x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXHANGE ACT OF
1934
|
Maryland
|
35-2085640
|
||
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
||
incorporation
or organization)
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Identification
No.)
|
110
East Charles Street
|
|||
Muncie, Indiana
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47305
|
||
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
|
Non-accelerated
filer ¨
(Do not check if a smaller
reporting company)
|
Smaller
reporting company x
|
Page
|
||
Number
|
||
PART
I – FINANCIAL INFORMATION
|
|
|
Item
1.
|
Financial
Statements
|
|
Consolidated
Condensed Balance Sheets
|
1
|
|
Consolidated
Condensed Statements of Income
|
2
|
|
Consolidated
Condensed Statement of Stockholders’ Equity
|
3
|
|
Consolidated
Condensed Statements of Cash Flows
|
4
|
|
Notes
to Unaudited Consolidated Condensed Financial Statements
|
5
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
20
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
29
|
Item
4.
|
Controls
and Procedures
|
29
|
PART
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
30
|
Item
1A.
|
Risk
Factors
|
30
|
Item
2.
|
Unregistered
Sales of Equity Changes in Securities and Use of Proceeds
|
30
|
Item
3.
|
Defaults
Upon Senior Securities
|
30
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
30
|
Item
5.
|
Other
Information
|
30
|
Item
6.
|
Exhibits
|
30
|
Signature
Page
|
31
|
|
|
||
Exhibits
|
|
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Cash
|
$ | 17,145,091 | $ | 27,245,633 | ||||
Interest-bearing
demand deposits
|
104,859,355 | 19,095,264 | ||||||
Cash
and cash equivalents
|
122,004,446 | 46,340,897 | ||||||
Investment
securities available for sale
|
172,843,811 | 130,913,670 | ||||||
Investment
securities held to maturity
|
7,663,851 | 8,147,407 | ||||||
Total
investment securities
|
180,507,662 | 139,061,077 | ||||||
Loans
held for sale
|
3,718,711 | 2,520,546 | ||||||
Loans
|
1,045,603,134 | 1,076,108,466 | ||||||
Allowance
for loan losses
|
(16,635,320 | ) | (16,414,331 | ) | ||||
Net
loans
|
1,028,967,814 | 1,059,694,135 | ||||||
Premises
and equipment, net of accumulated depreciation of $16,635,000 and
$16,414,000
|
34,098,633 | 34,556,318 | ||||||
Federal
Home Loan Bank of Indianapolis stock, at cost
|
18,631,500 | 18,631,500 | ||||||
Investment
in limited partnerships
|
4,033,012 | 4,160,629 | ||||||
Cash
surrender value of life insurance
|
44,630,216 | 44,247,277 | ||||||
Prepaid
FDIC premium
|
5,490,996 | 5,907,149 | ||||||
Core
deposit and other intangibles
|
5,528,095 | 5,881,075 | ||||||
Deferred
income tax benefit
|
19,534,511 | 19,514,151 | ||||||
Other
assets
|
19,985,885 | 18,519,603 | ||||||
Total
assets
|
$ | 1,487,131,481 | $ | 1,399,034,357 | ||||
Liabilities
|
||||||||
Deposits
|
||||||||
Non-interest-bearing
|
$ | 104,474,123 | $ | 98,024,890 | ||||
Interest
bearing
|
1,017,913,252 | 947,171,169 | ||||||
Total
deposits
|
1,122,387,375 | 1,045,196,059 | ||||||
Federal
Home Loan Bank advances
|
207,050,638 | 197,960,396 | ||||||
Other
borrowings
|
13,702,690 | 14,113,526 | ||||||
Other
liabilities
|
13,665,240 | 12,037,299 | ||||||
Total
liabilities
|
1,356,805,943 | 1,269,307,280 | ||||||
Commitments
and Contingent Liabilities
|
||||||||
Stockholders' Equity
|
||||||||
Preferred
stock, $.01 par value
Authorized and unissued — 5,000,000 shares Issued and outstanding — 32,382 shares; liquidation preference $1,000 per share |
324 | 324 | ||||||
Common
stock, $.01 par value
Authorized — 20,000,000 shares Issued and outstanding —6,984,754 shares |
69,847 | 69,847 | ||||||
Additional
paid-in capital - preferred stock
|
31,691,805 | 31,645,814 | ||||||
Additional
paid-in capital - common stock
|
72,461,857 | 72,485,756 | ||||||
Retained
earnings
|
29,127,755 | 28,654,285 | ||||||
Accumulated
other comprehensive loss
|
(1,834,284 | ) | (1,857,723 | ) | ||||
Unearned
employee stock ownership plan (ESOP) shares
|
(1,191,766 | ) | (1,271,226 | ) | ||||
Total
stockholders' equity
|
130,325,538 | 129,727,077 | ||||||
