MutualFirst Announces Third Quarter 2012 Earnings

              MutualFirst Announces Third Quarter 2012 Earnings

PR Newswire

MUNCIE, Ind., Oct. 25, 2012

MUNCIE, Ind., Oct.25, 2012 /PRNewswire/ --MutualFirst Financial, Inc.
(NASDAQ: MFSF), the holding company of MutualBank (the "Bank"), announced
today net income to common shareholders for the third quarter ended September
30, 2012 of $1.8 million, or $.26 for basic and diluted earnings per common
share. This compared to net income available to common shareholders for the
same period in 2011 of $596,000, or $.09 for basic and diluted earnings per
common share. Annualized return on assets was .59% and return on average
tangible common equity was 6.83% for the third quarter of 2012 compared to
.41% and 2.37% respectively, for the same period of last year.

Net income available to common shareholders for the nine months ended
September 30, 2012 was $4.2 million, or $.60 for basic earnings per common
share and $.59 for diluted earnings per common share compared to net income
available to common shareholders of $682,000, or $.10 for basic and diluted
earnings per common share for the nine months ended September 30, 2011.
Annualized return on assets was .48% and return on average tangible common
equity was 5.31% for the nine months ended in 2012 compared to .23% and .93%
respectively, for the same period of last year.

Other financial highlights for the third quarter ended September 30, 2012
included:

  oGross loans increased $8.5 million in the third quarter of 2012.
  oDeposits increased $21.5 million in the third quarter of 2012.
  oTangible common equity increased to 7.33% in the third quarter of 2012 and
    tangible book value increased to $15.40.
  oNon-performing assets declined $2.2 million, or 6.7% in the third quarter
    of 2012 and declined $8.6 million, or 21.9% compared to December 31,
    2011. Classified assets declined $5.8 million, or 9.5% in the third
    quarter of 2012.
  oNet charge offs on an annualized basis were .81% in the third quarter of
    2012 compared to 1.11% in the same period of 2011. Net charge offs on a
    linked quarter decreased from 1.04%.
  oNet interest margin was 3.05% for the third quarter of 2012 compared to
    3.19% in the same period of 2011. On a linked quarter basis, net
    interest margin declined from 3.10%.
  oNon-interest income for the quarter ended September 30, 2012 decreased
    $283,000 compared to the same period in 2011. On a linked quarter basis,
    non-interest income increased $676,000.
  oNon-interest expense for the third quarter of 2012 increased $97,000 over
    the same period in 2011. Non-interest expense increased $200,000 over the
    linked quarter.

"We are pleased to see continued improvement in our earnings and increased
loan production," said David W. Heeter, President and CEO.

Balance Sheet

Assets increased $45.2 million as of September 30, 2012 compared to December
31, 2011, primarily due to the $45.6 million increase in the gross loan
portfolio. Mortgage loans have increased $57.0 million in 2012 as mortgage
refinance activities remain brisk. The commercial loan portfolio has declined
$8.8 million in 2012, while the consumer loan portfolio has declined $2.6
million. In the third quarter of 2012, gross loans increased by $8.5
million. Mortgage loans increased $12.0 million and consumer loans increased
by $1.7 million. These increases were offset by declines in the commercial
loan portfolio of $5.2 million. Investments securities have increased by
$12.0 million over the end of 2011, but decreased by $22.5 million in the
third quarter to fund current loan growth. To help mitigate interest rate
risk, the Bank has sold its 30 year fixed rate mortgage loan production in the
secondary market. In the first nine months of 2012, the Bank has sold $34.7
million in fixed rate mortgage loans compared to $26.1 million during the
first nine months of 2011.

Deposits increased by $26.4 million as of September 30, 2012 compared to
December 31, 2011, as the Bank continues to see growth in core transactional
accounts. The increase in the core transactional accounts was $66.9 million,
while certificates of deposit decreased $40.5 million, in the first nine
months of 2012. Core transactional deposits increased to 50% of the Bank's
total deposits as of September 30, 2012 compared to 45% as of December 31,
2011. The increase in deposits, along with liquidation of securities, has
allowed the Bank to fund loan growth this year. FHLB advances have increased
by $11.7 million as the Bank has lengthened out maturing advances to help
mitigate interest rate risk.

