PRESS RELEASE
| Date: | July 23, 2004 |
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| From: | MutualFirst Financial, Inc. |
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| For Publication: | Immediately |
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| Contact: | Tim McArdle, Senior Vice President and Treasurer of |
| | | MutualFirst Financial, Inc. (765) 747-2818 |
MutualFirst Announces Second Quarter 2004 Earnings
Muncie, Indiana- MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of Mutual Federal Savings Bank (the "Bank"), announced today that net income for the second quarter ended June 30, 2004 was $1.8 million, or $.38 for basic and $.37 for diluted earnings per share. This compared to net income for the comparable period in 2003 of $2.4 million, or $.49 for basic and $.47 for diluted earnings per share. The 21.3% decrease in diluted earnings per share was primarily a result of reduced gain on sale of mortgage loans and smaller cash surrender value appreciation when compared to the year ago quarter. Annualized return on assets was .89% and return on equity was 7.59% for the second quarter of 2004 compared to 1.21% and 10.15% respectively, for the same period of last year.
Net income for the six months ended June 30, 2004 was $3.8 million or $.79 for basic and $.77 for diluted earnings per share. This compared to net income for the comparable period in 2003 of $4.5 million or $.89 for basic and $.86 for diluted earnings per share. The 10.5% decrease in diluted earnings per share was primarily a result of reduced gain on sale of mortgage loans and smaller cash surrender value appreciation when compared to the same period in 2003. Annualized return on average assets was .93% and return on average equity was 7.84% for the first half of 2004 compared to 1.14% and 9.41% respectively, for the same period of last year.
Assets totaled $818.4 million at June 30, 2004, a decrease from December 31, 2003 of $5.4 million. Loans, excluding loans held for sale, decreased $6.1 million or .9%. Consumer loans increased $2.8 million, or 1.5%, and commercial business loans increased $3.8 million, or 8.6%, while residential mortgage loans held in portfolio decreased $12.5 million. Mortgage loans held for sale increased $119,000 and mortgage loans sold during the first half of 2004 totaled $29.6 million.
Allowance for loan losses increased $241,000 from $6.8 million at December 31, 2003 to $7.0 million at June 30, 2004. Net charge offs for the first half of 2004 were $516,000 or ..15% of average loans on an annualized basis compared to $497,000, or .15% of average loans for the comparable period in 2003. As of June 30, 2004 allowance for loan losses as a percentage of loans receivable and non-performing loans was 1.00% and 179.59%, respectively.
Total deposits were $570.6 million at June 30, 2004 a decrease of $8.7 million, or 1.5% from December 31, 2003. Excluding an $17.8 million decrease in volatile short term public funds, retail deposits grew $9.1 million. Of this growth, $2.4 million was in non-interest bearing deposits. Total borrowings increased $8.2 million to $145.3 million at June 30, 2004 from $137.1 million at December 31, 2003.
Stockholders' equity decreased $5.3 million, or 5.4%, from $97.5 million at December 31, 2003, to $92.2 million at June 30, 2004. The decrease was due primarily to the repurchase of 365,385 shares of common stock for $8.6 million and dividend payments of $1.2 million. These decreases were partially offset by net income of $3.8 million, Employee Stock Ownership Plan (ESOP) shares earned of $379,000, and RRP shares earned of $300,000. Also, the market value of securities available for sale compared to their book value decreased $279,000 from a gain of $234,000 at December 31, 2003 to a loss of $45,000 at June 30, 2004.
NEXT PAGENet interest income decreased $72,000 from $6.9 million for the three months ended June 30, 2003, to $6.8 million for the three months ended June 30, 2004. The net interest margin decreased from 3.81% for the three-month period ended June 30, 2003, to 3.66% for the comparable period in 2004 as yields on interest-earning assets decreased at a slightly faster rate than the decrease in the cost of interest-bearing liabilities. Net interest income decreased $69,000 for the six months ended June 30, 2004 compared to the six months ended June 30, 2003. The net interest margin decreased from 3.83% for the six-month period ended June 30, 2003, to 3.65% for the comparable period in 2004 for the same reason mentioned above. This lower margin was partially offset by a $31.4 million increase in average interest-earning assets when comparing the first half of 2004 to that of 2003.
The provision for loan losses for the second quarter of 2004 was $530,000, compared to $375,000 for last year's comparable period. Non-performing loans to total loans at June 30, 2004 were .55% compared to .58% at June 30, 2003. Non-performing assets to total assets were .57% at June 30, 2004 compared to .68% at June 30, 2003. The reason for the increased loan loss provision was the re-classification of two non-performing commercial credits totaling $720,000 from sub-standard to doubtful. With this quarter's addition to the loan loss provision management believes loan loss reserves to be adequate.
