MutualFirst Financial Announces First Quarter Earnings

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April 27, 2018 9:00 AM UTC

MUNCIE, Ind., April 27, 2018 /PRNewswire/ -- MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of MutualBank (the "Bank"), announced today adjusted net income available to common shareholders, excluding $605,000 of one-time merger related expenses, for the first quarter ended March 31, 2018 was $4.5 million, or $0.57 diluted earnings per common share.  This compares to net income available to common shareholders for the same period in 2017 of $3.2 million, or $0.43 diluted earnings per common share. The adjusted net income for the first quarter ended March 31, 2018 represents an annualized return on average assets of 1.05% and return on average tangible common equity of 11.90% compared to 0.82% and 9.23%, respectively, for the same period of last year.

Including the one-time merger related expenses, net income available to common shareholders for the first quarter ended March 31, 2018 was $4.0 million, or $0.50 diluted earnings per common share.  Annualized return on average assets was 0.93% and return on average tangible common equity was 10.53% for the first quarter of 2018.

On February 28, 2018, MutualFirst Financial, Inc. closed its acquisition of Universal Bancorp and merged Universal's wholly owned subsidiary, BloomBank, into MutualFirst Financial's wholly owned subsidiary, MutualBank.  At closing, this acquisition increased total assets by approximately $398 million, total investments by $88 million, total loans by $253 million and total deposits by $315 million.  The initial goodwill generated by the acquisition was $22 million and a core deposit intangible of $4.5 million.

"We believe our expansion into central and southern Indiana, through this acquisition, allows us to continue the momentum we have created over the last several years," said David W. Heeter, President and CEO. 

Balance Sheet

Assets increased $407 million as of March 31, 2018 compared to December 31, 2017 primarily due to the acquisition of Universal.  The gross loan portfolio increased by $269 million primarily due to acquiring a $253 million net loan portfolio in the first quarter of 2018.   Organic loan growth of $16 million was primarily in commercial loans in the first quarter of 2018.  The mix of loans in our portfolio as of March 31, 2018 compared to December 31, 2017 shifted toward our desired strategic objective through the acquisition.  Commercial loans increased to 45.2% compared to 40.3%, residential loans decreased to 40.7% compared to 43.3% and non-residential consumer loans decreased to 14.1% compared to 16.4%.

Deposits increased by $338 million as of March 31, 2018 compared to December 31, 2017 primarily due to an increase of $315 million in the acquisition.  As of March 31, 2018, core deposits totaled $1.1 billion, or 70.4% of total deposits and certificates of deposit totaled $458 million, or 29.6% of total deposits.   This is compared to a mix of core deposits of 69.1% and certificates of deposit of 30.9 % as of December 31, 2017.

Mr. Heeter commented, "The acquisition of Universal met our strategic objectives by providing us an increase in commercial lending, a strong core deposit base and attractive new markets with growth potential."

Allowance for loan losses increased to $12.5 million as of March 31, 2018 compared to $12.4 million as of December 31, 2017.  The allowance for loan losses to non-performing loans as of March 31, 2018 was 211% compared to 236% as of December 31, 2017.  The allowance for loan losses to total loans as of March 31, 2018 was 0.86% compared to 1.05% as of December 31, 2017.  Non-performing loans to total loans at March 31, 2018 were 0.41% compared to 0.44% at December 31, 2017.  Non-performing assets to total assets were 0.39% at March 31, 2018 compared to 0.38% at December 31, 2017. Loans acquired from Universal in the first quarter of 2018 had an initial credit mark of $4.0 million.

Stockholders' equity was $191.1 million at March 31, 2018, an increase of $40.8 million from December 31, 2017. The increase was primarily due to $42.3 million of capital issued as part of the acquisition of Universal.  Other increases included net income available to common shareholders of $4.0 million.  These increases were partially offset by a decrease in accumulated other comprehensive income of $4.0 million, due market value changes in the investment portfolio, and common stock cash dividends paid of $1.5 million during the first quarter of 2018.  The Company's tangible book value per common share as of March 31, 2018 decreased to $18.92 compared to $20.08 as of December 31, 2017 and the tangible common equity ratio decreased to 8.25% as of March 31, 2018 compared to 9.35% as of December 31, 2017.  These declines are primarily a result of the acquisition in the first quarter of 2018.  MFSF's and the Bank's risk-based capital ratios remained in excess of "well-capitalized" levels as defined by all regulatory standards as of March 31, 2018.

