Company Quick10K Filing
Quick10K
Mutualfirst Financial
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$30.08 9 $259
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-01 Enter Agreement, Officers, Exhibits
8-K 2019-05-02 Shareholder Vote, Regulation FD, Other Events, Exhibits
8-K 2019-05-02 Other Events, Exhibits
8-K 2019-04-23 Earnings, Exhibits
8-K 2019-02-21 Other Events, Exhibits
8-K 2019-01-30 Earnings, Exhibits
8-K 2019-01-18 Other Events, Exhibits
8-K 2019-01-18 Other Events, Exhibits
8-K 2019-01-17 Other Events, Exhibits
8-K 2018-11-15 Other Events, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-08-16 Other Events, Exhibits
8-K 2018-08-01 Regulation FD, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-07-24 Regulation FD, Exhibits
8-K 2018-05-04 Shareholder Vote, Regulation FD, Other Events, Exhibits
8-K 2018-04-27 Earnings, Exhibits
8-K 2018-03-16 Enter Agreement, Exhibits
8-K 2018-02-28 M&A, Officers, Other Events, Exhibits
8-K 2018-02-22 Other Events, Exhibits
8-K 2018-02-02 Earnings, Exhibits
8-K 2018-01-19 Other Events, Exhibits
8-K 2018-01-03 Other Events
FLT FleetCor 22,940
ALK Alaska Air Group 7,450
USNA Usana Health Sciences 1,980
MNTA Momenta Pharmaceuticals 1,400
MMDM Modern Media Acquisition 270
AXTI AXT 217
ASV ASV Holdings 21
CREG China Recycling Energy 9
IVOB Invo Bioscience 0
MGHL Morgan Group Holding 0
MFSF 2019-03-31
Note 1: Basis of Presentation
Note 2: Acquisitions
Note 3: Earnings per Share
Note 4: Impact of Accounting Pronouncements
Note 5: Investment Securities
Note 6: Loans and Allowance
Note 7: Goodwill
Note 8: Accounting for Certain Loans Acquired in A Transfer
Note 9: Lease Commitments
Note 10: Derivative Financial Instruments
Note 11: Other Borrowings
Note 12: Accumulated Other Comprehensive Income (Loss)
Note 13: Fair Values of Financial Instruments
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operation
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II.Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 mfsf-20190331ex3115ef21e.htm
EX-31.2 mfsf-20190331ex3129f72f1.htm
EX-32 mfsf-20190331xex32.htm

Mutualfirst Financial Earnings 2019-03-31

MFSF 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 mfsf-20190331x10q.htm 10-Q mfsf_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 2019

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from 
                             to                             

 

Commission File Number 000‑27905

 

MutualFirst Financial, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Maryland

    

35‑2085640

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

110 E. Charles Street, Muncie, Indiana

 

47305‑2419

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (765) 747‑2800

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class

Name of each exchange on which registered

Common Stock, par value $.01 per share

Nasdaq Global Market

 

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes    No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes    No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer  

Accelerated filer  

Non-accelerated filer 

Smaller reporting company  

Emerging growth company  

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes    No 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock, par value $.01 per share

MFSF

The NASDAQ Stock Market, LLC

(Global Select Market)

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date. As of May 9, 2019, there were 8,617,362 shares of the registrant’s common stock outstanding.

 

 

 

MutualFirst Financial, Inc.

Form 10‑Q Quarterly Report for the Period Ended March 31, 2019

Table of Contents

 

 

 

 

Page

 

Number

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

Consolidated Condensed Balance Sheets

3

 

Consolidated Condensed Statements of Income

4

 

Consolidated Condensed Statements of Comprehensive Income

5

 

Consolidated Condensed Statement of Stockholders’ Equity

6

 

Consolidated Condensed Statements of Cash Flows

7

 

Notes to Unaudited Consolidated Condensed Financial Statements

8

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

48

 

 

 

Item 4. 

Controls and Procedures

50

 

 

 

PART II – OTHER INFORMATION 

 

 

 

 

Item 1. 

Legal Proceedings

51

 

 

 

Item 1A. 

