The Board of Directors of MutualFirst Financial, Inc., is using this Proxy Statement to solicit proxies from the holders of the Company’s common stock for use at the upcoming Annual Meeting of Stockholders.  The Annual Meeting will be held on Wednesday, May 1, 2019, at 3:00 p.m., local time, at the Company’s main office located at 110 E. Charles Street, Muncie, Indiana.

At the Annual Meeting, stockholders will be asked to vote on four proposals:  (1) the election of David W. Heeter and Brian C. Hewitt as directors of the Company for terms to expire in 2022, Edward C. Levy for a term to expire in 2021 and Michael J. Marien for a term to expire in 2020; (2) an advisory (non-binding) resolution to approve our executive compensation as disclosed in this Proxy Statement; (3) approval of the Company’s 2019 Omnibus Incentive Plan; and (4) ratification of the appointment of BKD, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2019 .  These proposals are described in more detail below.  Stockholders also will consider any other matters that may properly come before the Annual Meeting, although the Board of Directors knows of no other business to be presented.

MutualFirst Financial, Inc. may be referred to from time to time in this Proxy Statement as “MutualFirst ” or the “Company.”  Some of the information in this Proxy Statement relates to MutualBank, a wholly owned subsidiary of the Company, which may be referred to from time to time in this Proxy Statement as the “Bank.”

By submitting your proxy, you authorize the Company’s Board of Directors to represent you and vote your shares at the Annual Meeting in accordance with your instructions.  The Board also may vote your shares to adjourn the Annual Meeting from time to time and will be authorized to vote your shares at any adjournments or postponements of the Annual Meeting.

The Company’s Annual Report to Stockholders for the year ending December 31, 2018, which includes the Company’s audited financial statements, is being provided with this Proxy Statement.  Although this report is being made available to stockholders with this Proxy Statement, it does not constitute a part of the proxy solicitation materials and is not incorporated into this Proxy Statement by reference.

Again this year, we are distributing the Proxy Statement and the Annual Report to Stockholders over the Internet at http://www.proxyvote.com.  In addition, stockholders will be able to cast their votes on the Internet or by phone.  On March 22, 2019, we mailed to our stockholders of record as of March 4, 2019, a notice of the Annual Meeting and of the availability of the proxy materials on the Internet (“March 22 Notice”).  That notice contains instructions on how to access the proxy materials and Annual Report, including requesting an emailed or paper copy, and how to cast your vote by Internet, phone or regular mail or in person at the meeting.

Your vote is important .  You may vote by Internet or telephone, by sending a completed Proxy Card by regular mail or by submitting a ballot in person at the Annual Meeting.  We encourage you to attend the Annual Meeting in person no matter how you decide to cast your vote.  Please read the Proxy Statement and vote your shares as promptly as possible to ensure you are represented at the meeting.

2019 PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement.  It does not contain all the information you should consider before voting, and you should read the entire Proxy Statement carefully before voting.  This summary also contains our 2018 Business Highlights.  You should refer to the Annual Report to Stockholders for the year ending December 31, 2018, which is being made available with this Proxy Statement, for more complete information about the Company’s year-end financial condition and 2018 operating results.

2018 BUSINESS HIGHLIGHTS

At December 31, 2018, we had $2.0 billion in assets, $1.5 billion in loans, $1.5 billion in deposits and $202.4 million in stockholders’ equity. Earnings for 2018 were $18.9 million. This increase occurred as a result of the acquisition of Universal and a lower tax rate.

For the year ending December 31, 2018, we earned $18.9 million, or $2.25 per basic and $2.21 per diluted share, compared with net income of $12.3 million, or $1.67 per basic and $1.64 per diluted share for 2017.  The details of our 2018 performance are described in the accompanying Annual Report to Stockholders for the year ending December 31, 2018, in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements.

Key aspects of our 2018 operations include:

•	Return on average assets of .97% in 2018 compared to .78% in 2017.

•	Return on average tangible common equity of 11.66% in 2018 compared to 8.52% in 2017.

•	A $5.1 million, or 85.8%, increase in non-performing assets and a $5.5 million, or 31.2%, increase in classified assets.

•	Net charge-offs of .09% in 2018 compared to .10% in 2017.

INFORMATION ABOUT THE ANNUAL MEETING

What is the purpose of the Annual Meeting?

At the Annual Meeting, stockholders will be asked to vote on the following proposals:

The stockholders also will act on any other business that may properly come before the Annual Meeting.  Members of our management team will be present at the Annual Meeting to respond to your questions. At this time the board is not aware of any new business to be considered at the Meeting.

Who is entitled to vote?

The record date for the Annual Meeting is March 4, 2019.  Only stockholders of record at the close of business on that date are entitled to notice of and to vote at the Annual Meeting.  The only class of stock entitled to be voted at the Annual Meeting is the Company’s common stock.  Each outstanding share of common stock is entitled to one vote on each matter presented at the Annual Meeting.  At the close of business on the record date, there were 8,624,462 shares of common stock outstanding.

Who may attend the Annual Meeting?

The Annual Meeting is open to all Company stockholders and their designated proxy holders.  All attendees will be required to sign-in at the entrance to the meeting, and the Company reserves the right to request proof of stock ownership including brokerage statements for beneficial owners with shares held by their broker, proxy holder status (a valid proxy) or acceptable photo identification before granting entrance to the meeting.  Everyone attending the Annual Meeting agrees to abide by the rules for the conduct of the proceedings.  The use of cameras, recording devices and other electronic devices (including cell phones) is prohibited during the Annual Meeting, unless the attendee receives written authorization from the Company’s Secretary, who will be attending the Annual Meeting.

Where is the location of the Annual Meeting?

The Annual Meeting is being held at the main office of the Company and the Bank located at 110 E. Charles Street in Muncie, Indiana.  The office is on the northwest corner of E. Charles Street and S. Mulberry Street (between S. Walnut and S. Madison Streets).  Company and Bank personnel will be present to direct you to the location of the Annual Meeting in the main office building.

How many shares must be present to hold the Annual Meeting?

A quorum must be present at the Annual Meeting for any business to be conducted.  The presence at the Annual Meeting, in person or by proxy, of the holders of at least one-third of the shares of common stock outstanding on the record date will constitute a quorum.  Proxies received but marked as abstentions or broker non‑votes will be included in the calculation of the number of shares considered to be present at the Annual Meeting.

What if a quorum is not present at the Annual Meeting?

If a quorum is not present at the scheduled time of the Annual Meeting, the stockholders who are represented may adjourn the Annual Meeting until a quorum is present.  The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice of the adjourned meeting will be given, unless the adjourned meeting is held after June 30, 2019.  An adjournment will have no effect on the business that may be conducted at the Annual Meeting.

How do I vote?

You may vote by internet .   To vote by Internet, have in hand a copy of the Proxy Card and the 16 digit identification number assigned to you in a box marked by an arrow ( ®   xxxx-xxxx-xxxx-xxxx ) on the Proxy Card, go to www.proxyvote.com and follow the instructions for voting.  The deadline for voting online is 11:59 p.m. Eastern Time on April 30, 2019.  If your shares are held through a broker, bank or other nominee, check the voting form you received from that firm in order to determine whether, and how, you can vote online.

Y ou may vote by phone .  To vote by phone, have in hand a copy of the Proxy Card and the 16 digit identification number assigned to you in a box marked by an arrow ( ®   xxxx-xxxx-xxxx-xxxx ) on the Proxy Card, call the toll-free phone number 1-800-690-6903 and follow the instructions for voting.  The deadline for voting by phone is 11:59 p.m. Eastern Time on April 30, 2019.  If your shares are held through a broker, bank or other nominee, check the voting form you received from that firm in order to determine whether, and how, you can vote by phone.

You may vote by mail .   To vote by mail, request a paper copy of the Proxy Card or all the proxy materials as noted in the response to the previous question.  Then complete, sign and date the Proxy Card and return it in the postage-paid envelope provided or mail it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY  11717, in a timely manner.  The mailed card must be received by the Company before the start of the Annual Meeting.  If your shares are held through a broker, bank or other nominee, check the voting form you received from that firm in order to determine whether, and how, you can vote by mail.

You may vote in person at the annual meeting .   If you plan to attend the Annual Meeting and wish to vote in person, we will give you a ballot at the meeting.  Note, however, that if your shares are held in the name of your broker, bank or other nominee, you will need to obtain a proxy from the record holder of your shares indicating that you were the beneficial owner of those shares at the close of business on March 4, 2019, the record date for voting at the Annual Meeting.  You are encouraged to vote by proxy prior to the Annual Meeting, even if you plan to attend the meeting.

What if I return my executed Proxy Card without voting instructions?

Where properly executed proxies are returned to us without specific voting instructions, your shares will be voted by the proxy holders named on the Proxy Card “FOR” the election of management’s director nominees, “FOR” the advisory (non-binding) resolution to approve our executive compensation “FOR” the approval of the 2019 Omnibus Incentive Plan and “FOR” the ratification of the appointment of our independent registered public accounting firm.

What if other business is presented at the Annual Meeting?

