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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 September 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 78,417,764 shares, at November 2, 2004.

 

Table of Contents

 

BANK MUTUAL CORPORATION

 

10-Q INDEX

 

          Page No.
PART I.    FINANCIAL INFORMATION     

Item l.

    Financial Statements     
     Unaudited Consolidated Statements of Financial Condition
as of September 30, 2004 and December 31, 2003		    3
     Unaudited Consolidated Statements of Income
for the three months ended September 30, 2004 and 2003		    4
     Unaudited Consolidated Statements of Income
for the nine months ended September 30, 2004 and 2003		    5
     Unaudited Consolidated Statements of Shareholders’ Equity
for the nine months ended September 30, 2004 and 2003		    6
     Unaudited Consolidated Statements of Cash Flows
for the nine months ended September 30, 2004 and 2003		    7-8
     Notes to Unaudited Consolidated Financial Statements    9-22

Item 2.

    Management’s Discussion and Analysis of Financial Condition and Results of Operations    23-41

Item 3.

    Quantitative and Qualitative Disclosures about Market Risk    42-45

Item 4.

    Controls and Procedures    46
PART II.    OTHER INFORMATION     

Item 2.

    Unregistered Sale of Equity Securities and Use of Proceeds    47

Item 5.

    Other Information    48

Item 6.

    Exhibits    48
     Signatures    49

 

2

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PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

BANK MUTUAL CORPORATION

    AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

     September 30
2004
     December 31
2003
  
     (In thousands)  

Assets

                 

Cash and due from banks

    $ 26,469     $ 36,384  

Federal funds sold

      —         30,000  

Interest-earning deposits

      6,458       20,119  
    
 

Cash and cash equivalents

      32,927       86,503  

Securities available-for-sale, at fair value:

                 

Investment securities

      65,905       67,833  

Mortgage-related securities

      1,048,313       1,053,349  

Loans held for sale

      5,606       4,056  

Loans receivable, net

      1,831,110       1,712,278  

Goodwill

      52,570       52,570  

Other intangible assets

      4,577       5,073  

Mortgage servicing rights

      4,615       4,698  

Other assets

      129,521       122,167  
    
 
     $ 3,175,144     $ 3,108,527  
    
 

Liabilities and shareholders’ equity

                 

Liabilities:

                 

Deposits

    $ 1,979,423     $ 2,052,290  

Borrowings

      416,282       299,491  

Advance payments by borrowers for taxes and insurance

      28,665       2,987  

Other liabilities

      23,701       22,679  
    
 
       2,448,071       2,377,447  
    
 

Minority interest in real estate development

      2,296       —    
    
 

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 – 78,410,264 shares in 2004 and 78,775,779 in 2003

      788       788  

Additional paid-in capital

      495,453       495,990  

Retained earnings

      253,175       241,958  

Unearned ESOP shares

      (4,877 )     (5,766 )

Accumulated other comprehensive income

      (5,066 )     149  

Unearned deferred compensation

      (10,785 )     (2,039 )

Treasury stock – 373,585 shares in 2004

      (3,911 )     —    
    
 

Total shareholders’ equity

      724,777       731,080  
    
 
     $ 3,175,144     $ 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
September 30
     2004
     2003
     (In thousands, except
per share data)

Interest income:

               

Loans

    $ 24,421     $ 25,494

Investment securities

      955       1,125

Mortgage-related securities

      11,352       6,418

Interest-earning deposits

      28       765
    
 

Total interest income

      36,756       33,802

Interest expense:

               

Deposits

      10,425       12,484

Borrowings

      3,976       4,462

Advance payments by borrowers for taxes and insurance

      12       29
    
 

Total interest expense

      14,413       16,975
    
 

Net interest income

      22,343       16,827

Provision for loan losses

      267       —  
    
 

Net interest income after provision for loan losses

      22,076       16,827

Noninterest income:

               

Service charges on deposits

      1,226       1,259

Brokerage and insurance commissions

      653       547

Loan related fees and servicing revenue

      282       1,001

Gain on sale of investments

      —         —  

Gain on sales of loans

      253       2,761

Gain on sale of real estate

      2,009       —  

Loss on retirement of debt

      (1,737 )     —  

Other

      1,190       598
    
 

Total noninterest income

      3,876       6,166
    
 

Noninterest expenses:

               

Compensation, payroll taxes and other employee benefits

      9,242       8,143

Occupancy and equipment

      2,894       2,757

Amortization of other intangible assets

      165       165

Other

      2,758       3,015
    
 

Total noninterest expenses

      15,059       14,080
    
 

Income before income taxes

      10,893       8,913

Income taxes

      3,859       2,912
    
 

Net income

    $ 7,034     $ 6,001
    
 

Per share data:

               

Earnings per share – basic

    $ 0.09     $ 0.08
    
 

Earnings per share – diluted

    $ 0.09     $ 0.08
    
 

Cash dividends paid

    $ 0.05     $ 0.03
    
 

 

See Notes to Unaudited Consolidated Financial Statements.

 

4

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BANK MUTUAL CORPORATION

    AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

     Nine Months Ended
September 30
     2004
     2003
     (In thousands, except
per share data)

Interest income:

               

Loans

    $ 72,002     $ 80,123

Investment securities

      2,952       3,571

Mortgage-related securities

      34,563       20,552

Interest-earning deposits

      153       1,828
    
 

Total interest income

      109,670       106,074

Interest expense:

               

Deposits

      31,501       39,857

Borrowings

      11,827       13,644

Advance payments by borrowers for taxes and insurance

      24       61
    
 

Total interest expense

      43,352       53,562
    
 

Net interest income

      66,318       52,512

Provision for loan losses

      1,141       367
    
 

Net interest income after provision for loan losses

      65,177       52,145

Noninterest income:

               

Service charges on deposits

      3,452       3,557

Brokerage and insurance commissions

      2,128       1,822

Loan related fees and servicing revenue

      1,167       248

Gain on sale of investments

      537       121

Gain on sales of loans

      1,233       6,467

Gain on sale of real estate

      2,009       —  

Loss on retirement of debt

      (1,737 )     —  

Other

      3,363       3,493
    
 

Total noninterest income

      12,152       15,708
    
 

Noninterest expenses:

               

Compensation, payroll taxes and other employee benefits

      26,713       23,674

Occupancy and equipment

      8,306       8,168

Amortization of other intangible assets

      496       496

Other

      9,316       9,483
    
 

Total noninterest expenses

      44,831       41,821
    
 

Income before income taxes

      32,498       26,032

Income taxes

      11,272       8,982
    
 

Net income

    $ 21,226     $ 17,050
    
 

Per share data:

               

Earnings per share – basic

    $ 0.28     $ 0.22
    
 

Earnings per share – diluted

    $ 0.27     $ 0.22
    
 

Cash dividends paid

    $ 0.130     $ 0.084
    
 

 

See Notes to Unaudited Consolidated Financial Statements.

 

5

Table of Contents

 

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 (Loss)
     Unearned
Deferred
Compensation
     Treasury
Stock
     Total
  
     (In thousands)  

For the Nine Months Ended September 30, 2004