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 JUNE 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
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(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 JUNE 30, 2000 was 5,819,611.
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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
June 30, 2000 and December 31, 1999 Consolidated 3
Condensed Statement of Income for the three and six
months ended June 30, 2000 and June 30, 1999 4
Consolidated Condensed Statement of Stockholders' Equity
for the six months ended June 30, 2000 5
Consolidated Condensed Statement of Cash Flows for the six
months ended June 30, 2000 and June 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 14
Signature Page 15
</TABLE>
2
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
MUTUALFIRST FINACIAL, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheet
(Unaudited)
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Assets
Cash $16,485,222 $19,217,186
Interest-bearing deposits 1,102,396 765,945
------------ ------------
Cash and cash equivalents 17,587,618 19,983,131
Trading assets, at fair value 1,234,884
Investment securities:
Available for sale 31,818,789 29,598,800
Held to maturity (fair value of $11,208,000
and $12,106,000) 11,683,979 12,449,013
------------ ------------
Total investment securities 43,502,768 42,047,813
Loans 467,989,840 446,438,992
Allowance for loan losses (3,342,342) (3,652,073)
------------ ------------
Net loans 464,647,498 442,786,919
Premises and equipment 7,819,134 7,800,460
Federal Home Loan Bank of Indianapolis stock, at cost 5,338,500 5,338,500
Investment in limited partnerships 5,135,738 5,274,840
Cash surrender value of life insurance 11,088,611 10,806,957
Foreclosed real estate 1,419,644 728,737
Interest receivable:
Loans 2,336,944 2,134,656
Mortgage-backed securities 54,508 58,687
Investment securities and interest-bearing deposits 473,639 459,616
Core deposit intangibles and goodwill 1,359,112 1,466,928
Deferred income tax benefit 2,722,531 2,670,886
Other assets 2,486,613 1,730,426
------------ ------------
Total assets $565,972,858 $544,523,440
============ ============
Liabilities
Deposits
Non-interest-bearing 21,287,756 14,360,929
Interest bearing 371,489,091 350,243,469
------------ ------------
Total deposits 392,776,847 364,604,398
Federal Home Loan Bank Advances 64,767,011 72,289,384
Other Borrowings 1,706,996 2,608,354
Advances by borrowers for taxes and insurance 1,333,691 1,289,179
Interest payable 1,334,120 2,153,475
Other Liabilities 5,031,966 4,866,330
------------ ------------
Total liabilities 466,950,631 447,811,120
============ ============
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 56,732,884 56,740,190
Retained earnings 46,909,107 44,647,767
Accumulated other comprehensive loss (387,174) (284,047)
Unearned employee stock ownership plan (ESOP) shares (4,290,786) (4,449,786)
------------ ------------
Total stockholders' equity 99,022,227 96,712,320
------------ ------------
Total liabilities and stockholders' equity $565,972,858 $544,523,440
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
3
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<TABLE>
<CAPTION>
MUTUALFIRST FINACIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statement of income
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------------- --------------------------
2000 1999 2000 1999
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Interest Income
Loans receivable, including fees $9,038,297 $7,931,710 $17,743,917 $15,766,994
Trading account securities 17,735 8,192 24,441
Investment securities
Mortgage-backed securities available for sale 240,529 62,150 478,668 158,332
Federal Home Loan Bank stock 106,187 72,050 212,373 143,308
Other investments 489,865 294,781 955,684 543,361
Deposits with financial institutions 9,062 23,841 22,533 109,777
---------- ---------- ---------- ----------
Total interest income 9,883,940 8,402,267 19,421,367 16,746,213
---------- ---------- ---------- ----------
Interest Expense
Passbook savings 200,410 214,747 400,446 425,879
Certificates of deposit 3,379,056 3,358,424 6,658,783 6,698,021
Daily money market accounts 328,747 254,986 649,434 468,461
Demand and NOW acounts 122,703 161,945 243,971 323,704
Federal Home Loan Bank advances 953,123 660,820 1,763,097 1,325,858
Other interest expense 3,476 5,497 9,576
---------- ---------- ---------- ----------
Total interest expense 4,984,039 4,654,398 9,721,228 9,251,499
---------- ---------- ---------- ----------
Net Interest Income 4,899,901 3,747,869 9,700,139 7,494,714
Provision for loan losses 171,250 190,000 342,500 380,000
---------- ---------- ---------- ----------
Net Interest Income After Provision for Loan Losses 4,728,651 3,557,869 9,357,639 7,114,714
---------- ---------- ---------- ----------
Other Income
Service fee income 511,892 448,054 988,489 835,621
Net realized gains on sales of available-for-sale securities 32,326 32,326
Net trading account profit (loss) (62,594) 25,116 (74,703)
Equity in losses of limited partneships (88,160) (7,779) (90,707) (10,327)
Commissions 170,926 100,740 298,907 183,574
Increase in cash surrender value of life insurance 161,655 105,000 281,655 210,000
Other income 144,138 63,147 230,872 152,766
---------- ---------- ---------- ----------
Total other income 900,451 678,894 1,734,332 1,329,257
---------- ---------- ---------- ----------
Other Expenses
Salaries and employee benefits 1,809,368 1,592,979 3,657,573 3,162,038
Net occupancy expenses 172,241 159,470 351,414 326,260
Equipment expenses 187,527 188,167 382,226 340,240
Data processing fees 124,560 118,895 252,844 249,908
