Bank Mutual Corporation Reports 99% Increase In Net Income For The Second Quarter Of 2013

MILWAUKEE, July 17, 2013 /PRNewswire/ -- Bank Mutual Corporation (NASDAQ: BKMU) reported net income of $2.6 million or $0.06 per diluted share in the second quarter of 2013, which was a 99% improvement over net income of $1.3 million or $0.03 per diluted share in the same quarter in 2012.  Year-to-date, Bank Mutual Corporation ("Bank Mutual") reported net income of $5.2 million or $0.11 per diluted share in 2013, which was more than double the $2.5 million or $0.05 per diluted share reported during the same six-month period in 2012.  The improvements in net income between these periods were due primarily to higher net loan servicing fee revenue, higher net interest income, lower net losses and expenses on foreclosed real estate, and lower federal deposit insurance premiums. These developments were partially offset by lower gains on sales of loans, higher compensation-related costs and, for the year-to-date period, a larger provision for loan losses.   

David A. Baumgarten, President and Chief Executive Officer of Bank Mutual noted, "We continue to make progress improving our earning asset and funding mixes, as well as lowering our absolute funding costs.  As a result, our net interest margin improved for the fourth quarter in a row."  Mr. Baumgarten added, "Continued improvement in these areas should enable us to offset declines in revenue from our mortgage banking operations that we expect to occur in future quarters."  As previously announced, Mr. Baumgarten became the Chief Executive Officer of Bank Mutual on July 1, 2013, upon the retirement of Michael T. Crowley, Jr.  Mr. Crowley remains Chairman of the Board of Directors of Bank Mutual.      

Bank Mutual's net interest income increased by $1.3 million or 9.0% and by $2.6 million or 8.8% during the three and six months ended June 30, 2013, compared to the same periods in 2012.  These increases were primarily attributable to a 45 basis point improvement in Bank Mutual's net interest margin, from 2.56% in the first half of 2012 to 3.01% during the same period in the current year.  This improvement was due in part to an improved earning asset mix and an improved deposit funding mix between the periods.  Bank Mutual's average loans receivable (which generally have higher yields) increased by $38.6 million or 2.8% between the year-to-date periods and its average mortgage-related securities, investment securities, and overnight investments (which generally have lower yields) declined by $213.9 million or 22.5% in the aggregate between the periods.  With respect to Bank Mutual's deposit funding mix, its average checking and savings deposits (which generally have a lower interest cost or no interest cost) increased by $63.6 million or 7.4% in the aggregate between the year-to-date periods and its average certificates of deposit (which generally have a higher interest cost) declined by $257.0 million or 25.2% between the periods.  Management expects these earning asset and deposit funding trends to continue in the near term, although there can be no assurances. 

Also contributing to the improvement in net interest margin between the year-to-date periods in 2013 and 2012 was a 28 basis point decline in the average cost of Bank Mutual's certificates of deposit, as well as Bank Mutual's repayment of $100.0 million in high-cost borrowings from the FHLB of Chicago in the third quarter of 2012.  Management anticipates that Bank Mutual's cost of certificates of deposit will continue to decline modestly in the near term as older, higher-cost certificates of deposit continue to mature and are replaced by lower cost deposits, although there can be no assurances. 

The favorable impact of the aforementioned developments on net interest income was partially offset by a $175.3 million or 7.5% decrease in average earning assets during the first half of 2013 compared to the same period in 2012.  Bank Mutual's earning assets have declined in recent periods as it has used cash flows from its mortgage-related securities portfolio to fund a decline in its certificates of deposit, as previously noted.

Bank Mutual's provision for loan losses was $1.7 million in the second quarter of 2013 compared to $1.7 million in the same quarter last year.  The provision for the six months ended June 30, 2013, was $2.6 million compared to $1.8 million in the same period last year.  Bank Mutual's provision in the 2013 periods consisted primarily of increases in general loan loss allowances related to growth in its multi-family, commercial real estate, and commercial business loan portfolios in recent periods, as well as a modest increase in charge-off experience on its one- to four-family and consumer loan portfolios.  In comparison, during the first half of 2012, loss provisions against a number of specific multi-family, commercial real estate, and business loan relationships were partially offset by loss recaptures on non-performing loans that paid off and recoveries of previously charged-off loans.   In addition, Bank Mutual increased its general loss allowances modestly during the first half of 2012 due primarily to growth in its loan portfolio during that period.

