MARION CAPITAL HOLDINGS, INC. AND MUTUAL FIRST FINANCIAL, INC.
ANNOUNCE THE FORMATION OF A STRATEGIC ALLIANCE IN NORTHEAST INDIANA
Marion, Indiana - June 8, 2000--Marion Capital Holdings, Inc. (Nasdaq: MARN)
("Marion") and Mutual First Financial, Inc. (Nasdaq: MFSF) ("Muncie"), announced
today a definitive agreement to merge their respective holding companies and
banking operations in a strategic affiliation to form a northeast Indiana
franchise with total assets of $740 million and deposits of $500 million. Upon
the completion of the merger, Marion Capital Holdings, Inc. will be merged into
the recently renamed holding company Mutual First Financial, Inc. and First
Federal Savings Bank of Marion will be merged into Mutual Federal Savings Bank.
The combined banking operation will have a total of 16 branch locations
throughout the counties of Delaware, Grant, Kosciusko, and Randolph and will be
called Mutual Federal Savings Bank.
This strategic alliance will combine two bank operations, which
geographically compliment each other with no direct overlap. As a result, all
branches will remain open and all other current operations performed in Marion
will continue with the exception of the accounting function, which will be
transferred to Muncie.
The agreement provides that the shareholders of Marion will receive 1.862
shares of Muncie common stock for each Marion common share in a tax-free
exchange. Muncie will issue approximately 2.6 million shares of stock to
complete the merger, which will be accounted for under the purchase method of
accounting. MFSF will make an application to the Office of Thrift Supervision to
repurchase as many shares as possible to offset those shares being issued to
MARN shareholders. Following the merger, the former Muncie and Marion
shareholders will own approximately 70% and 30% of the combined company,
respectively. The merger, which has been unanimously approved by the Boards of
Directors of both Marion and Muncie, is valued at approximately $27 million
based on the market price of Muncie common stock as of the close of trading on
June 7, 2000. Based on the June 7, 2000 market price of Muncie common stock, the
exchange ratio results in an implied price for each Marion share of
approximately $20.16.
The transaction is expected to be accretive to the combined companies'
earnings per share and to both of the companies on an individual basis, in the
first full year of operations. The earnings accretion will result from the
synergies resulting in pre tax cost savings of approximately $1.2 million, or
6.9% of the combined operating expenses. Management believes that this
transaction should significantly enhance the combined companies' earnings per
share growth rate.
Muncie's Board of Directors will be comprised of four directors from Marion
and seven directors from Muncie. Steven L. Banks, the current President and
Chief Executive Officer of Marion, will serve as Senior Vice President & Chief
Operating Officer of Grant County, and he will be one of the four directors
joining the Mutual Board of Directors. The other three Marion directors that
will be joining the Muncie board are John M. Dalton, Jon R. Marler and Jerry D.
McVicker.
Banks said, "We believe the transaction will be beneficial to our
shareholders, customers, employees and the communities we serve. Marion and
Muncie complement each other extraordinarily well. The affiliation enhances our
strategy for increasing shareholder value, market expansion, and product
diversification. Marion customers will continue to receive the same high quality
of service they have become accustomed to from the same people that they have
put their trust in through the years."
R. Donn Roberts, President and Chief Executive Officer of Muncie,
summarized the announcement, "This transaction fits our existing strategy
perfectly. In conjunction with our mutual to stock conversion in December 1999,
we had embarked on a series of efforts designed to expand Muncie's retail
franchise. As a combined entity, we will be stronger than either company
individually with an opportunity for further expansion. The transaction enhances
the earnings momentum and capital growth that existed for both of us before the
merger."
Both men observed that the combined company will be well capitalized, with
an equity to asset ratio in excess of 16%. The combined company will continue
the strategy of market expansion while focusing on integrating the products and
services offered by both companies throughout the branch network. In addition to
market expansion, the structure of the transaction
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using the purchase method of accounting will leave intact the ability to enhance
shareholder value through stock repurchase programs.
The merger is expected to be completed before the end of calendar 2000,
subject to regulatory approval and approval by Marion and Muncie shareholders.
Marion Capital Holdings, Inc., headquartered in Marion, Indiana, with 3
branch offices, had $199 million in assets and $129 million in deposits as of
March 31, 2000. Mutual First Financial, Inc., headquartered in Muncie, Indiana,
with 13 branch offices, had $547 million in assets and $379 million in deposits
as of March 31, 2000.
