10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2015
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from  ___________________  to  ___________________

Commission File Number 000-27905

MutualFirst Financial, Inc.

(Exact name of registrant as specified in its charter)

Maryland	35-2085640
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
110 E. Charles Street, Muncie, Indiana	47305-2419
(Address of principal executive offices)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.01 per share	Nasdaq Global Market

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ¨   No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ¨   No  x

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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x   No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x   No  ¨

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Act.

Large accelerated filer  ¨	Accelerated filer  x	Non-accelerated filer  ¨	Smaller reporting company  ¨
		(Do not check if smaller    reporting company)

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date. As of July 30, 2015, there were 7,394,061 shares of the registrant’s common stock outstanding. 

MutualFirst Financial, Inc.

Form 10-Q Quarterly Report for the Period Ended June 30, 2015

Table of Contents

		Page
		Number
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets	1
	Consolidated Condensed Statements of Income	2
	Consolidated Condensed Statements of Comprehensive Income	3
	Consolidated Condensed Statement of Stockholders’ Equity	4
	Consolidated Condensed Statements of Cash Flows	5
	Notes to Unaudited Consolidated Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53
Item 4.	Controls and Procedures	56
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Changes in Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosure	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
Signature Page		61
Exhibits		62

MutualFirst Financial, Inc.

Consolidated Condensed Balance Sheets

(In Thousands, Except Share and Per Share Data)

	June 30,		December 31,
	2015		2014
	(Unaudited)
Assets
Cash and due from banks	$	6,745	$	7,475
Interest-bearing demand deposits		17,524		22,100
Cash and cash equivalents		24,269		29,575
Investment securities available for sale		261,506		260,806
Loans held for sale		12,486		6,140
Loans, net of allowance for loan losses of $12,906 and $13,168, at June 30, 2015 and December 31, 2014, respectively		1,026,717		1,003,518
Premises and equipment, net		30,818		30,939
Federal Home Loan Bank stock		9,810		11,964
Investment in limited partnerships		477		527
Deferred tax asset		13,750		13,575
Cash value of life insurance		51,602		51,002
Goodwill		1,800		1,800
Core deposit and other intangibles		825		1,105
Other assets		11,374		12,472
Total assets	$	1,445,434	$	1,423,423
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing	$	160,967	$	154,178
Interest-bearing		917,320		925,142
Total deposits		1,078,287		1,079,320
Federal Home Loan Bank advances		212,042		192,442
Other borrowings		9,816		10,174
Other liabilities		14,337		14,735
Total liabilities		1,314,482		1,296,671
Commitments and Contingencies
Stockholders' Equity
Common stock, $.01 par value
Authorized - 20,000,000 shares
Issued and outstanding - 7,394,061 and 7,236,002 shares at June 30, 2015 and December 31, 2014, respectively		74		72
Additional paid-in capital		76,792		74,916
Retained earnings		53,312		49,386
Accumulated other comprehensive income		774		2,378
Total stockholders' equity		130,952		126,752
Total liabilities and stockholders' equity	$	1,445,434	$	1,423,423

See notes to consolidated condensed financial statements

1

MutualFirst Financial, Inc.

Consolidated Condensed Statements of Income

(Unaudited)

(In Thousands, Except Share and Per Share Data)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015		2014			2015			2014
Interest and Dividend Income
Loans receivable	$	10,919	$	10,817		$	21,784		$	21,584
Investment securities		1,692		1,793			3,362			3,560
Federal Home Loan Bank stock		118		131			259			331
Deposits with financial institutions		2		3			9			7
Total interest and dividend income		12,731		12,744			25,414			25,482
Interest Expense
Deposits		1,334		1,527			2,706			3,227
Federal Home Loan Bank advances		724		516			1,390			990
Other		133		143			261			288
Total interest expense		2,191		2,186			4,357			4,505
Net Interest Income		10,540		10,558			21,057			20,977
Provision for loan losses		-		500			-			850
Net Interest Income After Provision for Loan Losses		10,540		10,058			21,057			20,127
Non-interest Income
Service fee income		1,464		1,538			2,822			2,879
Net realized gain on sales of available-for-sale securities		126		211			366			362
Commissions		1,142		1,178			2,263			2,260
Net gains on sales of loans		1,121		382			2,027			486
Net servicing fees (expense)		70		3			138			(22	)
Increase in cash value of life insurance		313		304			601			571
Gain (loss) on sale of other real estate and repossessed assets		32		(178	)		(50	)		(240	)
Other income		98		104			216			246
Total non-interest income		4,366		3,542			8,383			6,542
Non-interest Expenses
Salaries and employee benefits		6,084		5,500			12,614			11,372
Net occupancy expenses		515		600			1,118			1,269
Equipment expenses		410		435			863			894
Data processing fees		428		402			872			807
Advertising and promotion		378		306			711			607
ATM and debit card expenses		347		316			682			606
Deposit insurance		212		270			444			540
Professional fees		383		439			913			878
Software subscriptions and maintenance		433		386			860			802
Other real estate and repossessed assets		87		151			214			286
Other expenses		1,096		1,048			2,100			2,038
Total non-interest expenses		10,373		9,853			21,391			20,099
Income Before Income Tax		4,533		3,747			8,049			6,570
Income tax expense		1,315		1,133			2,351			1,936
Net Income Available to Common Shareholders	$	3,218	$	2,614		$	5,698		$	4,634
Earnings Per Share
Basic	$	0.44	$	0.37		$	0.78		$	0.65
Diluted	$	0.43	$	0.36		$	0.76		$	0.63
Dividends Per Share	$	0.12	$	0.08		$	0.24		$	0.14

See notes to consolidated condensed financial statements

2

MutualFirst Financial, Inc.

Consolidated Condensed Statements of Comprehensive Income

(Unaudited)

(In Thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Net Income	$	3,218		$	2,614		$	5,698		$	4,634
Other Comprehensive Income (Loss)
Net unrealized holding gain (loss) on securities available-for-sale		(3,179	)		3,164			(2,139	)		5,846
Net unrealized gain on securities available-for-sale for which a portion of an other-than-temporary impairment has been recognized in income		-			205			-			839
Reclassification adjustment for realized gains included in net income		(126	)		(211	)		(366	)		(362	)
Net unrealized gain on derivative used for cash flow hedges		42			17			57			49
		(3,263	)		3,175			(2,448	)		6,372
Income tax (expense) benefit related to other comprehensive income		1,124			(1,100	)		844			(2,199	)
Other comprehensive income (loss), net of tax		(2,139	)		2,075			(1,604	)		4,173
Comprehensive Income	$	1,079		$	4,689		$	4,094		$	8,807

See notes to consolidated condensed financial statements

3

MutualFirst Financial, Inc.

Consolidated Condensed Statement of Stockholders’ Equity
For the Period Ended June 30, 2015

(Unaudited)

(In Thousands, Except Share and Per Share Data)

	Common Stock		Additional Paid-in Capital Common		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances December 31, 2014		72		74,916		50,171			2,378			127,537
Cumulative effect of change in accounting principle for low income housing tax credits, net of tax of $270						(785	)					(785	)
Balance, beginning of period - as adjusted		72		74,916		49,386			2,378			126,752
Net income						5,698						5,698
Other comprehensive loss, net of taxes									(1,604	)		(1,604	)
Stock options, exercised		2		1,591								1,593
Tax benefit on stock options				285								285
Cash dividends, common stock ($.24 per share)						(1,772	)					(1,772	)
Balances June 30, 2015	$	74	$	76,792	$	53,312		$	774		$	130,952

See notes to consolidated condensed financial statements

4

MutualFirst Financial, Inc.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In Thousands, Except Share and Per Share Data)

	Six Months Ended
	June 30,
	2015			2014
Operating Activities
Net income	$	5,698		$	4,634
Items not requiring cash
Provision for loan losses		-			850
Depreciation and amortization		2,257			962
Deferred income tax		670			1,260
Loans originated for sale		(72,303	)		(18,990	)
Proceeds from sales of loans held for sale		67,785			15,770
Gain on sale of loans held for sale		(2,027	)		(486	)
Gain on sale of securities, available for sale		(366	)		(362	)
Loss on sale of other real estate and repossessed assets		50			240
Change in
Interest receivable and other assets		72			774
Interest payable and other liabilities		(30	)		1,045
Cash value of life insurance		(601	)		(571	)
Other adjustments		71			170
Net cash provided by operating activities		1,276			5,296
Investing Activities
Purchases of securities, available for sale		(35,886	)		(34,623	)
Proceeds from maturities and paydowns of securities, available for sale		19,173			14,800
Proceeds from sales of securities, available for sale		13,383			23,226
Redemption of Federal Home Loan Bank stock		2,154			-
Net change in loans		(24,297	)		(16,589	)
Purchases of premises and equipment		(704	)		(481	)
Proceeds from real estate owned sales		1,585			2,414
Net cash used in investing activities		(24,592	)		(11,253	)
Financing Activities
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits		33,087			16,512
Certificates of deposit		(34,119	)		(50,296	)
Proceeds from FHLB advances		193,700			320,200
Repayments of FHLB advances		(174,100	)		(276,082	)
Repayments of other borrowings		(379	)		(379	)
Cash dividends		(1,772	)		(999	)
Stock options exercised		1,593			450
Net cash provided by financing activities		18,010			9,406
Net Change in Cash and Cash Equivalents		(5,306	)		3,449
Cash and Cash Equivalents, Beginning of Period		29,575			25,285
Cash and Cash Equivalents, End of Period	$	24,269		$	28,734
Additional Cash Flows Information
Interest paid	$	4,332		$	4,432
Income tax paid		1,300			500
Transfers from loans to foreclosed real estate		436			1,148
Mortgage servicing rights capitalized		200			113

See notes to consolidated condensed financial statements

5

MutualFirst Financial, Inc.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(In Thousands, Except Share and Per Share Data)

Note 1:  Basis of Presentation

The consolidated condensed financial statements include the accounts of MutualFirst Financial, Inc. (MutualFirst or the “Company”), its wholly owned subsidiary MutualBank, an Indiana commercial bank (“Mutual” or the “Bank”), Mutual’s wholly owned subsidiaries, First MFSB Corporation, Mishawaka Financial Services, Summit Service Corp. and the wholly owned subsidiary of Summit Service Corp., Summit Mortgage Inc. (“Summit”), 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 the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 13, 2015.

The interim consolidated condensed financial statements at and for the three and six months ended June 30, 2015 and 2014, 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, 2014 has been derived from the Audited Consolidated Balance Sheet of the Company as of that date.

6

Note 2:Earnings Per Share

Earnings per share were computed as follows:

	Three Months Ended June 30,
	2015						2014
	Income		Weighted- Average Shares		Per- Share Amount		Income		Weighted- Average Shares		Per- Share Amount
Basic Earnings Per Share
Net income	$	3,218		7,383,435	$	0.44	$	2,614		7,133,233	$	0.37
Effect of Dilutive Securities
Stock options		-		164,299				-		227,167
Diluted Earnings Per Share
Net income available and assumed conversions	$	3,218		7,547,734	$	0.43	$	2,614		7,360,400	$	0.36

	Six Months Ended June 30,
	2015						2014
	Income		Weighted- Average Shares		Per- Share Amount		Income		Weighted- Average Shares		Per- Share Amount
Basic Earnings Per Share
Net income	$	5,698		7,348,773	$	0.78	$	4,634		7,126,082	$	0.65
Effect of Dilutive Securities
Stock options		-		179,633				-		230,680
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$	5,698		7,528,406	$	0.76	$	4,634		7,356,762	$	0.63

Options to purchase 37,161 and 44,161 shares of common stock were outstanding at June 30, 2015 and 2014, respectively, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares.

Note 3: Impact of Accounting Pronouncements

In May 2015, Financial Accounting Standards Board (FASB), issued Accounting Standards Update (ASU) 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This Update addresses the diversity in practice related to how certain investments measured at net asset value with future redemption dates are categorized; the amendments in this Update remove the requirement to categorize investments for which fair values are measured using the net asset value per share practical expedient. It also limits disclosures to investments for which the entity has elected to measure the fair value using the practical expedient. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company does not anticipate that the ASU will have a material effect on its financial position or results of operations.

7

In April 2015, FASB issued ASU 2015-05, Intangibles – Goodwill and Other – Internal-Use Software. The objective of the amendments in this update was to address the concerns of stakeholders that the lack of guidance about a customer’s accounting for fees in a cloud computing arrangement leads to unnecessary cost and complexity when evaluating the accounting for those fees, as well as some diversity in practice. The amendments in this update will help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement by providing guidance as to whether an arrangement includes the sale or license of software. The Company does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In February 2015, FASB issued Accounting Standards Update (ASU) 2015-01, Income Statement – Extraordinary and Unusual Items. The objective of the update was to simplify the income statement presentation requirements by eliminating the concept of extraordinary items.

The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity may also apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. An entity that prospectively applies this ASU should disclose both the nature and the amount of an item included in income from continuing operations after adoption that adjusts an extraordinary item previously classified and presented before the date of adoption, if applicable. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In August 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The update provides U.S. Generally Accepted Accounting Principles (GAAP) guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued.

The amendments in this update are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In August 2014, FASB, issued ASU 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure. The objective of this Update is to reduce diversity in practice by addressing the classification of foreclosed mortgage loans that are fully or partially guaranteed under government programs. Currently, some creditors reclassify those loans to real estate as with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables. The amendments affect creditors that hold government-guaranteed mortgage loans, including those guaranteed by the FHA and the VA.

8

The amendments in this update are effective for annual reporting periods ending after December 15, 2015 and interim periods beginning after December 15, 2015. An entity should adopt the amendments in this Update using either a prospective transition method or a modified retrospective transition method. For prospective transition, an entity should apply the amendments in this Update to foreclosures that occur after the date of adoption. For the modified retrospective transition, an entity should apply the amendments in the Update by means of a cumulative-effect adjustment (through a reclassification to a separate other receivable) as of the beginning of the annual period of adoption. Prior periods should not be adjusted. However, a reporting entity must apply the same method of transition as elected under ASU No. 2014-04. Early adoption, including adoption in an interim period, is permitted if the entity already has adopted Update 2014-04. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In June 2014, FASB issued ASU 2014-12 “Compensation – Stock Compensation.” This update defines the accounting treatment for share-based payments and “resolves the diverse accounting treatment of those awards in practice.” The new requirement mandates that “a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.” Compensation cost will now be recognized in the period in which it becomes likely that the performance target will be met.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In June 2014, FASB, issued ASU 2014-11 “Transfers and Servicing.” This update addresses the concerns of stakeholders’ by changing the accounting practices surrounding repurchase agreements. The new guidance changes the “accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements.”

The amendments in this update are effective for annual reporting periods beginning after December 15, 2015. Early adoption is prohibited. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In May 2014, FASB, in joint cooperation with IASB, issued ASU 2014-09 “Revenue from Contracts with Customers.” The topic of Revenue Recognition had become broad, with several other regulatory agencies issuing standards which lacked cohesion. The new guidance establishes a “common framework” and “reduces the number of requirements to which an entity must consider in recognizing revenue” and yet provides improved disclosures to assist stakeholders reviewing financial statements.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

The FASB and the Internal Accounting Standards Board (IASB) (together, the Boards) published for public comment revised Exposure Drafts outlining proposed changes to the accounting for leases. The proposals aim to improve the quality and comparability of financial reporting by providing greater transparency about leverage, the assets an organization uses in its operations and the risks to which it is exposed from entering into leasing transactions. Under existing accounting standards, a majority of leases are not reported on a lessee’s balance sheet. The amounts involved can be substantial. Additionally, the existing accounting models for leases require lessees and lessors to classify their leases as either capital leases (e.g., a lease of equipment for nearly all of its economic life) or operating leases (e.g., a lease of office space for 10 years) and to account for those leases differently.

9

For capital leases, a lessee recognizes lease assets and liabilities on the balance sheet. For operating leases, a lessee does not recognize lease assets or liabilities on the balance sheet. The existing standards have been criticized for failing to meet the needs of users of financial statements because they do not always provide a complete representation of leasing transactions. In response to this criticism, in 2006 the Boards initiated a joint project to improve the financial reporting of leasing activities under International Financial Reporting Standards (IFRSs) and U.S. GAAP. The Boards have developed an approach to lease accounting that would require a lessee to recognize assets and liabilities for the rights and obligations created by leases. A lessee would recognize assets and liabilities for leases of more than 12 months.

Stakeholders have informed the Boards that there are a wide variety of lease transactions with different economics. To better reflect those differing economics, the revised Exposure Drafts propose a dual approach to the recognition, measurement, and presentation of expenses and cash flows arising from a lease. For most real estate leases, a lessee would report a straight-line lease expense in its income statement. For most other leases, such as equipment or vehicles, a lessee would report amortization of the asset separately from interest on the lease liability. The Boards are also proposing disclosures that should enable investors and other users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases.

The leases project is a converged effort between the Boards. The revised Exposure Drafts for both organizations are nearly identical. The differences between the two proposals are primarily related to existing differences between U.S. GAAP and IFRS and decisions the FASB made related to nonpublic entities.

The Boards are also proposing changes to how equipment and vehicle lessors would account for leases that are off balance sheet. Those changes would provide greater transparency about such lessors’ exposure to credit risk and asset risk.

As of July 2015, FASB was working on drafting the final standard.

Note 4: Investment Securities

The amortized costs and approximate fair values, together with gross unrealized gains and losses on securities, are as follows:

	June 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale Securities
Mortgage-backed securities
Government-sponsored agencies	$	109,031	$	2,073	$	(509	)	$	110,595
Collateralized mortgage obligations
Government-sponsored agencies		85,629		884		(742	)		85,771
Municipal obligations		43,558		1,500		(480	)		44,578
Corporate obligations		21,777		65		(1,280	)		20,562
Total investment securities	$	259,995	$	4,522	$	(3,011	)	$	261,506

10

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale Securities
Mortgage-backed securities
Government-sponsored agencies	$	110,452	$	2,927	$	(89	)	$	113,290
Collateralized mortgage obligations
Government-sponsored agencies		97,325		1,270		(836	)		97,759
Federal agencies		4		-		-			4
Municipal obligations		27,246		2,013		(7	)		29,252
Corporate obligations		21,763		44		(1,306	)		20,501
Total investment securities	$	256,790	$	6,254	$	(2,238	)	$	260,806

The amortized cost and fair value of securities available for sale at June 30, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale
Description Securities	Amortized Cost		Fair Value
Security obligations due
Within one year		4,488		4,509
One to five years	$	14,491	$	14,577
Five to ten years		2,214		2,373
After ten years		44,142		43,681
		65,335		65,140
Mortgage-backed securities
Government-sponsored agencies		109,031		110,595
Collateralized mortgage obligations
Government-sponsored agencies		85,629		85,771
Totals	$	259,995	$	261,506

Proceeds from sales of securities available for sale for the three and six months ended June 30, 2015 and 2014 were $5.8 million and $13.4 million compared to $7.7 million and $23.2 million, respectively. Gross gains of $126,000 and $366,000 compared to $253,000 and $569,000 for the three and six months ended June 30, 2015 and 2014, respectively, were recognized on those sales. Gross losses of $42,000 and $207,000 for the three and six months ended June 30, 2014 were recognized on those sales. There were no gross losses recognized on the sales of securities for the three and six months ended June 30, 2015.

All mortgage-backed securities and collateralized-mortgage obligations held by the Company as of June 30, 2015 were in government-sponsored or federal agency securities.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at June 30, 2015 and December 31, 2014 was $109.7 million and $67.5 million, which is approximately 41.9 percent and 25.9 percent of the Company’s investment portfolio at those dates.

Based on our evaluation of available evidence, including recent changes in market interest rates, management believes the declines in fair value for these securities, for the periods presented, are temporary.

11

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

During the first half of 2015 and 2014, the Bank determined that its security holdings had no other-than-temporary impairment.

The following tables show the gross unrealized losses and fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2015 and December 31, 2014:

	June 30, 2015
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available for Sale
Mortgage-backed securities
Government-sponsored agencies	$	44,845	$	(509	)	$	-	$	-		$	44,845	$	(509	)
Collateralized mortgage obligations
Government-sponsored agencies		23,968		(211	)		23,215		(531	)		47,183		(742	)
Municipal obligations		14,646		(477	)		490		(3	)		15,136		(480	)
Corporate obligations		-		-			2,522		(1,280	)		2,522		(1,280	)
Total temporarily impaired securities	$	83,459	$	(1,197	)	$	26,227	$	(1,814	)	$	109,686	$	(3,011	)

	December 31, 2014
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available for Sale
Mortgage-backed securities
Government-sponsored agencies	$	1,069	$	(9	)	$	19,580	$	(80	)	$	20,649	$	(89	)
Collateralized mortgage obligations
Government-sponsored agencies		5,075		(40	)		34,159		(796	)	$	39,234	$	(836	)
Federal agencies												-		-
Municipal obligations		-		-			631		(7	)		631		(7	)
Corporate obligations		-		-			6,995		(1,306	)		6,995		(1,306	)
Total temporarily impaired securities	$	6,144	$	(49	)	$	61,365	$	(2,189	)	$	67,509	$	(2,238	)

Mortgage-Backed Securities (MBS) and Collateralized Mortgage Obligations (CMO)

The unrealized losses on the Company’s investment in MBSs and CMOs were caused by interest rate changes. The Company expects to recover the amortized cost basis over the term of the securities. Because (1) the decline in market value is attributable to changes in interest rates and not credit quality, (2) the Company does not intend to sell the investments and (3) it is more likely than not the Company will not be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company does not consider any of these investments to be other-than-temporarily impaired at June 30, 2015.

12

Municipals

The decrease in unrealized losses on the Company’s investments in securities of state and political subdivisions were caused by changes in interest rates.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.  The Company does not intend to sell the investment and it is more likely than not that the Company will not be required to sell these investments before recovery of its new, lower amortized cost basis, which may be at maturity.  The Corporation does not consider these investment securities to be other-than-temporarily impaired at June 30, 2015.

Corporate Obligations

The Company’s unrealized losses on investments in corporate obligations primarily relates to two investments in pooled trust preferred securities. The unrealized losses were primarily caused by (1) a decrease in performance and regulatory capital resulting from exposure to subprime mortgages and (2) a sector downgrade by several industry analysts. The Company recognized a loss equal to the credit loss for these securities, establishing a new, lower amortized cost basis. The credit loss was calculated by comparing expected discounted cash flows based on performance indicators of the underlying assets in the security to the carrying value of the investment. Because the Company does not intend to sell these investments and it is likely that the Company will not be required to sell the investments before recovery of its new, lower amortized cost basis, which may be at maturity, it does not consider the remainder of these investments to be other-than-temporarily impaired at June 30, 2015.

Other-Than-Temporary Impairment (OTTI)

Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or whether it will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities. For securities that are a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model. For securities where the security is not a beneficial interest in securitized financial assets, the Company uses debt and equity securities impairment accounting model.

The Company conducts periodic reviews to identify and evaluate each investment security to determine whether an other-than-temporary impairment has occurred. Economic models are used to determine whether an other-than-temporary impairment has occurred on these securities. While all securities are considered, the securities primarily impacted by other-than-temporary impairment testing are private-label mortgage-backed securities and trust preferred securities.

MutualFirst Financial uses market-based yield indicators as a baseline for determining appropriate discount rates, and then adjusts the resulting discount rates on the basis of its credit and structural analysis of specific trust preferred securities. The primary focus is on the returns a fixed income investor would require in order to allocate capital on a risk adjusted basis. There is currently little demand for pooled trust preferred securities; however, the Company looks principally to market yields for stand-alone trust preferred securities issued by banks, thrifts and insurance companies for which there is an active and liquid market. The next step is to make a series of adjustments to reflect the differences that exist between these products (both credit and structural) and, most importantly, to reflect idiosyncratic credit performance differences (both actual and projected) between these products and the underlying collateral in the specific trust preferred security. Importantly, as part of the analysis described above, MutualFirst considers the fact that structured instruments frequently exhibit leverage not present in stand-alone instruments, and makes adjustments as necessary to reflect this additional risk.

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Credit Losses Recognized on Investments

Certain debt securities have experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other-than-temporarily impaired.

The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income.

	Accumulated Credit Losses
	Three Months Ended
	June 30,
	2015		2014
Credit losses on debt securities held
Beginning of period	$	109	$	1,205
Reductions related to actual losses incurred		-		(500	)
As of June 30,	$	109	$	705

	Accumulated Credit Losses
	Six Months Ended
	June 30,
	2015		2014
Credit losses on debt securities held
Beginning of year	$	109	$	1,205
Reductions related to actual losses incurred		-		(500	)
As of June 30,	$	109	$	705

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Pooled Trust Preferred Securities. The Company has invested in pooled trust preferred securities. At June 30, 2015, the current book balance of our pooled trust preferred securities was $3.8 million. The original par value of these securities was $4.0 million prior to the OTTI write-downs in 2011 and earlier. OTTI taken on trust preferred securities previously was the result of deterioration in the performance of the underlying collateral. The deterioration was the result of increased defaults and deferrals of dividend payments in that year, creating credit impairment along with weakening financial performance of performing collateral, increasing the risk of future deferrals of dividends and defaults. No additional OTTI was determined in the first half of 2015. All pooled trust preferred securities owned by the Bank are exempt from the Volcker Rule.

The following table provides additional information related to the Bank’s investment in pooled trust preferred securities as of June 30, 2015:

Deal Name	Class	Original Par		Book Value		Fair Value		Unrealized loss			Realized Losses YTD		Lowest Current Rating	Number of Banks / Insurance Cos. Currently Performing		Total Number of Banks and Insurance Cos. In Issuance (Unique)		Actual Deferrals/ Defaults (as a % of original collateral)			Total Projected Defaults (as a % of performing collateral) (1)			Excess subordination (after taking into account best estimate of future deferrals/ defaults) (2)
	(Dollars in Thousands)
Alesco Preferred Funding IX	A2A		1,000		911		548		(363	)		-	BB+		42		51		10.04	%		12.95	%		55.14	%
U.S. Capital Funding I	B1		3,000		2,891		1,974		(917	)		-	B3		28		33		9.44	%		7.02	%		10.33	%
		$	4,000	$	3,802	$	2,522	$	(1,280	)	$	-

(1) A 10% recovery is applied to all projected defaults by depository institutions. A 15% recovery is applied to all projected defaults by insurance companies. No recovery is applied to current defaults.

