Edgar Filing: MUTUALFIRST FINANCIAL INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2004

	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 (State or other jurisdiction of incorporation or organization)	35-2085640 (I.R.S. Employer Identification No.)

110 E. Charles Street, Muncie, Indiana (Address of principal executive offices)	47305-2419 (Zip Code)

Registrant's telephone number, including area code: (765) 747-2800
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share
(Title of Class)

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 [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES [X] NO [ ]

The aggregate market value of the voting and non-voting common equity held by non-affiliates, computed by reference to the last sale price of such stock on the Nasdaq National Market as of June 30, 2004, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $86.7 million. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

As of March 3, 2005, there were issued and outstanding 4,686,564 shares of the registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE

PART III of Form 10-K--Portions of registrant's Proxy Statement for its 2005 Annual Meeting of Stockholders.

The purpose of this amendment to the Annual Report on Form 10-K for the year ended December 31, 2004, is to correct a typographical error in the previous amendment filed on June 2, 2005. Footnote 22 to the financial statements was not included in that June 2 amendment.

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Item 8. Financial Statements and Supplementary Data

MutualFirst Financial, Inc.

Accountants' Report and Consolidated Financial Statements

December 31, 2004, 2003 and 2002

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Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders
MutualFirst Financial, Inc.
Muncie, Indiana

We have audited the accompanying consolidated balance sheets of MutualFirst Financial, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MutualFirst Financial, Inc. as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

/s/ BKD, LLP

Indianapolis, Indiana
February 4, 2005, except for Note 22
as to which the date is March 3, 2005

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MutualFirst Financial, Inc.
Consolidated Balance Sheets
December 31, 2004 and 2003

	2004	2003
Assets

Cash and due from banks	$19,275,332	$21,073,754
Interest-bearing demand deposits	468,044	1,994,032
Cash and cash equivalents	19,743,376	23,067,786
Investment securities available for sale	39,408,978	33,471,986
Loans held for sale	2,913,150	1,975,277
Loans, net of allowance for loan losses of $6,866,910 and $6,779,218	713,021,688	703,980,796
Premises and equipment	12,191,117	10,070,804
Federal Home Loan Bank stock	7,957,700	7,264,200
Investment in limited partnerships	5,025,378	5,087,752
Deferred income tax benefit	4,003,199	3,846,184
Cash value of life insurance	27,090,357	26,140,357
Other assets	8,032,314	8,885,696

Total assets	$839,387,257	$823,790,838

Liabilities and Stockholders' Equity

Liabilities
Deposits
Noninterest-bearing	$39,999,427	$32,137,746
Interest-bearing	560,407,685	547,224,644
Total deposits	600,407,112	579,362,390
Federal Home Loan Bank advances	139,426,777	134,592,151
Notes payable	2,145,432	2,510,568
Other liabilities	9,547,793	9,805,597
Total liabilities	751,527,114	726,270,706

Commitments and Contingencies

Stockholders' Equity
Preferred stock, $.01 par value
Authorized and unissued - 5,000,000 shares
Common stock, $.01 par value
Authorized - 20,000,000 shares
Issued and outstanding - 4,708,318 and 5,293,155 shares	47,084	52,932
Additional paid-in capital	34,385,254	38,052,080
Retained earnings	56,826,053	63,409,374
Accumulated other comprehensive income (loss)	(88,646)	233,738
Unearned benefit plan shares	(3,309,602)	(4,227,992)
Total stockholders' equity	87,860,143	97,520,132
Total liabilities and stockholders' equity	$839,387,257	$823,790,838

See Notes to Consolidated Financial Statements

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MutualFirst Financial, Inc.
Consolidated Statements of Income
Years Ended December 31, 2004, 2003 and 2002

	2004	2003	2002
Interest and Dividend Income
Loans receivable	$42,839,649	$44,880,960	$48,246,747
Investment securities	1,196,295	1,130,134	1,593,708
Federal Home Loan Bank stock	334,544	360,153	423,963
Deposits with financial institutions	29,460	70,820	175,042
Total interest and dividend income	44,399,948	46,442,067	50,439,460

Interest Expense
Deposits	12,317,820	13,671,004	17,394,703
Federal Home Loan Bank advances	5,080,991	5,365,496	5,652,344
Other interest expense	76,849	62,424	71,528
Total interest expense	17,475,660	19,098,924	23,118,575

Net Interest Income	26,924,288	27,343,143	27,320,885
Provision for loan losses	1,556,500	1,450,000	1,712,483
Net Interest Income After Provision for Loan Losses	25,367,788	25,893,143	25,608,402

Other Income
Service fee income	3,193,229	2,926,705	2,784,744
Net realized gains (losses) on sales of available-for-sale securities	(2,817)	6,979	(2,763)
Commissions	853,842	745,427	790,086
Equity in income (losses) of limited partnerships	52,322	(323,450)	(516,509)
Net gains on sales of loans	729,897	1,356,593	1,368,033
Net servicing fees (expense)	122,596	(382,620)	65,470
Increase in cash value of life insurance	950,000	1,343,542	1,208,217
Other income	324,340	301,843	250,658
Total other income	6,223,409	5,975,019	5,947,936

Other Expenses
Salaries and employee benefits	16,167,177	13,097,034	12,453,962
Net occupancy expenses	1,149,931	1,170,121	1,104,617
Equipment expenses	1,124,185	1,024,196	891,202
Data processing fees	630,312	606,531	760,475
Advertising and promotion	721,957	639,859	455,143
Automated teller machine expense	587,076	492,176	492,766
Professional fees	750,144	605,095	489,412
Other expenses	3,184,942	2,831,223	3,052,731
Total other expenses	24,315,724	20,466,235	19,700,308

Income Before Income Tax	7,275,473	11,401,927	11,856,030
Income tax expense	1,753,450	3,340,415	3,376,500

