---



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|[X]  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2003OR                                
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
,ACT OF 1934

For the transition period from __________________ to __________________





|**Maryland**
(State or other jurisdiction of incorporation or organization)         | **35-2085640**
(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------------- | ---------------------------------------------------
|                                                                                   
|**110 E. Charles Street, Muncie, Indiana**
(Address of principal executive offices) | **47305-2419**
(Zip Code)                          











Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES [X]  NO [   ]

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

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

The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to
the last sale price of such stock on the Nasdaq National Market as of June 30, 2003, the last business day of the registrant's most
recently completed second fiscal quarter, was approximately $122.6 million. (The exclusion from such amount of the market value
of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

As of March 4, 2004, there were issued and outstanding 5,225,200 shares of the registrant's common stock.



PART II of Form 10-K--Portions of registrant's Annual Report to Stockholders for the fiscal year ended December 31, 2003.
PART III of Form 10-K--Portions of registrant's Proxy Statement for its 2004 Annual Meeting of Stockholders.

---

**Item 1.  Business**

**General**

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

At December 31, 2003, we had total assets of $823.8 million, deposits of $579.4 million
and stockholders' equity of $97.5 million. Our executive offices are located at 110 E. Charles
Street, Muncie, Indiana 47305-2400.

Our principal business consists of attracting retail deposits from the general public and
investing those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences, a variety of consumer loans, loans secured by
commercial and multi-family real estate and commercial business loans.

Our revenues are derived principally from interest on loans and interest on investments
and mortgage-backed securities.

We offer deposit accounts having a wide range of interest rates and terms, which
generally include passbook and statement savings accounts, money market deposit accounts,
NOW and non-interest bearing checking accounts and certificates of deposit with terms ranging
from seven days to 71 months.  We solicit deposits in our market area; we have not accepted
brokered deposits.

**Forward-Looking Statements**

This Form 10-K contains various forward-looking statements which are based on
assumptions and describe our future plans and strategies and our expectations.  These forward-looking statements are generally identified by words such as "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar words.  Our ability to predict results or the actual
effect of future plans or strategies is uncertain.  Factors which could cause actual results to differ
materially from those estimated include, but are not limited to, changes in interest rates, general
economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality
and composition of our loan and investment portfolios, demand for our loan products, deposit
flows, our operating expenses, competition, demand for financial services in our market areas
and accounting principles and guidelines.  These risks and uncertainties should be considered in
evaluating forward-looking statements and you should not rely too much on these statements.

**Market Area**

We are a community-oriented financial institution offering a variety of financial services
to meet the needs of the communities we serve.  We are headquartered in Muncie, Indiana and
we offer our financial services through 17 retail offices primarily serving Delaware, Randolph,
Kosciusko and Grant counties in Indiana.  We also originate mortgage loans in the contiguous
counties and we originate indirect consumer loans throughout Indiana.  See "Lending Activities -- Consumer and Other Lending."

**Lending Activities**

***General.***  Our mortgage loans carry either a fixed or an adjustable rate of interest.
Mortgage loans are generally long-term and amortize on a monthly basis with principal and
interest due each month.  At December 31, 2003, our net loan portfolio totaled $706.0 million,
which constituted85.7% of our total assets.

Loans up to $550,000 may be approved by individual loan officers.  Loans in excess of
$550,000, but not in excess of $1.0 million, require the signature of the recommending officer
and signatures from any two Executive Loan Committee members, unless the recommending
officer is one of the Executive Committee Loan members.  Loans in amounts greater than $1.0
million, but not to exceed $1.5 million, require the signature of the recommending officer and
any three ExecutiveLoan Committee members.  Loans not to exceed $1.5 million, to a borrower
whose aggregate debt is not greater than $3.0 million, may be approved by a majority vote of the
Loan Committee.  All loans in excess of $1.5 million and loans of any amount to a borrower
whose aggregate debt will exceed $3.0 million must be approved by the Board of Directors.

At December 31, 2003, the maximum amount which we could lend to any one borrower
and the borrower's related entities was approximately $14.1 million.  At December 31, 2003, our
largest lending relationship to a single borrower or a group of related borrowers consisted of nine
loans and one unfunded commitment to a local developer/entrepreneur and related entities
totaling $5.7 million.  Although the relationship dates back to 1980, the majority of the
outstanding debt has been originated since June 30, 1998, and consists of refinancing existing
debt and as a guarantor on related indebtedness. The loans are diverse and are secured by
apartment complexes, medical facilities and a bank branch, each with independent income
streams to support debt service requirements.  Each of the loans to this group of borrowers was
current and performing in accordance with its terms at December 31, 2003.

The following table presents information concerning the composition of our loan portfolio in dollar amounts and in percentages as of the dates
indicated.

|                              | December 31,          
|----------------------------- | ----------------------
|                              | 2003                  
|                              | Amount                
|                              | (Dollars in Thousands)
|Real Estate Loans:            |                       
|One- to four-family           | $393,450(1)           
|Multi-family                  | 5,353                 
|Commercial                    | 65,430                
|Construction and development  | 17,860                
|Total real estate loans       | 482,093               
|Other Loans:                  |                       
|Consumer Loans:               |                       
|Automobile                    | 40,497                
|Home equity                   | 25,401                
|Home improvement              | 20,924                
|Manufactured housing          | 4,108                 
|R.V.                          | 58,222                
|Boat                          | 38,096                
|Other                         | 3,443                 
|Total consumer loans          | 190,691               
|Commercial business loans     | 44,362                
|Total other loans             | 235,053               
|Total loans receivable, gross | 717,416(1)            
|                              |                       
|Less:                         |                       
|Undisbursed portion of loans  | 8,160                 
|Deferred loan fees and costs  | (3,749)               
|Allowance for losses          | 6,779                 
|Total loans receivable, net   | $705,956              

_______________

(1)  Includes loans held for sale of $2.0 million.
(2)  Includes loans held for sale of $7.9 million.



The following table shows the composition of our loan portfolio by fixed- and adjustable-rate at the dates indicated.

|                             | December 31,          
|---------------------------- | ----------------------
|                             | 2003                  
|                             | Amount                
|                             | (Dollars in Thousands)
|Fixed-Rate Loans:            |                       
|Real estate:                 |                       
|One- to four-family          | $281,497(1)           
|Multi-family                 | 3,483                 
|Commercial                   | 6,960                 
|Construction and development | 13,946                
|Total real estate loans      | 305,886               
|                             |                       
|Consumer                     | 165,182               
|Commercial business          | 12,099                
|Total fixed-rate loans       | 483,167               
|Adjustable-Rate Loans:       |                       
|Real estate:                 |                       
|One- to four-family          | 111,953               
|Multi-family                 | 1,870                 
|Commercial                   | 58,470                
|Construction and development | 3,914                 
|Total real estate loans      | 176,207               
|                             |                       
|Consumer                     | 25,509                
|Commercial business          | 32,263                
|Total adjustable-rate loans  | 233,979               
|Total loans                  | 717,416(1)            
|                             |                       
|Less:                        |                       
|Undisbursed portion of loans | 8,160                 
|Deferred loan fees and costs | (3,749)               
|Allowance for loan losses    | 6,779                 
|Total loans receivable, net  | $705,956              

________________
(1)  Includes loans held for sale of $2.0 million.
(2)  Includes loans held for sale of $7.9 million.

The following schedule illustrates the contractual maturity of our loan portfolio at December 31, 2003.  Mortgages which have adjustable or
renegotiable interest rates are shown as maturing in the period during which the contract is due.  The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.

|                                    | Real Estate            |                            |                                |                     |                    |                     |         
|----------------------------------- | ---------------------- | -------------------------- | ------------------------------ | ------------------- | ------------------ | ------------------- | --------
|                                    | One- toFour-Family(1)  | Multi-family andCommercial | Constructionand Development(2) | Consumer            | CommercialBusiness | Total              
|                                    | Amount                 | WeightedAverageRate        | Amount                         | WeightedAverageRate | Amount             | WeightedAverageRate | Amount  
|                                    | (Dollars in Thousands)
|Due DuringYears Ending
December 31,
|2004(3)                             | $    247               | 8.264%                     | $    249                       | 7.175%              | $    197           | 5.891%              | $5,062  
|2005                                | 514                    | 6.897                      | 2,294                          | 7.866               | 48                 | 7.859               | 4,278   
|2006                                | 972                    | 6.492                      | 660                            | 6.076               | 44                 | 9.703               | 9,420   
|2007 and 2008                       | 6,621                  | 6.506                      | 8,519                          | 6.472               | 217                | 6.705               | 35,822  
|2009 to 2010                        | 5,805                  | 6.266                      | 5,452                          | 6.141               | 103                | 6.910               | 18,944  
|2011 to 2025                        | 235,295                | 5.813                      | 53,609                         | 6.944               | 6,891              | 5.290               | 117,008 
|2026 and following                  | 143,996                | 6.017                      | ---                            | ---                 | 10,360             | 5.591               | 157     
|Total                               | $393,450               |                            | $70,783                        |                     | $17,860            |                     | $190,691

The total amount of loans due after December 31, 2004 which have predetermined
interest rates is $473.4 million, while the total amount of loans due after such date which have
floating or adjustable interest rates is $219.2 million.

***One- to Four-Family Residential Real Estate Lending.*****  We focus our real estate lending
efforts primarily on the origination of loans secured by first mortgages on owner-occupied, one-
to four-family residences in our market areas.  At December 31, 2003, one- to four-family
residential mortgage loans totaled $393.5 million, or 54.9% of our gross loan portfolio.

We generally underwrite our one- to four-family loans based on the applicant's
employment and credit history and the appraised value of the subject property.  Presently, we
lend up to 100% of the lesser of the appraised value or purchase price for one- to four-family
residential loans.  For loans with a loan-to-value ratio in excess of 80%, we generally require
private mortgage insurance in order to reduce our exposure to below 80%.  Properties securing
our one- to four-family loans are appraised by independent state licensed fee appraisers approved
by Mutual Federal's board of directors.  We require borrowers to obtain title insurance in the
amount of their mortgage.  Hazard insurance and flood insurance, if necessary, is required in an
amount not less than the value of the property improvements.

We originate one- to four-family mortgage loans on either a fixed- or adjustable-rate
basis, as consumer demand dictates.  Our pricing strategy for mortgage loans includes setting
interest rates that are competitive with Freddie Mac and other local financial institutions, and
consistent with our internal needs.  Adjustable-rate mortgage, or ARM, loans are offered with a
one-year, three-year, five-year or seven-year term to the initial repricing date.  After the initial
period, the interest rate for each ARM loan adjusts consistently with the initial term for the one-year and three-year terms, respectively, and annually for the five-year and seven-year terms, for
the remainder of the term of the loan.  We use the weekly average of the appropriate term
Treasury Bill Constant Maturity Index to reprice our ARM loans.  During fiscal 2003, we
originated $36.1 million of one- to four-family ARM loans and $187.9 million of one- to four-family fixed-rate mortgage loans.  By way of comparison, during fiscal 2002, we originated
$26.5 million of one- to four-family ARM loans, and $161.7 million of one- to four-family fixed-rate mortgage loans.

Fixed-rate loans secured by one- to four-family residences have contractual maturities of
up to 30 years, and are generally fully amortizing, with payments due monthly.  These loans
normally remain outstanding, however, for a substantially shorter period of time because of
refinancing and other prepayments.  A significant change in interest rates could alter considerably
the average life of a residential loan in our portfolio.  Our one- to four-family loans are generally
not assumable, do not contain prepayment penalties and do not permit negative amortization of
principal.  Most are written using underwriting guidelines which make them saleable in the
secondary market.  Our real estate loans generally contain a "due on sale" clause allowing us to
declare the unpaid principal balance due and payable upon the sale of the security property.

