10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2003   OR
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _______________

Commission File Number: 000-27905

MutualFirst Financial, Inc. (Exact Name of registrant specified in its charter)

Maryland (State or other jurisdiction of
incorporation or organization) 35-2085640 (I.R.S. Employer
Identification Number)

110 East Charles Street
Muncie, Indiana 47305
(765) 747-2800 (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days.
  Yes  [X]    No[   ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
  Yes  [X]    No[   ]

The number of shares of the Registrant's common stock, with $.01 par value, outstanding as of March 31, 2003 was 5,275,774.






Next Page



FORM 10 - Q
MutualFirst Financial, Inc.

INDEX

PART I - FINANCIAL INFORMATION			Page Number
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets at
		March 31, 2003 and December 31, 2002	1
	Consolidated Condensed Statement of Income for the
		three months ended March 31, 2003 and
		March 31, 2002	2
	Consolidated Condensed Statement of Stockholders' Equity
		for the three months ended March 31, 2003	3
	Consolidated Condensed Statements of Cash Flows for the
		three months ended March 31, 2003 and March 31, 2002	4-5
	Notes to Unaudited Consolidated Condensed Financial Statements		6-7
Item 2.	Management's Discussion and Analysis of Financial Condition
		and Results of Operations	8-11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		12
Item 4.	Controls and Procedures		13
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		14
Item 2.	Changes in Securities and Use of Proceeds		14
Item 3.	Defaults Upon Senior Securities		14
Item 4.	Submission of Matters to a Vote of Security Holders		14
Item 5.	Other Information		14
Item 6.	Exhibits and Reports on Form 8-K		14
Signature Page			15
Certifications			16-17

i Next Page


PART 1 FINANCIAL INFORMATION
ITEM 1. Financial Statements

MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY Consolidated Condensed Balance Sheets

			March 31, 2003(Unaudited)	December 31, 2002
Assets
Cash			$  16,720,812	$  17,986,004
Interest-bearing deposits			2,377,036	5,633,953
Cash and cash equivalents			19,097,848	23,619,957
Investment securities available for sale			37,697,541	42,362,138
Loans held for sale			3,878,538	7,850,711
Loans			660,841,600	647,398,940
Allowance for loan losses			(6,439,213)	(6,285,959)
Net loans			654,402,387	641,112,981
Premises and equipment			9,419,569	9,186,501
Federal Home Loan Bank of Indianapolis stock, at cost			6,993,400	6,993,400
Investment in limited partnerships			5,350,782	5,616,485
Cash surrender value of life insurance			25,733,308	25,439,308
Foreclosed real estate			1,160,861	1,472,865
Interest receivable			3,246,659	3,201,001
Core deposit intangibles and goodwill			918,032	921,462
Deferred income tax benefit			4,165,107	4,118,344
Other assets			4,408,956	3,902,506
Total assets			$776,472,988	$775,797,659
Liabilities
Deposits
	Non-interest-bearing		$31,501,118	$28,908,935
	Interest bearing		524,410,126	521,455,008
		Total deposits	555,911,244	550,363,943
Federal Home Loan Bank advances			112,420,486	115,403,203
Other borrowings			2,868,558	2,883,631
Advances by borrowers for taxes and insurance			2,389,987	1,334,768
Interest payable			1,380,159	1,015,977
Other liabilities			8,352,490	8,079,011
Total liabilities			683,322,924	679,080,533
Commitments and Contingent Liabilities
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 --- 5,275,774 and 5,523,052 shares	52,758	55,231
	Additional paid-in capital		33,549,946	38,782,755
	Retained earnings		63,326,101	61,779,695
	Accumulated other comprehensive income		394,306	464,452
	Unearned employee stock ownership plan (ESOP) shares		(3,416,646)	(3,496,106)
	Unearned recognition and retention plan (RRP) shares		(756,401)	(868,901)
		Total stockholders' equity	93,150,064	96,717,126
		Total liabilities and stockholders' equity	$776,472,988	$775,797,659

See notes to consolidated condensed financial statements.


