MUNCIE, Ind., April 20, 2012 /PRNewswire/ -- MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of MutualBank (the "Bank"), announced today net income available to common shareholders for the first quarter ended March 31, 2012 of $1.1 million, or $.15 for basic and diluted earnings per common share. This compared to a net loss for common shareholders during the same period in 2011 of $1.1 million, or a loss of $.17 for basic and diluted earnings per common share. Annualized return on assets was .40% and return on average tangible common equity was 4.17% for the first quarter of 2012 compared to a negative .19% and a negative 4.86% respectively, for the same period of last year.

"We are pleased to report increased earnings in the first quarter of this year," said David W. Heeter, President and CEO. "It appears the economy is starting to improve and hopefully the worst of the last economic cycle is behind us. This should allow us to cautiously concentrate on the future rather than managing the challenges that have continued to depress our industry."

Financial highlights for the first quarter ended March 31, 2012 included:

• Gross loan balances increased $16.3 million in the first quarter of 2012.
• Deposits increased $23.5 million or 2.0% while borrowings decreased $14.6 million since December 31, 2011.  
• Allowance for loan losses to non-performing loans as of March 31, 2012 was 56.21% compared to 52.81% as of December 31, 2011.  Allowance for loan losses to loans receivable was 1.78% as of March 31, 2012 compared to 1.83% as of December 31, 2011.
• Non-accrual loans decreased $1.4 million compared to December 31, 2011.
• Net charge offs on an annualized basis were .67% in the first quarter 2012 compared to 1.94% in the same period in 2011.
• Net interest margin was 3.03% for the first quarter 2012 compared to 3.14% for the first quarter of 2011.
• Provision for loan losses decreased $2.9 million in the first quarter of 2012 compared to the first quarter of 2011.
• Non-interest income for the quarter ended March 31, 2012 increased $281,000 compared to the first quarter 2011 due to an increase in service fee income, commission income, and gains on sale of investments. 
• Non-interest expense for the first quarter 2012 was $607,000 less than the first quarter 2011.  The decrease is primarily due to lower salary and benefit expense, occupancy expense, and deposit insurance expense. 
• Pretax preprovision earnings increased $531,000 in the first quarter of 2012 compared to the same period in 2011.

Balance Sheet

Assets increased $12.0 million as of March 31, 2012 compared to December 31, 2011, primarily due to the increase in gross loans by $16.3 million. The loan growth was primarily in the residential mortgage loan portfolio as mortgage refinances continued to occur at a rapid pace. The investment portfolio increased by $25.2 million in the first quarter of 2012 primarily in mortgage-backed securities. These increases were partially offset by cash and cash equivalents decreasing by $31.1 million.

Deposits increased by $23.5 million as the Bank continues to see increased activity in all of its markets for core deposit relationships. The increase in deposits has been in core transactional accounts which increased $43.6 million, partially offset by decreases in certificates of deposit of $20.1 million in the first quarter of 2012. Core transactional deposits increased to 48% of the Bank's total deposits as of March 31, 2012 compared to 45% as of December 31, 2011. The increase in deposits allowed the Bank to retire higher rate maturing debt, mainly FHLB advances, of $14.4 million in the first quarter of 2012 and fund the current loan growth.

Allowance for loan losses decreased by $181,000 to $16.6 million as of March 31, 2012. Net charge offs for the first quarter of 2012 were $1.5 million, or .67% of loans on an annualized basis, compared to $4.8 million, or 1.94% of loans on an annualized basis, for the first quarter of 2011. Classified loans also decreased $6.8 million, or 12.3% in the first quarter of 2012. The allowance for loan losses to non-performing loans as of March 31, 2012 increased to 56.21% compared to 52.81% as of December 31, 2011. The allowance for loan losses to total loans as of March 31, 2012 was 1.78%, a slight decrease from 1.83% as of March 31, 2011.

Stockholders' equity was $134.6 million at March 31, 2012, an increase of $2.0 million from December 31, 2011. The increase was a result of net income of $1.4 million and an increase in unrealized gain of $1.2 million. These increases were partially offset by dividend payments of $419,000 to common shareholders and $362,000 to preferred shareholders. The Company's tangible book value per share as of March 31, 2012 increased to $14.68 compared to $14.36 as of December 31, 2011 and tangible common equity ratio was 7.14% as of March 31, 2012 compared to 7.05% as of December 31, 2011. The Bank's risk-based capital ratio was well in excess of "well-capitalized" levels as defined by all regulatory standards as of March 31, 2012.