Our one- to four-family residential ARM loans are fully amortizing loans with contractual
maturities of up to 30 years, with payments due monthly.  Our ARM loans generally provide for
specified minimum and maximum interest rates, with a lifetime cap and floor, and a periodic
adjustment on the interest rate over the rate in effect on the date of origination.  As a
consequence of using caps, the interest rates on these loans may not be as rate sensitive as is our
cost of funds.  We offer a one-year ARM loan that is convertible into a fixed-rate loan.  When
these loans convert, they may be sold in the secondary market.

In order to remain competitive in our market areas, we sometimes originate ARM loans at
initial rates below the fully indexed rate.****ARM loans generally pose different credit risks than
fixed-rate loans, primarily because as interest rates rise, the borrower's payment rises, increasing
the potential for default. We have not experienced difficulty with the payment history for these
loans.  See "Asset Quality -- Non-performing Assets" and "-- Classified Assets."  At December
31, 2003, our one- to four-family ARM loan portfolio totaled $112.0 million, or 15.6% of our
gross loan portfolio.  At that date, the fixed-rate one- to four-family mortgage loan portfolio
totaled $281.5 million, or 39.3% of our gross loan portfolio.

***Multi-family and Commercial Real Estate Lending*****.  We offer a variety of multi-family
and commercial real estate loans for acquisition, renovation or construction.  These loans are
secured by the real estate and improvements financed.  The collateral securing these loans ranges
from industrial commercial buildings to churches, office buildings and multi-family housing
complexes.  At December 31, 2003, multi-family and commercial real estate loans totaled $70.8
million, or 9.87% of our gross loan portfolio.

Our loans secured by multi-family and commercial real estate are originated with either a
fixed or adjustable interest rate.  The interest rate on adjustable-rate loans is based on a variety of
indices, generally determined through negotiation with the borrower.  Loan-to-value ratios on our
multi-family and commercial real estate loans typically do not exceed 80% of the appraised value
of the property securing the loan.  These loans typically require monthly payments, may not be
fully amortizing and have maximum maturities of 25 years.

Loans secured by multi-family and commercial real estate are underwritten based on the
income producing potential of the property and the financial strength of the borrower.  The net
operating income, which is the income derived from the operation of the property less all
operating expenses, must be sufficient to cover the payments related to the outstanding debt.  We
generally require personal guarantees of the borrowers in addition to the security property as
collateral for such loans.  We also generally require an assignment of rents or leases in order to
be assured that the cash flow from the project will be used to repay the debt.  Appraisals on
properties securing multi-family and commercial real estate loans are performed by independent
state licensed fee appraisers approved by Mutual Federal's board of directors.  See "Loan
Originations, Purchases, Sales and Repayments."

We generally do not maintain a tax or insurance escrow account for loans secured by
multi-family and commercial real estate.  In order to monitor the adequacy of cash flows on
income-producing properties, the borrower is requested or required to provide periodic financial
information.

Loans secured by multi-family and commercial real estate are generally larger and involve
a greater degree of credit risk than one- to four-family residential mortgage loans.  Multi-family
and commercial real estate loans typically involve large balances to single borrowers or groups of
related borrowers.  Because payments on loans secured by multi-family and commercial real
estate are often dependent on the successful operation or management of the properties,
repayment of such loans may be subject to adverse conditions in the real estate market or the
economy.  If the cash flow from the project is reduced, or if leases are not obtained or renewed,
the borrower's ability to repay the loan may be impaired.  See "Asset Quality -- Non-performing
Assets."

***Construction and Development Lending*****.  We originate construction loans primarily
secured by existing residential building lots.  We make construction loans to builders and to
individuals for the construction of their residences.  Substantially all of these loans are secured by
properties located within our market area.  At December 31, 2003, we had $17.9 million in
construction and development loans outstanding, representing 2.5% of our gross loan portfolio.

Construction and development loans are obtained through continued business with
builders who have previously borrowed from us, from walk-in customers and through referrals
from realtors and architects.  The application process includes submission of complete plans,
specifications and costs of the project to be constructed.  This information and an independent
appraisal is used to determine the value of the subject property.  Loans are based on the lesser of
the current appraised value and/or the cost of construction, including the land and the building.
We generally conduct regular inspections of the construction project being financed.

Construction loans for one- to four-family homes are generally granted with a
construction period of up to nine months.  During the construction phase, the borrower generally
pays interest only on a monthly basis.  Loans to individuals for the construction of their
residences may be either short term construction financing or a construction/permanent loan
which automatically converts to a long term mortgage consistent with our one- to four-family
residential loan products.  Loan-to-value ratios on our construction and development loans
typically do not exceed 80% of the appraised value of the project on an as completed basis.
Single family construction loans with loan-to-value ratios over 80% usually require private
mortgage insurance.

Because of the uncertainties inherent in estimating construction and development costs
and the market for the project upon completion, it is difficult to evaluate accurately the total loan
funds required to complete a project, the related loan-to-value ratios and the likelihood of
ultimate success of the project.  These loans also involve many of the same risks discussed above
regarding multi-family and commercial real estate loans and tend to be more sensitive to general
economic conditions than many other types of loans.  In addition, payment of interest from loan
proceeds can make it difficult to monitor the progress of a project.

***Consumer and Other Lending***.  Consumer loans generally have shorter terms to
maturity, which reduces our exposure to changes in interest rates, and carry higher rates of
interest than one- to four-family residential mortgage loans.  In addition, management believes
that offering consumer loan products helps to expand and create stronger ties to our customer
base by increasing the number of customer relationships and providing cross-marketing
opportunities.  At December 31, 2003, our consumer loan portfolio totaled $190.7 million, or
26.6% of our gross loan portfolio.  We offer a variety of secured consumer loans, including home
equity and lines of credit, home improvement, auto, boat and recreational vehicle loans, and
loans secured by savings deposits.  We also offer a limited amount of unsecured loans.  We
originate our consumer loans both in our market area and throughout Indiana.

At December 31, 2003, our home equity loans, including lines of credit and home
improvement loans, totaled $46.3 million, or 6.5% of our gross loan portfolio.****These loans may
be originated in amounts, together with the amount of the existing first mortgage, of up to 100%
of the value of the property securing the loan.  The term to maturity on our home equity and
home improvement loans may be up to 15 years.  Home equity lines of credit have a maximum
term to maturity of 20 years and require a minimum monthly payment based on the outstanding
loan balance per month, which amount may be reborrowed at any time.  Other consumer loan
terms vary according to the type of collateral, length of contract and creditworthiness of the
borrower.

We directly and indirectly originate auto, boat and recreational vehicle loans.  We
generally buy indirect auto loans on a rate basis, paying the dealer a cash payment for loans with
an interest rate in excess of the rate we require.  This premium is amortized over the remaining
life of the loan.  Any prepayments or delinquencies are charged to future amounts owed to that
dealer, with no dealer reserve or other guarantee of payment if the dealer stops doing business
with us.

We underwrite indirect auto loans using the Fair-Isaacs credit scoring system.  We also
directly originate auto loans through bank personnel.  These loans are underwritten more
traditionally, with a review of the borrower's employment and credit history and an assessment of
the borrower's ability to repay the loan.

At December 31, 2003, auto loans totaled $40.5 million, or 5.7% of our gross loan
portfolio.  Auto loans may be written for up to six years and usually have fixed rates of interest.
Loan-to-value ratios are up to 100% of the sale price for new autos and 110% of value on used
cars, based on valuation from official used car guides.

Our boat and recreational vehicle loans are generally originated on an indirect basis.  We
utilize an independent company to market our loan products and help service and collect our boat
and RV loans, keeping down our marketing, collection and related personnel costs.  For these
services, we pay a fee based on a percentage of the loan amounts originated through this
company as well as monthly service fees.  We pay dealers a premium for each loan based on the
interest rate charged on each loan.  We amortize this premium, which is usually significantly
smaller than the premium we pay dealers for our indirect auto loans, over the estimated life of
each loan.

For a few of our largest boat and RV dealers, we also offer a program where we pay for
each loan on a rate basis, just as with our indirect auto loans.  Under this program, however, we
pay only a portion of the cash payment due, holding back a reserve in a Mutual Federal savings
account.  This dealer holdback is released to the dealer pro-rata over the life of the loan.

We underwrite indirect boat and RV loans using the Fair-Isaacs credit scoring system
and, as with our indirect auto loans, tend to accept only the more qualified buyers based on our
scoring.

Loans for boats and recreational vehicles totaled $96.3 million at December 31, 2003, or
13.4% of our gross loan portfolio. This has been the fastest growing portion of our consumer
loan portfolio over the past five years.  We will finance up to 100% of the purchase price for a
recreational vehicle and 95% for a boat.  Values are based on the applicable official used vehicle
guides.  The term to maturity for these types of loans is up to 10 years for used boats and
recreational vehicles and up to 15 years for new boats and recreational vehicles.  These loans are
generally written with fixed rates of interest.

At December 31, 2003, manufactured housing loans totaled $4.1 million, or .6% of our
gross loan portfolio.  Due to increased competition, we no longer offer manufactured housing
loans, and have allowed this portion of the loan portfolio to shrink over the past six years.

Consumer loans may entail greater risk than one- to four-family residential mortgage
loans, especially consumer loans secured by rapidly depreciable assets, such as automobiles,
boats and recreational vehicles.  In these cases, any repossessed collateral for a defaulted loan
may not provide an adequate source of repayment of the outstanding loan balance.  As a result,
consumer loan collections are dependent on the borrower's continuing financial stability and,
thus, are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

***Commercial Business Lending*****.  At December 31, 2003, commercial business loans
totaled $44.4 million, or 6.2% of our gross loan portfolio.  Most of our commercial business
loans have been extended to finance local businesses and include short-term loans to finance
machinery and equipment purchases, inventory and accounts receivable.  Commercial business
loans also involve the extension of revolving credit for a combination of equipment acquisitions
and working capital needs and agricultural purposes such as seed, farm equipment and livestock.

The terms of loans extended on the security of machinery and equipment are based on the
projected useful life of the machinery and equipment, generally not to exceed seven years.  Lines
of credit generally are available to borrowers for up to 13 months, and may be renewed by us
after an annual review of current financial information.

We issue a few financial-based standby letters of credit which are offered at competitive
rates and terms and are generally on a secured basis.  We continue to expand our volume of
commercial business loans.

Our commercial business lending policy includes credit file documentation and analysis
of the borrower's background, capacity to repay the loan, the adequacy of the borrower's capital
and collateral as well as an evaluation of other conditions affecting the borrower.  Analysis of the
borrower's past, present and future cash flows also is an important aspect of our credit analysis.
We generally obtain personal guarantees on our commercial business loans.  Nonetheless, these
loans are believed to carry higher credit risk than traditional single family loans.

Unlike residential mortgage loans, commercial business loans are typically made on the
basis of the borrower's ability to make repayment from the cash flow of the borrower's business.
As a result, the availability of funds for the repayment of commercial business loans may
substantially depend on the success of the business itself (which, in turn, often depends in part
upon general economic conditions).  Our commercial business loans are usually secured by
business assets.  However, the collateral securing the loans may depreciate over time, may be
difficult to appraise and may fluctuate in value based on the success of the business.

