MutualFirst Announces Increased Earnings in the Second Quarter of 2015

Jul 23, 2015, 09:00 ET from MutualFirst Financial, Inc.

MUNCIE, Ind., July 23, 2015 /PRNewswire/ -- MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of MutualBank (the "Bank"), announced today net income available to common shareholders for the second quarter ended June 30, 2015 increased to $3.2 million, or $0.43 diluted earnings per common share.  This compared to net income available to common shareholders for the same period in 2014 of $2.6 million, or $0.36 diluted earnings per common share. Annualized return on average assets was 0.90% and return on average tangible common equity was 10.04% for the second quarter of 2015 compared to 0.75% and 9.00%, respectively, for the same period of last year. 

Net income available to common shareholders for the six months ended June 30, 2015 increased to $5.7 million, or $0.76 diluted earnings per common share compared to net income available to common shareholders of $4.6 million, or $0.63 diluted earnings per common share for the six months ended June 30, 2014.  Annualized return on average assets was 0.80% and return on average tangible common equity was 8.98% for the first half of 2015 compared to 0.67% and 8.10%, respectively, for the same period of last year.

Other financial highlights for the second quarter ended June 30, 2015 included:

  • Gross loan balances increased by $16.0 million, or 6.3% on an annualized basis in the second quarter of 2015.
  • Asset quality improved as non-performing loans to total loans were 0.63% as of June 30, 2015 compared to 0.73% as of March 31, 2015 and non-performing assets to total assets were 0.60% as of June 30, 2015 compared to 0.72% as of March 31, 2015.
  • Core deposits increased $15.0 million in the second quarter of 2015 while term deposits declined by $22.9 million.
  • Tangible common equity to total assets is 8.89% and tangible book value per common share is $17.36 as of June 30, 2015 compared to tangible common equity to total assets of 8.95% and tangible book value per common share of $17.33 as of March 31, 2015.
  • Net interest income for the second quarter of 2015 increased by $22,000 on a linked quarter basis and decreased by $18,000 compared to the second quarter of 2014.
  • Asset quality improvement led to no provision for loan losses in the second quarter of 2015.
  • Net interest margin was 3.18% for the second quarter 2015 compared to 3.28% in the second quarter 2014.
  • Non-interest income in the second quarter of 2015 increased by $349,000 on a linked quarter basis and by $824,000 when compared to the second quarter of 2014.
  • Non-interest expense decreased in the second quarter of 2015 by $645,000 on a linked quarter basis and increased by $520,000 when compared to the second quarter of 2014.

"We are pleased with the continued momentum in our core earnings and the loan growth achieved in the first half of 2015," said David W. Heeter, President and CEO.  "We believe this momentum is sustainable as we execute on our new strategic plan."

In the first quarter of 2015, the Bank elected an accounting change to better align the recognition of low income housing tax credits and the corresponding amortization of the low income housing investments from the equity method of accounting to a proportional method of amortization.  This change has been made retrospectively and all comparisons in this release are as if this change was made at the beginning of 2014.

Balance Sheet

Assets increased $22.0 million as of June 30, 2015 compared to December 31, 2014, primarily due to the increase in gross loans of $22.9 million.  The increase in the gross loan portfolio was primarily due to an increase in commercial loans of $15.8 million and in non-real estate consumer loans of $18.1 million.  Heeter commented, "Over the last twelve months we have increased our non-residential consumer lending by approximately 22% and our commercial portfolio by 10%.  The growth complements our new strategic plan initiatives to change our mix of earning assets." The increase in gross loans was partially offset by a decline in the consumer residential loan portfolio of $11.0 million.  Mortgage loans held for sale increased by $6.3 million, since December 31, 2014, as the Bank has been selling longer term fixed rate loans originated in the first half of 2015 to mitigate interest rate risk.  Mortgage loans sold during the first half of 2015 totaled $65.8 million compared to $15.3 million in the first half of 2014 as mortgage production increased in the first half of 2015 compared to the same period in 2014 due to declines in mortgage rates, increased purchase activity and the acquisition of Summit Mortgage in the third quarter of 2014. 

Deposits decreased by $1.0 million in the first half of 2015.  The decrease in deposits has been primarily in certificates of deposit, which decreased $34.1 million, while core deposits increased $33.1 million in the first half of 2015. Core deposits increased to 66% of the Bank's total deposits as of June 30, 2015 compared to 63% as of December 31, 2014.

