MutualFirst
Financial Inc.

 
 
 
 
 
 
 
  2002
ANNUAL REPORT

 
 
 
 

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MutualFirst Financial, Inc. www.mfsbank.com

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MUTUAL FEDERAL SAVINGS BANK

 
MISSION STATEMENT


               The mission of the Bank will continue to be an independent, growing community bank, building relationships with individuals, families and businesses by offering a broad range of innovative consumer and commercial products and services. The Bank will depend upon high quality service to set the Bank apart from all competitors. These goals are accomplished by continually focusing on employees to ensure proper training, technological competence, teamwork, motivation and rewards are provided. Enhancing shareholder value, measured by total return will be key in the decision process. The Bank is committed to the effective utilization of technology to meet customer needs. Directors, officers and staff fill roles of influence and responsibility in the communities served. The Bank will continue to build on the tradition of strength, security, stability, longevity, consistency and superior quality service.


TABLE OF CONTENTS

		Page No.
President's Message		1
Selected Consolidated Financial Information		2
Management's Discussion and Analysis of Financial
	Condition and Results of Operations	4
Independent Accountant's Report		17
Consolidated Financial Statements		18
Notes to Consolidated Financial Statements		23
Corporate Information		47
Shareholder Information		49

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President's Letter Annual Report

I am pleased to bring you the report of MutualFirst Financial, Inc. on its third full year of operation. Year 2002 brought an historically low interest rate environment. This created further opportunities for mortgage borrowers to refinance and purchasers to obtain homes at attractively low rates. Consumer loan borrowing continued at a heavy pace. We continued to make strides in the commercial loan area. While the stock market in general did not perform well, our stock, as did most banks, overcame the tide and did very well. MutualFirst continued with its Strategic Plan, which included succession plan implementation and is confident in meeting the future with aggressiveness, continuity, and stability.
We are extremely pleased with our financial performance for year 2002. Our earnings for the year increased from $8.1 million to $8.5 million, or from $1.16 to $1.51 for diluted earnings per share. We were able to repurchase 1.2 million shares of our common stock for $21.2 million, which contributed to this 30% improvement in earnings per share. We are currently in our fifth buy back program. Our dividend payout increased by 15.6%. We increased our net interest margin from 3.67% to 3.84%. Our return on assets improved from 1.05% to 1.09% and our return on equity increased from 6.80% to 8.36%.
David W. Heeter was elected to the position of Executive Vice President of MutualFirst Financial, Inc. and Patrick C. Botts was elevated to the level of Executive Vice President and Chief Operating Officer of Mutual Federal Savings Bank early in the year. Both of these moves are designed to ensure an orderly transition of responsibilities in 2003.
Our equity position in Indiana Title Insurance, LLC proved to be an excellent investment. We have received approval to build our 18th branch near the intersection of US 30 and Indiana State Highway 15 in Warsaw. These are just two of the many ways we plan to build and grow the company to extend our 113-year history of success in the financial services industry. We will leverage our quality customer service, technological competence, lending expertise and breadth of deposit and investment products and services to assure this is a safe, sound and rewarding investment for our shareholders.
	President and Chief Executive Officer

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
               The following information is only a summary and you should read it in conjunction with our consolidated financial statements and accompanying notes contained in this Annual Report.

		At or For the Year Ended December 31,
		2002	2001	2000	1999	1998
		(In Thousands)
Selected Financial Condition Data
Total Assets		$775,798	$769,328	$770,370	$544,523	$469,515
Cash and cash equivalents		23,620	30,558	21,046	19,983	12,938
Loans, net		641,113	636,635	639,362	442,787	398,146
Investment Securities:
	Available-for -sale, at fair value	42,362	31,580	35,142	29,599	14,208
	Held-to-maturity	0	0	10,539	12,449	11,004
Total deposits		550,364	538,878	514,710	364,604	365,999
Total borrowings		118,287	110,743	116,182	74,898	52,462
Total stockholders' equity		96,717	109,744	129,941	96,712	43,846
Selected Operations Data
Total interest income		$50,440	$54,940	$41,180	$34,811	$34,474
Total interest expense		23,119	29,081	21,645	19,242	19,690
	Net interest income	27,321	25,859	19,535	15,569	14,784
Provision for loan losses		1,713	1,282	685	760	1,265
Net interest income after provision
	for loan losses	25,608	24,577	18,850	14,809	13,519
Service fee income		2,785	2,626	2,070	1,728	1,544
Gain on sale of loans and
	investment securities	1,365	1,350	144	32	807
Other non-interest income		1,798	2,126	1,402	1,091	1,077
Total non-interest income		5,948	6,102	3,616	2,851	3,428
Salaries and employee benefits		12,454	12,288	7,496	7,236	6,115
Charitable contributions		0	3	4	4,570	97
Other expenses		7,246	7,229	5,625	4,870	4,547
Total non-interest expense		19,700	19,520	13,125	16,676	10,759
Income before taxes		11,856	11,159	9,341	984	6,188
Income tax expense		3,376	3,079	3,106	138	2,049
Net income		$  8,480	$  8,080	$  6,235	$     846	$  4,139

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			At or For the Year Ended December 31,
			2002	2001	2000	1999	1998
Selected Financial Ratios and Other Financial Data:
Performance Ratios:
	Return on average assets (ratio of net
		income to average total assets)	1.09%	1.05%	1.09%	0.17%	0.89%
	Return on average equity (ratio of net
		income to average equity)	8.36	6.80	6.15	1.83	9.83
	Interest rate spread information:
		Average during the period	3.59	3.22	3.09	3.24	3.21
		Net interest margin(1)	3.84	3.67	3.71	3.41	3.42
Ratio of operating expense to average total assets			2.53	2.54	2.30	3.35	2.31
Ratio of average interest-earning assets to
	assets to average interest-bearing liabilities		107.71	110.85	115.17	104.05	104.56
Efficiency ratio(2)			59.21	61.08	56.69	90.53	59.08
Asset Quality Ratios: (4)
	Non-performing assets to total assets		0.89	1.05	0.56	0.30	0.29
	Non-performing loans to total loans		0.79	1.03	0.53	0.17	0.28
	Allowance for loan losses to non-performing loans		123.35	82.4	189.13	467.61	307.36
	Allowance for loan losses to loans receivable, net		0.97	0.86	1.01	0.82	0.85
Capital Ratios:
	Equity to total assets (4)		12.47	14.25	16.87	17.76	9.34
	Average equity to average assets		13.04	15.44	17.81	9.29	9.06
Share and Per Share Data:
	Average common shares outstanding
		Basic	5,483,929	6,949,879	5,558,377
		Diluted	5,597,307	6,964,305	5,558,377
	Per share:
		Basic earnings	$1.55	$1.16	$1.12
		Diluted earnings	$1.51	$1.16	$1.12
		Dividends	0.37	0.32	0.28
Dividend payout ratio (3)			24.50%	27.59%	25.00%
Other Data:
	Number of full-service offices		17	17	17	13	12

______________

(1)	Net interest income divided by average interest earning assets.
(2)	Total non-interest expense divided by net interest income plus total non-interest income
(3)	Dividends per share divided by earnings per share
(4)	At end of period

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction

               MutualFirst Financial, Inc., a Maryland corporation, is a savings and loan holding company, which has as its wholly-owned subsidiary, Mutual Federal Savings Bank, Muncie, Indiana. MFS Financial, Inc. was formed in September 1999 to become the holding company of Mutual Federal in connection with Mutual Federal's conversion from the mutual to stock form of organization on December 29, 1999. In April 2000, MFS Financial, Inc. formally changed its corporate name to MutualFirst Financial, Inc. ("MutualFirst"). The words "we," "our" and "us" refer to MutualFirst and Mutual Federal on a consolidated basis, except that references to us prior to December 29, 1999 refer only to Mutual Federal.

               Our principal business consists of attracting retail deposits from the general public and investing those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences and in a variety of consumer loans. We also originate loans secured by commercial and multi-family real estate, commercial business loans and construction loans secured primarily by residential real estate. We are headquartered in Muncie, Indiana with 17 retail offices primarily serving Delaware, Randolph, Kosciusko, and Grant counties in Indiana. We also originate mortgage loans in contiguous counties, and we originate indirect consumer loans throughout Indiana.

               The following discussion is intended to assist your understanding of our financial condition and results of operations. The information contained in this section should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements.

               Our results of operations depend primarily on our net interest income, which is the difference between interest income on interest-earning assets, which principally consist of loans and mortgage-backed and investment securities, and interest expense on interest-bearing liabilities, which principally consist of deposits and borrowings. Our results of operations also are affected by the level of our non-interest income and expenses and income tax expense.

Forward-Looking Statements

               The discussion contains various forward-looking statements, which are based on assumptions and describe our future plans and strategies and our expectations. These forward-looking statements are generally identified by words such as "believe," "expect," "intend," "anticipate," "estimate," "project," or similar words. Our ability to predict results or the actual effect of future plans or strategies is uncertain. Factors which could cause actual results to differ materially from those estimated include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of our loan and investment portfolios, demand for our loan products, deposit flows, our operating expenses, competition, demand for financial services in our market areas and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and you should not rely too much on these statements. We do not undertake, and specifically disclaim any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Management Strategy

               Our strategy is to operate as an independent, retail oriented financial institution dedicated to serving customers in our market areas. Our commitment is to provide a broad range of products and services to meet the needs of our customers. As part of this commitment, we are looking to increase our emphasis


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on commercial business products and services. We have also created a fully interactive transactional website. In addition, we are continually looking at cost-effective ways to expand our market area.

               Financial highlights of our strategy include:

• Continuing as a Diversified Lender. We have been successful in diversifying our loan portfolio to reduce our reliance on any one type of loan. From 1995 through 2000 approximately 36% of our loan portfolio consisted of loans other than one-to four- family real estate loans. Since that time to the end of 2002, that percentage had increased to 43.2%
   
• Continuing as a Leading One-to Four- Family Lender. We are one of the largest originators of one-to-four family residential loans in our four-county market area. During 2002, we originated $188.1 million of one- to four- family residential loans.
   
• Continuing To Focus On Asset Quality. Non-performing assets to total assets was .89% at December 31, 2002, an improvement from 1.05% at December 31, 2001. We are confident that our underwriting standards will continue to provide for a quality loan portfolio.
   
• Continuing Our Strong Capital Position. As a result of our consistent profitability, we have historically maintained a strong capital position. At December 31, 2002, our ratio of stockholders' equity to total assets was 12.5%.

Asset and Liability Management and Market Risk

               Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally is established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

               How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor our interest rate risk. In monitoring interest rate risk, we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities, and their sensitivity to actual or potential changes in market interest rates.