**Loan Originations, Purchases, Sales and Repayments**

We originate loans through referrals from real estate brokers and builders, our marketing
efforts, and our existing and walk-in customers.  We also originate many of our consumer loans
through relationships with dealerships.  While we originate both adjustable-rate and fixed-rate
loans, our ability to originate loans depends upon customer demand for loans in our market areas.
Demand is affected by local competition and the interest rate environment.  During the last
several years, due to low market rates of interest, our dollar volume of fixed-rate, one- to four-family loans has exceeded the dollar volume of the same type of adjustable-rate loans.  As part of
our interest rate risk management efforts, we have from time to time sold our fixed rate, one- to
four-family residential loans.  We have also, on a very limited basis, purchased one- to four-family residential and commercial real estate loans.  Furthermore, during the past few years, we,
like many other financial institutions, have experienced significant prepayments on loans due to
the low interest rate environment prevailing in the United States.

In periods of economic uncertainty, the ability of financial institutions, including us, to
originate or purchase large dollar volumes of loans may be substantially reduced or restricted,
with a resultant decrease in interest income.

The following table shows our loan origination, purchase, sale and repayment activities
for the years indicated.

|                                        | Year Ended December 31,
|--------------------------------------- | -----------------------
|                                        | 2003                   
|                                        | (In Thousands)         
|Originations by type:                   |                        
|Adjustable rate:                        |                        
|Real estate - one- to four-family       | $36,103                
|- multi-family                          | 89                     
|- commercial                            | 16,183                 
|- construction or development           | 7,765                  
|Non-real estate - consumer              | 4                      
|- commercial business                   | 9,646                  
|Total adjustable-rate                   | 69,790                 
|Fixed rate:                             |                        
|Real estate - one- to four-family       | 187,913                
|- multi-family                          | ---                    
|- commercial                            | 4,758                  
|- construction or development           | 20,207                 
|Non-real estate - consumer              | 67,289                 
|- commercial business                   | 5,541                  
|Total fixed-rate                        | 285,708                
|Total loans originated                  | 355,498                
|Purchases:                              |                        
|Real estate - one- to four-family       | 106                    
|- multi-family                          | ---                    
|- commercial                            | ---                    
|- construction or development           | ---                    
|Non-real estate - consumer              | ---                    
|- commercial business                   | ---                    
|Total loans purchased                   | 106                    
|Sales and Repayments:                   |                        
|Sales:                                  |                        
|Real estate - one- to four-family       | 52,038                 
|- multi-family                          | ---                    
|- commercial                            | ---                    
|- construction or development           | ---                    
|Non-real estate - consumer              | ---                    
|- commercial business                   | ---                    
|Total loans sold                        | 52,038                 
|Principal repayments                    | 244,234                
|Total reductions                        | 296,272                
|Increase (decrease) in other items, net | (1,382)                
|Net increase                            | $57,950                

When a borrower fails to make a payment on a mortgage loan on or before the default
date, a late charge notice is mailed 16 days after the due date.  When the loan is 31 days past due
(16 days for an ARM), we mail a delinquency notice to the borrower.  All delinquent accounts
are reviewed by a collector, who attempts to cure the delinquency by contacting the borrower
once the loan is 30 days past due.  If the loan becomes 60 days delinquent, the collector will
generally contact the borrower by phone or send a letter to the borrower in order to identify the
reason for the delinquency.  Once the loan becomes 90 days delinquent, the borrower is asked to
pay the delinquent amount in full, or establish an acceptable repayment plan to bring the loan
current.  Between 100 and 120 days delinquent a drive-by inspection is made to determine the
condition of the property.  If the account becomes 120 days delinquent, and an acceptable
repayment plan has not been agreed upon, a collection officer will generally refer the account to
legal counsel, with instructions to prepare a notice of intent to foreclose.  The notice of intent to
foreclose allows the borrower up to 30 days to bring the account current.  During this 30 day
period, the collector may accept a written repayment plan from the borrower which would bring
the account current within the next 90 days.  If the loan becomes 150 days delinquent and an
acceptable repayment plan has not been agreed upon, the collection officer will turn over the
account to our legal counsel with instructions to initiate foreclosure.

For consumer loans, a similar process is followed, with the initial written contact being
made once the loan is 30 days past due.

***Delinquent Loans.*****  The following table sets forth, as of December 31, 2003, our loans
delinquent 60 - 89 days by type, number, amount and percentage of type.

|                                | Loans Delinquent For: 
|------------------------------- | ----------------------
|                                | 60-89 Days            
|                                | Number                
|                                | (Dollars in Thousands)
|Real Estate:                    |                       
|One- to four-family             | 28                    
|Multi-family                    | ---                   
|Commercial                      | ---                   
|Construction and
   development | ---                   
|Consumer                        | 65                    
|Commercial business             | 3                     
|Total                           | 96                    

***Non-performing Assets.***  The table below sets forth the amounts and categories of non-performing assets in our loan portfolio at the dates indicated.  Loans are placed on non-accrual
status when the loan becomes more than 90 days delinquent.  At all dates presented, we had no
troubled debt restructurings which involve forgiving a portion of interest or principal on any
loans or making loans at a rate materially less than that of market rates.  Foreclosed assets owned
include assets acquired in settlement of loans.

|                                           | December 31,          
|------------------------------------------ | ----------------------
|                                           | 2003                  
|                                           | (Dollars in Thousands)
|Non-accruing loans:                        |                       
|One- to four-family                        | $1,316                
|Multi-family                               | ---                   
|Commercial real estate                     | 232                   
|Construction and development               | ---                   
|Consumer                                   | 653                   
|Commercial business                        | 1,039                 
|Total                                      | 3,270                 
|Accruing loans delinquent 90 days or more: |                       
|One- to four-family                        | ---                   
|Multi-family                               | ---                   
|Commercial real estate                     | ---                   
|Construction and development               | ---                   
|Consumer                                   | 10                    
|Commercial business                        | ---                   
|Total                                      | 10                    
|Total nonperfoming loans                   | 3,280                 
|Foreclosed assets:                         |                       
|One- to four-family                        | 557                   
|Multi-family                               | ---                   
|Commercial real estate                     | 40                    
|Construction and development               | ---                   
|Consumer                                   | 824                   
|Commercial business                        | ---                   
|Total                                      | 1,421                 
|Total non-performing assets                | $4,676                
|Total as a percentage of total assets      | .57%                  

For the year ended December 31, 2003, gross interest income which would have been
recorded had the non-accruing loans been current in accordance with their original terms
amounted to $263,800.  The amount included in interest income on these loans for the year ended
December 31, 2003 was $50,900.

At December 31, 2003, foreclosed commercial real estate consisted of a commercial
building in North Webster, which is currently being offered for sale.  In addition, thirteen
residential properties that were acquired in 2002 and 2003 with a book value of $557,000 remain
as foreclosed assets at December 31, 2003.  These properties are being offered for sale.  Non-accruing one- to four-family loans decreased from $2.1 million at December 31, 2002 to $1.3
million at December 31, 2003 as a result of better collection efforts.  Non-accruing commercial
real estate loans decreased from $2.2 million at December 31, 2002, to $232,000 at December
31, 2003, due primarily to a nursing home loan and an office building loan paying off.  At the
same time, non-accrual commercial business loans increased from $118,000 to $1.0 million,
which consists of six loans.  Efforts are underway to bring these six non-accrual commercial
business loans current or have them paid off.  It is management's opinion that these non-accruing
loans are sufficiently reserved and no additional allowance will be necessary.

***Other Loans of Concern.*****  In addition to the non-performing assets set forth in the table
above, as of December 31, 2003, there was an aggregate of $4.0 million in loans with respect to
which known information about the possible credit problems of the borrowers have caused
management to have doubts as to the abilities of the borrowers to comply with present loan
repayment terms and which may result in the future inclusion of such items in the non-performing asset categories.  These loans have been considered in management's determination
of the adequacy of our allowance for loan losses.

Included in the $4.0 million above are eight commercial business loans totaling $1.3
million, five commercial real estate loans totaling $314,000 and forty-six residential mortgage
loans totaling $2.4 million.  The majority of these loans were current as of December 31, 2003.

***Classified Assets.***Federal regulations provide for the classification of loans and other
assets, such as debt and equity securities considered by the Office of Thrift Supervision to be of
lesser quality, as "substandard," "doubtful" or "loss."  An asset is considered "substandard" if it is
inadequately protected by the current net worth and paying capacity of the obligor or of the
collateral pledged, if any.  "Substandard" assets include those characterized by the "distinct
possibility" that the insured institution will sustain "some loss" if the deficiencies are not
corrected.  Assets classified as "doubtful" have all of the weaknesses inherent in those classified
"substandard," with the added characteristic that the weaknesses present make "collection or
liquidation in full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable."  Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the establishment of a specific
loss reserve is not warranted.

When an insured institution classifies problem assets as either substandard or doubtful, it
may establish general allowances for loan losses in an amount deemed prudent by management
and approved by the board of directors.  General allowances represent loss allowances which
have been established to recognize the inherent risk associated with lending activities, but which,
unlike specific allowances, have not been allocated to particular problem assets.  When an
insured institution classifies problem assets as "loss," it is required either to establish a specific
allowance for losses equal to 100% of that portion of the asset so classified or to charge off such
amount.  An institution's determination as to the classification of its assets and the amount of its
valuation allowances is subject to review by the Office of Thrift Supervision and the FDIC,
which may order the establishment of additional general or specific loss allowances.

In connection with the filing of Mutual Federal's periodic reports with the Office of Thrift
Supervision and in accordance with our classification of assets policy, we regularly review the
problem assets in our portfolio to determine whether any assets require classification in
accordance with applicable regulations.  On the basis of management's review, at December 31,
2003, we had classified $6.7 million of Mutual Federal's loans as substandard, $25,000 as
doubtful and $200,000 as loss.  The total amount classified represented 7.13% of our
stockholders' equity and .84% of our assets at December 31, 2003, compared to 7.21% and .90%,
respectively, at December 31, 2002.

***Provision for Loan Losses*****.  We recorded a provision for loan losses during the year
ended December 31, 2003 of $1.5 million, compared to $1.7 million for the year ended
December 31, 2002 and $1.3 million for the year ended December 31, 2001.  The provision for
loan losses is charged to income to bring our allowance for loan losses to a level deemed
appropriate by management based on the factors discussed below under "-- Allowance for Loan
Losses."  The provision for loan losses during the year ended December 31, 2003 was based on
management's review of such factors which indicated that the allowance for loan losses was
adequate to cover losses inherent in the loan portfolio as of December 31, 2003.

***Allowance for Loan Losses*****.  We maintain an allowance for loan losses to absorb losses
inherent in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the
estimated losses inherent in the loan portfolio.  Our methodology for assessing the
appropriateness of the allowance consists of several key elements, which include the formula
allowance, specific allowances for identified problem loans and portfolio segments and the
unallocated allowance.  In addition, the allowance incorporates the results of measuring impaired
loans as provided in SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" and
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures."  These accounting standards prescribe the measurement methods, income
recognition and disclosures related to impaired loans.

The formula allowance is calculated by applying loss factors to outstanding loans based
on the internal risk evaluation of such loans or pools of loans. Changes in risk evaluations of
both performing and nonperforming loans affect the amount of the formula allowance. Loss
factors are based on our historical loss experience as well as on significant factors that, in
management's judgment, affect the collectibility of the portfolio as of the evaluation date.