Heeter commented, "We were encouraged by the increase in loan demand we experienced in this quarter."

Income Statement

Net interest income before the provision for loan losses decreased $446,000 for the quarter ended March 31, 2012 compared to the same period in 2011. The decrease was a result of the decline in the net interest margin from 3.14% in the first quarter of 2011 to 3.03% in the first quarter of 2012 and the decline in average earning assets of $10.1 million. On a linked quarter basis, net interest income before the provision for loan losses decreased $186,000 as net interest margin decreased by 6 basis points; however average earning assets increased by $4.0 million.

The provision for loan losses for the first quarter of 2012 decreased to $1.4 million compared to $4.2 million during last year's comparable period. The decrease was due to managements ongoing evaluation of the adequacy of the allowance for loan losses and was impacted by a decrease in net charge offs of $1.5 million in the first quarter of 2012 compared to net charge offs of $4.8 million in the first quarter of 2011. Non-performing loans to total loans at March 31, 2012 were 3.17% compared to 3.47% at December 31, 2011. This decrease in non-performing loans was primarily in our commercial loan portfolio. Non-performing assets to total assets were 2.62% at March 31, 2012 compared to 2.75% at December 31, 2011. "We believe that our allowance for loan losses adequately reflects the risk in our portfolio as we move forward and the current risk in the economy," Heeter added.

Non-interest income for the first quarter of 2012 was $2.9 million an increase of $281,000 compared to the first quarter of 2011. Non-interest income increased as service fees on deposits accounts increased primarily due to an increase in our core deposit relationships. Wealth management and retail brokerage services increased commissions over the first quarter of 2012 compared to 2011. Gain on sale of investments also increased as a result of selling one security that appeared to be prepaying faster than an acceptable level to maintain in the investment portfolio. These increases were partially offset by an increase in losses on sale of real estate owned and repossessed assets due to a reduced valuation on an asset expected to be sold in the second quarter of 2012 and a decrease in equity value of limited partnerships due to not having one-time income in the first quarter of 2011 repeated in the 2012 first quarter. On a linked quarter basis, non-interest income declined $2.5 million primarily due to a decrease in gain on sale of loans due to a large loan sale in the fourth quarter of 2011 not repeated in the first quarter of 2012, an increase in losses on real estate owned and repossessed assets as discussed earlier, and decreases in service fee on deposit accounts due to seasonality.

Non-interest expense decreased $607,000 when comparing the first quarter of 2012 with that of 2011. This decrease was a result of a reduction in salaries and benefits of $180,000 and occupancy expense of $259,000. The reduction in salaries and benefits was a result of the lower compensation expense and reduced expense on health insurance. The reduction in occupancy expense was a result of operating one less financial center in the first quarter of 2012 compared to the first quarter of 2011 and the mild winter in the Midwest. Another decrease included a $194,000 reduction in FDIC deposit insurance primarily due to the change the FDIC made on the assessment base. On a linked quarter basis, non-interest expense decreased $584,000.

Heeter concluded, "We continue to strive to increase shareholder value through improved earnings, improved credit quality and sufficient levels of capital."

MutualFirst Financial, Inc. and MutualBank, an Indiana-based financial institution, has thirty-two full-service retail financial centers in Delaware, Elkhart, Grant, Kosciusko, Randolph, St. Joseph and Wabash Counties in Indiana. MutualBank also has two Wealth Management and Trust offices located in Carmel and Crawfordsville, Indiana and a loan origination office in New Buffalo, Michigan. MutualBank is a leading residential lender in each of the market areas it serves, and provides a full range of financial services including wealth management and trust services and Internet banking services. The Company's stock is traded on the NASDAQ National Market under the symbol "MFSF" and can be found on the internet 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 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.

CONTACT: Chris Cook, Senior Vice President, Treasurer and CFO of MutualFirst Financial, Inc., +1-765-747-2945