               In order to minimize the potential for adverse effects of material and prolonged changes in interest rates on our results of operations, we adopted asset and liability management policies to better match the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities. Mutual Federal's board of directors sets and recommends asset and liability policies, which are implemented by the asset and liability management committee. The Asset and Liability Management Committee is chaired by the chief financial officer and is comprised of members of our senior management. The purpose of the Asset and Liability Management Committee is to communicate, coordinate and control asset/liability management issues consistent with our business plan and board-approved policies. This committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources consistent with liquidity, capital adequacy, growth, risk and profitability goals. The Asset and Liability Management Committee generally meets monthly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to a net present value of portfolio equity analysis and income simulations. At each meeting, the Asset and Liability Management Committee recommends appropriate strategy changes based on this review. The chief financial officer is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the board of directors, at least quarterly.


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               In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we have sought to:

• Originate and purchase adjustable rate mortgage loans and commercial business loans,
   
• Originate shorter-term consumer loans,
   
• Manage our deposits to establish stable deposit relationships,
   
• Acquire longer-term borrowings at fixed rates, when appropriate, to offset the negative impact of longer-term fixed rate loans in our loan portfolio, and
   
• Limit the percentage of fixed-rate loans in our portfolio.

               Depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the Asset and Liability Management Committee may increase our interest rate risk position somewhat in order to maintain our net interest margin. We intend to increase our emphasis on the origination of relatively short-term and/or adjustable rate loans. In addition, in an effort to avoid an increase in the percentage of long-term fixed-rate loans in our portfolio, in 2002, we sold $47.8 million of fixed rate, one-to four- family twenty to thirty year mortgage loans in the secondary market.

               The Asset and Liability Management Committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution's existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity that are authorized by our board of directors.

               The Office of Thrift Supervision provides Mutual Federal with the information presented in the following tables. The tables present the change in our net portfolio value at December 31, 2002 and 2001 that would occur upon an immediate and sustained change in market interest rates of 100 to 300 basis points as required by the Office of Thrift Supervision, and do not give any effect to actions that management might take to counteract that change. The changes in net portfolio value under all rate changes shown were within board of director-approved guidelines.










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December 31, 2002
Net Portfolio Value

Changes In Rates				NPV as % of PV of Assets
	$ Amount	$ Change	% Change	NPV Ratio	Change
(Dollars in thousands)
+300 bp	66,376	-23,916	-26%	8.89%	-252 bp
+200 bp	76,394	-13,898	-16%	9.98%	-143 bp
+100 bp	85,038	-5,254	-6%	10.92%	-49 bp
0 bp	90,292			11.41%
-100 bp	90,330	38	0%	11.30%	-11 bp
-200 bp	n/m(1)	n/m(1)	n/m(1)	n/m(1)	n/m(1)
-300 bp	n/m(1)	n/m(1)	n/m(1)	n/m(1)	n/m(1)

December 31, 2001
Net Portfolio Value

Changes In Rates				NPV as % of PV of Assets
	$ Amount	$ Change	% Change	NPV Ratio	Change
(Dollars in thousands)
+300 bp	72,270	-31,165	-30%	9.92%	-341 bp
+200 bp	83,082	-20,353	-20%	11.16%	-217 bp
+100 bp	93,661	-9,774	-9%	12.32%	-101 bp
0 bp	103,435			13.33%
-100 bp	109,059	5,624	5%	13.85%	+52 bp
-200 bp	n/m(1)	n/m(1)	n/m(1)	n/m(1)	n/m(1)
-300 bp	n/m(1)	n/m(1)	n/m(1)	n/m(1)	n/m(1)

___________________
(1)   Not meaningful because some market rates would compute to a rate less than zero.


               The Office of Thrift Supervision uses certain assumptions in assessing the interest rate risk of savings associations. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market value of certain assets under differing interest rate scenarios, among others.

               As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the tables.

Financial Condition at December 31, 2002 Compared to December 31, 2001

               General. Our total assets increased $6.5 million during 2002, ending the year at $775.8 million compared to $769.3 million at December 31, 2001, primarily due to increases in investments held for sale. Liabilities increased $19.5 million due to increased deposits and borrowings. Stockholders' equity decreased $13.0 million primarily due to the repurchase $21.2 million of common stock.


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               Loans. Our net loan portfolio increased $4.5 million from $636.6 million at December 31, 2001, to $641.1 million at December 31, 2002. Consumer loans increased $10.6 million or 6.5% from $162.2 million at December 31, 2001 to $172.8 million at December 31, 2002. Most of the consumer loan growth came from recreational vehicle loans, which increased $8.0 million or 17.8% from $44.7 million to $52.7 million and home equity loans, which increased $3.2 million or 17.2% from $18.4 million to $21.5 million. Commercial business loans increased $4.6 million or 15.2% from $30.1 million to $34.7 million at December 31, 2002. It has been our strategy to increase non-real estate mortgage loans as a percentage of our loan portfolio in order to mitigate interest rate risk and enhance the portfolio yield. Accordingly, we sold $47.8 million of our fixed rate one- to four- family mortgage loans in 2002. As a result, real estate mortgage loans decreased $10.9 million or 2.4% from $454.8 million to $443.9 million at December 31, 2002 and mortgage loans held for sale decreased $3.7 million.

               Allowance For Loan Loss. The allowance for loan loss increased to $6.3 million at December 31, 2002 from $5.5 million at December 31, 2001, an increase of $800,000 or 15.4%. Net charge offs were $876,000 during 2002, as compared to net charge offs of $2.3 million for 2001. This, along with a $1.7 million loan loss prevision during 2002, resulted in the allowance for loan losses as a percentage of total loans increasing to .97% at December 31, 2002 compared to .86% at December 31, 2001. The allowance for loan losses as a percentage of non-performing loans was 123.35% and 82.4% at December 31, 2002 and December 31, 2001, respectively. Non-performing loans were $5.1 million or .79% of total loans at December 31, 2002 compared to $6.6 million or 1.03% at December 31, 2001. The increase in the allowance for loan losses is due to continued poor economic conditions in some of our markets and the increase in the portfolio risk due to the increased percentage of consumer and commercial loans in the portfolio.

               Securities. Investment securities amounted to $42.4 million at December 31, 2002 compared to $31.6 million at December 31, 2001, a 34.1% increase. This increase was primarily due to the shifting of funds from cash and cash equivalents to short- to medium-term securities in order to increase earnings without a significant change in our liquidity.

               Liabilities. Our total liabilities increased $19.5 million or 3% to $679.1 million at December 31, 2002 from $659.6 million at December 31, 2001. This increase was due primarily to an increase in deposits of $11.5 million, and an increase in borrowed funds of $7.5 million to provide funding for stock repurchases.

               Stockholders' Equity. Stockholders' equity decreased $13.0 million from $109.7 million at December 31, 2001 to $96.7 million at December 31, 2002. The decrease was due primarily to the repurchase of 1.2 million shares of MutualFirst common stock at a cost of $21.2 million and dividend payments of $1.9 million. These decreases were partially offset by net income of $8.5 million, Employee Stock Ownership Plan (ESOP) shares earned of $585,000 and RRP shares earned of $840,000. Also, unrealized gain on securities available for sale increased $108,000.






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Average Balances, Net Interest Income, Yields Earned and Rates Paid

               The following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made. All average balances are daily average balances. Non-accruing loans have been included in the table as loans carrying a zero yield.

			Year ended December 31,
			2002			2001			2000
			Average Outstanding Balance	Interest Earned/ Paid	Average Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Average Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Average Yield/ Rate
			(Dollars in thousands)
Interest-Earning Assets:
	Interest -bearing deposits		$  11,215	$     175	1.56%	$    6,210	$     189	3.04%	$    1,003	$       56	5.58%
	Trading account securities		---	---	---	---	---	---	186	9	4.84
	Mortgage-backed securities		11,451	677	5.91	11,124	759	6.82	13,637	931	6.83
	Investment securities:
		Available-for-sale (1)	19,525	916	4.69	18,413	1,184	6.43	18,530	1,243	6.71
		Held-to-maturity	0	0		5,155	270	5.24	11,423	673	5.89
	Loans (2)(5)		662,212	48,247	7.29	656,579	52,018	7.92	475,912	37,811	7.94
	Stock in FHLB of Indianapolis		6,993	424	6.06	6,993	520	7.44	5,464	457	8.36
	Total interest-earning assets		711,396	50,439	7.09	704,474	54,940	7.80	526,155	41,180	7.83
Non-interest earning assets, net of allowance
	for loan losses and unrealized gain/loss		65,818			65,438			43,583
		Total assets	$777,214			$769,912			569,738
Interest-Bearing Liabilities:
	Demand and NOW accounts		$  81,774	429	0.52	$  74,545	729	0.98	$  56,288	516	0.92
	Savings deposits		54,515	592	1.09	49,468	921	1.86	39,842	845	2.12
	Money market accounts		47,301	740	1.56	43,042	1,270	2.95	33,310	1,369	4.11
	Certificate accounts		366,522	15,634	4.27	366,375	20,394	5.57	261,693	14,814	5.66
	Total deposits		550,112	17,395	3.16	533,430	23,314	4.37	391,133	17,544	4.49
	Borrowings		110,334	5,724	5.19	102,087	5,767	5.65	65,728	4,101	6.24
		Total interest-bearing accounts	660,446	23,119	3.50	635,517	29,081	4.58	456,861	21,645	4.74
Other liabilities			15,385			15,544			11,419
		Total liabilities	675,831			651,061			468,280
Stockholders' equity			101,383			118,851			101,458
		Total liabilities and stockholders' equity	$777,214			769,912			569,738
Net earning assets			$  50,950			$  68,957			$  69,294
Net interest income				$27,320			$25,859			$19,535
Net interest rate spread (3)					3.59%			3.22%			3.09%
Net yield on average interest-earning assets (4)					3.84%			3.67%			3.71%
Average interest-earning assets to
	average interest-bearing liabilities		107.71%			110.85%			115.17%

_____________________

(1)	Average balances were calculated using amortized cost, which excludes FASB 115 valuation allowances.
(2)	Calculated net of deferred loan fees, loan discounts, loans in process and loss reserves.
(3)	Interest rate spread is calculated by subtracting weighted average interest rate cost from weighted average interest rate yield for the period indicated.
(4)	The net yield on weighted average interest-earning assets is calculated by dividing net interest income by weighted average interest-earning assets for the period indicated.
(5)	The balances include nonaccrual loans.

