2014

Bank Mutual Corporation Reports Earnings for the First Quarter of 2011

MILWAUKEE, April 14, 2011 /PRNewswire/ -- Bank Mutual Corporation (NASDAQ: BKMU) reported net income in the first quarter of 2011 of $1.0 million or $0.02 per diluted share compared to $2.1 million or $0.05 per diluted share during the same period in the previous year.   Net income for these periods represented a return on average assets ("ROA") of 0.16% and 0.24%, respectively, and a return on average equity ("ROE") of 1.33% and 2.09%, respectively.   The decline in net income between these periods was principally due to a decline in gains on sales of investments, offset in part by an increase in net interest income.

Michael T. Crowley, Jr., Chairman and Chief Executive Officer of Bank Mutual Corporation ("Bank Mutual"), commented, "We are very pleased that we have returned to profitability so soon after the loss we experienced in the fourth quarter of 2010."  Mr. Crowley added, "The favorable impact of our decision to repay high-cost borrowings last December has, as anticipated, positively impacted our net interest income, which almost doubled from what it was in the fourth quarter of last year."  David A. Baumgarten, President of Bank Mutual, commented further, "We are also pleased that our loan loss provision returned to a much lower level during the quarter compared to late 2010.  Although our non-performing loans increased modestly during the period, based on a current analysis we are cautiously optimistic that our problem loans will be lower by the end of 2011."  Mr. Baumgarten continued, "We've completed an extensive review of our loan portfolio and have a good handle on our troubled loans.  Reducing the level of non-performing loans will continue to be our top priority for the near term."

Bank Mutual's net interest income increased by $1.7 million or 12.1% during the first quarter of 2011 compared to the same period in 2010.  This increase was primarily attributable to an improvement in Bank Mutual's net interest margin between the quarters, which increased to 2.82% in the 2011 period compared to 1.76% in the 2010 period.  This increase was principally the result of Bank Mutual's early repayment of $756.0 million in high-cost borrowings from the Federal Home Loan Bank ("FHLB") of Chicago in December of last year, which contributed to a significant decline in the average cost of Bank Mutual's interest-bearing liabilities in the first quarter of 2011 compared to the same quarter in 2010, as well as the amount of liabilities outstanding.

Bank Mutual's provision for loan losses was $3.2 million during the first quarter of 2011 compared to $3.4 in the same quarter last year.  The losses in both periods have been affected by continuing weak economic conditions, high unemployment, and lower values for real estate.  These conditions have been particularly challenging for borrowers whose loans are secured by commercial real estate, multi-family real estate, and developed and undeveloped land.  Beginning in the later part of last year, management began to notice an increase in vacancy rates, a decline in rents, and/or delays in unit sales for many of the properties that secure Bank Mutual's loans.  In many instances, management's observations have included loans that borrowers and/or loan guarantors have managed to keep current despite underlying difficulties with the collateral properties.   During the first quarter of 2011, Bank Mutual recorded $3.2 million in loss provisions against a number of commercial real estate and business loan relationships, the largest of which was a $903,000 loss on a $3.6 million loan relationship secured by multi-family dwellings.  Although the borrower was current with respect to all principal and interest payments, management concluded that it was likely the borrower would not be able to continue to service the debt.   In addition, Bank Mutual also recorded a $569,000 loss on a $8.3 million loan secured by an apartment complex and undeveloped land.  This loss was based on an updated independent appraisal that was received during the quarter and was in addition to $1.5 million that was recorded against this loan in 2010.  Remaining losses during the quarter tended to be on smaller commercial real estate and business loan relationships and, to a lesser extent, consumer and single-family residential loans.  

During the first quarter of the previous year Bank Mutual recorded $2.2 million in loss provisions against four unrelated loan relationships aggregating $10.2 million that defaulted during that period.   These loans are secured by office, commercial, and retail buildings, developed land, and equipment and inventory.   In addition, Bank Mutual recorded $1.0 million in additional losses against two unrelated loan relationships aggregating $13.9 million that had defaulted in earlier periods.  