Allowance for loan losses decreased by $1.3 million, to $15.5 million as of
September 30, 2012 compared to December 31, 2011 as the Bank's specific
allocation on impaired loans have declined by $1.5 million primarily through
charge offs of those specific allocations. Net charge offs in the third
quarter were $1.9 million, or .81% of total loans on an annualized basis. Net
charge offs for the first nine months of 2012 were $6.0 million, or .84% of
total loans on an annualized basis. The allowance for loan losses to
non-performing loans as of September 30, 2012 was 65.09% compared to 52.81% as
of December 31, 2011. The allowance for loan losses to total loans as of
September 30, 2012 was 1.61%, a decrease from 1.83% as of December 31, 2011.
Heeter commented, "We continue to actively monitor our loan portfolio and we
believe that our allowance for loan losses adequately reflects the risk in our
portfolio and the current risk in the economy as we move forward."

Stockholders' equity was $139.3 million at September 30, 2012, an increase of
$6.6 million from December 31, 2011. The increase was due primarily to net
income of $5.2 million and unrealized gains on securities of $3.3 million. The
increase was offset by dividend payments of $2.3 million to common and
preferred shareholders. The Company's tangible book value per share as of
September 30, 2012 increased to $15.40 compared to $14.38 as of December 31,
2011 and the tangible common equity ratio was 7.33% as of September 30, 2012
compared to 7.05% as of December 31, 2011. The Company's and the Bank's
risk-based capital ratio were well in excess of "well-capitalized" levels as
defined by all applicable regulatory standards as of September 30, 2012.

Income Statement

Net interest income before the provision for loan losses decreased $80,000 for
the quarter ended September 30, 2012 compared to the same period in 2011. The
decrease was a result of a decline in net interest margin by 14 basis points,
partially offset by an increase in average earning assets of $46.8 million
comparing the third quarter of 2012 with the same period in 2011. On a linked
quarter basis, net interest income before the provision for loan losses
decreased $35,000.

Net interest income before the provision for loan losses decreased $730,000
for the nine months ended of 2012 compared to the same period in 2011. The
decrease was a result of the decline in the net interest margin from 3.18% in
the first nine months of 2011 to 3.05% in the first nine months of 2012, which
was partially offset by an increase in average earning assets of $23.8
million.

The provision for loan losses for the third quarter of 2012 decreased to $1.5
million compared to $3.2 million 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
decreasing to $1.9 million, or .81% of loans on an annualized basis in the
third quarter of 2012 compared to net charge offs of $2.7 million, or 1.11% of
loans on an annualized basis in the third quarter of 2011. Net charge offs
have exceeded provision primarily due to charge offs related to previously
identified loans which had established specific allocations. Non-performing
loans to total loans at September 30, 2012 were 2.48% compared to 2.82% at
September 30, 2011. Non-performing assets to total assets were 2.08% at
September 30, 2012 compared to 2.43% at September 30, 2011.

The provision for loan losses for the first nine months of 2012 decreased to
$4.7 million compared to $9.1 million during last year's comparable period.
The decrease was primarily due to a reduction net charge offs to $6.0 million
in the first nine months of 2012 compared to net charge offs of $9.0 million
in the same period in 2011. Non-performing loans to total loans at September
30, 2012 were 2.48% compared to 3.47% at December 31, 2011. Non-performing
loans decreased $8.0 million, or 25% as of September 30, 2012 compared to
December 31, 2011.

Non-interest income for the third quarter of 2012 was $4.4 million, a decrease
of $283,000 compared to the third quarter of 2011. Gain on sale of loans and
servicing of loans increased by $617,000 in the third quarter of 2012 compared
to the same period in 2011. This increase was offset by a decrease in gain on
investment sales of $669,000. Service fee income on deposit accounts decreased
by $218,000 as fees collected on overdrafts have declined as overdraft
transactions have decreased. On a linked quarter basis, non-interest income
increased $676,000 primarily due to gain on sale of investments.

Non-interest income for the nine months ended of 2012 was $11.0 million, an
increase of $390,000 compared to the same period of 2011. Gain on sale of
loans and servicing income off of loans increased by $869,000 in the nine
months ended in 2012 compared to the same period in 2011. These increases
were partially offset by decreases in gain on sale of investments of $264,000
primarily due to decreased sales in 2012, decreases in service fee income on
deposits of $144,000 primarily related to less overdraft fee income, and an
increase in losses on sale of real estate owned of $165,000.

Non-interest expense increased $97,000 when comparing the third quarter of
2012 with that of 2011. The increase was primarily due to approximately
$200,000 expense related to property taxes to maintain secure collateral on a
large problem loan. On a linked quarter, non-interest expense increased
$200,000 for the above stated reasons.

