Announcing Third Quarter 2013 Earnings / MutualBank

Business & Personal Checking Accounts – MutualBank

 

Announcing Third Quarter 2013 Earnings

Published Tuesday, October 22, 2013 by Chris Cook, Senior Vice President and CFO

Muncie, Indiana - MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of MutualBank (the “Bank”), announced today net income to common shareholders for the third quarter ended September 30, 2013 increased to $2.2 million, or $.31 for basic earnings per common share and $.30 for diluted earnings per common share.  This compared to net income available to common shareholders for the same period in 2012 of $1.8 million, or $.26 for basic and diluted earnings per common share. Annualized return on assets was .71% and return on average tangible common equity was 8.17% for the third quarter of 2013 compared to .59% and 6.83% respectively, for the same period of last year. 

Net income available to common shareholders for the nine months ended September 30, 2013 increased to $5.6 million, or $.80 for basic earnings per common share and $.78 for diluted earnings per common share compared to net income available to common shareholders of $4.2 million, or $.60 for basic earnings per common share and $.59 for diluted earnings per common share for the nine months ended September 30, 2012.  Annualized return on assets was .62% and return on average tangible common equity was 7.00% for the nine months ended of 2013 compared to .48% and 5.31% respectively, for the same period of last year.

Other financial highlights for the third quarter ended September 30, 2013 included:

  • Gross loan balances increased by $4.7 million in the third quarter of 2013.
  • Deposits decreased $4.7 million in the third quarter of 2013.
  • Asset quality continues to improve, as non-performing loans to total loans were 1.34% as of September 30, 2013 compared to 1.94% as of June 30, 2013 and non-performing assets to total assets were 1.44% as of September 30, 2013 compared to 1.77% as of June 30, 2013.
  • Classified loans decreased approximately 22% in the third quarter of 2013 and 44% since December 31, 2012.
  • Foreclosed real estate and other repossessed assets increased $1.0 million as of September 30, 2013 compared to June 30, 2013 and decreased $637,000 compared to December 31, 2012.
  • Net charge offs on an annualized basis were .82% in the third quarter 2013, primarily due to a charge off of $1.2 million on a previously identified impaired loan, compared to .34% in the second quarter of 2013.   Without the one large charge off, net charge offs would have been .33%.
  • Tangible common equity to total assets is 7.78% and tangible book value per share is $15.36 as of September 30, 2013.
  • Net interest margin was 3.17% for the third quarter 2013 compared to 3.10% in the second quarter 2013.
  • Non-interest expense decreased on a comparative and linked quarter basis by $933,000 and $702,000, respectively.

“We are pleased with this quarter’s earnings and the hard work that continues to improve asset quality.” said David W. Heeter, President and CEO. 

Balance Sheet

Assets decreased $17.5 million as of September 30, 2013 compared to December 31, 2012, primarily due to the decrease in investment securities of $6.7 million and a decrease in gross loans of $6.6 million.  The decrease in the gross loan portfolio was primarily due to a decline in one-to four- family mortgage loans of $12.7 million and a decline in our commercial portfolio of $3.0 million, partially offset by an increase in consumer loans of $9.1 million.  In the third quarter of 2013, gross loans increased $4.7 million as consumer loans increased by $7.4 million, partially offset by a decline in one-to four- family mortgage loans of $1.7 million and a decline in commercial loans of $1.1 million.  Mortgage loans held for sale decreased by $4.1 million, since December 31, 2012, as refinances have slowed in the last few months.  The Bank has been selling most fixed rate loans originated in 2013 to mitigate interest rate risk and mortgage loans sold during the first nine months of 2013 totaled $59.4 million compared to $34.7 million in the first nine months of 2012.

Deposits decreased by $34.3 million in the first nine months of 2013.  The decrease in deposits has been primarily in certificates of deposit which decreased $71.2 million while core transactional deposits increased $36.9 million in the first nine months of 2013. Core transactional deposits increased to 56% of the Bank’s total deposits as of September 30, 2013 compared to 51% as of December 31, 2012.