FORWARD LOOKING STATEMENTS
When used in this press release or other public shareholder communications,
or in oral statements made with the approval of an authorized executive officer,
the words or phrases "will likely result," "are expected to," "will continue,"
"is anticipated," "estimate," "project," "significantly" or similar expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Marion and Muncie wish to
caution readers not to place undue reliance on any forward-looking statements,
which speak only as of the date made, and to advise readers that various factors
including regional and national economic conditions, changes in levels of market
interest rates, credit risks of lending activities and competitive and
regulatory factors could affect the combined banking operations' financial
performance and could cause the combined companies' actual results for future
periods to differ materially from those anticipated or projected.
Marion and Muncie do not undertake, and specifically disclaim, any
obligation to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
Muncie will be filing a Registration Statement on Form S-4 concerning the
merger with the Securities and Exchange Commission ("SEC"), which will include
the joint merger proxy statement / prospectus that will be mailed to
shareholders. WE URGE INVESTORS TO READ THESE DOCUMENTS BECAUSE THEY CONTAIN
IMPORTANT INFORMATION. Investors will be able to obtain the documents free of
charge, when filed, at the SEC's website, www.sec.gov. In addition, documents
filed with the SEC by Muncie will be available free of charge from the Secretary
of Muncie at 110 East Charles Street, Muncie, Indiana, 47305, telephone (765)
747-2800. Documents filed with the SEC by Marion will be available free of
charge from the Secretary of Marion at 100 West Third Street, Marion, Indiana,
46952, telephone (765) 664-0556. INVESTORS SHOULD READ THE JOINT MERGER PROXY
STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING A DECISION CONCERNING THE MERGER.
Copies of all recent proxy statements and annual reports are also available free
of charge from the respective companies by contacting the company secretary.
Marion and Muncie and their respective directors and executive officers may
be deemed to be participants in the solicitation of proxies to approve the
Merger. INFORMATION ABOUT THE PARTICIPANTS MAY BE OBTAINED THROUGH THE SEC'S
WEBSITE FROM THE DEFINITIVE PROXY STATEMENT FILED WITH THE SEC ON MAY 24, 2000
WITH RESPECT TO MUNCIE AND THE DEFINITIVE PROXY STATEMENT FILED WITH THE SEC ON
SEPTEMBER 14, 1999 WITH RESPECT TO MARION.
CONTACTS: Mutual First Financial, Inc.
R. Donn Roberts
President & Chief Executive Officer
Phone: (765) 747-2800
Marion Capital Holdings, Inc.
Steven L. Banks
President & Chief Executive Officer
Phone: (765) 664-0556
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================================================================================
MutualFirst Financial, Inc.
&
Marion Capital Holdings, Inc.
SYNOPSIS OF MERGER
JUNE 8, 2000
================================================================================
These investor materials contain forward-looking statements that involve
risk and uncertainty. It should be noted that a variety of factors could cause
the combined company's actual results and experience to differ materially from
the anticipated results or other expectations expressed in the combined
company's forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development, growth projections and results of the combined company's business
include, but are not limited to, the growth of the economy, interest rate
movements, timely development by the combined company of technology enhancements
for its products and operating systems, the impact of competitive products,
services and pricing, customer based requirements, Congressional legislation,
acquisition cost savings and revenue enhancements and similar matters. Readers
of this report are cautioned not to place undue reliance on forward-looking
statements which are subject to influence by the named risk factors and
unanticipated future events. Actual results, accordingly, may differ materially
from management expectations.
<PAGE>
[GRAPHIC: MAP AND DIAGRAM OF BRANCHES OF MARION CAPITAL HOLDINGS, INC. AND
MUTUAL FIRST FINANCIAL, INC.]
<PAGE>
Transaction Benefits
================================================================================
/ / STRATEGIC ALLIANCE:
. Creates a Northeast Indiana franchise with total assets of $740 million
and deposits of $508 million
. Positions "new" franchise to continue growth in NE Indiana to a greater
extent than either company can do individually
. Creates ability to provide strong retail products to a broader customer
base
. Branch systems complement each other with no direct overlap
/ / FINANCIAL:
. Accretive to GAAP & cash earnings per share of both companies
. Maintains strong capital position for future growth
. Purchase accounting provides flexibility to maintain stock repurchases u
Increases liquidity of shares
. Generates pre-tax cost savings of approximately $1.2 million
. Both companies have a diversified asset mix with less reliance on single
family residential loans than traditional thrifts
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Description of Marion (MARN)
================================================================================
. Headquartered in Marion, Indiana, the Company provides various lending,
deposit and other financial services to retail and commercial customers in
Indiana. The Company has 3 branch offices located in Marion and Gas City
Indiana.