Net Income	$5,522,023	$8,061,512	$8,479,530

Earnings Per Share
Basic	$1.19	$1.64	$1.55
Diluted	1.16	1.59	1.51

See Notes to Consolidated Financial Statements

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MutualFirst Financial, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2004, 2003 and 2002

				Accumulated
				Other	Unearned
				Comprehensive	Benefit
	Common	Paid-in	Retained	Income	Plan
	Stock	Capital	Earnings	(Loss)	Shares	Total

Balances, January 1, 2002	$66,938	$59,575,884	$55,195,694	$356,009	$(5,450,347)	$109,744,178
Comprehensive income
Net income			8,479,530			8,479,530
Other comprehensive income, net of tax - unrealized gains on securities				108,443		108,443
Comprehensive income						8,587,973
Cash dividends ($.37 per share)			(1,895,529)			(1,895,529)
Exercise of stock options	33	39,767				39,800
Stock repurchased	(11,740)	(21,172,202)				(21,183,942)
RRP shares earned					767,500	767,500
Tax benefit on RRP shares		72,120				72,120
ESOP shares earned		267,186			317,840	585,026

Balances, December 31, 2002	55,231	38,782,755	61,779,695	464,452	(4,365,007)	96,717,126
Comprehensive income
Net income			8,061,512			8,061,512
Other comprehensive income, net of tax - unrealized losses on securities				(230,714)		(230,714)
Comprehensive income						7,830,798
Cash dividends ($.42 per share)			(2,021,410)			(2,021,410)
Exercise of stock options	719	973,638				974,357
Stock repurchased	(3,264)	(2,768,683)	(4,410,423)			(7,182,370)
RRP shares granted	246	630,579			(630,825)
RRP shares earned					450,000	450,000
ESOP shares earned		433,791			317,840	751,631

Balances, December 31, 2003	52,932	38,052,080	63,409,374	233,738	(4,227,992)	97,520,132
Comprehensive income
Net income			5,522,023			5,522,023
Other comprehensive income, net of tax - unrealized losses on securities				(322,384)		(322,384)
Comprehensive income						5,199,639
Cash dividends ($.47 per share)			(2,149,714)			(2,149,714)
Exercise of stock options	382	553,156				553,538
Stock repurchased	(6,230)	(4,744,626)	(9,955,630)			(14,706,486)
RRP shares earned					600,550	600,550
Tax benefit on RRP shares		90,436				90,436
ESOP shares earned		434,208			317,840	752,048

Balances, December 31, 2004	$47,084	$34,385,254	$56,826,053	$(88,646)	$(3,309,602)	$87,860,143

See Notes to Consolidated Financial Statements

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MutualFirst Financial, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2004, 2003 and 2002

	2004	2003	2002

Operating Activities
Net income	$5,522,023	$8,061,512	$8,479,530
Items not requiring (providing) cash
Provision for loan losses	1,556,500	1,450,000	1,712,483
ESOP shares earned	752,048	751,631	585,026
RRP shares earned	600,550	450,000	767,500
Depreciation and amortization	2,786,288	2,476,012	2,790,952
Deferred income tax	117,298	417,241	363,338
Loans originated for sale	(25,613,232)	(45,647,544)	(55,029,628)
Proceeds from sales of loans held for sale	40,820,936	52,364,678	63,481,603
Gains on sales of loans held for sale	(729,897)	(1,356,593)	(1,368,033)
Change in
Interest receivable	155,291	7,153	495,559
Other assets	(193,052)	243,754	(175,615)
Interest payable	173,530	164,490	(343,963)
Other liabilities	(561,368)	(902,369)	940,074
Cash value of life insurance	(950,000)	(701,049)	(1,208,217)
Other adjustments	650,509	1,265,262	642,353
Net cash provided by operating activities	25,087,424	19,044,178	22,132,962
Investing Activities
Purchases of securities available for sale	(20,897,969)	(15,603,309)	(30,441,236)
Proceeds from maturities and paydowns of securities available for sale	10,676,145	11,451,638	14,800,015
Proceeds from sales of securities available for sale	3,472,490	12,172,309	5,000,000
Net change in loans	(28,416,263)	(67,000,877)	(13,717,276)
Purchases of premises and equipment	(3,182,626)	(1,894,557)	(1,394,578)
Proceeds from real estate owned sales	967,264	1,733,353	1,081,651
Other investing activities	(252,429)	(21,979)	(129,524)
Net cash used in investing activities	(37,633,388)	(59,163,422)	(24,800,948)
Financing Activities
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits	18,489,158	7,062,223	1,325,377
Certificates of deposits	2,555,564	21,936,224	10,160,395
Repayment of note payable	(427,560)	(435,487)	(437,470)
Proceeds from FHLB advances	253,700,000	105,000,000	46,280,000
Repayment of FHLB advances	(248,922,980)	(85,880,184)	(38,429,745)
Net change in advances by borrowers for taxes and insurance	130,034	113,720	(128,616)
Stock repurchased	(14,706,486)	(7,182,370)	(21,183,942)
Proceeds from stock options exercised	553,538	974,357	39,800
Cash dividends	(2,149,714)	(2,021,410)	(1,895,529)
Net cash provided by (used in) financing activities	9,221,554	39,567,073	(4,269,730)

Net Change in Cash and Cash Equivalents	(3,324,410)	(552,171)	(6,937,716)

Cash and Cash Equivalents, Beginning of Year	23,067,786	23,619,957	30,557,673

Cash and Cash Equivalents, End of Year	$19,743,376	$23,067,786	$23,619,957

Additional Cash Flows Information
Interest paid	$17,302,130	$19,263,414	$23,462,538
Income tax paid	1,672,000	3,191,271	3,089,069
Transfers from loans to foreclosed real estate	895,599	1,220,234	1,715,157
Loans transferred to held for sale	15,293,086	--	15,459,187
Loans transferred from held for sale	--	--	11,559,158
Mortgage servicing rights capitalized	408,208	514,893	524,534

See Notes to Consolidated Financial Statements

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 1: Nature of Operations and Summary of Significant Accounting Policies

The accounting and reporting policies of MutualFirst Financial, Inc. (Company) and its wholly owned subsidiary, Mutual Federal Savings Bank (Bank) and the Bank's wholly owned subsidiary, First MFSB Corporation, conform to accounting principles generally accepted in the United States of America and reporting practices followed by the thrift industry. The more significant of the policies are described below.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company is a thrift holding company whose principal activity is the ownership of the Bank. The Bank operates under a federal thrift charter and provides full banking services. As a federally chartered thrift, the Bank is subject to regulation by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation.

