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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form 10-Q

 

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2004

 

OR

 

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission File Number 000-31207

 

BANK MUTUAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Wisconsin   39-2004336

(State or other jurisdiction of

incorporation or organization)

   (IRS Employer Identification No.)

 

4949 West Brown Deer Road

Milwaukee, WI 53223

(414) 354-1500

(Address, including Zip Code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

 

Yes x     No ¨

 

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

 

Yes x     No ¨

 

The number of shares outstanding of the issuer’s common stock $0.01 par value per share, was 78,783,849 shares, at July 31, 2004.

 

Table of Contents

BANK MUTUAL CORPORATION

 

10-Q INDEX

 

          Page No.

PART I.

    FINANCIAL INFORMATION     

Item 1.

    Financial Statements     
     Unaudited Consolidated Statements of Financial Condition
as of June 30, 2004 and December 31, 2003		    3
     Unaudited Consolidated Statements of Income
for the three months ended June 30, 2004 and 2003		    4
     Unaudited Consolidated Statements of Income
for the six months ended June 30, 2004 and 2003		    5
     Unaudited Consolidated Statements of Shareholders’ Equity
for the six months ended June 30, 2004 and 2003		    6
     Unaudited Consolidated Statements of Cash Flows
for the six months ended June 30, 2004 and 2003		    7-8
     Notes to Unaudited Consolidated Financial Statements    9-21

Item 2.

    Management’s Discussion and Analysis of Financial Condition and Results of Operations    22-40

Item 3.

    Quantitative and Qualitative Disclosures about Market Risk    41-44

Item 4.

    Controls and Procedures    45

PART II.

    OTHER INFORMATION     

Item 2.

    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities    46

Item 6.

    Exhibits and Reports on Form 8-K    47
     Signatures    48

 

2

Table of Contents

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

BANK MUTUAL CORPORATION

    AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

    

June 30

2004

     December 31
2003
  
     (In thousands)  

Assets

                 

Cash and due from banks

    $ 32,919     $ 36,384  

Federal funds sold

      —         30,000  

Interest-earning deposits

      1,984       20,119  
    
 

Cash and cash equivalents

      34,903       86,503  

Securities available-for-sale, at fair value:

                 

Investment securities

      67,243       67,833  

Mortgage-related securities

      1,044,090       1,053,349  

Loans held for sale

      4,302       4,056  

Loans receivable, net

      1,759,725       1,712,278  

Goodwill

      52,570       52,570  

Other intangible assets

      4,742       5,073  

Mortgage servicing rights

      4,737       4,698  

Other assets

      135,281       122,167  
    
 
     $ 3,107,593     $ 3,108,527  
    
 

Liabilities and shareholders’ equity

                 

Liabilities:

                 

Deposits

    $ 2,001,278     $ 2,052,290  

Borrowings

      349,036       299,491  

Advance payments by borrowers for taxes and insurance

      19,690       2,987  

Other liabilities

      28,332       22,679  
    
 
       2,398,336       2,377,447  

Shareholders’ equity:

                 

Preferred stock – $.01 par value:

                 

Authorized– 20,000,000 shares in 2004 and 2003

                 

Issued and outstanding – none in 2004 and 2003

      —         —    

Common stock – $.01 par value:

                 

Authorized– 200,000,000 shares in 2004 and 2003

                 

Issued – 78,783,849 shares in 2004 and 78,775,779 in 2003

                 

Outstanding – 78,232,214 shares in 2004 and 78,775,779 in 2003

      788       788  

Additional paid-in capital

      496,139       495,990  

Retained earnings

      250,044       241,958  

Unearned ESOP shares

      (5,173 )     (5,766 )

Accumulated other comprehensive income

      (15,259 )     149  

Unearned deferred compensation

      (11,494 )     (2,039 )

Treasury stock – 551,635 shares in 2004

      (5,788 )     —    
    
 

Total shareholders’ equity

      709,257       731,080  
    
 
     $ 3,107,593     $ 3,108,527  
    
 

 

See Notes to Unaudited Consolidated Financial Statements.