Total
liabilities and stockholders' equity
|
$ | 1,487,131,481 | $ | 1,399,034,357 |
Three Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Interest Income
|
||||||||
Loans
receivable, including fees
|
$ | 15,500,545 | $ | 17,128,494 | ||||
Investment
securities:
|
||||||||
Mortgage-backed
securities
|
1,348,189 | 942,357 | ||||||
Federal
Home Loan Bank stock
|
93,923 | 119,000 | ||||||
Other
investments
|
258,818 | 455,777 | ||||||
Deposits
with financial institutions
|
43,009 | 10,304 | ||||||
Total
interest income
|
17,244,484 | 18,655,932 | ||||||
Interest Expense
|
||||||||
Passbook
savings
|
34,459 | 65,474 | ||||||
Certificates
of deposit
|
4,326,167 | 5,204,620 | ||||||
Daily
Money Market accounts
|
147,156 | 129,203 | ||||||
Demand
and NOW acounts
|
198,008 | 200,447 | ||||||
Federal
Home Loan Bank advances
|
1,814,769 | 2,430,999 | ||||||
Other
interest expense
|
236,012 | 233,651 | ||||||
Total
interest expense
|
6,756,571 | 8,264,394 | ||||||
Net
Interest Income
|
10,487,914 | 10,391,538 | ||||||
Provision
for losses on loans
|
1,525,000 | 1,450,000 | ||||||
Net
Interest Income After Provision for Loan Losses
|
8,962,914 | 8,941,538 | ||||||
Other Income
|
||||||||
Service
fee income
|
1,739,889 | 1,689,590 | ||||||
Net
realized gain (loss) on sale of securities
|
284,828 | 652 | ||||||
Equity
in losses of limited partnerships
|
(127,215 | ) | (77,744 | ) | ||||
Commissions
|
941,516 | 628,221 | ||||||
Net
gains on sales of loans
|
354,309 | 1,025,995 | ||||||
Net
servicing fees
|
36,848 | 77,037 | ||||||
Increase
in cash surrender value of life insurance
|
382,939 | 386,479 | ||||||
Other-than-temporary
losses on securities
|
||||||||
Total
other-than-temporary losses
|
(1,831,057 | ) | (200,000 | ) | ||||
Portion
of loss recognized in other comprehensive income (before
taxes)
|
1,254,239 | 0 | ||||||
Net
impairment losses recognized in earnings
|
(576,818 | ) | (200,000 | ) | ||||
Other
income
|
104,210 | 50,355 | ||||||
Total
other income
|
3,140,506 | 3,580,585 | ||||||
Other Expenses
|
||||||||
Salaries
and employee benefits
|
5,335,825 | 5,460,003 | ||||||
Net
occupancy expenses
|
660,877 | 809,974 | ||||||
Equipment
expenses
|
485,095 | 337,203 | ||||||
Data
processing fees
|
410,641 | 353,815 | ||||||
Automated
teller machine
|
279,079 | 280,137 | ||||||
Deposit
insurance
|
445,954 | 387,984 | ||||||
Professional
fees
|
342,319 | 334,608 | ||||||
Advertising
and promotion
|
297,889 | 362,500 | ||||||
Software
subscriptions and maintenance
|
397,123 | 332,751 | ||||||
Intangible
amortization
|
352,980 | 397,357 | ||||||
Repossessed
assets expense
|
466,885 | 297,696 | ||||||
Other
expenses
|
859,432 | 1,018,024 | ||||||
Total
other expenses
|
10,334,099 | 10,372,052 | ||||||
Income
Before Income Tax
|
1,769,321 | 2,150,071 | ||||||
Income
tax expense
|
426,000 | 354,000 | ||||||
Net
Income
|
1,343,321 | 1,796,071 | ||||||
Preferred
stock dividends and amortization
|
450,766 | 450,766 | ||||||
Net
Income Available to Common Shareholders
|
$ | 892,555 | $ | 1,345,305 | ||||
Basic
earnings per common share
|
$ | 0.13 | $ | 0.20 | ||||
Diluted
earnings per common share
|
$ | 0.13 | $ | 0.20 | ||||
Dividends
per common share
|
$ | 0.06 | $ | 0.12 |
Common
Stock
|
Preferred
Stock
|
Accumulated
|
||||||||||||||||||||||||||||||||||||||||||
Additional
|
Additional
|
Other
|
Unearned
|
|||||||||||||||||||||||||||||||||||||||||
Shares
|
paid-in
|
Shares
|
paid-in
|
Comprehensive
|
Retained
|
Comprehensive
|
ESOP
|
|||||||||||||||||||||||||||||||||||||
Outstanding
|
Amount
|
capital
|
Outstanding
|
Amount
|
capital
|
Income
|
Earnings
|
Income (Loss)
|
shares
|
Total
|
||||||||||||||||||||||||||||||||||
Balances,
December 31, 2009
|
6,984,754 | $ | 69,847 | $ | 72,485,756 | 32,382 | $ | 324 | $ | 31,645,814 | $ | 28,654,285 | $ | (1,857,723 | ) | $ | (1,271,226 | ) | $ | 129,727,077 | ||||||||||||||||||||||||
Comprehensive
income
|
||||||||||||||||||||||||||||||||||||||||||||
Net
income for the period
|
$ | 1,343,321 | 1,343,321 | 1,343,321 | ||||||||||||||||||||||||||||||||||||||||
