Bank Mutual Corp.'s plans for improving its lackluster earnings include making more commercial loans and selling more fee services to baby boomers.
One analyst, however, says the Milwaukee company's transition from a traditional thrift is taking too long and that it might be better off selling itself - now that it can. The Office of Thrift Supervision forbids stock-owned thrifts from being acquired until they have been public for three years, and Bank Mutual had its third anniversary as a public company Sunday.
The $3.5 billion-asset Bank Mutual reported third-quarter earnings of $5.1 million, down 26% from a year earlier. It had similar declines in the three previous quarters.
Michael T. Crowley Jr., Bank Mutual's chairman, president, and chief executive officer, blamed its earnings woes on market conditions - including competition for loans and deposits - and on interest rates.
In the nine months that ended Sept. 30, Bank Mutual originated $41 million of commercial real estate loans, 12.2% less than in the first three quarters of 2005. Commercial business loans were flat at $32 million, and total loan originations in the nine months fell 15.5% year over year, to $430 million.
Bank Mutual has hired four commercial lenders in the past year, but Mr. Crowley said it has been difficult to add more because good ones are hard to find. Moreover, he said, the company does not want to expand its commercial portfolio too quickly. "We are taking our time in bringing new credits on so we don't have credit quality issues down the road," he said.
To raise fee income, Bank Mutual is aggressively marketing its debit card program and building a retirement planning business in its insurance subsidiary, BancMutual Financial and Insurance. It is trying to cross-sell those services to baby boomers, especially those nearing retirement age who have pensions and other large retirement savings that need to be managed, Mr. Crowley said.
It is also training its younger employees in how best to talk with older customers to identify what products and services they want.
Whether all of this will lead to long-term independence is hard to tell, said Ronald J. Peterson, an analyst with Sterne, Agee & Leach Inc. in Chicago.
Though Bank Mutual's earnings have been down, Mr. Peterson said, that is more a function of the banking environment. "Everyone is facing the same challenges; it is not unique to Bank Mutual," he said.
But Kevin K. Reevey, an analyst at BankAtlantic Bancorp Inc.'s Ryan Beck & Co. Inc. in New York, said he thinks a sale of Bank Mutual in the near future is likely, in part because of the difficulty it has had bulking up in commercial lending.
The fact that it has branches in some of Wisconsin's most desirable markets would make it appealing to buyers, Mr. Reevey said. He also pointed out that Mr. Crowley owns about 3% of Bank Mutual's shares, and said "we believe he is shareholder-focused and would strongly consider an offer."
Mr. Crowley said he has been hearing rumors about Bank Mutual's possible sale for at least six months, but he would not comment on them.
Bank Mutual's stock hit a 52-week high of $12.76 on Sept. 21. It closed up 1.33% Monday, to $12.21.
