Exhibit 13, Mutual First Financial, Inc. Form 10-K

SHAREHOLDER INFORMATION
ANNUAL MEETING

The annual meeting of shareholders will be held at 3:00 p.m. local time, on April 28, 2004, at the Company's main office located at 110 E. Charles Street, Muncie, Indiana.

Transfer Agent:

Continental Stock Transfer & Trust Company

17 Battery Place, 8th Floor

New York, New York 10004

General Counsel:

Special Counsel:

Beasley & Gilkison, LLP

Silver, Freedman & Taff, L.L.P.

110 E. Charles Street

1700 Wisconsin Av. N.W.

Muncie, IN 47305

Washington, D.C. 20007

Independent Auditor:

BKD, LLP

201 N. Illinois, Suite 700

Indianapolis, IN 46204

Shareholder and General Inquiries:

David W. Heeter

Timothy J. McArdle

President and Chief Executive Officer

Senior Vice President, Treasurer and

MutualFirst Financial, Inc.

Chief Financial Officer

110 E. Charles Street

Muncie, IN 47305

ANNUAL AND OTHER REPORTS

Additional copies of the Company's Annual Report or Form 10-K filed with the Securities and Exchange Commission, are available at www.mfsbank.com.

The common stock for MutualFirst Financial, Inc. is traded under the symbol "MFSF"; on the NASDAQ National Market. The table below shows the high and low closing prices for our common stock for the periods indicated. This information was provided by the NASDAQ. At March 4, 2004, there were 5,225,200 shares of common stock issued and outstanding and approximately 1,412 shareholders of record.

Stock Price

Dividends per Share

Quarter Ending:

High

Low

First Quarter (ended 03/31/02)

18.300

14.900

$ .09

Second Quarter (ended 06/30/02)

19.800

18.050

$ .09

Third Quarter (ended 09/30/02)

20.590

17.900

$ .09

Fourth Quarter (ended 12/31/02)

19.770

18.730

$ .10

Stock Price

Dividends per Share

Quarter Ending:

High

Low

First Quarter (ended 03/31/03)

21.849

19.860

$ .10

Second Quarter (ended 06/30/03)

23.870

21.390

$ .10

Third Quarter (ended 09/30/03)

26.730

23.400

$ .11

Fourth Quarter (ended 12/31/03)

29.200

25.050

$ .11

Our cash dividend payout policy is continually reviewed by management and the Board of Directors. The Company intends to continue its policy of paying quarterly dividends; however, the payment will depend upon a number of factors, including capital requirements, regulatory limitations, the Company's financial condition, results of operations and the Bank's ability to pay dividends to the Company. The Company relies significantly upon such dividends originating from the Bank to accumulate earnings for payment of cash dividends to shareholders.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following information is only a summary and you should read it in conjunction with our consolidated financial statements and accompanying notes contained in this Annual Report.

	At or For the Year Ended December 31,

	2003		2002		2001		2000		1999
	(In Thousands)
Selected Financial Condition Data

Total Assets	$	823,791	$	775,798	$	769,328	$	770,370	$	544,523

Cash and cash equivalents		23,068		23,620		30,558		21,046		19,983

Loans, net		703,981		641,113		636,635		639,362		442,787

Investment Securities:
Available-for -sale, at fair value		33,472		42,362		31,580		35,142		29,599
Held-to-maturity		0		0		0		10,539		12,449

Total deposits		579,362		550,364		538,878		514,710		364,604

Total borrowings		137,103		118,287		110,743		116,182		74,898

Total stockholders' equity		97,520		96,717		109,744		129,941		96,712




Selected Operations Data

Total interest income	$	46,442	$	50,440	$	54,940	$	41,180	$	34,811
Total interest expense		19,099		23,119		29,081		21,645		19,242


Net interest income		27,343		27,321		25,859		19,535		15,569
Provision for loan losses		1,450		1,713		1,282		685		760

Net interest income after provision
for loan losses		25,893		25,608		24,577		18,850		14,809

Service fee income		2,927		2,785		2,626		2,070		1,728
Gain on sale of loans and
investment securities		1,364		1,365		1,350		144		32
Other non-interest income		1,684		1,798		2,126		1,402		1,091

Total non-interest income		5,975		5,948		6,102		3,616		2,851

Salaries and employee benefits		13,097		12,454		12,288		7,496		7,236
Charitable contributions		0		0		3		4		4,570
Other expenses		7,369		7,246		7,229		5,625		4,870

Total non-interest expense		20,466		19,700		19,520		13,125		16,676

Income before taxes		11,402		11,856		11,159		9,341		984

Income tax expense		3,340		3,376		3,079		3,106		138

Net income	$	8,062	$	8,480	$	8,080	$	6,235	$	846

	At or For the Year Ended December 31,

	2003		2002		2001		2000		1999
Selected Financial Ratios and Other Financial Data:
Performance Ratios:
Return on average assets (ratio of net
income to average total assets)		1.01%		1.09%		1.05%		1.09%		0.17%
Return on average equity (ratio of net
income to average equity)		8.43		8.36		6.80		6.15		1.83
Interest rate spread information:
Average during the period		3.56		3.59		3.22		3.09		3.24

Net interest margin(1)		3.73		3.84		3.67		3.71		3.41

Ratio of operating expense to average
total asstes		2.56		2.53		2.54		2.30		3.35

Ratio of average interest-earning
assets to average interest-bearing
liabilities		106.53		107.71		110.85		115.17		104.05
Efficiency ratio(2)		61.43		59.21		61.08		56.69		90.53


Asset Quality Ratios:(4)
Non-performing assets to total assets		0.57		0.89		1.05		0.56		0.30
Non-performing loans to total loans		0.46		0.79		1.03		0.53		0.17
Allowance for loan losses to non-performing loans		208.26		123.35		82.4		189.13		467.61
Allowance for loan losses to loans
receivable,net		0.95		0.97		0.86		1.01		0.82


Capital Ratios:
Equity to total assets(4)		11.87		12.47		14.25		16.87		17.76
Average equity to average assets		11.97		13.04		15.44		17.81		9.29


Share and Per Share Data:
Average common shares outstanding
Basic		4,904,007		5,483,929		6,949,879		5,558,377
Diluted		5,084,514		5,597,307		6,964,305		5,558,377
Per share:
Basic earnings		$1.64		$1.55		$1.16		$1.12
Diluted earnings		$1.59		$1.51		$1.16		$1.12
Dividends		0.42		0.37		0.32		0.28


Dividend payout ratio(3)		26.42%		24.50%		27.59%		25.00%


Other Data:
Number of full-service offices		17		17		17		17		13

(1)

Net interest income divided by average interest earning assets.

(2)

Total non-interest expense divided by net interest income plus total non-interest income

(3)

Dividends per share divided by diluted earnings per share

(4)

At end of period

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

MutualFirst Financial, Inc., a Maryland corporation, is a savings and loan holding company, which has as its wholly-owned subsidiary, Mutual Federal Savings Bank, Muncie, Indiana. MFS Financial, Inc. was formed in September 1999 to become the holding company of Mutual Federal in connection with Mutual Federal's conversion from the mutual to stock form of organization on December 29, 1999. In April 2000, MFS Financial, Inc. formally changed its corporate name to MutualFirst Financial, Inc. (“MutualFirst”). The words “we,” “our” and “us” refer to MutualFirst and Mutual Federal on a consolidated basis, except that references to us prior to December 29, 1999 refer only to Mutual Federal.

Our principal business consists of attracting retail deposits from the general public and investing those funds primarily in permanent loans secured by first mortgages on owner-occupied, one-to-four family residences, a variety of consumer loans, loans secured by commercial and multi-family real estate and commercial business loans. We are headquartered in Muncie, Indiana with 17 retail offices primarily serving Delaware, Randolph, Kosciusko, and Grant counties in Indiana. We also originate mortgage loans in contiguous counties, and we originate indirect consumer loans throughout Indiana.

The following discussion is intended to assist your understanding of our financial condition and results of operations. The information contained in this section should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements.

Our results of operations depend primarily on our net interest income, which is the difference between interest income on interest-earning assets, which principally consist of loans and mortgage-backed and investment securities, and interest expense on interest-bearing liabilities, which principally consist of deposits and borrowings. Our results of operations also are affected by the level of our non-interest income and expenses and income tax expense.

