SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM - TO
Commission File Number: 000-27905
MutualFirst Financial, Inc.
--------------------------------------------------------------------------------
(Exact Name of registrant specified in its charter)
Maryland 35-2085640
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
110 East Charles Street, Muncie, Indiana 47305
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(765) 747-2800
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]
The number of shares of the Registrant's common stock, without par value,
outstanding as of September 30, 2000 was 5,819,611.
<PAGE>
<TABLE>
<CAPTION>
FORM 10-Q
MutualFirst Financial, Inc.
INDEX
Page
PART I - FINANCIAL INFORMATION Number
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
September 30, 2000 and December 31, 1999 Consolidated 3
Condensed Statement of Income for the three and nine
months ended September 30, 2000 and September 30, 1999 4
Consolidated Condensed Statement of Stockholders' Equity
for the nine months ended September 30, 2000 5
Consolidated Condensed Statement of Cash Flows for the nine
months ended September 30, 2000 and September 30, 1999 6
Notes to Unaudited Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 15
</TABLE>
2
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheet
(Unaudited)
September 30, December 31,
2000 1999
-----------------------------------
<S> <C> <C>
Assets
-----------------------------------
Cash $14,007,235 $19,217,186
Interest-bearing deposits 546,592 765,945
-----------------------------------
Cash and cash equivalent 14,553,827 19,983,131
Trading assets, at fair value 1,234,884 Investment securities:
Available for sale 31,759,355 29,598,800
Held to maturity at fair market value 10,559,613 12,449,013
-----------------------------------
Total investment securities 42,318,968 42,047,813
Loans 484,840,549 446,438,992
Allowance for loan losses (3,426,343) (3,652,073)
-----------------------------------
Net loans 481,414,206 442,786,919
Premises and equipment 8,118,771 7,800,460
Federal Home Loan Bank of Indianapolis stock, at cost 5,338,500 5,338,500
Investment in limited partnerships 5,087,395 5,274,840
Cash surrender value of life insurance 11,228,611 10,806,957
Foreclosed real estate 1,121,295 728,737
Interest receivable:
Loans 2,351,760 2,134,656
Mortgage-backed securities 49,893 58,687
Investment securities and interest-bearing deposits 366,043 459,616
Core deposit intangibles and goodwill 1,304,493 1,466,928
Deferred income tax benefit 2,597,521 2,670,886
Other assets 1,724,618 1,730,426
-----------------------------------
Total assets $577,575,901 $544,523,440
===================================
Liabilities
-----------------------------------
Deposits
Non-interest-bearing $ 19,285,541 $ 14,360,929
Interest bearing 370,652,753 350,243,469
-----------------------------------
Total deposits 389,938,294 364,604,398
Federal Home Loan Bank advances 76,684,196 72,289,384
Other borrowings 1,706,996 2,608,354
Advances by borrowers for taxes and insurance 1,983,291 1,289,179
Interest payable 1,367,778 2,153,475
Other liabilities 5,517,335 4,866,330
-----------------------------------
Total liabilities 477,197,890 447,811,120
-----------------------------------
Stockholders' Equity
-----------------------------------
Preferred stock, $.01 par value
Authorized and unissued --- 20,000,000 shares
Common stock, $.01 par value
Authorized --- 20,000,000 shares
Issued and outstanding --- 5,819,611 58,196 58,196
Additional paid-in capital 56,754,270 56,740,190
Retained earnings 47,963,466 44,647,767
Accumulated other comprehensive loss (186,635) (284,047)
Unearned employee stock ownership plan (ESOP) shares (4,211,286) (4,449,786)
-----------------------------------
Total stockholders' equity 100,378,011 96,712,320
-----------------------------------
Total liabilities and stockholders' equity $577,575,901 $544,523,440
===================================
See notes to consolidated condensed financial statements.