Allowance for loan losses was $14.5 million as of September 30, 2013 compared to $16.0 million as of December 31, 2012.  Net charge offs in the third quarter were $2.0 million, or .82% of total loans on an annualized basis and for the first nine months of 2013 were $3.8 million, or .52% of total loans on an annualized basis.  One loan, for which a specific allowance had been allocated, was charged off $1.2 million in the quarter in preparation of its migration to real estate owned in the fourth quarter of 2013.  The allowance for loan losses to non-performing loans as of September 30, 2013 was 109.9% compared to 83.2% as of June 30, 2013 and 67.7% as of December 31, 2012.  The allowance for loan losses to total loans as of September 30, 2013 was 1.48% compared to 1.61% as of June 30, 2013 and 1.63% as of December 31, 2012.  Heeter commented, “We are pleased with the continued improvement in asset quality and we believe are reserves our adequate for the risk inherent in our balance sheet.”

Stockholders’ equity was $132.6 million at September 30, 2013, a decrease of $6.9 million from December 31, 2012. The decrease was due primarily to a redemption of $7.2 million of preferred stock held by the United States Treasury as part of the Small Business Lending Fund (SBLF) in the second quarter of 2013 and a decline in other comprehensive income of $4.8 million, primarily due to changes in market rates and a reduction in unrealized gains on the investment portfolio.  Other declines resulted from dividend payments of $1.3 million to common shareholders and $904,000 to preferred shareholders.  These declines were partially offset by net income of $6.6 million. The Company’s tangible book value per share as of September 30, 2013 increased to $15.36 compared to $15.33 as of December 31, 2012 and its tangible common equity ratio increased to 7.78% as of September 30, 2013 compared to 7.62% as of December 31, 2012.  MFSF and the Bank’s risk-based capital ratios were well in excess of “well-capitalized” levels as defined by all regulatory standards as of September 30, 2013. Heeter added, “Increased earnings and improving asset quality over the past few quarters have allowed for organic capital growth and will provide us options in redeeming additional portions of SBLF as we did in the second quarter.”

Income Statement

 

Net interest income before the provision for loan losses decreased $75,000 for the quarter ended September 30, 2013 compared to the same period in 2012.  The decrease was a result of a $58.6 million decline in average earning assets, mostly offset by an increase of 12 basis points in the net interest margin that increased to 3.17%.  The decline in average earning assets was primarily due to a decline of $88.3 million in the investment portfolio, partially offset by a $14.3 million increase in the loan portfolio.  On a linked quarter basis, net interest income before the provision for loan losses increased $220,000 as net interest margin increased by 7 basis points and average earnings asset increased by $794,000. 

Net interest income before the provision for loan losses decreased $295,000 for the first nine months of 2013 compared to the same period in 2012.  The decrease was a result of a $41.2 million decline in average earnings assets, partially offset by the net interest margin increasing from 3.05% in the first nine months of 2012 to 3.11% in the first nine months of 2013.

Heeter commented, “Our continued diligent approach to balance sheet management has increased our net interest margin in a very tough interest rate environment.”

 

The provision for loan losses for the third quarter of 2013 decreased to $750,000 compared to $1.5 million during last year’s comparable period.  The decrease was due to management’s ongoing evaluation of the adequacy of the allowance for loan losses, which was partially attributable to improving credit quality. Non-performing loans to total loans at September 30, 2013 was 1.34% compared to 2.48% at September 30, 2012.  Non-performing assets to total assets was 1.44% at September 30, 2013 compared to 2.08% at September 30, 2012. 

The provision for loan losses for the first nine months of 2013 decreased to $2.3 million compared to $4.7 million during last year’s comparable period.  The decrease was primarily due to a decline in net charge offs and improving asset quality.  Non-performing loans to total loans at September 30, 2013 were 1.34% compared to 2.40% at December 31, 2012.  This decrease in non-performing loans was primarily in one-to four-family mortgage loans and commercial real estate loans.

Non-interest income for the third quarter of 2013 was $3.3 million, a decrease of $1.1 million compared to the third quarter of 2012.  Decreases in non-interest income include declines in service fee income on deposit accounts of $197,000, which is primarily due to declining overdraft income, and in net gain on sale of investments of $642,000.  Gain on loan sales declined $457,000 primarily due to increasing rates, which reduced the gains on the loans held for sale at the beginning of the quarter.  This decline was partially offset by a recovery of the valuation in mortgage servicing rights of $100,000 due to the increase in market rates and a reduction in prepayments on serviced mortgage loans.  Increases in commission income of $182,000 partially offset the declines mentioned above.  On a linked quarter basis, non-interest income decreased $185,000, primarily due to a $356,000 reduction in a recovery of a valuation on mortgage servicing rights, partially offset by increases in gain on sale of investments and service fee income on transaction accounts.

