Bank Fees Dodd Frank

Bank Mutual Corporation Reports 120% Increase In Net Income For The First Quarter Of 2013.

MILWAUKEE
 , city (1990 pop. 628,088), seat of Milwaukee co., SE Wis., at the point where the Milwaukee, Menominee, and Kinnickinnic rivers enter Lake Michigan; inc. 1846.
, April 17, 2013 /PRNewswire/ — Bank Mutual Corporation
(
NASDAQ

: BKMU) reported net income of $2.5 million or $0.05 per
diluted
  
tr.v. di·lut·ed, di·lut·ing, di·lutes
1. To make thinner or less concentrated by adding a liquid such as water.

2. To lessen the force, strength, purity, or brilliance of, especially by admixture.
 share in the first quarter of 2013, which was a 120% improvement over
net income in the same quarter in 2012. Bank Mutual Corporation
(“Bank Mutual”) had net income of $1.2 million or $0.03 per
diluted share in the first quarter of the previous year. The improvement
in net income between these periods was due primarily to higher net
interest income, higher net loan servicing fee revenue, and lower net
losses and expenses on foreclosed real estate. These developments were
partially offset by lower gains on sales of loans and higher provision
for loan losses.

Michael
  [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
 , 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, noted, “Our net interest margin improved for the third
quarter in a row on the strength of improved
earning asset

 and funding
mixes, as well as lower absolute funding costs.” Mr. David A.

Baumgarten
) may refer to:

  • places in Austria:
  • Baumgarten, Burgenland, Austria


, President of Bank Mutual, added, “Strengthening our net
interest margin is a high priority for us, which will offset expected
declines in revenue from our mortgage banking operations as the year
progresses.” As previously announced, Mr. Baumgarten will become
the Chief Executive Officer of Bank Mutual on
July
 see month.
 1, 2013, upon the
retirement of Mr. Crowley. Mr. Crowley will remain Chairman of the Board
of Directors of Bank Mutual and Mr. Baumgarten will retain the title of
President of Bank Mutual.

Bank Mutual’s net interest income increased by $1.3 million or
8.6% during the three months ended March 31, 2013, compared to the same
period in 2012. This increase was primarily
attributable

 to a 32 basis
point improvement in Bank Mutual’s net interest margin, from 2.65%
in the first quarter of 2012 to 2.97% in the first quarter of 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 $61.5 million or 4.5% between the quarterly periods
and its average mortgage-related securities, investment securities, and
overnight investments (which generally have lower yields) declined by
$128.5 million or 14.7% 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 $67.8 million or 8.0% in the aggregate
between the quarterly periods and its average certificates of deposit
(which generally have a higher interest cost) declined by $237.9 million
or 23.0% 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 first quarter of 2013 and 2012 was a 19 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
 , city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837.
 in the second 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
  
adj.
1. Advantageous; helpful:

2. Encouraging; propitious:

3.
 impact of the
aforementioned
  
adj.
Mentioned previously.

n.
The one or ones mentioned previously.


Adjective

mentioned before

Adj. 1.
 developments on net
interest income was partially offset by a $67.1 million or 3.0% decrease
in average
earning assets

 during the first quarter of 2013 compared to
the same quarter in 2012. Bank Mutual’s earning assets have
declined in recent periods as it uses 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 $891,000 in the
first quarter of 2013 compared to $51,000 in the same quarter last year.
Bank Mutual’s provision in the first quarter of 2013 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 loan portfolio. In
comparison, during the first quarter of the previous year, loss
provisions against a number of specific multi-family, commercial real
estate, and business loan relationships were substantially offset by a
cash recovery related to a large loan relationship that had been
previously charged-off, as well as loss recoveries from two
non-performing loans that paid off during the period. In addition, Bank
Mutual reduced its general loss allowances modestly during the first
quarter of 2012 to reflect improved credit quality in its loan
portfolio, attributable to lower levels of
delinquent
 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent.


DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty.
 and classified
loans.

Although Bank Mutual’s provision for loan losses was higher in
the first quarter of 2013 than it was in the same period in 2012 (for
reasons described in the previous paragraph), Bank Mutual’s
provision for loan losses has generally trended lower in recent periods.
This trend is consistent with recent declines in Bank Mutual’s
non-performing loans and classified loans and is consistent with general
trends in the banking industry. It should be noted, however, that Bank
Mutual’s loan portfolio continues to be impacted by slow economic
growth, relatively high unemployment, and low real estate values. These
conditions are particularly 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 by $34,000 or 2.2% during the
three months ended March 31, 2013, compared to the same quarter in 2012.
Management attributes these improvements to an increase in Bank
Mutual’s average core deposit accounts, consisting of checking,
savings, and money market accounts, which increased by $67.8 million or
8.0% during the three months ended March 31, 2013, compared to the same
period in 2012. Also contributing were recent 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.

