<PAGE> 1
EXHIBIT 99.2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MUTUAL SAVINGS BANK
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------- -----------------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 23,697 $ 21,367
Federal funds sold 25,000
Interest-earning deposits 13,144 132,592
------------ -----------
CASH AND CASH EQUIVALENTS 36,841 178,959
Securities available-for-sale, at fair value:
Investment securities 77,795 57,763
Mortgage-related securities 452,199 374,100
Loans held for sale 4,958 541
Loans receivable, net 1,131,708 1,082,795
Real estate owned 4,831 4,953
Office properties and equipment 26,768 26,871
Federal Home Loan Bank stock, at cost 14,844 13,537
Accrued interest receivable 9,546 8,620
Intangible assets 10,792 11,496
Other assets 10,089 9,871
------------ -----------
$ 1,780,371 $1,769,506
============ ===========
LIABILITIES
Deposits $ 1,296,920 $1,343,007
Borrowings 270,520 242,699
Advance payments by borrowers for taxes and insurance 18,588 1,661
Other liabilities 19,746 18,319
------------ -----------
TOTAL LIABILITIES 1,605,774 1,605,686
EQUITY
Retained earnings 179,674 169,746
Net unrealized gain (loss) on securities available-for-sale (5,077) (5,926)
------------ -----------
TOTAL EQUITY 174,597 163,820
------------ -----------
$ 1,780,371 $1,769,506
============ ===========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
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MUTUAL SAVINGS BANK
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
2000 1999
--------- --------
(In Thousands)
<S> <C> <C>
Interest income:
Loans $21,711 $19,841
Investment securities 1,544 5,269
Mortgage-related securities 7,961 4,676
---------- ---------
TOTAL INTEREST INCOME 31,216 29,786
Interest expense:
Deposits 15,463 15,121
Borrowings 4,108 3,593
Advance payments by borrowers for taxes and insurance 102 112
---------- ---------
TOTAL INTEREST EXPENSE 19,673 18,826
---------- ---------
NET INTEREST INCOME 11,543 10,960
Provision for loan losses 40 32
---------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 11,503 10,928
Non-interest income:
Service charges on deposits 662 637
Brokerage commissions 438 497
Servicing fees on loans sold 100 110
Loan fees and service charges 105 140
Gain (loss) on sale of securities 1 (112)
Gains on sales of loans 109 71
Other 768 477
--------- ---------
TOTAL NON-INTEREST INCOME 2,183 1,820
Non-interest expense:
Compensation, payroll taxes and other employee benefits 4,468 4,322
Federal insurance premiums 68 199
Occupancy 1,249 1,369
Data processing 374 382
Marketing 625 411
Amortization of intangibles 235 677
Other 1,443 1,476
---------- ---------
TOTAL NON-INTEREST EXPENSE 8,462 8,836
INCOME BEFORE INCOME TAXES 5,224 3,912
Income taxes 1,810 1,508
---------- ---------
NET INCOME $ 3,414 $ 2,404
========== =========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
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<PAGE> 3
MUTUAL SAVINGS BANK
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
2000 1999
---- ----
(In Thousands)
<S> <C> <C>
Interest income:
Loans $63,114 $59,578
Investment securities 4,759 15,678
Mortgage-related securities 23,821 13,179
--------- ----------
TOTAL INTEREST INCOME 91,694 88,435
Interest expense:
Deposits 45,202 46,106
Borrowings 11,340 10,638
Advance payments by borrowers for taxes and insurance 192 209
--------- ----------
TOTAL INTEREST EXPENSE 56,734 56,953
--------- ----------
NET INTEREST INCOME 34,960 31,482
Provision for loan losses 276 235
--------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 34,684 31,247
Non-interest income:
Service charges on deposits 1,899 1,869
Brokerage commissions 1,432 1,324
Servicing fees on loans sold 305 339
Loan fees and service charges 397 536
Gain (loss) on sale of securities 20 (300)
Gains on sales of loans 152 507
Other 2,082 1,381
--------- ----------
TOTAL NON-INTEREST INCOME 6,287 5,656
Non-interest expense:
Compensation, payroll taxes and other employee benefits 13,307 12,904
Federal insurance premiums 210 615
Occupancy 3,851 4,215
Data processing 1,116 958
Marketing 1,881 1,548
Amortization of intangibles 704 2,033
Other 4,163 4,442
--------- ----------
TOTAL NON-INTEREST EXPENSE 25,232 26,715
INCOME BEFORE INCOME TAXES 15,739 10,188
Income taxes 5,811 3,894
--------- ----------
NET INCOME $ 9,928 $ 6,294
========= ==========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
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<PAGE> 4
MUTUAL SAVINGS BANK
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE TOTAL
EARNINGS INCOME EQUITY
------------ ------------------------ ------------
(In Thousands)
<S> <C> <C> <C>
For the Nine Months Ended September 30, 2000
--------------------------------------------
Balance at December 31, 1999 $169,746 $(5,926) $163,820
Comprehensive income:
Net income 9,928 9,928
Other comprehensive income
Change in net unrealized gain(loss)
on securities available-for-sale, net
of deferred income tax benefit of
$476 849 849
------------
Total comprehensive income 10,777
---------- ---------- ------------
Balance at September 30, 2000 $179,674 $(5,077) $174,597
========== ========== ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
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<PAGE> 5
MUTUAL SAVINGS BANK
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
2000 1999
---- ----
(In Thousands)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,810 $ 2,963
Cash flows from investing activities:
Proceeds from maturities of investments securities 27,424 65,000
Purchases of investment securities (161,068) (20,000)
Purchases of mortgage-related securities - (83,487)
Net purchases of investments in mutual funds (1,340) (1,096)
Principal payments on mortgage-related securities 38,501 49,119
Net (increase) decrease in loans receivable (51,730) (17,857)
Proceeds from sale of foreclosed properties 2,999 2,062
Purchase of Federal Home Loan Bank stock (1,307) -
Purchase of office properties and equipment (1,068) (993)
---------- -----------
NET CASH USED BY INVESTING ACTIVITIES (147,589) (7,252)
Cash flows from financing activities:
Net decrease in deposits (46,087) (34,705)
Net increase in short-term borrowings 70,000 -