Bank Mutual's non-performing loans and classified loans have trended lower in recent periods.     Although general economic, employment, and real estate conditions continue to improve modestly in Bank Mutual's markets, current conditions continue to be challenging for borrowers whose loans are secured by commercial real estate, multi-family real estate, and land. As such, there can be no assurances that non-performing loans and/or classified loans will continue to trend lower in future periods or that Bank Mutual's provision for loan losses will not vary considerably in future periods. 

Service charges on deposits increased modestly during the three and six months ended June 30, 2013, compared to the same periods in 2012.  These increases were due primarily to increases in certain service and transaction charges, as well as continued increases in fees from treasury management services that Bank Mutual offers to commercial customers.  These developments were offset in part by lower overdraft fee revenue in the 2013 periods compared to the same periods in 2012.  Management attributes these decreases to recent changes in customer behavior, due in part to generally improving employment and economic conditions in Bank Mutual's local market areas.

Brokerage and insurance commissions were $978,000 during the second quarter of 2013, a $14,000 or 1.5% increase from the same period in the previous year.  On a year-to-date basis, this source of revenue was $1.7 million in 2013, a $125,000 or 8.1% increase from the same period in 2012.  This revenue item consists of commissions earned on sales of tax-deferred annuities, mutual funds, and certain other securities, as well as personal and business insurance products.  Commission revenue in the 2013 periods benefited from higher sales of equity-related investments, which management attributes to improvement in equity markets earlier in the year.  Also contributing were increased sales of tax-deferred annuities, which management attributes to the continued popularity of such investments in generally lower interest rate environments.

Net loan-related fees and servicing revenue was $1.2 million during the three months ended June 30, 2013, compared to a loss of $1.4 million in the same period of the previous year.  On a year-to-date basis, this revenue was $2.2 million during the six months ended June 30, 2013, compared to a loss of $1.3 million in the same period of 2012.  The following table presents the components of net loan-related fees and servicing revenue for the periods indicated:

 


Three Months Ended June 30


Six Months Ended June 30


2013

2012


2013

2012


(Dollars in thousands)

Gross servicing fees

$722

$747


$1,437

$1,440

Mortgage servicing rights amortization

(785)

(979)


(1,793)

(2,022)

Mortgage servicing rights valuation recovery (loss)

1,115

(1,296)


2,229

(975)

    Loan servicing revenue, net

1,052

(1,528)


1,873

(1,557)

Other loan fee income

186

133


314

300

    Loan-related fees and servicing revenue, net

$1,238

$(1,395)


$2,187

$(1,257)

 

The change in the valuation allowance that Bank Mutual maintains against its mortgage servicing rights ("MSRs") is recorded as a recovery or loss, as the case may be, in the period in which the change occurs.  Higher market interest rates for residential loans in recent periods has resulted in lower prepayment expectations on the loans underlying the MSRs, which resulted in a decrease in the valuation allowance during the three and six month periods then ended.  In contrast, lower market interest rates in the 2012 periods resulted in higher prepayment expectations and an increase in the valuation allowance during those periods.  As of June 30, 2013, Bank Mutual had a remaining valuation allowance of $167,000 against MSRs with a gross book value of $9.1 million.  As of the same date Bank Mutual serviced $1.2 billion in loans for third-party investors compared to $1.1 billion one year ago.   

Gains on sales of loans were $1.4 million in the second quarter of 2013 compared to $3.6 million in the same quarter last year.  Year-to-date, gains on sales of loans were $3.2 million in 2013 compared to $6.5 million in 2012.  Bank Mutual typically sells most fixed-rate, one- to four-family mortgage loans that it originates in the secondary market.  During the three and six months ended June 30, 2013, sales of these loans were $51.3 million or 38.6% lower and $70.6 million or 27.6% lower than they were during the same periods in 2012, respectively.  Recent increases in market interest rates have resulted in lower originations and sales of fixed-rate, one- to four-family loans in the 2013 periods compared to the same periods in 2012.  Also contributing to the decrease in gains on sales of loans in 2013 was a decline in Bank Mutual's average gross profit margin on the sales of loans.  Management attributes this decline to the reduced burden that consumer demand has placed on the loan production capacity of the mortgage banking industry as a whole, due to a recent increase in market interest rates, which has caused gross profit margins to decrease.  If these trends continue, management believes that Bank Mutual's gains on sales of loans during the last half of 2013 will continue to decline and will be substantially lower than they were during the same period of 2012. 

