October 8. 1996 Point of Contact: Charles J. Viater
President/CEO
MFB CORP. ANNOUNCES STOCK REPURCHASE
SHAREHOLDER RIGHTS PLAN AND BIF/SAIF ASSESSMENT
Mishawaka, Indiana - MFB Corp. (NASDAQ/MFBC), (the "Corporation"),
parent company of Mishawaka Federal Savings (the "Bank"), announced today that
the Board of Directors has approved the repurchase of an additional 93,764
shares of the Corporation's outstanding common stock, without par value, a
number of shares equal to approximately 5% of its outstanding shares. This
brings the total shares now available for repurchase by the Corporation to
192,463 shares or approximately 10% of the Corporation's outstanding shares.
Such purchases will be made subject to market conditions in the open market or
block transactions. Repurchases may begin as early as October 11, 1996, as the
required regulatory approval has been received. Since the Company completed its
conversion to a publicly-owned stock company on March 24, 1994, it has completed
the repurchase of 328,371 shares at an average price of $13.52 per share.
Charles J.Viater, President/CEO indicated that "the repurchase of our shares
should benefit both our shareholders and the company and is consistent with our
ongoing efforts to improve shareholder value." The Board believes that the
Corporation's shares are from time to time undervalued by the market and this
program will have the effect of enhancing the book value per share and the
potential for growth in earnings per share of the Corporation's remaining
outstanding shares.
In addition, the Corporation announced that the Board of Directors has
adopted a Shareholder Rights Plan (the "Plan"). The Plan is designed to enhance
long term shareholder value by limiting the ability of individuals to engage in
inadequate. undesirable or hostile takeover attempts. The Plan also allows the
company to carry out its strategic plan of diversification, increased market
share, franchise growth and enhancement of long term shareholder value as a
local, independent community bank. Mr. Viater stated that the Plan is similar to
those maintained by more than 1,400 U.S. corporations.
To implement the Plan, shareholders of record as of October 21, 1996,
will receive one right for each outstanding share of the Corporation's Common
Stock. Initially, the Rights will trade automatically with the Common Stock and
separate Right Certificates will not be issued. The Rights will expire on
October 1, 2006, unless earlier redeemed or exchanged. The Board of Directors of
the Corporation may approve redemption of the Rights in whole, but not in part,
at a price of $.01 per Right.
Each Right entities the registered holder, subject to the terms of the
Rights Agreement, to purchase from the Corporation one share of the
Corporation's Common
Stock at a purchase price of $46.00 per share, subject to adjustment. The Rights
will not be exercisable until a subsequent distribution date which will occur
only if a person or group acquires beneficial ownership of 12% or more of the
Corporation's Common Stock (or 10% if a person or group of persons is declared
an "Adverse Person" by the Corporation's Board), or announces a tender or
exchange offer that would result in such person or group owning 30% or more of
the Common Stock. Upon the happening of certain other events, the Rights become
exercisable to purchase shares of Common Stock of the Corporation (or, in
certain circumstances, other consideration) at a 50% discount to market price.
Mr. Viater explained that "the Plan is not designed to, nor would it, prevent
MFB Corp. from being acquired, but instead ensures that any such action will be
taken in the best interests of those who own our stock." Mr. Viater further
pointed out that the issuance of the Rights has no dilutive effect on the shares
themselves or on the Corporation's earnings. Chairperson Marian Torian further
commented that "the Plan will permit the Corporation's directors and management
to continue to build long term value for the shareholders and maintain a locally
owned and operated banking alternative in Mishawaka, Indiana and the surrounding
communities."
On September 30, 1996, President Clinton signed into law a measure that
included a one time special assessment to capitalize the Savings Associations
Insurance Fund ("SAIF"), the deposit insurance fund of the Bank. The assessment
will be recognized as an operating expense during the fiscal year ended
September 30, 1996 and will be fully deductible for both federal and state
income tax purposes. This nonrecurring expense amounts to approximately $577,000
on an after tax basis, or the equivalent of $.29 per share outstanding. "This
special assessment is one that was beyond the control of the Bank and eliminates
the existing significant disparity between insurance premiums paid by banks and
those paid by savings institutions. We can now look forward to reduced deposit
insurance premiums in the future and, ultimately, parity with all other
financial institutions in the funding of deposit insurance," according to
Viater. Beginning January 1, 1997 the annual deposit insurance premium for the
Bank will be reduced from .23% to .064% of total assessable deposits.
The Bank is a wholly owned subsidiary of MFB Corp., with assets of $211
million as of June 30, 1996. The Bank provides retail and small business
financial services to the South Bend/Mishawaka area through its main office in
Mishawaka and three branch locations throughout the community.
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