1 Next Page


MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statements of Income
(Unaudited)

				Three Months Ended March 31
				2003	2002
Interest Income
	Loans receivable, including fees			$11,315,969	$12,214,887
		Investment securities:
			Mortgage-backed securities	157,158	154,116
			Federal Home Loan Bank stock	101,203	103,464
			Other investments	190,093	216,590
		Deposits with financial institutions		26,210	65,895
			Total interest income	11,790,633	12,754,952
Interest Expense
	Passbook savings			95,122	159,552
	Certificates of deposit			3,321,615	4,226,990
	Daily Money Market accounts			124,130	209,710
	Demand and NOW accounts			49,331	119,937
	Federal Home Loan Bank advances			1,357,735	1,384,264
	Other interest expense			15,606	24,710
			Total interest expense	4,963,539	6,125,163
Net Interest Income				6,827,094	6,629,789
	Provision for losses on loans			375,000	587,483
Net Interest Income After Provision for Loan Losses				6,452,094	6,042,306
Other Income
	Service fee income			698,895	606,672
	Equity in losses of limited partnerships			(146,442)	(37,390)
	Commissions			175,109	189,124
	Net gains on loan sales			350,063	0
	Increase in cash surrender value of life insurance			294,000	300,000
	Other income			34,211	113,299
			Total other income	1,405,836	1,171,705
Other Expenses
	Salaries and employee benefits			3,256,208	3,008,935
	Net occupancy expenses			284,788	241,986
	Equipment expenses			243,973	197,746
	Data processing fees			158,687	193,748
	Automated teller machine			114,399	85,456
	Deposit insurance expense			23,149	24,167
	Advertising and promotion			95,215	93,492
	Goodwill amortization			3,431	45,140
	Other expenses			775,332	769,611
			Total other expenses	4,955,182	4,660,281
Income Before Income Tax				2,902,748	2,553,730
	Income tax expense			835,300	669,600
Net Income				$2,067,448	$1,884,130
	Basic earnings per share			$0.42	$0.32
	Diluted earnings per share			$0.40	$0.32
	Dividends per share			$0.10	$0.09

See notes to consolidated condensed financial statements.

2 Next Page


MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Stockholders' Equity
For the Three Months Ended March 31, 2003
(Unaudited)

		Common Stock		Additional paid-in capital	Compre- hensive Income	Retained Earnings	Accumulated Other Compre- hensive Income	Unearned ESOP shares	Unearned RRP shares	Total
		Shares Outstanding	Amount
Balances, December 31, 2002		$5,523,052	$55,231	$38,782,755		$61,779,695	$464,452	($3,496,106)	($868,901)	$96,717,126
Comprehensive income
Net income for the period					$2,067,448	$2,067,448				2,067,448
Other comprehensive income, net of tax
	Unrealized gains on securities				(70,146)		(70,146)			(70,146)
Comprehensive income					$1,997,302
ESOP shares earned				88,540				79,460		168,000
Cash dividends ($.10 per share)						(521,042)				(521,042)
RRP shares earned									112,500	112,500
Stock repurchased		(254,778)	(2,548)	(5,430,024)						(5,432,572)
Stock options exercised		7,500	75	108,675						108,750
Balances,  December 31, 2002		$5,275,774	$52,758	$33,549,946		$63,326,101	$394,306	($3,416,646)	($756,401)	$93,150,064

See notes to consolidated condensed financial statements.

