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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2004
MFB CORP.
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of incorporation)
0-23374 35-1907258
(Commission File Number) (IRS Employer Identification No.)
4100 Edison Lakes Parkway
P.O. Box 528
Mishawaka, Indiana 46545
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (574) 273-7600
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release dated November 3, 2004.
Item 12. Results of Operations and Financial Condition.
MFB Corp., an Indiana corporation ("Registrant"), issued a press release which
was publicly disseminated on November 3, 2004 announcing its results of
operations for the quarter and year ended September 30, 2004. A copy of the
press release is furnished herewith as Exhibit 99.1. Pursuant to General
Instruction B.6 of Form 8-K, this exhibit is not "filed" for purposes of Section
18 of the Securities Exchange Act of 1934, but is instead furnished as required
by that instruction.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
/s/ Thomas J. Flournoy, Chief Financial Officer
Thomas J. Flournoy, Chief Financial Officer
Dated: November 3, 2004
November 3, 2004
Contact: Charles J.Viater
President/CEO
MFB Corp. ANNOUNCES EARNINGS FOR FOURTH
QUARTER AND YEAR ENDED SEPTEMBER 30, 2004
Mishawaka, Indiana - MFB Corp. (NASDAQ/MFBC), parent company
of MFB Financial (the "Bank"), reported today consolidated net income on an
unaudited basis of $210,000, or $0.15 diluted earnings per share for the three
months ended September 30, 2004, a decrease from the $1.11 million, or $0.83
diluted earnings per share for the three months ended September 30, 2003. MFB
Corp.'s consolidated net income for the fiscal year ended September 30, 2004 is
$1.79 million, or $1.30 diluted earning per share, compared to $2.40 million, or
$1.80 diluted earnings per share for the same period last year.
During the quarter, MFB Financial completed the acquisition of certain
assets and assumption of certain liabilities of Sobieski Bank located in South
Bend, Indiana. MFB Financial paid Sobieski Bank $407,000 to acquire assets with
a book value of $97.7 million and liabilities with a book value of $103.0
million. The Bank recorded intangibles of $5.1 million including goodwill of
$2.4 million as part of this transaction. The assets acquired included $8.5
million in cash, $35.8 million in investments, $50.8 million in loans, less
$602,000 in loan loss reserves and included $3.2 million in other assets. The
liabilities assumed included $68.1 million in deposits, $33.1 million in FHLB
advances and $1.8 million in other liabilities. In addition, MFB incurred
$440,000 of expenses related to this transaction.
Charles Viater, President and CEO, stated that "This strategic
acquisition in our primary market will position the Bank for continued growth in
profitability and market share and will generate greater value for our
shareholders over time."
MFB Corp.'s net interest income before provision for loan losses for
the three month period ended September 30, 2004 totaled $3.3 million compared to
$2.9 million for the same period last year. For the year ended September 30,
2004, net interest income before provision for loan losses totaled $11.7 million
compared to $11.1 million for the same period last year. The increase in net
interest income for the three month period was due to an increase in mortgage
loan and investment interest income, offset by an increase in FHLB advances
expenses. These increases were primarily attributable to the additional assets
and liabilities acquired from Sobieski. The increase in net interest income for
the year ended September 30, 2004 is primarily from reduced interest expense on
FHLB advances partially offset by a reduction in mortgage loan and investment
interest income.
The provision for loan losses for the fourth quarter ended
September 30, 2004 was $150,000 compared to $100,000 for the fourth quarter last
year. For the year ended September 30, 2004, the provision for loan losses was
$800,000 compared to $1.1 million for the same period last year. The decreased
provision for this year is based on several factors including the current
economic environment, current and past delinquency trends, change in the
character and mix of the loan portfolio, adequacy of collateral on loans and
historical and estimated loan charge offs. The quality of MFB Corp.'s loan
portfolio has continued to improve as nonperforming assets have declined to $4.2
million at September 30, 2004 from $4.5 million at September 30, 2003, despite a
significant increase in the total loan portfolio.
Total noninterest income decreased from $1.9 million for the fourth
quarter last year to $1.3 million for the fourth quarter this year. A mortgage
servicing rights valuation impairment charge occurred in the quarter ended
September 30, 2004 totaling $175,000 compared to a recovery of $465,000 for the
fourth quarter last year. The impairment and recovery on mortgage servicing
rights is related to the decline and subsequent recovery in the market value of
servicing rights associated with MFB Financial's $207 million mortgage loan
servicing portfolio. The values of mortgage servicing portfolios, which are
significantly dependent on estimated loan prepayment speeds, have been volatile
in the past two years. MFB Corp.'s net income has been significantly affected by
this volatility. For the year ended September 30, 2004, total noninterest income
was $5.7 million, an increase over the $5.0 million for the same period last
year. New and increased service fees on deposit accounts and rental income
significantly contributed to the increases for the year. These increases were
partially offset by a decline in gains on sale of mortgage loans from last year.
For the year ended September 30, 2004, the mortgage servicing rights recovery
was $289,000 compared to the impairment charge of $239,000 for the year ended
September 30, 2003. The loss on securities for the year ended September 30, 2004
totaling $109,000 is the result of a write down of a equity securities held by
MFB Corp. based on current estimates of fair value.
Noninterest expense increased from $3.1 million for the fourth quarter
last year to $4.3 million for the fourth quarter this year. Noninterest expense
increased from $11.9 million for the year ended September 30, 2003 to $14.6
million for the year ended September 30, 2004. Occupancy expenses related to the
operation of three acquired branches, opening another branch and the expenses
related to the acquisition of the new Corporate offices were the significant
contributors to this increase. Other areas of increase were salaries and
employee benefits, advertising, supplies, consulting expenses related to two
major projects and expenses related to the acquisition mentioned above.