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Rate/Volume Analysis

               The following table presents the dollar amount changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in volume multiplied by the old rate, and (2) changes in rate, which is a change in rate multiplied by the old volume. Changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

			Year Ended December 31,
			2002 vs. 2001			2001 vs. 2000
			Increase (decrease) Due to		Total Increase (decrease)	Increase (decrease) Due to		Total Increase (decrease)
			Volume	Rate		Volume	Rate
			(Dollars in thousands)
Interest-earning assets:
	Interest-bearing deposits		$106	($120)	($14)	$169	($36)	$133
	Trading account securities		0	0	0	(9)	0	(9)
	Investment securities:
		Available-for-sale	91	(440)	(349)	(174)	(58)	(232)
		Held-to-maturity	(270)	0	(270)	(335)	(68)	(403)
	Loans receivable		443	(4,215)	(3,772)	14,314	(106)	14,208
	Stock in FHLB of Indianapolis		0	(96)	(96)	118	(55)	63
		Total interest-earning assets	$370	($4,871)	(4,501)	$14,083	($323)	13,760
Interest-bearing liabilities:
	Savings deposits		$86	($415)	(329)	$188	($112)	76
	Money market accounts		115	(645)	(530)	343	(442)	(99)
	Demand and NOW accounts		65	(365)	(300)	177	36	213
	Certificate accounts		8	(4,769)	(4,761)	5,829	(249)	5,580
	Borrowings		447	(490)	(43)	2,085	(419)	1,666
		Total interest-bearing liabilities	$721	($6,684)	(5,963)	$8,622	($1,186)	7,436
Change in net interest income					$1,462			$6,324

Comparison Of Results Of Operations For Years Ended December 31, 2002 And 2001.

               General. Net income for the year ended December 31, 2002 increased $400,000 or 4.9% to $8.5 million compared to $8.1 million for the year ended December 31, 2001.

               Net Interest Income. Interest income decreased $4.5 million, or 8.2% to $50.4 million for the year ended December 31, 2002 from $54.9 million for the year ended December 31, 2001. Interest expense decreased $6.0 million, or 20.5% from $29.1 million for the year ended December 31, 2001 to $23.1 million for the year ended December 31, 2002. As a result, net interest income for the year ended December 31, 2002 increased $1.5 million, or 5.7% compared to 2001. The average interest rate spread increased from 3.22% for the year ended December 31, 2001 to 3.59% for the year ended December 31, 2002.

               Interest Income. The decrease in interest income during the year ended December 31, 2002 was due to a reduction in the average yield on our earning assets from 7.80% in 2001 to 7.09% in 2002 as a result of lower market interest rates. This decrease was partially offset by a $6.9 million increase in average


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earning assets from $704.5 million during 2001 to $711.4 million during 2002. The majority of this increase was in average loans receivable, which increased $5.6 million from $656.6 in 2001 to $662.2 million in 2002. The average yield on these loans decreased 63 basis points from 7.92% in 2001 to 7.29% in 2002.

               Interest Expense. The decrease in interest expense was due to a 108 basis point reduction in the cost of our average interest bearing liabilities from 4.58% in 2001 to 3.50% in 2002 as a result of lower market interest rates. This decrease was partially offset by a $24.9 million increase in average interest bearing liabilities from $635.5 million in 2001 to $660.5 million in 2002. The majority of this increase was in average deposits, which increased $16.7 million from $533.4 million in 2001 to $550.1 million in 2002. The average cost on these deposits decreased 121 basis points from 4.37% in 2001 to 3.16% in 2002.

               Provision for Loan Losses. For the year ended December 31, 2002, the provision for loan losses amounted to $1.7 million compared to $1.3 million in 2001. In each period, the provision for loan losses was based on an analysis of individual loans, prior and current year loss experience, overall growth in the portfolio, the change in the portfolio mix and current economic conditions in our markets. The reasons for the increase in the provision for loan losses in 2002 compared to 2001 were primarily due to continued poor economic conditions in some of our markets and a change in the loan portfolio mix with growth in the consumer and commercial loan portfolios and a reduction in the one-to four- family residential mortgage loan portfolio.

               Other Income. Other income for the year ended December 31, 2002 decreased $154,000 from $6.1 million the year ended December 31, 2001 to$5.9 million for the year-end December 31, 2002. This decrease was due primarily to an increase in our equity in losses on limited partnerships, which own various low-income housing projects that provide federal income tax credits to its equity owners. Our share of the losses was $517,000 for the year ended December 31, 2002 compared to $249,000 the previous year. Another factor affecting the change in other income was a $159,000 increase in service fee income. The increase in service fee income included a $117,000 increase or 24.5% in electronic transaction fees from $476,000 in 2001 to $593,000 in 2002. This is indicative of the increased customer usage of ATM/Debit cards.

               Other Expense. Total operating expenses increased $181,000 from $19.5 million for the year ended December 31, 2001 to $19.7 million for 2002. Salaries and employee benefits were $12.5 million for the year ended December 31, 2002 compared to $12.3 million for the 2001 period, an increase of $166,000 or 1.35%. The changes in salaries and benefits included a $357,000 increase in health insurance premium costs, increased ESOP expense due to the increase in the market value of our stock, staffing increases in the lending area due to increased activity, and annual pay increases. These increases were partially offset by a $230,000 reduction in incentive bonus from 2001 to 2002, and a $619,000 reduction in Recognition and Retention Plan (RRP) cost from $1.4 million in 2001 to $768,000 in 2002. Net occupancy expenses increased $131,000 due primarily to increased real estate taxes in 2002 compared to 2001.

               Income Tax Expense. Income tax expense for the year ended December 31, 2002 was $3.4 million compared to $3.1 million for the year ended December 31, 2001. The increase was due primarily to increased taxable income.

Comparison of Results of Operations For Years Ended December 31, 2001 And 2000.

               General. Net income for the year ended December 31, 2001 increased $1.9 million to $8.1 million compared to $6.2 million for the year ended December 31, 2000. The increase in net income was primarily due to the merger with Marion Capital Holdings completed in December 2000 and accounted for as a purchase.

               Net Interest Income. Interest income increased $13.7 million, or 33.4%, to $54.9 million for the year ended December 31, 2001 from $41.2 million for the year ended December 31, 2000. Interest expense increased $7.4 million, or 34.4%, from $21.6 million for the year ended December 31, 2000 to $29.0 million for the year ended December 31, 2001. As a result, net interest income for the year ended December 31, 2001


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increased $6.3 million, or 32.4% compared to 2000. The increase in net interest income was due to the increase in the average balance of net earning assets related to the merger with Marion Capital. In addition, the average interest rate spread increased from 3.09% to 3.22%.

               Interest Income. The increase in interest income during the year ended December 31, 2001 was due to an increase in the average balance of interest-earnings assets (primarily from the December, 2000 merger with Marion Capital Holdings). The average balance of the loan portfolio increased $180.7 million, or 38.0%, to $656.6 million for 2001, from $475.9 million for 2000, primarily due to the merger with Marion Capital Holdings. The average yield on our loan portfolio decreased slightly from 7.94% in 2000 to 7.92% in 2001, primarily due to lower market rates of interest.

               Interest Expense. The increase in interest expense during the year ended December 31, 2001 was due primarily to increased average balances of borrowings and deposits. As a result of the merger with Marion Capital Holdings, average balances of borrowings and deposits increased from $456.9 million in 2000, to $635.5 million in 2001. The average rate paid on deposits and borrowed funds decreased from 4.74% in 2000 to 4.58% in 2001, primarily due to decreasing market rates throughout the year.

               Provision For Loan Losses. For the year ended December 31, 2001, the provision for loan losses amounted to $1.3 million compared to $685,000 in 2000. The primary reason for this increase was an increase of non-accruing one-to-four family and commercial real estate loans. Non-accruing one-to-four family loans increased from $710,000 at December 31, 2000 to $2.9 million at December 31, 2001 as a result of the slowing economy, primarily in the Grant County market. Non-accruing commercial real estate loans increased from $1.5 million at December 31, 2000 to $2.9 million at December 31, 2001, due primarily to two nursing home loans becoming more than ninety days delinquent. At the present time it is management's opinion that these loans are sufficiently reserved and no additional allowance will be necessary. The 2001 provision and the allowance for loan losses were considered adequate based on size, condition and components of the loan portfolio, past history of loan losses, and current qualitative factors such as the local and national economy.

               Other Income. Other income for the year ended December 31, 2001 increased $2.5 million, or 68.8%, to $6.1 million for the year ended December 31, 2001 compared to $3.6 million for the year 2000. This improvement was primarily due to an increase of $555,000 in service fee income; $190,000 increase in commission income; $1.3 million gain on sale of loans; and a $587,000 increase in cash surrender value of life insurance. Most of thee increases, with the exception of the gain on sale of loans, were due to the merger with Marion Capital Holdings.

               Other Expenses. Total operating expenses increased $6.4 million from $13.1 million for the year ended December 31, 2000 to $19.5 million for 2001. Salaries and employees benefits were $12.3 million for the year ended December 31, 2001 compared to $7.5 million for the 2000 period, an increase of $4.8 million, or 63.9%. The reasons for the increase in salaries and benefits included an increase in the number of full time equivalent employees resulting from the merger with Marion Capital Holdings, the grant of restricted stock awards under the Recognition and Retention Plan, and an increased incentive bonus due to increased profitability. All other expenses increased $1.6 million, or 28.5 %, for the year ended December 31, 2001, compared to 2000. These increases were due primarily to the merger with Marion Capital Holdings.

               Income Tax Expense. Income tax expense for the year ended December 31, 2001 was $3.1 million, the same as for the year ended December 31, 2000. During 2001, there was increased tax-exempt income and increased low-income housing tax credits related to the Marion Capital Holdings merger. The effective tax rate was 27.6% and 33.3% for 2001 and 2000, respectively.

Liquidity and Commitments

               Mutual Federal is required to maintain adequate levels of investments that qualify as liquid assets under Office of Thrift Supervision regulations to ensure the institution's safe and sound operations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on


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investments in relation to the return on loans. Historically, we have maintained liquid assets at levels above the minimum requirements imposed by Office of Thrift Supervision regulations and above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained. At December 31, 2002, our liquidity ratio, which is our liquid assets as a percentage of net withdrawable savings deposits and current borrowings, was 9.81%.

               Our liquidity, represented by cash and cash equivalents and investment securities, is a product of our operating, investing and financing activities. Our primary sources of funds are deposits, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements. We also generate cash through borrowings. We utilize Federal Home Loan Bank advances to leverage our capital base and provide funds for our lending and investment activities, and to enhance out interest rate risk management.

               Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as overnight deposits or U.S. Agency securities. We use our sources of funds primarily to meet our ongoing commitments, to pay maturing certificates of deposit and savings withdrawals, to fund loan commitments and to maintain our portfolio of mortgage-backed securities and investment securities. At December 31, 2002, the total approved loan origination commitments outstanding amounted to $24.7 million. At the same date, the unadvanced portion of construction loans was $5.5 million. At December 31, 2002, unused lines of credit totaled $35.5 million and outstanding letters of credit totaled $7.0 million. As of December 31, 2002, certificates of deposit scheduled to mature in one year or less totaled $207.3 million, and investment and mortgage-backed securities scheduled to mature in one year or less totaled $18.3 million. Based on historical experience, management believes that a significant portion of maturing deposits will remain with us. We anticipate that we will continue to have sufficient funds, through deposits and borrowings, to meet our current commitments.