(2) Excess subordination represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences any credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages.

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Note 5: Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	June 30,			December 31,
	2015			2014
Net unrealized gain on securities available-for-sale	$	2,428		$	4,933
Net unrealized loss on securities available-for-sale for which a portion of an other-than-temporary impairment has been recognized in income		(917	)		(917	)
Net unrealized loss on derivative used for cash flow hedges		(52	)		(109	)
Net unrealized loss relating to defined benefit plan liability		(109	)		(109	)
		1,350			3,798
Tax expense		576			1,420
Net of tax amount	$	774		$	2,378

The following table presents the reclassification adjustments out of accumulated other comprehensive income that were included in net income in the Consolidated Statements of Income for the three and six months ended June 30, 2015 and 2014.

	Amount Reclassified from Accumulated Other Comprehensive Income For the Three Months Ended June 30,
Details about Accumulated Other Comprehensive Income Components	2015			2014			Affected Line Item in the Statements of Income
Unrealized gains on available-for-sale securities
Realized securities gains reclassified into income	$	126		$	211		Other income - net realized gains on sale of available-for-sale securities
Related income tax expense		(43	)		(72	)	Income tax expense
Total reclassifications for the period, net of tax	$	83		$	139

	Amount Reclassified from Accumulated Other Comprehensive Income For the Six Months Ended June 30,
Details about Accumulated Other Comprehensive Income Components	2015			2014			Affected Line Item in the Statements of Income
Unrealized gains on available-for-sale securities
Realized securities gains reclassified into income	$	366		$	362		Other income - net realized gains on sale of available-for-sale securities
Related income tax expense		(124	)		(123	)	Income tax expense
Total reclassifications for the period, net of tax	$	242		$	239

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Note 6: Fair Values of Financial Instruments

Fair value is 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. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of 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 supported by little or no market activity and are significant to the fair value of the assets or liabilities

Items Measured at Fair Value on a Recurring Basis

Following is a description of the valuation methodologies and inputs used for instruments measured at fair value on a recurring basis and recognized in the accompanying comparative 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. Pooled trust preferred securities prices are evaluated by a third party. Level 1 securities include marketable equity 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 obligations, small business administration, marketable equity, municipal, 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.

Third party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of identical or similar investment securities (Level 2). Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on investment securities relationship to other benchmark quoted investment securities. Any investment security not valued based upon the methods above are considered Level 3.

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The following table presents the fair value measurements of assets measured at fair value on a recurring basis and level within the ASC 820 fair value hierarchy in which the fair value measurements fall:

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Mortgage-backed securities
Government sponsored agencies	$	110,595	$	-	$	110,595	$	-
Collateralized mortgage obligations
Government sponsored agencies		85,771		-		85,771		-
Municipal obligations		44,578		-		44,578		-
Corporate obligations		20,562		-		18,040		2,522
Available-for-sale securities	$	261,506	$	-	$	258,984	$	2,522

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
December 31, 2014
Mortgage-backed securities
Government sponsored agencies	$	113,290	$	-	$	113,290	$	-
Collateralized mortgage obligations
Government sponsored agencies		97,759		-		97,759		-
Federal agencies		4		-		4		-
Municipal obligations		29,252		-		29,252		-
Corporate obligations		20,501		-		17,979		2,522
Available-for-sale securities	$	260,806	$	-	$	258,284	$	2,522

The following is a reconciliation of the beginning and ending balances for the three and six months ended June 30, 2015 and 2014 of recurring fair value measurements recognized in the accompanying balance sheets using significant unobservable (Level 3) inputs:

	Three Months Ended
	June 30,
	2015		2014
Beginning balance	$	2,522	$	4,043
Total realized and unrealized gains (losses)
Included in net income		-		56
Included in other comprehensive income (loss)		-		205
Purchases, sales, issuances and settlements		-		(566	)
Ending balance	$	2,522	$	3,738
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	0

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	Six Months Ended
	June 30,
	2015		2014
Beginning balance	$	2,522	$	3,336
Total realized and unrealized gains (losses)
Included in net income		-		56
Included in other comprehensive income (loss)		-		920
Purchases, issuances and settlements		-		(574	)
Ending balance	$	2,522	$	3,738
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	0

Items Measured at Fair Value on a Non-Recurring Basis

From time to time, certain assets may be recorded at fair value on a non-recurring basis. These non-recurring fair value adjustments typically are a result of the application of lower of cost or fair value accounting or a write-down occurring during the period. The following is a description of the valuation methodologies used for certain assets that are recorded at fair value.

Other Real Estate Owned

The fair value of real estate is generally determined based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis.

Other real estate owned is classified within Level 3 of the fair value hierarchy.

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fall.

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Other real estate owned	$	57	$	-	$	-	$	57

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
December 31, 2014
Other real estate owned		1,280		-		-		1,280

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The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

June 30, 2015	Fair Value		Valuation Technique	Unobservable Inputs	Range
Trust Preferred Securities	$	2,522	Discounted cash flow	Discount rate	8.0	%
				Constant prepayment rate	2.0	%
				Cumulative projected prepayments	40.0	%
				Probability of default	1.7 - 1.8	%
				Projected cures given deferral	0 - 15.0	%
				Loss severity	34.2 - 39.8	%
Other real estate owned	$	57	Third party valuations	Discount to reflect realizable value less estimated selling costs	29.8 - 93.0	%

December 31, 2014	Fair Value		Valuation Technique	Unobservable Inputs	Range
Trust Preferred Securities	$	2,522	Discounted cash flow	Discount rate	8.0	%
				Constant prepayment rate	2.0	%
				Cumulative projected prepayments	40.0	%
				Probability of default	1.7 - 1.8	%
				Projected cures given deferral	0 - 15.0	%
				Loss severity	34.2 - 39.8	%
Other real estate owned	$	1,280	Third party valuations	Discount to reflect realizable value less estimated selling costs	24.4 - 36.7	%

The following methods and assumptions were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value:

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

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

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

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

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

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

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

Other Borrowings - The fair value of these borrowings is estimated using discounted cash flow analyses using interest rates for similar financial instruments.

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

The estimated fair values of the Company’s financial instruments not carried at fair value in the consolidated balance sheets as of the dates noted below are as follows:

					Fair Value Measurements Using
June 30, 2015	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	24,269	$	24,269	$	24,269	$	-	$	-
Loans held for sale		12,486		12,541		-		12,541		-
Loans, net		1,026,717		1,019,952		-		-		1,019,952
FHLB stock		9,810		9,810		-		9,810		-
Interest receivable		4,054		4,054		-		4,054		-
Liabilities
Deposits		1,078,287		1,078,926		711,204		-		367,722
FHLB advances		212,042		211,706		-		211,706		-
Other borrowings		9,816		9,868		-		9,868		-
Interest payable		248		248		-		248		-

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					Fair Value Measurements Using
December 31, 2014	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	29,575	$	29,575	$	29,575	$	-	$	-
Loans held for sale		6,140		6,220		-		6,220		-
Loans, net		1,003,518		1,006,233		-		-		1,006,233
FHLB stock		11,964		11,964		-		11,964		-
Interest receivable		3,730		3,730		-		3,730		-
Liabilities
Deposits		1,079,320		1,050,295		648,314		-		401,981
FHLB advances		192,442		191,995		-		191,995		-
Other borrowings		10,174		10,283		-		10,283		-
Interest payable		223		223		-		223		-

Note 7: Loans and Allowance

Classes of loans at June 30, 2015 and December 31, 2014 include:

	June 30,			December 31,
	2015			2014
Real estate
Commercial	$	203,767		$	198,019
Commercial construction and development		29,940			33,102
Consumer closed end first mortgage		505,189			517,063
Consumer open end and junior liens		69,640			71,073
		808,536			819,257
Other loans
Consumer loans
Auto		15,072			14,712
Boat/RVs		112,583			94,761
Other		5,134			5,184
Commercial and industrial		101,640			88,474
		234,429			203,131
Total loans		1,042,965			1,022,388
Undisbursed loans in process		(7,359	)		(9,285	)
Unamortized deferred loan costs, net		4,017			3,583
Allowance for loan losses		(12,906	)		(13,168	)
Net loans	$	1,026,717		$	1,003,518

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The risk characteristics of each loan portfolio segment are as follows:

Commercial

Real estate

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

Construction and Development

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analyses of absorption and lease rates and financial analyses of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Commercial and Industrial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Consumer Real Estate and Other Consumer Loans

With respect to residential loans that are secured by consumer closed end first mortgages and are primarily owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires PMI if that ratio is exceeded. Consumer open end and junior lien loans are typically secured by a subordinate interest in 1-4 family residences, and other consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Nonaccrual Loans and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in managements’ opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions, but never greater than 90 days past due.

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All interest accrued but not collected for loans that are placed on nonaccrual status or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured and generally only after six months of satisfactory performance.

Nonaccrual loans, segregated by class of loans, as of June 30, 2015 and December 31, 2014 are as follows:

	June 30,		December 31,
	2015		2014
Real estate
Commercial	$	2,049	$	2,023
Commercial construction and development		-		209
Consumer closed end first mortgage		3,111		3,499
Consumer open end and junior liens		939		658
Consumer loans
Auto		2		-
Boat/RVs		139		191
Other		18		27
Commercial and industrial		58		605
	$	6,316	$	7,212

An age analysis of the Company’s past due loans, segregated by class of loans, as of June 30, 2015 and December 31, 2014 are as follows:

	June 30, 2015
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans 90 Days or More and Accruing
Real estate
Commercial	$	1,894	$	206	$	799	$	2,899	$	200,868	$	203,767	$	-
Commercial construction and development		-		-		-		-		29,940		29,940		-
Consumer closed end first mortgage		6,541		611		2,418		9,570		495,619		505,189		207
Consumer open end and junior liens		986		68		398		1,452		68,188		69,640		-
Consumer loans
Auto		41		2		2		45		15,027		15,072		-
Boat/RVs		390		100		132		622		111,961		112,583		-
Other		39		20		12		71		5,063		5,134		-
Commercial and industrial		569		44		24		637		101,003		101,640		-
	$	10,460	$	1,051	$	3,785	$	15,296	$	1,027,669	$	1,042,965	$	207

24

	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans 90 Days or More and Accruing
Real estate
Commercial	$	1,308	$	848	$	325	$	2,481	$	195,538	$	198,019	$	-
Commercial construction and development		-		-		209		209		32,893		33,102		-
Consumer closed end first mortgage		8,144		1,220		2,160		11,524		505,539		517,063		226
Consumer open end and junior liens		969		130		27		1,126		69,947		71,073		-
Consumer loans
Auto		65		-		-		65		14,647		14,712		-
Boat/RVs		775		158		115		1,048		93,713		94,761		-
Other		92		27		14		133		5,051		5,184		-
Commercial and industrial		1,066		176		441		1,683		86,791		88,474		-
	$	12,419	$	2,559	$	3,291	$	18,269	$	1,004,119	$	1,022,388	$	226

Impaired Loans

Loans are considered impaired in accordance with the impairment accounting guidance (ASC 310-10-35-16), when, based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Interest on impaired loans is recorded based on the performance of the loan. All interest received on impaired loans that are on nonaccrual status is accounted for on the cash-basis method until qualifying for return to accrual status. Interest is accrued per the contract for impaired loans that are performing.

The following tables present impaired loans as of and for the three and six month periods ended June 30, 2015 and 2014 and the year ended December 31, 2014. There were no loans with a specific valuation allowance as of June 30, 2015 and 2014, respectively, and December 31, 2014.

	June 30, 2015
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans - Quarter		Average Investment in Impaired Loans - YTD		Interest Income Recognized - Quarter		Interest Income Recognized - YTD
Loans without a specific valuation allowance
Real estate
Commercial	$	5,169	$	5,169	$	-	$	5,197	$	5,109	$	60	$	116
Commercial construction and development		649		1,155		-		750		810		8		15
Consumer closed end first mortgage		1,603		1,603		-		1,609		1,452		-		-
Commercial and industrial		224		255		-		463		561		1		2
Total	$	7,645	$	8,182	$	-	$	8,019	$	7,932	$	69	$	133

25

	December 31, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
Real estate
Commercial	$	4,933	$	4,933	$	-	$	3,776	$	161
Commercial construction and development		931		1,860		-		1,323		30
Consumer closed end first mortgage		1,138		1,138		-		1,142		8
Consumer open end and junior liens		-		-		-		100		3
Commercial and industrial		758		789		-		923		12
Total	$	7,760	$	8,720	$	-	$	7,264	$	214

	June 30, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans - Quarter		Average Investment in Impaired Loans - YTD		Interest Income Recognized - Quarter		Interest Income Recognized - YTD
Loans without a specific valuation allowance
Real estate
Commercial	$	2,863	$	2,863	$	-	$	2,907	$	2,988	$	33	$	65
Commercial construction and development		1,272		2,643		-		1,424		1,495		8		15
Consumer closed end first mortgage		847		847		-		851		978		3		5
Consumer open end and junior liens		-		-		-		125		167		1		3
Commercial and industrial		748		922		-		954		1,032		5		11
Total	$	5,730	$	7,275	$	-	$	6,261	$	6,660	$	50	$	99

The following information presents the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of June 30, 2015.

Commercial Loan Grades

Definition of Loan Grades. Loan grades are numbered 1 through 8. Grades 1-4 are "pass" credits, grade 5 [Special Mention] loans are "criticized" assets, and grades 6 [Substandard], 7 [Doubtful] and 8 [Loss] are "classified" assets. The use and application of these grades by the Bank conform to the Bank's policy and regulatory definitions.

Pass. Pass credits are loans in grades prime through fair. These are at least considered to be credits with acceptable risks and would be granted in the normal course of lending operations.

Special Mention. Special mention credits have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credits or in the Bank’s credit position at some future date. If weaknesses cannot be identified, classifying as special mention is not appropriate. Special mention credits are not adversely classified and do not expose the Bank to sufficient risk to warrant an adverse classification. No apparent loss of principal or interest is expected.

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Substandard. Substandard credits are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged. Financial statements normally reveal some or all of the following:  poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Credits so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss of the deficiencies are not corrected.

Doubtful. A doubtful extension of credit has all the weaknesses inherent in a substandard asset with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans. Doubtful classification for an entire credit should be avoided when collection of a specific portion appears highly probable with the adequately secured portion graded Substandard.

Retail Loan Grades

Pass. Pass credits are loans that are currently performing as agreed and are not troubled debt restructurings.

Special Mention. Special mention credits have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credits or in the Bank’s credit position at some future date. If weaknesses cannot be identified, classifying as special mention is not appropriate. Special mention credits are not adversely classified and do not expose the Bank to sufficient risk to warrant an adverse classification. No apparent loss of principal or interest is expected.

Substandard. Substandard credits are loans that have reason to be considered to have a weakness and placed on non-accrual. This would include all retail loans over 90 days and troubled debt restructurings.

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June 30, 2015
Commercial Credit Exposure Credit Risk Profile
Internal Rating	Real Estate		Construction and Development		Commercial and Industrial
Pass	$	193,341	$	27,596	$	99,725
Special Mention		3,265		1,490		1,468
Substandard		7,161		854		447
Doubtful		-		-		-
Total	$	203,767	$	29,940	$	101,640

Consumer Credit Exposure Credit Risk Profile
Internal Rating	Closed End First Mortgage		Real Estate Open End and Junior Liens		Auto		Boat/RV		Other
Pass	$	498,753	$	68,624	$	15,063	$	112,337	$	5,109
Special Mention		-		-		-		-		-
Substandard		6,436		1,016		9		246		25
Total	$	505,189	$	69,640	$	15,072	$	112,583	$	5,134

December 31, 2014
Commercial Credit Exposure Credit Risk Profile
Internal Rating	Real Estate		Construction and Development		Commercial and Industrial
Pass	$	187,436	$	30,422	$	84,746
Special Mention		3,316		1,721		439
Substandard		7,267		959		2,848
Doubtful		-		-		441
Total	$	198,019	$	33,102	$	88,474

Consumer Credit Exposure Credit Risk Profile
Internal Rating	Closed End First Mortgage		Real Estate Open End and Junior Liens		Auto		Boat/RV		Other
Pass	$	509,765	$	70,299	$	14,704	$	94,377	$	5,125
Special Mention		-		-		-		-		-
Substandard		7,298		774		8		384		59
Total	$	517,063	$	71,073	$	14,712	$	94,761	$	5,184

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Allowance for Loan Losses.

We maintain an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the estimated losses inherent in the loan portfolio.  Our methodology for assessing the appropriateness of the allowance consists of several key elements, including the general allowance and specific allowances for identified problem loans and portfolio segments.  In addition, the allowance incorporates the results of measuring impaired loans as provided in FASB ASC 310, Receivables.  These accounting standards prescribe the measurement methods, income recognition and disclosures related to impaired loans. The general allowance is calculated by applying loss factors to outstanding loans based on the internal risk evaluation of such loans or pools of loans. Changes in risk evaluations of both performing and nonperforming loans affect the amount of the general allowance. Loss factors are based on our historical loss experience as well as on significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date.

The appropriateness of the allowance is reviewed by management based upon its evaluation of then-existing economic and business conditions affecting our key lending areas and other conditions, such as credit quality trends (including trends in non-performing loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments and recent loss experience in particular segments of the portfolio that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectability of the loan.  Senior management reviews these conditions quarterly in discussions with our senior credit officers.  To the extent that any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of such condition may be reflected as a specific allowance applicable to such credit or portfolio segment.  Where any of these conditions is not evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s evaluation of the loss related to this condition is reflected in the general allowance for loan losses.  The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem credits or portfolio segments.

The allowance for loan losses is based on estimates of losses inherent in the loan portfolio.  Actual losses can vary significantly from the estimated amounts.  Our methodology as described permits adjustments to any loss factor used in the computation of the general allowance in the event that, in management’s judgment, significant factors which affect the collectability of the portfolio as of the evaluation date are not reflected in the loss factors.  By assessing the probable incurred losses inherent in the loan portfolio on a quarterly basis, we are able to adjust specific and inherent loss estimates based upon any more recent information that has become available.

The following table details activity in the allowance for loan losses by portfolio segment for the three and six month periods ended June 30, 2015 and 2014 and year ended December 31, 2014.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other segments.

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	Three Months Ended June 30, 2015
	Commercial			Mortgage			Consumer			Total
Allowance for loan losses:
Balance, beginning of period	$	6,894		$	3,567		$	2,756		$	13,217
Provision charged (credited) to expense		(201	)		48			153			-
Losses charged off		-			(297	)		(205	)		(502	)
Recoveries		132			-			59			191
Balance, end of period	$	6,825		$	3,318		$	2,763		$	12,906

	Six Months Ended June 30, 2015
	Commercial			Mortgage			Consumer			Total
Allowance for loan losses:
Balance, beginning of year	$	7,085		$	3,471		$	2,612		$	13,168
Provision charged (credited) to expense		(597	)		236			361			-
Losses charged off		-			(390	)		(322	)		(712	)
Recoveries		337			1			112			450
Balance, end of period	$	6,825		$	3,318		$	2,763		$	12,906
Ending balance:
Individually evaluated for impairment	$	-		$	-		$	-		$	-
Collectively evaluated for impairment		6,825			3,318			2,763			12,906
Total allowance for loan losses	$	6,825		$	3,318		$	2,763		$	12,906
Loans:
Ending balance
Individually evaluated for impairment	$	6,042		$	1,603		$	-		$	7,645
Collectively evaluated for impairment		329,305			503,586			202,429			1,035,320
Total Loans	$	335,347		$	505,189		$	202,429		$	1,042,965

30

	Year Ended December 31, 2014
	Commercial			Mortgage			Consumer			Total
Allowance for loan losses:
Balance, beginning of year	$	8,148		$	3,124		$	2,140		$	13,412
Provision charged (credited) to expense		(1,273	)		888			1,235			850
Losses charged off		(289	)		(572	)		(1,021	)		(1,882	)
Recoveries		499			31			258			788
Balance, end of period	$	7,085		$	3,471		$	2,612		$	13,168
Ending balance:
Individually evaluated for impairment	$	-		$	-		$	-		$	-
Collectively evaluated for impairment		7,085			3,471			2,612			13,168
Total allowance for loan losses	$	7,085		$	3,471		$	2,612		$	13,168

	Three Months Ended June 30, 2014
	Commercial			Mortgage			Consumer			Total
Allowance for loan losses:
Balance, beginning of period	$	7,899		$	3,305		$	2,166		$	13,370
Provision charged to expense		78			208			214			500
Losses charged off		(244	)		(170	)		(351	)		(765	)
Recoveries		30			1			107			138
Balance, end of period	$	7,763		$	3,344		$	2,136		$	13,243

	Six Months Ended June 30, 2014
	Commercial			Mortgage			Consumer			Total
Allowance for loan losses:
Balance, beginning of year	$	8,148		$	3,124		$	2,140		$	13,412
Provision charged (credited) to expense		(187	)		465			572			850
Losses charged off		(244	)		(250	)		(718	)		(1,212	)
Recoveries		46			5			142			193
Balance, end of period	$	7,763		$	3,344		$	2,136		$	13,243
Ending balance:
Individually evaluated for impairment	$	-		$	-		$	-		$	-
Collectively evaluated for impairment		7,763			3,344			2,136			13,243
Total allowance for loan losses	$	7,763		$	3,344		$	2,136		$	13,243

Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral.

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For all loan portfolio segments except consumer real estate and other consumer loans, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off consumer real estate and other consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge-down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged-off.

Information on non-performing assets, excluding performing restructured loans, is provided below:

	June 30,
	2015		2014
Non-performing assets
Non-accrual loans	$	6,316	$	5,762
Accruing loans delinquent 90 days or more and past due		207		348
Total non-performing loans		6,523		6,110
Foreclosed real estate		1,726		6,719
Other repossessed assets		455		379
Total non-performing assets	$	8,704	$	13,208

Troubled Debt Restructurings

Certain categories of impaired loans include loans that have been modified in a troubled debt restructuring, that involves granting economic concessions to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and circumstances.

When we modify loans in a troubled debt restructuring, we evaluate any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or we use the current fair value of the collateral, less selling costs for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through a specific reserve or a charge-off to the allowance.

Loans retain their accrual status at the time of their modification. As a result, if a loan is on nonaccrual at the time it is modified, it stays as nonaccrual until a period of satisfactory performance, generally six months, is obtained. If a loan is on accrual at the time of the modification, the loan is evaluated to determine the collection of principal and interest is reasonably assured and generally stays on accrual.

32

At June 30, 2015, the Company had a number of loans that were modified in troubled debt restructurings. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

The following tables describe troubled debts restructured during the three and six month periods ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015
	No. of Loans		Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial		1	$	820	$	820
Consumer closed end first mortgage		2		86		85

	Three Months Ended June 30, 2014
	No. of Loans		Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial		1	$	250	$	250
Consumer closed end first mortgage		7		367		380
Commercial and industrial		2		193		223

	Six Months Ended June 30, 2015
	No. of Loans		Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial		3	$	1,992	$	1,990
Construction and development		1		155		134
Consumer closed end first mortgage		5		242		239
Commercial and industrial		1		88		83

33

	Six Months Ended June 30, 2014
	No. of Loans		Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial		1	$	250	$	250
Consumer closed end first mortgage		10		748		774
Commercial and industrial		2		193		223

The impact on the allowance for loan losses was insignificant as a result of these modifications.

Newly restructured loans by type for the three and six months ended June 30, 2015 and 2014 are as follows:

	Three Months Ended June 30, 2015
	Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	820	$	-	$	820
Consumer closed end first mortgage		-		-		85		85

	Three Months Ended June 30, 2014
	Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	-	$	250	$	250
Consumer closed end first mortgage		-		18		362		380
Commercial and industrial		-		223		-		223

	Six Months Ended June 30, 2015
	Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	1,990	$	-	$	1,990
Construction and development		-		-		134		134
Consumer closed end first mortgage		-		-		239		239
Commercial and industrial		-		83		-		83

34

	Six Months Ended June 30, 2014
	Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	-	$	250	$	250
Consumer closed end first mortgage		-		18		756		774
Commercial and industrial		-		223		-		223

Defaults of any loans modified as troubled debt restructurings made in the three and six months ended June 30, 2014 are listed in the table below. There were no defaults on loans modified as troubled debt restructurings made in the three and six months ended June 30, 2015. Defaults are defined as any loans that become 90 days past due.

	Three Months Ended June 30, 2014
	No. of Loans		Post-Modification Outstanding Recorded Balance
Real Estate
Consumer closed end first mortgage		1	$	340

	Six Months Ended June 30, 2014
	No. of Loans		Post-Modification Outstanding Recorded Balance
Real Estate
Consumer closed end first mortgage		3	$	432
Consumer open end and junior liens		1		23

Note 8:  Change in Accounting Principle

The Company makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section 42 of the Internal Revenue Code. Mutual has investments in eight Indiana limited partnerships within Indiana and contiguous states. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

35

Mutual is a limited partner in each LIHTC Partnership. A separate unrelated third party is the general partner. Each limited partnership is managed by the general partner, who exercises full and exclusive control over the affairs of the limited partnership. Duties entrusted to the general partner of each limited partnership include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to consent to certain transactions, the limited partner(s) may not participate in the operation, management, or control of the limited partnership’s business, transact any business in the limited partnership’s name or have any power to sign documents for or otherwise bind the limited partnership. In addition, the general partner may only be removed by the limited partner(s) in the event the general partner fails to comply with the terms of the agreement and/or is negligent in performing its duties.

The Company believes the general partner of each limited partnership has the power to direct the activities which most significantly affect the performance of each partnership; therefore, Mutual has determined that it is not the primary beneficiary of any LIHTC partnership. The Company uses the proportional amortization method to account for a majority of its investments in these entities. These investments are included in accrued income and other assets.

During the 2015 first quarter, Mutual adopted ASU 2014-01. The amendments are required to be applied retrospectively to all periods presented. As a result of these changes, the Bank recorded a cumulative-effective adjustment to beginning retained earnings. The Company believes the application of the proportional amortization method aligns the accounting more closely with the economics of the transaction and therefore provides more transparency to the financial reporting.

