Muncie, Indiana - 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, 2013 of $1.6 million, or $.23 for basic and $.22 for diluted earnings per common share. This compared to net income available to common shareholders during the same period in 2012 of $1.1 million, or $.15 for basic and diluted earnings per common share. Annualized return on assets was .56% and return on average tangible common equity was 5.95% for the first quarter of 2013 compared to .40% and 4.17% respectively, for the same period of last year.
“We are pleased to report continued improvement in earnings and a 47% increase over the same quarter last year,” said David W. Heeter, President and CEO. “The local economies are improving slowly and we are cautiously optimistic that the improving economies will allow us to continue to improve earnings.”
Financial highlights for the first quarter ended March 31, 2013 included:
- Gross loan balances decreased $13.7 million in the first quarter of 2013 primarily due to selling current mortgage production.
- Core transactional deposit accounts increased $14.1 million.
- Allowance for loan losses to non-performing loans as of March 31, 2013 was 64.90% compared to 67.72% as of December 31, 2012. Allowance for loan losses to loans receivable was 1.65% as of March 31, 2013 compared to 1.63% as of December 31, 2012.
- Net charge offs on an annualized basis were 0.41% in the first quarter of 2013 compared to 0.67% in the same period in 2012.
- Net interest margin increased to 3.07% for the first quarter of 2013 compared to 3.03% for the first quarter of 2012.
- Provision for loan losses decreased $400,000 in the first quarter of 2013 compared to the first quarter of 2012.
- Non-interest income for the quarter ended March 31, 2013 increased $710,000 compared to the first quarter of 2012 due to gains on sale of loans in mortgage banking activity, a reduction in losses on sales of REO and gains on sale of investments.
- Non-interest expense for the first quarter of 2013 increased $319,000 over the first quarter of 2012. The increase is primarily due to increased salary and benefit expenses and occupancy expenses.
- Pretax pre-provision earnings increased $500,000 in the first quarter of 2013 compared to the same period in 2012.
- On April 8, 2013, the Company redeemed 25% of the preferred stock issued to the Secretary of the Treasury under the Small Business Lending Fund program.
Assets decreased $8.9 million as of March 31, 2013 compared to December 31, 2012, primarily due to the decrease in gross loans by $13.7 million. The decrease in the gross loan portfolio was primarily due to a $10.1 million decline in the residential mortgage loan portfolio as a majority of current mortgage production was sold into the secondary market for interest rate risk mitigation. The consumer and commercial portfolios declined $3.5 million primarily due to seasonality, which compared favorably to the decline in the first quarter of 2012 of $8.3 million.
Deposits decreased by $16.3 million as the Bank allowed wholesale deposits to run off, which was partly responsible for a $30.4 million decline in certificates of deposit. This decrease was partially offset by increases in core transactional accounts, which increased $14.1 million in the first quarter of 2013. Core transactional deposits increased to 53% of the Bank’s total deposits as of March 31, 2013 compared to 51% as of December 31, 2012 and 48% as of March 31, 2012. FHLB advances grew slightly as $20 million of longer term advances were utilize for interest rate risk mitigation replacing maturing advances.
Heeter commented, “We are making strides in changing the mix of our loan and our deposit portfolios. We are continuing our strategy to reduce our balance sheet exposure of residential mortgage loans and increasing the percentage of consumer and commercial portfolios. The deposit mix has changed favorably over the last few years to reduce our reliance on certificates of deposit. These changes should enhance net interest margin and reduce interest rate risk.”