The Bank generates mortgage, consumer and commercial loans and receives deposits from customers located primarily in central Indiana. The Bank's loans are generally secured by specific items of collateral including real property, consumer assets and business assets. First MFSB Corporation sells various insurance products.

Consolidation - The consolidated financial statements include the accounts of the Company, the Bank, and the Bank's subsidiary, after elimination of all material intercompany transactions.

Cash Equivalents - The Company considers all liquid investments with original maturities of three months or less to be cash equivalents.

Investment Securities - Securities available for sale are carried at fair value with unrealized gains and losses reported separately in accumulated other comprehensive income, net of tax.

Amortization of premiums and accretion of discounts are recorded using the interest method as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Loans held for sale are carried at the lower of aggregate cost or market. Market is determined using the aggregate method. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income based on the difference between estimated sales proceeds and aggregate cost.

Loans are carried at the principal amount outstanding. A loan is impaired when, based on current information or events, it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with insignificant delays not exceeding 90 days are not considered impaired. Certain nonaccrual and substantially delinquent loans may be considered to be impaired. The Company considers its investment in one-to-four family residential loans and consumer loans to be homogeneous and therefore excluded from separate identification for evaluation of impairment. Interest income is accrued on the principal balances of loans. The accrual of interest on impaired and nonaccrual loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed when considered uncollectible. Interest income is subsequently recognized only to the extent cash payments are received. Certain loan fees and direct costs are being deferred and amortized as an adjustment of yield on the loans over the contractual maturity of the loans.

Allowance for loan losses is maintained to absorb loan losses based on management's continuing review and evaluation of the loan portfolio and its judgment as to the impact of economic conditions on the portfolio. The evaluation by management includes consideration of past loss experience, changes in the composition of the portfolio, the current condition and amount of loans outstanding, and the probability of collecting all amounts due. Impaired loans are measured by the present value of expected future cash flows, or the fair value of the collateral of the loan, if collateral dependent. The allowance is increased by the provision for loan losses, which is charged against current period operating results. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. Management believes that as of December 31, 2004, the allowance for loan losses is adequate based on information currently available. A worsening or protracted economic decline in the areas within which the Bank operates would increase the likelihood of additional losses due to credit and market risks and could create the need for additional loss reserves.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Premises and equipment are carried at cost net of accumulated depreciation. Depreciation is computed using the straight-line method based principally on the estimated useful lives of the assets which range from 3 to 50 years. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations.

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula and is carried at cost.

Mortgage servicing rights on originated loans that have been sold are capitalized by allocating the total cost of the mortgage loans between the mortgage servicing rights and the loans based on their relative fair values. Capitalized servicing rights are amortized in proportion to and over the period of estimated servicing revenues. Impairment of mortgage servicing rights is based on the fair value of those rights. Fair values are estimated using discounted cash flows based on a current market interest rate. For purposes of measuring impairment, the rights are stratified based on the predominant risk characteristics of the underlying loans. The predominant characteristic currently used for stratification is type of loan. The amount of impairment recognized is the amount by which the capitalized mortgage servicing rights for a stratum exceed their fair values.

Investment in limited partnerships is recorded primarily on the equity method of accounting. Losses due to impairment are recorded when it is determined that the investment no longer has the ability to recover its carrying amount. The benefits of low income housing tax credits associated with the investment are accrued when earned.

Income tax in the consolidated statements of income includes deferred income tax provisions or benefits for all significant temporary differences in recognizing income and expenses for financial reporting and income tax purposes. The Company files consolidated income tax returns with the Bank.

Earnings per share is computed based upon the weighted-average common and common equivalent shares outstanding during each year. Unearned ESOP shares and RRP shares which have not vested have been excluded from the computation of average shares outstanding.

Reclassifications of certain amounts in the 2003 and 2002 consolidated financial statements have been made to conform to the 2004 presentation.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Stock Options are accounted for under the recognition and measurement principals of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the grant date. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	2004	2003	2002
Net income, as reported	$5,522	$8,062	$8,480
Less: Stock-based employee compensation cost determined under the fair value method, net of income taxes	(104)	(226)	(605)
Pro forma net income	$5,418	$7,836	$7,875
Earnings per share
Basic - as reported	$1.19	$1.64	$1.55
Basic - pro forma	1.17	1.59	1.44
Diluted - as reported	1.16	1.59	1.51
Diluted - pro forma	1.14	1.54	1.41

In December 2004, the Financial Accounting Standards Board (FASB) issued an amendment to SFAS 123 (SFAS 123R), which eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion No. 25 and generally requires that such transactions be accounted for using a fair value-based method. SFAS 123R will be effective for the Company beginning July 1, 2005. SFAS 123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. The cumulative effect of initially applying this Statement, if any, is recognized as of the required effective date.

As of the required effective date, the Company will apply SFAS 123R using either the modified version of prospective application or the modified version of retrospective application. Under prospective transition method, compensation cost is recognized on or after the required effective date for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated under SFAS 123 for either recognition or proforma disclosures. For periods before the required effective date, a company may elect to apply a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods by SFAS 123.