Should any other matters be properly presented at the Annual Meeting for action, the proxy holders named on the Proxy Card and acting thereunder will have the discretion to vote on these matters in accordance with their best judgment.  No other matters currently are expected by the Board of Directors to be properly presented at the Annual Meeting.

What if my shares are held in “street name” by a broker?

If your shares are held in “street name” by a broker, your broker is required to vote your shares in accordance with your instructions.  If you do not give instructions to your broker, your broker will be entitled to vote your shares with respect to “discretionary” items.  However, your broker will not be permitted to vote your shares with respect to “non-discretionary” items, and your shares will be treated as “broker non-votes.”  Whether an item is discretionary is determined by the exchange rules governing your broker.  The election of directors and the advisory (non-binding) votes regarding executive compensation and the approval of the 2019 Omnibus Incentive Plan are non-discretionary items.  The ratification of our auditors is a discretionary item.  Your broker will forward information to you indicating how you can forward voting instructions and whether you can forward them by Internet, mail or phone.

What if my shares are held in the Bank’s employee stock ownership plan (“ESOP”)?

If you are a participant in the Bank’s ESOP, the plan trustee is required to vote the shares allocated to your account under the plan in accordance with your instructions.  If you do not instruct the trustee how to vote your allocated shares, the trustee may vote your allocated shares in its sole discretion.

What if my shares are held in the Company’s 401(k) plan?

If you are one of our employees who owns Company shares in our 401(k) plan, you will receive voting instructions with respect to all the MutualFirst shares allocated to your account.  You are entitled to direct the trustee how to vote your shares.  If you do not provide instructions, your shares will be voted by the trustee in its sole discretion.

Can I change my vote after I submit my proxy?

Yes, you may revoke your proxy and change your vote at any time before the polls close at the Annual Meeting by:

•	properly submitting a later-dated proxy by Internet or phone by 11:59 p.m. Eastern Time on April 30, 2019;

•	properly mailing a later-dated proxy that is received by the Company before the start of the Annual Meeting;

•	giving written notice of the revocation of your proxy to the Company’s Secretary prior to the Annual Meeting; or

•	voting in person by ballot at the Annual Meeting.

Your proxy will not be automatically revoked just by your attendance at the Annual Meeting.  You must actually vote at the meeting by submitting a ballot in order to revoke a prior proxy.  If you have instructed a broker, bank or other nominee to vote your shares, you must follow directions received from your nominee to change your voting instructions to that nominee.

How will abstentions be treated?

If you abstain from voting, your shares will be included for purposes of determining whether a quorum is present.  Because directors will be elected by a plurality of the votes cast, abstaining is not offered as a voting option for Proposal 1.  If you abstain from voting on Proposals 2, 3 or 4 your shares will not be included in the number of shares voting on the proposal and, consequently, your abstention will have no effect on whether the proposal is approved.

How will broker non-votes be treated?

Shares treated as broker non-votes on one or more proposal will be included for purposes of calculating the presence of a quorum but will not be counted as votes cast.  Proposal 1 is a non-discretionary item that includes broker non-votes; however, because the directors are elected by a plurality of the votes cast, the broker non-votes will have no impact on the election results.  If you do not instruct your broker, bank or nominee how to vote your shares on Proposal 2 and 3, your shares will not be included in the number of shares voting on the proposal and will have no effect on whether the proposal is approved.  Proposal 4 is a discretionary item, so your broker is entitled to cast a vote without receiving instructions from you.  If, however, your broker does not cast any votes absent your instructions, these broker non-votes will have no effect on whether the proposal is approved.

Vote required to approve Proposal 1: Election of four directors.

Directors are elected by a plurality of the votes cast, in person or by proxy, at the Annual Meeting by holders of MutualFirst common stock.  Stockholders are not permitted to cumulate their votes for the election of directors.  Votes may be cast for or withheld from each nominee.  Votes that are withheld and broker non-votes will be excluded entirely from the vote and will have no effect on the election of directors.

What happens if a nominee is unable to stand for election?

If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee.  If a substitute nominee is selected, the Board of Directors, as holder of your proxy, will vote your shares for the substitute nominee, unless you have withheld authority to vote for the nominee replaced.

Vote required to approve Proposal 2: Advisory resolution to approve our executive compensation.

The adoption of the advisory (non-binding) resolution to approve our executive compensation as disclosed in this Proxy Statement requires the affirmative vote of a majority of the votes cast, in person or by proxy, at the Annual Meeting.

Vote required to approve Proposal 3: Approval of the Company’s 2019 Omnibus Incentive Plan.

The approval of the 2019 Omnibus Incentive Plan as disclosed in this Proxy Statement requires the affirmative vote of a majority of the votes outstanding and entitled to vote on the matter, in person or by proxy, at the Annual Meeting.

Vote required to approve Proposal 4: Ratification of the appointment of our independent registered public accounting firm.

The ratification of the appointment of our independent registered public accounting firm requires the affirmative vote of the majority of shares cast, in person or by proxy, at the Annual Meeting.

How does the Board of Directors recommend I vote on the proposals?

Your Board of Directors recommends that you vote:

•	FOR the election of four director nominees to the Board of Directors, for terms as indicated in this proxy statement;

•	FOR the adoption of an advisory (non-binding) resolution to approve our executive compensation as disclosed in this Proxy Statement;

•	FOR the approval of the Company’s 2019 Omnibus Incentive Plan; and

•	FOR the ratification of the appointment of our independent registered public accounting firm for the year ending December 31, 2019.

STOCK OWNERSHIP

Stock Ownership of Significant Stockholders, Directors and Executive Officers

The following table shows, as of March 4, 2019, the beneficial ownership of the Company’s common stock by:

•	any persons or entities known by management to beneficially own more than 5% of the outstanding shares of Company common stock;

•	each director and director nominee of the Company;

•	each executive officer of the Company and the Bank named in the “2018 Summary Compensation Table” appearing below; and

•	all of the executive officers and directors of the Company and the Bank as a group.

The address of each of the beneficial owners, except where otherwise indicated, is the Company’s address.  As of March 4, 2019, there were 8,624,462 shares of Company common stock issued and outstanding.

Beneficial ownership is determined in accordance with the rules of the SEC.  In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to outstanding stock options beneficially owned and held by that person that are currently exercisable or exercisable within 60 days after March 4, 2019, are deemed outstanding.  Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

(2)	Represents shares held by clients of Dimensional Fund Advisors LP, an investment advisor, which disclaims beneficial ownership of these shares.  Dimensional Fund Advisors LP filed an amended Schedule 13G with the SEC on February 8, 2019.

(Footnotes continue on next page)

________________________

(3)

According to filings under the Exchange Act, the PL Capital Group consists of the following persons and entities which share beneficial ownership of certain of the shares: Financial Edge Fund, L.P. (“Financial Edge Fund”); Financial Edge-Strategic Fund, LP (“Financial Edge Strategic”); PL Capital Focused Fund, L.P. (‘Focused Fund”), PL Capital, LLC (“PL Capital’), general partner of Financial Edge Fund, Financial Edge Strategic and Focused Fund; PL Capital Advisors, LLC (“PL Capital Advisors”), the investment advisor to Financial Edge Fund, Financial Edge Strategic, Focused Fund and Goodbody/PL LP; Goodbody /PL Capital LP (“Goodbody/PL LP”);Goodbody/PL Capital LLC(“Goodbody/PL LLC”), general partner of Goodbody/PL LP; John W. Palmer as managing member of PL Capital, PL Capital Advisors and Goodbody/PL LLC and individually; Richard Lashley, as managing member of PL Capital, PL Capital Advisors and Goodbody/PL LLC, and individually. Mr. Lashley is also a director of the Company. PL Capital Group has shared voting and dispositive power over 715,773 shares.

(4)

Represents shares held by Ancora Advisors, LLC, a registered investment advisor, as filed on Schedule 13-D/A on March 2, 2018 and as updated with information provided to the Company on Schedule 13-F.  Ancora Advisors, LLC reported sole voting and dispositive power over 530,725 shares. Mr. Bernard, a director nominee is a representative of Ancora Advisors.

(5)	Includes options for 5,000 shares and 20,000 shares owned by Mr. Davis’ spouse.

(6)	Includes options for 40,000 shares, 14,490 shares allocated to Mr. Heeter in the ESOP and 20,000 shares pledged as security for debt.

(7)	Includes 198,650 shares held directly and 128,700 shares held by the Eleanor T. Barkley, LP for which Mr. Barkley is the manager.

(8)	Includes options for 53,000 shares, 1,360 shares owned by Mr. Botts’ spouse, 200 shares in a UTMA account for his son and 13,135 shares allocated to Mr. Botts in the ESOP.

(9)	Includes options for 5,000 shares, 20,000 shares owned by Mr. Crull’s spouse and 23,500 shares pledged as security for debt.

(10)	Includes options for 5,000 shares, 500 shares owned by Mr. Hughes’ spouse and 4,000 shares in an IRA account.

