8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)  October 24, 2007 

MUTUALFIRST FINANCIAL, INC. 

(Exact name of registrant as specified in its chapter)

Maryland (State or other jurisdiction of incorporation 000-27905 (Commission File Number) 35-2085640 (IRS Employer Identification No.)

110 E. Charles Street, Muncie, Indiana (Address of principal executive offices) 47305-2419 (Zip Code)

Registrant's telephone number, including area code  (765) 747-2800

Not Applicable  

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

         On October 24, 2007, the Registrant issued a press release announcing earnings for the third quarter ended September 30, 2007. A copy of the press release, including unaudited financial information released as a part thereof, is attached as Exhibit 99 to this Current Report on Form 8-K and incorporated by reference herein.

Item 9.01.  Financial Statements and Exhibits

(d)	Exhibits
	99	Press release dated October 24, 2007.

SIGNATURES

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

	MUTUALFIRST FINANCIAL, INC.
Date: October 24, 2007	By:   /s/ David W. Heeter        David W. Heeter        President and Chief Executive Officer

EXHIBIT INDEX

Exhibit Number	Description
99	Press Release, dated October 24, 2007

EX-99.1

PRESS RELEASE

Date:	October 24, 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 Third 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 third quarter ended September 30, 2007 was $1.2 million, or $.28 for basic and diluted earnings per share. This compared to net income for the comparable period in 2006 of $1.1 million, or $.27 for basic and diluted earnings per share. Annualized return on assets was .49% and return on average tangible equity was 6.45% for the third quarter of 2007 compared to .47% and 6.23%, respectively, for the same period last year. On a linked quarter basis, third quarter 2007 basic and diluted earnings per share also increased $.01, or 3.7% when compared to the second quarter of 2007.

Net income for the nine months ended September 30, 2007 was $3.3 million, or $.81 for basic and $.80 for diluted earnings per share. This compared to net income for the comparable period in 2006 of $4.1 million, or $.96 for basic and $.94 for diluted earnings per share. Annualized return on average assets was .47% and return on average tangible equity was 6.16% for the first nine months of 2007 compared to .56% and 7.25% respectively, for the same period last year.

Net income for the three months ended September 30, 2007 increased primarily due to increasing non-interest income, management of non-interest expense, and a reduction in income tax expense. Net income for the nine months ended September 30, 2007 decreased primarily due to decreasing net interest income, partially offset by the above mentioned items.

Assets totaled $966.8 million at September 30, 2007, an increase from December 31, 2006 of $5.9 million, or 0.6%. Loans, excluding loans held for sale, increased $4.9 million or 0.6%. Consumer loans increased $5.2 million, or 2.3%, and residential mortgage loans held in the portfolio increased $1.0 million, or 0.2%, while commercial loans decreased $1.3 million, or 0.9%. Mortgage loans held for sale increased $1.1 million and mortgage loans sold during the first nine months of 2007 totaled $17.2 million. The increased loan balances are due primarily to increased production and loan purchases in the third quarter of 2007. Investment securities available for sale decreased $655,000, or 1.6%, compared to December 31, 2006.

Allowance for loan losses increased $26,000 to $8.2 million at September 30, 2007 when compared to December 31, 2006. Net charge offs for the first nine months of 2007 were $1.4 million, or .23% of average loans on an annualized basis, compared to $1.5 million, or .24% of average loans for the comparable period in 2006. The decrease was primarily due to larger recoveries during the 2007 period. As of September 30, 2007 the allowance for loan losses as a percentage of loans receivable and non-performing loans was 1.00% and 78.62%, respectively, compared to 1.00% and 143.59%, respectively, at December 31, 2006.

Total deposits were $706.4 million at September 30, 2007, an increase from $703.4 at December 31, 2006. This increase was due primarily to increases in core demand, money market and savings deposits of $8.0 million and wholesale deposit increases of $2.7 million. These increases were partially offset by decreases in retail certificates of deposit of $7.7 million. Total borrowings increased $1.4 million to $160.2 million at September 30, 2007 from $158.9 million at December 31, 2006.

