Note 2: Business Combinations

Universal Bancorp

On February 28, 2018, the Company completed the 100% acquisition of Universal Bancorp (“Universal”). Universal and BloomBank, a wholly-owned subsidiary of Universal, merged with and into the Company and the Bank, respectively. BloomBank was headquartered in Bloomfield, Indiana and had 13 retail financial center offices serving counties in central and southern Indiana. Under terms of the merger agreement, shareholders of Universal received fixed consideration of 15.6 shares of MutualFirst common stock and $250.00 in cash for each share of Universal common stock. The Company issued approximately 1.2 million shares of common stock, which was valued at approximately $42.3 million. Based upon the February 28, 2018 closing price of $35.70 per share of MutualFirst common stock, the transaction had an implied valuation of approximately $61.3 million. The Company incurred approximately $340,000 and $2.4 million in pretax expenses related to the acquisition during 2019 and 2018, respectively. These expenses are classified in the non-interest expense section of the income statement, primarily in salaries and employee benefits, professional fees and other expenses. As a result of the acquisition, the Company was able to increase both its deposit and loan base and expects to reduce costs through economies of scale. Goodwill resulted from this transaction due to the expected synergies and economies of scale.

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


Assets			Liabilities
Cash and cash equivalents	$	11,326	Deposits
Interest-bearing time deposits		8,747	Non-interest bearing	$	81,061
Investment securities, available for sale		87,817	NOW accounts		66,372
			Savings and money market		85,690
Loans			Certificated of deposits		82,107
Commercial		203,489	Total deposits		315,230
Residential mortgage		36,410
Consumer		12,532	Borrowings		25,463
Total loans		252,431	Interest payable		81
			Subordinated debt		4,000
Premises and equipment, net		4,799	Other liabilities		462
Federal Home Loan Bank stock		1,637	Total liabilities assumed	$	345,236
Deferred tax asset, net		2,848
Cash value of life insurance		7,556
Goodwill		20,511
Core deposit intangible		4,545
Interest receivable		1,259
Other real estate owned and repossessed assets		1,009
Other assets		2,073
Total assets purchased	$	406,558

Common shares issued	$	42,323
Cash paid		18,999
Total purchase price	$	61,322

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

Definitive Merger Agreement

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

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

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

MutualFirst has also agreed not to (i) solicit proposals relating to alternative business combination transactions involving MutualFirst or Mutual or (ii) subject to certain exceptions, enter into discussions or an agreement concerning, or to provide confidential information in connection with, any proposals for alternative business combination transactions involving MutualFirst or Mutual.