</TABLE>
3
<PAGE>
MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statement of income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income
Loans receivable, including fees $9,433,465 $8,108,748 $27,177,382 $23,875,742
Trading account securities 20,048 8,192 44,489
Investment securities
Mortgage-backed securities available for sale 230,280 54,912 708,948 213,244
Federal Home Loan Bank stock 114,063 73,312 326,436 216,620
Other investments 481,279 289,381 1,436,963 832,742
Deposits with financial institutions 10,648 23,659 33,181 133,436
---------- ---------- ----------- -----------
Total interest income 10,269,735 8,570,060 29,691,102 25,316,273
---------- ---------- ----------- -----------
Interest Expense
Passbook savings 195,694 217,504 596,140 643,383
Certificates of deposit 3,885,535 3,401,406 10,544,318 10,099,427
Daily money market accounts 352,988 285,184 1,002,422 753,645
Demand and NOW acounts 119,817 106,157 363,788 429,861
Federal Home Loan Bank advances 1,032,346 814,504 2,795,443 2,140,362
Other interest expense 11,588 5,497 21,164
---------- ---------- ----------- -----------
Total interest expense 5,586,380 4,836,343 15,307,608 14,087,842
---------- ---------- ----------- -----------
Net Interest Income 4,683,355 3,733,717 14,383,494 11,228,431
Provision for loan losses 171,250 190,000 513,750 570,000
---------- ---------- ----------- -----------
Net Interest Income After Provision for Loan Losses 4,512,105 3,543,717 13,869,744 10,658,431
---------- ---------- ----------- -----------
Other Income
Service fee income 520,102 444,937 1,508,591 1,222,445
Net realized gains on sales of available-for-sale
securities 32,326
Net trading account profit (loss) (45,000) 25,116 (119,703)
Equity in losses of limited partneships (45,232) 9,874 (135,939) (453)
Commissions 124,608 111,798 423,515 295,372
Increase in cash surrender value of life insurance 140,000 144,957 421,655 354,957
Other income 70,033 88,251 300,905 241,017
---------- ---------- ----------- -----------
Total other income 809,511 754,817 2,543,843 2,025,961
---------- ---------- ----------- -----------
Other Expenses
Salaries and employee benefits 1,812,116 1,709,011 5,469,689 4,871,049
Net occupancy expenses 154,310 162,057 505,724 488,317
Equipment expenses 181,096 192,313 563,322 532,553
Data processing fees 157,539 124,125 410,383 374,033
Deposit insurance expense 20,248 52,030 61,035 151,211
Advertising and promotion 109,467 88,964 335,331 322,966
Other expenses 705,858 571,733 2,272,035 1,688,518
---------- ---------- ----------- -----------
Total other expenses 3,140,634 2,900,233 9,617,519 8,428,647
---------- ---------- ----------- -----------
Income Before Income Tax 2,180,982 1,398,301 6,796,068 4,255,745
Income tax expense 719,250 447,500 2,258,250 1,381,500
---------- ---------- ----------- -----------
Net Income $1,461,732 $ 950,801 $ 4,537,818 $ 2,874,245
========== ========== =========== ===========
Basic earnings per share $0.27 $0.84
Diluted earnings per share $0.27 $0.84
Dividends per share $0.07 $0.21
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Stockholders' Equity
For the Nine Months Ended September 30, 2000
(Unaudited)
Common Stock
---------------------- Additional
Shares paid-in
Outstanding Amount capital
-------------------------------------
Balances January 1, 2000 5,819,611 $58,196 $56,740,190
Comprehensive income
Net income for the period
Other comprehensive income, net of tax
Unrealized gains on securities
Comprehensive income
ESOP shares earned 14,080
Cash dividends ($.14 per share)
-------------------------------------
Balances, September 30, 2000 5,819,611 $58,196 $56,754,270
=====================================
<TABLE>
<CAPTION>
Accumulated
Other Unearned
Comprehensive Retained Comprehensive ESOP
Income Earnings Loss shares Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances January 1, 2000 $44,647,767 ($284,047) ($4,449,786) $96,712,320
Comprehensive income
Net income for the period $4,537,818 $4,537,818 4,537,818
Other comprehensive income, net of tax
Unrealized gains on securities 97,412 97,412 97,412
----------
Comprehensive income $4,635,230
==========
ESOP shares earned 238,500 252,580
Cash dividends ($.14 per share) (1,222,119) (1,222,119)
---------------------------------------------------------
Balances, September 30, 2000 $47,963,466 ($186,635) ($4,211,286) $100,378,011
=========================================================
</TABLE>
5
<PAGE>
MUTUALFIRST FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------------
2000 1999
----------------------------------------
<S> <C> <C>
Operating Activities
Net income $4,537,818 $2,874,245