Stockholders’ equity increased $507,000, or 0.6%, from $87.3 million at December 31, 2006, to $87.8 million at September 30, 2007. The increase was due primarily to net income of $3.3 million, Employee Stock Ownership Plan (ESOP) and RRP shares earned of $469,000 and exercised stock options of $209,000. This increase was partially offset by the repurchase of 83,000 shares of common stock for $1.6 million and dividend payments of $1.9 million. Also, the market value of securities available for sale compared to their book value increased $8,000 from a loss of $355,000 at December 31, 2006 to a loss of $347,000 at September 30, 2007.

Net interest income before the provision for loan losses decreased $493,000 from $6.3 million for the three months ended September 30, 2006 to $5.9 million for the three months ended September 30, 2007. The reasons for the decrease were a $28.5 million, or 3.2%, decrease in average interest earning assets and a 14 basis point decrease in the net interest margin reflecting the Bank’s liability sensitive nature. The reduction in average interest earning assets was due primarily to a restructuring of the balance sheet in the fourth quarter of 2006 and decreased loan balances during the first half of 2007.

Net interest income before the provision for loan losses decreased $2.2 million for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. The reasons for the decrease were similar to those stated above. Average interest earning assets decreased $24.1 million, or 2.7% and the net interest margin decreased by 26 basis points from 3.03% for the nine months ended September 30, 2006 to 2.77% for the same period in 2007.

The provision for loan losses for the third quarter of 2007 was $532,000, compared to $525,000 for last year’s comparable period. Non-performing loans to total loans at September 30, 2007 were 1.27% compared to .60% at September 30, 2006. Non-performing assets to total assets were 1.37% at September 30, 2007 compared to .76% at September 30, 2006. The increase in non-performing loans is primarily related to five different commercial loan relationships all of which the Bank’s evaluation indicates that adequate collateral exists. CEO Dave Heeter commented, “We feel that we have adequately evaluated our risk on these loans and are taking appropriate actions to mitigate any potential loss.”

The provision for loan losses for the nine months ended September 30, 2007 remained flat at $1.4 million compared to the same period in 2006.

Non-interest income increased $256,000 to $2.0 million, or 14.6%, for the three months ended September 30, 2007 compared to the same period in 2006. The increase was due primarily to increases in commission income of $182,000, or 134.8%, increases in service fees on transaction accounts of $119,000, or 10.4%, and improved earnings on cash surrender value of life insurance of $31,000, or 11.6%. These increases were partially offset by decreases in gain on sale of loans of $31,000 and decreases in other income of $35,000. On a linked quarter basis, non-interest income increased $50,000, or 2.6%, primarily due to increases in commission income and service fees on transaction accounts.

For the nine month period ended September 30, 2007 non-interest income increased $602,000, or 11.8%, to $5.7 million compared to $5.1 million for the same period in 2006. The reasons are similar to those mentioned above.

Non-interest expense remained flat at $6.2 million for the three months ended September 30, 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 data processing expense of $31,000 due primarily to technological upgrades, increases in occupancy expense of $35,000, increases in salaries and employee benefits of $42,000, and increases in other expenses of $42,000. These increases were offset by decreases in marketing expense of $100,000 and professional fees of $60,000. On a linked quarter basis non-interest expense was flat at $6.2 million. CEO Heeter added, “Our team has done an excellent job at expanding our franchise from a year ago while managing costs.”

Non-interest expense decreased slightly to $18.6 million for the nine months ended September 30, 2007 compared to $18.7 million for the same period in 2006.

Income tax expense decreased $251,000 for the three months ended September 30, 2007 compared to the same period in 2006 due primarily to less taxable income and a tax benefit from the creation of a Nevada investment subsidiary. The effective tax rate also decreased from 15.8% to (3.2)% due to a higher percentage of non-taxable income to total income before income tax and an increased percentage of low income housing tax credits to taxable income when comparing the third quarter of 2007 to the third quarter of 2006, respectively.

For the nine-month period ended September 30, 2007, income tax expense decreased $771,000 compared to the same period in 2006. The decrease was due primarily to decreased taxable income and a tax benefit from the creation of a Nevada investment subsidiary. The effective tax rate also decreased from 20.9% to 8.3% due to a higher percentage of non-taxable income to total income before income tax and an increased percentage of low income housing tax credits to taxable income when comparing the first nine months of 2007 to the first nine months of 2006, 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 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.

