Bank Mutual profit falls on provision for loan loss

Management anticipates lending difficulties

Brown Deer-based Bank Mutual Corp. today reported lower profits in the first quarter, driven by a higher provision for loan loss.

Bank Mutual headquarters

The Bank Mutual headquarters in Brown Deer.

First quarter net income was $3.6 million, or 8 cents per diluted share, down from $4.5 million, or 10 cents per share, in the first quarter of 2016.

The company attributed the decline to a $717,000 provision for loan loss in the first quarter, compared with a $573,000 recovery of loan losses in the year-ago period. Bank Mutual has seen a “modest increase” in non-performing and other classified loans, which its management believes could be a leading indicator for a lending downturn.

“Management anticipates that Bank Mutual’s provision for loan losses will continue to consist of provisions rather than recoveries for the foreseeable future, particularly if Bank Mutual’s loan portfolio continues to grow,” the release stated.

Other factors that contributed to the lower profit were lower loan-related fees; lower revenues; and higher compensation and occupancy expenses. Mostly offsetting those, in the first quarter Bank Mutual’s net interest income increased 5.1 percent, to $18.6 million. Its deposit insurance premiums also declined and it lowered other non-interest expenses. Even so, non-interest income fell to $5.4 million, down from $6.2 million in the first quarter of 2016.

“Absent the tax-effected change in our provision for loan loss, we believe our earnings in the first quarter would have been comparable to the prior year,” said David Baumgarten, president and chief executive officer of Bank Mutual. “We are certainly pleased with the improvement in our net interest income, which was driven by continued growth in our earning assets and modest expansion of our net interest margin, excluding the consideration of call premiums in prior periods. However, we are less than satisfied with the decline in revenue from our mortgage banking and brokerage, advisory, and insurance lines of business. We have recently taken actions to reverse the trend for these revenue sources and we remain optimistic about the future.”

Bank Mutual Corp. had $2.7 billion in total assets and $2.4 billion in total liabilities as of March 31. It operates 64 Bank Mutual branches in Wisconsin and one in Minnesota, but is in the process of reducing that number to 57 through a five-branch sale and two-branch consolidation.

Brown Deer-based Bank Mutual Corp. today reported lower profits in the first quarter, driven by a higher provision for loan loss.

Bank Mutual headquarters

The Bank Mutual headquarters in Brown Deer.

First quarter net income was $3.6 million, or 8 cents per diluted share, down from $4.5 million, or 10 cents per share, in the first quarter of 2016.

The company attributed the decline to a $717,000 provision for loan loss in the first quarter, compared with a $573,000 recovery of loan losses in the year-ago period. Bank Mutual has seen a “modest increase” in non-performing and other classified loans, which its management believes could be a leading indicator for a lending downturn.

“Management anticipates that Bank Mutual’s provision for loan losses will continue to consist of provisions rather than recoveries for the foreseeable future, particularly if Bank Mutual’s loan portfolio continues to grow,” the release stated.

Other factors that contributed to the lower profit were lower loan-related fees; lower revenues; and higher compensation and occupancy expenses. Mostly offsetting those, in the first quarter Bank Mutual’s net interest income increased 5.1 percent, to $18.6 million. Its deposit insurance premiums also declined and it lowered other non-interest expenses. Even so, non-interest income fell to $5.4 million, down from $6.2 million in the first quarter of 2016.

“Absent the tax-effected change in our provision for loan loss, we believe our earnings in the first quarter would have been comparable to the prior year,” said David Baumgarten, president and chief executive officer of Bank Mutual. “We are certainly pleased with the improvement in our net interest income, which was driven by continued growth in our earning assets and modest expansion of our net interest margin, excluding the consideration of call premiums in prior periods. However, we are less than satisfied with the decline in revenue from our mortgage banking and brokerage, advisory, and insurance lines of business. We have recently taken actions to reverse the trend for these revenue sources and we remain optimistic about the future.”

Bank Mutual Corp. had $2.7 billion in total assets and $2.4 billion in total liabilities as of March 31. It operates 64 Bank Mutual branches in Wisconsin and one in Minnesota, but is in the process of reducing that number to 57 through a five-branch sale and two-branch consolidation.

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