Forward-Looking Statements

The discussion contains various forward-looking statements, which are based on assumptions and describe our future plans and strategies and our expectations. These forward-looking statements are generally identified by words such as “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar words. Our ability to predict results or the actual effect of future plans or strategies is uncertain. Factors which could cause actual results to differ materially from those estimated include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of our loan and investment portfolios, demand for our loan products, deposit flows, our operating expenses, competition, demand for financial services in our market areas

and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and you should not rely too much on these statements. We do not undertake, and specifically disclaim any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Management Strategy

Our strategy is to operate as an independent, retail oriented financial institution dedicated to serving customers in our market areas. Our commitment is to provide a broad range of products and services to meet the needs of our customers. As part of this commitment, we are looking to increase our emphasis on commercial business products and services. We have also created a fully interactive transactional website. In addition, we are continually looking at cost-effective ways to expand our market area.

Financial highlights of our strategy include:

•

Continuing as a Diversified Lender. We have been successful in diversifying our loan portfolio to reduce our reliance on any one type of loan. From 1995 through 2000 approximately 36% of our loan portfolio consisted of loans other than one-to four- family real estate loans. Since that time to the end of 2003, that percentage has increased to 45.1%

•

Continuing as a Leading One-to Four- Family Lender. We are one of the largest originators of one-to four-family residential loans in our four-county market area. During 2003, we originated $224.0 million of one- to four- family residential loans.

•

Continuing To Focus On Asset Quality. Non-performing assets to total assets was .57% at December 31, 2003, an improvement from .89% at December 31, 2002. We are confident that our underwriting standards will continue to provide for a quality loan portfolio.

•

Continuing Our Strong Capital Position. As a result of our consistent profitability, we have historically maintained a strong capital position. At December 31, 2003, our ratio of stockholders' equity to total assets was 11.8%.

Asset and Liability Management and Market Risk

Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally is established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor our interest rate risk. In monitoring interest rate risk, we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities, and their sensitivity to actual or potential changes in market interest rates.

In order to minimize the potential for adverse effects of material and prolonged changes in interest rates on our results of operations, we adopted asset and liability management policies to better match the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities. Mutual Federal's Board of Directors sets and recommends asset and liability policies, which are implemented by the asset and liability management committee. The Asset and Liability Management Committee is chaired by the chief financial officer and is comprised of members of our senior management. The purpose of the Asset and Liability Management Committee is to communicate, coordinate and control asset/liability management issues consistent with our business plan and board-approved policies. This committee establishes and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources consistent with liquidity, capital adequacy, growth, risk and profitability goals. The Asset and Liability Management Committee generally meets monthly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to a net present value of portfolio equity analysis and income simulations. At each meeting, the Asset and Liability Management Committee recommends appropriate strategy changes based on this review. The chief financial officer is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the Board of Directors, at least quarterly.

In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we have sought to:

•

Originate and purchase adjustable rate mortgage loans and commercial business loans,

•

Originate shorter-term consumer loans,

•

Manage our deposits to establish stable deposit relationships,

•

Acquire longer-term borrowings at fixed rates, when appropriate, to offset the negative impact of longer-term fixed rate loans in our loan portfolio, and

•

Limit the percentage of long-term fixed-rate loans in our portfolio.

Depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the Asset and Liability Management Committee may increase our interest rate risk position somewhat in order to maintain our net interest margin. We intend to increase our emphasis on the origination of relatively short-term and/or adjustable rate loans. In addition, in an effort to avoid an increase in the percentage of

long-term fixed-rate loans in our portfolio, in 2003, we sold $52.0 million of fixed-rate, one-to four- family, twenty to thirty year mortgage

loans in the secondary market.

The Asset and Liability Management Committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution's existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity that are authorized by our board of directors.

Mutual Federal employs a financial model that provides the following tables. The tables present the change in our net portfolio value at December 31, 2003 and 2002 that would occur upon an immediate and sustained change in market interest rates of 100 to 300 basis points as required by the Office of Thrift Supervision, and do not give any effect to actions that management might take to counteract that change. The changes in net portfolio value under all rate changes shown were within board of director-approved guidelines.

December 31, 2003

Net Portfolio Value

Changes							NPV as % of PV of Assets
In Rates	$ Amount		$ Change		% Change		NPV Ratio		Change
+300 bp		61,428		-30,407		-33%		8.05%		-305 bp
+200 bp		73,401		-18,434		-20%		9.36%		-174 bp
+100 bp		83,591		-8,244		-9%		10.37%		-73 bp
0 bp		91,835						11.10%
-100 bp		90,618		1,217		-1%		10.76%		-34 bp
-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)

December 31, 2002

Net Portfolio Value

Changes							NPV as % of PV of Assets
In Rates	$ Amount		$ Change		% Change		NPV Ratio		Change
+300 bp		71,596		-24,279		-25%		9.77%		-238 bp
+200 bp		81,139		-14,736		-15%		10.79%		-135 bp
+100 bp		89,884		-5,991		-6%		11.66%		-49 bp
0 bp		95,875						12.15%
-100 bp		93,628		-2,247		-2%		11.68%		-47 bp
-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)

(1)

Not meaningful because some market rates would compute to a rate less than zero.

Certain assumptions are input to the financial model in assessing the interest rate risk of savings associations. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market value of certain assets under differing interest rate scenarios, among others.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the tables.

Financial Condition at December 31, 2003 Compared to December 31, 2002

General. Our total assets increased $48.0 million during 2003, ending the year at $823.8 million compared to $775.8 million at December 31, 2002, primarily due to increases in loans. Liabilities increased $47.2 million due to increased deposits and borrowings. Stockholders' equity increased slightly to $97.5 million as net income of $8.1 million was partially offset by stock repurchases and dividends.

Loans. Our net loan portfolio increased $62.9 million from $641.1 million at December 31, 2002, to $704.0 million at December 31, 2003. Consumer loans increased $17.9 million or

10.3% from $172.8 million at December 31, 2002 to $190.7 million at December 31, 2003. Most of the consumer loan growth came from auto loans, which increased $7.5 million or 22.7% from $33.0 million to $40.5 million and recreational vehicles loans, which increased $5.5 million or 11.5% from $52.7 million to $58.2 million. Commercial business loans increased $9.7 million or 28.0% from $34.7 million to $44.4 million at December 31, 2003. It has been our strategy to increase non-real estate mortgage loans as a percentage of our loan portfolio in order to mitigate interest rate risk and enhance the portfolio yield. Accordingly, we sold $52.0 million of our fixed rate one- to four- family mortgage loans in 2003. As a result, real estate mortgage loans increased $36.1 million or 8.1% (a lesser percentage than the aforementioned non-real estate mortgage loans) from $443.9 million to $480.0 million at December 31, 2003 and mortgage loans held for sale decreased $5.9 million.

Allowance For Loan Loss. The allowance for loan loss increased to $6.8 million at December 31, 2003 from $6.3 million at December 31, 2002, an increase of $493,000 or 7.8%. Net charge offs were $957,000 during 2003, as compared to net charge offs of $876,000 for 2002. This, along with a $1.5 million loan loss provision during 2003, resulted in the allowance for loan losses as a percentage of total loans decreasing to .95% at December 31, 2003 compared to .97% at December 31, 2002. The allowance for loan losses as a percentage of non-performing loans was 208.26% and 123.35% at December 31, 2003 and December 31, 2002, respectively. Non-performing loans were $3.3 million or .46% of total loans at December 31, 2003 compared to $5.1 million or .79% at December 31, 2002. The increase in the allowance for loan losses was due to continued poor economic conditions in some of our markets, the increase in the portfolio risk due to the increased percentage of consumer and commercial loans in the portfolio and the increases in loan balances.

Securities. Investment securities amounted to $33.5 million at December 31, 2003 compared to $42.4 million at December 31, 2002, a 21.0% decrease. This decrease was primarily due to the use of funds from maturing securities to help fund loan growth.

Liabilities. Our total liabilities increased $47.2 million or 6.9% to $726.3 million at December 31, 2003 from $679.1 million at December 31, 2002. This increase was due primarily to an increase in deposits of $29.0 million, and an increase in borrowed funds of $18.8 million to provide funding for stock repurchases and to fund loan growth.

Stockholders' Equity. Stockholders' equity increased $803,000 from $96.7 million at December 31, 2002 to $97.5 million at December 31, 2003. The increase was due primarily to net income of $8.1 million, Employee Stock Ownership Plan (ESOP) shares earned of $752,000 and RRP shares earned of $450,000. These increases were partially offset by the repurchase of 326,378 shares of MutualFirst common stock at a cost of $7.2 million and dividend payments of $2.0 million. Also, unrealized gain on securities available for sale decreased $231,000 from $464,000 at December 31, 2002 to $234,000 at December 31, 2003.