Risk Factors

51

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

51

 

 

 

Item 3. 

Defaults Upon Senior Securities

51

 

 

 

Item 4. 

Mine Safety Disclosure

52

 

 

 

Item 5. 

Other Information

52

 

 

 

Item 6. 

Exhibits

53

 

 

 

 

 

 

Index to Exhibits

 

55

Signature Page 

 

56

 

 

 

 

 


 

 

MutualFirst Financial, Inc.

Consolidated Condensed Balance Sheets

(In Thousands, Except Share and Per Share Data)

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

2019

    

2018

 

(Unaudited)

 

 

Assets

 

  

 

 

  

Cash and due from banks

$

11,386

 

$

13,078

Interest-bearing demand deposits

 

19,964

 

 

20,336

Cash and cash equivalents

 

31,350

 

 

33,414

Interest-bearing time deposits

 

4,311

 

 

4,239

Investment securities available for sale (carried at fair value)

 

373,937

 

 

370,875

Loans held for sale

 

8,702

 

 

3,987

Loans, net of allowance for loan losses of $13,364 and $13,281, at March 31, 2019 and December 31, 2018, respectively

 

1,490,729

 

 

1,482,662

Premises and equipment, net

 

25,188

 

 

25,641

Federal Home Loan Bank stock

 

13,115

 

 

13,034

Deferred tax asset, net

 

6,674

 

 

7,744

Cash value of life insurance

 

60,462

 

 

60,160

Goodwill

 

22,310

 

 

22,310

Core deposit intangibles

 

3,356

 

 

3,569

Other real estate owned and repossessed assets

 

1,752

 

 

2,013

Other assets

 

22,255

 

 

19,665

Total assets

$

2,064,141

 

$

2,049,313

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

  

 

 

  

Liabilities

 

  

 

 

  

Deposits

 

  

 

 

  

Noninterest-bearing

$

272,826

 

$

259,909

Interest-bearing

 

1,286,945

 

 

1,259,316

Total deposits

 

1,559,771

 

 

1,519,225

Federal Home Loan Bank advances

 

256,236

 

 

292,497

Other borrowings

 

17,810

 

 

17,988

Other liabilities

 

19,140

 

 

17,240

Total liabilities

 

1,852,957

 

 

1,846,950

 

 

 

 

 

 

Commitments and Contingencies

 

  

 

 

  

 

 

 

 

 

 

Stockholders' Equity

 

  

 

 

  

Common stock, $0.01 par value

 

 

 

 

 

Authorized - 20,000,000 shares

 

 

 

 

 

Issued and outstanding - 8,624,462 and 8,603,462 shares

 

 

 

 

 

at March 31, 2019 and December 31, 2018, respectively

 

86

 

 

86

Additional paid-in capital

 

118,052

 

 

117,883

Retained earnings

 

90,531

 

 

87,018

Accumulated other comprehensive income (loss)

 

2,515

 

 

(2,624)

Total stockholders' equity

 

211,184

 

 

202,363

Total liabilities and stockholders' equity

$

2,064,141

 

$

2,049,313

 

 

See notes to consolidated condensed financial statements

3


 

MutualFirst Financial, Inc.

Consolidated Condensed Statements of Income

(Unaudited)

(In Thousands, Except Share and Per Share Data)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2019

    

2018

 

Interest and Dividend Income

 

 

  

 

 

  

 

Loans receivable

 

$

18,270

 

$

14,325

 

Investment securities

 

 

2,766

 

 

2,166

 

Federal Home Loan Bank stock

 

 

178

 

 

190

 

Deposits with financial institutions

 

 

88

 

 

67

 

Total interest and dividend income

 

 

21,302

 

 

16,748

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

  

 

 

  

 

Deposits

 

 

3,573

 

 

2,107

 

Federal Home Loan Bank advances

 

 

1,436

 

 

962

 

Other

 

 

251

 

 

95

 

Total interest expense

 

 

5,260

 

 

3,164

 

 

 

 

 

 

 

 

 

Net Interest Income

 

 

16,042

 

 

13,584

 

Provision for loan losses

 

 

475

 

 