36

The following table summarizes the balance sheet and income statement amounts impacted by the change at the dates or for the periods indicated:

	December 31,
	2014
Investment in limited partnerships
As previously reported	$	1,582
As reported under the new guidance		527
Deferred tax asset
As previously reported		13,305
As reported under the new guidance		13,575
Retained earnings
As previously reported		50,171
As reported under the new guidance		49,386

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2014		2014
Non-interest income
As previously reported	$	3,414	$	6,287
As reported under the new guidance		3,542		6,542
Income tax expense
As previously reported		1,062		1,794
As reported under the new guidance		1,133		1,936
Net income
As previously reported		2,557		4,521
As reported under the new guidance		2,614		4,634
Basic Earnings Per Share
As previously reported		0.36		0.63
As reported under the new guidance		0.37		0.65
Diluted Earnings Per Share
As previously reported		0.35		0.61
As reported under the new guidance		0.36		0.63

37

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following should be read in conjunction with the Management’s Discussion and Analysis in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on March 13, 2015.

MutualFirst is a Maryland corporation and a bank holding company headquartered in Muncie, Indiana, with operations in Allen, Delaware, Elkhart, Grant, Kosciusko, Randolph, St. Joseph and Wabash counties in Indiana. It owns MutualBank, an Indiana commercial bank with 30 bank branches in Indiana, trust offices in Carmel and Crawfordsville, Indiana and a loan origination office in New Buffalo, Michigan. MutualBank’s wholly owned subsidiary, Summit Service Corp, owns Summit Mortgage, a mortgage banking company located in Ft. Wayne, Indiana. The Company is subject to examination, supervision and regulation by the FRB, and the Bank is subject to regulation, supervision and examination by the IDFI and the FDIC.

Our principal business consists of attracting retail and commercial deposits from the general public and businesses, including some brokered deposits, and investing those funds primarily in loans secured by consumer closed end first mortgages and consumer open end and junior liens on owner-occupied, one- to four-family residences, a variety of other consumer loans, loans secured by commercial real estate, commercial construction and development and commercial and industrial loans. Funds not invested in loans generally are invested in investment securities, including mortgage-backed, mortgage-related securities, and municipals. We also obtain funds from FHLB advances and other borrowings.

Our results of operations depend primarily on the level of our net interest income, which is the difference between interest income on interest-earning assets, such as loans, mortgage-backed securities and investment securities, and interest expense on 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 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.

Second Quarter Highlights. At June 30, 2015, we had $1.4 billion in assets, $1.0 billion in loans, $1.1 billion in deposits and $131.0 million in stockholders’ equity. The Company’s total risk-based capital ratio at June 30, 2015 was 13.7%, exceeding the 10.0% requirement for a well-capitalized institution. Tangible common equity, as a percentage of tangible assets, increased to 8.9% as of June 30, 2015 compared to 8.7% and 8.3% at December 31, 2014 and June 30, 2014, respectively. For the quarter ended June 30, 2015, net income available to common shareholders was $3.2 million, or $0.44 per basic and $0.43 per diluted share, compared with net income available to common shareholders of $2.6 million, or $0.37 per basic and $0.36 per diluted share for the quarter ended June 30, 2014.

Financial highlights for the second quarter ended June 30, 2015 included:

· Gross loan balances increased by $16.0 million, or 6.3% on an annualized basis in the second quarter of 2015.

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· Asset quality improved as non-performing loans to total loans were 0.63% as of June 30, 2015 compared to 0.73% as of March 31, 2015 and non-performing assets to total assets were 0.60% as of June 30, 2015 compared to 0.72% as of March 31, 2015.

· Core deposits increased $15.0 million in the second quarter of 2015 while term deposits declined by $22.9 million.

· Tangible common equity to total assets is 8.89% and tangible book value per share is $17.36 as of June 30, 2015 compared to tangible common equity to total assets of 8.95% and tangible book value per share of $17.33 as of March 31, 2015.

· Net interest income for the second quarter of 2015 increased by $22,000 on a linked quarter basis and decreased by $18,000 compared to the second quarter of 2014.

· Asset quality improvement led to no provision for loan losses in the second quarter of 2015.

· Net interest margin was 3.18% for the second quarter 2015 compared to 3.28% in the second quarter 2014.

· Non-interest income in the second quarter of 2015 increased by $349,000 on a linked quarter basis and by $824,000 when compared to the second quarter of 2014.

· Non-interest expense decreased in the second quarter of 2015 by $645,000 on a linked quarter basis and increased by $520,000 when compared to the second quarter of 2014.

The Management’s Discussion and Analysis in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, contains a summary of our management’s new strategic plan for 2015-2019. The financial highlights of our strategic progress during the quarter include: increasing commercial and non-real estate consumer lending by $20.9 million in the second quarter and $33.9 million since year-end 2014; core deposits to total deposits increased to 66.0%, from 62.8% at year-end 2014, and non-interest income increased $824,000 and $1.8 million for the three and six months ended June 30, 2015, respectively, compared to the same periods in 2014.

Critical Accounting Policies

Note 1 to the Consolidated Financial Statements in Item 8 of the Form 10-K for the year ended December 31, 2014 contains a summary of the Company’s significant accounting policies. 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, valuation of intangible assets and securities, deferred tax asset and income tax accounting.

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

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

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

Mortgage Servicing Rights. Mortgage servicing rights (“MSRs”) associated with loans originated and sold, where servicing is retained, are capitalized and included in other assets in the consolidated balance sheet. The value of the capitalized servicing rights represents the fair value of 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 a reduction in loan servicing fee income.

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

Securities. Under FASB Codification Topic 320 (ASC 320), Investments-Debt and Equity Securities, investment securities must be classified as held-to-maturity, available-for-sale or trading. Management determines the appropriate classification at the time of purchase. The classification of securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and the Company has the ability to hold the securities to maturity. Securities not classified as held-to-maturity are classified as available-for-sale and are carried at fair value, with the unrealized holding gains and losses, net of tax, reported in other comprehensive income and do not affect earnings until realized.

The fair values of the Company’s securities are generally determined by reference to quoted prices from reliable independent sources utilizing observable inputs. Certain of the Company’s fair values of securities are determined using models whose significant value drivers or assumptions are unobservable and are significant to the fair value of the securities. These models are utilized when quoted prices are not available for certain securities or in markets where trading activity has slowed or ceased. When quoted prices are not available and are not provided by third party pricing services, management judgment is necessary to determine fair value. As such, fair value is determined using discounted cash flow analysis models, incorporating default rates, estimation of prepayment characteristics and implied volatilities.

The Company evaluates all securities on a quarterly basis, and more frequently when economic conditions warrant additional evaluations, for determining if an other-than-temporary impairment (“OTTI”) exists pursuant to guidelines established in ASC 320. In evaluating the possible impairment of securities, consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the ability and intent of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies or government sponsored agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

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If management determines that an investment experienced an OTTI, management must then determine the amount of the OTTI to be recognized in earnings. If management does not intend to sell the security and it is more likely than not that the Company will not be required to sell the security before recovery of its amortized cost basis less any current period loss, the OTTI will be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the OTTI related to other factors will be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings will become the new amortized cost basis of the investment. If management intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. Any subsequent recoveries related to the value of these securities are recorded as an unrealized gain (as other comprehensive income (loss) in stockholders’ equity) and not recognized in income until the security is ultimately sold.

The Company from time to time may dispose of an impaired security in response to asset/liability management decisions, future market movements, business plan changes, or if the net proceeds can be reinvested at a rate of return that is expected to recover the loss within a reasonable period of time.

Deferred Tax Asset. The Company has evaluated its deferred tax asset to determine if it is more likely than not that the asset will be utilized in the future. The Company’s most recent evaluation has determined that, except for the amounts represented by the valuation allowance in Note 15 to the Consolidated Financial Statements in Item 8 of the Form 10-K for the year ended December 31, 2014, the Company will more likely than not be able to utilize the remaining deferred tax asset. As of year-end 2014, the Company had generated average positive pre-tax pre-provision earnings of $15.5 million, or 1.1% of pre-tax pre-provision ROA over the previous five years. This level of earnings would be sufficient to utilize portions of the operating losses, tax credit carryforwards and temporary tax differences over the allowable periods. The analysis as of June 30, 2015, supports no additional valuation reserve is needed.

The valuation allowances established are the result of net operating losses for state franchise tax purposes totaling $33.6 million and capital losses realized on the sale of investment securities as well as the recognition of other than temporary impairment on investment securities where the loss, while recognized for financial statement purposes, has not yet been realized.

At the end of 2014, the Company had $144,000 in capital losses, a decrease from $404,000 in capital losses in 2013 as capital gains from the sale of available for sale securities were generated. The Company has avoided and will continue to avoid taking any book tax benefit on future capital losses without capital gains to offset the current capital losses. See Note 15 to the Consolidated Financial Statements in Item 8 of the Form 10-K for the year ended December 31, 2014.

Income Tax Accounting. We file a consolidated federal income tax return. The provision for income taxes is based upon income in our consolidated financial statements, rather than amounts reported on our income tax return. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date.

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Forward-Looking Statements

This Form 10-Q contains and our future filings with the SEC, Company press releases, other public pronouncements, stockholder communications and oral statements made by or with the approval of an authorized executive officer, will contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “project,” “could,” “intend,” “target” and other similar words and expressions of the future. These forward-looking statements include, but are not limited to: (i) statements of our goals, intentions and expectations; (ii) statements regarding our business plans, prospects, growth and operating strategies; (iii) statements regarding the asset quality of our loan and investment portfolios; and (iv) estimates of our risks and future costs and benefits. These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions that 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 unanticipated events.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (i) the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; (ii) changes in general economic conditions, either nationally or in our market areas; (iii) changes in the levels of general interest rates and the relative differences between short- and long-term interest rates, deposit interest rates, our net interest margin and funding sources; (v) fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; (vi) decreases in the secondary market for the sale of loans that we originate; (vii) results of examinations of us by the IDFI, FDIC, FRB or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; (viii) legislative or regulatory changes that adversely affect our business including the effect of Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act”), changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules, including changes that increase our capital requirements; (ix) our ability to attract and retain deposits; (x) increases in premiums for deposit insurance; (xi) management’s assumptions in determining the adequacy of the allowance for loan losses; (xii) our ability to control operating costs and expenses; (xiii) the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; (xiv) difficulties in reducing risks associated with the loans on our balance sheet; (xv) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; (xvi) a failure or security breach in the computer systems on which we depend; (xvii) our ability to retain key members of our senior management team; (xviii) costs and effects of litigation, including settlements and judgments; (xix) our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; (xx) increased competitive pressures among financial services companies; (xxi) changes in consumer spending, borrowing and savings habits; (xxii) the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; (xxiii) adverse changes in the securities markets; (xxiv) inability of key third-party providers to perform their obligations to us; (xv) changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board; and (xvi) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere in this report.

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The Company wishes to advise readers that these factors could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. 

Financial Condition

General. Total assets at June 30, 2015 were $1.4 billion, reflecting a $22.0 million increase since December 31, 2014, primarily as a result of a $23.2 million increase in net loans and a $6.3 million increase in loans held for sale, partially offset by a $5.3 million decrease in cash and cash equivalents. Interest-earning assets increased $25.8 million, or 2.0%, to $1.34 billion at June 30, 2015 compared to December 31, 2014, reflecting an increase in the loan portfolio. Interest-bearing liabilities increased by $11.4 million, or 1.0% to $1.14 billion at June 30, 2015 reflecting an increase in borrowings partially offset by a decrease in term deposits. Stockholders’ equity increased by $4.2 million or 3.3% at June 30, 2015 compared to year-end 2014.

Loans. Our gross loan portfolio, excluding loans held for sale, increased $20.6 million at June 30, 2015 to $1.0 billion. The following table reflects the changes in the gross amount of loans, excluding loans held for sale, by type during the six month period:

	At
	June 30,		December 31,		Amount			Percent
	2015		2014		Change			Change
	(Dollars in thousands)
Real estate
Commercial	$	203,767	$	198,019	$	5,748			2.90	%
Commercial construction and development		29,940		33,102		(3,162	)		(9.55	)
Consumer closed end first mortgage		505,189		517,063		(11,874	)		(2.30	)
Consumer open end and junior liens		69,640		71,073		(1,433	)		(2.02	)
Total real estate loans		808,536		819,257		(10,721	)		(1.31	)
Consumer loans
Auto		15,072		14,712		360			2.45
Boat/RV		112,583		94,761		17,822			18.81
Other		5,134		5,184		(50	)		(0.96	)
Total consumer other		132,789		114,657		18,132			15.81
Commercial and industrial		101,640		88,474		13,166			14.88
Total other loans		234,429		203,131		31,298			15.41
Total Loans	$	1,042,965	$	1,022,388	$	20,577			2.01	%

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The Bank’s strategy to increase commercial and consumer loans remains a primary focus as we continued to see growth in these areas during the first six months of 2015 as commercial and non-real estate consumer loans grew by $33.9 million. We continue to seek opportunities to provide sound commercial borrowers opportunities for new loans to meet their growing demands, refinance loans currently served by other financial institutions and build relationships with commercial clients in our footprint. The increase in the commercial and other consumer portfolios was partially offset by a $13.3 million decrease in the consumer real estate portfolios during the period. Lower rates have allowed consumers to refinance their mortgage loans. The Bank has seen an increase in mortgage lending volume during the quarter which also led to an increase in loans held for sale of $6.3 million. The Bank continues to sell longer term fixed-rate mortgage loans to reduce related interest rate risk.

Delinquencies and Non-performing Assets. As of June 30, 2015, our total loans delinquent 30-to-89 days were $11.5 million or 1.1% of total loans, compared to $14.9 million or 1.5% of total loans at the end of 2014.

At June 30, 2015, our non-performing assets totaled $8.7 million or 0.60% of total assets, compared to $10.7 million or 0.75% of total assets at December 31, 2014. This $2.0 million, or 19.0% decrease was primarily due to a reduction in foreclosed assets and non-performing commercial and industrial loans. The table below sets forth the amounts and categories of non-performing assets at the dates indicated.

	At
	June 30,		December 31,		Amount			Percent
	2015		2014		Change			Change
	(Dollars in thousands)
Non-accruing loans	$	6,316	$	7,212	$	(896	)		(12.42	)%
Accruing loans delinquent 90 days		207		226		(19	)		(8.41	)
Foreclosed assets		2,181		3,305		(1,124	)		(34.01	)
Total	$	8,704	$	10,743	$	(2,039	)		(18.98	)%

Our non-performing assets continued to decrease in the first half of 2015 as local economic conditions strengthened. The Bank continues to diligently monitor and write down loans that appear to have irreversible weakness. The Bank works to ensure possible problem loans have been identified and steps have been taken to reduce loss by restructuring loans to improve cash flow or by increasing collateral. In addition to the decrease in non-performing assets, the Company has seen improvement during the first half of 2015 in total classified assets. Total classified assets decreased by 18.7% from $26.2 million at December 31, 2014 to $21.3 million at June 30, 2015.

At June 30, 2015, foreclosed real estate totaled $1.7 million. The Bank has seen a decrease in this area as overall real estate owned sales volumes are up. At June 30, 2015, the Bank had 21 residential properties with a book value of $780,000. One commercial construction and development property accounts for $947,000 of the total REO balance. As of June 30, 2015, the Bank also held $455,000 in other repossessed assets, such as autos, boats, RVs and horse trailers.

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Allowance for Loan Losses. Allowance for loan losses decreased $337,000 to $12.9 million at June 30, 2015 compared to June 30, 2014, as reflected below:

	At and For the Six Months Ended
	June 30,
	2015			2014
	(Dollars in thousands)
Balance at beginning of period	$	13,168		$	13,412
Charge-offs		712			1,212
Recoveries		450			193
Net charge-offs		262			1,019
Provisions charged to operations		-			850
Balance at end of period	$	12,906		$	13,243
Ratio of net charge-offs during the period to average loans outstanding during the period		0.05	%		0.21	%
Allowance as a percentage of non-performing loans		197.85	%		216.74	%
Allowance as a percentage of total loans (end of period)		1.24	%		1.33	%

The allowance for loan losses decreased by $262,000 to $12.9 million as of June 30, 2015 as compared to December 31, 2014. The allowance for loan losses to non-performing loans as of June 30, 2015 was 197.9% compared to 177.0% as of December 31, 2014. The allowance for loan losses to total loans as of June 30, 2015 was 1.24%, compared to 1.30% as of December 31, 2014.

Deposits. Deposits decreased by $1.0 million in the first half of 2015. This decrease was primarily due to decreases in certificates of deposit of $34.1 million, partially offset by an increase in core accounts of $33.1 million. Core deposits increased to 66% of the Bank’s total deposits as of June 30, 2015 compared to 63% as of December 31, 2014 and 61% as of June 30, 2014.

	At
	June 30, 2015					December 31, 2014
	Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in thousands)
Type of Account:
Non-interest Checking	$	160,967		0.00	%	$	154,178		0.00	%
Interest-bearing NOW		255,247		0.28			253,042		0.23
Savings		128,804		0.01			124,051		0.01
Money Market		166,186		0.21			146,847		0.23
Certificates of Deposit		367,083		1.13			401,202		1.17
Total	$	1,078,287		0.47	%	$	1,079,320		0.52	%

Borrowings. Total borrowings increased to $221.9 million at June 30, 2015, up $19.2 million, or 9.5%, since year-end 2014 primarily due to a $19.6 million increase in FHLB advances. This increase was primarily to fund loan growth. Other borrowings, consisting of a bank loan and subordinated debenture, decreased $358,000 to $9.8 million at June 30, 2015 due to regular loan payments.

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In 2013, the Company borrowed $7.6 million from First Tennessee Bank, N.A. to refinance existing long-term debt. The loan was originated at a variable rate of LIBOR plus 2.80%; however the Company entered into an interest rate swap that fixed the rate of the note at 3.915% for the term of the note. The balance of the loan at June 30, 2015 was $5.7 million and it matures in December 2017.

The Company acquired $5.0 million of issuer trust preferred securities in a 2008 acquisition of MFB Corp., which had a net balance of $4.1 million at June 30, 2015 due to the purchase accounting adjustment in the acquisition. These securities mature 30 years from the date of issuance, or September 15, 2035. The securities bore a fixed rate of interest of 6.22% through July 2010 and thereafter were to reset quarterly at the prevailing three-month LIBOR rate plus 170 basis points. In December 2009, the Company entered into a cash flow hedge with FTN Financial to fix the floating portion of the issued trust preferred security at 5.15% for the next five years starting on September 15, 2010. The cash flow hedge expires September 15, 2015. The Company has had the right to redeem the trust preferred securities, in whole or in part, without penalty, since establishing the cash flow hedge.

Stockholders’ Equity. Stockholders’ equity was $131.0 million at June 30, 2015, an increase of $4.2 million from December 31, 2014. The increase was a result of net income of $5.7 million and an increase of $1.6 million due to exercising of stock options. These increases were partially offset by dividend payments of $1.8 million to common shareholders and an unrealized loss on investments of $1.6 million. The Company’s tangible book value per share as of June 30, 2015 increased to $17.36 compared to $17.03 as of December 31, 2014 and the tangible common equity ratio was 8.89% as of June 30, 2015 compared to 8.68% as of December 31, 2014. The Company’s and the Bank’s risk-based capital ratios were well in excess of “well-capitalized” levels as defined by all regulatory standards as of June 30, 2015.

Comparison of Results of Operations for the Three Months Ended June 30, 2015 and 2014.

General. Net income available to common shareholders for the three months ended June 30, 2015 was $3.2 million, or $0.44 basic and $0.43 diluted earnings per common share compared to net income available to common shareholders of $2.6 million, or $0.37 basic and $0.36 diluted earnings per common share for the three months ended June 30, 2014. Annualized return on average assets was 0.90% and return on average tangible common equity was 10.04% for the second quarter of 2015 compared to 0.75% and 9.00% respectively, for the same period of last year. 

Interest Income. Total interest income decreased $13,000, or 0.1%, to $12.73 million during the three months ended June 30, 2015 from $12.74 million during the same period in 2014, reflecting a 12 basis point decrease in the average yield on interest-earning assets during the quarter ended June 30, 2015. This decrease was primarily due to the decrease in rates in our loan portfolio.

Interest Expense. Interest expense increased $5,000, or 0.2%, to $2.2 million during the three months ended June 30, 2015. The primary reason for this increase was an increase of 23 basis points in the average rate paid on borrowings and a $22.5 million increase in average borrowings. This was partially offset by a decline of seven basis points in the average rate paid for interest-bearing deposits for the three months ended June 30, 2015, which was primarily due to continued re-pricing of deposit accounts and a changing mix of the deposits to a larger amount of transaction accounts as a percentage of interest-bearing liabilities.

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Net Interest Income. Net interest income before the provision for loan losses decreased $18,000 for the quarter ended June 30, 2015 compared to the same period in 2014. The decrease in net interest income was as a result of a 10 basis point decrease in net interest margin to 3.18%. The decrease in the margin was the result of interest earning assets, primarily loans, repricing downward faster than interest bearing liabilities. Average earning assets increased $37.3 million primarily due to an increase of $47.5 million in the loan portfolio. On a linked quarter basis, net interest income before the provision for loan losses increased $22,000 as net interest margin decreased by 2 basis points, offset by an increase in average earning assets of $12.7 million primarily due to increases in the loan portfolio. For more information on our asset/liability management especially as it relates to interest rate risk, see “Item 7A - Quantitative and Qualitative Disclosures About Market Risk” in this Form 10-K.

Provision for Loan Losses. There was no provision for loan losses in the second quarter of 2015 compared to $500,000 during last year’s comparable period. The decrease was due to management’s ongoing evaluation of the adequacy of the allowance for loan losses, which was partially attributable to net charge offs of $311,000, or 0.12% of loans on an annualized basis in the second quarter of 2015 compared to net charge offs of $627,000, or .25% of loans on an annualized basis in the second quarter of 2014. Non-performing loans to total loans at June 30, 2015 was 0.63% compared to 0.61% at June 30, 2014. Non-performing assets to total assets were 0.60% at June 30, 2015 compared to 0.94% at June 30, 2014.

Non-Interest Income. Non-interest income increased by $824,000 to $4.4 million in the second quarter of 2015 compared to $3.5 million in the second quarter of 2014.

	Three Months Ended					Amount			Percent
	6/30/2015		6/30/2014			Change			Change
	(Dollars in thousands)
Non-Interest Income:
Service fee income	$	1,464	$	1,538		$	(74	)		(4.81	)%
Net realized gain on sale of available-for-sale securities		126		211			(85	)		(40.28	)
Commissions		1,142		1,178			(36	)		(3.06	)
Net gains on sales of loans		1,121		382			739			193.46
Net servicing fees		70		3			67			2233.33
Increase in cash value of life insurance		313		304			9			2.96
Gain (loss) on sale of other real estate and repossessed assets		32		(178	)		210			(117.98	)
Other income		98		104			(6	)		(5.77	)
Total	$	4,366	$	3,542		$	824			23.26	%

Increases in non-interest income were primarily due to an increase of $739,000 in gain on sale of loans due to increased production and the acquisition of Summit Mortgage in the third quarter of 2014. Another increase was $210,000 on gain on sale of real estate and repossessed assets primarily due to the gain on the sale of one residential property in combination with decreased losses and subsequent charge-offs. On a linked quarter basis, non-interest income increased $349,000, due to increases in gain on sale of mortgage loans primarily due to an increase in mortgage activity, increases in fees and service charges on deposit accounts primarily due to seasonality in fee income, and increases in gain on sale of real estate and repossessed assets.

47

Non-Interest Expense. Non-interest expenses increased $520,000 to $10.4 million for the second quarter 2015. 

	Three Months Ended				Amount			Percent
	6/30/2015		6/30/2014		Change			Change
	(Dollars in thousands)
Non-Interest Expense:
Salaries and employee benefits	$	6,084	$	5,500	$	584			10.62	%
Net occupancy expenses		515		600		(85	)		(14.17	)
Equipment expenses		410		435		(25	)		(5.75	)
Data processing fees		428		402		26			6.47
Advertising and promotion		378		306		72			23.53
ATM and debit card expenses		347		316		31			9.81
Deposit insurance		212		270		(58	)		(21.48	)
Professional fees		383		439		(56	)		(12.76	)
Software subscriptions and maintenance		433		386		47			12.18
Other real estate and repossessed assets		87		151		(64	)		(42.38	)
Other expenses		1,096		1,048		48			4.58
Total	$	10,373	$	9,853	$	520			5.28	%

The increase in non-interest expense was primarily due to the acquisition of Summit Mortgage in the third quarter of 2014 which increased non-interest expenses $692,000, primarily in salaries and compensation. On a linked quarter basis, non-interest expense decreased $645,000 primarily due to decreases in salaries and benefit expenses of $446,000 and a decrease in professional fees of $147,000.

Income Tax Expense. Income tax expense for the second quarter 2015 increased by $182,000 compared to the same period in 2014 primarily due to the increase in taxable income. The Company’s effective tax rate decreased to 29.0% for the three months ended June 30, 2015 compared to 30.2% for the three months ended June 30, 2014 due to an increase in non-taxable income.

Comparison of Results of Operations for the Six Months Ended June 30, 2015 and 2014.

General. Net income available to common shareholders for the six months ended June 30, 2015 was $5.7 million, or $0.78 basic and $0.76 diluted earnings per common share compared to net income available to common shareholders of $4.6 million, or $0.65 basic and $0.63 diluted earnings per common share for the six months ended June 30, 2014. Annualized return on average assets was 0.80% and return on average tangible common equity was 8.98% for the first half of 2015 compared to 0.67% and 8.10% respectively, for the same period of last year. 

Interest Income. Total interest income decreased $68,000, or 0.3%, to $25.4 million during the six months ended June 30, 2015 from $25.5 million during the same period in 2014, reflecting a 12 basis point decrease in the average yield on interest-earning assets during the six months ended June 30, 2015. This decrease was primarily due to the decrease in rates in our loan portfolio in combination with a decrease in dividends on FHLB stock due to a one-time supplemental dividend paid in the first half of 2014 that was not repeated.

Interest Expense. Interest expense decreased $148,000, or 3.3%, to $4.4 million during the six months ended June 30, 2015 compared to $4.5 million during the six months ended June 30, 2014. The primary reason for this decrease was a decline of ten basis points in the average rate paid on interest-bearing accounts from 0.68% for the six months ended June 30, 2014 to 0.58% for the six months ended June 30, 2015.