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

The following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made. All average balances are daily average balances. Non-accruing loans have been included in the table as loans carrying a zero yield.

	Year ended December 31,
	2003								2002								2001

	Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate

	(Dollars in thousands)
Interest-Earning Assets:
Interest -bearing deposits	$	7,478		$	71		0.95	%	$	11,215		$	175		1.56	%	$	6,210		$	189		3.04	%
Mortgage-backed securities										11,451			677		5.91			11,124			759		6.82
Investment securities:		13,969			423		3.03
Available-for-sale (1)										19,525			916		4.69			18,413			1,184		6.43
Held-to-maturity		19,167			707		3.69			0			0					5,155			270		5.24
Loans (2) (5)		684,462			44,881		6.56			662,212			48,247		7.29			656,579			52,018		7.92
Stock in FHLB of Indianapolis		7,112			360		5.06			6,993			424		6.06			6,993			520		7.44

Total interest-earning assets		732,188			46,442		6.34			711,396			50,439		7.09			704,474			54,940		7.80

Non-interest earning assets, net of allowance
for loan losses and unrealized gain/loss		66,408								65,818								65,438

Total assets	$	798,596							$	777,214							$	769,912




Interest-Bearing Liabilities:
Demand and NOW accounts	$	87,167			189		0.22		$	81,774			429		0.52		$	74,545			729		0.98
Savings deposits		58,804			282		0.48			54,515			592		1.09			49,468			921		1.86
Money market accounts		47,746			488		1.02			47,301			740		1.56			43,042			1,270		2.95
Certificate accounts		374,085			12,712		3.40			366,522			15,634		4.27			366,375			20,394		5.57

Total deposits		567,802			13,671		2.41			550,112			17,395		3.16			533,430			23,314		4.37
Borrowings		119,492			5,428		4.54			110,334			5,724		5.19			102,087			5,767		5.65

Total interest-bearing accounts		687,294			19,099		2.78			660,446			23,119		3.50			635,517			29,081		4.58

Other liabilities		15,702								15,385								15,544

Total liabilities		702,996								675,831								651,061
Stockholders' equity		95,600								101,383								118,851

Total liabilities and stockholders' equity	$	798,596							$	777,214							$	769,912


Net earning assets	$	44,894							$	50,950							$	68,957


Net interest income				$	27,343							$	27,320							$	25,859


Net interest rate spread (3)							3.56	%							3.59	%							3.22	%


Net yield on average interest-earning assets (4)							3.73	%							3.84	%							3.67	%


Average interest-earning assets to
average interest-bearing liabilities		106.53	%							107.71	%							110.85	%

_______________

(1)

Average balances were calculated using amortized cost, which excludes FASB 115 valuation allowances.

(2)

Calculated net of deferred loan fees, loan discounts, loans in process and loss reserves.

(3)

Interest rate spread is calculated by subtracting weighted average interest rate cost from weighted average interest rate yield for the period indicated.

(4)

The net yield on weighted average interest-earning assets is calculated by dividing net interest income by weighted average interest-earning assets for the period indicated.

(5)

The balances include nonaccrual loans.

Rate/Volume Analysis

The following table presents the dollar amount changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in volume multiplied by the old rate, and (2) changes in rate, which is a change in rate multiplied by the old volume. Changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

	Year Ended December 31,
	2003 vs. 2002									2002 vs. 2001

	Increase (decrease) Due to						Total Increase (decrease)			Increase (decrease) Due to						Total Increase (decrease)

	Volume			Rate						Volume			Rate

	(Dollars in thousands)
Interest-earning assets:
Interest-bearing deposits		($ 48	)		($ 56	)		($ 104	)	$	106			($ 120	)		($ 14	)
Trading account securities		0			0			0			0			0			0
Investment securities:
Available-for-sale		105			(568	)		(463	)		91			(440	)		(349	)
Held-to-maturity		0			0			0			(270	)		0			(270	)
Loans receivable		1,580			(4,946	)		(3,366	)		443			(4,215	)		(3,772	)
Stock in FHLB of Indianapolis		7			(71	)		(64	)		0			(96	)		(96	)

Total interest-earning assets	$	1,644			($5,641	)		(3,997	)	$	370			($4,871	)		(4,501	)

Interest-bearing liabilities:
Savings deposits	$	43			($ 353	)		(310	)	$	86			($ 415	)		(329	)
Money market accounts		7			(259	)		(252	)		115			(645	)		(530	)
Demand and NOW accounts		27			(267	)		(240	)		65			(365	)		(300	)
Certificate accounts		317			(3,239	)		(2,922	)		8			(4,769	)		(4,761	)
Borrowings		451			(747	)		(296	)		447			(490	)		(43	)

Total interest-bearing liabilities	$	845			($4,865	)		(4,020	)	$	721			($6,684	)		(5,963	)

Change in net interest income							$	23								$	1,462

Comparison of Results of Operations for Years Ended December 31, 2003 and 2002.

General. Net income for the year ended December 31, 2003 decreased $418,000 or 4.9% to $8.1 million compared to $8.5 million for the year ended December 31, 2002. Although net income decreased, diluted earnings per share increased 5.3% from $1.51 in 2002 to $1.59 in 2003 due to share repurchases in the open market.

Net Interest Income. Interest income decreased $4.0 million, or 7.9% to $46.4 million for the year ended December 31, 2003 from $50.4 million for the year ended December 31, 2002. Interest expense decreased $4.0 million, or 17.4% from $23.1 million for the year ended December 31, 2002 to $19.1 million for the year ended December 31, 2003. As a result, net interest income for the year ended December 31, 2003 was flat at $27.3 million when compared to the previous year. The average interest rate spread decreased slightly from 3.59% for the year ended December 31, 2002 to 3.56% for the year ended December 31, 2003.

Interest Income. The decrease in interest income during the year ended December 31, 2003 was due to a reduction in the average yield on our earning assets from 7.09% in 2002 to 6.34% in 2003 as a result of lower market interest rates. This decrease was partially offset by a $21.4 million increase in average earning assets from $711.4 million during 2002 to $732.2

million during 2003. The majority of this increase was in average loans receivable, which increased $22.3 million from $662.2 in 2002 to $684.5 million in 2003. The average yield on these loans decreased 63 basis points from 7.29% in 2002 to 6.56% in 2003.

Interest Expense. The decrease in interest expense was due to a 72 basis point reduction in the cost of our average interest bearing liabilities from 3.50% in 2002 to 2.78% in 2003 as a result of lower market interest rates. This decrease was partially offset by a $26.8 million increase in average interest bearing liabilities from $660.5 million in 2002 to $687.3 million in 2003. The majority of this increase was in average deposits, which increased $17.7 million from $550.1 million in 2002 to $567.8 million in 2003. The average cost on these deposits decreased 75 basis points from 3.16% in 2002 to 2.41% in 2003.

Provision for Loan Losses. For the year ended December 31, 2003, the provision for loan losses amounted to $1.5 million compared to $1.7 million in 2002. In each period, the provision for loan losses was based on an analysis of individual loans, prior and current year loss experience, overall growth in the portfolio, the change in the portfolio mix and current economic conditions in our markets. While we continue to experience poor economic conditions in some of our markets and continue to change our portfolio mix to more non-mortgage related loans, the overriding reasons for the decrease in the provision for loan losses in 2003 compared to 2002 were a reduction in non-performing loans and larger than anticipated recoveries of previously written off loans.

Other Income. Other income for the year ended December 31, 2003 increased $27,000 from $5.9 million for the year ended December 31, 2002 to $6.0 million for the year ended December 31, 2003. This increase was due primarily to a decrease in our equity in losses on limited partnerships, which own various low-income housing projects that provide federal income tax credits to its equity owners. Our share of the losses was $323,000 for the year ended December 31, 2003 compared to $517,000 the previous year. Another factor affecting the change in other income was a $193,000 increase in service fee income. Also, cash surrender values of life insurance improved $135,000 in 2003 compared to 2002. These changes were partially offset by a decrease in net servicing fees of $448,000 (including a $320,000 third quarter valuation reserve for mortgage servicing rights).