(11)

Of the shares reported as beneficially owned by Mr. Lashley 352,451 shares of common stock are held in the name of Financial Edge Fund, L.P.; 154,723 shares of common stock are held in the name of Financial Edge-Strategic Fund, L.P.; 66,886 shares of common stock are held in the name of PL Capital/Focused Fund, L.P.; 141,713 shares of common stock are held in the name of Goodbody/PL Capital, L.P.; and 2,000 shares of common stock are held in Mr. Lashley's IRA.  With regard to the shares held by Financial Edge Fund, L.P., Financial Edge-Strategic Fund, L.P., PL Capital/Focused Fund, L.P., and Goodbody/PL Capital, L.P., Mr. Lashley reports beneficial ownership above because he has shared voting and dispositive power as a Managing Member of PL Capital, LLC and Goodbody/PL Capital, LLC, the general partners of the funds, and as a Managing Member of PL Capital Advisors, LLC, the investment advisor of the Funds.  Mr. Lashley disclaims beneficial ownership of the reported securities except to the extent of his pecuniary interest therein.

(12)	Includes 7,500 shares owned by Mr. Rosema’s spouse.

(13)	Includes options for 20,000 shares, 16,033 shares in Mr. Viater’s 401(k) account; 25,694 shares allocated to Mr. Viater in the ESOP; and 56,965 shares pledged as security for debt.

(14)	Mr. Bernard is a representative of Ancora Advisors. See footnote 4.

(15)	Includes options for 30,462 shares, 4,883 shares allocated to Mr. Cook in the ESOP and 20,000 shares pledged as security for debt.

(16)	Includes options for 5,000 shares and 2,115 shares allocated to Mr. Caldwell in the ESOP.

(17)

This amount includes options for 172,142 shares held by directors and executive officers and 120,465 shares pledged as security for debt.  This amount does not include the 200,000 shares owned by the MutualBank Charitable Foundation, Inc., which is an Indiana non-profit corporation and 501(c)(3) tax-exempt organization with no stock or stockholders.  Two of the six directors and all the officers of the foundation also are directors or officers of the Company or the Bank.  Pursuant to its charter and applicable federal regulations, these shares are required to be voted in any stockholder vote in the same ratio as the votes cast by all other stockholders of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive officers, and persons who own more than 10 percent of the Company’s common stock, to report to the SEC their initial ownership of the Company’s common stock and any subsequent changes in that ownership.  Specific due dates for these reports have been established by the SEC and the Company is required to disclose in this Proxy Statement any late filings or failures to file.

To the Company’s knowledge, based solely on its review of the Section 16 reports filed by its directors and executive officers and written representations from those directors and executive officers, all Section 16(a) filing requirements applicable to the Company’s executive officers and directors during the year ending December 31, 2018, were met, with the exception of two Form 3s filed late for directors Altobella and Bernard and one report covering 1,000 shares for Director Bernard and one report covering 49 shares for Director Hughes.

PROPOSAL 1

ELECTION OF DIRECTORS

General

The Company’s Board of Directors consists of 13 directors, divided into three classes.  Directors in each class generally are elected to serve for three-year terms that expire in successive years.  The term of one of the classes of MutualFirst’s directors will expire at the Annual Meeting. As a result of Company policy that requires directors to resign from the Board at the Annual Meeting following their attainment of 72 years of age, Director Rosema will retire as a member of the Board of Directors at the Annual Meeting. The Board thanks Mr. Rosema for many years of dedicated service. Due to Director Rosema’s departure as a director from the Board, the Company anticipates reducing the size of its Board at the Annual Meeting.

In addition, James M. Bernard was elected as a Director for a term ending at the 2020 Annual Meeting, pursuant to an agreement dated March 16, 2018 with Ancora Advisors and certain of its affiliates, including Mr. Bernard (the “Ancora Parties”). In order to address the concerns of the Ancora Parties, the Company nominated Mr. Bernard to the Board. Mr. Bernard has financial institution experience and is a Chartered Financial Analyst. Together in 2018 with the Ancora Parties, Mr. Bernard owns 6.2% of the company’s stock.

Nominees and Directors

The Company’s Board of Directors, based on the recommendations of the Nominating Committee, has nominated David W. Heeter and Brian C. Hewitt for election as Directors for three-year terms expiring at the Annual Meeting of Stockholders to be held in 2022, Edward C. Levy for election as a Director for a two-year term expiring at the Annual Meeting of stockholders to be held in 2021 and Michael J. Marien for a one-year term expiring at the Annual Meeting of Stockholders to be held in 2020. All of the Company’s Directors who currently serve also serve as Directors of the Bank. All Directors are required to retire at the Annual Meeting following the attainment of age 72 pursuant to Company policy.

The following table describes the Directors who are up for election at the Annual Meeting.

___________________

(1)   At March 4, 2019.

(2)   Includes years of service on the Board of the Bank prior to the formation of the Company.

(3)   Includes years of service as a director of Universal Bancorp which was acquired by MutualFirst on February 28, 2018.

(4)   Includes service as a director of MFB Corporation which was acquired by MutualFirst 2008.

The nominees have each consented to being named in this Proxy Statement and have agreed to serve if elected.  If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee.  If a substitute nominee is selected, the Board of Directors, as holder of your proxy, will vote your shares for the substitute nominee, unless you have withheld authority to vote for the nominee replaced.

The Company’s Board of Directors recommends that you vote “FOR” the election of each of the nominees.

Business Experience and Qualifications of Directors

The Board believes that the many years of service that our Directors have at the Company, the Bank or other financial institutions acquired by the Company is one of their most important qualifications for continued service on our Board.  This service has given them extensive knowledge of the banking business and our Company.  Furthermore, their service on Board committees, especially in areas of audit, compliance, compensation and trust business is critical to their ability to oversee the management of the Company and the Bank by our executive officers.  Service on the Board by three of our senior executive officers aids the outside directors’ understanding of the critical and complicated issues that are common in the banking business.  Each outside director brings special skills, experience and expertise to the Board as a result of their other business activities and associations.  The business experience for at least the past five years and the experience, qualifications, attributes, skills and areas of expertise of each director that further supports his service as a director are set forth below.

Michelle A. Altobella. Ms. Altobella is an attorney and currently the Chief Privacy Officer for Indiana University Health, Inc. and the Vice President and General Counsel for Indiana University Health East Region. Ms. Altobella is a specialist in healthcare law and corporate governance. Her expertise in corporate governance and her participation in our local business community over two decades enhances the Boards knowledge of corporate governance issues and involvement with the community.

Mark L. Barkley .  Mr. Barkley is the former chairman and CEO of Universal Bancorp and BloomBank, a position he held from 1997 until its merger with the Company in February 2018.   Mr. Barkley’s over 20-year background in bank operations and knowledge of our expanded market after the Universal acquisition are important to the Board and assists the Board in carrying out their functions of overseeing and understanding many aspects of the Bank’s business.

James M. Bernard. Mr. Bernard is a seasoned investment professional and holds the CFA designation. He is the Senior Vice President and Fixed Income Portfolio Manager for Ancora Advisors LLC. Mr. Bernard has also worked in a financial institution as an investment manager. Mr. Bernard’s vast experience understanding financial market conditions and the challenges they may pose helps the Board in addressing business issues.

Patrick C. Botts .  Mr. Botts has served as Executive Vice President of the Company and President and Chief Operating Officer of the Bank since November 2003.  During the years prior to that appointment, he had served as the Executive Vice President, Vice President of Human Resources, Marketing and Administration and Vice President of Retail Lending for the Bank and has been employed by the Bank since 1986.  Mr. Botts’ many years of service in all areas of the Bank’s operations and his duties as President of the Bank bring a special knowledge of the financial, economic and regulatory challenges the Company faces, and he is well suited to educating the Board on these matters.

Linn A. Crull .  Mr. Crull is a Certified Public Accountant and has been a member and managing partner of the accounting firm of Whitinger & Company, LLC, Muncie, Indiana, since 1979.  Mr. Crull has over 40 years of experience in public accounting, including conducting audits and preparing financial statements, and his knowledge of generally accepted accounting principles brings important technical expertise to the Board and was critical to his selection for service on the Board and as Chair of the Audit/Compliance Committee.  His years of providing business consulting services to a broad range of companies has provided him with knowledge of compensation issues that aids the Board and the Compensation Committee. His skills and experience as a member of a financial advisory firm provides insight into various investment vehicles that supports the Board and the Wealth Management Committee.

Wilbur R. Davis .  Mr. Davis currently serves as President of the Ball State Innovation Corporation, the technology transfer and commercialization arm of Ball State University.  Mr. Davis also served as co-founder and President of Ontario Systems, LLC, a computer software company located in Muncie, Indiana from 1980 until July, 2008 and Chairman until January 1, 2016.  He is the Chairman of the Board of Directors of the Company and the Bank.  Mr. Davis brings management expertise, as well as information technology knowledge to the Board.  His participation in our local business community for over 30 years brings a knowledge of the local economy and business opportunities to the Bank.