Income Statement

Net interest income before the provision for loan losses increased $1.9 million for the quarter ended March 31, 2018 compared to the same period in 2017.  The increase in net interest income was a result of an increase of $162.9 million in average interest earning assets, due to the acquisition in the first quarter 2018 and organic loan growth, and an increase of fourteen basis points in net interest margin to 3.35%. 

Provision for loan losses in the first quarter of 2018 was $450,000, a $250,000 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 $300,000, or 0.09% of total average loans on an annualized basis, in the first quarter of 2018 compared to net charge offs of $200,000, or 0.07% of total average loans on an annualized basis, in the first quarter of 2017.   

Non-interest income for the first quarter of 2018 was $4.4 million, an increase of $311,000 compared to the first quarter of 2017.  Increases in non-interest income included an increase of $164,000 in service fee income on deposit accounts aided by increases in interchange fee income along with increases due to the acquisition. An increase in other income was a result of $325,000 of death benefits received on bank-owned life insurance policies.  This increase was partially offset by a $135,000 decrease in net gain on loan sales due to slower mortgage loan production and a $122,000 increase in losses on sale of repossessed assets, due to losses on one former commercial relationship.

Non-interest expense increased $1.6 million when comparing the first quarter of 2018 with the same period in 2017.  The increase was primarily due to the acquisition in the first quarter of 2018.  One-time merger related expenses, primarily in professional fees and other expenses, were $605,000 in the first quarter of 2018 with no similar activity in the same period of 2017.

The effective tax rate for the first quarter of 2018 was 12.7% compared to 24.2% in the same quarter of 2017. The reason for the decline was the reduction of the corporate tax rate to 21% and an increase in tax free income partially due to an increase in holdings of tax free municipal securities. 

"We are off to a good start in 2018 and we believe that the enhancements in the first quarter will help continue the momentum that we have seen over the last several years.  We believe our larger market presence, along with a strong Indiana economy, will provide us more opportunities as we continue to focus on increasing shareholder value," 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 National 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):

2018

2017

2017

(000)

(000)

(000)

Assets

Cash and cash equivalents

$            41,069

$         27,341

$        22,304

Interest-bearing time deposits

4,627

1,853

1,905

Investment securities - AFS

354,145

277,378

254,966

Loans held for sale

3,686

4,577

5,077

Loans, gross

1,449,426

1,180,145

1,167,325

Allowance for loan losses

(12,537)

(12,387)

(12,382)

Net loans

1,436,889

1,167,758

1,154,943

Premises and equipment, net

26,208

21,539

21,041

FHLB of Indianapolis stock

12,820

11,183

11,183

Deferred tax asset, net

10,665

7,530

11,769

Cash value of life insurance

59,209

52,707

51,866

Other real estate owned and repossessed assets

1,753

733

1,035

Goodwill

23,869

1,800

1,800

Core deposit and other intangibles

4,509

127

307

Other assets

16,656

14,406

13,225

Total assets

$       1,996,105

$     1,588,932

$    1,551,421

Liabilities and Stockholders' Equity

Deposits

$       1,540,452

$     1,202,034

$    1,170,923

FHLB advances

230,546

217,163

218,191

Other borrowings

18,110

4,232

4,490

Other liabilities

15,935

15,221

15,219

Stockholders' equity

191,062

150,282

142,598

Total liabilities and stockholders' equity

$       1,996,105

$     1,588,932

$    1,551,421

Three Months

Three Months

Three Months

Ended

Ended

Ended

March 31,

December 31,

March 31,

Income Statement (Unaudited):

2018

2017

2017

(000)

(000)

(000)

Total interest and dividend income

$            16,748

$15,081

$        14,109

Total interest expense

3,164

2,888

2,396

   Net interest income

13,584

12,193

11,713

Provision for loan losses

450

350

200

Net interest income after provision 

  for loan losses

13,134

11,843

11,513

  Non-interest income

Service fee income

1,564

1,819

1,400

Net realized gain on sales of AFS securities

154

255

129

Commissions

1,262

1,253

1,196

Net gain on sale of loans

635

1,162

770

Net servicing fees

150

85

101

Increase in cash value of life insurance

289

278

272

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

(68)

(87)

54

Other income

449

83

202

Total non-interest income

4,435

4,848

4,124

  Non-interest expense

Salaries and employee benefits

7,289

7,098

6,726

Net occupancy expenses

897

773

809

Equipment expenses

556

466

427

Data processing fees

593

622

554

Advertising and promotion

360

318

312

ATM and debit card expense

471

392

418

Deposit insurance

257

162

213

Professional fees

782

680

396

Software subscriptions and maintenance

594

541

569

Other real estate and repossessed assets

45

45

47

Other expenses

1,133

840

935

Total non-interest expense

12,977

11,937

11,406

Income before income taxes

4,592

4,754

4,231

Income tax provision

585

3,294

1,025

Net income available to common shareholders

$              4,007

$1,460

$          3,206

Pre-tax pre-provision earnings (1)