In the second quarter of 2012 Bank Mutual recorded $543,000 in gains on sales of investments on the sale of $20.4 million in mortgage-related securities.  Bank Mutual did not sell any investments in 2013. 

In the second quarter of 2012 Bank Mutual recorded $336,000 in net other-than-temporary impairment ("OTTI") losses.  These losses consisted of the credit portion of the total OTTI loss related to Bank Mutual's investment in certain private-label collateralized mortgage obligations ("CMOs") rated less than investment grade.  Bank Mutual did not have any net OTTI losses in 2013.

Compensation-related expenses increased by $311,000 or 2.9% and $789,000 or 3.7% during the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012, respectively.  These increases were due primarily to annual merit increases and increases in payroll-related taxes.    These developments were partially offset by a modest decline in employee healthcare costs due to a renegotiation of such costs with the insurance provider.

Occupancy and equipment expenses increased by $83,000 or 3.0% and $208,000 or 3.6% during the three and six months ended June 30, 2013, respectively, compared to the same periods in the prior year, respectively.  These increases were principally caused by increased repairs and maintenance on Bank Mutual's facilities, due in part to increased snow removal costs earlier in 2013 compared to 2012.

Federal deposit insurance premiums were $236,000 and $1.0 million during the three and six months ended June 30, 2013, respectively.  These amounts compared to $871,000 and $1.7 million during the same periods in 2012, respectively.  The decrease in the 2013 periods was caused by recent improvements in Bank Mutual's financial condition and operating results, which, under the Federal Deposit Insurance Corporation's ("FDIC") risk-based premium assessment system, resulted in lower deposit insurance costs for Bank Mutual in 2013.  In addition, during the second quarter of 2013 Bank Mutual recorded a credit of $250,000 related to confirmation from the FDIC that improvements at Bank Mutual had been retroactively applied to the prior quarter.  Management believes that federal deposit insurance premiums during the remainder of 2013 could be approximately 35% lower than they were during the last half of 2012, although there can be no assurances.

Net losses and expenses on foreclosed real estate were $443,000 and $1.6 million during the three and six months ended June 30, 2013, respectively.  These amounts compared to $970,000 and $3.7 million in the same periods of last year, respectively.  Bank Mutual has experienced lower losses and expenses on foreclosed real estate in recent periods due to lower levels of foreclosed properties.  

Other non-interest expense decreased modestly during the three months ended June 30, 2013, compared to the same period in 2012.  Year-to-date, this expense decreased by $408,000 or 7.9% in 2013 compared to the same period in 2012.  The year-to-date decrease was primarily the result of lower legal, consulting, and accounting fees related to loan workout efforts and related professional services. 

Income tax expense was $1.5 million and $601,000 during the three months ended June 30, 2013 and 2012, respectively, and was $2.7 million and $1.1 million during the six months ended June 30, 2013 and 2012, respectively.  Bank Mutual's effective tax rates ("ETRs") during the three month periods in 2013 and 2012 were 35.9% and 31.3%, respectively.  The ETRs during the six month periods in these same years were 34.1% and 30.2%, respectively.  Bank Mutual's ETR will vary from period to period depending primarily on the impact of non-taxable revenue items, such as tax-exempt interest income and earnings from bank-owned life insurance ("BOLI").  Bank Mutual's ETR will generally be higher in periods in which these non-taxable revenue items comprise a smaller portion of pre-tax income. 

Bank Mutual's total assets decreased by $61.5 million or 2.5% during the six months ended June 30, 2013.  During the period Bank Mutual's mortgage-related securities available-for-sale decreased by $98.9 million due to regular repayments and its cash and due from banks decreased by $15.5 million due to seasonal factors.  These developments were partially offset by a $46.9 million increase in Bank Mutual's overnight investments (due primarily to cash flows from the securities portfolio) and an $11.9 million increase in its loan portfolio.  Also during the period, Bank Mutual's deposit liabilities decreased by $70.2 million.  Bank Mutual's total shareholders' equity increased from $271.9 million at December 31, 2012, to $274.6 million at June 30, 2013.         