Other Expense. Total operating expenses increased $766,000 or 3.9% from $19.7 million for the year ended December 31, 2002 to $20.5 million for 2003. Salaries and employee benefits were $13.1 million for the year ended December 31, 2003 compared to $12.5 million for the 2002 period, an increase of $643,000 or 5.2%. The changes in salaries and benefits included a $397,000 increase in health insurance premium costs, increased ESOP expense due to the increase in the market value of our stock, staffing increases in the lending area due to increased activity, and annual pay increases. Also adding to operating expenses for 2003 was a more aggressive marketing effort to promote loans and short term core deposits. The cost of this successful campaign increased advertising and promotion expense $185,000 in 2003 compared to 2002.

Income Tax Expense. Income tax expense for the year ended December 31, 2003 was $3.3 million compared to $3.4 million for the year ended December 31, 2002. The decrease was

due primarily to decreased taxable income partially offset by reduced tax credits on low income housing projects which expired in 2003. The effective tax rate increased from 28.5% to 29.3% when comparing 2002 and 2003, respectively.

Comparison of Results of Operations for Years Ended December 31, 2002 and 2001.

General. Net income for the year ended December 31, 2002 increased $400,000 or 4.9% to $8.5 million compared to $8.1 million for the year ended December 31, 2001.

Net Interest Income. Interest income decreased $4.5 million, or 8.2% to $50.4 million for the year ended December 31, 2002 from $54.9 million for the year ended December 31, 2001. Interest expense decreased $6.0 million, or 20.5% from $29.1 million for the year ended December 31, 2001 to $23.1 million for the year ended December 31, 2002. As a result, net interest income for the year ended December 31, 2002 increased $1.5 million, or 5.7% compared to 2001. The average interest rate spread increased from 3.22% for the year ended December 31, 2001 to 3.59% for the year ended December 31, 2002.

Interest Income. The decrease in interest income during the year ended December 31, 2002 was due to a reduction in the average yield on our earning assets from 7.80% in 2001 to 7.09% in 2002 as a result of lower market interest rates. This decrease was partially offset by a $6.9 million increase in average earning assets from $704.5 million during 2001 to $711.4 million during 2002. The majority of this increase was in average loans receivable, which increased $5.6 million from $656.6 in 2001 to $662.2 million in 2002. The average yield on these loans decreased 63 basis points from 7.92% in 2001 to 7.29% in 2002.

Interest Expense. The decrease in interest expense was due to a 108 basis point reduction in the cost of our average interest bearing liabilities from 4.58% in 2001 to 3.50% in 2002 as a result of lower market interest rates. This decrease was partially offset by a $24.9 million increase in average interest bearing liabilities from $635.5 million in 2001 to $660.5 million in 2002. The majority of this increase was in average deposits, which increased $16.7 million from $533.4 million in 2001 to $550.1 million in 2002. The average cost on these deposits decreased 121 basis points from 4.37% in 2001 to 3.16% in 2002.

Provision for Loan Losses. For the year ended December 31, 2002, the provision for loan losses amounted to $1.7 million compared to $1.3 million in 2001. In each period, the provision for loan losses was based on an analysis of individual loans, prior and current year loss experience, overall growth in the portfolio, the change in the portfolio mix and current economic conditions in our markets. The reasons for the increase in the provision for loan losses in 2002 compared to 2001 were primarily due to continued poor economic conditions in some of our markets and a change in the loan portfolio mix with growth in the consumer and commercial loan portfolios and a reduction in the one-to four- family residential mortgage loan portfolio.

Other Income. Other income for the year ended December 31, 2002 decreased $154,000 from $6.1 million the year ended December 31, 2001 to$5.9 million for the year-end December 31, 2002. This decrease was due primarily to an increase in our equity in losses on limited

partnerships, which own various low-income housing projects that provide federal income tax credits to its equity owners. Our share of the losses was $517,000 for the year ended December 31, 2002 compared to $249,000 the previous year. Another factor affecting the change in other income was a $159,000 increase in service fee income. The increase in service fee income included a $117,000 increase or 24.5% in electronic transaction fees from $476,000 in 2001 to $593,000 in 2002. This is indicative of the increased customer usage of ATM/Debit cards.

Other Expense. Total operating expenses increased $181,000 from $19.5 million for the year ended December 31, 2001 to $19.7 million for 2002. Salaries and employee benefits were $12.5 million for the year ended December 31, 2002 compared to $12.3 million for the 2001 period, an increase of $166,000 or 1.35%. The changes in salaries and benefits included a $357,000 increase in health insurance premium costs, increased ESOP expense due to the increase in the market value of our stock, staffing increases in the lending area due to increased activity, and annual pay increases. These increases were partially offset by a $230,000 reduction in incentive bonus from 2001 to 2002, and a $619,000 reduction in Recognition and Retention Plan (RRP) cost from $1.4 million in 2001 to $768,000 in 2002. Net occupancy expenses increased $131,000 due primarily to increased real estate taxes in 2002 compared to 2001.

Income Tax Expense. Income tax expense for the year ended December 31, 2002 was $3.4 million compared to $3.1 million for the year ended December 31, 2001. The increase was due primarily to increased taxable income.

Liquidity and Commitments

Mutual Federal is required to maintain adequate levels of investments that qualify as liquid assets under Office of Thrift Supervision regulations to ensure the institution's safe and sound operations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets at levels above the minimum requirements imposed by Office of Thrift Supervision regulations and above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained. At December 31, 2003, our liquidity ratio, which is our liquid assets as a percentage of net withdrawable savings deposits and current borrowings, was 7.93 %.

Our liquidity, represented by cash and cash equivalents and investment securities, is a product of our operating, investing and financing activities. Our primary sources of funds are deposits, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements. We also generate cash through borrowings. We utilize Federal Home Loan Bank

advances to leverage our capital base and provide funds for our lending and investment activities, and to enhance out interest rate risk management.

Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as overnight deposits or U.S. Agency securities. We use our sources of funds primarily to meet our ongoing commitments, to pay maturing certificates of deposit and savings withdrawals, to fund loan commitments and to maintain our portfolio of mortgage-backed securities and investment securities. At December 31, 2003, the total approved loan origination commitments outstanding amounted to $24.7 million. At the same date, the unadvanced portion of construction loans was $7.5 million. At December 31, 2003, unused lines of credit totaled $39.6 million and outstanding letters of credit totaled $7.2 million. As of December 31, 2003, certificates of deposit scheduled to mature in one year or less totaled $224.6 million, and investment and mortgage-backed securities scheduled to mature in one year or less totaled $12.2 million. Based on historical experience, management believes that a significant portion of maturing deposits will remain with us. We anticipate that we will continue to have sufficient funds, through deposits and borrowings, to meet our current commitments. The following table presents our contractual obligations (excluding deposit products).

	Payments due by period
	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
Contractual Obligations

FHLB Advances	$134,592	$48,665	$48,294	$16,769	$20,864
Notes Payable	2,511	360	707	797	647

Total	$137,103	$49,025	$49,001	$17,566	$21,511

The Company's purchase obligations have no material impact on its cash flow or liquidity and, accordingly, have not been included in the above table.

Capital

Consistent with our goals to operate a sound and profitable financial organization, Mutual Federal actively strives to remain a “well capitalized” institution in accordance with regulatory standards. Total stockholders' equity of MutualFirst Financial, Inc. was $97.5 million at December 31, 2003, or 11.8% of total assets on that date. As of December 31, 2003, Mutual Federal exceeded all capital requirements of the Office of Thrift Supervision, with regulatory capital ratios as follows: core capital, 11.32%; Tier I risk-based capital, 15.83%; and total risk-based capital, 16.97%. The regulatory capital requirements to be considered well capitalized are 5.0%, 6.0% and 10.0%, respectively.

Impact of New Accounting Standards

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This statement clarifies reporting of contracts as either derivatives or hybrid instruments. MutualFirst Financial, Inc. has determined that all derivatives or hybrid instruments covered under this statement have been properly reported under SFAS No. 149.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities. FIN 46 provides guidance with respect to variable interest entities and when the assets, liabilities, non-controlling interest, and results of operations of a variable interest entity need to be included in a company's consolidated financial statements. A variable interest entity exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics are the direct or indirect ability to make decisions about an entity's activities through voting rights or similar rights, the obligation to absorb the expected losses of an entity if they occur, and the right to receive the expected residual returns of the entity if they occur.