$              5,042

$5,104

$          4,431

 

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

Three

Three

months ended

months ended

3/31/2018

3/31/2017

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

$            21,686

$               67

1.24%

$      21,425

$               25

0.47%

 Mortgage-backed securities:

Available-for-sale

175,951

1,127

2.56

161,169

998

2.48

 Investment securities:

Available-for-sale

130,858

1,039

3.18

91,578

722

3.15

 Loans receivable

1,280,521

14,325

4.47

1,172,551

12,249

4.18

Stock in FHLB of Indianapolis

11,765

190

6.46

11,117

115

4.14

Total interest-earning assets (2)

1,620,781

16,748

4.13

1,457,840

14,109

3.87

Non-interest earning assets, net of allowance 

  for loan losses and unrealized gain/loss

108,909

97,384

     Total assets

$       1,729,690

$  1,555,224

Interest-Bearing Liabilities:

 Demand and NOW accounts

$          344,426

437

0.51

$    292,641

200

0.27

 Savings deposits

157,519

5

0.01

139,435

4

0.01

 Money market accounts

183,643

220

0.48

175,048

125

0.29

 Certificate accounts

405,893

1,445

1.42

385,155

1,137

1.18

 Total deposits

1,091,481

2,107

0.77

992,279

1,466

0.59

 Borrowings

234,946

1,057

1.80

229,919

930

1.62

  Total interest-bearing liabilities

1,326,427

3,164

0.95

1,222,198

2,396

0.78

Non-interest bearing deposit accounts

223,763

176,455

Other liabilities

16,047

15,489

  Total liabilities

1,566,237

1,414,142

Stockholders' equity

163,453

141,082

    Total liabilities and stockholders' equity

$       1,729,690

$  1,555,224

Net interest earning assets

$          294,354

$    235,642

Net interest income

$         13,584

$         11,713

Net interest rate spread (4)

3.18%

3.09%

Net yield on average interest-earning assets (4)

3.35%

3.21%

Net yield on average interest-earning assets, tax equivalent (3)(4)

3.42%

3.32%

Average interest-earning assets to

  average interest-bearing liabilities

122.19%

119.28%

 

Three Months

Three Months

Three Months

Ended

Ended

Ended

March 31,

December 31,

March 31, 

  Selected Financial Ratios and Other Financial Data (Unaudited):

2018

2017

2017

Share and per share data:

 Average common shares outstanding:

   Basic

7,810,916

7,389,394

7,332,455

   Diluted

7,965,893

7,526,416

7,480,481

 Per common share:

   Basic earnings

$               0.51

$0.20

$            0.44

   Diluted earnings 

$               0.50

$0.19

$            0.43

   Dividends

$               0.18

$0.18

$            0.16

Dividend payout ratio

36.00%

94.74%

37.21%

Performance Ratios:

   Return on average assets (ratio of net

      income to average total assets)(4)

0.93%

0.37%

0.82%

   Return on average tangible common equity (ratio of net 

      income to average tangible common equity)(4)

10.53%

3.89%

9.23%

   Interest rate spread information:

    Average during the period(4)

3.18%

3.11%

3.09%

    Net interest margin(4)(5)

3.35%

3.27%

3.21%

Efficiency Ratio

72.02%

70.05%

72.02%

    Ratio of average interest-earning

     assets to average interest-bearing

     liabilities

122.19%

121.44%

119.28%

Allowance for loan losses:

       Balance beginning of period

$            12,387

$12,378

$        12,382

        Net charge-offs (recoveries):

Real Estate:

Commercial

53

0

0

Commercial construction and development

0

0

0

Consumer closed end first mortgage

12

24

41

Consumer open end and junior liens

0

0

0

Total real estate loans

65

24

41

Other loans:

Auto

(10)

5

7

Boat/RV

131

208

143

Other

30

37

16

Commercial and industrial

84

67

(7)

Total other

235

317

159

Net charge-offs (recoveries)

300

341

200

Provision for loan losses

450

350

200

Balance end of period

$            12,537

$12,387

$        12,382

    Net loan charge-offs to average loans (4)

