MutualFirst Financial Announces First Quarter Earnings

MUNCIE, Ind., April 21, 2016 /PRNewswire/ -- MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of MutualBank (the "Bank"), announced today net income available to common shareholders for the first quarter ended March 31, 2016 was $2.4 million, or $0.31 per diluted common share, compared to net income available to common shareholders for the same period in 2015 of $2.5 million, or $0.33 per diluted common share. Annualized return on average assets was 0.63% and return on average tangible common equity was 6.92% for the first quarter of 2016 compared to 0.70% and 7.91%, respectively, for the same period of last year. 

Earnings were down in the first quarter 2016 compared to the first quarter of 2015 primarily due to $200,000 more in provision for loan losses and $398,000 more in non-interest expense.  An increase in non-interest expense of $258,000 was in one-time non-recurring items associated with a new pooled captive insurance company of $155,000, a write-down due to decommissioning an old office building of $63,000 and $40,000 of miscellaneous other one-time expenses. "These expenses will not be recurring and we believe they will provide benefits in future periods," said David W. Heeter, President and CEO.  Pre-tax pre-provision earnings increased 6.3% without the one-time non-recurring items and gain on sale of investments.

Other financial highlights for the first quarter ended March 31, 2016 included:           

• Increased the common stock cash dividend 17% and authorized a 5% stock repurchase plan.
• Commercial loans increased $9.5 million, or 10.1% on an annualized basis during the first quarter of 2016 and the commercial loan pipeline remains strong.  Non-real estate consumer loans increased $2.8 million, or 7.8% on an annualized basis during the first quarter of 2016.
• Asset quality improved during the first quarter of 2016 as non-performing loans to total loans were 0.59% as of March 31, 2016 compared to 0.66% as of December 31, 2015 and non-performing assets to total assets were 0.59% as of March 31, 2016 compared to 0.65% as of December 31, 2015.
• Deposits increased $22.5 million, or 8% on an annualized basis during the first quarter of 2016.
• Tangible common equity to total tangible assets was 9.24% and tangible book value per common share was $18.54 as of March 31, 2016 compared to tangible common equity to total tangible assets of 9.11% and tangible book value per common share of $18.11 as of December 31, 2015.
• Net interest income for the first quarter of 2016 increased by $244,000 compared to the same period in 2015.
• Provision for loan losses increased to $200,000 for the first quarter of 2016 compared to no provision for the same period in 2015.
• Non-interest income remained approximately the same in the first quarter of 2016 compared to the first quarter of 2015.
• Non-interest expense increased $398,000 in the first quarter of 2016 compared to the same period in 2015, primarily due to non-recurring expenses.

Balance Sheet

Assets increased $21.0 million as of March 31, 2016 compared to December 31, 2015, primarily due to the increase in cash and investments of $15.8 million along with the increase in gross loans of $6.0 million.  The increase in the gross loan portfolio was primarily due to growth in commercial loans of $9.5 million, or 10.1% annualized, and in non-real estate consumer loans of $2.8 million, or 7.8% annualized.  These increases were partially offset by a decline in the residential loan portfolio of $6.3 million.  The commercial and consumer loan portfolio increased to 55.4% of the total loan portfolio compared to 54.6% as of December 31, 2015.  Mortgage loans held for sale decreased by $105,000 at March 31, 2016 compared December 31, 2015.  Mortgage loans sold during the first quarter of 2016 totaled $23.9 million compared to $25.5 million for same period in 2015.

Deposits increased by $22.5 million in the first quarter of 2016.  The increase in deposits was primarily in core deposits, which increased $17.9 million in the first quarter of 2016 along with an increase of $4.7 million in certificates of deposit.

"The flattening yield curve and the resulting pressure on the margin have been partially offset by the success in our strategy to change our asset and liability mix," Heeter commented.