David W. Heeter .  Mr. Heeter has served as President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank since 2003.  During the years prior to that appointment, he had served as Executive Vice President of the Company and the Bank and as Chief Operating Officer and Vice President of Human Resources, Marketing and Administration of the Bank.  He has been employed by the Bank since 1986.  Mr. Heeter’s many years of service in all areas of the Bank’s operations and his duties as Chief Executive Officer of the Bank bring a special knowledge of the financial, economic and regulatory challenges the Company faces, and he is well suited to educating the Board on these matters.

Brian C. Hewitt .  Mr. Hewitt is a former director of Universal Bancorp and BloomBank, a position he held from 2013 until its merger with the Company in February, 2018. Mr. Hewitt is currently a practicing attorney with the firm of Hewitt Law and Mediation LLC. Mr. Hewitt represents businesses and individuals in the areas of estate and trust planning and litigation as well as mediation, real estate, business and commercial law. His legal background serves the Board as a resource for matters of real estate, contract law and business transactions.

William V. Hughes .  Mr. Hughes has served as a partner in the law firm of Beasley & Gilkison, LLP, Muncie, Indiana, since 1977.  That law firm serves as general counsel to the Bank.  Mr. Hughes brings extensive legal knowledge to the Board, particularly with respect to Indiana real property law, commercial transactions, trusts and estates and business litigation.  His legal background also serves the Board as a resource for matters of corporate governance and director responsibility. Mr. Hughes chairs the Wealth Management Committee.

Richard J. Lashley .  In 1996 Mr. Lashley became a co-founder and co-owner of PL Capital LLC, an investment management firm which specializes in the banking industry.  In addition, Mr. Lashley has served on multiple bank and thrift boards.  Mr. Lashley currently also serves as a director of Banc of California.  From June 2015 to February 2016, Mr. Lashley served as a director of Metro Bancorp, Inc. in Harrisburg, PA. From 2009 - 2013, Mr. Lashley served as a director of State Bancorp, Inc., in Jericho, New York. From 2011 - 2015, Mr. Lashley served as a director of BCSB Bancorp, Inc., in Baltimore, Maryland, and from 2008-2011, Mr. Lashley served as a director of Community FSB Holding Co., in Woodhaven, NY.   He worked for KPMG Peat Marwick, LLP from 1984-1996 where he provided professional accounting and financial advisory services to bank and thrift clients nationwide.  He is licensed as a CPA in New Jersey (status inactive). Mr. Lashley serves as Chairman of the Compensation Committee and serves on the Audit Committee.

Edward C. Levy .  Mr. Levy has been an officer and owner of Freeman-Spicer Financial Services, Inc., a business finance and leasing company for more than five years and is a 50% owner and managing partner in two real estate partnerships.  During 2010, he became chairman of One-Touch Automation, Inc., a company engaged in home and business automation and security systems in Indiana.  He is a partner in CVM Productions, Inc., a video production company specializing in corporate marketing and advertising videos and live sports broadcasting for network distribution.  Mr. Levy is also president of Visible Electronics, Inc. a lighting and electronic company.  The company has also developed lifts for the RV Industry.  He had served as a director of MFB Corp. and its banking subsidiary for three years prior to their acquisition by the Company in 2008.  Mr. Levy’s extensive knowledge of investments, insurance and these regulated industries supports the Board’s and Wealth Management Committee’s knowledge in these areas.  He also brings that understanding of regulations to the Audit/Compliance Committee.  Mr. Levy’s background in finance, real estate and management is also important to his service on our Audit/Compliance Committee.

Michael J. Marien .  Mr. Marien is employed by R. W. Baird, a registered broker/dealer and investment advisor firm.  He has an active FINRA Series 7 License and Series 66 Indiana License.  He retired in 2009 as Account Manager for IT/Signode Corp., a division of Illinois Tool Works (packaging of steel industry products and services, Glenview, Illinois), after 40 years of service.  He had served as a director of MFB Corp. and its banking subsidiary for 21 years and was chairman of the board of MFB Corp. for five years prior to the acquisition by the Company in 2008.  Mr. Marien brings his prior knowledge of the Wealth Management business of MFB Corp. to his service on our Wealth Management Committee and Compensation Committee.  His participation in our local business community for over 30 years brings knowledge of the local economy and business opportunities to the Bank.

Charles J. Viater .  Mr. Viater has served as Senior Vice President of the Company and Regional President of the Bank since July 2008.  He had served as president, chief executive officer and a director of MFB Corp. and its banking subsidiary for 13 years prior to their acquisition by the Company in 2008.  Prior to its acquisition by the Company, MFB Corp. had $500 million in assets and was operated under the leadership of Mr. Viater.  Mr. Viater’s over 30-year background in bank operations and knowledge of the local communities we now serve after the MFB Corp. acquisition are important to the Board.  He has training as a CPA.

Director Compensation

The Company uses a combination of cash and stock-based compensation to attract and retain qualified persons to serve as non-employee directors of the Company and the Bank.  Each director of the Company also is a director of the Bank.  Directors are not compensated separately for their service on the Company’s Board of Directors.  In setting director compensation, the Board of Directors considers the significant amount of time and level of skill required for service on the Boards of the Company and the Bank, particularly due to the duties imposed on directors of public companies and financial institutions.  The types and levels of director compensation are annually reviewed and set by the Compensation Committee and ratified by the full Board of Directors.

For the year ending December 31, 2018, each director received an annual fee of $34,000 for serving on the Bank’s Board of Directors, except for Messrs. Heeter, Botts, and Viater, who were compensated as executive officers of the Bank and are not separately compensated as directors.  Mr. Davis receives an additional $10,000 per year for serving as Chairman of the Board of Directors; Mr. Crull receives an additional $5,000 for serving as the Chairman of the Audit/Compliance Committee; Mr. Lashley receives an additional $3,000 for serving as Chairman of the Compensation Committee; and Mr. Hughes receives an additional $3,000 for serving as the Chairman of the Wealth Management Committee.  In addition, each director receives $200.00 per Board committee meeting attended and the Audit/Compliance Committee members receive $400.00 per meeting attended. No stock options were granted to directors in 2018.

The Bank maintains deferred compensation arrangements with some directors, which allowed them to defer all or a portion of their Board fees earned before September 2008 and earn interest on deferred amounts at the rate of 10% per year, which rate was set at the inception of the plan in 1993 and was not an above-market rate at that time.  Participants receive the deferred amounts as income when they are no longer serving as active directors.  The participant may choose to receive the deferred payments in a lump sum or in annual installments for 15 years beginning at age 70.

Messrs. Levy and Marien were parties to director fee continuation agreements with the institution acquired in 2008, which were assumed by the Company.  Those agreements provided that if the director retired after attaining age 72 and had served as a director for at least five years, he would be entitled to an annual retirement benefit for five years (or 10 years, if the director had more than 10 years of service) equal to 50% of the total fees paid to him during the last plan year before ending service.  These agreements also provided that, in the event of a change in control followed within 24 months by a termination of service as a director prior to age 72, the director would be entitled to receive the present value of the normal retirement benefit (without regard to years of service) paid in a lump sum.

Director Compensation Table for 2018

The following table provides compensation information for each member of our Board of Directors during the year ending December 31, 2018 (except for Messrs. Heeter, Botts and Viater, whose compensation is reported as named executive officers).  All prior stock options and restricted stock awards to non-officer directors were fully vested at December 31, 2018, and no stock option or restricted stock awards were granted to non-officer directors during 2018.

_______________________

Business Relationships and Transactions with Executive Officers, Directors and Related Persons

The Company and the Bank may engage in transactions or series of transactions with our directors, executive officers and certain persons related to them.  Except for loans by the Bank, which are governed by a separate policy, these transactions are considered “related party” transactions under applicable regulations of the SEC and are subject to review and approval of the Audit/Compliance Committee and ratification by the Board of Directors.  All other transactions with executive officers, directors and related persons are approved by the Board of Directors.

The Bank has a written policy of granting loans to officers and directors, which fully complies with all applicable federal regulations.  Loans to directors and executive officers are made in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank’s underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable features.  These loans to directors and executive officers are not made at preferential rates; however, certain closing fees are waived.  No director, executive officer or any of their affiliates had aggregate indebtedness to the Bank at below-market interest rates exceeding $120,000 in the aggregate since December 31, 2018.  Loans to all directors and executive officers and their associates totaled approximately $12.7 million at December 31, 2018, which was approximately 6.3% of the Company’s consolidated stockholders’ equity at that date.  All loans to directors and executive officers were performing in accordance with their terms at December 31, 2018.

BOARD OF DIRECTORS’ MEETINGS AND COMMITTEES AND

CORPORATE GOVERNANCE MATTERS

Board Meetings, Independence and Ethics Code

Meetings of the Company’s Board of Directors are generally held on a monthly basis. The Company’s Board of Directors held 12 regular meetings and one ADHOC meeting during the year ending December 31, 2018. During 2018, each of the directors of the Company attended 80% or more of the aggregate of the total number of Board meetings and the total number of meetings of the Board committees on which the director served.  Generally, all directors attend each annual meeting of stockholders, and all but one of our directors attended last year’s annual meeting.

