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MutualFirst Financial Announces First Quarter Earnings

MUNCIE, Ind., April 23, 2019 /PRNewswire/ -- MutualFirst Financial, Inc. (MFSF), the holding company of MutualBank (the "Bank"), announced today net income available to common shareholders for the first quarter ended March 31, 2019 was $5.2 million, or $0.60 diluted earnings per common share.  This compares to net income available to common shareholders for the same period in 2018 of $4.0 million, or $0.50 diluted earnings per common share.  The net income for the first quarter ended March 31, 2019 represents an annualized return on average assets of 1.02% and return on average tangible common equity of 11.73% compared to 0.93% and 10.53%, respectively, for the same period of last year.

Other financial highlights for the first quarter of 2019 include:

  • Organic net loan growth in non-residential consumer loans of $10.1 million, or 15.2% on an annualized basis and in commercial loans of $6.3 million, or 3.7% on an annualized basis.
  • Deposit growth of $40.5 million, or 10.7% on an annualized basis.
  • Tangible book value per share increased $1.00 to $21.51 and tangible common equity to total assets increased to 9.10% compared to 8.72% at December 31, 2018.
  • Net interest income increased $2.5 million over the same period in 2018, while margin remained constant, primarily due to the Universal Bancorp acquisition (the "Acquisition").
  • Non-interest income increased $650,000 over the same period in 2018 primarily due to an increase in net gain on sale of mortgages and the Acquisition.
  • Non-interest expense increased $1.6 million over the same period in 2018 primarily due to the Acquisition.

"We are pleased with the start of 2019 and believe the results are indicative of our successful acquisition of Universal in 2018," said David W. Heeter, President and CEO. 

Balance Sheet

Assets increased $14.8 million as of March 31, 2019 compared to December 31, 2018.  The gross loan portfolio increased by $8.2 million, or 2.2% annualized, primarily due to organic loan growth of $10.1 million, or 15.2% of annualized growth in non-residential consumer loans and $6.3 million, or 3.7% of annualized growth in commercial loans.  These increases were partially offset by a reduction in residential loan balances of $8.3 million.  The mix of loans in our portfolio as of March 31, 2019 compared to December 31, 2018 continued to shift toward our desired strategic objective of increasing commercial and consumer loans.  Commercial loans increased to 46.2% of total loans compared to 46.0%, residential loans decreased to 35.4% compared to 36.2% and non-residential consumer loans increased to 18.4% compared to 17.8%. Loans held for sale increased $4.7 million as activity in our mortgage banking division increased in the first quarter of 2019.  Investment securities also increased by $3.1 million primarily as a result of increasing market value due to declining longer-term interest rates.

Deposits increased by $40.5 million, or 10.7% on an annualized basis as of March 31, 2019 compared to December 31, 2018.  The increase was a result of certificates of deposit increasing $24.5 million and core deposits increasing $16.4 million.  As of March 31, 2019, core deposits totaled $1.0 billion, or 67.1% of total deposits and certificates of deposit totaled $513 million, or 32.9% of total deposits.   This is compared to a mix of core deposits of 67.8% and certificates of deposit of 32.2% as of December 31, 2018.  The increase in deposits helped reduce FHLB advances by $36.3 million.

Mr. Heeter commented, "Our loan mix continues to shift toward our strategic objectives.  We believe our new markets provide us opportunities to organically grow our loan portfolio within our strategic plan.  Deposit growth in the first quarter was seasonally strong.  Our core deposit mix should continue to remain fairly constant as we fund our loan growth."

Allowance for loan losses increased to $13.4 million as of March 31, 2019 compared to $13.3 million as of December 31, 2018.  The allowance for loan losses to non-performing loans as of March 31, 2019 was 206% compared to 146% as of December 31, 2018.  The allowance for loan losses to total loans as of March 31, 2019 remained the same at 0.89% compared to December 31, 2018.  Non-performing loans to total loans at March 31, 2019 were 0.43% compared to 0.61% at December 31, 2018.  Non-performing assets to total assets were 0.40% at March 31, 2019 compared to 0.54% at December 31, 2018.

