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MutualFirst Announces Increased Earnings in the Second Quarter 2014

Published Tuesday, July 22, 2014


Muncie, Indiana
- MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of MutualBank (the “Bank”), announced today net income to common shareholders for the second quarter ended June 30, 2014 increased to $2.6 million, or $.36 for basic earnings per common share and $.35 for diluted earnings per common share.  This compared to net income available to common shareholders for the same period in 2013 of $1.8 million, or $.26 for basic earnings per common share and $.25 for diluted earnings per common share. Annualized return on assets was .73% and return on average tangible common equity was 8.81% for the second quarter of 2014 compared to .60% and 6.59% respectively, for the same period of last year.  

Net income available to common shareholders for the six months ended June 30, 2014 increased to $4.5 million, or $.63 for basic earnings per common share and $.61 for diluted earnings per common share compared to net income available to common shareholders of $3.4 million, or $.49 for basic earnings per common share and $.48 for diluted earnings per common share for the six months ended June 30, 2013.  Annualized return on assets was .65% and return on average tangible common equity was 7.91% for the first half of 2014 compared to .58% and 6.27% respectively, for the same period of last year.

Other financial highlights for the second quarter ended June 30, 2014 included:

  • Gross loan balances increased by $16.5 million, or 6.7% on an annualized basis in the second quarter of 2014.

  • Asset quality continues to improve as non-performing loans to total loans were 0.61% as of June 30, 2014 compared to 0.80% as of March 31, 2014 and non-performing assets to total assets were 0.94% as of June 30, 2014 compared to 1.12% as of March 31, 2014.

  • Classified loans decreased approximately 16% in the second quarter of 2014 and 20% since December 31, 2013.

  • Deposits decreased $25.7 million in the second quarter of 2014 primarily due to a decrease in certificates of deposit of $25.8 million.

  • Tangible common equity to total assets is 8.40% and tangible book value per share is $16.54 as of June 30, 2014 compared to tangible common equity to total assets of 7.92% and tangible book value per share of $15.46 as of December 31, 2013.

  • Cash dividend on common stock increased by 33%.

  • Net interest income for the second quarter of 2014 increased by $139,000 on a linked quarter basis and $538,000 compared to the second quarter of 2013.
     
  • Net interest margin was 3.28% for the second quarter 2014 compared to 3.10% in the second quarter 2013.

  • Non-interest income in the second quarter of 2014 increased by $541,000 on a linked quarter basis and decreased by $45,000 when compared to the second quarter of 2013.

  • Non-interest expense decreased in the second quarter of 2014 by $394,000 on a linked quarter basis and $49,000 when compared to the second quarter of 2013.

“We are pleased with the growth in core earnings and loans in the second quarter.  We are optimistic that our economies are continuing to strengthen, allowing for continued loan growth,” said David W. Heeter, President and CEO.

 

Balance Sheet:


 Assets increased $19.1 million as of June 30, 2014 compared to December 31, 2013, primarily due to the increase in gross loans of $14.9 million.  The increase in the gross loan portfolio was primarily due to an increase in commercial loans of $14.2 million and in non-real estate consumer loans of $9.1 million.  This increase was partially offset by a decline in the consumer residential loan portfolio of $8.4 million.  Mortgage loans held for sale increased by $3.6 million, since December 31, 2013, as the Bank has been selling longer term fixed rate loans originated in the first half of 2014 to mitigate interest rate risk.  Mortgage loans sold during the first half of 2014 totaled $15.3 million compared to $43.1 million in the first half of 2013 as mortgage production was slower in the first half of 2014 compared to the same period in 2013.

Deposits decreased by $33.8 million in the first half of 2014.  The decrease in deposits has been primarily in certificates of deposit, which decreased $50.3 million, while core transactional deposits increased $16.5 million in the first half of 2014. Core transactional deposits increased to 61% of the Bank’s total deposits as of June 30, 2014 compared to 58% as of December 31, 2013. 