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for loan losses 513,750 570,000
Securities gains - (32,326)
Net loss on sale of real estate owned 107,229 38,684
Securities amortization (accretion), net (25,016) 9,333
ESOP shares earned 252,580
Equity in losses of limited partnerships 135,939 453
Amortization of net loan origination costs 1,346,554 1,062,436
Amortization of core deposit intangibles and goodwill 162,435 176,653
Depreciation and amortization 572,921 517,217
Deferred income tax - (25,646)
Change in
Trading account securities 1,234,884 (1,312,734)
Interest receivable (114,737) (316,995)
Other assets 5,806 438,115
Interest payable (785,697) (270,037)
Other liabilities 651,006 862,769
Increase in cash surrender value of life insurance (421,654) (354,957)
---------------------------------------
Net cash provided by operating activities 8,173,818 4,237,210
---------------------------------------
Investing Activities
Purchases of securities available for sale (3,473,126) (2,803,763)
Proceeds from maturities and paydowns of securities
available for sale 1,514,525 1,332,986
Proceeds from sales of securities available for sale - 5,880,368
Purchases of securities held to maturity - (6,490,708)
Proceeds from maturities and paydowns of securities held
to maturity 1,883,238 4,487,471
Net change in loans (41,358,538) (40,728,450)
Purchases of premises and equipment (891,231) (629,140)
Proceeds from real estate owned sales 416,009 261,149
Purchase of FHLB of Indianapolis stock - (551,100)
Distribution from limited partnership 51,506 6,823
Purchases of insurance contracts - (966,000)
Other investing activities (44,849) (10,676)
---------------------------------------
Net cash used by investing activities (41,902,466) (40,211,039)
---------------------------------------
Financing Activities
Net change in
Noninterest-bearing, interest bearing demand and savings deposits (1,860,058) 896,700
Certificates of deposits 27,193,954 12,780,368
Short-term borrowings (840,000) 875,000
Repayment of note payable (61,358) (61,357)
Proceeds from FHLB advances 210,500,000 92,500,000
Repayment of FHLB (206,105,188 (67,592,923)
Net change in advances by borrowers for taxes and insurance 694,112 698,253
Dividends paid (1,222,118) -
---------------------------------------
Net cash provided by financing activities 28,299,344 40,096,041
---------------------------------------
Net Change in Cash and Cash Equivalents (5,429,304) 4,122,212
Cash and Cash Equivalents, Beginning of Year 19,983,131 12,938,102
-------------------------------------
Cash and Cash Equivalents, End of Period $14,553,827 $17,060,314
=====================================
Additional Cash Flows Information
Interest paid $16,093,305 $14,357,879
Income tax paid 1,516,000 804,000
Transfers from loans to foreclosed real estate 870,947 453,246
</TABLE>
See notes to consolidated condensed financial statements.
6
<PAGE>
MutualFirst Financial, Inc. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
NOTE 1: Basis of Presentation
The consolidated financial statements include the accounts of MutualFirst
Financial, Inc. (the "Company"), its wholly owned subsidiary, Mutual Federal
Savings Bank, a federally chartered savings bank ("Mutual Federal"), and Mutual
Federal's two wholly owned subsidiaries, First MFSB Corporation and Third MFSB
Corporation. A summary of significant accounting policies is set forth in Note 1
of Notes to Financial Statements included in the December 31, 1999 Annual Report
to Shareholders. All significant inter-company accounts and transactions have
been eliminated in consolidation.
The interim consolidated condensed financial statements have been prepared in
accordance with instructions to Form 10-Q, and therefore do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
The interim consolidated condensed financial statements at September 30, 2000,
and for the three month and nine month periods ended September 30, 2000 and 1999
have not been audited by independent accountants, but in the opinion of
management, reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for such periods.
NOTE 2: Earnings Per Share
Earnings per share have been computed based upon the weighted average common and
common equivalent shares outstanding during the period subsequent to Mutual
Federal's conversion to a stock savings bank on December 29, 1999. Unearned
Employee Stock Ownership Plan shares have been excluded from the computation of
average common shares outstanding. For the three months and nine months ended
September 30, 2000, weighted average shares outstanding for basic and diluted
earnings per share were 5,394,507 and 5,386,557 respectively.