Non-interest income decreased $522,000 or 26.2%, to $1.5 million for the three months ended June 30, 2004 compared to $2.0 million for the same period in 2003. Due to reduced mortgage refinancing activity in the 2004 quarter, gain on sale of loans (including a $140,000 reduction in mortgage servicing rights reserve) was $217,000, down from $573,000 in the comparable 2003 quarter. Also, the increase in cash surrender value of life insurance was $255,000 less for the second quarter in 2004 when compared to the comparable 2003 quarter due to the receipt of life insurance proceeds in 2003 following the death of a former director of Marion Capital Holdings Inc. (a December, 2000 merger partner). Non-interest income for the six months ended June 30, 2004 decreased $388,000 from $3.4 million for the six months ended June 30, 2003 to $3.0 million. This decrease was due primarily to the reasons set forth above, partially offset by a gain in equity of limited partnerships of $22,000 in the first half of 2004 compared to a loss of $225,000 in the comparable period in 2003.
Non-interest expense remained steady at $5.2 million when comparing the three months ended June 30, 2004 to the same period in 2003. For the six-month period non-interest expense was up $395,000 when comparing the first half of 2004 to the same period in 2003. The majority of this increase was due to a $116,000 increase in health insurance premium costs, a reduction of deferred compensation relating to mortgage originations of $106,000, and a $106,000 increase in the cost of RRP and ESOP plans.
Income tax expense decreased $182,000 for the three months ended June 30, 2004 compared to the same period in 2003. The decrease resulted from decreased taxable income, partially offset by an increase in the effective tax rate from 28.3% to 29.6%. For the six-month period ended June 30, 2004, income tax expense decreased $182,000 compared to the same period in 2003. The decrease was due primarily to decreased taxable income, partially offset by an increase in the effective tax rate from 28.5% to 29.7%.
MutualFirst Financial, Inc. and Mutual Federal Savings Bank are headquartered in Muncie, Indiana with eighteen full service offices in Delaware, Randolph, Kosciusko and Grant counties.
Statements contained in this release, which are not historical facts, are forward-looking statements, as that term is defined in the Private Securities Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time.
NEXT PAGE| MUTUALFIRSTFINANCIAL INC. |
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| 30-Jun | 31-Dec |
| Selected Financial Condition Data(Unaudited): | 2004 | 2003 |
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| (000) | (000) |
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| Total Assets | $818,408 | $823,791 |
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| Cash and cash equivalents | 18,183 | 23,068 |
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| Loans held for sale | 2,094 | 1,975 |
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| Loans receivable, net | 697,591 | 703,981 |
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| Investment securities available for sale, at fair value | 36,495 | 33,472 |
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| Total deposits | 570,635 | 579,362 |
| Total borrowings | 145,283 | 137,103 |
| Total stockholders' equity | 92,231 | 97,520 |
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| Three Months | Three Months | Three Months | | Six Months | Six Months |
| Ended | Ended | Ended | | Ended | Ended |
| 30-Jun | 31-Mar | 30-Jun | | 30-Jun | 30-Jun |
| Selected Operations Data (Unaudited): | 2004 | 2004 | 2003 | | 2004 | 2003 |
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| (000) | (000) | (000) | | (000) | (000) |
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| Total interest income | $11,048 | $11,197 | $11,737 | | $22,245 | $23,528 |
| Total interest expense | 4,211 | 4,367 | 4,828 | | 8,578 | 9,792 |
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| Net interest income | 6,837 | 6,830 | 6,909 | | 13,667 | 13,736 |
| Provision for loan losses | 530 | 227 | 375 | | 757 | 750 |
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| Net interest income after provision | | | | | | |
| for loan losses | 6,307 | 6,603 | 6,534 | | 12,910 | 12,986 |
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Non-interest income
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| Fees and service charges | 743 | 702 | 748 | | 1,445 | 1,447 |
| Equity in gains (losses) of limited partnerships | 19 | 3 | (78) | | 22 | (225) |
| Commissions | 154 | 143 | 175 | | 297 | 350 |
| Net gain on loan sales and servicing | 217 | 395 | 573 | | 612 | 923 |
| Increase in cash surrender value of life insurance | 247 | 258 | 502 | | 505 | 796 |
| Other income | 88 | 40 | 70 | | 128 | 105 |
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| Total non-interest income | 1,468 | 1,541 | 1,990 | | 3,009 | 3,396 |
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Non-interest expense
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| Salaries and benefits | 3,329 | 3,440 | 3,221 | | 6,769 | 6,477 |
| Occupancy and equipment | 684 | 698 | 641 | | 1,382 | 1,284 |