Allowance for loan losses was $13.2 million as of June 30, 2014 compared to $13.4 million as of March 31, 2014 and December 31, 2013.  Net charge offs in the second quarter were $627,000, or .25% of total loans on an annualized basis, compared to $392,000, or .16% of total loans on an annualized basis in the first quarter of 2014.    The allowance for loan losses to non-performing loans as of June 30, 2014 was 216.7% compared to 170.3% as of March 31, 2014 and 156.2% as of December 31, 2013.  The allowance for loan losses to total loans as of June 30, 2014 was 1.33% compared to 1.37% as of December 31, 2013.  Non-performing loans to total loans at June 30, 2014 were .61% compared to .88% at December 31, 2013.  This decrease in non-performing loans was primarily in one-to four-family mortgage loans and commercial loans.  Non-performing assets to total assets were .94% at June 30, 2014 compared to 1.22% at December 31, 2013. Heeter commented, “We are pleased with the continued improvement in asset quality.”

Stockholders’ equity was $119.8 million at June 30, 2014, an increase of $8.1 million from December 31, 2013. The increase was primarily due to net income to common shareholders of $4.5 million and an increase in other comprehensive income of $4.2 million due to favorable movement in market interest rates, which created greater unrealized gains in the securities portfolio.  These increases were partially offset by common stock dividends of $999,000.  The Company’s tangible book value per share as of June 30, 2014 increased to $16.54 compared to $15.46 as of December 31, 2013 and the tangible common equity ratio increased to 8.40% as of June 30, 2014 compared to 7.92% as of December 31, 2013.  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 June 30, 2014. 

 

Income Statement: 


 Net interest income before the provision for loan losses increased $538,000 for the quarter ended June 30, 2014 compared to the same period in 2013.  The increase in net interest income was as a result of an 18 basis point increase in net interest margin to 3.28%.  The increase in the margin was the result of interest bearing liabilities repricing downward faster than earning assets.  Average earning assets declined $3.4 million primarily due to a decline of $14.7 million in the investment portfolio, mainly offset by a $12.9 million increase in the loan portfolio.  On a linked quarter basis, net interest income before the provision for loan losses increased $139,000 as net interest margin increased by 2 basis points and average earning assets increased by $10.9 million primarily due to increases in the loan portfolio.  

Net interest income before the provision for loan losses increased $978,000 for the first half of 2014 compared to the same period in 2013.  The increase was a result of the net interest margin increasing to 3.27% in the first half of 2014 compared to 3.08% in the first half of 2013.  This increase was partially offset by a decrease of $13.7 million in average earning assets due to a decline in the average investment portfolio of $14.4 million.

 The provision for loan losses for the second quarter of 2014 decreased to $500,000 compared to $550,000 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 decreased net charge offs of $627,000, or .25% of loans on an annualized basis in the second quarter of 2014 compared to charge offs of $840,000, or .34% of loans on an annualized basis in the second quarter of 2013.   Non-performing loans to total loans at June 30, 2014 was .61% compared to 1.94% at June 30, 2013.  Non-performing assets to total assets were .94% at June 30, 2014 compared to 1.77% at June 30, 2013.  

The provision for loan losses for the first half of 2014 decreased to $850,000 compared to $1.5 million during last year’s comparable period.  The decrease was primarily due to a decline in net charge offs and improving asset quality.  Net charge offs for the first half of 2014 equaled $1.0 million, or .21% of loans on an annualized basis compared to $1.8 million, or .37% in the same period of 2013.

Non-interest income for the second quarter of 2014 was $3.4 million a decrease of $45,000 compared to the second quarter of 2013.  Decreases in non-interest income include declines in loan servicing fees of $432,000 primarily due to a $456,000 mortgage servicing rights recovery in the second quarter of 2013 not repeated in 2014.  Another reason for the decrease was an increase in losses on sale of other real estate by $215,000 in the second quarter of 2014 compared to the same time period in 2013.  These declines were mainly offset by increases in gain on sale of loans of $248,000 primarily due to a less volatile rate environment as compared to the second quarter of 2013, increases in fees and service charges on deposit accounts of $174,000 primarily due to income on debit card transactions and increases in gain on sale of investments of $168,000. On a linked quarter basis, non-interest income increased $541,000, due to increases in gain on sale of mortgage loans primarily due to an increase in mortgage activity and increases in fees and service charges on deposit accounts primarily due to seasonality in fee income.

Non-interest income for the first half of 2014 was $6.3 million, a decrease of $810,000 compared to the first half of 2013.  The decrease was primarily due to a $429,000 change in servicing fee income due to mortgage valuation reserves released in the second quarter of 2013 that was not repeated in 2014.  Increase in losses on sale of other real estate of $296,000 was another reason for the decline, primarily attributable to larger write-downs of certain real estate owned properties compared to the first half of 2013 when there were several large gains on sale of real estate owned properties. 