Non-interest expense decreased $580,000 when comparing the first nine months
of 2012 with that of 2011. Decreases related to non-interest expense have
been a result of decreased occupancy and equipment expense of $347,000, a
reduction in salaries and benefit expense of $193,000 primarily due to savings
on employee health insurance, decreased deposit insurance expense of $231,000
and decreased intangible expense of $149,000. These decreases were partially
offset by increases in software subscriptions and maintenance of $176,000 and
increases in marketing expense of $161,000.

"Enhancing shareholder value continues to be our top priority. While there is
still uncertainty surrounding the fiscal cliff and the impact to the economy,
we believe we continue to improve and strengthen our ability to perform for
our shareholders." commented Heeter.

MutualFirst Financial, Inc. and MutualBank, an Indiana-based financial
institution, has thirty-two full-service retail financial centers in Delaware,
Elkhart, Grant, Kosciusko, Randolph, St. Joseph and Wabash Counties in
Indiana. MutualBank also has two Wealth Management and Trust offices located
in Carmel and Crawfordsville, Indiana and a loan origination office in New
Buffalo, Michigan. MutualBank is a leading residential lender in each of the
market areas it serves, and provides a full range of financial services
including wealth management and trust services and Internet banking services.
The Company's stock is traded on the NASDAQ National Market under the symbol
"MFSF" and can be found on the internet at www.bankwithmutual.com.

Statements contained in this release, which are not historical facts, are
forward-looking statements, as that term is defined in the Private Securities
Reform Act of 1995. Such forward-looking statements are subject to risks and
uncertainties, which could cause actual results to differ from those currently
anticipated due to a number of factors, which include, but are not limited to,
factors discussed in documents filed by the Company with the Securities and
Exchange Commission from time to time.

 MUTUALFIRSTFINANCIAL INC.
                                          September 30, June 30,  December 31,
Balance Sheet (Unaudited):                2012          2012      2011
                                          (000)         (000)     (000)
Assets
Cash and cash equivalents                 $44,319       $23,590   $56,638
Investment securities - AFS               342,863       365,396   330,878
Loans held for sale                       4,072         8,598     1,441
Loans, gross                              962,911       954,423   917,274
Allowance for loan loss                   (15,536)      (16,003)  (16,815)
Net loans                                 947,375       938,420   900,459
Premise and equipment                    32,344        32,022    32,025
FHLB of Indianapolis stock                14,391        14,391    14,391
Investment in limited partnerships        2,730         2,858     3,113
Cash surrender value of life insurance    48,076        47,737    47,023
Prepaid FDIC premium                      1,947         2,236     2,821
Core deposit and other intangibles        2,634         2,863     3,373
Deferred income tax benefit               14,896        16,107    17,385
Foreclosed real estate                    6,184         7,364     6,525
Other assets                              10,565        9,866     11,121
Total assets                              1,472,396     1,471,448 1,427,193
Liabilities and Stockholders' Equity
Deposits                                  1,193,031     1,171,500 1,166,636
FHLB advances                             113,194       136,574   101,451
Other borrowings                          11,812        12,014    12,410
Other liabilities                         15,084        14,719    14,069
Stockholders' equity                      139,275       136,641   132,627
Total liabilities and stockholders'       1,472,396     1,471,448 1,427,193
equity



              ThreeMonths  ThreeMonths ThreeMonths   NineMonths   NineMonths
              Ended         Ended        Ended          Ended         Ended
              September30, June 30,    September30,  September30, September30,
Income
Statement     2012          2012         2011           2012          2011
(Unaudited):
              (000)         (000)        (000)          (000)         (000)
Total
interest      $13,908       $14,101      $15,249        $41,907       $46,739
income
Total
interest      3,593         3,751        4,854          11,373        15,475
expense
 Net
interest      10,315        10,350       10,395         30,534        31,264
income
Provision for 1,475         1,850        3,200          4,675         9,100
loan losses
Net interest
income after
provision
 for loan    8,840         8,500        7,195          25,859        22,164
losses