 

Non-interest income for the first nine months of 2013 was $10.4 million, a decrease of $644,000 compared to the first nine months of 2012.  The decrease was primarily due to a reduction of $740,000 in gain on sale of investments, a reduction of $667,000 in service fee income, and a reduction of $734,000 on gain on sale of loans.  The decreases were partially offset by increases of $556,000 of recovery on valuations on mortgage servicing rights, decreases on losses of sale of repossessed assets of $470,000 and increases of $282,000 on commission income.  

 

Non-interest expense decreased $933,000 when comparing the third quarter of 2013 with the same period in 2012.  Occupancy and equipment declined $360,000 in the third quarter primarily due to property tax refunds and reductions after an assessment of all bank-owned properties.  Professional fees have reduced $102,000 primarily due to improving asset quality and a reduction in investment management fees.  Other declines in expenses were related to repossessed asset expense of $67,000, deposit insurance of $61,000 and core deposit intangible amortization of $43,000.  On a linked quarter basis, non-interest expense decreased $702,000 primarily due to decreased occupancy and equipment expense of $268,000 as described above and decreased salaries and employee benefits of $249,000 primarily due to reduced expense on the self-funded health insurance plan.

Non-interest expense decreased $645,000 when comparing the first nine months of 2013 with the same period in 2012.  Non-interest expense declines were a result of $215,000 in professional fees, $178,000 in occupancy and equipment expense and $162,000 in repossessed asset expense for the reasons stated earlier.  Other declines were in core deposit intangible expense of $137,000 and a $119,000 reduction in marketing expenses.  These declines were partially offset by salaries and benefits increasing by $455,000, primarily due to increases in employee benefit costs compared to the same time period in 2012.

The effective tax rate for the third quarter of 2013 was 30.6% compared to 29.6% in the third quarter of 2012.  The increase was due to an increase in taxable income and a change in the State of Indiana tax code.  The State of Indiana will lower the Financial Institution Tax over the next four years from 8.5% to 6.5%.  During this change, the Bank will be required to calculate the deferred tax asset at the lower phased in rate, which will increase our tax expense over this time period.

Heeter concluded, “We continue to be encouraged by our results and the progress being made.   Continuing to enhance shareholder value is our main priority while balancing the risks that financial institutions currently operate under.”

MutualFirst Financial, Inc. and MutualBank, an Indiana-based financial institution, has thirty-one 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 commercial lending, 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.

 

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Personal Social Media Account Security

For many of us, social media has become a part of our everyday lives and helps us conveniently keep tabs on the people and topics we care most about.

Recently however, there has been an increase of social media account take overs by cybercriminals. As stated in the media, one contributing factor in some of the social media account takeovers has been the use of weak passwords.


Tips for creating a stronger password:


  • Passwords should typically:
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    • contain at least 1 number
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    • contain both upper and lower case characters.
  • Do not use your name, date of birth, maiden name, mother’s maiden name, address, or other easily guessable words for passwords. 
  • Another way to create a strong password is to use a series of words that do not relate to each other. For example, JumpingFastRelaxStop!#.

 


Social media additional security options:


Another way to help avoid social media account takeover is to use the additional security options available. Two-factor authentication adds an extra layer of security that drastically decreases your chances of account takeover. Two-factor authentication is essentially the using of two separate components to verify your identity, the combination of something you HAVE with something you KNOW. A good example of two-factor authentication you most likely are already used to is withdrawing cash from an ATM, for example. Having both your debit card AND knowing a pin number is required to complete the withdrawal and protect your identity.

A popular and convenient two-factor authentication method is using a combination of both an online password and a text message verification sent to your phone. Enabling this type of authentication typically follows this process:

  1. Enter your password into Facebook or another website
  2. Immediately receive a text on your phone with a temporary pass key
  3. Enter the passkey received back on the site/app and you’re logged in

This may seem like overkill, but enabling this two-factor authentication will drastically decrease the chances of your social accounts being hacked. And actually, the process of setting up and using this authentication is pretty simple and convenient.

 


How to enable two-factor authentication:


Many popular social networks like Facebook, Twitter, LinkedIN, and others already support two-factor authentication. To learn more about how to do so on the most popular sites on the web, be sure to check out this article:

http://socialcustomer.com/2014/04/how-to-enable-two-factor-authentication-on-50-top-websites-including-facebook-twitter-and-others.html

Wednesday, April 22, 2015

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