450

 

Net Interest Income After Provision for Loan Losses

 

 

15,567

 

 

13,134

 

 

 

 

 

 

 

 

 

Non-interest Income

 

 

  

 

 

  

 

Service fee income

 

 

1,808

 

 

1,564

 

Net realized gain on sales of available for sale securities

 

 

444

 

 

154

 

Commissions

 

 

1,196

 

 

1,262

 

Net gains on sales of loans

 

 

1,030

 

 

635

 

Net servicing fees

 

 

149

 

 

150

 

Increase in cash value of life insurance

 

 

302

 

 

289

 

Loss on sale of other real estate and repossessed assets

 

 

(29)

 

 

(68)

 

Other income

 

 

185

 

 

449

 

Total non-interest income

 

 

5,085

 

 

4,435

 

 

 

 

 

 

 

 

 

Non-interest Expenses

 

 

  

 

 

  

 

Salaries and employee benefits

 

 

8,560

 

 

7,289

 

Net occupancy expenses

 

 

1,044

 

 

897

 

Equipment expenses

 

 

647

 

 

556

 

Data processing fees

 

 

651

 

 

593

 

ATM and debit card expenses

 

 

562

 

 

471

 

Deposit insurance

 

 

207

 

 

257

 

Professional fees

 

 

408

 

 

782

 

Advertising and promotion

 

 

329

 

 

360

 

Software subscriptions and maintenance

 

 

769

 

 

594

 

Intangible amortization

 

 

214

 

 

163

 

Other real estate and repossessed assets

 

 

53

 

 

45

 

Other expenses

 

 

1,115

 

 

970

 

Total non-interest expenses

 

 

14,559

 

 

12,977

 

 

 

 

 

 

 

 

 

Income Before Income Tax

 

 

6,093

 

 

4,592

 

Income tax expense

 

 

855

 

 

585

 

Net Income

 

$

5,238

 

$

4,007

 

 

 

 

 

 

 

 

 

Earnings Per Common Share

 

 

  

 

 

  

 

Basic

 

$

0.61

 

$

0.51

 

Diluted

 

$

0.60

 

$

0.50

 

Dividends Per Common Share

 

$

0.20

 

$

0.18

 

 

 

See notes to consolidated condensed financial statements

4


 

MutualFirst Financial, Inc.

Consolidated Condensed Statements of Comprehensive Income

(Unaudited)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2019

    

2018

 

Net Income

 

$

5,238

 

$

4,007

 

Other Comprehensive Income (Loss)

 

 

  

 

 

  

 

Net unrealized holding gain (loss) on securities available for sale

 

 

6,959

 

 

(4,931)

 

Reclassification adjustment for realized gains included in net income

 

 

(444)

 

 

(154)

 

 

 

 

6,515

 

 

(5,085)

 

Income tax (benefit) expense related to other comprehensive income

 

 

(1,376)

 

 

1,079

 

Other comprehensive income (loss), net of tax

 

 

5,139

 

 

(4,006)

 

Comprehensive Income

 

$

10,377

 

$

 1

 

 

 

See notes to consolidated condensed financial statements

5


 

MutualFirst Financial, Inc.

Consolidated Condensed Statement of Stockholders’ Equity

For the Periods Ended March 31, 2019 and 2018

(Unaudited)

(In Thousands, Except Share and Per Share Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Additional

    

 

 

    

Accumulated Other

    

 

 

 

 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

 

 

 

 

Stock

    

Capital

    

Earnings

    

 Income (Loss)

    

Total

Balances December 31, 2017

 

$

74

 

$

75,319

 

$

74,508

 

$

381

 

$

150,282

Net income

 

 

  

 

 

  

 

 

4,007

 

 

  

 

 

4,007

Other comprehensive loss, net of taxes

 

 

 

 

 

 

 

 

 

 

 

(4,006)

 

 

(4,006)

Cash dividends, common stock ($0.18 per share)

 

 

 

 

 

 

 

 

(1,544)

 

 

 

 

 

(1,544)

Issuance of common stock related to acquisition

 

 

12

 

 

42,311

 

 

 

 

