10-Q 1 v121843_10q.htm
UNITED STATES
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 June 30, 2008 OR

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXHANGE 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
35-2085640
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
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 o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer x Non-accelerated filer o (Do not check if a smaller reporting company)  Smaller reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the Registrant’s common stock, with $.01 par value, outstanding as of August 8, 2008 was 6,994,754.


FORM 10 - Q
MutualFirst Financial, Inc.

INDEX
 
   
Page
 
 Number
PART I – FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements
  
 
Consolidated Condensed Balance Sheets
1
 
Consolidated Condensed Statements of Income
2
 
Consolidated Condensed Statement of Stockholders’ Equity
3
 
Consolidated Condensed Statements of Cash Flows
4
 
Notes to Unaudited Consolidated Condensed Financial Statements
5
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
7
     
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
15
     
Item 4.
Controls and Procedures
15
     
PART II – OTHER INFORMATION
  
     
Item 1.
Legal Proceedings
17
     
Item 1A.
Risk Factors
17
     
Item 2.
Unregistered Sales of Equity Changes in Securities and Use of Proceeds
  17
     
Item 3.
Defaults Upon Senior Securities
17
     
Item 4.
Submission of Matters to a Vote of Security Holders
17
     
Item 5.
Other Information
18
     
Item 6.
Exhibits
18
     
Signature Page
19
   
Exhibits
 

 
PART 1 FINANCIAL INFORMATION
ITEM 1. Financial Statements
MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheets

 
  
June 30,
  
December 31,
  
 
  
2008
  
2007
  
   
(Unaudited)
  
 
  
           
Assets
              
Cash
  
$
20,378,445
  
$
21,003,114
  
Interest-bearing demand deposits
    
9,663,238
   
2,645,057
 
Cash and cash equivalents
    
30,041,683
   
23,648,171
 
Interest-bearing deposits
    
0
   
100,000
 
Investment securities available for sale
    
54,516,378
   
43,592,485
 
Loans held for sale
    
1,060,781
   
1,644,615
 
Loans
    
801,346,831
   
810,788,842
 
Allowance for loan losses
    
(8,603,588
)
  
(8,352,345
)
Net loans
    
792,743,243
   
802,436,497
 
Premises and equipment
    
17,241,051
   
16,168,434
 
Federal Home Loan Bank of Indianapolis stock, at cost
    
10,914,300
   
10,036,900
 
Investment in limited partnerships
    
3,141,833
   
3,246,468
 
Cash surrender value of life insurance
    
30,903,260
   
30,350,760
 
Foreclosed real estate
    
2,301,588
   
1,364,505
 
Interest receivable
    
3,584,194
   
3,692,879
 
Goodwill
    
14,187,725
   
14,187,725
 
Deferred income tax benefit
    
7,675,991
   
5,174,082
 
Other assets
    
7,139,894
   
6,873,491
 
               
Total assets
  
$
975,451,921
  
$
962,517,012
  
               
Liabilities
              
Deposits
              
Non-interest-bearing
  
$
49,680,185
  
$
47,172,012
  
Interest bearing
    
627,996,889
   
619,235,341
 
Total deposits
    
677,677,074
   
666,407,353
 
Federal Home Loan Bank advances
    
198,778,290
   
191,675,155
 
Notes payable
    
676,268
   
1,055,433
 
Other borrowings
    
250,175
   
3,907,394
 
Advances by borrowers for taxes and insurance
    
3,880,454
   
1,463,809
 
Interest payable
    
2,005,545
   
2,467,199
 
Other liabilities
    
8,753,611
   
8,526,819
 
Total liabilities
    
892,021,417
   
875,503,162
 
               
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 —4,118,079 and 4,226,638 shares
   
41,181
   
42,266
 
Additional paid-in capital
    
32,122,140
   
32,567,085
 
Retained earnings
    
56,921,411
   
56,725,785
 
Accumulated other comprehensive income (loss)
    
(3,906,242
)
  
(414,380
)
Unearned employee stock ownership plan (ESOP) shares
    
(1,747,986
)
  
(1,906,906
)
Total stockholders' equity
    
83,430,504
   
87,013,850
 
               
Total liabilities and stockholders' equity
  
$
975,451,921
  
$
962,517,012
  
 
See notes to consolidated condensed financial statements.