Non-interest
income
Fees and
service       1,644         1,752        1,862          5,049         5,193
charges
Net gain
(loss) on     1,095         283          1,764          1,575         1,839
sale of
investments
Other than
temporary     0             0            0              0             (193)
impairment of
securities
Equity in
losses of     (124)         (128)        (107)          (372)         (256)
limited
partnerships
Commissions   859           1,036        879            2,914         2,835
Net gain
(loss) on     541           715          245            1,388         685
loan sales
Net servicing (16)          (142)        (337)          (126)         (292)
fees
Increase in
cash
surrender     340           336          346            1,017         1,071
value of life
insurance
Gain (Loss)
on sale of
other real    30            (160)        (22)           (523)         (358)
estate and
repossessed
assets
Other income 12            13           34             93            101
Total
non-interest  4,381         3,705        4,664          11,015        10,625
income

Non-interest
expense
Salaries and  5,273         5,293        5,240          15,910        16,103
benefits
Occupancy and 1,353         1,277        1,328          3,833         4,180
equipment
Data
processing    361           387          373            1,178         1,153
fees
Professional  420           426          433            1,188         1,169
fees
Marketing     488           372          453            1,214         1,053
Deposit       312           314          330            939           1,170
insurance
Software
subscriptions 384           395          338            1,145         969
and
maintenance
Intangible    229           255          280            745           894
amortization
Repossessed
assets        247           281          279            691           746
expense
Other        1,066         933          982            2,816         2,802
expenses
Total
non-interest  10,133        9,933        10,036         29,659        30,239
expense
Income       3,088         2,272        1,823          7,215         2,550
before taxes
Income tax
provision     915           628          375            1,971         114
(benefit)
Net income   2,173         1,644        1,448          5,244         2,436
Preferred
stock         362           362          852            1,085         1,754
dividends and
amortization
Net income
available to  $1,811        $1,282       $596           $4,159        $682
common
shareholders
Pretax
preprovision  $4,201        $3,760       $4,171         $10,805       $9,896
earnings



Average Balances, Net Interest Income, Yield
Earned and Rates Paid
                               Three                         Three
                               mosended                     mosended
                               9/30/2012                     9/30/2011
                   Average     Interest  Average Average     Interest  Average
                   Outstanding Earned/   Yield/  Outstanding Earned/   Yield/
                   Balance     Paid      Rate    Balance     Paid      Rate
                   (000)       (000)             (000)       (000)
Interest-Earning
Assets:
Interest -bearing $18,570     $14       0.30%   $22,612     $17       0.30%
deposits
Mortgage-backed
securities:
Available-for-sale 320,739     2,054     2.56    280,901     1,963     2.80
Investment
securities:
Available-for-sale 33,763      201       2.38    22,253      170       3.06
Loans receivable  963,523     11,532    4.79    964,061     12,991    5.39
Stock in FHLB of   14,391      107       2.97    14,391      107       2.97
Indianapolis
Total
interest-earning   1,350,986   13,908    4.12    1,304,218   15,248    4.68
assets (3)
Non-interest
earning assets,
net of allowance
 for loan losses
and unrealized     118,260                       118,638
gain/loss
 Total assets  $1,469,246                    $1,422,856
Interest-Bearing
Liabilities:
Demand and NOW    $249,739    226       0.36    $217,885    292       0.54
accounts
Savings deposits  107,326     13        0.05    96,565      27        0.11
Money market      90,326      102       0.45    70,915      127       0.72
accounts
Certificate       593,841     2,523     1.70    654,746     3,458     2.11
accounts
Total deposits    1,041,232   2,864     1.10    1,040,111   3,904     1.50
Borrowings        141,553     729       2.06    110,140     949       3.45
 Total
interest-bearing   1,182,785   3,593     1.22    1,150,251   4,853     1.69
accounts
Non-interest
bearing deposit    132,309                       124,757
accounts
Other liabilities  16,384                        12,312
 Total            1,331,478                     1,287,320
liabilities
Stockholders'      137,768                       135,536
equity
 Total
liabilities and    $1,469,246                    $1,422,856
stockholders'
equity
Net earning assets $168,201                      $153,967
Net interest                   $10,315                       $10,395
income
Net interest rate                        2.90%                         2.99%
spread
Net yield on
average                                  3.05%                         3.19%
interest-earning
assets
Average
interest-earning
assets toaverage                        114.22%                       113.39%
interest-bearing
liabilities



