220 1 --
Decrease in other liabilities....... (5,029) (13,060) (7,410) (1,573) (94)
(Increase) decrease in other
assets........................... (2,172) (30) 3,665 (2,355) 9,039
(Increase) decrease in accrued
interest receivable.............. (982) (293) (585) 1,425 (3,533)
Other............................... (220) 1,006 587 513 (882)
--------- -------- --------- --------- ---------
Net cash provided (used) by operating
activities.......................... 114 (3,527) 17,344 (5,638) 9,507
Investing Activities
Proceeds from maturities and sales of
investment securities............... 20,000 65,070 65,000 429,337 397,619
Purchases of investment securities.... (18,808) (20,000) (20,000) (380,489) (376,634)
Proceeds from sales of
mortgage-related securities......... -- -- 54,060 -- 3,822
Purchases of mortgage-related
securities.......................... (115,412) (34,123) (213,504) (119,548) (72,071)
Net (purchases) sales of investments
in mutual funds..................... (867) (728) (1,481) (1,410) 16,742
Principal payments on mortgage-related
securities.......................... 23,765 35,602 60,367 77,407 59,514
Net (increase) decrease in loans
receivable.......................... (47,101) (7,290) (29,581) 208,864 96,953
Proceeds from sale of foreclosed
properties.......................... 1,936 1,147 1,673 3,438 627
Proceeds from sale of (purchase of)
Federal Home Loan Bank stock........ (1,048) -- -- 6,700 277
</TABLE>

F-5
<PAGE> 150
MUTUAL SAVINGS BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
--------------------- -----------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Purchases of office properties and
equipment........................... (646) (497) (1,173) (3,141) (1,854)
Sales of office properties and
equipment........................... -- -- 29 -- --
Business acquisition, net of cash and
cash equivalents acquired of
$8,328.............................. -- -- -- -- (118,164)
--------- -------- --------- --------- ---------
Net cash provided (used) by investing
activities.......................... (138,181) 39,181 (84,610) 221,158 6,831
Financing Activities
Net increase (decrease) in deposits... (42,394) (11,539) (55,851) 36,528 (8,653)
Net decrease (increase) in short-term
borrowings.......................... 26,000 -- -- -- (208,194)
Proceeds from long-term borrowings.... 33,000 -- -- -- 228,000
Repayments on long-term borrowings.... (37,032) (123) (28,123) (45) --
Net increase (decrease) in advance
payments by borrowers for taxes and
insurance........................... 11,351 11,407 (49) (819) 1,636
--------- -------- --------- --------- ---------
Net cash provided (used) by financing
activities.......................... (9,075) (255) (84,023) 35,664 12,789
--------- -------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents......................... (147,142) 35,399 (151,289) 251,184 29,127
Cash and cash equivalents at beginning
of period........................... 178,959 330,248 330,248 79,064 49,937
--------- -------- --------- --------- ---------
Cash and cash equivalents at end of
period.............................. 31,817 365,647 $ 178,959 $ 330,248 $ 79,064
========= ======== ========= ========= =========
Supplemental information:
Interest paid on deposits........... $ 28,256 $ 29,166 $ 61,220 $ 65,315 $ 61,598
Income taxes paid................... 4,058 3,092 6,678 7,859 5,530
Loans transferred to other real
estate owned..................... 1,673 951 1,773 7,975 178
Loans transferred from loans held
for sale to portfolio............ -- 19,171 17,748 17 --
Mutual fund liquidation proceeds.... -- 14,047 14,047 -- --
</TABLE>

See accompanying notes.

F-6
<PAGE> 151

MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Mutual Savings Bank (the Bank) provides a full range of financial services
to customers through its branch locations in Wisconsin. The Bank is subject to
competition from other financial institutions and is also subject to the
regulations of certain federal and state agencies and undergoes periodic
examinations by those regulatory authorities.

BASIS OF FINANCIAL STATEMENT PRESENTATION

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of the Bank
and its wholly owned subsidiaries, Lake Financial and Insurance Services (Lake),
Mutual Investment Company (MIC) and MC Development Ltd. (MD). Lake provides
investment and insurance services, MIC owns and manages an investment portfolio
for the benefit of the Bank, and MD holds, for sale, title to certain parcels of
developed and undeveloped real estate. Significant intercompany accounts and
transactions have been eliminated in consolidation.

The unaudited consolidated financial statements as of June 30, 2000 and for
the six months then ended have been prepared in accordance with generally
accepted accounting principles for interim financial information. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.

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

CASH AND CASH EQUIVALENTS

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

INVESTMENT SECURITIES AND MORTGAGE-RELATED SECURITIES

TRADING ACCOUNT ASSETS

Trading account assets are held for resale in anticipation of short-term
market movements. Trading account assets are stated at fair value. Gains and
losses are included in net gain or loss on sales of securities and are based on
the specific identification method. There were no trading account assets at
December 31, 1999 or 1998 or June 30, 2000.

SECURITIES AVAILABLE-FOR-SALE

Management determines the appropriate classification of debt securities at
the time of purchase. Debt securities, equity securities and investments in
mutual funds not classified as trading are classified as

F-7
<PAGE> 152
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

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

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

Stock of the Federal Home Loan Bank (FHLB) is carried at cost which is its
redeemable value.

LOANS HELD FOR SALE AND SALES OF LOANS

Loans held for sale, which generally consist of current production of
certain fixed-rate first mortgage loans, are recorded at the lower of aggregate
cost or market value. Fees received from the borrower are deferred and recorded
as an adjustment of the carrying value. Loans held for sale may be transferred
to loans held for investment when the Bank has both the ability and intent to
hold the loans for the foreseeable future or until maturity. Upon transfer, any
difference between the carrying amount of the loan and its outstanding principal
balance is recognized as an adjustment to yield by the interest method.

INTEREST AND FEES ON LOANS

Allowances of $161 (unaudited), $228 and $172 are established for accrued
but uncollected interest on mortgage loans for which any payments were more than
90 days past due at June 30, 2000 and December 31, 1999 and 1998, respectively.
Interest previously accrued on these loans is removed from income at that time.
Payments received, if any, on these loans are recorded as principal reduction or
as interest based on management's judgment as to ultimate collectibility of all
contractual future principal and interest payments.

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

ALLOWANCE FOR LOSSES ON LOANS

The allowance for losses on loans is composed of general valuation
allowances. The Bank may establish a specific valuation allowance on loans it
considers impaired but in such event the loan is reduced by the amount of the
specific allowance and a corresponding amount is charged off to the allowance
for losses on loans. A loan is considered impaired when, based on current
information and events, it is probable that the Bank will not be able to collect
all amounts due according to the contractual terms of the loan agreement. When
the carrying amount of the loan exceeds (1) the present value of the expected
cash flows, discounted at the loan's original effective interest rate, or (2)
the fair value of the underlying collateral, a specific valuation allowance is
recorded for such excess. The adjusted balance of the loan is adjusted
(decreased) to reflect significant changes in the estimated fair value of
collateral, the estimated amount and timing of an impaired loan's expected
future cash flows, or if actual cash flows that differ significantly from
expected future cash flows. General valuation allowances are based on an
evaluation of the various risk components that are inherent in the credit
portfolio. The risk components that are

F-8
<PAGE> 153
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

evaluated include past loan loss experience; the level of non-performing and
classified assets; current economic conditions; volume, growth and composition
of the loan portfolio; adverse situations that may affect borrowers' ability to
repay; the estimated value of any underlying collateral; peer group comparisons;
regulatory guidance; and other relevant factors.

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

FORECLOSED PROPERTIES AND REPOSSESSED ASSETS

Foreclosed properties acquired through, or in lieu of, loan foreclosure are
recorded at the lower of cost or fair value less estimated costs to sell. Costs
related to the development and improvement of property are capitalized, whereas
costs related to holding the property are expensed.

PREMISES AND EQUIPMENT

Land, buildings, leasehold improvements and equipment are carried at
amortized cost. Buildings and furniture, equipment and automobiles are amortized
over their estimated useful lives (40 to 45 years and 3 to 10 years,
respectively) using the straight line method. Leasehold improvements are
amortized over the shorter of their useful lives or the lease terms (generally
10 years). The Bank reviews buildings, leasehold improvements and equipment for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment exists when the
estimated undiscounted cash flows for the property is less than its carrying
value. If identified, an impairment loss is recognized through a charge to
earnings based on the fair value of the property.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, representing the excess of purchase price over the fair value of
net assets acquired, results from acquisitions made by the Bank. The Bank's
goodwill is being amortized to operating expense using the straight-line method
over 15 years. Other intangible assets are amortized over their estimated useful
lives, generally 7-10 years. The carrying amount of goodwill and other
intangible assets are reviewed if facts and circumstances indicate that it may
be impaired. If this review indicates that it is not recoverable, as determined
based on the estimated undiscounted cash flows of the entity acquired over the
remaining amortization period, the carrying amount of the goodwill is reduced
for the estimated shortfall of the cash flows discounted at the average cost of
capital for thrift institutions as compared to the carrying value.

INCOME TAXES

The Bank files a consolidated federal income tax return and separate, or
combined, state income tax returns, depending on the state. Income taxes are
accounted for using the "asset and liability" method. Under this method, a
deferred tax asset or liability is determined based on the enacted tax rates
that will be in effect when the differences between the financial statement
carrying amounts and tax bases of existing assets and liabilities are expected
to be reported in the Bank's income tax returns. The effect on deferred taxes of
a change in tax rates is recognized in income in the period that includes the
enactment date of the change. A valuation allowance is provided for any deferred
tax asset for which it is more likely

F-9
<PAGE> 154
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

than not that the asset will not be realized. Changes in valuation allowances
are recorded as a component of income.

PENSION COSTS

The Bank's net periodic pension cost consists of the expected cost of
benefits earned by employees during the current period and an interest cost on
the projected benefit obligation, reduced by the expected earnings on assets
held by the retirement plan, amortization of transitional assets over a period
of 15 years (beginning in 1987), amortization of prior service cost and by
amortization of recognized actuarial gains and losses over the estimated future
service period of existing plan participants.

SEGMENT INFORMATION

The Bank has determined that it has one reportable segment -- community
banking. The Bank offers a range of financial products and services to external
customers, including: accepting deposits from the general public; originating
residential, consumer and limited types of commercial loans (primarily loans
secured by multi-family properties); and marketing annuities and other insurance
products. Revenues for each of these products are disclosed in the consolidated
statements of income.

PENDING ACCOUNTING CHANGES

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," and SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities -- Deferral of the Effective
Date of SFAS No. 133," which delays the implementation date of SFAS No. 133 for
one year, to fiscal years beginning after June 15, 2000, provide a comprehensive
and consistent standard for the recognition of derivatives and hedging
activities. SFAS 133 requires all derivatives to be recorded on the balance
sheet at fair value. However, special accounting is provided for certain
derivatives that meet the definition of hedges. Changes in the fair value of
derivatives that do not meet the definition of hedges are required to be
reported in earnings in the period of change. The Bank does not use derivative
financial instruments such as futures, swaps, caps, floors, options or interest
or principal only strips of similar instruments. Therefore, SFAS No. 133 is not
expected to have a significant impact on the Bank. The Bank will implement this
statement on January 1, 2001.

2. BUSINESS COMBINATIONS

On March 31, 1997, the Bank completed the acquisition of First Federal
Bancshares of Eau Claire, Inc. (First Federal) in a cash transaction for $125.1
million. The transaction has been accounted for as a purchase. First Federal was
the parent company of First Federal Bank of Eau Claire, F.S.B. First Federal had
total assets of $730.7 million as of March 31, 1997. This acquisition resulted
in the recording of identifiable intangibles (value of deposit base) of $10.4
million and goodwill (unidentifiable intangible asset) of $24.1 million. The
results of operations of the acquired company are included in the consolidated
financial statements from the date of acquisition.

Scheduled amortization of intangibles was $2,711, $2,738 and $1,941 for the
years ended December 31, 1999, 1998 and 1997, and $469 (unaudited) and $1,355
(unaudited) for the six-month periods ended June 30, 2000 and 1999 respectively.
In 1999, increased competition for deposits from alternate investment products,
increases in interest rates which negatively impacted the volume of new loan
originations and credit standards more stringent than those used by the acquiree
caused management to

F-10
<PAGE> 155
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

2. BUSINESS COMBINATIONS -- (CONTINUED)

revise cash flow estimates to be realized from the acquired business.
Accordingly, $15,579 of intangibles were written off for the estimated shortfall
of the cash flows discounted at the average cost of capital for thrift
institutions as compared to the carrying value. This write-off is included in
amortization of intangibles on the statement of income. The unamortized balance
of goodwill and intangible assets was $11,027 (unaudited), $11,496 and $29,786
at June 30, 2000, and December 31, 1999 and 1998, respectively.

F-11
<PAGE> 156
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

3. SECURITIES

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

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
At June 30, 2000 (Unaudited):
U.S. government and federal agency obligation..... $ 28,909 $ 26 $ (773) $ 28,162
Asset-backed securities........................... -- -- -- --
Mutual funds...................................... 29,894 -- (595) 29,299
-------- ---- -------- --------
Total investment securities.................... 58,803 26 (1,368) 57,461
-------- ---- -------- --------
Federal Home Loan Mortgage Corporation............ 67,880 28 (2,904) 65,004
Federal National Mortgage Association............. 388,707 798 (10,102) 379,403
Private Placement CMOs............................ 16,798 1 (327) 16,472
Government National Mortgage Association.......... 492 7 (1) 498
-------- ---- -------- --------
Total mortgage-related securities.............. 473,877 834 (13,334) 461,377
-------- ---- -------- --------
Total.......................................... $532,680 $860 $(14,702) $518,838
======== ==== ======== ========
At December 31, 1999:
U.S. government and federal agency obligations.... $ 30,107 $ -- $ (932) $ 29,175
Asset-backed securities........................... 51 -- -- 51
Mutual funds...................................... 29,027 -- (490) 28,537
-------- ---- -------- --------
Total investment securities.................... 59,185 -- (1,422) 57,763
-------- ---- -------- --------
Federal Home Loan Mortgage Corporation............ 72,763 94 (2,641) 70,216
Federal National Mortgage Association............. 290,785 745 (6,146) 285,384
Private Placement CMOs............................ 17,884 65 (22) 17,927
Government National Mortgage Association.......... 566 8 (1) 573
-------- ---- -------- --------
Total mortgage-related securities.............. 381,998 912 (8,810) 374,100
-------- ---- -------- --------
Total.......................................... $441,183 $912 $(10,232) $431,863
======== ==== ======== ========
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
At December 31, 1998:
U.S. government and federal agency obligations.... $ 75,113 $ 308 $ -- $ 75,421
Asset-backed securities........................... 228 -- -- 228
Mutual funds...................................... 41,592 -- (707) 40,885
-------- ------ ----- --------
Total investment securities.................... 116,933 308 (707) 116,534
-------- ------ ----- --------
Federal Home Loan Mortgage Corporation............ 43,607 168 (58) 43,717
Federal National Mortgage Association............. 192,200 2,250 (97) 194,353
Private Placement CMOs............................ 31,630 370 (6) 31,994
Government National Mortgage Association.......... 797 36 -- 833
-------- ------ ----- --------
Total mortgage-related securities.............. 268,234 2,824 (161) 270,897
-------- ------ ----- --------
Total.......................................... $385,167 $3,132 $(868) $387,431
======== ====== ===== ========
</TABLE>

F-12
<PAGE> 157
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

3. SECURITIES -- (CONTINUED)

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

<TABLE>
<CAPTION>
JUNE 30 2000
-----------------------
AMORTIZED
COST FAIR VALUE
--------- ----------
(UNAUDITED)
<S> <C> <C>
Due in one year or less..................................... $ 3,543 $ 3,543
Due after one year through five years....................... 25,366 24,619
Mutual funds................................................ 29,894 29,299
Mortgage-related securities................................. 473,877 461,377
-------- --------
$532,680 $518,838
======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31 1999
-----------------------
AMORTIZED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 10,000 $ 9,925
Due after one year through five years....................... 20,158 19,301
Mutual funds................................................ 29,027 28,537
Mortgage-related securities................................. 381,998 374,100
-------- --------
$441,183 $431,863
======== ========
</TABLE>

F-13
<PAGE> 158
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

3. SECURITIES -- (CONTINUED)

A reconciliation of the gross change in the unrealized gain or loss on
available-for-sale securities to the change in unrealized gain or loss on
available-for-sale securities reported as a component of comprehensive income
follows:

<TABLE>
<CAPTION>
JUNE 30 2000
-------------------------------------
BEFORE TAX
TAX (BENEFIT) NET-OF-TAX
AMOUNT EXPENSE AMOUNT
------ --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Change in unrealized losses on available-for-sale
securities................................................ $(13,842) $(5,170) $(8,672)
Less: reclassification adjustment for gains realized in net
income.................................................... -- -- --
-------- ------- -------
Change in net unrealized losses recognized in other
comprehensive
income.................................................... $(13,842) $(5,170) $(8,672)
======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31 1999
-----------------------------------
BEFORE TAX
TAX (BENEFIT) NET-OF-TAX
AMOUNT EXPENSE AMOUNT
------ --------- ----------
<S> <C> <C> <C>
Change in unrealized losses on available-for-sale
securities................................................ $(11,962) $(4,276) $(7,686)
Less: reclassification adjustment for gains realized in net
income.................................................... (378) (132) (246)
-------- ------- -------
Change in net unrealized losses recognized in other
comprehensive
income.................................................... $(11,584) $(4,144) $(7,440)
======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31 1998
-------------------------------------
BEFORE TAX
TAX (BENEFIT) NET-OF-TAX
AMOUNT EXPENSE AMOUNT
------ --------- ----------
<S> <C> <C> <C>
Change in unrealized gains on available-for-sale
securities................................................ $2,372 $832 $1,540
Less: reclassification adjustment for gains (losses)
realized in net
income.................................................... -- -- --
------ ---- ------
Change in net unrealized gains recognized in other
comprehensive income...................................... $2,372 $832 $1,540
====== ==== ======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31 1997
---------------------------------
BEFORE TAX
TAX (BENEFIT) NET-OF-TAX
AMOUNT EXPENSE AMOUNT
------ --------- ----------
<S> <C> <C> <C>
Change in unrealized gains on available-for-sale
securities................................................ $2,435 $855 $1,580
Less: reclassification adjustment for losses realized in net
income.................................................... 12 5 7
------ ---- ------
Change in net unrealized gains recognized in other
comprehensive
income.................................................... $2,423 $850 $1,573
====== ==== ======
</TABLE>

F-14
<PAGE> 159
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

3. SECURITIES -- (CONTINUED)

Total proceeds and gross realized gains and losses from sale of
available-for-sale securities were:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30 YEAR ENDED
----------------- -------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Proceeds............................................... $-- $ $54,060 $-- $3,825
Gross gains............................................ -- -- 378 -- 3
Gross losses........................................... -- -- -- -- 15
</TABLE>

Net losses of $0 (unaudited), $108 (unaudited) and $220 were recognized in
income from sales of securities classified as trading for the six months ended
June 30, 2000 and 1999 and the year ended December 31, 1999. There were no
realized net gains or losses on trading securities in 1998 or 1997 and no
unrealized gains or losses recognized in income related to trading securities
for any period presented.

Investment securities with a fair value of approximately $10 million at
June 30, 2000 (unaudited) and December 31, 1999 and 1998, were pledged to secure
public funds.

4. LOANS RECEIVABLE

Loans receivable consist of the following:

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- ------------------------
2000 1999 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
First mortgage loans:
One to four-family..................................... $ 733,958 $ 743,993 $ 742,231
Multi-family........................................... 65,105 53,777 53,521
Commercial............................................. 65,267 52,375 40,922
Construction and development........................... 30,840 26,530 21,939
---------- ---------- ----------
Total first mortgage real estate loans................. 895,170 876,675 858,613
---------- ---------- ----------
Consumer and other loans:
Consumer loans:
Fixed equity........................................ 108,811 89,315 67,629
Home equity lines of credit......................... 55,371 50,618 45,827
Student............................................. 27,698 28,371 29,634
Home improvement.................................... 12,134 9,920 8,373
Other............................................... 9,436 10,028 12,970
Total consumer loans.............................. 213,450 188,252 164,433
---------- ---------- ----------
Commercial business loans.............................. 42,815 39,488 28,839
---------- ---------- ----------
Total consumer and other loans...................... 256,265 227,740 193,272
Total loans receivable.............................. 1,151,435 1,104,415 1,051,885
</TABLE>

F-15
<PAGE> 160
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

4. LOANS RECEIVABLE -- (CONTINUED)

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- ------------------------
2000 1999 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Less:
Undisbursed loan proceeds.............................. 16,368 14,658 7,001
Allowance for losses on loans.......................... 7,085 6,948 6,855
Unearned loan fees and discounts....................... (5) 14 440
---------- ---------- ----------
23,448 21,620 14,296
---------- ---------- ----------
$1,127,987 $1,082,795 $1,037,589
========== ========== ==========
</TABLE>

The Bank's first mortgage loans, fixed equity, home equity lines of credit
and home improvement loans are primarily secured by properties housing one to
four families which are generally located in the Bank's local lending areas in
Wisconsin.

A summary of the activity in the allowance for losses on loans follows:

<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30 DECEMBER 31
---------------- -------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year.................. $6,948 $6,855 $6,855 $7,195 $3,921
Provisions.................................... 236 247 350 637 1,065
Allowance of acquired business................ -- -- -- -- 2,449
Charge-offs................................... (114) (127) (341) (1,220) (751)
Recoveries.................................... 15 18 84 243 511
------ ------ ------ ------ ------
Balance at end of year........................ $7,085 $6,949 $6,948 $6,855 $7,195
====== ====== ====== ====== ======
</TABLE>

There are no loans which are considered to be impaired at June 30, 2000,
December 31, 1999 or December 31, 1998.

The unpaid principal balance of loans serviced for others were $278,057
(unaudited), $287,789, $279,759 and $250,496 at June 30, 2000 and December 31,
1999, 1998 and 1997, respectively. These loans are not reflected in the
consolidated financial statements.

5. REAL ESTATE OWNED

Real estate owned is summarized as follows:

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- ----------------
2000 1999 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Acquired by foreclosure or in lieu of foreclosure........... $2,977 $3,018 $3,505
Acquired for development or resale.......................... 1,935 1,935 1,935
------ ------ ------
$4,912 $4,953 $5,440
====== ====== ======
</TABLE>

F-16
<PAGE> 161
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

6. ACCRUED INTEREST

Accrued interest on loans and investments are summarized as follows:

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- ----------------
2000 1999 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Mortgage-related securities................................. $2,484 $1,787 $1,174
Investment securities....................................... 553 814 821
Loans receivable............................................ 6,565 6,019 6,040
------ ------ ------
$9,602 $8,620 $8,035
====== ====== ======
</TABLE>

7. PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- ------------------
2000 1999 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Land........................................................ $ 6,969 $ 6,969 $ 6,889
Office buildings............................................ 25,840 25,292 25,177
Furniture, equipment and automobiles........................ 12,015 12,060 11,759
Leasehold improvements...................................... 1,203 1,203 1,442
------- ------- -------
46,027 45,524 45,267
Less allowances for depreciation and amortization........... 19,300 18,653 17,700
------- ------- -------
$26,727 $26,871 $27,567
======= ======= =======
</TABLE>

Depreciation expense for the six months ended June 30, 2000 and 1999 and
the years ended 1999, 1998 and 1997, was $790 (unaudited), $935 (unaudited),
$1,840, $2,033 and $1,816, respectively.

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

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- -----------
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
2000........................................................ $ 435 $ 870
2001........................................................ 660 660
2002........................................................ 446 446
2003........................................................ 417 417
2004........................................................ 390 390
Thereafter.................................................. 1,364 1,364
------ ------
Total..................................................... $3,712 $4,147
====== ======
</TABLE>

Total rental expenses totaled $273 (unaudited), $302 (unaudited), $609,
$639 and $682 for the six months ended June 30, 2000 and 1999 and the years
ended 1999, 1998 and 1997, respectively.

F-17
<PAGE> 162
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

8. DEPOSITS

Deposits are summarized as follows:

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- ------------------------
2000 1999 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Checking accounts:
Non-interest-bearing................................... $ 49,002 $ 42,596 $ 43,031
Interest-bearing....................................... 86,133 89,685 100,753
---------- ---------- ----------
135,135 132,281 143,784
Money market accounts.................................... 220,721 231,174 159,361
Savings accounts......................................... 148,406 151,447 166,316
Certificate accounts:
Due within one year.................................... 539,156 593,512 638,596
After one but within two years......................... 190,143 178,431 237,113
After two but within three years....................... 46,057 34,716 30,129
After three but within four years...................... 10,593 11,535 10,479
After four but within five years....................... 10,397 9,868 11,583
After five years....................................... 5 43 1,497
---------- ---------- ----------
796,351 828,105 929,397
---------- ---------- ----------
$1,300,613 $1,343,007 $1,398,858
========== ========== ==========
</TABLE>

The aggregate amount of certificate accounts with balances of one hundred
thousand dollars or more is approximately $63,787 (unaudited), $62,223 and
$70,513 at June 30, 2000 and December 31, 1999 and 1998, respectively.

Interest expense on deposits was as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30 DECEMBER 31
------------------ -----------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest-bearing checking accounts............. $ 452 $ 472 $ 940 $ 1,070 $ 1,137
Money market accounts.......................... 5,656 4,315 9,796 6,571 5,458
Savings accounts............................... 1,786 1,981 3,885 4,268 4,696
Certificate accounts........................... 21,845 24,217 46,470 53,327 49,626
------- ------- ------- ------- -------
$29,739 $30,985 $61,091 $65,236 $60,917
======= ======= ======= ======= =======
</TABLE>

The deposit accounts are insured by the FDIC to a maximum of one hundred
thousand dollars for each insured depositor in accordance with applicable law
and regulation.

F-18
<PAGE> 163
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

9. BORROWINGS

Borrowings consist of the following:

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
--------------------- ----------------------------------------------
2000 1999 1998
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- --------- ------- --------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Federal Home Loan Bank advances
maturing:
2000....................... $ 31,147 7.07% $ 42,152 6.53% $ 42,170 5.77%
2001....................... 33,000 6.59 -- -- -- --
2002....................... -- -- -- -- 203,000 5.20
2003....................... 520 4.30 547 5.11 569 4.65
2004....................... 200,000 5.70 200,000 5.70 -- --
Thereafter................. -- -- 25,000 4.98
Other borrowings................ -- -- 83 10.25
-------- -------- --------
$264,667 $242,699 $270,822
======== ======== ========
</TABLE>

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

The Bank is required to maintain unencumbered mortgage loans in its
portfolio aggregating at least 167% of the amount of outstanding advances from
the FHLB as collateral. The Bank's borrowings at the FHLB are limited to the
lesser of 35% of total assets or 60% of the book value of certain mortgage
loans. In addition, these notes are collateralized by FHLB stock of $14,585 at
June 30, 2000 (unaudited) and December 31, 1999.

10. EQUITY

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

As a state-chartered savings bank, the Bank is required to meet minimum
capital levels established by the State of Wisconsin in addition to federal
regulations.

Quantitative measures established by federal regulation to ensure adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as these terms are defined in regulations)
to risk-weighted assets (as these terms are defined in regulations), and of Tier
I capital (as these terms are defined in regulations) to average assets (as
these terms are defined in regulations). For the state of Wisconsin, total
capital (as these terms are defined in regulations) as a ratio

F-19
<PAGE> 164
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

10. EQUITY -- (CONTINUED)

of total assets must meet a minimum standard. Management believes, as of June
30, 2000 and December 31, 1999, that the Bank meets all capital adequacy
requirements to which it is subject.

As of June 30, 2000 and December 31, 1999 and 1998, the most recent
notification from the State of Wisconsin categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. The
Bank is not aware of any conditions or events which would change their status as
well capitalized. There are no conditions or events since that notification that
management believes have changed the Bank's category.

<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
----------------- ---------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 2000 (unaudited):
Total capital (to risk-weighted assets)... $171,598 18.69% $73,453 8.00% $91,817 10.00%
Tier 1 capital (to risk-weighted
assets)................................ 164,513 17.92% 36,727 4.00% 55,090 6.00%
Tier 1 capital (to average assets)........ 164,513 9.37% 70,244 4.00% 87,458 5.00%
State of Wisconsin capital (to total
assets)................................ 171,598 9.72% 105,918 6.00% N/A N/A
As of December 31, 1999:
Total capital (to risk-weighted assets)... $164,565 18.51% $71,143 8.00% $88,928 10.00%
Tier 1 capital (to risk-weighted
assets)................................ 157,617 17.72% 35,571 4.00% 53,357 6.00%
Tier 1 capital (to average assets)........ 157,617 8.66% 72,770 4.00% 90,962 5.00%
State of Wisconsin capital (to total
assets)................................ 164,565 9.26% 106,587 6.00% N/A N/A
As of December 31, 1998:
Total capital (to risk-weighted assets)... $150,439 17.02% $70,728 8.00% $88,409 10.00%
Tier 1 capital (to risk-weighted
assets)................................ 143,584 16.24% 35,364 4.00% 53,046 6.00%
Tier 1 capital (to average assets)........ 143,584 7.78% 73,798 4.00% 92,248 5.00%
State of Wisconsin capital (to total
assets)................................ 150,439 8.00% 112,783 6.00% N/A N/A
</TABLE>

F-20
<PAGE> 165
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

10. EQUITY -- (CONTINUED)

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

<TABLE>
<CAPTION>
RISK- TIER I STATE OF
BASED (CORE) WISCONSIN
CAPITAL CAPITAL CAPITAL
------- ------- ---------
<S> <C> <C> <C>
As of June 30, 2000 (Unaudited):
Equity per financial statements........................... $167,588 $167,588 $167,588
Unrealized losses on investments (excluding unrealized
loss on mutual funds).................................. 8,077 8,077 8,077
Intangibles............................................... (11,027) (11,027) (11,027)
Mortgage servicing rights................................. (125) (125) (125)
Allowance for loan losses................................. 7,085 -- 7,085
-------- -------- --------
Regulatory capital.......................................... $171,598 $164,513 $171,598
======== ======== ========
As of December 31, 1999:
Equity per financial statements........................... $163,820 $163,820 $163,820
Unrealized losses on investments (excluding unrealized
loss on mutual funds).................................. 5,436 5,436 5,436
Intangibles............................................... (11,496) (11,496) (11,496)
Mortgage servicing rights................................. (143) (143) (143)
Allowance for loan losses................................. 6,948 -- 6,948
-------- -------- --------
Regulatory capital.......................................... $164,565 $157,617 $164,565
======== ======== ========
As of December 31, 1998:
Equity per financial statements........................... $175,743 $175,743 $175,743
Unrealized losses on investments (excluding unrealized
loss on mutual funds).................................. (2,221) (2,221) (2,221)
Intangibles............................................... (29,786) (29,786) (29,786)
Mortgage servicing rights................................. (152) (152) (152)
Allowance for loan losses................................. 6,855 -- 6,855
-------- -------- --------
Regulatory capital.......................................... $150,439 $143,584 $150,439
======== ======== ========
</TABLE>

11. EMPLOYEE BENEFIT PLANS

The Bank has a discretionary, defined-contribution savings plan (the Plan).
The Plan is qualified under Sections 401 and 401(k) of the Internal Revenue Code
and provides employees meeting certain minimum age and service requirements the
ability to make contributions to the Plan on a pretax basis. The Bank may then
match a percentage of the employee's contributions. Matching contributions made
by the Bank were $39 (unaudited) and $36 (unaudited) in the six months ended
June 30, 2000 and 1999, $68 in 1999, $56 in 1998 and $52 in 1997.

The Bank also has a defined-benefit pension plan covering employees meeting
certain minimum age and service requirements and a supplemental pension plan for
certain qualifying employees. The benefits are generally based on years of
service and the employee's compensation during the last five years of

F-21
<PAGE> 166
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

11. EMPLOYEE BENEFIT PLANS -- (CONTINUED)

employment. The Bank's funding policy is to contribute annually the amount
necessary to satisfy the requirements of the Employee Retirement Income Security
Act of 1974.

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

The following tables set forth the Plan's funded status and net periodic
benefit cost for 1999 and 1998. No such information is available relative to
interim periods.

<TABLE>
<CAPTION>
1999 1998
---- ----
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Change in Benefit Obligation
Benefit obligation at beginning of year..................... $13,916 $10,878
Service cost................................................ 659 632
Interest cost............................................... 934 798
Plan amendments............................................. -- 1,118
Actuarial (gain) loss....................................... (1,629) 704
Benefits paid............................................... (328) (214)
------- -------
Benefit obligation at end of year........................... $13,552 $13,916
======= =======
Change in Plan Assets
Fair value of plan assets at beginning of year.............. $13,218 $11,057
Actual return on plan assets................................ 333 963
Employer contributions...................................... 996 1,412
Benefits paid............................................... (328) (214)
------- -------
Fair value of plan assets at end of year.................... $14,219 $13,218
======= =======
Funded Status
Funded (underfunded) status at end of year.................. $ 668 $ (698)
Unrecognized net actuarial gain (loss)...................... (239) 791
Unrecognized prior service cost............................. 1,028 1,230
Unrecognized net transition asset........................... (101) (151)
------- -------
Prepaid benefit cost........................................ $ 1,356 $ 1,172
======= =======
Weighted average assumptions used in cost calculations:
Discount rate............................................. 6.75% 7.00%
Rate of increase in compensation levels................... 5.50% 5.50%
Expected long-term rate of return on plan assets.......... 7.50% 7.50%
======= =======
</TABLE>

F-22
<PAGE> 167
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

11. EMPLOYEE BENEFIT PLANS -- (CONTINUED)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Components of Net Periodic Benefit Cost
Service cost................................................ $ 659 $ 632 $ 503
Interest cost............................................... 934 797 690
Expected return on plan assets.............................. (986) (824) (715)
Amortization of transition asset............................ (50) (50) (50)
Amortization of prior service cost.......................... 202 144 76
Recognized actuarial loss................................... 54 24 29
----- ----- -----
Total net periodic benefit cost............................. $ 813 $ 723 $ 533
===== ===== =====
</TABLE>

The supplemental pension plan had a projected benefit obligation of $3,110
and $3,247 and assets aggregating $2,777 and $2,521 at December 31, 1999 and
1998, respectively.

Total net periodic pension expense was $513 (unaudited) and $438
(unaudited) in the six months ended June 30, 2000 and 1999, respectively.

The Bank acquired an ESOP with the acquisition of First Federal which
covered substantially all former employees of First Federal with two or more
years of employment and who were at least 21 years of age. The cash proceeds
received by the ESOP in connection with the merger were used to prepay the
unpaid principal and interest outstanding under the ESOP. The remaining cash
balance has been invested in a mutual fund. An allocation was made to the
participants' accounts as of December 31, 1998 and the final allocation was made
as of December 31, 1999. The Bank is in the process of applying for a
determination letter to terminate the Plan and anticipates that all assets will
be available for distribution in a lump sum during 2000.

12. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEARS ENDED DECEMBER 31
---------------- ----------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal......................................... $3,706 $2,456 $ 6,896 $7,010 $ 7,041
State........................................... 187 (76) 793 204 291
------ ------ ------- ------ -------
3,893 2,380 7,689 7,214 7,332
Deferred expense (benefit):
Federal......................................... 87 5 (3,120) (786) (1,007)
State........................................... 21 1 (766) 156 297
------ ------ ------- ------ -------
108 6 (3,886) (630) (710)
------ ------ ------- ------ -------
$4,001 $2,386 $ 3,803 $6,584 $ 6,622
====== ====== ======= ====== =======
</TABLE>

For state income tax purposes, the subsidiaries of the Bank have net
business loss carryovers of $487 available to offset against future income which
expire through 2013.

F-23
<PAGE> 168
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

12. INCOME TAXES -- (CONTINUED)

The income tax provision differs from the provision computed at the federal
statutory corporate rate for six months ended June 30, 2000 and 1999 and the
years ended December 31, 1999, 1998 and 1997 follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30 YEAR ENDED DECEMBER 31
----------------- ----------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income (loss) before provision for income
taxes.......................................... $10,515 $6,276 $ (680) $17,735 $16,807
======= ====== ====== ======= =======
Tax expense at federal statutory rate............ $ 3,680 $2,197 $ (238) $ 6,207 $ 5,882
Increase (decrease) in taxes resulting from:
State income taxes -- Net of federal tax
benefit..................................... 135 (49) 21 382 382
Nondeductible intangible amortization.......... 164 216 3,487 490 351
Other.......................................... 22 24 533 (495) 7
------- ------ ------ ------- -------
Provision for income taxes....................... $ 4,001 $2,386 $3,803 $ 6,584 $ 6,622
======= ====== ====== ======= =======
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Bank's deferred tax assets and liabilities as of June 30, 2000
and December 31, are summarized as follows:

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- ----------------------------
2000 1999 1998 1997
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Deferred tax assets:
State net operating losses........................... $ 26 $ 26 $ 26 $ 238
Loan loss reserves................................... 1,886 2,103 1,673 1,274
Deferred loan fees................................... 51 225 155 370
Pension.............................................. 1,241 1,151 1,147 1,165
Unrealized loss on investment securities............. 5,170 3,394 -- 78
Other................................................ 1,371 1,252 297 402
------ ------ ------- -------
Total deferred tax assets.............................. 9,745 8,151 3,298 3,527
------ ------ ------- -------
Deferred tax liabilities:
Property and equipment depreciation.................. 1,057 1,057 1,196 1,200
FHLB stock dividends................................. 556 555 544 820
Purchase accounting adjustments...................... 1,536 1,611 3,910 4,407
Unrealized gain on investment securities............. -- -- 750 --
------ ------ ------- -------
Total deferred tax liabilities......................... 3,149 3,223 6,400 6,427
------ ------ ------- -------
Net deferred tax asset (liability)..................... $6,596 $4,928 $(3,102) $(2,900)
====== ====== ======= =======
</TABLE>

The Bank qualified under provisions of the Internal Revenue Code that
permitted it to deduct from taxable income an allowance for bad debts that
differed from the provision for such losses charged to income for financial
reporting purposes. Accordingly, no provision for federal income taxes has been
made for approximately $48,592 of retained income as of June 30, 2000
(unaudited) and December 31, 1999. If,

F-24
<PAGE> 169
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

12. INCOME TAXES -- (CONTINUED)

in the future, the Bank no longer qualifies as a bank for tax purposes, income
taxes of approximately $19,500 would be imposed.

13. CONTINGENT LIABILITY

The Bank has entered into an agreement whereby, for an initial fee and
annual fee, certain of its United States Treasury notes are pledged as
collateral for an Industrial Development Revenue Bond which was issued by a
local municipality to finance commercial real estate owned by a third party,
unrelated to the Bank. Under the terms of the agreement, the Bank must maintain
with a trustee collateral with a fair market value, as defined, aggregating
128%, 135% and 135% or more of the sum of the outstanding principal balance of
the bonds plus accrued interest on the outstanding principal at June 30, 2000
and December 31, 1999 and 1998, respectively. The Bank continues to receive
interest payments on the collateral.

At June 30, 2000 (unaudited) and December 31, 1999 and 1998, United States
Treasury notes with outstanding principal balances aggregating approximately
$10,000 were held by the trustee as collateral for these bonds which had an
outstanding principal balance of $5,165 (unaudited), $5,165 and $5,410 for June
30, 2000 and December 31, 1999 and 1998, respectively. The third-party borrower
is not in default on any scheduled payments due under the bond issue which has a
scheduled maturity of on December 15, 2009.

14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

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

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

<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
----------- ------------------
2000 1999 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Unused consumer lines of credit............................. $66,958 $63,461 $59,406
Unused commercial lines of credit........................... 1,480 1,003 946
Commitments to extend credit:
Fixed rate ((7.625-9.25) in 2000; 6.60%-8.25% in 1999 and
6.15%-7.25% in 1998)................................... 10,496 7,418 19,445
Adjustable rate........................................... 17,344 7,595 4,003
</TABLE>

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

F-25
<PAGE> 170
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

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

Bank generally extends credit only on a secured basis. Collateral obtained
varies, but consists principally of one-to four-family residences.

Forward commitments to sell mortgage loans of $2,274 (unaudited), $0 and
$17,030 at June 30, 2000 and December 31, 1999 and 1998, respectively, represent
commitments obtained by the Bank from a secondary market agency to purchase
mortgages from the Bank and place them in a mortgage-backed security pool with a
defined yield. Commitments to sell loans expose the Bank to interest rate risk
if market rates of interest decrease during the commitment period. Commitments
to sell loans are made to mitigate interest rate risk on commitments to
originate loans and loans held for sale.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Certain financial instruments and all nonfinancial
instruments are excluded from this disclosure. Accordingly, the aggregate fair
value of amounts presented does not represent the underlying value of the Bank
and is not particularly relevant to predicting the Bank's future earnings or
cash flows.