The appropriateness of the allowance is reviewed by management based upon its
evaluation of then-existing economic and business conditions affecting our key lending areas and
other conditions, such as credit quality trends (including trends in nonperforming loans expected
to result from existing conditions), collateral values, loan volumes and concentrations, specific
industry conditions within portfolio segments and recent loss experience in particular segments
of the portfolio that existed as of the balance sheet date and the impact that such conditions were
believed to have had on the collectibility of the loan.  Senior management reviews these
conditions quarterly in discussions with our senior credit officers.  To the extent that any of these
conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of
the evaluation date, management's estimate of the effect of such condition may be reflected as a
specific allowance applicable to such credit or portfolio segment.  Where any of these conditions
is not evidenced by a specifically identifiable problem credit or portfolio segment as of the
evaluation date, management's evaluation of the loss related to this condition is reflected in the
unallocated allowance.  The evaluation of the inherent loss with respect to these conditions is
subject to a higher degree of uncertainty because they are not identified with specific problem
credits or portfolio segments.

The allowance for loan losses is based on estimates of losses inherent in the loan
portfolio.  Actual losses can vary significantly from the estimated amounts.  Our methodology as
described permits adjustments to any loss factor used in the computation of the formula
allowance in the event that, in management's judgment, significant factors which affect the
collectibility of the portfolio as of the evaluation date are not reflected in the loss factors.  By
assessing the estimated losses inherent in the loan portfolio on a quarterly basis, we are able to
adjust specific and inherent loss estimates based upon any more recent information that has
become available.  Due to the loss of numerous manufacturing jobs in the communities we serve
during recent years, including 2003, and the increase in higher risk loans, like consumer and
commercial loans, as a percentage of total loans, management has concluded that our allowance
for loan losses should be greater than historical loss experience would otherwise indicate.

At December 31, 2003, our allowance for loan losses was $6.8 million, or .95% of the
total loan portfolio, and approximately 208.26% of total non-performing loans.  Assessing the
adequacy of the allowance for loan losses is inherently subjective as it requires making material
estimates, including the amount and timing of future cash flows expected to be received on
impaired loans, that are susceptible to significant change.  In the opinion of management, the
allowance, when taken as a whole, is adequate to absorb reasonable estimated loan losses
inherent in our loan portfolio.

The following table sets forth an analysis of our allowance for loan losses.

|                                                                                           | Year Ended December 31,
|------------------------------------------------------------------------------------------ | -----------------------
|                                                                                           | 2003                   
|                                                                                           | (Dollars in Thousands) 
|Balance at beginning of period                                                             | $6,286                 
|Charge-offs:                                                                              
|One- to four-family                                                                        | 210                    
|Multi-family                                                                               | ---                    
|Commercial real estate                                                                     | 173                    
|Construction and development                                                               | ---                    
|Consumer                                                                                   | 948                    
|Commercial business                                                                        | 30                     
|                                                                                           | 1,361                  
|Recoveries:                                                                               
|One- to four-family                                                                        | 27                     
|Multi-family                                                                               | ---                    
|Commercial real estate                                                                     | 108                    
|Construction and development                                                               | ---                    
|Consumer                                                                                   | 159                    
|Commercial business                                                                        | 110                    
|                                                                                           | 404                    
|Net charge-offs                                                                            | 957                    
|Amount acquired with Marion purchase                                                       | ---                    
|Provisions charged to operations                                                           | 1,450                  
|Balance at end of period                                                                   | $6,779                 
|Ratio of net charge-offs during the period  to average loans outstanding during the period | 0.14%                  
|Allowance as a percentage of
 non-performing loans                                         | 208.26%                
|Allowance as a percentage of total loans
 (end of period)                                  | 0.95%                  

The distribution of our allowance for loan losses at the dates indicated is summarized as follows:

|                            | December 31,               
|--------------------------- | ---------------------------
|                            | 2003                       
|                            | Amount ofLoan LossAllowance
|                            | (Dollars in Thousands)     
|One- to four-family         | $1,149                     
|Multi-family                | 72                         
|Commercial real estate      | 990                        
|Construction or development | 89                         
|Consumer                    | 3,585                      
|Commercial business         | 894                        
|Unallocated                 | ---                        
|Total                       | $6,779                     

|                            | December 31,               
|--------------------------- | ---------------------------
|                            | 2000                       
|                            | Amount ofLoan LossAllowance
|                            | (Dollars in Thousands)     
|One- to four-family         | $1,106                     
|Multi-family                | 610                        
|Commercial real estate      | 1,550                      
|Construction or development | 68                         
|Consumer                    | 2,505                      
|Commercial business         | 455                        
|Unallocated                 | 178                        
|Total                       | $6,472                     

(1)  Includes loans held for sale of $2.0 million.
(2)  Includes loans held for sale of $7.9 million.

**Investment Activities**

Federally chartered savings institutions may invest in various types of liquid assets,
including United States Treasury obligations, securities of various federal agencies, including
callable agency securities, certain certificates of deposit of insured banks and savings institutions,
certain bankers' acceptances, repurchase agreements and federal funds.  Subject to various
restrictions, federally chartered savings institutions also may invest in investment grade
commercial paper and corporate debt securities and mutual funds the assets of which conform to
the investments that a federally chartered savings institution is otherwise authorized to make
directly.  See "How We Are Regulated - Mutual Federal" and "- Qualified Thrift Lender Test" for
a discussion of additional restrictions on our investment activities.

The Chief Financial Officer has the basic responsibility for the management of our
investment portfolio, subject to the direction and guidance of the Asset and Liability
Management Committee.  The Chief Financial Officer considers various factors when making
decisions, including the marketability, maturity and tax consequences of the proposed
investment.  The maturity structure of investments will be affected by various market conditions,
including the current and anticipated slope of the yield curve, the level of interest rates, the trend
of new deposit inflows, and the anticipated demand for funds via deposit withdrawals and loan
originations and purchases.

The general objectives of our investment portfolio are to provide liquidity when loan
demand is high, to assist in maintaining earnings when loan demand is low and to maximize
earnings while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk
and interest rate risk.  See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Asset and Liability Management and Market Risk" contained in portions of our
Annual Report to Stockholders, filed as Exhibit 13 to this Form 10-K.

Our investment securities currently consist of U.S. Agency securities, mortgage-backed
securities, collateralized mortgage obligations, marketable equity securities (which consist of
shares in mutual funds that invest in government obligations, corporate obligations, mortgage-backed securities and asset-backed securities) and corporate obligations.  See Note 3 of the Notes
to Consolidated Financial Statements contained in portions of our Annual Report to Stockholders, filed as
Exhibit 13 to this Form 10-K.  At December 31, 2003, our investment securities portfolio did not
contain any tax-exempt securities.  Our mortgage-backed securities portfolio currently consists of
securities issued under government-sponsored agency programs.

While mortgage-backed securities carry a reduced credit risk as compared to whole loans,
these securities remain subject to the risk that a fluctuating interest rate environment, along with
other factors like the geographic distribution of the underlying mortgage loans, may alter the
prepayment rate of the mortgage loans and affect both the prepayment speed and value of the
securities.

At times over the past several years, we also have maintained a trading portfolio of U.S.
Government securities.  We are permitted by the board of directors to have a portfolio of up to
$5.0 million, and to trade up to $2.0 million in these securities at any one time.  At December 31,
2003, however, we did not have a trading portfolio.  See Note 3 of the Notes to Consolidated
Financial Statements contained in portions of our Annual Report to Stockholders, filed as Exhibit 13 to this
Form 10-K.

Mutual Federal has investments in six separate Indiana limited partnerships that were
organized to construct, own and operate three multi-unit apartment complexes in the Indianapolis
area, one in Findley, Ohio, one in Goshen, Indiana, and one in Niles, Michigan (the Pedcor
Projects).  The general partner in each of these Pedcor Projects is Pedcor Investments.  We have
no financial or other relationships with Pedcor Investments.  The three Indianapolis area Pedcor
Projects and the Pedcor project located in Niles, Michigan, are operated as multi-family, low and
moderate-income housing projects, and have been performing as planned for several years.  The
Findley, Ohio Pedcor Project, which also is operated as a multi-family, low and moderate-income
housing project, was completed in 2000.  At the inception of the Findley, Ohio Pedcor Project in
February 1998, we invested $2.1 million and committed to invest an additional $1.9 million.  As
of December 31, 2003, $1.5 million of this commitment remained payable over the next six
years.  At the inception of the Niles, Michigan Project in August 1997, we committed to invest
$3.6 million over ten years.  As of December 31, 2003, $1.3 million remained payable over the
next four years.  At the inception of the Goshen, Indiana Pedcor Project, in March 2003, we
made the only required investment of $500,000.

A low and moderate-income housing project qualifies for certain federal income tax
credits if (1) it is a residential rental property, (2) the units are used on a non-transient basis, and
(3) at least 20% of the units in the project are occupied by tenants whose incomes are 50% or less
of the area median gross income, adjusted for family size, or alternatively, at least 40% of the
units in the project are occupied by tenants whose incomes are 60% or less of the area median
gross income.  Qualified low-income housing projects generally must comply with these and
other rules for 15 years, beginning with the first year the project qualified for the tax credit, or
some or all of the tax credit together with interest may be recaptured. The tax credit is subject to
the limitation as the use of general business credit, but no basis reduction is required for any
portion of the tax credit claimed.  As of December 31, 2003, at least 80% of the units in the
Pedcor Projects were occupied, and all of the tenants met the income test required for the tax
credits.

We received tax credits totalling $753,000 for the year ended December 31, 2003,
$843,000 for the year ended December 31, 2002 and $817,000 for the year ended December 31,
2001 from the Pedcor Projects. The Pedcor Projects have incurred operating losses in the early
years of their operations primarily due to accelerated depreciation of assets.  We have accounted
for our investment in four of the six Pedcor Projects on the equity method.  Accordingly, we have
recorded our share of these losses as reductions to Mutual Federal's investment in the four Pedcor
Projects.  Mutual Federal has less than a 20% ownership interest in the remaining two Pedcor
Projects, and we have recorded our investment in these projects at amortized cost.

The following summarizes Mutual Federal's equity in the Pedcor Projects' losses and tax
credits recognized in our consolidated financial statements.

|                                                     | For the Year Ended December 31,
|---------------------------------------------------- | -------------------------------
|                                                     | 2003                           
|                                                     | (In Thousands)                 
|Investments in Pedcor low
 income housing projects   | $5,088                         
|Equity in losses, net of income tax effect           | $  (318)                       
|Tax credit                                           | 753                            
|Increase in after tax income from Pedcor Investments | $    435                       

See Note 6 of the Notes to Consolidated Financial Statements contained in our Annual
Report to Stockholders filed as Exhibit 13 to this Form 10-K for additional information regarding
our limited partnership investments.

The following table sets forth the composition of our investment and mortgage-related securities portfolio and other
investments at the dates indicated.  As of December 31, 2003, our investment securities portfolio did not contain securities of any
issuer with an aggregate book value in excess of 10% of our equity capital, excluding those issued by the United States Government or
its agencies.

|                                          | December 31,   
|----------------------------------------- | ---------------
|                                          | 2003           
|                                          | AmortizedCost  
|                                          | (In Thousands) 
|Investment securities held-to-maturity    | $           ---
|Investment securities available-for-sale:
|Mutual funds                              | 7,645          
|Federal agency obligations                | 3,258          
|Mortgage-backed securities                | 3,900          
|Collateralized mortgage obligations       | 8,374          
|Corporate obligations                     | 9,756          
|Municipal obligations                     | 150            
|Total investment securities held for sale | 33,083         
|Trading account securities                | ---            
|Total investment securities               | 33,083         
|Investment in limited partnerships        | 5,088          
|Investment in insurance company           | 590            
|Federal Home Loan Bank stock              | 7,264          
|Total investments                         | $    46,025    

The following table indicates, as of December 31, 2003, the composition and maturities
of our investment securities and mortgage-backed securities portfolio, excluding Federal Home
Loan Bank stock and our trading securities.

|                            | Due in                
|--------------------------- | ----------------------
|                            | Less Than1 Year       
|                            | AmortizedCost         
|                            | (Dollars in Thousands)
|Corporate obligations       | $ 3,573               
|Federal agency obligations  | 999                   
|Municipal obligations       | 8                     
|Mutual funds                | 7,645                 
|Mortgage-backed securities: |                       
|Freddie Mac                 | 8                     
|Fannie Mae                  | ---                   
|Ginnie Mae                  | ---                   
|Other                       | ---                   
|                            | $12,233               
|Weighted average yield      | 3.70%                 

**Sources of Funds**

***General.*****  Our sources of funds are deposits, borrowings, payment of principal and
interest on loans, interest earned on or maturation of other investment securities and funds
provided from operations.