Deposit insurance expense 20,789 44,181 40,787 99,181
Advertising and promotion 114,609 139,375 225,864 234,002
Other expenses 868,458 592,516 1,566,177 1,174,898
---------- ---------- ---------- ----------
Total other expenses 3,297,552 2,835,583 6,476,885 5,586,527
---------- ---------- ---------- ----------
Income Before Income Tax 2,331,550 1,401,180 4,615,086 2,857,444
Income tax expense 763,000 453,500 1,539,000 934,000
---------- ---------- ---------- ----------
Net Income $1,568,550 $ 947,680 $3,076,086 $1,923,444
========== ========== ========== ==========
Basic earnings per share $0.29 $0.57
Diluted earnings per share $0.29 $0.57
Dividends per share $0.07 $0.14
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
MUTUALFIRST FINACIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Stockholders' Equity
For the Six Months Ended June 30, 2000
(Unaudited)
Common Stock
--------------------- Additional
Shares paid-in
Outstanding Amount capital
-------------------------------------
Balances January 1, 2000 5,819,611 $58,196 $56,740,190
Comprehensive income
Net income for the period
Other comprehensive loss,
net of tax
Unrealized losses on securities
Comprehensive income
ESOP shares earned (7,306)
Cash dividends ($.14 per share)
----------------------------------
Balances, June 30, 2000 5,819,611 $58,196 $56,732,884
==================================
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<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 $3,076,086 3,076,086 3,076,086
Other comprehensive loss,
net of tax
Unrealized losses on securities (103,127) (103,127) (103,127)
----------
Comprehensive income $2,972,959
==========
ESOP shares earned 159,000 151,694
Cash dividends ($.14 per share) (814,746) (814,746)
-----------------------------------------------------
Balances, June 30, 2000 $46,909,107 ($387,174) ($4,290,786) $99,022,227
=====================================================
</TABLE>
See notes to consolidated condensed financial statements.
5
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<TABLE>
<CAPTION>
MUTUALFIRST FINACIAL, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Cash Flows
(Unaudited)
Six Months Ended for June 30,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Operating Activities
Net income $ 3,076,086 $ 1,923,444
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses 342,500 380,000
Securities gains (32,326)
Net loss on sale of real estate owned 94,363 34,077
Securities accretion, net (17,747) (9,458)
ESOP shares earned 151,694
Equity in losses of limited partnerships 90,707 10,327
Amortization of net loan origination costs 937,081 108,723
Amortization of core deposit intangibles and goodwill 107,816 117,769
Depreciation and amortization 373,817 333,241
Deferred income tax 96,135
Change in
Trading account securities 1,234,884 (1,357,734)
Interest receivable (212,132) (300,300)
Other assets (604,492) 1,164,057
Interest payable (819,355) (475,514)
Other liabilities 13,941 (129,436)
Increase in cash surrender value of life insurance (281,654) (210,000)
Other adjustments 131,602
----------- -----------
Net cash provided by operating activities 4,487,509 1,784,607
----------- -----------
Investing Activities
Purchases of securities available for sale (3,389,592) (2,014,539)
Proceeds from maturities and paydowns of securities available for sale 1,040,782 963,216
Proceeds from sales of securities available for sale 4,874,497
Purchases of securities held to maturity (6,006,993)
Proceeds from maturities and paydowns of securities held to maturity 756,830 4,175,686
Net change in loans (24,309,456) (23,276,595)
Purchases of premises and equipment (392,490) (390,906)
Proceeds from real estate owned sales 416,009 203,149
Distribution from limited partnership 48,395 5,521
Other investing activities (31,984) (6,543)
----------- -----------
Net cash used by investing activities (25,861,506) (21,473,507)
----------- -----------
Financing Activities
Net change in
Noninterest-bearing, interest bearing demand and savings deposits 1,685,941 948,842
Certificates of deposits 26,486,508 17,614,093
Short-term borrowings (840,000)
Repayment of note payable (61,358) (30,678)
Proceeds from FHLB advances 125,500,000 32,000,000
Repayment of FHLB advances (133,022,373) (31,270,716)
Net change in advances by borrowers for taxes and insurance 44,512 89,422
Dividends Paid (814,746)
----------- -----------
Net cash provided by financing activities 18,978,484 19,350,963
----------- -----------
Net Change in Cash and Cash Equivalents (2,395,513) (337,937)
Cash and Cash Equivalents, Beginning of Year 19,983,131 12,938,102
----------- -----------
Cash and Cash Equivalents, End of Period $17,587,618 $12,600,165
=========== ===========
Additional Cash Flows Information
Interest paid 10,540,583 9,727,013
Income tax paid 1,176,000 670,000
Transfers from loans to foreclosed real estate 1,169,296 394,862
</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 June 30, 2000, and
for the three month and six month periods ended, June 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 six months ended
June 30, 2000, weighted average shares outstanding for basic and diluted
earnings per share were 5,386,557 and 5,382,582 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.'s common stock. The transaction is subject to
approval by shareholders of Marion Capital Holdings, Inc. and appropriate
regulatory agencies. As of June 30, 2000, Marion Capital Holdings, Inc. had
total assets and shareholders' equity of $198,867,000 and $31,785,000,
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 MFSB Corporation and Third
MFSB Corporation. The assets of First MFSB 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.