NOTE 3: Business Combination
On June 7, 2000, the Company signed a definitive agreement to acquire Marion
Capital Holdings, Inc. (Marion, Indiana). The acquisition will be accounted for
under the purchase method of accounting. Under the terms of the agreement, the
Company will exchange 1.862 shares of the Company's common stock for each share
of Marion Capital Holdings, Inc. common stock. The transaction is subject to
approval by shareholders of Marion Capital Holdings, Inc. and appropriate
regulatory agencies. As of September 30, 2000, Marion Capital Holdings, Inc. had
total assets and shareholders' equity of $198,443,000 and $32,034,881,
respectively.
7
<PAGE>
Item #2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
MutualFirst Financial, Inc., a Maryland corporation (the "Company"), was
organized in September, 1999. On December 29, 1999, it acquired the common stock
of Mutual Federal Savings Bank ("Mutual Federal") upon the conversion of Mutual
Federal from a federal mutual savings bank to a federal stock savings bank.
Mutual Federal was originally organized in 1889 and currently conducts its
business from thirteen full service offices located in Delaware, Randolph, and
Kosciusko Counties, Indiana, with its main office located in Muncie. Mutual
Federal's principal business consists of attracting deposits from the general
public and originating fixed rate and adjustable rate loans secured primarily by
first mortgage liens on one-to- four family residential real estate. Mutual
Federal's deposit accounts are insured up to applicable limits by the SAIF of
the FDIC.
Mutual Federal offers a number of financial services, including: (1) one-to-four
family residential real estate loans; (2) commercial real estate loans; (3) real
estate construction loans; (4) land loans; (5) multi-family residential loans;
(6) consumer loans, including home equity loans, automobile loans, recreational
vehicle and boat loans; (7) commercial loans; (8) money market demand accounts
("MMDA's"); (9) savings accounts; (10) checking accounts; (11) NOW accounts; and
(12) certificates of deposit.
Mutual Federal currently owns two subsidiaries, First M.F.S.B. Corporation and
Third M.F.S.B. Corporation. The assets of First M.F.S.B. Corporation consist of
an investment in Family Financial Life Insurance Company. Family Financial is an
Indiana stock insurance company that primarily engages in retail sales of
mortgage and credit life insurance products in connection with loans originated
by its shareholder financial institutions. Third M.F.S.B., which does business
as Mutual Financial Services, offers tax-deferred annuities, long-term health
and life insurance products. All securities related products and services made
available through Mutual Financial Services are offered by a third party
independent broker-dealer.
The Company's results of operations depend primarily upon the level of net
interest income, which is the difference between the interest income earned on
interest earning assets, such as loans and investments, and costs incurred with
respect to interest bearing liabilities, primarily deposits and borrowings.
Results of operations also depend upon the level of the Company's non-interest
income, including fee income and service charges, and the level of its
non-interest expense, including general and administrative expenses.
8
<PAGE>
Financial Condition
Assets totaled $577.6 million at September 30, 2000, an increase from December
31, 1999 of $33.1 million for an annualized growth rate of 8.1%. This growth
occurred in net loans, up $38.6 million from year-end 1999 primarily due to a
$31.9 million increase in commercial and consumer loans. Loan growth was funded
by growth of deposits and increased borrowings from the Federal Home Loan Bank.
Deposits totaled $389.9 million at September 30, 2000 an increase of $25.3
million or an annualized rate of 9.25% from December 31, 1999. Increases in
Public Entity Deposits of $15.4 million, and increases in retail certificates of
deposit of $10.2 million account for this growth. Total borrowings increased
$3.5 million to $78.4 million.
Stockholders' equity increased $3.7 million from $96.7 million at December 31,
1999 to $100.4 million at September 30, 2000. The increase was due to net income
for the nine months ended September 30, 2000 of $4.5 million and Employee Stock
Ownership Plan (ESOP) shares earned of $253,000 and a decrease in the unrealized
loss on available for sale securities of $97,000. Cash dividends declared of
$815,000 partially offset these increases.
Comparison of the operating results for the three months ended September 30,
2000 and 1999.
Net income was $1.5 million or 27 cents for both basic and diluted earnings per
share for the quarter ended September 30, 2000. This compared to net income for
the comparable period in 1999 of $951,000. The increase in earnings was
primarily due to an increase in net interest income partially offset by
increases in non-interest expenses and income tax expense. The annualized return
on average assets was 1.03% and .76% for the three months ended September 30,
2000, and 1999, respectively.