3 Next Page


MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Cash Flows
(Unaudited)

					Three Months Ended March 31,
					2003	2002
Operating Activities
	Net income				$  2,067,448	$  1,884,130
	Adjustments to reconcile net income to net cash provided by operating activities
		Provision for loan losses			375,000	587,483
		Securities losses			3,293	-
		Net loss on sale of real estate owned			79,936	45,102
		Securities amortization (accretion), net			93,703	5,425
		ESOP shares earned			168,000	129,774
		RRP shares earned			112,500	202,750
		Equity in losses of limited partnerships			146,442	37,390
		Amortization of net loan origination costs			358,501	568,599
		Amortization of core deposit intangibles and goodwill			3,430	45,139
		Depreciation and amortization			233,508	204,633
		Loans originated for sale			(6,303,058)	-
		Proceeds from sales on loans held for sale			10,625,295	-
		Gains on sales of loans held for sale			(350,063)	-
		Change in
			Interest receivable		(45,658)	66,959
			Other assets		(402,945)	(644,715)
			Interest payable		364,182	533,208
			Other liabilities		306,368	(53,161)
			Increase in cash surrender value of life insurance		(294,000)	(300,000)
				Net cash provided by operating activities	7,541,882	3,312,716
Investing Activities
	Purchases of securities available for sale				(5,108,885)	(3,429,656)
	Proceeds from maturities and paydowns of securities available for sale				4,559,578	5,853,778
	Proceeds from sales of securities available for sale				5,000,000	-
	Net change in loans				(14,502,073)	(8,982,400)
	Purchases of premises and equipment				(466,576)	(116,810)
	Proceeds from real estate owned sales				589,251	374,800
	Distribution from limited partnership				15,755	29,400
	Other investing activities				121,982	(25,545)
				Net cash used by investing activities	(9,790,968)	(6,296,433)
Financing Activities
	Net change in
		Noninterest-bearing, interest bearing demand and savings deposits			6,565,667	2,314,064
		Certificates of deposits			(1,018,366)	1,289,665
	Repayment of note payable				(30,679)	(30,679)
	Proceeds from FHLB advances				6,500,000	3,280,000
	Repayment of FHLB advances				(9,500,000)	(8,000,000)
	Net change in advances by borrowers for taxes and insurance				1,055,219	1,052,119
	Stock repurchased				(5,432,572)	(5,657,471)
	Proceeds from exercise of stock options				108,750	5,000
	Dividends Paid				(521,042)	(555,410)
				Net cash provided by financing activities	(2,273,023)	(6,302,712)
Net Change in Cash and Cash Equivalents					(4,522,109)	(9,286,429)
Cash and Cash Equivalents, Beginning of Year					23,619,957	30,557,673
Cash and Cash Equivalents, End of Period					$19,097,848	$21,271,244

4 Next Page

Additional Cash Flows Information
	Interest paid	$  4,599,357	$  5,591,955
	Income tax paid	300,000	880,000
	Transfers from loans to foreclosed real estate	479,165	423,848
	Loans held for sale transferred to loans		11,559,158
	Mortgage servicing rights capitalized	103,790

See notes to consolidated condensed financial statements.


















5 Next Page


MutualFirst Financial, Inc. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1:     Basis of Presentation

The consolidated financial statements include the accounts of MutualFirst Financial, Inc. (the "Company"), its wholly owned subsidiary, Mutual Federal Savings Bank, a federally chartered savings bank ("Mutual Federal"), and Mutual Federal's two wholly owned subsidiaries, First MFSB Corporation and Third MFSB Corporation. All significant inter-company accounts and transactions have been eliminated in consolidation.

Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K annual report for 2002 filed with the Securities and Exchange Commission.

The interim consolidated financial statements at March 31, 2003 have not been audited by independent accountants, but in the opinion of management, reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for such periods. The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

The Consolidated Condensed Balance Sheet of the Company as of December 31, 2002 has been derived from the Audited Consolidated Balance Sheet of the Company as of that date.