1
MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statements of Income
(Unaudited)

   
Three Months Ended
  
Six Months Ended
  
   
June 30
  
June 30
  
   
2008
  
2007
  
2008
  
2007
  
Interest Income
                          
Loans receivable, including fees
  
$
12,747,150
  
$
13,405,006
  
$
25,796,104
  
$
26,555,556
  
Investment seurities:
                    
Mortgage-backed securities
    
219,471
   
111,722
   
377,895
   
228,299
 
Federal Home Loan Bank stock
    
134,264
   
110,275
   
253,290
   
237,457
 
Other investments
    
361,511
   
398,024
   
766,950
   
786,212
 
Deposits with financial institutions
    
26,529
   
30,800
   
51,786
   
57,672
 
Total interest income
    
13,488,925
   
14,055,827
   
27,246,025
   
27,865,196
 
                           
Interest Expense
                          
Passbook savings
    
72,553
   
72,365
   
141,365
   
142,538
 
Certificates of deposit
    
4,142,148
   
5,196,614
   
8,757,016
   
10,294,805
 
Daily Money Market accounts
    
75,432
   
161,524
   
185,917
   
316,802
 
Demand and NOW acounts
    
289,712
   
726,664
   
803,197
   
1,400,661
 
Federal Home Loan Bank advances
    
2,092,243
   
1,768,094
   
4,155,285
   
3,568,851
 
Other interest expense
    
17,009
   
16,106
   
43,098
   
31,712
 
Total interest expense
    
6,689,097
   
7,941,367
   
14,085,878
   
15,755,369
 
                           
Net Interest Income
   
6,799,828
   
6,114,460
   
13,160,147
   
12,109,827
 
Provision for losses on loans
    
732,500
   
532,500
   
1,345,000
   
865,000
 
Net Interest Income After Provision for Loan Losses
    
6,067,328
   
5,581,960
   
11,815,147
   
11,244,827
 
                           
Other Income
                          
Service fee income
    
1,365,385
   
1,245,876
   
2,524,717
   
2,309,411
 
Net realized gain on redemption of VISA stock
    
0
   
0
   
137,434
   
0
 
Equity in losses of limited partnerships
    
(23,644
)
  
(26,591
)
  
(47,288
)
  
(53,183
)
Commissions
    
307,578
   
243,883
   
599,673
   
441,211
 
Net gains on sales of loans
    
128,220
   
79,104
   
311,579
   
147,322
 
Net servicing fees
    
28,641
   
16,644
   
55,480
   
39,030
 
Increase in cash surrender value of life insurance
    
276,000
   
317,500
   
552,500
   
655,000
 
Other income
    
27,075
   
77,932
   
95,255
   
148,067
 
Total other income
    
2,109,255
   
1,954,348
   
4,229,350
   
3,686,858
 
                           
Other Expenses
                          
Salaries and employee benefits
    
3,892,190
   
3,654,317
   
7,710,531
   
7,293,241
 
Net occupancy expenses
    
448,525
   
362,645
   
899,836
   
778,270
 
Equipment expenses
    
355,388
   
328,823
   
698,750
   
646,460
 
Data processing fees
    
243,388
   
298,484
   
510,201
   
554,040
 
Automated teller machine
   
195,382
   
172,421
   
397,954
   
347,035
 
Professional fees
    
230,968
   
177,410
   
440,119
   
356,065
 
Advertising and promotion
    
316,990
   
228,743
   
547,411
   
437,470
 
Other expenses
    
1,188,435
   
981,941
   
2,168,117
   
2,010,699
 
Total other expenses
    
6,871,266
   
6,204,784
   
13,372,919
   
12,423,280
 
                           
Income Before Income Tax
    
1,305,317
   
1,331,524
   
2,671,578
   
2,508,405
 
Income tax expense
    
131,000
   
203,000
   
282,000
   
335,700
 
                           
Net Income
  
$
1,174,317
  
$
1,128,524
  
$
2,389,578
  
$
2,172,705
  
                           
Basic earnings per share
  
$
0.30
  
$
0.27
  
$
0.60
  
$
0.53
  
                           
Diluted earnings per share
  
$
0.30
  
$
0.27
  
$
0.60
  
$
0.52
  
                           
Dividends per share
  
$
0.16
  
$
0.15
  
$
0.32
  
$
0.30
  

See notes to consolidated condensed financial statements.

2

MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Stockholders' Equity
For the Six Months Ended June 30, 2008
(Unaudited)

                       
Accumulated
          
   
Common Stock
 
Additional
          
Other
  
Unearned
      
   
Shares
      
paid-in
 
Comprehensive
  
Retained
  
Comprehensive
  
ESOP
      
   
Outstanding
  
Amount
  
capital
  
Income
  
Earnings
  
Income (Loss)
  
shares
  
Total
  
                                   
                                   
Balances, December 31, 2007, as reported
    
4,226,638
  
$
42,266
  
$
32,567,085
        
$
56,725,785
   $ 
(414,380
)
 $ 
(1,906,906
)
$
87,013,850
  
                                                   
Comprehensive income
                                                  
                                                   
Net income for the period
                    
$
2,389,578
    
2,389,578
               
2,389,578
 
                                                   
Other comprehensive income, net of tax
                                                  
                                                   
Net unrealized losses on securities
                      
(3,491,862
)
        
(3,491,862
)
        
(3,491,862
)
                                                   
Comprehensive income
                     $ 
(1,102,284
)
                        
                                                   
ESOP shares earned
                
41,197
                     
158,920
   
200,117
 
                                                   
Cash dividends ($.32 per share)
                           
(1,329,882
)
              
(1,329,882
)
                                                   
RRP shares earned
                
10,528
                           
10,528
 
                                                   
Stock repurchased and retired
    
(108,559
)
  
(1,085
)
  
(496,670
)
         
(864,070
)
                
(1,361,825
)
                                                   
Balances, June 30, 2008
    
4,118,079
   
41,181
 
$
32,122,140
        
$
56,921,411
   $ 
(3,906,242
)
 $
(1,747,986
)
$
83,430,504
  

See notes to consolidated condensed financial statements.