48

Net Interest Income. Net interest income before the provision for loan losses increased $80,000 for the first half of 2015 compared to the same period in 2014. The increase was a result of an increase of $36.4 million in average earning assets due to an increase in the average loan portfolio of $46.1 million. This increase was partially offset by the net interest margin decreasing to 3.19% in the first half of 2015 compared to 3.27% in the first half of 2014. For more information on our asset/liability management especially as it relates to interest rate risk, see “Item 7A - Quantitative and Qualitative Disclosures About Market Risk” in this Form 10-K.

Provision for Loan Losses. The provision for loan losses for the first half of 2015 was zero compared to $850,000 during last year’s comparable period. The decrease was primarily due to a decline in net charge offs and improving asset quality. Net charge offs for the first half of 2015 equaled $262,000, or 0.05% of loans on an annualized basis compared to $1.0 million, or 0.21% in the same period of 2014.

Non-Interest Income. Non-interest income increased by $1.8 million to $8.4 million in the first half of 2015 compared to $6.5 million in the first half of 2014.

	Six Months Ended						Amount			Percent
	6/30/2015			6/30/2014			Change			Change
	(Dollars in thousands)
Non-Interest Income:
Service fee income	$	2,822		$	2,879		$	(57	)		(1.98	)%
Net realized gain on sale of available-for-sale securities		366			362			4			1.10
Commissions		2,263			2,260			3			0.13
Net gains on sales of loans		2,027			486			1,541			317.08
Net servicing fees (costs)		138			(22	)		160			(727.27	)
Increase in cash value of life insurance		601			571			30			5.25
Loss on sale of other real estate and repossessed assets		(50	)		(240	)		190			(79.17	)
Other income		216			246			(30	)		(12.20	)
Total	$	8,383		$	6,542		$	1,841			28.14	%

The increase in non-interest income for the first half of 2015 was primarily due to a $1.5 million increase in gain on sale of loans due to increased production and the acquisition of Summit Mortgage in the third quarter of 2014. The Bank also experienced a decline in loss on sale of real estate and other repossessed assets of $190,000.

49

Non-Interest Expense. Non-interest expenses increased $1.3 million to $21.4 million for the first half of 2015. 

	Six Months Ended				Amount			Percent
	6/30/2015		6/30/2014		Change			Change
	(Dollars in thousands)
Non-Interest Expense:
Salaries and employee benefits	$	12,614	$	11,372	$	1,242			10.92	%
Net occupancy expenses		1,118		1,269		(151	)		(11.90	)
Equipment expenses		863		894		(31	)		(3.47	)
Data processing fees		872		807		65			8.05
Advertising and promotion		711		607		104			17.13
ATM and debit card expenses		682		606		76			12.54
Deposit insurance		444		540		(96	)		(17.78	)
Professional fees		913		878		35			3.99
Software subscriptions and maintenance		860		802		58			7.23
Other real estate and repossessed assets		214		286		(72	)		(25.17	)
Other expenses		2,100		2,038		62			3.04
Total	$	21,391	$	20,099	$	1,292			6.43	%

The increases in non-interest expense were primarily a result of the acquisition of Summit Mortgage in the third quarter of 2014, which increased expense by $1.2 million in the first half of 2015.

Income Tax Expense. Income tax expense for the first half of 2015 increased by $415,000 compared to the same period in 2014 primarily due to the increase in taxable income. The Company’s effective tax rate decreased to 29.2% for the six months ended June 30, 2015 compared to 29.5% for the six months ended June 30, 2014 due to an increase in non-taxable income.

Liquidity

We are required to have enough cash and investments that qualify as liquid assets in order to maintain sufficient liquidity to ensure safe and sound operation. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. We are starting to see the liquidity levels decrease as we continue to diligently work to grow our loan portfolio.

Liquidity management involves the matching of cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs and the ability of the Company to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term investments at any given time will cover adequately any reasonably anticipated, immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short-term notice if needed. Our liquidity, represented by cash and cash-equivalents and investment securities, is a product of our operating, investing and financing activities.

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Liquidity management is both a daily and long-term function of the management of the Company and the Bank. It is overseen by the Asset and Liability Management Committee. The Board of Directors required the Bank to maintain a minimum liquidity ratio of 10% of deposits. At June 30, 2015, our ratio was 26.5%. The Company is currently in excess of the minimum liquidity ratio set by the Board due to a larger investment portfolio. Management continues to seek to utilize liquidity off of the investment portfolio to fund loan growth over the next few years as demand for loans increases. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer term basis, we maintain a strategy of investing in various lending products and investment securities, including mortgage-backed securities. The Bank uses its sources of funds primarily to meet its ongoing commitments, pay maturing deposits, fund deposit withdrawals and fund loan commitments.

We hold cash and investments that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operation and meet demands for funds (particularly withdrawals of deposits). At June 30, 2015, on a consolidated basis, the Company had $285.8 million in cash and investment securities available for sale and $12.5 million in loans held for sale generally available for its cash needs. We can also generate funds from borrowings, primarily FHLB advances, and, to a lesser degree, third party loans. At June 30, 2015, the Bank had the ability to borrow an additional $91.0 million in FHLB advances. In addition, we have historically sold 15- and 30-year long-term, fixed-rate mortgage loans in the secondary market in order to reduce interest rate risk and to create another source of liquidity. The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its own operating expenses (many of which are paid to the Bank), the Company is responsible for paying amounts owed on its trust preferred securities, any dividends declared to its common stockholders, and interest and principal on outstanding debt. The Company’s primary source of funds is Bank dividends, the payment of which is subject to regulatory limits. At June 30, 2015, the Company, on an unconsolidated basis, had $3.2 million in cash, interest-bearing deposits and liquid investments generally available for its cash needs.

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

We use our sources of funds primarily to meet ongoing commitments, pay maturing deposits and fund withdrawals, and to fund loan commitments. At June 30, 2015, the approved outstanding loan commitments, including unused lines of credit, amounted to $273.3 million. Certificates of deposit scheduled to mature in one year or less at June 30, 2015, totaled $162.3 million. It is management’s policy to offer deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that a majority of maturing deposits will remain with the Bank.

Except as set forth above, management is not aware of any trends, events, or uncertainties that will have, or that are reasonably likely to have a material impact on liquidity, capital resources or operations. Further, management is not aware of any current recommendations by regulatory agencies, which, if they were to be implemented, would have this effect.

51

Off-Balance Sheet Activities

In the normal course of operations, the Bank engages in a variety of financial transactions that are not recorded in our financial statements. These transactions involve varying degrees of off-balance sheet credit, interest rate and liquidity risks. These transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. We also have off-balance sheet obligations to repay borrowings and deposits. For the quarter ended June 30, 2015, we engaged in no off-balance sheet transactions likely to have a material effect on our financial condition, results of operations or cash flows. At June 30, 2015, the Bank had $117.0 million in commitments to make loans, $7.4 million in undisbursed portions of closed loans, $146.2 million in unused lines of credit and $2.7 million in standby letters of credit. In addition, on a consolidated basis, at June 30, 2015, the Company had $221.9 million in outstanding non-deposit borrowings, of which $25.2 million is due in the next twelve months.

Capital Resources

The Bank is subject to minimum capital requirements imposed by the FDIC. See ‘Item 1 - Business- How We Are Regulated - Regulatory Capital Requirements’ of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The FDIC may require the Bank to have additional capital above the specific regulatory levels if it believes the Bank is subject to increased risk due to asset problems, high interest rate risk and other risks. The Company is subject to minimum capital requirements imposed by the FRB, which are substantially similar to those imposed on the Bank, including guidelines for bank holding companies to be considered well-capitalized. The FDIC and FRB have issued revisions to these capital requirements, which would increase the levels required, particularly if the Bank and the Company want to continue paying dividends or executive bonuses. These new rules started being phased in January.

At June 30, 2015, the Bank’s regulatory capital exceeded the FDIC regulatory requirements, and the Bank was well-capitalized under regulatory prompt corrective action standards. In addition, at June 30, 2015, the Company’s capital levels exceeded the FRB’s requirements, and the Company was considered well-capitalized under FRB guidelines. Consistent with our goals to operate a sound and profitable organization, our policy is for the Bank to maintain well-capitalized status.

52

Our regulatory capital ratios at June 30, 2015 are reflected below:

	Actual Capital Levels					Minimum Regulatory Capital Levels					Minimum Required To be Considered Well- Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Leverage Capital Level(1):
MutualFirst Consolidated	$	126,207		8.9	%	$	57,047		4.0	%	$	N/A		N/A	%
MutualBank		128,014		9.0			57,064		4.0			71,330		5.0
Common Equity Tier 1 CapitalLevel (2) :
MutualFirst Consolidated	$	125,710		12.4	%	$	45,577		4.5	%	$	65,834		6.5	%
MutualBank		128,014		12.7			45,513		4.5			65,741		6.5
Tier 1 Risk-Based Capital Level (3) :
MutualFirst Consolidated	$	126,207		12.5	%	$	60,770		6.0	%	$	81,026		8.0	%
MutualBank		128,014		12.7			60,684		6.0			80,912		8.0
Total Risk-Based Capital Level (4) :
MutualFirst Consolidated	$	138,897		13.7	%	$	81,026		8.0	%	$	101,283		10.0	%
MutualBank		140,704		13.9			80,912		8.0			101,140		10.0

(1) Tier 1 Capital to Assets for Leverage Ratio of $1.4 billion for the Bank and Company at March 31, 2015.

(2) Common Equity Tier 1 Capital to Risk-Weighted Assets of $1.0 billion for the Bank and Company at March 31, 2015.

(3) Tier 1 Capital to Risk-Weighted Assets.

(4) Total Capital to Risk-Weighted Assets.

Impact of Inflation

The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the economic value of total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of the inflationary changes in the consumer price index (“CPI”) coincides with changes in interest rates. For example, the price of one or more of the components of the CPI may fluctuate considerably and thereby influence the overall CPI without having a corresponding effect on interest rates or upon the cost of those goods and services normally purchased by us. In years of high inflation and high interest rates, intermediate and long-term interest rates tend to increase, thereby adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans. In addition, higher short-term interest rates caused by inflation tend to increase the cost of funds. In other years, the opposite may occur.

Item 3 Quantitative and Qualitative Disclosures About Market Risk

Information about the Company’s asset and liability management and market and interest-rate risks is included in Item 7A of the Form 10-K for the year ended December 31, 2014, filed with the SEC on March 13, 2015.

Asset and Liability Management and Market Risk

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

53

Management continues to evaluate options to mitigate interest rate risk in an increasing interest rate environment during this cycle of extremely low interest rates. This includes shortening assets and lengthening liabilities when possible.

How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates, we monitor our interest rate risk. In monitoring interest rate risk, we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and their sensitivity to actual or potential changes in market interest rates. In order to minimize the potential for adverse effects of material and prolonged changes in interest rates on our results of operations, the Bank’s board of directors establishes asset and liability management policies to better match the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities.

These asset and liability policies are implemented by the Asset and Liability Management Committee, which is chaired by the Chief Financial Officer and is comprised of members of our senior management team. The purpose of the Asset and Liability Management Committee is to communicate, coordinate and control asset/liability management issues consistent with our business plan and board-approved policies. The committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objective of these actions is to manage assets and funding sources consistent with liquidity, capital adequacy, growth, risk and profitability goals. The Asset and Liability Management Committee generally meets monthly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to a net present value of portfolio equity analysis and income simulations. At each meeting, the Asset and Liability Management Committee recommends appropriate strategy changes based on this review. The Chief Financial Officer is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the Board of Directors, at least quarterly.

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

· originate and purchase adjustable rate mortgage loans and commercial business loans;

· originate shorter-duration consumer loans,

· manage our deposits to establish stable deposit relationships,

· acquire longer-term borrowings at fixed rates, when appropriate, to offset the negative impact of longer-term fixed rate loans in our loan portfolio, and

· limit the percentage of long-term fixed-rate loans in our portfolio.

Depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the Asset and Liability Management Committee may increase our interest rate risk position somewhat in order to maintain our net interest margin and improve earnings. We will continue to increase our emphasis on the origination of relatively short-term and/or adjustable rate loans. In addition, in an effort to avoid an increase in the percentage of long-term, fixed-rate loans in our portfolio, during the first half of 2015 we sold in the secondary market $65.8 million of primarily fixed rate, one- to four-family mortgage loans with a term to maturity of 15 years or greater.

54

If past rate movements are an indication of future changes, they usually are neither instantaneous nor do a majority of core deposits reprice at the same level as rates change. The following chart reflects the Bank’s percentage change in net interest income, over a one year time period, and capital assuming an instantaneous parallel rate shock in a range from down 100 basis points to up 400 basis points as of June 30, 2015.

	Percentage Change in
	Net Interest Income			Capital
Rate Shock:
Up 400 basis points		(9.6	)%		4.4	%
Up 300 basis points		(6.5	)%		4.1	%
Up 200 basis points		(3.6	)%		4.4	%
Up 100 basis points		(1.2	)%		3.2	%
Down 100 basis points		(4.7	)%		(14.2	)%

The following chart indicates the Company’s percentage change in net interest income and capital assuming rate movements that are not instantaneous, but change over in year.

	Percentage Change in
	Net Interest Income			Capital
Rate Shock:
Up 400 basis points		(3.7	)%		7.2	%
Up 300 basis points		(3.4	)%		5.6	%
Up 200 basis points		(2.6	)%		4.9	%
Up 100 basis points		(1.3	)%		3.3	%
Down 100 basis points		(5.5	)%		(14.2	)%

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the chart. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the tables. Therefore, the Company also considers potential interest rate shocks that are not immediate parallel shocks in various rate scenarios. Management currently believes that interest rate risk is managed appropriately in more practical rate shock scenarios than those in the chart above.

55

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and (as defined in sec Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) that is designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate. An evaluation of the Company’s disclosure controls and procedures as of June 30, 2015, was carried out under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer and several other members of our senior management preceding the filing date of this annual report. Our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2015, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Company’s management (including our Chief Executive Officer and 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.

The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within MutualFirst have been detected. These inherent limitations include the realities that judgment in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

56

Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in SEC Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 Annual Report on Form 10-K for the year ended December 31, 2014.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

None.

57

Item 6. Exhibits.

Regulation S-K Exhibit Number	Document	Reference to Prior Filing or Exhibit Number Attached Hereto
3.1	Articles of Incorporation	b
3.1a	Articles Supplementary to Charter	p
3.2	Articles Supplementary for the Series A Preferred Stock	c
3.3	Articles Supplementary for the SBLF Preferred Stock	a
3.4	Amended Bylaws	k
3.4a	Amended and Restated Bylaws	q
3.5	Articles Supplementary to the Company’s Charter re: term of appointed directors	l
4.1	Form of Common Stock Certificate	b
4.2	Form of Certificate for the Series A Preferred Stock	c
4.3	Form of Certificate for the SBLF Preferred Stock	a
9	Voting Trust Agreement	None
10.1	Employment Agreement with David W. Heeter	e
10.2	Employment Agreement with Patrick C. Botts	e
10.3	Form of Supplemental Retirement Plan Income Agreements for Patrick C. Botts and David W. Heeter	f
10.4	Named Executive Officer Salaries and Bonus Arrangements for 2013	n
10.5	Form of Director Shareholder Benefit Program Agreement, as amended, for Jerry D. McVicker	g
10.6	Form of Agreements for Executive Deferred Compensation Plan for Patrick C. Botts and David W. Heeter	f
10.7	Registrant’s 2001 Stock Option and Incentive Plan	h
10.8	Registrant’s 2001 Recognition and Retention Plan	h
10.9	Director Fee Arrangements for 2013	10.9
10.10	Director Deferred Compensation Plan	i
10.11	MutualFirst Financial, Inc. 2008 Stock Option and Incentive Plan	d
10.12	MFB Corp. 2002 Stock Option Plan	d
10.13	MFB Corp. 1997 Stock Option Plan	d
10.14	Employment Agreement with Charles J. Viater	e
10.15	Salary Continuation Agreement with Charles J. Viater	d
10.16	Loan Agreement with First Tennessee Bank National Association dated December 21, 2009.	m
10.17	Form of Incentive Stock Option Agreement for 2008 Stock Option and Incentive Plan	j
10.18	Form of Non-Qualified Stock Option Agreement for 2008 Stock Option and Incentive Plan	j

58

10.19	Small Business Lending Fund - Securities Purchase Agreement, dated August 25, 2011, between MutualFirst Financial, Inc. and the Secretary of the Treasury, with respect to the issuance and sale of the SBLF Preferred Stock	a
10.20	Repurchase Agreement dated August 25, 2011, between MutualFirst Financial, Inc. and the United States Department of the Treasury, with respect to the repurchase and redemption of the TARP Preferred Stock	a
10.21	Employment Agreement with Christopher D. Cook.	e
10.22	Agreement with Richard J. Lashley and PL Capital Group	q
11	Statement re computation of per share earnings	None
12	Statements re computation of ratios	None
14	Code of Ethics	o
16	Letter re change in certifying accountant	None
18	Letter re change in accounting principles	None
21	Subsidiaries of the registrant	21
22	Published report regarding matters submitted to vote of security holders	None
23	Consents of experts and counsel	23
24	Power of Attorney	None
31.1	Rule 13(a)-14(a) Certification (Chief Executive Officer)	31.1
31.2	Rule 13(a)-14(a) Certification (Chief Financial Officer)	31.2
32	Section 1350 Certification	32
101	Financial Statements from the Company’s Form 10-K for the year ended December 31, 2014, formatted in Extensive Business Reporting Language (XBRL); (i) Consolidated Condensed Balance Sheets as of December 31, 2014 and 2013; (ii) Consolidated Condensed Statements of Income for the Years Ended December 31, 2014, 2013 and 2012; (iii) Consolidated Condensed Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013 and 2012; (iv) Consolidated Condensed Statement of Stockholders’ Equity for the Years Ended December 31, 2014, 2013 and 2012 (v) Consolidated Condensed Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012; and (vi) Notes to Consolidated Financial Statements, December 31, 2014, 2013 and 2012, as follows:
	101.INS XBRL Instance Document	101.INS
	101.SCH XBRL Taxonomy Extension Schema Document	101.SCH
	101.CAL XBRL Taxonomy Extension Calculation Linkbase Document	101.CAL
	101.DEF XBRL Taxonomy Extension Definition Linkbase Document	101.DEF
	101.LAB XBRL Taxonomy Extension Labels Linkbase Document	101.LAB
	101.PRE XBRL Taxonomy Extension Presentation Linkbase Document	101.PRE

a	Filed as an exhibit to the Company’s Form 8-K filed on August 26, 2011 and incorporated herein by reference.
b	Filed as an exhibit to the Company’s Form S-1 registration statement filed on September 16, 1999 and incorporated herein by reference.
c	Filed as an exhibit to the Company’s Form 8-K filed on December 23, 2008 and incorporated herein by reference.

59

d	Filed as an Exhibit to the Company’s Annual Report on Form 10-K filed on March 23, 2009 and incorporated herein by reference.
e	Filed as an exhibit to the Company’s Form 10-Q filed on November 14, 2012 and incorporated herein by reference.
f	Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on March 30, 2001 and incorporated herein by reference.
g	Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on April 2, 2002 and incorporated herein by reference.
h	Filed as an Appendix to the Company’s Form S-4/A Registration Statement filed on October 19, 2001 and incorporated herein by reference.
i	Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on March 16, 2007 and incorporated herein by reference.
j	Filed as an exhibit to the Company’s Form 10-K filed on March 23, 2010 and incorporated herein by reference.
k	Filed as an exhibit to the Company’s Form 8-K filed on October 15, 2007 and incorporated herein by reference.
l	Filed as an exhibit to the Company’s Form 8-K filed on July 15, 2008 and incorporated herein by reference.
m	Filed as an exhibit to the Company’s Form 8-K filed on December 24, 2009 and incorporated herein by reference.
n	Filed as an exhibit to the Company’s Form 8-K filed on February 15, 2012 and incorporated herein by reference.
o	Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on March 15, 2004 and incorporated herein by reference.
p	Filed as an exhibit to the Company’s Form 8-K filed on July 15, 2008 and incorporated herein by reference.
q	Filed as an exhibit to the Company’s Form 8-K filed on February 27, 2015 and incorporated herein by reference.

(b) Exhibits - See list in (a)(3) and the Exhibit Index following the signature page.

(c) Financial Statements Schedules – None

60

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.

Date:  August 5, 2015	By:	/s/David W. Heeter
		David W. Heeter
		President and Chief Executive Officer
Date:  August 5, 2015	By:	/s/Christopher D. Cook
		Christopher D. Cook
		Senior Vice President, Treasurer and Chief Financial Officer

61

INDEX TO EXHIBITS

Number	Description
31.1	Rule 13(a)-14(a) Certification (Chief Executive Officer)
31.2	Rule 13(a)-14(a) Certification (Chief Financial Officer)
32	Section 1350 Certification
101	Financial Statements from the Company’s Form 10-Q for the three months ended June 30, 2015 and year ended December 31, 2014, formatted in Extensive Business Reporting Language (XBRL); (i) Consolidated Condensed Balance Sheets as of June 30, 2015 and 2014; (ii) Consolidated Condensed Statements of Income for the Three and Six Months Ended June 30, 2015 and 2014; (iii) Consolidated Condensed Statement of Stockholders’ Equity for the Period Ended June 30, 2015; (iv) Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014; and (vi) Notes to Consolidated Financial Statements for the Three and Six Months Ended June 30, 2015 and 2014, as follows:

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

62

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, David W. Heeter, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MutualFirst Financial, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2015	By:	/s/ David W. Heeter
		David W. Heeter
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Christopher D. Cook, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MutualFirst Financial, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2015	By:	/s/ Christopher D. Cook
		Christopher D. Cook
		Senior Vice President, Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32

EXHIBIT 32

SECTION 1350 CERTIFICATION

Each of the undersigned hereby certifies in his capacity as an officer of MutualFirst Financial, Inc. (the “Registrant”) that the Quarterly Report of the Registrant on Form 10-Q for the period ended June 30, 2015 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the consolidated financial condition of the Registrant at the end of such period and the results of operations of the Registrant for such period.

Date: August 5, 2015	By:	/s/ David W. Heeter
		David W. Heeter
		President and Chief Executive Officer
Date: August 5, 2015	By:	/s/ Christopher D. Cook
		Christopher D. Cook
		Senior Vice President, Treasurer and Chief Financial Officer

XML

Loans (Non-Accrual Loan, Segregated by Class of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 6,316	$ 6,316	$ 7,212	$ 5,762
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	2,049		2,023
Construction Loans [Member] | Commercial Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans			209
First Mortgage [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	3,111		3,499
Second Mortgage [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	939		658
Automobile Loan [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	2
Boat/RVs [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	139		191
Other [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	18		27
Commercial and Industrial [Member] | Commercial Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-accrual loans	$ 58		$ 605

XML

Change in Accounting Principle (Schedul of Impact of Accounting Changes) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Investment in limited partnerships	$ 477,000		$ 477,000		$ 527,000
Deferred tax asset	13,750,000		13,750,000		13,575,000
Retained earnings	53,312,000		53,312,000		49,386,000
Noninterest Income	4,366,000	$ 3,542,000	8,383,000	$ 6,542,000
Income tax expense	1,315,000	1,133,000	2,351,000	1,936,000
Income available to common stockholders	$ 3,218,000	$ 2,614,000	$ 5,698,000	$ 4,634,000
Basic	$ 0.44	$ 0.37	$ 0.78	$ 0.65
Diluted	$ 0.43	$ 0.36	$ 0.76	$ 0.63
As Previously Reported [Member]
Investment in limited partnerships					1,582,000
Deferred tax asset					13,305,000
Retained earnings					50,171,000
Noninterest Income		$ 3,414,000		$ 6,287,000
Income tax expense		1,062,000		1,794,000
Income available to common stockholders		$ 2,557,000		$ 4,521,000
Basic		$ 0.36		$ 0.63
Diluted		$ 0.35		$ 0.61
As Reported Under the New Guidance [Member]
Investment in limited partnerships					527,000
Deferred tax asset					13,575,000
Retained earnings					$ 49,386,000
Noninterest Income		$ 3,542,000		$ 6,542,000
Income tax expense		1,133,000		1,936,000
Income available to common stockholders		$ 2,614,000		$ 4,634,000
Basic		$ 0.37		$ 0.65
Diluted		$ 0.36		$ 0.63

XML

Loans (Newly Restructured Loans by Type) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total modification			$ 83,000	$ 223,000
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only
Term	$ 820,000		1,990,000
Combination		$ 250,000		250,000
Total modification	820,000	$ 250,000	1,990,000	250,000
Commercial Segment [Member] | Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Combination			134,000
Total modification			134,000
Commercial Segment [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only
Term		$ 223,000	83,000	223,000
Total modification		$ 223,000	83,000	223,000
Consumer [Member] | First Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only
Term		$ 18,000		18,000
Combination	85,000	362,000	239,000	756,000
Total modification	$ 85,000	$ 380,000	$ 239,000	$ 774,000

XML

Fair Values of Financial Instruments (Fair Value Measurement of Assets Measured at Fair Value on Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 261,506	$ 260,806
Mortgage-backed Securities, Government Sponsored Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	110,595	113,290
Collateralized Mortgage Obligations, Government Sponsored Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	85,771	97,759
Federal Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		4
Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	44,578	29,252
Corporate Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	20,562	$ 20,501
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Government Sponsored Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Fair Value, Inputs, Level 1 [Member] | Collateralized Mortgage Obligations, Government Sponsored Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Fair Value, Inputs, Level 1 [Member] | Federal Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Fair Value, Inputs, Level 1 [Member] | Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Fair Value, Inputs, Level 1 [Member] | Corporate Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	258,984	$ 258,284
Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Government Sponsored Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	110,595	113,290
Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Obligations, Government Sponsored Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	85,771	97,759
Fair Value, Inputs, Level 2 [Member] | Federal Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		4
Fair Value, Inputs, Level 2 [Member] | Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	44,578	29,252
Fair Value, Inputs, Level 2 [Member] | Corporate Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	18,040	17,979
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,522	2,522
Fair Value, Inputs, Level 3 [Member] | Corporate Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 2,522	$ 2,522