Capital

               Consistent with our goals to operate a sound and profitable financial organization, Mutual Federal actively strives to remain a "well capitalized" institution in accordance with regulatory standards. Total stockholders' equity of MutualFirst Financial, Inc. was $96.7 million at December 31, 2002, or 12.5% of total assets on that date. As of December 31, 2002, Mutual Federal exceeded all capital requirements of the Office of Thrift Supervision, with regulatory capital ratios as follows: core capital, 11.67%; Tier I risk-based capital, 16.53%; and total risk-based capital, 17.67%. The regulatory capital requirements to be considered well capitalized are 5.0%, 6.0% and 10.0%, respectively.

Impact of New Accounting Standards

               In October 2002, FASB issued SFAS No. 147 Acquisitions of Certain Financial Institutions, which amends SFAS No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9, Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution Is Acquired in a Business Combination Accounted for by the Purchase Method. Except for transactions between two or more mutual enterprises, SFAS No. 147 removes acquisitions of financial institutions from the scope of both SFAS No. 72 and Interpretation No. 9 and requires that those transactions be accounted in accordance with SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition, SFAS No. 147 amends SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. Those intangible assets are


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subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that SFAS No. 144 requires for other long-lived assets that are held and used.

               The effective date of SFAS No. 147 was October 1, 2002, with earlier application relating to previously recognized unidentifiable intangible assets permitted. The statement's adoption did not have a significant impact on the MutualFirst's financial position or results of operations.

               The Financial Accounting Standards Board (FASB) has issued Statement of Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, which amends FASB Statement No. 123, Accounting for Stock-Based Compensation. SFAS No.148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation.

               Under the provisions of SFAS No. 123, companies that adopted the fair value based method were required to apply that method prospectively for new stock option awards. This contributed to a "ramp-up" effect on stock-based compensation expense in the first few years following adoption, which caused concern for companies and investors because of the lack of consistency in reported results. To address that concern, SFAS No. 148 provides two additional methods of transition that reflect an entity's full complement of stock-based compensation expense immediately upon adoption, thereby eliminating the ramp-up effect.

               SFAS No. 148 requires that the data be presented more prominently and in a more user-friendly format in the footnotes to the financial statements. In addition, SFAS No. 148 requires that this information be included in interim as well as annual financial statements.

               The annual disclosure provisions of SFAS No. 148 are now effective for MutualFirst and the interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning in 2003.

Critical Accounting Policies

               The notes to the consolidated financial statements contain a summary of Mutualfirst's significant accounting policies presented on pages 22 to 24 of the Annual Report to Shareholders for the year ended December 31, 2002. Certain of these policies are important to the portrayal of MutualFirst's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management believes that its critical accounting policies include determining the allowance for loan losses, the valuation of foreclosed assets and real estate held for development and the valuation of intangible assets.

               The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. A worsening or protracted economic decline would increase the likelihood of additional losses due to credit and market risk and could create the need for additional loss reserves.

Allowance for Loan Losses

               The allowance for loan losses is a significant estimate that can and does change based on management's assumptions about specific borrowers and current general economic and business conditions, among other factors. Management reviews the adequacy of the allowance for loan losses on at least a quarterly basis. The evaluation by management includes consideration of past loss experience, changes in the composition of the loan portfolio, the current condition and amount of loans outstanding, identified problem loans and the probability of collecting all amounts due.


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Foreclosed Assets

               Foreclosed assets are carried at the lower of cost or fair value less estimated selling costs. Management estimates the fair value of the properties based on current appraisal information. Fair value estimates are particularly susceptible to significant changes in the economic environment, market conditions, and real estate market. A worsening or protracted economic decline would increase the likelihood of a decline in property values and could create the need to write down the properties through current operations.

Intangible Assets

               MutualFirst periodically assesses the impairment of its goodwill and the recoverability of its core deposit intangible. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. If actual external conditions and future operating results differ from MutualFirst's judgments, impairment and/or increased amortization charges may be necessary to reduce the carrying value of these assets to the appropriate value.

Impact of Inflation

               Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

               Our primary assets and liabilities are monetary in nature. As a result, interest rates affect our performance more than general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturity structure of our assets and liabilities are critical to the maintenance of acceptance performance levels.

               The principal effect of inflation, as distinct from levels of interest rates, on earnings is in the area of non-interest expense. Expense items such as employee compensation, employee benefits and occupancy and equipment cost may increase because of inflation. Inflation also may increase the dollar value of the collateral securing loans that we have made. We are unable to determine the extent to which properties securing our loans have appreciated in dollar value due to inflation.







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Selected Quarterly Financial Information

Quarter Ended		Interest Income	Interest Expense	Net Interest Income	Provision for Loan Losses	Net Income	Basic Earnings per Common Share	Diluted Earnings per Common Share
2002
March		$12,755	$ 6,125	$ 6,630	$ 587	$1,884	$0.32	$0.32
June		12,716	5,888	6,828	375	2,013	0.35	0.34
September		12,550	5,709	6,841	375	2,326	0.44	0.43
December		12,418	5,396	7,022	375	2,257	0.44	0.43
	Total	$50,439	$23,118	$27,321	$1,712	$8,480	1.55	1.51
2001
March		$14,057	$ 7,734	$ 6,323	$ 189	$1,739	$0.23	$0.22
June		14,112	7,514	6,598	296	2,164	0.30	0.30
September		13,667	7,173	6,494	607	2,116	0.31	0.31
December		13,104	6,660	6,444	190	2,061	0.33	0.33
	Total	$54,940	$29,081	$25,859	$1,282	$8,080	1.16	1.16

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Independent Accountants' Report



Board of Directors
MutualFirst Financial, Inc.
Muncie, Indiana


We have audited the accompanying consolidated balance sheets of MutualFirst Financial, Inc. as of December 31, 2002 and 2001, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements described above present fairly, in all material respects, the consolidated financial position of MutualFirst Financial, Inc. as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.



Indianapolis, Indiana
February 7, 2003





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MutualFirst Financial, Inc.
Consolidated Balance Sheets
December 31, 2002 and 2001

					2002	2001
Assets
	Cash and due from banks				$  17,986,004	$  24,140,688
	Interest-bearing demand deposits				5,633,953	6,416,985
		Cash and cash equivalents			23,619,957	30,557,673
	Investment securities available for sale				42,362,138	31,580,095
	Loans held for sale				7,850,711	11,559,158
	Loans, net of allowance for loan losses of $6,285,959 and $5,449,292				641,112,981	636,635,126
	Premises and equipment				9,186,501	8,674,152
	Federal Home Loan Bank stock				6,993,400	6,993,400
	Investment in limited partnerships				5,616,485	5,677,060
	Deferred income tax benefit				4,118,344	4,553,975
	Cash surrender value of life insurance				25,439,308	24,231,091
	Other assets				9,497,834	8,866,143
				Total assets	$775,797,659	$769,327,873
Liabilities and Stockholders' Equity
	Liabilities
		Deposits
			Noninterest-bearing		$  28,908,935	$  23,433,570
			Interest-bearing		521,455,008	515,444,601
				Total deposits	550,363,943	538,878,171
		Federal Home Loan Bank advances			115,403,203	107,484,586
		Notes payable			2,883,631	3,258,677
		Other liabilities			10,429,756	9,962,261
				Total liabilities	679,080,533	659,583,695
	Commitments and Contingencies
	Stockholders' Equity
		Preferred stock, $.01 par value
			Authorized and unissued - 5,000,000 shares
		Common stock, $.01 par value
			Authorized - 20,000,000 shares
			Issued and outstanding - 5,523,052 and 6,693,841 shares		55,231	66,938
		Additional paid-in capital			38,782,755	59,575,884
		Retained earnings			61,779,695	55,195,694
		Accumulated other comprehensive income			464,452	356,009
		Unearned benefit plan shares			(4,365,007)	(5,450,347)
				Total stockholders' equity	96,717,126	109,744,178
				Total liabilities and stockholders' equity	$ 775,797,659	$ 769,327,873

See Notes to Consolidated Financial Statements

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MutualFirst Financial, Inc.
Consolidated Statements of Income
Years Ended December 31, 2002, 2001 and 2000

				2002	2001	2000
Interest and Dividend Income
	Loans receivable			$48,246,747	$52,018,175	$37,810,620
	Trading account securities			---	---	8,192
	Investment securities			1,593,708	2,212,568	2,847,684
	Federal Home Loan Bank stock			423,963	519,859	457,271
	Deposits with financial institutions			175,042	189,272	56,116
			Total interest and dividend income	50,439,460	54,939,874	41,179,883
Interest Expense
	Deposits			17,394,703	23,314,477	17,543,506
	Federal Home Loan Bank advances			5,652,344	5,719,922	4,095,843
	Other interest expense			71,528	46,980	5,497
			Total interest expense	23,118,575	29,081,379	21,644,846
Net Interest Income				27,320,885	25,858,495	19,535,037
	Provision for loan losses			1,712,483	1,281,648	685,000
Net Interest Income After Provision for Loan Losses				25,608,402	24,576,847	18,850,037
Other Income
	Service fee income			2,784,744	2,625,649	2,070,326
	Net realized gains (losses) on sales of available-for-sale
		securities		(2,763)	46,241	---
	Net trading assets gain			---	---	25,116
	Commissions			790,086	750,524	560,831
	Equity in losses of limited partnerships			(516,509)	(249,300)	(209,948)
	Net gains on sales of loans and servicing			1,368,033	1,304,077	143,791
	Increase in cash value of life insurance			1,208,217	1,176,000	589,389
	Other income			316,128	448,600	436,146
			Total other income	5,947,936	6,101,791	3,615,651
Other Expenses
	Salaries and employee benefits			12,453,962	12,288,117	7,496,211
	Net occupancy expenses			1,104,617	973,568	692,132
	Equipment expenses			891,202	906,636	782,116
	Data processing fees			760,475	780,360	559,631
	Advertising and promotion			455,143	516,487	462,230
	Automated teller machine expense			492,766	524,886	457,356
	Other expenses			3,542,143	3,529,753	2,674,940
			Total other expenses	19,700,308	19,519,807	13,124,616
Income Before Income Tax				11,856,030	11,158,831	9,341,072
	Income tax expense			3,376,500	3,078,700	3,105,850
Net Income				$  8,479,530	$  8,080,131	$  6,235,222
Earnings per Share
	Basic			$ 1.55	$ 1.16	$ 1.12
	Diluted			1.51	1.16	1.12

See Notes to Consolidated Financial Statements

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MutualFirst Financial, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2002, 2001 and 2000

				Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income	Unearned Benefit Plan Shares	Total
Balances, January 1, 2000				$ 58,196	$ 56,740,190	$ 44,647,767	$ (284,047)	$ (4,449,786)	$ 96,712,320
	Comprehensive income
		Net income				6,235,222			6,235,222
		Other comprehensive income, net of tax -
			unrealized gains on securities				339,575		339,575
	Comprehensive income								6,574,797
	Cash dividends ($.28 per share)					(1,502,418)			(1,502,418)
	Exercise of stock options			188	203,886				204,074
	Stock issued in acquisition, net of costs			25,410	27,567,304				27,592,714
	ESOP shares earned				41,905			318,000	359,905
Balances, December 31, 2000				83,794	84,553,285	49,380,571	55,528	(4,131,786)	129,941,392
	Comprehensive income
		Net income				8,080,131			8,080,131
		Other comprehensive income, net of tax -
			unrealized gains on securities				300,481		300,481
	Comprehensive income								8,380,612
	Cash dividends ($.32 per share)					(2,265,008)			(2,265,008)
	Exercise of stock options			114	53,836				53,950
	Stock repurchased			(19,060)	(28,205,313)				(28,224,373)
	RRP shares granted			2,090	3,028,410			(3,030,500)
	RRP shares earned							1,394,099	1,394,099
	ESOP shares earned				145,666			317,840	463,506
Balances, December 31, 2001				66,938	59,575,884	55,195,694	356,009	(5,450,347)	109,744,178
	Comprehensive income
		Net income				8,479,530			8,479,530
		Other comprehensive income, net of tax -
			unrealized gains on securities				108,443		108,443
	Comprehensive income								8,587,973
	Cash dividends ($.37 per share)					(1,895,529)			(1,895,529)
	Exercise of stock options			33	39,767				39,800
	Stock repurchased			(11,740)	(21,172,202)				(21,183,942)
	RRP shares earned							767,500	767,500
	Tax benefit on RRP shares				72,120				72,120
	ESOP shares earned				267,186			317,840	585,026
Balances, December 31, 2002				$ 55,231	$ 38,782,755	$ 61,779,695	$ 464,452	$ (4,365,007)	$ 96,717,126

See Notes to Consolidated Financial Statements

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MutualFirst Financial, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2002, 2001 and 2000

				2002	2001	2000
Operating Activities
	Net income			$  8,479,530	$  8,080,131	$  6,235,222
	Items not requiring (providing) cash
		Provision for loan losses		1,712,483	1,281,648	685,000
		ESOP shares earned		585,026	463,506	359,905
		RRP shares earned		767,500	1,394,099	---
		Depreciation and amortization		2,790,952	3,336,680	2,416,172
		Deferred income tax		363,338	650,457	1,324,430
		Loans originated for sale		(55,029,628)	(66,040,391)	(11,779,434)
		Proceeds from sales on loans held for sale		63,481,603	59,698,638	8,009,898
		Gains on sales of loans held for sale		(1,368,033)	(1,304,077)	(65,130)
	Change in
		Trading account securities		---	---	1,234,884
		Interest receivable		495,559	616,615	(916,078)
		Other assets		(175,615)	534,165	(119,882)
		Interest payable		(343,963)	(12,512)	(896,500)
		Other liabilities		940,074	426,810	(1,510,608)
		Cash surrender value of life insurance		(1,208,217)	(1,176,000)	(589,389)
	Other adjustments			642,353	1,325,092	398,881
			Net cash provided by operating activities	22,132,962	9,274,861	4,787,371
Investing Activities
	Purchases of securities available for sale			(30,441,236)	(11,517,408)	(3,489,519)
	Proceeds from maturities and paydowns of securities available for sale			14,800,015	7,331,030	2,186,922
	Proceeds from sales of securities available for sale			5,000,000	10,261,210	---
	Proceeds from maturities and paydowns of securities held to maturity			---	7,110,618	1,893,239
	Proceeds from sales of securities held to maturity			---	1,499,928	---
	Net change in loans			(13,717,276)	(1,992,175)	(36,317,394)
	Purchases of premises and equipment			(1,394,578)	(802,172)	(1,442,449)
	Proceeds from real estate owned sales			1,081,651	184,606	1,822,824
	Cash received in acquisition, net			---	---	6,362,718
	Other investing activities			(129,524)	(11,988)	(758,940)
			Net cash provided by (used in) investing activities	(24,800,948)	12,063,649	(29,742,599)
Financing Activities
	Net change in
		Noninterest-bearing, interest-bearing demand and savings deposits		1,325,377	11,977,689	(4,841,526)
		Certificates of deposits		10,160,395	12,190,945	20,938,838
		Securities sold under repurchase agreements		---	---	(840,000)
	Repayment of note payable			(437,470)	(443,824)	(61,358)
	Proceeds from FHLB advances			46,280,000	192,200,000	282,000,000
	Repayment of FHLB advances			(38,429,745)	(197,327,508)	(269,855,188)
	Net change in advances by borrowers for taxes and insurance			(128,616)	11,235	(24,268)
	Stock repurchased			(21,183,942)	(28,224,373)	---
	Proceeds from stock options exercised			39,800	53,950	204,074
	Cash dividends			(1,895,529)	(2,265,008)	(1,502,418)
			Net cash provided by (used in) financing activities	(4,269,730)	(11,826,894)	26,018,154
Net Change in Cash and Cash Equivalents				(6,937,716)	9,511,616	1,062,926
Cash and Cash Equivalents, Beginning of Year				30,557,673	21,046,057	19,983,131
Cash and Cash Equivalents, End of Year				$23,619,957	$30,557,673	$21,046,057
Additional Cash Flows Information
	Interest paid			$ 23,462,538	$ 29,093,891	$ 22,425,869
	Income tax paid			3,089,069	1,505,000	2,042,000
	Transfers from loans to foreclosed real estate			1,715,157	684,649	1,307,005
	Loans transferred to held for sale			15,459,187	---	7,866,107
	Loans transferred from held for sale			11,559,158	---	---
	Mortgage servicing rights capitalized			524,534	581,773	78,661
	Fair value of net assets in acquisition			---	---	28,013,809

See Notes to Consolidated Financial Statements

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 1:        Nature of Operations and Summary of Significant Accounting Policies

The accounting and reporting policies of MutualFirst Financial, Inc. (Company) and its wholly owned subsidiary, Mutual Federal Savings Bank (Bank) and the Bank's wholly owned subsidiaries, First MFSB Corporation and Third MFSB Corporation, conform to accounting principles generally accepted in the United States of America and reporting practices followed by the thrift industry. The more significant of the policies are described below.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company is a thrift holding company whose principal activity is the ownership of the Bank. The Bank operates under a federal thrift charter and provides full banking services. As a federally chartered thrift, the Bank is subject to regulation by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation.

The Bank generates mortgage, consumer and commercial loans and receives deposits from customers located primarily in central Indiana. The Bank's loans are generally secured by specific items of collateral including real property, consumer assets and business assets. First MFSB sells various insurance products and Third MFSB offers tax-deferred annuities, mutual funds and equity securities.

Consolidation - The consolidated financial statements include the accounts of the Company, the Bank, and the Bank's subsidiaries,
after elimination of all material intercompany transactions.

Cash Equivalents - The Company considers all liquid investments with original maturities of three months or less to be cash equivalents.

Investment Securities - Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Securities held to maturity are carried at amortized cost. Debt securities not classified as held to maturity and marketable equity securities are classified as available for sale. Securities available for sale are carried at fair value with unrealized gains and losses reported separately in accumulated other comprehensive income, net of tax. 

Amortization of premiums and accretion of discounts are recorded using the interest method as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Loans held for sale are carried at the lower of aggregate cost or market. Market is determined using the aggregate method. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income based on the difference between estimated sales proceeds and aggregate cost.

Loans are carried at the principal amount outstanding. A loan is impaired when, based on current information or events, it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with insignificant delays not exceeding 90 days outstanding are not considered impaired. Certain nonaccrual and substantially delinquent loans may be considered to be impaired. The Company considers its investment in one-to-four family residential loans and consumer loans to be homogeneous and therefore excluded from separate identification for evaluation of impairment. Interest income is accrued on the principal balances of loans. The accrual of interest on impaired and nonaccrual loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed when considered uncollectible. Interest income is subsequently recognized only to the extent cash payments are received. Certain loan fees and direct costs are being deferred and amortized as an adjustment of yield on the loans over the contractual maturity of the loans.

Allowance for loan losses is maintained to absorb loan losses based on management's continuing review and evaluation of the loan portfolio and its judgment as to the impact of economic conditions on the portfolio. The evaluation by management includes consideration of past loss experience, changes in the composition of the portfolio, the current condition and amount of loans outstanding, and the probability of collecting all amounts due. Impaired loans are measured by the present value of expected future cash flows, or the fair value of the collateral of the loan, if collateral dependent. The allowance is increased by the provision for loan losses, which is charged against current period operating results. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. Management believes that as of December 31, 2002, the allowance for loan losses is adequate based on information currently available. A worsening or protracted economic decline in the areas within which the Bank operates would increase the likelihood of additional losses due to credit and market risks and could create the need for additional loss reserves.

Premises and equipment are carried at cost net of accumulated depreciation. Depreciation is computed using the straight-line method based principally on the estimated useful lives of the assets which range from 3 to 50 years. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations.

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula and is carried at cost.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Investment in limited partnerships is recorded primarily on the equity method of accounting. Losses due to impairment are recorded when it is determined that the investment no longer has the ability to recover its carrying amount. The benefits of low income housing tax credits associated with the investment are accrued when earned.

Income tax in the consolidated statements of income includes deferred income tax provisions or benefits for all significant temporary differences in recognizing income and expenses for financial reporting and income tax purposes. The Company files consolidated income tax returns with the Bank.

Earnings per share is computed based upon the weighted-average common and common equivalent shares outstanding during each year. Unearned ESOP shares and RRP shares which have not vested have been excluded from the computation of average shares outstanding.

Reclassifications of certain amounts in the 2001 and 2000 consolidated financial statements have been made to conform to the 2002 presentation.

Stock Options are accounted for under the recognition and measurement principals of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the grant date. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

		2002	2001
Net income, as reported		$8,480	$8,080
Less: Stock-based employee compensation cost determined
	under the fair value method, net of income taxes	(605)	(292)
Pro forma net income		$7,875	$7,788
Earnings per share
	Basic - as reported	$ 1.55	$ 1.16
	Basic - pro forma	1.44	1.12
	Diluted - as reported	1.51	1.16
	Diluted - pro forma	1.41	1.12

Note 2:        Restriction on Cash

The Bank is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2002, was $6,944,000.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 3:        Investment Securities

			2002
			Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Available for sale
	Mortgage-backed securities		$  6,615	$309	$    ---	$  6,924
	Collateralized mortgage obligations		9,406	116	(7)	9,515
	Federal agencies		1,997	86	---	2,083
	Small Business Administration		241	---	(2)	239
	Corporate obligations		7,723	308	---	8,031
	Marketable equity securities		15,456	4	(40)	15,420
	Municipal obligation		150	---	---	150
		Total investment securities	$41,588	$823	$ (49)	$42,362

			2001
			Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Available for sale
	Mortgage-backed securities		$  5,613	$157	$   (2)	$  5,768
	Collateralized mortgage obligations		4,867	111	(24)	4,954
	Federal agencies		2,940	67	(2)	3,005
	Corporate obligations		7,238	311	---	7,549
	Marketable equity securities		10,179	---	(25)	10,154
	Municipal obligation		150	---	---	150
		Total investment securities	$30,987	$646	$(53)	$31,580

Marketable equity securities consist of shares in mutual funds which invest in government obligations and mortgage-backed securities.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

The amortized cost and fair value of securities available for sale at December 31, 2002, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

		2002
		Amortized Cost	Fair Value
Within one year		$  3,227	$  3,268
One to five years		6,013	6,297
Five to ten years		480	549
After ten years		150	150
		9,870	10,264
Mortgage-backed securities		6,615	6,924
Collateralized mortgage obligations		9,406	9,515
Small Business Administration		241	239
Marketable equity securities		15,456	15,420
	Totals	$41,588	$42,362

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $14,928,000 at December 31, 2002, and $5,049,000 at December 31, 2001.

