Bank Mutual Corporation Reports Second Quarter Earnings.Business Editors MILWAUKEE--(BUSINESS WIRE)---July 19, 2001 Bank Mutual Corporation (Nasdaq: BKMU) reported earnings of $5.1 million or $0.24 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the second quarter of 2001 and $9.9 million or $0.46 diluted earnings per share for the six months ended June June: see month. 30, 2001. Cash earnings per share (excludes the amortization of goodwill and other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ) for the second quarter of 2001 were $0.28 and for the six months ended June 30, 2001, were $0.54. Comparisons of quarterly results are substantially affected by the November November: see month. 1, 2000 restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). in which Mutual Savings Bank Mutual savings bank A state-chartered savings bank which is owned by its depositors and managed by a fiduciary board of trustees. converted from the mutual to the stock form of organization, resulting in the creation of Bank Mutual Corporation as a publicly-held holding company. The transactions included Bank Mutual's stock offering and Bank Mutual's related acquisition of First Northern Capital Corp. the holding company for First Northern Savings Bank savings bank, financial institution that, until recently, performed only the following functions: receiving savings deposits of individuals, investing them, and providing a modest return to its depositors in the form of interest. . The restructuring and First Northern acquisition occurred in the fourth quarter of 2000 and information prior to that time represents the results of only Mutual Savings Bank. Market interest rates continued to decrease throughout the second quarter of 2001 as a result of the Federal Reserve's actions. With the reduced interest rate environment, fixed rate mortgage loans became more popular with customers than adjustable rate mortgage This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. loans. Bank Mutual sells the majority of its fixed rate mortgage loan originations The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. and in the first six months of 2001, fixed rate mortgage loan sales coupled with increased prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. were the primary contributors to the $105.2 million decrease in the total loan portfolio. Mortgage loan originations were $169.9 million in the second quarter of 2001 and were $267.1 million for the first six months of 2001. Mortgage loan sales were $93.7 million for the second quarter of 2001 and $131.8 million for the first six months of 2001. Assets at June 30, 2001 were $ 2.86 billion as compared to $2.79 billion at December December: see month. 31, 2000. Deposits grew $49.7 million in the second quarter of 2001 and $115.9 million for first six months of 2001.Management believes this growth in deposits is primarily the result of uncertainties in the stock market that have prompted consumers to place their funds in stable, insured accounts Insured account A bank or financial account that is insured for the benefit of the depositor, protecting against loss in the event that the savings institution becomes insolvent. See: FDIC. . This growth in deposits along with the sale of fixed rate mortgage loans resulted in borrowings being reduced to $497.8 million at June 30, 2001 as compared to $567.6 million at December 31, 2000. Bank Mutual's asset quality continues to be very good. Non-performing loans A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms. to total loans at June 30, 2001 were 0.21% and non-performing assets to total assets were 0.20%. Both of these ratios are indications of the economic strength within the state of Wisconsin Wisconsin, state, United States Wisconsin (wĭskŏn`sən, –sĭn), upper midwestern state of the United States. It is bounded by Lake Superior and the Upper Peninsula of Michigan, from which it is divided by the Menominee , as compared to other parts of the country, and the underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. standards used by the operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. . The net interest margin for the first six months of 2001 was 2.66% as compared to 2.78% for the same period last year. The compression compression, external stress applied to an object or substance, tending to cause a decrease in volume (see pressure). Gases can be compressed easily, solids and liquids to a very small degree if at all. of the net interest margin was primarily the result of investing cash from the increase in deposits and the reduction of the mortgage and consumer loan portfolio into short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments. The yield on short-term investments is less than the yield on loans thereby resulting in the reduction in the net interest margin. Book value per share was $13.21 and tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. book value per share was $10.61 at June 30, 2001. Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on average equity (ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. ) for the second quarter of 2001 was 6.90% and for the six months ended June 30, 2001 was 6.78% and the ROE excluding amortization of goodwill and other intangible assets for the same periods were 10.09% and 10.01%. The annualized return on average assets (ROA ROA See: Return on assets ROA See: Right of accumulation ROA See return on assets (ROA). ) for the second quarter of 2001 was 0.72% and for the first six months of 2001 was 0.70%. ROA excluding the amortization of goodwill and other intangible assets was 0.86% for the second quarter of 2001 and 0.85% for the six months ended June 30, 2001. Further information regarding Bank Mutual's assets, liabilities and operations is attached. Employees of Mutual Savings Bank and First Northern Savings Bank, continue their work on "Best Practices" teams to determine ways to adopt the best customer service and other practices of the two entities and to provide efficiencies. As part of that work, Bank Mutual has identified several operating systems Operating systems can be categorized by technology, ownership, licensing, working state, usage, and by many other characteristics. In practice, many of these groupings may overlap. for modification A change or alteration in existing materials. Modification generally has the same meaning in the law as it does in common parlance. The term has special significance in the law of contracts and the law of sales. , upgrade or replacement and has determined that the operating systems could best be implemented in the context of a combined savings bank subsidiary. To facilitate an orderly orderly /or·der·ly/ (or´der-le) an attendant in a hospital who works under the direction of a nurse. or·der·ly n. An attendant in a hospital. systems planning process, Bank Mutual now projects that it will combine its savings bank subsidiaries in 2003. This schedule is a projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. subject to change and refinement. Bank Mutual has not yet determined the manner in which the combination will take place, and is not able to make any estimates at this time as to the financial effects, if any, of a combination. "Our commitment to customer service during this transition remains paramount Paramount (pâr`əmount'), city (1990 pop. 47,669), Los Angeles co., S Calif.; inc. 1957. Originally a dairy region, it has become highly industrialized since the 1950s. " said Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. T. Crowley Crowley (krou`lē), city (1990 pop. 13,983), seat of Acadia parish, SW La.; inc. 1888. It is a shipping, milling, and storage center for a large rice-growing area and has a rice experiment station. Oil and natural gas wells are located nearby. , Jr., Chairman and Chief Executive Officer of Bank Mutual Corporation, "and we are pleased that we are achieving this goal while improving our profitability." Bank Mutual Corporation is the fourth largest financial institution holding company headquartered in the state of Wisconsin and its stock is quoted on The Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. (R) under the symbol "BKMU". Its two subsidiary banks, Mutual Savings Bank and First Northern Savings Bank, operate 69 offices in the state of Wisconsin and one office in Minnesota Minnesota, state, United States Minnesota (mĭn'ĭsō`tə), upper midwestern state of the United States. It is bordered by Lake Superior and Wisconsin (E), Iowa (S), South Dakota and North Dakota (W), and the Canadian provinces . Outlook (The following are forward looking statements; see "Cautionary Statements" below) Bank Mutual's management has identified a number of factors which may affect the company's operations and results in the balance of 2001. They are as follows:
- Mutual Savings Bank and First Northern Savings Bank will continue
to operate in 2001 as separate operating subsidiaries and,
therefore, we do not expect significant cost savings from combined
operations during 2001. Expense growth is expected to reflect
general economic conditions.
- 2001 may provide a continuing environment of declining interest
rates. If that is the case, there are a number of effects that
Bank Mutual, like other financial institutions, could continue to
experience.
- The decrease in the mortgage loan portfolio could continue as
fixed rate mortgage loans remain attractive to consumers. Bank
Mutual sells most of its fixed rate mortgage loans to the
secondary market.
- If mortgage loan refinancings continue as they have in the
first and second quarters of 2001, fee income could increase.
- Bank Mutual may further emphasize consumer loans, and
commercial real estate and business loans, which can present
higher risks than residential mortgages.
- Deposit growth may or may not continue depending upon the
uncertainties of the stock market.
- If deposit growth continues along with the continued sale of
fixed rate mortgage loans, borrowings could be reduced.