Financial Condition
Assets totaled $566 million at June 30, 2000, an increase from December 31, 1999
of $21.5 million for an annualized growth rate of 7.9%. This growth occurred in
net loans, up $21.9 million from year-end 1999 primarily due to a $16.8 million
increase in consumer loans. Loan growth was funded by growth of deposits and a
reduction of cash and cash equivalents.
8
<PAGE>
Deposits totaled $392.8 million at June 30, 2000 an increase of $28.2 million or
an annualized rate of 15.5% from December 31, 1999. Increases in Public Entity
Deposits of $23.4 million, and increases in short-term savings and transaction
type accounts of $7 million account for this growth. Total borrowings decreased
$8.4 million to $66.5 million, as a result of the utilization of a portion of
the proceeds from the stock sale and a reduction of cash, which had been held
for Y2K purposes.
Stockholders' equity increased $2.3 million from $96.7 million at December 31,
1999 to $99 million at June30, 2000. The increase was due to net income for the
six months ended June 30, 2000 of $3.1 million and Employee Stock Ownership Plan
(ESOP) shares earned of $152,000. Cash dividends declared of $815,000 and an
increase in the unrealized loss on available for sale securities of $103,000
partially offset these increases.
Comparison of the operating results for the three months ended June 30, 2000 and
1999.
Net income was $1.6 million or 29 cents for both basic and diluted earnings per
share for the quarter ended June 30, 2000. This compared to net income for the
comparable period in 1999 of $948,000. 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 1.13% and .83% for the three months ended June 30, 2000, and 1999,
respectively.
Interest income increased $1.5 million or 17.6% from $8.4 million for the three
months ended June 30, 1999 to $9.9 million for the same period in 2000. Interest
expense increased $300,000 or 7.1% from $4.7 million for the three months ended
June 30, 1999, to $5.0 million for the same period in 2000. As a result, net
interest income for the three months ended June 30, 2000 increased $1.2 million
or 30.7% compared to the same period in 1999. The increase in net interest
income was due primarily to an increase of $46 million in the average
outstanding loans receivable and $19.1 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 proceeds received in
conjunction with the Company's stock issuance. Also, the net interest rate
spread increased to 3.25% for the three months ended June 30, 2000 from 3.16%
during the same period in 1999, primarily due to the use of the proceeds
received with the company's stock issuance.
The Company's provision for loan losses for the three-months ended June 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 they are put on non-accrual status. At June 30, 2000 and December
31, 1999, respectively, non-accrual loans were $416,000 and $753,000. The
allowance for loan losses was $3.3 million or .71% of net loans and $3.7 million
or approximately .82% of net loans at June 30, 2000 and December 31, 1999,
respectively.
9
<PAGE>
Non-interest income increased $221,000, or 32.5% for the three months ended June
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
$64,000 and no net trading account activity compared to a trading loss of
$63,000 for the three month period ended June 30, 1999.
Non-interest expense increased $461,000 or 16.3% for the three months ended June
30, 2000 compared to the same period in 1999. Salaries and employee benefits
were $1.8 million for the three months ended June 30, 2000 compared to $1.6
million for the 1999 period, an increase of $200,000 or 12.5%. This increase
resulted primarily from $80,000 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 $280,000 for the three months ended June 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 $47,000 decrease in deposit insurance expense and charitable
contributions from the three months ended June 30, 2000 compared to the same
period of 1999.
Income tax expense increased $310,000 for the three months ended June 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 six months ended June 30, 2000 and
1999.
Net income was $3.1 million or 57 cents for both basic and diluted earnings per
share for the six-month period ended June 30, 2000. This compared to net income
for the comparable period in 1999 of $1.9 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 1.12% and .80% for the six-month period ended June 30,
2000, and 1999, respectively.