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

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

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

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

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

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

Deposits and Advance Payments by Borrowers for Taxes and Insurance: The
fair values disclosed for variable rate investment accounts, NOW accounts,
passbook accounts, money market certificates, accrued interest and advance
payments by borrowers for taxes and insurance are equal to the carrying amounts
at the reporting date. Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash

F-26
<PAGE> 171
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

15. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)

flow calculation that applies interest rates currently offered on certificates
to a schedule of aggregated expected monthly maturities on time deposits.

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

Commitments to Extend Credit and Forward Commitments to Sell Loans: The
fair value of these commitments is considered to approximate the carrying values
due to the short-term nature of these commitments.

<TABLE>
<CAPTION>
JUNE 30 2000 DECEMBER 31 1999 DECEMBER 31 1998
------------------------ ----------------------- -----------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
-------- ----- -------- ----- -------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents... $ 31,817 $ 31,817 $ 178,959 $ 178,959 $ 330,248 $ 330,248
Investment and mortgage-
related securities........ 518,838 518,838 431,863 431,863 387,431 387,431
Loans receivable, net....... 1,127,987 1,106,015 1,082,795 1,067,333 1,045,046 1,056,232
Loans held for sale......... 1,632 1,632 541 541 27,723 27,723
Federal Home Loan
Bank stock................ 14,585 14,585 13,537 13,537 13,537 13,537
Accrued interest
receivable................ 9,602 9,602 8,620 8,620 8,035 8,035
Deposits and accrued
interest.................. 1,300,613 1,238,606 1,343,007 1,298,038 1,398,858 1,381,119
Advance payments by
borrowers................. 13,012 13,012 1,661 1,661 1,710 1,710
Borrowings.................. 264,667 262,843 242,699 194,443 270,822 230,233
</TABLE>

The preceding table does not include any amount for the value of any
off-balance-sheet items (see Note 14) since the fair value of these items is not
significant.

16. MERGER AND CONVERSION

On February 21, 2000, Mutual and First Northern Capital Corp. (First
Northern), entered into an Agreement and Plan of Merger (the Merger Agreement).
The Merger Agreement has been approved by the boards of directors of Mutual and
First Northern.

To accomplish the transaction Mutual also adopted a plan of restructuring
in which it will reorganize into a mutual holding company (MHC) in which
Mutual's depositors will hold all of the voting rights. The MHC in turn will
form and own the majority interest in a subsidiary, a mid-tier stock holding
company (Mid-Tier HC). The balance of the shares of Common Stock will be offered
for sale to Mutual's depositors and issued to First Northern shareholders in the
Merger. As a result of the reorganization and merger, First Northern Capital
Corp will merge with and into Mid-Tier HC and, Mutual Savings Bank and First
Northern Savings Bank, S.A., will become wholly owned subsidiaries of Mid-Tier
HC.

Subject to the terms and conditions of the Merger Agreement, at the time of
the Merger, each outstanding share of First Northern common stock (First
Northern Common Stock), will be converted into the right to receive cash in the
amount of $15.00, or 1.5 shares of common stock, par value $.01 per

F-27
<PAGE> 172
MUTUAL SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO JUNE 30, 2000 AND THE
SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 IS UNAUDITED)

16. MERGER AND CONVERSION -- (CONTINUED)

share, of Mid-Tier HC Common Stock or a combination of cash and shares of
Mid-Tier HC Common Stock (Merger Consideration). Prior to the closing date,
Mutual will select the percentage of the total Merger Consideration to be paid
in Common Stock, which may not be less than 40% or more than 70%; the balance
will be paid in cash. The remaining shares of the Mid-Tier HC will be offered
for sale to Mutual's depositors, pursuant to the terms of a Plan of
Restructuring. The Restructuring will be accounted for as a pooling of
interests, whereas the merger will be accounted for as a purchase.

Consummation of the Merger is subject to the satisfaction of certain
closing conditions set forth in the Merger Agreement, including approval by the
shareholders of First Northern and approval by the Office of Thrift Supervision,
the Federal Deposit Insurance Corporation and the Administrator of the Division
of Savings Institutions of the Wisconsin Department of Financial Institutions as
to both the Restructuring and the Merger. The depositors of Mutual must also
approve Mutual's Plan of Restructuring. The Merger is also subject to receipt of
an opinion of counsel to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
and the receipt of an opinion of counsel or a private letter ruling from the
Internal Revenue Service as to the federal income tax treatment of certain
transactions contemplated by the Merger Agreement. In addition, the Merger is
conditioned upon the approval for listing on the NASDAQ National Market of the
shares of Common Stock to be issued in the Merger, which shares will be
registered under the Securities Act of 1933 by a registration statement to be
filed with the Securities and Exchange Commission.

The amount and pricing of the proposed stock offering will be based upon an
independent appraisal of the Bank. In connection with the conversion, the costs
of issuing the common stock will be deducted from the sale proceeds. At June 30,
2000 and December 31, 1999, $749,000 (unaudited) and $0 of costs related to the
conversion have been capitalized. In the event that the consummation of the
conversion or merger do not occur, any recorded costs will be expensed.

At the time of conversion, the Bank will establish a liquidation account in
an amount equal to its net worth as of the date of the latest consolidated
statement of financial condition appearing in the final prospectus. The
liquidation account will be maintained for the benefit of eligible account
holders and supplemental eligible account holders, if any, who continue to
maintain their deposit accounts at the Bank after the conversion.

The liquidation account will be reduced annually to the extent that
eligible account holders and supplemental eligible account holders, if any, have
reduced their qualifying deposits as of each anniversary date. Subsequent
increases will not restore an eligible account holder's or a supplemental
eligible account holder's interest in the liquidation account. In the event of a
complete liquidation, each eligible account holder and supplemental eligible
account holder, if any, will be entitled to receive balances for accounts then
held.

Concurrently with the execution of the Merger Agreement, in order to induce
Mutual to enter into the Merger Agreement, the parties entered into a Stock
Option Agreement by which First Northern granted to Mutual an irrevocable option
to purchase up to 1,708,675 shares of First Northern Common Stock, which equals
19.9% of the number of shares of First Northern Common Stock outstanding on
February 21, 2000, at an exercise price of $9.0375 per share. The option would
become exercisable under certain circumstances if First Northern becomes the
subject of a third-party proposal for a competing transaction.

F-28
<PAGE> 173

FIRST NORTHERN DATA
INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders
First Northern Capital Corp.
Green Bay, Wisconsin

We have audited the accompanying consolidated statement of financial
condition of First Northern Capital Corp. and Subsidiaries as of December 31,
1999, and the related consolidated statements of income, stockholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The consolidated
financial statements of First Northern Capital Corp. and Subsidiaries as of and
for each of the two years in the period ended December 31, 1998, were audited by
other auditors whose report dated January 22, 1999, expressed an unqualified
opinion on those statements.

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

In our opinion, the 1999 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of First
Northern Capital Corp. and Subsidiaries at December 31, 1999, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Wipfli Ullrich Bertelson LLP
January 21, 2000 (except for
Note 17, as to which the date
is February 22, 2000)
Green Bay, Wisconsin

FN-1
<PAGE> 174

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
First Northern Capital Corp.

We have audited the accompanying consolidated statements of financial
condition of First Northern Capital Corp. (the "Company") and subsidiaries as of
December 31, 1998, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company and
subsidiaries at December 31, 1998, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1998, in conformity with auditing standards generally accepted in
the United States.
Ernst & Young LLP
January 22, 1999
Milwaukee, Wisconsin

FN-2
<PAGE> 175

FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash........................................................ $ 8,043 $ 6,350
Interest-earning deposits................................... 4,329 861
-------- --------
Cash and cash equivalents................................. 12,372 7,211
Securities available-for-sale, at fair value:
Investment securities..................................... 8,444 9,205
Mortgage-related securities............................... 5,554 996
Securities held-to-maturity:
Investment securities (estimated fair value of $25,644 in
1999 and $23,935 in 1998).............................. 26,215 23,741
Mortgage-related securities (estimated fair value of
$9,976 in 1999 and $11,594 in 1998).................... 10,048 11,522
Loans held-for-sale......................................... 1,085 3,075
Loans receivable............................................ 736,880 631,739
Accrued interest receivable................................. 4,229 3,686
Foreclosed properties and repossessed assets................ 382 106
Office properties and equipment............................. 7,463 7,573
Federal Home Loan Bank stock................................ 9,250 5,250
Life insurance policies..................................... 13,548 12,514
Other assets................................................ 4,153 3,095
-------- --------
Total Assets...................................... $839,623 $719,713
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits.................................................. $566,908 $542,372
Borrowings................................................ 185,899 91,977
Advance payments by borrowers for taxes and insurance..... 3,887 3,433
Other liabilities......................................... 6,134 5,838
-------- --------
Total liabilities................................. 762,828 643,620
-------- --------
Commitments and Contingencies (see Note 14)
Stockholders' equity:
Cumulative preferred stock -- $1 par value:
Authorized -- 10,000,000 shares, no shares outstanding
Common stock -- $1 par value:
Authorized -- 30,000,000 shares
Issued -- 9,134,735 shares
Outstanding -- 8,548,658 shares in 1999 and 8,764,945
shares in 1998........................................ 9,135 9,135
Additional paid-in capital................................ 8,780 9,126
Retained earnings......................................... 64,468 60,582
Accumulated other comprehensive income.................... 479 960
Treasury stock at cost -- 586,077 shares in 1999 and
369,790 shares in 1998................................. (6,067) (3,710)
-------- --------
Total stockholders' equity........................ 76,795 76,093
-------- --------
Total Liabilities and Stockholders' Equity........ $839,623 $719,713
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

FN-3
<PAGE> 176

FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Interest and dividend income:
Loans..................................................... $49,448 $46,783 $43,972
Investment securities..................................... 2,336 2,138 1,844
Interest-earning deposits................................. 82 147 45
Mortgage-related securities............................... 904 622 735
------- ------- -------
Total interest and dividend income................ 52,770 49,690 46,596
------- ------- -------
Interest expense:
Deposits.................................................. 23,559 23,270 21,437
Borrowings................................................ 6,964 5,578 4,905
Advance payments by borrowers for taxes and insurance..... 163 155 149
------- ------- -------
Total interest expense............................ 30,686 29,003 26,491
------- ------- -------
Net interest income......................................... 22,084 20,687 20,105
Provision for loan losses................................... 472 420 320
------- ------- -------
Net interest income after provision for loan losses......... 21,612 20,267 19,785
------- ------- -------
Other income:
Fees on serviced loans.................................... 179 167 313
Loan fees and service charges............................. 236 268 251
Deposit account service charges........................... 1,414 1,300 1,227
Insurance commissions..................................... 329 292 324
Gains on sales of loans................................... 380 1,042 359
Gain on sales of securities............................... -- 9 --
Other..................................................... 1,316 1,161 802
------- ------- -------
Total other income................................ 3,854 4,239 3,276
------- ------- -------
Operating expenses:
Compensation, payroll taxes, and other employee
benefits............................................... 7,882 7,804 7,266
Federal insurance premiums................................ 321 301 284
Occupancy................................................. 981 862 875
Data processing........................................... 1,616 1,476 1,403
Furniture and equipment................................... 409 459 480
Telephone and postage..................................... 431 438 471
Marketing................................................. 475 409 370
Other..................................................... 2,449 2,322 2,225
------- ------- -------
Total operating expenses.......................... 14,564 14,071 13,374
------- ------- -------
Income before provision for income taxes.................... 10,902 10,435 9,687
Provision for income taxes.................................. 3,525 3,606 3,651
------- ------- -------
Net income.................................................. $ 7,377 $ 6,829 $ 6,036
======= ======= =======
Earnings per share -- Basic................................. $ 0.85 $ 0.77 $ 0.68
======= ======= =======
Earnings per share -- Diluted............................... $ 0.83 $ 0.75 $ 0.66
======= ======= =======
Cash dividends paid per share............................... $ 0.40 $ 0.36 $ 0.32
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

FN-4
<PAGE> 177

FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
-------------------------------------------------------------------
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY
STOCK CAPITAL EARNINGS INCOME STOCK TOTAL
------ ---------- -------- ------------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997............. $9,136 $9,841 $53,735 $ 385 ($2,873) $70,224
Comprehensive income:
Net income...................... 6,036 6,036
Other comprehensive income...... 229 229
-------
Total comprehensive
income................... 6,265
Cash dividends ($0.32 per share)... (2,826) (2,826)
Purchase of treasury stock......... (441) (441)
Exercise of stock options.......... (403) 998 595
------ ------ ------- ----- ------- -------
Balance, December 31, 1997........... 9,136 9,438 56,945 614 (2,316) 73,817
Comprehensive income:
Net income...................... 6,829 6,829
Other comprehensive income...... 346 346
-------
Total comprehensive
income................... 7,175
Cash dividends ($0.36 per share)... (3,192) (3,192)
Retirement of common stock......... (1) (17) (18)
Purchase of treasury stock......... (2,333) (2,333)
Exercise of stock options.......... (295) 939 644
------ ------ ------- ----- ------- -------
Balance, December 31, 1998........... 9,135 9,126 60,582 960 (3,710) 76,093
Comprehensive income:
Net income...................... 7,377 7,377
Other comprehensive loss........ (481) (481)
-------
Total comprehensive
income................... 6,896
Cash dividends ($0.40 per share)... (3,491) (3,491)
Purchase of treasury stock......... (2,935) (2,935)
Exercise of stock options.......... (346) 578 232
------ ------ ------- ----- ------- -------
Balance, December 31, 1999........... $9,135 $8,780 $64,468 $ 479 ($6,067) $76,795
====== ====== ======= ===== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

FN-5
<PAGE> 178

FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 7,377 $ 6,829 $ 6,036
--------- -------- --------
Adjustments to reconcile net income to cash provided by
operating activities:
Provision for losses on loans.......................... 472 420 320
Provision for depreciation and amortization............ 886 859 873
Gains on sales of loans................................ (380) (1,042) (359)
Gain on sale of securities............................. -- (9) --
Loans originated for sale.............................. (20,135) (66,527) (20,746)
Proceeds from loan sales............................... 22,505 66,613 21,159
Increase in interest receivable........................ (543) (40) (351)
Increase in interest payable........................... 110 194 165
Increase in other assets............................... (1,171) (1,277) (7,314)
Increase (decrease) in other liabilities............... (131) 995 824
--------- -------- --------
Total adjustments................................. 1,613 186 (5,429)
--------- -------- --------
Net cash provided by operating activities................... 8,990 7,015 607
--------- -------- --------
Cash flows from investing activities:
Proceeds from maturities of available-for-sale investment
securities............................................. 2,800 1,500 2,000
Proceeds from maturities of held-to-maturity investment
securities............................................. 10,184 16,701 4,800
Purchases of available-for-sale investment securities..... (2,590) (2,794) (2,740)
Purchases of held-to-maturity investment securities....... (12,713) (21,982) (9,471)
Principal payments on available-for-sale mortgage-related
securities............................................. 88 933 901
Principal payments on held-to-maturity mortgage-related
securities............................................. 3,073 1,949 621
Purchase of available-for-sale mortgage-related
securities............................................. (2,982) (998) --
Purchase of held-to-maturity mortgage-related
securities............................................. (3,453) (2,779) (1,977)
Proceeds from the sale of securities available-for-sale... -- 2,251 --
Net increase in loans receivable.......................... (106,014) (38,774) (39,963)
Purchases of office properties and equipment.............. (776) (428) (839)
Purchase of Federal Home Loan Bank stock.................. (4,000) (750) (1,477)
Redemption of Federal Home Loan Bank stock................ -- 750 --
--------- -------- --------
Net cash used in investing activities....................... (116,383) (44,421) (48,145)
--------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

FN-6
<PAGE> 179

FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits.................................. $ 24,426 $ 60,390 $ 23,300
Net increase (decrease) in short-term borrowings.......... 63,943 (20,050) 9,080
Proceeds from long-term borrowings........................ 80,270 35,750 63,825
Repayment of long-term borrowings......................... (50,291) (27,000) (46,900)
Net increase (decrease) in advance payments by borrowers
for taxes and insurance................................ 454 (428) (1,586)
Cash dividends............................................ (3,491) (3,192) (2,826)
Purchase of treasury stock................................ (2,935) (2,333) (441)
Retirement of common stock................................ -- (18) --
Proceeds from exercise of stock options................... 178 534 487
-------- -------- --------
Net cash provided by financing activities................... 112,554 43,653 44,939
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 5,161 6,247 (2,599)
Cash and cash equivalents at beginning of year.............. 7,211 964 3,563
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 12,372 $ 7,211 $ 964
======== ======== ========
Supplemental Information to the Statements of Cash Flows:
Cash paid during the year for:
Interest on deposits...................................... $ 22,449 $ 22,911 $ 21,273
Interest on borrowings.................................... 6,601 5,515 4,799
Income taxes.............................................. 3,570 3,842 3,212
Loans transferred to foreclosed properties and repossessed
assets.................................................... 554 315 387
</TABLE>

See accompanying notes to consolidated financial statements.

FN-7
<PAGE> 180

FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of First Northern Capital Corp. and
Subsidiaries (the "Company") conform to generally accepted accounting principles
and general practices within the financial institution industry. Significant
accounting and reporting policies are summarized below.

Business -- The Company provides a full range of financial services to
individual and corporate customers in Northeastern Wisconsin through First
Northern Savings Bank (the "Savings Bank"). The Company is subject to
competition from other traditional and nontraditional financial institutions and
is also subject to the regulations of certain federal and state agencies and
undergoes periodic examinations by those regulatory authorities.

Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of First Northern Capital Corp., its wholly
owned subsidiary, First Northern Savings Bank, and the Savings Bank's wholly
owned subsidiaries, First Northern Investment, Inc. and Great Northern Financial
Services Corporation. All significant intercompany balances and transactions
have been eliminated. Investment in the Savings Bank's 50% owned subsidiary
Savings Financial Corporation, which is not material, is accounted for on the
equity method.

Use of Estimates in Preparation of Financial Statements -- The preparation
of the accompanying consolidated financial statements of First Northern Capital
Corp. and Subsidiaries in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that directly
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results may differ from these estimates.

Cash and Cash Equivalents -- The Company considers its interest-earning
deposits, which have a maturity of three months or less when purchased, to be
cash equivalents.

Investment and Mortgage-Related Securities -- Management determines the
appropriate classification of securities at the time of purchase. Securities are
classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at amortized cost. Securities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale securities are stated at
fair value with the unrealized gains and losses, net of tax, reported as
accumulated other comprehensive income (loss) within stockholders' equity until
realized. Interest and dividends are included in interest income from securities
as earned. Realized gains and losses and declines in value judged to be other
than temporary are included in net gains and losses from sales of investment and
mortgage-related securities. The cost of securities sold is based on the
specific-identification method.

Fair values of many securities are estimates based on financial methods or
prices paid for similar securities. It is possible interest rates could change
considerably resulting in a material change in the estimated fair value.

Federal Home Loan Bank Stock -- The Company's investment in Federal Home
Loan Bank (FHLB) stock is carried at cost which is its redeemable (fair) value
since the market for this stock is restricted.

Loans Held-for-Sale -- Loans held-for-sale consist of the current
origination of certain fixed-rate mortgage loans and education loans which are
recorded at the lower of aggregate cost or fair value. Fees received from the
borrower and certain direct loan-origination costs are deferred and recorded as
an adjustment of the sale price. A gain or loss is recognized at the time of the
sale reflecting the present value of the difference between the contractual
interest rate of the loans sold and the yield to the investor, adjusted for the
initial value of mortgage servicing rights.

FN-8
<PAGE> 181
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Loans Receivable and Related Interest Income -- Interest on loans is
accrued and credited to income as earned. Accrual of interest is generally
discontinued either when reasonable doubt exists as to the full, timely
collection of interest or principal or when a loan becomes contractually past
due by 90 days or more with respect to interest or principal. At that time, any
accrued but uncollected interest is reversed and additional income is recorded
only to the extent that payments are received and the collection of principal is
reasonably assured. Loans are restored to accrual status when the obligation is
brought current, has performed in accordance with the contractual terms for a
reasonable period of time, and the ultimate collectibility of the total
contractual principal and interest is reasonably assured. The balance of
nonperforming loans was not material to the consolidated financial statements at
December 31, 1999 and 1998.

Loan Fees and Related Costs -- Certain loan-origination fees, commitment
fees, and direct loan-origination costs are being deferred and net amounts
amortized as an adjustment of the related loan's yield. The Savings Bank is
amortizing these amounts into interest income, using the level-yield method,
over the contractual life of the related loan. Other loan-origination and
commitment fees not required to be recognized as a yield adjustment are included
in loan fees.

Allowances for Loan Losses -- Allowances for loan losses are provided based
on past experience and prevailing market conditions. Management's evaluation of
loss considers various factors including, but not limited to, general economic
conditions, loan portfolio composition, and prior loss experience. This
evaluation is inherently subjective since it requires material estimates that
may be susceptible to significant change. Loans are charged against the
allowance for loan losses when management believes the collectibility of the
principal is unlikely. In addition, various regulatory agencies periodically
review the allowance for loan losses. These agencies may require additions to
the allowance for loan losses based on their judgments of collectibility.

The Company considers loans secured by one- to four-unit residential
properties and all consumer loans to be large groups of smaller-balance
homogenous loans. These loans are collectively evaluated in the analysis of the
adequacy of the allowance for loan losses.

The Company's commercial and five or more family residential portfolio is
subject to a loan-by-loan analysis of the adequacy of the allowance for loan
losses and impairment. These loans are considered impaired when, based on
current information, it is probable the Company will not collect all amounts due
in accordance with the contractual terms of the loan agreement. The value of
impaired loans is based on discounted cash flows of expected future payments
using the loan's internal effective interest rate or the fair value of the
collateral if the loan is collateral dependent. The Company would establish an
allowance where the carrying amount of the impaired loan is greater than the
value. The Company did not have any impaired loans during 1999, 1998, or 1997.

In management's judgment, the allowance for loan losses is adequate to
cover probable losses relating to specifically identified loans, as well as
probable losses inherent in the balance of the loan portfolio.

Mortgage Servicing Rights -- The Company recognizes mortgage servicing
rights on loans that are originated and subsequently sold or securitized and
servicing is retained. A portion of the cost of the loans is required to be
allocated to the servicing rights based on the relative fair values of the loans
and the servicing rights. The Company amortizes these mortgage servicing rights
over the period of estimated net servicing revenue. Impairment of mortgage
servicing rights is assessed based on the fair value of those rights. Fair
values are estimated using discounted cash flows based on a current market
interest rate.

Office Properties and Equipment -- Office properties and equipment are
stated at cost. Maintenance and repair costs are charged to expense as incurred.
Gains or losses on disposition of office properties and equipment are reflected
in income or expense, respectively. Depreciation is computed on the
straight-line method and is based on the estimated useful lives of the assets.
The cost of leasehold improvements is amortized using the straight-line method
over the lesser of the term of the respective lease or estimated
FN-9
<PAGE> 182
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
economic life of the improvements. Estimated useful lives include periods up to
40 years for properties and up to 12 years for furniture and equipment.

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

Income Taxes -- The Company files one consolidated federal income tax
return. Federal income tax expense (credit) is allocated to each subsidiary
based on an intercompany tax sharing agreement. The subsidiaries file separate
state franchise tax returns as applicable.

Deferred income taxes have been provided under the liability method.
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities as
measured by the current enacted tax rates which will be in effect when these
differences are expected to reverse. Deferred tax expense (benefit) is the
result of changes in the deferred tax asset and liability.

Advertising Costs -- Advertising costs are expensed as incurred.

Comprehensive Income -- Comprehensive income consists of net income and
other comprehensive income. Other comprehensive income includes unrealized gains
and losses on securities available-for-sale, net of tax, which are recognized as
a separate component of equity, accumulated other comprehensive income.

Reclassifications -- Certain reclassifications have been made to the 1998
and 1997 consolidated financial statements to conform to the 1999
classifications.

Future Accounting Change -- In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. This statement requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial condition and measure those instruments at fair value. The accounting
for changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation. This statement is effective for fiscal
years beginning after June 15, 2000, as amended by SFAS No. 137. The effect of
adoption of this statement on the consolidated financial statements of the
Company is dependent on the amount and nature of derivatives in place at the
time of adoption. Management does not anticipate the adoption of this statement
will have a material effect on the financial position or operating results of
the Company.

FN-10
<PAGE> 183
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2. SECURITIES AVAILABLE-FOR-SALE

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

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Investment securities:
U.S. government and agency securities.............. $ 6,737 $ 6 $ 86 $ 6,657
Asset management funds............................. 563 17 546
FHLMC stock........................................ 33 1,097 1,130
Equity securities.................................. 111 111
------- ------ ---- -------
Total investment securities..................... 7,444 1,103 103 8,444
------- ------ ---- -------
Mortgage-related securities:
Federal Home Loan Mortgage Corporation............. 1,938 92 1,846
Federal National Mortgage Association.............. 1,862 1,862
Government National Mortgage Association........... 1,955 109 1,846
------- ------ ---- -------
Total mortgage-related securities............... 5,755 -- 201 5,554
------- ------ ---- -------
Total........................................... $13,199 $1,103 $304 $13,998
======= ====== ==== =======
DECEMBER 31, 1998
Investment securities:
U.S. government and agency securities.............. $ 7,041 $ 88 $ 4 $ 7,125
Asset management funds............................. 535 1 534
FHLMC stock........................................ 33 1,513 1,546
------- ------ ---- -------
Total investment securities..................... 7,609 1,601 5 9,205
------- ------ ---- -------
Mortgage-related securities -- Federal Home Loan
Mortgage Corporation............................... 998 2 996
------- ------ ---- -------
Total........................................... $ 8,607 $1,601 $ 7 $10,201
======= ====== ==== =======
</TABLE>

Sales of securities available-for-sale resulted in total proceeds of
$2,251,000 and gross realized gains of $9,000 in 1998. There were no sales of
securities available-for-sale in 1999 or 1997.

At December 31, 1999, U.S. government and agency securities
available-for-sale have the following maturities:

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $2,748 $2,754
Due after one year through five years....................... 3,989 3,903
------ ------
Total U.S. government and agency securities............... $6,737 $6,657
====== ======
</TABLE>

Expected maturities for mortgage-related securities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

The amortized cost and estimated fair value of investment securities
available-for-sale pledged to secure public deposits, short-term borrowings, and
for other purposes required by law were $6,383,000 and $6,110,000, respectively,
as of December 31, 1999.

FN-11
<PAGE> 184
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. SECURITIES HELD-TO-MATURITY

The amortized cost and estimated fair value of securities held-to-maturity
are as follows:

There were no sales of securities held-to-maturity in 1999, 1998, or 1997.

At December 31, 1999, investment securities held-to-maturity have the
following maturities:

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $ 4,700 $ 4,689
Due after one year through five years....................... 18,899 18,510
Due after five years through ten years...................... 2,616 2,445
------- -------
Total investment securities held-to-maturity.............. $26,215 $25,644
======= =======
</TABLE>

The amortized cost and estimated fair value of investment securities
held-to-maturity pledged to secure public deposits, short-term borrowings, and
for other purposes required by law were $5,389,000 and $5,258,000, respectively,
as of December 31, 1999.

FN-12
<PAGE> 185
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. LOANS RECEIVABLE

The composition of loans at December 31 follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
First mortgage loans:
One- to four-family residential........................... $465,737 $416,974
Five or more family residential........................... 35,815 32,013
Commercial real estate.................................... 17,699 7,546
Construction.............................................. 36,668 29,937
Other..................................................... 3,769 3,129
-------- --------
Total first mortgage loans............................. 559,688 489,599
-------- --------
Consumer loans:
Consumer.................................................. 20,153 18,416
Second mortgage........................................... 78,223 66,426
Automobile................................................ 96,356 73,502
-------- --------
Total consumer loans................................... 194,732 158,344
-------- --------
Commercial loans............................................ 4,771
======== ========
Gross loans................................................. 759,191 647,943
-------- --------
Less:
Undisbursed loan proceeds................................. 17,852 11,750
Allowance for loan losses................................. 3,910 3,531
Unearned loan fees........................................ 549 923
-------- --------
Deductions.................................................. 22,311 16,204
-------- --------
Total loans receivable...................................... $736,880 $631,739
======== ========
</TABLE>

The majority of the Company's lending activity is with borrowers within its
primary market area of Northeastern Wisconsin.

Loans serviced for investors were $151,374,000, $150,161,000, and
$126,980,000 at December 31, 1999, 1998, and 1997, respectively. These loans are
not reflected in the consolidated financial statements. A mortgage servicing
rights asset is generated on loans originated and subsequently sold. The balance
of mortgage servicing rights is included with other assets on the consolidated
statements of financial condition and is immaterial to the consolidated
statements of financial condition as of December 31, 1999 and 1998. There was no
impairment of mortgage servicing rights and the carrying value of mortgage
servicing rights approximates the fair market value at December 31, 1999 and
1998.

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

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year................................ $3,531 $3,177 $2,937
Provisions.................................................. 472 420 320
Loans charged off........................................... (122) (99) (101)
Recoveries on loans......................................... 29 33 21
------ ------ ------
Balance at end of year...................................... $3,910 $3,531 $3,177
====== ====== ======
</TABLE>

FN-13
<PAGE> 186
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5. OFFICE PROPERTIES AND EQUIPMENT

Office properties and equipment at December 31 consist of the following:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $2,045 $2,045
Buildings and improvements.................................. 7,067 7,052
Furniture and equipment..................................... 2,767 2,891
Leasehold improvements...................................... 31 74
------ ------
Cost........................................................ 11,910 12,062
Less -- Accumulated depreciation and amortization........... 4,447 4,489
------ ------
Net depreciated value....................................... $7,463 $7,573
====== ======
</TABLE>

NOTE 6. DEPOSITS

Deposits are summarized at December 31 as follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Passbook.................................................... $ 68,832 $ 65,887
Negotiable order of withdrawal accounts:
Non-interest-bearing...................................... 29,530 25,747
Interest-bearing.......................................... 40,649 43,526
Variable rate insured money market accounts................. 67,317 64,938
Certificate accounts:
4.00% to 4.99%............................................ 36,930 42,348
5.00% to 5.99%............................................ 282,742 206,600
6.00% to 7.99%............................................ 38,085 90,613
-------- --------
Subtotal certificate accounts............................. 357,757 339,561
-------- --------
Subtotal deposits........................................... 564,085 539,659
Accrued interest............................................ 2,823 2,713
-------- --------
Total deposits.............................................. $566,908 $542,372
======== ========
Weighted average interest rate.............................. 4.33% 4.35%
======== ========
</TABLE>

Aggregate annual maturities of certificate accounts at December 31, 1999,
are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
2000........................................................ $247,348
2001........................................................ 78,691
2002........................................................ 23,585
2003........................................................ 3,165
2004........................................................ 4,968
--------
Total....................................................... $357,757
========
</TABLE>

Deposit accounts with balances greater than $100,000 were $75,157,000 and
$68,685,000 at December 31, 1999 and 1998, respectively.

FN-14
<PAGE> 187
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7. BORROWINGS

Borrowings at December 31 consist of the following:

<TABLE>
<CAPTION>
1999 1998
-------------------- -------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
BALANCE RATE BALANCE RATE
------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Federal Home Loan Bank advances maturing in:
1999................................................... $15,200 5.88%
2000................................................... $ 48,555 5.94% 20,375 5.69%
2001................................................... 15,965 5.82% 10,900 5.88%
2002................................................... 11,934 5.82% 18,000 5.43%
2003................................................... 11,325 5.75% 11,325 5.75%
2004................................................... 20,000 5.81%
2008................................................... 1,025 5.90% 8,025 4.99%
2009................................................... 5,000 5.15%
Open line of credit.................................... 68,595 4.74% 7,675 5.13%
-------- ---- ------- ----
Total FHLB advances.................................... 182,399 5.42% 91,500 5.59%
Federal Reserve Bank line of credit.................... 3,500 4.54% 477 4.12%
-------- ---- ------- ----
Totals................................................. $185,899 5.41% $91,977 5.58%
======== ==== ======= ====
</TABLE>

The Company is required to maintain as collateral unencumbered one- to
four-family mortgage loans such that the outstanding balance of FHLB advances
does not exceed 60% of the book value of this collateral. The FHLB advances are
also collateralized by the FHLB stock owned by the Company. The variable rate
term FHLB advances at December 31, 1999, which are included above, total
$30,000,000 and are at interest rates tied to the one-month LIBOR index.

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

At December 31, 1999, the Company had an irrevocable letter of credit
outstanding with the FHLB for $725,000. This letter of credit is pledged against
a municipal deposit with the Company. No amounts have been drawn against the
letter of credit by the Company.

FN-15
<PAGE> 188
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense:
Federal................................................... $3,540 $3,333 $2,802
State..................................................... 120 432 577
------ ------ ------
Total current.......................................... 3,660 3,765 3,379
------ ------ ------
Deferred tax expense (credit):
Federal................................................... (108) (127) 209
State..................................................... (27) (32) 63
------ ------ ------
Total deferred......................................... (135) (159) 272
------ ------ ------
Total provision for income taxes............................ $3,525 $3,606 $3,651
====== ====== ======
</TABLE>

A summary of the source of differences between income taxes at the federal
statutory rate and the provision for income taxes for the years ended December
31 follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income before provision for income taxes.......... $10,902 100 $10,435 100 $9,687 100
======= === ======= === ====== ===
Tax expense at federal statutory rate............. $ 3,707 34 $ 3,552 34 $3,294 34
Increase (decrease) in taxes resulting from:
State income taxes -- Net of federal tax
benefit....................................... 57 1 264 3 422 4
Cash surrender value of life insurance in excess
of premiums................................... (227) (2) (225) (2) (61) (1)
Other........................................... (12) -- 15 -- (4) --
------- --- ------- --- ------ ---
Provision for income taxes........................ $ 3,525 33 $ 3,606 35 $3,651 37
======= === ======= === ====== ===
</TABLE>

FN-16
<PAGE> 189
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8. INCOME TAXES -- (CONTINUED)
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company's assets and
liabilities. The major components of net deferred tax assets at December 31 are
as follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Deferred compensation..................................... $1,041 $1,010
Allowance for loan losses................................. 1,066 830
Excess servicing gains.................................... 31 41
Other..................................................... 14 4
------ ------
Total deferred tax assets.............................. 2,152 1,885
------ ------
Deferred tax liabilities:
Deferred loan fees........................................ 576 429
Mortgage servicing rights................................. 239 262
FHLB stock dividends...................................... 159 164
Depreciation and amortization............................. 163 174
Unrealized securities gains............................... 320 634
Other..................................................... 59 35
------ ------
Total deferred tax liabilities......................... 1,516 1,698
------ ------
Net deferred tax asset...................................... $ 636 $ 187
====== ======
</TABLE>

NOTE 9. EMPLOYEE BENEFIT PLANS

The Company has a participatory defined contribution 401(k) plan. The plan
covers all employees with at least one year of service and who have attained age
21. The Company annually contributes 3% of an employee's gross earnings and may
fund an additional discretionary dollar amount to the plan. The Company also
matches 50% of the first 4% of the amount of each employee's contribution. In
addition, each employee may contribute amounts in excess of 4%, up to the lesser
of 15% of compensation or federal tax limits, with no Company participation.
Total expense relating to this plan for 1999, 1998, and 1997 was $459,000,
$442,000, and $379,000, respectively.

The Company has an unfunded deferred retirement plan for directors. All
members of the Company's Board of Directors are eligible under the plan.
Directors of predecessor institutions who are members of an advisory board are
eligible at the discretion of the Company. Currently, there are four advisory
board members in the plan. The Company also has supplemental retirement plans
for several of its executives. Total expense relating to these plans for 1999,
1998, and 1997 was $360,000, $809,000, and $513,000, respectively. The Company
does not, as a policy, offer postretirement benefits other than the plans
discussed above.

The Company has stock option plans which provide for the grant of incentive
stock options, nonqualified stock options, stock appreciation rights (SARs), or
restricted stock. The plans provide that incentive stock option prices will not
be less than the fair market value of the stock at the grant date and
nonqualified stock option prices shall not be less than 90% of the fair value of
the stock at the grant date. Options granted are eligible to be exercised
equally over a three-year period. All options expire no later than ten years
from the grant date.

FN-17
<PAGE> 190
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The fair value of each option granted is estimated on the grant date using
the Black-Scholes methodology. The following assumptions were made in estimating
fair value for options granted for the years ended December 31:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Dividend yield.............................................. 3.00% 3.00% 4.50%
Risk-free interest rate..................................... 6.86% 5.41% 5.75%
Weighted average expected life (years)...................... 7.0 7.0 7.0
Expected volatility......................................... 23.9% 22.2% 20.2%
</TABLE>

The weighted average fair value of options granted as of their grant date,
using the assumptions shown above, was computed at $3.49, $3.11, and $1.45 per
share for options granted in 1999, 1998, and 1997, respectively.

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

No compensation cost has been recognized for the plan. Had compensation
cost been determined on the basis of fair value, net income and earnings per
share would have been reduced as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income:
As reported........................................... $7,377 $6,829 $6,036
====== ====== ======
Pro forma............................................. $7,139 $6,665 $5,953
====== ====== ======
Earnings per share:
As reported:
Basic.............................................. $ 0.85 $ 0.77 $ 0.68
Diluted............................................ 0.83 0.75 0.66
Pro forma:
Basic.............................................. 0.82 0.75 0.67
Diluted............................................ 0.80 0.73 0.65
</TABLE>

FN-18
<PAGE> 191
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
A summary of stock option transactions for each of the three years in the
period ended December 31, 1999, is as follows:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE WEIGHTED AVERAGE
SHARES PER SHARE EXERCISE PRICE
--------- ------------ ----------------
<S> <C> <C> <C>
Balance at January 1, 1997........................ 607,620 $ 1.77 - $8.38 $ 5.19
Granted......................................... 113,000 $ 1.77 - $7.88 8.36
Exercised....................................... (121,618) $ 1.77 - $7.88 4.09
-------- ------
Balance at December 31, 1997...................... 599,002 $ 1.77 - $8.38 6.02
Granted......................................... 95,600 $ 12.75 - $13.25 13.14
Exercised....................................... (100,138) $ 1.77 - $8.38 5.34
-------- ------
Balance at December 31, 1998...................... 594,464 $ 1.77 - $13.25 7.27
Granted......................................... 106,000 $11.875 - $12.50 12.39
Exercised....................................... (50,314) $ 1.77 - $8.25 3.53
Expired......................................... (3,600) $ 12.75 12.75
-------- ------
Balance at December 31, 1999...................... 646,550 $ 1.77 - $13.25 $ 8.38
======== ======
</TABLE>

The following is a summary of the options outstanding at December 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- -------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICE RANGE NUMBER LIFE - YEARS PRICE NUMBER PRICE
-------------------- ------ ------------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
$1.77 -- $2.94............................... 43,150 2.3 $ 2.82 43,150 $ 2.82
$3.06 -- $4.78............................... 79,600 2.3 4.08 79,600 4.08
$6.38 -- $8.38............................... 325,800 6.3 7.51 294,333 7.42
$11.875 -- $13.25............................ 198,000 9.5 12.75 30,667 13.15
------- --- ------ ------- ------
Total...................................... 646,550 6.5 $ 8.38 447,750 $ 6.77
======= === ====== ======= ======
</TABLE>

NOTE 10. STOCKHOLDERS' EQUITY

The Board of Directors of the Company is authorized to issue cumulative
preferred stock in series and to establish the relative rights and preferences
of each series with respect to rates, redemption rights and prices, conversion
terms, voluntary liquidation rights, and voting powers. Cumulative preferred
stock will rank prior to common stock as to dividend rights and liquidation
preferences. Under Wisconsin state law, preferred stockholders are entitled to
vote as a separate class or series in certain circumstances, including any
amendment which would adversely change the specific terms of such series of
stock or which would create or enlarge any class or series ranking prior thereto
in rights and preferences (excluding substituting the surviving entity in a
merger or consolidation of the Company).

The Savings Bank is subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory--and possibly additional
discretionary--actions by regulators that, if undertaken, could have a direct
material effect on the Savings Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Savings Bank must meet specific capital guidelines that involve quantitative
measures of the Savings Bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting practices. The
Savings Bank's capital

FN-19
<PAGE> 192
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. STOCKHOLDERS' EQUITY -- (CONTINUED)
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.