MUTUALFIRST FINANCIAL INC.

	30-Sep		31-Dec
Selected Financial Condition Data(Unaudited):	2007		2006
	(000)		(000)
Total Assets	$	966,789	$	960,842
Cash and cash equivalents		23,550		24,915
Loans held for sale		2,400		1,330
Loans receivable, net		810,554		805,625
Investment securities available for sale, at fair value		40,708		41,363
Total deposits		706,397		703,359
Total borrowings		160,243		158,852
Total stockholders' equity		87,771		87,264

	Three Months			Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended			Ended
	30-Sep			30-Jun			30-Sep			30-Sep			30-Sep
Selected Operations Data (Unaudited):	2007			2007			2006			2007			2006
	(000)			(000)			(000)			(000)			(000)
Total interest income	$	14,128		$	14,056		$	14,335		$	41,993		$	41,835
Total interest expense		8,277			7,941			7,991			24,032			21,706
Net interest income		5,851			6,115			6,344			17,961			20,129
Provision for loan losses		532			533			525			1,397			1,443
Net interest income after provision
for loan losses		5,319			5,582			5,819			16,564			18,686
Non-interest income
Fees and service charges		1,266			1,246			1,147			3,575			3,267
Equity in gains (losses) of limited partnerships		(23	)		(27	)		(13	)		(76	)		(15	)
Commissions		317			244			135			758			487
Net gain (loss) on loan sales and servicing		90			96			121			277			356
Increase in cash surrender value of life insurance		298			317			267			953			771
Other income		56			78			91			204			223
Total non-interest income		2,004			1,954			1,748			5,691			5,089
Non-interest expense
Salaries and benefits		3,633			3,654			3,591			10,926			10,967
Occupancy and equipment		896			864			861			2,668			2,571
Data processing fees		259			298			228			814			660
Professional fees		176			177			236			532			727
Marketing		173			229			273			610			715
Other expenses		1,061			982			1,019			3,072			3,010
Total non-interest expense		6,198			6,204			6,208			18,622			18,650
Income before taxes		1,125			1,332			1,359			3,633			5,125
Income tax provision		(36	)		203			215			300			1,071
Net income	$	1,161		$	1,129		$	1,144		$	3,333		$	4,054

Average Balances, Net Interest Income, Yield Earned and Rates Paid
	Three							Three
	mos ended							mos ended
	9/30/2007							9/30/2006
	Average		Interest		Average			Average		Interest		Average
	Outstanding		Earned/		Yield/			Outstanding		Earned/		Yield/
	Balance		Paid		Rate			Balance		Paid		Rate
								(000)		(000)
Interest-Earning Assets:
Interest -bearing deposits	$	2,063	$	20		3.88	%	$	1,670	$	20		4.79	%
Mortgage-backed securities:
Available-for-sale		8,449		128		6.06			10,972		134		4.89
Investment securities:
Available-for-sale		30,629		416		5.43			29,853		375		5.02
Loans receivable		817,878		13,453		6.58			844,816		13,699		6.49
Stock in FHLB of Indianapolis		9,938		112		4.51			10,171		107		4.21
Total interest-earning assets (3)		868,957		14,129		6.50			897,482		14,335		6.39
Non-interest earning assets, net of allowance
for loan losses and unrealized gain/loss		88,519							85,245
Total assets	$	957,476						$	982,727
Interest-Bearing Liabilities:
Demand and NOW accounts	$	129,503	$	752		2.32	%	$	111,987		547		1.95
Savings deposits		54,338		71		0.52			58,890		74		0.50
Money market accounts		24,279		166		2.73			30,884		167		2.16
Certificate accounts		441,917		5,270		4.77			458,666		5,046		4.40
Total deposits		650,037		6,259		3.85			660,427		5,834		3.53
Borrowings		155,649		2,018		5.19			173,110		2,157		4.98
Total interest-bearing accounts		805,686		8,277		4.11			833,537		7,991		3.83
Non-interest bearing deposit accounts		48,616							46,082
Other liabilities		15,911							15,285
Total liabilities		870,213							894,904
Stockholders' equity		87,263							87,823
Total liabilities and stockholders' equity	$	957,476						$	982,727
Net earning assets	$	63,271						$	63,945
Net interest income			$	5,852						$	6,344
Net interest rate spread						2.39	%						2.56	%
Net yield on average interest-earning assets						2.69	%						2.83	%
Average interest-earning assets to
average interest-bearing liabilities						107.85	%						107.67	%