- The Financial Accounting Standards Board (FASB) has approved a new
accounting standard that will significantly alter the recognition
of goodwill expense. For fiscal years beginning after December 15,
2001, goodwill will no longer be amortized over a stated period of
time but rather it will remain on the statement of financial
condition and periodically be tested for impairment. If goodwill
is found to be impaired, the impaired amount will be expensed to
current operations. Other identifiable intangible assets will
continue to be expensed over their useful life.
Cautionary Statements
The discussions in this news release which are not historical
statements contain forward-looking statements that involve risk and
uncertainties. Statements which are not historical statements include
those under "Outlook" and those in the future tense or which use terms
such as "believe," "expect," "projection," 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 changing interest rates,
changes in demand for loans or other services, competition from other
institutions, the results of our lending activities and loan loss
experience, the need to continue to integrate our operations, general
economic developments, and other factors discussed in our filings with
the Securities and Exchange Commission.
BANK MUTUAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
2001 2000
---------- ------------
Assets (in thousands)
Cash and due from banks $ 42,109 $ 30,625
Federal funds sold 95,000 20,000
Interst-earning deposits 44,940 15,097
---------- ------------
Cash and cash equivalents 182,049 65,722
Securities available-for-sale, at
fair value:
Investment securities 126,709 94,129
Mortgage-related securities 482,059 464,873
Loans held for sale 20,263 7,469
Loans receivable, net 1,867,401 1,972,636
Goodwill 54,119 55,967
Other intangible assets 6,727 7,057
Other assets 120,749 121,679
---------- ------------
$ 2,860,076 $ 2,789,532
========== ============
Liabilities and Shareholders' Equity
Liabilities:
Deposits $ 2,010,741 $ 1,894,820
Borrowings 497,756 567,624
Advance payments by borrowers for
taxes and insurance 24,744 4,312
Other liabilities 31,613 38,379
---------- ------------
2,564,854 2,505,135
Shareholders' equity:
Preferred stock - $.01 par value:
Authorized - 10,000,000 shares in 2001 and 2000
Issued and outstanding - none in 2001 and 2000 - -
Common stock - $.01 per value:
Authorized - 100,000,000 shares in 2001 and 2000
Issued and outstanding - 22,341,665 shares
in 2001 and 2000 223 223
Additional paid-in capital 108,151 108,151
Retained earnings 192,671 184,351
Unearned ESOP shares (9,000) (8,971)
Accumulated other comprehensive income 4,049 643
Treasury stock - 64,000 shares in 2001;
none in 2000 (872) -
---------- ------------
295,222 284,397
---------- ------------
$ 2,860,076 $ 2,789,532
========== ============
BANK MUTUAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
--------- --------- ---------- ---------
(In thousands) (In thousands)
Interest income:
Loans $ 37,299 $ 21,062 $ 76,006 $ 41,403
Investments 2,107 1,066 4,235 2,175
Mortgage-related
securities 7,411 8,161 15,183 15,860
Interest-earning deposits 1,236 361 1,923 1,044
--------- --------- ---------- ---------
Total interest income 48,053 30,650 97,347 60,482
Interest expense:
Deposits 23,189 14,961 46,162 29,739
Borrowings 7,354 3,857 15,985 7,232
Advance payment by
borrowers for taxes
and insurance 89 64 125 90
--------- --------- ---------- ---------
Total interest expense 30,632 18,882 62,272 37,061
--------- --------- ---------- ---------
Net interest income 17,421 11,768 35,075 23,421
Provision for loan losses 109 160 210 236
--------- --------- ---------- ---------
Net interest income after
provision for loan losses 17,312 11,608 34,865 23,185
Noninterest income:
Service charges on deposits 1,099 660 2,120 1,237
Brokerage and insurance
commissions 696 502 1,218 994
Loan related fees 355 226 710 497
Gain on sales of loans 983 35 1,382 43
Other 1,027 703 2,079 1,245
--------- --------- ---------- ---------
Total noninterest income 4,160 2,126 7,509 4,016
Noninterest expenses:
Compensation, payroll
taxes and other
employee benefits 6,963 4,116 13,743 8,624
Occupancy and equipment 2,503 1,593 5,203 3,336
Amortization of goodwill 774 169 1,549 337
Amortization of other
intangible assets 166 66 331 132
Other 2,956 2,176 5,728 4,257
--------- --------- ---------- ---------
Total noninterest expenses 13,362 8,120 26,554 16,686
--------- --------- ---------- ---------
Income before income taxes 8,110 5,614 15,820 10,515
Income taxes 3,032 2,146 5,939 4,001
--------- --------- ---------- ---------
Net income $ 5,078 $ 3,468 $ 9,881 $ 6,514
========= ========= ========== =========
Per share data:
Earnings per share-basic
and diluted $ 0.24 N/A $ 0.46 N/A
Note: Mutual Savings Bank established Bank Mutual Corporation on
November 1, 2000 and simultaneously issued public shares and
purchased First Northern Capital Corp. Information prior to that
date is that of Mutual Savings. The First Northern acquisition
was accounted for by using the purchase accounting method.