The Board has determined that Directors Crull, Davis, Hewitt, Lashley, Levy, Marien, Rosema, Altobella and Bernard, who constitute a majority of our Board members, are “independent directors,” as that term is defined in the NASDAQ listing standards.  Among other things, when making this determination, the Board considers each director’s current or previous employment relationships and material transactions or relationships with the Company or the Bank, members of their immediate family and entities in which the director has a significant interest.  The purpose of this review is to determine whether any relationships or transactions exist or have occurred that are inconsistent with a determination that the director is independent.  Among other matters, in reaching its determination on independence, the Board considered the fact that certain of the directors or their affiliates have borrowed money from the Bank.  See "Election of Directors - Business Relationships and Transactions with Executive Officers, Directors and Related Persons."

Stockholders may communicate directly with the Board of Directors by sending written communications to Wilbur R. Davis, Chairman of the Board, MutualFirst   Financial, Inc., 110 E. Charles Street, Muncie, Indiana  47305-2400.

The Board of Directors has adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees.  You may obtain a copy of the Code free of charge by writing to the Corporate Secretary of the Company, 110 E. Charles Street, Muncie, Indiana  47305-2400 or by calling (765) 747-2800.  In addition, the Code of Business Conduct and Ethics was filed with the SEC as Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ending December 31, 2003, and is available at http://www.bankwithmutual.com/conduct .

Board Leadership Structure and Risk Oversight

As noted above, the positions of Chairman of the Board of the Company and Chief Executive Officer and President of the Company are held by separate persons.  This has been the case since the Company was formed.  The

Board believes this structure is appropriate for the Company and the Bank because it creates a clear line between management by the executive management and oversight of management by the Board of Directors, led by the Chairman.

Committees of the Board of Directors

The Board of Directors of the Company has standing Audit/Compliance, Compensation, Wealth Management and Nominating Committees.  The Board of Directors has adopted written charters for the Audit/Compliance Committee, the Compensation Committee and the Nominating Committee.  Copies of the charters for the Audit/Compliance Committee, Compensation Committee and the Nominating Committee are available on our website at http://www.bankwithmutual.com/Committees .  You also may obtain a copy of these committee charters free of charge by writing to the Corporate Secretary, MutualFirst   Financial, Inc., 110 E. Charles Street, Muncie, Indiana  47305-2400 or by calling (765) 747-2800.

Audit/Compliance Committee

The Audit/Compliance Committee is comprised of Directors Crull (Chairman), Bernard, Davis, Lashley and Levy, all of whom are “independent directors” under the NASDAQ listing standards.  No member of the Audit/Compliance Committee had any relationship with the Company or the Bank requiring disclosure under Item 404 of SEC Regulation S-K, which requires the disclosure of certain related person transactions.  The Board of Directors has determined that Directors Crull, Lashley and Levy each is an “audit committee financial expert” as defined in Item 407(e) of Regulation S-K of the SEC and that all of the Audit/Compliance Committee members meet the independence and financial literacy requirements under the NASDAQ listing standards.  In 2018, the Audit/Compliance Committee met four times.

The Audit/Compliance Committee is responsible for hiring, terminating and/or reappointing the Company’s independent auditor and for reviewing the annual audit report prepared by our independent registered public accounting firm.  The functions of the Audit/Compliance Committee also include:

•	approving non-audit and audit services to be performed by the independent registered public accounting firm;

•	reviewing and approving all related party transactions for potential conflict of interest situations;

•	reviewing and assessing the adequacy of the Audit/Compliance Committee Charter on an annual basis;

•	reviewing significant financial information for the purpose of giving added assurance that the information is accurate and timely and that it includes all appropriate financial statement disclosures;

•	ensuring the existence of effective accounting and internal control systems; and

•	overseeing the entire audit function of the Company, both internal and independent.

Compensation Committee

The Compensation Committee is comprised of six   independent directors, Directors Lashley (Chairman), Altobella, Crull, Davis, Marien and Rosema. No member of the Compensation Committee had any relationship with the Company or the Bank requiring disclosure under Item 404 of SEC Regulation S-K, which requires the disclosure of certain related person transactions.  The Compensation Committee is responsible for:

•

determining compensation to be paid to its officers and employees, which are based, in part, on the recommendations of Messrs. Heeter and Botts, except that compensation paid to Mr. Heeter is determined based on the recommendation of a majority of the independent directors, and neither Mr. Heeter nor Mr. Botts are present during voting or deliberations concerning their compensation;

•	overseeing the administration of the employee benefit plans covering employees generally;

•	administering the Company’s cash and equity compensation incentive plans;

•	setting Board and Board committee fees; and

•	reviewing our compensation policies and programs.

The Company’s Compensation Committee met   five times during the year ending December 31, 2018. The Compensation Committee does not delegate its authority to any one of its members or any other person.  The Compensation Committee did not retain any compensation consultants in 2018 to determine or recommend the level or form of director or executive compensation. The Compensation Committee also reviews our incentive compensation plans to determine if they encourage undue or unnecessary risk or the manipulation of earnings.

Nominating Committee

The Nominating Committee is comprised of Directors Davis (Chairman), Altobella, Bernard, Crull and, Lashley.  The Nominating Committee is primarily responsible for selecting and recommending nominees for election to the Board.  The Nominating Committee generally meets once per year to make nominations.  The Nominating Committee will consider nominees recommended by stockholders in accordance with the procedures in the Company’s bylaws, but the Nominating Committee has not actively solicited such nominations.  The Nominating Committee has the following responsibilities under its charter:

•	recommend to the Board the appropriate size of the Board and assist in identifying, interviewing and recruiting candidates for the Board;

•

recommend candidates (including incumbents) for election and appointment to the Board of Directors, subject to the provisions set forth in the Company’s charter and bylaws relating to the nomination or appointment of directors, based on the following criteria: business experience, education, integrity and reputation, independence, conflicts of interest, diversity, age, number of other directorships and commitments (including charitable obligations), tenure on the Board, attendance at Board and committee meetings, stock ownership, specialized knowledge (such as an understanding of banking, accounting, marketing, finance, regulation and public policy) and a commitment to the Company’s communities and shared values, as well as overall experience in the context of the needs of the Board as a whole;

•	review nominations submitted by stockholders, which have been addressed to the Corporate Secretary, and which comply with the requirements of the Company’s charter and bylaws;

•	consider and evaluate nominations from stockholders using the same criteria as all other nominations;

•	annually recommend to the Board committee assignments and committee chairs on all committees of the Board, and recommend committee members to fill vacancies on committees as necessary; and

•	perform any other duties or responsibilities expressly delegated to the Committee by the Board.

As noted above, the Nominating Committee Charter provides for a number of criteria that are considered when selecting new members of the Board.  Those criteria, as well as viewpoint, skill, race, gender and national origin, are considered by the Nominating Committee and the Board when seeking to fill a vacancy or a new seat on the Board in order to consider diversity on our Board of Directors.

Nominations, other than those made by the Nominating Committee, must be made pursuant to timely notice in writing to the Corporate Secretary as set forth in Article I, Section 1.09 of the Company’s bylaws.  In general, to be timely, a stockholder’s notice must be received by the Company not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; however, if less than 100 days’ notice of the date of the scheduled annual meeting is given by the Company, the stockholder has until the close of business on the tenth day following the day on which notice of the date of the scheduled annual meeting was made.  The stockholder’s notice must include the information set forth in Article I, Section 1.09 of the Company’s bylaws, which includes the following:

•

as to each person whom a stockholder proposes to nominate for election as a director: all information relating to the proposed nominee that is required to be disclosed in the solicitation of proxies for election as directors or is otherwise required pursuant to Regulation 14A under the Securities Exchange Act of 1934; and

•	as to the stockholder giving the notice: the name and address of the stockholder as they appear on the Company’s books and the number of shares of the Company’s common stock beneficially owned by the stockholder.

This description is a summary of our nominating process.  Any stockholder wishing to propose a director candidate to the Company should review and must comply in full with the procedures set forth in the Company’s charter and bylaws and in Maryland law.  During the year ending December 31, 2018, the Nominating Committee was responsible for selecting director nominees and met one time with respect to the selection of director nominees.

Equity Incentive Plans

Our 2008 Stock Option and Incentive Plan is a stock-based compensation plan designed to reward directors, regional (advisory) directors, officers and employees for service with a proprietary interest in the Company and to encourage such individuals to remain with the Company.  It   provides for the award of stock options or stock appreciation rights for up to 352,741 shares of our common stock and provides for the award of incentive stock options to qualifying employees under the federal tax laws.  The Compensation Committee administers this plan, determines employee eligibility, grants awards and sets the terms of awards.  Awards are discretionary and are based on an assessment of the participant’s position, years of service, and contribution to the success and growth of the Company.  The exercise price of options awarded must be no less than the fair market value of a share of the Company’s common stock on the date of grant.  Options that are not exercisable become immediately exercisable at the time of a change in control or of a tender or exchange offer for the Company’s shares.  Upon any termination of service, unexercised options remain exercisable for the lesser of three months or the remaining term of the option and all unvested options are lost.  This plan has been in place for 10 years.  As a result, no more shares may be awarded under the plan.