Allowance for loan losses was $12.7 million as of March 31, 2016 compared to $12.6 million as of December 31, 2015.  The allowance for loan losses to non-performing loans as of March 31, 2016 was 196.2% compared to 176.3% as of December 31, 2015.  The allowance for loan losses to total loans remained constant at 1.17% as of March 31, 2016 compared to December 31, 2015.  Non-performing loans to total loans as of March 31, 2016 were 0.59% compared to 0.66% as of December 31, 2015.  Non-performing assets to total assets were 0.59% as of March 31, 2016 compared to 0.65% as of December 31, 2015.

Stockholders' equity was $140.8 million as of March 31, 2016, an increase of $3.8 million from December 31, 2015. The increase was primarily due to net income available to common shareholders of $2.4 million, an increase to comprehensive income of $2.2 million and an increase of $887,000 due to exercises of stock options.  These increases were partially offset by common stock cash dividends of $1.0 million and stock repurchases of $761,000.  The Company's tangible book value per common share as of March 31, 2016 increased to $18.54 compared to $18.11 as of December 31, 2015 and the tangible common equity ratio increased to 9.24% as of March 31, 2016 compared to 9.11% as of December 31, 2015.  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 March 31, 2016.

Income Statement

Net interest income before the provision for loan losses increased $244,000 for the quarter ended March 31, 2016 compared to the same period in 2015.  The increase in net interest income was a result of a $62.8 million increase in average interest-earning assets, which was attributable to an increase of $62.0 million in average loans.  The increase was partially offset by a decline in net interest margin by seven basis points to 3.13%.  The tax equivalent margin decreased four basis points to 3.22% compared to the first quarter of 2015.  On a linked-quarter basis, net interest income before the provision for loan losses decreased $338,000 primarily due to a prepayment penalty received in the fourth quarter of 2015 of $342,000 not repeated in the first quarter of 2016 and one less day in the 2016 quarter.

The provision for loan losses in the first quarter of 2016 was $200,000 compared to no provision during last year's comparable period.  This was due to management's ongoing evaluation of the adequacy of the allowance for loan losses, which was attributable to net charge-offs of $171,000, or 0.06% of average loans on an annualized basis in the first quarter of 2016, compared to net recoveries of $49,000 in the first quarter of 2015, and growth in the loan portfolio.   

Non-interest income for the first quarter of 2016 was $4.0 million, a decrease of $20,000 compared to the first quarter of 2015.  The decrease was primarily related to a decrease in net gains on sale of investments of $122,000. This decline was partially offset by lower net losses on sale of other real estate and repossessed assets.  On a linked-quarter basis, non-interest income decreased by $367,000 due to a decline in service fee income of $255,000 due to seasonality in service fees on checking accounts and a decrease in other income of $166,000 due to a death benefit received from bank-owned life insurance not repeated in the first quarter of 2016.

Non-interest expense increased $398,000 when comparing the first quarter of 2016 with the same period in 2015.  The increase was primarily due to other expenses increasing $236,000 primarily due to one-time expenses associated with a pooled captive insurance company.  Additionally, occupancy and equipment expenses increased $77,000 primarily due to disposal charges of $63,000 on an existing building that was taken out of commission and replaced by a new branch location. On a linked-quarter basis, non-interest expense increased $313,000 primarily due to the items discussed above and increased advertising expense of $241,000. 

The effective tax rate for the first quarter of 2016 was 24.8% compared to 29.5% in the same quarter of 2015.  The decrease was related to an increase in tax free income from municipal securities in the investment portfolio and a tax benefit from the pooled captive insurance company mentioned earlier.

Heeter concluded, "While earnings were less than we expected in the first quarter, we believe investments have been made that will produce better results throughout this year and in future periods."

MutualFirst Financial, Inc. is the parent company of MutualBank, an Indiana-based financial institution since 1889. MutualBank has thirty-one full-service retail financial centers in Allen, 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 mortgage banking 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 Litigation 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.

SOURCE MutualFirst Financial, Inc.

Related Links

http://www.bankwithmutual.com