Quantitative measures established by federal and state regulation to ensure
capital adequacy require the Savings Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital to risk-weighted
assets and of Tier I capital to average assets. Management believes, as of
December 31, 1999, that the Savings Bank meets all capital adequacy requirements
to which it is subject.

As of December 31, 1999, the most recent notification from the Office of
Thrift Supervision (OTS) categorized the Savings Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Savings Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the Savings Bank's category.

The Savings Bank's actual and regulatory capital amounts (in thousands) and
ratios are as follows:

<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
--------------- ------------------ -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1999:
Risk-based capital (to risk-weighted assets)..... $76,326 14.0% >=$43,770 >=8.0% >=$54,713 >=10.0%
Tier I (core) capital (to risk-weighted
assets)........................................ $72,416 13.2% >=$21,885 >=4.0% >=$32,828 >= 6.0%
Tier I (core) capital (to adjusted assets)....... $72,416 8.6% >=$33,546 >=4.0% >=$41,783 >= 5.0%
Tangible equity (to tangible assets)............. $72,416 8.6% >=$33,546 >=4.0% >=$41,783 >= 5.0%
State of Wisconsin capital (to total assets)..... $77,197 9.2% >=$50,377 >=6.0% N/A N/A

DECEMBER 31, 1998:
Risk-based capital (to risk-weighted assets)..... $72,055 15.7% >=$36,620 >=8.0% >=$45,775 >=10.0%
Tier I (core) capital (to risk-weighted
assets)........................................ $68,524 15.0% >=$18,310 >=4.0% >=$27,465 >= 6.0%
Tier I (core) capital (to adjusted assets)....... $68,524 9.6% >=$28,697 >=4.0% >=$35,872 >= 5.0%
Tangible equity (to tangible assets)............. $68,524 9.6% >=$28,697 >=4.0% >=$35,872 >= 5.0%
State of Wisconsin capital (to total assets)..... $73,414 10.2% >=$43,181 >=6.0% N/A N/A
</TABLE>

FN-20
<PAGE> 193
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. STOCKHOLDERS' EQUITY -- (CONTINUED)
Following are reconciliations of the Savings Bank's stockholder's equity
under generally accepted accounting principles to capital as determined by
regulations:

<TABLE>
<CAPTION>
RISK- TIER I STATE OF
BASED (CORE) WISCONSIN
CAPITAL CAPITAL CAPITAL
------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
As of December 31, 1999:
Regulatory capital........................................ $76,326 $72,416 $77,197
Unrealized gains on available-for-sale securities......... 479 479
Investments in and advances to nonincludable
subsidiaries........................................... 392 392
Allowance for loan losses................................. (3,910) (3,910)
------- ------- -------
Stockholder's equity (First Northern Savings Bank only)..... $73,287 $73,287 $73,287
======= ======= =======
Stockholders' equity (First Northern Capital Corp.)......... $76,795 $76,795 $76,795
======= ======= =======
As of December 31, 1998:
Regulatory capital........................................ $72,055 $68,524 $73,414
Unrealized gains on available-for-sale securities......... 960 960
Investments in and advances to nonincludable
subsidiaries........................................... 399 399
Allowance for loan losses................................. (3,531) (3,531)
------- ------- -------
Stockholder's equity (First Northern Savings Bank only)..... $69,883 $69,883 $69,883
======= ======= =======
Stockholders' equity (First Northern Capital Corp.)......... $76,093 $76,093 $76,093
======= ======= =======
</TABLE>

The capital distribution regulations allow a well-capitalized bank to make
capital distributions during a calendar year up to 100% of its net income to
date plus the amount that would reduce by one half its surplus capital ratio at
the beginning of the calendar year. Any distributions in excess of that amount
requires prior OTS notice, with the opportunity for OTS to object to the
distribution.

Unlike the Savings Bank, the Company is not subject to these regulatory
capital requirements or restrictions on the payment of dividends to it
stockholders. However, the source of its future dividends may depend upon
dividends from the Savings Bank.

On October 18, 1996, the Company began a second stock repurchase program
for its common stock to be used for the exercise of stock options. The program
concluded on October 20, 1997, with a total of 60,800 shares being purchased at
an average price of $8.62 per share. A third stock repurchase program began
March 20, 1998, for up to 446,101 shares. The program concluded on December 31,
1999, with a total of 446,101 shares being repurchased at an average price of
$11.81 per share.

FN-21
<PAGE> 194
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11. ACCUMULATED OTHER COMPREHENSIVE INCOME

Comprehensive income is shown in the consolidated statements of
stockholders' equity. The Company's accumulated other comprehensive income is
comprised of the unrealized gain or loss on securities available-for-sale. The
following shows the activity in accumulated other comprehensive income:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Accumulated other comprehensive income at beginning of
year...................................................... $960 $614 $385
---- ---- ----
Activity:
Unrealized gain (loss) on securities available-for-sale... (795) 577 382
Tax impact................................................ 314 (231) (153)
---- ---- ----
Net change in unrealized gain (loss) on securities
available-for-sale........................................ (481) 346 229
---- ---- ----
Accumulated other comprehensive income at end of year....... $479 $960 $614
==== ==== ====
</TABLE>

NOTE 12. EARNINGS PER SHARE

The following shows the computation of the basic and diluted earnings per
share for the years ended December 31:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EARNINGS
NET INCOME SHARES PER SHARE
---------- --------- ---------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
1999
Earnings per share -- Basic................................. $7,377 8,704,183 $0.85
=====
Effect of stock options -- Net.............................. 176,782
---------
Earnings per share -- Diluted............................... $7,377 8,880,965 $0.83
====== ========= =====
1998
Earnings per share -- Basic................................. $6,829 8,851,486 $0.77
=====
Effect of stock options -- Net.............................. 241,167
---------
Earnings per share -- Diluted............................... $6,829 9,092,653 $0.75
====== ========= =====
1997
Earnings per share -- Basic................................. $6,036 8,834,937 $0.68
=====
Effect of stock options -- Net.............................. 245,300
---------
Earnings per share -- Diluted............................... $6,036 9,080,237 $0.66
====== ========= =====
</TABLE>

NOTE 13. SEGMENT INFORMATION

First Northern Capital Corp., through a branch network of its subsidiary,
First Northern Savings Bank, provides a full range of consumer and commercial
financial institution services to individuals and businesses in Northeastern
Wisconsin. These services include demand, time, and savings deposits; safe
deposit services; credit cards; notary services; night depository; money orders,
traveler's checks, and cashier's checks; savings bonds; secured and unsecured
consumer, commercial, and real estate loans; ATM processing; cash management;
and financial planning.

FN-22
<PAGE> 195
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13. SEGMENT INFORMATION -- (CONTINUED)
While the Company's chief decision-makers monitor the revenue streams of
various Company products and services, operations are managed and financial
performance is evaluated on a Company-wide basis. Accordingly, all of the
Company's financial institution operations are considered by management to be
aggregated in one reportable operating segment.

NOTE 14. COMMITMENTS

The Company is party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments consist of commitments to extend credit and forward
commitments to sell mortgage loans. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the statements of financial condition. The contract amounts
reflect the extent of involvement the Company has in the particular class of
financial instrument. The Company's maximum exposure to credit loss for
commitments to extend credit is represented by the contract amount of those
instruments. For forward commitments to sell loans, the contract amounts do not
represent exposure to credit loss.

Off-balance-sheet financial instruments whose contract amounts represent
credit and/or interest rate risk at December 31 are as follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit:
Fixed rate (8.25% to 8.50% in 1999 and 6.375% to 7.50% in
1998).................................................. $ 178 $ 4,656
Adjustable rate (6.50% to 7.75% in 1999 and 5.75% to 8.00%
in 1998)............................................... 2,554 3,618
Commitments to sell mortgage loans.......................... -- 4,103
Unused overdraft protection lines of credit for checking
accounts.................................................. 1,462 1,522
Unused home equity lines of credit.......................... 19,327 15,819
Unused commercial real estate line of credit................ 3,195 102
Unused commercial letters of credit......................... 513 841
Unused credit card lines of credit.......................... 6,606 4,577
</TABLE>

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

Commitments to extend credit on a fixed-rate basis expose the Company to a
certain amount of interest rate risk if market rates of interest substantially
increase during the commitment period.

Forward commitments to sell mortgage loans represent commitments obtained
by the Company from a secondary market agency to purchase mortgages from the
Company and place them in a mortgage-related security pool with a defined yield.
Commitments to sell loans expose the Company to interest rate risk if market
rates of interest decrease during the commitment period. Commitments to sell
loans are made to mitigate interest rate risk on the existing loan portfolio and
on commitments to extend credit.

Letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that

FN-23
<PAGE> 196
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14. COMMITMENTS -- (CONTINUED)
involved in extending loans to customers. The commitments are structured to
allow for 100% collateralization on all standby letters of credit.

The Company has no investments in nor is a party to transactions involving
derivative investments, except mortgage-related securities which represent
minimal risk to the Company.

NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates, methods, and assumptions for the Company's financial
instruments are summarized below.

Cash and Cash Equivalents -- The carrying values approximate the fair
values for these assets.

Investment and Mortgage-Related Securities -- Fair values are based on
quoted market prices where available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar securities.

Loans Receivable and Loans Held-for-Sale -- For certain homogeneous
categories of loans, such as fixed-rate residential mortgages, fair value is
estimated using the quoted market prices for securities backed by similar loans,
adjusted for differences in loan characteristics. The fair value of other types
of loans is estimated by discounting the future cash flows using the current
rates at which similar loans would be made to borrowers with similar credit
ratings.

Accrued Interest Receivable and Payable -- The carrying amounts reported in
the consolidated statements of financial condition approximate their fair
values.

Federal Home Loan Bank Stock -- Fair value for the Federal Home Loan Bank
stock is based on its redeemable (carrying) value, as a market for this stock is
restricted.

Deposits -- The fair value of deposits with no stated maturity, such as
passbooks, negotiable order of withdrawal accounts, and variable rate insured
money market accounts, is the amount payable on demand on the reporting date.
The fair value of fixed-rate, fixed-maturity, certificate accounts is estimated
using discounted cash flows with discount rates at interest rates currently
offered for deposits of similar remaining maturities.

Borrowings -- Rates currently available to the Company for debt with
similar terms and remaining maturities are used to estimate fair value of
existing debt. The fair value of borrowed funds due on demand is the amount
payable at the reporting date. The fair value of borrowed funds with fixed terms
is estimated using discounted cash flows with discount rates at interest rates
currently offered by lenders for similar remaining maturities.

Off-Balance-Sheet Instruments -- The fair value of commitments is estimated
using the fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements, the current interest rates, and
the present creditworthiness of the counterparties. Since this amount is
immaterial, no amounts for fair value are presented.

FN-24
<PAGE> 197
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)

The carrying value and estimated fair value of financial instruments at
December 31 were as follows:

<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents......................... $ 12,372 $ 12,372 $ 7,211 $ 7,211
Securities........................................ 50,261 49,618 45,464 45,730
Federal Home Loan Bank stock...................... 9,250 9,250 5,250 5,250
Total loans -- Net............................. 737,965 700,493 634,814 636,243
Accrued interest receivable....................... 4,229 4,229 3,686 3,686
-------- -------- -------- --------
Total financial assets......................... $814,077 $775,962 $696,425 $698,120
======== ======== ======== ========
Financial liabilities:
Deposits.......................................... $564,085 $565,121 $539,659 $541,866
Accrued interest payable.......................... 2,823 2,823 2,713 2,713
Borrowed funds.................................... 185,899 184,559 91,977 92,522
-------- -------- -------- --------
Total financial liabilities.................... $752,807 $752,503 $634,349 $637,101
======== ======== ======== ========
</TABLE>

Limitations -- Fair value estimates are made at a specific point in time
based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Company's entire holdings of a
particular instrument. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters that
could affect the estimates. Fair value estimates are based on existing on- and
off-balance-sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Deposits with no stated maturities are
defined as having a fair value equivalent to the amount payable on demand. This
prohibits adjusting fair value derived from retaining those deposits for an
expected future period of time. This component, commonly referred to as a
deposit base intangible, is neither considered in the above amounts nor is it
recorded as an intangible asset on the statement of financial condition.
Significant assets and liabilities that are not considered financial assets and
liabilities include office properties and equipment. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in the estimates.

FN-25
<PAGE> 198
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash........................................................ $ 3,129 $ 5,998
Investment in subsidiaries.................................. 73,287 69,883
Other....................................................... 393 228
------- -------
Total Assets........................................... $76,809 $76,109
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Other liabilities......................................... $ 14 $ 16
------- -------
Total liabilities...................................... 14 16
------- -------
Stockholders' equity:
Common stock.............................................. 9,135 9,135
Additional paid-in capital................................ 8,780 9,126
Retained earnings......................................... 64,468 60,582
Accumulated comprehensive income.......................... 479 960
Treasury stock at cost.................................... (6,067) (3,710)
------- -------
Total stockholders' equity............................. 76,795 76,093
------- -------
Total Liabilities and Stockholders' Equity............. $76,809 $76,109
======= =======
</TABLE>

FN-26
<PAGE> 199
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16. CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Interest and dividend income................................ $ 168 $ 249 $ 170
Equity in earnings of subsidiary............................ 7,384 6,751 6,010
------ ------ ------
Total income.............................................. 7,552 7,000 6,180
------ ------ ------
Compensation................................................ 12 12 12
Other operating expenses.................................... 158 109 115
------ ------ ------
Total expenses............................................ 170 121 127
------ ------ ------
Income before provision for income taxes.................... 7,382 6,879 6,053
Provision for income taxes.................................. 5 50 17
------ ------ ------
Net income.................................................. $7,377 $6,829 $6,036
====== ====== ======
</TABLE>

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $7,377 $6,829 $6,036
------ ------ ------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Equity in earnings of subsidiary.......................... (7,384) (6,751) (6,010)
Change in other operating assets and liabilities.......... (3) 47 29
------ ------ ------
Total adjustments.................................... (7,387) (6,704) (5,981)
------ ------ ------
Net cash provided by (used in) operating activities......... (10) 125 55
------ ------ ------
Cash flows from investing activities:
Dividends received from subsidiary........................ 3,500 6,355 2,915
Purchase of investment available-for-sale................. (111) -- --
------ ------ ------
Net cash provided by investing activities................... 3,389 6,355 2,915
------ ------ ------
Cash flows from financing activities:
Cash dividends paid....................................... (3,491) (3,192) (2,826)
Purchase of treasury stock................................ (2,935) (2,333) (441)
Retirement of common stock................................ -- (18) --
Proceeds from exercise of stock options................... 178 534 487
------ ------ ------
Net cash used in financing activities....................... (6,248) (5,009) (2,780)
------ ------ ------
Net increase (decrease) in cash............................. (2,869) 1,471 190
Cash at beginning of year................................... 5,998 4,527 4,337
------ ------ ------
Cash at end of year......................................... $3,129 $5,998 $4,527
====== ====== ======
</TABLE>

FN-27
<PAGE> 200
FIRST NORTHERN CAPITAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 17. SUBSEQUENT EVENT

On February 21, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Mutual Savings Bank ("Mutual"), a
Wisconsin-chartered mutual savings bank and OV Corp. (the "Merger Corp."), a
wholly owned subsidiary of Mutual organized for the purpose of effecting the
transactions contemplated by the Merger Agreement. The Merger Corp. will be the
surviving corporation. The Merger Agreement provides for the acquisition of the
Company by Mutual through a merger of the Company with and into the Merger Corp.

Subject to the terms and conditions of the Merger Agreement, at the time of
the merger, each outstanding share of the Company's common stock will be
converted into the right to receive cash in the amount of $15.00 or 1.5 shares
of common stock of the Merger Corp. or a combination of cash and shares of the
Merger Corp.

In connection with the Merger, the Company and Mutual will engage in a
restructuring. As part of the restructuring, Mutual will form a mutual holding
company. The mutual holding company will own a majority of the Merger Corp.'s
common stock. The balance of the shares of the Merger Corp. will be offered for
sale to Mutual's depositors and issued to First Northern stockholders in the
Merger. As a result of the restructuring, the Savings Bank and Mutual will
become wholly owned subsidiaries of the Merger Corp.

The Merger and subsequent restructuring are subject to approval by the
stockholders of the Company, depositors of Mutual, and various regulatory
agencies.

Concurrent with the execution of the Merger Agreement, the parties entered
into a Stock Option Agreement by which the Company granted Mutual an irrevocable
option to purchase up to 1,708,675 shares of the Company's stock equal to 19.9%
of the number of shares of the Company's stock outstanding on February 21, 2000,
at an exercise price of $9.0375 per share. The option would become exercisable
under certain circumstances if the Company becomes the subject of a third party
proposal for a competing transaction.

FN-28
<PAGE> 201

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

OVERVIEW

First Northern Capital Corp. (the "Company" or "First Northern") is a
unitary savings and loan holding company, of which First Northern Savings Bank,
S.A. (the "Savings Bank"), a Wisconsin chartered capital stock savings and loan
association, is a wholly owned subsidiary.

The Savings Bank was reorganized into First Northern on December 20, 1995,
with each outstanding share of the Savings Bank's common stock converted into
one share of the Company's common stock (the "Reorganization"). Consequently,
the holders of all the outstanding stock of the Savings Bank acquired the same
proportionate ownership interest in First Northern as they had held in the
Savings Bank. The consolidated capital, assets, liabilities, income and other
financial data of First Northern immediately following the Reorganization were
substantially the same as those of the Savings Bank immediately prior to
consummation of the Reorganization.

The Savings Bank is the only direct subsidiary of the Company and its
operations are the primary contributor to the Company's earnings and expenses.
The Savings Bank's business consists primarily of attracting deposits from the
general public and originating loans throughout its Northeastern Wisconsin
branch network. Great Northern Financial Services Corporation ("GNFSC"), a
wholly owned subsidiary of the Savings Bank, offers full brokerage services to
the public through a network agreement with a registered broker-dealer and sells
tax deferred annuities, credit life and disability insurance. Another wholly
owned Savings Bank subsidiary, First Northern Investments, Inc. ("FNII"),
manages a majority of the Savings Bank's investments, purchases automobile loans
from Savings Financial Corp. ("SFC") and mortgage loan participations from its
parent. SFC, which is 50% owned by the Savings Bank, originates, services and
sells automobile loans to FNII and its other parent corporation.

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

MERGER AGREEMENT

On February 21, 2000, First Northern entered into a Merger Agreement with
Mutual Savings Bank which provides for the acquisition of First Northern by
Mutual. See Item 1. "Business--Merger Agreement with Mutual Saving Bank.", which
is incorporated by reference herein.

BALANCE SHEET ANALYSIS

LIQUIDITY. The Company's primary sources of funds are deposits (retail and
wholesale), proceeds from principal and interest payments on loans, advances
from the Federal Home Loan Bank (the "FHLB") of Chicago, and, to a lesser
extent, maturities of investment securities and short-term investments, sales of
loans, repurchase agreements, and operations. While scheduled loan repayments
and maturing investments are a relatively predictable source of funds, deposit
flows and loan prepayments are influenced to a great extent by interest rates,
general economic conditions, and competition.

Federal regulations historically have required First Northern to maintain
minimum levels of liquid assets such as cash, certain time deposits, U.S.
government and agency securities, and other obligations generally having
remaining maturities of less than five years. Liquidity requirements have varied
from time to time based upon economic conditions and deposit flows. The current
requirement is 4% of the preceding calendar month's average net withdrawable
deposits and borrowings payable on demand or in one year or less ("liquidity
base") or of the average daily balance of the liquidity base during the
preceding quarter. The Company's total liquidity ratio at December 31, 1999 was
5.45% and 5.49% at December 31, 1998. The liquidity ratio decreased at year-end
1999 as compared to year-end 1998 as a result of funding loan originations.

FN-29
<PAGE> 202

Liquidity management is both a daily and long-term responsibility of
management. The Company adjusts its investments in liquid assets based upon
management's assessment of: (i) expected loan demand; (ii) expected deposit
flows; (iii) yields available on interest-earning deposits; and (iv) the
objectives of its asset/liability management program. Excess liquidity is
generally invested in interest-earning overnight deposits and short- to
intermediate-term U.S. Government and agency obligations. If the Savings Bank
requires funds beyond its ability to generate them from operations, it can
borrow from the FHLB of Chicago (See "Borrowings").

INVESTMENT AND MORTGAGE-RELATED SECURITIES. A substantial portion of the
Company's investment securities (approximately $32.4 million at December 31,
1999 and $33.3 million at December 31, 1998) are held and managed by FNII. (See
Notes to Consolidated Financial Statements -- Note 2 and Note 3 -- Securities
Available-for-Sale and Securities Held-to-Maturity.)

Interest-earning deposits increased $3.5 million in 1999 as a result of
placing excess funds in overnight deposits until the funds (usually a day) are
needed.

The securities available-for-sale increased to $14.0 million at December
31, 1999, from $10.2 million at December 31, 1998. The increase in 1999 is the
result of reinvesting interest earned on the investments held in
available-for-sale into additional securities and the purchasing of additional
mortgage-related securities. First Northern purchases mortgage-backed and
mortgage-related securities that are guaranteed by government sponsored
enterprises such as FHLMC, FNMA and GNMA.

The securities held-to-maturity increased to $36.3 million at December 31,
1999 from $35.3 million at December 31, 1998, as a result of reinvesting
interest earned on the investments held-to-maturity.

LENDING ACTIVITIES. First Northern has traditionally concentrated on the
origination of adjustable and fixed interest rate one- to four-family mortgage
loans and consumer loans throughout its 19 offices. First Northern also
originates construction, more than four-family ("multi-family") residential,
commercial real estate loans and beginning in 1999, commercial loans. In
addition, the Savings Bank will purchase one- to four-family and multi-family
mortgage loans from other sources primarily within the State of Wisconsin.
Adjustable interest rate mortgage loans are originated for First Northern's
portfolio while fixed interest rate mortgage loans, particularly those with
terms greater than 20 years, are primarily originated for sale in the secondary
mortgage market. First Northern retains 15 and 20 year fixed interest rate
mortgage loan originations in its portfolio. At December 31, 1999, approximately
75% of First Northern's mortgage loan portfolio were interest rate adjustable as
compared to 76% at December 31, 1998.

First Northern originates a variety of adjustable and fixed interest rate
mortgage loan products based upon market demands and general economic
conditions. Adjustable indexed interest rate mortgage loans at December 31,
1999, contain an interest rate adjustment provision tied to the national monthly
median cost of funds ratio for Savings Association Insurance Fund ("SAIF")
insured institutions, plus an additional mark-up of 2.95% to 4.25% (the "index")
which varies with the mortgage loan product. Interest rates on indexed mortgage
loans are adjusted, up or down, on predetermined dates fixed by contract, in
relation to and based on the index or market interest rates. In the first six
months of 1999, First Northern adjusted interest rates on indexed mortgage loans
downward at or before the contractual interest rate adjustment date in response
to decreasing market interest rates. If the adjustable indexed mortgage loans
interest rates had not been decreased, these mortgage loans would have
refinanced to a fixed interest rate mortgage loan or another indexed mortgage
loan at a lesser interest rate. In the second quarter of 1999, the increasing
market interest rates allowed First Northern to increase interest rates on
certain mortgage loans. In 1999, First Northern decreased interest rates on
approximately $28.0 million of its mortgage loans and increased interest rates
on approximately $43.0 million of its mortgage loans.

Adjustable indexed interest rate mortgage loans have an initial period,
ranging from one to five years, during which the interest rate is fixed, with
adjustments permitted thereafter, subject to annual and lifetime interest rate
caps which vary with the product. Annual limits on interest rate increases are
1% to 2%, while aggregate lifetime interest rate increases over the term of the
loan are currently at 6% above the original mortgage loan interest rate.

FN-30
<PAGE> 203

First Northern's origination of second mortgage loans, automobile, boat,
recreational vehicle and other types of consumer loans, which are generally of
shorter maturities than first mortgage loans, enhances the matching of
maturities of its assets and liabilities and offer a higher yield. Second
mortgage loans are offered on both a fixed and adjustable interest rate basis;
other consumer loans are generally offered on a fixed interest rate basis.

At December 31, 1999, approximately 23% and as of December 31, 1998,
approximately 35% of First Northern's consumer loan portfolio was interest rate
adjustable.

First Northern added commercial lending to its existing product lines in
the second quarter of 1999. To manage the commercial banking department, First
Northern hired an experienced commercial loan manager. During 1999, $5.0 million
of commercial loans were originated as well as $14.4 million of commercial real
estate loans which are reported in the mortgage loan originations.

The following table sets forth First Northern's mortgage, consumer and
commercial loan originations and purchases:

LOAN ORIGINATIONS AND PURCHASES

<TABLE>
<CAPTION>
DURING THE YEAR ENDED
DECEMBER 31,
----------------------
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Mortgage loans originated and purchased:
Construction -- residential............................... $ 46,226 $ 31,115
Construction -- commercial real estate.................... 1,540 5,930
Loans on existing property................................ 80,051 59,021
Refinancing............................................... 62,432 153,614
Other loans............................................... 2,739 2,049
-------- --------
Total mortgage loans originated and purchased.......... 192,988 251,729
Consumer loans originated and purchased:
Consumer.................................................. 10,831 9,912
Second mortgage........................................... 47,415 38,747
Automobile................................................ 72,264 48,661
Education................................................. 2,143 2,317
-------- --------
Total consumer loans originated and purchased.......... 132,653 99,637
-------- --------
Commercial loans originated and purchased................... 5,032
-------- --------
Total loans originated and purchased................... $330,673 $351,366
======== ========
</TABLE>

The dollar volume of First Northern's mortgage loan originations and
purchases decreased in 1999 as compared to 1998 primarily as a result of a
decline in the mortgage loan refinancing activity. In addition, First Northern
continued to purchase mortgage loans in 1999 primarily from other Wisconsin
financial institutions. In 1999, First Northern purchased $31.9 million of
one-to four-family residential loans, $1.5 million of multi-family loans and
$3.5 million of commercial real estate loans as compared to $15.0 million of
one-to four-family residential, $1.7 million of multi-family and $0.6 million of
commercial real estate loans in 1998. First Northern purchases loans when
interest rates on these loans provide an opportunity to incrementally add to the
profitability of the Company.

First Northern's growth in the dollar amount of mortgage loans outstanding
was $70.1 million or 14.3% for 1999 as compared to $38.7 million or 8.6% in
1998. The increase in the 1999 mortgage loan portfolio was the result of more
adjustable interest rate mortgage loan originations which are retained in the
portfolio, as opposed to 30 year fixed interest rate mortgage loan originations
which are sold in the secondary market, and reduced mortgage loan refinancings.

FN-31
<PAGE> 204

At December 31, 1999, First Northern had approximately $140.2 million fixed
interest rate mortgage loans in its mortgage loan portfolio, compared to
approximately $116.0 million of fixed interest rate mortgage loans at December
31, 1998.

In 1999, First Northern sold $20.1 million of fixed interest rate mortgage
loans as compared to $63.2 million in 1998. This decrease was the result of
increasing interest rates on fixed interest rate mortgage loans and a shift in
consumer preference toward adjustable interest rate mortgage loans.

The consumer loan portfolio at December 31, 1999, increased $36.4 million
as compared to December 31, 1998 as a result of increased consumer loan
originations and purchases. The increase in consumer loan originations of $33.0
million was the result of increased second mortgage loan originations and an
increase in the dollar amount of loan purchases from SFC. In 1999, First
Northern and FNII purchased $63.7 million of automobile loans from SFC as
compared to $40.9 million in 1998. This increase in purchases from SFC was the
result of continued growth in the indirect automobile loan market. SFC
originates indirect automobile loans in the State of Wisconsin and sells these
loans to the Savings Bank or FNII and the other SFC shareholder while retaining
the servicing of such loans.

ASSET QUALITY. First Northern currently classifies any loan on which a
payment is 90 days or more past due as non-performing. The following table
summarizes non-performing loans and assets:

NON-PERFORMING LOANS AND ASSETS

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1999 1998
---- ----
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Non-accrual mortgage loans.................................. $243 $223
Non-accrual consumer loans.................................. 40 123
---- ----
Total non-performing loans................................ 283 346
Properties subject to foreclosure........................... 318 68
Foreclosed properties and repossessed assets................ 63 38
---- ----
Total non-performing assets............................... $664 $452
==== ====
Non-performing loans as a percent of total loans............ .04% .05%
==== ====
Non-performing assets as a percent of total assets.......... .08% .06%
==== ====
</TABLE>

Total non-performing loans and assets increased in dollar amount in 1999 as
compared to 1998, but decreased as a percentage of total loans. This low level
of non-performing loans, as compared to state and national averages, was the
result of the stable economy in First Northern's market areas and management's
continued emphasis to maintain non-performing assets at low levels.

Management also believes that allowances for losses on loans, real estate
owned and repossessed assets are adequate. While management uses available
information to recognize losses on loans, real estate owned and repossessed
assets, future additions to the allowances may be necessary based on changes in
economic conditions or regulatory requirements.

FN-32
<PAGE> 205

A summary of the general loan loss allowances is shown below:

GENERAL LOAN LOSS ALLOWANCES

<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at the beginning of the year....................... $ 3,531 $ 3,177 $2,937
Provisions................................................. 472 420 320
Charge-offs................................................ (122) (99) (101)
Recoveries................................................. 29 33 21
--------- --------- ------
Balance at the end of the year............................. $ 3,910 $ 3,531 $3,177
========= ========= ======
Allowance as a percent of total loans...................... .53% .56% .53%
========= ========= ======
Allowance as a percent of non-performing loans............. 1,381.63% 1,020.52% 722.05%
========= ========= ======
Allowance as a percent of total assets..................... .47% .49% .48%
========= ========= ======
Allowance as a percent of non-performing assets............ 588.86% 781.19% 535.75%
========= ========= ======
</TABLE>

LIFE INSURANCE POLICIES. Life insurance policies or bank owned life
insurance ("BOLI") increased $1.0 million in 1999 primarily as a result of the
increased value. BOLI is long-term life insurance on the lives of certain
current and past Savings Bank employees where the insurance policy benefits and
ownership are retained by the Savings Bank. The cash value accumulation on BOLI
is permanently tax deferred if the policy is held to the participant's death.
Management believes this is an effective method to help offset a portion of
future employee benefit costs.

DEPOSITS. Deposits increased $24.5 million or 4.5% in 1999 as compared to
$60.6 million or 12.6% in 1998. Deposit growth moderated in 1999 primarily as a
result of the investment returns on competing investments in which consumers
placed their funds. As of December 31, 1999 deposits totaled $566.9 million or
74.3% of total liabilities.

First Northern experienced modest deposit growth in 1999 as a result of:
(i) Northeastern Wisconsin continuing to have good economic growth which has
created new customers; and (ii) the utilization of wholesale and jumbo deposits.
Competition for retail deposits in First Northern's market area has been and
will continue to be very strong.

First Northern establishes savings deposit interest rates to be competitive
in each market area and to maintain a favorable interest rate spread. The
deposit acquisition philosophy continues to be that an increase in deposit
dollars will be sought only if the increase is incrementally profitable.

Due to competition for retail deposits, First Northern will continue to
seek alternative sources of funding, including wholesale and jumbo ($90,000 or
more) deposits. At December 31, 1999, First Northern had a total of $53.2
million of wholesale brokered, corporate and municipal jumbo deposits as
compared to $32.1 million at the end of 1998. Jumbo and wholesale deposits
accounted for 86% of the deposit increase for 1999 and at times, were obtained
at a slightly lower cost than retail deposits. This strategy of acquiring
wholesale and jumbo deposits continues to be an integral part of the Savings
Bank's deposit acquisition strategy for 2000.

First Northern established an internet site (www.firstnorthern.com) in 1999
and utilized other websites to publicize deposit interest rates. Management
believes the website aided in the acquisition of jumbo deposits. The First
Northern website is anticipated to develop into another distribution channel for
First Northern products and services in the year 2000 and beyond.

First Northern believes that the household checking account is the basic
account upon which further customer banking relationships can be developed.
First Northern utilized aggressive pricing and marketing of the checking account
and has been able to become the "primary financial institution" for many

FN-33
<PAGE> 206

households. First Northern will continue to emphasize the number of households
using First Northern's checking account services which is anticipated to
increase associated non-interest fee income.

To enhance this checking account relationship and to increase non-interest
fee income, First Northern continued to expand its First Northern CheckCard
(Debit Card) base. The First Northern CheckCard offers a checking account
customer the opportunity to access a checking account anywhere in the world
where VISA is accepted. First Northern aggressively marketed the First Northern
CheckCard since 1997 and as a result of this aggressive marketing philosophy,
the CheckCard has gained greater customer acceptance and increased product
profitability.

New deposit opportunities will be available as a result of the addition of
the Commercial Banking Department in 1999. Efforts to obtain commercial checking
and other commercial investments from new and existing commercial customers will
be an area of emphasis for First Northern.

The Taxpayers Relief Act of 1997 continues to offer investors and
homeowners significant tax planning opportunities ranging from income tax
savings, estate tax savings, lower capital gains rates, retirement and education
benefits, and the elimination of certain taxes altogether. Although First
Northern had anticipated that the new Roth and Education Individual Retirement
Account would result in higher deposit growth, First Northern did not experience
a significant deposit growth in these retirement accounts for the second
straight year. Educational efforts will continue to be made to communicate the
advantages of the Roth and Education Individual Retirement Accounts to existing
and potential customers.

The GNFSC Investment Center, established in April, 1995, posted a fifth
straight year of profitability. Profits for 1999 were a record for the
Investment Center. The Investment Center offers non-insured deposit products,
such as fixed and variable tax-deferred annuities, stocks, mutual funds and
brokerage products through a network agreement with a registered broker-dealer.
The establishment of the Investment Center has resulted in increased customer
retention and new customer relationships through the existing Savings Bank's
branch network.

First Northern's objective is to create a one-stop family financial banking
center by offering a wide selection of checking accounts, short, intermediate
and long-term certificates of deposit, insured retirement accounts, mutual
funds, other investments and mortgage and consumer loans to meet a wide variety
of customer needs.

BORROWINGS. Borrowings, primarily from the FHLB of Chicago, increased $93.9
million at December 31, 1999, as compared to December 31, 1998, as a result of
the Savings Bank's loan growth and modest deposit growth. The borrowings have
maturities ranging from overnight to approximately nine years (See Notes to
Consolidated Financial Statements -- Note 7-Borrowings). Management anticipates
it will continue to utilize borrowings to fund its growth in interest-earning
assets in 2000.

STOCKHOLDERS' EQUITY. First Northern's stockholders' equity to total assets
ratio at December 31, 1999, was 9.15%, as compared to 10.57% at December 31,
1998. First Northern employs methods which are intended to increase
interest-earning assets and thus reduce the percentage of equity to total assets
(known as leveraging). In addition to interest-earning asset growth, the Company
has also repurchased its stock. The first stock repurchase program, which began
in March of 1996 and was completed in September 1996, resulted in the repurchase
of 456,934 shares at an average cost of $7.91 per share. A second stock
repurchase program which began in October 1996 authorized the repurchase of
438,114 shares. The second stock repurchase program repurchased 60,800 shares at
an average cost of $8.62 per share before it expired in October 1997. A third
stock repurchase program was implemented in March of 1998 which authorized the
repurchase of up to 446,101 shares. At December 31, 1999, all 446,101 shares
authorized to be repurchased were at an average cost of $11.81 per share. First
Northern may implement additional stock repurchase programs in the future if it
is determined to be economically prudent and with the consent of Mutual per the
Merger Agreement.

The Wisconsin Department of Financial Institutions -- Division of Savings
Institutions, which regulates the Savings Bank, requires maintenance of a
minimum of six percent equity to total assets. In addition, the Office of Thrift
Supervision ("OTS") capital rules require the Savings Bank to meet certain
FN-34
<PAGE> 207

capital standards: (i) tier I (core) capital to risk-weighted assets; (ii)
risk-based capital to risk-weighted assets; and (iii) tier I (core) capital to
adjusted assets. The Savings Bank meets and exceeds all regulatory capital
standards (See Notes to Consolidated Financial Statements -- Note
10 -- Stockholders' Equity).

ASSET AND LIABILITY MANAGEMENT

The primary function of asset and liability management is to provide
liquidity and maintain an appropriate balance between interest-earning assets
and interest-bearing liabilities. Interest rate risk is the imbalance between
interest-earning assets and interest-bearing liabilities at a given maturity or
repricing date and is commonly referred to as the interest rate gap (the "gap").
A positive gap exists when there are more assets than liabilities maturing or
repricing within the same time frame. A negative gap occurs when there are more
liabilities than assets maturing or repricing within the same time frame. The
following chart reflects First Northern's gap position as of December 31, 1999:

CUMULATIVE GAP POSITION

<TABLE>
<CAPTION>
3 MONTHS 4 TO 12 1 TO 5 OVER
OR LESS MONTHS YEARS 5 YEARS TOTAL
-------- ------- ------ ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans (1)............... $ 26,677 $ 212,205 $221,665 $81,289 $541,836
Consumer loans (2)............... 58,651 58,566 67,003 11,597 195,817
Commercial loans................. 3,730 75 966 0 4,771
Investment securities (3)........ 28,666 6,975 20,816 0 56,457
Mortgage-related securities
(4)........................... 780 3,100 8,017 3,906 15,803
Interest-earning deposits........ 4,230 99 0 0 4,329
--------- --------- -------- ------- --------
Total rate-sensitive assets... 122,734 281,020 318,467 96,792 819,013
Interest-bearing liabilities:
Passbook accounts (5)............ 2,117 6,354 24,428 35,933 68,832
NOW & variable rate insured money
market accounts (5)........... 60,676 4,864 20,596 51,360 137,496
Time deposits (5)................ 112,860 168,264 76,633 0 357,757
Advance payments by borrowers for
taxes and insurance........... 1,944 1,943 0 0 3,887
Borrowings....................... 108,161 40,773 35,940 1,025 185,899
--------- --------- -------- ------- --------
Total rate-sensitive
liabilities................. 285,758 222,198 157,597 88,318 753,871
--------- --------- -------- ------- --------
Gap................................ $(163,024) $ 58,822 $160,870 $ 8,474 $ 65,142
========= ========= ======== ======= ========
Cumulative gap..................... $(163,024) $(104,202) $ 56,667 $65,142
========= ========= ======== =======
Cumulative gap as a percentage of
total assets..................... (19.4)% (12.4)% 6.7% 7.8%
========= ========= ======== =======
</TABLE>

-------------------------
(1) Excludes undisbursed loan proceeds of $17,852.
(2) Includes $1,085 of education loans held for sale.
(3) Includes $9,250 of FHLB stock; includes $13,548 of life insurance policies;
excludes unrealized gains or losses.
(4) Excludes unrealized gains or losses.
(5) Does not include accrued interest, which totals $2,823 for all deposits.

The calculation of a gap position is subjective by nature and requires
management to make a number of assumptions as to when an asset or liability will
reprice or mature. Assumptions used in estimating the maturity/repricing amounts
and dates of the more significant asset and liability categories include: (i)
investment securities -- based upon contractual maturities and if applicable,
call dates; (ii) loans -- based upon contractual maturities, repricing date, if
applicable, scheduled repayments of principal and projected prepayments of
principal based upon the Company's historical experience; (iii) mortgage-related
securities based upon an average of Wall Street estimates for prepayment speeds;
and (iv) deposits based

FN-35
<PAGE> 208

upon contractual maturities and various decay rates applied to the remaining
deposit dollars. The decay rate, which varies with deposit product, is based on
historical decay rates of First Northern.

First Northern's overall asset and liability management goal is to maximize
long-term profitability and returns to stockholders. First Northern's current
strategy is to: (i) originate and retain adjustable interest rate mortgage
loans; (ii) originate and retain 15 and 20 year fixed interest rate mortgage
loans; (iii) originate and sell most 30 year fixed interest rate mortgage loans;
(iv) originate shorter maturity consumer loans; (v) emphasize the origination of
adjustable interest rate home equity loans; (vi) counsel depositors to balance
their deposits between short-, intermediate-, and long-term deposits; and (vii)
offer new and attractive deposits and investment opportunities. In addition,
borrowings with various terms are used to reach the targeted asset/liability
mix. Currently, management's strategic goal for asset/liability management is to
maintain a cumulative one (1) year gap within a range of a positive 10% to a
negative 20%. Management believes this is an appropriate level to achieve First
Northern's long-term goals, while controlling interest rate risk.