 

 

 

 

42,323

Balances March 31, 2018

 

$

86

 

$

117,630

 

$

76,971

 

$

(3,625)

 

$

191,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances December 31, 2018

 

$

86

 

$

117,883

 

$

87,018

 

$

(2,624)

 

$

202,363

Net income

 

 

  

 

 

  

 

 

5,238

 

 

  

 

 

5,238

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

5,139

 

 

5,139

Stock options, exercised

 

 

 

 

 

169

 

 

 

 

 

 

 

 

169

Cash dividends, common stock ($0.20 per share)

 

 

 

 

 

 

 

 

(1,725)

 

 

 

 

 

(1,725)

Balances March 31, 2019

 

$

86

 

$

118,052

 

$

90,531

 

$

2,515

 

$

211,184

 

 

See notes to consolidated condensed financial statements

 

 

6


 

MutualFirst Financial, Inc.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2019

    

2018

 

Operating Activities

 

 

  

 

 

  

 

Net income

 

$

5,238

 

$

4,007

 

Items not requiring cash

 

 

  

 

 

  

 

Provision for loan losses

 

 

475

 

 

450

 

Depreciation and amortization

 

 

1,521

 

 

1,269

 

Increase in cash value of life insurance

 

 

(302)

 

 

(289)

 

Net amortization (accretion) of purchase accounting adjustments

 

 

17

 

 

(61)

 

Loans originated for sale

 

 

(30,452)

 

 

(19,259)

 

Proceeds from sales of loans held for sale

 

 

26,703

 

 

20,729

 

Net gain on sale of loans

 

 

(1,030)

 

 

(635)

 

Net gain on sale of securities, available for sale

 

 

(444)

 

 

(154)

 

Gain on bank owned life insurance

 

 

 -

 

 

(326)

 

Loss on sale of other real estate and repossessed assets

 

 

29

 

 

68

 

Change in

 

 

 

 

 

 

 

Interest receivable and other assets

 

 

1,163

 

 

927

 

Interest payable and other liabilities

 

 

(1,772)

 

 

(541)

 

Other adjustments

 

 

(281)

 

 

22

 

Net cash provided by operating activities

 

 

865

 

 

6,207

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

  

 

 

  

 

Net change in interest-bearing time deposits

 

 

(72)

 

 

5,973

 

Purchases of securities, available for sale

 

 

(14,599)

 

 

(37,305)

 

Proceeds from maturities and paydowns of securities, available for sale

 

 

7,359

 

 

6,332

 

Proceeds from sales of securities, available for sale

 

 

10,785

 

 

36,811

 

Purchase of Federal Home Loan Bank stock

 

 

(81)

 

 

 -

 

Net change in loans

 

 

(9,586)

 

 

(17,736)

 

Net cash and cash equivalents paid in acquisition

 

 

 -

 

 

(7,673)

 

Purchases of premises and equipment

 

 

(540)

 

 

(390)

 

Proceeds from sale of real estate owned and repossessed assets

 

 

942

 

 

366

 

Proceeds from bank owned life insurance

 

 

 -

 

 

1,669

 

Proceeds from sale of premises and equipment

 

 

375

 

 

67

 

Net cash used in investing activities

 

 

(5,417)

 

 

(11,886)

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

  

 

 

  

 

Net change in

 

 

  

 

 

  

 

Noninterest-bearing, interest-bearing demand and savings deposits

 

 

16,012

 

 

19,727

 

Certificates of deposit

 

 

24,534

 

 

3,462

 

Proceeds from FHLB advances

 

 

100,500

 

 

112,600

 

Repayments of FHLB advances

 

 

(136,800)

 

 

(124,700)

 

Proceeds from other borrowings

 

 

 -

 

 

10,000

 

Repayments of other borrowings

 

 

(202)

 

 

(138)

 

Cash dividends

 

 

(1,725)

 

 

(1,544)

 

Stock options exercised

 

 

169

 

 

 -

 

Net cash provided by financing activities

 

 

2,488

 

 

19,407

 

Net Change in Cash and Cash Equivalents

 

 

(2,064)

 

 