Non-interest expense decreased $49,000 when comparing the second quarter of 2014 with the same period in 2013.  The decrease was primarily due to declines in marketing expense by $134,000 and other expenses of $96,000.  The declines were partially offset by increases in professional fees of $120,000 primarily due to revenue enhancement and acquisition activity, which included trust business and a mortgage company, in the second quarter of 2014 and software subscription and maintenance of $75,000 primarily due to technological updates.  On a linked quarter basis, non-interest expense decreased $394,000 primarily due to decreases in salaries and benefit expenses of $373,000.

Non-interest expense increased $284,000 when comparing the first half of 2014 with the same period in 2013.  Increases were primarily a result of salaries and benefits increasing by $289,000, primarily due to increases in employee benefit costs, increases in professional fees of $223,000, primarily due to revenue enhancement and acquisition opportunities. These increases were partially offset by reductions in other expenses of $170,000, in marketing expense of $102,000, and deposit insurance of $100,000. 

Heeter concluded, “We continue to be encouraged by the increases in our core businesses and continue to seek ways to enhance shareholder value.” 

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

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.
(765) 747-2945 

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Interesting Facts About Computer Security

In light of the fun fact countdown we have been posting for our 125th Anniversary, our Information Security Department has put together a list of interesting facts about computer security. While they aren't "fun", they should give you an idea of how important it is to take proactive steps to protect you and your data!

  • The first recorded “hackers” were from 1878, only 2 years after the telephone was invented, a group of teenagers were running switchboards for telephones.  They were later fired because they were more interested on how the telephone system worked then making proper connections.  They tried to hack the system to see how it worked.
  • The largest data breach is history was in 2007 where at least 160 million credit and debit card numbers were stolen and a loss of around $200 million as a result.  Albert Gonzalez, one of the persons behind the data breach, was prosecuted and sentenced to 20 years in prison.

  • 3 out of 4 Americans will be a victim to cyber-crime.

  • Data breach investigations increased 54% from 2012.

  • The United States is number one in cyber-crime victims at a whopping 59%.  After that is the United Kingdom at 14%.

  • Retail is the top industry that has been compromised at 35% of all cyber-attacks.

  • The top malware hosting country is the United States at 42%.

  • The most exploited program for vulnerabilities is Java at 78% of all vulnerablities.

  • 85% of all exploits were third-party programs. 

  • The median number of days for a victim of cyber-crime to know they have been compromised is 87 days.

  • 31% of all compromises were a result of weak passwords.

  • The top 5 compromised passwords in 2013 were:

- 123456
- 123456789
- 1234
- Password
- 12345

  • Spam still accounts for 70% of all inbound emails in 2013.

  • 58% of spam e-mail contains information about pharmaceuticals.

  • The top malicious e-mail subject line in 2013 was “Some important information is missing”.

  • The top 6 vulnerabilities

- SQL Injection
- Cross-Site Scripting
- Use of Default Passwords
- Configuration Issues
- Weak Encryption Ciphers
- Denial-of-Service

  • 100% of all mobile apps have had vulnerabilities in them ranging from low severity to critical severity.

  • 68% of mobile vulnerabilities create information leakage which is the highest of mobile vulnerabilities.

  • From 2008 until now, an estimated $1 trillion dollars of data was stolen around the world due to cyber-crimes.

  • In 2009 the world’s largest bot net, a large group of “zombie” computers, were run by Ukrainian gangs with a total of 1.9 million zombie computers from all around the world.

  • 5 cyber-criminals are on FBI’s most wanted list and are responsible for losses ranging from $350,000 - $100 million.

  • The United States loses around $100 billion a year due to cyber crimes.

  • More than 600,000 Facebook accounts alone are compromised every day.

  • 33.63% computers are affected by malware.

- 78.92% are Trojans
- 10.78% are worms
- 7.44% are viruses
- 2.69% are adware
- 0.17% are other malware

 

Sources:
www.floridatechonline.com/online-degree-resources/interesting-facts-on-cyber-security/ 

www.visual.ly/interesting-facts-about-internet-threats-and-security 

Tuesday, August 5, 2014

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