Proceeds from sales of securities available for sale during 2002 and 2001 were $5,000,000 and $10,261,000. Gross gains of $3,000 and $93,000 and gross losses of $6,000 and $69,000 were recognized on those sales in 2002 and 2001. There were no sales of securities in 2000.

Proceeds from sales of securities held to maturity during 2001 were $1,500,000. Gross gains of $28,000 and gross losses of $6,000 were recognized on those sales in 2001. The remaining balance of held-to-maturity securities totaling $2,290,000 was reclassified as available for sale.

There were no trading securities at December 31, 2002 or 2001.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 4:         Loans and Allowance

			2002	2001
Loans
	Real estate loans
		One-to-four family	$366,556	$376,772
		Multi family	8,211	10,059
		Commercial	54,252	51,503
		Construction and development	14,853	16,438
			443,872	454,772
	Consumer loans
		Auto	32,997	33,159
		Home equity	21,515	18,365
		Home improvement	20,135	19,782
		Mobile home	5,643	7,910
		Recreational vehicles	52,672	44,700
		Boats	36,530	33,904
		Other	3,322	4,411
			172,814	162,231
Commercial business loans			34,660	30,092
		Total loans	651,346	647,095
Undisbursed loans in process			(7,240)	(7,669)
Unamortized deferred loan fees and costs, net			3,293	2,658
Allowance for loan losses			(6,286)	(5,449)
		Net loans	$641,113	$636,635

Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. 

		2002	2001	2000
Allowance for loan losses
	Balances, January 1	$5,449	$6,472	$3,652
	Allowance acquired in acquisition	---	---	3,172
	Provision for losses	1,713	1,282	685
	Recoveries on loans	939	61	57
	Loans charged off	(1,815)	(2,366)	(1,094)
	Balances, December 31	$6,286	$5,449	$6,472

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

At December 31, 2002 and 2001, accruing loans delinquent 90 days or more totaled $64,000 and $46,000. Non-accruing loans at December 31, 2002 and 2001 were $5,032,000 and $6,567,000.

Information on impaired loans is summarized below.

			2002	2001
Impaired loans with an allowance			$2,141	$2,690
Impaired loans for which the discounted cash flows or collateral value
	exceeds the carrying value of the loan		210	---
		Total impaired loans	$2,351	$2,690
Allowance for impaired loans included in the Company's
	allowance for loan losses		$    321	$    404

		2002	2001	2000
Average balance of impaired loans		$  3,821	$ 3,642	$ 141
Interest income recognized on impaired loans		24	114	---
Interest income recognized on impaired loans -
	cash basis	8	23	---

Note 5:        Premises and Equipment

			2002	2001
Cost
	Land		$3,067	$2,285
	Buildings and land improvements		9,010	8,981
	Equipment		7,106	6,525
		Total cost	19,183	17,791
Accumulated depreciation and amortization			(9,996)	(9,117)
		Net	$9,187	$8,674

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 6:         Investment In Limited Partnerships

	2002	2001
Pedcor Investments 1987-II (99.00 percent ownership)	642	748
Pedcor Investments 1988-V (98.97 percent ownership)	417	472
Pedcor Investments 1990-XI (19.79 percent ownership)	51	72
Pedcor Investments 1990-XIII (99.00 percent ownership)	752	698
Pedcor Investments 1997-XXVIII (99.00 percent ownership)	3,017	3,320
Pedcor Investments 1997-XXIX (99.00 percent ownership)	737	367
	$5,616	$5,677

The limited partnerships build, own and operate apartment complexes. The Company records its equity in the net income or loss of the Pedcor Investments 1987-II, 1988-V, 1990-XIII, 1997-XXVIII and 1997-XXIX based on the Company's interest in the partnerships. The Company has recorded its investment in Pedcor Investments 1990-XI, which represents less than a 20 percent ownership, at amortized cost and records income when distributions are received. The Company recorded losses from these limited partnerships of $517,000, $249,000 and $210,000 for 2002, 2001 and 2000. In addition, the Company has recorded the benefit of low income housing credits of $845,000, $817,000 and $339,000 for 2002, 2001 and 2000. Combined financial statements for the limited partnerships recorded under the equity method of accounting are as follows:

				2002	2001
Combined balance sheets condensed
	Assets
		Cash		$       204	$       192
		Land and property		29,445	30,306
		Other assets		1,281	1,402
			Total assets	$30,930	$31,900
	Liabilities
		Notes payable		$28,695	$29,525
		Other liabilities		1,512	1,370
			Total liabilities	30,207	30,895
	Partners' equity (deficit)
		General partners		(3,705)	(3,285)
		Limited partners		4,428	4,290
			Total partners' equity	723	1,005
			Total liabilities and partners' equity	$30,930	$31,900

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

			2002	2001	2000
Combined condensed statements of operations
	Total revenue		$4,369	$3,567	$3,743
	Total expenses		4,882	4,124	4,353
		Net loss	$(513)	$(557)	$(610)

Note 7:        Deposits

		2002	2001
Noninterest-bearing demand		$  30,058	$  23,434
Interest-bearing demand		61,354	60,013
Passbook		54,677	49,702
Money market savings		45,330	48,110
Certificates and other time deposits of $100,000 or more		78,063	83,126
Other certificates		280,882	274,493
	Total deposits	$550,364	$538,878

Certificates including other time deposits of $100,000 or more maturing in years ending December 31:

2003	$207,280
2004	51,654
2005	66,218
2006	8,692
2007	24,979
Thereafter	122
	$358,945

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 8:        Federal Home Loan Bank Advances

Maturities Year Ending December 31	Amount
2003	$   32,061
2004	30,303
2005	20,381
2006	4,902
2007	518
Thereafter	27,238
	$115,403

At December 31, 2002, the Company has pledged $375,000,000 in qualifying first mortgage loans and investment securities as collateral for advances and outstanding letters of credit. Advances, at interest rates from 1.73 to 7.33 percent at December 31, 2002, are subject to restrictions or penalties in the event of prepayment.

Note 9:        Notes Payable

The Bank has a noninterest-bearing, unsecured term note payable to Pedcor Investments 1997-XXVIII, L.P. of $1,584,000 and $1,646,000 at December 31, 2002 and 2001 payable in semiannual installments through January 1, 2010. At December 31, 2002 and 2001, the Bank was obligated under an irrevocable direct pay letter of credit for the benefit of a third party in the amount of $1,254,000 relating to this note and the financing for an apartment project by Pedcor Investments 1997-XXVIII L.P.

The Bank also has a noninterest-bearing, unsecured term note payable to Pedcor Investments 1997-XXIX, LP. The note, which is payable in annual installments through August 15, 2008, had a balance of $1,300,000 and $1,613,000 at December 31, 2002 and 2001.

Maturities Year Ending December 31
2003	$   351
2004	345
2005	342
2006	339
2007	396
Thereafter	1,111
	$2,884

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 10:        Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of these loans consist of the following:

		2002	2001	2000
Loans serviced for
	Freddie Mac	$  89,432	$  82,629	$40,585
	Fannie Mae	12,343	4,924	8,467
	Federal Home Loan Bank	12,081	---	---
	Other investors	14,680	12,993	17,559
		$128,536	$100,546	$66,611

The aggregate fair value of capitalized mortgage servicing rights at December 31, 2002, 2001 and 2000 is based on comparable market values and expected cash flows, with impairment assessed based on portfolio characteristics including product type, investor type, and interest rates.

No valuation allowance was necessary at December 31, 2002, 2001 and 2000.

		2002	2001	2000
Mortgage Servicing Rights
	Balances, January 1	$   879	$428	$279
	Servicing rights acquired	---	---	133
	Servicing rights capitalized	524	572	79
	Amortization of servicing rights	(210)	(121)	(63)
	Balances, December 31	$1,193	$879	$428

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 11:        Income Tax

				2002	2001	2000
Income tax expense
	Currently payable
		Federal		$2,124	$1,804	$1,669
		State		889	628	113
	Deferred
		Federal		411	552	864
		State		(48)	95	460
			Total income tax expense	$3,376	$3,079	$3,106
Reconciliation of federal statutory to actual tax expense
	Federal statutory income tax at 34%			$4,031	$3,794	$3,176
	Effect of state income taxes			555	477	378
	Low income housing credits			(843)	(817)	(339)
	Tax-exempt income			(439)	(430)	(217)
	Other			72	55	108
		Actual tax expense		$3,376	$3,079	$3,106
Effective tax rate				28.5%	27.6%	33.3%

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

The components of the deferred asset are as follows:

			2002	2001
Assets
	Allowance for loan losses		$2,558	$2,144
	Deferred compensation		2,150	1,949
	Charitable contribution carryover		510	857
	Depreciation and amortization		320	361
	Business tax and AMT credit carryovers		524	861
	Investments in limited partnerships		---	435
	Other		518	328
		Total assets	6,580	6,935
Liabilities
	FHLB stock		(210)	(210)
	State income tax		(222)	(210)
	Loan fees		(1,194)	(1,358)
	Investments in limited partnerships		(28)	---
	Unrealized gain on securities available for sale		(310)	(237)
	Mortgage servicing rights		(498)	(366)
		Total liabilities	(2,462)	(2,381)
			$4,118	$4,554

The Company has a charitable contribution carryover of $1,501,000 that expires in 2005 and unused business income tax credits of $351,000 expiring in 2017. In addition, the Company has an AMT credit carryover of $173,000 with an unlimited carryover period.