The Board has approved a new 2019 Omnibus Incentive Plan, subject to shareholder approval to provide for the availability of stock awards in keeping with the Company’s strategy of attracting and retaining directors, officers and employees. Please see Proposal III on pages 36 to 45.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information for each named executive officer concerning stock options held at December 31, 2018.

Option Exercises and Stock Vested in 2018

The following table sets forth certain information with respect to the exercise of stock options and vesting of restricted stock for each named executive officer during the year end December 31, 2018.

________________________

(1)	Value realized on exercise represents the excess of the fair market value of the shares acquired at exercise over the exercise price of the option.

(2)	Value realized on vesting represents the fair market value of the shares on the vesting date.

Equity Compensation Plan Information

The following table summarizes our equity compensation plans as of December 31, 2018.

(1)	No shares were available for award under this plan.

Non-Equity Incentive Plans

In March 2018, based on a recommendation from its Compensation Committee, the Board of Directors of the Company approved the MutualBank 2018 Executive Variable Compensation Plan, which provided for cash incentive payments to designated executives of the Company, including the five named executive officers.  This cash incentive plan provides for one-time payments to the designated executives based on the Company’s 2018 Basic EPS.  Under the plan, cash payments would be calculated as a percentage of 2018 base salary, with the appropriate percentage determined by whether a targeted Basic EPS level was met for 2018.  For the named executive officers of the Company, the plan established seven designated Basic EPS levels (including the Company’s target Basic EPS based on its 2018 budget) based upon internal forecasts for the performance of the Company and a range of percentage of salary cash incentive payments for meeting these designated Basic EPS levels based upon each officer’s anticipated contribution to that performance as follows:

The Company’s Basic EPS for 2018 was $2.25, which was a Basic EPS level that entitled the named executive officers to a cash payment under the plan.  Messrs. Heeter, Cook, Botts, Viater and Caldwell qualified for an incentive cash payment of 45%, 30%, 35%, 30% and 25%, respectively of his 2018 base salary.  The Compensation Committee and the Board determined that payments at that level were appropriate and awarded Messrs. Heeter, Cook, Botts, Viater and Caldwell cash payments of $187,187; $77,166, $119,729; $95,251 and $51,794 respectively, for 2018, which payments were made in early 2019.

In March 2019, based on a recommendation from its Compensation Committee, the Board of Directors of the Company approved a draft of the MutualBank Executive Variable Compensation Plan, which provides for annual cash incentive payments to designated executives of the Company, including its five named executive officers.  This cash incentive plan provides for potential one-time payments to the designated executives based on the Company’s Basic EPS for each year.  Under the plan, cash payments are calculated as a percentage of base salary for the year, with the appropriate percentage determined by whether and what targeted Basic EPS level is met that year.  Each year, the Compensation Committee designates the Basic EPS targets based upon internal forecasts for the performance of the Company and related percentage of salary bonuses levels based upon each officer’s anticipated contribution to that performance for the current year.  For the named executive officers of the Company in 2019, the Compensation Committee established seven designated Basic EPS levels (one of which is based on the Company’s 2019 target performance) and a range of percentage of salary cash incentive payments for meeting each Basic EPS level as follows:

The plan does not create any vested rights in the participants and may be modified, repealed or discontinued at any time by the Board of Directors.  In addition, the plan includes a clawback requiring repayment to the extent any payment made is later determined to have been based on performance measurements that are subsequently deemed to be inaccurate due to misstatement or misrepresentation.

Nonqualified Deferred Compensation

The Bank maintains an executive deferral program for the benefit of designated senior executives, including Messrs. Heeter and Botts, to supplement their retirement earnings to provide them with approximately another 10% of their expected salary at retirement as additional annual retirement income, after Social Security benefits, ESOP shares and income from all retirement plans of the Bank, to the extent they chose to participate in the program.  Pursuant to the agreements under the program, key executives have been provided an additional opportunity to defer, at their choice, 1% to 15% of their base salary into a non-qualified deferral program.  For each participant, the Bank matched $.50 of every dollar deferred, up to a maximum match established in each person’s agreement.  The Bank also pays interest on each account at a rate of 10%, which rate was set at the inception of the plan in 1993 and was not an above-market rate at that time.  Matching contributions and interest vest over five years.  The Bank maintains a record of all amounts deferred by the executive.  Benefits are paid to the executives when they reach age 65.  The deferred compensation benefit is the annuitized value, at 10%, of the executive’s account, which

value is paid in monthly installments over 15 years.  The plan provides for earlier payouts for disability and for continued payouts as death benefits.  Deferrals under this plan ceased after 2008; however, annual earnings at 10% continue.  For the year ending December 31, 2018, the aggregate earnings accrued for Messrs. Heeter and Botts on their deferred compensation balances (a portion of which also is reflected in the 2018 Summary Compensation Table) were $34,305 and $26,314, respectively.

Non Qualified Deferred Compensation Table for 2018

The following table sets forth certain information with respect to our Executive Deferred Compensation Agreements with each named executive officer for the year ended December 31, 2018.

 

Retirement Plans

The Company has designed retirement plans or programs to ensure our employees have adequate income levels after employment.  Prior to July 2009, the Company maintained a 401(k) Retirement Savings Plan, in which the Compensation Committee determined the amount of Company contributions for all employees.  The Company also maintained an ESOP designed to ensure all employees have a vested interest in the success of the Company.  The ESOP purchased shares of the Company’s stock in 1999, which were allocated to employees annually over 15 years.  On July 1, 2009, these two qualified plans were combined into a KSOP.  This reduced our administrative expenses and provides employee compensation tied to the success of the Company.  Under the KSOP, in addition to the regular ESOP allocations, employee contributions are matched.

The Company also maintains a non-qualified Executive Benefit Plan (“Benefit Plan”) for key employees, including Messrs. Heeter and Botts.  The Benefit Plan is designed to provide the executives with retirement income, in conjunction with Social Security and the KSOP, of approximately 60% of their pre-retirement income.  An estimated annual retirement payment is established based on the individual’s anticipated salary at retirement, estimates of the person’s retirement income from Social Security benefits, all tax qualified plans of the Bank and an assumed 8% annual rate of return.  This estimated payment amount is reviewed periodically for changes in the relevant factors.

The Bank makes an annual payment to each participant for the purpose of funding the cost of their future benefit.  Those contributions are taxable income to the participant in the year they are made and are reflected in the 2018 Summary Compensation Table.

Under the Benefit Plan, if the executive is involuntarily terminated other than for cause or in connection with a change in control, the Bank must make a lump sum contribution to the executive of the full contribution for the then-current year and the present value, based on an 8% rate, of the next five years of required contributions (or of all required remaining contributions if less).  In addition, if the executive is deemed to be terminated in connection with a change of control, the Bank must make a lump sum final contribution to the executive’s account equal to

the present value, at 8%, of all remaining contributions required under then-current payout estimates, through age 65.

In the 2008 acquisition of another financial institution, the Bank assumed the terms of the Salary Continuation Agreement between that entity and Mr. Viater, which provides for an annual retirement benefit of $60,000 payable in monthly installments for 15 years if he retires at the age of 60 or later.  Any payments made upon a change in control are subject to reduction to avoid adverse tax consequences under Section 280G.  

Employment Agreements

The Bank has entered into three-year employment agreements with Messrs. Heeter, Cook, Botts and Viater which provide for annual one-year extensions, if authorized by the Compensation Committee and the Board.  Under these agreements, each executive’s salary is reviewed for adjustments annually and cannot be decreased below any adjusted level.  The 2018 base salaries of Messrs. Heeter, Cook, Botts and Viater under these agreements are $414,000, $256,000, $340,000 and $316,000, respectively.  Under these agreements, each executive is entitled to participate equitably in discretionary bonuses awarded to executive employees and in the Bank’s other employee benefit plans, including medical, dental, group life, disability and accidental death and dismemberment insurance benefits.  Each agreement provides that the executive’s employment may be terminated by the Bank or by the executive at any time and also provides for termination upon the occurrence of certain events specified by federal regulations.  If the executive’s employment is terminated due to disability, he would receive his salary and other benefits for the remainder of the three-year term, with a reduction in his salary for disability insurance payments from insurance purchased by the Bank.  If the executive’s employment is terminated due to death, his estate would receive all benefits under the agreement through the end of the month in which the executive dies.  If the executive’s employment is terminated for cause or voluntarily by the executive, he would receive all benefits under the agreement through that termination date.  If the executive’s employment is terminated by constructive termination, with no change in control, the Bank would be required to pay to the executive his then-current salary over the three-year term and to provide the executive with his then-current employee health benefits for the remaining term of his agreement.  If the executive’s employment is involuntarily terminated in connection with a change in control, MutualBank must pay to the executive in a lump sum 299% of his Section 280G base amount (the base amount is essentially the executive’s average annual Box 1, W-2 compensation during the five full calendar year periods prior to the effective date of the termination) and continue to provide substantially the same health benefits as were being provided to the executive officers of MutualBank immediately prior to the change in control, in each case subject to reduction to ensure deductibility under Section 280G of the Internal Revenue Code.  The executives have no responsibility to mitigate amounts owed to them under the agreements nor does any compensation received from another employer reduce post-termination compensation under the agreements .  The agreements provide that for the three years following any termination of employment, each officer will be prohibited from soliciting Company or Bank depositors, customers and employees to leave the Company or the Bank.

