Bank Mutual Corp. earnings fall 50%

New federal tax law dings bank as it heads into merger

Bank Mutual headquarters
The Bank Mutual headquarters in Brown Deer.

Brown Deer-based Bank Mutual Corp. today reported its profits fell more than 50 percent in the fourth quarter of 2017.

Bank Mutual headquarters
The Bank Mutual headquarters in Brown Deer.

The bank reported fourth quarter net income of $1.9 million, or 4 cents per share, down from $4.1 million, or 9 cents per share, in the fourth quarter of 2016.

The bank’s full-year net income was $13.5 million, or 30 cents per diluted share, down from $17 million, or 37 cents per share, in 2016.

Bank Mutual attributed the steep declines to the recent reduction in the corporate federal income tax rate to 21 percent. The company said the fourth quarter and full year 2017 results each included a $4.4 million negative adjustment to its net deferred tax assets related to the change.

“Although this reduction is expected to benefit future earnings, it resulted in a negative adjustment to Bank Mutual’s net deferred tax asset of $4.4 million because such asset had been valued using the former income tax rate of 35 percent,” the company said.

In addition, Bank Mutual is in the process of being acquired by Green Bay-based Associated Banc-Corp. As a result, Bank Mutual incurred $472,000 in related expenses in the fourth quarter and $1.7 million in related expenses for the full year.

Without those two impacts, Bank Mutual said its adjusted earnings would have been $6.6 million for the fourth quarter and $19.1 million for the year. Positive full-year developments included higher net interest income (up 6.5 percent); a lower provision for loan losses (-$722,000, down from $1 million); higher brokerage, advisory and insurance revenue (up 32 percent to $853,000); additional revenue from real estate held for investment ($488,000, up from $12,000); lower occupancy, equipment and data processing costs (down 0.5 percent); and fewer non-interest expenses ($8.3 million, down from $9.6 million).

Also in the fourth quarter, Bank Mutual recorded higher advertising and marketing costs compared to the fourth quarter of 2017. For the full year, Bank Mutual recorded a $197,000 loss on its sale of five retail branches to Marine Credit Union, and $187,000 in one-time costs related to that sale and the consolidation of two other retail branch offices this year.

Bank Mutual indicated staffing levels have decreased from those branch sales and consolidations, as well as the pending merger.

“Also contributing to the decrease in staffing levels in the fourth quarter of 2017 was a general decrease in the number of employees as a consequence of the pending merger with Associated, primarily through attrition,” the company said.

“Our core operating results were strong in the fourth quarter due in part to continued declines in our non-performing and other classified assets,” said David Baumgarten, president and chief executive officer of Bank Mutual. “We feel very good about the quality of the loan portfolio we are bringing into the pending merger with Associated. We also feel good about the profitability of the existing book of business we are bringing to Associated, as evidenced by the improvement in net interest margin to 3.15 percent in the fourth quarter. We believe the future is bright for the combination of these two exceptional financial institutions and we look forward to working with Associated to complete the integration.”

Baumgarten could not immediately be reached for more information about whether the results may impact the merger.

Bank Mutual operates 57 branches in Wisconsin and one branch in Minnesota. It has $2.6 billion in total assets.

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