***Deposits*.**  We offer deposit accounts to consumers and businesses having a wide range of
interest rates and terms.  Our deposits consist of savings deposit accounts, NOW and demand
accounts and certificates of deposit.   We solicit deposits in our market areas and have not
accepted brokered deposits.  We primarily rely on competitive pricing policies, marketing and
customer service to attract and retain these deposits.

The flow of deposits is influenced significantly by general economic conditions, changes
in money market and prevailing interest rates, and competition.  The variety of our deposit
accounts has allowed us to be competitive in obtaining funds and to respond to changes in
consumer demand.  We have become more susceptible to short-term fluctuations in deposit
flows, as customers have become more interest rate conscious.  We try to manage the pricing of
our deposits in keeping with our asset/liability management, liquidity and profitability objectives,
subject to competitive factors.  Based on our experience, we believe that our deposits are
relatively stable sources of funds.  Our ability to attract and maintain these deposits, however,
and the rates paid on them, has been and will continue to be affected significantly by market
conditions.

The following table sets forth the dollar amount of savings deposits in the various types
of deposit programs we offered at the dates indicated.

|                                            | December 31,          
|------------------------------------------- | ----------------------
|                                            | 2003                  
|                                            | Amount                
|                                            | (Dollars in Thousands)
|Transactions and Savings Deposits:          |                       
|Noninterest bearing accounts                | $ 31,551              
|Passbook accounts                           | 57,785                
|Interest-bearing NOW and
   demand accounts | 60,396                
|Money market accounts                       | 48,750                
|Total non-certificates                      | 198,482               
|Certificates:                               |                       
|0.00 -  1.99%                               | 128,970               
|2.00 -  3.99%                               | 145,134               
|4.00 -  5.99%                               | 58,016                
|6.00 -  7.99%                               | 48,760                
|8.00 -  9.99%                               | ---                   
|10.00% and over                             | ---                   
|Total certificates                          | 380,880               
|Total deposits                              | $579,362              

The following table shows rate and maturity information for our certificates of deposit as
of December 31, 2003.

|                                                 | 1.00-1.99%             | 2.00-3.99% | 4.00-5.99% | 6.00-7.99% | Total    | Percentof Total
|------------------------------------------------ | ---------------------- | ---------- | ---------- | ---------- | -------- | ---------------
|                                                 | (Dollars in Thousands)
|Certificate accounts
maturing in quarter
ending: |                        |            |            |            |          |                
|March 31, 2004                                   | $ 60,292               | $ 27,951   | $ 4,942    | $   687    | $ 93,872 | 24.65%         
|June 30, 2004                                    | 27,112                 | 22,155     | 1,465      | 32         | 50,764   | 13.33          
|September 30, 2004                               | 23,606                 | 19,239     | 932        | 128        | 43,905   | 11.53          
|December 31, 2004                                | 13,336                 | 18,669     | 1,525      | 2,532      | 36,062   | 9.47           
|March 31, 2005                                   | 356                    | 10,128     | 4,359      | 19,513     | 34,356   | 9.02           
|June 30, 2005                                    | 902                    | 12,313     | 9,654      | 13,706     | 36,575   | 9.60           
|September 30, 2005                               | 1,947                  | 1,650      | 4,202      | 6,093      | 13,892   | 3.65           
|December 31, 2005                                | 1,048                  | 3,944      | 598        | 5,291      | 10,881   | 2.86           
|March 31, 2006                                   | ---                    | 6,568      | 1,576      | 238        | 8,382    | 2.20           
|June 30, 2006                                    | ---                    | 2,871      | 2,282      | ---        | 5,153    | 1.35           
|September 30, 2006                               | 141                    | 3,396      | 1,872      | ---        | 5,409    | 1.42           
|December 31, 2006                                | 230                    | 634        | 2,102      | 510        | 3,476    | .90            
|Thereafter                                       | ---                    | 14,616     | 22,507     | 30         | 38,153   | 10.02          
|Total                                            | $128,970               | $145,134   | $58,016    | $48,760    | $380,880 | 100.00%        
|Percent of total                                 | 33.86%                 | 38.10%     | 15.23%     | 12.84%     | 100.00%  |                

The following table indicates, as of December 31, 2003, the amount of our certificates of
deposit and other deposits by time remaining until maturity.

|                                            | Maturity        |                 
|------------------------------------------- | --------------- | ----------------
|                                            | 3 Monthsor Less | Over3 to 6Months
|                                            | (In Thousands) 
|                                           
|Certificates of deposit less than $100,000  | $51,580         | $40,492         
|Certificates of deposit of $100,000 or more | 20,116          | 9,002           
|Public funds (1)                            | 22,176          | 1,270           
|Total certificates of deposit               | $93,872         | $50,764         

_______________(1)  Deposits from governmental and other public entities.

***Borrowings*.**  Although deposits are our primary source of funds, we utilize borrowings
when they are a less costly source of funds and can be invested at a positive interest rate spread,
when we desire additional capacity to fund loan demand or when they meet our asset/liability
management goals.  Our borrowings historically have consisted of advances from the Federal
Home Loan Bank of Indianapolis and securities sold under agreement to repurchase.  See Note 8
of the Notes to Consolidated Financial Statements contained in portions of our Annual Report to
Stockholders, filed as Exhibit 13 to this Form 10-K.

We may obtain advances from the Federal Home Loan Bank of Indianapolis upon the
security of certain of our mortgage loans and mortgage-backed securities.  These advances may
be made pursuant to several different credit programs, each of which has its own interest rate,
range of maturities and call features.  At December 31, 2003, we had $134.6 million in Federal
Home Loan Bank advances outstanding.  Based on current collateral levels we could borrow an
additional $137 million from the Federal Home Loan Bank at prevailing interest rates.  We
believe that we will continue to have sufficient funds, through deposits and borrowings, to meet
our current commitments.   See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Commitments" contained in portions of our Annual Report to
Stockholders, filed as Exhibit 13 to this Form 10-K.

The following table sets forth, for the years indicated, the maximum month-end balance
and average balance of Federal Home Loan Bank advances, securities sold under agreement to
repurchase and other borrowings.

|                                               | Year Ended December 31,
|---------------------------------------------- | -----------------------
|                                               | 2003                   
|                                               | (In Thousands)         
|Maximum Balance:                               |                        
|FHLB advances                                  | $134,592               
|Securities sold under agreements to repurchase | ---                    
|Other borrowings                               | 2,884                  
|                                               |                        
|Average Balance:                               |                        
|FHLB advances                                  | $120,687               
|Securities sold under agreements to repurchase | ---                    
|Other borrowings                               | 2,728                  

The following table sets forth certain information as to our borrowings at the dates indicated.

|                                                                                  | December 31,          
|--------------------------------------------------------------------------------- | ----------------------
|                                                                                  | 2003                  
|                                                                                  | (Dollars in Thousands)
|FHLB advances                                                                     | $134,592              
|Securities sold under agreements to repurchase                                    | ---                   
|Other borrowings                                                                  | 2,511                 
|Total borrowings                                                                  | $137,103              
|Weighted average interest rate of FHLB
 advances                                  | 4.42%                 
|                                                                                  |                       
|Weighted average interest rate of securities
 sold under agreements to repurchase | ---%                  
|                                                                                  |                       
|Weighted average interest rate of other
 borrowings                               | ---%                  

**Subsidiary and Other Activities**

As a federally chartered savings bank, Mutual Federal is permitted by Office of Thrift
Supervision regulations to invest up to 2% of its assets, or $16.4 million at December 31, 2003,
in the stock of, or unsecured loans to, service corporation subsidiaries.  Mutual Federal may
invest an additional 1% of its assets in service corporations where such additional funds are used
for inner-city or community development purposes.

At December 31, 2003, Mutual Federal had two active subsidiaries, First M.F.S.B.
Corporation and Third M.F.S.B. Corporation.  First M.F.S.B. owns stock in Family Financial
Life Insurance Company, a life and accident and health insurance company chartered in Indiana.
Family Financial Life primarily sells mortgage and credit life insurance, as well as accident and
disability insurance.  It also issues and services annuity contracts.  As of December 31, 2003,
Mutual Federal's total investment in this subsidiary was $637,100.  For the year ended December
31, 2003, First M.F.S.B. reported net income of $47,600, which consisted of dividends from
Family Financial Life.

Third M.F.S.B., which does business as Mutual Financial Services, offers tax-deferred
annuities, long-term health and life insurance products.****All securities related products and
services made available through Mutual Financial Services are offered by a third party
independent broker-dealer.  As of December 31, 2003, Mutual Federal's total investment in this
subsidiary was $459,600.  For the year ended December 31, 2003, Third M.F.S.B. reported net
income of $176,000, which consisted of commissions less expenses.  As of January 1, 2004,
Third M.F.S.B. was liquidated, and its activities are engaged in directly by Mutual Federal.  This
change was required by a change in the policy of the OTS governing third-party brokerage
arrangements.

On January 25, 2002, *MutualFirst* purchased 26.9% of Indiana Title Insurance Co., LLC
("ITIC"), a full service title insurance company.  As of December 31, 2003, *MutualFirst*'s
investment in ITIC was $957,000.  For the year ended December 31, 2003, *MutualFirst* recorded
net income of $130,000 from ITIC, which consisted of title insurance commissions and other
fees less expenses.  The investment in ITIC is being accounted for on the equity method.

**Competition**

We face strong competition in originating real estate and other loans and in attracting
deposits.  Competition in originating real estate loans comes primarily from other savings
institutions, commercial banks, credit unions and mortgage bankers.  Other savings institutions,
commercial banks, credit unions and finance companies provide vigorous competition in
consumer lending.

We attract our deposits through our branch office system.  Competition for deposits
comes principally from other savings institutions, commercial banks and credit unions located in
the same community, as well as mutual funds and other alternative investments.  We compete for
deposits by offering superior service and a variety of account types at competitive rates.

**Employees**

At December 31, 2003, we had a total of 220 full-time and 45 part-time employees.  Our
employees are not represented by any collective bargaining group.  Management considers its
employee relations to be good.

**HOW WE ARE REGULATED**

Set forth below is a brief description of certain laws and regulations which apply to us.
This description, as well as other descriptions of laws and regulations contained in this Form 10-K, is not complete and is qualified in its entirety by reference to the applicable laws and
regulations.

Legislation is introduced from time to time in the United States Congress that may affect
our operations.  In addition, the regulations by which we are governed may be amended from
time to time.  Any such legislation or regulatory changes could adversely affect us.  We cannot
assure you as to whether or in what form any such changes will occur.

**General**

Mutual Federal, as a federally chartered savings institution, is subject to federal regulation
and oversight by the Office of Thrift Supervision extending to all aspects of Mutual Federal's
operations. Mutual Federal also is subject to regulation and examination by the FDIC, which
insures the deposits of Mutual Federal to the maximum extent permitted by law, and to
requirements of the Federal Reserve Board.  Federally chartered savings institutions are required
to file periodic reports with the Office of Thrift Supervision and are subject to periodic
examinations by the Office of Thrift Supervision and the FDIC. The investment and lending
authority of savings institutions are prescribed by federal laws and regulations, and savings
institutions are prohibited from engaging in any activities not permitted by such laws and
regulations. This regulation and supervision primarily is intended for the protection of depositors
and not for the purpose of protecting stockholders.

