EX-99 2 v072160_ex99.htm
PRESS RELEASE
 
Date:
April 20, 2007
   
From:
MutualFirst Financial, Inc.
   
For Publication:
Immediately
   
Contact:
Tim McArdle, Senior Vice President and Treasurer of
 
MutualFirst Financial, Inc. (765) 747-2818

MutualFirst Announces First Quarter 2007 Earnings
 
 Muncie, Indiana - MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of Mutual Federal Savings Bank (the “Bank”), announced today that net income for the first quarter ended March 31, 2007 was $1.0 million, or $.25 for basic and diluted earnings per share. This compared to net income for the same period in 2006 of $1.6 million, or $.37 for basic and $.36 for diluted earnings per share. Annualized return on assets was .44% and return on average tangible equity was 5.79% for the first quarter of 2007 compared to .65% and 8.32% respectively, for the same period of last year. The comparative reduction of income for the three month period was primarily due to a shrinking net interest margin as discussed below. The increase in net interest margin on a linked quarter basis is also discussed below. “We continue to operate in a difficult interest rate environment,” Dave Heeter, President and CEO of MutualFirst said. “We believe this slight margin expansion is indicative that we are making progress against obvious challenges.”

On March 22, 2007 the Bank completed the acquisition of Wagley Investment Advisors, Inc. Wagley Investment Advisors, Inc. will be known as Mutual Financial Advisors, providing new and expanded investment management services not previously offered by the Bank.  Mutual Financial Advisors will offer a full range of non-bank investment options and money management.  “This acquisition will expand the Bank’s customer base and will create opportunity to deepen customers relationships,” CEO Heeter added.

Assets totaled $945.4 million at March 31, 2007, a decrease from December 31, 2006 of $15.5 million, or 1.6%. Gross loans, excluding loans held for sale, decreased $10.8 million, or 1.3%. Consumer loans decreased $1.7 million or .7%, and commercial loans decreased $5.3 million, or 3.8%, while residential mortgage loans held in the portfolio decreased $3.8 million, or .8%. Residential mortgage loans held for sale decreased $50,000 and mortgage loans sold during the quarter totaled $5.0 million compared to $4.7 million sold in the first quarter of last year. First quarter seasonality and paydowns are the primary reasons for the decreased loan balances. The current loan pipeline is strong and indicates the opportunity for growth. Investment securities available for sale decreased $860,000, or 2.1%.
 
 
 
 
Allowance for loan losses was $8.2 million at March 31, 2007, an increase of $64,000 from December 31, 2006. Net charge offs for the quarter ended March 31, 2007 were $269,000 or .13% of average loans on an annualized basis compared to $464,000, or .22% of average loans for the comparable period in 2006. The decrease was primarily due to a recovery of $196,000 for previously charged off commercial leases. As of March 31, 2007, the allowance for loan losses as a percentage of non-performing loans and total loans was 155.0% and 1.02%, respectively, compared to 143.59% and 1.00%, respectively at December 31, 2006. CEO Heeter commented, “We continue to see consistent quality in our loan portfolio. Aversion to higher risk loan opportunities like sub-prime lending has created solid loan quality.”

Total deposits were $700.7 million at March 31, 2007, a slight decrease of $2.7 million, or .4% from December 31, 2006. This decrease was due primarily to decreases in wholesale deposits of $9.7 million and retail certificates of deposit of $6.0 million. Consistent with our strategy, these decreases were mostly offset by increases in core demand, money market and savings deposits of $13.0 million. Total borrowings decreased $14.8 million to $144.0 million at March 31, 2007 from $158.9 million at December 31, 2006 due to the payment of several maturing and variable rate FHLB advances.Stockholders’ equity was $87.6 million at March 31, 2007, an increase of $373,000, or .4% from December 31, 2006. Net income of $1.0 million, Employee Stock Ownership Plan (ESOP) and RRP shares earned of $167,000 and options exercised netting $87,000 were partially offset by the repurchase of 16,000 shares of common stock for $317,000 and dividend payments of $653,000. Also, the unrealized loss on securities available for sale decreased $46,000 from $355,000 at December 31, 2006 to $309,000 at March 31, 2007.
 
