MutualFirst Financial, ;Inc., the holding company of Mutual Federal Savings Bank (the ;"Bank"), announced today that net income for the third quarter ended September ;30, 2005 was $1.6 million, or $.36 for basic and $.35 for diluted earnings per ;share. This compared to net income for the comparable period in 2004 of $1.7 ;million, or $.38 for basic and $.37 for diluted earnings per share. ;Annualized return on assets was .70% and return on equity was 7.16% for the ;third quarter of 2005 compared to .84% and 7.62% respectively, for the same ;period last year. Net income for the nine months ended September 30, 2005 was $4.9 million ;or $1.12 for basic and $1.09 for diluted earnings per share. This compared to ;net income for the comparable period in 2004 of $5.5 million or $1.17 for ;basic and $1.13 for diluted earnings per share. Annualized return on average ;assets was .76% and return on average equity was 7.42% for the first three ;quarters of 2005 compared to .90% and 7.74% respectively, for the same period ;last year. On September 16, 2005 the Bank completed the purchase of certain assets ;and assumption of certain liabilities of Fidelity Federal Savings Bank ;("Fidelity") located in Marion, Indiana. The assets purchased included ;residential real estate mortgage loans of $55.4 million, consumer loans of ;$14.0 million, commercial real estate loans of $12.8 million and commercial ;business loans of $3.6 million. With the addition of Fidelity's assets, MutualFirst's assets totaled ;$972.0 million at September 30, 2005, an increase from December 31, 2004 of ;$132.6 million, or 15.8%. Loans, excluding loans held for sale, increased ;$115.0 million or 16.0%. Consumer loans increased $24.2 million, or 12.4%, ;and commercial business loans increased $8.2 million, or 15.2%, while ;residential and commercial real estate loans held in portfolio increased $82.6 ;million or 17.7%. Mortgage loans held for sale decreased $2.9 million and ;mortgage loans sold during the first three quarters of 2005 totaled $12.2 ;million. Allowance for loan losses increased $1.3 million to $8.2 million, which ;includes additional reserves of $1.6 million acquired with the Fidelity ;purchase and assumption, when comparing September 30, 2005 to December 31, ;2004. Net charge offs for the first three quarters of 2005 were $1.6 million ;or .30% of average loans on an annualized basis compared to $865,000, or .16% ;of average loans for the comparable period in 2004. The primary reason for ;the increase was a $240,000 charge-off of a commercial business loan to a ;distribution center that failed and the collateral (accounts receivable) have ;proven to be uncollectible. Also, the Bank wrote down $650,000 of an $800,000 ;commercial business loan because the business generates insufficient cash flow ;to service the debt and the value of the collateral (fixed assets) is not ;sufficient to pay off the total debt. As of September 30, 2005 allowance for ;loan losses as a percentage of loans receivable and non-performing loans was ;.98% and 119.1%, respectively. Total deposits were $698.8 million at September 30, 2005 an increase of ;$98.4 million, or 16.4% from December 31, 2004. The increase included $75.9 ;million of deposits acquired in the Fidelity purchase and assumption. Total ;borrowings increased $31.4 million, including $20.5 million with the Fidelity ;acquisition, to $172.5 million at September 30, 2005 from $141.6 million at ;December 31, 2004. Stockholders' equity was unchanged at $87.9 million at September 30, 2005 ;when compared to December 31, 2004. Increases due to net income of $4.9 ;million, Employee Stock Ownership Plan (ESOP) shares earned of $549,000, and ;RRP shares earned of $192,000 were offset by the repurchase of 179,000 shares ;of common stock for $4.2 million and dividend payments of $1.8 million. Also, ;the market value of securities available for sale compared to their book value ;decreased $278,000 from a loss of $89,000 at December 31, 2004 to a loss of ;$367,000 at September 30, 2005. Net interest income increased $87,000 from $6.6 million for the three ;months ended September 30, 2004, to $6.7 million for the three months ended ;September 30, 2005. The primary reason for the improvement was due to a $55.4 ;million, or 7.3% increase in average interest earning assets partially offset ;by a 20 basis point decrease in the net interest margin reflecting the bank's ;liability sensitive nature as short term interest rates rise. Net interest ;income decreased $214,000 for the nine months ended September 30, 2005 ;compared to the nine months ended September 30, 2004. The net interest margin ;decreased from 3.60% for the nine-month period ended September 30, 2004, to ;3.41% for the comparable period in 2005 for the same reason mentioned