3
MutualFirst Financial, Inc.
Consolidated Condensed Statements of Cash Flows
(Unaudited)

   
 Six Months Ended
  
   
 June 30,
  
   
 2008
  
2007
  
Operating Activities
            
Net income
  
$
2,389,578
  
$
2,172,705
  
Items not requiring (providing) cash
              
Provision for loan losses
    
1,345,000
   
865,000
 
ESOP shares earned
    
200,117
   
310,461
 
RRP shares earned
    
10,528
   
10,528
 
Depreciation and amortization
    
1,337,054
   
1,311,864
 
Deferred income tax
    
(174,000
)
  
(350,000
)
Loans originated for sale
    
(27,657,883
)
  
(11,748,865
)
Proceeds from sales of loans held for sale
    
28,270,879
   
12,103,665
 
Gains on sales of loans held for sale
    
(311,579
)
  
(147,322
)
Change in
              
Interest receivable
    
108,685
   
342,790
 
Other assets
    
16,014
   
28,743
 
Interest payable
    
(461,654
)
  
151,756
 
Other liabilities
    
226,792
   
897,984
 
Cash value of life insurance
    
(552,500
)
  
(655,000
)
Other adjustments
    
(239,639
)
  
35,813
 
Net cash provided by operating activities
    
4,507,392
   
5,330,122
 
               
Investing Activities
              
Net change in interest earning deposits
    
100,000
   
100,000
 
Purchases of securities available for sale
    
(20,761,567
)
  
(568,879
)
Proceeds from matuities and paydowns of securities available for sale
    
3,628,076
   
1,869,443
 
Net change in loans
    
6,230,513
   
8,003,005
 
Purchases of premises and equipment
    
(1,787,614
)
  
(444,584
)
Proceeds from real estate owned sales
    
291,651
   
635,776
 
Cash paid in acquisition, net
    
-
   
(515,475
)
Other investing activities
    
50,335
   
50,335
 
Net cash (used in) provided by investing activities
    
(12,248,606
)
  
9,129,621
 
               
Financing Activities
              
Net change in
              
Noninterest-bearing, interest-bearing demand and savings deposits
    
4,199,589
   
7,614,160
 
Certificates of deposits
    
7,070,132
   
(20,042,804
)
Repayment of note payable
    
(410,376
)
  
(240,678
)
Proceeds from FHLB advances
    
265,725,000
   
204,150,000
 
Repayment of FHLB advances
    
(258,517,338
)
  
(207,088,800
)
Repayment of other short term borrowing
    
(3,657,219
)
  
-
 
Net change in advances by borrowers for taxes and insurance
    
2,416,645
   
1,844,972
 
Stock repurchased
    
(1,361,825
)
  
(853,692
)
Proceeds from stock options exercised
    
-
   
87,000
 
Cash dividends
    
(1,329,882
)
  
(1,300,353
)
Other financing activities
            
250,500
 
Net cash (used in) provided by financing activities
    
14,134,726
   
(15,579,695
)
               
Net Change in Cash and Cash Equivalents
    
6,393,512
   
(1,119,952
)
               
Cash and Cash Equivalents, Beginning of Year
    
23,648,171
   
24,914,872
 
               
Cash and Cash Equivalents, End of Period
  
$
30,041,683
  
$
23,794,920
  
               
Additional Cash Flows Information
              
Interest paid
  
$
14,547,532
  
$
15,603,613
  
Income tax paid
    
900,000
   
230,000
 
Transfers from loans to foreclosed real estate
    
1,491,696
   
932,584
 
Mortgage servicing rights capitalized
    
282,417
   
120,772
 

See Notes to Consolidated Condensed Financial Statements

4

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

Note 1: Basis of Presentation

The consolidated condensed financial statements include the accounts of MutualFirst Financial, Inc. (the “Company”), its wholly owned subsidiary, Mutual Bank, a federally chartered savings bank (“Mutual”), Mutual’s wholly owned subsidiaries, First MFSB Corporation and Mutual Federal Investment Company (“MFIC”), and MFIC majority owned subsidiary, Mutual Federal REIT, Inc. 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 2007 filed with the Securities and Exchange Commission.

The interim consolidated financial statements at June 30, 2008 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, 2007 has been derived from the Audited Consolidated Balance Sheet of the Company as of that date.


