Commercial real estate drags on Bank Mutual

Brown Deer-based Bank Mutual Corp. barely posted a profit in the second quarter, posting net income of $731,000, or 2 cents per share, down from $3.8 million, or 8 cents per share, from the second quarter of 2009.

“A low interest rate environment and a difficult market for commercial real estate continue to challenge our earnings performance,” said Michael Crowley Jr., chairman, president, and chief executive officer of Bank Mutual.

Bank Mutual’s provision for loan losses was $6.2 million during the second quarter, up from $472,000 in the same quarter last year.

The company said its losses have been affected by the continued weakness of the economy and the high unemployment rate since 2008, which have resulted in lower real estate values. The company said that those conditions have been “particularly challenging” for its portfolio of multi-family and commercial real estate loans and commercial business loans.

During the second quarter of Bank Mutual recorded $4.1 million in loss provisions against seven unrelated loan relationships aggregating $15.9 million. The loans are secured by office, commercial, and retail buildings, developed land, and equipment and inventory.

Bank Mutual’s losses on foreclosed real estate were $2.1 million during the second quarter of 2010, compared to $69,000 in the same quarter last year. Year-to-date, the bank’s losses on foreclosed real estate were $3 million in 2010 compared to $64,000 during first six months of 2009.

The company said future losses on foreclosed real estate could remain elevated in the near term.

Bank Mutual’s multi-family and commercial real estate mortgage loan originations were $26.7 million during the six months ended June 30, 2010, compared to $33.8 million during the same period in 2009.

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