The Company is currently evaluating the effect of the recognition and measurement provisions of SFAS 123R but believes the adoption of SFAS 123R will not result in a material impact on the Company's results of operations or financial condition.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 2: Restriction on Cash

The Bank is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2004 was $7,662,000.

Note 3: Investment Securities Available for Sale

	2004
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Mortgage-backed securities	$2,661	$80	$(16)	$2,725
Collateralized mortgage obligations	8,614	16	(31)	8,599
Federal agencies	2,002	--	(23)	1,979
Small Business Administration	178	--	(2)	176
Corporate obligations	11,103	57	(34)	11,126
Marketable equity securities	14,999	--	(195)	14,804
Total investment securities	$39,557	$153	$(301)	$39,409

	2003
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Mortgage-backed securities	$3,900	$149	$(5)	$4,044
Collateralized mortgage obligations	8,374	83	--	8,457
Federal agencies	3,044	41	--	3,085
Small Business Administration	214	1	--	215
Corporate obligations	9,756	206	--	9,962
Marketable equity securities	7,645	--	(86)	7,559
Municipal obligation	150	--	--	150
Total investment securities	$33,083	$480	$(91)	$33,472

Marketable equity securities consist of shares in mutual funds which invest in government obligations and mortgage-backed securities.

Certain investments in debt and marketable equity securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2004 and 2003, was $28,166,000 and $8,247,000, which is approximately 71 and 25 percent of the Company's available-for-sale investment portfolio at those dates. These declines primarily resulted from recent increases in market interest rates.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows our investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2004 and 2003:

	2004
	Less than 12 Months		12 Months or More		Total
Description of Securities	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Mortgage-backed securities	$127	$(3)	$341	$(13)	$468	$(16)
Collateralized mortgage obligations	3,998	(31)	--	--	3,998	(31)
Federal agencies	1,979	(23)	--	--	1,979	(23)
Small Business Administration	176	(2)	--	--	176	(2)
Corporate obligations	7,648	(34)	--	--	7,648	(34)
Marketable equity securities	6,926	(76)	6,971	(119)	13,897	(195)
Total temporarily impaired securities	$20,854	$(169)	$7,312	$(132)	$28,166	$(301)

	2003
	Less than 12 Months		12 Months or More		Total
Description of Securities	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Mortgage-backed securities	$732	$(5)	$--	$--	$732	$(5)
Marketable equity securities	6,200	(38)	1,315	(48)	7,515	(86)
Total temporarily impaired securities	$6,932	$(43)	$1,315	$(48)	$8,247	$(91)

The amortized cost and fair value of securities available for sale at December 31, 2004, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	2004
	Amortized Cost	Fair Value
Within one year	$3,561	$3,554
One to five years	5,533	5,540
After ten years	4,011	4,011
	13,105	13,105
Mortgage-backed securities	2,661	2,725
Collateralized mortgage obligations	8,614	8,599
Small Business Administration	178	176
Marketable equity securities	14,999	14,804
Totals	$39,557	$39,409

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $14,389,000 at December 31, 2004 and $7,504,000 at December 31, 2003.

Proceeds from sales of securities available for sale during 2004, 2003 and 2002 were $3,472,000, $12,172,000 and $5,000,000. Gross gains of $30,000 and $3,000 in 2003 and 2002, and gross losses of $3,000, $23,000 and $6,000 in 2004, 2003 and 2002 were recognized on those sales.

Note 4: Loans and Allowance

	2004	2003
Loans
Real estate loans
One-to-four family	$382,764	$391,476
Multi family	4,657	5,353
Commercial	68,067	65,430
Construction and development	20,745	17,860
	476,233	480,119
Consumer loans
Auto	39,475	40,497
Home equity	29,464	25,401
Home improvement	23,289	20,924
Mobile home	2,879	4,108
Recreational vehicles	58,643	58,222
Boats	38,382	38,096
Other	3,327	3,443
	195,459	190,691
Commercial business loans	53,620	44,362
Total loans	725,312	715,172
Undisbursed loans in process	(9,237)	(8,160)
Unamortized deferred loan costs, net	3,814	3,748
Allowance for loan losses	(6,867)	(6,779)
Net loans	$713,022	$703,981

	2004	2003	2002
Allowance for loan losses
Balances, January 1	$6,779	$6,286	$5,449
Provision for losses	1,557	1,450	1,713
Recoveries on loans	523	404	939
Loans charged off	(1,992)	(1,361)	(1,815)
Balances, December 31	$6,867	$6,779	$6,286

At December 31, 2004 and 2003, accruing loans delinquent 90 days or more totaled $119,000 and $10,000. Non-accruing loans at December 31, 2004 and 2003 were $3,985,000 and $3,270,000.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Information on impaired loans is summarized below.

	2004	2003
Impaired loans with an allowance	$4,064	$2,089
Impaired loans for which the discounted cash flows or collateral value exceeds the carrying value of the loan	---	---
Total impaired loans	$4,064	$2,089
Allowance for impaired loans included in the Company's allowance for loan losses	$828	$151

	2004	2003	2002
Average balance of impaired loans	$4,205	$2,942	$3,821
Interest income recognized on impaired loans	131	62	24
Interest income recognized on impaired loans - cash basis	47	22	8

Note 5: Premises and Equipment

	2004	2003
Cost
Land	$3,334	$3,066
Buildings and land improvements	11,119	9,396
Equipment	9,763	8,571
Total cost	24,216	21,033
Accumulated depreciation and amortization	(12,025)	(10,962)
Net	$12,191	$10,071