The allowance for loan losses decreased by $47,000 to $16.0 million as of March 31, 2013 as compared to December 31, 2012. Net charge offs for the first quarter of 2013 were $1.0 million, or 0.41% of loans on an annualized basis, compared to $1.5 million, or 0.67% of loans on an annualized basis, for the first quarter of 2012. Classified loans decreased $3.7 million, or 8.9% in the first quarter of 2013 compared to the fourth quarter of 2012. The allowance for loan losses to non-performing loans as of March 31, 2013 decreased to 64.9% compared to 67.7% as of December 31, 2012. The allowance for loan losses to total loans as of March 31, 2013 was 1.65%, an increase from 1.63% as of December 31, 2012. “We continue to be pleased with the level of our asset quality and we believe that our current allowance for loan losses adequately reflects the risk in our portfolio and the current risk in the economy,” Heeter added.
Stockholders’ equity was $140.1 million at March 31, 2013, an increase of $646,000 from December 31, 2012. The increase was a result of net income of $2.0 million. This increase was partially offset by dividend payments of $423,000 to common shareholders and $362,000 to preferred shareholders. The Company’s tangible book value per share as of March 31, 2013 increased to $15.40 compared to $15.33 as of December 31, 2012 and tangible common equity ratio was 7.72% as of March 31, 2013 compared to 7.62% as of December 31, 2012. The Company’s and the Bank’s risk-based capital ratio were well in excess of “well-capitalized” levels as defined by all regulatory standards as of March 31, 2013.
Net interest income before the provision for loan losses increased $109,000 for the quarter ended March 31, 2013 compared to the same period in 2012. The increase was a result of an increase in the net interest margin from 3.03% in the first quarter of 2012 to 3.07% in the first quarter of 2013, which was offset slightly by a decline in average earning assets of $2.0 million. On a linked quarter basis, net interest income before the provision for loan losses decreased $133,000 as average earning assets declined by $25.6 million; however net interest margin increased by 3 basis points.
The provision for loan losses for the first quarter of 2013 decreased to $950,000 compared to $1.4 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 and was impacted by a decrease in net charge offs to $1.0 million for the first quarter of 2013 compared to net charge offs of $1.5 million in the first quarter of 2012. Non-performing loans to total loans at March 31, 2013 were 2.54% compared to 2.40% at December 31, 2012. The increase in the non-performing ratio was primarily due to the reduction in gross loan balances in the first quarter of 2013. Non-performing assets to total assets were 2.25% at March 31, 2013 compared to 2.21% at December 31, 2012.
Non-interest income for the first quarter of 2013 was $3.6 million an increase of $710,000 compared to the first quarter of 2012. Non-interest income increased as gains on sales of foreclosed properties increased $412,000, due to a gain of $19,000 compared to a loss in the first quarter of 2012 of $393,000. Gain on sale of loans increased $304,000 as mortgage banking activity increased by $21 million in the first quarter of 2013 compared to the same time period in 2012. Gain on sale of investments also increased $142,000 as a small portion of the investment portfolio was restructured to mitigate interest rate risk. These increases were partially offset by a decline in service fees on deposit accounts by $82,000 as the number of overdraft transactions continues to decline. On a linked quarter basis, non-interest income declined $870,000 primarily due to a decrease in gain on sale of investments due to a balance sheet restructuring in the fourth quarter of 2012, which was not repeated in the first quarter of 2013.
Non-interest expense increased $319,000 when comparing the first quarter of 2013 with that of 2012. This increase was a result of an increase in salaries and benefits of $208,000 and occupancy expense of $197,000. The increase in salaries and benefits was a result of the increased health insurance premiums and increased retirement benefit expense due to the Company’s employee stock ownership plan expense, which is directly tied to the Company’s increasing stock price. The increase in occupancy expense was a result of higher branch operating costs due to weather conditions and increased depreciation expense. These increases were partially offset by a reduction in marketing expense and intangible amortization in the first quarter of 2013 compared to the similar period in 2012. On a linked quarter basis, non-interest expense decreased $692,000 primarily due to the one time prepayment charge on FHLB advances in the fourth quarter 2012, which was not repeated in the first quarter of 2013.
Heeter concluded, “While we are pleased with the current results, we are focused to continue to grow earnings and increase shareholder value.”
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.