Brokerage

 and insurance commissions were $691,000 during the first
quarter of 2013, a $110,000 or 18.9% increase from the same period in
the previous year. 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 first quarter of 2013 benefited from higher
sales of equity-related investments, which management attributes to
improvement in equity markets in recent periods. Contributing to a
lesser degree were increased sales of tax-deferred annuities, which
management attributes to the increased popularity of such investments in
the current interest rate environment.

Net loan-related fees and servicing revenue was $949,000 during the
three months ended March 31, 2013, compared to $137,000 in the same
period of the previous year. The following table presents the components
of net loan-related fees and servicing revenue for the periods
indicated:

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. Market interest rates for residential mortgage loans have
been very low in recent periods, which have resulted in increased

volatility

 in the valuation allowance Bank Mutual maintains against its
MSRs. Modest increases in market interest rates near the end of the
first quarters of both 2013 and 2012 resulted in lower loan
prepayment

 expectations and a decrease in the valuation allowance as of the end of
those periods. As of March 31, 2013, Bank Mutual had a valuation
allowance of $1.3 million 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 $1.9 million in the first quarter of
2013 compared to $2.9 million in the same quarter last year. Bank Mutual
typically sells most fixed-rate, one- to four-family mortgage loans that
it originates in the secondary market. During the three months ended
March 31, 2013, sales of these loans were $103.8 million compared to
$123.0 million during the same period in the previous year. Although
market interest rates for residential mortgage loans remain low by
historical standards, recent increases in such rates have resulted in
lower originations and sales of fixed-rate, one- to four-family loans in
2013 relative to prior periods. Also contributing to the decrease in
gains on sales of loans in 2013 was a decline in Bank Mutual’s
average
gross profit margin

A measure calculated by dividing gross profit by net sales.
 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 remainder of 2013 are likely to be lower than they were in
2012.

Increase in
cash surrender value

 of life insurance investments was
$724,000 during the three months ended March 31, 2013, compared to
$527,000 during the same period in 2012. This increase was caused by
higher payouts associated with excess death benefits in the 2013 period
compared to the prior year period.

Compensation-related expenses increased by $478,000 or 4.5% in the
first quarter of 2013 compared to the same quarter in 2012. This
increase was 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 $125,000 or 4.2%
during the three months ended March 31, 2013, compared to the same
period in 2012. This increase was principally caused by increased
repairs and maintenance on Bank Mutual’s facilities, due in part to
increased snow removal costs in 2013 compared to 2012.

Federal deposit insurance premiums were $807,000 during the first
three months of 2013 compared $831,000 during the same period in 2012.
The modest decrease was caused by a decline in Bank Mutual’s
average total assets during the first quarter of 2013 compared to the
same period in 2012. Under the FDIC’s current risk-based assessment
system, management believes Bank Mutual’s quarterly federal
insurance premiums could be up to 35% lower in future quarters due to
recent improvements in Bank Mutual’s financial condition and
operating results. However, there can be no assurances.

Advertising and marketing-related expenses decreased by $72,000 or
12.0% during the three months ended March 31, 2013, compared to the same
period in the prior year. This decrease was primarily caused by reduced
television advertising during the first quarter of 2013.
Marketing-related expenses are highly dependent on future management
decisions, as well as variability in the timing of marketing-related
efforts. As such there can be no assurances that such expenses will not
vary considerably from period to period.

Net losses and expenses on foreclosed real estate were $1.1 million
during the first quarter of 2013 compared to $2.8 million in the same
quarter of last year. 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 by $381,000 or 13.7% during the
three months ended March 31, 2013, compared to the same period in 2012.
This decrease was primarily the result of lower legal, consulting, and
accounting fees related to loan
workout

1. The process of a debtor’s meeting a loan commitment by satisfying altered repayment terms.
 efforts and related
professional
services

.

Income tax expense was $1.2 million and $462,000 during the three
months ended March 31, 2013 and 2012, respectively. Bank Mutual’s
effective tax rates (”
ETR

ETR Effective Tax Rate
Etr Etruscan
ETR Eastern Test Range
ETR Express Toll Route
“) during these periods were 32.1%
and 28.9%, respectively. Bank Mutual’s ETR will vary from period to
period depending primarily on the impact of non-taxable revenue, such as
tax-exempt interest income and earnings from bank-owned life insurance
(”
BOLI

“). The ETR will generally be higher in periods in which
non-taxable revenue comprises a smaller portion of pre-tax income or
loss.

Bank Mutual’s total assets decreased by $24.4 million or 1.0%
during the three months ended March 31, 2013. During the period Bank
Mutual’s mortgage-related securities available-for-sale decreased
by $62.6 million due to regular repayments and its cash and due from
banks decreased by $15.4 million due to seasonal factors. These
developments were partially offset by a $57.0 million increase in Bank
Mutual’s overnight investments due primarily to cash flows from the
securities portfolio. Also during the period, Bank Mutual’s deposit
liabilities decreased by $21.4 million. Bank Mutual’s total
shareholders’ equity increased from $271.9 million at
December
 see month.
 31,
2012, to $274.0 million at March 31, 2013.