IMPACT OF YEAR 2000

First Northern did not experience any problems to its critical operating
systems on January 1, 2000. First Northern had tested and/or upgraded its
systems (such as software, hardware, telephones, voicemail, heating,
ventilating, air conditioners, alarms etc.) throughout 1999. The Company
anticipated that all modifications, upgrades or replacement of all systems would
not exceed $170,000 (pre-tax). At December 31, 1999, approximately $148,000
(pre-tax) had been spent. First Northern will continue to monitor its systems
during 2000.

GRAMM-LEACH-BLILEY ACT

Management anticipates the Gramm-Leach-Bliley Act will not have a
significant impact on First Northern's operations in the near future; however,
management will continue to evaluate and look for opportunities as a result of
the Act and is unable to predict the impact on its operations at this time. See
Item 1. "Business -- Regulation -- Federal Regulation of Holding
Companies -- Gramm-Leach-Bliley Act."

AVERAGE BALANCE SHEET AND YIELD/RATE ANALYSIS

The following table presents, for the periods indicated, the total dollar
amount of interest income from average interest-earning assets, the resultant
yields, and the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made
since First Northern does not have any tax exempt investments. Average balances
are derived from average daily balances. The yield on securities
available-for-sale are included in investment securities and mortgage-

FN-36
<PAGE> 209

related securities and yields are calculated on the historical basis. The yields
and rates are established by dividing income or expense dollars by the average
balance of the asset or liability.

AVERAGE BALANCE SHEET, INTEREST AND RATE PAID

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1999 1998 1997
------------------------------- ------------------------------- -------------------------------
AVERAGE INTEREST YIELD/ AVERAGE INTEREST YIELD/ AVERAGE INTEREST YIELD/
BALANCE EARNED/PAID RATE BALANCE EARNED/PAID RATE BALANCE EARNED/PAID RATE
------- ----------- ------ ------- ----------- ------ ------- ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets(1):
Mortgage loans............ $500,111 $35,164 7.03% $456,977 $33,510 7.33% $426,748 31,443 7.37%
Consumer loans............ 175,577 13,816 7.87 160,706 13,273 8.26 148,614 12,529 8.43
Commercial Loans.......... 5,454 468 8.58
Investment securities..... 38,789 2,336 6.02 34,828 2,138 6.14 29,154 1,844 6.33
Interest-earning
deposits................ 1,702 82 4.82 2,623 147 5.60 762 45 5.91
Mortgage-related
securities.............. 14,765 904 6.12 9,996 622 6.22 11,558 735 6.36
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total................... 736,398 52,770 7.17 665,130 49,690 7.47 616,836 46,596 7.55
Interest-bearing
liabilities:
Passbook accounts......... 70,425 1,385 1.97 63,643 1,364 2.14 60,057 1,322 2.20
NOW and variable rate
insured money market
accounts................ 132,629 3,085 2.33 117,944 2,927 2.48 104,665 2,536 2.42
Time deposits............. 350,423 19,090 5.45 327,674 18,979 5.79 307,423 17,579 5.72
Advance payments by
borrowers for taxes and
insurance............... 7,002 162 2.31 6,680 155 2.32 6,652 149 2.24
Borrowings................ 124,186 6,964 5.61 95,890 5,578 5.82 82,644 4,905 5.94
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total................... 684,665 30,686 4.48 611,831 29,003 4.74 561,441 26,491 4.72
-------- ------- ---- -------- ------- ---- -------- ------- ----
Net interest-earning
assets and interest rate
spread.................. $ 51,733 2.69% $ 53,299 2.73% $ 55,395 2.83%
======== ==== ======== ==== ======== ====
Average interest-earning
assets, net interest
income and net yield on
average interest-earning
assets.................. $736,398 $22,084 3.00% $665,130 $20,687 3.11% $616,836 20,150 3.26%
======== ======= ==== ======== ======= ==== ======== ======= ====
Average interest-earning
assets to
interest-bearing
liabilities............. 107.6% 108.7% 109.9%
======== ======== ========
</TABLE>

-------------------------
(1) For the purpose of these computations, non-accruing loans and loans
held-for-sale are included in the average loan amounts outstanding.

RATE VOLUME ANALYSIS OF NET INTEREST INCOME

The interaction of changes in volume and rates earned or paid with regard
to interest-earning assets and interest-bearing liabilities has a significant
impact on net income between periods. The volume of interest-earning dollars in
loans and investments compared to the volume of interest-bearing dollars in
deposits and borrowings, combined with the interest rate spread, produces the
changes in net interest income between periods.

Information in the table below is provided in each category with respect to
(i) changes attributable to rate (changes in rate multiplied by prior volume),
(ii) changes attributable to volume (changes in volume multiplied by prior rate,
and (iii) changes attributable to changes in rate/volume (changes in rate

FN-37
<PAGE> 210

multiplied by changes in volume). Changes attributable to the combined impact of
volume and rate have been allocated proportionately to the changes due to volume
and the changes due to rate.

<TABLE>
<CAPTION>
RATE VOLUME ANALYSIS
YEAR ENDED DECEMBER 31,
1999 VS 1998
-------------------------------------
INCREASE (DECREASE) DUE TO:
-------------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans........................................... $(1,371) $3,154 $(129) $1,654
Consumer loans........................................... (627) 1,228 (58) 543
Commercial loans......................................... 468 468
Investment securities.................................... (42) 245 (5) 198
Interest-earning deposits................................ (20) (52) 7 (65)
Mortgage-related securities.............................. (10) 297 (5) 282
------- ------ ----- ------
Total................................................. $(2,070) $4,872 $ 278 3,080
======= ====== ===== ======
Interest-bearing liabilities:
Passbook accounts........................................ $ (108) $ 141 $ (12) 21
NOW and variable rate insured money market accounts...... (177) 357 (22) 158
Time deposits............................................ (1,114) 1,302 (77) 111
Advance payments by borrowers for taxes and insurance.... (1) 8 7
Borrowings............................................... (201) 1,646 (59) 1,386
------- ------ ----- ------
Total................................................. $(1,601) $3,454 $(170) 1,683
======= ====== ===== ------
Net change in net interest income.......................... $1,397
======
</TABLE>

<TABLE>
<CAPTION>
RATE VOLUME ANALYSIS
YEAR ENDED DECEMBER 31,
1998 VS 1997
-----------------------------------
INCREASE (DECREASE) DUE TO:
-----------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans............................................ $(171) $2,250 $(12) $2,067
Consumer loans............................................ (253) 1,018 (21) 744
Commercial loans Investment securities.................... (55) 360 (11) 294
Interest-earning deposits................................. (2) 110 (6) 102
Mortgage-related securities............................... (16) (99) 2 (113)
----- ------ ---- ------
Total..................................................... $(497) $3,639 $(48) 3,094
===== ====== ==== ------
Interest-bearing liabilities:
Passbook accounts......................................... $ (36) $ 80 $ (2) 42
NOW and variable rate insured money market accounts....... 63 320 8 391
Time deposits............................................. 215 1,171 14 1,400
Advance payments by borrowers for taxes and insurance..... 5 1 6
Borrowings................................................ (99) 788 (16) 673
----- ------ ---- ------
Total..................................................... $ 148 $2,360 $ 4 2,512
===== ====== ==== ------
Net change in net interest income........................... $ 582
======
</TABLE>

FN-38
<PAGE> 211

<TABLE>
<CAPTION>
RATE VOLUME ANALYSIS
YEAR ENDED DECEMBER 31,
1997 VS 1996
----------------------------------
INCREASE (DECREASE) DUE TO:
----------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans............................................ $763 $1,801 $48 $2,612
Consumer loans............................................ (88) 1,908 (16) 1,804
Commercial loans Investment securities.................... 15 245 2 262
Interest-earning deposits................................. 6 (25) (2) (21)
Mortgage-related securities............................... (14) 79 (2) 63
---- ------ --- ------
Total..................................................... $682 $4,008 $30 4,720
==== ====== === ------
Interest-bearing liabilities:
Passbook accounts......................................... $(23) $ 33 $(1) 9
NOW and variable rate insured money market accounts....... 92 54 2 148
Time deposits............................................. 175 852 9 1,036
Advance payments by borrowers for taxes and insurance..... (2) (11) (13)
Borrowings................................................ 77 1,976 55 2,108
---- ------ --- ------
Total..................................................... $319 $2,904 $65 3,288
==== ====== === ------
Net change in net interest income........................... $1,432
======
</TABLE>

RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998.

GENERAL. Net income increased $548,000 in 1999 primarily as a result of an
increase in interest-earning assets and a reduction in the effective income tax
rate. Offsetting some of the increase in net income was a reduction of the gains
on the sales of loans and a compression of the net interest margin. The net
interest margin decreased as a result of the cost of new deposits and maturing
deposits increasing faster than the interest earned on the loan portfolio.

INTEREST INCOME. Interest income on mortgage loans increased $1.7 million
as a result of increased dollars outstanding in the mortgage portfolio. The
average mortgage loan portfolio increased $43.1 million in 1999. The average
interest rate decreased in 1999 to 7.03% from 7.33% in 1998 primarily as the
result of: (i) mortgage loans being originated at interest rates below the
existing mortgage loan yield and (ii) downward interest rate adjustments to
qualified interest rate adjustable mortgage loans in the first six months of
1999. As market interest rates increased, mortgage loan originations in the
fourth quarter of 1999 equaled or exceeded the yield on the mortgage loan
portfolio and in the third and fourth quarter of 1999 interest rates on
qualified adjustable interest rate mortgage loans were increased.

Interest income on consumer loans increased $543,000 as a result of an
increase in the average portfolio of $14.9 million. The average interest rate on
the consumer loan portfolio decreased to 7.87% in 1999 as compared to 8.26% in
1998 as a result of consumer loan originations being at interest rates below the
yield on the consumer loan portfolio. Consumer loan origination interest rates
exceeded the yield on the consumer loan portfolio beginning in the second half
of 1999.

Interest income on commercial loans was $468,000. The commercial loan
portfolio had an average portfolio yield of 8.58% in 1999. First Northern began
originating commercial loans late in the second quarter of 1999.

Investment securities and mortgage-related interest income increased in
1999 as a result of increased dollars outstanding. First Northern purchases
investment securities and mortgage-related securities when it

FN-39
<PAGE> 212

incrementally adds to the overall profitability of the Company or to aid in its
interest rate risk management.

Interest-earning deposit interest income decreased $65,000 in 1999
primarily as the result of decreased interest-earning deposits outstanding.

INTEREST EXPENSE. Interest on deposits increased $289,000 in 1999 as a
result of increased deposits. Average deposits increased $44.2 million and the
average cost of deposits decreased to 4.26% in 1999 from 4.57% in 1998. First
Northern continued to utilize wholesale deposits in 1999 as a method to acquire
deposits. There are times when wholesale deposits are a more cost effective
method to acquire funds than retail deposits or borrowings.

Borrowings continued to increase in 1999 and as a result, the interest
expense on borrowings increased $1.4 million. The increases in interest-earning
assets in 1999 and the modest growth in deposits necessitated the increase in
borrowings. It is anticipated by the Company that borrowings will continue to be
utilized throughout 2000 to fund its growth in interest-earning assets. First
Northern primarily borrows from the FHLB of Chicago.

Advance payments by borrowers for taxes and insurance ("escrow") interest
expense increased in 1999 as a result of increased escrow dollars outstanding.
The escrow interest rate for 1999 was 2.74% as compared to 2.83% for 1998. The
escrow interest rate for 2000 will be 2.51%.

PROVISIONS FOR LOAN LOSSES. The provision for loan losses increased $52,000
in 1999 primarily as a result of the growth in the loan portfolio and the
composition of the loan portfolio specifically, the addition of commercial
loans. The total loan loss allowance at December 31, 1999, is $3,910,000 or .53%
of the total loan portfolio at December 31, 1999, as compared to $3,531,000 or
.56% of the total loan portfolio at December 31, 1998.

OTHER INCOME. Fees on serviced loans increased $12,000 primarily as a
result of the increased dollar amount of serviced loans and a reduction in the
dollar amount of mortgage loan prepayments. At December 31, 1999, First Northern
serviced $151.4 million in loans as compared to $150.2 million at the end of
1998. As the principal of a mortgage loan which was sold with servicing retained
prepays or repays, the mortgage servicing asset is reduced and netted against
the fees on serviced loans thereby reducing the income on serviced loans. As
mortgage loan repayments or prepayments decrease, the reduction to the mortgage
servicing asset is reduced as well as the reduction to the income on serviced
loans.

Loan fees and service charges income decreased $32,000 as a result of
decreased Wisconsin Housing and Economic Development Authority ("WHEDA") loans
originations. First Northern originates mortgage loans for WHEDA and receives a
fee for each origination. During 1999 the dollar amount of WHEDA originations
decreased as a result of lack of consumer demand for the product.

Deposit account service charges increased $114,000 primarily as the result
of: (i) the increased number of NOW(checking) accounts and their associated
fees; and (ii) customer usage of the CheckCard. CheckCard is a debit card where
each time the Savings Bank's CheckCard is used a fee, which varies with each
merchant, is paid to the Savings Bank by the debit card company. The Savings
Bank promotes the use of its debit card by direct mail and internal promotions.

Insurance commissions increased $37,000 primarily as a result of increased
bonuses received from insurance carriers. First Northern attained a
pre-determined threshold of insurance sales and insurance losses were below
another threshold thereby earning approximately $85,700 in insurance bonuses in
1999. Insurance bonuses in 1998 were $0.

Gains on the sales of loans decreased $662,000 as a result of reduced
mortgage loan sales. The Savings Bank sold $20.1 million of mortgage loans in
1999 as compared to $63.2 million in 1998. (See Financial Condition--Balance
Sheet--Lending Activities)

FN-40
<PAGE> 213

Other non-interest income increased $155,000 primarily as the result of
life insurance owned by First Northern. First Northern purchased life insurance
to partially offset the future cost of employee or director benefits. Interest
earned on life insurance in 1999 was $714,000.

OPERATING EXPENSES. Compensation expense increased $78,000 as a result of
salary and benefit costs increases and the 1998 increased accruals for the
director deferred retirement plan and supplemental executive retirement plan.

Federal deposit insurance premiums increased $20,000 as a result of
increased deposits.

Occupancy expense increased $119,000 as a result of the Savings Bank's
rental of approximately 14,000 square feet of additional office space in
downtown Green Bay, which began in the third quarter of 1999. First Northern
consolidated several of its back office support departments that had been
located in three separate First Northern locations as a result of the growth in
these areas.

Data Processing expense increased $140,000 as the result of: (i)
accelerated depreciation of $45,000 on personal computers ("PCs"); (ii)
increased cost associated with First Northern's service bureau; (iii)
depreciation of new teller software; and (iv) cost of data processing supplies.

Furniture and equipment expense decreased $50,000 primarily as the result
of a decrease in the cost of furniture and equipment service contracts and
depreciation expense. Service contract expense was decreased as a result of
eliminating individual service contracts and placing certain furniture and
equipment under an insurance service agreement. Depreciation expense was
decreased as a result of certain furniture and equipment that became fully
depreciated.

Marketing expense increased $66,000 to promote loan and deposit products.
First Northern believes that growth in lending and deposits volumes is
facilitated by increased marketing of those products.

Other expenses increased $127,000 as a result of increased costs associated
with the operations of SFC, costs associated with the operation of the debit
card and the reversal by the Petroleum Environmental Clean-up Fund of a
reimbursement, in the amount of $53,700, for environmental clean-up costs of a
lot at a subdivision owned by GNFSC. First Northern is presently appealing this
reversal.

INCOME TAXES. The effective income tax rate for 1999 was 32.3% as compared
to 34.6% for 1998. The decrease in the effective income tax rate was the result
of the life insurance policies owned by First Northern and an increase in the
earnings of FNII, which is not subject to state income taxes. Since First
Northern intends to hold the life insurance until the participants' death, the
life insurance interest income is not taxable. In addition, First Northern moved
its indirect automobile loan portfolio to FNII at the beginning of the second
quarter of 1998, which has reduced state franchise taxes. In March 1999, First
Northern sold approximately $56.3 million in mortgage loan participations to
FNII to further reduce its state franchise tax.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997.

GENERAL. Net income increased $793,000 in 1998 primarily as a result of the
dollar increase in interest-earning assets, gains from the sales of loans and a
reduction in the effective income tax rate.

INTEREST INCOME. Interest income on mortgage loans increased $2,067,000 as
a result of increased dollars outstanding in the mortgage loan portfolio. The
average interest rate earned decreased as a result of: (i) mortgage loans being
originated at interest rates below the existing mortgage loan portfolio yield;
(ii) downward interest rate adjustments to certain mortgage loans in its
portfolio before their scheduled adjustment dates in response to the refinancing
of existing adjustable interest rate mortgage loans; and (iii) the prepayments
of mortgage loans with higher than market interest rates.

Interest income on consumer loans increased $744,000 as a result of an
increase of $12.1 million of consumer loans outstanding throughout 1998. The
average interest rate earned on the consumer portfolio decreased to 8.26% in
1998 as compared to 8.43% in 1997 as a result of: (i) consumer loan originations
at interest rates that were below the existing yield on the consumer loan
portfolio; (ii) decreases in some of

FN-41
<PAGE> 214

First Northern's consumer loans which use the prime interest rate as an index;
and (iii) prepayments to consumer loans that are at interest rates above market
interest rates.

Investment securities and interest-earning deposits interest income
increased $294,000 and $102,000 respectively, as a result of increased dollars
outstanding.

The increase in the dollar amount of interest-earning deposits is the
result of excess funds above the funding needs for loans and operations, being
invested in short-term certificates of deposits or in overnight investments.
These additional funds were created by strong deposit gains and sales of loans.

Interest on mortgage-related securities decreased $113,000 as a result of
prepayment and repayments to the underlying collateral (mortgage loans). The
average interest rate earned on mortgage-related securities decreased to 6.22%
from 6.36% primarily as the result of prepayments and repayments to higher than
market interest rate securities and the purchase of mortgage-related securities
at lower interest rates than existing yields on the mortgage-related securities
portfolio.

INTEREST EXPENSE. Interest expense on deposits increased $1,833,000 as a
result of increased deposits. First Northern utilizes various time deposit terms
and interest rates to attract new deposits and in 1998, utilized wholesale
deposits as a method to acquire less expensive deposits.

Interest expense on borrowings increased $673,000 in 1998 primarily as a
result of increased average borrowings outstanding. First Northern primarily
borrows from the FHLB of Chicago.

Advance payments by borrowers for taxes and insurance ("escrow") interest
expense increased modestly in 1998 as a result of the increased number of escrow
accounts that were interest-bearing. Although the interest rate paid on escrow
accounts of 2.83% was the same in 1998 as it was in 1997, and the average
dollars in escrow were approximately equal, a number of non interest-bearing
escrow accounts were replaced by interest-bearing escrow accounts thus
increasing interest expense. The escrow interest rate for 1999 is 2.74%.

PROVISIONS FOR LOAN LOSSES. First Northern provided an additional $420,000
to loan loss allowances in 1998. The total loan loss allowance at December 31,
1998, is $3,531,000 or .56% of the total loan portfolio at December 31, 1998, as
compared to $3,177,000 or .53% of the total loan portfolio at December 31, 1997.

OTHER INCOME. Fees on serviced loans decreased $146,000 primarily as the
result of the amortization of the mortgage servicing asset in accordance with
Financial Accounting Standards ("FASB") No. 122, "Accounting for Mortgage
Servicing Rights." As the principal of a mortgage loan which was sold with
servicing retained repays or prepays, the mortgage servicing asset is reduced
and netted against the fees on serviced loans, thereby reducing the income on
serviced loans. In 1998, the amortization of the mortgage loan servicing asset
amounted to $215,000 and $38,900 in 1997.

Deposit account service charges increased $73,000 primarily as the result
of: (i) the increased number of NOW(checking) accounts and their associated
fees; and (ii) customer usage of CheckCard.

Insurance commissions decreased $32,000 primarily as a result of a
reduction in the bonus received from insurance carriers.

Gains on the sales of loans increased $683,000 as a result of increased
loan sales. Loan sales in 1998 were $65.6 million as compared to $21.2 million
in 1997.

Other non-interest income increased $359,000 primarily as the result of
BOLI. In December 1997, First Northern purchased $7.4 million of life insurance
to partially offset the future cost of employee benefits. Interest earned on the
$7.4 million of life insurance in 1998 was $396,000.

OPERATING EXPENSES. Compensation expense increased $538,000 as a result of
normal salary increases, the addition of 5 full-time equivalent employees and
increased accruals for the director deferred retirement plan and supplemental
executive retirement plan.

FN-42
<PAGE> 215

Federal deposit insurance premiums increased $17,000 as a result of
increased deposits and in 1997, the receipt of a $15,000 refund of deposit
insurance premiums paid from prior periods.

Data processing expense increased $73,000 primarily from increased
depreciation expense and service contract expense on data processing equipment.

Furniture and equipment expense decreased $21,000 as a result of a number
of pieces of furniture and equipment being fully depreciated at the end of 1997.

Telephone and postage expenses decreased $33,000 by negotiating a reduction
to the cost of long distance calls and an increase in expense deferrals
associated with the substantial increase in loan originations. Incremental
telephone and postage expenses associated with loan originations are deferred
and amortized back against interest income over the life of the loan, which
results in an adjustment to the loan yield.

Marketing expense increased $39,000 as a result of increased advertising
and marketing of deposit and loan products. First Northern believes the growth
in lending and deposit volumes is facilitated by increased marketing of those
products and hence, increased costs.

Other expenses increased $97,000 as a result of increased costs associated
with the operations of SFC, costs associated with the issuance and operations of
the debit card and an increase in bad checks and customer fraud.

INCOME TAXES. The effective income tax rate for 1998 is 34.6% as compared
to 37.7% for 1997. This decrease in the effective income tax rate is primarily
the result of earnings on BOLI for which no income tax provision is provided and
the increase in earnings at FNII which is not subject to state income taxes.
Both activities have reduced state franchise taxes.

BUSINESS

OVERVIEW. First Northern Capital Corp. (the "Company" or "First Northern"),
a unitary savings and loan holding company, was incorporated in Wisconsin in
1995 for the purpose of owning all of the outstanding stock of First Northern
Savings Bank, S.A. (the "Savings Bank"), a Wisconsin chartered capital stock
savings and loan association, which reorganized into the holding company
structure effective December 20, 1995 (the "Reorganization"). At that date, each
outstanding share of the Savings Bank's common stock was converted into one
share of the Company's common stock. Consequently, the former holders of all the
outstanding stock of the Savings Bank acquired the same proportionate ownership
interest in First Northern as they had held in the Savings Bank. The
consolidated capitalization, assets, liabilities, income and other financial
data of First Northern immediately following the Reorganization were
substantially the same as those of the Savings Bank immediately prior to
consummation of the Reorganization. The Reorganization was effected to provide
greater flexibility in meeting the Company's future financial and competitive
needs. All data presented in this 10-K for dates and periods prior to December
20, 1995 relate to the Savings Bank. All references herein to First Northern or
the Company for any date or period prior to consummation of the Reorganization
shall be deemed to refer to the Savings Bank.

The Savings Bank is the only direct subsidiary of the Company and its
operations are the primary contributor to the Company's earnings and expenses.
The Savings Bank's business consists primarily of attracting deposits from the
general public and originating loans throughout its Northeastern Wisconsin
branch network. Great Northern Financial Services Corporation ("GNFSC"), a
wholly owned subsidiary of the Savings Bank, offers full brokerage services to
the public, including the sale of tax deferred annuities and mutual funds, and
sells credit life and disability insurance. Another wholly owned subsidiary,
First Northern Investments, Inc. ("FNII"), manages a majority of the Savings
Bank's investments and purchases automobile loans from Savings Financial
Corporation ("SFC" ) and mortgage loans from the Savings Bank. The Savings
Bank's 50% owned subsidiary, SFC, originates, services and sells automobile
loans to FNII, the Saving Bank and its other parent corporation.

FN-43
<PAGE> 216

First Northern is based in Green Bay, Wisconsin and conducts its business
from 19 offices located in a contiguous, eight-county (Brown, Marinette,
Manitowoc, Door, Shawano, Outagamie, Waupaca, and Calumet) area in Northeastern
Wisconsin.

On August 18, 1997, First Northern effected a 2-for-1 stock split in the
form of a 100% stock dividend. Unless otherwise indicated, all shares and per
share information have been restated to reflect the stock split.

MERGER AGREEMENT WITH MUTUAL SAVINGS BANK. On February 22, 2000, First
Northern, and Mutual Savings Bank, a Wisconsin-chartered mutual savings bank
("Mutual"), announced that they had entered into an Agreement and Plan of
Merger, dated as of February 21, 2000 ( the "Merger Agreement"), by and among
Mutual, First Northern and OV Corp., a Wisconsin corporation organized as a
wholly owned subsidiary of Mutual for the purpose of effecting the transactions
contemplated by the Merger Agreement ("Merger Corp."). The Merger Agreement
provides for the acquisition of First Northern by Mutual through a merger of
First Northern with and into Merger Corp. (the "Merger"), which will be the
surviving corporation ("Survivor"). The Merger Agreement has been approved by
the boards of directors of Mutual and First Northern.

Subject to the terms and conditions of the Merger Agreement, at the time of
the Merger, each outstanding share of First Northern common stock, par value
$1.00 per share ("First Northern Common Stock"), will be converted into the
right to receive cash in the amount of $15.00, or 1.5 shares of common stock,
par value $.01 per share, of Survivor ("Survivor Common Stock"), or a
combination of cash and shares of Survivor Common Stock (the "Merger
Consideration"). Prior to the closing date, Mutual will select the percentage of
the total Merger Consideration to be paid in the Survivor Common Stock, which
may not be less than 40% or more than 70%; the balance will be paid in cash.
Each First Northern stockholder will be entitled to elect to receive (a) cash,
(b) Survivor Common Stock or (c) as to First Northern stockholders holding not
less than 170 shares of First Northern Common Stock, a combination of cash and
Survivor Common Stock, with the percentage of such shares of their First
Northern Common Stock equal to the lesser of the Stock Percentage and 50%
converted into Survivor Common Stock and the balance converted into cash.
Elections will be subject to proration if the cash or stock elections exceed the
maximum amounts permitted under the Merger Agreement. Cash will be paid in lieu
of any fractional shares of the Survivor Common Stock which holders of First
Northern Common Stock would otherwise receive.

In connection with the Merger, Mutual and First Northern will engage in a
restructuring involving a number of steps (the "Restructuring"). As a part of
the Restructuring, Mutual will form a mutual holding company in which Mutual's
depositors will hold all the voting rights. The mutual holding company will own
a majority of the Survivor Common Stock; the balance of the shares of Survivor
Common Stock will be offered for sale to Mutual's depositors and issued to First
Northern stockholders in the Merger. As a result of the Restructuring, Mutual
Savings Bank and the Savings Bank, will become wholly owned subsidiaries of
Survivor. Thus, Survivor will be a subsidiary mid-tier stock holding company.

Consummation of the Merger is subject to the satisfaction of certain
closing conditions set forth in the Merger Agreement, including approval by the
stockholders of First Northern and approval by the OTS, the FDIC and the
WDFI -- Administrator. The depositors of Mutual must also approve Mutual's plan
for the Restructuring. The Merger is also subject to receipt of an opinion of
counsel to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code and the receipt of an
opinion of counsel or a private letter ruling from the Internal Revenue Service
as to the federal income tax treatment of certain transactions contemplated by
the Merger Agreement. In addition, the Merger is conditioned upon the approval
for listing on the NASDAQ National Market of the shares of Survivor Common Stock
to be issued in the Merger, which shares will be registered under the Securities
Act of 1933 by a registration statement to be filed by Survivor with the
Securities and Exchange Commission.

granted to Mutual an irrevocable option to purchase up to 1,708,675 shares of
First Northern Common Stock, which equals 19.9% of the number of shares of First
Northern Common Stock outstanding at February 21, 2000, at an exercise price of
$9.0375 per share. The option would become exercisable under certain
circumstances if First Northern becomes the subject of a third-party proposal
for a competing transaction.

CAUTIONARY FACTORS. This document contains or incorporates by reference
various forward-looking statements concerning the Company's prospects that are
based on the current expectations and beliefs of management. Forward-looking
statements may also be made by the Company from time to time in other reports
and documents as well as oral presentations. When used in written documents or
oral statements, the words "anticipate," "believe," "estimate," "expect,"
"objective" and similar expressions are intended to identify forward-looking
statements. The statements contained herein and such future statements involve
or may involve certain assumptions, risks and uncertainties, many of which are
beyond the Company's control, that could cause the Company's actual results and
performance to differ materially from what is expected. In addition to the
assumptions and other factors referenced specifically in connection with such
statements, the following factors could impact the business and financial
prospects of the Company: general economic conditions; legislative and
regulatory initiatives; increased competition and other effects of the
deregulation and consolidation of the financial services industry; monetary and
fiscal policies of the federal government; deposit flows; disintermediation; the
cost of funds; general market rates of interest; interest rates or investment
returns on competing investments; demand for loan products; demand for financial
services; changes in accounting policies or guidelines; unforeseen future costs
and consequences of the year 2000 problem; and changes in the quality or
composition of the Savings Banks loan and investment portfolios and the
investment portfolio of FNII. Further, First Northern's Merger Agreement with
Mutual is subject to regulatory, First Northern stockholder and Mutual depositor
approvals and other closing conditions.

THE THRIFT INDUSTRY. The operations of First Northern and the Savings Bank,
as well as other savings associations and other financial institutions, are
significantly influenced by general economic conditions, by the related
monetary, tax and fiscal policies of the federal government and by the policies
of regulatory authorities, including the Board of Governors of the Federal
Reserve System ("Federal Reserve Board"), the Office of Thrift Supervision
("OTS"), the Federal Deposit Insurance Corporation ("FDIC") and in the case of
First Northern and the Savings Bank, the Wisconsin Department of Financial
Institutions -- Division of Savings Institutions ("WDFI -- Administrator").
First Northern's results of operations are also affected by accounting
principles and regulations adopted by the Financial Accounting Standards Board
("FASB") and other organizations. Deposit flows and costs of funds are
influenced by interest rates on competing investments, general market rates of
interest, the level of personal savings and the public perception of the
financial strength of the industry. Lending activities are affected by the
demand for mortgage financing and other types of loans, which in turn is
affected by the interest rates at which such financing may be offered and market
forces acting upon the supply of housing and the availability of funds.

RECAPITALIZATION OF SAIF. The Savings Association Insurance Fund ("SAIF")
of the FDIC was recapitalized during 1996 by a one-time special assessment
imposed on all SAIF members. The $2,856,000 assessment paid by First Northern
had a significant impact on its 1996 financial results. However, the effect of
the recapitalization is a significant reduction in federal deposit insurance
premiums for SAIF-insured institutions on an ongoing basis.

MARKET AREA AND COMPETITION. First Northern's primary market area is an
eight county area in Northeastern Wisconsin, which surrounds Green Bay, the
third largest city in Wisconsin. First Northern operates 19 offices located in
14 cities in this area. These counties and cities are serviced by four Green Bay
area television stations and are included in the circulation of a Green Bay
newspaper.

Financial organizations, such as First Northern, experience intense
competition in both attracting and retaining deposits and in making real estate
and consumer loans. First Northern's management believes that its share of the
deposit market is approximately 10% and that its mortgage lending market share
in its primary market area is approximately 9%. Most direct competition for
deposits has come from commercial

FN-45
<PAGE> 218

banks, credit unions, stock brokerage firms and money market mutual funds. In
addition to offering competitive types of accounts and interest rates, the
principal methods used by First Northern to attract deposits include the
offering of a variety of services, and convenient business hours and branch
locations, with inter-branch deposit and withdrawal privileges at each location.
Competition in originating real estate loans comes primarily from commercial
banks and mortgage bankers. The primary factors in competing for loans are
interest rates and interest rate adjustment provisions, loan fees and the
quality of service to borrowers.

The Wisconsin Statutes governing savings associations and their holding
companies provide for regional reciprocal interstate banking which permits
additional competitors to enter First Northern's primary market and may tend to
create further concentration in the financial services industry. Under Wisconsin
law, Wisconsin chartered savings institutions may open branches in Illinois,
Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri and Ohio, provided that
reciprocal legislation is adopted in such states (the "Regional States").
Currently, all but Missouri have adopted reciprocal legislation. A Wisconsin
based savings and loan holding company is able to acquire a savings institution
or holding company in any of the Regional States and such a holding company
located in a Regional State is able to make similar acquisitions in Wisconsin.
In addition, the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, which allows bank holding companies that are adequately capitalized and
adequately managed to acquire banks anywhere in the nation regardless of whether
the acquisition is prohibited under state law, also created further competition
and concentration in the financial services industry.

See "-- Regulation -- Federal Regulation of Holding
Companies -- Gramm-Leach-Bliley Act" below for a description of this significant
new federal legislation which could have a far reaching impact on the financial
services industry.

LENDING ACTIVITIES. First Northern has traditionally concentrated on
originations of adjustable and fixed interest rate one- to four-family mortgage
loans and consumer loans. First Northern also originates five or more family
residential, commercial real estate and short-term construction mortgage loans.
Adjustable interest rate mortgage loans are originated for First Northern's
portfolio; while 30 year fixed interest rate mortgage loans are primarily
originated for sale in the secondary mortgage market. Fixed interest rate
mortgage loans with terms of 15 and 20 years are retained in First Northern's
mortgage loan portfolio. At December 31, 1999, approximately 75% of First
Northern's mortgage loan portfolio was interest rate adjustable as compared to
76% at December 31, 1998.

To aid in matching maturities of its assets and liabilities, First Northern
originates second mortgage loans, automobile, boat, recreational vehicle and
other types of consumer loans. These loans are generally of shorter maturities
than first mortgage loans and are originated at both adjustable or fixed
interest rates.

First Northern started a commercial banking division in 1999, which
originates commercial loans and commercial real estate loans. First Northern
hired an experienced commercial banking manager to guide the development of this
division. At December 31, 1999, the commercial banking division had originated
commercial loans of $5.0 million and commercial real estate loans of $14.4
million, which are reported in mortgage loan originations.

First Northern lends primarily in its eight county market area in
Northeastern Wisconsin. At December 31, 1999, approximately 99.2% of the total
dollar amount of First Northern's mortgage loans outstanding were on properties
located in Wisconsin with the other 0.8% representing properties located
primarily in other Midwestern states.

First Northern's loan portfolio of $759.2 million before deductions at
December 31, 1999 was 90.4% by dollar volume of its total assets. As of that
date, approximately 63.4% by dollar volume of the loan portfolio consisted of
conventional first mortgage loans secured by one- to four-family residences,
with an additional 25.7% by dollar volume in consumer loans, 6.6% by dollar
volume in multi-family (more than four) residential properties, 3.2% by dollar
volume in commercial real estate properties, 0.6% by dollar volume in commercial
loans and 0.5% by dollar volume in other properties.

FN-46
<PAGE> 219

LOAN INTEREST RATES AND TERMS. Interest rates charged on First Northern's
loans are affected primarily by the demand for such loans and the supply and
cost of money available for lending purposes. These factors are in turn affected
by general economic conditions and such other forces as monetary policies of the
federal government, including the Federal Reserve Board, the general supply of
money, tax policies and governmental budgetary matters. Certain lending
activities of Wisconsin chartered savings associations are subject to Wisconsin
usury laws.

The maturities and average periods that loans actually remain outstanding,
together with the variability of loan interest provisions, in each case as
compared with the corresponding factors for loan funding sources, are the key
determinants of a lender's exposure to interest rate risk. Loan sales may also
be used as a means of reducing interest rate risk. First Northern's general
policy, which is subject to review by management as a result of changing market
and economic conditions, and other factors, is to retain all adjustable interest
rate mortgage loans in its portfolio and to keep up to approximately 25% of the
mortgage portfolio in fixed interest rate mortgage loans. The percentage of
fixed mortgage loans held in the loan portfolio was increased from 20% to 25% in
1998 as a result of First Northern's asset and liability position which allowed
for some additional interest rate risk and other investment opportunities in the
market. First Northern estimates that generally not more than 5% of the total
mortgage portfolio will be in 30 year fixed interest rate mortgage loans. This
policy is part of First Northern's asset/liability management strategy.

Mortgage loans made by First Northern generally are long-term loans,
amortized on a monthly basis with principal and interest due each month. First
Northern does not include a prepayment penalty on one-to four-family
owner-occupied mortgage loans. Although the original contractual loan payment
period for mortgage loans normally ranges from 15 to 30 years, First Northern's
experience has been that, because of prepayments in connection with refinancing
and sales of property, mortgage loans typically remain outstanding for a
substantially shorter period. First Northern estimates that the average range of
time mortgage loans are outstanding is approximately six to ten years.

Management of First Northern is committed to managing the maturities of
assets and liabilities. To aid in this , management's policy is to emphasize the
origination of consumer and commercial loans and other loans having short
maturities, such as three to six years, and mortgage loans which are interest
rate adjustable or are eligible for sale in the secondary market. At December
31, 1999, consumer loans (second mortgage, automobile and other consumer loans)
outstanding totaled $194.7 million. Consumer loan originations and purchases for
the year ended December 31, 1999 were $132.7 million, of which $29.4 million or
22.2% were interest rate adjustable. Consumer loan originations and purchases in
1998 were $99.6 million, of which $32.8 million or 32.9% were interest rate
adjustable, and in 1997 originations and purchases were $98.2 million, of which
$29.2 million or 29.7% were interest rate adjustable.

Since February 1985, First Northern has originated mortgage loans using
contracts which contain interest rate adjustment clauses allowing a lifetime
interest rate adjustment of between 5% to 8% over the original contract interest
rate on all residential mortgage loans and subject to annual interest rate
adjustment caps of up to 2%. First Northern's ability to successfully market
such loans depends on, among other things, prevailing interest rates, the
volatility of interest rates and the public's acceptance of adjustable interest
rate mortgage loans. First Northern has generally fixed the interest rate for
the first one, two, three or five years of the loan term. First Northern also
maintains a policy of including a "due on sale" clause in its mortgage loans.
This clause generally gives First Northern the right, subject to certain
restrictions, to declare a loan immediately due and payable in the event, among
other things, that the borrower sells or otherwise disposes of the real property
subject to the mortgage without first either obtaining First Northern's consent
or repaying the loan.

LOAN ORIGINATIONS. First Northern has general authority to lend anywhere in
the United States; however, it has chosen to concentrate its mortgage
origination activities in Northeastern Wisconsin with primary emphasis in the
counties served by its offices. As of December 31, 1999, First Northern had only
93 loans secured by out-of-state properties, representing $4.3 million or 0.8%
of the total dollars in its mortgage loan portfolio. First Northern's mortgage
lending is subject to written, non-discriminatory

FN-47
<PAGE> 220

underwriting guidelines and to loan origination procedures approved annually by
First Northern's Board of Directors. Property appraisals by independent
appraisers, in accordance with First Northern's appraisal policy, are required.
Detailed loan applications are obtained to determine the borrower's ability to
repay, and the more significant items on these applications are verified through
the use of credit reports, financial statements and employment and income
confirmations. Loans are reviewed and approved as directed by the underwriting
guidelines established by the Board of Directors.

At December 31, 1999, First Northern serviced for others $151.4 million of
whole loans and participation interests in mortgage loans. In addition, as of
December 31, 1999, First Northern had approximately $140.2 million of 15, 20 and
30 year fixed interest rate mortgages in its mortgage loan portfolio. See "Loan
Interest Rates and Terms" above. In 1999, 1998 and 1997, First Northern sold
$20.1, $63.2, and $18.7 million, respectively of fixed interest rate mortgage
loans to the secondary market in accordance with First Northern's asset and
liability management policy. First Northern also originates mortgage loans for
the Wisconsin Department of Veterans Affairs ("WDVA") and the Wisconsin Housing
and Economic Development Authority ("WHEDA"), which result in additional
origination fees and servicing income. First Northern does not currently
originate a significant amount of Federal Housing Administration ("FHA") insured
or Veterans Administration ("VA") partially guaranteed loans.

In addition to traditional mortgage lending activities, First Northern has
participated in various state and local special loan programs. Many of these
programs are designed specifically to make home ownership more available to
qualified low/moderate income families. Through the Federal Home Loan Bank
("FHLB") of Chicago's Affordable Housing Program, First Northern has obtained
funding for down payment and closing cost assistance to assist low income
first-time home buyers.

During 1999, First Northern purchased $31.9 million of single-family home
loans, $1.5 million in multi-family loans and $3.5 million in commercial real
estate loans from others. In 1998, First Northern purchased $15.0 million of
single-family home loans, $1.7 million in multi-family loans, and $0.6 million
in commercial real estate loans. In 1997, First Northern purchased $7.8 million
of single-family loans, $3.7 million of multi-family loans, and $1.0 million of
commercial real estate loans.