| Data processing fees | 150 | 197 | 151 | | 347 | 310 |
| Deposit insurance expense | 22 | 22 | 22 | | 44 | 45 |
| Marketing | 147 | 95 | 227 | | 242 | 323 |
| Other expenses | 866 | 890 | 927 | | 1,756 | 1,706 |
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| Total non-interest expense | 5,198 | 5,342 | 5,189 | | 10,540 | 10,145 |
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| Income before taxes | 2,577 | 2,802 | 3,335 | | 5,379 | 6,237 |
| Income tax provision | 763 | 834 | 945 | | 1,598 | 1,780 |
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| Net income | $1,814 | $1,968 | $2,390 | | $3,781 | $4,457 |
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NEXT PAGE | Three Months | Three Months | Three Months | | Six Months | Six Months |
| Ended | Ended | Ended | | Ended | Ended |
| Selected Financial Ratios and Other Financial Data | 30-Jun | 31-Mar | 30-Jun | | 30-Jun | 30-Jun |
| (Unaudited): | 2004 | 2004 | 2003 | | 2004 | 2003 |
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| Share and per share data: | | | | | | |
| Average common shares outstanding | | | | | | |
| Basic | 4,732,176 | 4,797,668 | 4,869,462 | | 4,764,922 | 5,002,173 |
| Diluted | 4,879,960 | 4,977,754 | 5,044,636 | | 4,928,857 | 5,166,765 |
| Per share: | | | | | | |
| Basic earnings | $0.38 | $0.41 | $0.49 | | $0.79 | $0.89 |
| Diluted earnings | $0.37 | $0.40 | $0.47 | | $0.77 | $0.86 |
| Dividends | $0.12 | $0.11 | $0.10 | | $0.23 | $0.20 |
| Dividend payout ratio | 32.43% | 27.50% | 21.28% | | 29.87% | 23.26% |
| Performance Ratios: |
| Return on average assets (ratio of net | | | | | | |
| income to average total assets)(1) | 0.89% | 0.96% | 1.21% | | 0.93% | 1.14% |
| Return on average equity (ratio of net | | | | | | |
| income to average equity)(1) | 7.59% | 8.08% | 10.15% | | 7.84% | 9.41% |
| Interest rate spread information: | | | | | | |
| Average during the period(1) | 3.53% | 3.50% | 3.65% | | 3.50% | 3.65% |
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| Net interest margin(1)(2) | 3.66% | 3.64% | 3.81% | | 3.65% | 3.83% |
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| Efficiency Ratio | 62.59% | 63.82% | 58.31% | | 63.20% | 59.22% |
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| Ratio of average interest-earning |
| assets to average interest-bearing |
| liabilities | 106.04% | 106.53% | 106.38% | | 106.28% | 106.58% |
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| Allowance for loan losses: |
| Balance beginning of period | $6,799 | $6,779 | $6,441 | | $6,779 | $6,286 |
| Charge offs: |
| One- to four- family | 111 | 50 | 38 | | 161 | 93 |
| Multi-family | 0 | 0 | 0 | | 0 | 0 |
| Commercial real estate | 13 | 0 | 114 | | 13 | 114 |
| Construction or development | 0 | 0 | 0 | | 0 | 0 |
| Consumer loans | 255 | 254 | 210 | | 509 | 381 |
| Commercial business loans | 0 | 115 | 0 | | 115 | 19 |
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| Sub-total | 379 | 419 | 362 | | 798 | 607 |
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| Recoveries: | | | | | | |
| One- to four- family | 2 | 18 | 24 | | 20 | 27 |
| Multi-family | 0 | 0 | 0 | | 0 | 0 |
| Commercial real estate | 2 | 159 | 0 | | 161 | 0 |
| Construction or development | 0 | 0 | 0 | | 0 | 0 |
| Consumer loans | 66 | 35 | 58 | | 101 | 80 |
| Commercial business loans | 0 | 0 | 3 | | 0 | 3 |
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| Sub-total | 70 | 212 | 85 | | 282 | 110 |
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| Net charge offs | 309 | 207 | 277 | | 516 | 497 |
| Additions charged to operations | 530 | 227 | 375 | | 757 | 750 |
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| Balance end of period | $7,020 | $6,799 | $6,539 | | $7,020 | $6,539 |
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| Net loan charge-offs to average loans (1) | 0.18% | 0.17% | 0.16% | | 0.15% | 0.15% |
NEXT PAGE | June 30, | March 31, | June 30, |
| 2004 | 2004 | 2003 |
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| Total shares outstanding | 4,949,919 | 5,199,725 | 5,267,974 |
| Tangible book value per share | $18.45 | $18.40 | $17.85 |
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| Nonperforming assets (000's) | | | |
| Loans: Non-accrual | $3,366 | $3,692 | $3,915 |
| Past due 90 days or more | 543 | 214 | 90 |
| Restructured | 0 | 0 | 0 |
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| Total nonperforming loans | 3,909 | 3,906 | 4,005 |
| Real estate owned | 303 | 631 | 928 |
| Other repossessed assets | 463 | 501 | 494 |
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| Total nonperforming assets | $4,675 | $5,038 | $5,427 |
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| Asset Quality Ratios: | | | |
| Non-performing assets to total assets | 0.57% | 0.62% | 0.68% |
| Non-performing loans to total loans | 0.55% | 0.56% | 0.58% |
| Allowance for loan losses to non-performing loans | 179.59% | 179.72% | 163.27% |
| Allowance for loan losses to loans receivable | 1.00% | 1.02% | 0.97% |
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| (1) Ratios for the three and six month periods have been annualized. |
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| (2) Net interest income divided by average interest earning assets. |
END