NOTE 2:     Benefit Plans

On December 1, 2000, the stockholders of the Company approved a Stock Option Plan and a Recognition and Retention Plan (RRP). These plans allow for the purchase in the open market or through the issuance of authorized and unissued shares of up to 581,961 shares of common stock for the Stock Option Plan and 232,784 shares of common stock for the RRP. Under the Stock Option Plan, stock option rights covering 581,961 shares of stock may be granted to officers, key employees and directors of the Company and its subsidiaries. Options for 507,000 of such shares were granted effective January 12, 2001. The options have an exercise price per share equal to the market value at the date of grant. Of the options granted, 247,248 have a 15-year term and 259,752 have a 10-year term. 212,000 of these options become exercisable at the rate of 33.3% per year and 295,000 become exercisable at a rate of 20% per year. Under the RRP plan, stock awards covering 232,784 shares of common may be awarded to the directors and key employees of the Company and its subsidiaries. Grants of 209,000 of such shares have been awarded effective January 12, 2001. Beginning March 20, 2001, 122,000 of these shares vest at a rate of 20% per year and 87,000 shares were fully vested as of March 20, 2002. Expense under the RRP plan was $112,500 for the three-month period ended March 31, 2003.

Note 3:    Stock Options

The Company has a stock-based employee compensation plan, which is described more fully in Notes to Financial Statements included in the December 31, 2002 Annual Report to shareholders. The Company accounts for this plan under the recognition and measurement principles 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 (SFAS) No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.





6 Next Page

		Three Months Ended March 31, 2003	Three Months Ended March 31, 2002
		(Dollars in thousands, except per share data)
Net income, as reported		$2,067	$1,884
Less:  Total stock-based employee
	compensation cost determined under
	the fair value based method, net of
	income taxes	$   (39)	$ (151)
Pro forma net income		$2,028	$1,733
Earnings per share:
	Basic - as reported	$0.42	$0.32
	Basic - pro forma	$0.41	$0.29
	Diluted - as reported	$0.40	$0.32
	Diluted - pro forma	$0.39	$0.29

Note 4:    Effect of Recent Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") adopted Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. This Statement 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 also improves the clarity and prominence of disclosures about the proforma effects of using the fair value based method of accounting for stock-based compensation for all companies - regardless of the accounting method used - by requiring 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 improves the timeliness to those disclosures by requiring that this information be included in interim as well as annual financial statements. In the past, companies were required to make proforma disclosures only in annual financial statements.

The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002.

The FASB has stated it intends to issue a new statement on accounting for stock-based compensation and will require companies to expense stock options using a fair value based method at date of grant. The implementation for this proposed statement is not known.



7 Next Page



Item 2:    Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

MutualFirst Financial, Inc., a Maryland corporation (the "Company"), was organized in September 1999. On December 29, 1999, it acquired the common stock of Mutual Federal Savings Bank ("Mutual Federal") upon the conversion of Mutual Federal from a federal mutual savings bank to a federal stock savings bank.

Mutual Federal was originally organized in 1889 and currently conducts its business from seventeen full service offices located in Delaware, Randolph, Grant, and Kosciusko counties, Indiana, with its main office located in Muncie. Mutual Federal's principal business consists of attracting deposits from the general public and originating fixed rate and adjustable rate loans secured primarily by first mortgage liens on one- to four- family residential real estate as well as commercial real estate and loans on consumer goods. The Savings Association Insurance Fund (SAIF) of the FDIC insures Mutual Federal's deposit accounts up to applicable limits.

Mutual Federal currently owns two subsidiaries, First MFSB Corporation and Third MFSB Corporation. The assets of First MFSB Corporation consist of an investment in Family Financial Life Insurance Company. Family Financial is an Indiana stock insurance company that primarily engages in retail sales of mortgage and credit life insurance products in connection with loans originated by its shareholder financial institutions. Third MFSB, which does business as Mutual Financial Services, offers tax-deferred annuities and long-term health and life insurance products. All securities- related products and services made available through Mutual Financial Services are offered by a third party independent broker-dealer.

The Company's results of operations depend primarily on the level of net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and investments, and costs incurred with respect to interest-bearing liabilities, primarily deposits and borrowings. Results of operations also depend upon the level of the Company's non-interest income, including fee income and service charges, and the level of its non-interest expense, including general and administrative expenses.

Critical Accounting Policies

The notes to the consolidated financial statements contain a summary of the Company'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 the Company'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, mortgage servicing rights and intangible assets.

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.



8 Next Page



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.

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.