Interest income increased $2.7 million, or 16.2%, from $16.7 million for the six
months ended June 30, 1999 to $19.4 million for the same period in 2000.
Interest expense increased $470,000, or 5.1%, from $9.3 million for the
six-months ended June 30, 1999 to $9.7 million the same period in 2000. As a
result, net interest income for the six months ended June 30, 2000 increased
$2.2 million, or 29.4%, compared to the same period in 1999. The increase in net
interest income was due primarily to a $46.3 million increase in the average
outstanding balance of loans receivable and a $20.2 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 from 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 for the ESOP, were
$49.9 million.
10
<PAGE>
Also, the net interest rate spread increased to 3.24% for the six months ended
June 30, 2000 from 3.22% during the same period in 1999.
The Company's provision for loan losses for the six months ended June 30, 2000
was $342,000, compared to $380,000 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 $400,000, or 30.5%, for the six months ended June
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
$268,000 and a gain of $25,000 on net trading account activity compared to a
trading loss of $75,000 for the six months ended June 30, 1999.
Non-interest expense increased $900,000, or 16.1% for the six months ended June
30, 2000, compared to the same period in 1999. Salaries and employee benefits
were $3.7 million for the six months ended June 30, 2000, compared to $3.2
million for the 1999 period, an increase of $500,000, or 15.6%. This increase
resulted primarily from $152,000 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 $391,000 for the six months ended June 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 $58,000 decrease in deposit insurance expense from the six
months ended June 30, 2000, compared to the same period in 1999 due to a rate
reduction.
Income tax expense increased $605,000 for the six months ended June 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 June 30,
2000, Mutual Federal had liquid assets of $45.9 million and a liquidity ratio of
8.95%.
11
<PAGE>
ITEM #3 - Quantitative and Quantitative Disclosures about Market Risk
Presented below as of June 30, 2000 and 1999 is an analysis performed by the OTS
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.
June 30, 2000
Net Portfolio Value
NPV as % of PV Assets
Changes ---------------------
In Rates $ Amount $ Change % Change NPV Ratio Change
-------- -------- -------- -------- --------- -------
+300 bp 43,916 -29,825 -40% 8.57% -478 bp
+200 bp 54,010 -19,732 -27% 10.27% -308 bp
+100 bp 64,143 -9,598 -13% 11.90% -146 bp
0 bp 73,742 13.35%
-100 bp 81,582 7,840 11% 14.47% +112 bp
-200 bp 86,101 12,359 17% 15.05% +169 bp
-300 bp 90,096 16,354 22% 15.52% +217 bp
June 30, 1999
Net Portfolio Value
NPV as % of PV Assets
Changes ---------------------
In Rates $ Amount $ Change % Change NPV Ratio Change
-------- -------- -------- -------- --------- -------
+300 bp 21,591 -24,027 -53% 4.75% -460 bp
+200 bp 30,255 -15,363 -34% 6.49% -286 bp
+100 bp 38,555 -7,063 -15% 8.07% -128 bp
0 bp 45,618 9.35%
-100 bp 50,475 4,858 11% 10.18% +83 bp
-200 bp 53,776 8,158 18% 10.69% +135 bp
-300 bp 56,963 11,345 25% 11.18% +183 bp
The analysis at June 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.
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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.
On April 26, 2000, the Company held its annual meeting of the
shareholders. A total of 4,472,556 shares of common stock were
represented in person or by proxy at the meeting. William V. Hughes
was elected to the Board of Directors for a three-year term expiring
in 2003. 4,378,731 shares were voted in favor of the election of the
nominee and there were 93,825 votes withheld. R. Donn Roberts was
elected to the Board of Directors for a three-year term, expiring in
2003. 4,370,827 shares were voted in favor of the election of the
nominee and there were 101,729 votes withheld. James D. Rosema was
elected to the Board of Directors for a three-year expiring in 2003.
4,366,506 shares were voted in favor of the election of the nominee
and there were 106,050 votes withheld. The shareholders approved and
ratified the appointment of Olive LLP as the Company's independent
auditors for the fiscal year ending December 31, 2000. There were
4,416,526 shares voted in favor, 49,950 were voted against, and 6,080
abstentions.
Item 5. Other Information.
None.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 27. Financial Data Schedule
(b) On June 8, 2000 the Company filed a current report on Form 8-K
disclosing the merger between MutualFirst Financial, Inc. and
Marion Capital Holdings. The Agreement and Plan of Reorganization
is attached to Form 8-K as an Exhibit thereto.
14
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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: August 11, 2000 By: /s/ R. Donn Roberts
-------------------------
R. Donn Roberts
President and Chief Executive Officer
Date: August 11, 2000 By: /s/ Timothy J. McArdle
----------------------------
Timothy J. McArdle
Senior Vice President and Treasurer
15