above. ;This lower margin was partially offset by a $33.7 million, or 4.5% increase in ;average interest-earning assets when comparing the first three quarters of ;2005 to that of 2004. The provision for loan losses for the first three quarters of 2005 was ;$1.3 million, compared to $1.1 million for last year's comparable period due ;primarily to the increased loan balances year to date. Non-performing loans ;to total loans at September 30, 2005 were .82% compared to .56% at September ;30, 2004. Non-performing assets to total assets were .90% at September 30, ;2005 compared to .61% at September 30, 2004. These increases are primarily ;due to a $1.9 million residential real estate loan secured by a first mortgage ;being over 90 days past due. Management is confident that the collateral is ;more than enough to cover the debt and that the Bank will have no loss related ;to this loan. Non-interest income increased $76,000 or 4.9%, to $1.7 million for the ;three months ended September 30, 2005 compared to $1.6 million for the same ;period in 2004. Increases in service fee income, due to a new overdraft ;privilege program was partially offset by a $59,000 reduction in the gain on ;sale of loans due to reduced mortgage refinancing activity in the 2005 quarter ;and a $24,000 reduction in other income due primarily to reduced gains on the ;sale of real estate owned. For the nine month period ended September 30, 2005 ;non-interest income increased $322,000 or 7.0% to $4.9 million compared to ;$4.6 for the comparable period in 2004. The increase was due primarily to a ;$637,000 or 28.3% increase in service fee income and a $239,000 or 45.8% ;increase in commission income due to the overdraft privilege program and ;increased annuity sales. These increases were partially offset by a $405,000 ;reduction in the gain on sale of loans due to reduced mortgage refinancing ;activity in the 2005 period and a $84,000 reduction in other income due ;primarily to reduced gain on the sale of real estate owned. Non-interest expense increased $334,000 or 6.1% to $5.8 million for the ;three months ended September 30, 2005 compared to $5.5 million for the same ;period in 2004. The increase was due primarily to increased occupancy and ;equipment expenses which were up $57,000 due to costs related to a new office ;opened in June of this year in Syracuse, Indiana. Also, we relocated our ;corporate and investment management and private banking staffs to a recently ;purchased office building located next to our main office in Muncie. Data ;processing fees increased $31,000 due to the addition of the new office and ;the expiration of several contractual credits from our service provider ;received in the 2004 period and not in the 2005 period. Other expenses ;increased $118,000 due to increases in legal and consulting services primarily ;related to regulatory compliance requirements and other general and ;administrative expense increases. Non-interest expense increased $977,000 or ;6.1% to $17.0 million for the nine months ended September 30, 2005 compared to ;$16.0 million for the same period in 2005 for similar reasons mentioned above. Income tax expense decreased $93,000 for the three months ended September ;30, 2005 compared to the same period in 2004 due to less taxable income. The ;effective tax rate decreased from 27.3% to 26.3% due to an increased ;percentage of low income housing tax credits to taxable income when comparing ;the third quarter of 2005 to the third quarter of 2004. For the nine-month ;period ended September 30, 2005, income tax expense decreased $438,000 ;compared to the same period in 2004. The decrease was due primarily to ;decreased taxable income. The effective tax rate decreased to 27.1% from ;29.0% due to an increased percentage of low income housing tax credits to ;taxable income when comparing the third half of 2005 to the third half of ;2004. MutualFirst Financial, Inc. and Mutual Federal Savings Bank are ;headquartered in Muncie, Indiana with twenty 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 ;changes in interest rates; the loss of deposits and loan demand to ;competitors; substantial changes in financial markets; changes in real estate ;values and the real estate market; or regulatory changes. ; ; ; MUTUALFIRST FINANCIAL INC. ------------------------------------------------------------------------- ; 30-Sep 31-Dec Selected Financial Condition Data (Unaudited): 2005 2004 ------------------------------------------------------------------------- (000) (000) ; Total Assets $971,970$839,387 ; Cash and cash equivalents 19,452 19,743 ; Loans held for sale 0 2,913 ; Loans receivable, net 826,707 713,022 ; Investment securities available for sale, at fair value 40,766 39,409 ; Total deposits 698,824 600,407 ; Total borrowings 