Retained earnings include approximately $14,743,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which income would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amounts was approximately $5,013,000.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 12:        Other Comprehensive Income

			2002
			Before-Tax Amount	Tax Expense	Net-of-Tax Amount
Unrealized gains on securities
	Unrealized holding gains arising during the
		year	$176	$(70)	$106
	Less: reclassification adjustment for losses
		realized in net income	(3)	1	(2)
	Net unrealized gains		$179	$(71)	$108
			2001
			Before-Tax Amount	Tax Expense	Net-of-Tax Amount
Unrealized gains on securities
	Unrealized holding gains arising during the
		year	$549	$(216)	$333
	Less: reclassification adjustment for gains
		realized in net income	46	(13)	33
	Net unrealized gains		$503	$(203)	$300
			2000
			Before-Tax Amount	Tax Expense	Net-of-Tax Amount
Net unrealized gains on securities			$563	$(223)	$340

Note 13:        Commitments and Contingent Liabilities

In the normal course of business there are outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated statements of financial condition.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Financial instruments whose contract amount represents credit risk as of December 31 were as follows:

	2002	2001
Loan commitments	$67,388	$65,915
Standby letters of credit	7,039	7,269

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation. Collateral held varies, but may include residential real estate, income-producing commercial properties, or other assets of the borrower.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

The Company and Bank are also subject to claims and lawsuits which arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of the Company.

Note 14:        Dividend and Capital Restrictions

The Company is not subject to any regulatory restrictions on the payment of dividends to its stockholders.

Without prior approval, current regulations allow the Bank to pay dividends to the Company not exceeding retained net income for the current calendar year plus those for the previous two calendar years. At December 31, 2002, the stockholder's equity of the Bank was $91,440,000, of which none is available, without prior regulatory approval, for dividend distribution to the Company.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 15:        Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies and is assigned to a capital category. The assigned capital category is largely determined by three ratios that are calculated according to the regulations: total risk adjusted capital, Tier 1 risk-based capital, and core leverage ratios. The ratios are intended to measure capital relative to assets and credit risk associated with those assets and off-balance sheet exposures of the entity. The capital category assigned to an entity can also be affected by qualitative judgments made by regulatory agencies about the risk inherent in the entity's activities that are not part of the calculated ratios.

There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification of a bank in any of the undercapitalized categories can result in actions by regulators that could have a material effect on a bank's operations. At December 31, 2002 and 2001, the Bank was categorized as well capitalized and met all subject capital adequacy requirements. There are no conditions or events since December 31, 2002 that management believes have changed the Bank's classification.

The Bank's actual and required capital amounts and ratios are as follows:

	Actual		Required for Adequate Capital 1		To Be Well Capitalized 1
	Amount	Ratio	Amount	Ratio	Amount	Ratio
As of December 31, 2002
Total risk-based capital 1 (to risk-weighted assets)	$  96,269	17.7%	$43,585	8.0%	$54,482	10.0%
Tier 1 risk-based capital 1 (to risk-weighted assets)	90,055	16.5%	21,793	4.0%	32,689	6.0%
Core capital 1 (to adjusted total assets)	90,055	11.7%	23,142	3.0%	38,571	5.0%
Core capital 1 (to adjusted tangible assets)	90,055	11.7%	15,428	2.0%	NA	NA
Tangible capital 1 (to adjusted total assets)	90,055	11.7%	11,571	1.5%	NA	NA
As of December 31, 2001
Total risk-based capital 1 (to risk-weighted assets)	$108,340	20.7%	$41,951	8.0%	$52,439	10.0%
Tier 1 risk-based capital 1 (to risk-weighted assets)	102,969	19.6%	20,975	4.0%	31,463	6.0%
Core capital 1 (to adjusted total assets)	102,969	13.5%	22,912	3.0%	38,186	5.0%
Core capital 1 (to adjusted tangible assets)	102,969	13.5%	15,275	2.0%	NA	NA
Tangible capital 1 (to adjusted total assets)	102,969	13.5%	11,456	1.5%	NA	NA
______________________ 1 As defined by regulatory agencies

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 16:        Employee Benefits

The Company has a retirement savings 401(k) plan in which substantially all employees may participate. The contributions are discretionary and determined annually. In 2002, 2001 and 2000, the Company matched employees' contributions at the rate of 50 percent for the first $600 participant contributions to the 401(k) and made a contribution to the profit-sharing plan of 3 percent of qualified compensation. The Company's expense for the plan was $297,000, $253,000 and $216,000 for 2002, 2001 and 2000.

The Company has a supplemental retirement plan and deferred compensation arrangements for the benefit of certain officers. The Company also has deferred compensation arrangements with certain directors whereby, in lieu of currently receiving fees, the directors or their beneficiaries will be paid benefits for an established period following the director's retirement or death. These arrangements are informally funded by life insurance contracts which have been purchased by the Company. The Company records a liability for these vested benefits based on the present value of future payments. The Company's expense for the plan was $695,000, $689,000 and $416,000 for 2002, 2001 and 2000.

The Company has an ESOP covering substantially all of its employees. At December 31, 2002, 2001 and 2000, the Company had 349,626, 381,395 and 413,179 unearned ESOP shares with a fair value of $6,916,000, $5,759,000 and $6,094,000. Shares are released to participants proportionately as ESOP debt is repaid. Dividends on allocated shares are recorded as dividends and charged to retained earnings. Dividends on unallocated shares are used to repay the loan. Compensation expense is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors of the Company and Bank, are made to the ESOP. Expense under the ESOP for 2002, 2001 and 2000 was $585,000, $464,000 and $360,000. At December 31, 2002, the ESOP had 80,857 allocated shares, 349,626 suspense shares and 31,783 committed-to-be released shares. At December 31, 2001, the ESOP had 52,389 allocated shares, 381,395 suspense shares and 31,784 committed-to-be released shares. At December 31, 2000, the ESOP had 20,589 allocated shares, 413,179 suspense shares and 31,800 committed-to-be released shares.

The Company has a Recognition and Retention Plan (RRP) for the award of up to 232,784 shares of the common stock of the Company to directors and executive officers. Common stock awarded under the RRP vests ratably over a three or five-year period commencing with the date of the grants. In 2001, the Company granted 209,000 RRP shares under the plan. Expense recognized on the vested shares totaled approximately $768,000 and $1,394,000 in 2002 and 2001. The unearned portion of these stock awards is presented as a reduction of stockholders' equity.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 17:        Stock Option Plan

Under the Company's stock option plan approved in 2000, which is accounted for in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations, the Company grants selected executives and other key employees and directors incentive and non-qualified stock option awards which vest and become fully exercisable at the discretion of the stock option committee as the options are granted. The Company is authorized to grant options for up to 581,961 shares of the Company's common stock. Under certain provisions of the plan, the number of shares available for grant may be increased without shareholder approval by the amount of shares surrendered as payment of the exercise price of the stock option and by the number of shares of common stock of the Company that could be repurchased by the Company using proceeds from the exercise of stock options. The exercise price of each option, which has a 10 or 15 year life, may not be less than the market price of the Company's stock on the date of grant; therefore, no compensation expense will be recognized when the options are granted. No grants were awarded in 2002 or 2000, except for 58,295 options issued as part of an acquisition in 2000.

The following is a summary of the status of the Company's stock option plan and changes in that plan for 2002 and 2001.

		2002		2001		2000
Options		Shares	Weighted- Average Exercise Price	Shares	Weighted- Average Exercise Price	Shares	Weighted- Average Exercise Price
Outstanding, beginning of year		535,714	$14.30	39,521	$10.97	---	$     ---
	Granted	---	---	507,000	14.50	58,295	---
	Exercised	(3,331)	11.95	(5,807)	9.29	(18,774)	10.87
	Forfeited/expired	(297)	5.37	(5,000)	14.50	---	---
	Outstanding, end of year	532,086	14.32	535,714	14.30	39,521	10.97
	Options exercisable at year end	287,420		165,714		39,521
Weighted-average fair value of
	options granted during the year				2.77

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

At December 31, 2002, certain information by exercise price for options outstanding and exercisable is as follows:

Exercise Price	Number of Shares	Weighted- Average Remaining Contractual Life	Number of Shares Exercisable
$10.87	18,774	3.7 years	18,774
12.35	13,912	4.6 years	13,913
14.50	499,400	10.3 years	254,733

Although the Company has elected to follow APB No. 25, SFAS No. 123 requires pro forma disclosures of net income and earnings per share as if the Company had accounted for its employee stock options under that statement (see Note 1). The fair value of each option grant was estimated on the grant date using an option-pricing model with the following assumptions:

	2001
Risk-free interest rates	5.14%
Dividend yields	2.19%
Volatility factors of expected market price of common stock	8.40%
Weighted-average expected life of the options	8 years

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 16:        Earnings Per Share

Earnings per share were computed as follows:

			2002
			Income	Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
	Income available to common shareholders		$8,480	5,484,792	$1.55
Effect of Dilutive Securities
	Stock options		---	113,378	---
Diluted Earnings Per Share
	Income available to common stockholders
		and assumed conversions	$8,480	5,598,170	$1.51
			2001
			Income	Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
	Income available to common shareholders		$8,080	6,949,879	$1.16
Effect of Dilutive Securities
	Stock options		---	14,426	---
Diluted Earnings Per Share
	Income available to common stockholders
		and assumed conversions	$8,080	6,964,305	$1.16
			2000
			Income	Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
	Income available to common shareholders		$6,235	5,557,775	$1.12
Effect of Dilutive Securities
	Stock options		---	602	---
Diluted Earnings Per Share
	Income available to common stockholders
		and assumed conversions	$6,235	5,558,377	$1.12

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 19:        Fair Values of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and Cash Equivalents - The fair value of cash and cash equivalents approximates carrying value.

Investment and Mortgage-Backed Securities - Fair values are based on quoted market prices.

Loans Held For Sale - Fair values are based on quoted market prices.

Loans - The fair value for loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

FHLB Stock - Fair value of FHLB stock is based on the price at which it may be resold to the FHLB.

Cash Value of Life Insurance - The fair value of life insurance values approximate carrying value.

Interest Receivable/Payable - The fair values of interest receivable/payable approximate carrying values.

Deposits - The fair values of noninterest-bearing, interest-bearing demand and savings accounts are equal to the amount payable on demand at the balance sheet date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on such time deposits.

Federal Home Loan Bank Advances - The fair value of these borrowings are estimated using a discounted cash flow calculation, based on current rates for similar debt for periods comparable to the remaining terms to maturity of these advances.

Notes Payable - The fair value of this note is estimated using a discount calculation based on current rates.

Advances by Borrowers for Taxes and Insurance - The fair value approximates carrying value.