Stockholders' equity was $211.2 million at March 31, 2019, an increase of $8.8 million from December 31, 2018. This increase included net income available to common shareholders of $5.2 million and an increase in accumulated other comprehensive income of $5.1 million, due to the market value changes in the investment portfolio discussed above.  These increases were partially offset by common stock cash dividends paid of $1.7 million during the first quarter of 2019.  The Company's tangible book value per common share as of March 31, 2019 increased to $21.51 compared to $20.51 as of December 31, 2018 and the tangible common equity ratio increased to 9.10% as of March 31, 2019 compared to 8.72% as of December 31, 2018.

Income Statement

Net interest income before the provision for loan losses increased $2.5 million for the quarter ended March 31, 2019 compared to the same period in 2018.  The increase in net interest income was a result of an increase of $292.1 million in average interest earning assets, due to the Acquisition in the first quarter 2018 and organic loan growth.  Net interest margin was 3.35%, which was the same in the first quarter of 2019 as in the first quarter of 2018.  The tax equivalent net interest margin increased one basis point to 3.43% as of the first quarter of 2019 compared to the first quarter of 2018.  The net interest margin in the first quarter of 2019 was aided by approximately three basis points of accretion from purchase accounting related to the acquisition. On a linked-quarter basis, net interest income decreased $452,000 primarily due to a decline in accretion from purchase accounting and a reduction in days in the quarter compared to the fourth quarter of 2018.  Net interest margin declined twelve basis points on a linked-quarter due to a six basis point decline in accretion from purchase accounting and approximately six basis point decline due to two less days in the first quarter of 2019 compared to the fourth quarter of 2018. 

Provision for loan losses in the first quarter of 2019 was $475,000, a $25,000 increase from last year's comparable period.  Provision for loan losses was calculated based on management's ongoing evaluation of the adequacy of the allowance for loan losses, which is partially attributable to an increasing loan portfolio and net charge offs of $392,000, or 0.10% of total average loans on an annualized basis in the first quarter of 2019 compared to net charge offs of $300,000, or 0.09% of total average loans on an annualized basis, in the first quarter of 2018.   

Non-interest income for the first quarter of 2019 was $5.1 million, an increase of $650,000 compared to the first quarter of 2018.  Increases in non-interest income included an increase of $395,000 on gain on sale of loans due to a 31% increase in the dollar amount of sold mortgages and a $244,000 increase in service fee income on deposit accounts aided by increases in interchange fee income along with increases due to the Acquisition. An increase on net gain on sale of investments of $290,000 was primarily due to an opportunistic restructure of a portion of the investment portfolio.  These increases were partially offset by a decrease in other income due to $325,000 of death benefits received on bank-owned life insurance policies in the first quarter of 2018 which was not repeated in the first quarter of 2019.  On a linked-quarter basis, non-interest income decreased $211,000 primarily due to a decline of $582,000 in service charges on deposit accounts due to seasonality of interchange income.  This decline was partially offset by an increase of $306,000 in net gain on sale of investments and an increase of $128,000 in net gain on sale of loans.

Non-interest expense increased $1.6 million when comparing the first quarter of 2019 with the same period in 2018.  The increase was primarily due to the Acquisition, which closed on February 28, 2018.  On a linked-quarter basis, non-interest expense decreased $460,000 primarily due to a decrease in salaries and employee benefits of $335,000 primarily as a result of a reduction in health insurance expense.

The effective tax rate for the first quarter of 2019 was 14.0% compared to 12.7% in the same quarter of 2018. The increase was due to an increase in taxable income compared to tax free income.

"2019 has started off well and we are pleased with the results from our acquisition of Universal in 2018. We believe that the enhancements made in 2018 will continue our performance momentum with our larger footprint," Mr. Heeter concluded.  

MutualFirst Financial, Inc. is the parent company of MutualBank, an Indiana-based financial institution since 1889. MutualBank has thirty-nine full-service retail financial centers throughout Indiana. MutualBank has two offices located in Fishers and Crawfordsville, Indiana specializing in wealth management and trust services and a loan origination office in New Buffalo, Michigan. MutualBank also operates a wholly owned subsidiary named Summit Mortgage which operates out of Fort Wayne, Indiana. MutualBank provides a full range of financial services including commercial and business banking, personal banking, wealth management, trust services, investments and internet banking services. The Company's stock is traded on the NASDAQ Global Market under the symbol "MFSF". Additional information can be found online at www.bankwithmutual.com.

Statements contained in this release, which are not historical facts, are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time.