FIN No. 46 was effective immediately for new entities that were created or acquired after January 31, 2003. The effective date for entities in which MutualFirst Financial had a variable interest prior to February 1, 2003 was originally July 1, 2003 but the FASB delayed the effective date for these entities to December 15, 2003.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-based Compensation – Transition and Disclosure, which provides guidance for transition from the intrinsic value method of accounting for stock-based compensation under Accounting Principles Board (“APB”) Opinion No. 25 to SFAS No. 123's fair value method of accounting, if a company so elects. MutualFirst Financial applies APB Opinion No. 25 and related Interpretations in accounting for the stock option plan. Accordingly, no compensation costs have been recognized, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. Had compensation cost for MutualFirst Financial's stock option plan been recorded based on the fair value at the grant dates for awards under the plan consistent with the method prescribed by SFAS No. 123, net income and net income per share would have been adjusted to the proforma amounts indicated in Note 3.

In November 2002, FASB Interpretation No. 45 (“FIN 45”), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others was issued. FIN 45 requires the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The most significant FIN 45 instruments of the MutualFirst Financial are standby letters of credit. MutualFirst Financial has determined that its standby letters of credit obligations under FIN 45 are not material for disclosure.

Critical Accounting Policies

The notes to the consolidated financial statements contain a summary of Mutualfirst's significant accounting policies presented on pages -- to -- of the Annual Report to Shareholders for the year ended December 31, 2003. Certain of these policies are important to the portrayal of MutualFirst's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management believes that its critical accounting policies include determining the allowance for loan losses, the valuation of foreclosed assets, mortgage servicing rights and real estate held for development and the valuation of intangible assets.

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. A worsening or protracted economic decline would increase the likelihood of additional losses due to credit and market risk and could create the need for additional loss reserves.

Allowance for Loan Losses

The allowance for loan losses is a significant estimate that can and does change based on management's assumptions about specific borrowers and current general economic and business conditions, among other factors. Management reviews the adequacy of the allowance for loan losses on at least a quarterly basis. The evaluation by management includes consideration of past loss experience, changes in the composition of the loan portfolio, the current condition and amount of loans outstanding, identified problem loans and the probability of collecting all amounts due.

Foreclosed Assets

Foreclosed assets are carried at the lower of cost or fair value less estimated selling costs. Management estimates the fair value of the properties based on current appraisal information. Fair value estimates are particularly susceptible to significant changes in the economic environment, market conditions, and real estate market. A worsening or protracted economic decline would increase the likelihood of a decline in property values and could create the need to write down the properties through current operations.

Mortgage Servicing Rights

Mortgage servicing rights (“MSRs”) associated with loans originated and sold, where servicing is retained, are capitalized and included in other intangible assets in the consolidated balance sheet. The value of the capitalized servicing rights represents the present value of the future servicing fees arising from the right to service loans in the portfolio. Critical accounting policies for MSRs relate to the initial valuation and subsequent impairment tests. The methodology used to determine the valuation of MSRs requires the development and use of a number of estimates, including anticipated principal amortization and prepayments of that principal balance. Events that may significantly affect the estimates used are changes in interest rates, mortgage loan prepayment speeds and the payment performance of the underlying loans.

The carrying value of the MSRs is periodically reviewed for impairment based on a determination of fair value. For purposes of measuring impairment, the servicing rights are compared to a valuation prepared based on a discounted cash flow methodology, utilizing current prepayment speeds and discount rates. Impairment, if any, is recognized through a valuation allowance and is recorded as amortization of intangible assets.

Intangible Assets

MutualFirst periodically assesses the impairment of its goodwill and the recoverability of its core deposit intangible. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. If actual external conditions and future operating results differ from MutualFirst's judgments, impairment and/or increased amortization charges may be necessary to reduce the carrying value of these assets to the appropriate value.

Impact of Inflation

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Our primary assets and liabilities are monetary in nature. As a result, interest rates affect our performance more than general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturity structure of our assets and liabilities are critical to the maintenance of acceptance performance levels.

The principal effect of inflation, as distinct from levels of interest rates, on earnings is in the area of non-interest expense. Expense items such as employee compensation, employee benefits and occupancy and equipment cost may increase because of inflation. Inflation also may increase the dollar value of the collateral securing loans that we have made. We are unable to determine the extent to which properties securing our loans have appreciated in dollar value due to inflation.

Selected Quarterly Financial Information

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

	(In thousands)
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

2002
March	$	12,755	$	6,125	$	6,630	$	587	$	1,884	$	0.32	$	0.32
June		12,716		5,888		6,828		375		2,013		0.35		0.34
September		12,550		5,709		6,841		375		2,326		0.44		0.43
December		12,418		5,396		7,022		375		2,257		0.44		0.43

Total	$	50,439	$	23,118	$	27,321	$	1,712	$	8,480		1.55		1.51

MutualFirst Financial, Inc.

Accountants' Report and Consolidated Financial Statements

December 31, 2003, 2002 and 2001

NEXT PAGE

Independent Accountants' Report

Board of Directors
MutualFirst Financial, Inc.
Muncie, Indiana

We have audited the accompanying consolidated balance sheets of MutualFirst Financial, Inc. as of December 31, 2003 and 2002, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial position of MutualFirst Financial, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

BKD, LLP
Indianapolis, Indiana
February 6, 2004

NEXT PAGE

MutualFirst Financial, Inc.
Consolidated Balance Sheets
December 31, 2003 and 2002

					2003	2002
Assets
	Cash and due from banks				$ 21,073,754	$ 17,986,004
	Interest-bearing demand deposits				1,994,032	5,633,953
				Cash and cash equivalents	23,067,786	23,619,957
	Investment securities available for sale				33,471,986	42,362,138
	Loans held for sale				1,975,277	7,850,711
	Loans, net of allowance for loan losses of $6,779,218 and $6,285,959				703,980,796	641,112,981
	Premises and equipment				10,070,804	9,186,501
	Federal Home Loan Bank stock				7,264,200	6,993,400
	Investment in limited partnerships				5,087,752	5,616,485
	Deferred income tax benefit				3,846,184	4,118,344
	Cash value of life insurance				26,140,357	25,439,308
	Other assets				8,885,696	9,497,834
				Total assets	$823,790,838	$775,797,659

Liabilities and Stockholders' Equity
	Liabilities
		Deposits
			Noninterest-bearing		$ 32,137,746	$ 28,908,935
			Interest-bearing		547,224,644	521,455,008
				Total deposits	579,362,390	550,363,943
			Federal Home Loan Bank advances		134,592,151	115,403,203
			Notes payable		2,510,568	2,883,631
			Other liabilities		9,805,597	10,429,756
				Total liabilities	726,270,706	679,080,533

	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 - 5,293,155 and 5,523,052 shares		52,932	55,231
		Additional paid-in capital			38,052,080	38,782,755
		Retained earnings			63,409,374	61,779,695
		Accumulated other comprehensive income			233,738	464,452
		Unearned benefit plan shares			(4,227,992)	(4,365,007)
				Total stockholders' equity	97,520,132	96,717,126

				Total liabilities and stockholders' equity	$823,790,838	$775,797,659

See Notes to Consolidated Financial Statements

NEXT PAGE

MutualFirst Financial, Inc.
Consolidated Statements of Income
Years Ended December 31, 2003, 2002 and 2001

			2003	2002	2001
Interest and Dividend Income
	Loans receivable		$44,880,960	$48,246,747	$52,018,175
	Investment securities		1,130,134	1,593,708	2,212,568
	Federal Home Loan Bank stock		360,153	423,963	519,859
	Deposits with financial institutions		70,820	175,042	189,272
		Total interest and dividend income	46,442,067	50,439,460	54,939,874

Interest Expense
	Deposits		13,671,004	17,394,703	23,314,477
	Federal Home Loan Bank advances		5,365,496	5,652,344	5,719,922
	Other interest expense		62,424	71,528	46,980
		Total interest expense	19,098,924	23,118,575	29,081,379

Net Interest Income			27,343,143	27,320,885	25,858,495
	Provision for loan losses		1,450,000	1,712,483	1,281,648
Net Interest Income After Provision for Loan Losses			25,893,143	25,608,402	24,576,847

Other Income
	Service fee income		2,926,705	2,784,744	2,625,649
	Net realized gains (losses) on sales of available-for-sale securities		6,979	(2,763)	46,241
	Commissions		745,427	790,086	750,524
	Equity in losses of limited partnerships		(323,450)	(516,509)	(249,300)
	Net gains on sales of loans		1,356,593	1,368,033	1,304,077
	Net servicing fees (expense)		(382,620)	65,470	84,268
	Increase in cash value of life insurance		1,343,542	1,208,217	1,176,000
	Other income		301,843	250,658	364,332
		Total other income	5,975,019	5,947,936	6,101,791