Mortgage Servicing Rights

Mortgage servicing rights ("MSRs") associated with loans originated and sold, where servicing is retained, are capitalized and included in other intangible assets in the consolidated balance sheet. The value of the capitalized servicing rights represents the present value of the future servicing fees arising from the right to service loans in the portfolio. Critical accounting policies for MSRs relate to the initial valuation and subsequent impairment tests. The methodology used to determine the valuation of MSRs requires the development and use of a number of estimates, including anticipated principal amortization and prepayments of that principal balance. Events that may significantly affect the estimates used are changes in interest rates, mortgage loan prepayment speeds and the payment performance of the underlying loans. The carrying value of the MSRs is periodically reviewed for impairment based on a determination of fair value. For purposes of measuring impairment, the servicing rights are compared to a valuation prepared based on a discounted cash flow methodology, utilizing current prepayment speeds and discount rates. Impairment, if any, is recognized through a valuation allowance and is recorded as amortization of intangible assets.

Intangible Assets

The Company 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 it implied fair value. If actual external conditions and future operating results differ from the Company's judgments, impairment and/or increased amortization charges may be necessary to reduce the carrying value of these assets to the appropriate value.

Forward Looking Statements

This quarterly report on Form 10-Q ("Form 10-Q") contains statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may appear in a number of places in this Form 10-Q and include statements regarding the intent, belief, outlook, estimate or expectations of the company, its directors or its officers primarily with respect to future events and the future financial performance of the company. Readers of this Form 10-Q are cautioned that any such forward looking statements are not guarantees of future events or performance and involve risk and uncertainties, and that actual results may differ materially from those in the forward looking statements as a result of various factors. The accompanying information contained in this Form 10-Q identifies important factors that could cause such differences. These factors include changes in interest rates; the loss of deposits and loan demand to competitors; substantial changes in financial markets; changes in real estate values and the real estate market; or regulatory changes.



9 Next Page



Financial Condition

Assets totaled $776.5 million at March 31, 2003, an increase of $675,000 from $775.8 million at December 31, 2002. The primary reason for the increase was a $9.4 million increase in loans, including loans held for sale, from $655.3 million at December 31, 2002 to $664.7 million at March 31, 2003. This increase was partially offset by a reduction in investment securities available for sale of $4.7 million from $42.4 million at December 31, 2002 to $37.7 million at March 31, 2003 and a reduction of cash and cash equivalents from $23.6 million at December 31, 2002, to $19.1 million at March 31, 2003 to help fund the increases in loans. Excluding loans held for sale, the real estate mortgage loan portfolio increased $12.2 million during the period. Consumer loans decreased $622,000 and commercial business loans increased $1.9 million.

Allowance for loan losses increased $153,000 from $6.3 million at December 31, 2002 to $6.4 million at March 31, 2003. The Company determined to increase its allowance primarily due to a continued slow economy in some of our market areas. Net charge offs for the first three months of 2003 were $220,000 or .13% of average loans on an annualized basis, compared to $193,000, or ..12% for the first three months of 2002.

Total deposits were $555.9 million at March 31, 2003 an increase of $5.5 million or 1.0% from $550.4 million at December 31, 2002. Of this growth, $2.6 million was in non-interest bearing deposits. Total borrowings decreased $3.0 million to $115.3 million at March 31, 2003 from $118.3 million at December 31, 2002.

Stockholders' equity decreased $3.6 million to $93.1 million at March 31, 2003 from $96.7 million at December 31, 2002. The decrease was due primarily to the repurchase of 255,000 shares of common stock for $5.4 million and dividend payments of $521,000. These decreases were partially offset by net income of $2.1 million, Employee Stock Ownership Plan (ESOP) shares earned of $168,000, and RRP shares earned of $113,000. Also, unrealized gain on securities available for sale decreased $70,000.

Comparison of the Operating Results for the Three Months Ended March 31, 2003 and 2002

Net income for the quarter ended March 31, 2003 was $2.1 million, or $.42 basic and $.40 diluted earnings per share. This compared to net income for the comparable period in 2002 of $1.9 million, or $.32 basic and diluted earnings per share. Annualized return on average assets was 1.07% and return on average equity was 8.68% for the first quarter of 2003, compared to .98% and 7.04%, respectively, for the same period last year.