Service charges on deposits increased by $78,000 or 5.6% during the three months ended March 31, 2011, compared to the same quarter in 2010.   Management attributes this improvement to an increase in Bank Mutual's core deposit accounts, consisting of checking, savings, and money market accounts, which increased by $97.6 million or 11.7% during the twelve months ended March 31, 2011.  In addition, management believes that unfavorable economic conditions during much of 2009 and 2010 resulted in reduced spending by consumers in general during those periods, which had an adverse impact on Bank Mutual's transaction fee revenue, which consists principally of ATM, debit card, and overdraft fees.

Brokerage and insurance commissions were $614,000 during the first quarter of 2011, a $28,000 or 4.8% improvement over the same period in the previous year.  This improvement was principally due to increased sales of tax-deferred annuity products in 2011 compared to 2010.  It is not unusual for sales of such products to increase during periods of lower interest rates, when the returns on annuities improve relative to other investment alternatives such as certificates of deposit.  In the first quarter of last year, this revenue item also benefited from higher commissions on sales of other equity investments due to favorable trends in equity markets during that time frame.

Net loan-related fees and servicing revenue was $251,000 during the three months ended March 31, 2011, compared to $158,000 in the same period of 2010.  The following table presents the primary components of net loan-related fees and servicing revenue for the periods indicated:


Three Months Ended March 31


2011

2010


(Dollars in thousands)

Gross servicing fees

$681

$629

Mortgage servicing rights amortization

(516)

(476)

Mortgage servicing rights valuation recovery (loss)

6

(76)

   Loan servicing revenue, net

171

77

Other loan fee income

80

81

   Loan-related fees and servicing revenue, net

$251

$158



Gross servicing fees and related amortization increased in the 2011 period compared to the 2010 period as a result of an increase in the amount of loans that Bank Mutual services for third-party investors.  As of March 31, 2011, Bank Mutual serviced $1.1 billion in loans for third-party investors compared to $1.0 billion at March 31, 2010.   Loan-related fees and servicing revenue is also impacted by changes in the valuation allowance that is established against mortgage servicing rights.   The change in this allowance is recorded as a recovery or charge, as the case may be, in the period in which the change occurs.  

Gains on sales of loans were $596,000 in the first quarter of 2011 compared to $653,000 in the same period last year.  During the first quarter of 2011 sales of one- to four-family mortgage loans were $57.6 million compared to $45.9 million for the same period in 2010.  Loans held for sale were $3.9 million at March 31, 2011, compared to $37.8 million at December 31, 2010.  Despite an increase in loan sales in the first quarter of 2011 compared to the first quarter of last year, loan sales actually have declined in recent months due to slightly higher interest rates for fixed-rate, single-family mortgage loans.  Bank Mutual typically sells these loans in the secondary market.  If this trend continues, Bank Mutual expects that gains on sales of loans in 2011 will be significantly lower than they were in 2010.  

Net gains on investment activities were $1.1 million during the three months ended March 31, 2011, compared to $4.4 million during the same period in 2010.  In the period just ended Bank Mutual sold a $20.8 million investment in a mutual fund that management did not expect would perform well in a higher interest rate environment.   In the first quarter of the prior year, Bank Mutual sold $167.6 million in longer-term, mortgage-related securities.  At the time, management considered these sales to be prudent in light of expectations that interest rates may trend higher in the future.

Total non-interest expense was $17.1 million in the first quarter of 2011 compared to $16.6 million in the same quarter last year.  This increase was primarily attributable to a $686,000 or 7.9% increase in compensation-related expense in the 2011 quarter compared to the 2010 quarter.   This increase was principally due to an increase in compensation expense related to Bank Mutual's hiring of certain key management personnel over the past few months.  In April 2010 Mr. Baumgarten joined Bank Mutual as President and more recently hired two new senior vice presidents to manage commercial banking and credit administration and risk.  In addition, Bank Mutual recently hired several commercial relationship managers experienced in originating loans and selling deposit and cash management services to the mid-tier commercial banking market, defined by Bank Mutual as business entities with sales revenues of $10 to $100 million.  This is a new market segment for Bank Mutual.

Also contributing to the increase in compensation-related expense in the 2011 quarter compared to the same period in the prior year was an increase in costs related to Bank Mutual's defined-benefit pension plan.  This increase was caused by an increase in the number of qualified participants in the plan in recent periods, as well as a decline in the interest rate used to determine the present value of the pension obligation.  

