MutualFirst Announces Third Quarter 2012 Earnings

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:

  • Gross loans increased $8.5 million in the third quarter of 2012.
  • Deposits increased $21.5 million in the third quarter of 2012.
  • Tangible common equity increased to 7.33% in the third quarter of 2012 and tangible book value increased to $15.40.
  • Non-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.
  • Net 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%.
  • Net 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%.
  • Non-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.
  • Non-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.





    MUTUALFIRST FINANCIAL 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' equity

1,472,396

1,471,448

1,427,193





 


Three Months

Three Months

Three Months


Nine Months

Nine Months


Ended

Ended

Ended


Ended

Ended


September 30,

June  30,

September 30,


September 30,

September 30,

Income Statement (Unaudited):

2012

2012

2011


2012

2011


(000)

(000)

(000)


(000)

(000)








Total interest income

$13,908

$14,101

$15,249


$41,907

$46,739

Total interest expense

3,593

3,751

4,854


11,373

15,475








   Net interest income

10,315

10,350

10,395


30,534

31,264

Provision for loan losses

1,475

1,850

3,200


4,675

9,100

Net interest income after provision







  for loan losses

8,840

8,500

7,195


25,859

22,164








  Non-interest income







Fees and service charges

1,644

1,752

1,862


5,049

5,193

Net gain (loss) on sale of investments

1,095

283

1,764


1,575

1,839

Other than temporary impairment of securities

0

0

0


0

(193)

Equity in losses of limited partnerships

(124)

(128)

(107)


(372)

(256)

Commissions

859

1,036

879


2,914

2,835

Net gain (loss) on loan sales 

541

715

245


1,388

685

Net servicing fees

(16)

(142)

(337)


(126)

(292)

Increase in cash surrender value of life insurance

340

336

346


1,017

1,071

Gain (Loss) on sale of other real estate and repossessed assets

30

(160)

(22)


(523)

(358)

Other income 

12

13

34


93

101

Total non-interest income

4,381

3,705

4,664


11,015

10,625








  Non-interest expense







Salaries and benefits

5,273

5,293

5,240


15,910

16,103

Occupancy and equipment

1,353

1,277

1,328


3,833

4,180

Data processing fees

361

387

373


1,178

1,153

Professional fees

420

426

433


1,188

1,169

Marketing

488

372

453


1,214

1,053

Deposit insurance

312

314

330


939

1,170

Software subscriptions and maintenance

384

395

338


1,145

969

Intangible amortization

229

255

280


745

894

Repossessed assets expense

247

281

279


691

746

Other  expenses

1,066

933

982


2,816

2,802

Total non-interest expense

10,133

9,933

10,036


29,659

30,239








Income  before taxes

3,088

2,272

1,823


7,215

2,550

Income tax provision (benefit)

915

628

375


1,971

114

Net income 

2,173

1,644

1,448


5,244

2,436

Preferred stock dividends and amortization

362

362

852


1,085

1,754

Net income available to common shareholders

$1,811

$1,282

$596


$4,159

$682








Pretax preprovision earnings

$4,201

$3,760

$4,171


$10,805

$9,896








 

Average Balances,  Net Interest Income, Yield Earned and Rates Paid






Three



Three




mos ended



mos ended




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 deposits

$18,570

$14

0.30%

$22,612

$17

0.30%

 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 Indianapolis

14,391

107

2.97

14,391

107

2.97

Total interest-earning assets (3)

1,350,986

13,908

4.12

1,304,218

15,248

4.68

Non-interest earning assets, net of allowance 







  for loan losses and unrealized gain/loss

118,260



118,638



     Total assets

$1,469,246



$1,422,856

















Interest-Bearing Liabilities:







 Demand and NOW accounts

$249,739

226

0.36

$217,885

292

0.54

 Savings deposits

107,326

13

0.05

96,565

27

0.11

 Money market accounts

90,326

102

0.45

70,915

127

0.72

 Certificate accounts

593,841

2,523

1.70

654,746

3,458

2.11

 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 accounts

1,182,785

3,593

1.22

1,150,251

4,853

1.69

Non-interest bearing deposit accounts

132,309



124,757



Other liabilities

16,384



12,312



  Total liabilities

1,331,478



1,287,320



Stockholders' equity

137,768



135,536



    Total liabilities and stockholders' equity

$1,469,246



$1,422,856










Net earning assets

$168,201



$153,967










Net interest income


$10,315



$10,395









Net interest rate spread



2.90%



2.99%








Net yield on average interest-earning assets



3.05%



3.19%








Average interest-earning assets to average interest-bearing liabilities



114.22%



113.39%








 








Selected Financial Ratios and Other Financial Data (Unaudited):

Three Months

Three Months

Three Months


Nine Months

Nine Months

Ended

Ended

Ended


Ended

Ended

September 30,

June 30,

September 30,


September 30,

September 30,

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 earnings 

$0.26

$0.18

$0.09


$0.60

$0.10

   Diluted earnings

$0.26

$0.18

$0.09


$0.59

$0.10

   Dividends

$0.06

$0.06

$0.06


$0.18

$0.18








Dividend payout ratio

23.08%

33.33%

66.67%


30.51%

180.00%








Performance Ratios:







   Return on average assets (ratio of net







      income to average total assets)(1)

0.59%

0.45%

0.41%


0.48%

0.23%

   Return on average tangible common equity (ratio of net 







      income to average tangible common equity)(1)

6.83%

4.97%

2.37%


5.31%

0.93%

   Interest rate spread information:







    Average during the period(1)

2.90%

2.95%

2.99%


2.89%

2.98%








    Net interest margin(1)(2)

3.05%

3.10%

3.19%


3.05%

3.18%








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 period

$16,003

$16,634

$15,957


$16,815

$16,372

       Charge offs:







          One- to four- family

505

706

464


1,652

2,655

          Commercial real estate

1,346

900

2,017


3,363

5,582

          Consumer loans

268

561

556


1,174

1,636

          Commercial business loans

137

749

0


890

0

              Sub-total

2,256

2,916

3,037


7,079

9,873








        Recoveries:







          One- to four- family

195

2

63


199

166

          Commercial real estate

14

167

64


374

65

          Consumer loans

103

59

234


343

651

          Commercial business loans

2

207

0


209

0

              Sub-total

314

435

361


1,125

882








Net charge offs

1,942

2,481

2,676


5,954

8,991

Additions charged to operations

1,475

1,850

3,200


4,675

9,100

Balance end of period

$15,536

$16,003

$16,481


$15,536

$16,481








    Net loan charge-offs to average loans (1)

0.81%

1.04%

1.11%


0.84%

1.24%








 


September 30,

June 30, 

December 31,

September 30,


2012

2012

2011

2011






Total shares outstanding

6,993,971

6,992,029

6,987,586

6,987,586

Tangible book value per share

$15.40

$15.00

$14.38

$14.42

Tangible common equity to tangible assets

7.33%

7.14%

7.05%

7.20%






 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 loans

1,412

1,140

1,160

1,433

Total non-accrual loans

23,112

24,576

30,711

25,938

Accruing loans past due 90 days or more

757

290

1,127

1,103

Total nonperforming loans

23,869

24,866

31,838

27,041

    Real estate owned

6,184

7,365

6,525

6,703

    Other repossessed assets

573

600

867

1,019

Total nonperforming assets

$30,626

$32,831

$39,230

$34,763






Performing restructured loans (4)

7,855

6,389

8,402

11,882






Asset Quality Ratios:





Non-performing assets to total assets 

2.08%

2.23%

2.75%

2.43%

Non-performing loans to total loans

2.48%

2.61%

3.47%

2.82%

Allowance for loan losses to non-performing loans

65.09%

64.36%

52.81%

60.95%

Allowance for loan losses to loans receivable

1.61%

1.68%

1.83%

1.72%











(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.



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