Interest income decreased $1.0 million, or 7.6%, from $12.8 million for the three months ended March 31, 2002 to $11.8 million for the three months ended March 31, 2003 due to a decrease in the yield on average interest-earning assets from 7.24% for the 2002 period to 6.64% for the 2003 period. Average interest-earning assets increased from $704.3 million during the three months ended March 31, 2002 to $710.0 million during the comparable period in 2003. Interest expense decreased $1.1 million, or 19%, from $6.1 million for the three months ended March 31, 2002, to $5.0 million for the three months ended March 31, 2003 due to a decrease in the average cost of interest-bearing liabilities from 3.78% for the 2002 period to 2.99% for the 2003 period. Average interest-bearing liabilities increased from $647.9 million during the three months ended March 31, 2002 to $664.9 million during the comparable period in 2003. As a result, net interest income for the three-month period ended March 31, 2003, increased $197,000, or 3.0%, compared to the same period in 2002. The average interest rate spread increased from 3.47% for the three-month period ended March 31, 2002, to 3.67% for the comparable period in 2003 as yields on interest earning-assets continued to decrease at a slower rate than the decrease in the cost of interest-bearing liabilities.



10 Next Page



The provision for loan losses for the first quarter of 2003 was $375,000 compared to $587,000 for the same period in 2002. Non-performing loans to total loans at March 31, 2003 were .71% compared to 1.03% at March 31, 2002. Non-performing assets to total assets were .81% at March 31, 2003, compared to 1.07% at March 31, 2002. The non-performing commercial properties are 43.1% of non-performing loans. The non-performing commercial loans are comprised primarily of two nursing home loans totaling $1.5 million and three other loans totaling $481,000. Negotiations are in progress with the owners and possible buyers to satisfy these obligations.

Non-interest income, excluding net gain on loan sales, decreased $116,000 for the three-months ended March 31, 2003 compared to the same period in 2002. This was primarily due to increased losses of $109,000 in the limited partnerships in the first quarter of 2003 compared to the comparable period in 2002. During the first quarter of 2003, there was a gain of $350,000 on the sale of residential mortgage loans, compared to no gain for the same period in 2002.

Non-interest expense increased $295,000 or 6.3% to $5.0 million for the three months ended March 31, 2003 compared to $4.7 million for the same period in 2002. Salaries and employee benefits were $3.3 million for the three months ended March 31, 2003 compared to $3.0 million for the 2002 period, an increase of $247,000 or 8.2%. The change in salaries and benefits included a $208,000 increase in health insurance premium costs due to increased health care costs and an increased level of claims experience. Also included was a $41,000 increase in our ESOP expense due to the increase in the market value of our stock. All other expenses increased $48,000 or 2.9% for the three-month period ended March 31, 2003 compared to the same period in 2002

Income tax expense increased $166,000 for the three months ended March 31, 2003 compared to the same period in 2002. The increase resulted from increased taxable income and an increase in the effective tax rate from 26.2% to 28.8% due to less non- taxable income.

Liquidity and Capital Resources

The standard measure of liquidity for savings associations is the ratio of cash and eligible investments to a certain percentage of the net-withdrawable savings accounts and borrowings due within one year. As of March 31, 2003, Mutual Federal had liquid assets of $56.4 million and a liquidity ratio of 8.47 %.








11 Next Page



ITEM 3 - Quantitative and Quantitative Disclosures about Market Risk

Presented below as of March 31, 2003 and 2002 is an analysis of Mutual Federal's interest rate risk as measured by changes in Mutual Federal's net portfolio value ("NPV") assuming an instantaneous and sustained parallel shift in the yield curve, in 100 basis point increments, up 300 basis points and down 200 basis points.