Note 6: Investment In Limited Partnerships

	2004	2003
Pedcor Investments 1988-V (98.97 percent ownership)	$323	$364
Pedcor Investments 1990-XI (19.79 percent ownership)	28	40
Pedcor Investments 1990-XIII (99.00 percent ownership)	765	725
Pedcor Investments 1997-XXVIII (99.00 percent ownership)	2,758	2,800
Pedcor Investments 1997-XXIX (99.00 percent ownership)	696	659
Pedcor Investments 2001-LI (9.94 percent ownership)	455	500
	$5,025	$5,088

15 NEXT PAGE

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

The limited partnerships build, own and operate apartment complexes. The Company records its equity in the net income or loss of the limited partnerships based on the Company's interest in the partnerships. The Company recorded income from these limited partnerships of $52,000 in 2004 and losses of $323,000 and $517,000 for 2003 and 2002. In addition, the Company has recorded the benefit of low income housing credits of $800,000, $753,000 and $843,000 for 2004, 2003 and 2002. Combined financial statements for the limited partnerships recorded under the equity method of accounting are as follows:

	2004	2003
Combined condensed balance sheets
Assets
Cash	$150	$154
Land and property	35,129	36,128
Other assets	1,174	1,231
Total assets	$36,453	$37,513
Liabilities
Notes payable	$33,875	$34,711
Other liabilities	1,347	1,240
Total liabilities	35,222	35,951
Partners' equity (deficit)
General partners	(2,931)	(2,487)
Limited partners	4,162	4,049
Total partners' equity	1,231	1,562
Total liabilities and partners' equity	$36,453	$37,513

	2004	2003	2002
Combined condensed statements of operations
Total revenue	$4,349	$3,695	$4,369
Total expenses	(5,014)	(4,129)	(4,882)
Net loss	$(665)	$(434)	$(513)

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 7: Deposits

	2004	2003
Noninterest-bearing demand	$39,999	$32,138
Interest-bearing demand	58,440	59,809
Savings	61,629	57,785
Money market savings	54,704	48,750
Certificates and other time deposits of $100,000 or more	121,871	109,008
Other certificates	263,764	271,872
Total deposits	$600,407	$579,362

Certificates including other time deposits of $100,000 or more maturing in years ending December 31:

2005	$239,040
2006	69,224
2007	54,944
2008	10,092
2009	12,335
	$385,635

Note 8: Federal Home Loan Bank Advances

Maturities Years Ending December 31
2005	$63,252
2006	28,932
2007	12,665
2008	13,112
2009	1,655
Thereafter	19,811
	$139,427

At December 31, 2004, the Company has pledged $389,517,000 in qualifying first mortgage loans and investment securities as collateral for advances and outstanding letters of credit. Advances, at interest rates from 1.38 to 7.33 percent at December 31, 2004, are subject to restrictions or penalties in the event of prepayment.

Note 9: Notes Payable

The Bank has a noninterest-bearing, unsecured term note payable to Pedcor Investments 1997-XXVIII, L.P. of $1,461,000 and $1,523,000 at December 31, 2004 and 2003 payable in semiannual installments through January 1, 2010. At December 31, 2004 and 2003, the Bank was obligated under an irrevocable direct pay letter of credit for the benefit of a third party in the amount of $1,254,000 relating to this note and the financing for an apartment project by Pedcor Investments 1997-XXVIII L.P.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

The Bank also has a noninterest-bearing, unsecured term note payable to Pedcor Investments 1997-XXIX, LP. The note, which is payable in annual installments through August 15, 2008, had a balance of $684,000 and $988,000 at December 31, 2004 and 2003.

Maturities Years Ending December 31
2005	$362
2006	357
2007	371
2008	413
2009	416
Thereafter	226
	$2,145

Note 10: Loan Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of these loans consist of the following:

	2004	2003	2002
Loans serviced for
Freddie Mac	$104,733	$90,616	$89,432
Fannie Mae	5,530	7,712	12,343
Federal Home Loan Bank	23,852	17,307	12,081
Other investors	7,611	12,327	14,680
	$141,726	$127,962	$128,536

The aggregate fair value of capitalized mortgage servicing rights is based on comparable market values and expected cash flows, with impairment assessed based on portfolio characteristics including product type, investor type, and interest rates.

	2004	2003	2002
Mortgage Servicing Rights
Balances, January 1	$1,333	$1,193	$879
Servicing rights capitalized	408	515	524
Amortization of servicing rights	(366)	(375)	(210)
	1,375	1,333	1,193
Valuation allowance	(180)	(320)	--
Balances, December 31	$1,195	$1,013	$1,193

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Activity in the valuation allowance for mortgage servicing right was as follows:

	2004	2003
Balance, beginning of year	$320	$--
Additions	--	320
Reductions	(140)	--
Balances, end of year	$180	$320

*No valuation allowance was necessary at December 31, 2002.

Note 11: Income Tax

	2004	2003	2002
Income tax expense
Currently payable
Federal	$1,148	$2,090	$2,124
State	488	833	889
Deferred
Federal	87	439	411
State	30	(22)	(48)
Total income tax expense	$1,753	$3,340	$3,376
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34%	$2,474	$3,877	$4,031
Effect of state income taxes	342	535	555
Low income housing credits	(800)	(753)	(843)
Tax-exempt income	(363)	(492)	(439)
Other	100	173	72
Actual tax expense	$1,753	$3,340	$3,376
Effective tax rate	24.1%	29.3%	28.5%

19 NEXT PAGE

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

The components of the deferred asset included on the balance sheets are as follows:

	2004	2003
Assets
Unrealized loss on securities available for sale	$59	$--
Allowance for loan losses	2,858	2,707
Deferred compensation	2,389	2,264
Charitable contribution carryover	--	188
Depreciation and amortization	--	136
Business tax and AMT credit carryovers	885	515
Other	613	143
Total assets	6,804	5,953
Liabilities
FHLB stock	(463)	(322)
State income tax	(219)	(232)
Loan fees	(378)	(697)
Investments in limited partnerships	(1,229)	(279)
Unrealized gain on securities available for sale	--	(155)
Mortgage servicing rights	(497)	(422)
Total liabilities	(2,786)	(2,107)
	$4,018	$3,846

The Company has unused business income tax credits of $712,000 that expire in 2017. In addition, the Company has an AMT credit carryover of $173,000 with an unlimited carryover period.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Retained earnings include approximately $14,743,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which income would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amounts was approximately $5,013,000.