First Northern requires borrowers to obtain title insurance or abstracts of
title, depending on the type of mortgage product, on first mortgage real estate
loans. Home equity loan borrowers are required to obtain a title search before
and after the loan is originated to assure First Northern that the loan has been
properly recorded and secured. Borrowers also must obtain hazard insurance prior
to closing and, when required by the Department of Housing and Urban
Development, flood insurance. Borrowers may be required to advance funds on a
monthly basis together with each payment of principal and interest to a mortgage
escrow account from which First Northern makes disbursements for items such as
real estate taxes and private mortgage insurance premiums as they become due.
First Northern is required by Wisconsin law to pay interest on mortgage escrow
accounts for loans originated after January 31, 1983 that are secured by one- to
four-family, owner-occupied residences. The interest rate is based on the annual
average of passbook interest rates paid by all Wisconsin financial institutions
(2.74% for 1999). Currently, approximately 84.2% of the escrow dollars are
interest bearing. The interest rate paid on escrow dollars is adjusted annually.
The interest rate to be paid on qualified mortgage escrow dollars in 2000 is
2.51%.

Regulations of the WDFI-Administrator also limit the amount, which First
Northern may lend up to specific percentages of the value of the real property
securing the loan (referred to as "loan-to-value" ratios), as determined by an
appraisal at the time the loan is originated. A loan secured by a first lien
mortgage may not exceed 90% of the appraised value of the real estate security
unless, among other things, the portion exceeding that percentage is insured or
guaranteed by a mortgage insurance company against losses resulting from
borrower default or the loan is guaranteed by a federal or state agency. First
Northern's policy is to not make first mortgage loans in excess of 80% of the
lower of the appraised value or the purchase price unless the excess is insured
by private mortgage insurance or the loan is guaranteed by a federal or state
agency. Real estate loans secured by other than a first lien must also conform
generally to First Northern's policy of limiting loans to 80% of value; however,
First Northern adjusted its policy in 1998 to allow loan amounts to equal 100%
of value. All mortgage loan applications are reviewed

FN-48
<PAGE> 221

by First Northern's corporate underwriting staff to ensure compliance with its
uniform loan underwriting guidelines.

The federal agencies regulating First Northern have also established real
estate lending standards, which, among other things, create loan-to-value ratios
for various real estate loan categories. First Northern's current underwriting
standards, as stated above, conform with these real estate lending standards.

First Northern has been expanding its consumer lending portfolio, which
generally consists of home equity, automobile, boat, recreational vehicles,
credit card and other loans, to obtain higher yields, to serve the needs of its
customers and to aid in the management of interest rate risk. In addition, First
Northern purchases automobile loans from its subsidiary, SFC, which originates
automobile loans on an indirect basis for its parent companies. First Northern
has historically experienced relatively low delinquencies and few losses on
consumer loans.

First Northern added commercial loans to its product line offering the
second quarter of 1999. An experienced commercial loan manager with over 20
years of commercial lending experience was hired to develop the commercial
banking area. In addition to the commercial and industrial loans originated,
First Northern has experienced an increase in commercial real estate lending,
which is reported in the mortgage loan originations as a result of the
commercial loan product line. First Northern anticipates it will continue to
emphasize commercial loan growth.

LOAN PORTFOLIO COMPOSITION. The following table sets forth the composition
of First Northern's loan portfolio (excluding loans held for sale) by type of
collateral at the dates indicated. The table does not reflect loans sold and
serviced for others. First Northern continues to service loans sold to others.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------- ----------------- ----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family
residential............... $465,737 61.35% $416,974 64.36% $393,563 64.74% $376,189 66.72% $352,449 69.08%
Five or more family
residential............... 35,815 4.72 32,013 4.94 24,506 4.03 20,154 3.57 17,591 3.45
Commercial real estate...... 17,699 2.33 7,546 1.16 9,269 1.52 9,975 1.77 10,028 1.97
Construction-residential.... 29,758 3.92 25,467 3.93 19,192 3.16 16,306 2.89 10,782 2.11
Construction-commercial..... 6,910 .91 4,470 0.69 2,156 0.35 1,701 0.30 1,225 0.24
Other....................... 3,769 .49 3,129 0.48 2,226 0.37 1,900 0.34 1,788 0.35
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total mortgage loans........ 559,688 73.72 489,599 75.56 450,912 74.17 426,225 75.59 393,863 77.20
Consumer loans:
Consumer.................... 20,153 2.66 18,416 2.84 18,200 2.99 18,179 3.22 20,307 3.98
Second mortgage............. 78,223 10.30 66,426 10.25 68,596 11.28 59,148 10.49 46,528 9.12
Automobile.................. 96,356 12.69 73,502 11.35 70,276 11.56 60,339 10.70 49,504 9.70
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total consumer loans...... 194,732 25.65 158,344 24.44 157,072 25.83 137,666 24.41 116,339 22.80
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Commercial loans............ 4,771 .63
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Gross total loans......... 759,191 100.00% 647,943 100.00% 607,984 100.00% 563,891 100.00% 510,202 100.00%
====== ====== ====== ====== ======
Less:
Undisbursed loan
proceeds.............. 17,852 11,750 10,290 5,942 6,071
Allowance for losses.... 3,910 3,531 3,177 2,937 2,608
Unearned loan fees...... 549 923 988 1,017 988
-------- -------- -------- -------- --------
Net loans receivable.... $736,880 $631,739 $593,529 $553,995 $500,535
======== ======== ======== ======== ========
</TABLE>

CONTRACTUAL MATURITIES OF LOANS. The following table presents information
as of December 31, 1999 regarding loan maturities and contractual principal
repayments by categories of loans during the periods

FN-49
<PAGE> 222

indicated. Loans with adjustable interest rates are shown as maturing in the
year of their contractual maturity.

<TABLE>
<CAPTION>
PRINCIPAL REPAYMENTS CONTRACTUALLY DUE IN YEAR(S) ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
2003- 2005- 2009- AFTER
2000 2001 2002 2004 2008 2013 2013 TOTAL
---- ---- ---- ----- ----- ----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans:
Mortgage................ $ 3,077 $ 1,684 $ 8,512 $12,455 $37,216 $101,204 $358,872 $523,020
Mortgage
construction(1)....... 5,538 1,070 4,735 6,400 18,925 36,668
Consumer loans.......... 29,203 27,821 26,759 43,486 37,746 25,590 4,127 194,732
Commercial.............. 3,654 5 485 627 4,771
------- ------- ------- ------- ------- -------- -------- --------
Total..................... $41,472 $30,580 $35,756 $61,303 $74,962 $133,194 $381,924 $759,191
======= ======= ======= ======= ======= ======== ======== ========
</TABLE>

-------------------------
(1) First Northern's mortgage construction loans are originated for either the
construction phase or the combined construction and full amortization term
of the loan.

Of the $717.7 million of loans contractually due after December 31, 2000,
approximately $256.2 million have fixed interest rates and approximately $461.5
million have adjustable interest rates.

Contractual maturities of loans do not reflect the actual life of the loan
portfolio. The average life of mortgage loans is substantially less than their
contractual terms because of loan prepayments. The average life of mortgage
loans tends to increase, however, when current mortgage market interest rates
exceed interest rates on existing mortgages and decrease when mortgage interest
rates decline. The average life of consumer loans is affected by the general and
local economy.

FN-50
<PAGE> 223

MORTGAGE AND CONSUMER LOANS. The following table sets forth activity for
First Northern's investment and held-for-sale loan portfolios for the periods
indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mortgage loans originated and
purchased:
Construction -- Residential........ $ 46,226 $ 31,115 $ 25,709 $ 25,695 $ 17,265
Construction -- Commercial......... 1,540 5,930 901 51
Loans on existing property......... 80,051 59,021 51,536 49,017 37,491
Refinancing(1)..................... 62,432 153,614 42,166 35,497 15,130
Other loans........................ 2,739 2,049 2,398 2,668 2,560
--------- --------- --------- --------- ---------
Total mortgage loans originated
and purchased................. 192,988 251,729 121,809 113,778 72,497
Consumer loans originated and
purchased:
Other consumer..................... 10,831 9,912 8,670 7,615 8,773
Second mortgage.................... 47,415 38,747 36,896 32,548 30,474
Automobile......................... 72,264 48,661 50,059 45,722 26,109
Education.......................... 2,143 2,317 2,568 2,382 2,895
--------- --------- --------- --------- ---------
Total consumer loans originated
and purchased................. 132,653 99,637 98,193 88,267 68,251
--------- --------- --------- --------- ---------
Commercial loans originated.......... 5,032
Mortgage loans sold.................. (20,085) (63,180) (18,668) (11,065) (11,583)
Education loans sold................. (2,040) (2,391) (2,491) (3,187) (10,489)
Loan repayments and other credits.... (197,300) (245,836) (154,750) (134,104) (112,140)
--------- --------- --------- --------- ---------
Net increase in real estate loans and
other loans........................ $ 111,248 $ 39,959 $ 44,093 $ 53,689 $ 6,536
========= ========= ========= ========= =========
</TABLE>

-------------------------
(1) Refinanced mortgage loans are stated as gross dollars. Net new refinanced
dollars for the years ended December 31, 1999, 1998, 1997, 1996 and 1995,
were $46.3 million, $95.0 million, $25.7 million, $24.9 million, and $10.8
million, respectively. Net new dollars are the additional dollars that were
disbursed above an existing loan balance for the same borrower and property.

First Northern is permitted to make secured and unsecured consumer loans
including automobile, recreational vehicle, marine and other consumer loans,
home equity, property improvement, manufactured housing, education and deposit
account loans. At December 31, 1999, consumer loans represented 25.7% of total
loans.

LOAN FEE INCOME. A borrower on a one- to four-family owner-occupied
residence may be charged a loan origination fee or a processing fee of up to 1%
of the loan amount, with the actual amount being dependent upon, among other
things, market conditions at the time of origination. These fees are in addition
to appraisal and other third party fees paid by the borrower to First Northern
at the time of application. Loan origination and commitment fees and certain
direct loan origination costs are being deferred and the net amounts amortized
as an adjustment to the related loan's yield. First Northern is amortizing these
amounts using the level-yield method, adjusted for prepayments, over the
contractual life of the related loans. Currently, there are no loan fees charged
on consumer loans.

USURY LIMITATION AND INTEREST RATE ADJUSTMENT PROVISIONS. Any loan secured
by a real estate mortgage and made, refinanced, renewed, extended or modified
after November 1, 1981, is not subject to a maximum interest rate. Consumer
loans of $25,000 or less are generally subject to the Wisconsin Consumer Act
which establishes disclosure requirements for interest rates and finance charges
and, for transactions entered into before November 1, 1984, limits the maximum
finance charges.

FN-51
<PAGE> 224

Mortgage lenders have historically had authority under Wisconsin law to
include interest adjustment clauses in loan contracts. Before June 12, 1976, the
only limit on interest adjustment increases was the general usury ceiling.
However, as of that date, Wisconsin law began to distinguish between two kinds
of interest adjustment clauses in connection with loans on owner-occupied one-to
four- family residential property: (1) those that tie interest adjustments to
fluctuations in an approved index ("indexed" interest adjustment provisions);
and (2) those that do not ("unindexed" interest adjustment provisions). Subject
to certain statutory restrictions, interest adjustments under an unindexed
interest adjustment provision are solely at the option of the lender.

Under Wisconsin law, unindexed adjustable rate provisions contained in
first lien mortgage loans made on one- to four-family owner-occupied dwellings
may: (1) permit rate increases to be made as often as once every 6 months, upon
30 days' written notice, and in increments of up to 1% each; and (2) enable a
lender that has waived a permitted interest rate increase to subsequently
increase the interest rate to the level that would have been in effect had the
opportunity for an increase not been waived.

Mortgages that are subject to indexed interest rate adjustment provisions
are treated in substantially the same way under Wisconsin law. However, instead
of increases or decreases occurring solely at the discretion of the lender,
interest rates may be increased, and must be decreased, in accordance with
changes in the approved index. Unlike its unindexed adjustable rate counterpart,
adjustments made under an indexed adjustable rate provision governed by the 1981
law may be made at intervals more frequent than 6 months.

Borrowers may prepay their loan without penalty during the 30 days
following notice of a rate increase, or at any time after 5 years from the date
of the loan.

First Northern has originated both unindexed and indexed adjustable
interest rate mortgages. With both types of adjustable rate forms, First
Northern has generally fixed the interest rate for the first one, two, three or
five years of the loan term. The unindexed adjustable interest rate loans also
provide for a maximum interest rate adjustment of 1% during each 12 month period
thereafter. The indexed adjustable rate loan provides for a maximum interest
rate adjustment of the lesser of the index or 1% to 2% depending on origination
date of the loan, during each 12 month period. Since February 1985, First
Northern has originated adjustable interest rate mortgage loans using contracts
which contain interest rate adjustment clauses allowing a lifetime interest rate
adjustment of between 5% and 8% over the original contract interest rate on all
residential mortgage loans.

First Northern has been able to exercise its escalation and de-escalation
rights under the interest rate adjustments clauses on its mortgage loan
portfolio. The use of the adjustment clause gives First Northern greater control
over its income and portfolio retention due to its ability to increase or
decrease interest yields on its mortgage portfolio. See "Loan Interest Rates and
Terms" above.

CLASSIFIED ASSETS AND DELINQUENCIES. When a borrower fails to make a
required payment on a loan, First Northern or SFC attempts to have the
deficiency cured by contacting the borrower. Contacts are made after a payment
is more than 30 days past due and, in most cases, deficiencies are cured
promptly. If the delinquency exceeds 90 days and is not cured through First
Northern's normal collection procedures, First Northern will institute measures
to remedy the default, including commencing a foreclosure action or accepting a
voluntary deed of the secured property in lieu of foreclosure from the mortgagor
or repossessing other collateral. If a foreclosure action is instituted and the
loan is not reinstated, paid in full, or refinanced, the property is sold at a
judicial sale at which, in most instances, First Northern is the buyer.

Under Wisconsin law, a mortgagor is afforded a period of time, subsequent
to the entry of judgment and prior to judicial sale, within which to redeem the
equity in the property ("equity right of redemption"). The length of the equity
right of redemption varies depending on the form of foreclosure proceedings
selected by the lender, the type and condition of the real estate security and
other factors. The majority of First Northern's residential foreclosures follow
a form which provides a 6 month equity right of

FN-52
<PAGE> 225

redemption and a waiver of any deficiency judgment against the borrower. Use of
this process takes approximately 8-12 months from commencement of the action to
judicial confirmation of the sale.

The OTS has established a classification system for problem assets. Under
the OTS regulation, problem assets are classified as "substandard," "doubtful,"
or "loss." Assets classified as loss are required to be charged-off. Assets
classified as doubtful or substandard do not require a write-off of the amounts
so classified but may necessitate additions to the general allowance for loan
losses. An institution's determination as to the classification of its assets
and the amount of valuation allowances are subject to review by the District
Director of the OTS or the FDIC, who could order the establishment of additional
loan loss allowances.

The following table identifies the dollar amount of loans that are
classified as substandard, doubtful or loss as of the dates indicated.

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Substandard................................................. $638 441 $578
Doubtful.................................................... 13 6 16
Loss........................................................ 18 14
---- ---- ----
Total Classified Assets..................................... $669 $461 $594
==== ==== ====
</TABLE>

The increase in the amount of total classified assets in 1999 was the
result of an increase in overall delinquencies and the fact that December 31,
1998, total classified assets were very low.

ALLOWANCES FOR LOSSES. Allowances for losses on loans, real estate, and
repossessed assets are based on management's evaluation of various factors
including, but not limited to, general economic conditions, loan portfolio
composition, prior loss experience, estimated sales price of collateral,
regulatory environment and holding and selling costs.

While First Northern has a low level of non-performing assets and low
historical charge-off experience, the inherent credit risk within the portfolio
(primarily relating to the indirect automobile loan portfolio and commercial
loans) has increased. It is this increased credit risk which primarily resulted
in the increase in the loan loss allowance.

Management believes that the allowances for losses on loans, real estate,
and repossessed assets are adequate. While management uses available information
to recognize losses on loans and real estate owned, future additions to the
allowances may be necessary based on changes in economic conditions or
regulatory requirements.

FN-53
<PAGE> 226

All of First Northern's loans are domestic. A summary of the allowance for
loan losses is shown below.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mortgage loans:
Balance, beginning of year........................ $1,813 $1,624 $1,453 $1,578 $1,499
Provisions........................................ 295 186 170 10 79
Charge-offs:
One- to four-family residential................ (1)
Recoveries:
One- to four-family residential................ 4
Commercial real estate......................... 1 1
------ ------ ------ ------ ------
Net recoveries.................................... 3 1 1
------ ------ ------ ------ ------
Transfer of loss reserve.......................... (136)
------ ------ ------ ------ ------
Balance, end of year.............................. 2,108 1,813 1,624 1,453 1,578
Consumer loans:
Balance, beginning of year........................ 1,718 1,553 1,484 1,030 901
Provisions........................................ 53 234 150 360 161
Charge-offs:
Consumer....................................... (79) (47) (44) (23) (30)
Automobile..................................... (43) (52) (57) (43) (41)
------ ------ ------ ------ ------
Total charge-offs......................... (122) (99) (101) (66) (71)
------ ------ ------ ------ ------
Recoveries:
Consumer....................................... 9 7 8 11 21
Automobile..................................... 20 23 12 13 18
------ ------ ------ ------ ------
Total recoveries............................. 29 30 20 24 39
------ ------ ------ ------ ------
Net charge-offs................................... (93) (69) (81) (42) (32)
------ ------ ------ ------ ------
Transfer of loss reserve.......................... 136
------ ------ ------ ------ ------
Balance, end of year.............................. 1,678 1,718 1,553 1,484 1,030
------ ------ ------ ------ ------
Commercial loans:
Balance, beginning of period Provisions, charged
to provision for loan losses................... 124
Charge-offs
Recoveries Net (charge-offs) or recoveries........ -- -- -- -- --
------ ------ ------ ------ ------
Balance, end of year........................... 124
------ ------ ------ ------ ------
Total allowance for loan losses.............. $3,910 $3,531 $3,177 $2,937 $2,608
====== ====== ====== ====== ======
Foreclosed properties & repossessed assets:
Balance, beginning of year..................... $ 6 $ -- $ -- $ 1 $ 1
Provisions, charged to non-interest expense.... 8 10 13
Charge-offs:
One- to four-family residential.............. (14) (4) (14)
------ ------ ------ ------ ------
Balance, end of year........................... $ -- $ 6 $ -- $ -- $ 1
====== ====== ====== ====== ======
Total charge-offs to average loans outstanding...... 0.02% 0.02% 0.02% 0.01% 0.01%
====== ====== ====== ====== ======
Net charge-offs to average loans outstanding........ 0.01% 0.01% 0.01% 0.01% 0.01%
====== ====== ====== ====== ======
</TABLE>

Interest income on loans is accrued and credited to operations based on the
principal amount outstanding. The accrual of interest income is generally
discontinued when a loan becomes 90 days past due as to principal or interest
and/or when, in the opinion of management, full collection is unlikely.

FN-54
<PAGE> 227

When interest accruals are discontinued, uncollected interest credited to income
in the current year is reversed and uncollected interest accrued in the prior
year is charged to the allowance for loan losses. Management may elect to
continue the accrual of interest when the loan is in the process of collection
and the value of collateral is sufficient to cover the principal balance and
accrued interest. Interest received on non-accrual loans generally is either
applied against principal or reported as interest income, according to
management's judgment as to the collectibility of principal. Generally, loans
are restored to accrual status when the obligation is brought current, has
performed in accordance with the contractual terms for a reasonable period of
time and the ultimate collectibility of the total contractual principal and
interest is no longer in doubt.

The following tables show the Company's total allowance for loan losses and
the allocation to the various categories of loans held for investment at the
dates indicated.

<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
------------------------------------
% OF
LOANS IN
ALLOWANCE CATEGORY
AS A % OF TO TOTAL
LOANS IN OUTSTANDING
AMOUNT CATEGORY(1) LOANS(1)
------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Breakdown of allowance
Mortgage loans:
One- to four-family residential........................... $1,566 0.34% 61.35%
Five or more family residential........................... 254 0.71 4.72
Commercial real estate.................................... 241 1.36 2.33
Construction.............................................. 0.00 4.83
Other..................................................... 30 0.80 0.49
Classified mortgage loans................................. 17 3.00
------ ---- ------
Total mortgage loans................................... 2,108 0.38 73.72
Consumer loans:
Consumer.................................................. 239 1.18 2.66
Second mortgage........................................... 657 0.84 10.30
Automobile................................................ 765 0.79 12.69
Education................................................. 0.00
Classified consumer loans................................. 17 2.00
------ ---- ------
Total consumer loans................................... 1,678 0.86 25.65
Commercial loans(2)......................................... 124 2.60 0.63
------ ---- ------
Total allowance for loans................................... $3,910 0.52% 100.00%
====== ==== ======
</TABLE>

-------------------------
(1) Percentages are calculated on gross loan balances.
(2) First Northern began originating commercial loans in the second quarter of
1999.

FN-55
<PAGE> 228

<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
------------------------------------
% OF
LOANS IN
ALLOWANCE CATEGORY
AS A % OF TO TOTAL
LOANS IN OUTSTANDING
AMOUNT CATEGORY(1) LOANS(1)
------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Breakdown of allowance
Mortgage loans:
One- to four-family residential........................... $1,475 0.35% 64.36%
Five or more family residential........................... 150 0.47 4.94
Commercial real estate.................................... 141 1.87 1.16
Construction.............................................. 4.62
Other..................................................... 38 1.21 0.48
Classified mortgage loans................................. 9 3.00
------ ---- ------
Total mortgage loans................................... 1,813 0.37 75.56
Consumer loans:
Consumer.................................................. 96 0.52 2.84
Second mortgage........................................... 269 0.41 10.25
Automobile................................................ 1,340 1.82 11.35
Education................................................. 0.00
Classified consumer loans................................. 13 2.00
------ ---- ------
Total consumer loans................................... 1,718 1.08 24.44
------ ---- ------
Total allowance for loans................................... $3,531 0.54% 100.00%
====== ==== ======
</TABLE>

-------------------------
(1) Percentages are calculated on gross loan balances.

<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
------------------------------------
% OF
LOANS IN
ALLOWANCE CATEGORY
AS A % OF TO TOTAL
LOANS IN OUTSTANDING
AMOUNT CATEGORY(1) LOANS(1)
------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Breakdown of allowance
Mortgage loans:
One- to four-family residential........................... $1,324 0.34% 64.74%
Five or more family residential........................... 135 0.55 4.03
Commercial real estate.................................... 127 1.37 1.52
Construction.............................................. 3.51
Other..................................................... 24 1.08 0.37
Classified mortgage loans................................. 14 3.00
------ ---- ------
Total mortgage loans................................... 1,624 0.36 74.17
Consumer loans:
Consumer.................................................. 85 0.47 2.99
Second mortgage........................................... 250 0.37 11.28
Automobile................................................ 1,213 1.73 11.56
Education................................................. 0.00
Classified consumer loans................................. 5 2.00
------ ---- ------
Total consumer loans................................... 1,553 0.99 25.83
------ ---- ------
Total allowance for loans................................... $3,177 0.52% 100.00%
====== ==== ======
</TABLE>

-------------------------
(1) Percentages are calculated on gross loan balances.

FN-56
<PAGE> 229

<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
------------------------------------
% OF
LOANS IN
ALLOWANCE CATEGORY
AS A % OF TO TOTAL
LOANS IN OUTSTANDING
AMOUNT CATEGORY(1) LOANS(1)
------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Breakdown of allowance
Mortgage loans:
One- to four-family residential........................... $1,180 0.31% 66.72%
Five or more family residential........................... 121 0.60 3.57
Commercial real estate.................................... 114 1.14 1.77
Construction.............................................. 3.19
Other..................................................... 18 0.95 0.34
Classified mortgage loans................................. 20 3.00
------ ---- ------
Total mortgage loans................................... 1,453 0.34 75.59
Consumer loans:
Consumer.................................................. 83 0.46 3.22
Second mortgage........................................... 211 0.36 10.49
Automobile................................................ 1,172 1.94 10.70
Education................................................. 0.00
Classified consumer loans................................. 18 2.00
------ ---- ------
Total consumer loans................................... 1,484 1.08 24.41
------ ---- ------
Total allowance for loans................................... $2,937 0.52% 100.00%
====== ==== ======
</TABLE>

-------------------------
(1) Percentages are calculated on gross loan balances.

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
------------------------------------
% OF
LOANS IN
ALLOWANCE CATEGORY
AS A % OF TO TOTAL
LOANS IN OUTSTANDING
AMOUNT CATEGORY(1) LOANS(1)
------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Breakdown of allowance
Mortgage loans:
One- to four-family residential........................... $1,359 0.39% 69.08%
Five or more family residential........................... 98 0.56 3.45
Commercial real estate.................................... 97 0.97 1.97
Construction.............................................. 2.35
Other..................................................... 16 0.89 0.35
Classified mortgage loans................................. 8 2.05
------ ---- ------
Total mortgage loans................................... 1,578 0.40 77.20
Consumer loans:
Consumer.................................................. 79 0.39 3.98
Second mortgage........................................... 137 0.29 9.12
Automobile................................................ 811 1.64 9.70
Education................................................. 0.00
Classified consumer loans................................. 3 2.00
------ ---- ------
Total consumer loans................................... 1,030 0.89 22.80
------ ---- ------
Total allowance for loans................................... $2,608 0.51% 100.00%
====== ==== ======
</TABLE>

-------------------------
(1) Percentages are calculated on gross loan balances.

FN-57
<PAGE> 230

The following table is a summary of non-performing loans and assets.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accrual mortgage loans (90 days or more
past due)................................. $ 243 $ 223 $ 333 $ 509 $ 266
Non-accrual consumer loans.................. 40 123 107 235 152
--------- --------- ------- ------- -------
Total non-performing loans.................. 283 346 440 744 418
Foreclosed properties, properties subject to
foreclosure and repossessed assets........ 381 106 153 189 136
--------- --------- ------- ------- -------
Total non-performing assets................. $ 664 $ 452 $ 593 $ 933 $ 554
========= ========= ======= ======= =======
Non-performing loans as a percentage of
total loans............................... .04% .05% .07% .13% .08%
========= ========= ======= ======= =======
Non-performing assets as a percentage of
total assets.............................. .08% .06% .09% .15% .10%
========= ========= ======= ======= =======
Loan loss allowances as a percentage of
non-performing loans...................... 1,381.63% 1,020.52% 722.05% 394.76% 623.92%
========= ========= ======= ======= =======
Loan loss allowances as a percentage of
non-performing assets..................... 588.86% 781.19% 535.75% 314.79% 470.76%
========= ========= ======= ======= =======
Interest income that would have been
recognized if non-accrual loans had been
current(1)................................ $ 12 $ 9 $ 13 $ 25 $ 12
========= ========= ======= ======= =======
</TABLE>

-------------------------
(1) No accrued interest income was included in net income in any of the years
presented from loans classified as non-accrual.

In addition, management is not aware of any possible credit problems of
borrowers not otherwise reflected herein which causes management to have serious
doubts as to the ability of such borrowers to comply with their present loan
repayment terms.

INVESTMENT AND MORTGAGE-RELATED ACTIVITIES. First Northern is authorized to
invest in obligations issued or fully guaranteed by the United States, certain
federal agency obligations, certain time deposits, negotiable certificates of
deposit issued by commercial banks, mortgage-backed and mortgage-related
securities, investment grade corporate notes and other specified investments.

FN-58
<PAGE> 231

The following table sets forth the composition of First Northern's
investment and mortgage-related securities portfolio at December 31, 1999, 1998
and 1997.

INVESTMENT AND MORTGAGE-RELATED SECURITIES
PORTFOLIO COMPOSITION AT DECEMBER 31

<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
PERCENT PERCENT PERCENT
CARRYING OF CARRYING OF CARRYING OF
VALUE TOTAL VALUE TOTAL VALUE TOTAL
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning deposits................ $ 4,329 7.93% $ 861 1.86% $ 324 0.81%
Securities available-for-sale:
U.S. government securities............. 3,192 5.85 3,303 7.13 3,290 8.24
Federal agency obligations............. 3,465 6.35 3,822 8.25 2,002 5.01
Mortgage-related securities............ 5,554 10.17 996 2.15 932 2.33
Asset Management Fund.................. 546 1.00 534 1.15 500 1.25
FHLMC stock............................ 1,130 2.07 1,546 3.34 1,007 2.52
Northwest Equities Corporation stock... 111 0.20
------- ------ ------- ------ ------- ------
Total securities
available-for-sale................ 13,998 25.64 10,201 22.02 7,731 19.35
Securities held-to-maturity:
U.S. government securities............. 1,000 2.50
Federal agency obligations............. 25,216 46.19 23,741 51.25 20,231 50.63
Corporate issue obligations............ 999 1.83
Mortgage-related securities............ 10,048 18.41 11,522 24.87 10,675 26.71
------- ------ ------- ------ ------- ------
Total securities held-to-maturity... 36,263 66.43 35,263 76.12 31,906 79.84
------- ------ ------- ------ ------- ------
Total.................................... $54,590 100.00% $46,325 100.00% $39,961 100.00%
======= ====== ======= ====== ======= ======
Average remaining life or term to
repricing for interest-earning
deposits, securities available-
for-sale and held-to-maturity(1)....... 22 months 23 months 18 months
</TABLE>

-------------------------
(1) For purposes of calculating the remaining life or term, securities
available-for-sale are assumed to have a zero term.

See Notes 2 and 3 of the Notes to Consolidated Financial Statements.

FN-59
<PAGE> 232

The following table sets forth the maturity ranges for investment and
mortgage-related securities, with their respective weighted average yields and
the total market value.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
-----------------------------------------------------------------------------------

OVER ONE OVER FIVE
ONE YEAR OR LESS TO FIVE YEARS TO TEN YEARS OVER TEN YEARS
-------------------- -------------------- -------------------- --------------
WEIGHTED WEIGHTED WEIGHTED
AMORTIZED AVERAGE AMORTIZED AVERAGE AMORTIZED AVERAGE AMORTIZED
COST YIELD COST YIELD COST YIELD COST
--------- -------- --------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
Investment and Mortgage-related
Securities
U.S. government obligations..... $2,248 6.48% $ 994 4.69%
Federal agency obligations...... 500 5.70 2,995 6.25
Mortgage-related securities..... $ 938 5.54% $4,817
Asset Management Fund........... 563 5.28
FHLMC stock..................... 33 43.78
Northwest Equities
Corporation stock............. 111 3.06
------ ------- ------- ------ ------ ------ ------
Total investment and
mortgage-related
securities available-
for-sale.................. $2,892 6.64% $ 4,552 5.79% $ 938 5.54% $4,817
====== ======= ======= ====== ====== ====== ======
HELD-TO-MATURITY:
Investment and Mortgage-related
Securities
Federal agency obligations...... $4,700 5.97% $17,900 5.76% $2,616 5.99%
Corporate issue obligations..... 999 6.82
Mortgage-related securities..... 831 5.98 2,986 5.92 $6,231
------ ------- ------- ------ ------ ------ ------
Total investment and
mortgage-related
securities held-to-
maturity.................. $4,700 5.97% $19,730 5.82% $5,602 5.95% $6,231
====== ======= ======= ====== ====== ====== ======

<CAPTION>
AT DECEMBER 31, 1999
-----------------------------------------
INVESTMENT AND
OVER TEN MORTGAGE-RELATED
YEARS SECURITIES TOTAL
-------- ------------------------------
WEIGHTED APPROX. WEIGHTED
AVERAGE AMORTIZED MARKET AVERAGE
YIELD COST VALUE YIELD
-------- --------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
Investment and Mortgage-related
Securities
U.S. government obligations..... $ 3,242 $ 3,192 5.93%
Federal agency obligations...... 3,495 3,465 6.17
Mortgage-related securities..... 6.81% 5,755 5,554 6.61
Asset Management Fund........... 563 546 5.28
FHLMC stock..................... 33 1,130 43.78
Northwest Equities
Corporation stock............. 111 111 3.06
---- ------- ------- -----
Total investment and
mortgage-related
securities available-
for-sale.................. 6.81% $13,199 $13,998 6.33%
==== ======= ======= =====
HELD-TO-MATURITY:
Investment and Mortgage-related
Securities
Federal agency obligations...... $25,216 $24,645 5.82%
Corporate issue obligations..... 999 999 6.82
Mortgage-related securities..... 6.21% 10,048 9,976 6.10
---- ------- ------- -----
Total investment and
mortgage-related
securities held-to-
maturity.................. 6.21% $36,263 $35,620 5.93%
==== ======= ======= =====
</TABLE>

The following table sets forth the composition of First Northern's
mortgage-related held-to-maturity securities portfolio at December 31, 1999,
1998 and 1997.

<TABLE>
<CAPTION>
MORTGAGE-RELATED PORTFOLIO COMPOSITION
AT DECEMBER 31,
-----------------------------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal Home Loan Mortgage Corporation...................... $ 6,192 $ 7,347 $ 7,028
Federal National Mortgage Association....................... 3,856 4,175 3,647
----------- ----------- -----------
Total mortgage-related securities......................... $ 10,048 $ 11,522 $ 10,675
=========== =========== ===========
Average remaining contractual life or term to repricing for
mortgage-related securities(1)............................ 166 months 150 months 139 months
</TABLE>

-------------------------
(1) The expected maturities for mortgage-related securities will differ from
contractual maturities because borrowers may have the right to call or
prepay mortgage obligations with or without prepayment penalties.

DEPOSIT ACTIVITIES. First Northern has a number of different programs
designed to attract both short-term and long-term deposits from the general
public. These programs include regular passbook accounts, NOW checking accounts,
money market deposit accounts, fixed rate and variable rate certificate accounts
and negotiated rate certificates, as well as certain other accounts. Included
among those programs are individual retirement accounts ("IRAs") and
self-employed pension plan ("SEPP") accounts.

FN-60
<PAGE> 233

The specific programs offered by First Northern have changed over time as
new types of accounts and minimum denomination requirements have been
authorized. Currently there are no statutory or regulatory required minimum
denominations or interest rate ceilings on any deposit accounts. First Northern
currently offers deposit accounts with minimum balance requirements and interest
rates as follows:

<TABLE>
<CAPTION>
MINIMUM
TYPE OR TERM BALANCE INTEREST RATE
------------ ------- -------------
<S> <C> <C>
NOW Checking Accounts(1).................................... Varies Rate Set Weekly
Regular Deposit Accounts(2)................................. $100 Rate Set Weekly
Money Market Accounts....................................... $2,500 Rate Set Weekly
Daily Advantage Money Market Account........................ $10,000 Rate Set Weekly
High Five Passbook.......................................... $5,000 Rate Set Weekly
91 Day through 60 Month Certificate......................... $500 Rate Set Weekly
18 month IRA and SEPP Variable Certificates................. $100 Rate Set Monthly
Jumbo Certificates.......................................... $90,000 Rate Set Daily
</TABLE>

-------------------------
(1) Some of the NOW Checking Accounts offered by First Northern do not bear
interest.

(2) As a practical matter, although subject to First Northern's right to impose
a prior notice requirement, deposits may be invested in and withdrawn from
passbook accounts without restriction. Interest is computed daily from the
date of deposit to the date of withdrawal and credited quarterly at a rate
established by the Investment Committee of management within regulatory
limits.

FN-61
<PAGE> 234

The following tables set forth the distribution of the average balances of
the Company's deposit accounts and the weighted average effective interest rates
on each category of deposits presented for the years indicated.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999
---------------------------------------
WEIGHTED
PERCENT AVERAGE
AVERAGE OF TOTAL EFFECTIVE
BALANCE DEPOSITS RATE
------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CORE DEPOSITS:
Non-interest bearing NOW checking....................... $ 26,005 4.70%
Interest bearing NOW checking........................... 38,348 6.93 1.11%
Money market............................................ 68,276 12.34 3.89
Passbook................................................ 70,425 12.72 1.97
-------- ------ ----
Total core deposits.................................. 203,054 36.69 2.20
Certificate of deposit accounts........................... 350,423 63.31 5.45
-------- ------ ----
Total deposits............................................ $553,477 100.00% 4.26%
======== ====== ====
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------
WEIGHTED
PERCENT AVERAGE
AVERAGE OF TOTAL EFFECTIVE
BALANCE DEPOSITS RATE
------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CORE DEPOSITS:
Non-interest bearing NOW checking....................... $ 22,899 4.50%
Interest bearing NOW checking........................... 37,232 7.31 1.06%
Money market............................................ 57,813 11.35 4.38
Passbook................................................ 63,643 12.50 2.14
-------- ------ ----
Total core deposits.................................. 181,587 35.66 2.04
Certificate of deposit accounts........................... 327,674 64.34 5.79
-------- ------ ----
Total deposits............................................ $509,261 100.00% 4.57%
======== ====== ====
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
---------------------------------------
WEIGHTED
PERCENT AVERAGE
AVERAGE OF TOTAL EFFECTIVE
BALANCE DEPOSITS RATE
------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CORE DEPOSITS:
Non-interest bearing NOW checking....................... $ 19,364 4.10%
Interest bearing NOW checking........................... 35,036 7.42 1.06%
Money market............................................ 50,265 10.65 4.31
Passbook................................................ 60,057 12.72 2.20
-------- ------ ----
Total core deposits.................................. 164,722 34.89 2.25
Certificate of deposit accounts........................... 307,423 65.11 5.72
-------- ------ ----
Total deposits............................................ $472,145 100.00% 4.54%
======== ====== ====
</TABLE>

FN-62
<PAGE> 235

The following table presents certificates of deposits in amounts of
$100,000 or more by maturity:

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1999 1998
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Maturity:
3 months or less.......................................... $30,820 $17,619
Greater than 3 months -- 6 months......................... 10,186 7,350
Greater than 6 months -- 12 months........................ 9,843 10,499
Greater than 12 months.................................... 10,785 10,225
------- -------
$61,634 $45,693
======= =======
</TABLE>

BORROWED FUNDS. First Northern has a line of credit with the FHLB of
Chicago and has borrowed from the FHLB on an overnight and fixed interest rate
basis to assist with funding loan originations.

From time to time, First Northern borrows funds under repurchase
agreements. First Northern accepts funds from municipalities and school
districts. When the amounts of such funds are in excess of FDIC insurance
limits, First Northern collateralizes its obligation to repay such parties
through repurchase agreements. Repurchase agreements are used to lock-in a
profit spread to First Northern. Furthermore, because the repurchase agreements
from municipalities and school districts are not considered deposits, First
Northern does not pay premiums to the FDIC on such amounts. At December 31, 1999
and 1998, First Northern had no borrowings under repurchase agreements as
compared to $0.9 million of borrowings under repurchase agreements at December
31, 1997. The weighted average interest rate of the repurchase agreements as of
December 31, 1997 was 5.79%. See Note 7 of the Notes to Consolidated Financial
Statements.

FN-63
<PAGE> 236

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

<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance outstanding at end of year:
Securities sold under agreement to repurchase............ $ 900
Fixed interest rate notes payable to FHLB................ $113,804 $83,825 75,075
Overnight borrowings from FHLB........................... 68,595 7,675 26,065
Other borrowings......................................... 3,500 477 1,237
Weighted average interest rate at end of year:
Securities sold under agreements to repurchase........... 5.79%
Fixed interest rate notes payable to FHLB................ 5.80% 5.71% 5.85%
Overnight borrowings from FHLB........................... 4.74% 5.13% 6.92%
Other borrowings......................................... 4.54% 4.12% 5.27%
Maximum amount outstanding during the year:
Securities sold under agreements to repurchase........... $ 900 $ 1,500
Fixed interest rate notes payable to FHLB................ $123,846 97,750 75,525
Overnight borrowings from FHLB........................... 68,595 37,220 33,400
Other borrowings......................................... 3,500 3,500 1,312
Average amount outstanding during the year:
Securities sold under agreements to repurchase........... $ 650 $ 1,217
Fixed interest rate notes payable to FHLB................ $ 95,338 84,339 65,830
Overnight borrowings from FHLB........................... 27,798 9,982 15,264
Other borrowings......................................... 1,050 919 314
Weighted average interest rate during the year:
Securities sold under agreements to repurchase........... 5.79% 5.65%
Fixed interest rate notes payable to FHLB................ 5.71% 5.83% 5.97%
Overnight borrowings from FHLB........................... 5.45% 5.79% 5.80%
Other borrowings......................................... 4.74% 5.21% 5.49%
</TABLE>

Borrowings increased to $185.9 million at December 31, 1999, as compared to
$92.0 million at December 31, 1998, primarily as a result of the loan portfolio
growth, decreased loan sales and modest deposit growth. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

YIELDS EARNED AND RATES PAID. First Northern's net earnings depend
primarily upon the spread between the income it receives from its loan and
investment portfolios and its cost of money, consisting of interest paid on
deposit accounts and borrowings.