The increase in compensation-related expense between the 2011 and 2010 quarters was partially offset by a decline in ESOP expense in 2011 compared 2010.  Last year marked the scheduled end of a 10-year commitment to the ESOP.   Bank Mutual does not intend to make additional contributions to the ESOP at this time.  However, this decision is subject to review on a periodic basis and contributions may be reinstated in future periods.

Losses on foreclosed real estate were $685,000 during the first quarter of 2011 compared a loss of $955,000 in the same quarter last year.  In the past year Bank Mutual has experienced elevated losses on foreclosed real estate due to lower real estate values and weak economic conditions.   If these conditions persist, future losses on foreclosed real estate could remain elevated in the near term.

Income tax expense was $361,000 during the three months ended March 31, 2011, compared to $1.1 million in the same period of 2010.  Bank Mutual's effective tax rate ("ETR") for the three month periods in 2011 and 2010 was 26.0% and 33.3%, respectively.  Bank Mutual's ETR was lower in the 2011 period because non-taxable revenue, such as earnings from bank-owned life insurance ("BOLI"), comprised a larger percentage of pre-tax earnings than it did in 2010.    

Bank Mutual's portfolio of one- to four-family mortgage loans increased slightly from $531.9 million at December 31, 2010, to $534.9 million at March 31, 2011.  In recent quarters Bank Mutual has elected to retain certain fixed-rate one- to- four family loans with maturities of up to 15 years in its loan portfolio, rather than selling such loans in the secondary market.  In addition, with the recent increase in market interest rates on one- to four-family loans, fewer borrowers with adjustable-rate loans have elected to refinance into fixed-rate loans, which Bank Mutual typically sells in the secondary market.  

Multi-family and commercial real estate mortgage loan originations were $14.6 million during the quarter ended March 31, 2011, compared to $5.2 million during the same period in 2010.  Despite this increase, Bank Mutual's aggregate portfolio of multi-family and commercial real estate mortgage loans decreased slightly from $495.5 million at December 31, 2010, to $494.4 million at March 31, 2011.  Originations of construction and development loans were $7.3 million during the three months ended March 31, 2011, compared to $4.1 million during the same period in 2010.  Despite this increase, Bank Mutual's portfolio of construction and development loans declined by $13.9 million or 16.6% during the three months ended March 31, 2011.  This decrease was caused in part by the reclassification of certain construction and development loans to permanent loans as a result of the completion of construction.

Commercial business loan originations in the quarter ended March 31, 2011, were $12.1 million compared to $4.4 million in the same period in 2010.  Bank Mutual's portfolio of commercial business loans increased by $3.4 million or 6.8%, from $50.1 million to $53.5 million during the three months ended March 31, 2011.  

Consumer loan originations, including fixed-term home equity loans and home equity lines of credit, were $16.8 million during the quarter ended March 31, 2011, compared to $15.2 million during the same period in the prior year.  Bank Mutual's consumer loan portfolio declined from $243.5 million at December 31, 2010, to $237.8 million at March 31, 2011.  

Management has taken proactive steps in recent months to improve the outlook for loan growth at Bank Mutual.  Mr. Baumgarten noted, "We have expanded our commercial banking capabilities in recent months, to include the hiring of additional experienced commercial relationship managers.  We expect to add a few more experienced relationship managers during the remainder of 2011."  Mr. Baumgarten continued, "We have the capital and management expertise to continue to be a stable, reliable partner for our business and retail customers in Wisconsin and expect to introduce additional products and services in the coming months."

Bank Mutual's interest-earning deposits, which consist primarily of overnight deposits held at the Federal Reserve of Chicago, declined from $184.4 million at December 31, 2010, to $57.4 million at March 31, 2011.  This decline was caused by the security purchases described in the next paragraph, as well as a decrease in deposit liabilities, as described in a subsequent paragraph.

Bank Mutual's available-for-sale securities portfolio increased by $119.3 million or 18.0% during the three months ended March 31, 2011.  This increase was primarily the result of the purchase of $168.8 million in medium-term government agency mortgage-backed securities ("MBSs") and collateralized mortgage obligations ("CMOs") during the period.  The impact of these purchases was partially offset by the sale of a $20.8 million mutual fund, as previously described.