13,728

 

Cash and Cash Equivalents, Beginning of Period

 

 

33,414

 

 

27,341

 

Cash and Cash Equivalents, End of Period

 

$

31,350

 

$

41,069

 

Additional Cash Flows Information 

 

 

  

 

 

  

 

Interest paid

 

$

5,306

 

$

3,026

 

Transfers from loans to foreclosed assets

 

 

727

 

 

445

 

Mortgage servicing rights capitalized

 

 

64

 

 

56

 

Right of use assets obtained in exchange for lease obligations

 

 

3,603

 

 

 -

 

 

 

 

 

 

 

 

 

In conjunction with the acquisition, liabilities were assumed as follows:

 

 

 

 

 

 

 

Fair value of assets acquired

 

$

 -

 

$

406,928

 

Cash paid in acquisition

 

 

 -

 

 

(18,999)

 

Common stock issued

 

 

 -

 

 

(42,323)

 

Liabilities assumed

 

$

 -

 

$

345,606

 

 

See notes to consolidated condensed financial statements

 

7


 

MutualFirst Financial, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(In Thousands, Except Share and Per Share Data)

Note 1:  Basis of Presentation

The consolidated condensed financial statements include the accounts of MutualFirst Financial, Inc. (MutualFirst or the “Company”), its wholly owned subsidiaries, MFBC Statutory Trust, Universal Preferred Trust, MutualFirst Risk Management, Inc., Mutual Risk Advisors, Inc., and MutualBank, an Indiana commercial bank (“Mutual” or the “Bank”), Mutual’s wholly owned subsidiaries, First MFSB Corporation, Mishawaka Financial Services, Summit Service Corp. and the wholly owned subsidiary of Summit Service Corp., Summit Mortgage Inc. (“Summit”), Mutual Federal Investment Company (“MFIC”), and MFIC majority owned subsidiary, Mutual Federal REIT, Inc. All significant inter-company accounts and transactions have been eliminated in consolidation. These companies conform to accounting principles generally accepted in the United States of America and reporting practices followed by the banking industry. The more significant of the policies are described below.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10‑K  for the year ended December 31, 2018, filed with the Securities and Exchange Commission on March 15, 2019.

The interim consolidated condensed financial statements at and for the three months ended March 31, 2019 and 2018, have not been audited by independent accountants, but in the opinion of management, reflect all adjustments necessary to present fairly the financial position, results of operations and cash flows for such periods. The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

The Consolidated Condensed Balance Sheet of the Company as of December 31, 2018 has been derived from the Audited Consolidated Balance Sheet of the Company as of that date.

 

Note 2:  Acquisitions

On February 28, 2018, the Company completed the 100% acquisition of Universal Bancorp (“Universal”). Universal and BloomBank, a wholly-owned subsidiary of Universal, merged with and into the Company and the Bank, respectively. BloomBank was headquartered in Bloomfield, Indiana and had 13 retail financial center offices serving counties in central and southern Indiana. Under terms of the merger agreement, shareholders of Universal received fixed consideration of 15.6 shares of MutualFirst common stock and $250.00 in cash for each share of Universal common stock. The Company issued approximately 1.2 million shares of common stock, which was valued at approximately $42.3 million. Based upon the February 28, 2018 closing price of $35.70 per share of MutualFirst common stock, the transaction had an implied valuation of approximately $61.3 million. The Company incurred approximately $605,000 in pretax expenses related to the acquisition in the first three months of 2018. These expenses were classified in the non-interest expense section of the income statement, primarily in professional fees and other expenses. As a result of the acquisition, the Company was able to increase both its deposit and loan base and expects to reduce costs through economies of scale. Goodwill resulted from this transaction due to the expected synergies and economies of scale.

8


 

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on valuations of the fair value of tangible and intangible assets acquired, liabilities assumed and related deferred tax impacts, which were based on assumptions that were subject to change as management evaluated, the purchase price for the Universal acquisition is detailed in the following table. If, prior to the end of the one-year measurement period for finalizing the purchase price allocation, information becomes available which would indicate adjustments were required to the purchase price allocation, such adjustments will be recorded in the reporting period in which the adjustment amounts were determined. No measurement period adjustments were recorded in the first quarter of 2019. Measurement period adjustments recorded in 2018 were calculated as if the accounting had been completed as of the acquisition date.