Note 2: Earnings per share

Note 2 — Earnings per share

Earnings per share were computed as follows: (Dollars in thousands except per share data)
 

   
Three Months Ended Ended June 30,
 
   
2008
  
2007
  
       
Weighted-
          
Weighted-
      
       
Average
  
Per-Share
      
Average
  
Per-Share
  
   
Income
  
Shares
  
Amount
  
Income
  
Shares
  
Amount
  
   
(000's)
          
(000's)
          
                           
Basic Earnings Per Share
                                      
Income available to common shareholders
  
$
1,174
    
3,970,982
  
$
0.30
  
$
1,129
    
4,120,844
  
$
0.27
  
Effect of Dilutive securities
                                      
Stock options and RRP grants
          
0
               
53,142
       
Diluted Earnings Per Share
                                      
                                       
Income available to common stockholders and assumed
                                      
conversions
  
$
1,174
    
3,970,982
 
$
0.30
  
$
1,129
    
4,173,986
 
$
0.27
  
 
   
Six Months Ended Ended June 30,
 
   
2008
  
2007
  
       
Weighted-
          
Weighted-
      
       
Average
  
Per-Share
      
Average
  
Per-Share
  
   
Income
  
Shares
  
Amount
  
Income
  
Shares
  
Amount
  
   
(000's)
          
(000's)
          
                           
Basic Earnings Per Share
                                      
Income available to common shareholders
  
$
2,390
    
3,987,123
  
$
0.60
  
$
2,173
    
4,125,935
  
$
0.53
  
Effect of Dilutive securities
                                      
Stock options and RRP grants
           
0
                 
60,168
         
Diluted Earnings Per Share
                                      
                                       
Income available to common stockholders and assumed
                                      
conversions
  
$
2,390
    
3,987,123
 
$
0.60
  
$
2,173
    
4,186,103
 
$
0.52
  

Options of 380,613 and 91,000 shares were not included in the calculation above due to being anti-dilutive to earnings per share as of June 30, 2008 and June 30, 2007.

5

Note 3: Future Accounting Pronouncements

In December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations (SFAS141R). SFAS 141R established principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for business combinations where the acquisition date is on or after fiscal years beginning after December 15, 2008. SFAS 141R is expected to have an impact on the Company’s accounting for any business combinations closing on or after January 1, 2009.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. SFAS 160 is effective for fiscal years beginning after December 15, 2008.

Note 4: Disclosures About Fair Value of Assets and Liabilities

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 has been applied prospectively as of the beginning of the year.
 
FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
 
Level 1
Quoted prices in active markets for identical assets or liabilities
   
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
   
Level 3
 
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
 

6

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.
 
Available-for-sale Securities
 
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. The Company uses a third-party provider to provide market prices on its securities and no securities are priced as Level 1 securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include mortgage-backed, collateralized mortgage, federal agency and certain corporate obligation securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include certain corporate obligation securities.
 
       
Fair Value Measurements Using
  
   
Fair Value
  
Quoted Prices in
 Active Markets 
for Identical 
Assets
(Level 1)
  
Significant 
Other 
Observable 
Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
                   
Available-for-sale securities
  
$
54,516,378
  
$
—
  
$
48,743,878
  
$
5,772,500
  
 
The following is a reconciliation of the beginning and ending balances for the three months ended June 30, 2008 of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs:
 
   
Available-for-
sale securities
  
       
Beginning balance
  
$
9,711,340
  
 
        
Total realized and unrealized gains and losses
        
Included in net income
        
Included in other comprehensive income
    
(3,938,840
)
Purchases, issuances and settlements
        
Transfers in and/or out of Level 3
           
 
        
Ending balance
  
$
5,772,500
  
 
        
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date
  
$
—
  

 
The following is a reconciliation of the beginning and ending balances for the six months ended June 30, 2008 of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs:
 
   
Available-for-
sale securities
  
       
Beginning balance
  
$
9,923,242
  
 
        
Total realized and unrealized gains and losses
        
Included in net income
        
Included in other comprehensive income
    
(4,150,742
)
Purchases, issuances and settlements
         
Transfers in and/or out of Level 3
           
 
        
Ending balance
  
$
5,772,500
  
 
        
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date
  
$
—
  

Note 5: Stock Option Plan
 
MutualFirst Financial, Inc. shareholders approved a new Stock Option Plan at the last shareholder’s meeting. There have been no stock options granted on the new plan.
 
Note 6: Subsequent Event

On July 18, 2008, the Company completed its acquisition of MFB Corp. MFB Financial, the wholly owned subsidiary of MFB Corp., was merged into Mutual as part of this acquisition. This merger added ten branch offices in St. Joseph and Elkhart counties, Indiana, two trust offices in Hamilton and Montgomery counties, Indiana, and a loan production office in Berrien County, Michigan to the existing Bank footprint as discussed below.

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 Bank (“Mutual”) upon the conversion of Mutual from a federal mutual savings bank to a federal stock savings bank.