Other Expenses
	Salaries and employee benefits		13,097,034	12,453,962	12,288,117
	Net occupancy expenses		1,170,121	1,104,617	973,568
	Equipment expenses		1,024,196	891,202	906,636
	Data processing fees		606,531	760,475	780,360
	Advertising and promotion		639,859	455,143	516,487
	Automated teller machine expense		492,176	492,766	524,886
	Other expenses		3,436,318	3,542,143	3,529,753
		Total other expenses	20,466,235	19,700,308	19,519,807

Income Before Income Tax			11,401,927	11,856,030	11,158,831
	Income tax expense		3,340,415	3,376,500	3,078,700

Net Income			$ 8,061,512	$ 8,479,530	$ 8,080,131

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

NEXT PAGE

See Notes to Consolidated Financial Statements

MutualFirstFinancial, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2003, 2002 and 2001

						Accumulated	Unearned
						Other	Benefit
			Common	Paid-in	Retained	Comprehensive	Plan
			Stock	Capital	Earnings	Income	Shares	Total
Balances, January 1, 2001			$83,794	$84,553,285	$49,380,571	$55,528	$(4,131,786)	$129,941,392
	Comprehensive income
		Net income			8,080,131			8,080,131
		Other comprehensive income, net of tax - unrealized gains on securities				300,481		300,481
	Comprehensive income							8,380,612
	Cash dividends ($.32 per share)				(2,265,008)			(2,265,008)
	Exercise of stock options		114	53,836				53,950
	Stock repurchased		(19,060)	(28,205,313)				(28,224,373)
	RRP shares granted		2,090	3,028,410			(3,030,500)
	RRP shares earned						1,394,099	1,394,099
	ESOP shares earned			145,666			317,840	463,506

Balances, December 31, 2001			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

See Notes to Consolidated Financial Statements

NEXT PAGE

MutualFirst Financial, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2003, 2002 and 2001

				2003	2002	2001
Operating Activities
	Net income			$8,061,512	$8,479,530	$8,080,131
	Items not requiring (providing) cash
		Provision for loan losses		1,450,000	1,712,483	1,281,648
		ESOP shares earned		751,631	585,026	463,506
		RRP shares earned		450,000	767,500	1,394,099
		Depreciation and amortization		2,476,012	2,790,952	3,336,680
		Deferred income tax		417,241	363,338	650,457
		Loans originated for sale		(45,647,544)	(55,029,628)	(66,040,391)
		Proceeds from sales of loans held for sale		52,364,678	63,481,603	59,698,638
		Gains on sales of loans held for sale		(1,356,593)	(1,368,033)	(1,304,077)
	Change in
		Interest receivable		7,153	495,559	616,615
		Other assets		243,754	(175,615)	534,165
		Interest payable		164,490	(343,963)	(12,512)
		Other liabilities		(902,369)	940,074	426,810
		Cash value of life insurance		(701,049)	(1,208,217)	(1,176,000)
	Other adjustments			1,265,262	642,353	1,325,092
			Net cash provided by operating activities	19,044,178	22,132,962	9,274,861

Investing Activities
	Purchases of securities available for sale			(15,603,309)	(30,441,236)	(11,517,408)
	Proceeds from maturities and paydowns of securities available for sale			11,451,638	14,800,015	7,331,030
	Proceeds from sales of securities available for sale			12,172,309	5,000,000	10,261,210
	Proceeds from maturities and paydowns of securities held to maturity			---	---	7,110,618
	Proceeds from sales of securities held to maturity			---	---	1,499,928
	Net change in loans			(67,000,877)	(13,717,276)	(1,992,175)
	Purchases of premises and equipment			(1,894,557)	(1,394,578)	(802,172)
	Proceeds from real estate owned sales			1,733,353	1,081,651	184,606
	Other investing activities			(21,979)	(129,524)	(11,988)
			Net cash provided by (used in) investing activities	(59,163,422)	(24,800,948)	12,063,649

Financing Activities
	Net change in
		Noninterest-bearing, interest-bearing demand and savings deposits		7,062,223	1,325,377	11,977,689
		Certificates of deposits		21,936,224	10,160,395	12,190,945
	Repayment of note payable			(435,487)	(437,470)	(443,824)
	Proceeds from FHLB advances			105,000,000	46,280,000	192,200,000
	Repayment of FHLB advances			(85,880,184)	(38,429,745)	(197,327,508)
	Net change in advances by borrowers for taxes and insurance			113,720	(128,616)	11,235
	Stock repurchased			(7,182,370)	(21,183,942)	(28,224,373)
	Proceeds from stock options exercised			974,357	39,800	53,950
	Cash dividends			(2,021,410)	(1,895,529)	(2,265,008)
			Net cash provided by (used in) financing activities	39,567,073	(4,269,730)	(11,826,894)

Net Change in Cash and Cash Equivalents				(552,171)	(6,937,716)	9,511,616

Cash and Cash Equivalents, Beginning of Year				23,619,957	30,557,673	21,046,057

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

Additional Cash Flows Information
	Interest paid			$19,263,414	$23,462,538	$29,093,891
	Income tax paid			3,191,271	3,089,069	1,505,000
	Transfers from loans to foreclosed real estate			1,220,234	1,715,157	684,649
	Loans transferred to held for sale			---	15,459,187	---
	Loans transferred from held for sale			---	11,559,158	---
	Mortgage servicing rights capitalized			514,893	524,534	581,773

See Notes to Consolidated Financial Statements

NEXT PAGE

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(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 subsidiaries, First MFSB Corporation and Third 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 sells various insurance products and Third MFSB offers tax-deferred annuities, mutual funds and equity securities.
	Consolidation - The consolidated financial statements include the accounts of the Company, the Bank, and the Bank's subsidiaries, 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.

MutualFirstFinancial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(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, 2003, 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.
	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.

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

	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 2002 and 2001 consolidated financial statements have been made to conform to the 2003 presentation.
	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.

		2003	2002	2001

Net income, as reported		$8,062	$8,480	$8,080
Less: Stock- based employee compensation cost determined under the fair value method, net of income taxes		(226)	(605)	(292)

Pro forma net income		$7,836	$7,875	$7,788

Earnings per share
	Basic - as reported	$ 1.64	$ 1.55	$ 1.16
	Basic - pro forma	1.59	1.44	1.12
	Diluted - as reported	1.59	1.51	1.16
	Diluted - pro forma	1.54	1.41	1.12

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(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, 2003 was $7,223,000.
Note 3: Investment Securities Available for Sale

	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

	2002
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Mortgage- backed securities	$6,615	$309	$- - -	$ 6,924
Collateralized mortgage obligations	9,406	116	(7)	9,515
Federal agencies	1,997	86	- - -	2,083
Small Business Administration	241	- - -	(2)	239
Corporate obligations	7,723	308	- - -	8,031
Marketable equity securities	15,456	4	(40)	15,420
Municipal obligation	150	- - -	- - -	150
Total investment securities	$41,588	$823	$(49)	$42,362

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

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

	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, 2003, was $8,247,000, which is approximately 25 percent of the Company's available-for-sale-investment-portfolio. These declines primarily resulted from recent increases in market interest rates and failure of certain investments to maintain consistent credit quality ratings or meet projected earnings targets.
	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.
	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, 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, 2003, 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.

	2003
	Amortized Cost	Fair Value

Within one year	$ 4,624	$ 4,697
One to five years	8,216	8,390
Five to ten years	60	60
After ten years	50	50
	12,950	13,197
Mortgage- backed securities	3,900	4,044
Collateralized mortgage obligations	8,374	8,457
Small Business Administration	214	215
Marketable equity securities	7,645	7,559
Totals	$33,083	$33,472

	The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $7,504,000 at December 31, 2003, and $14,928,000 at December 31, 2002.

	Proceeds from sales of securities available for sale during 2003, 2002 and 2001 were $12,172,000, $5,000,000 and $10,261,000. Gross gains of $30,000, $3,000 and $93,000 and gross losses of $23,000, $6,000 and $69,000 were recognized on those sales in 2003, 2002 and 2001.

	Proceeds from sales of securities held to maturity during 2001 were $1,500,000. Gross gains of $28,000 and gross losses of $6,000 were recognized on those sales in 2001. The remaining balance of held-to-maturity securities totaling $2,290,000 was reclassified as available for sale.