172,549 141,572 ; Total stockholders' equity 87,912 87,860 ; ; ; Three Three Three NineNine Months Months Months Months Months Ended Ended Ended Ended Ended 30-Sep 30-Jun 30-Sep 30-Jun 30-Sep Selected Operations Data(Unaudited): 20052005200420052004 ------------------------------------------------------- ---------------- (000) (000) (000) (000) (000) ; Total interest income $12,087 $11,507 $10,979 $34,830 $33,224 Total interest expense5,389 4,815 4,368 14,766 12,946 -------------------------- ----------------Net interest income6,698 6,692 6,611 20,064 20,278 Provision for loan losses 444 444 350 1,331 1,107 -------------------------- ---------------- Net interest income after provision for loan losses 6,254 6,248 6,261 18,733 19,171 -------------------------- ---------------- ; Non-interest income ---------------------------- Fees and service charges 1,013 990 806 2,889 2,251 Equity in gains (losses) of limited partnerships 44 (9) 69 18 90 Commissions 206 341 225 761 522 Net gain on loan sales and servicing93 117 152 359 764 Increase in cash surrender value of life insurance250 250 255 765 760 Other income 40 29 63 108 191 -------------------------- ---------------- Total non-interest income1,646 1,718 1,570 4,900 4,578 -------------------------- ---------------- ; Non-interest expense ---------------------------- Salaries and benefits 3,435 3,380 3,304 10,221 10,073 Occupancy and equipment 806 791 748 2,418 2,129 Data processing fees 210 202 179 606 526 Deposit insurance expense20 21 21 62 65 Marketing204 193 208 536 449 Other expenses 1,117 1,048 999 3,133 2,756 -------------------------- ---------------- Total non-interest expense 5,792 5,635 5,459 16,976 15,998 -------------------------- ---------------- ; Income before taxes 2,108 2,331 2,372 6,657 7,751 Income tax provision 555 642 648 1,807 2,245 -------------------------- ---------------- Net income $1,553 $1,689 $1,724 $4,850 $5,506 ========================== ================ ; ; ; Average Balances, Net Interest Income, Yield Earned and Rates Paid ------------------------------------------------------------------- Three mos ended 9/30/2005 ----------------------------------Average Interest Average Outstanding Earned/Yield/Balance Paid Rate ---------------------------------- (000) (000) Interest-Earning Assets: Interest -bearing deposits $2,169 $14 2.58% Mortgage-backed securities: Available-for-sale 11,240 134 4.77 Investment securities: Available-for-sale 30,169 298 3.95 Loans receivable756,43411,548 6.11 Stock in FHLB of Indianapolis 8,746 94 4.30 ---------------------------------- Total interest-earning assets (1) 808,75812,088 5.98 Non-interest earning assets, net of allowance for loan losses and unrealized gain/loss 72,944 ---------- Total assets $881,702 ========== ; ; Interest-Bearing Liabilities: Demand and NOW accounts $57,980 38 0.26 Savings deposits 59,607 75 0.50 Money market accounts 46,354 205 1.77 Certificate accounts 426,755 3,579 3.35 ---------------------------------- Total deposits 590,696 3,897 2.64 Borrowings 146,455 1,492 4.07 ---------------------------------- Total interest-bearing accounts 737,151 5,389 2.92 Non-interest bearing deposit accounts 43,291 Other liabilities 14,481 ---------- Total liabilities 794,923 Stockholders' equity 86,779 ---------- Total liabilities and stockholders' equity $881,702 ========== Net earning assets $71,607 ========== Net interest income$6,699 ========== Net interest rate spread 3.06%========== Net yield on average interest-earning assets3.31%========== Average interest-earning assets to average interest-bearin ;iabilities 109.71%========== ; ; Nine mos ended 9/30/2005 ---------------------------------- ; AverageInterestAverage Outstanding Earned/ Yield/Balance Paid Rate (000) (000) ---------------------------------- Interest-Earning Assets: Interest -bearing deposits $1,793 $27 2.01% Mortgage-backed securities: Available-for-sale 11,148 392 4.69 Investment securities: Available-for-sale 29,432 803 3.64 Loans receivable734,166 33,328 6.05 Stock in FHLB of Indianapolis 8,290 260 4.18 ---------------------------------- Total interest-earning assets (1) 784,829 34,810 5.91 Non-interest earning assets, net of allowance for loan losses and unrealize ;ain/loss 71,044 ---------- Total assets $855,873 ========== ; ; Interest-Bearing Liabilities: Demand and NOW accounts $58,656 111 0.25 Savings deposits 61,062 182 0.40 Money market accounts 51,230 563 1.47 Certificate accounts 402,954 9,788 3.24 ---------------------------------- Total deposits 573,902 10,644 2.47 Borrowings 139,534 4,122 3.94 ---------------------------------- Total interest-bearing accounts 713,436 14,766 2.76 Non-interest bearing deposit accounts 41,314 Other liabilities 13,930 ---------- Total liabilities 768,680 Stockholders' equity 87,193 ---------- Total