XML

Investment Securities (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2011
Investment [Line Items]
Fair value of investments reported at less than historical cost	$ 109,700,000		$ 109,700,000		$ 67,500,000
Percentage of Bank portfolio	41.90%		41.90%		25.90%
Proceeds from sales of securities - available for sale	$ 5,800,000	$ 7,700,000	$ 13,383,000	$ 23,226,000
Gross realized gain on sale of securities	126,000	253,000,000	$ 366,000	569,000,000
Gross realized losses on sale of securities		$ 42,000		$ 207,000
Percentage of recovery estimate depository institutions			10.00%
Percentage of recovery estimate insurance companies			15.00%
Pooled Trust Preferred Securities [Member]
Investment [Line Items]
Current par balance	3,800,000		$ 3,800,000
Original Par	$ 4,000,000		$ 4,000,000			$ 4,000,000

XML

Loans (Commercial and Retail Credit Exposure Credit Risk Profile by Internal Rating) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 1,042,965	$ 1,022,388
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	203,767	198,019
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	193,341	187,436
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,265	3,316
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	7,161	7,267
Commercial Segment [Member] | Construction Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	29,940	33,102
Commercial Segment [Member] | Construction Loans [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	27,596	30,422
Commercial Segment [Member] | Construction Loans [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,490	1,721
Commercial Segment [Member] | Construction Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	854	959
Commercial Segment [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	101,640	88,474
Commercial Segment [Member] | Commercial and Industrial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	99,725	84,746
Commercial Segment [Member] | Commercial and Industrial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,468	439
Commercial Segment [Member] | Commercial and Industrial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	447	2,848
Commercial Segment [Member] | Commercial and Industrial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		441
Consumer [Member] | First Mortgage [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	505,189	517,063
Consumer [Member] | First Mortgage [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	498,753	509,765
Consumer [Member] | First Mortgage [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	6,436	7,298
Consumer [Member] | Second Mortgage [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	69,640	71,073
Consumer [Member] | Second Mortgage [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	68,624	70,299
Consumer [Member] | Second Mortgage [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,016	774
Consumer [Member] | Automobile Loan [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	15,072	14,712
Consumer [Member] | Automobile Loan [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	15,063	14,704
Consumer [Member] | Automobile Loan [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	9	8
Consumer [Member] | Boat/RVs [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	112,583	94,761
Consumer [Member] | Boat/RVs [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	112,337	94,377
Consumer [Member] | Boat/RVs [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	246	384
Consumer [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,134	5,184
Consumer [Member] | Other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,109	5,125
Consumer [Member] | Other [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	25	59
Consumer [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 101,640	$ 88,474

XML

Fair Values of Financial Instruments (Estimated Fair Values of Financial Instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Assets, carrying amount
Cash and cash equivalents	$ 24,269	$ 29,575	$ 28,734	$ 25,285
FHLB stock, carrying amount	9,810	11,964
Interest receivable, carrying amount	4,054	3,730
Loans held for sale, carrying amount	12,486	6,140
Loans net, carrying amount	1,026,717	1,003,518
Liabilities, carrying amount
Deposits, carrying amount	1,078,287	1,079,320
FHLB advances, carrying amount	212,042	192,442
Other borrowings, carrying amount	9,816	10,174
Interest payable, carrying amount	248	223
Assets
Cash and cash equivalents	24,269	29,575
FHLB stock, fair value	9,810	11,964
Interest receivable, fair value	4,054	3,730
Loans held for sale, fair value	12,541	6,220
Loans, fair value	1,019,952	1,006,233
Liabilities, fair value
Deposits, fair value	1,078,926	1,050,295
FHLB advances, fair value	211,706	191,995
Other borrowings, fair value	9,868	10,283
Interest payable, fair value	248	223
Fair Value, Inputs, Level 1 [Member]
Assets
Cash and cash equivalents	24,269	29,575
Liabilities, fair value
Deposits, fair value	711,204	648,314
Fair Value, Inputs, Level 2 [Member]
Assets
FHLB stock, fair value	9,810	11,964
Interest receivable, fair value	4,054	3,730
Loans held for sale, fair value	12,541	6,220
Liabilities, fair value
FHLB advances, fair value	211,706	191,995
Other borrowings, fair value	9,868	10,283
Interest payable, fair value	248	223
Fair Value, Inputs, Level 3 [Member]
Assets
Loans, fair value	1,019,952	1,006,233
Liabilities, fair value
Deposits, fair value	$ 367,722	$ 401,981

XML

Loans (Troubled Debts Restructured Defaulted) (Details) - Jun. 30, 2014 - Consumer [Member]	USD ($) loan	USD ($) loan
First Mortgage [Member]
Financing Receivable, Modifications [Line Items]
No. of Loans | loan	1	3
Post-Modification Outstanding Recorded Balance	$ 340,000	$ 432,000
Second Mortgage [Member]
Financing Receivable, Modifications [Line Items]
No. of Loans | loan		1
Post-Modification Outstanding Recorded Balance		$ 23,000

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2015

Basis of Presentation

Basis of Presentation

Note 1:Basis of Presentation

The consolidated condensed financial statements include the accounts ofMutualFirst Financial, Inc. (MutualFirst or the “Company”), its wholly owned subsidiary MutualBank, an Indiana commercial bank (“Mutual” or the “Bank”), Mutual’s wholly owned subsidiaries, First MFSB Corporation, Mishawaka Financial Services, Summit Service Corp. and the wholly owned subsidiary of Summit Service Corp., Summit Mortgage Inc. (“Summit”), 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 the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 13, 2015.

The interim consolidated condensed financial statements at and for the three and six months ended June 30, 2015 and 2014, 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, 2014 has been derived from the Audited Consolidated Balance Sheet of the Company as of that date.

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Loans (Activity in Allowance for Loan Losses by Portfolio Segment) (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, Beginning of period	$ 13,217,000	$ 13,370,000	$ 13,168,000	$ 13,412,000	$ 13,412,000
Provision charged (credited) to expense		500,000		850,000	850,000
Losses charged off	(502,000)	(765,000)	(712,000)	(1,212,000)	(1,882,000)
Recoveries	191,000	138,000	450,000	193,000	788,000
Allowance for loan losses, End of period	12,906,000	13,243,000	12,906,000	13,243,000	13,168,000
Allowance for loan losses, collectively evaluated for impairment, Ending balance						$ 12,906,000	$ 13,168,000	$ 13,243,000
Total allowance for loan losses	13,217,000	13,370,000	13,168,000	13,412,000	13,412,000	12,906,000	13,168,000	13,243,000
Loans, individually evaluated for impairment, Ending balance						7,645,000
Loans, collectively evaluated for impairment, Ending balance						1,035,320,000
Total loans receivable						1,042,965,000	1,022,388,000
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, Beginning of period	6,894,000	7,899,000	7,085,000	8,148,000	8,148,000
Provision charged (credited) to expense	(201,000)	78,000	(597,000)	(187,000)	(1,273,000)
Losses charged off		(244,000)		(244,000)	(289,000)
Recoveries	132,000	30,000	337,000	46,000	499,000
Allowance for loan losses, End of period	6,825,000	7,763,000	6,825,000	7,763,000	7,085,000
Allowance for loan losses, collectively evaluated for impairment, Ending balance						6,825,000	7,085,000	7,763,000
Total allowance for loan losses	6,894,000	7,899,000	7,085,000	8,148,000	8,148,000	6,825,000	7,085,000	7,763,000
Loans, individually evaluated for impairment, Ending balance						6,042,000
Loans, collectively evaluated for impairment, Ending balance						329,305,000
Total loans receivable						335,347,000
Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, Beginning of period	3,567,000	3,305,000	3,471,000	3,124,000	3,124,000
Provision charged (credited) to expense	48,000	208,000	236,000	465,000	888,000
Losses charged off	(297,000)	(170,000)	(390,000)	(250,000)	(572,000)
Recoveries		1,000	1,000	5,000	31,000
Allowance for loan losses, End of period	3,318,000	3,344,000	3,318,000	3,344,000	3,471,000
Allowance for loan losses, collectively evaluated for impairment, Ending balance						3,318,000	3,471,000	3,344,000
Total allowance for loan losses	3,567,000	3,305,000	3,471,000	3,124,000	3,124,000	3,318,000	3,471,000	3,344,000
Loans, individually evaluated for impairment, Ending balance						1,603,000
Loans, collectively evaluated for impairment, Ending balance						503,586,000
Total loans receivable						505,189,000
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, Beginning of period	2,756,000	2,166,000	2,612,000	2,140,000	2,140,000
Provision charged (credited) to expense	153,000	214,000	361,000	572,000	1,235,000
Losses charged off	(205,000)	(351,000)	(322,000)	(718,000)	(1,021,000)
Recoveries	59,000	107,000	112,000	142,000	258,000
Allowance for loan losses, End of period	2,763,000	2,136,000	2,763,000	2,136,000	2,612,000
Allowance for loan losses, collectively evaluated for impairment, Ending balance						2,763,000	2,612,000	2,136,000
Total allowance for loan losses	$ 2,756,000	$ 2,166,000	$ 2,612,000	$ 2,140,000	$ 2,140,000	2,763,000	$ 2,612,000	$ 2,136,000
Loans, collectively evaluated for impairment, Ending balance						202,429,000
Total loans receivable						$ 202,429,000

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Investment Securities (Debt Securities for which Credit Loss was Recognized in Income and Other Losses Recorded in Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2014
Investment Securities [Abstract]
Credit losses on debt securities held, beginning of period	$ 109	$ 1,205	$ 1,205
Reductions related to actual losses incurred		(500)	(500)
Credit losses on debt securities held, end of period	$ 109	$ 705	$ 705

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Investment Securities (Investments Gross Unrealized Losses and Fair Value in Continuous Unrealized Loss Position) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Total, Fair Value	$ 109,700	$ 67,500
Mortgage-backed Securities, Government Sponsored Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	44,845	1,069
Less than 12 months, Unrealized Losses	(509)	(9)
12 months or more, Fair Value		19,580
12 months or more, Unrealized Losses		(80)
Total, Fair Value	44,845	20,649
Total, Unrealized Losses	(509)	(89)
Collateralized Mortgage Obligations, Government Sponsored Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	23,968	5,075
Less than 12 months, Unrealized Losses	(211)	(40)
12 months or more, Fair Value	23,215	34,159
12 months or more, Unrealized Losses	(531)	(796)
Total, Fair Value	47,183	39,234
Total, Unrealized Losses	(742)	(836)
Municipals [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	14,646
Less than 12 months, Unrealized Losses	(477)
12 months or more, Fair Value	490	631
12 months or more, Unrealized Losses	(3)	(7)
Total, Fair Value	15,136	631
Total, Unrealized Losses	(480)	(7)
Corporate Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
12 months or more, Fair Value	2,522	6,995
12 months or more, Unrealized Losses	(1,280)	(1,306)
Total, Fair Value	2,522	6,995
Total, Unrealized Losses	(1,280)	(1,306)
Total temporarily impaired securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	83,459	6,144
Less than 12 months, Unrealized Losses	(1,197)	(49)
12 months or more, Fair Value	26,227	61,365
12 months or more, Unrealized Losses	(1,814)	(2,189)
Total, Fair Value	109,686	67,509
Total, Unrealized Losses	$ (3,011)	$ (2,238)

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Loans (Non-Performing Assets Excluding Restructured Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014
Loans [Abstract]
Non-accrual loans	$ 6,316	$ 6,316	$ 7,212	$ 5,762
Accruing loans 90 days + past due	207		$ 226	348
Total non-performing loans	6,523			6,110
Other real estate owned	1,726			6,719
Other repossessed assets	455			379
Total non-performing assets	$ 8,704			$ 13,208

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Investment Securities (Pooled Trust Preferred Collateralized Debt Obligations) (Details) $ in Thousands		6 Months Ended		12 Months Ended
		Jun. 30, 2015 USD ($) entity	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2011 USD ($)
Fair Value		$ 261,506		$ 260,806
Unrealized gain (loss)		(3,011)		$ (2,238)
Realized losses YTD		366	$ 362
Pooled Trust Preferred Securities [Member]
Original Par		4,000			$ 4,000
Book Value		3,802
Fair Value		2,522
Unrealized gain (loss)		$ (1,280)
Pooled Trust Preferred Securities [Member] | Alesco Preferred Funding IX [Member]
Class		A2A
Original Par		$ 1,000
Book Value		911
Fair Value		548
Unrealized gain (loss)		$ (363)
Number of Banks / Insurance Cos. Currently Performing | entity		42
Total Number of Banks and Insurance Cos. In Issuance (Unique) | entity		51
Actual Deferrals/Defaults (as a % of original collateral)		10.04%
Total Projected Defaults (as a % of performing collateral)	[1]	12.95%
Excess subordination (after taking into account best estimate of future deferrals/defaults)	[2]	55.14%
Pooled Trust Preferred Securities [Member] | U.S. Capital Funding I [Member]
Class		B1
Original Par		$ 3,000
Book Value		2,891
Fair Value		1,974
Unrealized gain (loss)		$ (917)
Number of Banks / Insurance Cos. Currently Performing | entity		28
Total Number of Banks and Insurance Cos. In Issuance (Unique) | entity		33
Actual Deferrals/Defaults (as a % of original collateral)		9.44%
Total Projected Defaults (as a % of performing collateral)	[1]	7.02%
Excess subordination (after taking into account best estimate of future deferrals/defaults)	[2]	10.33%
Minimum | Pooled Trust Preferred Securities [Member] | Alesco Preferred Funding IX [Member]
Class		BB+
Minimum | Pooled Trust Preferred Securities [Member] | U.S. Capital Funding I [Member]
Class		B3

[1] A 10% recovery is applied to all projected defaults by depository institutions. A 15% recovery is applied to all projected defaults by insurance companies. No recovery is applied to current defaults.

[2] Excess subordination represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences any credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages.

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Accumulated Other Comprehensive Income (Loss) (Components of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Abstract]
Net unrealized gain (loss) on securities available-for-sale	$ 2,428	$ 4,933
Net unrealized loss on securities available-for-sale for which a portion of an other-than-temporary impairment has been recognized in income	(917)	(917)
Net unrealized loss on derivative used for cash flow hedges	(52)	(109)
Net unrealized loss relating to defined benefit plan liability	(109)	(109)
Accumulated other comprehensive income before tax	1,350	3,798
Tax expense	576	1,420
Net of tax amount	$ 774	$ 2,378

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Consolidated Condensed Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating Activities
Net income	$ 5,698	$ 4,634
Items not requiring cash
Provision for loan losses		850
Depreciation and amortization	2,257	962
Deferred income tax	670	1,260
Loans originated for sale	(72,303)	(18,990)
Proceeds from sales of loans held for sale	67,785	15,770
Gain on sale of loans held for sale	(2,027)	(486)
Gain on sale of securities - available for sale	(366)	(362)
Loss on sale of other real estate and repossessed assets	50	240
Change in
Interest receivable and other assets	72	774
Interest payable and other liabilities	(30)	1,045
Cash value of life insurance	(601)	(571)
Other adjustments	71	170
Net cash provided by operating activities	1,276	5,296
Purchases of securities
Available for sale	(35,886)	(34,623)
Proceeds from maturities and paydowns of securities
Available for sale	19,173	14,800
Proceeds from sales of securities - available for sale	13,383	23,226
Redemption of Federal Home Loan Bank stock	2,154
Net change in loans	(24,297)	(16,589)
Purchases of premises and equipment	(704)	(481)
Proceeds from real estate owned sales	1,585	2,414
Net cash used in investing activities	(24,592)	(11,253)
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits	33,087	16,512
Certificates of deposit	(34,119)	(50,296)
Proceeds from FHLB advances	193,700	320,200
Repayments of FHLB advances	(174,100)	(276,082)
Repayments of other borrowings	(379)	(379)
Cash dividends	(1,772)	(999)
Stock options exercised	1,593	450
Net cash provided by financing activities	18,010	9,406
Net Change in Cash and Cash Equivalents	(5,306)	3,449
Cash and Cash Equivalents, Beginning of Period	29,575	25,285
Cash and Cash Equivalents, End of Period	24,269	28,734
Additional Cash Flows Information
Interest paid	4,332	4,432
Income tax paid	1,300	500
Transfers from loans to foreclosed real estate	436	1,148
Mortgage servicing rights capitalized	$ 200	$ 113

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Accumulated Other Comprehensive Income (Loss) (Reclassification out of Accumulated Other Comprehensive Income (Loss) Alternate) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Related income tax expense	$ (1,315,000)	$ (1,133,000)	$ (2,351,000)	$ (1,936,000)
Net Income Available to Common Shareholders	3,218,000	2,614,000	5,698,000	4,634,000
Reclassification out of AOCI [Member] | Accumulated Net Unrealized Investment Gain (Loss) [Member]
Non-interest income	126,000	211,000	366,000	362,000
Related income tax expense	(43,000)	(72,000)	(124,000)	(123,000)
Net Income Available to Common Shareholders	$ 83,000	$ 139,000	$ 242,000	$ 239,000

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Loans (Age Analysis of Past Due Loans Segregated by Class of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 15,296	$ 18,269
Current	1,027,669	1,004,119
Total loans receivable	1,042,965	1,022,388
Total Loans > 90 Days or More and Accruing	207	226	$ 348
30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	10,460	12,419
60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,051	2,559
90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	3,785	3,291
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2,899	2,481
Current	200,868	195,538
Total loans receivable	203,767	198,019
Commercial Real Estate [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,894	1,308
Commercial Real Estate [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	206	848
Commercial Real Estate [Member] | 90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	799	325
Commercial Segment [Member] | Construction Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		209
Current	29,940	32,893
Total loans receivable	29,940	33,102
Commercial Segment [Member] | Construction Loans [Member] | 90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		209
Commercial Segment [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans receivable	101,640	88,474
Consumer [Member] | First Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	9,570	11,524
Current	495,619	505,539
Total loans receivable	505,189	517,063
Total Loans > 90 Days or More and Accruing	207	226
Consumer [Member] | First Mortgage [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	6,541	8,144
Consumer [Member] | First Mortgage [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	611	1,220
Consumer [Member] | First Mortgage [Member] | 90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2,418	2,160
Consumer [Member] | Second Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,452	1,126
Current	68,188	69,947
Total loans receivable	69,640	71,073
Consumer [Member] | Second Mortgage [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	986	969
Consumer [Member] | Second Mortgage [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	68	130
Consumer [Member] | Second Mortgage [Member] | 90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	398	27
Consumer [Member] | Automobile Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	45	65
Current	15,027	14,647
Total loans receivable	15,072	14,712
Consumer [Member] | Automobile Loan [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	41	65
Consumer [Member] | Automobile Loan [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2
Consumer [Member] | Automobile Loan [Member] | 90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2
Consumer [Member] | Boat/RVs [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	622	1,048
Current	111,961	93,713
Total loans receivable	112,583	94,761
Consumer [Member] | Boat/RVs [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	390	775
Consumer [Member] | Boat/RVs [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	100	158
Consumer [Member] | Boat/RVs [Member] | 90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	132	115
Consumer [Member] | Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	71	133
Current	5,063	5,051
Total loans receivable	5,134	5,184
Consumer [Member] | Other [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	39	92
Consumer [Member] | Other [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	20	27
Consumer [Member] | Other [Member] | 90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	12	14
Consumer [Member] | Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	637	1,683
Current	101,003	86,791
Total loans receivable	101,640	88,474
Consumer [Member] | Commercial and Industrial [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	569	1,066
Consumer [Member] | Commercial and Industrial [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	44	176
Consumer [Member] | Commercial and Industrial [Member] | 90 Days or More Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 24	$ 441

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Consolidated Condensed Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 6,745	$ 7,475
Interest-bearing demand deposits	17,524	22,100
Cash and cash equivalents	24,269	29,575
Investment securities available for sale	261,506	260,806
Loans held for sale	12,486	6,140
Loans, net of allowance for loan losses of $12,906 and $13,168, at June 30, 2015 and December 31, 2014, respectively	1,026,717	1,003,518
Premises and equipment, net	30,818	30,939
Federal Home Loan Bank stock	9,810	11,964
Investment in limited partnerships	477	527
Deferred tax asset	13,750	13,575
Cash value of life insurance	51,602	51,002
Goodwill	1,800	1,800
Core deposit and other intangibles	825	1,105
Other assets	11,374	12,472
Total assets	1,445,434	1,423,423
Deposits
Noninterest-bearing	160,967	154,178
Interest-bearing	917,320	925,142
Total deposits	1,078,287	1,079,320
Federal Home Loan Bank advances	212,042	192,442
Other borrowings	9,816	10,174
Other liabilities	14,337	14,735
Total liabilities	$ 1,314,482	$ 1,296,671
Commitments and Contingencies
Stockholders' Equity
Common stock, $.01 par value Authorized - 20,000,000 shares Issued and outstanding - 7,394,061 and 7,236,002 shares at June 30, 2015 and December 31, 2014, respectively	$ 74	$ 72
Additional paid-in capital	76,792	74,916
Retained earnings	53,312	49,386
Accumulated other comprehensive income	774	2,378
Total stockholders' equity	130,952	126,752
Total liabilities and stockholders' equity	$ 1,445,434	$ 1,423,423

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Loans (Troubled Debts Restructured) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) loan	Jun. 30, 2014 USD ($) loan	Jun. 30, 2015 USD ($) loan	Jun. 30, 2014 USD ($) loan
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
No. of Loans | loan			1	2
Pre-Modification Outstanding Recorded Balance			$ 88,000	$ 193,000
Post-Modification Outstanding Recorded Balance			$ 83,000	$ 223,000
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
No. of Loans | loan	1	1	3	1
Pre-Modification Outstanding Recorded Balance	$ 820,000	$ 250,000	$ 1,992,000	$ 250,000
Post-Modification Outstanding Recorded Balance	$ 820,000	$ 250,000	$ 1,990,000	250,000
Commercial Segment [Member] | Construction Loans [Member]
Financing Receivable, Modifications [Line Items]
No. of Loans | loan			1
Pre-Modification Outstanding Recorded Balance			$ 155,000
Post-Modification Outstanding Recorded Balance			134,000
Commercial Segment [Member] | Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
No. of Loans | loan		2
Pre-Modification Outstanding Recorded Balance		$ 193,000
Post-Modification Outstanding Recorded Balance		$ 223,000	$ 83,000	$ 223,000
Consumer [Member] | First Mortgage [Member]
Financing Receivable, Modifications [Line Items]
No. of Loans | loan	2	7	5	10
Pre-Modification Outstanding Recorded Balance	$ 86,000	$ 367,000	$ 242,000	$ 748,000
Post-Modification Outstanding Recorded Balance	$ 85,000	$ 380,000	$ 239,000	$ 774,000

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Consolidated Condensed Statement of Stockholders' Equity - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands	Common Stock [Member]	Additional paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Beginning Balance (As Previously Reported [Member]) at Dec. 31, 2014	$ 72	$ 74,916	$ 50,171	$ 2,378	$ 127,537
Beginning Balance at Dec. 31, 2014	72	74,916	49,386	2,378	126,752
Net income			5,698		5,698
Other comprehensive loss, net of taxes				(1,604)	(1,604)
Stock options, exercised	2	1,591			1,593
Tax benefit on stock options		285			285
Cash dividends, common stock			(1,772)		(1,772)
Ending Balance at Jun. 30, 2015	$ 74	$ 76,792	$ 53,312	$ 774	$ 130,952

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Fair Values of Financial Instruments (Fair Value Measurement of Assets Measured at Fair Value on Nonrecurring Basis) (Details) - Other real estate owned/Foreclosed real estate - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	$ 57,000	$ 1,280,000
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	$ 57,000	$ 1,280,000

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Change in Accounting Principle (Tables)

6 Months Ended

Jun. 30, 2015

Change in Accounting Principle [Abstract]

Schedule of Impact of Accounting Changes

The following table summarizes the balance sheet and income statement amounts impacted by the change at the dates or for the periods indicated:

			December 31,
			2014
Investment in limited partnerships
	As previously reported	$	1,582
	As reported under the new guidance		527
Deferred tax asset
	As previously reported		13,305
	As reported under the new guidance		13,575
Retained earnings
	As previously reported		50,171
	As reported under the new guidance		49,386
			Three Months Ended		Six Months Ended
			June 30,		June 30,
			2014		2014
Non-interest income
	As previously reported	$	3,414	$	6,287
	As reported under the new guidance		3,542		6,542
Income tax expense
	As previously reported		1,062		1,794
	As reported under the new guidance		1,133		1,936
Net income
	As previously reported		2,557		4,521
	As reported under the new guidance		2,614		4,634
Basic Earnings Per Share
	As previously reported		0.36		0.63
	As reported under the new guidance		0.37		0.65
Diluted Earnings Per Share
	As previously reported		0.35		0.61
	As reported under the new guidance		0.36		0.63

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Fair Values of Financial Instruments (Quantitative Information about Unobservable Inputs used in Recurring and Nonrecurring Level Three Fair Value Measurements) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Pooled Trust Preferred Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 2,522	$ 2,522
Valuation Technique	Discounted cash flow	Discounted cash flow
Constant prepayment rate	2.00%	2.00%
Cumulative projected prepayments	40.00%	40.00%
Discount rate	8.00%	8.00%
Pooled Trust Preferred Securities | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Probability of default	1.70%	1.70%
Projected cures given deferral	0.00%	0.00%
Loss severity	34.20%	34.20%
Pooled Trust Preferred Securities | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Probability of default	1.80%	1.80%
Projected cures given deferral	15.00%	15.00%
Loss severity	39.80%	39.80%
Other real estate owned/Foreclosed real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 57	$ 1,280
Valuation Technique	Third party valuations	Third party valuations
Other real estate owned/Foreclosed real estate | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount to reflect realizable value less estimated selling costs	29.80%	24.40%
Other real estate owned/Foreclosed real estate | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount to reflect realizable value less estimated selling costs	93.00%	36.70%

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Earnings Per Share (Schedule of Earnings per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Basic Earnings Per Share
Net income	$ 3,218	$ 2,614	$ 5,698	$ 4,634
Weighted-Average Shares number of common shares, basic	7,383,435	7,133,233	7,348,773	7,126,082
Earnings per share, basic	$ 0.44	$ 0.37	$ 0.78	$ 0.65
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$ 3,218	$ 2,614	$ 5,698	$ 4,634
Weighted-Average Shares, effect of dilutive securities stock option	164,299	227,167	179,633	230,680
Weighted-Average Shares income available to common stockholders and assumed conversions, diluted	7,547,734	7,360,400	7,528,406	7,356,762
Earnings per share, diluted	$ 0.43	$ 0.36	$ 0.76	$ 0.63

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Consolidated Condensed Statement of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2014
Statement Of Stockholders Equity [Abstract]
Cumulative effect of change in accounting principle for low income housing tax credits, tax	$ 270