Bank Mutual Corporation and Subsidiaries
Supplemental Financial Information (Unaudited)
(Dollars in thousands except per share amounts and ratios)
During the quarter During the six months
ended June 30, ended June 30, 2000
Originations & Purchases 2001 2000 2001 2000
------------------------ ---------- ---------- ---------- ----------
Originations:
Mortgage loans $ 169,907 $ 44,813 $ 267,065 $ 71,545
Consumer loans 65,733 38,747 114,523 68,779
Commercial business loans 6,043 11,674 10,048 13,856
---------- ---------- ---------- ----------
Total loan originations $ 241,683 95,234 $ 391,636 154,180
========== ========== ========== ==========
Purchases:
Mortgage loans - - - 15,425
---------- ---------- ---------- ----------
Total loan purchases - - - 15,425
---------- ---------- ---------- ----------
Total loans originated and
purchased $ 241,683 $ 95,234 $ 391,636 $ 169,605
========== ========== ========== ==========
Loan Sales $ 93,986 $ 3,802 $ 132,250 $ 4,940
========== ========== ========== ==========
Loan Portfolio Analysis
-----------------------
June 30, December 31,
2001 2000
--------------- --------------
Mortgage loans:
One-to-four family $ 1,094,213 $ 1,207,912
Multi-family 112,878 105,925
Commercial real estate 126,173 118,636
Construction and development 109,901 94,235
--------------- --------------
Total mortgage loans 1,443,165 1,526,708
Consumer loans 430,238 441,366
Commercial business loans 62,896 59,844
--------------- --------------
Total loans receivable 1,936,299 2,027,918
Deductions to total loans receivable 68,898 55,282
--------------- --------------
Total loans receivable, net $ 1,867,401 $ 1,972,636
=============== ==============
Asset Quality Ratios June 30, December 31,
-------------------- 2001 2000
--------------- --------------
Non-performing mortgage loans $ 1,920 $ 730
Non-performing consumer loans 370 383
Non-performing commercial & industrial loans 743 750
Accruing loans delinquent 90 days or more 884 1,258
--------------- --------------
Total non-performing loans $ 3,917 $ 3,121
=============== ==============
Total non-performing assets $ 5,786 $ 5,402
=============== ==============
Non-performing loans to total loans 0.21% 0.16%
Non-performing assets to total assets 0.20% 0.19%
Allowance for loan losses to non-performing
loans 315.09% 392.12%
Allowance for loan losses to non-performing
assets 213.31% 226.55%
Allowance for loan losses to total loans 0.66% 0.62%
Net charge-offs $ (106) $ (161)
Net charge-offs to average loans (annualized) 0.01% 0.01%
Allowance for loan losses $ 12,342 $ 12,238
Note: Mutual Savings Bank established Bank Mutual Corporation on
November 1, 2000 and simultaneously issued public shares and
purchased First Northern Capital Corp. Information prior to that
date is that of Mutual Savings. The First Northern acquisition
was accounted for by using the purchase accounting method.