Allowance for loan losses was $12.9 million as of June 30, 2015 compared to $13.2 million as of December 31, 2014.  Net charge-offs in the first half of 2015 were $262,000, or 0.05% of total loans on an annualized basis, compared to $1.0 million, or 0.21% of total loans on an annualized basis in the first half of 2014.    The allowance for loan losses to non-performing loans as of June 30, 2015 was 197.9% compared to 177.0% as of December 31, 2014.  The allowance for loan losses to total loans as of June 30, 2015 was 1.24% compared to 1.30% as of December 31, 2014.  Non-performing loans to total loans at June 30, 2015 were 0.63% compared to 0.73% at December 31, 2014.  Non-performing assets to total assets were 0.60% at June 30, 2015 compared to 0.75% at December 31, 2014.

Stockholders' equity was $131.0 million at June 30, 2015, an increase of $4.2 million from December 31, 2014. The increase was primarily due to net income available to common shareholders of $5.7 million and an increase of $1.6 million due to exercises of stock options.  These increases were partially offset by common stock dividends of $1.8 million and a decrease in accumulated other comprehensive income of $1.6 million.  The Company's tangible book value per common share as of June 30, 2015 increased to $17.36 compared to $17.12 as of December 31, 2014 and the tangible common equity ratio increased to 8.89% as of June 30, 2015 compared to 8.68% as of December 31, 2014.  MFSF and the Bank's risk-based capital ratios were well in excess of "well-capitalized" levels as defined by all regulatory standards as of June 30, 2015.

Income Statement

Net interest income before the provision for loan losses decreased $18,000 for the quarter ended June 30, 2015 compared to the same period in 2014.  The decrease in net interest income was primarily a result of a 10 basis point decrease in net interest margin to 3.18%.  The decrease in the margin was the result of interest earning assets, primarily loans, repricing downward faster than interest bearing liabilities.  Average earning assets increased $37.3 million primarily due to an increase of $47.5 million in the loan portfolio.  On a linked quarter basis, net interest income before the provision for loan losses increased $22,000 as net interest margin decreased by 2 basis points, offset by an increase in average earning assets of $12.7 million primarily due to increases in the loan portfolio. 

Net interest income before the provision for loan losses increased $80,000 for the first half of 2015 compared to the same period in 2014.  The increase was a result of an increase of $36.4 million in average earning assets due to an increase in the average loan portfolio of $46.1 million. This increase was partially offset by the net interest margin decreasing to 3.19% in the first half of 2015 compared to 3.27% in the first half of 2014.  

There was no provision for loan losses in the second quarter of 2015 compared to $500,000 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 of $311,000, or 0.12% of loans on an annualized basis in the second quarter of 2015 compared to net charge offs of $627,000, or 0.25% of loans on an annualized basis in the second quarter of 2014.   Non-performing loans to total loans at June 30, 2015 was 0.63% compared to 0.61% at June 30, 2014.  Non-performing assets to total assets were 0.60% at June 30, 2015 compared to 0.94% at June 30, 2014. 

The provision for loan losses for the first half of 2015 was zero compared to $850,000 during last year's comparable period.  The decrease was primarily due to a decline in net charge offs and improving asset quality.  Net charge-offs for the first half of 2015 equaled $262,000, or 0.05% of loans on an annualized basis compared to $1.0 million, or 0.21% in the same period of 2014.

Non-interest income for the second quarter of 2015 was $4.4 million, an increase of $824,000 compared to the second quarter of 2014.  Increases in non-interest income included an increase of $739,000 in net gain on sale of loans due to increased production and the acquisition of Summit Mortgage in the third quarter of 2014.  Another increase was $210,000 on net gain on sale of other real estate and repossessed assets.  On a linked quarter basis, non-interest income increased $349,000 due to increases in net gain on sale of mortgage loans primarily due to an increase in mortgage activity, increases in fees and service charges on deposit accounts primarily due to seasonality in fee income, and increases in net gain on sale of other real estate and repossessed assets.

Non-interest income for the first half of 2015 was $8.4 million, an increase of $1.8 million compared to the first half of 2014.  The increase was primarily due to a $1.5 million increase in net gain on sale of loans due to the same reasons as stated above and a decline in net loss on sale of real estate and repossessed assets of $190,000.