Bank Mutual's loans receivable increased by $11.9 million or 0.8% during the six months ended June 30, 2013.  Total loans originated for portfolio decreased by $52.1 million or 22.6% during this period compared to the same period in the previous year.   Originations in all categories of loans declined with the exception of multi-family and construction and development loans, the latter of which consists primarily of multi-family projects.  Management attributes the decline in the origination volumes of commercial real estate and commercial business loans to slow economic growth in recent quarters and overall borrower uncertainty related to the future direction of the economy in general.  Also contributing to the decline in commercial borrowing was the anticipated federal tax law changes in 2013 that motivated certain commercial customers to accelerate contemplated transactions to the fourth quarter of last year, a period in which Bank Mutual experienced a substantial increase in commercial loan originations.  Management attributes the increases in multi-family lending, including construction of such properties, to elevated demand for multi-family properties caused by a general decline in the level of home ownership in recent periods.  With respect to declines in one- to four-family and consumer loan production in the first half of 2013, management attributes these declines to higher interest rates and recent economic uncertainty, as well as increased competition for second mortgages in some of its markets. 

Bank Mutual's deposit liabilities decreased by $70.2 million or 3.8% during the six months ended June 30, 2013.  Core deposits, consisting of checking, savings and money market accounts, increased by $39.6 million or 3.8% during the period while certificates of deposit declined by $109.8 million or 13.5%.  Bank Mutual continues to closely manage the rates it offers on certificates of deposit to control its overall liquidity position, which has resulted in a decline in certificates of deposit in recent periods.  Core deposits have increased in recent periods in response to management's efforts to increase sales of such products and related services to commercial businesses, as well as efforts to focus its retail sales efforts on such products and related services.  Also contributing to the increase in core deposits in recent periods, however, is customer reaction to the low interest rate environment.  Management believes that this environment has encouraged some customers to switch to core deposits in an effort to retain flexibility in the event interest rates rise in the future. 

Bank Mutual's shareholders' equity increased from $271.9 million at December 31, 2012, to $274.6 million at June 30, 2013.  This increase was caused by net income during the period, partially offset by the payment of cash dividends of $0.02 per share to shareholders in each of the first and second quarters.  Also impacting shareholders' equity during the period was a $976,000 increase in accumulated other comprehensive loss primarily caused by a decline in the fair value of Bank Mutual's available-for-sale securities.  This development was the result of a recent increase in market interest rates which had an adverse impact on the fair value of Bank Mutual's available-for-sale securities.  The book value of Bank Mutual's common stock was $5.91 per share at June 30, 2013, compared to $5.87 per share at December 31, 2012.  

Bank Mutual's ratio of shareholders' equity to total assets was 11.65% at June 30, 2013, compared to 11.24% at December 31, 2012.  The increase in this ratio was caused by the reasons noted in the previous paragraph.  Also contributing was a decline in Bank Mutual's total assets during the period, as previously described.  Bank Mutual's subsidiary bank is "well capitalized" for regulatory capital purposes.  As of March 31, 2013 (the latest information available), the subsidiary bank had a total risk-based capital ratio of 18.23% and a Tier 1 capital ratio of 10.46%.  The minimum ratios to be considered "well capitalized" under current supervisory regulations are 10% for total risk-based capital and 6% for Tier 1 capital.  The minimum ratios to be considered "adequately capitalized" are 8% and 4%, respectively.   

The Board of Governors of the Federal Reserve ("FRB") and the Office of the Comptroller of the Currency ("OCC") recently published final regulatory capital rules under Basel III.  Although there can be no assurances, management does not expect these new rules to have a significant impact on its regulatory capital, financial condition, or results of operations.  In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") will eventually impose specific capital requirements on savings and loan holding companies such as Bank Mutual.  These developments, as well as other requirements that could be imposed by regulators, may impact the ability of Bank Mutual and/or its subsidiary bank to pay dividends or, in the case of Bank Mutual, repurchase its common stock.   