7

 
Mutual was originally organized in 1889 and currently conducts its business from twenty-two full service offices located in Delaware, Elkhart, Grant, Kosciusko, Randolph, and Wabash counties, Indiana, with its main office located in Muncie. Mutual’s principal business consists of attracting deposits from the general public and originating fixed and variable rate loans secured primarily by first mortgage liens on residential and commercial real estate, consumer goods, and business assets. Mutual’s deposit accounts are insured by the Federal Deposit Insurance Corporation up to applicable limits.

Mutual currently owns two subsidiaries, First MFSB Corporation and Mutual Federal Investment Company (“MFIC”). The assets of First MFSB Corporation consist of an investment in Family Financial Holdings Incorporated. Family Financial is an ordinary Indiana corporation that provides debt cancellation products to financial institutions. MFIC is a Nevada corporation holding approximately $45 million in investments. MFIC currently owns one subsidiary, Mutual Federal REIT. The assets of Mutual Federal REIT consist of approximately $124 million in one-to four-family mortgage loans.

The following should be read in conjunction with the Management’s Discussion and Analysis in the Company’s December 31, 2007 Annual Report on Form 10-K.
 
Critical Accounting Policies

The notes to the consolidated financial statements contain a summary of the Company’s significant accounting policies presented on pages 65 to 69 of the Annual Report on Form 10-K for the year ended December 31, 2007. 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.

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.

8

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 potential 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 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 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

The Company does not undertake - and specifically disclaims any obligation - to publicly release the result of any revisions which may be made to 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.

Overview

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. The structure of our interest-earning assets versus the structure of interest-bearing liabilities along with the shape of the yield curve has a direct impact on our net interest income.

Historically, our interest-earning assets have been longer term in nature (i.e., fixed-rate mortgage loans) and interest-bearing liabilities have been shorter term (i.e., certificates of deposit, regular savings accounts, etc). This structure would impact net interest income favorably in a decreasing rate environment, assuming a normally shaped yield curve, as the rates on interest-bearing liabilities would decrease more rapidly than rates on the interest-earning assets. Conversely, in an increasing rate environment, assuming a normally shaped yield curve, net interest income would be impacted unfavorably as rates on interest-earning assets would increase at a slower rate than rates on interest-bearing liabilities.

The Federal Funds rate set by the Board of Governors of the Federal Reserve System has decreased 225 basis points from December 31, 2007 and 325 basis points from June 30, 2007 to June 30, 2008. These decreases in the Federal Funds rate have allowed for deposits and borrowings to reprice lower. Any future decreases in the Federal Funds rate in the upcoming months should allow for continued downward repricing of our deposits and borrowings, reducing pressure on net interest income. Any increase in the Federal Funds rate will increase interest expense and reduce net interest income if there is not a corresponding increase in long term rates.

Since 2000 it has been the Company’s strategic objective to change the repricing structure of its interest-earning assets from longer term to shorter term to better match the structure of our interest-bearing liabilities and therefore reduce the impact interest rate changes have on our net interest income. Strategies employed to accomplish this objective have been to increase the originations of variable rate commercial loans and shorter term consumer loans and to sell longer term mortgage loans. The percentage of consumer and commercial loans to total loans has increased from 35% at the end of 2000 to 46% currently. As we continue to increase our investment in business-related loans, which are considered to entail greater risks than one-to four- family residential loans, in order to help offset the pressure on our net interest margin, our provision for loan losses may increase to reflect this increased risk. On the liability side of the balance sheet, the Company is employing strategies to increase the balance of core deposit accounts such as low cost checking and money market accounts. The percentage of core deposits to total deposits has increased from 33% to 36% over this time period. These are ongoing strategies that are dependent on current market conditions and competition.

10

During the first six months of 2008, in keeping with its strategic objective to reduce interest rate risk exposure, the Company also sold $28.2 million of long term fixed rate loans that had been held for sale, which reduced potential earning assets and therefore had a negative impact on net interest income. This was offset, in the short term, by recognizing a gain on the sale of these loans of $312,000.

The Company converted to a public company at the end of 1999, and at the end of 2000 bought a $200 million thrift for stock. Since that time the Company has been buying back the Company’s stock to manage capital levels and enhance earnings per share. During the first six months of 2008, the Company used $1.4 million for this purpose, thereby reducing earning assets from where they otherwise would have been and correspondingly reducing net interest income.

On March 22, 2007 the Bank completed the acquisition of Wagley Investment Advisors, Inc. Wagley Investment Advisors, Inc. is now known as Mutual Financial Advisors, providing new and expanded investment management services not previously offered by the Bank.  Mutual Financial Advisors offers a full range of non-bank investment options and money management. 

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. In addition to the recent acquisition of Wagley Investment Advisors, the Company opened a new branch in Elkhart County in February 2008 and plans to open another in September 2008 in Elkhart County. The intent of these initiatives is to increase income over the long term. However, on a short term basis, expenses relating to the new branches and a new division will have the affect of increasing non-interest expense with limited immediate offsetting income.