Net interest income before the provision for loan losses decreased $1.0 million from $7.0 million for the three months ended March 31, 2006 to $6.0 million for the three months ended March 31, 2007. The primary reason for the decline was a 41 basis point decrease in the net interest margin reflecting the Bank’s liability sensitive nature, as short term interest rates rose and average interest-earning assets decreased $17.8 million, or 2.0%. This reduction in average interest-earning assets was primarily due to a restructuring of the balance sheet in the fourth quarter of 2006 and decreased loan balances in the first quarter of 2007. On a linked quarter basis, net interest margin increased to 2.79% for the three months ended March 31, 2007 compared to 2.75% for the three months ended December 31, 2006. The primary reason for the increase was the restructuring of the balance sheet in the fourth quarter 2006 and a flattening of deposit re-pricing during the first quarter of 2007.
 
The provision for loan losses for the first quarter of 2007 was $332,000, down from $393,000 for last year’s comparable period. The decrease was due to decreased net charge offs, improving delinquency trends and lower loan balances. Non-performing loans to total loans at March 31, 2007 were .66% compared to .70% at December 31, 2006. Non-performing assets to total assets were .80% at March 31, 2007 compared to .86% at December 31, 2006.

 
 
 
Non-interest income increased $69,000 to $1.7 million, or 4.1% for the three months ended March 31, 2007 compared to the same period in 2006. The increase was primarily due to increases in the increase of cash surrender value of life insurance of $101,000, or 42.4% and service fees on transaction accounts of $56,000, or 5.6%. These increases were partially offset by decreases in gains on sales and servicing of loans sold of $43,000 and gains on limited partnerships of $38,000. On a linked quarter basis, non-interest income increased $179,000. Gain on sales and servicing of loans sold increased $1.1 million primarily due to a $24.6 million loan sale in November 2006 at a loss of $1.2 million. Other income decreased $1.0 million primarily due to non-recurring events including a gain on a land exchange in Elkhart County and prior year state tax refunds in the fourth quarter of 2006 compared to the first quarter of 2007.

Non-interest expense remained unchanged at $6.2 million for the three months ended March 31, 2007 compared to the same period in 2006. Increases in current quarter non-interest expense compared to the same period in 2006 include increases in marketing expense of $64,000 and increases in occupancy expense of $28,000 which are a result of the acquisition of three branches from First Financial Bank. Other expenses increased $56,000 primarily due to increased REO expense due to more repossessed properties. These increases were offset by decreases in salaries and employee benefits of $110,000, primarily due to changes in health care plans, and decreases in professional fees of $80,000, primarily due to a recovery of legal costs on charged off leases and the conclusion of a three year consulting agreement in November of 2006.

Income tax expense decreased $387,000 for the three months ended March 31, 2007 compared to the same period in 2006 due to less taxable income. The effective tax rate decreased from 25.0% to 11.3% due to an increased percentage of low income housing tax credits to taxable income when comparing the first quarter of 2006 and the first quarter of 2007, respectively.

MutualFirst Financial, Inc. and Mutual Federal Savings Bank are headquartered in Muncie, Indiana with twenty-one full service offices in Delaware, Grant, Kosciusko, Randolph and Wabash counties.


Statements contained in this release, which are not historical facts, are forward-looking statements, as that term is defined in the Private Securities Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time.
 
 
 
 
 
MUTUALFIRST
FINANCIAL INC.
  
 
           
           
   
31-Mar
  
31-Dec
  
Selected Financial Condition Data(Unaudited):
  
2007
  
2006
  
   
(000)
  
(000)
  
           
Total Assets
  
$
945,351
  
$
960,842
  
 
              
Cash and cash equivalents
    
20,583
   
24,915
 
 
              
Loans held for sale
    
1,280
   
1,330
 
 
              
Loans receivable, net
    
794,789
   
805,625
 
 
              
Investment securities available for sale, at fair value
    
40,504
   
41,363
 
 
              
Total deposits
    
700,657
   
703,359
 
 
              
Total borrowings
    
144,032
   
158,852
 
 
              
Total stockholders' equity
    
87,638
   
87,264
 
               
               
               
 
   
Three Months
  
Three Months
  
Three Months
  
   
Ended
  
Ended
  
Ended
  
   
31-Mar
  
31-Dec
  
31-Mar
  
Selected Operations Data (Unaudited):
  
2007
 
2006
 
2006
  
   
(000)
 
(000)
 
(000)
  
               
Total interest income
  
$
13,809
  
$
14,284
  
$
13,588
  
Total interest expense
    
7,814
   
8,184
   
6,557
 
                     
Net interest income
    
5,995
   
6,100
   
7,031
 
Provision for loan losses
    
332
   
625
   
393
 
Net interest income after provision
                    
for loan losses
    
5,663
   
5,475
   
6,638
 
                     
Non-interest income
                    
Fees and service charges
    
1,064
   
1,103
   
1,007
 
Equity in gains (losses) of limited partnerships
    
(27
)
  