Off-Balance Sheet Commitments - Commitments include commitments to purchase and originate mortgage loans, commitments to sell mortgage loans, and standby letters of credit and are generally of a short-term nature. The fair values of such commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The carrying amount of these investments are reasonable estimates of the fair value of these financial statements.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

The estimated fair values of the Company's financial instruments are as follows:

		2002		2001
		Carrying Amount	Fair Value	Carrying Amount	Fair Value
Assets
	Cash and cash equivalents	$  23,620	$  23,620	$  30,558	$  30,558
	Securities available for sale	42,362	42,362	31,580	31,580
	Loans held for sale	7,851	7,965	11,559	11,586
	Loans	641,113	656,643	636,635	650,212
	Stock in FHLB	6,993	6,993	6,993	6,993
	Cash value of life insurance	25,439	25,439	24,231	24,231
	Interest receivable	3,201	3,201	3,697	3,697
Liabilities
	Deposits	550,364	550,880	538,878	539,883
	FHLB Advances	115,403	126,336	107,485	112,026
	Notes payable	2,884	2,369	3,259	2,693
	Interest payable	1,016	1,016	1,360	1,360
	Advances by borrowers for taxes and insurance	1,335	1,335	1,463	1,463

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)
Note 20:    Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:


Condensed Balance Sheets

			2002	2001
Assets
	Cash on deposit with Bank		$  2,355	$       831
	Cash on deposit with others		17	112
		Total cash and cash equivalents	2,372	943
	Investment securities available for sale		---	1,001
	Loans receivable		1,250	2,500
	Investment in common stock of Bank		91,440	104,377
	Deferred income tax		621	857
	Other assets		866	133
		Total assets	$96,549	$109,811
Liabilities - other			$  (168)	$         67
Stockholders' Equity			96,717	109,744
		Total liabilities and stockholders' equity	$96,549	$109,811

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Condensed Statements of Income

			2002	2001	2000
Income
	Interest income from Bank		$       29	$       401	$   904
	Interest income from investments		8	136	158
	Interest income from loans		324	404	---
	Dividends from Bank		21,500	10,000	---
	Other income		137	4	---
		Total income	21,998	10,945	1,062
Expenses
	Interest expense		9	---	---
	Other		221	181	120
		Total expenses	230	181	120
Income before income tax and equity in
	undistributed income of subsidiary		21,768	10,764	942
Income tax expense			105	297	374
Income before equity in undistributed income
	of subsidiary		21,663	10,467	568
Equity in undistributed income of subsidiary			(13,183)	(2,387)	5,667
Net Income			$  8,480	$  8,080	$6,235

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Condensed Statements of Cash Flows

				2002	2001	2000
Operating Activities
	Net income			$  8,480	$ 8,080	$ 6,235
	Item not requiring (providing) cash
		ESOP shares earned		585	464	360
		Deferred income tax benefit		236	289	246
		Distributions in excess of earnings (undistributed income)
			of Bank	13,183	2,387	(5,667)
		Other		(266)	276	(488)
			Net cash provided by operating activities	22,218	11,496	686
Investing Activities
	Cash received in acquisition, net			---	---	630
	Net change in loans			1,250	389	---
	Purchase of securities available for sale			---	---	(2,498)
	Proceeds from sales of securities available for sale			---	503	---
	Proceeds from maturities of securities available for sale			1,001	1,000	---
		Net cash provided by (used in) investing activities		2,251	1,892	(1,868)
Financing Activities
	Stock repurchased			(21,184)	(28,224)	---
	Cash dividends			(1,896)	(2,265)	(1,502)
	Proceeds from stock options exercised			40	54	204
		Net cash used in financing activities		(23,040)	(30,435)	(1,298)
Net Change in Cash and Cash Equivalents				1,429	(17,047)	(2,480)
Cash and Cash Equivalents, Beginning of Year				943	17,990	20,470
Cash and Cash Equivalents, End of Year				$ 2,372	$ 943	$ 17,990
Additional Cash Flow and Supplementary Information
	Fair value of stock issued in acquisition of Marion			$ ---	$ ---	$ 27,804
	Fair value of net assets, excluding cash, in acquisition			---	---	2,411

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Officers & Directors of MutualFirst Financial, Inc.

Board of Directors Wilbur R. Davis
Chairman of the Boards of MutualFirst Financial
and Mutual Federal Savings Bank;
President, Ontario Systems Corporation

Julie A. Skinner
Vice Chairman of the Boards of MutualFirst Financial
and Mutual Federal Savings Bank; civic leader

R. Donn Roberts
President and Chief Executive Officer of MutualFirst
Financial and Mutual Federal Savings Bank

Edward J. Dobrow
President, D&M Leasing

Linn A. Crull
Certified Public Accountant;
Member/Owner, Whitinger & Company, LLC

James D. Rosema
President, Rosema Corporation

William V. Hughes
Attorney, Partner in Beasley & Gilkison, LLP Steven L. Banks
Senior Vice President of MutualFirst Financial
and Mutual Federal Savings Bank

John M. Dalton
Former Chairman, President and Chief Executive
Officer of Marion Capital Holdings

Jon R. Marler
President, Carico Systems;
Senior Vice President, Ralph M. Williams and
Associates; President, Empire Real Estate

Jerry D. McVicker
Interim Superintendent, Marion Community Schools



Officers
R. Donn Roberts, President and Chief Executive
Officer
David W. Heeter, Executive Vice President
Timothy J. McArdle, Senior Vice President and
Treasurer
Steven L. Banks, Senior Vice President
Rosalie Petro, Secretary

Officers & Directors of Mutual Federal Savings Bank

Board of Directors The Directors of MutualFirst Financial, Inc. also serve
as the Board of Directors of Mutual Federal Savings
Bank.

Senior Directors
Charles R. McCormick, Senior Director
Jack E. Buckles, Senior Director
G. Richard Benson, Senior Director

Winchester Advisory Board
Kenneth W. Girton, Advisory Director
Robert Morris, Advisory Director
Clark G. Loney, Advisory Director
Gene Gulley, Senior Advisory Director Warsaw Advisory Board
Candace Wolkins, Advisory Director
John Sadler, Advisory Director
David Carey, Advisory Director
Stephen Harris, Advisory Director
Phillip J. Harris, Senior Advisory Director
J. Kevin Zachary, Senior Advisory Director

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Corporate Officers

R. Donn Roberts, President and Chief Executive Officer
David Heeter, Executive Vice President
Patrick Botts, Executive Vice President and Chief Operating Officer
Steven Campbell, Senior Vice President
Stephen Selby, Senior Vice President
Timothy McArdle, Senior Vice President and Treasurer
Steven Banks, Senior Vice President
Max Courtney, Vice President
Marvin Vincent, Vice President
Michael Barber, Vice President
Larry Phillips, Vice President and Controller
Cynthia Fortney, Vice President
Michael Fisher, Vice President
James Tinkey, Vice President
Lynda Stoner, Vice President
Ralph Spencer, Jr., Vice President
Clifford Keys, Vice President
Norb Adrian, Assistant Vice President
Lori Ritchey, Assistant Vice President
Connie Bower, Assistant Vice President
Crystal Bradford, Assistant Vice President
Lila Piper, Assistant Vice President
Manfred Walgram, Assistant Vice President
William Curl, Assistant Vice President
Glenda Thomas, Assistant Vice President
Brad Durrer, Assistant Vice President
Rosalie Petro, Corporate Secretary


Administrative Officers
Jean DeHart, Branch Manager, Northwest
Carla Burt, Business Development Officer
Tammy Hefflin, Assistant Controller & Manager, Accounting
Jan Heminger, Branch Manager, West Bethel
Kim Evans, Branch Manager, South Madison
Patti Decker, Branch Manager, Yorktown
Denise Abrams, Branch Manager, East Jackson
Vicki Reade, Branch Manager, Albany
Kristen Mattingly, Manager, Marketing
Sharon Ferguson, Manager, Deposit Products
Brad Zimmerman, Manager, Information Systems
Cathy Coolman, Branch Manager, Gas City
Barbara Peterson, Manager, Loan Operations
Dorothy Douglass, Manager, Human Resources
Elisabeth Winters, Branch Manager, Wal-Mart, Marion
JoEllen Frazier, Branch Manager, Marion Third Street
Stephanie Salyer, Branch Manager, Warsaw Market Street
Marlene Hoffer, Branch Manager, Warsaw East Center Street
Sonya Sochor, Branch Manager, West Jackson Street
Christopher Cook, Assistant Treasurer
Angel Workman, Branch Manager, Broadway
Lesley Neal, Internal & Compliance Auditor
Jolene Morrow, Branch Manager, North Webster
Robin Timbrook, Manager, Electronic Banking


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MUTUALFIRST FINANCIAL, INC.
SHAREHOLDER INFORMATION

ANNUAL MEETING
The annual meeting of shareholders will be held at 3:00 p.m. local time, on April 30, 2003, at the Company's main office, located at 110 E. Charles Street, Muncie, Indiana.

Transfer Agent:
	Continental Stock Transfer & Trust Company 17 Battery Place New York, New York 10004 (212) 509-4000
General Counsel:		Special Counsel:
	Beasley & Gilkison, LLP 110 E. Charles St. Muncie, IN 47305		Silver, Freedman & Taff, L.L.P. 1700 Wisconsin Av. N.W. Washington, D.C. 20007
Independent Auditor:
	BKD, LLP 201 N. Illinois, Suite 700 Indianapolis, IN 46204
Shareholder and General Inquiries:
	R. Donn Roberts President & Chief Executive Officer MutualFirst Financial, Inc. 110 E. Charles Street Muncie, IN 47305		Timothy J. McArdle Senior Vice President and Treasurer

ANNUAL AND OTHER REPORTS

Copies of the Company's Annual Report or Form 10-K filed with the Securities and Exchange Commission, may be obtained without cost, by writing or calling: MutualFirst Financial, Inc. Investor Relations, Attn: R. Donn Roberts, President and Chief Executive Officer, 110 E. Charles Street, Muncie, Indiana 47305.

The common stock for MutualFirst Financial, Inc. is traded under the symbol "MFSF" on the NASDAQ National Market. The table below shows the high and low closing prices for our common stock for the periods indicated. This information was provided by the NASDAQ. At March 6, 2003, there were 5,308,852 shares of common stock issued and outstanding and approximately 1,477 shareholders of record.

	Stock Price		Dividends per Share
Quarter Ending:	High	Low
First Quarter (ended 03/31/01)	$15.125	$13.875	$.08
Second Quarter (ended 06/30/01)	$14.65	$13.938	$.08
Third Quarter (ended 09/30/01)	$15.39	$14.34	$.08
Fourth Quarter (ended 12/31/01)	$15.20	$14.50	$.08
	Stock Price		Dividends per Share
Quarter Ending:	High	Low
First Quarter (ended 03/31/02)	$18.300	$14.900	$.09
Second Quarter (ended 06/30/02)	$19.800	$18.050	$.09
Third Quarter (ended 09/30/02)	$20.590	$17.900	$.09
Fourth Quarter (ended 12/31/02)	$19.770	$18.730	$.10

Our cash dividend payout policy is continually reviewed by management and the Board of Directors. The company intends to continue its policy of paying quarterly dividends; however, the payment will depend upon a number of factors, including capital requirements, regulatory limitations, the Company's financial condition, results of operations and the Bank's ability to pay dividends to the Company. The Company relies significantly upon such dividends originating from the Bank to accumulate earnings for payment of cash dividends to shareholders.

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MutualFirst
Financial Inc.
110 E. Charles Street
Muncie, IN 47305


End.