Note 12: Other Comprehensive Income

	Before-Tax Amount	2004 Tax Credit	Net-of-Tax Amount
Unrealized losses on securities
Unrealized holding losses arising during the year	$(537)	$213	$(324)
Less: reclassification adjustment for losses realized in net income	(3)	1	(2)
Net unrealized losses	$(534)	$212	$(322)

	Before-Tax Amount	2003 Tax Credit	Net-of-Tax Amount
Unrealized losses on securities
Unrealized holding losses arising during the year	$(343)	$117	$(226)
Less: reclassification adjustment for gains realized in net income	7	(2)	5
Net unrealized losses	$(350)	$119	$(231)

	Before-Tax Amount	2002 Tax Credit	Net-of-Tax Amount
Unrealized losses on securities
Unrealized gains on securities
Unrealized holding gains arising during the year	$176	$(70)	$106
Less: reclassification adjustment for losses realized in net income	(3)	1	(2)
Net unrealized gains	$179	$(71)	$108

21 NEXT PAGE

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002

(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 13: Commitments and Contingent Liabilities

In the normal course of business there are outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated statements of financial condition.

Financial instruments whose contract amount represents credit risk as of December 31 were as follows:

	2004	2003
Loan commitments	$78,641	$72,419
Standby letters of credit	7,211	7,165

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation. Collateral held varies, but may include residential real estate, income-producing commercial properties, or other assets of the borrower.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

The Company and Bank are also subject to claims and lawsuits which arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of the Company.

Note 14: Stockholders' Equity

The Company is not subject to any regulatory restrictions on the payment of dividends to its stockholders.

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002

(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Without prior approval, current regulations allow the Bank to pay dividends to the Company not exceeding retained net income for the current year plus the previous two calendar years. At December 31, 2004, the Bank had regulatory approval to pay dividends to the Company of an amount not to exceed $15,000,000.

Note 15: Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies and is assigned to a capital category. The assigned capital category is largely determined by three ratios that are calculated according to the regulations: total risk adjusted capital, Tier 1 risk-based capital, and core leverage ratios. The ratios are intended to measure capital relative to assets and credit risk associated with those assets and off-balance sheet exposures of the entity. The capital category assigned to an entity can also be affected by qualitative judgments made by regulatory agencies about the risk inherent in the entity's activities that are not part of the calculated ratios.

There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification of a bank in any of the undercapitalized categories can result in actions by regulators that could have a material effect on a bank's operations. At December 31, 2004 and 2003, the Bank was categorized as well capitalized and met all subject capital adequacy requirements. There are no conditions or events since December 31, 2004 that management believes have changed the Bank's classification.

The Bank's actual and required capital amounts and ratios are as follows:

	Actual		Required for Adequate Capital		To Be Well Capitalized
	Amount	Ratio	Amount	Ratio	Amount	Ratio
As of December 31, 2004
Total risk-based capital (to risk-weighted assets)	$90,595	15.0%	$48,436	8.0%	$60,545	10.0%
Tier 1 risk-based capital (to risk-weighted assets)	84,153	13.9%	24,218	4.0%	36,327	6.0%
Core capital (to adjusted total assets)	84,153	10.0%	25,121	3.0%	41,868	5.0%
Core capital (to adjusted tangible assets)	84,153	10.0%	16,747	2.0%	N/A	N/A
Tangible capital (to adjusted total assets)	84,153	10.0%	12,560	1.5%	N/A	N/A
As of December 31, 2003
Total risk-based capital (to risk-weighted assets)	$99,636	17.0%	$46,975	8.0%	$58,719	10.0%
Tier 1 risk-based capital (to risk-weighted assets)	92,979	15.8%	23,487	4.0%	35,231	6.0%
Core capital (to adjusted total assets)	92,979	11.3%	24,638	3.0%	41,063	5.0%
Core capital (to adjusted tangible assets)	92,979	11.3%	16,425	2.0%	N/A	N/A
Tangible capital (to adjusted total assets)	92,979	11.3%	12,319	1.5%	N/A	N/A

23 NEXT PAGE

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 16: Employee Benefits

The Company has a retirement savings 401(k) plan in which substantially all employees may participate. The contributions are discretionary and determined annually. In 2004, 2003 and 2002, the Company matched employees' contributions at the rate of 50 percent for the first $600 of participant contributions to the 401(k) and made a contribution to the profit-sharing plan of 3 percent of qualified compensation. The Company's expense for the plan was $370,000, $225,000 and $297,000 for 2004, 2003 and 2002.

The Company has a supplemental retirement plan and deferred compensation arrangements for the benefit of certain officers. The Company also has deferred compensation arrangements with certain directors whereby, in lieu of currently receiving fees, the directors or their beneficiaries will be paid benefits for an established period following the director's retirement or death. These arrangements are informally funded by life insurance contracts which have been purchased by the Company. The Company records a liability for these vested benefits based on the present value of future payments. The Company's expense for the plan was $753,000, $776,000 and $695,000 for 2004, 2003 and 2002.