Other
comprehensive income, net of tax
|
||||||||||||||||||||||||||||||||||||||||||||
Net
unrealized gain on securities
|
111,562 | $ | 111,561 | 111,561 | ||||||||||||||||||||||||||||||||||||||||
Net
unrealized loss on derivatives
|
(88,122 | ) | (88,122 | ) | (88,122 | ) | ||||||||||||||||||||||||||||||||||||||
Comprehensive
income
|
$ | 1,366,761 | ||||||||||||||||||||||||||||||||||||||||||
ESOP
shares earned
|
(29,817 | ) | 79,460 | 49,643 | ||||||||||||||||||||||||||||||||||||||||
Accretion
of discount on preferred stock
|
45,991 | (45,991 | ) | 0 | ||||||||||||||||||||||||||||||||||||||||
Share-based
compensation
|
5,918 | 5,918 | ||||||||||||||||||||||||||||||||||||||||||
Cash
dividends ($.06 per common share)
|
(419,085 | ) | (419,085 | ) | ||||||||||||||||||||||||||||||||||||||||
Cash
dividends - preferred stock
|
(404,775 | ) | (404,775 | ) | ||||||||||||||||||||||||||||||||||||||||
Balances,
March 31, 2010
|
6,984,754 | $ | 69,847 | $ | 72,461,857 | 32,382 | $ | 324 | $ | 31,691,805 | $ | 29,127,755 | $ | (1,834,284 | ) | $ | (1,191,766 | ) | $ | 130,325,538 |
Three Months Ended
March 31,
|
||||||||
2010
|
2009
|
|||||||
Operating
Activities
|
||||||||
Net
income
|
$ | 1,343,321 | $ | 1,796,071 | ||||
Items
not requiring (providing) cash
|
||||||||
Provision
for loan losses
|
1,525,000 | 1,450,000 | ||||||
Depreciation
and amortization
|
1,278,720 | 1,070,119 | ||||||
Deferred
income tax
|
(42,441 | ) | 858,655 | |||||
Loans
originated for sale
|
(15,466,632 | ) | (56,081,338 | ) | ||||
Proceeds
from sales of loans held for sale
|
14,480,091 | 42,442,457 | ||||||
Gains
on sales of loans held for sale
|
(354,309 | ) | (1,025,995 | ) | ||||
Gain
on available for sale securities
|
(284,828 | ) | (652 | ) | ||||
Gain
on sale of premises and equipment
|
- | (187,651 | ) | |||||
Loss
on other-than-temporary impairement, AFS securities
|
576,818 | 200,000 | ||||||
ESOP
compensation expense
|
49,643 | 46,246 | ||||||
Change
in
|
||||||||
Interest
receivable and other assets
|
(119,065 | ) | 809,227 | |||||
Prepaid
FDIC premiums
|
416,153 | 2,887 | ||||||
Interest
payable and other liabilities
|
479,389 | (538,691 | ) | |||||
Cash
value of life insurance
|
(382,939 | ) | (386,479 | ) | ||||
Other
adjustments
|
(32,147 | ) | (380,630 | ) | ||||
Net
cash provided by (used in) operating activities
|
3,466,774 | (9,925,774 | ) | |||||
Investing
Activities
|
||||||||
Net
change in interest earning deposits
|
- | (14,000,000 | ) | |||||
Purchases
of securities available for sale
|
(56,426,287 | ) | (24,701,997 | ) | ||||
Proceeds
from maturities and paydowns of securities:
|
||||||||
Available
for sale
|
6,019,368 | 4,155,426 | ||||||
Held
to maturity
|
322,120 | 380,040 | ||||||
Proceeds
from sale of available-for-sale securities
|
8,408,554 | 500,000 | ||||||
Net
change in loans
|
25,525,197 | 19,815,913 | ||||||
Purchases
of premises and equipment
|
(85,045 | ) | (186,590 | ) | ||||
Proceeds
from sale of premises and equipment
|
- | 1,033,151 | ||||||
Proceeds
from real estate owned sales
|
1,312,736 | 560,081 | ||||||
Other
investing activities
|
759,037 | 268,381 | ||||||
Net
cash used in investing activities
|
(14,164,320 | ) | (12,175,595 | ) | ||||
Financing
Activities
|
||||||||
Net
change in
|
||||||||
Noninterest-bearing,
interest-bearing demand and savings deposits
|
42,662,481 | (7,661,417 | ) | |||||
Certificates
of deposits
|
34,528,835 | 59,521,288 | ||||||
Proceeds
from FHLB advances
|
20,000,000 | 7,000,000 | ||||||
Repayment
of FHLB advances
|
(10,733,315 | ) | (27,549,026 | ) | ||||
Repayment
of other borrowings
|
(421,598 | ) | (415,655 | ) | ||||
Cash
dividends paid
|
(823,860 | ) | (1,071,450 | ) | ||||
Other
financing activities
|
1,148,552 | 1,303,554 | ||||||
Net
cash provided by financing activities
|
86,361,095 | 31,127,294 | ||||||
Net
Change in Cash and Cash Equivalents
|
75,663,549 | 9,025,925 | ||||||
Cash
and Cash Equivalents, Beginning of Year
|
46,340,897 | 39,703,452 | ||||||
Cash
and Cash Equivalents, End of Year