The Office of Thrift Supervision regularly examines Mutual Federal and prepares reports
for the consideration of Mutual Federal's board of directors on any deficiencies that it may find in
Mutual Federal's operations. The FDIC also has the authority to examine Mutual Federal in its
role as the administrator of the Savings Association Insurance Fund. Mutual Federal's
relationship with its depositors and borrowers also is regulated to a great extent by both Federal
and state laws, especially in such matters as the ownership of savings accounts and the form and
content of Mutual Federal's mortgage requirements.  Any change in these laws and regulations,
whether by the FDIC, the Office of Thrift Supervision or Congress, could have a material adverse
impact on our operations.

***MutualFirst* Financial, Inc.**

Pursuant to regulations of the Office of Thrift Supervision and the terms of *MutualFirst*'s
Maryland articles of incorporation, the purpose and powers of *MutualFirst* are to pursue any or
all of the lawful objectives of a thrift holding company and to exercise any of the powers
accorded to a thrift holding company.

If Mutual Federal fails the qualified thrift lender test, *MutualFirst* must obtain the
approval of the Office of Thrift Supervision prior to continuing, directly or through other
subsidiaries, any business activity other than those approved for multiple thrift holding
companies or their subsidiaries.  In addition, within one year of such failure *MutualFirst* must
register as, and will become subject to, the restrictions applicable to bank holding companies.
The activities authorized for a bank holding company are more limited than the activities
authorized for a unitary or multiple thrift holding company.  See "- Qualified Thrift Lender Test."

**Mutual Federal**

The Office of Thrift Supervision has extensive authority over the operations of savings
institutions.  Mutual Federal is required to file periodic reports with the Office of Thrift
Supervision and is subject to periodic examinations by the Office of Thrift Supervision and the
FDIC.  When these examinations are conducted by the Office of Thrift Supervision and the
FDIC, the examiners may require Mutual Federal to provide for higher general or specific loan
loss reserves.

The Office of Thrift Supervision also has extensive enforcement authority over all
savings institutions and their holding companies, including Mutual Federal and *MutualFirst*.
This enforcement authority includes, among other things, the ability to assess civil money
penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions.  In
general, these enforcement actions may be initiated for violations of laws and regulations and
unsafe or unsound practices.  Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the Office of Thrift Supervision.
Except under certain circumstances, final enforcement actions by the Office of Thrift Supervision
must be publicly disclosed.

In addition, the investment, lending and branching authority of Mutual Federal is
prescribed by federal laws and it is prohibited from engaging in any activities not permitted by
such laws.  For instance, no savings institution may invest in non-investment grade corporate
debt securities.  In addition, the permissible level of investment by federal institutions in loans
secured by non-residential real property may not exceed 400% of total capital, except with
approval of the Office of Thrift Supervision.  Federal savings institutions are also generally
authorized to branch nationwide.  Mutual Federal is in compliance with the noted restrictions.

Mutual Federal's general permissible lending limit for loans-to-one-borrower is equal to
the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured
by certain readily marketable collateral, in which case this limit is increased to 25% of
unimpaired capital and surplus).  At December 31, 2003, Mutual Federal's lending limit under
this restriction was $14.1 million.  Mutual Federal is in compliance with the loans-to-one-borrower limitation.

The Office of Thrift Supervision, as well as the other federal banking agencies, has
adopted guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, asset quality, earnings standards, internal controls and audit
systems, interest rate risk exposure and compensation and other employee benefits.  Any
institution which fails to comply with these standards must submit a compliance plan.

**Regulatory Capital Requirements**

Federally insured savings institutions, such as Mutual Federal, are required to maintain a
minimum level of regulatory capital.  The Office of Thrift Supervision has established capital
standards, including a tangible capital requirement, a leverage ratio or core capital requirement
and a risk-based capital requirement applicable to such savings institutions.  These capital
requirements must be generally as stringent as the comparable capital requirements for national
banks.  The Office of Thrift Supervision also may impose capital requirements in excess of these
standards on individual institutions on a case-by-case basis.

The capital regulations require tangible capital of at least 1.5% of adjusted total assets, as
defined by regulation.  Tangible capital generally includes common stockholders' equity and
retained income, and certain noncumulative perpetual preferred stock and related income.  In
addition, all intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital for calculating compliance with the requirement.
At December 31, 2003, Mutual Federal had $908,000 of intangible assets.

At December 31, 2003, Mutual Federal had tangible capital of $93.0 million, or 11.32%
of adjusted total assets, which is approximately $80.0 million above the minimum requirement of
1.5% of adjusted total assets in effect on that date.

The capital standards also require core capital equal to at least 3.0% of adjusted total
assets.  Core capital generally consists of tangible capital plus certain intangible assets, including
a limited amount of purchased credit card relationships.  As a result of the prompt corrective
action provisions discussed below, however, a savings institution must maintain a core capital
ratio of at least 4.0% to be considered adequately capitalized unless its supervisory condition is
such to allow it to maintain a 3.0% ratio.  At December 31, 2003, Mutual Federal had $908,000
of intangible assets, none of which qualified for inclusion in core capital.

At December 31, 2003, Mutual Federal had core capital equal to $93.0 million, or
11.32% of adjusted total assets, which is $68.3 million above the minimum requirement of 3.0%
in effect on that date.

The Office of Thrift Supervision also requires savings institutions to have total capital of
at least 8.0% of risk-weighted assets.  Total capital consists of core capital, as defined above, and
supplementary capital.  Supplementary capital consists of certain permanent and maturing capital
instruments that do not qualify as core capital and general valuation loan and lease loss
allowances up to a maximum of 1.25% of risk-weighted assets.  Supplementary capital may be
used to satisfy the risk-based requirement only to the extent of core capital.  The Office of Thrift
Supervision is also authorized to require a savings institution to maintain an additional amount of
total capital to account for concentration of credit risk and the risk of non-traditional activities.
At December 31, 2003, Mutual Federal had $6.6 million of general loan loss reserves, which was
less than 1.25% of risk-weighted assets.

In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet items, will be multiplied by a risk weight, ranging from 0% to 100%, based on the
risk inherent in the type of asset.  For example, the Office of Thrift Supervision has assigned a
risk weight of 50% for prudently underwritten permanent one- to four-family first lien mortgage
loans not more than 90 days delinquent and having a loan-to-value ratio of not more than 80% at
origination unless insured to such ratio by an insurer approved by Fannie Mae or Freddie Mac.

As of December 31, 2003, Mutual Federal had total risk-based capital of $99.6 million
and risk-weighted assets of $587.2 million; or total capital of 16.97% of risk-weighted assets.
This amount was $52.7 million above the 8.0% requirement in effect on that date.

The Office of Thrift Supervision and the FDIC are authorized and, under certain
circumstances, required to take actions against savings institutions that fail to meet their capital
requirements.  The Office of Thrift Supervision is generally required to restrict the activities of
an "undercapitalized institution," which is an institution with less than either a 4% core capital
ratio, a 4% Tier 1 risked-based capital ratio or an 8.0% risk-based capital ratio.  Any such
institution must submit a capital restoration plan and, until such plan is approved by the Office of
Thrift Supervision, may not increase its assets, acquire another institution, establish a branch or
engage in any new activities, and generally may not make capital distributions.  The Office of
Thrift Supervision is authorized to impose the additional restrictions that are applicable to
significantly undercapitalized institutions.

As a condition to the approval of the capital restoration plan, any company controlling an
undercapitalized institution must agree that it will enter into a limited capital maintenance
guarantee with respect to the institution's achievement of its capital requirements.

Any savings institution that fails to comply with its capital plan or has Tier 1 risk-based
or core capital ratio of less than 3.0% or a risk-based capital ratio of less than 6.0% and is
considered "significantly undercapitalized" must be made subject to one or more additional
specified actions and operating restrictions which may cover all aspects of its operations and may
include a forced merger or acquisition of the institution.  An institution that becomes "critically
undercapitalized" because it has a tangible capital ratio of 2.0% or less is subject to further
restrictions on its activities in addition to those applicable to significantly undercapitalized
institutions.  In addition, the Office of Thrift Supervision must appoint a receiver, or conservator
with the concurrence of the FDIC, for a savings institution, with certain limited exceptions,
within 90 days after it becomes critically undercapitalized.  Any undercapitalized institution is
also subject to the general enforcement authority of the Office of Thrift Supervision and the
FDIC, including the appointment of a conservator or a receiver.

The Office of Thrift Supervision is also generally authorized to reclassify an institution
into a lower capital category and impose the restrictions applicable to such category if the
institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

The imposition by the Office of Thrift Supervision or the FDIC of any of these measures
on Mutual Federal may have a substantial adverse effect on our operations and profitability.

**Limitations on Dividends and Other Capital Distributions**

Office of Thrift Supervision regulations impose various restrictions on distributions of
capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other
transactions charged to the capital account.

Generally, savings institutions, such as Mutual Federal, that before and after the proposed
distribution remain well-capitalized, may make capital distributions during any calendar year
equal to the greater of 100% of net income for the year-to-date plus retained net income for the
two preceding years.  However, an institution deemed to be in need of more than normal
supervision by the Office of Thrift Supervision may have its dividend authority restricted by the
Office of Thrift Supervision.  Mutual Federal may pay dividends in accordance with this general
authority.

Savings institutions proposing to make any capital distribution need not submit written
notice to the Office of Thrift Supervision prior to such distribution unless they are a subsidiary of
a holding company or would not remain well-capitalized following the distribution.  Savings
institutions that do not, or would not meet their current minimum capital requirements following
a proposed capital distribution or propose to exceed these net income limitations must obtain
Office of Thrift Supervision approval prior to making such distribution.  The Office of Thrift
Supervision may object to the distribution during that 30-day period based on safety and
soundness concerns.  See "- Regulatory Capital Requirements."

**Qualified Thrift Lender Test**

All savings institutions, including Mutual Federal, are required to meet a qualified thrift
lender test to avoid certain restrictions on their operations.  This test requires a savings institution
to have at least 65% of its portfolio assets, as defined by regulation, in qualified thrift
investments on a monthly average for nine out of every 12 months on a rolling basis.  As an
alternative, the savings institution may maintain 60% of its assets in the assets specified in
Section 7701(a)(19) of the Internal Revenue Code.  Under either test, such assets primarily
consist of residential housing related loans and investments.  At December 31, 2003, Mutual
Federal met the test and has always met the test since its effectiveness.

Any savings institution that fails to meet the qualified thrift lender test must convert to a
national bank charter, unless it requalifies as a qualified thrift lender and thereafter remains a
qualified thrift lender.  If an institution does not requalify and converts to a national bank charter,
it must remain Savings Association Insurance Fund-insured until the FDIC permits it to transfer
to the Bank Insurance Fund.  If such an institution has not yet requalified or converted to a
national bank, its new investments and activities are limited to those permissible for both a
savings institution and a national bank, and it is limited to national bank branching rights in its
home state.  In addition, the institution is immediately ineligible to receive any new Federal
Home Loan Bank borrowings and is subject to national bank limits for payment of dividends.  If
such an institution has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not permissible for a national
bank.  In addition, it must repay promptly any outstanding Federal Home Loan Bank borrowings,
which may result in prepayment penalties.  If any institution that fails the qualified thrift lender
test is controlled by a holding company, then within one year after the failure, the holding
company must register as a bank holding company and become subject to all restrictions on bank
holding companies.