The following table sets forth First Northern's weighted average yields
earned on mortgage loans, consumer loans, and investment and mortgage-related
securities; the weighted average interest rates paid on deposits and borrowings;
and the spread between yields earned and rates paid at the dates indicated.

FN-64
<PAGE> 237

Since the majority of First Northern's deposit accounts are market rate
accounts, the cost of deposits will likely continue to be subject to interest
rate fluctuations.

<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Weighted average yield earned:
Mortgage loans............................................ 6.93% 7.03% 7.34% 7.16% 7.06%
Consumer loans............................................ 7.93 8.32 8.56 8.56 8.66
Commercial loans.......................................... 8.25
Mortgage, consumer and commercial loans................ 7.22 7.35 7.66 7.51 7.44
Investment securities..................................... 6.13 5.92 6.41 6.14 6.33
Mortgage-related securities............................... 6.29 6.06 6.37 6.44 7.02
Total loan portfolio, investment securities, and
mortgage-related securities.......................... 7.14 7.25 7.57 7.43 7.39
Weighted average rate paid:
Deposits.................................................. 4.33 4.35 4.61 4.42 4.56
FHLB and other borrowings(1).............................. 5.76 5.66 5.87 5.71 6.02
Total deposits and FHLB and other borrowings........... 4.68 4.54 4.83 4.60 4.63
Interest rate spread at the end of the year................. 2.46 2.71 2.74 2.83 2.76
</TABLE>

-------------------------
(1) At December 31, 1999, 1998, 1997 and 1996, overnight borrowing interest
rates were unusually high or low and, for the purpose of this report, First
Northern used an average of the overnight borrowing interest rates from the
preceding week to more accurately reflect the cost at December 31 of the
respective years.

The following table shows average yields earned and rates paid using daily
averages during the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average yield earned during the year:
Mortgage loans............................................ 7.03% 7.33% 7.37% 7.18% 6.99%
Consumer loans............................................ 7.87 8.26 8.43 8.50 8.44
Commercial loans.......................................... 8.58
Investment securities(1).................................. 5.97 6.10 6.31 6.23 6.47
Mortgage-related securities............................... 6.12 6.22 6.36 6.50 7.06
All interest-earning assets............................ 7.17 7.47 7.55 7.42 7.28
Average rate paid during the year:
Deposits.................................................. 4.23 4.54 4.51 4.43 4.42
Borrowings................................................ 5.61 5.82 5.94 5.78 6.79
All interest-bearing liabilities....................... 4.48 4.74 4.72 4.56 4.59
Average interest rate spread(2)............................. 2.69 2.73 2.83 2.86 2.69
Net yield on average interest-earning assets(3)............. 3.00 3.11 3.26 3.31 3.17
Net yield on total interest-earning assets(4)............... 2.75 3.02 3.14 3.14 3.17
</TABLE>

-------------------------
(1) Includes interest-earning deposits.

(2) Average yield on all interest-earning assets during the period less average
rate paid on all interest-bearing liabilities.

(3) Net interest earned divided by average interest-earning assets for the year.

(4) Net interest earned divided by total interest-earning assets for the year.

FN-65
<PAGE> 238

AVERAGE BALANCE SHEET AND RATE/YIELD ANALYSIS. "See Management's Discussion
and Analysis of Financial Condition and Results of Operations."

AVERAGE EQUITY TO AVERAGE ASSETS. The ratio of average equity to average
assets measures a financial institution's financial strength. At December 31,
1999, savings and loan associations in Wisconsin were required to maintain an
average equity to average assets ratio of at least 6.00%. At December 31, 1999,
1998, 1997, 1996 and 1995 the Savings Bank's average equity to average assets
ratio was 9.99%, 10.83%, 11.24%, 12.14%, and 12.99%, respectively.

CASH DIVIDENDS. The following schedule sets forth the cash dividends paid
per year:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash Dividends Paid Per Share......................... $0.40 $0.36 $0.32 $ 0.30 $0.28
===== ===== ===== ======== =====
Cash Dividends Payout Ratio........................... 47.1% 46.8% 47.1% 81.1%(1) 54.9%
===== ===== ===== ======== =====
(dividends declared per share divided by basic net
income per share)
</TABLE>

-------------------------
(1) The Cash Dividends Payout Ratio was significantly increased in 1996 as a
result of the SAIF special assessment, which significantly reduced net
income per share. Without the SAIF special assessment, the Cash Dividend
Payout Ratio would have been 55.0%.

SUBSIDIARIES. GNFSC, a wholly owned subsidiary of the Savings Bank, engages
in the sale of credit life and disability insurance, and offers brokerage
services to the public, including the sale of tax deferred annuities and mutual
funds. First Northern's investment in GNFSC as of December 31, 1999 was
$391,000.

FNII, a wholly owned Savings Bank subsidiary, was established September 2,
1994 for the purpose of managing a majority of First Northern's investment
portfolio. In April 1998, FNII began to purchase loans originated by SFC and the
Savings Bank moved its indirect auto loan portfolio to FNII. In March 1999, the
Savings Bank sold a $56.1 million mortgage loan participation to FNII. FNII
managed approximately $32.4 million of investments, $51.3 million of mortgage
loans and $75.3 million of indirect auto loans at December 31, 1999. First
Northern's investment in FNII as of December 31, 1999 was $161,858,000.

In March 1992, the Savings Bank acquired a 50% stock interest in SFC from
another financial institution. SFC originates, sells, and services indirect
automobile loans. As a result of this acquisition, SFC will on a regular basis,
sell such loans to First Northern or FNII but retain the servicing of the loans.
In April 1998, SFC began selling such loans to FNII but retains the servicing of
the loans. First Northern's investment in SFC as of December 31, 1999 was
$40,000.

Keystone Financial Services, Inc. ("Keystone"), a wholly owned subsidiary
of the Savings Bank, also engaged in the sale of credit life and disability
insurance and tax deferred annuities and offered discount brokerage services for
Prime Federal prior to the merger with and into First Northern. After the
merger, First Northern transferred such business to GNFSC. Keystone is inactive,
but will continue to be a wholly owned subsidiary of the Savings Bank for
possible future use in a related or other area. First Northern's investment in
Keystone as of December 31, 1999 was $100.

Another wholly owned subsidiary of the Savings Bank, First Northern
Financial Services, Inc., operated as a consumer lending subsidiary through
1981. As a result of legislative changes, First Northern now directly engages in
consumer lending activities. First Northern Financial Services, Inc. is
inactive, but it continues in existence for possible future use in a related or
other area. First Northern's book value investment in First Northern Financial
Services, Inc. as of December 31, 1999 was $100.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") imposes restrictions on savings associations' powers. It essentially
creates parallel regulation for state and federally chartered savings
associations and prevents state associations, such as the Savings Bank, from
exercising

FN-66
<PAGE> 239

powers not authorized to federal associations or which the FDIC deems to
constitute a serious risk to the safety, soundness or stability of an insured
institution and/or the SAIF or to be inconsistent with sound banking principles.
The FDIC has informed First Northern that the certain activities that GNFSC is
performing are permissible for a federally chartered savings association but not
a national bank. Therefore, First Northern is required to deduct its investment
and loans to GNFSC when calculating its core, tangible and risked-based capital
ratios.

FN-67
<PAGE> 240

Excerpts from Quarterly Report on Form 10-Q for the Quarter ended June 30, 2000

FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash........................................................ $ 10,735 $ 8,043
Interest-earning deposits................................... 499 4,329
-------- --------
Cash and cash equivalents......................... 11,234 12,372
Securities available-for-sale, at fair value
Investment securities..................................... 10,941 8,444
Mortgage-related securities............................... 5,304 5,554
Securities held-to-maturity
Investment securities (estimated fair value of
$26,440 -- 2000; $25,644 -- 1999)...................... 26,920 26,215
Mortgage-related securities (estimated fair value of
$9,442 -- 2000; $9,976 -- 1999)........................ 9,515 10,048
Loans held for sale......................................... 2,083 1,085
Loans receivable............................................ 795,094 736,880
Accrued interest receivable................................. 4,852 4,229
Foreclosed properties and repossessed assets................ 456 382
Office properties and equipment............................. 8,092 7,463
Federal Home Loan Bank stock................................ 12,500 9,250
Life insurance policies..................................... 14,076 13,548
Prepaid expense and other assets............................ 3,808 4,153
-------- --------
$904,875 $839,623
======== ========

LIABILITIES
Deposits.................................................... $568,625 $566,908
Borrowings.................................................. 247,353 185,899
Advance payments by borrowers for taxes and insurance....... 7,402 3,887
Other liabilities........................................... 5,891 6,134
-------- --------
Total liabilities................................. 829,271 762,828
Commitments and Contingencies (See Note 8)
STOCKHOLDERS' EQUITY
Cumulative preferred stock, $1 par value; 10,000,000 shares
authorized; none outstanding..............................
Common stock, $1 par value; 30,000,000 shares authorized;
shares issued: 9,134,735 -- 2000 and 1999 shares
outstanding: 8,375,808 -- 2000; 8,548,658 -- 1999......... 9,135 9,135
Additional paid-in capital.................................. 8,528 8,780
Retained earnings........................................... 65,971 64,468
Accumulated other comprehensive income...................... 381 479
Treasury stock at cost (758,927 shares -- 2000; 586,077
shares -- 1999)........................................... (8,411) (6,067)
-------- --------
Total stockholders' equity........................ 75,604 76,795
-------- --------
$904,875 $839,623
======== ========
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.

FN-68
<PAGE> 241

FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------
2000 1999
------- -------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Interest and dividend income:
Loans..................................................... $14,459 $11,944
Investment securities..................................... 731 559
Interest-earning deposits................................. 21 23
Mortgage-related securities............................... 244 210
------- -------
Total interest and dividend income................ 15,455 12,736
Interest expense:
Deposits.................................................. 6,443 5,776
Borrowings................................................ 3,560 1,389
Advance payments by borrowers for taxes and insurance..... 31 30
------- -------
Total interest expense............................ 10,034 7,195
------- -------
Net interest income............................... 5,421 5,541
Provision for loan losses................................... 165 114
------- -------
Net interest income after provision for loan
losses.......................................... 5,256 5,427
Non-interest income:
Fees on serviced loans.................................... 50 45
Loan fees and service charges............................. 66 64
Deposit account service charges........................... 409 336
Insurance commissions..................................... 87 101
Gain on sale of security.................................. 10 --
Gains on sales of loans................................... 43 140
Other..................................................... 431 347
------- -------
Total non-interest income......................... 1,096 1,033
Non-interest expense:
Compensation, payroll taxes and other employee benefits... 2,067 1,964
Federal insurance premiums................................ 29 79
Occupancy................................................. 308 209
Data processing........................................... 409 399
Furniture and equipment................................... 130 97
Telephone and postage..................................... 99 100
Marketing................................................. 162 99
Other..................................................... 654 721
------- -------
Total non-interest expense........................ 3,858 3,668
Income before income taxes........................ 2,494 2,792
Income taxes................................................ 774 917
------- -------
Net income........................................ $ 1,720 $ 1,875
======= =======
Basic net income per share........................ $ 0.20 $ 0.21
======= =======
Diluted net income per share...................... $ 0.20 $ 0.21
======= =======
Cash dividends paid per share..................... $ 0.11 $ 0.10
======= =======
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.

FN-69
<PAGE> 242

FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
2000 1999
------- -------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Interest and dividend income:
Loans..................................................... $28,104 $23,678
Investment securities..................................... 1,409 1,104
Interest-earning deposits................................. 40 41
Mortgage-related securities............................... 498 395
------- -------
Total interest and dividend income................ 30,051 25,218
Interest expense:
Deposits.................................................. 12,602 11,506
Borrowings................................................ 6,541 2,787
Advance payments by borrowers for taxes and insurance..... 43 42
------- -------
Total interest expense............................ 19,186 14,335
------- -------
Net interest income............................... 10,865 10,883
Provision for loan losses................................... 330 174
------- -------
Net interest income after provision for loan
losses.......................................... 10,535 10,709
Non-interest income:
Fees on serviced loans.................................... 105 81
Loan fees and service charges............................. 124 117
Deposit account service charges........................... 799 652
Insurance commissions..................................... 198 161
Gain on sale of security.................................. 10 --
Gains on sales of loans................................... 54 308
Other..................................................... 814 634
------- -------
Total non-interest income......................... 2,104 1,953
Non-interest expense:
Compensation, payroll taxes and other employee benefits... 4,180 3,818
Federal insurance premiums................................ 59 160
Occupancy................................................. 608 450
Data processing........................................... 812 790
Furniture and equipment................................... 242 200
Telephone and postage..................................... 217 221
Marketing................................................. 267 214
Other..................................................... 1,309 1,303
------- -------
Total non-interest expense........................ 7,694 7,156
Income before income taxes........................ 4,945 5,506
Income taxes................................................ 1,569 1,840
------- -------
Net income........................................ $ 3,376 $ 3,666
======= =======
Basic net income per share........................ $ 0.40 $ 0.42
======= =======
Diluted net income per share...................... $ 0.39 $ 0.41
======= =======
Cash dividends paid per share..................... $ 0.22 $ 0.20
======= =======
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.

FN-70
<PAGE> 243

FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER-
COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE
STOCK CAPITAL EARNINGS STOCK INCOME TOTAL
------ ---------- -------- -------- ------------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JUNE 30,
2000
Balance at January 1, 2000....... $9,135 $8,780 $64,468 $(6,067) $ 479 $76,795
Comprehensive income:
Net income.................. 3,376 3,376
Other comprehensive
losses.................... (98) (98)
-------
Total comprehensive
income.................... 3,278
Cash dividends ($.11 per
share)...................... (1,873) (1,873)
Purchase of treasury stock..... (2,749) (2,749)
Exercise of stock options...... (252) 405 153
------ ------ ------- ------- ----- -------
Balance at June 30, 2000......... $9,135 $8,528 $65,971 $(8,411) $ 381 $75,604
====== ====== ======= ======= ===== =======
FOR THE SIX MONTHS ENDED JUNE 30,
1999
Balance at January 1, 1999....... $9,135 $9,126 $60,582 $(3,710) $ 960 $76,093
Comprehensive income:
Net income.................. 3,666 3,666
Other comprehensive
losses.................... (234) (234)
-------
Total comprehensive
income.................... 3,432
Cash dividends ($.10 per
share)...................... (1,755) (1,755)
Purchase of treasury stock..... (1,151) (1,151)
Exercise of stock options...... (291) 495 204
------ ------ ------- ------- ----- -------
Balance at June 30, 1999......... $9,135 $8,835 $62,493 $(4,366) $ 726 $76,823
====== ====== ======= ======= ===== =======
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.

FN-71
<PAGE> 244

FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 3,376 $ 3,666
Adjustments to reconcile net income to cash provided by
operating activities:
Provision for losses on loans.......................... 330 174
Provision for depreciation and amortization............ 444 424
Gains on sales of loans................................ (54) (308)
Gain on sale of security............................... (10) --
Loans originated for sale.............................. (3,601) (15,767)
Proceeds from loan sales............................... 2,657 18,686
Increase in interest receivable........................ (623) (221)
Increase in interest payable........................... 747 23
Increase in other assets............................... (24) (936)
Decrease in other liabilities.......................... (777) (236)
-------- --------
Net cash provided by operating activities......... 2,465 5,505
Cash flows from investing activities:
Proceeds from maturities of available-for-sale investment
securities............................................. 1,750 1,000
Proceeds from maturities of held-to-maturity investment
securities............................................. 1,996 7,057
Purchases of available-for-sale investment securities..... (4,510) (495)
Purchases of held-to-maturity investment securities....... (2,679) (9,467)
Principal payments on available-for-sale mortgage-related
securities............................................. 111 177
Principal payments on held-to-maturity mortgage-related
securities............................................. 1,688 1,096
Purchase of available-for-sale mortgage-related
securities............................................. -- (2,982)
Purchases of held-to-maturity mortgage-related
securities............................................. (991) (1,491)
Proceeds from the sale of securities...................... 121 --
Net increase in loans receivable.......................... (58,672) (38,323)
Purchases of office properties and equipment.............. (1,073) (266)
Purchase of Federal Home Loan Bank stock.................. (3,250) (500)
-------- --------
Net cash used by investing activities............. (65,509) (44,194)
Cash flows from financing activities:
Net increase in deposits.................................. 1,431 8,766
Net increase in short-term borrowings..................... 7,315 19,188
Proceeds from long-term borrowings........................ 95,020 20,195
Repayments of long-term borrowings........................ (40,881) (13,202)
Cash dividend paid........................................ (1,873) (1,755)
Purchase of treasury stock................................ (2,749) (1,151)
Proceeds from exercise of stock options................... 128 204
Net increase in advance payments by borrowers for taxes
and insurance.......................................... 3,515 3,483
-------- --------
Net cash provided by financing activities......... 61,906 35,728
Decrease in cash and cash equivalents............. (1,138) (2,961)
Cash and cash equivalents at beginning of period............ 12,372 7,211
-------- --------
Cash and cash equivalents at end of period........ $ 11,234 $ 4,250
======== ========
Supplemental Information to the Statement of Cash Flows:
Interest on deposits...................................... $ 12,315 $ 11,468
Interest on borrowings.................................... 6,080 2,726
Income taxes.............................................. 2,729 1,970
Loans transferred to foreclosed properties and repossessed
assets................................................. 186 143
</TABLE>

See Notes to Unaudited Consolidated Financial Statements.

FN-72
<PAGE> 245

FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

GENERAL

1. The consolidated financial statements include the accounts of First
Northern Capital Corp. ("First Northern" or the "Company") and its wholly-owned
subsidiary First Northern Savings Bank, S.A. and its subsidiaries (collectively,
the "Savings Bank"): Great Northern Financial Services Corporation ("GNFSC"),
First Northern Investments Incorporated ("FNII"), Keystone Financial Services,
Incorporated ("Keystone") and First Northern Financial Services, Incorporated.
All significant intercompany balances and transactions have been eliminated
according to generally accepted accounting principles. The Savings Bank's
ownership of Savings Financial Corporation ("SFC"), a 50% owned subsidiary, is
accounted for by the equity method.

2. The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and Rule 10-01 of Regulation S-X. The financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial information. In the opinion of
First Northern, the accompanying Unaudited Consolidated Statements of Financial
Condition, Unaudited Consolidated Statements of Income, Unaudited Consolidated
Statement of Stockholders' Equity and Unaudited Consolidated Statements of Cash
Flows contain all adjustments, which are of a normal recurring nature, necessary
to present fairly the consolidated financial position of the Company and
subsidiaries at June 30, 2000 and December 31, 1999, the results of their income
for the three and six months ended June 30, 2000 and 1999, the changes in
stockholders' equity for the six months ended June 30, 2000 and 1999, and their
cash flows for the six months ended June 30, 2000 and 1999. The accompanying
Unaudited Consolidated Financial Statements and related notes should be read in
conjunction with First Northern's 1999 Annual Report on Form 10-K. Operating
results for the three and six months ended June 30, 2000, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.

FN-73
<PAGE> 246
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. Securities Available-for-Sale

The amortized cost and estimated fair values of securities
available-for-sale are as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
At June 30, 2000:
Investment securities:
U.S. government and agency securities............ $ 9,506 $ 26 $(124) $ 9,408
Asset Management Funds........................... 579 (18) 561
Federal Home Loan Mortgage Corporation stock..... 33 939 -- 972
------- ------ ----- -------
10,118 965 (142) 10,941
------- ------ ----- -------
Mortgage-related securities:
Federal Home Loan Mortgage Corporation........... 1,875 (97) 1,778
Federal National Mortgage Association............ 1,708 1,708
Government National Mortgage Association......... 1,907 (89) 1,818
------- ------ ----- -------
5,490 (186) 5,304
------- ------ ----- -------
$15,608 $ 965 $(328) $16,245
======= ====== ===== =======
At December 31, 1999:
Investment securities:
U.S. government and agency securities............ $ 6,737 $ 6 $ (86) $ 6,657
Asset Management Funds........................... 563 (17) 546
Federal Home Loan Mortgage Corporation stock..... 33 1,097 1,130
Northwest Equities Corporation stock............. 111 111
------- ------ ----- -------
7,444 1,103 (103) 8,444
------- ------ ----- -------
Mortgage-related securities:
Federal Home Loan Mortgage Corporation........... 1,938 (92) 1,846
Federal National Mortgage Association............ 1,862 1,862
Government National Mortgage Association......... 1,955 (109) 1,846
------- ------ ----- -------
5,755 (201) 5,554
------- ------ ----- -------
$13,199 $1,103 $(304) $13,998
======= ====== ===== =======
</TABLE>

At June 30, 2000, the U.S. government and agency securities
available-for-sale have the following maturities:

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $ 999 $1,000
Due after one year through 5 years.......................... 8,507 8,408
------ ------
$9,506 $9,408
====== ======
</TABLE>

Expected maturities from mortgage-related securities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.

FN-74
<PAGE> 247
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. Securities Held-to-Maturity

The amortized cost and estimated fair values of mortgage-related securities
held-to-maturity are as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
At June 30, 2000:
Investment securities:
U.S. government and agency securities............ $25,921 $(480) $25,441
Corporate Bonds.................................. 999 -- -- 999
------- --- ----- -------
Total investment securities.............. 26,920 -- (480) 26,440
------- --- ----- -------
Mortgage-related securities:
Federal Home Loan Mortgage Corporation........... 6,419 $10 (58) 6,371
Federal National Mortgage Association............ 3,096 -- (25) 3,071
------- --- ----- -------
Total mortgage-related securities........ 9,515 10 (83) 9,442
------- --- ----- -------
Total investment securities and
mortgage-related securities............ $36,435 $10 $(563) $35,882
======= === ===== =======
At December 31, 1999:
Investment securities:
U.S. government and agency securities............ $25,216 $(571) $24,645
Corporate bond................................... 999 -- -- 999
------- --- ----- -------
Total investment securities.............. 26,215 -- (571) 25,644
------- --- ----- -------
Mortgage-related securities:
Federal Home Loan Mortgage Corporation........... 6,192 $15 (60) 6,147
Federal National Mortgage Association............ 3,856 1 (28) 3,829
------- --- ----- -------
Total mortgage-related securities........ 10,048 16 (88) 9,976
------- --- ----- -------
Total investment securities and
mortgage-related securities............ $36,263 $16 $(659) $35,620
======= === ===== =======
</TABLE>

At June 30, 2000, the investment securities have the following maturities:

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $ 6,001 $ 5,977
Due after one year through 5 years.......................... 18,623 18,224
Due after 5 years through 10 years.......................... 2,296 2,239
------- -------
$26,920 $26,440
======= =======
</TABLE>

FN-75
<PAGE> 248
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. Loans Receivable

The composition of loans follows:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
First mortgage loans:
One to four family residential............................ $489,180 $465,737
Five or more family residential........................... 37,843 35,815
Commercial real estate.................................... 22,727 17,699
Construction-residential.................................. 36,326 29,758
Construction-commercial................................... 6,769 6,910
Other..................................................... 3,909 3,769
-------- --------
596,754 559,688
Consumer loans:
Consumer.................................................. 23,207 20,153
First mortgage............................................ 88,472 78,223
Automobile................................................ 98,326 96,356
-------- --------
210,005 194,732
Commercial loans............................................ 10,661 4,771
-------- --------
817,420 759,191
Less:
Undisbursed loan proceeds................................. 17,667 17,852
Allowance for losses...................................... 4,218 3,910
Unearned loan fees........................................ 441 549
-------- --------
22,326 22,311
-------- --------
$795,094 $736,880
======== ========
</TABLE>

6. The weighted average number of shares outstanding, including common
stock equivalents, for the three months ended June 30, 2000 and 1999 were
8,657,170 and 8,901,033, respectively and for the six months ended June 30, 2000
and 1999 there were 8,685,923 and 8,943,369, respectively.

7. Certain amounts in the 1999 financial statements have been reclassified
to conform to the 2000 presentations.

8. Off-balance sheet financial instruments whose contract amounts represent
credit and/or interest rate risk at June 30, 2000 are as follows:

<TABLE>
<S> <C>
Commitment to extend credit:
Fixed rate (8.50% to 8.625%)............................ $ 622
Adjustable rate (7.625% to 10.00%)...................... 4,350
Commitment to sell loans (8.50% to 8.625%)................ 898
Unused overdraft protection lines of credit for checking
accounts................................................ 1,396
Unused equity lines of credit............................. 21,154
Unused commercial lines of credit......................... 7,494
Unused commercial letters of credit....................... 1,153
Unused credit card lines of credit........................ 7,796
</TABLE>

FN-76
<PAGE> 249
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. On February 21, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Mutual Savings Bank ("Mutual"), a
Wisconsin-chartered mutual savings bank and a wholly owned subsidiary of Mutual
organized for the purpose of effecting the transactions contemplated by the
Merger Agreement. Mutual intends to assign the rights and obligations of this
subsidiary to Bank Mutual Corporation ("Bank Mutual"). The Merger Agreement
provides for the acquisition of the Company by Mutual through a merger of the
Company into Bank Mutual.

Subject to the terms and conditions of the Merger Agreement, at the time of
the merger, each outstanding share of the Company's common stock will be
converted into the right to receive cash in the amount of $15.00 or 1.5 shares
of common stock of the Bank Mutual or a combination of cash and shares of Bank
Mutual.

In connection with the Merger, the Company and Mutual will engage in a
restructuring. As part of the restructuring, Mutual will form a mutual holding
company. The mutual holding company will own a majority of Bank Mutual's common
stock. The balance of the shares of Bank Mutual will be offered for sale to
Mutual's depositors and issued to First Northern stockholders in the Merger. As
a result of the restructuring, the Savings Bank and Mutual will become wholly
owned subsidiaries of Bank Mutual.

The Merger and Mutual restructuring and stock offering are subject to
approval by the stockholders of the Company (for the Merger), depositors of
Mutual (for the restructuring), and various regulatory agencies (for all
transactions).

Through June 30, 2000, First Northern has incurred direct expenditures
relating to the merger of $321,000. If the merger is not consummated, these
expenditures will be expensed.

FN-77
<PAGE> 250

MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

CAUTIONARY FACTORS

This document contains various forward-looking statements concerning the
Company's prospects that are based on the current expectations and beliefs of
management. Forward-looking statements may also be made by the Company from time
to time in other reports and documents as well as oral presentations. When used
in written documents or oral statements, the words "anticipate," "believe,"
"estimate," "expect," "objective" and similar expressions are intended to
identify forward-looking statements. The statements contained herein and such
future statements involve or may involve certain assumptions, risks and
uncertainties, many of which are beyond the Company's control, that could cause
the Company's actual results and performance to differ materially from what is
expected. In addition to the assumptions and other factors referenced
specifically in connection with such statements, the following factors could
impact the business and financial prospects of the Company: general economic
conditions; legislative and regulatory initiatives; monetary and fiscal policies
of the federal government; deposit flows; disintermediation; the cost of funds;
general market rates of interest; interest rates or investment returns on
competing investments; demand for loan products; demand for financial services;
changes in accounting policies or guidelines; changes in the quality or
composition of the Savings Bank's and FNII's loan and investment portfolios; the
status of our proposed merger with Mutual Savings Bank; and other factors
referred to in the reports filed with the Securities and Exchange Commission.

RECENT DEVELOPMENTS

Merger Agreement with Mutual Savings Bank. On February 22, 2000, First
Northern, and Mutual Savings Bank, a Wisconsin-chartered mutual savings bank
("Mutual"), announced that they had entered into an Agreement and Plan of
Merger, dated as of February 21, 2000 ( the "Merger Agreement"), by and among
Mutual, First Northern and OV Corp., a Wisconsin corporation organized as a
wholly owned subsidiary of Mutual for the purpose of effecting the transactions
contemplated by the Merger Agreement. Mutual intends to assign the rights and
obligations of this subsidiary to Bank Mutual Corporation ("Bank Mutual"). The
Merger Agreement provides for the acquisition of First Northern by Mutual
through a merger of First Northern with and into Bank Mutual (the "Merger"),
which will be the surviving corporation ("Bank Mutual"). The Merger Agreement
has been approved by the boards of directors of Mutual and First Northern.

Subject to the terms and conditions of the Merger Agreement, at the time of
the Merger, each outstanding share of First Northern common stock, par value
$1.00 per share ("First Northern Common Stock"), will be converted into the
right to receive cash in the amount of $15.00, or 1.5 shares of common stock,
par value $.01 per share, of Bank Mutual ("Bank Mutual Common Stock"), or a
combination of cash and shares of Bank Mutual Common Stock (the "Merger
Consideration"). Prior to the closing date, Mutual will select the percentage of
the total Merger Consideration to be paid in Bank Mutual Common Stock, which may
not be less than 40% or more than 70%; the balance will be paid in cash. Each
First Northern stockholder will be entitled to elect to receive (a) cash, (b)
Bank Mutual Common Stock or (c) as to First Northern stockholders holding not
less than 170 shares of First Northern Common Stock, a combination of cash and
Bank Mutual Common Stock, with the percentage of such shares of their First
Northern Common Stock equal to the lesser of the Stock Percentage and 50%
converted into Bank Mutual Common Stock and the balance converted into cash.
Elections will be subject to proration if the cash or stock elections exceed the
maximum amounts permitted under the Merger Agreement. Cash will be paid in lieu
of any fractional shares of Bank Mutual Common Stock which holders of First
Northern Common Stock would otherwise receive.

In a separate transaction related to the Merger, Mutual will engage in a
restructuring involving a number of steps (the "Restructuring"). As a part of
the Restructuring, Mutual will form a mutual holding company in which Mutual's
depositors will hold all the voting rights. The mutual holding company will own
a majority of Bank Mutual Common Stock; the balance of the shares of Bank Mutual
Common
FN-78
<PAGE> 251

Stock will be offered for sale to Mutual's depositors and issued to First
Northern stockholders in the Merger. As a result of the Restructuring, Mutual
Savings Bank and the Savings Bank will become wholly owned subsidiaries of Bank
Mutual. Thus, Bank Mutual will be a subsidiary mid-tier stock holding company.

Consummation of the Merger is subject to the satisfaction of certain
closing conditions set forth in the Merger Agreement, including approval by the
stockholders of First Northern and approval by the OTS, the FDIC and the
WDFI -- Administrator. The depositors of Mutual must also approve Mutual's plan
for the Restructuring. The Merger is also subject to receipt of an opinion of
counsel to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code as to the federal
income tax treatment of certain transactions contemplated by the Merger
Agreement. In addition, the Merger is conditioned upon the approval for listing
on the NASDAQ National Market of the shares of Bank Mutual Common Stock to be
issued in the Merger, which shares will be registered under the Securities Act
of 1933.

At August 7, 2000, First Northern and Mutual continued the process of
filing all necessary regulatory filings with the OTS and Securities and Exchange
Commission and anticipates that the acquisition of First Northern by Mutual will
be completed by the end of 2000.

Concurrently with the execution of the Merger Agreement, in order to induce
Mutual to enter into the Merger Agreement, the parties entered into a Stock
Option Agreement by which First Northern granted to Mutual an irrevocable option
to purchase up to 1,708,675 shares of First Northern Common Stock, which equals
19.9% of the number of shares of First Northern Common Stock outstanding at
February 21, 2000, at an exercise price of $9.0375 per share. The option would
become exercisable under certain circumstances if First Northern becomes the
subject of a third-party proposal for a competing transaction.

FINANCIAL CONDITION

BALANCE SHEET

Cash and Cash Equivalents. Cash and cash equivalents decreased $1.1 million
at June 30, 2000, as compared to December 31, 1999, primarily because the
Savings Bank maintained additional cash at December 31, 1999, as a precaution
against possible events associated with Year 2000 concerns. Shortly after
December 31, 1999, the cash was redeployed by paying down short-term borrowings.

Securities Available-for-Sale. Investment securities available-for-sale
increased $2.5 million as of June 30, 2000, as compared to December 31, 1999,
primarily as a result of the reinvestment of maturing securities, the interest
earnings on securities being reinvested and the purchase of additional
securities, partially offset by decreased market value. (See Notes to Unaudited
Consolidated Financial Statements -- 3. Securities Available-for-Sale)

Mortgage-related securities available-for-sale decreased $0.3 million at
June 30, 2000, as compared to December 31, 1999, as a result of prepayments and
repayments of the underlying securities.

Securities Held-to-Maturity. Investment securities held-to-maturity
increased $0.7 million as of June 30, 2000 as compared to December 31, 1999 as a
result of additional investment securities purchases.

Mortgage-related securities held-to-maturity decreased $0.5 million as a
result of prepayments and repayments of the underlying securities.

Loans Held for Sale. At June 30, 2000, First Northern had $2.1 million of
fixed interest rate mortgage and education loans classified as held for sale as
compared to $1.1 million at December 31, 1999. The increase in loans held for
sale is primarily the result of education loans originated during the six months
of 2000, all of which are contractually assigned to be sold.

FN-79
<PAGE> 252

Loans Receivable. Loans receivable increased $58.2 million at June 30,
2000, as compared to December 31, 1999, as a result of: (i) increased adjustable
interest rate mortgage loan originations and purchases; (ii) reduced prepayments
or refinancing of mortgage loans; and (iii) commercial lending. Loan
originations and purchases are as follows:

LOAN ORIGINATIONS AND PURCHASES

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Mortgage loans originated and purchased:
Construction.................................... $ 13,019 $ 20,822 $ 28,332 $ 29,643
Loans on existing property...................... 25,584 18,365 42,831 27,072
Refinancing..................................... 5,993 18,124 11,179 47,326
Other loans..................................... 1,234 1,238 1,807 1,479
-------- -------- -------- --------
Total mortgage loans originated and
purchased............................. 45,830 58,549 84,149 105,520
Consumer loans originated and purchased:
Consumer........................................ 5,149 4,697 7,560 6,450
First mortgage.................................. 14,867 15,261 25,853 24,390
Automobile...................................... 12,939 20,412 28,213 32,269
Education....................................... 94 71 1,272 1,021
-------- -------- -------- --------
Total consumer loans originated and
purchased............................. 33,049 40,441 62,898 64,130
Commercial loans.................................. 1,858 2,887 7,166 2,887
-------- -------- -------- --------
Total loans originated and purchased.... $ 80,737 $101,877 $154,213 $172,537
======== ======== ======== ========
</TABLE>

Mortgage loan originations and purchases decreased $12.7 million for the
second quarter of 2000, as compared to the same period in 1999 and $21.4 million
for the first six months of 2000 as compared to the first six months of 1999,
primarily as the result of decreased refinancing of existing First Northern
mortgage loans. Purchase mortgage loan originations increased in the second
quarter of 2000 primarily as a result of increased purchase activity within
First Northern's market. Although total mortgage loan originations decreased for
the second quarter of 2000 and the first six months of 2000, the mortgage loan
portfolio outstanding increased $20.2 and $37.1 million, respectively (before
deductions for undisbursed loan proceeds, allowance for loan losses and unearned
loan fees). The increased mortgage loan portfolio was primarily the result of:
(i) increased adjustable interest rate mortgage loan originations; (ii) reduced
prepayments of principal on outstanding loans; and (iii) reduced refinancing of
existing mortgage loans, all of which, management believes, is attributable to
the increase of interest rates on fixed interest rate mortgage loans.

First Northern added commercial banking services to its existing product
lines in the second quarter of 1999. To manage the commercial banking
department, First Northern hired a commercial loan manager with 20 years of
commercial banking experience. At June 30, 2000, First Northern's commercial
loan portfolio outstanding was at $10.7 million and management anticipates that
this segment of its loan portfolio will continue to increase. Management
believes commercial banking will enable First Northern to enhance its interest
earning assets and its interest rate spread management.

Consumer loan originations and purchases decreased $7.4 million in the
second quarter of 2000 and $1.2 million in the first six months of 2000 as
compared to the same periods in 1999, primarily as the result of decreased
indirect automobile originations through SFC. As market interest rates rose, the
indirect automobile interest loan interest rates also rose. This increase in the
interest rates on indirect automobile loans decreased the volume of
originations.

FN-80
<PAGE> 253

LOAN SALES

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
2000 1999 2000 1999
------- ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Mortgage Loans......................................... $1,818 $6,753 $2,121 $16,392
Education Loans........................................ 316 1,985 482 1,986
------ ------ ------ -------
Total Loans Sold............................. $2,134 $8,738 $2,603 $18,378
====== ====== ====== =======
</TABLE>

Loans sold in the second quarter of 2000 and for the six months ended June
30, 2000, as compared to the same periods in 1999, decreased as a result of the
reduction in 30 year fixed interest rate mortgage loan originations. First
Northern retains all adjustable interest rate mortgage loan originations in its
portfolio; retains the majority of 15 and 20 year fixed interest rate mortgage
loans; and sells most 30 year fixed interest rate mortgage loans in the
secondary market. First Northern is contractually committed to sell its current
education loan portfolio as well as, future originations.

Office Properties and Equipment. First Northern entered into an operating
lease for approximately 14,000 square feet of office space in the third quarter
of 1999. This office space centralized the loan servicing, loan origination
processing, information systems, marketing and customer support services
departments of the Savings Bank. The additional leased space is needed to
accommodate growth in these areas. Total annual cost of this office space and
its associated equipment is approximately $152,000 (after-tax).

Federal Home Loan Bank Stock. Stock in the Federal Home Loan Bank ("FHLB")
increased $3.3 million to $12.5 million at June 30, 2000, as compared to $9.3
million at December 31, 1999. This increase in FHLB stock is the result of
increased borrowings outstanding from the FHLB of Chicago. The FHLB requires
member institutions to purchase one share of FHLB stock for every $20,000 of
FHLB borrowings. The FHLB borrowings are secured by First Northern's 1-4 family
residential mortgage loans.

Life Insurance Policies. Life insurance policies or bank owned life
insurance ("BOLI") increased $0.5 million in the first six months of 2000 as a
result of the increased value of the policies. BOLI is long-term life insurance
on the lives of certain current and past Savings Bank employees where the
insurance policy benefits and ownership are retained by the Savings Bank. The
cash value accumulation on BOLI is permanently tax deferred if the policy is
held to the participant's death. Management believes this an effective method to
help offset a portion of future employee benefit costs.

Deposits. Deposits increased $0.9 million for the second three months of
2000 and $1.7 million for the first six months of 2000 as a result of offering
competitive interest rates and the acquisition of "jumbo" (certificates of
deposit in excess of $100,000) deposits. Jumbo deposits consist of wholesale,
negotiated retail and municipal deposits which at times, are a cheaper source of
funds than retail deposits or borrowing. First Northern's total jumbo deposits
were $53.1 million at June 30, 2000.

Borrowings. FHLB borrowings increased $61.5 million in the first six months
of 2000, primarily to fund the growth of the loan portfolio. First Northern will
borrow monies if borrowing is a less costly form of funding for loans and
investments than the cost of acquiring deposits. First Northern anticipates that
it will continue to utilize borrowings in 2000 if borrowings incrementally add
to the overall profitability of the Company.

Advance Payments by Borrowers for Taxes and Insurance. Advance payments by
borrowers for taxes and insurance ("escrow") increased $3.5 million at June 30,
2000, as compared to December 31, 1999. The increase of escrow dollars was the
result of the payments received for First Northern's customers' escrow accounts.

Stockholders' Equity. First Northern paid a cash dividend of $0.11 per
share on May 15, 2000, to stockholders of record on May 8, 2000. The increase of
$0.01 per share represents a 10.0% increase over

FN-81
<PAGE> 254

the second quarter of 1999 cash dividend of $0.10 per share. The cash dividend
payout ratio was 55.00% and 47.62% for the quarter ended June 30, 2000 and 1999,
respectively and 55.00% and 47.62% for the six months ended June 30, 2000 and
1999, respectively.

On March 20, 2000, First Northern approved a fourth stock repurchase
program to repurchase up to 429,315 shares (5% of total shares then outstanding)
in the open market. At June 30, 2000, 210,500 shares had been purchased at an
average price of $13.06 per share.