Foreclosed properties and repossessed assets increased by $3.2 million or 16.7% during the quarter ended March 31, 2011.  This increase was caused by foreclosures related to a number of smaller commercial real estate loans and, to a lesser extent, single-family residential loans.

Deposit liabilities decreased by $60.3 million or 2.9% during the quarter ended March 31, 2011, to $2.02 billion compared to $2.08 billion at December 31, 2010.  Core deposits, consisting of checking, savings, and money market accounts, declined by $19.4 million or 2.0% during the period while certificates of deposit declined by $41.0 million or 3.6%.   Core deposits were higher than typical at December 31, 2010, due to the timing of certain local government tax deposits which had not been withdrawn as of that date.  With respect to certificates of deposit, Bank Mutual has reduced the rates it offers on this product during the past year in an effort to manage its overall liquidity position, which has resulted in a decline in certificates of deposit.  

Bank Mutual's borrowings, which consist of advances from the FHLB of Chicago, were $149.7 million at March 31, 2011, compared to $149.9 million at December 31, 2011.   As previously noted, Bank Mutual repaid $756.0 million in high-cost borrowings from the FHLB of Chicago in December of last year.  Bank Mutual recorded an $89.3 million expense in the fourth quarter of 2010 as a result of a prepayment penalty for this repayment.  However, Bank Mutual also significantly reduced the average cost of its interest-bearing liabilities as a result of the repayment, as previously noted.   Management believes that additional funds are available to be borrowed from the FHLB of Chicago or other sources in the future to fund loan originations or security purchases if needed or desirable; however, management does not expect additional borrowings to be significant in the near term.  There can be no assurances of the future availability of borrowings or any particular level of future borrowings.  The loan programs offered by the FHLB of Chicago are not related to funding programs offered by the U.S. government under its Troubled Asset Relief Program, more commonly known as "TARP," in which Bank Mutual has not participated.  

Other liabilities declined to $34.0 million at March 31, 2011, from $45.0 million at December 31, 2010.  Most of this decline was seasonal, caused by a decline in drafts payable related to disbursement of customer escrow deposits near the end of 2010.

Shareholders' equity declined slightly from $313.0 million at December 31, 2010, to $312.6 million at March 31, 2011.  This decline was primarily due to Bank Mutual's payment of $1.4 million in cash dividends, offset in part by $1.0 million in net income for the period.  Also contributing to the decline in shareholders' equity was an increase in accumulated other comprehensive loss, due to a modest increase in the unrealized loss on Bank Mutual's available-for-sale securities.  Bank Mutual's ratio of shareholders' equity to total assets was 12.36% at March 31, 2011, compared to 12.07% at December 31, 2010.  Book value per share of Bank Mutual's common stock was $6.82 at March 31, 2011, compared to $6.84 at December 31, 2010.  

Bank Mutual's subsidiary bank is "well capitalized" for regulatory capital purposes.  As of December 31, 2010 (the latest information available), the subsidiary bank's total risk-based capital ratio was 17.86% and its Tier 1 capital ratio was 9.12%.  The minimum percentages to be "adequately capitalized" under current supervisory regulations are 8% and 4%, respectively.  The minimums to be "well capitalized" are 10% and 5%, respectively.

During the first quarter of 2011 Bank Mutual paid a cash dividend of $0.03 per share to shareholders.   While Bank Mutual's capital remains strong, regulators have continued to focus on the capital levels of financial institutions such as Bank Mutual's bank subsidiary and have often requested capital levels above stated requirements.   In addition, in 2010 Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") which, when fully effective, will impose capital requirements on savings and loan holding companies such as Bank Mutual.  These developments, and other future requirements which may 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 stock.   During the first quarter of 2011 Bank Mutual did not repurchase any shares of its common stock nor did its board of directors authorize a program for the purchase of additional shares.  