On July 18, 2008, the Company completed the acquisition of MFB Corp and its thrift subsidiary. This transaction allows the Bank to enter into new markets, expand commercial lending and enhance trust services to existing customers through trust powers received from MFB Financial.

11

Financial Condition

Assets totaled $975.5 million at June 30, 2008, an increase from December 31, 2007 of $12.9 million, or 1.3%. Loans, excluding loans held for sale, decreased $9.0 million or 1.1%. Consumer loans decreased $3.6 million, or 1.6%, while commercial loans increased $5.0 million, or 3.5%, and residential mortgage loans held in the portfolio decreased $10.4 million, furthering our strategy to reduce the percentage of fixed rate real estate mortgage loans to total loans. Mortgage loans held for sale decreased $584,000 and mortgage loans sold during the first half of 2008 totaled $28.2 million compared to $12.1 million during the same period in 2007. The decreased loan balances were due primarily to an increase in sales of fixed rate real estate mortgage loans. Investment securities available for sale increased $10.9 million, or 25.0%, offsetting the reduction in the loan portfolio. Cash and cash equivalents increased $6.4 million, or 27.0% as the bank’s interest earning cash accounts increased.

Allowance for loan losses increased $252,000 to $8.6 million when comparing June 30, 2008 to December 31, 2007. Net charge offs for the first half of 2008 were $1.1 million, or .27% of average loans on an annualized basis compared to $744,000, or .18% of average loans for the comparable period in 2007. On a linked quarter basis, net charge offs compared to average loans were .28% in the second quarter 2008 compared to .26% in the first quarter 2008. As of June 30, 2008 the allowance for loan losses as a percentage of loans receivable and non-performing loans was 1.07% and 78.35%, respectively, compared to 1.03% and 79.72%, respectively, at December 31, 2007.

Total deposits were $677.7 million at June 30, 2008, an increase from $666.4 million at December 31, 2007. This increase was due primarily to increases in core demand, money market and savings deposits of $4.2 million and wholesale deposits of $15.8 million. The increase was partially offset by decreases in certificates of deposit of $8.7 million. Total borrowings increased $3.1 million to $199.7 million at June 30, 2008 from $196.6 million at December 31, 2007.

Stockholders’ equity decreased $3.6 million, or 4.1%, from $87.0 million at December 31, 2007, to $83.4 million at June 30, 2008. The decrease was due primarily to a decrease in the market value of securities available for sale compared to their book value of $3.5 million from a loss of $414,000 at December 31, 2007 to a loss of $3.9 million at June 30, 2008. This decrease was due primarily to price decreases, caused chiefly by illiquid credit markets, in certain investment grade trust preferred securities owned by the bank. The decrease in the investment grade trust preferred securities are not seen as other than temporary price changes. Other decreases in stockholders’ equity resulted from the use of $1.4 million to repurchase 109,000 shares of common stock and dividend payments of $1.3 million. These decreases were partially offset by net income of $2.4 million, and Employee Stock Ownership Plan (ESOP) and RRP shares earned of $211,000.

12

Comparison of the Operating Results for the Three Months Ended June 30, 2008 and 2007

Net income for the second quarter ended June 30, 2008 was $1.2 million, or $.30 for basic and diluted earnings per share. This compared to net income for the comparable period in 2007 of $1.1 million, or $.27 for basic and diluted earnings per share. Annualized return on assets was .49% and return on tangible equity was 6.58% for the second quarter of 2008 compared to .48% and 6.24% respectively, for the same period last year.

Net interest income before the provision for loan losses increased $685,000 from $6.1 million for the three months ended June 30, 2007 to $6.8 million for the three months ended June 30, 2008. The reasons for the increase were an $8.1 million, or .9%, increase in average interest earning assets and a 28 basis point increase in the net interest margin. On a linked quarter basis, net interest margin increased to 3.13% for the three months ended June 30, 2008 compared to 2.94% for the three months ended March 31, 2008.
The provision for loan losses for the second quarter of 2008 was $733,000, compared to $533,000 for last year’s comparable period. Non-performing loans to total loans at June 30, 2008 were 1.37% compared to .61% at June 30, 2007. Non-performing assets to total assets were 1.51% at June 30, 2008 compared to .80% at June 30, 2007. On a linked quarter basis, non-performing loans to total loans decreased from 1.44% for the quarter ended March 31, 2008 to 1.37% for the quarter ended June 30, 2008.

Non-interest income increased $155,000 to $2.1 million, or 7.9%, for the three months ended June 30, 2008 compared to the same period in 2007. The increase was due primarily to increases in service fees on transaction accounts of $119,000, or 9.6%, due primarily to increased overdraft fees, increases in commission income of $64,000, or 26.2%, due primarily to increased annuity sales, and increases in net gain on loan sales and servicing of $61,000, or 63.8%, due primarily to increased loan sales.