Bank Mutual's non-performing loans were $19.9 million or 1.41% of loans receivable as of June 30, 2013, compared to $25.8 million or 1.84% of loans receivable as of December 31, 2012.  Non-performing assets, which includes non-performing loans, were $32.0 million or 1.36% of total assets and $39.8 million or 1.64% of total assets as of these same dates, respectively.   Bank Mutual's non-performing assets and classified loans have declined in recent periods.  However, this trend is subject to many factors that are outside of Bank Mutual's control, such as economic and market conditions.  As such, there can be no assurances that Bank Mutual's non-performing assets and classified loans will continue to decline in future periods or that there will not be significant variability in Bank Mutual's provision for loan losses from period to period.

Bank Mutual's allowance for loan losses was $22.5 million or 1.59% of total loans at June 30, 2013, compared to $21.6 million or 1.54% of total loans at December 31, 2012.  As a percent of non-performing loans, Bank Mutual's allowance for loan losses was 113.2% at June 30, 2013, compared to 83.6% at December 31, 2012.  Management believes the allowance for loan losses at June 30, 2013, was adequate to cover probable and estimable losses in Bank Mutual's loan portfolio as of that date.  However, future increases to the allowance may be necessary and results of operations could be adversely affected if future conditions differ from the assumptions used by management to determine the allowance for loan losses as of the end of the period. 

Bank Mutual Corporation is the third largest financial institution holding company headquartered in the state of Wisconsin as of March 31, 2013 (the latest information available).  Its stock is quoted on the NASDAQ Global Select Market under the ticker BKMU.  Its subsidiary bank, Bank Mutual, operates 75 banking locations in the state of Wisconsin and one in Minnesota.

Cautionary Statements
This report contains or incorporates by reference various forward-looking statements concerning Bank Mutual's prospects that are based on the current expectations and beliefs of management.  Forward-looking statements may contain, and are intended to be identified by, words such as "anticipate," "believe," "estimate," "expect," "objective," "projection," "intend," and similar expressions; the use of verbs in the future tense and discussions of periods after the date on which this report is issued are also forward-looking statements.  The statements contained herein and such future statements involve or may involve certain assumptions, risks, and uncertainties, many of which are beyond Bank Mutual's control, that could cause Bank Mutual's actual results and performance to differ materially from what is stated or expected.  In addition to the assumptions and other factors referenced specifically in connection with such statements, the following factors could impact the business and financial prospects of Bank Mutual:  general economic conditions, including volatility in credit, lending, and financial markets; declines in the real estate market, which could further affect both collateral values and loan activity; continuing relatively high unemployment and other factors which could affect borrowers' ability to repay their loans; negative developments affecting particular borrowers, which could further adversely impact loan repayments and collection; legislative and regulatory initiatives and changes, including action taken, or that may be taken, in response to difficulties in financial markets and/or which could negatively affect the rights of creditors; monetary and fiscal policies of the federal government; the effects of further regulation and consolidation within the financial services industry, including substantial changes under the  Dodd-Frank Act; regulators' increasing expectations for financial institutions' capital levels and restrictions imposed on institutions, as to payments of dividends or otherwise, to maintain or achieve those levels, including the possible effects of new regulatory capital requirements under Basel III; pending and/or potential rulemaking or other actions by the Consumer Financial Protection Bureau ("CFPB"); potential regulatory or other actions affecting Bank Mutual or the Bank; potential changes in the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), which could impact the home mortgage market; increased competition and/or disintermediation within the financial services industry; changes in tax rates, deductions and/or policies; potential further changes in FDIC premiums and other governmental assessments; changes in deposit flows; changes in the cost of funds; fluctuations in general market rates of interest and/or yields or rates on competing loans, investments, and sources of funds; demand for loan or deposit products; illiquidity of financial markets and other negative developments affecting particular investment and mortgage-related securities, which could adversely impact the fair value of and/or cash flows from such securities; changes in customers' demand for other financial services; Bank Mutual's potential inability to carry out business plans or strategies; changes in accounting policies or guidelines; natural disasters, acts of terrorism, or developments in the war on terrorism; the risk of failures in computer or other technology systems or data maintenance, or breaches of security relating to such systems; and the factors discussed in Bank Mutual's filings with the Securities and Exchange Commission, particularly under Part I, Item 1A, "Risk Factors," of Bank Mutual's 2012 Annual Report on Form 10-K.