Bank Mutual’s loans receivable decreased by $3.6 million or
0.3% during the three months ended March 31, 2013. Total loans
originated for portfolio decreased by $11.1 million or 12.3% during this
period compared to the same period in the previous year. Originations in
all categories of loans declined with the exception of construction and
development loans. Management attributes the changes in the
origination

 volumes of multi-family, commercial real estate, construction and
development, and commercial business loans to normal variability in the
timing of loan closings and customer demand for such loans. Also
contributing to this variability was the risk of federal tax law changes
in 2013 that
motivated
  
tr.v. mo·ti·vat·ed, mo·ti·vat·ing, mo·ti·vates
To provide with an incentive; move to action; impel.


mo
 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. Although originations of multi-family mortgage loans,
including permanent and construction, declined in the first quarter of
2013 compared to 2012, the Company has experienced elevated demand for
such loans in recent periods. Management believes this elevated demand
reflects a general decline in the level of home ownership in recent
periods and increased demand for multi-family housing. With respect to
declines in one- to four-family and consumer loan production in the
first quarter of 2013, management attributes these declines to modestly
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 $21.4 million or
1.1% during the three months ended March 31, 2013. Core deposits,
consisting of checking, savings and money market accounts, increased by
$25.8 million or 2.4% during the period while certificates of deposit
declined by $47.3 million or 5.8%. 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 $274.0 million at March 31, 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. The
book value of Bank Mutual’s common stock was $5.90 per share at
March 31, 2013, compared to $5.87 per share at December 31, 2012.

Bank Mutual’s ratio of shareholders’ equity to total
assets was 11.45% at March 31, 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
  
tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates
1. To control or direct according to rule, principle, or law.

2.
 capital purposes. As of December 31, 2012 (the latest
information available), the subsidiary bank had a total
risk-based
capital ratio

 of 18.02% and a
Tier 1 capital

 ratio of 10.28%. The
minimum ratios to be considered “well capitalized” under
current
supervisory
  
n.
1. One who supervises.

2. One who is in charge of a particular department or unit, as in a governmental agency or school system.

3. One who is an elected administrative officer in certain U.S.
 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.

Bank Mutual’s capital measures remain strong as of March 31,
2013. However, federal banking regulators have continued to focus on the
capital levels of financial institutions such as Bank Mutual’s bank
subsidiary. 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
 n. a banking and lending institution, chartered either by a state or the Federal government. Savings and loans only make loans secured by real property from deposits, upon which they pay interest slightly higher than that paid by most banks.
 holding
companies such as Bank Mutual. These developments, as well as other
requirements that could be imposed by regulators, including potential
developments under
Basel
  or  , Fr. Bâle, canton, N Switzerland, bordering on France and Germany.
 III, may impact the ability of Bank Mutual
and/or its subsidiary bank to pay dividends or, in the case of Bank
Mutual,
repurchase
  
tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es
To buy (something) again.

n.
The act of buying something that one previously sold or owned.

Noun 1.
 its common stock.

Bank Mutual’s non-performing loans were $23.3 million or 1.66%
of loans receivable as of March 31, 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 $36.7 million or 1.54%
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 substantially 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 $21.4 million or
1.53% of total loans at March 31, 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
92.2% at March 31, 2013, compared to 83.6% at December 31, 2012.
Management believes the allowance for loan losses at March 31, 2013, was
adequate to cover
probable

 and
estimable
  
adj.
1. Possible to estimate:

2. Deserving of esteem; admirable:
 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 fourth largest financial institution
holding company headquartered in the state of
Wisconsin
 , 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
 and its stock is
quoted on the NASDAQ Global Select Market under the symbol
“BKMU”. Its subsidiary bank, Bank Mutual, operates 75 banking
locations in the state of Wisconsin and one in
Minnesota
 , 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
.

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
 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.
,” “intend,” and
similar expressions; the use of verbs in the
future tense

n.
A verb tense expressing future time.

Noun 1. future tense – a verb tense that expresses actions or states in the future
future
 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
 , something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although
 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 potential 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 its subsidiary bank; potential changes
in the Federal National Mortgage Association (”
Fannie Mae
 see Federal National Mortgage Association.
“)
and the
Federal Home Loan Mortgage Corporation
 commonly known as  privately owned, government-sponsored organization that uses private capital to buy home mortgages as a means to help lower housing costs.
 (”
Freddie
Mac

 see Federal Home Loan Mortgage Corporation.
“), 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
Federal Deposit Insurance Corporation
 (FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000.
 (”
FDIC

See Federal Deposit Insurance Corporation (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

n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks.
;
natural disasters, acts of
terrorism
 the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances.
, 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
 relate prep

 relate prep → ,  
 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.

SOURCE Bank Mutual Corporation