 

 

 

 

 

 

 

 

 

Assets

    

 

  

 

Liabilities

 

 

  

Cash and cash equivalents

 

$

11,326

 

Deposits

 

 

  

Interest-bearing time deposits

 

 

8,747

 

Non-interest bearing

 

$

81,061

Investment securities, available for sale

 

 

87,817

 

NOW accounts

 

 

66,372

 

 

 

 

 

Savings and money market

 

 

85,690

Loans

 

 

 

 

Certificated of deposits

 

 

82,107

Commercial

 

 

203,489

 

Total deposits

 

 

315,230

Residential mortgage

 

 

36,410

 

 

 

 

 

Consumer

 

 

12,532

 

Borrowings

 

 

25,463

Total loans

 

 

252,431

 

Interest payable

 

 

81

 

 

 

 

 

Subordinated debt

 

 

4,000

Premises and equipment, net

 

 

4,799

 

Other liabilities

 

 

462

Federal Home Loan Bank stock

 

 

1,637

 

Total liabilities assumed

 

$

345,236

Deferred tax asset, net

 

 

2,848

 

 

 

 

 

Cash value of life insurance

 

 

7,556

 

 

 

 

 

Goodwill

 

 

20,511

 

 

 

 

 

Core deposit intangible

 

 

4,545

 

 

 

 

 

Interest receivable

 

 

1,259

 

 

 

 

 

Other real estate owned and repossessed assets

 

 

1,009

 

 

 

 

 

Other assets

 

 

2,073

 

 

 

 

 

Total assets purchased

 

$

406,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued

 

$

42,323

 

 

 

 

 

Cash paid

 

 

18,999

 

 

 

 

 

Total purchase price

 

$

61,322

 

 

 

 

 

 

Of the total purchase price, $4.5 million was allocated to a core deposit intangible that is being amortized over its estimated life of 15 years. Of the remaining purchase price, $20.5 million was allocated to goodwill, which is not deductible for tax purposes. Loans acquired had a fair value of $252.4 million. The contractual principal at the acquisition date was $257.0 million. The $4.6 million will be accreted into income for the performing loans or utilized for charging off non-performing loans.

Pro Forma Financial Information

The results of operations of Universal Bancorp have been included in the Company’s consolidated financial statements since the acquisition date. The following schedule includes pro forma results for the three months

9


 

ended March 31, 2018, as if the Universal acquisition occurred as of the beginning of the reporting period presented.

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 2018

Summary of Operations

 

 

 

Net interest income

 

$

15,875

Provision for loan losses

 

 

(450)

Net interest income after provision

 

$

15,425

Non-interest income

 

 

4,713

Non-interest expense

 

 

(18,795)

Income before income taxes

 

$

1,343

Income tax benefit (expense)

 

 

208

Net income to common shareholders

 

$

1,551

Basic earnings per share

 

$

0.18

Diluted earnings per share

 

$

0.18

 

 

 

The pro-forma information for March 31, 2018 includes operating revenue from Universal of $1.4 million since the date of acquisition. Earnings of Universal since the acquisition date, net of tax and non-recurring expenses related to the acquisition were $1.2 million as of March 31, 2018. The pro forma information is presented for information purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.

Note 3:  Earnings Per Share

Earnings per share were computed as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

2019

 

2018

 

 

    

 

 

    

Weighted-Average

    

Per-Share

    

 

 

    

Weighted-Average

    

Per-Share

 

 

 

Net Income

 

Shares

 

Amount

 

Net Income

 

Shares

 

Amount

 

Basic Earnings Per Share

 

 

  

 

  

 

 

  

 

 

  

 

  

 

 

  

 

Net income

 

$

5,238

 

8,621,406

 

$

0.61

 

$

4,007

 

7,810,916

 

$

0.51

 

Effect of Dilutive Securities

 

 

  

 

  

 

 

  

 

 

  

 

  

 

 

  

 

Stock options

 

 

  

 

124,415

 

 

  

 

 

  

 

154,977

 

 

  

 

Diluted Earnings Per Share

 

 

  

 

  

 

 

  

 

 

  

 

  

 

 

  

 

Net income available and assumed conversions

 

$

5,238

 

8,745,821

 

$

0.60

 

$

4,007

 

7,965,893

 

$

0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2019 and 2018, the exercise price for all options was lower than the average market price of the common shares.