|
$ | 122,004,446 | $ | 48,729,377 | ||||
Additional
Cash Flows Information
|
||||||||
Interest
paid
|
$ | 6,617,556 | $ | 7,973,004 | ||||
Income
tax paid
|
- | - | ||||||
Transfers
from loans to foreclosed real estate
|
3,409,821 | 482,737 | ||||||
Mortgage
servicing rights capitalized
|
142,685 | 885,732 |
Three Months Ended Ended March
31,
|
||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
Weighted-
|
Weighted-
|
|||||||||||||||||||||||
Average
|
Per-Share
|
Average
|
Per-Share
|
|||||||||||||||||||||
Income
|
Shares
|
Amount
|
Income
|
Shares
|
Amount
|
|||||||||||||||||||
(000's)
|
(000's)
|
|||||||||||||||||||||||
Basic
Earnings Per Share
|
||||||||||||||||||||||||
Net
income
|
$ | 1,344 | 6,861,589 | $ | 1,796 | 6,825,544 | ||||||||||||||||||
Dividends
and accretion on preferred stock
|
(451 | ) | (451 | ) | ||||||||||||||||||||
Income
available to common shareholders
|
$ | 893 | 6,861,589 | $ | 0.13 | $ | 1,345 | 6,825,544 | $ | 0.20 | ||||||||||||||
Effect
of Dilutive securities
|
||||||||||||||||||||||||
Stock
options and RRP grants
|
2,549 | 0 | ||||||||||||||||||||||
Diluted
Earnings Per Share
|
||||||||||||||||||||||||
Income
available to common stockholders and assumed conversions
|
$ | 893 | 6,864,138 | $ | 0.13 | $ | 1,345 | 6,825,544 | $ | 0.20 |
March 31, 2010
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gains
|
Loss
|
Value
|
|||||||||||||
Available
for Sale Securities
|
||||||||||||||||
Mortgage-backed
securities
|
$ | 48,517 | $ | 955 | $ | (80 | ) | $ | 49,392 | |||||||
Collateralized
mortgage obligations
|
111,716 | 2,220 | (314 | ) | 113,622 | |||||||||||
Municipals
|
1,186 | 53 | (5 | ) | 1,234 | |||||||||||
Federal
Agencies
|
5,000 | 16 | (41 | ) | 4,975 | |||||||||||
Small
Business Administration
|
69 | - | (1 | ) | 68 | |||||||||||
Corporate
obligations
|
6,945 | - | (5,054 | ) | 1,891 | |||||||||||
Marketable
equity securities
|
1,696 | - | (34 | ) | 1,662 | |||||||||||
Total
investment securities
|
$ | 175,129 | $ | 3,244 | $ | (5,529 | ) | $ | 172,844 | |||||||
Held
to Maturity Securities
|
||||||||||||||||
Mortgage-backed
securities
|
$ | 4,378 | $ | 38 | $ | (1,270 | ) | $ | 3,146 | |||||||
Collateralized
mortgage obligations
|
2,786 | 158 | (523 | ) | 2,421 | |||||||||||
Federal
Agency
|
500 | 3 | - | 503 | ||||||||||||
Total
investment securities
|
$ | 7,664 | $ | 199 | $ | (1,793 | ) | $ | 6,070 |
December 31, 2009
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gains
|
Loss
|
Value
|
|||||||||||||
Available
for Sale Securities
|
||||||||||||||||
Mortgage-backed
securities
|
$ | 29,175 | $ | 824 | $ | (109 | ) | $ | 29,890 | |||||||
Collateralized
mortgage obligations
|
85,726 | 1,874 | (571 | ) | 87,029 | |||||||||||
Municipals
|
9,313 | 360 | (17 | ) | 9,656 | |||||||||||
Small
Business Administration
|
158 | - | (1 | ) | 157 | |||||||||||
Corporate
obligations
|
7,321 | - | (4,782 | ) | 2,539 | |||||||||||
Marketable
equity securities
|
1,685 | - | (42 | ) | 1,643 | |||||||||||
Total
investment securities
|
$ | 133,378 | $ | 3,058 | $ | (5,522 | ) | $ | 130,914 | |||||||
Held
to Maturity Securities
|
||||||||||||||||
Mortgage-backed
securities
|
$ | 4,619 | $ | 29 | $ | (1,373 | ) | $ | 3,275 | |||||||
Collateralized
mortgage obligations
|
3,028 | 158 | (632 | ) | 2,554 | |||||||||||
Federal
Agency
|
500 | 4 | - | 504 | ||||||||||||
Total
investment securities
|
$ | 8,147 | $ | 191 | $ | (2,005 | ) | $ | 6,333 |
Available for Sale
|
Held to Maturity
|
|||||||||||||||
Amortized
|
Fair
|
Amortized
|
Fair
|
|||||||||||||
Description Securities
|
Cost
|
Value
|
Cost
|
Value
|
||||||||||||
Security
obligations due
|
||||||||||||||||
Within
one year
|
$ | 100 | $ | 100 | $ | - | $ | - | ||||||||
One
to five years
|
1,000 | 1,002 | 500 | 503 | ||||||||||||
Five
to ten years
|
- | - | - | - | ||||||||||||
After
ten years
|
12,031 | 6,998 | - | - | ||||||||||||
13,131 | 8,100 | 500 | 503 | |||||||||||||
Mortgage-backed
securities
|
48,517 | 49,392 | 4,378 | 3,146 | ||||||||||||
Collateralized
mortgage obligations
|