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 4: Loans and Allowance

			2003	2002
Loans
	Real estate loans
		One- to- four family	$391,476	$366,556
		Multi family	5,353	8,211
		Commercial	65,430	54,252
		Construction and development	17,860	14,853
			480,119	443,872
	Consumer loans
		Auto	40,497	32,997
		Home equity	25,401	21,515
		Home improvement	20,924	20,135
		Mobile home	4,108	5,643
		Recreational vehicles	58,222	52,672
		Boats	38,096	36,530
		Other	3,443	3,322
			190,691	172,814
	Commercial business loans		44,362	34,660
		Total loans	715,172	651,346

	Undisbursed loans in process		(8,160)	(7,240)
	Unamortized deferred loan fees and costs, net		3,748	3,293
	Allowance for loan losses		(6,779)	(6,286)
		Net loans	$703,981	$641,113

		2003	2002	2001
Allowance for loan losses
	Balances, January 1	$6,286	$5,449	$6,472
	Provision for losses	1,450	1,713	1,282
	Recoveries on loans	404	939	61
	Loans charged off	(1,361)	(1,815)	(2,366)

	Balances, December 31	$6,779	$6,286	$5,449

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

	At December 31, 2003 and 2002, accruing loans delinquent 90 days or more totaled $10,000 and $64,000. Non-accruing loans at December 31, 2003 and 2002 were $3,270,000 and $5,032,000.

	Information on impaired loans is summarized below.

	2003	2002

Impaired loans with an allowance	$2,089	$2,141

Impaired loans for which the discounted cash flows or collateral value exceeds the carrying value of the loan	- - -	210

Total impaired loans	$2,089	$2,351

Allowance for impaired loans included in the Company's allowance for loan losses	$ 151	$ 321

	2003	2002	2001

Average balance of impaired loans	$2,942	$3,821	$3,642
Interest income recognized on impaired loans	62	24	114
Interest income recognized on impaired loans - cash basis	22	8	23

Note 5: Premises and Equipment

			2003	2002

Cost
	Land		$ 3,066	$3,067
	Buildings and land improvements		9,396	9,010
	Equipment		8,571	7,106
		Total cost	21,033	19,183
Accumulated depreciation and amortization			(10,962)	(9,996)
		Net	$10,071	$9,187

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 6: Investment In Limited Partnerships

	2003	2002

Pedcor Investments 1987-II (99.00 percent ownership)	$ - - -	$ 642
Pedcor Investments 1988-V (98.97 percent ownership)	364	417
Pedcor Investments 1990-XI (19.79 percent ownership)	40	51
Pedcor Investments 1990-XIII (99.00 percent ownership)	725	752
Pedcor Investments 1997-XXVIII (99.00 percent ownership)	2,800	3,017
Pedcor Investments 1997-XXIX (99.00 percent ownership)	659	737
Pedcor Investments 2001-LI (9.94 percent ownership)	500	---
	$5,088	$5,616

The limited partnerships build, own and operate apartment complexes. The Company records its equity in the net income or loss of the Pedcor Investments 1987-II, 1988-V, 1990-XIII, 1997-XXVIII, 1997-XXIX and 2001-LI based on the Company's interest in the partnerships. The Company has recorded its investment in Pedcor Investments 1990-XI, which represents less than a 20 percent ownership, at amortized cost and records income when distributions are received. The Company recorded losses from these limited partnerships of $323,000, $517,000 and $249,000 for 2003, 2002 and 2001. In addition, the Company has recorded the benefit of low income housing credits of $753,000, $843,000 and $817,000 for 2003, 2002 and 2001. Combined financial statements for the limited partnerships recorded under the equity method of accounting are as follows:

				2003	2002
Combined condensed balance sheets
	Assets
		Cash		$ 154	$ 204
		Land and property		36,128	29,445
		Other assets		1,231	1,281

			Total assets	$37,513	$30,930

	Liabilities
		Notes payable		$34,711	$28,695
		Other liabilities		1,240	1,512
			Total liabilities	35,951	30,207

	Partners' equity (deficit)
		General partners		(2,487)	(3,705)
		Limited partners		4,049	4,428
			Total partners' equity	1,562	723

			Total liabilities and partners' equity	$37,513	$30,930

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

	2003	2002	2001
Combined condensed statements of operations
Total revenue	$ 3,695	$ 4,369	$ 3,567
Total expenses	(4,129)	(4,882)	(4,124)
Net loss	$ (434)	$ (513)	$ (557)

Note 7: Deposits

	2003	2002

Noninterest- bearing demand	$ 32,138	$ 28,909
Interest- bearing demand	59,809	62,503
Passbook	57,785	54,677
Money market savings	48,750	45,330
Certificates and other time deposits of $100,000 or more	109,008	78,063
Other certificates	271,872	280,882
Total deposits	$579,362	$550,364

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

	2004	$224,603
	2005	95,704
	2006	22,420
	2007	26,448
	2008	11,684
	Thereafter	21
		$380,880

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 8: Federal Home Loan Bank Advances

Maturities Years Ending December 31		Amount


	2004	$ 48,665
	2005	31,210
	2006	17,084
	2007	3,775
	2008	12,994
	Thereafter	20,864
		$134,592

	At December 31, 2003, the Company has pledged $397,000,000 in qualifying first mortgage loans and investment securities as collateral for advances and outstanding letters of credit. Advances, at interest rates from 1.11 to 7.33 percent at December 31, 2003, 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 $1,523,000 and $1,584,000 at December 31, 2003 and 2002 payable in semiannual installments through January 1, 2010. At December 31, 2003 and 2002, 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.

	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 $988,000 and $1,300,000 at December 31, 2003 and 2002.

Maturities Years Ending December 31


	2004	$ 360
	2005	356
	2006	351
	2007	366
	2008	431
	Thereafter	647
		$2,511

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

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:

	2003	2002	2001
Loans serviced for
Freddie Mac	$ 90,616	$ 89,432	$ 82,629
Fannie Mae	7,712	12,343	4,924
Federal Home Loan Bank	17,307	12,081	- - -
Other investors	12,327	14,680	12,993
	$127,962	$128,536	$100,546

	The aggregate fair value of capitalized mortgage servicing rights at December 31, 2003, 2002 and 2001 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.

	2003	2002	2001
Mortgage Servicing Rights
Balances, January 1	$1,193	$ 879	$ 428
Servicing rights capitalized	515	524	572
Amortization of servicing rights	(375)	(210)	(121)
	1,333	1,193	879
Valuation allowance	(320)	- - -	- - -

Balances, December 31	$1,013	$1,193	$ 879

	During 2003, the Company established a valuation allowance of $320,000. No valuation allowance was necessary at December 31, 2002 and 2001.

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 11: Income Tax

				2003	2002	2001
Income tax expense
	Currently payable
		Federal		$2,090	$2,124	$1,804
		State		833	889	628
	Deferred
		Federal		439	411	552
		State		(22)	(48)	95
			Total income tax expense	$3,340	$3,376	$3,079

Reconciliation of federal statutory to actual tax expense
	Federal statutory income tax at 34%			$3,877	$4,031	$3,794
	Effect of state income taxes			535	555	477
	Low income housing credits			(753)	(843)	(817)
	Tax-exempt income			(492)	(439)	(430)
	Other			173	72	55

			Actual tax expense	$3,340	$3,376	$3,079

Effective tax rate				29.3%	28.5%	27.6%

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(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:

			2003	2002
Assets
	Allowance for loan losses		$2,707	$2,558
	Deferred compensation		2,264	2,150
	Charitable contribution carryover		188	510
	Depreciation and amortization		136	320
	Business tax and AMT credit carryovers		515	524
	Other		143	518
		Total assets	5,953	6,580

Liabilities
	FHLB stock		(322)	(210)
	State income tax		(232)	(222)
	Loan fees		(697)	(1,194)
	Investments in limited partnerships		(279)	(28)
	Unrealized gain on securities available for sale		(155)	(310)
	Mortgage servicing rights		(422)	(498)
		Total liabilities	(2,107)	(2,462)
			$ 3,846	$4,118

	The Company has a charitable contribution carryover of $552,000 that expires in 2005 and unused business income tax credits of $342,000 expiring in 2017. In addition, the Company has an AMT credit carryover of $173,000 with an unlimited carryover period.

	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.