The Company has an ESOP covering substantially all of its employees. At December 31, 2004, 2003 and 2002, the Company had 286,060, 317,843 and 349,626 unearned ESOP shares with a fair value of $6,963,000, $7,981,000 and $6,916,000. Shares are released to participants proportionately as ESOP debt is repaid. Dividends on allocated shares are recorded as dividends and charged to retained earnings. Dividends on unallocated shares are used to repay the loan. Compensation expense is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors of the Company and Bank, are made to the ESOP. Expense under the ESOP for 2004, 2003 and 2002 was $752,000, $752,000 and $585,000. The following table provides information on ESOP shares at December 31.

	2004	2003	2002
Allocated shares	147,725	115,942	80,857
Suspense shares	286,060	317,843	349,626
Committed-to-be released shares	31,783	31,783	31,783

The Company has a Recognition and Retention Plan (RRP) for the award of up to 232,784 shares of the common stock of the Company to directors and executive officers. Common stock awarded under the RRP vests ratably over a three or five-year period commencing with the date of the grants. Expense recognized on the vested shares totaled approximately $601,000, $450,000 and $768,000 in 2004, 2003 and 2002. The unearned portion of these stock awards is presented as a reduction of stockholders' equity.

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MutualFirst Financial, Inc.

Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002

Note 17: Stock Option Plan

Under the Company's stock option plan, which is accounted for in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations, the Company grants selected executives and other key employees and directors incentive and non-qualified stock option awards which vest and become fully exercisable at the discretion of the stock option committee as the options are granted. The Company is authorized to grant options for up to 581,961 shares of the Company's common stock. Under certain provisions of the plan, the number of shares available for grant may be increased without shareholder approval by the amount of shares surrendered as payment of the exercise price of the stock option and by the number of shares of common stock of the Company that could be repurchased by the Company using proceeds from the exercise of stock options. The exercise price of the options, which have a 10 to 15 year life, may not be less than the market price of the Company's stock on the date of grant; therefore, no compensation expense will be recognized when the options are granted.

The following is a summary of the status of the Company's stock option plan and changes in that plan for 2004, 2003 and 2002.

	2004		2003		2002
Options	Shares	Weighted- Average Exercise Price	Shares	Weighted- Average Exercise Price	Shares	Weighted- Average Exercise Price
Outstanding, beginning of year	528,389	$16.03	530,086	$14.32	535,714	$14.30
Granted	--	--	75,000	25.66	--	--
Exercised	(38,175)	14.50	(71,897)	13.55	(3,331)	11.95
Forfeited/expired	(2,400)	14.50	(4,800)	14.50	(2,297)	13.32
Outstanding, end of year	487,814	16.15	528,389	16.03	530,086	14.32
Options exercisable at year end	354,414		337,389		286,619
Weighted-average fair value of options granted during the year	2.76

25 NEXT PAGE

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

At December 31, 2004, certain information by exercise price for options outstanding and exercisable is as follows:

Exercise Price	Number of Shares	Weighted- Average Remaining Contractual Life	Number of Shares Exercisable
$12.35	13,912	2.6 years	13,912
14.50	398,902	8.6 years	340,502
25.66	75,000	11.4 years	--

Although the Company has elected to follow APB No. 25, SFAS No. 123 requires pro forma disclosures of net income and earnings per share as if the Company had accounted for its employee stock options under that statement (see Note 1). The fair value of each 2003 option grant was estimated on the grant date using an option-pricing model with the following assumptions:


Risk-free interest rates	2.29%
Dividend yields	1.76%
Volatility factors of expected market price of common stock	9.30%
Weighted-average expected life of the options	8 years

26 NEXT PAGE

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 18. Earnings Per Share

Earnings per share were computed as follows:

	Income	2004 Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
Income available to common shareholders	$5,522	4,625,437	$1.19
Effect of Dilutive Securities
Stock options	--	146,599	--
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$5,522	4,772,036	$1.16

	Income	2003 Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
Income available to common shareholders	$8,062	4,904,007	$1.64
Effect of Dilutive Securities
Stock options	--	180,507	--
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$8,062	5,084,514	$1.59

	Income	2002 Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
Income available to common shareholders	$8,480	5,484,792	$1.55
Effect of Dilutive Securities
Stock options	--	113,378	--
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$8,480	5,598,170	$1.51

Options to purchase 75,000 shares of common stock at $25.66 per share were outstanding at December 31, 2004, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. Additionally, 24,584 shares not vested under the Recognition and Retention Plan have been excluded for similar reasons.

27 NEXT PAGE

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 19: Fair Values of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and Cash Equivalents - The fair value of cash and cash equivalents approximates carrying value.

Investment and Mortgage-Backed Securities - Fair values are based on quoted market prices.

Loans Held For Sale - Fair values are based on quoted market prices.

Loans - The fair value for loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

FHLB Stock - Fair value of FHLB stock is based on the price at which it may be resold to the FHLB.

Cash Value of Life Insurance - The fair value of life insurance values approximate carrying value.

Interest Receivable/Payable - The fair values of interest receivable/payable approximate carrying values.

Deposits - The fair values of noninterest-bearing, interest-bearing demand and savings accounts are equal to the amount payable on demand at the balance sheet date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on such time deposits.

Federal Home Loan Bank Advances - The fair value of these borrowings are estimated using a discounted cash flow calculation, based on current rates for similar debt for periods comparable to the remaining terms to maturity of these advances.

Notes Payable - The fair value of this note is estimated using a discount calculation based on current rates.

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Advances by Borrowers for Taxes and Insurance - The fair value approximates carrying value.

Off-Balance Sheet Commitments - Commitments include commitments to purchase and originate mortgage loans, commitments to sell mortgage loans, and standby letters of credit and are generally of a short-term nature. The fair values of such commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The carrying amounts of these investments are reasonable estimates of the fair value of these financial statements.