MutualFirst Financial, Inc. Selected Financials










(Audited)



March 31,

December 31,

March 31,

Balance Sheet (Unaudited):

2019

2018

2018


(000)

(000)

(000)

Assets




Cash and cash equivalents

$            31,350

$         33,414

$        41,069

Interest-bearing time deposits

4,311

4,239

4,627

Investment securities - AFS

373,937

370,875

354,145

Loans held for sale

8,702

3,987

3,686

Loans, gross

1,504,093

1,495,943

1,449,426

Allowance for loan losses

(13,364)

(13,281)

(12,537)

Net loans

1,490,729

1,482,662

1,436,889

Premises and equipment, net

28,580

25,641

26,208

FHLB of Indianapolis stock

13,115

13,034

12,820

Deferred tax asset, net

6,674

7,744

10,665

Cash value of life insurance

60,462

60,160

59,209

Other real estate owned and repossessed assets

1,752

2,013

1,753

Goodwill

22,310

22,310

23,869

Core deposit and other intangibles

3,356

3,569

4,509

Other assets

18,863

19,665

16,656

Total assets

$       2,064,141

$     2,049,313

$    1,996,105





Liabilities and Stockholders' Equity




Deposits

$       1,559,771

$     1,519,225

$    1,540,452

FHLB advances

256,236

292,497

230,546

Other borrowings

21,223

17,988

18,110

Other liabilities

15,747

17,240

15,935

Stockholders' equity

211,164

202,363

191,062

Total liabilities and stockholders' equity

$       2,064,141

$     2,049,313

$    1,996,105





 


Three Months

Three Months

Three Months


Ended

Ended

Ended


March 31,

December 31,

March 31,

Income Statement (Unaudited):

2019

2018

2018


(000)

(000)

(000)





Total interest and dividend income

$            21,302

$         21,489

$        16,748

Total interest expense

5,260

4,995

3,164





   Net interest income

16,042

16,494

13,584

Provision for loan losses

475

600

450

Net interest income after provision 




  for loan losses

15,567

15,894

13,134





  Non-interest income




Service fee income

1,808

2,390

1,564

Net realized gain on sales of AFS securities

444

138

154

Commissions

1,196

1,114

1,262

Net gain on sale of loans

1,030

902

635

Net servicing fees

149

158

150

Increase in cash value of life insurance

302

315

289

Net gain (loss) on sale of other real estate and repossessed assets

(29)

(9)

(68)

Other income

185

288

449

Total non-interest income

5,085

5,296

4,435





  Non-interest expense




Salaries and employee benefits

8,560

8,895

7,289

Net occupancy expenses

1,044

986

897

Equipment expenses

647

625

556

Data processing fees

651

686

593

Advertising and promotion

329

331

360

ATM and debit card expense

562

582

471

Deposit insurance

207

207

257

Professional fees

408

463

782

Software subscriptions and maintenance

769

732

594

Other real estate and repossessed assets

53

49

45

Intangible amortization

214

249

163

Other expenses

1,115

1,214

970

Total non-interest expense

14,559

15,019

12,977





Income before income taxes

6,093

6,171

4,592

Income tax provision

855

881

585

Net income available to common shareholders

$              5,238

$           5,290

$          4,007





Pre-tax pre-provision earnings (1)

$              6,568

$           6,771

$          5,042


 

Average Balances,  Net Interest Income, Yield Earned and Rates Paid





Three



Three




months ended



months ended




3/31/2019



3/31/2018



Average

Interest

Average

Average

Interest

Average


Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/


Balance

Paid

Rate

Balance

Paid

Rate


(000)

(000)

(annualized)

(000)

(000)

(annualized)

Interest-earning Assets:







 Interest-bearing deposits

$            24,688

$               88

1.43%

$      21,686

$               67

1.24%

 Mortgage-backed securities:







Available-for-sale

218,076

1,523

2.79

175,951

1,127

2.56

 Investment securities:







Available-for-sale

152,592

1,243

3.26

130,858

1,039

3.18

 Loans receivable

1,504,429

18,270

4.86

1,280,521

14,325

4.47

Stock in FHLB of Indianapolis

13,088

178

5.44

11,765

190

6.46

Total interest-earning assets (2)

1,912,873

21,302

4.45

1,620,781

16,748

4.13

Non-interest earning assets, net of allowance 







  for loan losses and unrealized gain/loss

140,226



108,909



     Total assets

$       2,053,099



$  1,729,690

















Interest-Bearing Liabilities:







 Demand and NOW accounts

$          399,719

784

0.78

$    344,426

437

0.51

 Savings deposits

184,481

5

0.01

157,519

5

0.01

 Money market accounts

181,866

330

0.73

183,643

220

0.48

 Certificate accounts

508,575

2,454

1.93

405,893

1,445

1.42

 Total deposits

1,274,641

3,573

1.12

1,091,481

2,107

0.77

 Borrowings

287,265

1,687

2.35

234,946

1,057

1.80

  Total interest-bearing liabilities

1,561,906

5,260

1.35

1,326,427

3,164

0.95

Non-interest bearing deposit accounts

267,668



223,763



Other liabilities

19,080



16,047



  Total liabilities

1,848,654



1,566,237



Stockholders' equity

204,445



163,453



    Total liabilities and stockholders' equity

$       2,053,099



$  1,729,690










Net interest earning assets

$          350,967



$    294,354










Net interest income


$         16,042



$         13,584









Net interest rate spread (4)



3.11%



3.18%








Net interest margin (4)



3.35%



3.35%








Net interest margin, tax equivalent (3)(4)



3.43%



3.42%








Average interest-earning assets to







  average interest-bearing liabilities



122.47%



122.19%






















 


Three Months

Three Months

Three Months


Ended

Ended

Ended


March 31,

December 31,

March 31,

  Selected Financial Ratios and Other Financial Data (Unaudited):

2019

2018

2018













Share and per share data:




 Average common shares outstanding:




   Basic

8,621,406

8,590,729

7,810,916

   Diluted

8,745,821

8,732,290

7,965,893

 Per common share:




   Basic earnings

$               0.61

$             0.62

$            0.51

   Diluted earnings 

$               0.60

$             0.61

$            0.50

   Dividends

$               0.20

$             0.20

$            0.18





Dividend payout ratio

33.33%

32.79%

36.00%





Performance Ratios:




   Return on average assets (ratio of net




      income to average total assets)(4)

1.02%

1.04%

0.93%

   Return on average tangible common equity (ratio of net 




      income to average tangible common equity)(4)

11.73%

12.56%

10.53%

   Interest rate spread information:




    Average during the period(4)

3.11%

3.22%

3.18%





    Net interest margin(4)(5)

3.35%

3.47%

3.35%





Efficiency Ratio

68.91%

68.93%

72.02%





    Ratio of average interest-earning




     assets to average interest-bearing




     liabilities

122.47%

124.01%

122.19%





Allowance for loan losses:




       Balance beginning of period

$            13,281

$         13,009

$        12,387

        Net charge-offs (recoveries):




Real Estate:




Commercial

51

40

53

Commercial construction and development

0

0

0

Consumer closed end first mortgage

40

23

12

Consumer open end and junior liens

0

0

0

Total real estate loans

91

63

65

Other loans:




Auto

88

5

(10)

Boat/RV

171

212

131

Other

42

48

30

Commercial and industrial

0

0

84

Total other

301

265

235





Net charge-offs (recoveries)

392

328

300

Provision for loan losses

475

600

450

Balance end of period

$            13,364

$         13,281

$        12,537





    Net loan charge-offs to average loans (4)

0.10%

0.09%

0.09%














March 31,

December 31,

March 31,


2019

2018

2018





Total shares outstanding

8,624,462

8,603,462

8,574,924

Tangible book value per common share

$              21.51

$           20.51

$          18.97

Tangible common equity to tangible assets

9.10%

8.72%

8.27%





 Nonperforming assets (000's)




Non-accrual loans




Real Estate:




Commercial

$              1,281

$           4,782

$          1,415

Commercial construction and development

-

62

17

Consumer closed end first mortgage

3,759

2,777

3,633

Consumer open end and junior liens

212

273

223

Total real estate loans

5,252

7,894

5,288

Other loans:




Auto

64

88

11

Boat/RV

646

470

367

Other

44

46

21

Commercial and industrial

267

91

208

Total other

1,021

695

607

Total non-accrual loans

6,273

8,589

5,895

Accruing loans past due 90 days or more

206

517

38

Total nonperforming loans

6,479

9,106

5,933

    Real estate owned

1,141

1,223

1,390

    Other repossessed assets

611

790

363

 Total nonperforming assets

$              8,231

$         11,119

$          7,686





Performing restructured loans (6)

$              1,087

$           2,571

$             913





Asset Quality Ratios:




Non-performing assets to total assets 

0.40%

0.54%

0.39%

Non-performing loans to total loans

0.43%

0.61%

0.41%

Allowance for loan losses to non-performing loans

206%

146%

211%

Allowance for loan losses to loans receivable

0.89%

0.89%

0.86%





 


Three Months

Three Months

Three Months




Ended

Ended

Ended




March 31,

December 31,

March 31,



Non-GAAP Measurements (7)

2019

2018

2018









Total stockholders' equity (GAAP)

$          211,164

$       202,363

$      191,062



Less: Intangible assets

25,667

25,879

28,378



Tangible common equity (non-GAAP)

$          185,497

$       176,484

$      162,684









Total assets (GAAP)

$       2,064,141

$     2,049,313

$    1,996,105



Less: Intangible assets

25,667

25,879

28,378



Tangible assets (non-GAAP)

$       2,038,474

$     2,023,434

$    1,967,727









Tangible common equity to tangible assets (non-GAAP)

9.10%

8.72%

8.27%









Book value per common share (GAAP)

$              24.48

$           23.52

$          22.28



Less: Effect of intangible assets

2.98

3.01

3.31



Tangible book value per common share

$              21.51

$           20.51

$          18.97









Return on average stockholders' equity (GAAP)

10.25%

10.87%

9.81%



Add: Effect of intangible assets

1.48%

1.69%

0.72%



Return on average tangible common equity (non-GAAP)

11.73%

12.56%

10.53%









Total tax free interest income (GAAP)






Loans receivable

$                102

$              106

$             100



Investment securities

1,209

1,226

944



Total tax free interest income

$              1,311

$           1,332

$          1,044



Total tax free interest income, gross (at 21%)

$              1,659

$           1,686

$          1,322









Net interest margin, tax equivalent (non-GAAP)






Net interest income (GAAP)

$            16,042

$         16,494

$        13,584



Add: Tax effect tax free interest income (3)

348

354

278



Net interest income (non-GAAP)

16,390

16,848

13,862



Divided by: Average interest-earning assets

1,912,873

1,898,949

1,620,871



Net interest margin, tax equivalent

3.43%

3.55%

3.42%









One-time merger related expenses






Non-tax deductible

$                   -

$                -

$             220



Tax deductible

-

79

385



Total one-time merger related expenses

$                   -

$               79

$             605



Subtract tax benefit

-

17

81



Net one-time merger related expenses

$                   -

$               62

$             524



Net income (GAAP)

-

5,290

4,007



Net income with out one-time merger expenses (non-GAAP)

$                   -

$           5,352

$          4,531









Adjusted diluted earnings per share






Net income without one-time merger expenses (non-GAAP)

$                   -

$           5,352

$          4,531



Average diluted shares

-

8,732,290

7,965,893



Adjusted diluted earnings per share (non-GAAP)

$                   -

$             0.61

$            0.57









Adjusted return on assets






Net income with out one-time merger expenses (non-GAAP)

$                   -

$           5,352

$          4,531



Average assets

-

2,028,923

1,729,690



Adjusted return on average assets (non-GAAP)

-

1.06%

1.05%









Adjusted return on tangible common equity






Net income with out one-time merger expenses (non-GAAP)

$                   -

$           5,352

$          4,531



Average tangible common equity 

-

168,443

152,276



Adjusted return on average tangible common equity (non-GAAP)

-

12.71%

11.90%









Ratio Summary:






Return on average equity

10.25%

10.87%

9.81%



Return on average tangible common equity

11.73%

12.56%

10.53%



Return on average assets

1.02%

1.04%

0.93%



Tangible common equity to tangible assets

9.10%

8.72%

8.27%



Net interest margin, tax equivalent

3.43%

3.55%

3.42%









(1)   Pre-tax pre-provision income is calculated by taking net income available to common shareholders and adding income tax provision and provision for loan losses.







(2)   Calculated net of deferred loan fees, loan discounts, loans in process and loss reserves.










(3)   Tax equivalent margin is calculated by taking non-taxable interest and grossing up by 21% applicable tax rate.









(4)   Ratios for the three month periods have been annualized.












(5)   Net interest income divided by average interest earning assets.












(6)   Performing restructured loans are excluded from non-performing ratios.  Restructured loans that are on non-accrual are in the non-accrual loan categories.







(7)   This earnings release and selected financials contain GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding MutualFirst's results of operations or financial position. This table shows non-GAAP financial measures and  the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure.








Cision

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