Note 4:  Impact of Accounting Pronouncements

In March 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-01 “Leases (Topic 842): Codification Improvements.” These amendments align the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. The ASU also requires lessors within the scope of Topic 842, Financial Services-Depository Lending, to present all “principal payments received under leases” within investing activities on the Consolidated Statements of Cash Flows. Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early application is permitted. An entity should apply the amendments as of the date that it first applied Topic 842, using the same transition methodology in accordance with paragraph 842-10-65-1(c). The

10


 

Company adopted Topic 842 on January 1, 2019 and applied the amendments in ASU 2019-01 as of the same date and it did not have a material impact on its accounting and disclosures.

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. These amendments modify the disclosure requirements in Topic 820 as follows:

·

Removal of the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements.

·

For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

·

Additional disclosure of the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

The guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018‑13 and delay adoption of the additional disclosures until their effective date. The Company is assessing ASU 2018‑13 and the impact on its disclosures.

In June 2018, the FASB issued ASU 2018‑07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting. This ASU expands the scope of Topic 718, Compensation – Stock Compensation to include share-based payments issued to nonemployees for goods and services. Topic 718 currently only includes share-based payments to employees where the ASU will substantially align the accounting for share-based payments to nonemployees and employees. The ASU supersedes Subtopic 505‑50, Equity – Equity-Based Payments to Non-Employees. The guidance is effective for public companies for fiscal year, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company has adopted ASU 2018‑07 and it did not have a material impact on the Company’s accounting and disclosures.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. The new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption, permitted. The Company adopted ASU 2017-12 on January 1, 2019 and it did not have a material impact on the Company’s accounting and disclosures.

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements. Topic 326 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. The ASU is intended to provide financial statement users with useful information about the expected credit losses on financial instruments and other commitments to extend credit.

·

The ASU requires financial assets measured at amortized cost (primarily loans) be presented at the amount net of a valuation allowance for credit losses, and that the income statement include the

11


 

measurement of credit losses for newly recognized financial assets as well as changes in expected losses on previously recognized financial assets. The provisions of this ASU do not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect its expectations of the credit loss estimate. The new model will be based on relevant information including past events, historical experience, current conditions, and reasonable and supportive forecasts that affect the collectability of the asset. The provisions of this ASU differ from current U.S. generally accepted accounting principles (“GAAP”) in that current U.S. GAAP generally delays recognition of the full amount of credit losses until the loss is probable of occurring.

·

This ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a write-down.

This ASU will be effective for the Company for interim and annual periods beginning in the first quarter of 2020. Earlier adoption is permitted beginning in the first quarter of 2019. The Company is in process of implementing a third-party software solution to assist in the application of the new standard. The Company continues to evaluate all resources and data (both current and historical) needed. The overall impact of the new standard on the financial condition or results of operations cannot yet be determined.

In February 2016, the FASB issued ASU 2016‑02, Leases. The objective of the amendment is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. These changes will increase transparency among companies by recognizing lease assets and liabilities on the balance sheet and disclosing additional information about lease arrangements. The amendments in this update were effective for annual and interim periods beginning in the first quarter of 2019. The Company has operating leases in place for some locations as well as equipment. In July 2018, the FASB issued ASU 2018-10, which provides narrow-scope improvements to the lease standard and ASU 2018-11, which allows entities to choose an additional transition method, under which an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transitional method, the entity shall recognize and measure the leases that exist at the adoption date and the prior comparative periods are not adjusted. The Company adopted this ASU as of January 1, 2019 using the transitional method. The new standard provides a number of optional practical expedients in transition. The Company has elected the pract