Interest income increased $1.7 million or 19.8% from $8.6 million for the three
months ended September 30, 1999 to $10.3 million for the same period in 2000.
Interest expense increased $750,000 or 15.5% from $4.8 million for the three
months ended September 30, 1999, to $5.6 million for the same period in 2000. As
a result, net interest income for the three months ended September 30, 2000
increased $1 million or 25.4% compared to the same period in 1999. The increase
in net interest income was due primarily to an increase of $43 million in the
average outstanding loans receivable and $22.2 million in the average balance of
investment securities available for sale. The increase in average loans
outstanding was due to increased loan demand. The increase in investment
securities available for sale was primarily attributable to the utilization of
net proceeds received in conjunction with the Company's stock issuance.
The Company's provision for loan losses for the three-months ended September 30,
2000 was $171,000 compared to $190,000 for the same period in 1999. Mutual
Federal reviews all loans on an individual basis when the loan reaches 90 days
past due, at which point
9
<PAGE>
they are put on non-accrual status. At September 30, 2000 and December 31, 1999,
respectively, non-accrual loans were $498,000 and $753,000. The allowance for
loan losses was $3.4 million or .71% of net loans and $3.7 million or
approximately .82% of net loans at September 30, 2000 and December 31, 1999,
respectively.
Non-interest income increased $55,000, or 7.2% for the three months ended
September 30, 2000 compared to the same period in 1999 primarily due to
transaction account growth resulting in an increase in service fee income of
$75,000 and no net trading account activity compared to a trading loss of
$45,000 for the three month period ended September 30, 1999. Also, there was a
loss of $45,000 in limited partnerships for the three month period ended
September 30, 2000, compared to a $10,000 gain in the comparable 1999 period.
Non-interest expense increased $240,000 or 8.3% for the three months ended
September 30, 2000 compared to the same period in 1999. Salaries and employee
benefits were $1.8 million for the three months ended September 30, 2000
compared to $1.7 million for the 1999 period, an increase of $100,000 or 5.9%.
This increase resulted primarily from $100,000 of compensation expense related
to the ESOP. Other expenses also increased $134,000 for the three months ended
September 30, 2000 compared to the same period in 1999. The increase in other
expenses resulted from nominal increases in a variety of expense categories.
These increases were partially offset by a $32,000 decrease in deposit insurance
expense from the three months ended September 30, 2000 compared to the same
period of 1999.
Income tax expense increased $271,000 for the three months ended September 30,
2000 compared to the same period in 1999. The increase was a result of increased
taxable income for the period.
Comparison of the operating results for the nine months ended September 30, 2000
and 1999.
Net income was $4.5 million or 84 cents for both basic and diluted earnings per
share for the nine-month period ended September 30, 2000. This compared to net
income for the comparable period in 1999 of $2.9 million. The increase in
earnings was primarily due to an increase in net interest income partially
offset by an increase in non-interest expenses and income tax expense. The
annualized return on average assets was 1.09% and .79% for the nine-month period
ended September 30, 2000, and 1999, respectively.
Interest income increased $4.4 million, or 17.4%, from $25.3 million for the
nine months ended September 30, 1999 to $29.7 million for the same period in
2000. Interest expense increased $1,220,000, or 8.7%, from $14.1 million for the
nine-months ended September 30, 1999 to $15.3 million the same period in 2000.
As a result, net interest income for the nine months ended September 30, 2000
increased $3.2 million, or 28.1%, compared to the same period in 1999. The
increase in net interest income was due primarily to a
10
<PAGE>
$48.4 million increase in the average outstanding balance of loans receivable
and a $20.4 million increase in the average outstanding balance of investment
securities available for sale. The increase in average loans outstanding was due
to increased loan demand. The increase in investment securities available for
sale was due to the utilization of net proceeds received in conjunction with the
Company's stock issuance. Net proceeds of the Company's stock issuance after
cost, and excluding the shares issued to the ESOP, were $49.9 million.
The Company's provision for loan losses for the nine months ended September 30,
2000 was $513,000, compared to $570,000 for the same period in 1999. Mutual
Federal reviews all loans on an individual basis when the loan reaches 90 days
past due, at which point they are put on non-accrual status.