Selected         ThreeMonths  ThreeMonths ThreeMonths   Nine Months   Nine Months
Financial Ratios
and Other        Ended         Ended        Ended          Ended         Ended
Financial Data   September30, June 30,     September30,  September30, September30,
(Unaudited):     2012          2012         2011           2012          2011
Share and per
share data:
Average common
shares
outstanding
 Basic         6,949,126     6,938,273    6,911,597      6,937,229     6,902,676
 Diluted       7,074,896     7,044,522    6,927,433      7,032,032     6,992,429
Per common
share:
 Basic         $0.26         $0.18        $0.09          $0.60         $0.10
earnings
 Diluted       $0.26         $0.18        $0.09          $0.59         $0.10
earnings
 Dividends     $0.06         $0.06        $0.06          $0.18         $0.18
Dividend payout  23.08%        33.33%       66.67%         30.51%        180.00%
ratio
Performance
Ratios:
 Return on
average assets
(ratio of net
 income to
average total    0.59%         0.45%        0.41%          0.48%         0.23%
assets)(1)
 Return on
average tangible
common equity
(ratio of net
 income to
average tangible 6.83%         4.97%        2.37%          5.31%         0.93%
common
equity)(1)
 Interest rate
spread
information:
 Average
during the       2.90%         2.95%        2.99%          2.89%         2.98%
period(1)
 Net interest 3.05%         3.10%        3.19%          3.05%         3.18%
margin(1)(2)
Efficiency Ratio 68.95%        70.67%       66.64%         71.38%        72.19%
 Ratio of
average
interest-earning
 assets to
average
interest-bearing
 liabilities 114.22%       113.23%      113.39%        113.91%       112.80%
Allowance for
loan losses:
 Balance
beginning of     $16,003       $16,634      $15,957        $16,815       $16,372
period
 Charge
offs:
 One-   505           706          464            1,652         2,655
to four- family

Commercial real  1,346         900          2,017          3,363         5,582
estate
        268           561          556            1,174         1,636
Consumer loans

Commercial       137           749          0              890           0
business loans
    2,256         2,916        3,037          7,079         9,873
Sub-total

Recoveries:
 One-   195           2            63             199           166
to four- family

Commercial real  14            167          64             374           65
estate
        103           59           234            343           651
Consumer loans

Commercial       2             207          0              209           0
business loans
    314           435          361            1,125         882
Sub-total
Net charge offs  1,942         2,481        2,676          5,954         8,991
Additions
charged to       1,475         1,850        3,200          4,675         9,100
operations
Balance end of   $15,536       $16,003      $16,481        $15,536       $16,481
period
 Net loan
charge-offs to   0.81%         1.04%        1.11%          0.84%         1.24%
average loans
(1)



                        September30,   June 30,  December31,  September30,
                        2012            2012       2011          2011
Total shares            6,993,971       6,992,029  6,987,586     6,987,586
outstanding
Tangible book value per $15.40          $15.00     $14.38        $14.42
share
Tangible common equity  7.33%           7.14%      7.05%         7.20%
to tangible assets
Nonperforming assets
(000's)
Non-accrual loans
One- to four- family    $9,862          $9,732     $10,080       $9,099
Commercial real estate  8,969           10,887     16,906        13,129
Consumer loans          2,869           2,817      2,565         2,277
Commercial business     1,412           1,140      1,160         1,433
loans
Total non-accrual loans 23,112          24,576     30,711        25,938
Accruing loans past due 757             290        1,127         1,103
90 days or more
Total nonperforming     23,869          24,866     31,838        27,041
loans
 Real estate owned   6,184           7,365      6,525         6,703
 Other repossessed   573             600        867           1,019
assets
Total nonperforming     $30,626         $32,831    $39,230       $34,763
assets
Performing restructured 7,855           6,389      8,402         11,882
loans (4)
Asset Quality Ratios:
Non-performing assets   2.08%           2.23%      2.75%         2.43%
to total assets
Non-performing loans to 2.48%           2.61%      3.47%         2.82%
total loans
Allowance for loan
losses to               65.09%          64.36%     52.81%        60.95%
non-performing loans
Allowance for loan
losses to loans         1.61%           1.68%      1.83%         1.72%
receivable
(1) Ratios for the three and nine month periods have been annualized.
(2) Net interest income divided by average interest earning assets.
(3) Calculated net of deferred loan fees, loan discounts, loans in process
and loss reserves.
(4) Performing restructured loans are excluded from non-performing ratios.
Restructured loans that are on non-accrual are in the non-accrual loan
categories.

SOURCE MutualFirst Financial, Inc.

Website: http://www.bankwithmutual.com
Contact: Chris Cook, Senior Vice President, Treasurer and CFO of MutualFirst
Financial, Inc., +1-765-747-2945
 
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