 Bank Mutual Corporation and Subsidiaries 

 Unaudited Consolidated Statements of Financial Condition 

 (Dollars in thousands, except per share data) 



June 30


December 31


2013


2012

 ASSETS 




 Cash and due from banks 

$34,506


$50,030

 Interest-earning deposits 

83,964


37,029

   Cash and cash equivalents 

118,470


87,059

 Mortgage-related securities available-for-sale, at fair value 

451,305


550,185

 Mortgage-related securities held-to-maturity, at amortized cost 




     (fair value of $155,079 in 2013 and $163,589 in 2012) 

156,502


157,558

 Loans held-for-sale 

13,179


10,739

 Loans receivable (net of allowance for loan losses of $22,542 




     in 2013 and $21,577 in 2012) 

1,414,123


1,402,246

 Foreclosed properties and repossessed assets 

12,040


13,961

 Mortgage servicing rights, net 

8,900


6,821

 Other assets 

182,288


189,695





     Total assets 

$2,356,807


$2,418,264





 LIABILITIES AND EQUITY 




 Liabilities: 




   Deposit liabilities 

$1,797,742


$1,867,899

   Borrowings 

207,459


210,786

   Advance payments by borrowers for taxes and insurance 

23,473


4,956

   Other liabilities 

50,657


59,837

     Total liabilities 

2,079,331


2,143,478

 Equity: 




   Preferred stock - $0.01 par value: 




     Authorized - 20,000,000 shares in 2013 and 2012 




     Issued and outstanding - none in 2013 and 2012 

-


-

   Common stock - $0.01 par value: 




     Authorized - 200,000,000 shares in 2013 and 2012 




     Issued - 78,783,849 shares in 2013 and 2012 




     Outstanding - 46,432,284 shares in 2013 and 46,326,484 in 2012 

788


788

   Additional paid-in capital 

489,034


489,960

   Retained earnings 

148,568


145,231

   Accumulated other comprehensive loss 

(5,693)


(4,717)

   Treasury stock - 32,351,565 shares in 2013 and 32,457,365 in 2012 

(358,127)


(359,409)

     Total shareholders' equity 

274,570


271,853

   Non-controlling interest in real estate partnership 

2,906


2,933

     Total equity including non-controlling interest 

277,476


274,786





     Total liabilities and equity 

$2,356,807


$2,418,264

 

 

 Bank Mutual Corporation and Subsidiaries 




 Unaudited Consolidated Statements of Income 




 (Dollars in thousands, except per share data) 





 Three Months Ended  


 Six Months Ended  


 June 30 


 June 30 


2013


2012


2013


2012

 Interest income: 








   Loans 

$15,974


$16,205


$32,182


$32,629

   Mortgage-related securities 

3,538


4,792


7,465


9,094

   Investment securities 

10


23


23


34

   Interest-earning deposits 

38


59


65


100

      Total interest income 

19,560


21,079


39,735


41,857

 Interest expense: 








   Deposits 

2,173


3,868


4,938


7,924

   Borrowings 

1,197


2,357


2,422


4,181

   Advance payment by borrowers for taxes and insurance 

1


1


1


1

      Total interest expense 

3,371


6,226


7,361


12,106

      Net interest income 

16,189


14,853


32,374


29,751

 Provision for loan losses 

1,730


1,730


2,622


1,781

      Net interest income after provision for loan losses 

14,459


13,123


29,752


27,970

 Non-interest income: 








   Service charges on deposits 

1,685


1,664


3,278


3,223

   Brokerage and insurance commissions 

978


964


1,670


1,545

   Loan-related fees and servicing revenue, net 

1,238


(1,395)


2,187


(1,257)

   Gain on loan sales activities, net 

1,382


3,551


3,242


6,455

   Gain on sales of investments, net 

-


543


-


543

   Other-than-temporary impairment ("OTTI") losses: 








      Total OTTI losses 

-


(909)


-


(909)

      Non-credit portion of OTTI losses 

-


573


-


573

        Net OTTI losses 

-


(336)


-


(336)

   Increase in cash surrender value of life insurance 

426


524


1,150


1,050

   Other non-interest income 

1,358


1,419


2,972


2,983

      Total non-interest income 

7,067


6,934


14,499


14,206

 Non-interest expense: 