 

3

Table of Contents

BANK MUTUAL CORPORATION

    AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

     Three Months Ended
June 30
  
     2004
    2003
  
     (In thousands, except
per share data)		  

Interest income:

                

Loans

    $ 23,684    $ 26,944  

Investment securities

      967      1,264  

Mortgage-related securities

      11,585      6,781  

Interest-earning deposits

      17      587  
    
  

Total interest income

      36,253      35,576  

Interest expense:

                

Deposits

      10,352      13,480  

Borrowings

      4,010      4,575  

Advance payments by borrowers for taxes and insurance

      8      22  
    
  

Total interest expense

      14,370      18,077  
    
  

Net interest income

      21,883      17,499  

Provision for loan losses

      384      109  
    
  

Net interest income after provision for loan losses

      21,499      17,390  

Noninterest income:

                

Service charges on deposits

      1,153      1,268  

Brokerage and insurance commissions

      703      598  

Loan related fees and servicing revenue

      350      (669 )

Gain on sale of investments

      537      121  

Gain on sales of loans

      600      1,939  

Other

      1,086      1,780  
    
  

Total noninterest income

      4,429      5,037  
    
  

Noninterest expenses:

                

Compensation, payroll taxes and other employee benefits

      8,872      7,849  

Occupancy and equipment

      2,600      2,747  

Amortization of other intangible assets

      166      166  

Other

      3,381      3,598  
    
  

Total noninterest expenses

      15,019      14,360  
    
  

Income before income taxes

      10,909      8,067  

Income taxes

      3,791      2,887  
    
  

Net income

    $ 7,118    $ 5,180  
    
  

Per share data:

                

Earnings per share – basic

    $ 0.09    $ 0.07  
    
  

Earnings per share – diluted

    $ 0.09    $ 0.07  
    
  

Cash dividends paid

    $ 0.040    $ 0.027  
    
  

 

See Notes to Unaudited Consolidated Financial Statements.

 

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BANK MUTUAL CORPORATION

    AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

     Six Months Ended
June 30
  
     2004
    2003
  
     (In thousands, except
per share data)		  

Interest income:

                

Loans

    $ 47,581    $ 54,629  

Investment securities

      1,997      2,446  

Mortgage-related securities

      23,211      14,134  

Interest-earning deposits

      125      1,063  
    
  

Total interest income

      72,914      72,272  

Interest expense:

                

Deposits

      21,076      27,373  

Borrowings

      7,851      9,182  

Advance payments by borrowers for taxes and insurance

      12      32  
    
  

Total interest expense

      28,939      36,587  
    
  

Net interest income

      43,975      35,685  

Provision for loan losses

      874      367  
    
  

Net interest income after provision for loan losses

      43,101      35,318  

Noninterest income:

                

Service charges on deposits

      2,226      2,298  

Brokerage and insurance commissions

      1,475      1,275  

Loan related fees and servicing revenue

      885      (753 )

Gain on sale of investments

      537      121  

Gain on sales of loans

      980      3,706  

Other

      2,173      2,895  
    
  

Total noninterest income

      8,276      9,542  
    
  

Noninterest expenses:

                

Compensation, payroll taxes and other employee benefits

      17,471      15,531  

Occupancy and equipment

      5,412      5,411  

Amortization of other intangible assets

      331      331  

Other

      6,558      6,468  
    
  

Total noninterest expenses

      29,772      27,741  
    
  

Income before income taxes

      21,605      17,119  

Income taxes

      7,413      6,070  
    
  

Net income

    $ 14,192    $ 11,049  
    
  

Per share data:

                

Earnings per share – basic

    $ 0.19    $ 0.15  
    
  

Earnings per share – diluted

    $ 0.18    $ 0.14  
    
  

Cash dividends paid

    $ 0.080    $ 0.054  
    
  

 

See Notes to Unaudited Consolidated Financial Statements.

 

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BANK MUTUAL CORPORATION

    AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

 

     Common
Stock
    Additional
Paid-In
Capital
     Retained
Earnings
     Unearned
ESOP
Shares
     Accumulated
Other
Comprehensive
Income
     Unearned
Deferred
Compensation
     Treasury
Stock
     Total
  
     (In thousands)  

For the Six Months Ended June 30, 2004

                                                                

Balance at January 1, 2004

    $ 788    $ 495,990     $ 241,958     $ (5,766 )   $ 149     $ (2,039 )   $ —       $ 731,080  

Comprehensive income:

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