Bank Mutual Corporation and Subsidiaries
Supplemental Financial Information (Unaudited)
(Dollars in thousands except per share amounts and ratios)
Three months ended Six months ended
Operating Ratios June 30, June 30,
(annualized) 2001 2000 2001 2000
---------------- ---------- ---------- ---------- ----------
Net interest margin 2.63% 2.78% 2.66% 2.78%
Return on average assets 0.72% 0.79% 0.70% 0.74%
Return on average assets
excluding goodwill 0.85% 0.83% 0.83% 0.79%
Return on average assets,
excluding goodwill and
other intangible assets 0.86% 0.84% 0.85% 0.80%
Return on average
shareholders' equity 6.90% 8.41% 6.78% 7.95%
Return on average
shareholders' equity
excluding goodwill 9.75% 9.27% 9.66% 8.79%
Return on average
shareholders' equity
excluding goodwill and
other intangible assets 10.09% 9.49% 10.01% 9.00%
Efficiency ratio excluding
amortization of goodwill 58.63% 57.89% 59.01% 60.10%
Efficiency ratio, excluding
amortization of goodwill
and other intangible assets 57.85% 57.41% 58.23% 59.62%
Non-interest expense
(excluding amortization of
goodwill) as a percent of
average assets 1.78% 1.81% 1.78% 1.87%
Non -interest expense
(excluding amortization
of goodwill and other
intangible assets) as a
percent of average assets 1.76% 1.80% 1.76% 1.85%
Three months ended Six months ended
June 30, June 30,
Other Information 2001 2000 2001 2000
----------------- ---------- ---------- ---------- ----------
Average earning assets $2,644,916 $1,695,216 $2,637,022 $1,684,096
Average assets $2,823,997 $1,754,055 $2,810,338 $1,749,165
Average interest bearing
liabilities $2,405,076 $1,525,934 $2,399,677 $1,521,863
Average shareholders'
equity $ 294,525 $ 164,925 $ 291,502 $ 163,915
Average shareholders'
equity excluding average
goodwill $ 240,020 $ 156,924 $ 236,566 $ 155,829
Average shareholders'
equity excluding average
goodwill and other
intangible assets $ 235,942 $ 155,042 $ 232,438 $ 153,926
Weighted average number of
shares outstanding
-used in basic earnings
per share 21,480,250 N/A 21,515,606 N/A
-used in diluted earnings
per share 21,550,263 N/A 21,550,613 N/A
Average balance of
goodwill and other
intangible assets less
applicable deferred taxes $ 58,583 $ 9,883 $ 59,064 $ 9,989
Amortization of goodwill
and other intangible
assets less applicable
deferred taxes for the
period $ 873 $ 209 $ 1,747 $ 416
June 30, December 31,
2001 2000
---------- ----------
Number of shares
outstanding 22,341,665 22,341,665
Goodwill and other
intangible assets less
applicable deferred taxes $ 58,148 $ 60,198
Book value per share $ 13.21 $ 12.73
Tangible book value per
share $ 10.61 $ 10.04
Note: Mutual Savings Bank established Bank Mutual Corporation on
November 1, 2000 and simultaneously issued public shares and
purchased First Northern Capital Corp. Information prior to that
date is that of Mutual Savings. The First Northern acquisition
was accounted for by using the purchase accounting method.
Bank Mutual Corporation and Subsidiaries
Supplemental Financial Information (Unaudited)
(Dollars in thousands except per share amounts and ratios)
June 30, December 31,
2001 2000
--------------------- ---------------------
Yield on loans 7.58% 7.70%
Yield on investments 5.88% 6.81%
Combined yield on loans
and investments 7.09% 7.48%
Cost of deposits 4.62% 4.96%
Cost of borrowings 5.62% 6.27%
Total cost of funds 4.78% 5.26%
Interest rate spread 2.31% 2.22%
Note: Mutual Savings Bank established Bank Mutual Corporation on
November 1, 2000 and simultaneously issued public shares and
purchased First Northern Capital Corp. Information prior to that
date is that of Mutual Savings. The First Northern acquisition
was accounted for by using the purchase accounting method.
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