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Consolidated Condensed Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Statement Of Financial Position [Abstract]
Allowance for loan losses	$ 12,906,000	$ 13,168,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, Authorized	20,000,000	20,000,000
Common stock, shares Issued	7,394,061	7,236,002
Common stock, shares outstanding	7,394,061	7,236,002

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

Earnings per share were computed as follows:

	Three Months Ended June 30,
	2015					2014
		Income	Weighted- Average Shares		Per-Share Amount		Income	Weighted- Average Shares		Per-Share Amount
Basic Earnings Per Share
Net income	$	3,218	7,383,435	$	0.44	$	2,614	7,133,233	$	0.37
Effect of Dilutive Securities
Stock options		-	164,299				-	227,167
Diluted Earnings Per Share
Net income available and assumed conversions	$	3,218	7,547,734	$	0.43	$	2,614	7,360,400	$	0.36

	Six Months Ended June 30,
	2015					2014
		Income	Weighted- Average Shares		Per-Share Amount		Income	Weighted- Average Shares		Per-Share Amount
Basic Earnings Per Share
Net income	$	5,698	7,348,773	$	0.78	$	4,634	7,126,082	$	0.65
Effect of Dilutive Securities
Stock options		-	179,633				-	230,680
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$	5,698	7,528,406	$	0.76	$	4,634	7,356,762	$	0.63

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 30, 2015
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Trading Symbol	mfsf
Entity Registrant Name	MUTUALFIRST FINANCIAL INC
Entity Central Index Key	0001094810
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		7,394,061

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2015

Investment Securities [Abstract]

Amortized Cost and Fair Values of Securities

The amortized costs and approximate fair values, together with gross unrealized gains and losses on securities, are as follows:

	June 30, 2015
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for Sale Securities
Mortgage-backed securities
Government-sponsored agencies	$	109,031	$	2,073	$	(509)	$	110,595
Collateralized mortgage obligations
Government-sponsored agencies		85,629		884		(742)		85,771
Municipal obligations		43,558		1,500		(480)		44,578
Corporate obligations		21,777		65		(1,280)		20,562
Total investment securities	$	259,995	$	4,522	$	(3,011)	$	261,506

	December 31, 2014
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for Sale Securities
Mortgage-backed securities
Government-sponsored agencies	$	110,452	$	2,927	$	(89)	$	113,290
Collateralized mortgage obligations
Government-sponsored agencies		97,325		1,270		(836)		97,759
Federal agencies		4		-		-		4
Municipal obligations		27,246		2,013		(7)		29,252
Corporate obligations		21,763		44		(1,306)		20,501
Total investment securities	$	256,790	$	6,254	$	(2,238)	$	260,806

Amortized Cost and Fair Value of Available for Sale Securities by Contractual Maturity

	Available for Sale
Description Securities	Amortized Cost		Fair Value
Security obligations due
Within one year		4,488		4,509
One to five years	$	14,491	$	14,577
Five to ten years		2,214		2,373
After ten years		44,142		43,681
		65,335		65,140
Mortgage-backed securities
Government-sponsored agencies		109,031		110,595
Collateralized mortgage obligations
Government-sponsored agencies		85,629		85,771
Totals	$	259,995	$	261,506

Investments Gross Unrealized Losses and Fair Value in Continuous Unrealized Loss Position

The following tables show the gross unrealized losses and fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2015 and December 31, 2014:

	June 30, 2015
	Less than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for Sale
Mortgage-backed securities
Government-sponsored agencies	$	44,845	$	(509)	$	-	$	-	$	44,845	$	(509)
Collateralized mortgage obligations
Government-sponsored agencies		23,968		(211)		23,215		(531)		47,183		(742)
Municipal obligations		14,646		(477)		490		(3)		15,136		(480)
Corporate obligations		-		-		2,522		(1,280)		2,522		(1,280)
Total temporarily impaired securities	$	83,459	$	(1,197)	$	26,227	$	(1,814)	$	109,686	$	(3,011)

	December 31, 2014
	Less than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for Sale
Mortgage-backed securities
Government-sponsored agencies	$	1,069	$	(9)	$	19,580	$	(80)	$	20,649	$	(89)
Collateralized mortgage obligations
Government-sponsored agencies		5,075		(40)		34,159		(796)	$	39,234	$	(836)
Federal agencies										-		-
Municipal obligations		-		-		631		(7)		631		(7)
Corporate obligations		-		-		6,995		(1,306)		6,995		(1,306)
Total temporarily impaired securities	$	6,144	$	(49)	$	61,365	$	(2,189)	$	67,509	$	(2,238)

Debt Securities for which Credit Loss was Recognized in Income and Other Losses Recorded in Other Comprehensive Income

The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income.

	Accumulated Credit Losses
	Three Months Ended
	June 30,
	2015		2014
Credit losses on debt securities held
Beginning of period	$	109	$	1,205
Reductions related to actual losses incurred		-		(500)
As of June 30,	$	109	$	705

	Accumulated Credit Losses
	Six Months Ended
	June 30,
	2015		2014
Credit losses on debt securities held
Beginning of year	$	109	$	1,205
Reductions related to actual losses incurred		-		(500)
As of June 30,	$	109	$	705

Pooled Trust Preferred Collateralized Debt Obligations

The following table provides additional information related to the Bank’s investment in pooled trust preferred securities as of June 30, 2015:

Deal Name	Class	Original Par		Book Value		Fair Value		Unrealized loss		Realized Losses YTD		Lowest Current Rating	Number of Banks / Insurance Cos. Currently Performing	Total Number of Banks and Insurance Cos. In Issuance (Unique)	Actual Deferrals/ Defaults (as a % of original collateral)		Total Projected Defaults (as a % of performing collateral) (1)		Excess subordination (after taking into account best estimate of future deferrals/ defaults) (2)
	(Dollars in Thousands)
Alesco Preferred Funding IX	A2A		1,000		911		548		(363)		-	BB+	42	51	10.04	%	12.95	%	55.14	%
U.S. Capital Funding I	B1		3,000		2,891		1,974		(917)		-	B3	28	33	9.44	%	7.02	%	10.33	%
		$	4,000	$	3,802	$	2,522	$	(1,280)	$	-

(1)  A  10% recovery is applied to all projected defaults by depository institutions. A 15% recovery is applied to all projected defaults by insurance companies.  No recovery is applied to current defaults.

(2)  Excess subordination represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences any credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages.

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Consolidated Condensed Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Interest and Dividend Income
Loans receivable	$ 10,919	$ 10,817	$ 21,784	$ 21,584
Investment securities	1,692	1,793	3,362	3,560
Federal Home Loan Bank stock	118	131	259	331
Deposits with financial institutions	2	3	9	7
Total interest and dividend income	12,731	12,744	25,414	25,482
Interest Expense
Deposits	1,334	1,527	2,706	3,227
Federal Home Loan Bank advances	724	516	1,390	990
Other	133	143	261	288
Total interest expense	2,191	2,186	4,357	4,505
Net Interest Income	10,540	10,558	21,057	20,977
Provision for loan losses		500		850
Net Interest Income After Provision for Loan Losses	10,540	10,058	21,057	20,127
Non-interest Income
Service fee income	1,464	1,538	2,822	2,879
Net realized gain on sales of available-for-sale securities	126	211	366	362
Commissions	1,142	1,178	2,263	2,260
Net gains on sales of loans	1,121	382	2,027	486
Net servicing fees (expense)	70	3	138	(22)
Increase in cash value of life insurance	313	304	601	571
Gain (loss) on sale of other real estate and repossessed assets	32	(178)	(50)	(240)
Other income	98	104	216	246
Total non-interest income	4,366	3,542	8,383	6,542
Non-interest Expenses
Salaries and employee benefits	6,084	5,500	12,614	11,372
Net occupancy expenses	515	600	1,118	1,269
Equipment expenses	410	435	863	894
Data processing fees	428	402	872	807
Advertising and promotion	378	306	711	607
ATM and debit card expenses	347	316	682	606
Deposit insurance	212	270	444	540
Professional fees	383	439	913	878
Software subscriptions and maintenance	433	386	860	802
Other real estate and repossessed assets	87	151	214	286
Other expenses	1,096	1,048	2,100	2,038
Total non-interest expenses	10,373	9,853	21,391	20,099
Income Before Income Tax	4,533	3,747	8,049	6,570
Income tax expense	1,315	1,133	2,351	1,936
Net Income Available to Common Shareholders	$ 3,218	$ 2,614	$ 5,698	$ 4,634
Earnings Per Share
Basic	$ 0.44	$ 0.37	$ 0.78	$ 0.65
Diluted	0.43	0.36	0.76	0.63
Dividends per common share	$ 0.12	$ 0.08	$ 0.24	$ 0.14

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Investment Securities

6 Months Ended

Jun. 30, 2015

Investment Securities [Abstract]

Investment Securities

Note 4: Investment Securities

The amortized costs and approximate fair values, together with gross unrealized gains and losses on securities, are as follows:

	June 30, 2015
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for Sale Securities
Mortgage-backed securities
Government-sponsored agencies	$	109,031	$	2,073	$	(509)	$	110,595
Collateralized mortgage obligations
Government-sponsored agencies		85,629		884		(742)		85,771
Federal agencies		4		-		-		4
Municipal obligations		43,554		1,500		(480)		44,574
Corporate obligations		21,777		66		(1,281)		20,562
Total investment securities	$	259,995	$	4,523	$	(3,012)	$	261,506

	December 31, 2014
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for Sale Securities
Mortgage-backed securities
Government-sponsored agencies	$	110,452	$	2,927	$	(89)	$	113,290
Collateralized mortgage obligations
Government-sponsored agencies		97,325		1,270		(836)		97,759
Federal agencies		4		-		-		4
Municipal obligations		27,246		2,013		(7)		29,252
Corporate obligations		21,763		44		(1,306)		20,501
Total investment securities	$	256,790	$	6,254	$	(2,238)	$	260,806

The amortized cost and fair value of securities available for sale at June 30, 2015, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale
Description Securities	Amortized Cost		Fair Value
Security obligations due
Within one year		4,488		4,509
One to five years	$	14,491	$	14,577
Five to ten years		2,214		2,373
After ten years		44,142		43,681
		65,335		65,140
Mortgage-backed securities
Government-sponsored agencies		109,031		110,595
Collateralized mortgage obligations
Government-sponsored agencies		85,629		85,771
Totals	$	259,995	$	261,506

Proceeds from sales of securities available for sale for the three and six months ended June 30, 2015and 2014  were $5.8 million and$13.4 million compared to $7.7 million and $23.2 million, respectively.  Gross gains of $125,000 and $366,000 compared to $253,000 and $569,000 for the three and six months ended June 30, 2015 and 2014, respectively, were recognized on those sales.  Gross losses of $42,000 and $207,000 for the three and six months ended June 30, 2014were recognized on those sales.  There were no gross losses recognized on the sales of securities for the three and six months ended June 30, 2015.

All mortgage-backed securities and collateralized-mortgage obligations held by the Company as of June 30, 2015 were in government-sponsored or federal agency securities.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost.  Total fair value of these investments at June 30, 2015 and December 31, 2014 was $109.7 millionand $67.5million, which is approximately 41.9 percent and 25.9 percent of the Company’s investment portfolio at those dates. 

Based on our evaluation of available evidence, including recent changes in market interest rates, management believes the declines in fair value for these securities, for the periods presented, are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

During the first half of 2015and 2014, the Bank determined that its security holdingshad no other-than-temporary impairment. 

The following tables show the gross unrealized losses and fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2015 and December 31, 2014:

	June 30, 2015
	Less than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for Sale
Mortgage-backed securities
Government-sponsored agencies	$	44,845	$	(509)	$	-	$	-	$	44,845	$	(509)
Collateralized mortgage obligations
Government-sponsored agencies		23,968		(211)		23,215		(531)		47,183		(742)
Municipal obligations		14,646		(477)		490		(3)		15,136		(480)
Corporate obligations		-		-		2,522		(1,281)		2,522		(1,281)
Total temporarily impaired securities	$	83,459	$	(1,197)	$	26,227	$	(1,815)	$	109,686	$	(3,012)

	December 31, 2014
	Less than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for Sale
Mortgage-backed securities
Government-sponsored agencies	$	1,069	$	(9)	$	19,580	$	(80)	$	20,649	$	(89)
Collateralized mortgage obligations
Government-sponsored agencies		5,075		(40)		34,159		(796)	$	39,234	$	(836)
Federal agencies										-		-
Municipal obligations		-		-		631		(7)		631		(7)
Corporate obligations		-		-		6,995		(1,306)		6,995		(1,306)
Total temporarily impaired securities	$	6,144	$	(49)	$	61,365	$	(2,189)	$	67,509	$	(2,238)

Mortgage-Backed Securities (MBS) and Collateralized Mortgage Obligations (CMO)

The unrealized losses on the Company’s investment in MBSs and CMOs were caused by interest rate changes.  The Company expects to recover the amortized cost basis over the term of the securities.  Because (1) the decline in market value is attributable to changes in interest rates and not credit quality, (2) the Company does not intend to sell the investments and (3) it is more likely than not the Company will not be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company does not consider any of these investments to be other-than-temporarily impaired at June 30, 2015.

Municipals

The decrease in unrealized losses on the Company’s investments in securities of state and political subdivisions were caused by changes in interest rates.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.  The Company does not intend to sell the investment and it is more likely than not that the Company will not be required to sell these investments before recovery of its new, lower amortized cost basis, which may be at maturity.  The Corporation does not consider these investment securities to be other-than-temporarily impaired at June 30, 2015.

Corporate Obligations

The Company’s unrealized losses on investments in corporate obligations primarily relates to an investment in a  pooled trust preferred security.  The unrealized losses were primarily caused by (1) a decrease in performance and regulatory capital resulting from exposure to subprime mortgages and (2) a sector downgrade by several industry analysts.  The Company currently expects some of the securities to settle at a price less than the amortized cost basis of the investment (that is, the Company expects to recover less than the entire amortized cost basis of the security).  The Company has recognized a loss equal to the credit loss for these securities, establishing a new, lower amortized cost basis.  The credit loss was calculated by comparing expected discounted cash flows based on performance indicators of the underlying assets in the security to the carrying value of the investment.  Because the Company does not intend to sell these investments and it is likely that the Company will not be required to sell the investments before recovery of its new, lower amortized cost basis, which may be at maturity, it does not consider the remainder of these investments to be other-than-temporarily impaired at June 30, 2015.

Other-Than-Temporary Impairment (OTTI)

Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or whether it will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities.  For securities that are a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model.  For securities where the security is not a beneficial interest in securitized financial assets, the Company uses debt and equity securities impairment accounting model.

The Company conducts periodic reviews to identify and evaluate each investment security to determine whether an other-than-temporary impairment has occurred.  Economic models are used to determine whether an other-than-temporary impairment has occurred on these securities.  While all securities are considered, the securities primarily impacted by other-than-temporary impairment testing are private-label mortgage-backed securities and trust preferred securities. 

MutualFirst Financial uses market-based yield indicators as a baseline for determining appropriate discount rates, and then adjusts the resulting discount rates on the basis of its credit and structural analysis of specific trust preferred securities.  The primary focus is on the returns a fixed income investor would require in order to allocate capital on a risk adjusted basis.  There is currently no active market for pooled trust preferred securities; however, the Company looks principally to market yields for stand-alone trust preferred securities issued by banks, thrifts and insurance companies for which there is an active and liquid market.  The next step is to make a series of adjustments to reflect the differences that exist between these products (both credit and structural) and, most importantly, to reflect idiosyncratic credit performance differences (both actual and projected) between these products and the underlying collateral in the specific trust preferred security.  Importantly, as part of the analysis described above, MutualFirst considers the fact that structured instruments frequently exhibit leverage not present in stand-alone instruments, and make adjustments as necessary to reflect this additional risk.

Credit Losses Recognized on Investments

Certain debt securities have experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other-than-temporarily impaired.

The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income.

	Accumulated Credit Losses
	Three Months Ended
	June 30,
	2015		2014
Credit losses on debt securities held
Beginning of period	$	109	$	1,205
Reductions related to actual losses incurred		-		(500)
As of June 30,	$	109	$	705

	Accumulated Credit Losses
	Six Months Ended
	June 30,
	2015		2014
Credit losses on debt securities held
Beginning of year	$	109	$	1,205
Reductions related to actual losses incurred		-		(500)
As of June 30,	$	109	$	705

Pooled Trust Preferred Securities.  The Company has invested in pooled trust preferred securities.  At June 30, 2015, the current book balance of our pooled trust preferred securities was $3.8million.  The original par value of these securities was $4.0 million prior to the OTTI write-downs in 2011 and earlier.  OTTI taken on trust preferred securities previously was the result of deterioration in the performance of the underlying collateral.  The deterioration was the result of increased defaults and deferrals of dividend payments in that year, creating credit impairment along with weakening financial performance of performing collateral, increasing the risk of future deferrals of dividends and defaults.  No additional OTTI was determined in the first half of 2015.  All pooled trust preferred securities owned by the Bank are exempt from the Volcker Rule.

The following table provides additional information related to the Bank’s investment in pooled trust preferred securities as of June 30, 2015:

Deal Name	Class	Original Par		Book Value		Fair Value		Unrealized gain (loss)		Realized Losses YTD		Lowest Current Rating	Number of Banks / Insurance Cos. Currently Performing	Total Number of Banks and Insurance Cos. In Issuance (Unique)	Actual Deferrals/ Defaults (as a % of original collateral)		Total Projected Defaults (as a % of performing collateral) (1)		Excess subordination (after taking into account best estimate of future deferrals/ defaults) (2)
	(Dollars in Thousands)
Alesco Preferred Funding IX	A2A		1,000		912		547		(365)		-	BB+	42	51	10.04	%	12.95	%	55.14	%
U.S. Capital Funding I	B1		3,000		2,891		1,974		(917)		-	B3	28	33	9.44	%	7.02	%	10.33	%
		$	4,000	$	3,803	$	2,521	$	(1,282)	$	-

(1)  A 10% recovery is applied to all projected defaults by depository institutions. A 15% recovery is applied to all projected defaults by insurance companies.  No recovery is applied to current defaults.

(2)  Excess subordination represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences any credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages.

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Impact of Accounting Pronouncements

6 Months Ended

Jun. 30, 2015

Impact of Accounting Pronouncements [Abstract]

Impact of Accounting Pronouncements

Note 3:Impact of Accounting Pronouncements

In May 2015, Financial Accounting Standards Board(FASB), issued Accounting Standards Update (ASU)2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This Update addresses the diversity in practice related to how certain investments measured at net asset value with future redemption dates are categorized; the amendments in this Update remove the requirement to categorize investments for which fair values are measured using the net asset value per share practical expedient. It also limits disclosures to investments for which the entity has elected to measure the fair value using the practical expedient. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted.  The Company does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In April 2015, FASB issued ASU 2015-05, Intangibles – Goodwill and Other – Internal-Use Software.  The objective of the amendments in this update was to address the concerns of stakeholders that the lack of guidance about a customer’s accounting for fees in a cloud computing arrangement leads to unnecessary cost and complexity when evaluating the accounting for those fees, as well as some diversity in practice. The amendments in this update will help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement by providing guidance as to whether an arrangement includes the sale or license of software.  The Company does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In February 2015, FASB issued Accounting Standards Update (ASU) 2015-01, Income Statement – Extraordinary and Unusual Items.  The objective of the update was to simplify the income statement presentation requirements by eliminating the concept of extraordinary items.  

The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015.  A reporting entity may apply the amendments prospectively.  A reporting entity may also apply the amendments retrospectively to all prior periods presented in the financial statements.  Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption.  An entity that prospectively applies this ASU should disclose both the nature and the amount of an item included in income from continuing operations after adoption that adjusts an extraordinary item previously classified and presented before the date of adoption, if applicable.  The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In August 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The update provides U.S. Generally Accepted Accounting Principles (GAAP) guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued.

The amendments in this update are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In August 2014, FASB, issued ASU 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure. The objective of this Update is to reduce diversity in practice by addressing the classification of foreclosed mortgage loans that are fully or partially guaranteed under government programs. Currently, some creditors reclassify those loans to real estate as with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables. The amendments affect creditors that hold government-guaranteed mortgage loans, including those guaranteed by the FHA and the VA.

The amendments in this update are effective for annual reporting periods ending after December 15, 2015 and interim periods beginning after December 15, 2015. An entity should adopt the amendments in this Update using either a prospective transition method or a modified retrospective transition method. For prospective transition, an entity should apply the amendments in this Update to foreclosures that occur after the date of adoption. For the modified retrospective transition, an entity should apply the amendments in the Update by means of a cumulative-effect adjustment (through a reclassification to a separate other receivable) as of the beginning of the annual period of adoption. Prior periods should not be adjusted. However, a reporting entity must apply the same method of transition as elected under ASU No. 2014-04. Early adoption, including adoption in an interim period, is permitted if the entity already has adopted Update 2014-04. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In June 2014, FASB issued ASU 2014-12 “Compensation – Stock Compensation.” This update defines the accounting treatment for share-based payments and “resolves the diverse accounting treatment of those awards in practice.” The new requirement mandates that “a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.” Compensation cost will now be recognized in the period in which it becomes likely that the performance target will be met.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In June 2014, FASB, issued ASU 2014-11 “Transfers and Servicing.” This update addresses the concerns of stakeholders’ by changing the accounting practices surrounding repurchase agreements. The new guidance changes the “accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements.”

The amendments in this update are effective for annual reporting periods beginning after December 15, 2015. Early adoption is prohibited. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In May 2014, FASB, in joint cooperation with IASB, issued ASU 2014-09 “Revenue from Contracts with Customers.” The topic of Revenue Recognition had become broad, with several other regulatory agencies issuing standards which lacked cohesion. The new guidance establishes a “common framework” and “reduces the number of requirements to which an entity must consider in recognizing revenue” and yet provides improved disclosures to assist stakeholders reviewing financial statements.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2017. Early adoption is not permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

The FASB and the Internal Accounting Standards Board (IASB) (together, the Boards) published for public comment revised Exposure Drafts outlining proposed changes to the accounting for leases. The proposals aim to improve the quality and comparability of financial reporting by providing greater transparency about leverage, the assets an organization uses in its operations and the risks to which it is exposed from entering into leasing transactions. Under existing accounting standards, a majority of leases are not reported on a lessee’s balance sheet. The amounts involved can be substantial. Additionally, the existing accounting models for leases require lessees and lessors to classify their leases as either capital leases (e.g., a lease of equipment for nearly all of its economic life) or operating leases (e.g., a lease of office space for 10 years) and to account for those leases differently.

For capital leases, a lessee recognizes lease assets and liabilities on the balance sheet. For operating leases, a lessee does not recognize lease assets or liabilities on the balance sheet. The existing standards have been criticized for failing to meet the needs of users of financial statements because they do not always provide a complete representation of leasing transactions. In response to this criticism, in 2006 the Boards initiated a joint project to improve the financial reporting of leasing activities under International Financial Reporting Standards (IFRSs) and U.S. GAAP. The Boards have developed an approach to lease accounting that would require a lessee to recognize assets and liabilities for the rights and obligations created by leases. A lessee would recognize assets and liabilities for leases of more than 12 months.

Stakeholders have informed the Boards that there are a wide variety of lease transactions with different economics. To better reflect those differing economics, the revised Exposure Drafts propose a dual approach to the recognition, measurement, and presentation of expenses and cash flows arising from a lease. For most real estate leases, a lessee would report a straight-line lease expense in its income statement. For most other leases, such as equipment or vehicles, a lessee would report amortization of the asset separately from interest on the lease liability. The Boards are also proposing disclosures that should enable investors and other users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases.

The leases project is a converged effort between the Boards. The revised Exposure Drafts for both organizations are nearly identical. The differences between the two proposals are primarily related to existing differences between U.S. GAAP and IFRS and decisions the FASB made related to nonpublic entities.

The Boards are also proposing changes to how equipment and vehicle lessors would account for leases that are off balance sheet. Those changes would provide greater transparency about such lessors’ exposure to credit risk and asset risk.

As of July 2015, FASB was working on drafting the final standard.

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Earnings Per Share (Narrative) (Details) - shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from earnings per share computation	37,161	44,161

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Income (Loss) [Abstract]

Components of Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	June 30,		December 31,
	2015		2014
Net unrealized gain on securities available-for-sale	$	2,428	$	4,933
Net unrealized loss on securities available-for-sale for which a portion of an other-than-temporary impairment has been recognized in income		(917)		(917)
Net unrealized loss on derivative used for cash flow hedges		(52)		(109)
Net unrealized loss relating to defined benefit plan liability		(109)		(109)
		1,350		3,798
Tax expense		576		1,420
Net of tax amount	$	774	$	2,378

Reclassification out of Accumulated Other Comprehensive Income (Loss)

The following table presents the reclassification adjustments out of accumulated other comprehensive income that were included in net income in the Consolidated Statements of Income for the three and six months ended June 30, 2015 and 2014.

	Amount Reclassified from Accumulated Other Comprehensive Income For the Three Months Ended June 30,
Details about Accumulated Other Comprehensive Income Components	2015		2014		Affected Line Item in the Statements of Income
Unrealized gains on available-for-sale securities
Realized securities gains reclassified into income	$	126	$	211	Other income - net realized gains on sale of available-for-sale securities
Related income tax expense		(43)		(72)	Income tax expense
Total reclassifications for the period, net of tax	$	83	$	139

	Amount Reclassified from Accumulated Other Comprehensive Income For the Six Months Ended June 30,
Details about Accumulated Other Comprehensive Income Components	2015		2014		Affected Line Item in the Statements of Income
Unrealized gains on available-for-sale securities
Realized securities gains reclassified into income	$	366	$	362	Other income - net realized gains on sale of available-for-sale securities
Related income tax expense		(124)		(123)	Income tax expense
Total reclassifications for the period, net of tax	$	242	$	239

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Loans and Allowance

6 Months Ended

Jun. 30, 2015

Loans and Allowance [Abstract]

Loans and Allowance

Note 7: Loans and Allowance

Classes of loans at June 30, 2015 and December 31, 2014include:

	June 30,		December 31,
	2015		2014
Real estate
Commercial	$	203,767	$	198,019
Commercial construction and development		29,940		33,102
Consumer closed end first mortgage		505,189		517,063
Consumer open end and junior liens		69,640		71,073
		808,536		819,257
Other loans
Consumer loans
Auto		15,072		14,712
Boat/RVs		112,583		94,761
Other		5,134		5,184
Commercial and industrial		101,640		88,474
		234,429		203,131
Total loans		1,042,965		1,022,388
Undisbursed loans in process		(7,359)		(9,285)
Unamortized deferred loan costs, net		4,017		3,583
Allowance for loan losses		(12,906)		(13,168)
Net loans	$	1,026,717	$	1,003,518

The risk characteristics of each loan portfolio segment are as follows:

Commercial

Real estate

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.  Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan.  Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.  The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria.  As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk.  In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.