111,716 | 113,622 | 2,786 | 2,421 | ||||||||||||
Small
Business Administration
|
69 | 68 | - | - | ||||||||||||
Marketable
equity securities
|
1,696 | 1,662 | - | - | ||||||||||||
Totals
|
$ | 175,129 | $ | 172,844 | $ | 7,664 | $ | 6,070 |
March 31, 2010
|
||||||||||||||||||||||||
Less than 12 months
|
12 months or more
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
|||||||||||||||||||
Available for Sale
|
||||||||||||||||||||||||
Mortgage-backed
securities
|
$ | 17,227 | $ | (80 | ) | $ | - | $ | - | $ | 17,227 | $ | (80 | ) | ||||||||||
Collateralized
mortgage obligations
|
1,960 | (35 | ) | 4,341 | (279 | ) | 6,301 | (314 | ) | |||||||||||||||
Federal
agencies
|
1,959 | (41 | ) | - | - | 1,959 | (41 | ) | ||||||||||||||||
Municipals
|
- | - | 668 | (5 | ) | 668 | (5 | ) | ||||||||||||||||
Small
Business Administration
|
- | - | 68 | (1 | ) | 68 | (1 | ) | ||||||||||||||||
Corporate
obligations
|
- | - | 1,791 | (5,054 | ) | 1,791 | (5,054 | ) | ||||||||||||||||
Marketable
equity securities
|
- | - | 1,662 | (34 | ) | 1,662 | (34 | ) | ||||||||||||||||
Total
temporarily impaired securities
|
$ | 21,146 | $ | (156 | ) | $ | 8,530 | $ | (5,373 | ) | $ | 29,676 | $ | (5,529 | ) | |||||||||
Held
to Maturity
|
||||||||||||||||||||||||
Mortgage-backed
securities
|
$ | 190 | $ | (551 | ) | $ | 1,417 | $ | (719 | ) | 1,607 | (1,270 | ) | |||||||||||
Collateralized
mortgage obligations
|
183 | (118 | ) | 411 | (405 | ) | 594 | (523 | ) | |||||||||||||||
Total
temporarily impaired securities
|
$ | 373 | $ | (669 | ) | $ | 1,828 | $ | (1,124 | ) | $ | 2,201 | $ | (1,793 | ) |
March 31, 2009
|
||||||||||||||||||||||||
Less
than 12 months
|
12
months or more
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
|||||||||||||||||||
Available
for Sale
|
||||||||||||||||||||||||
Mortgage-backed
securities
|
$ | 8,511 | $ | (109 | ) | $ | - | $ | - | $ | 8,511 | $ | (109 | ) | ||||||||||
Collateralized
mortgage obligations
|
16,829 | (251 | ) | 4,609 | (320 | ) | 21,438 | (571 | ) | |||||||||||||||
Municipals
|
1,025 | (17 | ) | - | - | 1,025 | (17 | ) | ||||||||||||||||
Small
Business Administration
|
- | - | 157 | (1 | ) | 157 | (1 | ) | ||||||||||||||||
Corporate
obligations
|
- | - | 2,539 | (4,782 | ) | 2,539 | (4,782 | ) | ||||||||||||||||
Marketable
equity securities
|
- | - | 1,647 | (42 | ) | 1,647 | (42 | ) | ||||||||||||||||
Total
temporarily impaired securities
|
$ | 26,365 | $ | (377 | ) | $ | 8,952 | $ | (5,145 | ) | $ | 35,317 | $ | (5,522 | ) | |||||||||
Held
to Maturity
|
||||||||||||||||||||||||
Mortgage-backed
securities
|
$ | 239 | $ | (559 | ) | $ | 1,521 | $ | (814 | ) | 1,760 | (1,373 | ) | |||||||||||
Collateralized
mortgage obligations
|
199 | (157 | ) | 420 | (475 | ) | 619 | (632 | ) | |||||||||||||||
Total
temporarily impaired securities
|
$ | 438 | $ | (716 | ) | $ | 1,941 | $ | (1,289 | ) | $ | 2,379 | $ | (2,005 | ) |
|
·
|
Detailed
credit and structural evaluation of each piece of collateral in the trust
preferred securities;
|
|
·
|
Collateral
performance projections for each piece of collateral in the trust
preferred security;
|
|
·
|
Terms
of the trust preferred structure, as laid out in the indenture;
and
|
|
·
|
Discounted
cash flow modeling.
|
Realized
|
||||||||||||||||||||||||||||||
Original
|
Book
|
Fair
|
Unrealized
|
Losses
|
Lowest
|
|||||||||||||||||||||||||
Deal
|
Class
|
Par
|
Value
|
Value
|
Loss
|
2010
|
2009
|
Rating
|
||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||||||||
Alesco
Preferred Funding IX
|
A2A
|
$ | 1,000 | $ | 894 | $ | 251 | $ | (643 | ) | $ | - | $ | - |
BB
|
|||||||||||||||
Alesco
Preferred Funding XVII
|
C1
|
1,000 | 105 | 2 | (103 | ) | - | (900 | ) |
Ca
|
||||||||||||||||||||
Preferred
Term Securities XIII
|
B1
|
1,000 | 823 | 415 | (408 | ) | - | (177 | ) |
Ca
|
||||||||||||||||||||
Preferred
Term Securities XVIII
|
C
|
1,000 | 891 | 139 | (752 | ) | (117 | ) | - |
Ca
|
||||||||||||||||||||
Preferred
Term Securities XXVII
|
C1
|
1,000 | 691 | 182 | (509 | ) | (276 | ) | - |
Ca
|
||||||||||||||||||||
U.S.