liabilities and stockholders' equity $855,873 ========== Net earning assets $71,393 ; Net interest income$20,044 ========== ; Net interest rate spread 3.15%========== Net yield on average interest-earning assets 3.41%========== Average interest-earning assets to average interest-bearin ;iabilities 110.01%========== ; ; ; Three Three Three Months Months Months Ended Ended Ended Selected Financial Ratios and Other 30-Sep 30-Jun 30-Sep Financial Data (Unaudited):2005 2005 2004 ------------------------------------------------------------------------- ; Share and per share data: Average common shares outstandin ;asic 4,310,148 4,352,236 4,557,861Diluted 4,417,051 4,464,114 4,698,863 Per share:Basic earnings $0.36 $0.39 $0.38Diluted earnings $0.35 $0.38 $0.37Dividends $0.13 $0.13 $0.12 ; Dividend payout ratio 37.14% 34.21% 32.43% ; Performance Ratios:Return on average assets (ratio of net income to average total assets)(1)0.70% 0.80% 0.84%Return on average equity (ratio of net income to average equity)(1) 7.16% 7.69% 7.62%Interest rate spread information: Average during the period(1) 3.06% 3.21% 3.39% ; Net interest margin(1)(2)3.31% 3.45% 3.51% ; Efficiency Ratio 69.42% 67.00% 66.73% ; Ratio of average interest-earning assets to average interest- bearing liabilities 109.71%109.90%105.37% ; Allowance for loan losses: Balance beginning of period $6,909 $6,737 $7,020 Charge offs: One- to four- family 149350 Multi-family0 0 0 Commercial real estate0 621 Construction or development0 0 0 Consumer loans 319 237 228 Commercial business loans505 150 254 -------------------------------- Sub-total 838 486 553 ;Recoveries: One- to four- family 10 9 1 Multi-family0 0 0 Commercial real estate0 120 154 Construction or development0 0 0 Consumer loans 108551 Commercial business loans 15 0 0 -------------------------------- Sub-total 35 214 206 ; Net charge offs803 272 347 Acquired with Fidelity Federal purchase 1,646 Additions charged to operations 444 444 350 -------------------------------- Balance end of period $8,196 $6,909 $7,023 ================================ Net loan charge-offs to average loans (1) 0.42% 0.15% 0.20% ; ; Nine Months Nine Months Ended Ended Selected Financial Ratios and Other 30-Sep 30-Sep Financial Data (Unaudited): 2005 2004 -------------------------------------------------------------------------- ; ; Share and per share data: Average common shares outstandin ;asic 4,342,519 4,695,246Diluted4,460,734 4,851,521 Per share:Basic earnings $1.12 $1.17Diluted earnings$1.09 $1.13Dividends $0.39 $0.35 ; Dividend payout ratio 35.78% 30.97% ; Performance Ratios:Return on average assets (ratio of net income to average total assets)(1) 0.76% 0.90%Return on average equity (ratio of net income to average equity)(1) 7.42% 7.74%Interest rate spread information: Average during the period(1) 3.15% 3.33% ; Net interest margin(1)(2) 3.40% 3.60% ; Efficiency Ratio 68.00% 64.36% ; Ratio of average interest-earning assets to average interest- bearing liabilities 110.01% 106.06% ; Allowance for loan losses: Balance beginning of period $6,867 $6,779 Charge offs: One- to four- family 185211 Multi-family 0 0 Commercial real estate 6 34 Construction or development 0 0 Consumer loans 835737 Commercial business loans 897369 -------------------------- Sub-total 1,923 1,351 ;Recoveries: One- to four- family 22 21 Multi-family 0 0 Commercial real estate 120314 Construction or development 0 0 Consumer loans 117151 Commercial business loans 15 0 -------------------------- Sub-total 274486 ; Net charge offs 1,649865 Acquired with Fidelity Federal purchase1,646 Additions charged to operations 1,332 1,109 -------------------------- Balance end of period $8,196 $7,023 ========================== Net loan charge-offs to average loans (1)0.30% 0.16% ; ; ; ; September 30, June 30, September 30, 2005 20052004 -------------------------------------------- Total shares outstanding4,580,129 4,608,0134,781,778 Tangible book value per share $16.18 $18.82 $18.58 ; Nonperforming assets (000's) Loans: Non-accrual $6,877 $4,386 $4,053 Past due 90 days or more 6 694 10 ----------------------------------------Total nonperforming loans $6,883 $5,080 $4,063 Restructured Loans 117 120 120 Real estate owned 864 351 285 Other repossessed assets 866 985 625 ---------------------------------------- Total nonperforming assets$8,730 $6,536 $5,093 ; Asset Quality Ratios:Non-performing assets to total assets 0.90%0.78% 0.61%Non-performing loans to total loans 0.82%0.69% 0.57%Allowance for loan losses to non-performing loans 119.08% 136.00% 172.85%Allowance for loan losses to loans receivable 0.98%0.94% 0.98% ; ; (1) Ratios for the three and nine month periods have been annualized. ; (2) Net interest income divided by average interest earning assets. ; ; ; ;

Source: PR Newswire