Repayments of long-term borrowings (42,179) (123)
Net increase in advance payments by borrowers for taxes and insurance 16,927 16,842
---------- -----------
NET CASH USED BY FINANCING ACTIVITIES (1,339) (17,986)
DECREASE IN CASH AND CASH EQUIVALENTS (142,118) (22,275)
Cash and cash equivalents at beginning of period 178,959 330,248
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,841 $ 307,973
========== ===========
Supplemental Information to the Statement of Cash Flows:
Interest on deposits $ 43,342 $ 43,800
Income taxes 5,607 4,947
Loans transferred to foreclosed properties and repossessed assets 2,541 1,445
Mutual fund liquidation proceeds - 14,047
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
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MUTUAL SAVINGS BANK
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Mutual Savings Bank included herein
have been included by Bank Mutual Corporation (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. The Company is
a successor to Mutual Savings Bank ("Mutual Savings") in a regulatory
restructuring into a mutual holding company form, which was effective on
November 1, 2000. The restructuring included the capitalization of the Company,
the sale of certain of its common shares, and the acquisition by the Company of
all of the shares of Mutual Savings. Simultaneously, the Company acquired First
Northern Capital Corp. These financial statements do not include the effects of
the restructuring or the First Northern Capital Corp. acquisition.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information,
Rule 10-01 of Regulation S-X and the instructions to Form 10-Q. The financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial information. In
the opinion of the Company, the accompanying Unaudited Consolidated Statements
of Financial Condition, Unaudited Consolidated Statements of Income, Unaudited
Consolidated Statement of Equity and Unaudited Consolidated Statements of Cash
Flows contained all adjustments, which are of a normal recurring nature,
necessary to present fairly the consolidated financial position of Mutual
Savings and subsidiaries at September 30, 2000 and December 31, 1999, the
results of their income for the three and nine months ended September 30, 2000
and 1999, the changes in equity for the nine months ended September 30, 2000,
and their cash flows for the nine months ended September 30, 2000 and 1999. The
accompanying Unaudited Consolidated Financial Statements and related notes
should be read in conjunction with the Company's Registration Statement on Form
S-1, No. 333-39362. Operating results for the nine months ended September 30,
2000, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000.
NOTE 2 RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." Under SFAS NO. 123, an entity may
elect to recognize stock-based compensation expense based on the fair value of
the awards, or they may elect to account for stock-based compensation under APB
Opinion No. 25, "Accounting for Stock Issued to Employees." If an entity elects
to account for stock-based compensation under APB No. 25, it is not required to
recognize expense based on the fair value of the awards. However the entity must
disclose in the financial statement the effects of SFAS No. 123, as if the
recognition provisions of SFAS No. 123 were adopted.
Subject to shareholder approval, Bank Mutual will establish certain other
stock-based compensation plans. Bank Mutual currently expects that it will not
adopt the recognition provisions of the statement, but will provide the required
footnote disclosures. Therefore, it is not expected that the adoption of SFAS
No. 123 will have a material impact to the financial position or results of
operations.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." This
statement established standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. SFAS No. 128 simplifies the standards for computing EPS previously
found in APB Opinion No. 15, "Earnings Per Share," and makes them more
comparable with international EPS standards.
Mutual Savings, as a mutual savings bank, does not have common stock authorized,
issued or outstanding and do not calculate or present EPS. Such disclosures will
be reportable for financial statements after November 1, 2000.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognized all
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derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.
SFAS NO. 133, as amended, is effective for all quarters of those years beginning
after June 15, 2000. This statement may not be applied retroactively to
financial statements prior periods. As Mutual Savings does not utilize
derivatives, it does not expect that the adoption of SFAS No. 133 will have a
material impact on our financial position or results of operations.
At September 30, 2000, Mutual Savings does not provide stock-based compensation
to its employees. However, on November 1, 2000, concurrent with the
restructuring, the Company established an Employee Stock Ownership Plan and
Trust, the accounting for which will comply with the American Institute of
Certified Public Account's Statement of Position 93-6, " Employers' Accounting
for Employee Stock Ownership Plans." In accordance with this Statement, expense
equal to the cost of the shares contributed to the Plan will be charged to
future earnings in proportion to and over the period that the shares are
scheduled to be released from the Trust. This will have a negative effect on the
future earnings of the Company.
IMPACT OF INFLATION AND CHANGING PRICES.
The financial statements and accompanying notes of Mutual Savings have been
prepared in accordance with the generally accepted accounting principles (GAAP).
GAAP generally requires the measurement of financial position and operating
results in terms of historical dollars without consideration for changes in the
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of our operations. Unlike
industrial companies, our assets and liabilities are primarily monetary in
nature. As a result, changes in market interest rates have a greater impact on
performance than do the effects of inflation.
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