Non-interest expense increased $520,000 when comparing the second quarter of 2015 with the same period in 2014.  The increase was primarily due to the acquisition of Summit Mortgage in the third quarter of 2014.  On a linked quarter basis, non-interest expense decreased $645,000 primarily due to decreases in salaries and benefit expenses of $446,000 as a result of lower health insurance expenses and a decrease in professional fees of $147,000.

Non-interest expense increased $1.3 million when comparing the first half of 2015 with the same period in 2014.  The increase was primarily a result of the acquisition of Summit Mortgage in the third quarter of 2014, which increased expense by $1.2 million in the first half of 2015.

Heeter concluded, "We continue to be encouraged by the increases in our core businesses and continue to seek ways to enhance shareholder value."

MutualFirst Financial, Inc. is the parent company of MutualBank, an Indiana-based financial institution since 1889. MutualBank has thirty full-service retail financial centers in Delaware, Elkhart, Grant, Kosciusko, Randolph, St. Joseph and Wabash Counties in Indiana. MutualBank has two offices located in Carmel and Crawfordsville, Indiana specializing in wealth management and trust services and a loan origination office in New Buffalo, Michigan. MutualBank also operates a wholly owned subsidiary named Summit Mortgage which operates out of Fort Wayne, Indiana. MutualBank provides a full range of financial services including commercial and business banking, personal banking, wealth management, trust services, investments and internet banking services. The Company's stock is traded on the NASDAQ National Market under the symbol "MFSF".  Additional information can be found online 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.

(Unaudited)

(Unaudited)

Adjusted*

Adjusted*

June 30,

March 31, 

December 31,

June 30,

Balance Sheet (Unaudited):

2015

2015

2014

2014

(000)

(000)

(000)

(000)

Assets

Cash and cash equivalents

$24,269

$18,667

$29,575

$28,734

Investment securities - AFS

261,506

267,503

260,806

267,225

Loans held for sale

12,486

10,771

6,140

5,482

Loans, gross

1,039,623

1,023,607

1,016,686

994,306

Allowance for loan loss

(12,906)

(13,217)

(13,168)

(13,243)

Net loans

1,026,717

1,010,390

1,003,518

981,063

Premise and equipment, net

30,818

31,034

30,939

31,104

FHLB of Indianapolis stock

9,810

11,964

11,964

14,391

Investment in limited partnerships (1)

477

502

527

582

Deferred tax asset (1)

13,750

13,259

13,575

13,898

Cash value of life insurance

51,602

51,289

51,002

50,414

Goodwill

1,800

1,800

1,800

0

Core deposit and other intangibles

825

965

1,105

1,406

Other assets

11,374

11,954

12,472

15,323

Total assets

$1,445,434

$1,430,098

$1,423,423

$1,409,622

Liabilities and Stockholders' Equity

Deposits

$1,078,287

$1,086,125

$1,079,320

$1,079,300

FHLB advances

212,042

187,542

192,442

187,046

Other borrowings

9,816

9,995

10,174

10,532

Other liabilities

14,337

15,957

14,735

13,857

Stockholders' equity (1)

130,952

130,479

126,752

118,887

Total liabilities and stockholders' equity

$1,445,434

$1,430,098

$1,423,423

$1,409,622

(Unaudited)

(Unaudited)

Adjusted*

(Unaudited)

Adjusted*

Three Months

Three Months

Three Months

Six Months

Six Months

Ended

Ended

Ended

Ended

Ended

June 30,

March 31, 

June 30,

June 30,

June 30,

Income Statement (Unaudited):

2015

2015

2014

2015

2014

(000)

(000)

(000)

(000)

(000)

Total interest income

$12,731

$12,683

$12,744

$25,414

$25,482

Total interest expense

2,191

2,165

2,186

4,357

4,505

   Net interest income

10,540

10,518

10,558

21,057

20,977

Provision for loan losses

0

0

500

0

850

Net interest income after provision 

  for loan losses

10,540

10,518

10,058

21,057

20,127

  Non-interest income

Service fee income

1,464

1,358

1,538

2,822

2,879

Net realized gain on sales of AFS securities

126

240

211

366

362

Commissions

1,142

1,121

1,178

2,263

2,260

Equity in losses of limited partnerships (1)

0

0

0

0

0

Net gain on sale of loans

1,121

906

382

2,027

486

Net servicing fees (expenses)