Change in Control Agreement

The Bank entered into a Change in Control Agreement with Mr. Caldwell on October 15, 2017 which provides for annual one-year extensions, if authorized by the Compensation Committee and the Board. Under the agreement, if Mr. Caldwell’s employment is terminated within twelve months subsequent to a Change in Control for any reason other than for cause, disability, retirement or as a result of Mr. Caldwell’s death, or if Mr. Caldwell resigns for good reason as a result of any material breach of the change in control agreement by Mr. Caldwell’s employer or as a result of a material change in the location where Mr. Caldwell works, Mr. Caldwell will be entitled to a lump sum payment equal to his annual compensation plus the cost of his benefits over a twelve month period including the cost of all group insurance, life insurance, health and accident and disability insurance and any other benefit plan program or insurance he was entitled to participate in immediately prior to his termination. In the event of his termination, Mr. Caldwell would be entitled to receive $277,957 based on his compensation for 2018.

In the 2008 acquisition of another financial institution, the Bank also assumed Mr. Viater’s director fee continuation agreement, which provides that if he retires after attaining age 65 and continues to serve as a director for at least five years, he would be entitled to an annual retirement benefit for 10 years equal to 50% of any director fees paid to him during the last plan year before ending service.  In the event of a change in control followed within 24 months by a termination of service as a director prior to age 72, the director would be entitled to receive the present value of the normal retirement benefit (without regard to years of service) paid in a lump sum.

Potential Payments upon Termination of Employment or Change in Control

 

The following tables show the approximate value of the benefits and payments that the Named Executive Officers would have been entitled to receive as of December 31, 2018 had their employment been terminated or had a change in control occurred on that date. The table excludes (i) amounts accrued through December 31, 2018 that would be paid in the normal course of continued employment, such as accrued but unpaid salary and bonus amounts, (ii) vested account balances under the Company’s KSOP plan, and (iii) already vested equity awards.

 

(1)	Represents payment of Mr. Heeter’s salary and benefits for the remaining term of his employment agreement (i.e. through December 31, 2021), assuming Mr. Heeter’s employment is terminated by MutualFirst on December 31, 2018.

(2)	Represents continued payment of Mr. Heeter’s salary through the end of the month in which his death occurred, as provided in his employment agreement.  The amount shown is one month’s salary.

(3)

Represents payment of Mr. Heeter’s salary and benefits for the remaining term of his employment agreement (i.e. through December 31, 2021), assuming Mr. Heeter’s employment is terminated by MutualFirst on December 31, 2018 after having established that he is permanently disabled, less any proceeds received for a disability policy maintained by the Bank.

(1)	Represents continued payment of Mr. Cook’s salary and benefits for the remaining term of his employment agreement (i.e. through December 31, 2021), assuming Mr. Cook’s employment is terminated by MutualFirst on December 31, 2018.

(2)	Represents continued payment of Mr. Cook’s salary through the end of the month in which his death occurred, as provided in his employment agreement.  The amount shown is one month’s salary.

(3)

Represents continued payment of Mr. Cook’s salary and benefits for the remaining term of his employment agreement (i.e. through December 31, 2021), assuming Mr. Cook’s employment is terminated by MutualFirst on December 31, 2018 after having established that he is permanently disabled, less any proceeds received for a disability policy maintained by the Bank.

(1)	Represents continued payment of Mr. Botts’ salary and benefits for the remaining term of his employment agreement (i.e. through December 31, 2021), assuming Mr. Botts’ employment is involuntarily terminated by MutualFirst on December 31, 2018.

(2)	Represents continued payment of Mr. Botts’ salary through the end of the month in which his death occurred, as provided in his employment agreement.  The amount shown is one month’s salary.

(3)

Represents continued payment of Mr. Botts’ salary and benefits for the remaining term of his employment agreement (i.e. through December 31, 2021), assuming Mr. Botts’ employment is terminated by MutualFirst on December 31, 2018 after having established that he is permanently disabled, less any proceeds received for a disability policy maintained by the Bank.

(1)	Represents continued payment of Mr. Viater’s salary and benefits for the remaining term of his employment agreement (i.e. through December 31, 2021), assuming Mr. Viater’s employment is terminated by MutualFirst on December 31, 2018.

(2)	Represents continued payment of Mr. Viater’s salary through the end of the month in which his death occurred, as provided in his employment agreement.  The amount shown is one month’s salary.

(3)

Represents continued payment of Mr. Viater’s salary and benefits for the remaining term of his employment agreement (i.e. through December 31, 2021), assuming Mr. Viater’s employment is terminated by MutualFirst on December 31, 2018 after having established that he is permanently disabled, less any proceeds received for a disability policy maintained by the Bank.

PROPOSAL 2

ADVISORY (NON-BINDING) RESOLUTION TO

APPROVE EXECUTIVE COMPENSATION

Our stockholders have been presented with a say-on-pay proposal for over a decade at our Annual Meetings and have approved our executive compensation at these annual meetings by a significant percentage of the votes cast.  We are presenting for a vote at the Annual Meeting an advisory, (non-binding) stockholder resolution to approve the compensation of our executives, as described in this Proxy Statement pursuant to the compensation disclosure rules of the SEC.

This (non-binding) advisory resolution will be presented at the Annual Meeting as follows:

RESOLVED, that the stockholders approve the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion in the Company’s Proxy Statement for the 2019 Annual Meeting.

This vote will not be binding on the Company’s Board of Directors or Compensation Committee and may not be construed as overruling a decision by the Board or create or imply any additional fiduciary duty on the Board.  It also will not affect any compensation already paid or awarded to any executive.  The Compensation Committee and the Board will consider the outcome of the vote when considering future executive compensation arrangements.  At last year’s annual meeting, over 90% of the shares voting on a similar (non-binding) resolution voted to approve the Company’s compensation to executives.  Because of this level of approval, the vote had no specific influence on the Company’s compensation practices in 2018.

As disclosed in more detail in “Executive Compensation – Philosophy and Objective of Compensation Programs,” the Compensation Committee has a very deliberate and thoughtful process for establishing a broad-based compensation program for our executives and believes that a well-structured compensation program should align the interests of our executives with those of the stockholders and include components that drive the creation of sustainable stockholder value over the long-term and do not simply focus on short-term gains.  Our compensation program seeks to help the Company and the Bank attract, motivate and retain talented and dedicated executives, orient its executives toward the achievement of business goals, and link the compensation of its executives to the Company’s success.  Executive compensation determinations are a complex and demanding process.  The Compensation Committee exercises great care and discipline in its analysis and decision-making and recognizes our stockholders’ interest in executive compensation practices.  The Compensation Committee seeks to establish compensation levels that attract highly effective executives who work well as a team and whose values are aligned with our corporate values to conduct our business with character, compassion and class and to compete effectively.  A primary focus of our compensation program has been to compensate actual performance, using realistic incentive thresholds.

Therefore, our overriding principles in setting types and amounts of compensation are: (1) to link individual compensation to the successful achievement of performance objectives; (2) to attract, retain and motivate our top performers at a competitive level in our market; (3) to align the interests of key executives with those of our stockholders in furtherance of our goal to improve stockholder value; (4) to ensure that our incentive compensation does not encourage incurring excessive risk; and (5) to comply with any applicable regulatory compensation limits.  In setting executive compensation and benefits in line with this philosophy, the Compensation Committee has established a full compensation package that includes base salary, annual incentive bonus compensation, retirement benefits, equity compensation, perquisites and other benefits.

The Company’s Board of Directors recommends that stockholders vote FOR the advisory (non-binding) resolution to approve executive compensation.

PROPOSAL 3

PROPOSAL III.  APPROVAL OF THE 2019 OMNIBUS INCENTIVE PLAN

Introduction

On March 20, 2019, based upon the recommendation of the Compensation Committee, our Board of Directors approved the Company’s 2019 Omnibus Incentive Plan (the “2019 Plan”), subject to approval by the Company’s stockholders at the Annual Meeting. The 2019 Plan will only become effective if it is approved by the Company’s stockholders at the Annual Meeting.

The purpose of the 2019 Plan is to promote the long-term success, and enhance the long-term value, of the Company by linking the personal interests of employees and directors with those of the Company’s stockholders. The 2019 Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of employees and directors upon whose judgment, interest, and special effort the successful conduct of its operation largely is dependent, in a manner that does not expose the Company to imprudent risks and that is consistent with the long-term health of the Company.