(166
)
  
12
 
Commissions
    
197
   
195
   
198
 
Net gain (loss) on loan sales and servicing
    
91
   
(963
)
  
134
 
Increase in cash surrender value of life insurance
    
338
   
304
   
237
 
Other income
    
70
   
1,081
   
76
 
Total non-interest income
    
1,733
   
1,554
   
1,664
 
                     
Non-interest expense
                    
Salaries and benefits
    
3,639
   
3,651
   
3,749
 
Occupancy and equipment
    
908
   
858
   
879
 
Data processing fees
    
256
   
238
   
218
 
Professional fees
    
179
   
266
   
258
 
Marketing
    
209
   
251
   
144
 
Other expenses
    
1,028
   
1,105
   
972
 
Total non-interest expense
    
6,219
   
6,369
   
6,220
 
                     
Income before taxes
    
1,177
   
660
   
2,082
 
Income tax provision
   
133
   
(43
)
  
520
 
Net income
 
$
1,044
  
$
703
  
$
1,562
  
 
 
 
 
 
Average Balances, Net Interest Income, Yield Earned and Rates Paid
                  
       
Three
  
 
  
 
  
Three
  
 
  
 
  
 
  
mos ended
  
 
  
 
  
mos ended
  
 
  
 
  
 
  
3/31/2007
  
 
  
 
  
3/31/2006
  
 
  
 
  
Average
  
Interest
  
Average
  
Average
  
Interest
  
Average
  
 
  
Outstanding
  
Earned/
  
Yield/
  
Outstanding
  
Earned/
  
Yield/
  
 
  
Balance
  
Paid
  
Rate
  
Balance
  
Paid
  
Rate
  
 
  
(000)
  
(000)
  
 
  
(000)
  
(000)
      
Interest-Earning Assets:
                                      
Interest -bearing deposits
  
$
2,963
  
$
27
    
3.64
%
$
2,097
  
$
12
    
2.29
%
Mortgage-backed securities:
                                      
Available-for-sale
    
9,696
   
117
   
4.83
   
9,761
   
106
   
4.34
 
Investment securities:
                                      
Available-for-sale
    
30,759
   
388
   
5.05
   
30,057
   
327
   
4.35
 
Loans receivable
    
807,217
   
13,150
   
6.52
   
826,381
   
13,023
   
6.30
 
Stock in FHLB of Indianapolis
    
9,938
   
127
   
5.11
   
10,125
   
120
   
4.74
 
Total interest-earning assets (3)
    
860,573
   
13,809
   
6.42
   
878,421
   
13,588
   
6.19
 
Non-interest earning assets, net of allowance
                                     
for loan losses and unrealized gain/loss
    
86,409
               
84,419
             
Total assets
  
$
946,982
              
$
962,840
              
                                       
                                       
Interest-Bearing Liabilities:
                                      
Demand and NOW accounts
  
$
119,243
    
674
   
2.26
 
$
79,698
    
160
   
0.80
 
Savings deposits
    
56,943
   
70
   
0.49
   
62,521
   
77
   
0.49
 
Money market accounts
    
26,338
   
155
   
2.35
   
43,028
   
187
   
1.74
 
Certificate accounts
    
447,376
   
5,098
   
4.56
   
466,220
   
4,364
   
3.74
 
Total deposits
    
649,900
   
5,997
   
3.69
   
651,467
   
4,788
   
2.94
 
Borrowings
    
146,038
   
1,817
   
4.98
   
163,517
   
1,769
   
4.33
 
Total interest-bearing accounts
    
795,938
   
7,814
   
3.93
   
814,984
   
6,557
   
3.22
 
Non-interest bearing deposit accounts
    
49,269
               
44,340
             
Other liabilities
    
14,684
               
14,472
             
Total liabilities
    
859,891
               
873,796
             
Stockholders' equity
    
87,091
               
89,044
             
Total liabilities and stockholders' equity
  
$
946,982
              
$
962,840
              
 
                                      
Net earning assets
  
$
64,635
              
$
63,437
              
 
                                      
Net interest income
        
$
5,995
              
$
7,031
        
 
                                      
Net interest rate spread
                
2.49
%
              
2.97
%
 
                                      
Net yield on average interest-earning assets
                
2.79
%
              
3.20
%
 
                                      
Average interest-earning assets to
                                      
average interest-bearing liabilities
                
108.12
%
              
107.78
%
 
 
 