Construction and Development

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analyses of absorption and lease rates and financial analyses of the developers and property owners.  Construction loans are generally based on estimates of costs and value associated with the complete project.  These estimates may be inaccurate.  Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project.  Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained.  These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Commercial and Industrial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value.  Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis.  In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Consumer Real Estate and Other Consumer Loans

With respect to residential loans that are secured by consumer closed end first mortgages and are primarily owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires PMI if that ratio is exceeded.  Consumer open end and junior lien loans are typically secured by a subordinate interest in 1-4 family residences, and other consumer loans are secured by consumer assets such as automobiles or recreational vehicles.  Some consumer loans are unsecured such as small installment loans and certain lines of credit.  Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.  Repayment can also be impacted by changes in property values on residential properties.  Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Nonaccrual Loans and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Loans are placed on non-accrual status when, in managements’ opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions, but never greater than 90 days past due. 

All interest accrued but not collected for loans that are placed on nonaccrual status or charged off is reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured and generally only after six months of satisfactory performance.

Nonaccrualloans, segregated by class of loans, as of June 30, 2015 and December 31, 2014 are as follows:

	June 30,		December 31,
	2015		2014
Real estate
Commercial	$	2,049	$	2,023
Commercial construction and development		-		209
Consumer closed end first mortgage		3,111		3,499
Consumer open end and junior liens		939		658
Consumer loans
Auto		2		-
Boat/RVs		139		191
Other		18		27
Commercial and industrial		58		605
	$	6,316	$	7,212

An age analysis of the Company’s past due loans, segregated by class of loans, as of June 30, 2015 and December 31, 2014 are as follows:

	June 30, 2015
		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans 90 Days or More and Accruing
Real estate
Commercial	$	1,894	$	206	$	799	$	2,899	$	200,868	$	203,767	$	-
Commercial construction and development		-		-		-		-		29,940		29,940		-
Consumer closed end first mortgage		6,541		611		2,418		9,570		495,619		505,189		207
Consumer open end and junior liens		986		68		398		1,452		68,188		69,640		-
Consumer loans
Auto		41		2		2		45		15,027		15,072		-
Boat/RVs		390		100		132		622		111,961		112,583		-
Other		39		20		12		71		5,063		5,134		-
Commercial and industrial		569		44		24		637		101,003		101,640		-
	$	10,460	$	1,051	$	3,785	$	15,296	$	1,027,669	$	1,042,965	$	207

	December 31, 2014
		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans 90 Days or More and Accruing
Real estate
Commercial	$	1,308	$	848	$	325	$	2,481	$	195,538	$	198,019	$	-
Commercial construction and development		-		-		209		209		32,893		33,102		-
Consumer closed end first mortgage		8,144		1,220		2,160		11,524		505,539		517,063		226
Consumer open end and junior liens		969		130		27		1,126		69,947		71,073		-
Consumer loans
Auto		65		-		-		65		14,647		14,712		-
Boat/RVs		775		158		115		1,048		93,713		94,761		-
Other		92		27		14		133		5,051		5,184		-
Commercial and industrial		1,066		176		441		1,683		86,791		88,474		-
	$	12,419	$	2,559	$	3,291	$	18,269	$	1,004,119	$	1,022,388	$	226

Impaired Loans

Loans are considered impaired in accordance with the impairment accounting guidance (ASC 310-10-35-16), when, based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Interest on impaired loans is recorded based on the performance of the loan.  All interest received on impaired loans that are on nonaccrual status is accounted for on the cash-basis method until qualifying for return to accrual status.  Interest is accrued per the contract for impaired loans that are performing.

The following tables present impaired loans as of and for the three and six month periods ended June 30, 2015 and 2014 and the year ended December 31, 2014.  There were no loans with a specific valuation allowance as of June 30, 2015 and 2014, respectively, and December 31, 2014.

	June 30, 2015
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans - Quarter		Average Investment in Impaired Loans - YTD		Interest Income Recognized - Quarter		Interest Income Recognized - YTD
Loans without a specific valuation allowance
Real estate
Commercial	$	5,169	$	5,169	$	-	$	5,197	$	5,109	$	60	$	116
Commercial construction and development		649		1,155		-		750		810		8		15
Consumer closed end first mortgage		1,603		1,603		-		1,609		1,452		-		-
Commercial and industrial		224		255		-		463		561		1		2
Total	$	7,645	$	8,182	$	-	$	8,019	$	7,932	$	69	$	133

	December 31, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
Real estate
Commercial	$	4,933	$	4,933	$	-	$	3,776	$	161
Commercial construction and development		931		1,860		-		1,323		30
Consumer closed end first mortgage		1,138		1,138		-		1,142		8
Consumer open end and junior liens		-		-		-		100		3
Commercial and industrial		758		789		-		923		12
Total	$	7,760	$	8,720	$	-	$	7,264	$	214

	June 30, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans - Quarter		Average Investment in Impaired Loans - YTD		Interest Income Recognized - Quarter		Interest Income Recognized - YTD
Loans without a specific valuation allowance
Real estate
Commercial	$	2,863	$	2,863	$	-	$	2,907	$	2,988	$	33	$	65
Commercial construction and development		1,272		2,643		-		1,424		1,495		8		15
Consumer closed end first mortgage		847		847		-		851		978		3		5
Consumer open end and junior liens		-		-		-		125		167		1		3
Commercial and industrial		748		922		-		954		1,032		5		11
Total	$	5,730	$	7,275	$	-	$	6,261	$	6,660	$	50	$	99

The following information presents the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of June 30, 2015.

Commercial Loan Grades

Definition of Loan Grades.  Loan grades are numbered 1 through 8.  Grades 1-4 are "pass" credits, grade 5 [Special Mention] loans are "criticized" assets, and grades 6 [Substandard], 7 [Doubtful] and 8 [Loss] are "classified" assets.  The use and application of these grades by the Bank conform to the Bank's policy and regulatory definitions.

Pass.  Pass credits are loans in grades prime through fair.  These are at least considered to be credits with acceptable risks and would be granted in the normal course of lending operations. 

Special Mention.  Special mention credits have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credits or in the Bank’s credit position at some future date.  If weaknesses cannot be identified, classifying as special mention is not appropriate.  Special mention credits are not adversely classified and do not expose the Bank to sufficient risk to warrant an adverse classification.  No apparent loss of principal or interest is expected. 

Substandard.  Substandard credits are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged.  Financial statements normally reveal some or all of the following:  poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection.  Credits so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the Bank will sustain some loss of the deficiencies are not corrected.

Doubtful.  A doubtful extension of credit has all the weaknesses inherent in a substandard asset with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.  Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.  Doubtful classification for an entire credit should be avoided when collection of a specific portion appears highly probable with the adequately secured portion graded Substandard.

Retail Loan Grades

Pass.  Pass credits are loans that are currently performing as agreed and are not troubled debt restructurings. 

Special Mention.  Special mention credits have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credits or in the Bank’s credit position at some future date.  If weaknesses cannot be identified, classifying as special mention is not appropriate.  Special mention credits are not adversely classified and do not expose the Bank to sufficient risk to warrant an adverse classification.  No apparent loss of principal or interest is expected. 

Substandard.  Substandard credits are loans that have reason to be considered to have a weakness and placed on non-accrual.  This would include all retail loans over 90 days and troubled debt restructurings.

June 30, 2015
Commercial Credit Exposure Credit Risk Profile
Internal Rating	Real Estate			Construction and Development	Commercial and Industrial
Pass	$	193,341	$	27,596	$	99,725
Special Mention		3,265		1,490		1,468
Substandard		7,161		854		447
Doubtful		-		-		-
Total	$	203,767	$	29,940	$	101,640
Consumer Credit Exposure Credit Risk Profile
Internal Rating	Closed End First Mortgage		Real Estate Open End and Junior Liens		Auto		Boat/RV		Other
Pass	$	498,753	$	68,624	$	15,063	$	112,337	$	5,109
Special Mention		-		-		-		-		-
Substandard		6,436		1,016		9		246		25
Total	$	505,189	$	69,640	$	15,072	$	112,583	$	5,134

December 31, 2014
Commercial Credit Exposure Credit Risk Profile
Internal Rating	Real Estate			Construction and Development	Commercial and Industrial
Pass	$	187,436	$	30,422	$	84,746
Special Mention		3,316		1,721		439
Substandard		7,267		959		2,848
Doubtful		-		-		441
Total	$	198,019	$	33,102	$	88,474
Consumer Credit Exposure Credit Risk Profile
Internal Rating	Closed End First Mortgage		Real Estate Open End and Junior Liens		Auto		Boat/RV		Other
Pass	$	509,765	$	70,299	$	14,704	$	94,377	$	5,125
Special Mention		-		-		-		-		-
Substandard		7,298		774		8		384		59
Total	$	517,063	$	71,073	$	14,712	$	94,761	$	5,184

Allowance for Loan Losses.

We maintain an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the estimated losses inherent in the loan portfolio.  Our methodology for assessing the appropriateness of the allowance consists of several key elements, including the general allowance and specific allowances for identified problem loans and portfolio segments.  In addition, the allowance incorporates the results of measuring impaired loans as provided in FASB ASC 310, Receivables.  These accounting standards prescribe the measurement methods, income recognition and disclosures related to impaired loans.  The general allowance is calculated by applying loss factors to outstanding loans based on the internal risk evaluation of such loans or pools of loans. Changes in risk evaluations of both performing and nonperforming loans affect the amount of the general allowance. Loss factors are based on our historical loss experience as well as on significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date.

The appropriateness of the allowance is reviewed by management based upon its evaluation of then-existing economic and business conditions affecting our key lending areas and other conditions, such as credit quality trends (including trends in non-performing loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments and recent loss experience in particular segments of the portfolio that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectability of the loan.  Senior management reviews these conditions quarterly in discussions with our senior credit officers.  To the extent that any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of such condition may be reflected as a specific allowance applicable to such credit or portfolio segment.  Where any of these conditions is not evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s evaluation of the loss related to this condition is reflected in the general allowance for loan losses.  The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem credits or portfolio segments.

The allowance for loan losses is based on estimates of losses inherent in the loan portfolio.  Actual losses can vary significantly from the estimated amounts.  Our methodology as described permits adjustments to any loss factor used in the computation of the general allowance in the event that, in management’s judgment, significant factors which affect the collectability of the portfolio as of the evaluation date are not reflected in the loss factors.  By assessing the probable incurred losses inherent in the loan portfolio on a quarterly basis, we are able to adjust specific and inherent loss estimates based upon any more recent information that has become available.  

The following table details activity in the allowance for loan losses by portfolio segment for the three and six month periods ended June 30, 2015 and 2014 and year ended December 31, 2014.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other segments.

	Three Months Ended June 30, 2015
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of period	$	6,894	$	3,567	$	2,756	$	13,217
Provision charged (credited) to expense		(201)		48		153		-
Losses charged off		-		(297)		(205)		(502)
Recoveries		132		-		59		191
Balance, end of period	$	6,825	$	3,318	$	2,763	$	12,906

	Six Months Ended June 30, 2015
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of year	$	7,085	$	3,471	$	2,612	$	13,168
Provision charged (credited) to expense		(597)		236		361		-
Losses charged off		-		(390)		(322)		(712)
Recoveries		337		1		112		450
Balance, end of period	$	6,825	$	3,318	$	2,763	$	12,906
Ending balance:
Individually evaluated for impairment	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		6,825		3,318		2,763		12,906
Total allowance for loan losses	$	6,825	$	3,318	$	2,763	$	12,906
Loans:
Ending balance
Individually evaluated for impairment	$	6,042	$	1,603	$	-	$	7,645
Collectively evaluated for impairment		329,305		503,586		202,429		1,035,320
Total Loans	$	335,347	$	505,189	$	202,429	$	1,042,965

	Year Ended December 31, 2014
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of year	$	8,148	$	3,124	$	2,140	$	13,412
Provision charged (credited) to expense		(1,273)		888		1,235		850
Losses charged off		(289)		(572)		(1,021)		(1,882)
Recoveries		499		31		258		788
Balance, end of period	$	7,085	$	3,471	$	2,612	$	13,168
Ending balance:
Individually evaluated for impairment	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		7,085		3,471		2,612		13,168
Total allowance for loan losses	$	7,085	$	3,471	$	2,612	$	13,168

	Three Months Ended June 30, 2014
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of period	$	7,899	$	3,305	$	2,166	$	13,370
Provision charged to expense		78		208		214		500
Losses charged off		(244)		(170)		(351)		(765)
Recoveries		30		1		107		138
Balance, end of period	$	7,763	$	3,344	$	2,136	$	13,243

	Six Months Ended June 30, 2014
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of year	$	8,148	$	3,124	$	2,140	$	13,412
Provision charged (credited) to expense		(187)		465		572		850
Losses charged off		(244)		(250)		(718)		(1,212)
Recoveries		46		5		142		193
Balance, end of period	$	7,763	$	3,344	$	2,136	$	13,243
Ending balance:
Individually evaluated for impairment	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		7,763		3,344		2,136		13,243
Total allowance for loan losses	$	7,763	$	3,344	$	2,136	$	13,243

Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral.

For all loan portfolio segments except consumer real estate and other consumer loans, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off consumer real estate and other consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge-down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged-off.

Information on non-performing assets, excluding performing restructured loans, is provided below:

	June 30,
	2015		2014
Non-performing assets
Non-accrual loans	$	6,316	$	5,762
Accruing loans delinquent 90 days or more and past due		207		348
Total non-performing loans		6,523		6,110
Foreclosed real estate		1,726		6,719
Other repossessed assets		455		379
Total non-performing assets	$	8,704	$	13,208

Troubled Debt Restructurings

Certain categories of impaired loans include loans that have been modified in a troubled debt restructuring, that involves granting economic concessions to borrowers who have experienced financial difficulties.  These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions.  Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and circumstances.  

When we modify loans in a troubled debt restructuring, we evaluate any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or we use the current fair value of the collateral, less selling costs for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through a specific reserve or a charge-off to the allowance.

Loans retain their accrual status at the time of their modification.  As a result, if a loan is on nonaccrual at the time it is modified, it stays as nonaccrual until a period of satisfactory performance, generally six months, is obtained.  If a loan is on accrual at the time of the modification, the loan is evaluated to determine the collection of principal and interest is reasonably assured and generally stays on accrual.

At June 30, 2015, the Company had a number of loans that were modified in troubled debt restructurings.  The modification of terms of such loans included one or a combination of the following:  an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.  

The following tables describe troubled debts restructured during the three and six month periods ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015
	No. of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial	1	$	820	$	820
Consumer closed end first mortgage	2		86		85

	Three Months Ended June 30, 2014
	No. of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial	1	$	250	$	250
Consumer closed end first mortgage	7		367		380
Commercial and industrial	2		193		223

	Six Months Ended June 30, 2015
	No. of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial	3	$	1,992	$	1,990
Construction and development	1		155		134
Consumer closed end first mortgage	5		242		239
Commercial and industrial	1		88		83

	Six Months Ended June 30, 2014
	No. of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial	1	$	250	$	250
Consumer closed end first mortgage	10		748		774
Commercial and industrial	2		193		223

The impact on the allowance for loan losses was insignificant as a result of these modifications. 

Newly restructured loans by type for the three and six months ended June 30, 2015 and 2014 are as follows:

	Three Months Ended June 30, 2015
		Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	820	$	-	$	820
Consumer closed end first mortgage		-		-		85		85

	Three Months Ended June 30, 2014
		Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	-	$	250	$	250
Consumer closed end first mortgage		-		18		362		380
Commercial and industrial		-		223		-		223

	Six Months Ended June 30, 2015
		Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	1,990	$	-	$	1,990
Construction and development		-		-		134		134
Consumer closed end first mortgage		-		-		239		239
Commercial and industrial		-		83		-		83

	Six Months Ended June 30, 2014
		Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	-	$	250	$	250
Consumer closed end first mortgage		-		18		756		774
Commercial and industrial		-		223		-		223

Defaults of any loans modified as troubled debt restructurings made in the three and six months ended June 30, 2014 are listed in the table below.  There were no defaults on loans modified as troubled debt restructurings made in the three and six months ended June 30, 2015.  Defaults are defined as any loans that become 90 days past due.

	Three Months Ended June 30, 2014
	No. of Loans	Post-Modification Outstanding Recorded Balance
Real Estate
Consumer closed end first mortgage	1	$	340

	Six Months Ended June 30, 2014
	No. of Loans	Post-Modification Outstanding Recorded Balance
Real Estate
Consumer closed end first mortgage	3	$	432
Consumer open end and junior liens	1		23

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2015

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

Note 5: Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	June 30,		December 31,
	2015		2014
Net unrealized gain on securities available-for-sale	$	2,428	$	4,933
Net unrealized loss on securities available-for-sale for which a portion of an other-than-temporary impairment has been recognized in income		(917)		(917)
Net unrealized loss on derivative used for cash flow hedges		(52)		(109)
Net unrealized loss relating to defined benefit plan liability		(109)		(109)
		1,350		3,798
Tax expense		576		1,420
Net of tax amount	$	774	$	2,378

The following table presents the reclassification adjustments out of accumulated other comprehensive income that were included in net income in the Consolidated Statements of Income for the three and six months ended June 30, 2015 and 2014.

	Amount Reclassified from Accumulated Other Comprehensive Income For the Three Months Ended June 30,
Details about Accumulated Other Comprehensive Income Components	2015		2014		Affected Line Item in the Statements of Income
Unrealized gains on available-for-sale securities
Realized securities gains reclassified into income	$	126	$	211	Other income - net realized gains on sale of available-for-sale securities
Related income tax expense		(43)		(72)	Income tax expense
Total reclassifications for the period, net of tax	$	83	$	139

	Amount Reclassified from Accumulated Other Comprehensive Income For the Six Months Ended June 30,
Details about Accumulated Other Comprehensive Income Components	2015		2014		Affected Line Item in the Statements of Income
Unrealized gains on available-for-sale securities
Realized securities gains reclassified into income	$	366	$	362	Other income - net realized gains on sale of available-for-sale securities
Related income tax expense		(124)		(123)	Income tax expense
Total reclassifications for the period, net of tax	$	242	$	239

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Fair Values of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

Note 6:Fair Values of Financial Instruments

Fair value is 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.  Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.  There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1Quoted prices in active markets for identical assets or liabilities

Level 2Observable 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 3Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities

Items Measured at Fair Value on a Recurring Basis

Following is a description of the valuation methodologies and inputs used for instruments measured at fair value on a recurring basis and recognized in the accompanying comparative 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.  Pooled trust preferred securities prices are evaluated by a third party.  Level 1 securities include marketable equity 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 obligations, small business administration, marketable equity, municipal, 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.

Third party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of identical or similar investment securities (Level 2).  Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on investment securities relationship to other benchmark quoted investment securities.  Any investment security not valued based upon the methods above are considered Level 3.

The following table presents the fair value measurements of assets measured at fair value on a recurring basis and level within the ASC 820 fair value hierarchy in which the fair value measurements fall:

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Mortgage-backed securities
Government sponsored agencies	$	110,595	$	-	$	110,595	$	-
Collateralized mortgage obligations
Government sponsored agencies		85,771		-		85,771		-
Municipal obligations		44,578		-		44,578		-
Corporate obligations		20,562		-		18,040		2,522
Available-for-sale securities	$	261,506	$	-	$	258,984	$	2,522

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
December 31, 2014
Mortgage-backed securities
Government sponsored agencies	$	113,290	$	-	$	113,290	$	-
Collateralized mortgage obligations
Government sponsored agencies		97,759		-		97,759		-
Federal agencies		4		-		4		-
Municipal obligations		29,252		-		29,252		-
Corporate obligations		20,501		-		17,979		2,522
Available-for-sale securities	$	260,806	$	-	$	258,284	$	2,522

The following is a reconciliation of the beginning and ending balances for the three and six months ended June 30, 2015 and 2014 of recurring fair value measurements recognized in the accompanying balance sheets using significant unobservable (Level 3) inputs:

	Three Months Ended
	June 30,
		2015		2014
Beginning balance	$	2,522	$	4,043
Total realized and unrealized gains (losses)
Included in net income		-		56
Included in other comprehensive income (loss)		-		205
Purchases, sales, issuances and settlements		-		(566)
Ending balance	$	2,522	$	3,738
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	0

	Six Months Ended
	June 30,
		2015		2014
Beginning balance	$	2,522	$	3,336
Total realized and unrealized gains (losses)
Included in net income		-		56
Included in other comprehensive income (loss)		-		920
Purchases, issuances and settlements		-		(574)
Ending balance	$	2,522	$	3,738
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	0

Items Measured at Fair Value on a Non-Recurring Basis

From time to time, certain assets may be recorded at fair value on a non-recurring basis.  These non-recurring fair value adjustments typically are a result of the application of lower of cost or fair value accounting or a write-down occurring during the period.  The following is a description of the valuation methodologies used for certain assets that are recorded at fair value.

Other Real Estate Owned

The fair value of real estate is generally determined based on appraisals by qualified licensed appraisers.  The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach.  If an appraisal is not available, the fair value may be determined by using a cash flow analysis.

Other real estate owned is classified within Level 3 of the fair value hierarchy.

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fall. 

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Other real estate owned	$	57	$	-	$	-	$	57

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
December 31, 2014
Other real estate owned		1,280		-		-		1,280

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

June 30, 2015	Fair Value		Valuation Technique	Unobservable Inputs	Range
Trust Preferred Securities	$	2,522	Discounted cash flow	Discount rate	8.0	%
				Constant prepayment rate	2.0	%
				Cumulative projected prepayments	40.0	%
				Probability of default	1.7 - 1.8	%
				Projected cures given deferral	0 - 15.0	%
				Loss severity	34.2 - 39.8	%
Other real estate owned	$	57	Third party valuations	Discount to reflect realizable value less estimated selling costs	29.8 - 93.0	%

December 31, 2014	Fair Value		Valuation Technique	Unobservable Inputs	Range
Trust Preferred Securities	$	2,522	Discounted cash flow	Discount rate	8.0	%
				Constant prepayment rate	2.0	%
				Cumulative projected prepayments	40.0	%
				Probability of default	1.7 - 1.8	%
				Projected cures given deferral	0 - 15.0	%
				Loss severity	34.2 - 39.8	%
Other real estate owned	$	1,280	Third party valuations	Discount to reflect realizable value less estimated selling costs	24.4 - 36.7	%

The following methods and assumptions were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value:  

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

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

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

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

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

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

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

Other Borrowings - The fair value of these borrowings is estimated using discounted cash flow analyses using interest rates for similar financial instruments. 

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

The estimated fair values of the Company’s financial instruments not carried at fair value in the consolidated balance sheets as of the dates noted below are as follows:

					Fair Value Measurements Using
June 30, 2015		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	24,269	$	24,269	$	24,269	$	-	$	-
Loans held for sale		12,486		12,541		-		12,541		-
Loans, net		1,026,717		1,019,952		-		-		1,019,952
FHLB stock		9,810		9,810		-		9,810		-
Interest receivable		4,054		4,054		-		4,054		-
Liabilities
Deposits		1,078,287		1,078,926		711,204		-		367,722
FHLB advances		212,042		211,706		-		211,706		-
Other borrowings		9,816		9,868		-		9,868		-
Interest payable		248		248		-		248		-

					Fair Value Measurements Using
December 31, 2014		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	29,575	$	29,575	$	29,575	$	-	$	-
Loans held for sale		6,140		6,220		-		6,220		-
Loans, net		1,003,518		1,006,233		-		-		1,006,233
FHLB stock		11,964		11,964		-		11,964		-
Interest receivable		3,730		3,730		-		3,730		-
Liabilities
Deposits		1,079,320		1,050,295		648,314		-		401,981
FHLB advances		192,442		191,995		-		191,995		-
Other borrowings		10,174		10,283		-		10,283		-
Interest payable		223		223		-		223		-

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Change in Accounting Principle

6 Months Ended

Jun. 30, 2015

Change in Accounting Principle [Abstract]

Change in Accounting Principle

Note 8:Change in Accounting Principle

The Company makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section 42 of the Internal Revenue Code. Mutual has investments in eight Indiana limited partnerships within Indiana and contiguous states.  The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

Mutual is a limited partner in each LIHTC Partnership. A separate unrelated third party is the general partner. Each limited partnership is managed by the general partner, who exercises full and exclusive control over the affairs of the limited partnership. Duties entrusted to the general partner of each limited partnership include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to consent to certain transactions, the limited partner(s) may not participate in the operation, management, or control of the limited partnership’s business, transact any business in the limited partnership’s name or have any power to sign documents for or otherwise bind the limited partnership. In addition, the general partner may only be removed by the limited partner(s) in the event the general partner fails to comply with the terms of the agreement and/or is negligent in performing its duties.

The Company believes the general partner of each limited partnership has the power to direct the activities which most significantly affect the performance of each partnership; therefore, Mutual has determined that it is not the primary beneficiary of any LIHTC partnership. The Company uses the proportional amortization method to account for a majority of its investments in these entities. These investments are included in accrued income and other assets. 

During the 2015 first quarter, Mutual adopted ASU 2014-01.  The amendments are required to be applied retrospectively to all periods presented.  As a result of these changes, the Bank recorded a cumulative-effective adjustment to beginning retained earnings.The Company believes the application of the proportional amortization method aligns the accounting more closely with the economics of the transaction and therefore provides more transparency to the financial reporting.