Non-interest income increased $518,000, or 25.6%, for the nine months ended
September 30, 2000 compared to the same period in 1999 primarily due to
transaction account growth resulting in an increase in service fee income and
commissions of $414,000 and a gain of $25,000 on net trading account activity
compared to a trading loss of $120,000 for the nine months ended September 30,
1999.
Non-interest expense increased $1.2 million, or 14.1% for the nine months ended
September 30, 2000, compared to the same period in 1999. Salaries and employee
benefits were $5.5 million for the nine months ended September 30, 2000,
compared to $4.9 million for the 1999 period, an increase of $600,000, or 12.3%.
This increase resulted primarily from $253,000 of compensation expense related
to the ESOP, and the additions to staffing for a new in-store branch opened in
1999. In addition, both the commercial and consumer lending staffs were
expanded. Other expenses also increased $591,000 for the nine months ended
September 30, 2000, compared to the same period in 1999. The increase in other
expenses resulted from nominal increases in a variety of expense categories.
These increases were partially offset by a $90,000 decrease in deposit insurance
expense from the nine months ended September 30, 2000, compared to the same
period in 1999 due to a rate reduction.
Income tax expense increased $876,000 for the nine months ended September 30,
2000, compared to the same period in 1999. The increase was a result of
increased taxable income for the period.
Liquidity and Capital Resources
The standard measure of liquidity for savings associations is the ratio of cash
and eligible investments to a certain percentage of net withdrawable savings
accounts and borrowings due within one year. The minimum required ratio is
currently set by Office of Thrift Supervision regulation at 4%. As of September
30, 2000, Mutual Federal had liquid assets of $40.9 million and a liquidity
ratio of 8.31%.
11
<PAGE>
ITEM #3 - Quantitative and Quantitative Disclosures about Market Risk
Presented below as of September 30, 2000 and 1999 is an analysis performed by
the OTS (for September 30, 1999) and by Mutual Federal (for September 30, 2000)
of Mutual Federal's interest risk as measured by changes in Mutual Federal's net
portfolio value ("NPV") for instantaneous and sustained parallel shifts in the
yield curve, in 100 basis point increments, up and down 300 basis points.
September 30, 2000
Net Portfolio Value
The analysis at September 30, 2000 indicates that there have been no material
changes in market interest rates for Mutual Federal's interest rate sensitivity
instruments which would cause a material change in the market risk exposures
which effect the quantitative and qualitative risk disclosures as presented in
item 7A of the Company's annual report on Form 10-K for the period ended
December 31, 1999.
12
<PAGE>
<TABLE>
<CAPTION>
September 30, 2000
Net Portfolio Value
NPV as % of PV of Assets
Changes ------------------------
In Rates $ Amount $ Change % Change NPV Ratio Change
-------- -------- -------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
+300 bp 55,333 -27,879 -34% 10.77% -412 bp
+200 bp 64,336 -18,875 -23% 12.19% -270 bp
+100 bp 74,638 -8,574 -10% 13.74% -115 bp
0 bp 83,212 14.89%
-100 bp 91,511 8,299 10% 15.92% +103 bp
-200 bp 95,698 12,486 15% 16.27% +138 bp
-300 bp 96,621 13,409 16% 16.09% +119 bp
September 30, 1999
Net Portfolio Value
NPV as % of PV Asets
Changes ------------------------
In Rates $ Amount $ Change % Change NPV Ratio Change
-------- -------- -------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
+300 bp 17,597 -26,726 -60% 3.73% -500 bp
+200 bp 27,043 -17,280 -39% 5.59% -315 bp
+100 bp 36,222 -8,101 -18% 7.30% -143 bp
0 bp 44,323 8.74%
-100 bp 50,086 5,763 13% 9.70% +96 bp
-200 bp 53,970 9,647 22% 10.30% +157 bp
-300 bp 57,798 13,475 30% 10.88% +214 bp
</TABLE>
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 27. Financial Data Schedule
14
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MutualFirst Financial, Inc.
Date: November 10, 2000 By: /s/ R. Donn Roberts
-----------------------------------
R. Donn Roberts
President and Chief Executive
Officer
Date: November 10, 2000 By: /s/ Timothy J. McArdle
-----------------------------------
Timothy J. McArdle
Senior Vice President and Treasurer
15