0.09%

0.11%

0.07%

March 31,

December 31,

March 31,

2018

2017

2017

Total shares outstanding

8,574,924

7,389,394

7,344,233

Tangible book value per common share

$              18.97

$           20.08

$          19.13

Tangible common equity to tangible assets

8.27%

9.35%

9.07%

 Nonperforming assets (000's)

Non-accrual loans

Real Estate:

Commercial

$              1,415

$           1,107

$          1,054

Commercial construction and development

17

-

-

Consumer closed end first mortgage

3,633

3,409

3,179

Consumer open end and junior liens

223

309

286

Total real estate loans

5,288

4,825

4,519

Other loans:

Auto

11

22

5

Boat/RV

367

198

128

Other

21

16

34

Commercial and industrial

208

159

86

Total other

607

395

253

Total non-accrual loans

5,895

5,220

4,772

Accruing loans past due 90 days or more

38

31

0

Total nonperforming loans

5,933

5,251

4,772

    Real estate owned

1,390

251

403

    Other repossessed assets

363

482

631

 Total nonperforming assets

$              7,686

$           5,984

$          5,806

Performing restructured loans (6)

$                913

$           1,389

$          1,816

Asset Quality Ratios:

Non-performing assets to total assets 

0.39%

0.38%

0.37%

Non-performing loans to total loans

0.41%

0.44%

0.41%

Allowance for loan losses to non-performing loans

211%

236%

259%

Allowance for loan losses to loans receivable

0.86%

1.05%

1.06%

Three Months

Three Months

Three Months

Ended

Ended

Ended

March 31,

December 31,

March 31, 

Non-GAAP Measurements (7)

2018

2017

2017

Total stockholders' equity (GAAP)

$          191,062

$       150,282

$      142,598

Less: Intangible assets

28,378

1,927

2,107

Tangible common equity (non-GAAP)

$          162,684

$       148,355

$      140,491

Total assets (GAAP)

$       1,996,105

$     1,588,932

$    1,551,421

Less: Intangible assets

28,378

1,927

2,107

Tangible assets (non-GAAP)

$       1,967,727

$     1,587,005

$    1,549,314

Tangible common equity to tangible assets (non-GAAP)

8.27%

9.35%

9.07%

Book value per common share (GAAP)

$              22.28

$           20.34

$          19.42

Less: Effect of intangible assets

3.31

0.26

0.29

Tangible book value per common share

$              18.97

$           20.08

$          19.13

Return on average stockholders' equity (GAAP)

9.81%

3.84%

9.09%

Add: Effect of intangible assets

0.72%

0.05%

0.14%

Return on average tangible common equity (non-GAAP)

10.53%

3.89%

9.23%

Total tax free interest income (GAAP)

Loans receivable

$                100

$              104

$             107

Investment securities

944

743

647

Total tax free interest income

$              1,044

$              847

$             754

Total tax free interest income, gross (at 21%, or 34% prior to 2018)

$              1,322

$           1,283

$          1,142

Net interest margin, tax equivalent (non-GAAP)

Net interest income (GAAP)

$            13,584

$         12,193

$        11,713

Add: Tax effect tax free interest income (3)

278

436

388

Net interest income (non-GAAP)

13,862

12,629

12,101

Divided by: Average interest-earning assets

1,620,871

1,489,596

1,457,840

Net interest margin, tax equivalent

3.42%

3.39%

3.32%

One-time merger related expenses

Non-tax deductible

$                220

Tax deductible

385

Total one-time merger related expenses

$                605

Subract tax benefit

81

Net one-time merger related expenses

$                524

Net income (GAAP)

4,007

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

$              4,531

Adjusted diluted earnings per share

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

$              4,531

Average diluted shares

7,965,893

Adjusted diluted earnings per share (non-GAAP)

$               0.57

Adjusted return on assets

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

$              4,531

Average assets

1,729,690

Adjusted return on average assets (non-GAAP)

1.05%

Adjusted return on tangible common equity

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

$              4,531

Average tangible common equity 

152,276

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

11.90%

Ratio Summary:

Return on average equity

9.81%

3.84%

9.09%

Return on average tangible common equity

10.53%

3.89%

9.23%

Return on average assets

0.93%

0.37%

0.82%

Tangible common equity to tangible assets

8.27%

9.35%

9.07%

Net interest margin, tax equivalent

3.42%

3.39%

3.32%

(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 for 2018 and 34% applicable tax rate prior to 2018.

(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 View original content:http://www.prnewswire.com/news-releases/mutualfirst-financial-announces-first-quarter-earnings-300637683.html

SOURCE MutualFirst Financial, Inc.


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