   Compensation, payroll taxes, and other employee benefits 

11,008


10,697


22,061


21,272

   Occupancy and equipment 

2,861


2,778


5,940


5,732

   Federal insurance premiums  

236


871


1,043


1,702

   Advertising and marketing 

535


471


1,062


1,070

   Losses and expenses on foreclosed real estate, net 

443


970


1,575


3,748

   Other non-interest expense 

2,328


2,353


4,726


5,134

      Total non-interest expense 

17,411


18,140


36,407


38,658

      Income before income tax expense  

4,115


1,917


7,844


3,518

 Income tax expense  

1,478


601


2,677


1,063

      Net income before non-controlling interest 

2,637


1,316


5,167


2,455

 Net loss attributable to non-controlling interest 

12


13


27


29

      Net income  

$2,649


$1,329


$5,194


$2,484









 Per share data: 








   Earnings per share-basic  

$0.06


$0.03


$0.11


$0.05

   Earnings per share-diluted 

$0.06


$0.03


$0.11


$0.05

   Cash dividends paid 

$0.02


$0.01


$0.04


$0.02

 

 Bank Mutual Corporation and Subsidiaries 





 Unaudited Supplemental Financial Information 





 (Dollars in thousands, except per share amounts and ratios) 
















 Three Months Ended  


 Six Months Ended  



 June 30 


 June 30 

Loan Originations and Sales


2013


2012


2013


2012

 Mortgage loans originated for portfolio: 









   One- to four-family 


$28,225


$28,417


$45,375


$50,995

   Multi-family 


17,816


5,870


29,499


26,965

   Commercial real estate 


6,068


10,351


10,205


16,372

   Construction and development 


23,917


25,033


45,024


27,220

     Total mortgage loans 


76,026


69,671


130,103


121,552

 Consumer loan originations 


12,289


32,100


25,655


57,156

 Commercial business loan originations 


10,593


38,129


22,444


51,596

      Total loans originated for portfolio 


$98,908


$139,900


$178,202


$230,304










 Mortgage loans originated for sale 


$78,393


$121,250


$188,743


$248,148










 Mortgage loan sales 


$81,757


$133,073


$185,536


$256,109





















June 30


December 31





Loan Portfolio Analysis


2013


2012





 Mortgage loans: 









   One- to four-family 


$449,398


$465,170





   Multi-family  


263,329


264,013





   Commercial real estate  


243,978


263,775





   Construction and development 


162,369


129,348





      Total mortgage loans 


1,119,074


1,122,306





 Consumer loans 


242,178


246,913





 Commercial business loans 


149,808


132,436





   Total loans receivable 


1,511,060


1,501,655





 Allowance for loan losses 


(22,542)


(21,577)





 Undisbursed loan proceeds and deferred fees and costs 

(74,395)


(77,832)





   Total loans receivable, net 


$1,414,123


$1,402,246














 Loans serviced for others 


$1,157,746


$1,147,722





 

 Bank Mutual Corporation and Subsidiaries 

 Unaudited Supplemental Financial Information (continued) 

 (Dollars in thousands, except per share amounts and ratios) 








June 30


December 31

Non-Performing Loans and Assets


2013


2012

 Non-accrual mortgage loans: 





     One- to four-family  


$5,567


$8,192

     Multi-family 


4,256


6,824

     Commercial real estate 


7,815


6,994

     Construction and development loans 


703


937

         Total non-accrual mortgage loans 


18,341


22,947

 Non-accrual consumer loans: 





     Secured by real estate 


780


1,514

     Other consumer loans 


33


59

         Total non-accrual consumer loans 


813


1,573

 Non-accrual commercial business loans 


355


693

         Total non-accrual loans 


19,509


25,213

 Accruing loans delinquent 90 days or more 


406


584

         Total non-performing loans 


19,915


25,797

 Foreclosed properties and repossessed assets 


12,040


13,961

         Total non-performing assets 


$31,955


$39,758

 Non-performing loans to loans receivable, net 


1.41%


1.84%

 Non-performing assets to total assets 


1.36%


1.64%








June 30


December 31

Special Mention and Substandard Loans


2013


2012

(includes all non-performing loans, above)





 Mortgage loans: 