Capital Funding I
|
B1
|
3,000 | 2,891 | 617 | (2,274 | ) | - | (109 | ) |
Caa1
|
||||||||||||||||||||
U.S.
Capital Funding III
|
B1
|
|
1,000 | 500 | 185 | (315 | ) | - | - |
Ca
|
||||||||||||||||||||
U.S.
Capital Funding V
|
B1
|
1,300 | 51 | 1 | (50 | ) | - | (605 | ) |
Caa3
|
||||||||||||||||||||
Total
|
$ | 10,300 | $ | 6,846 | $ | 1,792 | $ | (5,054 | ) | $ | (393 | ) | $ | (1,791 | ) |
|
·
|
The
securities have vintage years between 1993 and 2007, with the majority
being between 2002 and 2007.
|
|
·
|
The
securities include sub-prime, Alt-A, and home equity
loans.
|
|
·
|
Investment
grade securities total $1.4 million in book value and $3.2 million in book
value are below investment grade.
|
Accumulated Credit Losses
|
||||||||
2010
|
2009
|
|||||||
Credit
losses on debt securities held
|
||||||||
Beginning
of year
|
$ | (3,905 | ) | $ | (1,350 | ) | ||
Additions
related to increases in previously recognized other-than- temporary
losses
|
(577 | ) | (200 | ) | ||||
As
of March 31,
|
$ | (4,482 | ) | $ | (1,550 | ) |
2010
|
2009
|
|||||||
Net
unrealized gain on securities available-for-sale
|
$ | 1,332 | $ | (2,122 | ) | |||
Net
unrealized loss on securities available-for-sale for which a portion of an
other-than-temporary impairment has been recognized in
income
|
(1,261 | ) | (483 | ) | ||||
Net
unrealized loss on derivative used for cash flow hedges
|
(134 | ) | - | |||||
Net
unrealized loss relating to defined benefit plan liability
|
- | - | ||||||
Less
reclassification adjustment for realized losses included in
income
|
108 | 199 | ||||||
Other
comprehensive income, before tax effect
|
45 | (2,406 | ) | |||||
Tax
expense (benefit)
|
22 | (632 | ) | |||||
Other
comprehensive income (loss)
|
$ | 23 | $ | (1,774 | ) |
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Net
unrealized loss on securities available-for-sale
|
$ | (1,025 | ) | $ | 331 | |||
Net
unrealized loss on securities available-for-sale for which a portion of an
other-than-temporary impairment has been recognized in
income
|
(1,261 | ) | (2,796 | ) | ||||
Net
unrealized loss on derivative used for cash flow hedges
|
(89 | ) | 44 | |||||
Net
unrealized loss relating to defined benefit plan liability
|
(438 | ) | (438 | ) | ||||
(2,813 | ) | (2,859 | ) | |||||
Tax
effect
|
(979 | ) | (1,001 | ) | ||||
Net-of-tax
amount
|
$ | (1,834 | ) | $ | (1,858 | ) |
Level
1
|
Quoted
prices in active markets for identical assets or
liabilities
|
Level
2
|
Observable
inputs other than Level 1 prices, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or
liabilities
|
Level
3
|
Unobservable
inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or
liabilities
|
Fair Value Measurements Using
|
||||||||||||||||
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
March
31, 2010
|
||||||||||||||||
Mortgage-backed
securities
|
$ | 49,392 | $ | - | $ | 49,392 | $ | - | ||||||||
Collateralized
mortgage obligations
|
113,622 | - | 113,622 | - | ||||||||||||
Federal
agencies
|
4,975 | - | 4,975 | - | ||||||||||||
Municipals
|
1,234 | - | 1,234 | - | ||||||||||||
Small
Business Administration
|
68 | - | 68 | - | ||||||||||||
Corporate
obligations
|
1,891 | - | - | 1,891 | ||||||||||||
Marketable
equity securities
|
1,662 | 1,662 | - | - | ||||||||||||
Available-for-sale
securities
|
$ | 172,844 | $ | 1,662 | $ | 169,291 | $ | 1,891 | ||||||||
December
31, 2009
|
||||||||||||||||
Mortgage-backed
securities
|
$ | 29,890 | $ | - | $ | 29,890 | $ | - | ||||||||
Collateralized
mortgage obligations
|
87,029 | - | 87,029 | - | ||||||||||||
Municipals
|
9,656 | - | 9,656 | - | ||||||||||||
Small
Business Administration
|
157 | - | 157 | - | ||||||||||||
Corporate
obligations
|
2,539 | - | - | 2,539 | ||||||||||||
Marketable
equity securities
|
1,643 | 1,643 | - | - | ||||||||||||
Available-for-sale
securities
|
$ | 130,914 | $ | 1,643 | $ | 126,732 | $ | 2,539 |
2010
|
2009
|
|||||||
Beginning
balance
|
$ | 2,539 | $ | 6,317 | ||||
Total
realized and unrealized gains and losses
|
||||||||
Included
in net income
|
(393 | ) | (200 | ) | ||||