. A summary of the bank's balance sheet and earnings performance as of March
31, 2000 is as follows:
(000s)
Total Assets: $ 199,194
Loans, net: 164,735
Securities: 2,972
Deposits: 129,474
Total Equity: 31,612
Equity to Assets: 15.87%
LTM Earnings 2,565
LTM EPS $ 1.82
LTM ROE: 7.85%
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Description of Muncie (MFSF)
================================================================================
. Headquartered in Muncie, Indiana, the bank operates 13 banking locations in
Delaware, Randolph, and Kosciusko counties in Indiana. The bank primarily
originates single family residential and consumer loans in addition to
commercial loans.
. A summary of the bank's balance sheet and earnings performance as of March
31, 2000 is as follows:
(`000s)
Total Assets: $ 547,395
Loans, net: 450,300
Securities: 44,289
Deposits: 378,879
Total Equity: 97,812
Equity to Assets: 17.87%
Earnings (Quarter) (1): 1,508
EPS (Quarter): $ 0.28
ROE (Qtr. Ann.): 6.17%
(1) Represents the first full quarter following their mutual to stock conversion
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STRONG NORTHEAST INDIANA MARKET SHARE
================================================================================
Dollars in thousands
Deposit Data & Market Share Information is as of June 30, 1999
Source: SNL Securities, L.P.
TOTAL MARKET
COUNTY INSTITUTION DEPOSITS SHARE % *
------ ----------- -------- ---------
Delaware MFSF $ 271,944 20.17%
Grant MARN 131,202 19.60
Kosciusko MFSF 80,237 10.84
Randolph MFSF 32,107 10.60
* Reflects deposits of commercial banks and thrifts
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DESCRIPTION OF STRATEGIC ALLIANCE TRANSACTION
================================================================================
EXCHANGE RATIO: Fixed exchange ratio of 1.862 shares of MFSF for each
MARN share. Based on exchange ratio, 2.6 million shares
will be issued to MARN shareholders.
VALUE: The aggregate deal value approximates $27 million.
OWNERSHIP: MFSF 70% / MARN 30%
MANAGEMENT: Chairman & CEO: R. DONN ROBERTS, MUNCIE
Senior VP & Chief Operating Officer of Grant County:
STEVE BANKS, MARION
BOD REPRESENTATION: 7 MFSF members / 4 MARN members
ACCOUNTING /
STOCK PERCENTAGE: Purchase Accounting; 100% Stock
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STRONG BALANCE SHEET COMPOSITION
================================================================================
Estimated March 31, 2000 Pro Forma Balance Sheet
($ in thousands)
Estimated
MFSF MARN Pro Forma
--------------------------------------------------------------------------------
Assets $547,395 $199,194 $741,245
Loans, net 450,300 164,735 615,035
Investments 44,289 2,972 47,261
Deposits 378,879 129,474 508,353
Borrowings 61,558 32,352 93,909
Tangible Capital 96,404 30,988 123,860
Approximate Market
Capitalization (Millions) $63.0 $21.6 $90.4
Tangible Capital /
Assets 17.6% 15.6% 16.7%
Shares Outstanding 5,819,611 1,357,554 8,347,377
================================================================================
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EPS ACCRETION
================================================================================
($ in thousands, except for per share data )
Annualized
Projected
Income
----------
MFSF projected net income $5,900
MARN projected net income $2,300
------
Total projected net income $8,200
Cost Savings, after tax ($1.2 million pre tax) $684
Purchase and other accounting adjustments $27
------
Proforma Net Income $8,911
======
MFSF EPS Accretion 2.5%
MARN EPS Accretion 24.7%
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COST SAVINGS ANALYSIS
================================================================================
($ in thousands)
Non Interest Expense
Salaries & Benefits $473
Data Processing 171
Annual Depreciation Costs 192
Elimination of Goodwill Expense 113
Other 297
------
Total $1,246
======
Estimated Pre-tax Merger and Restructuring Charges of $2.25mm
Note: Purchase accounting adjustments will result in the elimination of the
current goodwill amortization expense.
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