70

68

3

138

(22)

Increase in cash value of life insurance

313

288

304

601

571

Net gain (loss) on sale of other real estate and repossessed assets

32

(82)

(178)

(50)

(240)

Other income (1)

98

118

104

216

246

Total non-interest income

4,366

4,017

3,542

8,383

6,542

  Non-interest expense

Salaries and employee benefits

6,084

6,530

5,500

12,614

11,372

Net occupancy expenses

515

603

600

1,118

1,269

Equipment expenses

410

453

435

863

894

Data processing fees

428

444

402

872

807

Advertising and promotion

378

333

306

711

607

ATM and debit card expense

347

335

316

682

606

Deposit insurance

212

232

270

444

540

Professional fees

383

530

439

913

878

Software subscriptions and maintenance

433

427

386

860

802

Other real estate and repossessed assets

87

127

151

214

286

Other expenses

1,096

1,004

1,048

2,100

2,038

Total non-interest expense

10,373

11,018

9,853

21,391

20,099

Income  before taxes

4,533

3,517

3,747

8,049

6,570

Income tax provision (1)

1,315

1,036

1,133

2,351

1,936

Net income available to common shareholders

$3,218

$2,481

$2,614

$5,698

$4,634

Pre-tax pre-provision earnings (2)

$4,533

$3,517

$4,247

$8,049

$7,420

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

Three

Three

months ended

months ended

6/30/2015

6/30/2014

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

$18,311

$2

0.04%

$17,765

$3

0.07%

 Mortgage-backed securities:

Available-for-sale

198,457

1,260

2.54

216,563

1,454

2.69

 Investment securities:

Available-for-sale

62,187

432

2.78

51,597

339

2.63

 Loans receivable

1,035,677

10,919

4.22

988,180

10,817

4.38

Stock in FHLB of Indianapolis

11,183

118

4.22

14,391

131

3.64

Total interest-earning assets (3)

1,325,815

12,731

3.84

1,288,496

12,744

3.96

Non-interest earning assets, net of allowance 

  for loan losses and unrealized gain/loss

108,457

108,272

     Total assets

$1,434,272

$1,396,768

Interest-Bearing Liabilities:

 Demand and NOW accounts

$265,293

150

0.23

$258,592

144

0.22

 Savings deposits

129,309

3

0.01

126,685

3

0.01

 Money market accounts

159,772

100

0.25

130,127

83

0.26

 Certificate accounts

379,570

1,081

1.14

432,618

1,296

1.20

 Total deposits

933,944

1,334

0.57

948,022

1,526

0.64

 Borrowings

192,691

857

1.78

170,188

660

1.55

  Total interest-bearing accounts

1,126,635

2,191

0.78

1,118,210

2,186

0.78

Non-interest bearing deposit accounts

161,272

146,998

Other liabilities

15,454

13,924

  Total liabilities

1,303,361

1,279,132

Stockholders' equity

130,911

117,636

    Total liabilities and stockholders' equity

$1,434,272

$1,396,768

Net earning assets

$199,180

$170,286

Net interest income

$10,540

$10,558

Net interest rate spread (5)

3.06%

3.17%

Net yield on average interest-earning assets (5)

3.18%

3.28%

Net yield on average interest-earning assets, tax equivalent (4)(5)

3.24%

3.32%

Average interest-earning assets to

  average interest-bearing liabilities

117.68%

115.23%

(Unaudited)

(Unaudited)

Adjusted*

(Unaudited)

Adjusted*

Three Months

Three Months

Three Months

Six Months

Six Months

Ended

Ended

Ended

Ended

Ended

June 30,

March 31,

June 30,

June 30,

June 30,

  Selected Financial Ratios and Other Financial Data (Unaudited):

2015

2015

2014

2015

2014

Share and per share data:

 Average common shares outstanding

   Basic

7,383,435

7,313,725

7,133,233

7,348,773

7,126,082

   Diluted

7,547,734

7,508,693

7,360,400

7,528,406

7,356,762

 Per common share:

   Basic earnings (1)

$0.44

$0.34

$0.37

$0.78

$0.65

   Diluted earnings (1)

$0.43

$0.33

$0.36

$0.76

$0.63

   Dividends

$0.12

$0.12

$0.08

$0.24

$0.14

Dividend payout ratio

27.91%

36.36%

22.22%

31.58%

22.22%

Performance Ratios:

   Return on average assets (ratio of net

      income to average total assets)(5)

0.90%

0.70%

0.75%

0.80%

0.67%

   Return on average tangible common equity (ratio of net 

      income to average tangible common equity)(5)

10.04%

7.91%

9.00%

8.98%

8.10%

   Interest rate spread information:

    Average during the period(5)

3.06%

3.09%

3.17%

3.08%

3.16%

    Net interest margin(5)(6)

3.18%

3.20%

3.28%

3.19%

3.27%

Efficiency Ratio

69.59%

75.80%

69.88%

72.66%

73.04%

    Ratio of average interest-earning

     assets to average interest-bearing

     liabilities

117.68%

117.44%

115.23%

117.56%

115.09%

Allowance for loan losses:

       Balance beginning of period

$13,217

$13,168

$13,370

$13,168

$13,412

       Charge offs:

Mortgage first lien

297

93

170

390

250

Mortgage - lines of credit and junior liens 

0

2

60

2

293

Commercial real estate

0

0

0

0

0

Construction and development

0

0

244

0

244

Consumer loans

205

115

291

320

425

Commercial business loans

0

0

0

0

0

Sub-total

502

210

765

712

1,212

        Recoveries:

Mortgage first lien

0

1

1

1

5

Mortgage - lines of credit and junior liens 

0

1

1

1

4

Commercial real estate

106

21

1

127

7

Construction and development

17

152

1

169

8

Consumer loans

59

52

106

111

138

Commercial business loans

9

32

28

41

31

Sub-total

191

259

138

450

193

Net charge offs (recoveries)

311

(49)

627

262

1,019

Additions charged to operations

0

0

500

0

850

Balance end of period

$12,906

$13,217

$13,243

$12,906

$13,243

    Net loan charge-offs to average loans (5)

0.12%

-0.02%

0.25%

0.05%

0.21%

(Unaudited)

(Unaudited)

Adjusted*

Adjusted*

June 30,

March 31,

December 31,

June 30,

2015

2015

2014

2014

Total shares outstanding

7,394,061

7,369,702

7,236,002

7,157,979

Tangible book value per share (1)

$17.36

$17.33

$17.12

$16.41

Tangible common equity to tangible assets (1)

8.89%

8.95%

8.68%

8.34%

 Nonperforming assets (000's)

Non-accrual loans

Mortgage first lien

$3,111

$3,922

$3,499

$2,891

Mortgage - lines of credit and junior liens 

939

593

658

141

Commercial real estate

2,049

1,913

2,023

1,154

Construction and development

0

187

209

711

Consumer loans

159

178

218

182

Commercial business loans

58

610

605

683

Total non-accrual loans

6,316

7,403

7,212

5,762

Accruing loans past due 90 days or more

207

96

226

348

Total nonperforming loans

6,523

7,499

7,438

6,110

    Real estate owned

1,726

2,490

2,829

6,719

    Other repossessed assets

455

367

476

379

 Total nonperforming assets

$8,704

$10,356

$10,743

$13,208

Performing restructured loans (7)

$5,572

$4,539

$4,618

$4,368

Asset Quality Ratios:

Non-performing assets to total assets 

0.60%

0.72%

0.75%

0.94%

Non-performing loans to total loans

0.63%

0.73%

0.73%

0.61%

Allowance for loan losses to non-performing loans

197.85%

176.25%

177.03%

216.74%

Allowance for loan losses to loans receivable

1.24%

1.29%

1.30%

1.33%

*Adjusted - During the first quarter of 2015 MutualFirst Financial, Inc. made an accounting change to better align low income tax credits with the amortization of those investments.  This change is retrospective and has been applied, where applicable, to 12/31/14 and 6/30/14 information.

(1)  Adjusted 12/31/2014 and 6/30/2014 for retrospective accounting change in the first quarter of 2015.

(2)    Pre-tax pre-provision income is calculated by taking net income available to common shareholders and adding income tax provision and provision for loan losses.

(3)   Calculated net of deferred loan fees, loan discounts, loans in process and loss reserves.

(4) Tax equivalent margin is calculated by taking non-taxable interest and grossing up by 34% applicable tax rate.

(5)    Ratios for the three and six month periods have been annualized.

(6)    Net interest income divided by average interest earning assets.

(7)    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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