We currently have one equity-based incentive plan in effect, the Company’s 2008 Stock Option and Incentive Plan (the “Existing Plan”), which provides for awards to employees, officers and directors of the Company and its subsidiaries of stock options, stock appreciation rights and restricted stock. If our stockholders approve the 2019 Plan, no further awards can be made under the Existing Plan, and shares of Common Stock reserved to make new awards under that plan will be released; shares of Common Stock reserved to fund issued and outstanding awards under the Existing Plan and our prior equity incentive plans will continue to be reserved for those awards. All awards outstanding under the Existing Plan and our prior equity incentive plans will remain outstanding in accordance with their terms and will continue to be governed solely by the terms of the documents evidencing such awards, and no provision of the 2019 Plan will be deemed to affect or otherwise modify the rights or obligations of the holders of such awards with respect to their acquisition of shares.

Reasons for Seeking Stockholder Approval of the 2019 Plan

We use equity compensation as a key tool for attracting, retaining and motivating the best available talent. Our stockholders have previously authorized a total of 352,741 shares of Common Stock for awards under the Existing Plan. As of March 20, 2019 (the latest practicable date prior to the mailing of this proxy statement), 189,862 shares were subject to outstanding awards under the Existing Plan and our prior equity incentive plans and no shares remain available for future awards under the Existing Plan. We believe approval of the 2019 Plan is critical to ensuring that we have adequate shares available to attract, retain and motivate top talent.

Certain Considerations

Burn Rate; Longevity of Authorized Shares . Burn rate, which is a measure of the rate at which companies use (or burn) shares available for grant in their equity compensation plans, is an important factor for investors concerned about stockholder dilution. The burn rate is defined in terms of the gross number of equity awards granted during a calendar year divided by the weighted average of number of shares of Common Stock outstanding during the year. The Company’s burn rate over the last three years is 0.0% as the Company hasn’t awarded options since 2012. The Company’s burn rate for the three year period between 2010 and 2012 was 1.82%. We believe our current three-year average burn rate of 0.0% should be viewed favorably by our stockholders. However, we note that the Committee intends to increase its utilization of performance-based awards in the near future.

Although our future annual share usage will depend upon and be influenced by a number of factors, such as the number of plan participants, the price per share of our Common Stock and the methodology used to establish the equity award mix, the 600,000 shares of Common Stock reserved for issuance under the 2019 Plan will enable us to continue to utilize equity awards as an important component of our compensation program and help meet our objectives to attract, retain and incentivize talented personnel. The calculation of the share reserve took into account, among other things: (i) the effect the acquisitions over the previous ten years have had on our size and employee head count, (ii) our stock price and volatility, (iii) our share burn rate and overhang, (iv) the existing terms of our outstanding awards, and (v) our proposed fungible share rate of 2-for-1 for full value awards (stock-based awards

other than stock options and stock appreciation rights) under the 2019 Plan. The results of this analysis were presented to our Compensation Committee for their consideration. In addition, we anticipate that the fungible share design will permit a more efficient and effective use of those shares for future equity awards. Upon approval of the proposal, based on the factors described above, we estimate that the pool of shares available under the 2019 Plan would last for approximately four to six years.

Plan Cost .   Another metric often used by investors to assess the appropriateness of the number of shares to be authorized for issuance under an equity plan is the cost of the shares relative to the current outstanding shares of the Company. The 600,000 shares being requested will represent 7% of the approximately 8.6 million shares outstanding as of the date of this proxy statement. Although our current practice has been to grant a significant portion of the awards as options, to the extent we grant full value awards, the number of the additional shares which will actually be issued will be less, because each share issued under full value awards counts on a 2-for-1 basis against the number of shares authorized for issuance according to the plan. For example, this means that, for every 100 shares of restricted stock issued by us under the 2019 Plan, the number of shares available under the 2019 Plan will be reduced by 200 shares. We believe these facts should be viewed favorably by investors as they demonstrate that the cost of our 2019 Plan is reasonable.

Overhang . Overhang is another measure that is sometimes used to assess the dilutive impact of equity programs such as the 2019 Plan. Overhang indicates the amount by which existing stockholder ownership would be diluted if the shares authorized for issuance under our Existing Plan, coupled with the shares subject to outstanding awards under the Existing Plan and our prior equity incentive plans, were issued. As of March 4, 2019, the overhang represented by the number of outstanding awards plus shares available for issuance under the Existing Plan stood at 2%. The additional 600,000 shares to be authorized under the 2019 Plan (taking into account that no further grants will be made under the Existing Plan if stockholders approve the 2019 Plan) will result in an overhang of between 6% and 9%, depending on the mix of awards. We believe these levels of overhang should not be viewed as excessive by investors.

The following description sets forth the material terms of the 2019 Plan. It does not purport to be complete and is qualified in its entirety by reference to the full text of the 2019 Plan, a copy of which is attached to this proxy statement as Appendix A.

Corporate Governance Practices

The 2019 Plan incorporates the following provisions that enable us to maintain sound corporate governance practices in granting equity-based awards to employees and directors that we believe are consistent with the interests of stockholders, including:

Awards, Shares Authorized and Limitations

The 2019 Plan provides for the grant to employees and directors of the Company and its subsidiaries (whom we refer to collectively as “participants”) the following types of awards:

Subject to adjustment as described under “- Changes in Capitalization,” the total number of shares available for awards under the 2019 Plan will be 600,000. Shares issued under the 2019 Plan may be either authorized but unissued shares, or shares that have been reacquired by the Company. Shares subject to awards which terminate, expire or lapse are again available for awards under the 2019 Plan.

The 2019 Plan sets forth annual limits with respect to awards which may be granted to a participant. A participant may receive different types of awards during a calendar year. Under the 2019 Plan, subject to adjustment as described in “Changes in Capitalization,” awards granted during a calendar year to any one participant are subject to the following limitations: (1) aggregate grants of stock options or stock appreciation rights are subject to an annual limit of 50,000 shares; (2) aggregate grants of restricted stock or restricted stock units are subject to an annual limit of 25,000 shares; and (3) aggregate grants of performance shares or performance units are subject to an annual limit of 25,000 shares. In addition, the aggregate number of shares that may be credited as director compensation and/or covered by awards to a non-employee director with respect to a calendar year is subject to an annual limit of 10,000 shares. The 2019 Plan provides that up to 550,000 of the shares available for award under the Plan may be issued as incentive stock options.

Changes in Capitalization

The 2019 Plan provides that in the event of any reorganization, recapitalization, reclassification, stock split, stock dividend, distribution, contribution of shares, merger consideration, rights offering or any other changes in corporate structure or shares of the Company, in order to prevent dilution or enlargement of participant rights under the 2019 Plan, the number of shares of Common Stock authorized for issuance, available for issuance or covered by any outstanding award and the exercise price or other per share amounts applicable to any such award, and the various limitations described above, may be adjusted by the Committee. Fractional shares will not be issued under the 2019 Plan.

Eligibility

Any employee or director (including advisory and emeritus directors) of the Company or any of its subsidiaries is eligible to receive an award under the 2019 Plan. As of December 31, 2018, there were approximately 539 employees, including 40 part-time employees and 10 non-employee directors of the Company and its subsidiaries.

Administration of the 2019 Plan

The 2019 Plan is administered by the Compensation Committee of the board of directors (which we refer to in this section as the “Committee”). Each director of the Committee qualifies as (i) a “Non-Employee Director,” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, and (ii) an “Independent Director” under the Listing Rules of the NASDAQ Stock Market. Committee members serve at the discretion of the Company's board of directors and may be removed by the board at any time.

The Committee generally has full power to:

Duration and Modification

The 2019 Plan will remain in effect until terminated in accordance with its terms; however, no award may be made under the 2019 Plan on or after the tenth anniversary of its approval by the Company’s stockholders. The Company’s board of directors or the Committee generally may, at any time, terminate, amend or modify the 2019 Plan without approval of participants or the Company’s stockholders. Stockholder approval must be obtained if it is required by law, rule or regulation. As a result, stockholder approval will generally be required for material amendments to the 2019 Plan, such as amendments to increase the number of shares which may be issued under awards. Additionally, the Company’s board of directors, in its discretion, may voluntarily seek stockholder approval if it so desires.

No Repricing Without Stockholder Approval

Stock options and stock appreciation rights may not be repriced, replaced or regranted through cancellation, exchanged for cash or other awards or by lowering the exercise or grant price of a previously granted stock option or stock appreciation right (other than as described under “- Changes in Capitalization”), except with the approval of the Company’s stockholders.

Stock Options

General .  Stock options may be granted to employees and directors at any time and from time to time by the Committee. The Committee has broad discretion in determining the number of shares subject to options granted to each participant. Each option grant is evidenced by an option agreement that specifies the exercise price, the duration of the option, the number of shares to which the option pertains, the vesting schedule, and such other provisions as the Committee determines. In addition, the option agreement specifies whether the option was intended to be an incentive stock option or a non-qualified stock option. The exercise price must not be less than the fair market value of a share of Common Stock on the date of grant, provided that the exercise price of an incentive stock option granted to a holder of more than ten percent of the Common Stock must not be less than 110% of fair market value on the date of grant. The duration of a stock option may not exceed ten years, provided that the duration of an incentive stock option granted to a holder of more than ten percent of the Common Stock may not exceed five years.