March 31, 2003
Net Portfolio Value

Changes In Rates	$ Amount	$ Change	% Change	NPV as % of PV of Assets
				NPV Ratio	Change
+300 bp	65,799	-26,181	-28%	9.03%	-265 bp
+200 bp	76,613	-15,367	-17%	10.23%	-145 bp
+100 bp	85,765	-6,215	-7%	11.16%	-52 bp
0 bp	91,980			11.68%
-100 bp	88,961	-3,019	-3%	11.13%	-55 bp
-200 bp	89,402	-2,578	-3%	11.02%	-66 bp
-300 bp	n/m(1)	n/m(1)	n/m(1)	n/m(1)	n/m(1)

March 31, 2002
Net Portfolio Value

Changes In Rates	$ Amount	$ Change	% Change	NPV as % of PV of Assets
				NPV Ratio	Change
+300 bp	72,708	-31,150	-30%	10.22%	-332 bp
+200 bp	82,838	-21,020	-20%	11.36%	-217 bp
+100 bp	94,011	-9,847	-9%	12.57%	-96 bp
0 bp	103,858			13.53%
-100 bp	111,961	8,103	8%	14.23%	+70 bp
-200 bp	112,537	8,679	8%	14.08%	+55 bp
-300 bp	n/m(1)	n/m(1)	n/m(1)	n/m(1)	n/m(1)

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

The analysis at March 31, 2003 indicates that there have been no material changes in market interest rates for Mutual Federal's interest rate sensitivity instruments which would cause a material change in the market risk exposures that effect the quantitative and qualitative risk disclosures as presented in item 7A of the Company's annual report on Form 10-K for the period ended December 31, 2002.



12 Next Page



ITEM 4. Controls and Procedures.

(a)

Evaluation of Disclosure Controls and Procedures: An evaluation of the Company's disclosure controls and procedures (as defined in Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the "Act") was carried out under the supervision and with the participation of the Company's Chief Executive Officer, Principal Financial Officer and several other members of the Company's senior management within the 90-day period preceding the filing date of this quarterly report. The Company's Chief Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and the Principal Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

(b)

Changes in Internal Controls: In the quarter ended March 31, 2003, the Company did not make any significant changes in, nor take any corrective actions regarding its internal controls or other factors that could significantly affect these controls.

13 Next Page


PART II. OTHER INFORMATION

Item 1.	Legal Proceedings
	None.
Item 2.	Changes in Securities and use of Proceeds
	None.
Item 3.	Defaults Upon Senior Securities.
	None.
Item 4.	Submission of Matters to Vote of Security Holders.
	None.
Item 5.	Other Information.
	None.
Item 6.	Exhibits and Reports on Form 8-K.
	(a)	Exhibits
		Exhibit 99.1 - Certificate of the Chief Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	(b)	No reports on Form 8-K were filed during the quarter ended March 31, 2003.

14 Next Page


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MutualFirst Financial, Inc.
Date: May 14, 2003	By:	/s/ R. Donn Roberts R. Donn Roberts President and Chief Executive Officer
Date: May 14, 2003	By:	/s/ Timothy J. McArdle Timothy J. McArdle Senior Vice President and Treasurer (Principal Financial and Accounting Officer)

15 Next Page


CERTIFICATIONS

I, R. Donn Roberts, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of MutualFirst Financial, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
	a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.	The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003 By: /s/ R. Donn Roberts R. Donn Roberts
President and Chief Executive Officer

16 Next Page





CERTIFICATIONS

I, Timothy J. McArdle, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of MutualFirst Financial, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
	a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.	The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003 By: /s/ Timothy J. McArdle Timothy J. McArdle
Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)

17 End.

EX-99

EXHIBIT 99.1

CERTIFICATION
Each of the undersigned hereby certifies in his capacity as an officer of MutualFirst Financial, Inc. (the "Company") that the Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.

Date: May 14, 2003	By:	/s/ R. Donn Roberts R. Donn Roberts President and Chief Executive Officer
Date: May 14, 2003	By:	/s/ Timothy J. McArdle Timothy J. McArdle, Senior Vice President Treasurer and Chief Financial Officer