ASSET QUALITY

First Northern currently classifies any loan on which a payment is greater
than 90 days past due as non-performing. The following table summarizes
non-performing loans and assets:

NON-PERFORMING LOANS AND ASSETS

<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
2000 1999
----------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual mortgage loans................................. $177 $243
Non-accrual consumer loans................................. 78 40
---- ----
Total non-performing loans....................... 255 283
Properties subject to foreclosure.......................... 397 318
Foreclosed properties and repossessed assets............... 59 63
---- ----
Total non-performing assets...................... $711 $664
==== ====
Non-performing loans as a percent of total loans........... 0.03% 0.04%
==== ====
Non-performing assets as a percent of total assets......... 0.08% 0.08%
==== ====
</TABLE>

Total non-performing loans decreased as of June 30, 2000, as compared to
December 31, 1999, primarily as a result of a decrease in non-performing
mortgage loans. Management believes non-performing loans and assets, expressed
as a percentage of total loans and assets, are far below state and national
averages for financial institutions. There are no material accruing loans which,
at June 30, 2000, management has reason to believe will become non-performing or
result in potential losses.

In addition, management believes that First Northern's allowance for loan
losses are adequate. While management uses available information to recognize
losses on loans and real estate owned, future additions to the allowances may be
necessary based on changes in economic conditions. Furthermore, various
regulatory agencies, as an integral part of their examination process,
periodically review First Northern's allowances for losses on loans and real
estate owned. Such agencies may require First Northern to recognize additions to
the allowances based on the agencies' judgement of information available to them
at the time of their examination.

All of First Northern's loans are domestic, meaning the loans are secured
by real estate or other collateral located in the continental United States.

FN-82
<PAGE> 255

A summary of the allowance for losses is shown below.

LOAN LOSS ALLOWANCE

<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage loans:
Balance at the beginning of the period.................... $ 2,108 $ 1,813
Provisions for the period................................. 290 295
Charge-offs:
One-to-four family residential....................... -- --
Recoveries:
One to four family residential......................... 3 --
--------- ---------
Net recoveries............................................ 3 --
--------- ---------
Balance at the end of the period.......................... 2,401 2,108
Consumer loans:
Balance at the beginning of the period.................... 1,678 1,718
Provisions for the period................................. 30 53
Charge-offs:
Consumer............................................... (26) (79)
Automobile............................................. (12) (43)
--------- ---------
Total charge-offs................................. (38) (122)
Recoveries:
Consumer............................................... 10 9
Automobile............................................. 3 20
--------- ---------
Total recoveries.................................. 13 29
--------- ---------
Net charge-offs........................................... (25) (93)
--------- ---------
Balance at the end of the period............................ 1,683 1,678
--------- ---------
Commercial loans:
Balance at the beginning of the period.................... 124
Provisions for the period................................. 10 124
--------- ---------
Balance at the end of the period............................ 134 124
--------- ---------
Total loan loss allowances at the end of the
period.......................................... $ 4,218 $ 3,910
========= =========
Allowance as a percent of total loans....................... 0.53% 0.53%
========= =========
Allowance as a percent of non-performing loans.............. 1,654.12% 1,381.63%
========= =========
Allowance as a percent of total assets...................... 0.47% 0.47%
========= =========
Allowance as a percent of non-performing assets............. 593.25% 588.86%
========= =========
</TABLE>

RESULTS OF OPERATIONS

Average Balance Sheet and Yield/Rate Analysis

The following table presents, for the periods indicated, the total dollar
amount of interest income from average interest-earning assets, the resultant
yields, and the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made
since First Northern's investment portfolio does not contain tax-exempt
securities. Average balances are derived from average daily balances. The yields
and rates are established by dividing income or expense dollars by the

FN-83
<PAGE> 256

average balance of the asset or liability. The yields and rates for the three
months ended June 30, 2000 and 1999, have been annualized.

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------
2000 1999
---------------------------- ----------------------------
INTEREST INTEREST
AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE
------- -------- ------ ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets(1):
Mortgage loans..................... $557,371 $19,771 7.09% $485,549 $17,154 7.07%
Consumer loans..................... 204,224 7,968 7.80% 162,835 6,476 7.95%
Commercial loans................... 7,961 365 9.17% 1,191 48 8.06%
Investment securities(2)........... 44,773 1,409 6.29% 37,222 1,104 5.93%
Interest-earning deposits.......... 1,610 40 4.97% 1,836 41 4.47%
Mortgage-related securities(2)..... 15,756 498 6.32% 13,113 395 6.02%
-------- ------- ---- -------- ------- ----
TOTAL 831,695 30,051 7.23% 701,746 25,218 7.19%
Interest-bearing liabilities:
Passbook accounts.................. 70,595 673 1.91% 68,865 682 1.98%
NOW and variable rate insured money
market accounts................. 137,427 1,805 2.63% 130,510 1,477 2.26%
Time deposits...................... 354,698 10,124 5.71% 345,218 9,347 5.42%
Advance payments by borrowers for
taxes and insurance............. 3,952 43 2.18% 3,573 42 2.35%
Borrowings......................... 215,535 6,541 6.07% 101,085 2,787 5.51%
-------- ------- ---- -------- ------- ----
TOTAL...................... 782,207 19,186 4.91% 649,251 14,335 4.42%
-------- ------- ---- -------- ------- ----
Net interest-earning assets balance
and interest rate spread........... $ 49,488 2.32% $ 52,495 2.77%
======== ==== ======== ====
Average interest-earning assets, net
interest income and net yield on
average interest-earning assets.... $831,695 $10,865 2.61% $701,746 $10,883 3.10%
======== ======= ==== ======== ======= ====
Average interest-earning assets to
interest-bearing liabilities....... 106.3% 108.1%
======== ========
</TABLE>

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

(1) For the purpose of these computations, non-accruing loans are included in
the average loan amounts outstanding.

(2) For the purpose of these computations, the available-for-sale investment
securities and mortgage-related securities are presented and yields
calculated based upon the historical cost basis.

FN-84
<PAGE> 257

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1999
----------------------------
INTEREST
AVERAGE EARNED/ YIELD/
BALANCE PAID RATE
------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets(1):
Mortgage loans............................................ $500,111 $35,164 7.03%
Consumer loans............................................ 175,577 13,816 7.87%
Commercial loans.......................................... 5,454 468 8.58%
Investment securities(2).................................. 38,789 2,336 6.02%
Interest-earning deposits................................. 1,702 82 4.82%
Mortgage-related securities(2)............................ 14,765 904 6.12%
-------- ------- ----
TOTAL............................................. 736,398 52,770 7.17%
Interest-bearing liabilities:
Passbook accounts......................................... 70,425 1,385 1.97%
NOW and variable rate insured money market accounts....... 132,629 3,085 2.33%
Time deposits............................................. 350,423 19,090 5.45%
Advance payments by borrowers for taxes and insurance..... 7,002 162 2.31%
Borrowings................................................ 124,186 6,964 5.61%
-------- ------- ----
TOTAL............................................. 684,665 30,686 4.48%
-------- ------- ----
Net interest-earning assets balance and interest rate
spread.................................................... $ 51,733 2.69%
======== ====
Average interest-earning assets, net interest income and net
yield on average interest-earning assets.................. $736,398 $22,084 3.00%
======== ======= ====
Average interest-earning assets to interest-bearing
liabilities............................................... 107.6%
========
</TABLE>

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

(1) For the purpose of these computations, non-accruing loans are included in
the average loan amounts outstanding.

(2) For the purpose of these computations, the available-for-sale investment
securities and mortgage-related securities are presented and yields
calculated based upon the historical cost basis.

Rate Volume Analysis of Net Interest Income

The interaction of changes in volume and rates earned or paid with regard
to interest-earning assets and interest-bearing liabilities has a significant
impact on net income between periods. The volume of interest-earning dollars in
loans and investments compared to the volume of interest-bearing dollars in
deposits and borrowings combined with the interest rate spread produces the
changes in net interest income between periods.

FN-85
<PAGE> 258

The following table sets forth the relative contribution of changes in
volume and effective interest rates on changes in net interest income for the
periods indicated.

<TABLE>
<CAPTION>
SIX MONTH ENDED JUNE 30,
-----------------------------------
2000 VS 1999
-----------------------------------
INCREASE (DECREASE) DUE TO:
-----------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans...................................... $ 49 $2,561 $ 7 $2,617
Consumer loans...................................... (122) 1,645 (31) 1,492
Commercial loans.................................... 7 272 38 317
Investments securities.............................. 67 224 14 305
Interest-earning deposits........................... 5 (5) (1) (1)
Mortgage-related securities......................... 20 79 4 103
----- ------ ---- ------
TOTAL....................................... $ 26 $4,776 $ 31 4,833
===== ====== ==== ------
Interest-bearing liabilities:
Passbook accounts................................... $ (24) $ 16 $ (1) (9)
NOW and variable rate insured money market
accounts......................................... 237 78 13 328
Time deposits....................................... 506 257 14 777
Advance payments by borrowers for taxes and
insurance........................................ (3) 4 -- 1
Borrowings.......................................... 283 3,151 320 3,754
----- ------ ---- ------
TOTAL....................................... $ 999 $3,506 $346 4,851
===== ====== ==== ------
Net change in net interest income..................... $ (18)
======
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 VS 1998
-------------------------------------
INCREASE (DECREASE) DUE TO:
-------------------------------------
RATE/
RATE VOLUME VOLUME TOTAL
---- ------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans....................................... $(1,371) $3,154 $(129) $1,654
Consumer loans....................................... (627) 1,228 (58) 543
Commercial loans..................................... -- -- 468 468
Investments securities............................... (42) 245 (5) 198
Interest-earning deposits............................ (20) (52) 7 (65)
Mortgage-related securities.......................... (10) 297 (5) 282
------- ------ ----- ------
TOTAL........................................ $(2,070) $4,872 $ 278 3,080
======= ====== ===== ------
Interest-bearing liabilities:
Passbook accounts.................................... $ (108) $ 141 $ (12) 21
NOW and variable rate insured money market
accounts.......................................... (177) 357 (22) 158
Time deposits........................................ (1,114) 1,302 (77) 111
Advance payments by borrowers for taxes and
insurance......................................... (1) 8 -- 7
Borrowings........................................... (201) 1,646 (59) 1,386
------- ------ ----- ------
TOTAL........................................ $(1,601) $3,454 $(170) 1,683
======= ====== ===== ------
Net change in net interest income...................... $1,397
======
</TABLE>

FN-86
<PAGE> 259

The following table set forth the weighted average yields at the dates
indicated.

<TABLE>
<CAPTION>
AT JUNE 30,
------------
2000 1999
---- ----
<S> <C> <C>
Weighted average rate of return at June 30:
Mortgage loans............................................ 7.13% 6.93%
Consumer loans............................................ 8.15 8.06
Commercial loans.......................................... 9.17 7.68
Mortgage loans, consumer loans and commercial loans....... 7.43 7.22
Investment securities..................................... 6.42 5.91
Mortgage-related securities............................... 6.36 6.15
Total loan portfolio, mortgage-backed and investment
securities............................................. 7.35 7.13
Weighted average rate paid at June 30:
Deposits.................................................. 4.62% 4.19%
Borrowings................................................ 6.64 5.49
Total deposits and borrowings............................. 5.23 4.42
Spread at June 30......................................... 2.12 2.71
</TABLE>

Statements of Income

General. Net income decreased 8.3% for the second quarter of 2000 and 7.9%
for the six months ended June 30, 2000 as compared to the same periods in 1999.
This decrease was primarily the result of a reduction of the net interest margin
and increased operating expenses.

Interest and Dividend Income. Interest income on loans increased $2,515,000
in the second quarter of 2000 and $4,426,000 in the first six months of 2000 as
a result of the increased dollar amount of mortgage, consumer, and commercial
loans outstanding. The average mortgage loans outstanding increased $71.8
million or 14.8% in the second quarter of 2000 as compared to the same period in
1999 and average consumer loans outstanding increased $41.4 million. Commercial
loans, which were introduced to First Northern customers in the second quarter
of 1999, had a balance outstanding at June 30, 2000 of $10.7 million. The yield
on the mortgage loan portfolio increased in the first six months of 2000 as
compared to the first six months of 1999 as a result of interest rates on
mortgage loan originations being more than the yield on the existing portfolio
and escalations to interest rate adjustable mortgage loans in the portfolio.
Since September of 1999, the interest rates on mortgage loan originations have
exceeded the yield on the existing mortgage portfolio. See Financial
Condition -- Balance Sheet -- Loans Receivable. Consumer loan yields decreased
during the first six months of 2000 as compared to the same period in 1999 as a
result of interest rates on originations and purchases being below the portfolio
average yield.

Interest income on investment securities increased $172,000 for the three
months ended June 30, 2000 and $305,000 for the six months ended June 30, 2000,
as a result of an increase in the dollar amount of investment securities
outstanding and an increase in the yield earned on investment securities.

Interest income on interest-earning deposits increased slightly for the
second quarter of 2000 and six months ended June 30, 2000 primarily as a result
of additional interest-earning deposits outstanding.

Interest income on mortgage-related securities increased $34,000 for the
second quarter of 2000 and $103,000 for the six months ended June 30, 2000 as a
result of the increased average mortgage-related securities outstanding and the
increase in the average interest rate earned.

Interest Expense. Interest expense on deposits increased $667,000 for the
three months ended June 30, 2000 and $1,096,000 for the six months ended June
30, 2000 primarily as the result of increased cost of deposits and increased
deposits outstanding. The average cost of deposits increased as a result of
rising general market interest rates and competition's deposit interest rates
offered. Since June 1999, the Federal Open Market Committee ("FOMC") has
increased interest rates substantially. The rise in FOMC interest rates raises
the interest rate expectations of consumers and hence the need to increase
interest rates on new or renewing deposits.

FN-87
<PAGE> 260

First Northern has utilized various time deposit terms and "special"
interest rates on various time deposit terms to attract new deposits. In
addition, the Savings Bank has acquired jumbo deposits to aid in its deposit
growth. See Financial Condition -- Balance Sheet -- Deposits.

Interest expense on borrowings increased $2,171,000 in the second quarter
of 2000 and $3,754,000 in the first six months of 2000 as compared to the same
periods in 1999 as a result of increased dollars outstanding and increased
average interest paid on those borrowings. First Northern's growth in interest
earning assets outpaced the growth in deposits thereby necessitating an increase
in borrowings. First Northern anticipates it will continue to emphasize growth
in interest earning assets and will fund a portion of that growth with
borrowings. First Northern primarily borrows from the Federal Home Loan Bank of
Chicago and staggers the borrowing maturities from overnight to 9 years in term.

Provision for Loan Losses. First Northern provided $165,000 to its general
loan loss allowance in the second quarter of 2000 as compared to $114,000 for
the second quarter of 1999, and $330,000 for the first six months of 2000 as
compared to $174,000 for the same period in 1999. The increased provisions were
the result of growth in loans, especially those that have higher inherent credit
losses. Multi-family mortgage loans increased $0.5 million in the second quarter
of 2000 and $2.0 million for the six months ended June 30, 2000. Commercial
loans increased $0.9 million in the second quarter of 2000 and $5.9 million for
the six months ended June 30, 2000. Consumer loans increased $8.2 million in the
second quarter of 2000 and $15.3 million for the six months ended June 30, 2000.
Mortgage loans, other than multi-family, increased $20.2 million in the second
quarter of 2000 and $35.5 million for the six months ended June 30, 2000.

First Northern uses a risk-based assessment of the unidentified inherent
losses in its loan portfolio to determine the level of loan loss allowance. The
assessment is based on internal reviews intended to determine the adequacy of
the allowance in view of presently known factors. Management believes the
current loan loss allowance is their best estimate of the inherent credit losses
in the portfolio.

Non-Interest Income. Fees on serviced loans increased $5,000 in the second
quarter of 2000 and $24,000 in the first six months of 2000 as a result of
decreased repayments or prepayments on loans sold (with servicing retained). As
the principal of a mortgage loan which was sold, repays or prepays, the mortgage
servicing asset is reduced and netted from fees on serviced loans, thereby
reducing the income on the serviced loans. When the repayments or prepayments
decrease, such as in the second quarter of 2000 and the first six months of
2000, the amortization from the mortgage servicing assets also decreases and
hence, the income on serviced loans increases. First Northern's mortgage loan
servicing asset at June 30, 2000 was $528,800.

Loan fees and service charges increased slightly in the second quarter and
first six months of 2000 primarily as the result of late charges collected on
loans and fees collected from the Savings Bank's line-of-credit home equity
loans.

Income from deposit account service charges increased $73,000 in the second
quarter and $147,000 in the first six months of 2000 as a result of debit card
fee income and fees from customers who overdraw their checking account and other
depository fees. Each time First Northern's debit card is used, a fee which
varies with each merchant, is paid to the Savings Bank by the debit card
company. The Savings Bank promotes the use of its debit card by direct mail.

Insurance commissions decreased $14,000 in the second quarter and increased
$37,000 in the first six months of 2000. The second quarter of 2000 decrease was
the result of decreased insurance bonus in 2000 as compared to the insurance
bonuses in 1999. The increase for the six months was the result of insurance
bonuses. If First Northern obtains a predetermined threshold of insurance sales
and insurance losses are below another threshold, insurance bonuses are earned.
First Northern received $49,000 in insurance bonuses in the first quarter of
2000.

Gains on the sale of loans decreased $97,000 and $254,000 for the second
quarter and six months ended June 30, 2000, respectively as a result of
decreased loan sales. First Northern sold $2,134,000 of loans in the second
quarter of 2000 as compared to $8,738,000 in the second quarter of 1999 and
FN-88
<PAGE> 261

$2,603,000 of loans in the six months ended June 30, 2000 as compared to
$18,378,000 for the same period in 1999. Loan sales decreased substantially in
the second quarter of 2000 and the first six months of 2000 as a result of
decreased thirty-year fixed interest rate mortgage loan originations, which are
sold to the secondary market.

Other income increased $84,000 for the three months ended June 30, 2000 and
$180,000 for the six months ended June 30, 2000, as compared to the same periods
last year as a result of: (i) ATM surcharges; (ii) interest income on Bank Owned
Life Insurance; and (iii) interest from officers' life insurance.

Non-Interest Expense. Compensation expense increased $103,000 for the three
months ended and $362,000 for the six months ended June 30, 2000 as a result of:
(i) increased number of employees; (ii) increased compensation to existing
employees; (iii) increased education and training costs; (iv) reduced expense
deferrals associated with loan originations; and (v) 2000 being a leap year
which added one additional day of compensation for hourly paid employees.

Federal insurance premiums decreased $50,000 for the second quarter of 2000
and $101,000 for the six months ended June 30, 2000 as a result of a decrease in
federal deposit premiums charged First Northern and other Savings Association
Insurance Fund ("SAIF") insured institutions. Beginning in the year 2000, the
Financing Income Corporation Obligations ("FICO") bonds interest cost was spread
to all insured financial institutions rather than just the SAIF insured
institutions. Thus, the deposit insurance cost to SAIF institutions was reduced.

Occupancy expense increased $99,000 in the second quarter of 2000 and
$158,000 for the six months ended June 30, 2000 primarily as a result of the
Savings Bank's rental of approximately 14,000 square feet of office space in
downtown Green Bay. This rental space consolidated various operational
departments into one location whereas previously they were located in three
separate Savings Bank offices.

Data processing expense increased $10,000 in the three months ended June
30, 2000 and $22,000 for the six months ended June 30, 2000, as a result of an
increase in service bureau expense and service contracts on data processing
equipment. Service bureau expense increased as a result of increased contract
cost, additional transactions processed and additional products offered.

Furniture and equipment expense increased $33,000 in the second quarter of
2000 and $42,000 in the first six months of 2000 as a result of increased cost
of service contracts on equipment and increased depreciation on furniture and
equipment at the remodeled Kiel Office.

Marketing expense increased $63,000 in the second quarter of 2000 and
$53,000 in the first six months of 2000 primarily as a result of increased
marketing of First Northern's products and services.

Other expenses decreased $67,000 in the three months ended June 30, 2000
and increased slightly for the six months ended June 30, 2000. The decrease was
primarily the result of a $53,700 environmental clean-up cost of a lot at a
subdivision owned by GNFSC in 1999.

Income Taxes. The effective income tax rate for the second quarter of 2000
was 31.0% and 31.7% for the six months ended June 30, 2000 as compared to 32.8%
in the second quarter of 1999 and 33.4% for the six months ended June 30, 2000.
The decrease in the effective income tax rate was the result of the purchase of
BOLI and an increase in the earnings of FNII, which is not subject to state
income taxes. Since First Northern intends to hold the life insurance policies
until the participants' death, BOLI interest income is not taxable. In addition,
First Northern moved its indirect automobile loan portfolio to FNII at the
beginning of the second quarter of 1999, which has reduced state income taxes.
In March 1999, First Northern moved approximately $56.3 million in mortgage loan
participations to FNII and further reduced its state income tax.

Legislation. The Gramm-Leach-Bliley Act ("Act") passed by Congress could
significantly alter the environment in which First Northern and the Savings Bank
operate. This Act tore down the former artificial statutory barriers between
financial institutions, insurance companies, and investment firms and may lead
to increased competition among such entities. In addition, the Act will prevent
the sale of unitary thrift holding companies, such as First Northern, to
commercial companies. Finally, the Act placed additional obligations on First
Northern and the Savings Bank in the areas of customer privacy, CRA-related
agreements, and the operation of ATMs.

FN-89
<PAGE> 262

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY

Historically, federal regulations have required the Savings Bank to
maintain a minimum percentage of liquid assets to net withdrawable accounts plus
short-term borrowings. The required percentage (liquidity ratio) has varied from
time to time based upon economic conditions and deposit flows. The liquidity
ratio is set by the Office of Thrift Supervision ("OTS") and it is currently 4%
of average of net withdrawable accounts plus short-term borrowings payable on
demand or in one year or less during the current calendar quarter. In general,
liquid assets, for the purposes of calculating the liquidity ratio, include
cash, certain time deposits, and U.S. government and agency obligations. The
Savings Bank has historically maintained a liquidity ratio that exceeds the OTS
requirement. The Savings Bank's quarterly average liquidity ratio at June 30,
2000, was 7.09%. At December 31, 1999, its monthly average liquidity ratio was
7.15%. The slight decrease in the liquidity ratio at June 30, 2000, is mainly
attributable to the growth in the loan portfolio. The Savings Bank believes that
its maintenance of excess liquidity, above the 4% federally required liquidity
ratio, is an appropriate strategy to aid in proper asset/liability management.

Liquidity management is both a daily and long-term responsibility of
management. The Savings Bank adjusts its investments in liquid assets based upon
management's assessment of: (i) expected loan demand; (ii) expected deposit
flows; (iii) yields available on interest-earning deposits; and (iv) the
objectives of its asset/liability management program. Excess liquidity is
invested generally in interest-earning overnight deposits and other short-term
government and agency obligations. When the Savings Bank requires funds beyond
its ability to generate them internally, it can borrow funds from the FHLB of
Chicago or other sources. The FHLB of Chicago limits advances to member
institutions to an aggregate amount not to exceed 35% of the member
institution's total assets. Wisconsin law permits First Northern, without the
prior written approval of the Wisconsin Department of Financial
Institutions -- Division of Savings Institutions, to borrow an aggregate amount
not to exceed 50% of its total assets.

CAPITAL RESOURCES AND REGULATORY INFORMATION

First Northern's net worth to total assets ratio at June 30, 2000, for
State of Wisconsin regulatory requirements was 8.40%, or 2.4% over the Wisconsin
minimum legal requirement of 6.00% of total assets established by the Division
of Savings Institutions of the Department of Financial Institutions, which
regulates First Northern.

As of June 30, 2000, the most recent notification from the OTS categorized
the Savings Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Savings Bank must
maintain minimum tangible, core and risk based ratios as set forth in the
following table. As a state-chartered savings institution, the Savings Bank is
also subject to a minimum capital requirement of the State of Wisconsin.
Management believes that, at June 30, 2000, the Savings Bank exceeded all
capital adequacy requirements to which it is subject. There are no conditions or
events since that notification that management believes have changed the Savings
Bank's categorization as well capitalized.

FN-90
<PAGE> 263

The Savings Bank's required and actual capital amounts and ratios are
presented in the following table.

<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
MINIMUM REQUIRED UNDER PROMPT
FOR CAPITAL CORRECTIVE ACTION
ACTUAL ADEQUACY PURPOSES PROVISIONS
--------------- ------------------ ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AS OF JUNE 30, 2000:
Risk-based capital (to risk-weighted
assets).................................. $74,979 12.60% >=$47,703 >=8.00% >=$59,629 >=10.00%
Tier 1 (core) capital (to risk-weighted
assets)................................ $70,787 11.90% >=$23,852 >=4.00% >=$35,777 >=6.00%
Tier 1 (core) capital (to adjusted
assets)................................ $70,787 7.80% >=$36,170 >=4.00% >=$45,212 >=5.00%
Tangible equity (to tangible assets)..... $70,787 7.80% >=$36,170 >=4.00% >=$45,212 >=5.00%
State of Wisconsin capital (to total
assets)................................ $75,698 8.40% >=$54,320 >=6.00% N/A N/A
AS OF DECEMBER 31, 1999:
Risk-based capital (to risk-weighted
assets).................................. $76,326 14.00% >=$43,770 >=8.00% >=$54,713 >=10.00%
Tier 1 (core) capital (to risk-weighted
assets)................................ $72,416 13.20% >=$21,885 >=4.00% >=$32,828 >=6.00%
Tier 1 (core) capital (to adjusted
assets)................................ $72,416 8.60% >=$33,546 >=4.00% >=$41,783 >=5.00%
Tangible equity (to tangible assets)..... $72,416 8.60% >=$33,546 >=4.00% >=$41,783 >=5.00%
State of Wisconsin capital (to total
assets)................................ $77,197 9.20% >=$50,377 >=6.00% N/A N/A
</TABLE>

FN-91
<PAGE> 264

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. THE AFFAIRS OF MUTUAL SAVINGS OR BANK MUTUAL MAY CHANGE AFTER
THE DATE OF THIS PROSPECTUS. DELIVERY OF THIS DOCUMENT AND THE SALES OF SHARES
MADE HEREUNDER DOES NOT MEAN OTHERWISE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................... 3
Risk Factors............................... 19
The Parties................................ 22
How We Intend to Use the Proceeds from the
Offering................................. 24
Policy Regarding Dividends................. 26
Market for Bank Mutual Common Stock........ 27
Regulatory Capital Compliance.............. 28
Capitalization............................. 30
Pro forma Financial Data................... 32
Mutual Savings' Operating Strategy......... 45
Certain Effects of the First Northern
Merger on Bank Mutual.................... 47
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 51
Business of Mutual Savings Bank............ 68
Management................................. 95
Regulation................................. 107
Taxation................................... 119
The Restructuring and the Offering......... 120
Restrictions on Acquisition of Bank
Mutual................................... 136
Description of Capital Stock of Bank
Mutual................................... 138
Legal and Tax Opinions..................... 140
Experts.................................... 140
Registration Requirements.................. 141
Where You Can Find Additional
Information.............................. 141
Index to Financial Statements.............. 142
</TABLE>

---------------------
UNTIL THE LATER OF OCTOBER , 2000 OR 25 DAYS AFTER COMMENCEMENT OF THE
OFFERING, ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

UP TO 8,701,000

SHARES OF

COMMON STOCK

[BANK MUTUAL LOGO]
PROPOSED HOLDING COMPANY FOR
MUTUAL SAVINGS BANK
--------------------

PROSPECTUS
--------------------

[RYAN, BECK LOGO]

SEPTEMBER , 2000

------------------------------------------------------
------------------------------------------------------
<PAGE> 265

PROSPECTUS SUPPLEMENT

BANK MUTUAL CORPORATION

MUTUAL SAVINGS BANK SAVINGS AND INVESTMENT PLAN

Bank Mutual Corporation is providing this prospectus supplement to
participants in the Mutual Savings Bank Savings and Investment Plan, a 401(k)
plan. As a participant in the 401(k) plan, you will be able to direct the 401(k)
plan to purchase common stock of Bank Mutual in its offering with amounts
allocated to your account under the 401(k) plan.

This prospectus supplement relates to your initial election to direct that
all or a portion of your account be invested in a fund made up of Bank Mutual
common stock. If the offering is oversubscribed and the total amount you
allocate cannot be used to purchase Bank Mutual common stock, the amount which
cannot be used for purchase will be reinvested in the other funds available
under the 401(k) plan. If you cannot acquire all the Bank Mutual common stock
you want in the offering you may direct the investment of your account in the
Bank Mutual stock fund after the offering is completed, although those purchases
will be on the open market, at the then-current market price rather than the
subscription offering price.

The prospectus of Bank Mutual dated September , 2000 accompanying this
prospectus supplement includes detailed information with respect to the offering
and the financial condition, results of operations and business of Mutual
Savings. You should read this prospectus supplement, which provides information
with respect to the 401(k) plan, only in conjunction with the prospectus.

PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 19 OF THE PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus supplement is September , 2000.

S-1
<PAGE> 266

TABLE OF CONTENTS

<TABLE>
<S> <C>
THE OFFERING................................................ S-3
Securities Offered........................................ S-3
Election to Purchase Common Stock in the Offering;
Priorities............................................. S-3
Participation Limits...................................... S-4
Value of 401(k) Plan Assets............................... S-4
Method of Directing Transfer.............................. S-4
Time for Directing Transfer............................... S-4
Irrevocability of Transfer Direction...................... S-4
Direction to Purchase Common Stock After the Subscription
Offering............................................... S-5
Purchase Price of Common Stock............................ S-5
Nature of a Participant's Interest in the Common Stock.... S-5
Voting Rights of Common Stock............................. S-5
DESCRIPTION OF THE 401(k) PLAN.............................. S-6
Introduction.............................................. S-6
Reference to Full Text of Plan............................ S-6
Eligibility and Participation............................. S-6
Contributions Under the 401(k) Plan....................... S-6
Limitations on 401(k) Plan Contributions.................. S-7
Vesting Under the 401(k) Plan............................. S-8
Investment of Contributions and Account Balances.......... S-8
Withdrawals and Distributions From the 401(k) Plan........ S-11
Trustees.................................................. S-11
Plan Administrator........................................ S-12
Reports to 401(k) Plan Participants....................... S-12
Amendment and Termination................................. S-12
Merger, Consolidation or Transfer......................... S-12
Federal Income Tax Consequences........................... S-12
Additional ERISA Considerations........................... S-15
SEC Reporting and Short-Swing Profit Liability of Officers
and Directors.......................................... S-16
</TABLE>

S-2
<PAGE> 267

THE OFFERING

SECURITIES OFFERED

Bank Mutual is offering participation interests in the Mutual Savings Bank
Savings and Investment Plan, a 401(k) plan. The participation interests can, if
you so elect, represent indirect ownership of Bank Mutual's common stock. The
401(k) plan may acquire up to 500,000 shares of Bank Mutual common stock to be
held in a Bank Mutual common stock fund maintained by the plan. Only employees
of Mutual Savings may become participants in the 401(k) plan.

The priority of your elected investment in the Bank Mutual stock fund is
governed by the priorities in the Mutual stock offering, which are described
below. You may have a priority either (a) because you were a participant at
January 31, 1999, or other specified dates, in the Mutual CD fund of the 401(k)
plan; or (b) because, outside of the 401(k) plan, you meet one of the conditions
discussed below for priority.

Information with regard to the 401(k) plan is contained in this prospectus
supplement and information with regard to the financial condition, results of
operations and business of Mutual Savings is contained in the attached
prospectus. The address of the principal executive office of Mutual Savings is
4949 West Brown Deer Road, P. O. Box 245034, Brown Deer, WI 53224-9534. Mutual
Savings' telephone number is (414) 354-1500.

ELECTION TO PURCHASE COMMON STOCK IN THE OFFERING; PRIORITIES

In connection with the offering, the 401(k) plan now permits you to
transfer all or part of your account balances in the 401(k) plan to the Bank
Mutual stock fund to be used to purchase common stock issued in the offering.
The Bank Mutual stock fund will purchase common stock in accordance with your
directions. In the event the stock offering is oversubscribed, i.e. there are
more orders for common stock than shares available for sale in the offering, and
the full amount you allocated cannot be used to purchase common stock in the
offering, the amount that cannot be invested in common stock will be reinvested
in the other investment funds of the 401(k) plan in accordance with your then
existing investment election, in proportion to your investment direction
allocation percentages (or, if you made no allocations to other investment
funds, in the investment funds from which their amount was removed, on a
proportionate basis). If you do not direct the investment of your account
balances in the Bank Mutual stock fund, your account balances will remain in the
other investment funds of the 401(k) plan as previously directed by you.

Bank Mutual is offering the shares of common stock of Bank Mutual in what
we call a "subscription offering." Subscription rights to purchase stock have
been granted to Mutual Savings' depositors in the order of priority listed
below:

(1) Depositors with accounts at Mutual Savings with total balances of at
least $50 on January 31, 1999 (the "eligibility record date");

(2) Our employee stock ownership plan;

(3) Depositors with accounts at Mutual Savings with total balances of at
least $50 on June 30, 2000;

(4) Any depositors of Mutual Savings on the voting record date, who do not
qualify in earlier priorities; and

(5) Directors, officers and employees of Mutual Savings who do not qualify
in earlier priorities.

Also, under the First Northern merger agreement and our plan of restructuring,
some shares of Bank Mutual common stock will be issued to First Northern
shareholders.

The shares of Bank Mutual common stock not purchased in the subscription
offering or issued in the First Northern merger may be offered in what we call a
"community offering." The community offering, should it occur, will take place
at the end of the subscription offering or, at the discretion of Bank Mutual,
concurrently with or during the subscription offering.

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The 401(k) plan itself was a depositor of Mutual Savings at the eligibility
record date. Therefore, the 401(k) plan itself has subscription rights to the
offering. The 401(k) plan is "passing through" those rights to 401(k) plan
participants who had invested in the Mutual CD fund of the 401(k) plan on
January 31, 1999, June 30, 2000 or the voting record date. Those rights are
being allocated to those persons because the 401(k) plan held the Mutual CD for
the benefit of participants who had invested in that fund. We will determine
priority rights in the same order as priority rights in the subscription
offering, so that persons having higher priorities will be more likely to
receive shares in the event the subscription offering is over-subscribed or
401(k) plan participants together wish to acquire more shares through the 401(k)
plan than the 401(k) plan is able to purchase.

In addition, if you individually qualify to participate in the subscription
offering, you may subscribe through the 401(k) plan. In that case, your 401(k)
plan subscriptions will have whatever priority you personally have. For example,
if you personally had an account with a balance of at least $50 at January 31,
1999, you will be in the first priority category for investments through the
401(k) plan. Similarly, if you have never had a Mutual Savings account but are a
Mutual employee, you will be in the fifth priority. Therefore, if the
subscription offering is over-subscribed, participants with higher priorities
will be more likely to receive the shares that they want than those with lower
priorities.

Common stock so purchased will be placed in the newly created Bank Mutual
stock fund and allocated to your 401(k) plan account.

PARTICIPATION LIMITS

If you participated in the Mutual CD fund of the 401(k) plan at January 31,
1999, June 30, 2000 or the voting record date, your investment in the Bank
Mutual stock fund of the 401(k) plan will not be counted against your personal
limits for purchase under the Bank Mutual stock offering. Therefore, you may
purchase shares through the 401(k) plan and still buy up to 80,000 shares
outside the 401(k) plan (subject to the other limits under the stock offering).

If you were not a January 31, 1999, June 30, 2000 or voting record date
participant in the Mutual CD fund, your participation in the Bank Mutual stock
fund will count against limitations on your purchase of shares in the Bank
Mutual stock offering, and thus reduce what you could otherwise buy outside of
the 401(k) plan.

VALUE OF 401(K) PLAN ASSETS

As of June 30, 2000, the market value of the assets of the 401(k) plan
totaled approximately $3.9 million. The plan administrator informed each
participant of the value of his or her account balance under the 401(k) plan as
of June 30, 2000.

METHOD OF DIRECTING TRANSFER

You will receive a form on which you can elect to transfer all or a portion
of your account balance in the 401(k) plan to the Bank Mutual stock fund in
connection with the offering. If you wish to use all or part of your account
balance in the 401(k) plan to purchase common stock issued in the offering, you
should indicate that decision on the election form.

TIME FOR DIRECTING TRANSFER

If you wish to purchase common stock with your 401(k) account balances, you
must return your election form to Eugene H. Maurer, Jr., Mutual Savings Bank, no
later than 10:00 a.m. central time on October 16, 2000.

IRREVOCABILITY OF TRANSFER DIRECTION

You may not revoke your election to transfer amounts credited to your
account in the 401(k) plan to the Bank Mutual stock fund. After the Bank Mutual
stock offering, however, you will be able to change the investment of your
accounts under the 401(k) plan as explained below.

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DIRECTION TO PURCHASE COMMON STOCK AFTER THE SUBSCRIPTION OFFERING

Whether you choose to purchase stock in the subscription offering, or
attempt to purchase stock in the offering but are unable to do so because the
offering is oversubscribed, you will also be able to purchase stock after the
offering. You may direct that a certain percentage of your future contributions
or your account balance in the 401(k) plan be transferred to the Bank Mutual
stock fund and invested in common stock, or to the other investment funds
available under the 401(k) plan. You may change your investment allocation at
any time. Investment elections are implemented as soon as administratively
practicable. Special restrictions may apply to transfers directed to and from
the Bank Mutual stock fund by the participants who are subject to the provisions
of section 16(b) of the Securities Exchange Act relating to the purchase and
sale of securities by officers, directors and principal shareholders of Bank
Mutual.

PURCHASE PRICE OF COMMON STOCK

The funds transferred to the Bank Mutual stock fund will be invested in a
savings account or CD of Mutual Savings Bank and used to purchase common stock
in the subscription offering, except in the event of an over-subscription, as
discussed above. The 401(k) plan will pay $10.00 per share for shares purchased
in the subscription offering, which will be the same price paid by all other
persons in the subscription offering.

After the subscription offering, the 401(k) plan will acquire Bank Mutual
common stock in open market transactions at the prevailing price. Mutual Savings
Bank will pay transaction fees associated with the purchase, sale or transfer of
the common stock.

NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK

The 401(k) plan assets, including Bank Mutual common stock, are held in
trust for participants of the 401(k) plan. Shares of common stock acquired by
the 401(k) plan at your direction will be allocated to your account. Because
each participant makes his own investment decisions for his or her own account,
the decisions of other participants should not affect the earnings allocated to
your account.

VOTING RIGHTS OF COMMON STOCK

The trustee of the trust holding 401(k) plan assets generally will exercise
voting rights attributable to all common stock held by the Bank Mutual stock
fund as directed by participants with accounts invested in the fund. When
stockholders have a right to vote on a matter, you will have voting instruction
rights reflecting your proportionate interest in the fund. The trustee will vote
the common stock according to the voting instructions the trustee receives from
the participants. Shares with respect to which the trustee receives no voting
instructions from participants will be voted in the same proportion as shares
for which the trustee receives voting instructions unless the Mutual Savings
Bank Investment Committee directs the trustee to vote the unvested shares in a
different manner.

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DESCRIPTION OF THE 401(K) PLAN

INTRODUCTION

The Mutual Savings Bank Savings and Investment Plan is a tax-qualified
plan. It contains a 401(k) feature which permits participants to defer current
compensation to their account balances. The plan also permits participant
direction of investment. In connection with the offering, the 401(k) Plan has
been amended to permit investment by participants in stock of Bank Mutual. As a
result of the amendment, up to 100% of the assets of the 401(k) Plan can be
invested in Bank Mutual common stock.

Mutual Savings Bank intends that the 401(k) plan, in operation, will comply
with the requirements of the Internal Revenue Code and the Employee Retirement
Income Security Act of 1974, commonly referred to as ERISA. Mutual Savings Bank
may amend the 401(k) plan from time to time in the future, as it sees fit or to
maintain compliance with Federal law. Since the 401(k) plan is governed by the
ERISA, Federal law provides you with various rights and protections as a
participant in the 401(k) plan. However, your benefits under the 401(k) plan are
not insured by the Pension Benefit Guaranty Corporation under Title IV of ERISA.

REFERENCE TO FULL TEXT OF PLAN

The following statements are summaries of certain provisions of the 401(k)
plan. They are not complete and are qualified in their entirety by the full text
of the 401(k) plan. You may obtain a copy of the 401(k) plan by filing a request
with Mutual Savings Bank, Attention: Linda T. Finger, Benefits Administrator. We
urge each employee to read carefully the full text of the 401(k) plan.

ELIGIBILITY AND PARTICIPATION

Any employee of Mutual Savings Bank is eligible to become a participant in
the 401(k) plan on the January 1 or July 1 following completion of one year of
service and attainment of age 21. You are considered to have completed one year
of service if you remain employed on the first anniversary of your date of
employment and completed 1,000 hours of service during the 12 month period
ending on that date. If you do not earn 1,000 hours of service during that
period, you will be considered to have completed one year of service if you
remain employed on any subsequent anniversary of your date of employment and
completed at least 1,000 hours of service during the 12 month period ending on
that date.