**Transactions with Affiliates**

Generally, transactions between a savings institution or its subsidiaries and its affiliates
are required to be on terms as favorable to the institution as transactions with non-affiliates.  In
addition, certain of these transactions, such as loans to an affiliate, are restricted to a percentage
of the institution's capital.  Affiliates of Mutual Federal include *MutualFirst* and any company
which is under common control with Mutual Federal.  In addition, a savings institution may not
lend to any affiliate engaged in activities not permissible for a bank holding company or acquire
the securities of most affiliates.  The Office of Thrift Supervision has the discretion to treat
subsidiaries of savings institutions as affiliates on a case by case basis.

Certain transactions with directors, officers or controlling persons are also subject to
conflict of interest regulations enforced by the Office of Thrift Supervision.  These conflict of
interest regulations and other statutes also impose restrictions on loans to such persons and their
related interests.  Among other things, such loans must generally be made on terms substantially
the same as loans to unaffiliated individuals.

**Federal Reserve System**

The Federal Reserve Board requires all depository institutions to maintain non-interest
bearing reserves at specified levels against their transaction accounts, primarily checking, NOW
and Super NOW checking accounts.  At December 31, 2003, Mutual Federal was in compliance
with these reserve requirements.  The balances maintained to meet the reserve requirements
imposed by the Federal Reserve Board may be used to satisfy liquidity requirements that may be
imposed by the Office of Thrift Supervision.

Savings institutions are authorized to borrow from the Federal Reserve Bank "discount
window," but Federal Reserve Board regulations require institutions to exhaust other reasonable
alternative sources of funds, including Federal Home Loan Bank borrowings, before borrowing
from the Federal Reserve Bank.

**Federal Taxation**

***General.***** We are subject to federal income taxation in the same general manner as other
corporations, with some exceptions discussed below.  The following discussion of federal
taxation is intended only to summarize certain pertinent federal income tax matters and is not a
comprehensive description of the tax rules applicable to us. Mutual Federal's federal income tax
returns have been closed without audit by the IRS through its year ended December 31, 1999.
*MutualFirst* and Mutual Federal will file a consolidated federal income tax return for fiscal year
2003.

***Bad Debt Reserves****.*Prior to the Small Business Job Protection Act, Mutual Federal was
permitted to establish a reserve for bad debts under the percentage of taxable income method and
to make annual additions to the reserve utilizing that method.  These additions could, within
specified formula limits, be deducted in arriving at taxable income. As a result of the Small
Business Job Protection Act, savings associations of Mutual Federal's size must now use the
direct charge off method in computing bad debt deductions.  In addition, federal legislation
requires Mutual Federal to recapture, over a six year period, the excess of tax bad debt reserves at
December 31, 1997 over those established as of the base year reserve balance as of December 31,
1987.  As of December 31, 2003 the amount of Mutual Federal's reserves subject to recapture
were approximately $90,000.

***Taxable Distributions and Recapture.***** Prior to the Small Business Job Protection Act,
bad debt reserves created prior to the year ended December 31, 1997 were subject to recapture
into taxable income if Mutual Federal failed to meet certain thrift asset and definitional tests.
Recent federal legislation eliminated these thrift related recapture rules.  However, under current
law, pre-1988 reserves remain subject to recapture should Mutual Federal make certain
non-dividend distributions or cease to maintain a thrift/bank charter.

***Minimum Tax.***** The Internal Revenue Code imposes an alternative minimum tax at a rate
of 20% on a base of regular taxable income plus certain tax preferences, called alternative
minimum taxable income.  The alternative minimum tax is payable to the extent such alternative
minimum taxable income is in excess of an exemption amount. Net operating losses can offset
no more than 90% of alternative minimum taxable income. Certain payments of alternative
minimum tax may be used as credits against regular tax liabilities in future years.  Mutual
Federal is subject to the alternative minimum tax, and has $173,000 available as credits for
carryover.

***Corporate Dividends-Received Deduction.*****  *MutualFirst* may eliminate from its income
dividends received from Mutual Federal as a wholly owned subsidiary of *MutualFirst*if it elects
to file a consolidated return with Mutual Federal.  The corporate dividends-received deduction is
100% or 80%, in the case of dividends received from corporations with which a corporate
recipient does not file a consolidated tax return, depending on the level of stock ownership of the
payor of the dividend.  Corporations which own less than 20% of the stock of a corporation
distributing a dividend may deduct 70% of dividends received or accrued on their behalf.

**State Taxation**

Mutual Federal is subject to Indiana's financial institutions tax, which is imposed at a flat
rate of 8.5% on "adjusted gross income" apportioned to Indiana.  "Adjusted gross income," for
purposes of the financial institutions tax, begins with taxable income as defined by Section 63 of
the Internal Revenue Code and incorporates federal tax law to the extent that it affects the
computation of taxable income.  Federal taxable income is then adjusted by several Indiana
modifications.

Other applicable state taxes include generally applicable sales and use taxes plus real and
personal property taxes.

**Internet Website**

We maintain a website with the address of www.mfsbank.com.  The information
contained on our website is not included as a part of, or incorporated by reference into, this
Annual Report on Form 10-K.  This Annual Report on Form 10-K and our other reports, proxy
statements and other information, including earnings press releases, filed with the SEC are
available on that website through a link to the SEC's website at "Inside MFSB - *MutualFirst*
Financial Inc. - SEC Filings."  For more information regarding access to these filings on our
website, please contact our Corporate Secretary, *MutualFirst* Financial, Inc., 110 E. Charles
Street, Muncie, Indiana, 47305; telephone number (765) 747-2800.

**Executive Officers Who Are Not Directors**

The business experience for at least the past five years for each of our executive officers
who do not serve as directors is set forth below.

***Steven R. Campbell***.  Age 60 years.  Mr. Campbell is Senior Vice President of Mutual
Federal's Retail Banking Division, a position he has held since 1991. He has been employed by
Mutual Federal since 1984.

***Timothy J. McArdle***.  Age 53 years.  Mr. McArdle, a certified public accountant, has
served as Senior Vice President of Mutual Federal since 1995, and Treasurer of Mutual Federal
since 1986.  He also serves as Senior Vice President, Treasurer and Controller of *MutualFirst*
Financial.  He has been employed by Mutual Federal since 1981.

***Stephen C. Selby***.  Age 58 years.  Since 1995, Mr. Selby has served as Senior Vice
President of the Operations Division at Mutual Federal.  Prior to 1995, he served as Vice
President of the Operations Division for nine years.  Mr. Selby has served in various other
capacities at Mutual Federal since 1964.

***Clifford E. Keys***.  Age 75 years.  Mr. Keys is Vice President of the Administration
Division since joining Mutual Federal in January 2003.  Prior to 2003 he was Vice-Chairman and
President of Sherry Laboratories Inc.

**Item 2. Description of Property**

At December 31, 2003, we had 17 full service offices.  We own the office building in
which our home office and executive offices are located.  At December 31, 2003, we owned all
but two of our other branch offices.  The net book value of our investment in premises,
equipment and leaseholds, excluding computer equipment, was approximately $9.1 million at
December 31, 2003.

We anticipate opening another branch office in May 2004.  Otherwise, we believe that
our current facilities are adequate to meet our present and immediately foreseeable needs.

We utilize a third party service provider to maintain our database of depositor and
borrower customer information.  At December 31, 2003, the net book value of the data
processing and computer equipment utilized by us was $1.0 million.

**Item 3. Legal Proceedings**

From time to time we are involved as plaintiff or defendant in various legal actions
arising in the normal course of business.  We do not anticipate incurring any material liability as
a result of such litigation.

**Item 4.  Submission of Matters to a Vote of Security Holders**

No matter was submitted to a vote of security holders, through the solicitation of proxies
or otherwise, during the quarter ended December 31, 2003.

**PART II**

**Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters**

The information under the caption "Shareholder Information" in the Company's Annual
Report to Stockholders for the year ended December 31, 2003, portions of which are included as
Exhibit 13 to this Form 10-K, is incorporated herein by reference.

**Item 6.  Selected Financial Data**

The information under the heading "Selected Financial and Other Data" in the Company's
Annual Report to Stockholders for the year ended December 31, 2003, portions of which are
included as Exhibit 13 to this Form 10-K, is incorporated herein by reference.

**Item 7.  Management's Discussion and Analysis of Financial Condition and Results of
Operation**

The information under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report to Stockholders for the
year ended December 31, 2003, portions of which are included as Exhibit 13 to this Form 10-K,
is incorporated herein by reference.

**Item 7A.  Quantitative and Qualitative Disclosures About Market Risk**

The information under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Asset and Liability Management and Market Risk" in the
Company's Annual Report to Stockholders for the year ended December 31, 2003, portions of
which are included as Exhibit 13 to this Form 10-K, is incorporated herein by reference.

**Item 8.  Financial Statements and Supplementary Data**

The consolidated financial statements and notes thereto and supplementary data (selected
quarterly financial information) contained in the Company's Annual Report to Stockholders for
the year ended December 31, 2003, portions of which are included as Exhibit 13 to this Form 10-K, are incorporated herein by reference.

**Item 9.  Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure**

No disclosure under this item is required.

**Item 9A.  Controls and Procedures**

An evaluation of our disclosure controls and procedures (as defined in Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the "Exchange Act")) was carried out under the
supervision and with the participation of the our Chief Executive Officer, Principal Financial
Officer and several other members of our senior management within the 90-day period preceding
the filing date of this annual report.  Our Chief Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures as currently in effect are effective in
ensuring that the information required to be disclosed by us in the reports we file or submit under
the Exchange Act is (i) accumulated and communicated to our management (including our Chief
Executive Officer and Principal Financial Officer) in a timely manner, and (ii) recorded,
processed, summarized and reported within the time periods specified in the SEC's rules and
forms.

There have been no changes in our internal controls over financial reporting (as defined in
Rule 13a-15(f) under the Act) that occurred during the year ended December 31, 2003, that has
materially affected, or is reasonably likely to materially affect, our internal controls over financial
reporting.

We intend to continually review and evaluate the design and effectiveness of our
disclosure controls and procedures and to improve our controls and procedures over time and to
correct any deficiencies that we may discover in the future.  The goal is to ensure that senior
management has timely access to all material financial and non-financial information concerning
the Company's business.  While we believe the present design of our disclosure controls and
procedures is effective to achieve our goal, future events affecting our business may cause us to
modify our disclosure controls and procedures.



**Item 10.	Directors and Executive Officers of the Registrant**

**Directors**

Information concerning the Company's directors is incorporated herein by reference from
the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in
April 2004, except for information contained under the headings "Compensation Committee
Report on Executive Compensation", "Shareholder Return Performance Presentation" and
"Report of the Audit Committee", a copy of which will be filed not later than 120 days after the
close of the fiscal year.

**Executive Officers**

Information concerning the executive officers of the Company who are not directors is
incorporated herein by reference from Part I of this Form 10-K under the caption "Executive
Officers of the Registrant Who Are Not Directors."

**Section 16(a) Beneficial Ownership Reporting Compliance**

Section 16(a) of the Exchange Act requires the Company's directors and executive
officers, and persons who own more than 10% of a registered class of the Company's equity
securities, to file with the SEC reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company.  Officers, directors and greater than
10% stockholders are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.

To the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were required during
the fiscal year ended December 31, 2003, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with.

**Code of Ethics**

In March 2004, the Company adopted a written Code of Ethics based upon the standards
set forth under Item 406 of Regulation S-K of the Securities Exchange Act.  The Code of Ethics
applies to all of the Company's directors, officers and employees.  A copy of the Company's
Code of Ethics is being filed with the SEC as Exhibit 14 to this Annual Report on Form 10-K.