The following table summarizes the balance sheet and income statement amounts impacted by the change at the dates or for the periods indicated:

			December 31,
			2014
Investment in limited partnerships
	As previously reported	$	1,582
	As reported under the new guidance		527
Deferred tax asset
	As previously reported		13,305
	As reported under the new guidance		13,575
Retained earnings
	As previously reported		50,171
	As reported under the new guidance		49,386
			Three Months Ended		Six Months Ended
			June 30,		June 30,
			2014		2014
Non-interest income
	As previously reported	$	3,414	$	6,287
	As reported under the new guidance		3,542		6,542
Income tax expense
	As previously reported		1,062		1,794
	As reported under the new guidance		1,133		1,936
Net income
	As previously reported		2,557		4,521
	As reported under the new guidance		2,614		4,634
Basic Earnings Per Share
	As previously reported		0.36		0.63
	As reported under the new guidance		0.37		0.65
Diluted Earnings Per Share
	As previously reported		0.35		0.61
	As reported under the new guidance		0.36		0.63

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Fair Values of Financial Instruments (Reconciliation of Recurring Fair Value Measurements Recognized in Balance Sheet using Significant Unobservable (Level Three) Inputs) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Fair Values of Financial Instruments [Abstract]
Beginning balance	$ 2,522	$ 4,043	$ 2,522	$ 3,336
Total realized and unrealized gains (losses)
Included in net income		56		56
Included in other comprehensive income (loss)		205		920
Purchases, sales, issuances and settlements		(566)		(574)
Ending balance	2,522	3,738	2,522	3,738
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$ 0	$ 0	$ 0	$ 0

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Loans and Allowance (Tables)

6 Months Ended

Jun. 30, 2015

Loans and Allowance [Abstract]

Schedule of Classes of Loans

Classes of loans at June 30, 2015 and December 31, 2014include:

	June 30,		December 31,
	2015		2014
Real estate
Commercial	$	203,767	$	198,019
Commercial construction and development		29,940		33,102
Consumer closed end first mortgage		505,189		517,063
Consumer open end and junior liens		69,640		71,073
		808,536		819,257
Other loans
Consumer loans
Auto		15,072		14,712
Boat/RVs		112,583		94,761
Other		5,134		5,184
Commercial and industrial		101,640		88,474
		234,429		203,131
Total loans		1,042,965		1,022,388
Undisbursed loans in process		(7,359)		(9,285)
Unamortized deferred loan costs, net		4,017		3,583
Allowance for loan losses		(12,906)		(13,168)
Net loans	$	1,026,717	$	1,003,518

Non-Accrual Loans Segregated by Class of Loans

Nonaccrualloans, segregated by class of loans, as of June 30, 2015 and December 31, 2014 are as follows:

	June 30,		December 31,
	2015		2014
Real estate
Commercial	$	2,049	$	2,023
Commercial construction and development		-		209
Consumer closed end first mortgage		3,111		3,499
Consumer open end and junior liens		939		658
Consumer loans
Auto		2		-
Boat/RVs		139		191
Other		18		27
Commercial and industrial		58		605
	$	6,316	$	7,212

Age Analysis of Past Due Loans Segregated by Class of Loans

An age analysis of the Company’s past due loans, segregated by class of loans, as of June 30, 2015 and December 31, 2014 are as follows:

	June 30, 2015
		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans 90 Days or More and Accruing
Real estate
Commercial	$	1,894	$	206	$	799	$	2,899	$	200,868	$	203,767	$	-
Commercial construction and development		-		-		-		-		29,940		29,940		-
Consumer closed end first mortgage		6,541		611		2,418		9,570		495,619		505,189		207
Consumer open end and junior liens		986		68		398		1,452		68,188		69,640		-
Consumer loans
Auto		41		2		2		45		15,027		15,072		-
Boat/RVs		390		100		132		622		111,961		112,583		-
Other		39		20		12		71		5,063		5,134		-
Commercial and industrial		569		44		24		637		101,003		101,640		-
	$	10,460	$	1,051	$	3,785	$	15,296	$	1,027,669	$	1,042,965	$	207

	December 31, 2014
		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans 90 Days or More and Accruing
Real estate
Commercial	$	1,308	$	848	$	325	$	2,481	$	195,538	$	198,019	$	-
Commercial construction and development		-		-		209		209		32,893		33,102		-
Consumer closed end first mortgage		8,144		1,220		2,160		11,524		505,539		517,063		226
Consumer open end and junior liens		969		130		27		1,126		69,947		71,073		-
Consumer loans
Auto		65		-		-		65		14,647		14,712		-
Boat/RVs		775		158		115		1,048		93,713		94,761		-
Other		92		27		14		133		5,051		5,184		-
Commercial and industrial		1,066		176		441		1,683		86,791		88,474		-
	$	12,419	$	2,559	$	3,291	$	18,269	$	1,004,119	$	1,022,388	$	226

Impaired Loans

The following tables present impaired loans as of and for the three and six month periods ended June 30, 2015 and 2014 and the year ended December 31, 2014.  There were no loans with a specific valuation allowance as of June 30, 2015 and 2014, respectively, and December 31, 2014.

	June 30, 2015
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans - Quarter		Average Investment in Impaired Loans - YTD		Interest Income Recognized - Quarter		Interest Income Recognized - YTD
Loans without a specific valuation allowance
Real estate
Commercial	$	5,169	$	5,169	$	-	$	5,197	$	5,109	$	60	$	116
Commercial construction and development		649		1,155		-		750		810		8		15
Consumer closed end first mortgage		1,603		1,603		-		1,609		1,452		-		-
Commercial and industrial		224		255		-		463		561		1		2
Total	$	7,645	$	8,182	$	-	$	8,019	$	7,932	$	69	$	133

	December 31, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
Real estate
Commercial	$	4,933	$	4,933	$	-	$	3,776	$	161
Commercial construction and development		931		1,860		-		1,323		30
Consumer closed end first mortgage		1,138		1,138		-		1,142		8
Consumer open end and junior liens		-		-		-		100		3
Commercial and industrial		758		789		-		923		12
Total	$	7,760	$	8,720	$	-	$	7,264	$	214

	June 30, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans - Quarter		Average Investment in Impaired Loans - YTD		Interest Income Recognized - Quarter		Interest Income Recognized - YTD
Loans without a specific valuation allowance
Real estate
Commercial	$	2,863	$	2,863	$	-	$	2,907	$	2,988	$	33	$	65
Commercial construction and development		1,272		2,643		-		1,424		1,495		8		15
Consumer closed end first mortgage		847		847		-		851		978		3		5
Consumer open end and junior liens		-		-		-		125		167		1		3
Commercial and industrial		748		922		-		954		1,032		5		11
Total	$	5,730	$	7,275	$	-	$	6,261	$	6,660	$	50	$	99

Commercial and Retail Credit Exposure Credit Risk Profile by Internal Rating

June 30, 2015
Commercial Credit Exposure Credit Risk Profile
Internal Rating	Real Estate			Construction and Development	Commercial and Industrial
Pass	$	193,341	$	27,596	$	99,725
Special Mention		3,265		1,490		1,468
Substandard		7,161		854		447
Doubtful		-		-		-
Total	$	203,767	$	29,940	$	101,640
Consumer Credit Exposure Credit Risk Profile
Internal Rating	Closed End First Mortgage		Real Estate Open End and Junior Liens		Auto		Boat/RV		Other
Pass	$	498,753	$	68,624	$	15,063	$	112,337	$	5,109
Special Mention		-		-		-		-		-
Substandard		6,436		1,016		9		246		25
Total	$	505,189	$	69,640	$	15,072	$	112,583	$	5,134

December 31, 2014
Commercial Credit Exposure Credit Risk Profile
Internal Rating	Real Estate			Construction and Development	Commercial and Industrial
Pass	$	187,436	$	30,422	$	84,746
Special Mention		3,316		1,721		439
Substandard		7,267		959		2,848
Doubtful		-		-		441
Total	$	198,019	$	33,102	$	88,474
Consumer Credit Exposure Credit Risk Profile
Internal Rating	Closed End First Mortgage		Real Estate Open End and Junior Liens		Auto		Boat/RV		Other
Pass	$	509,765	$	70,299	$	14,704	$	94,377	$	5,125
Special Mention		-		-		-		-		-
Substandard		7,298		774		8		384		59
Total	$	517,063	$	71,073	$	14,712	$	94,761	$	5,184

Activity in Allowance for Loan Losses by Portfolio Segment

The following table details activity in the allowance for loan losses by portfolio segment for the three and six month periods ended June 30, 2015 and 2014 and year ended December 31, 2014.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other segments.

	Three Months Ended June 30, 2015
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of period	$	6,894	$	3,567	$	2,756	$	13,217
Provision charged (credited) to expense		(201)		48		153		-
Losses charged off		-		(297)		(205)		(502)
Recoveries		132		-		59		191
Balance, end of period	$	6,825	$	3,318	$	2,763	$	12,906

	Six Months Ended June 30, 2015
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of year	$	7,085	$	3,471	$	2,612	$	13,168
Provision charged (credited) to expense		(597)		236		361		-
Losses charged off		-		(390)		(322)		(712)
Recoveries		337		1		112		450
Balance, end of period	$	6,825	$	3,318	$	2,763	$	12,906
Ending balance:
Individually evaluated for impairment	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		6,825		3,318		2,763		12,906
Total allowance for loan losses	$	6,825	$	3,318	$	2,763	$	12,906
Loans:
Ending balance
Individually evaluated for impairment	$	6,042	$	1,603	$	-	$	7,645
Collectively evaluated for impairment		329,305		503,586		202,429		1,035,320
Total Loans	$	335,347	$	505,189	$	202,429	$	1,042,965

	Year Ended December 31, 2014
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of year	$	8,148	$	3,124	$	2,140	$	13,412
Provision charged (credited) to expense		(1,273)		888		1,235		850
Losses charged off		(289)		(572)		(1,021)		(1,882)
Recoveries		499		31		258		788
Balance, end of period	$	7,085	$	3,471	$	2,612	$	13,168
Ending balance:
Individually evaluated for impairment	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		7,085		3,471		2,612		13,168
Total allowance for loan losses	$	7,085	$	3,471	$	2,612	$	13,168

	Three Months Ended June 30, 2014
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of period	$	7,899	$	3,305	$	2,166	$	13,370
Provision charged to expense		78		208		214		500
Losses charged off		(244)		(170)		(351)		(765)
Recoveries		30		1		107		138
Balance, end of period	$	7,763	$	3,344	$	2,136	$	13,243

	Six Months Ended June 30, 2014
	Commercial		Mortgage		Consumer		Total
Allowance for loan losses:
Balance, beginning of year	$	8,148	$	3,124	$	2,140	$	13,412
Provision charged (credited) to expense		(187)		465		572		850
Losses charged off		(244)		(250)		(718)		(1,212)
Recoveries		46		5		142		193
Balance, end of period	$	7,763	$	3,344	$	2,136	$	13,243
Ending balance:
Individually evaluated for impairment	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		7,763		3,344		2,136		13,243
Total allowance for loan losses	$	7,763	$	3,344	$	2,136	$	13,243

Information on Non-Performing Assets

Information on non-performing assets, excluding performing restructured loans, is provided below:

	June 30,
	2015		2014
Non-performing assets
Non-accrual loans	$	6,316	$	5,762
Accruing loans delinquent 90 days or more and past due		207		348
Total non-performing loans		6,523		6,110
Foreclosed real estate		1,726		6,719
Other repossessed assets		455		379
Total non-performing assets	$	8,704	$	13,208

Troubled Debts Restructured

The following tables describe troubled debts restructured during the three and six month periods ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015
	No. of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial	1	$	820	$	820
Consumer closed end first mortgage	2		86		85

	Three Months Ended June 30, 2014
	No. of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial	1	$	250	$	250
Consumer closed end first mortgage	7		367		380
Commercial and industrial	2		193		223

	Six Months Ended June 30, 2015
	No. of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial	3	$	1,992	$	1,990
Construction and development	1		155		134
Consumer closed end first mortgage	5		242		239
Commercial and industrial	1		88		83

	Six Months Ended June 30, 2014
	No. of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Real estate
Commercial	1	$	250	$	250
Consumer closed end first mortgage	10		748		774
Commercial and industrial	2		193		223

Newly Restructured Loans by Types

Newly restructured loans by type for the three and six months ended June 30, 2015 and 2014 are as follows:

	Three Months Ended June 30, 2015
		Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	820	$	-	$	820
Consumer closed end first mortgage		-		-		85		85

	Three Months Ended June 30, 2014
		Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	-	$	250	$	250
Consumer closed end first mortgage		-		18		362		380
Commercial and industrial		-		223		-		223

	Six Months Ended June 30, 2015
		Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	1,990	$	-	$	1,990
Construction and development		-		-		134		134
Consumer closed end first mortgage		-		-		239		239
Commercial and industrial		-		83		-		83

	Six Months Ended June 30, 2014
		Interest Only		Term		Combination		Total Modification
Real Estate
Commercial	$	-	$	-	$	250	$	250
Consumer closed end first mortgage		-		18		756		774
Commercial and industrial		-		223		-		223

Troubled Debts Restructured Defaulted

Defaults of any loans modified as troubled debt restructurings made in the three and six months ended June 30, 2014 are listed in the table below.  There were no defaults on loans modified as troubled debt restructurings made in the three and six months ended June 30, 2015.  Defaults are defined as any loans that become 90 days past due.

	Three Months Ended June 30, 2014
	No. of Loans	Post-Modification Outstanding Recorded Balance
Real Estate
Consumer closed end first mortgage	1	$	340

	Six Months Ended June 30, 2014
	No. of Loans	Post-Modification Outstanding Recorded Balance
Real Estate
Consumer closed end first mortgage	3	$	432
Consumer open end and junior liens	1		23

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Investment Securities (Amortized Cost and Fair Values of Securities ) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 259,995	$ 256,790
Gross Unrealized Gains	4,522	6,254
Gross Unrealized Losses	(3,011)	(2,238)
Fair Value	261,506	260,806
Mortgage-backed Securities, Government Sponsored Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	109,031	110,452
Gross Unrealized Gains	2,073	2,927
Gross Unrealized Losses	(509)	(89)
Fair Value	110,595	113,290
Collateralized Mortgage Obligations, Government Sponsored Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	85,629	97,325
Gross Unrealized Gains	884	1,270
Gross Unrealized Losses	(742)	(836)
Fair Value	85,771	97,759
Federal Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		4
Fair Value		4
Municipals [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	43,558	27,246
Gross Unrealized Gains	1,500	2,013
Gross Unrealized Losses	(480)	(7)
Fair Value	44,578	29,252
Corporate Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	21,777	21,763
Gross Unrealized Gains	65	44
Gross Unrealized Losses	(1,280)	(1,306)
Fair Value	$ 20,562	$ 20,501

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Loans (Impaired Loans) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Impaired Financing Receivable With No Related Allowance [Abstract]
Recorded balance					$ 7,760
Unpaid principal balance					8,720
Average investment in impaired loans					7,264
Interest income recognized					214
Impaired Financing Receivables Total [Abstract]
Recorded balance, total	$ 7,645	$ 5,730	$ 7,645	$ 5,730
Unpaid principal balance, total	8,182	7,275	8,182	7,275
Average investment in impaired loans, total	8,019	6,261	7,932	6,660
Interest income recognized, total	69	50	133	99
Commercial Real Estate [Member]
Impaired Financing Receivable With No Related Allowance [Abstract]
Recorded balance	5,169	2,863	5,169	2,863	4,933
Unpaid principal balance	5,169	2,863	5,169	2,863	4,933
Average investment in impaired loans	5,197	2,907	5,109	2,988	3,776
Interest income recognized	60	33	116	65	161
Commercial Segment [Member] | Construction Loans [Member]
Impaired Financing Receivable With No Related Allowance [Abstract]
Recorded balance	649	1,272	649	1,272	931
Unpaid principal balance	1,155	2,643	1,155	2,643	1,860
Average investment in impaired loans	750	1,424	810	1,495	1,323
Interest income recognized	8	8	15	15	30
Commercial Segment [Member] | Commercial and Industrial [Member]
Impaired Financing Receivable With No Related Allowance [Abstract]
Recorded balance	224	748	224	748	758
Unpaid principal balance	255	922	255	922	789
Average investment in impaired loans	463	954	561	1,032	923
Interest income recognized	1	5	2	11	12
Consumer [Member] | First Mortgage [Member]
Impaired Financing Receivable With No Related Allowance [Abstract]
Recorded balance	1,603	847	1,603	847	1,138
Unpaid principal balance	1,603	847	1,603	847	1,138
Average investment in impaired loans	$ 1,609	851	$ 1,452	978	1,142
Interest income recognized		3		5	8
Consumer [Member] | Second Mortgage [Member]
Impaired Financing Receivable With No Related Allowance [Abstract]
Average investment in impaired loans		125		167	100
Interest income recognized		$ 1		$ 3	$ 3

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Consolidated Condensed Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 3,218	$ 2,614	$ 5,698	$ 4,634
Other comprehensive income:
Net unrealized holding gain (loss) on securities available-for-sale	(3,179)	3,164	(2,139)	5,846
Net unrealized gain on securities available-for-sale for which a portion of an other-than-temporary impairment has been recognized in income		205		839
Reclassification adjustment for realized gains included in net income	(126)	(211)	(366)	(362)
Net unrealized gain on derivative used for cash flow hedges	42	17	57	49
Other comprehensive income (loss), before tax, total	(3,263)	3,175	(2,448)	6,372
Income tax (expense) related to other comprehensive income	1,124	(1,100)	844	(2,199)
Other comprehensive income, net of tax	(2,139)	2,075	(1,604)	4,173
Comprehensive Income	$ 1,079	$ 4,689	$ 4,094	$ 8,807

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Earnings Per Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share

Note 2:Earnings Per Share

Earnings per share were computed as follows:

	Three Months Ended June 30,
	2015					2014
		Income	Weighted- Average Shares		Per-Share Amount		Income	Weighted- Average Shares		Per-Share Amount
Basic Earnings Per Share
Net income	$	3,218	7,383,435	$	0.44	$	2,614	7,133,233	$	0.37
Effect of Dilutive Securities
Stock options		-	164,299				-	227,167
Diluted Earnings Per Share
Net income available and assumed conversions	$	3,218	7,547,734	$	0.43	$	2,614	7,360,400	$	0.36

	Six Months Ended June 30,
	2015					2014
		Income	Weighted- Average Shares		Per-Share Amount		Income	Weighted- Average Shares		Per-Share Amount
Basic Earnings Per Share
Net income	$	5,698	7,348,773	$	0.78	$	4,634	7,126,082	$	0.65
Effect of Dilutive Securities
Stock options		-	179,633				-	230,680
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$	5,698	7,528,406	$	0.76	$	4,634	7,356,762	$	0.63

Options to purchase37,161 and 44,161shares of common stock were outstanding at June 30, 2015 and 2014, respectively, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares.

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Investment Securities (Amortized Cost and Fair Value of Available-for-Sale Securities by Contractual Maturity) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Security obligations due, amortized cost, within one year	$ 4,488
Security obligations due, amortized cost, One to five years	14,491
Security obligations due, amortized cost, Five to ten years	2,214
Security obligations due, amortized cost, After ten years	44,142
Total security obligations due, amortized cost	65,335
Available for sale, amortized cost	259,995	$ 256,790
Security obligations due, Fair Value, within one year	4,509
Security obligations due, Fair value, One to five years	14,577
Security obligations due, Fair value, Five to ten years	2,373
Security obligations due, Fair value, After ten years	43,681
Total Security obligations due, Fair value	65,140
Investment securities available for sale	261,506	260,806
Mortgage-backed Securities, Government Sponsored Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	109,031	110,452
Investment securities available for sale	110,595	113,290
Collateralized Mortgage Obligations, Government Sponsored Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	85,629	97,325
Investment securities available for sale	$ 85,771	$ 97,759

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Label	Element	Value
Other Than Temporary Impairment Credit Losses Recognized In Earnings Credit Losses On Debt Securities Held	us-gaap_OtherThanTemporaryImpairmentCreditLossesRecognizedInEarningsCreditLossesOnDebtSecuritiesHeld	$ 109
Restatement Adjustment [Member]
Cumulative Effect on Retained Earnings, Net of Tax	us-gaap_CumulativeEffectOnRetainedEarningsNetOfTax1	(785)
Retained Earnings [Member] | Restatement Adjustment [Member]
Cumulative Effect on Retained Earnings, Net of Tax	us-gaap_CumulativeEffectOnRetainedEarningsNetOfTax1	$ (785)

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Loans (Categories of Loans) (Details) - USD ($)	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 1,042,965,000		$ 1,022,388,000
Undisbursed loans in process	(7,359,000)		(9,285,000)
Unamortized deferred loan costs, net	4,017,000		3,583,000
Allowance for loan losses	(12,906,000)	$ (13,217,000)	(13,168,000)	$ (13,243,000)	$ (13,370,000)	$ (13,412,000)
Net loans	1,026,717,000		1,003,518,000
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	203,767,000		198,019,000
Construction Loans [Member] | Commercial Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	29,940,000		33,102,000
First Mortgage [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	505,189,000		517,063,000
Second Mortgage [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	69,640,000		71,073,000
Automobile Loan [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	15,072,000		14,712,000
Boat/RVs [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	112,583,000		94,761,000
Other [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	5,134,000		5,184,000
Commercial and Industrial [Member] | Commercial Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	101,640,000		88,474,000
Commercial and Industrial [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	101,640,000		88,474,000
Real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	808,536,000		819,257,000
Real estate | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	203,767,000		198,019,000
Real estate | Construction Loans [Member] | Commercial Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	29,940,000		33,102,000
Real estate | First Mortgage [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	505,189,000		517,063,000
Real estate | Second Mortgage [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	69,640,000		71,073,000
Other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	234,429,000		203,131,000
Other | Automobile Loan [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	15,072,000		14,712,000
Other | Boat/RVs [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	112,583,000		94,761,000
Other | Other [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	5,134,000		5,184,000
Other | Commercial and Industrial [Member] | Commercial Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 101,640,000		$ 88,474,000

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Fair Values of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Fair Values of Financial Instruments [Abstract]

Fair Value Measurements of Assets Measured at Fair Value on Recurring Basis

The following table presents the fair value measurements of assets measured at fair value on a recurring basis and level within the ASC 820 fair value hierarchy in which the fair value measurements fall:

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Mortgage-backed securities
Government sponsored agencies	$	110,595	$	-	$	110,595	$	-
Collateralized mortgage obligations
Government sponsored agencies		85,771		-		85,771		-
Municipal obligations		44,578		-		44,578		-
Corporate obligations		20,562		-		18,040		2,522
Available-for-sale securities	$	261,506	$	-	$	258,984	$	2,522

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
December 31, 2014
Mortgage-backed securities
Government sponsored agencies	$	113,290	$	-	$	113,290	$	-
Collateralized mortgage obligations
Government sponsored agencies		97,759		-		97,759		-
Federal agencies		4		-		4		-
Municipal obligations		29,252		-		29,252		-
Corporate obligations		20,501		-		17,979		2,522
Available-for-sale securities	$	260,806	$	-	$	258,284	$	2,522

Reconciliation of Recurring Fair Value Measurements Recognized in Balance Sheet using Significant Unobservable (Level Three) Inputs

The following is a reconciliation of the beginning and ending balances for the three and six months ended June 30, 2015 and 2014 of recurring fair value measurements recognized in the accompanying balance sheets using significant unobservable (Level 3) inputs:

	Three Months Ended
	June 30,
		2015		2014
Beginning balance	$	2,522	$	4,043
Total realized and unrealized gains (losses)
Included in net income		-		56
Included in other comprehensive income (loss)		-		205
Purchases, sales, issuances and settlements		-		(566)
Ending balance	$	2,522	$	3,738
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	0

	Six Months Ended
	June 30,
		2015		2014
Beginning balance	$	2,522	$	3,336
Total realized and unrealized gains (losses)
Included in net income		-		56
Included in other comprehensive income (loss)		-		920
Purchases, issuances and settlements		-		(574)
Ending balance	$	2,522	$	3,738
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	0

Fair Value Measurement of Assets Measured at Fair Value on Nonrecurring Basis

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fall. 

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
June 30, 2015
Other real estate owned	$	57	$	-	$	-	$	57

			Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
December 31, 2014
Other real estate owned		1,280		-		-		1,280

Quantitative Information about Unobservable Inputs used in Recurring and Nonrecurring Level Three Fair Value Measurements

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

June 30, 2015	Fair Value		Valuation Technique	Unobservable Inputs	Range
Trust Preferred Securities	$	2,522	Discounted cash flow	Discount rate	8.0	%
				Constant prepayment rate	2.0	%
				Cumulative projected prepayments	40.0	%
				Probability of default	1.7 - 1.8	%
				Projected cures given deferral	0 - 15.0	%
				Loss severity	34.2 - 39.8	%
Other real estate owned	$	57	Third party valuations	Discount to reflect realizable value less estimated selling costs	29.8 - 93.0	%

December 31, 2014	Fair Value		Valuation Technique	Unobservable Inputs	Range
Trust Preferred Securities	$	2,522	Discounted cash flow	Discount rate	8.0	%
				Constant prepayment rate	2.0	%
				Cumulative projected prepayments	40.0	%
				Probability of default	1.7 - 1.8	%
				Projected cures given deferral	0 - 15.0	%
				Loss severity	34.2 - 39.8	%
Other real estate owned	$	1,280	Third party valuations	Discount to reflect realizable value less estimated selling costs	24.4 - 36.7	%

Estimated Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments not carried at fair value in the consolidated balance sheets as of the dates noted below are as follows:

					Fair Value Measurements Using
June 30, 2015		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	24,269	$	24,269	$	24,269	$	-	$	-
Loans held for sale		12,486		12,541		-		12,541		-
Loans, net		1,026,717		1,019,952		-		-		1,019,952
FHLB stock		9,810		9,810		-		9,810		-
Interest receivable		4,054		4,054		-		4,054		-
Liabilities
Deposits		1,078,287		1,078,926		711,204		-		367,722
FHLB advances		212,042		211,706		-		211,706		-
Other borrowings		9,816		9,868		-		9,868		-
Interest payable		248		248		-		248		-

					Fair Value Measurements Using
December 31, 2014		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	29,575	$	29,575	$	29,575	$	-	$	-
Loans held for sale		6,140		6,220		-		6,220		-
Loans, net		1,003,518		1,006,233		-		-		1,006,233
FHLB stock		11,964		11,964		-		11,964		-
Interest receivable		3,730		3,730		-		3,730		-
Liabilities
Deposits		1,079,320		1,050,295		648,314		-		401,981
FHLB advances		192,442		191,995		-		191,995		-
Other borrowings		10,174		10,283		-		10,283		-
Interest payable		223		223		-		223		-