The 401(k) plan year is January 1 to December 31. As of June 30, 2000,
there were 320 active employees eligible to participate in the 401(k) plan.

CONTRIBUTIONS UNDER THE 401(K) PLAN

401(k) plan contributions. As a participant in the 401(k) plan, you are
permitted to defer a portion of your compensation on a pre-tax basis, and to
have that amount contributed to the 401(k) plan on your behalf. The amount that
you may defer may range from 0% to 10%, subject to the limitations of the
Internal Revenue Code. For purposes of the 401(k) plan, "compensation" means any
earnings reportable on Internal Revenue Service Form W-2 as wages for Federal
income tax purposes (exclusive of reimbursements or other expense allowances,
fringe benefits (cash and non-cash), moving expenses, deferred compensation and
welfare benefits), plus elective contributions, for the plan year. Elective
contributions are amounts excludable from your gross income and contributed to
this 401(k) plan or a section 125 cafeteria plan. In 2000, the maximum amount of
your annual compensation that can be taken into account under the 401(k) plan is
limited to $170,000 per the Internal Revenue Code. This limit is subject to
increase pursuant to an annual cost of living adjustment. You may elect to
modify the amount contributed to the 401(k) plan by filing a new elective
deferral agreement with the 401(k) plan administrator which will be effective
the first day of the following January, except that you may discontinue your
elected deferrals at any time.

Employer contributions. If you make elective deferral contributions, your
employer will at the same time make matching contributions to the 401(k) plan
equal to 20% of your elective deferral, on deferrals of up to 5% of your
compensation. Your elective contributions in excess of 5% of your compensation
will not be

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matched. In addition, your employer may contribute an additional matching
contribution for any plan year. This additional matching contribution would be
allocated among the accounts of those plan participants who remain in the employ
of Mutual Savings on the last day of the plan year and who had completed 1,000
hours of service during the plan year in proportion to their contributions not
in excess of 5% of compensation.

LIMITATIONS ON 401(K) PLAN CONTRIBUTIONS

Limitation on employee elective deferrals. The amount of your elective
deferral contributions may not currently exceed $10,500 per calendar year. The
Internal Revenue Service will periodically increase this annual limitation. If
you defer salary in excess of this limitation, your gross income for Federal
income tax purposes will include the excess in the year of the deferral. In
addition, unless the excess deferral is distributed before April 15 of the
following year, it will be taxed again in the year distributed. Income on the
excess deferral distributed by April 15 of the immediately succeeding year will
be treated, for Federal income tax purposes, as earned and received by the
participant in the tax year in which the distribution is made.

Limitations on annual additions and benefits. In any plan year the
contributions and forfeitures you receive under the 401(k) plan and Mutual's
employee stock ownership plan, in the aggregate, cannot exceed the lesser of
$30,000 or 25% of your compensation, as defined in the 401(k) plan. To the
extent contributions and forfeitures exceed these limitations correction will be
made in the 401(k) plan by having the plan administrator:

(1) distribute any elective deferrals and gains attributable to those
elective deferrals, to the extent that the distribution or return would
reduce the "excess amount" in the participant's accounts;

(2) allocate any "excess amount" remaining after the return of any elective
deferrals to plan participants in the same manner as employer matching
contributions, excluding any participant whose allocation would
otherwise exceed these limitations; and

(3) hold any excess amount remaining after the return of elective deferrals
and reallocation in a "Section 415 Suspense Account" to be used to
reduce employer contributions to the 401(k) plan for the next year.

Limitation on plan contributions for highly compensated employees. The
Internal Revenue Code contains an actual deferral percentage test which limits
the amount of elective deferral contributions and an actual contribution
percentage test which limits the amount of matching contributions that may be
made to the 401(k) plan in any plan year on behalf of highly compensated
employees. Under each test the average contributions on behalf of highly
compensated participants may not exceed the average contributions for all other
participants by more than a percentage specified in the Internal Revenue Code.
Mutual will advise you if these rules limit a contribution or allocation which
would otherwise be made for you. Also, Mutual Savings may exercise its
discretion to make special additional contributions for individuals who are not
highly compensated in order to facilitate passage of the actual deferral
percentage and actual contribution percentage tests. Mutual will notify you if
any special additional contribution is made on your behalf.

Highly compensated employees for a plan year include:

(1) an employee who, during the plan year or the preceding plan year, was
at any time an owner of more than 5% of the stock of Bank Mutual, or
stock possessing more than 5% of the total combined voting power of all
stock of Bank Mutual; or

(2) an employee who, for the preceding plan year, received compensation
from Mutual Savings Bank in excess of $80,000, and, if Mutual Savings
Bank elects for a plan year, was in the group consisting of the top 20%
of employees when ranked on the basis of compensation paid during the
plan year. The $80,000 amount is adjusted annually to reflect increases
in the cost of living.

The trustee will distribute amounts contributed by highly compensated
employees that exceed the actual deferral percentage limitation in any plan
year, together with any income allocable. These contributions must be
distributed before the close of the following plan year first to highly
compensated employees with the greatest dollar amount of deferrals, until the
plan satisfies the actual deferral percentage test. Moreover,
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Mutual Savings will be subject to a 10% excise tax on these contributions
unless, together with any income allocable thereto, they are distributed before
the close of the first 2 1/2 months following the plan year to which the
contributions relate. In addition, the trustee will distribute any matching
contributions on behalf of highly compensated employees that exceed the actual
contribution percentage limitation in any plan year, together with any income
allocable thereto, before the close of the following plan year. A 10% excise tax
will also be imposed on Mutual Savings Bank with respect to these contributions,
unless such contributions, plus any income allocable thereto, are distributed
within 2-1/2 months following the close of the plan year in which they arose.

VESTING UNDER THE 401(K) PLAN

At all times, you have a fully vested, nonforfeitable interest in your
accounts holding elective deferral contributions and employer matching
contributions made on your behalf.

INVESTMENT OF CONTRIBUTIONS AND ACCOUNT BALANCES

All amounts credited to your accounts under the 401(k) plan are held in
trusts which are administered by trustees appointed by Mutual Savings' board of
directors.

Prior to the effective date of the offering, you and the other participants
were provided the opportunity to direct the investment of your accounts into one
of the following funds:

- Mutual Savings Bank Certificate of Deposit Fund

- Warburg Pincus Fixed Income Common Fund

- Invesco Value total Return Fund

- Dreyfus Founders Balanced Fund

- Oppenheimer Quest Balanced Value A

- American Century Income & Growth Fund

- Dreyfus Appreciation Fund

- Janus Twenty Fund

- Deutsche International Equity Fund

The 401(k) plan now provides that in addition to the funds specified above,
you may direct the investment of all or a portion of your account in the Bank
Mutual stock fund.

You may elect to have both past contributions and earnings, as well as
future contributions to your account, invested in the Bank Mutual stock fund or
among the funds listed above, or a combination. You may change your investment
election at any time. Changes are implemented as soon as administratively
practicable. Transfers of past contributions and the earnings thereon do not
affect the investment mix of future contributions. If you make an election to
direct investment of assets into the Bank Mutual stock fund, you may change your
investment at a future date. This may be done by: (i) filing an investment
change form with the Human Resources Department of Mutual Savings Bank; (ii) by
calling (1-800-784-6696); or (iii) by the Internet at
(http://www.wtl.com/mr401k). Allocations out of the Bank Mutual stock fund will
be implemented by sale of Bank Mutual stock on the open market. The proceeds of
the sale will be allocated to your account and reinvested in the other funds as
you direct.

A. CURRENT FUNDS

Prior to the effective date of the offering, the trustee invested 401(k)
plan accounts in the nine funds specified above. The following table provides
performance data with respect to the investment funds available under the 401(k)
plan. The information about the Mutual Savings Bank CD has been provided by
Mutual

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Savings Bank. The information about the remaining funds, which are mutual funds,
has been drawn from fund prospectuses and a publication of Bloomberg LP.

<TABLE>
<CAPTION>
YTD %
TOTAL 1999 1998 1997 TOTAL TOTAL
INVESTMENT RETURN TOTAL TOTAL TOTAL % RETURN % RETURN
FUND OBJECTIVE FUND 07/19/00 % RETURN % RETURN % RETURN 5 YRS 10 YRS
-------------- ---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Stable Asset......... Mutual Savings CD 5.44 5.37 5.83 5.90 5.97 n/a
Corporate Bond....... Warburg Pincus 1.73 (0.04) 6.51 8.80 7.20 7.22
Fixed-Income Common
Mixed Assets......... Invesco Total Return (4.63) (1.36) 13.63 25.04 10.68 n/a
Mixed Assets......... Dreyfus Founders 2.43 (2.22) 13.96 16.92 14.90 11.47
Balanced
Growth & Income...... Oppenheimer Quest (1.13) 11.23 28.18 31.01 21.67 16.24
Balanced Value A
Growth & Income...... American Century (1.87) 17.96 27.66 34.31 28.02 21.43
Growth & Income
Growth Equity........ Janus Twenty (2.90) 64.90 73.39 29.70 45.22 26.88
Growth Equity........ Dreyfus Appreciation 3.30 9.97 30.85 27.85 26.10 16.81
Fund
International........ Deutsche International (6.79) 32.22 20.82 17.37 21.44 19.25
Equity
</TABLE>

Past performance is no guarantee of future results. Actual investment
performance may differ from what is reflected above based upon your beginning
account balance, transfers within your account and the timing of deposits to
your account. Investment return and principal value of the mutual funds will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.

The following is a brief description of each of the 401(k) plan's nine
existing investment funds:

Mutual Savings Bank CD Fund invests in certificates of deposit of
Mutual Savings Bank for short terms approximating one year. The CDs are
insured by the FDIC up to $100,000 for each covered depositor.

Warburg Pincus Fixed-Income Common Fund is an open-end fund whose
investment objective seeks to provide high current income consistent with
reasonable risk and also capital appreciation. The fund seeks to achieve
its objective by investing primarily in fixed-income securities denominated
primarily in U. S. dollars.

Invesco Total Return Fund is an open-end fund which seeks to provide a
high total return on investment through capital appreciation and current
income. The fund seeks to meet its objective by investing its assets
primarily in a combination of equity securities and fixed-income
securities. The fund seeks reasonably consistent total returns over a
variety of market cycles.

Dreyfus Founders Balanced Fund is an open-end fund whose investment
objective seeks to provide current income and capital appreciation. The
fund seeks to achieve its objective by investing in a balanced portfolio of
dividend paying common stocks, U. S. and foreign government obligations and
a variety of corporate fixed-income securities.

Oppenheimer Quest Balanced Value A Fund is an open-end fund whose
investment objective seeks a combination of growth of capital and
investment income. The fund invests mainly in common stocks of U. S.
issuers that the portfolio manager believes are undervalued in the
marketplace. The fund also invests in other equity securities, such as
preferred stock and convertible securities.

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American Century Growth & Income Fund is an open-end fund which seeks
to provide dividend growth, current income and capital appreciation. The
fund seeks to meet its objective by investing its assets primarily in large
company stocks. The fund may invest in the stocks of small and medium sized
companies.

Janus Twenty Fund seeks growth of capital. The fund invest primarily
in common stocks. Security selection is based on analysis of economic and
stock market cycles to determine if investing in equity securities is
favorable at any given time. In unfavorable markets, the fund will invest
in senior securities or short-term interest bearing securities.

Dreyfus Appreciation Fund is an open-end fund whose investment
objective seeks long-term capital growth. The fund seeks to achieve its
objective by investing primarily in common stocks of domestic and foreign
issuers. The fund may also invest in debt securities of foreign
governments.

Deutsche International Equity Fund is an open-end, no-load fund whose
investment objective seeks long-term capital appreciation. The fund seeks
to achieve its objective by investing in foreign equity securities or other
securities with equity characteristics

Please see the prospectuses for each of the above funds (other than the
Mutual Savings Bank CD fund) for more detailed information. You can obtain
additional copies of any of these prospectuses from Mr. Eugene H. Maurer, Mutual
Savings Bank, 4949 West Brown Deer Road, P. O. Box 245034, Brown Deer, WI
53224-9534. Phone: (414) 354-1500.

You as an individual participant do not have voting rights with respect to
any of the investment funds other than the Bank Mutual stock fund.

Upon request you are entitled to receive the following information with
respect to the 401(k) plan's investment funds:

(i) a description of the annual operating expenses of each investment
alternative (e.g. investment management fees, administrative fees,
transaction costs) which reduce the rate of return to participants
and beneficiaries, and the aggregate amount of such expenses
expressed as a percentage of average net assets of the investment
alternative;

(ii) copies of any prospectuses, financial statements and reports, and of
any other materials relating to the investment alternatives available
under the plan, to the extent such information is provided to the
plan;

(iii) a list of the assets held in the portfolio of each common or
collective fund (that is not a registered mutual fund) and for each
fixed rate investment contract, name of the issuer, the contract term
and the rate of return;

(iv) information concerning the current value of, as well as the past and
current investment performance of, each available investment
alternative, determined, net of expenses, on a reasonable and
consistent basis; and

(v) information concerning the value of any investment alternatives held
in your account.

To receive any of the information above, contact Mr. Eugene H. Maurer,
Mutual Savings Bank, 4949 West Brown Deer Road, P. O. Box 245034, Brown Deer, WI
53224-9534. Phone: (414) 354-1500.

B. THE BANK MUTUAL STOCK FUND

Any amounts allocated to the Bank Mutual stock fund in advance of the
offering will be held in a Mutual Savings Bank savings account or certificate of
deposit. On the closing date of the offering, those amounts will be applied to
purchase Bank Mutual stock. The funds of 401(k) plan participants with higher
priorities in the subscription offering will be invested before those of
participants of those with lower priorities. In the event the offering is
over-subscribed and all of the cash in the fund may not be used to purchase Bank
Mutual common stock, the amount that cannot be invested in accordance with
participant elections will be reinvested in the

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other investment funds in accordance with each participant's existing investment
election (or, if you made no allocations to other investment funds, in the
investment funds from which their amount was removed, on a proportionate basis).
However, commencing after the closing date of the offering, participants will
have the ability to direct amounts into the Bank Mutual stock fund the same as
in any fund under the plan.

For periods after the offering, the plan fiduciaries will, to the extent
practicable, use all amounts allocated to the Bank Mutual stock fund, including
cash dividends paid on common stock held in the Bank Mutual stock fund, to
purchase shares of common stock of Bank Mutual on the open market. Only whole
shares of Bank Mutual will be purchased. Each person who elects to invest in the
Bank Mutual stock fund will have two sub-accounts in such fund, i.e., a stock
sub-account and a cash sub-account (a money market account or savings deposit
account holding cash that will be used to buy whole shares). The cash
sub-account may be invested in Mutual Savings accounts. Periodically, when the
cash sub-account has sufficient cash, the plan will use such cash to purchase
stock. It is expected that all purchases will be made at prevailing market
prices. Under certain circumstances, the plan fiduciaries may be required to
limit the daily volume of shares purchased.

As of the date of this prospectus supplement, none of the shares of common
stock have been issued or are outstanding and there is no established market for
the common stock. Accordingly, there is no record of the historical performance
of the Bank Mutual stock fund. Performance will be dependent upon a number of
factors, including the financial condition and profitability of Bank Mutual and
Mutual Savings Bank and market conditions for the common stock generally.

WITHDRAWALS AND DISTRIBUTIONS FROM THE 401(K) PLAN

Distribution upon termination of employment. Payment of your account
balance will be made upon your termination of employment in a lump-sum payment.
Payment will be made in cash except to the extent that your account is invested
in Bank Mutual common stock, in which case you may receive the portion of your
account so invested in shares of Bank Mutual common stock (no fractional shares
will be distributed). Alternatively, the lump-sum payment may be directly rolled
over to another qualified employee benefit plan or individual retirement
account. Payment generally is made as soon as administratively possible after
termination of your employment. However, if your account balance exceeds $5,000,
distribution will be made on the first of the month after your 65th birthday
unless you elect to receive an earlier distribution.

Distribution upon death. If you die prior to distribution of your account
balance, your account balance will be paid to your beneficiary in a lump sum as
soon as administratively practicable following your death. Alternatively, if
your spouse is your beneficiary, your account balance may be directly rolled
over to an individual retirement account.

Withdrawals prior to termination of employment. You may withdraw amounts
from your account during employment only under limited circumstances: (i) if you
are still employed after you attain age 70 1/2; or (ii) if you suffer a
financial hardship, provided that the amount you withdraw does not exceed the
amount actually needed. Hardship distributions may only be made to you from your
elective contribution account balance. Hardship distributions may not be made
from your matching contribution account balance. If you receive a hardship
distribution, you will not be permitted to make any additional elective
contributions (or receive matching contributions with respect thereto) until
January 1 following the one year anniversary of the date of the hardship
withdrawal.

Nonalienation of benefits. Except for Federal tax liens or a qualified
domestic relations order, your benefits payable under the 401(k) plan cannot be
alienated. Examples of alienation include transferring your benefits voluntarily
and a creditor placing a lien on your benefits. Any attempt to alienate your
benefits, whether voluntary or involuntary, shall be void.

TRUSTEES

Two separate trusts have been created to hold the assets of the plan. The
trustee of each trust is appointed by the Board of Directors of Mutual Savings
Bank. Currently the trustee of one of the trusts is Charles Schwab Trust
Company. The trustee of the other trust is Mutual Savings Bank. The Mutual
Savings Bank Investment Committee directs the trustees with respect to the
investment funds which are to be available

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under the plan. The Mutual Savings Bank Investment Committee is also appointed
by the Board of Directors of Mutual Savings Bank.

PLAN ADMINISTRATOR

The 401(k) plan is administered by Mutual Savings Bank as the plan
administrator. Mutual's address is 4949 West Brown Deer Road, P. O. Box 245034,
Milwaukee, WI 53224-9534, telephone number (414) 354-1500. The plan
administrator is responsible for the administration of the 401(k) plan,
interpretation of the provisions of the 401(k) plan, prescribing procedures for
filing applications for benefits, preparation and distribution of information
explaining the 401(k) plan, maintenance of 401(k) plan records, books of account
and all other data necessary for the proper administration of the 401(k) plan,
preparation and filing of all returns and reports relating to the 401(k) plan
which are required to be filed and for all disclosures required to be made to
participants, beneficiaries and others.

REPORTS TO 401(K) PLAN PARTICIPANTS

The plan administrator, or its designee, will furnish you with a quarterly
statement showing:

(1) the current market value of each fund as of the end of the quarter; and

(2) the amount of contributions and earnings allocated to your account for
that period.

AMENDMENT AND TERMINATION

It is the intention of Mutual Savings to continue the 401(k) plan
indefinitely. Nevertheless, Mutual Savings may terminate the 401(k) plan at any
time. Mutual Savings reserves the right to make, from time to time, any
amendment or amendments to the 401(k) plan which do not cause any part of the
trust to be used for, or diverted to, any purpose other than the exclusive
benefit of participants or their beneficiaries; provided, however, that Mutual
Savings may make any amendment it determines necessary or desirable, with or
without retroactive effect, to comply with ERISA.

MERGER, CONSOLIDATION OR TRANSFER

In the event of the merger or consolidation of the 401(k) plan with another
plan, or the transfer of the trust assets to another plan, the 401(k) plan
requires that you would, if either the 401(k) plan or the other plan then
terminated, receive a benefit immediately after the merger, consolidation or
transfer which is no less than the benefit you would have been entitled to
receive immediately before the merger, consolidation or transfer, if the plan
had then terminated.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material Federal income tax aspects of
the 401(k) plan. However, statutory provisions are subject to change, as are
their interpretations, and their application may vary in individual
circumstances. The consequences under state and local income tax laws may not be
the same as under the Federal income tax laws. You are urged to consult your tax
advisors with respect to any distribution from the 401(k) plan and transactions
involving the 401(k) plan.

The 401(k) plan is tax-qualified and the related trust is exempt from tax
under the Internal Revenue Code. The 401(k) plan will be administered to comply
in operation with the requirements of the Internal Revenue Code as of the
effective date of any change in the law. Mutual Savings expects to timely adopt
any amendments to the 401(k) plan that may be necessary to maintain the
qualified status of the 401(k) plan under the Internal Revenue Code.

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Assuming that the 401(k) plan is administered in accordance with the
requirements of the Internal Revenue Code, participation in the 401(k) plan
under existing federal income tax laws will have the following effects:

(1) The contributions to your account and the investment earnings on the
account are not includible in your Federal taxable income until the
contributions or earnings are actually distributed or withdrawn from
the 401(k) plan. Special tax treatment may apply to the taxable portion
of any distribution that includes Bank Mutual common stock or qualifies
as a lump-sum distribution, as described below; and

(2) Income earned on assets held by the trust will not be taxable to the
trust.

Lump-sum distribution. A distribution from the 401(k) plan to you or your
beneficiary will qualify as a lump-sum distribution if it:

(1) is made within one calendar year;

(2) is on account of your death or, if you have completed 5 years of plan
participation, on account of your disability, separation from service
(after completion of 5 years of plan participation) or after you attain
age 59 1/2; and

(3) consists of your entire balance under the 401(k) plan and all other
profit sharing plans, if any, maintained by Mutual Savings. The portion
of any lump-sum distribution that is required to be included in your
taxable income for Federal income tax purposes, consists of the entire
amount of the lump-sum distribution less the amount of after-tax
contributions, if any, made by you to the 401(k) plan or any other
profit sharing plan maintained by Mutual Savings which is included as
part of the lump-sum distribution.

Averaging rules. The portion of the total taxable amount of a lump-sum
distribution that is attributable to participation after 1973 in the 401(k) plan
or in any other profit-sharing plan maintained by Mutual Savings, referred to as
the ordinary income portion, will be taxable generally as ordinary income for
Federal income tax purposes.

If you turned 50 by 1985, you may elect to have your lump-sum distribution
taxed under a ten-year income averaging rule which would allow you to pay a
separate tax on the lump-sum distribution that would approximate the tax (under
the rates in effect in 1986) that would have been due if the distribution had
been received in ten equal annual installments; you also may elect to have that
portion of the lump-sum distribution attributable to your pre-1974 participation
in a plan treated as a long-term capital gain and taxed at a rate of 20%.

Common stock included in lump-sum distribution. If a lump-sum distribution
includes common stock, the distribution generally will be taxed in the manner
described above under lump-sum distributions, except that you may elect to have
the total taxable amount reduced by the amount of any net unrealized
appreciation with respect to such common stock, i.e., the net unrealized
appreciation is the excess of the value of such common stock at the time of the
distribution over the cost or other basis to the trust. You need not have
completed five years of participation in order to elect this special treatment
with respect to net unrealized appreciation.

Example: Assume the 401(k) plan purchases 100 shares of common stock in the
offering at $10 per share. Ten dollars would be the cost basis of
the stock to the 401(k) plan. If the 401(k) plan distributes the
common stock to you in a lump-sum distribution when the stock is
trading at $18 per share, you will be taxed in the year of
distribution on the $10 cost basis of the stock to the 401(k)
plan. The additional $8 per share, or the net unrealized
appreciation, will not be taxed until you sell the stock.

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The tax basis of such common stock for purposes of computing gain or loss
on its subsequent sale will be the value of the common stock at the time of
distribution less the amount of net unrealized appreciation.

Example: Assuming the same facts as above, your cost basis in the stock is
$10, which is the $18 value of the stock at the time of
distribution minus the $8 of net unrealized appreciation.

Any gain on a sale or other taxable disposition of such common stock, to
the extent of the amount of net unrealized appreciation at the time of
distribution, will be considered long-term capital gain regardless of the
holding period of such common stock. Any gain on a sale or other taxable
disposition of the common stock in excess of the amount of net unrealized
appreciation at the time of distribution will be considered short-term, or
long-term capital gain depending upon the length of the holding period of the
common stock.

Example: Assume you sell 50 shares of the stock in January, seven months
after you receive the distribution, for $20 per share. You will be
taxed as follows: You will not be taxed again on the $10 cost
basis you recognized as income at the time of distribution. The $8
in net unrealized appreciation will be taxed at long-term capital
gains rates. However, the $2 appreciation in the value of the
stock that occurred since the distribution will be taxed at
short-term capital gains rates since you have only held the stock
for seven months following its distribution to you.

You may instead elect not to have the special rule apply to the net
unrealized appreciation. In this case, your net unrealized appreciation will be
taxed in the year of the distribution.

Contribution to another qualified plan or to an individual retirement
account. You may defer Federal income taxation of all or any portion of the
total taxable amount of a lump-sum distribution, including the proceeds from the
sale of any common stock included in the lump-sum distribution, to the extent
that such amount, or a portion thereof, is rolled over, i. e., contributed,
within 60 days after the date of its receipt by you, to another qualified plan
or to an individual retirement account. If less than the total taxable amount of
a lump-sum distribution is contributed to another qualified plan or to an
individual retirement account within the applicable 60-day period, the amount
not so contributed must be included in your income for Federal income tax
purposes and will not be eligible for the special averaging rules or for capital
gains treatment.

Example: You receive a distribution of 500 shares of stock and $3,000 cash
from the 401(k) plan on June 30. If you intend to roll your
distribution over to another tax qualified plan or individual
retirement account, you must do so no later than August 29, which
is 60 days after you received the distribution. If you roll over
all the stock but none of the cash, you must include the $3,000
cash in your income for the calendar year in which the
distribution is made to you.

You generally may defer the Federal income taxation of any portion of any
other distribution made on account of your separation from service, if the
amount is distributed within one taxable year, and is contributed, within 60
days after the date of its receipt by you, to an individual retirement account.

You have the right to elect to have the plan directly roll over all or any
portion of an "eligible rollover distribution" to another qualified plan or to
an individual retirement account. If you do not elect to have an eligible
rollover distribution so transferred directly to another qualified plan or to an
individual retirement account, the distribution will be subject to a mandatory
federal withholding tax equal to 20% of the taxable distribution. An eligible
rollover distribution means any amount distributed from the 401(k) plan except:

(1) a distribution that is (a) one of a series of substantially equal
periodic payments made, not less frequently than annually, over your
life or the joint lives of you and your designated beneficiary, or (b)
for a specified period of ten years or more;

(2) any amount that is required to be distributed under the minimum
distribution rules; and

(3) any other distributions excepted under applicable federal law.

If your beneficiary is your surviving spouse, he or she also may defer
federal income taxation of all or any portion of a distribution from the 401(k)
plan to the extent that such amount, or a portion thereof, is contributed within
60 days after the date of its receipt by your surviving spouse, to an individual
retirement account. Any amount received by your surviving spouse that is not
contributed to another qualified plan or to
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an individual retirement account within the applicable 60-day period, and any
amount received by a nonspouse beneficiary will be included in such
beneficiary's income for Federal tax purposes in the year in which it is
received.

If all or any portion of the total taxable amount of a lump-sum
distribution is contributed within the applicable 60-day period to an individual
retirement account or directly rolled to an individual retirement account, any
subsequent distribution from the individual retirement account will not be
eligible for the special averaging rules, for capital gains treatment or for the
special treatment of net unrealized appreciation.

Additional Tax on Early Distributions. If you receive a distribution from
the 401(k) plan prior to attaining age 59 1/2 it will be subject to an
additional federal income tax equal to 10% of the taxable amount of the
distribution. The 10% additional income tax will not apply, however, to the
extent the distribution is rolled over into an IRA or another qualified plan or
the distribution is made for certain reasons, including a distribution:

(1) made to a beneficiary, or to your estate, on or after your death;

(2) attributable to your disability;

(3) part of a series of substantially equal periodic payments not less
frequently than annually made for your life or life expectancy or the
joint lives or joint life expectancies of you and your beneficiary;

(4) made to you after separation from service under the 401(k) plan after
attainment of age 55;

(5) made to pay medical expenses to the extent deductible for Federal
income tax purposes;

(6) made to an alternate payee pursuant to a qualified domestic relations
order;

(7) made to satisfy a Federal tax levy; or

(8) made to effect the distribution of excess contributions or excess
deferrals.

ADDITIONAL ERISA CONSIDERATIONS

As noted above, the 401(k) plan is subject to certain provisions of ERISA,
including special provisions relating to control over the 401(k) plan's assets
by participants and beneficiaries. The 401(k) plan's feature that allows you to
direct the investment of your account balances is intended to satisfy the
requirements of section 404(c) of ERISA relating to control over plan assets by
a participant or beneficiary. The effect of this is two-fold. First, you will
not be deemed a "fiduciary" because of your exercise of investment discretion.
Second, no person who otherwise is a fiduciary, such as your employer, the plan
administrator, or a plan trustee is liable under the fiduciary responsibility
provisions of ERISA for any loss which results from your exercise of control
over the assets in your 401(k) plan account.

Because you will be entitled to invest all or a portion of your account
balance in the 401(k) plan in Bank Mutual common stock, the regulations under
section 404(c) of ERISA require that the 401(k) plan establish procedures that
ensure the confidentiality of your decision to purchase, hold, or sell employer
securities, except to the extent that disclosure of such information is
necessary to comply with federal or state laws not preempted by the ERISA. These
regulations also require that your exercise of voting and similar rights with
respect to the common stock be conducted in a way that ensures the
confidentiality of your exercise of these rights. Under these procedures, only
those individuals who are actively involved in the processing of participant
investment elections, the maintenance and distribution of account information
and compliance with the reporting and disclosure requirements of ERISA would
have access to information relating to participant directed transactions
involving employer securities, including purchase, holding and sale and the
exercise of voting, tender and similar rights. Those persons would be charged
with the responsibility not to use or divulge that information in any way except
in carrying out such responsibilities. Further, no other officers or employees
of Mutual Savings or its affiliates shall be permitted access to such
information (except as it relates to the requesting person's own account). Mr.
Eugene H. Maurer, Jr., Mutual Savings Bank, 4949 West Brown Deer Road, P. O. Box
245034, Milwaukee, WI 53224-9534 (phone: 414-354-1500) is the plan fiduciary
responsible for monitoring compliance with these confidentiality procedures. In
addition Mr. Maurer shall
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appoint an independent fiduciary to carry out any activities relating to any
situations that Mr. Maurer determines have a potential for undue employer
influence on participants with respect to the exercise of their rights as
shareholders with respect to Bank Mutual stock such as, for example, tender
offers, exchange offers and contested board elections.

SEC REPORTING AND SHORT-SWING PROFIT LIABILITY OF BANK MUTUAL OFFICERS AND
DIRECTORS

Section 16 of the Securities Exchange Act of 1934 imposes reporting and
liability requirements on officers, directors, and persons beneficially owning
more than 10% of public companies such as Bank Mutual. Section 16(a) requires
the filing of reports of beneficial ownership and changes in that ownership. In
addition to the reporting requirements, section 16(b) provides for the recovery
by Bank Mutual of profits realized by an officer, director or any person
beneficially owning more than 10% of Bank Mutual's common stock resulting from
non-exempt purchases and sales of Bank Mutual common stock within any six-month
period.

Unless there is an exemption, discretionary transactions in and beneficial
ownership of the common stock through the Bank Mutual stock fund of the 401(k)
plan by officers, directors and persons beneficially owning more than 10% of the
common stock of Bank Mutual generally must be reported to the SEC by such
individuals. The SEC has adopted rules that provide exemptions from the profit
recovery provisions of section 16(b) for transactions in employer securities
within an employee benefit plan, provided certain requirements are met. These
requirements generally involve restrictions upon the timing of elections to
acquire or dispose of employer securities for the accounts of section 16(b)
persons. Except for distributions of common stock due to death, disability,
retirement, termination of employment or under a qualified domestic relations
order, persons affected by section 16(b) are required to hold shares of common
stock distributed from the 401(k) plan for six months following such
distribution and are prohibited from directing additional purchases within the
Bank Mutual stock fund for six months after receiving such a distribution.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

<TABLE>

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<S> <C>
Legal Fees and Expenses............................................... $800,000
Financial Advisor..................................................... 200,000
Accounting Fees and Expenses.......................................... 300,000
Appraisal/Business Plan Fees.......................................... 150,000
Conversion Agent...................................................... 80,000
Printing Fees and Expenses............................................ 275,000
Postage and Mailing Expenses.......................................... 275,000
Stock Certificate Expenses............................................ 8,000
Transfer Agent Fees................................................... 50,000
Marketing Agent Fees and Expenses..................................... 930,000
Filing Fees:
OTS........................................................... 10,000
Nasdaq (including entry and listing fees)..................... 95,000
SEC........................................................... 23,000
NASD.......................................................... 9,000
IRS Ruling Request............................................ 5,000
Other................................................................. 415,000
--------
*Total.............................................. $3,625,000
</TABLE>

-----------------
* All amounts are estimated. Expenses relate to a combination of the
restructuring, the stock issuance and the First Northern merger because the
transactions are in many respects intermingled. Represents Mutual's expenses,
but does not include First Northern's.

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Bank Mutual will be incorporated under federal law, and indemnification
of its directors will be governed by federal law, and OTS regulations
thereunder. Federal regulations define areas for indemnity coverage by federal
savings banks, such as Mutual Savings (the "Bank") as follows:

(a) Any person against who any action is brought or threatened because
that person is or was a director or officer of the Bank shall be indemnified by
the Bank, as the case may be, for:

(i) Any amount for which such person becomes liable under a
judgment in such action; and

(ii) Reasonable costs and expenses, including reasonable
attorney's fees, actually paid or incurred by such person in
defending or settling such action, or in enforcing his or her
rights to indemnification if the person attains a favorable
judgment in such enforcement action, which may be advanced in
certain instances.

(b) Indemnification provided for in subparagraph (a) shall be made to
such officer or director only if the requirements of this paragraph are met:

(i) The Bank shall make the indemnification provided by
subparagraph (a) in connection with any such action which results
in a final judgment on the merits in favor of such officer or
director.

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(ii) The Bank shall make the indemnification provided by
subparagraph (a) in case of settlement of such action, final
judgment against such director or officer or final judgment in
favor of such director or officer other than on the merits, if a
majority of the disinterested directors of the Bank determines that
such a director or officer was acting in good faith within the
scope of his or her employment or authority as he or she could
reasonably have believed under the circumstances was in the best
interest of the Bank or its members.

(i) "action" means any judicial or administrative
proceeding, or threatened proceeding, whether civil, criminal, or
otherwise, including any appeal or other proceeding for review;

(ii) "final judgment" means a judgment, decree, or order
which is not appealable and as to which the period for appeal has
expired with no appeal taken:

(iii) "settlement" includes the entry of a judgment by
consent or by confession or a plea of guilty or nolo contendere.

Regulations promulgated by the OTS subject Bank Mutual to the same
indemnification regulations applicable to the Bank as described above.

The Bank has a directors and officers liability policy providing for
insurance against certain liabilities incurred by directors and officers of the
Bank while serving in their capacities as such, and Bank Mutual and the MHC will
continue coverage, which is intended to be increased to reflect Bank Mutual's
status as a publicly-traded company.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Not Applicable.

ITEM 26. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

See the Exhibit Index following the Signatures page in this
Registration Statement, which Exhibit Index is incorporated herein by reference.

ITEM 22. UNDERTAKINGS.

Bank Mutual hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate

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<PAGE> 283

offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement; and

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;

provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

(4) That every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions referred to in Item 20 of
this Registration Statement, or otherwise, Bank Mutual has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by Bank Mutual of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, Bank Mutual will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

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<PAGE> 284

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
Village of Brown Deer, State of Wisconsin, on September 7, 2000.

BANK MUTUAL CORPORATION
(Registrant)

By: /s/ Michael T. Crowley, Jr.
-----------------------------------
Michael T. Crowley, Jr.
Chairman and Chief Executive Officer
of Mutual Savings Bank, which is
forming Bank Mutual Corporation
pursuant to the Plan of
Reorganization

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the date indicated.*

SIGNATURE TITLE
<S> <C>
/s/ Michael T. Crowley, Jr. Chairman and Chief Executive Officer;
------------------------------------- Director
Michael T. Crowley, Jr.

/s/ Eugene H. Maurer, Jr. Senior Vice President and Chief Financial Officer
------------------------------------- (principal financial officer)
Eugene H. Maurer, Jr.

/s/ Marlene M. Scholz Controller (principal accounting officer)
-------------------------------------
Marlene M. Scholz

THOMAS H. BUESTRIN** Director
-------------------------------------
Thomas H. Buestrin

MICHAEL T. CROWLEY, SR.** Director
-------------------------------------
Michael T. Crowley, Sr.

R.W. DWYER, JR.** Director
-------------------------------------
R.W. Dwyer, Jr.

HERBERT W. ISERMANN** Director
-------------------------------------
Herbert W. Isermann

WILLIAM J. MIELKE** Director
-------------------------------------
William J. Mielke

DAVID J. ROLFS** Director
-------------------------------------
David J. Rolfs

</TABLE>

*Each of the above signatures is affixed as of September 7, 2000. Capacities
indicated are with Mutual Savings Bank, which is forming Bank Mutual Corporation
pursuant to the Plan of Reorganization.

**By /s/ Michael T. Crowley, Jr.
--------------------------------
Attorney-in-fact

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<PAGE> 285

BANK MUTUAL
("BANK MUTUAL" OR THE "REGISTRANT")

EXHIBIT INDEX
TO
FORM S-1 REGISTRATION STATEMENT

The following exhibits are filed with or incorporated by reference in
this Registration Statement:

EXHIBIT DESCRIPTION INCORPORATED HEREIN PREVIOUSLY FILED
BY REFERENCE TO FILED HEREWITH
<S> <C> <C> <C> <C>

1.1 Agency Agreement between Mutual Savings X
Bank and Ryan Beck (draft form of)
1.2(a) Agreement between Mutual Savings Bank and X
Ryan, Beck & Co. executed February 3, 2000
1.2(b) Confirming amendment thereto dated June X
14, 2000
2.1 Plan of Restructuring from Mutual Savings X
Bank to Mutual Holding Company of Mutual
Savings Bank, as amended and restated
July 31, 2000*
2.2 Agreement and Plan of Merger, dated as of X
February 21, 2000, by and among Mutual
Savings Bank, OV Corp. and First Northern
Capital Corporation*
3(i) Charter of Bank Mutual X
3(ii) Bylaws of Bank Mutual X
4.1 Charter of Bank Mutual Exhibit 3(i) above
4.2 Stock Issuance Plan of Mutual Savings, X
as amended and restated July 31, 2000
4.3 Plan of Restructuring Exhibit 2.1 above
5.1 Opinion of Quarles & Brady LLP as to the X
legality of the securities being
registered
8.1 Opinion of Quarles & Brady LLP as to the X
tax consequences of the transaction

10.1 Mutual Savings Benefit Restoration Plan X
10.2 Mutual Savings' Outside Directors' X
Retirement Plan
</TABLE>

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<PAGE> 286

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED HEREIN PREVIOUSLY FILED
BY REFERENCE TO FILED HEREWITH
<S> <C> <C> <C> <C>
10.3 Mutual Savings Executive Excess Benefit X
Plan
10.4 Agreement regarding deferred compensation X
Agreement dated May 16, 1988 between
Mutual Savings and Michael T. Crowley, Sr.
10.5(a) Employment Agreement between Mutual X
Savings and Michael T. Crowley Jr.
10.5(b) Amendment thereto dated February 17, 1998 X
10.6(a) Employment Agreement between Mutual X
Savings and Michael T. Crowley, Sr. dated
December 31, 1993
10.6(b) Amendment thereto dated February 17, 1998 X
10.7 Form of Employment Agreements of other X
Mutual Savings executive officers
23.1 Consent of Ernst & Young LLP, Mutual X
Savings' independent accountants
23.2 Consent of Wipfli Ullrich Bertelson LLP, X
First Northern's independent accountants
23.3 Consents of Quarles & Brady LLP Contained in Exhibits
5.1 and 8.1
23.4 Consent of RP Financial, appraiser X
23.5 Consent of Michael Meeuwsen, named as a X
prospective director
23.6 Consent of Ernst & Young LLP, First Contained in Exhibit
Northern's former independent accountants 23.1
24.1 Powers of Attorney On Signatures page
27.1 Financial Data Schedule X
99.1(a) RP Financial Appraisal as of June 9, 2000** X
99.1(b) RP Financial Appraisal Update as of
August 25, 2000** X
99.2 Marketing Materials, including X
Q&A brochure and share order form
</TABLE>

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

* Without exhibits or schedules, which will be furnished to the Commission
upon request.
** Portions of this exhibit are being filed via EDGAR. The registrant has
filed the balance of the exhibit in paper form, pursuant to a continuing
hardship request.

EI-2