Mutualfirst Financial Inc (MFSF) SEC Filing 10-K Annual report for the fiscal year ending Tuesday, December 31, 2019

Exhibit 99

MutualFirst Financial Announces Record Earnings for 2019

MUNCIE, Ind., Jan. 31, 2020 /PRNewswire/ -- MutualFirst Financial, Inc. (NASDAQ: MFSF), the holding company of MutualBank (the “Bank”), announced today record net income available to common shareholders for the fourth quarter ended December 31, 2019 of $6.6 million, or $0.77 diluted earnings per common share. This compared to net income available to common shareholders for the same period in 2018 of $5.3 million, or $0.61 diluted earnings per common share. Net income for the fourth quarter ended December 31, 2019 represents an annualized return on average assets of 1.28% and annualized return on average tangible common equity of 13.36% compared to 1.04% and 12.56%, respectively, for the same period of last year.

Record net income available to common shareholders for the year ended 2019 was $23.8 million, or $2.74 diluted earnings per common share, compared to net income available to common shareholders of $18.9 million, or $2.21 diluted earnings per common share for the year ended 2018. Net income for the year ended 2019 represents a return on average assets of 1.15% and return on average tangible common equity of 12.60% compared to 0.97% and 11.66%, respectively, for the same period of last year.

On a Form 8-K filed on October 29, 2019, MutualFirst announced it had entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Northwest Bancshares, Inc. (“Northwest Bancshares”). Pursuant to the Merger Agreement at the closing of the merger, MutualFirst will merge with and into Northwest Bancshares, with Northwest Bancshares as the surviving entity. Immediately thereafter, MutualBank will merge with and into Northwest Bank, the wholly owned subsidiary of Northwest Bancshares, with Northwest Bank as the surviving entity.

Under the terms of the Merger Agreement, each share of common stock of MutualFirst will be converted into the right to receive 2.4 shares of Northwest Bancshares’s common stock, for total consideration valued at approximately $346 million at announcement.

The Merger Agreement has been approved by the Boards of Directors of Northwest Bancshares and MutualFirst. Completion of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals and the approval of stockholders of MutualFirst. The parties anticipate completing the Merger during the second quarter 2020.

Adjusted net income available to common shareholders for the fourth quarter ended December 31, 2019, without one-time merger related expenses of $1.1 million pre-tax and $1.0 million after tax, was $7.6 million, or $0.88 diluted earnings per common share. Adjusted net income represents an annualized return on average assets of 1.48% and return on average tangible common equity of 15.38%. Adjusted net income available to common shareholders for the year ended 2019, without the one-time merger related expenses, was $24.8 million, or $2.85 diluted earnings per common share. Adjusted net income represents a return on average assets of 1.20% and return on average tangible common equity of 13.13%.

“We are pleased with our record performance in 2019,” said David W. Heeter, CEO, “We also are very excited about joining the Northwest team. Northwest has demonstrated a similar commitment to its clients, employees and the communities it serves, shares our core values and has an outstanding record of enhancing shareholder value.”

Balance Sheet

Assets increased $14.5 million as of December 31, 2019 compared to December 31, 2018 primarily due to increases in mortgage loans held for sale and investment securities. Mortgage loans held for sale increased $9.4 million compared to December 31, 2018 due to strong mortgage production as originations increased in 2019 compared to 2018. Investment securities increased $14.7 million from December 31, 2018 to December 31, 2019 primarily due to a decline in market interest rates, which increased the market value of the securities. The gross loan portfolio decreased by $5.7 million from December 31, 2018 to December 31, 2019 due to a decrease in residential mortgage loans of $47.6 million primarily as a result of a sale of $27 million of mortgages in the third quarter of 2019. This decrease was mainly offset by increases in commercial loans by $31.3 million, or 4.5%, and non-residential consumer loans by $10.6 million, or 4.0%. The loan mix is 48.3% commercial loans, 33.0% residential loans and 18.7% non-residential consumer loans as of December 31, 2019 compared to 46.0%, 36.2% and 17.8%, respectively, as of December 31, 2018.

Deposits increased by $34.3 million in 2019 due to an increase of $20.0 million in core deposits and $14.2 million in certificates of deposit. As of December 31, 2019, core deposits totaled $1.1 billion, or 67.6% of total deposits and certificates of deposit totaled $503 million, or 32.4% of total deposits compared to 67.8% and 32.2%, respectively, on December 31, 2018.

Allowance for loan losses remained constant at $13.3 million as of December 31, 2019 compared to December 31, 2018. The allowance for loan losses to non-performing loans as of December 31, 2019 was 185% compared to 146% as of December 31, 2018. The allowance for loan losses to total loans as of December 31, 2019 remained the same as December 31, 2018 at 0.89%. Non-performing loans to total loans at December 31, 2019 were 0.48% compared to 0.61% at December 31, 2018. Non-performing assets to total assets were 0.45% at December 31, 2019 compared to 0.54% at December 31, 2018.

Stockholders’ equity was $226.8 million at December 31, 2019, an increase of $24.4 million from December 31, 2018. The increase was primarily due to net income available to common shareholders of $23.8 million during the year ended December 31, 2019 and an increase in accumulated other comprehensive income of $10.8 million. These increases were partially offset by common stock dividends of $6.9 million and stock repurchases of 136,471 shares at a cost of $4.3 million in 2019. The Company’s tangible book value per common share as of December 31, 2019 was $23.43 compared to $20.51 as of December 31, 2018 and the tangible common equity ratio increased to 9.89% as of December 31, 2019 compared to 8.72% as of December 31, 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 December 31, 2019.

Income Statement

Net interest income before the provision for loan losses decreased $528,000 for the quarter ended December 31, 2019 compared to the same period in 2018. The decrease in net interest income was primarily a result of a decrease of thirteen basis points in net interest margin from 3.47% in the fourth quarter of 2018 compared to 3.34% in the fourth quarter of 2019. Net interest margin decreased primarily due to a larger decrease in the yield on interest-earnings assets of sixteen basis points compared to a decrease of two basis points on cost of interest-bearing liabilities. This decrease was partially offset by an increase of $15.4 million in average interest-earning assets, due primarily to organic loan growth. Net interest margin was also aided in the quarter by approximately three basis points of purchase accounting adjustments in fourth quarter of 2019 compared to nine basis points in the fourth quarter of 2018. On a linked-quarter basis, net interest income decreased by $279,000 primarily due to a decrease in net interest margin of four basis points and a decline in average earning assets of $9.6 million.

Net interest income before the provision for loan losses increased $1.2 million for the year ended 2019 compared to 2018. The increase in net interest income was primarily due to an increase of $101.5 million in average interest-earning assets. This increase was partially offset by a decrease of twelve basis points in net interest margin from 3.47% for the year ended 2018 compared to 3.35% in 2019. Net interest margin decreased primarily due to an increase in the cost of interest-bearing liabilities of twenty-two basis points compared to an increase in yield on interest-earning assets of six basis points. Net interest margin was aided by purchase accounting adjustments of eight basis points for the year ended 2018 compared to four basis points for 2019.