   One- to four-family 


$6,192


$8,472

   Multi-family  


10,250


8,969

   Commercial real estate  


53,280


56,842

   Construction and development 


18,101


15,446

      Total mortgage loans 


87,823


89,729

 Consumer loans 


813


1,631

 Commercial business loans 


2,265


4,007

   Total 


$90,901


$95,367








 Six Months Ended June 30 

Activity in Allowance for Loan Losses


2013


2012

 Balance at the beginning of the period 


$21,577


$27,928

 Provision for loan losses 


2,622


1,781

 Charge-offs: 





   One- to four-family  


(860)


(560)

   Multi-family 


-


(371)

   Commercial real estate 


(493)


(3,225)

   Construction and development loans 


(6)


(102)

   Consumer loans 


(838)


(379)

   Commercial business loans 


(199)


(48)

     Total charge-offs 


(2,396)


(4,685)

    Total recoveries 


739


1,005

      Net charge-offs 


(1,657)


(3,680)

 Balance at the end of the period 


$22,542


$26,029

 Net charge-offs to average loans, annualized 


0.23%


0.54%








June 30


December 31

Allowance Ratios


2013


2012

 Allowance for loan losses to non-performing loans 


113.19%


83.64%

 Allowance for loan losses to total loans 


1.59%


1.54%

 Bank Mutual Corporation and Subsidiaries 

 Unaudited Supplemental Financial Information (continued) 

 (Dollars in thousands, except per share amounts and ratios) 








June 30


December 31

 Deposit Liabilities Analysis


2013


2012

 Non-interest-bearing checking 


$154,256


$143,684

 Interest-bearing checking 


236,003


236,380

 Savings accounts 


231,601


217,170

 Money market accounts  


473,753


458,762

 Certificates of deposit 


702,129


811,903

    Total deposit liabilities 


$1,797,742


$1,867,899

 




 Three Months Ended  


 Six Months Ended  



 June 30 


 June 30 

Selected Operating Ratios


2013


2012


2013


2012

 Net interest margin (1) 


3.02%


2.47%


3.01%


2.56%

 Net interest rate spread 


2.93%


2.38%


2.93%


2.46%

 Return on average assets 


0.44%


0.20%


0.43%


0.20%

 Return on average shareholders' equity 


3.88%


1.97%


3.80%


1.85%

 Efficiency ratio (2) 


74.87%


84.06%


77.67%


88.36%

 Non-interest expense as a percent of average assets  


2.91%


2.76%


3.04%


3.04%

 Shareholders' equity to total assets at end of period 


11.65%


10.23%


11.65%


10.23%

 (1) Net interest margin is determined by dividing net interest income by average earning assets for the periods indicated. 





 (2) Efficiency ratio is determined by dividing non-interest expense by the sum of net interest income and non-interest income (excluding investment gains and net OTTI) for the periods indicated. 
















 Three Months Ended  


 Six Months Ended  



 June 30 


 June 30 

Other Information


2013


2012


2013


2012

 Average earning assets 


$2,140,748


$2,402,366


$2,149,567


$2,324,912

 Average assets 


2,392,095


2,631,223


2,392,095


2,542,688

 Average interest bearing liabilities 


1,884,497


2,194,922


1,905,817


2,119,603

 Average shareholders' equity 


273,010


269,670


273,010


268,633

 Weighted average number of shares outstanding: 









    As used in basic earnings per share 


46,224,831


46,189,723


46,220,262


46,187,796

    As used in diluted earnings per share 


46,366,959


46,196,363


46,349,463


46,194,463












June 30


December 31







2013


2012





 Number of shares outstanding (net of treasury shares) 

46,432,284


46,326,484





 Book value per share 


$5.91


$5.87

























June 30


December 31





Weighted Average Net Interest Rate Spread


2013


2012





 Yield on loans 


4.38%


4.56%





 Yield on investments 


2.38%


2.36%





 Combined yield on loans and investments 


3.78%


3.82%





 Cost of deposits 


0.45%


0.63%





 Cost of borrowings 


2.32%


2.37%





 Total cost of funds 


0.63%


0.81%





 Interest rate spread 


3.15%


3.01%





 

 

SOURCE Bank Mutual Corporation



RELATED LINKS
http://www.bankmutualcorp.com

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