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