Bank Mutual Corporation Reports Earnings for the Third Quarter of 2006 and Nine Months Ended September 30, 2006

Business Wire, Oct 19, 2006

MILWAUKEE -- Bank Mutual Corporation (NASDAQ:BKMU) reported net earnings of $5.1 million or $0.09 diluted earnings per share for the three months ended September 30, 2006 as compared to $6.9 million or $0.11 diluted earnings per share during the same period in 2005. Earnings for the nine months ended September 30, 2006 were $16.0 million or $0.26 diluted earnings per share as compared to $22.0 million or $0.34 diluted earnings per share for the nine months ended September 30, 2005. Earnings decreased for both periods primarily as a result of a decrease in the net interest margin. Diluted earnings per share calculations and net income were also affected by Bank Mutual's ongoing stock repurchase programs.

"Although our interest income continues to increase as a result of our efforts to change the mix of our assets, increases in both the costs of deposits and borrowings have more than offset these gains. However, we continue to focus on the long term financial aspects of Bank Mutual. Specifically, we continue to focus on building our commercial business and commercial real estate loan portfolios and adding offices that access new markets or further penetrate existing markets. Although these activities do not immediately increase our net income, they do create a foundation on which we expect to build profitability and consistency of earnings," stated Michael T. Crowley, Jr., Chairman, President and Chief Executive Officer of Bank Mutual Corporation.

The reported results represent an 18.2% decrease in diluted earnings per share for the third quarter of 2006 and a 23.5% decrease in diluted earnings per share for the nine months ended September 30, 2006 as compared to the same periods in 2005. Net income for the third quarter of 2006 decreased 26.0% and for the nine months ended September 30, 2006, decreased 27.5% as compared to the same periods in 2005.

One-to-four family mortgage loan originations and purchases were $105.5 million for the third quarter of 2006 and $308.7 million for the first nine months of 2006 as compared to $143.6 million for the third quarter of 2005 and $420.8 million for the first nine months of 2005. These decreases in one-to-four family mortgage loan originations were primarily the result of increased market interest rates on mortgage loan offerings, decreased sales of homes, and decreased one- to four-family mortgage loan purchases.

Multi-family and commercial real estate mortgage loan originations were $39.2 million for the third quarter of 2006 and $103.5 million for the first nine months of 2006 as compared to $35.9 million for the third quarter of 2005 and $88.6 million for the first nine months of 2005. These increased originations were primarily the result of additional marketing efforts and the hiring of a commercial real estate loan manager.

Loan sales were $28.2 million for the three months ended September 30, 2006 as compared to $42.0 million for the third quarter of 2005. Loan sales for the nine months ended September 30, 2006 were $68.0 million as compared to $107.0 million for the same period in 2005. Loan sales decreased in both periods because of reduced fixed rate mortgage loan originations that resulted from decreased demand caused by higher interest rates and a slow down in home sales. As a result of the decreased sales, gains on the sales of loans were $339,000 for the third quarter of 2006 and $851,000 for the first nine months of 2006 as compared to $564,000 and $1.4 million for the same periods in 2005.

Consumer loan originations for the three months ended September 30, 2006 were $42.5 million as compared to $65.5 million for the third quarter of 2005 and $126.3 million for the first nine months of 2006 as compared to $172.6 million for the first nine months of 2005. The decreases in consumer loan originations were primarily the result of increased interest rates on consumer loan offerings and discontinued indirect automobile loan originations through our 50% owned subsidiary, Savings Financial Corporation, as previously disclosed.

Commercial business loan originations in the third quarter of 2006 were $15.9 million as compared to $9.9 million in the third quarter of 2005 and $32.5 million for the nine months ended September 30, 2006 as compared to $32.4 million for the same period in 2005. The increase in the third quarter of 2006 was primarily the result of management's emphasis on commercial business loan originations and increased demand for commercial business loans.

In total, loan originations and purchases in the third quarter of 2006 were $203.1 million as compared to $254.8 million for the same period in 2005 and $571.0 million for the first nine months of 2006 as compared to $714.4 million for the first nine months of 2005. Although total originations and purchases were less in both periods of 2006 as compared to 2005, the total loan portfolio continued to grow as a result of decreased refinancing of existing loans.

Total assets at September 30, 2006 were $3.5 billion as compared to $3.4 billion at December 31, 2005. The increase was primarily a result of an increased loan portfolio which was funded by increases in deposits.