Mutualfirst Financial (MFSF) 8-K MutualFirst Announces First Quarter 2008 Earnings

PRESS RELEASE

Date:	April 15, 2008
From:	MutualFirst Financial, Inc.
For Publication:	Immediately
Contact:	Tim McArdle, Senior Vice President and Treasurer of
	MutualFirst Financial, Inc. (765) 747-2818

MutualFirst Announces First Quarter 2008 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 first quarter ended March 31, 2008 was $1.2 million, or $.30 for basic and diluted earnings per share. This compared to net income for the same period in 2007 of $1.0 million, or $.25 for basic and diluted earnings per share. Annualized return on assets was .51% and return on average tangible equity was 6.80% for the first quarter of 2008 compared to .44% and 5.79% respectively, for the same period of last year. The comparative enhancement of income for the three month period was primarily due to an expanding net interest margin and a mandatory redemption of Visa stock as discussed below. Basic and diluted earnings per share without the one time mandatory redemption of Visa stock was $.28. “We are pleased with the financial results to begin 2008. We continue to operate in a difficult credit environment, however, we believe we are effectively managing this environment,” Dave Heeter, President and CEO of MutualFirst said.

Assets totaled $960.1 million at March 31, 2008, a decrease from December 31, 2007 of $2.4 million, or 0.2%. Gross loans, excluding loans held for sale, decreased $9.0 million, or 1.0%. Consumer loans decreased $5.2 million or 2.3%, and commercial loans increased $4.9 million, or 3.5%, while residential mortgage loans held in the portfolio decreased $8.7 million, or 2.0%. Residential mortgage loans held for sale increased $574,000 and mortgage loans sold during the quarter totaled $14.0 million compared to $5.0 million sold in the first quarter of last year. First quarter seasonality on consumer loans and mortgage loan sales are the primary reasons for the decreased loan balances. Investment securities available for sale increased $889,000, or 2.0%.

Allowance for loan losses was $8.4 million at March 31, 2008, an increase of $88,000 from December 31, 2007. Net charge offs for the quarter ended March 31, 2008 were $524,000 or .26% of average loans on an annualized basis compared to $269,000, or .13% of average loans for the comparable period in 2007. The increase was primarily due to a $200,000 commercial business loan recovery in the first quarter 2007 which was not duplicated in first quarter 2008. On a linked quarter basis net charge offs decreased from .33% of average loans on an annualized basis as of December 31, 2007 compared to .26% as of March 31, 2008. The allowance for loan losses as a percentage of non-performing loans and total loans was 73.14% and 1.05%, respectively at March 31, 2008, compared to 79.72% and 1.03%, respectively at December 31, 2007. CEO Heeter commented, “We continue to closely monitor the quality in our loan portfolio. We were pleased to have lower charge offs in the first quarter of 2008 when compared to the fourth quarter of 2007.”

Total deposits were $678.1 million at March 31, 2008 an increase of $11.7 million, or 1.8% from December 31, 2007. This increase was due primarily to increases in core demand, money market and savings deposits of $11.2 million. Total borrowings decreased $14.5 million to $182.2 million at March 31, 2008 from $196.6 million at December 31, 2007 primarily due to the payment of several maturing and variable rate FHLB advances.

Stockholders’ equity was $86.8 million at March 31, 2008, a decrease of $259,000, or 0.3% from December 31, 2007. The repurchase of 47,000 shares of common stock for $629,000 and dividend payments of $667,000 were partially offset by net income of $1.2 million and Employee Stock Ownership Plan (ESOP) and RRP shares earned of $113,000. Also, the market value of securities available for sale compared to their book value decreased $291,000 from a loss of $414,000 at December 31, 2007 to a loss of $706,000 at March 31, 2008.

Net interest income before the provision for loan losses increased $365,000 from $6.0 million for the three months ended March 31, 2007 to $6.4 million for the three months ended March 31, 2008. The primary reason for the increase was a 15 basis point increase in the net interest margin to 2.94% compared to 2.79% for the first quarter 2007, reflecting the Bank’s liability sensitive nature, as short term interest rates declined and average interest-earning assets increased $5.6 million, or 0.7%. On a linked quarter basis, net interest margin increased to 2.94% for the three months ended March 31, 2008 compared to 2.84% for the three months ended December 31, 2007.