	Three Months			Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended			Ended
Selected Financial Ratios and Other	30-Sep			30-Jun			30-Sep			30-Sep			30-Sep
Financial Data (Unaudited):	2007			2007			2006			2007			2006
Share and per share data:
Average common shares outstanding
Basic		4,102,302			4,120,844			4,166,531			4,117,685			4,222,178
Diluted		4,144,979			4,173,986			4,240,173			4,172,017			4,301,591
Per share:
Basic earnings	$	0.28		$	0.27		$	0.27		$	0.81		$	0.96
Diluted earnings	$	0.28		$	0.27		$	0.27		$	0.80		$	0.94
Dividends	$	0.15		$	0.15		$	0.15		$	0.45		$	0.43
Dividend payout ratio		53.57	%		55.56	%		55.56	%		56.25	%		45.74	%
Performance Ratios:
Return on average assets (ratio of net
income to average total assets)(1)		0.49	%		0.48	%		0.47	%		0.47	%		0.56	%
Return on average tangible equity (ratio of net
income to average tangible equity)(1)		6.45	%		6.24	%		6.23	%		6.16	%		7.25	%
Interest rate spread information:
Average during the period(1)		2.39	%		2.53	%		2.56	%		2.48	%		2.77	%
Net interest margin(1)(2)		2.69	%		2.85	%		2.83	%		2.77	%		3.03	%
Efficiency Ratio		78.91	%		76.89	%		76.72	%		78.73	%		73.96	%
Ratio of average interest-earning
assets to average interest-bearing
liabilities		107.85	%		108.49	%		107.67	%		108.07	%		107.73	%
Allowance for loan losses:
Balance beginning of period	$	8,277		$	8,219		$	8,177		$	8,156		$	8,100
Charge offs:
One- to four- family		360			64			215			544			470
Multi-family		0			0			0			0			0
Commercial real estate		26			0			54			26			54
Construction or development		0			0			0			0			0
Consumer loans		332			314			387			1,059			812
Commercial business loans		36			267			62			303			387
Sub-total		754			645			718			1,932			1,723
Recoveries:
One- to four- family		9			48			1			57			78
Multi-family		0			0			0			0			0
Commercial real estate		0			0			0			0			0
Construction or development		0			0			0			0			0
Consumer loans		117			121			65			302			142
Commercial business loans		0			1			1			201			11
Sub-total		126			170			67			560			231
Net charge offs		628			475			651			1,372			1,492
Additions charged to operations		532			533			525			1,397			1,443
Balance end of period	$	8,181		$	8,277		$	8,051		$	8,181		$	8,051
Net loan charge-offs to average loans (1)		0.31	%		0.24	%		0.31	%		0.23	%		0.24	%

	September 30,			June 30,			September 30,
	2007			2007			2006
Total shares outstanding		4,299,138			4,329,183			4,391,637
Tangible book value per share	$	16.87		$	16.71		$	16.60
Nonperforming assets (000's)
Loans: Non-accrual	$	8,603		$	4,383		$	4,955
Accruing loans past due 90 days or more		1,695			400			7
Restructured loans		108			110			112
Total nonperforming loans		10,406			4,893			5,074
Real estate owned		1,599			1,519			1,449
Other repossessed assets		1,282			1,207			977
Total nonperforming assets	$	13,287		$	7,619		$	7,500
Asset Quality Ratios:
Non-performing assets to total assets		1.37	%		0.80	%		0.76	%
Non-performing loans to total loans		1.27	%		0.61	%		0.60	%
Allowance for loan losses to non-performing loans		78.62	%		169.16	%		158.67	%
Allowance for loan losses to loans receivable		1.00	%		1.03	%		0.95	%

(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.