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 12: Other Comprehensive Income


		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 losses realized in net income	7	(2)	5

	Net unrealized losses	$(350)	$119	$(231)

		2002
		Before- Tax Amount	Tax Expense	Net- of- Tax Amount

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

		2001
		Before- Tax Amount	Tax Expense	Net- of- Tax Amount
Unrealized gains on securities
	Unrealized holding gains arising during the year	$549	$(216)	$333
	Less: reclassification adjustment for gains realized in net income	46	(13)	33

	Net unrealized gains	$503	$(203)	$300

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.

MutualFirstFinancial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

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

	2003	2002

Loan commitments	$72,419	$67,388
Standby letters of credit	7,165	7,039

	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: Dividend and Capital Restrictions

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

	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, 2003, the stockholder' s equity of the Bank was $94,121,000, of which $91,012,000 was restricted, without prior regulatory approval, for dividend distribution to the Company.

MutualFirstFinancial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

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, 2003 and 2002, the Bank was categorized as well capitalized and met all subject capital adequacy requirements. There are no conditions or events since December 31, 2003 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 ¹		To Be Well Capitalized ¹
	Amount	Ratio	Amount	Ratio	Amount	Ratio

Total risk- based capital ¹ (to risk- weighted assets)	$99,636	17.0%	$46,975	8.0%	$58,719	10.0%
Tier 1 risk- based capital ¹ (to risk- weighted assets)	92,979	15.8%	23,487	4.0%	35,231	6.0%
Core capital ¹ (to adjusted total assets)	92,979	11.3%	24,638	3.0%	41,063	5.0%
Core capital ¹ (to adjusted tangible assets)	92,979	11.3%	16,425	2.0%	N/A	N/A
Tangible capital ¹ (to adjusted total assets)	92,979	11.3%	12,319	1.0%	N/A	N/A
As of December 31, 2002
Total risk- based capital ¹ (to risk- weighted assets)	$96,269	17.7%	$43,585	8.0%	$54,482	10.0%
Tier 1 risk- based capital ¹ (to risk- weighted assets)	90,055	16.5%	21,793	4.0%	32,689	6.0%
Core capital ¹ (to adjusted total assets)	90,055	11.7%	23,142	3.0%	38,571	5.0%
Core capital ¹ (to adjusted tangible assets)	90,055	11.7%	15,428	2.0%	NA	NA
Tangible capital ¹ (to adjusted total assets)	90,055	11.7%	11,571	1.5%	NA	NA
¹ As defined by regulatory agencies

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(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 2003, 2002 and 2001, 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 $225,000, $297,000 and $253,000 for 2003, 2002 and 2001.

	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 $776,000, $695,000 and $689,000 for 2003, 2002 and 2001.

	The Company has an ESOP covering substantially all of its employees. At December 31, 2003, 2002 and 2001, the Company had 317,843; 349,626 and 381,395 unearned ESOP shares with a fair value of $7,981,000; $6,916,000 and $5,759,000. 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 2003, 2002 and 2001 was $752,000, $585,000 and $464,000. The following table provides information on ESOP shares at December 31.

	2003	2002	2001

Allocated shares	115,942	80,857	52,389
Suspense shares	317,843	349,626	381,395
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 $450,000, $768,000 and $1,394,000 in 2003, 2002 and 2001. The unearned portion of these stock awards is presented as a reduction of stockholders' equity.

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

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 2003, 2002 and 2001.

	2003		2002		2001
Options	Shares	Weighted- Average Exercise Price	Shares	Weighted- Average Exercise Price	Shares	Weighted- Average Exercise Price


Outstanding, beginning of year	530,086	$14.32	535,714	$14.30	39,521	$10.97
Granted	75,000	25.66	- - -	- - -	507,000	14.50
Exercised	(71,897)	13.55	(3,331)	11.95	(5,807)	9.29
Forfeited/expired	(4,800)	14.50	(2,297)	13.32	(5,000)	14.50
Outstanding, end of year	528,389	16.03	530,086	14.32	535,714	14.30
Options exercisable at year end	337,389		286,619		165,714
Weighted- average fair value of options granted during the year		2.76				2.77

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

At December 31, 2003, 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	3.6 years	13,912
14.50	439,477	9.5 years	323,477
25.66	75,000	12.4 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 option grant was estimated on the grant date using an option- pricing model with the following assumptions:

	2003	2001

Risk- free interest rates	2.29%	5.14%
Dividend yields	1.76%	2.19%
Volatility factors of expected market price of common stock	9.30%	8.40%
Weighted- average expected life of the options	8 years	8 years

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Note 18: Earnings Per Share

Earnings per share were computed as follows:

	2003
	Income	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

	2002
	Income	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

	2001
	Income	Weighted- Average Shares	Per- Share Amount

Basic Earnings Per Share
Income available to common shareholders	$8,080	6,949,879	$1.16
Effect of Dilutive Securities
Stock options	- - -	14,426	- - -
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$8,080	6,964,305	$1.16

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(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.

	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 amount of these investments are reasonable estimates of the fair value of these financial statements.

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

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

		2003		2002
		Carrying Amount	Fair Value	Carrying Amount	Fair Value
Assets
	Cash and cash equivalents	$23,068	$23,068	$23,620	$23,620
	Securities available for sale	33,472	33,472	42,362	42,362
	Loans held for sale	1,975	2,001	7,851	7,965
	Loans	703,981	712,277	641,113	656,643
	Stock in FHLB	7,264	7,264	6,993	6,993
	Cash value of life insurance	26,140	26,140	25,439	25,439
	Interest receivable	3,194	3,194	3,201	3,201

Liabilities
	Deposits	579,362	580,378	550,364	550,880
	FHLB Advances	134,592	142,127	115,403	126,336
	Notes payable	2,511	2,188	2,884	2,369
	Interest payable	851	851	1,016	1,016
	Advances by borrowers for taxes and insurance	1,448	1,448	1,335	1,335

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(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
		2003	2002
Assets
	Cash on deposit with Bank	$ 1,623	$ 2,355
	Cash on deposit with others	24	17
	Total cash and cash equivalents	1,647	2,372
	Loans receivable	- - -	1,250
	Investment in common stock of Bank	94,121	91,440
	Deferred income tax	195	621
	Other assets	946	866
	Total assets	$96,909	$96,549

Liabilities - other		$ (611)	$(168)

Stockholders' Equity		97,520	96,717

	Total liabilities and stockholders' equity	$96,909	$96,549

MutualFirstFinancial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Condensed Statements of Income

			2003	2002	2001

Income
	Interest income from Bank		$ 20	$ 29	$ 401
	Interest income from investments		- - -	8	136
	Interest income from loans		116	324	404
	Dividends from Bank		5,000	21,500	10,000
	Other income		130	137	4
		Total income	5,266	21,998	10,945

Expenses			331	230	181

Income before income tax and equity in undistributed income of subsidiary			4,935	21,768	10,764

Income tax expense (benefit)			(18)	105	297

Income before equity in undistributed income of subsidiary			4,953	21,663	10,467

Equity in undistributed income of subsidiary			3,109	(13,183)	(2,387)

Net Income			$8,062	$ 8,480	$ 8,080

MutualFirst Financial, Inc.
Notes to Consolidated Financial Statements
December 31, 2003, 2002 and 2001
(Table Dollar Amounts in Thousands, Except Share and Per Share Data)

Condensed Statements of Cash Flows

				2003	2002	2001
Operating Activities
	Net income			$ 8,062	$ 8,480	$ 8,080
	Item not requiring (providing) cash
		ESOP shares earned		752	585	464
		Deferred income tax benefit		426	236	289
		Distributions in excess of earnings (undistributed income) of Bank		(3,109)	13,183	2,387
		Other		123	(266)	276
			Net cash provided by operating activities	6,254	22,218	11,496

Investing Activities
	Net change in loans			1,250	1,250	389
	Purchase of securities available for sale				- - -	- - -
	Proceeds from maturities of securities available for sale			- - -	1,001	1,000
			Net cash provided by investing activities	1,250	2,251	1,892

Financing Activities
	Stock repurchased			(7,182)	(21,184)	(28,224)
	Cash dividends			(2,021)	(1,896)	(2,265)
	Proceeds from stock options exercised			974	40	54
			Net cash used in financing activities	(8,229)	(23,040)	(30,435)

Net Change in Cash and Cash Equivalents				(725)	1,429	(17,047)

Cash and Cash Equivalents, Beginning of Year				2,372	943	17,990

Cash and Cash Equivalents, End of Year				$ 1,647	$ 2,372	$ 943

END

SHAREHOLDER INFORMATION ANNUAL MEETING

ANNUAL AND OTHER REPORTS

SHAREHOLDER INFORMATION
ANNUAL MEETING