The provision for loan losses for the first quarter of 2008 was $612,000, increased from $332,000 for last year’s comparable period. The increase was due to increased net charge offs and increased delinquency over the comparable period in 2007. On a linked quarter basis, the provision for loan losses decreased $231,000 primarily due to lower charge offs as discussed above. Non-performing loans to total loans at March 31, 2008 were 1.44% compared to 1.29% at December 31, 2007. This increase in non-performing loans was primarily due an increased level of residential property and consumer related loans. Non-performing assets to total assets were 1.47% at March 31, 2008 compared to 1.35% at December 31, 2007.

Non-interest income increased $387,000 to $2.1 million, or 22.3% for the three months ended March 31, 2008 compared to the same period in 2007. The increase was primarily due to increases in service fees on transaction accounts of $95,000, or 8.9%, increases in gains on sales and servicing of loans sold of $119,000, or 130.8%, increases in commission income of $95,000, or 48.2% and increases in other income of $136,000 due primarily to the mandatory redemption of Visa stock of $137,000. These increases were partially offset by a decrease in cash surrender value of life insurance of $61,000, or 18.1% primarily due to lower market rates. On a linked quarter basis, non-interest income increased $40,000.

Non-interest expense increased to $6.5 million for the three months ended March 31, 2008 compared to $6.2 million for the same period in 2007. Increases in current quarter non-interest expense compared to the same period in 2007 include increases in salaries and employee benefits of $179,000 primarily due to a new branch opening and annual salary adjustments, increases in occupancy expense of $90,000 primarily due to a new branch in Elkhart County, Indiana, increases in professional fees of $30,000 primarily due to the pending acquisition of MFB Corp., and increases in marketing expense of $21,000. These decreases were partially offset by decreased other expenses of $48,000. On a linked quarter basis, non-interest expense decreased $31,000.

Income tax expense increased $18,000 for the three months ended March 31, 2008 compared to the same period in 2007 due to increased taxable income. The effective tax rate decreased from 11.3% to 11.1% due to an increased percentage of non-taxable income to taxable income when comparing the first quarter of 2007 and the first quarter of 2008, respectively.

MutualFirst Financial, Inc. and Mutual Federal Savings Bank are headquartered in Muncie, Indiana with twenty-two full service offices in Delaware, Elkhart, Grant, Kosciusko, Randolph and Wabash 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.

MUTUALFIRST FINANCIAL INC.
	31-Mar		31-Dec
Selected Financial Condition Data(Unaudited):	2008		2007
	(000)		(000)
Total Assets	$	960,126	$	962,517
Cash and cash equivalents		29,075		23,648
Loans held for sale		2,219		1,645
Loans receivable, net		791,972		802,436
Investment securities available for sale, at fair value		44,581		43,692
Total deposits		678,097		666,407
Total borrowings		182,166		196,638
Total stockholders' equity		86,755		87,014

	Three Months			Three Months			Three Months
	Ended			Ended			Ended
	31-Mar			31-Dec			31-Mar
Selected Operations Data (Unaudited):	2008			2007			2007
	(000)			(000)			(000)
Total interest income	$	13,757		$	14,380		$	13,809
Total interest expense		7,397			8,195			7,814
Net interest income		6,360			6,185			5,995
Provision for loan losses		612			843			332
Net interest income after provision
for loan losses		5,748			5,342			5,663
Non-interest income
Fees and service charges		1,159			1,256			1,064
Equity in losses of limited partnerships		(24	)		(24	)		(27	)
Commissions		292			242			197
Net gain on loan sales and servicing		210			195			91
Increase in cash surrender value of life insurance		277			278			338
Other income		206			133			70
Total non-interest income		2,120			2,080			1,733
Non-interest expense
Salaries and benefits		3,818			3,832			3,639
Occupancy and equipment		998			923			908
Data processing fees		267			245			256
Professional fees		209			232			179
Marketing		230			277			209
Other expenses		980			1,024			1,028
Total non-interest expense		6,502			6,533			6,219
Income before taxes		1,366			889			1,177
Income tax provision (benefit)		151			(4	)		133
Net income	$	1,215		$	893		$	1,044