Included
in other comprehensive loss
|
(272 | ) | (2,903 | ) | ||||
Purchases,
issuances and settlements
|
17 | (7 | ) | |||||
Transfers
in/out of Level 3
|
- | - | ||||||
Ending
balance
|
$ | 1,891 | $ | 3,207 | ||||
Total
gains or losses for the period included in net income attributable to the
change in unrealized gains or losses related to assets and liabilities
still held at the reporting date
|
$ | 393 | $ | 200 |
Fair Value Measurements Using
|
||||||||||||||||
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
March
31, 2010
|
||||||||||||||||
Impaired
Loans
|
$ | 3,733 | $ | - | $ | - | $ | 3,733 | ||||||||
Other
real estate owned
|
1,580 | - | - | 1,580 | ||||||||||||
December
31, 2009
|
||||||||||||||||
Impaired
Loans
|
$ | 4,614 | $ | - | $ | - | $ | 4,614 | ||||||||
Other
real estate owned
|
977 | - | - | 977 |
March 31, 2010
|
December 31, 2009
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
Amount
|
Value
|
Amount
|
Value
|
|||||||||||||
Assets
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 122,004 | $ | 122,004 | $ | 46,341 | $ | 46,341 | ||||||||
Investment
securities held-to-maturity
|
7,664 | 6,070 | 8,147 | 6,333 | ||||||||||||
Loans
held for sale
|
3,719 | 3,761 | 2,521 | 2,527 | ||||||||||||
Loans
|
1,028,968 | 1,051,243 | 1,059,694 | 1,086,805 | ||||||||||||
Stock
in FHLB
|
18,632 | 18,632 | 18,632 | 18,632 | ||||||||||||
Interest
receivable
|
4,429 | 4,429 | 4,376 | 4,376 | ||||||||||||
Liabilities
|
||||||||||||||||
Deposits
|
$ | 1,122,387 | $ | 1,083,559 | $ | 1,045,196 | $ | 1,007,530 | ||||||||
FHLB
advances
|
207,051 | 203,019 | 197,960 | 194,717 | ||||||||||||
Other
borrowings
|
13,703 | 14,747 | 14,114 | 15,083 | ||||||||||||
Interest
payable
|
1,331 | 1,331 | 1,192 | 1,192 | ||||||||||||
Advances
by borrowers for taxes and insurance
|
2,882 | 2,882 | 1,734 | 1,734 |
Three
Months Ended
|
Amount
|
Percent
|
||||||||||||||
3/31/2010
|
3/31/2009
|
Change
|
Change
|
|||||||||||||
Non-Interest
Income
|
||||||||||||||||
Service
fee income
|
$ | 1,740 | $ | 1,690 | $ | 50 | 3.0 | % | ||||||||
Net
realized gain on sale of securities
|
285 | 1 | 284 | 28400.0 | % | |||||||||||
Equity
in losses of limited partnerships
|
(127 | ) | (78 | ) | (49 | ) | 62.8 | % | ||||||||
Commissions
|
942 | 628 | 314 | 50.0 | % | |||||||||||
Net
gains on sales of loans
|
354 | 1,026 | (672 | ) | -65.5 | % | ||||||||||
Net
servicing fees
|
37 | 77 | (40 | ) | -51.9 | % | ||||||||||
Increase
in cash surrend value of life insurance
|
383 | 386 | (3 | ) | -0.8 | % | ||||||||||
Net
other-than-temporary losses on securities
|
(577 | ) | (200 | ) | (377 | ) | 188.5 | % | ||||||||
Other
income
|
104 | 51 | 53 | 103.9 | % | |||||||||||
Total
Non-Interest Income
|
$ | 3,141 | $ | 3,581 | $ | (440 | ) | -12.3 | % |
Three Months Ended
|
Amount
|
Percent
|
||||||||||||||
3/31/2010
|
3/31/2009
|
Change
|
Change
|
|||||||||||||
Non-Interest Expense
|
||||||||||||||||
Salaries
and employee benefits
|
$ | 5,336 | $ | 5,460 | $ | (124 | ) | -2.3 | % | |||||||
Net
occupancy expenses
|
661 | 810 | (149 | ) | -18.4 | % | ||||||||||
Equipment
expenses
|
485 | 337 | 148 | 43.9 | % | |||||||||||
Data
processing fees
|
411 | 354 | 57 | 16.1 | % | |||||||||||
Automated
teller machine
|
279 | 280 | (1 | ) | -0.4 | % | ||||||||||
Deposit
insurance
|
446 | 388 | 58 | 14.9 | % | |||||||||||
Professional
fees
|
342 | 335 | 7 | 2.1 | % | |||||||||||
Advertising
and promotion
|
298 | 363 | (65 | ) | -17.9 | % | ||||||||||
Software
subscriptions and publications
|
397 | 333 | 64 | 19.2 | % | |||||||||||
Intangible
amortization
|
353 | 397 | (44 | ) | -11.1 | % | ||||||||||
Repossessed
assets expense
|
467 | 298 | 169 | 56.7 | % | |||||||||||
Other
expenses
|
859 | 1,018 | (159 | ) | -15.6 | % | ||||||||||
Total
Non-Interest Expense
|
$ | 10,334 | $ | 10,373 | $ | (39 | ) | -0.4 | % |
Changes
|
NPV as % of PV of Assets
|
|||||||||||||||||||
In Rates
|
$ Amount
|
$ Change
|
% Change
|
NPV Ratio
|
Change
|
|||||||||||||||
+300
bp
|
179,826 | -22,454 | -11 | % | 12.60 | % | -75 | bp | ||||||||||||