Bank Mutual's non-performing loans were $124.3 million or 9.39% of loans receivable as of March 31, 2011, compared to $122.9 million or 9.29% as of December 31, 2010.  Non-performing assets, which includes non-performing loans, were $146.8 million or 5.80% of total assets and $142.2 million or 5.49% of total assets as of these same dates, respectively.  Classified loans, which consist of loans rated by management as "special mention" or "substandard" and which include all non-performing loans, were $170.9 million at March 31, 2010, compared to $158.5 million at December 31, 2010.  Bank Mutual's elevated level of non-performing loans and assets, as well as classified loans, is due to continuing weakness in economic conditions, low values for commercial and multi-family real estate, and high unemployment rates in recent years, which has resulted in increased stress on borrowers and increased loan delinquencies.   Many properties securing Bank Mutual's loans have experienced increased vacancy rates, reduced lease rates, and/or delays in unit sales, as well as lower real estate values.  During the fourth quarter of 2010 in particular, management increased its assessment of the number of loans secured by commercial real estate, multi-family real estate, undeveloped land, and commercial business assets that are or will likely become collateral dependent.  In many instances, management's assessment included loans that borrowers have managed to keep current despite underlying difficulties with the properties that secure the loans.   As of March 31, 2011, non-performing loans included $48.2 million in loans that were current on all contractual principal and interest payments, but which management determined should be classified as non-performing in light of underlying difficulties with the properties that secure the loans, as well as an increasingly strict regulatory environment.  Bank Mutual has continued to record periodic interest payments on these loans in interest income provided the borrowers have remained current on the loans and provided, in the judgment of management, Bank Mutual's net recorded investment in the loan has been deemed to be collectible.

Bank Mutual's allowance for loan losses declined to $43.5 million or 3.29% of total loans at March 31, 2011, compared to $48.0 million or 3.63% at December 31, 2010.  As a percent of non-performing loans, Bank Mutual's allowance for loan losses was 35.0% at March 31, 2011, compared to 39.0% at December 31, 2010.  The decrease in the allowance was caused by $7.6 million in net charge-offs that was only partially offset by the additional loss allowances established during the period, as described earlier in this release.   During the period Bank Mutual charged off $1.9 million on two loans from the same borrower that aggregated $6.1 million and which were paid off during the period.  In addition, Bank Mutual charged off $3.7 million on four unrelated loans that aggregated $6.8 million on which management commenced foreclosure proceedings during the period.  For the most part, these allowances were established in prior periods.

Management believes the allowance for loan losses at March 31, 2011, 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 fifth largest financial institution holding company headquartered in the state of Wisconsin and its stock is quoted on The NASDAQ Global Select Market under the symbol "BKMU".  Its subsidiary bank, Bank Mutual, operates 78 banking locations in the state of Wisconsin and one in Minnesota.

Cautionary Statements

The discussion in this earnings release 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 words such as "anticipate," "believe," "estimate," "expect," "objective," "projection" and similar expressions or use of verbs in the future tense, and are intended to identify forward-looking statements; any discussions of periods after the date for which this report is filed 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 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 instability 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 right 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; potential changes in Fannie Mae and 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; 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; demand for other financial services; changes in accounting policies or guidelines; natural disasters, acts of terrorism, or developments in the war on terrorism; 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 2010 Annual Report on Form 10-K.

Bank Mutual Corporation and Subsidiaries

Unaudited Consolidated Statements of Financial Condition

(Dollars in thousands, except per share data)


March 31


December 31


2011


2010

ASSETS




Cash and due from banks

$26,498


$48,393

Interest-earning deposits

57,377


184,439

  Cash and cash equivalents

83,875


232,832

Securities available-for-sale, at fair value:




  Investment securities

206,037


228,023

  Mortgage-related securities

576,522


435,234

Loans held-for-sale, net

3,908


37,819

Loans receivable, net

1,322,727


1,323,569

Foreclosed properties and repossessed assets

22,522


19,293

Goodwill

52,570


52,570

Mortgage servicing rights, net

7,862


7,769

Other assets

253,113


254,709





    Total assets

$2,529,136


$2,591,818





LIABILITIES AND EQUITY




Liabilities:




  Deposit liabilities

$2,017,996


$2,078,310

  Borrowings

149,662


149,934

  Advance payments by borrowers for taxes and insurance

11,948


2,697

  Other liabilities

34,028


44,999

    Total liabilities

2,213,634


2,275,940

Equity:




  Preferred stock - $0.01 par value:




    Authorized - 20,000,000 shares in 2010 and 2009




    Issued and outstanding - none in 2010 and 2009

-


-

  Common stock - $0.01 par value:




    Authorized - 200,000,000 shares in 2010 and 2009




    Issued - 78,783,849 shares in 2010 and 2009




    Outstanding - 45,818,882 shares in 2011 and 45,769,443 in 2010

788


788

  Additional paid-in capital

493,972


494,377

  Retained earnings

190,906


191,238

  Accumulated other comprehensive loss

(7,131)


(6,897)

  Treasury stock - 32,964,967 shares in 2011 and 33,014,406 in 2010

(365,945)


(366,553)

    Total shareholders' equity

312,590


312,953

  Non-controlling interest in real estate partnership

2,912


2,925

    Total equity including non-controlling interest

315,502


315,878





    Total liabilities and equity

$2,529,136


$2,591,818



Bank Mutual Corporation and Subsidiaries

Unaudited Consolidated Statements of Income

(Dollars in thousands, except per share data)






Three Months Ended March 31


2011


2010

Interest income:




  Loans

$17,873


$20,857

  Investment securities

1,344


4,731

  Mortgage-related securities

3,795


6,359

  Interest-earning deposits

51


45

     Total interest income

23,063


31,992

Interest expense:




  Deposits

5,469


8,210

  Borrowings

1,770


9,666

  Advance payment by borrowers for taxes and insurance

1


1

     Total interest expense

7,240


17,877

     Net interest income

15,823


14,115

Provision for loan losses

3,180


3,366

     Net interest income after provision for loan losses

12,643


10,749

Non-interest income:




  Service charges on deposits

1,468


1,390

  Brokerage and insurance commissions

614


586

  Loan-related fees and servicing revenue, net

251


158

  Gain on loan sales activities, net

596


653

  Gain on investments, net

1,113


4,384

  Other non-interest income

1,753


1,797

     Total non-interest income

5,795


8,968

Non-interest expense:




  Compensation, payroll taxes, and other employee benefits

9,399


8,713

  Occupancy and equipment

2,998


2,985

  Federal insurance premiums and special assessment

1,022


1,011

  Loss on foreclosed real estate, net

685


955

  Other non-interest expense

2,946


2,898

     Total non-interest expense

17,050


16,562

     Income before income tax expense  

1,388


3,155

Income tax expense  

361


1,051

     Net income before non-controlling interest

1,027


2,104

Net loss (income) attributable to non-controlling interest

13


(1)

     Net income  

$1,040


$2,103





Per share data:




  Earnings per share-basic  

$0.02


$0.05

  Earnings per share-diluted

$0.02


$0.05

  Cash dividends paid

$0.03


$0.07



Bank Mutual Corporation and Subsidiaries

Unaudited Supplemental Financial Information

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








Three Months Ended March 31

Loan Originations and Sales


2011


2010

Mortgage loan originations:





  One- to four-family


$43,905


$52,364

  Multi-family


5,564


3,861

  Commercial real estate


9,014


1,364

  Construction and development


7,292


4,072

    Total mortgage loans


65,775


61,661

Consumer loan originations


16,821


15,165

Commercial business loan originations


12,078


4,401

     Total loans originated


$94,674


$81,227






Mortgage loan sales


$57,615


$45,911













March 31


December 31

Loan Portfolio Analysis


2011


2010

Mortgage loans:





  One- to four-family


$534,855


$531,874

  Multi-family  


241,183


247,210

  Commercial real estate  


253,222


248,253

  Construction and development


69,594


83,490

     Total mortgage loans


1,098,854


1,110,827

Consumer loans


237,806


243,498

Commercial business loans


53,495


50,123

  Total loans receivable


1,390,155


1,404,448

Allowance for loan losses


(43,526)


(47,985)

Undisbursed loan proceeds and deferred fees and costs

(23,902)


(32,894)

  Total loans receivable, net


$1,322,727


$1,323,569






Loans serviced for others


$1,093,857


$1,017,300



Bank Mutual Corporation and Subsidiaries  

Unaudited Supplemental Financial Information (continued)

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








March 31


December 31

Non-Performing Loans and Assets


2011


2010

Non-accrual mortgage loans:





    One- to four-family  


$18,408


$18,684

    Multi-family


33,120


31,660

    Commercial real estate


53,367


41,244

    Construction and development loans


15,385


26,563

        Total non-accrual mortgage loans


120,280


118,151

Non-accrual consumer loans:





    Secured by real estate


1,378


1,369

    Other consumer loans


209


275

        Total non-accrual consumer loans


1,587


1,644

Non-accrual commercial business loans


1,888


2,779

        Total non-accrual loans


123,755


122,574

Accruing loans delinquent 90 days or more


509


373

        Total non-performing loans


124,264


122,947

Foreclosed properties and repossessed assets


22,522


19,293

        Total non-performing assets


146,786


142,240

Non-performing loans to loans receivable, net


9.39%


9.29%

Non-performing assets to total assets


5.80%


5.49%








March 31


December 31

Classified Loans


2011


2010

Mortgage loans:





  One- to four-family


$20,894


$18,972

  Multi-family  


51,004


55,011

  Commercial real estate  


74,825


47,937

  Construction and development


17,096


29,546

     Total mortgage loans


163,819


151,466

Consumer loans


1,724


1,763

Commercial business loans


5,307


5,298

  Total


$170,850


$158,527








Three Months Ended March 31

Activity in Allowance for Loan Losses


2011


2010

Balance at the beginning of the period


$47,985


$17,028

Provision for loan losses


3,180


3,366

Charge-offs:





  One- to four-family  


(1,092)


(100)

  Multi-family


(2,878)


-

  Commercial real estate


(735)


(1,132)

  Construction and development loans


(2,415)


-

  Consumer loans


(228)


(227)

  Commercial business loans


(302)


(72)

    Total charge-offs


(7,650)


(1,531)

   Total recoveries


11


29

     Net charge-offs


(7,639)


(1,502)

Balance at the end of the period


43,526


18,892

Net charge-offs to average loans, annualized


2.24%


0.40%








March 31


December 31

Allowance Ratios


2011


2010

Allowance for loan losses to non-performing loans


35.03%


39.03%

Allowance for loan losses to total loans


3.29%


3.63%






































Bank Mutual Corporation and Subsidiaries

Unaudited Supplemental Financial Information (continued)

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








March 31


December 31

Deposit Liabilities Analysis


2011


2010

Non-interest-bearing checking


$94,577


$94,446

Interest-bearing checking


210,732


219,136

Savings accounts


217,757


210,334

Money market accounts  


405,421


423,923

Certificates of deposit


1,089,509


1,130,471

   Total deposit liabilities


$2,017,996


$2,078,310













Three Months Ended March 31

Selected Operating Ratios


2011


2010

Net interest margin (1)


2.82%


1.76%

Net interest rate spread


2.70%


1.53%

Return on average assets


0.16%


0.24%

Return on average shareholders' equity


1.33%


2.09%

Efficiency ratio (2)


83.15%


88.57%

Non-interest expense as a percent of average assets  


2.60%


1.90%

Shareholders' equity to total assets at end of period


12.36%


11.46%

Tangible common equity to adjusted total assets





      at end of period (3)


10.50%


10.02%

(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 less net investment gains for the periods indicated.

(3) This is a non-GAAP disclosure.  The ratio is computed as shareholders' equity less goodwill

      divided by total assets less goodwill.  


















Three Months Ended March 31

Other Information


2011


2010

Average earning assets


$2,240,471


$3,204,777

Average assets


2,625,619


3,488,098

Average interest bearing liabilities


2,033,942


2,906,096

Average shareholders' equity


313,404


402,287

Average tangible shareholders' equity (4)


260,834


349,717

Weighted average number of shares outstanding:





   As used in basic earnings per share


45,736,419


45,574,581

   As used in diluted earnings per share


45,863,051


46,008,331

(4) Average tangible shareholders' equity is average total shareholders' equity minus goodwill.








March 31


December 31



2011


2010

Number of shares outstanding (net of treasury shares)

45,818,882


45,769,443

Book value per share


$6.82


$6.84













March 31


December 31

Weighted Average Net Interest Rate Spread


2011


2010

Yield on loans


5.38%


5.45%

Yield on investments


2.73%


2.74%

Combined yield on loans and investments


4.39%


4.55%

Cost of deposits


1.04%


1.12%

Cost of borrowings


4.79%


4.79%

Total cost of funds


1.30%


1.37%

Interest rate spread


3.09%


3.18%



SOURCE Bank Mutual Corporation



RELATED LINKS
http://www.bankmutualcorp.com

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