The estimated fair values of the Company's financial instruments are as follows:

	2004		2003
	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Assets
Cash and cash equivalents	$19,743	$19,743	$23,068	$23,068
Securities available for sale	39,409	39,409	33,472	33,472
Loans held for sale	2,913	2,913	1,975	2,001
Loans	713,022	719,318	703,981	712,277
Stock in FHLB	7,958	7,958	7,264	7,264
Cash value of life insurance	27,090	27,090	26,140	26,140
Interest receivable	3,039	3,039	3,194	3,194
Liabilities
Deposits	600,407	584,928	579,362	580,378
FHLB advances	139,427	141,255	134,592	142,127
Notes payable	2,145	1,853	2,511	2,188
Interest payable	1,025	1,025	851	851
Advances by borrowers for taxes and insurance	1,579	1,579	1,448	1,448

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 20: Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:

Condensed Balance Sheets
	2004	2003
Assets
Cash on deposit with Bank	$832	$1,623
Cash on deposit with others	71	24
Total cash and cash equivalents	903	1,647
Investment in common stock of Bank	84,958	94,121
Investment in affiliate	982	956
Deferred and current income tax	1,031	810
Other assets	6	6
Total assets	$87,880	$97,540
Liabilities - other	$20	$20
Stockholders' Equity	87,860	97,520
Total liabilities and stockholders' equity	$87,880	$97,540

Condensed Statements of Income
	2004	2003	2002
Income
Interest income from Bank	$10	$20	$29
Interest income from investments	--	--	8
Interest income from loans	--	116	324
Dividends from Bank	15,000	5,000	21,500
Other income	25	130	137
Total income	15,035	5,266	21,998

Expenses	359	331	230

Income before income tax and equity in undistributed income of subsidiary	14,676	4,935	21,768

Income tax expense (benefit)	(128)	(18)	105

Income before equity in undistributed income of subsidiary	14,804	4,953	21,663

Equity in undistributed income of subsidiary	(9,282)	3,109	(13,183)

Net Income	$5,522	$8,062	$8,480

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Condensed Statements of Cash Flows

	2004	2003	2002
Operating Activities
Net income	$5,522	$8,062	$8,480
Item not requiring (providing) cash
ESOP shares earned	752	752	585
Deferred income tax benefit	186	426	236
Distributions in excess of (equity in undistributed income) income of Bank	9,282	(3,109)	13,183
Other	(184)	123	(266)
Net cash provided by operating activities	15,558	6,254	22,218

Investing Activities
Net change in loans	--	1,250	1,250
Proceeds from maturities of securities available for sale	--	--	1,001
Net cash provided by investing activities	--	1,250	2,251

Financing Activities
Stock repurchased	(14,706)	(7,182)	(21,184)
Cash dividends	(2,150)	(2,021)	(1,896)
Proceeds from stock options exercised	554	974	40
Net cash used in financing activities	(16,302)	(8,229)	(23,040)

Net Change in Cash on Deposit With Bank	(744)	(725)	1,429

Cash on Deposit With Bank, Beginning of Year	1,647	2,372	943

Cash on Deposit With Bank, End of Year	$903	$1,647	$2,372

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MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 21: Quarterly Results of Operations (Unaudited)

Quarter Ended	Interest Income	Interest Expense	Net Interest Income	Provision for Loan Losses	Net Income	Basic Earnings Per Common Share	Diluted Earnings Per Common Share
2004
March	$11,197	$4,367	$6,830	$227	$1,968	$0.41	$0.40
June	11,048	4,211	6,837	530	1,814	0.38	0.37
September	10,979	4,368	6,611	350	1,724	0.38	0.37
December	11,176	4,530	6,646	450	16	0.00	0.00
Total	$44,400	$17,476	$26,924	$1,557	$5,522	1.19	1.16
2003
March	$11,791	$4,964	$6,827	$375	$2,068	$0.42	$0.40
June	11,737	4,828	6,909	375	2,390	0.49	0.47
September	11,532	4,696	6,836	325	1,983	0.41	0.39
December	11,382	4,611	6,771	375	1,621	0.33	0.32
Total	$46,442	$19,099	$27,343	$1,450	$8,062	1.64	1.59

In the fourth quarter of 2004, the Company incurred an expense of approximately $1,700,000, net of tax ($.38 per diluted share) associated with a separation agreement entered into in November 2004 with a former officer of the Bank.

Note 22: Subsequent Event

On March 3, 2005, the Bank entered into a definitive agreement to purchase certain assets and assume certain liabilities representing the operations of Fidelity Federal Savings Bank of Marion, Indiana. The Bank will pay $20 million in cash for these net assets, subject to adjustments. The purchase which requires the approval of the Office of Thrift Supervision, is scheduled to close in the third quarter of 2005.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) List of Financial Statements

The following are contained in Item 8 of this Form 10-K:

Annual Report Section

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2004 and 2003

Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2004,
2003 and 2002

Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and
2002

Notes to Consolidated Financial Statements

(a)(2) List of Financial Statement Schedules:

All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable.

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(a)(3) List of Exhibits:

Regulation S-K Exhibit Number	Document	Reference to Prior Filing or Exhibit Number Attached Hereto

23	Consents of Experts and Counsel	23
31.1	Rule 13(a)-14(a) Certification (Chief Executive Officer)	31.1
31.2	Rule 13(a)-14(a) Certification (Chief Financial Officer)	31.2
32	Section 1350 Certification	32

(b) Exhibits - Included, see list in (a)(3).

(c) Financial Statements Schedules - None

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		MutualFirst Financial, Inc.

Date: June 7, 2005	By:	/s/ David W. Heeter David W. Heeter, President and Chief Executive Officer (Duly Authorized Representative)

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INDEX TO EXHIBITS

Number	Description

23	Consent of Accountants

31.1	Rule 13(a)-14(a) Certification (Chief Executive Officer)

31.2	Rule 13(a)-14(a) Certification (Chief Financial Officer)

32	Section 1350 Certification

END