Non-interest expense increased $667,000 to $6.9 million, or 10.8%, for the three months ended June 30, 2008 compared to the same period in 2007. Increases in current quarter non-interest expense compared to the same period in 2007 included increases in occupancy and equipment expense of $135,000, primarily due to a new branch office in Elkhart County, increases in salaries and employee benefits of $238,000, primarily due to salary adjustments and new employees for the Elkhart County branch, increases in marketing expense of $88,000, primarily due to re-branding of the Bank’s name, and increases in other expenses of $207,000, primarily due to FDIC premium increases and expenses related to the Bank’s name change.

Income tax expense decreased $72,000 for the three months ended June 30, 2008 compared to the same period in 2007 due primarily to less income subject to income taxes. The effective tax rate also decreased from 15.2% to 10.0% due to an increased percentage of low income housing tax credits to taxable income when comparing the second quarter of 2008 to the second quarter of 2007, respectively.

13

Comparison of the Operating Results for the Six Months Ended June 30, 2008 and 2007

Net income for the six months ended June 30, 2008 was $2.4 million or $.60 for basic and diluted earnings per share. This compared to net income for the comparable period in 2007 of $2.2 million or $.53 for basic and $.52 for diluted earnings per share. Annualized return on average assets was .50% and return on average tangible equity was 6.69% for the first half of 2008 compared to .46% and 6.01% respectively, for the same period last year.

Net interest income before the provision for loan losses increased $1.1 million for the six months ended June 30, 2008 compared to the six months ended June 30, 2007. The reasons for the increase were similar to those stated above. Average interest earning assets increased $6.9 million, or 8.0% and the net interest margin increased by 22 basis points from 2.82% for the six months ended June 30, 2007 to 3.04% for the same period in 2008.
The provision for loan losses for the six months ended June 30, 2008 was $1.3 million compared to $865,000 for last year’s comparable period. The increased provision for the six months ended 2008 compared to the same time period in 2007 was a result of increased non-performing assets, mostly in one-to four-family and commercial real estate loans. Non-performing assets were 1.51% at June 30, 2008 compared to .80% at June 30, 2007.

For the six month period ended June 30, 2008 non-interest income increased $543,000, or 14.7%, to $4.2 million compared to $3.7 million for the same period in 2007. The increase was due primarily to increases in service fee income on transaction accounts of $215,000, or 9.3%, increases in commission income of $158,000, or 35.9%, increases in gains and serving of loans sold of $181,000, and the gain on redemption of VISA stock of $137,000. These increases were partially offset by a decrease in income from cash surrender value of life insurance of $103,000 and a decrease in other income of $53,000.

For the six month period ended June 30, 2008 non-interest expense increased $1.0 million, or 7.6%, to $13.4 million compared to $12.4 million for the same period in 2007. The increase was due primarily to increases in salaries and employee benefits of $417,000, primarily due to annual salary adjustments and staffing of a new branch, increases in occupancy and equipment expenses of $174,000, primarily due to the new Elkhart branch, increases in advertising of $110,000, primarily due to the re-branding of the bank’s name, increases in professional fees of $84,000, primarily due to legal expenses related to delinquent loans, and increases in other expenses of $157,000, due primarily to FDIC premium increases, merger related expenses and expenses related to the bank’s name change.

For the six-month period ended June 30, 2008, income tax expense decreased $54,000 compared to the same period in 2007. The decrease was due primarily to less income subject to income taxes. The effective tax rate also decreased from 13.3% to 10.6% due to an increased percentage of low income housing tax credits to taxable income when comparing the first half of 2008 to the first half of 2007, respectively.

14

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 June 30, 2008, Mutual Federal had liquid assets of $70.1 million and a liquidity ratio of 8.16%. It is anticipated that this level of liquidity will be adequate for the remainder of 2008.

ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk

Presented below as of June 30, 2008 and 2007 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.
 
       
June 30, 2008
              
                       
       
Net Portfolio Value
              
Changes 
              
NPV as % of PV of Assets
  
In Rates
  
$ Amount
  
$ Change
  
% Change
  
NPV Ratio
  
Change
  
                       
+300 bp
    
55,648
    
-36,680
    
-40
%
  
6.23
%
  
-336 bp
  
+200 bp
    
68,115
    
-24,213
    
-26
%
  
7.44
%
  
-215 bp
  
+100 bp
    
81,281
    
-11,047
    
-12
%
  
8.66
%
  
-94 bp
  
0 bp
    
92,328
                
9.59
%
      
-100 bp
    
96,594
    
4,266
    
5
%
  
9.84
%
  
25 bp
  
-200 bp
    
95,683
    
3,355
    
4
%
  
9.59
%
  
0 bp
  
-300 bp
    
n/m
(1)
  
n/m
(1)
  
n/m
(1)
  
n/m
(1)
  
n/m
(1)
 
       
June 30, 2007
              
                       
       
Net Portfolio Value
              
Changes 
              
NPV as % of PV of Assets
  
In Rates
  
$ Amount
  
$ Change
  
% Change
  
NPV Ratio
  
Change
  
                       
+300 bp
    
58,286
    
-45,416
    
-44
%
  
6.79
%
  
-443 bp
  
+200 bp
    
74,945
    
-28,757
    
-28
%
  
8.51
%
  
-272 bp
  
+100 bp
    
89,486
    
-14,216
    
-14
%
  
9.92
%
  
-130 bp
  
0 bp
    
103,702
                
11.22
%
      
-100 bp
    
114,324
    
10,622
    
10
%
  
12.12
%
  
90 bp
  
-200 bp
    
120,058
    
16,356
    
16
%
  
12.52
%
  
129 bp
  
-300 bp
    
126,889
    
23,187
    
22
%
  
12.98
%
  
176 bp
  
 
n/m(1) - not meaningful because certain market interest rates would be below zero at that level of rate shock.