+200
bp
|
191,918 | -10,362 | -5 | % | 13.17 | % | -19 | bp | ||||||||||||
+100
bp
|
198,078 | -4,202 | -1 | % | 13.34 | % | -2 | bp | ||||||||||||
0
bp
|
202,280 | 13.36 | % | |||||||||||||||||
-100
bp
|
n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | ||||||||||
-200
bp
|
n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | ||||||||||
-300
bp
|
n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) |
Changes
|
NPV as % of PV of Assets
|
|||||||||||||||||||
In Rates
|
$ Amount
|
$ Change
|
% Change
|
NPV Ratio
|
Change
|
|||||||||||||||
+300
bp
|
177,931 | -24,349 | -9 | % | 12.99 | % | -51 | bp | ||||||||||||
+200
bp
|
188,198 | -14,082 | -4 | % | 13.46 | % | -4 | bp | ||||||||||||
+100
bp
|
195,727 | -6,553 | 0 | % | 13.73 | % | 22 | bp | ||||||||||||
0
bp
|
195,726 | 13.50 | % | |||||||||||||||||
-100
bp
|
n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | ||||||||||
-200
bp
|
n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | ||||||||||
-300
bp
|
n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) | n/m | (1) |
(a)
|
An
evaluation of the Company’s disclosure controls and procedures (as defined
in Rule 13a -15(c) under the Securities Exchange Act of 1934 (the “Act”)
was carried out under the supervision and with the participation of the
Company’s Chief Executive Officer, Chief Financial Officer and several
other members of the Company’s senior management. The Company’s Chief
Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures as currently in effect are effective in
ensuring that the information required to be disclosed by the Company in
the reports it files or submits under the Act is (i) accumulated and
communicated to the Company’s management (including the Chief Executive
Officer and the Chief Financial Officer) in a timely manner, and (ii)
recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms. There have been no changes in our
internal control over financial reporting (as defined in Rule 13a – 15(f)
under the Act) that occurred during the quarter ended March 31, 2010 that
have materially affected, or are likely to materially affect our internal
control over financial reporting.
|
PART II.
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
|
None.
|
||
Item
1A.
|
Risk
Factors
|
|
There
are no material changes to the risk factors disclosed in the Company’s
Form 10-K for the year ended December 31, 2009.
|
||
Item
2.
|
Registered
sales of Equity Securities and use of Proceeds
|
|
On
August 13, 2008 the Company’s Board of Directors authorized management to
repurchase an additional 5% of the Company’s outstanding stock, or
approximately 350,000 shares. Information on the shares
purchased during the first quarter of 2010 is as
follows.
|
Total Number of
|
Maximum Number of
|
|||||||||||||||
Shares Purchased
|
Shares that May Yet
|
|||||||||||||||
Total Number of
|
Average Price
|
As Part of Publicly
|
Be Purchased
|
|||||||||||||
Shares
Purchased
|
Per Share
|
Announced Plan
|
Under the Plan
|
|||||||||||||
330,000 |
(1)
|
|||||||||||||||
January
1, 2010 - January 31, 2010
|
- | - | - | 330,000 | ||||||||||||
February
1, 2010 - February 28, 2010
|
- | - | - | 330,000 | ||||||||||||
March
1, 2010 - March 31, 2010
|
- | - | - | 330,000 | ||||||||||||
- | - | - |
Item
3.
|
Defaults
Upon Senior Securities.
|
|
None.
|
||
Item
4.
|
Submission
of Matters to Vote of Security Holders.
|
|
None.
|
||
Item
5.
|
Other
Information.
|
|
None.
|
||
Item
6.
|
Exhibits.
|
Number
|
Description
|
|
31.1
|
Rule
13a – 14(a) Certification – Chief Executive Officer
|
|
31.2
|
Rule
13a – 14(a) Certification – Chief Financial Officer
|
|
32
|
Certificate
of the Chief Executive Officer and Chief Financial Officer pursuant to U.
S. C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of
2003.
|
MutualFirst
Financial, Inc.
|
||
Date:
May 17, 2010
|
By:
|
/s/ David W.
Heeter
|
David
W. Heeter
|
||
President
and Chief Executive Officer
|
||
Date:
May 17, 2010
|
By: |
/s/ Timothy J.
McArdle
|
Timothy
J. McArdle
|
||
Senior
Vice President and
Treasurer
|