Average Balances, Net Interest Income, Yield Earned and Rates Paid
			Three							Three
			mos ended							mos ended
			3/31/2008							3/31/2007
	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 deposits	$	5,053	$	25		1.98	%	$	2,963	$	27		3.64	%
Mortgage-backed securities:
Available-for-sale		11,539		158		5.48			9,696		117		4.83
Investment securities:
Available-for-sale		32,732		406		4.96			30,759		388		5.05
Loans receivable		806,593		13,049		6.47			807,217		13,150		6.52
Stock in FHLB of Indianapolis		10,289		119		4.63			9,938		127		5.11
Total interest-earning assets (3)		866,206		13,757		6.35			860,573		13,809		6.42
Non-interest earning assets, net of allowance
for loan losses and unrealized gain/loss		88,429							86,409
Total assets	$	954,635						$	946,982
Interest-Bearing Liabilities:
Demand and NOW accounts	$	128,790	$	514		1.60	%	$	119,243		674		2.26
Savings deposits		52,608		69		0.52			56,943		70		0.49
Money market accounts		22,704		110		1.94			26,338		155		2.35
Certificate accounts		428,373		4,615		4.31			447,376		5,098		4.56
Total deposits		632,475		5,308		3.36			649,900		5,997		3.69
Borrowings		172,793		2,089		4.84			146,038		1,817		4.98
Total interest-bearing accounts		805,268		7,397		3.67			795,938		7,814		3.93
Non-interest bearing deposit accounts		48,320							49,269
Other liabilities		14,421							14,684
Total liabilities		868,009							859,891
Stockholders' equity		86,626							87,091
Total liabilities and stockholders' equity	$	954,635						$	946,982
Net earning assets	$	60,938						$	64,635
Net interest income			$	6,360						$	5,995
Net interest rate spread						2.68	%						2.49	%
Net yield on average interest-earning assets						2.94	%						2.79	%
Average interest-earning assets to
average interest-bearing liabilities						107.57	%						108.12	%

	Three Months			Three Months			Three Months
	Ended			Ended			Ended
	31-Mar			31-Dec			31-Mar
Selected Financial Ratios and Other Financial Data (Unaudited):	2008			2007			2007
Share and per share data:
Average common shares outstanding
Basic		4,003,509			4,063,357			4,129,925
Diluted		4,003,509			4,089,234			4,197,120
Per share:
Basic earnings	$	0.30		$	0.22		$	0.25
Diluted earnings	$	0.30		$	0.22		$	0.25
Dividends	$	0.16		$	0.15		$	0.15
Dividend payout ratio		53.33	%		68.18	%		60.00	%
Performance Ratios:
Return on average assets (ratio of net
income to average total assets)(1)		0.51	%		0.37	%		0.44	%
Return on average tangible equity (ratio of net
income to average tangible equity)(1)		6.80	%		4.96	%		5.79	%
Interest rate spread information:
Average during the period(1)		2.68	%		2.56	%		2.49	%
Net interest margin(1)(2)		2.94	%		2.84	%		2.79	%
Efficiency Ratio		76.67	%		79.04	%		80.47	%
Ratio of average interest-earning
assets to average interest-bearing
liabilities		107.57	%		107.44	%		108.12	%
Allowance for loan losses:
Balance beginning of period	$	8,352		$	8,181		$	8,156
Charge offs:
One- to four- family		2			101			120
Multi-family		0			0			0
Commercial real estate		31			18			0
Construction or development		0			0			0
Consumer loans		548			672			413
Commercial business loans		30			0			0
Sub-total		611			791			533
Recoveries:
One- to four- family		2			64			0
Multi-family		0			0			0
Commercial real estate		0			0			0
Construction or development		0			0			0
Consumer loans		28			55			64
Commercial business loans		57			0			200
Sub-total		87			119			264
Net charge offs		524			672			269
Additions charged to operations		612			843			332
Balance end of period	$	8,440		$	8,352		$	8,219
Net loan charge-offs to average loans (1)		0.26	%		0.33	%		0.13	%

	March 31,			December 31,			March 31,
	2008			2007			2007
Total shares outstanding		4,179,879			4,226,638			4,357,130
Tangible book value per share	$	17.13		$	16.99		$	16.58
Nonperforming assets (000's)
Loans: Non-accrual	$	10,625		$	8,949		$	5,144
Accruing loans past due 90 days or more		809			1,421			48
Restructured loans		106			107			111
Total nonperforming loans		11,540			10,477			5,303
Real estate owned		1,478			1,364			1,003
Other repossessed assets		1,120			1,137			1,254
Total nonperforming assets	$	14,138		$	12,978		$	7,560
Asset Quality Ratios:
Non-performing assets to total assets		1.47	%		1.35	%		0.80	%
Non-performing loans to total loans		1.44	%		1.29	%		0.66	%
Allowance for loan losses to non-performing loans		73.14	%		79.72	%		154.99	%
Allowance for loan losses to loans receivable		1.05	%		1.03	%		1.02	%

(1) Ratios for the three month period 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.