The analysis at June 30, 2008 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, 2007.

ITEM - 4 Controls and Procedures.

 
(a)
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a -15(c) under 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, Chief Financial Officer and several other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief 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 Chief 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. There have been no changes in our internal control over financial reporting (as defined in Rule 13a - 15(f) under the Act) that occurred during the quarter ended June 30, 2008 that has materially affected, or is likely to materially affect our internal control over financial reporting.

15
 
The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company’s business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures.

16
 
PART II.
OTHER INFORMATION
   
Item 1.
Legal Proceedings
   
 
 None. 
   
Item 1A.
Risk Factors
   
 
There are no material changes to the risk factors disclosed in the Company’s Form 10-K for the year ended December 31, 2007.
   
Item 2.
Registered sales of Equity Securities and use of Proceeds
   
 
On September 12, 2007 the Company’s Board of Directors authorized management to repurchase an additional 5% of the Company’s outstanding stock, or approximately 215,000 shares. Information on the shares purchased during the second quarter of 2008 is as follows.

           
Total Number of
  
Maximum Number of
  
           
Shares Purchased
  
Shares that May Yet
  
   
Total Number of 
  
Average Price 
  
As Part of Publicly
  
Be Purchased
  
   
Shares Purchased
  
Per Share
  
Announced Plan
  
Under the Plan
  
                     
96,839
 (1)
April 1, 2008 - April 30, 2008
    
15,000
 
$
12.82
    
15,000
   
81,839
 
May 1, 2008 - May 31, 2008
    
20,000
   
12.55
    
20,000
   
61,839
 
June 1, 2008 - June 30, 2008
    
26,800
   
10.81
    
26,800
   
35,039
 
                     
     
61,800
 
$
11.86
    
61,800
       
(1) Amount represents the number of shares available to be repurchased under the plan as of March 31, 2008
 

Item 3.
Defaults Upon Senior Securities.
   
 
 None. 
   
Item 4.
Submission of Matters to Vote of Security Holders.
   
 
The following is a record of the votes cast at the Company’s Annual Meeting of Stockholders in the election of directors of the Company:

 
FOR
  
VOTE WITHHELD
       
Linn A. Crull
3,683,036
  
166,638
       
Wilbur R. Davis
3,680,793
  
168,881
       
Jon R. Marler
3,679,821
  
169,853

Accordingly, the individuals named above, were declared to be duly elected directors of the Company for terms to expire in 2011.

17

The following is a record of the votes cast for the proposal to ratify the appointment of BKD,LLP as the Company’s independent auditors for the fiscal year ending December 31, 2007.

FOR
3,822,069
AGAINST
9,836
ABSTAIN
9,953

Accordingly, the proposal described above was declared to be duly adopted by the stockholders of the Corporation.

The following is a record of the votes cast for the proposal to approve the issuance of MutualFirst Financial, Inc. shares in the merger.

FOR
2,652,852
AGAINST
475,949
ABSTAIN
15,742

Accordingly, the proposal described above was declared to be duly adopted by the stockholders of the Corporation.

The following is a record of the votes cast for the proposal to approve the MutualFirst Financial, Inc. 2008 Stock Option and Incentive Plan.

FOR
2,508,332
AGAINST
619,754
ABSTAIN
16,458

Accordingly, the proposal described above was declared to be duly adopted by the stockholders of the Corporation.

Item 5.
Other Information.
 
None. 
 
Item 6.
Exhibits.
 
Index to Exhibits
 
Number
  
Description
     
3.1
  
Charter of the Company, as amended
     
3.2 
  
Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on October 15, 2007 (File No. 000-27905))
     
31.1
  
Rule 13a - 14(a) Certification - Chief Executive Officer
     
31.2
  
Rule 13a - 14(a) Certification - Chief Financial Officer
     
32
  
Certificate of the Chief Executive Officer and Chief Financial Officer pursuant to U. S. C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2003.

18

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.
 
 
MutualFirstFinancial, Inc.
     
Date: August 8, 2008
By:
/s/ David W. Heeter
  David W. Heeter
  President and Chief Executive Officer
     
Date: August 8, 2008
By:
/s/ Timothy J. McArdle
  Timothy J. McArdle
  Senior Vice President and Treasurer
 
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