**Item 11.  Executive Compensation**

Information concerning executive compensation is incorporated herein by reference from
the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in
April 2004, except for information contained under the headings "Compensation Committee
Report on Executive Compensation", "Shareholder Return Performance Presentation" and
"Report of the Audit Committee", a copy of which will be filed not later than 120 days after the
close of the fiscal year.

**Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters**

Information concerning security ownership of certain beneficial owners and management
is incorporated herein by reference from the Company's definitive proxy statement for its Annual
Meeting of Stockholders to be held in April 2004, except for information contained under the
headings "Compensation Committee Report on Executive Compensation", "Shareholder Return
Performance Presentation" and "Report of the Audit Committee", a copy of which will be filed
not later than 120 days after the close of the fiscal year.

*Equity Compensation Plan Information.*  The following table summarizes our equity
compensation plans as of December 31, 2003.

|Plan Category                                                    | Number of securities tobe issued upon exercise
of outstanding optionswarrants and rights | Weighted-averageexercise price ofoutstanding optionswarrants and rights | Number of Securitiesremaining available  forfuture issuance under
equity compensation plans
|---------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------------------------------------------------------------------
|Equity compensation plans
   approved by security
   holders     | 528,389                                                                                  | $16.03                                                                  | 11,761(1)                                                                                  
|Equity compensation plans
   not approved by security
   holders | ---                                                                                      | ---                                                                     | ---                                                                                        

___________
(1)  	Includes 11,761 shares available for future grants under *MutualFirst* Financial, Inc's stock option plan.

**Item 13.	Certain Relationships and Related Transactions**

Information concerning certain relationships and related transactions is incorporated
herein by reference from the Company's definitive proxy statement for its Annual Meeting of
Stockholders to be held in April 2004, except for information contained under the headings
"Compensation Committee Report on Executive Compensation", "Shareholder Return
Performance Presentation" and "Report of the Audit Committee", a copy of which will be filed
not later than 120 days after the close of the fiscal year.

**Item 14.	Principal Accountant Fees and Services**

Information concerning principal accountant fees and services are incorporated herein by
reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held
in April, 2004 (excluding the information contained under the heading of "Report of the
Audit/Compliance Committee") a copy of which will be filed no later than 120 days after
December 31, 2003.

**PART IV**

**Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K**

**(a)(1) Financial Statements**

The following are contained in the portions of the Company's Annual Report to
Stockholders filed as Exhibit 13 to this Form 10-K and are incorporated by reference into Item 8
of this Form 10-K:

|Annual Report Section                                                                                   
|--------------------------------------------------------------------------------------------------------
|Independent Accountant's Report                                                                         
|Consolidated Balance Sheets at December 31, 2003 and 2002                                               
|Consolidated Statements of Income for the Years Ended December 31, 2003, 2002 and 2001                  
|Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2003,
    2002 and 2001
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and2001               
|Notes to Consolidated Financial Statements                                                              

**(a)(2) Financial Statement Schedules**:

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

**(a)(3) Exhibits**:

|**Regulation
S-KExhibitNumber** | **Document**                                                                                                                                                                                                                                                         | **Reference toPrior Filing orExhibit Number
Attached Hereto**
|------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------
|                                |                                                                                                                                                                                                                                                                      |                                                              
|2                               | Plan of acquisition, reorganization, arrangement, liquidation or succession                                                                                                                                                                                          | None                                                         
|3(i)                            | Articles of Incorporation                                                                                                                                                                                                                                            | *                                                            
|3(ii)                           | Amended Bylaws                                                                                                                                                                                                                                                       | ++                                                           
|4                               | Instruments defining the rights of security holders, including indentures:                                                                                                                                                                                           |                                                              
|                                | Form of *MutualFirst* Financial, Inc. Common Stock Certificate                                                                                                                                                                                                       | *                                                            
|9                               | Voting Trust Agreement                                                                                                                                                                                                                                               | None                                                         
|10                              | Material contracts:                                                                                                                                                                                                                                                 
|                                | Employment Agreement with David W. Heeter                                                                                                                                                                                                                            | 10.1                                                         
|                                | Employment Agreement with Patrick C. Botts                                                                                                                                                                                                                           | 10.2                                                         
|                                | Employment Agreement with Timothy J. McArdle                                                                                                                                                                                                                         | **                                                           
|                                | Employment Agreement with Steven L. Banks                                                                                                                                                                                                                            | ++                                                           
|                                | Form of Supplemental Retirement Plan Income Agreements for R. Donn Roberts  Steven Campbell, Patrick C. Botts, David W. Heeter, Timothy J. McArdle and Stephen C.    Selby                                                                                           | **                                                           
|                                | Form of Director Shareholder Benefit Program, as amended, for Steven L. Banks
  Form of Executive Shareholder Benefit Program Agreement, as amended, for Steven L. Banks
  Form of Director Shareholder Benefit Program Agreement, as amended, for Jerry D. McVicker | ++
++
++                                                     
|                                | Form of Agreements for Executive Deferred Compensation Plan for R. Donn Roberts,
    Patrick C. Botts, Steven Campbell, David W. Heeter, Timothy J. McArdle and Stephen C. Selby                                                                                     | **                                                           
|                                | Registrant's 2000 Stock Option and Incentive Plan                                                                                                                                                                                                                    | ***                                                          
|                                | Registrant's 2000 Recognition and Retention Plan                                                                                                                                                                                                                     | ***                                                          
|11                              | Statement re computation of per share earnings                                                                                                                                                                                                                       | None                                                         
|12                              | Statements re computation of ratios                                                                                                                                                                                                                                  | None                                                         
|13                              | Annual Report to Security Holders                                                                                                                                                                                                                                    | 13                                                           
|14                              | Code of Ethics                                                                                                                                                                                                                                                       | 14                                                           
|16                              | Letter re change in certifying accountant                                                                                                                                                                                                                            | None                                                         
|18                              | Letter re change in accounting principles                                                                                                                                                                                                                            | None                                                         
|21                              | Subsidiaries of the registrant                                                                                                                                                                                                                                       | 21                                                           
|22                              | Published report regarding matters submitted to vote of security holders                                                                                                                                                                                             | None                                                         
|23                              | Consents of Experts and Counsel                                                                                                                                                                                                                                      | 23                                                           
|24                              | Power of Attorney                                                                                                                                                                                                                                                    | None                                                         
|31.1                            | Rule 13(a)-14(a) Certification (Chief Executive Officer)                                                                                                                                                                                                             | 31.1                                                         
|31.2                            | Rule 13(a)-14(a) Certification (Chief Financial Officer)                                                                                                                                                                                                             | 31.2                                                         
|32                              | Section 1350 Certification                                                                                                                                                                                                                                           | 32                                                           

______________*Filed as an exhibit to the Company's Form S-1 registration statement filed on September 16, 1999 (File No. 333-87239) pursuant to Section 5 of the
Securities Act of 1933.  Such previously filed document is incorporated herein by reference in accordance with Item 601 of Regulation S-K.**Filed as an exhibit to the Company's Annual Report on Form 10-K filed on March 30, 2000 (File No. 000-27905).  Such previously filed document is
incorporated herein by reference in accordance with Item 601 of Regulation S-K.***Filed as an Appendix to the Company's Form S-4/A Registration Statement filed on October 19, 2000 (File No. 333-46510).  Such previously filed
document is incorporated herein by reference in accordance with Item 601 of Regulation S-K.++Filed as an exhibit to the Company's Annual Report on Form 10-K filed on April 2, 2001 (File No. 000-27905).  Such previously filed document is
incorporated herein by reference in accordance with Item 601 of Regulation S-K.

**(b) Reports on Form 8-K**

During the quarter ended December 31, 2003, no Current Reports on Form 8-K were filed by the
Company, except for one filed on October 8, 2003, reporting a change in management under Items 5 and
7 and another filed on October 23, 2003 disclosing the press release of third quarter earnings under Item
12.



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

| |     | ***MutualFirst* Financial, Inc.**                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------
| |     |                                                                                                            
| |     |                                                                                                            
| | By: | /s/ David W. HeeterDavid W. Heeter, President and Chief Executive Officer*(Duly Authorized Representative)*

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.

|/s/ David W. Heeter                                                                                                | /s/ Wilbur R. Davis                   
|------------------------------------------------------------------------------------------------------------------ | --------------------------------------
|David W. Heeter, President
   *(Principal Executive Officer)*                                                      | Wilbur R. Davis, Chairman of the Board
|                                                                                                                   |                                       
|Date: March 15, 2004                                                                                               | Date: March 15, 2004                  
|                                                                                                                   |                                       
|/s/ R. Donn Roberts                                                                                                | /s/ Edward J. Dobrow                  
|R. Donn Roberts, Director                                                                                          | Edward J. Dobrow, Director            
|                                                                                                                   |                                       
|Date: March 15, 2004                                                                                               | Date: March 15, 2004                  
|                                                                                                                   |                                       
|                                                                                                                   |                                       
|/s/ Linn A. Crull                                                                                                  | /s/ James D. Rosema                   
|Linn A. Crull, Director                                                                                            | James D. Rosema, Director             
|                                                                                                                   |                                       
|Date: March 15, 2004                                                                                               | Date: March 15, 2004                  
|                                                                                                                   |                                       
|                                                                                                                   |                                       
|/s/ William V. Hughes                                                                                              | /s/ Jerry D. McVicker                 
|William V. Hughes, Director                                                                                        | Jerry D. McVicker, Director           
|                                                                                                                   |                                       
|Date: March 15, 2004                                                                                               | Date: March 15, 2004                  
|                                                                                                                   |                                       
|                                                                                                                   |                                       
|/s/ Julie A. Skinner                                                                                               | /s/ John M. Dalton                    
|Julie A. Skinner, Director                                                                                         | John M. Dalton, Director              
|                                                                                                                   |                                       
|Date: March 15, 2004                                                                                               | Date: March 15, 2004                  
|                                                                                                                   |                                       
|                                                                                                                   |                                       
|/s/ Steven L. Banks                                                                                                | /s/ Jon R. Marler                     
|Steven L. Banks, Director                                                                                          | Jon R. Marler, Director               
|                                                                                                                   |                                       
|Date: March 15, 2004                                                                                               | Date: March 15, 2004                  
|                                                                                                                   |                                       
|                                                                                                                   |                                       
|/s/ Timothy J. McArdle                                                                                             | /s/ Patrick C. Botts                  
|Timothy J. McArdle, Senior Vice President,
Treasurer and Controller *(Principal Financial and Accounting Officer)* | Patrick C. Botts, Director            
|                                                                                                                   |                                       
|Date: March 15, 2004                                                                                               | Date: March 15, 2004                  



|Number |  | Description                                             
|------ |  | --------------------------------------------------------
|       |  |                                                         
|10.1   |  | Employment Agreement with David W. Heeter               
|       |  |                                                         
|10.2   |  | Employment Agreement with Patrick C. Botts              
|       |  |                                                         
|13     |  | Annual Report to Security Holders                       
|       |  |                                                         
|14     |  | Code of Ethics                                          
|       |  |                                                         
|21     |  | Subsidiaries of the Registrant                          
|       |  |                                                         
|23     |  | Consent of Accountants                                  
|       |  |                                                         
|31.1   |  | Rule 13(a)-14(a) Certification (Chief Executive Officer)
|       |  |                                                         
|31.2   |  | Rule 13(a)-14(a) Certification (Chief Financial Officer)
|       |  |                                                         
|32     |  | Section 1350 Certification