 
 
               
   
Three Months
  
Three Months
  
Three Months
  
   
Ended
  
Ended
  
Ended
  
   
31-Mar
  
31-Dec
  
31-Mar
  
Selected Financial Ratios and Other Financial Data (Unaudited):
  
2007
  
2006
  
2006
  
               
               
               
Share and per share data:
              
Average common shares outstanding
              
Basic
    
4,129,925
   
4,131,938
   
4,269,197
 
Diluted
    
4,197,120
   
4,205,594
   
4,353,654
 
Per share:
                    
Basic earnings
 
$
0.25
  
$
0.17
  
$
0.37
  
Diluted earnings
  
$
0.25
  
$
0.17
  
$
0.36
  
Dividends
  
$
0.15
  
$
0.15
  
$
0.14
  
                     
Dividend payout ratio
    
60.00
%
  
88.24
%
  
38.89
%
                     
Performance Ratios:
                    
Return on average assets (ratio of net
                    
income to average total assets)(1)
    
0.44
%
  
0.29
%
  
0.65
%
Return on average tangible equity (ratio of net
                   
income to average tangible equity)(1)
    
5.79
%
  
3.88
%
  
8.32
%
Interest rate spread information:
                    
Average during the period(1)
    
2.49
%
  
2.49
%
  
2.97
%
                     
Net interest margin(1)(2)
    
2.79
%
  
2.75
%
  
3.20
%
 
                    
Efficiency Ratio
    
80.47
%
  
83.21
%
  
71.54
%
 
                    
Ratio of average interest-earning
                    
assets to average interest-bearing
                    
liabilities
    
108.12
%
  
107.31
%
  
107.78
%
                     
Allowance for loan losses:
                    
Balance beginning of period
  
$
8,156
  
$
8,051
  
$
8,100
  
Charge offs:
                    
One- to four- family
    
120
   
57
   
222
 
Multi-family
    
0
   
0
   
0
 
Commercial real estate
    
0
   
48
   
0
 
Construction or development
    
0
   
0
   
0
 
Consumer loans
    
413
   
476
   
247
 
Commercial business loans
    
0
   
0
   
25
 
Sub-total
    
533
   
581
   
494
 
                     
Recoveries:
                    
One- to four- family
    
0
   
3
   
0
 
Multi-family
    
0
   
0
   
0
 
Commercial real estate
    
0
   
0
   
0
 
Construction or development
    
0
   
0
   
0
 
Consumer loans
    
64
   
58
   
30
 
Commercial business loans
    
200
   
0
   
0
 
Sub-total
    
264
   
61
   
30
 
                     
Net charge offs
    
269
   
520
   
464
 
Additions charged to operations
    
332
   
625
   
393
 
Balance end of period
  
$
8,219
  
$
8,156
  
$
8,029
  
                     
Net loan charge-offs to average loans (1)
    
0.13
%
  
0.25
%
  
0.22
%
 
 
 
 
 
 
 
March 31,
 
December 31,
 
March 31,
 
 
 
2007
 
2006
 
2006
  
               
Total shares outstanding
    
4,357,130
   
4,366,636
   
4,513,476
 
Tangible book value per share
  
$
16.68
  
$
16.57
  
$
16.65
  
                     
Nonperforming assets (000's)
                    
Loans: Non-accrual
  
$
5,144
  
$
5,569
  
$
4,416
  
Accruing loans past due 90 days or more
    
48
   
0
   
2,025
 
Restructured loans
    
111
   
111
   
115
 
Total nonperforming loans
    
5,303
   
5,680
   
6,556
 
Real estate owned
    
1,003
   
1,273
   
1,647
 
Other repossessed assets
    
1,254
   
1,322
   
823
 
Total nonperforming assets
  
$
7,560
  
$
8,275
  
$
9,026
  
                     
Asset Quality Ratios:
                    
Non-performing assets to total assets
   
0.80
%
  
0.86
%
  
0.94
%
Non-performing loans to total loans
    
0.66
%
  
0.70
%
  
0.79
%
Allowance for loan losses to non-performing loans
    
154.99
%
  
143.59
%
  
122.47
%
Allowance for loan losses to loans receivable
    
1.02
%
  
1.00
%
  
0.97
%
 
(1) Ratios for the three periods have been annualized.
 
(2) Net interest income divided by average interest earning assets.
 
(3) Calculated net of deferred loan fees, loan discounts, loans in process and loss reserves.