Income tax expense has decreased from last year for both the three
month period and year ended September 30 due to decreased income before income
taxes.
MFB Corp.'s total assets of $541.2 million as of September 30, 2004
have increased from the $428.6 million at September 30, 2003 primarily due to
the Sobieski Bank acquisition referenced above. Total loans at September 30,
2004 of $399.9 million represented a growth of 25.6% from the $318.2 million
last year. Mortgage loans have increased from $134.1 million at September 30,
2003 to $179.1 million at September 30, 2004, commercial loans increased from
$154.1 million last year to $181.8 million this year and consumer loans,
including home equity loans, increased from $30.0 million last year to $39.0
million this year. Investment securities increased from $40.0 million at
September 30, 2003 to $66.0 million at September 30, 2004.
MFB Corp.'s allowance for loan losses at September 30, 2004 was
1.53% of loans compared to 1.63% at September 30, 2003. The ratio of
nonperforming assets to loans declined from 1.43% at September 30, 2003 to 1.07%
at September 30, 2004, due to loan charge offs and liquidation of nonperforming
loans. For the fourth quarter ended September 30, 2004, net charge offs were
$51,000 compared to $615,000 net charge offs for the quarter ended September 30,
2003. Net charge offs for the year ended September 30, 2004 total $526,000
compared to $1.10 million for the same period last year. In management's
opinion, the allowance for loan losses is adequate to cover probable incurred
losses at September 30, 2004.
Total deposits increased from $292.1 million last year to $357.9
million this year and Federal Home Loan Bank advances increased from $98.8
million last year to $133.4 million this year primarily due to the acquisition
of Sobieski Bank assets and liabilities.
Total shareholders' equity increased from $34.3 million at
September 30, 2003 to $35.9 million at September 30, 2004. The book value of MFB
Corp. stock increased from $26.60 at September 30, 2003 to $27.04 at September
30, 2004. At September 30, 2004, MFB Financial remains "well capitalized" by all
regulatory standards.
MFB Corp.'s wholly-owned bank subsidiary, MFB Financial, provides
retail and business financial services to the Michiana area through its eleven
banking centers in St. Joseph and Elkhart counties. MFB's three newest banking
centers acquired as part of the acquisition of certain assets and liabilities of
Sobieski Bank are all located in South Bend, Indiana.
.
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2004 and 2003
(In thousands, except share information)
September 30, September 30,
2004 2003
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ASSETS
Cash and due from financial institutions $ 9,524 $ 13,881
Interest - bearing deposits in other financial institutions - short term 19,071 26,476
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Total cash and cash equivalents 28,595 40,357
Securities available for sale 66,021 40,029
Other Investments 12,628 10,020
Loans held for sale 1,034 6,626
Mortgage Loans 179,111 134,052
Commercial Loans 181,842 154,106
Consumer Loans 38,972 29,997
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Loans receivable 399,925 318,155
Less: allowance for loan losses (6,074) (5,198)
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Loan receivable, net 393,851 312,957
Premises and equipment, net 19,384 6,090
Mortgage servicing rights 2,092 1,373
Cash surrender value of life insurance 5,707 5,217
Other assets 6,855 5,955
Goodwill & other intangibles 5,055 -
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Total assets $ 541,222 $ 428,624
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing demand deposits $ 31,658 $ 26,482
Savings, NOW and MMDA deposits 136,099 107,341
Time deposits 190,136 158,283
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Total deposits 357,893 292,106
FHLB advances 98,790
133,443
Loans from correspondent banks 6,500 300
Accrued expenses and other liabilities 7,480 3,177
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Total liabilities 505,316 394,373
Shareholders' equity
Common stock, no par value, 5,000,000 shares authorized;
shares issued: 1,689,417-09/30/04 and 9/30/03;
shares outstanding: 1,329,060-09/30/04 and 1,287,710-9/30/03 12,486 12,560
Retained earnings - substantially restricted 32,195 31,022
Accumulated other comprehensive income (loss),
net of tax of $48 -09/30/04 and $(36) - 9/30/03 (792) (466)
Treasury stock, 360,357 common shares - 09/30/04;
401,707 common shares - 9/30/03, at cost (7,983) (8,865)
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Total shareholders' equity 35,906 34,251
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Total Liabilities and Shareholders' equity $ 541,222 $ 428,624
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See accompanying notes to (unaudited) consolidated financial statements
MFB CORP. AND SUBSIDIARY
Consolidated Statements of Income (Unaudited)
Three Months and Year Ended September 30, 2004 and 2003
(in thousands, except per share information)
Three Months Ended Year Ended
2004 2003 2004 2003
Total interest income $ 6,314 $ 5,730 $ 22,792 $ 23,327
Total interest expense 2,974 2,808 11,089 12,245
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Net interest income 3,340 2,922 11,703 11,082
Provision for loan losses 150 100 800 1,110
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Net interest income after provision for loan
losses 3,190 2,822 10,903 9,972
Other non-interest income 1,426 1,405 5,500 5,180
Mortgage servicing impairment
recovery(charge) (175) 465 289 (239)
Gain(losses) on investments securities - - (109) 40
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Total non-interest income 1,251 1,870 5,680 4,981
Salaries and employee benefits 1,874 1,737 7,021 6,803
Occupancy and equipment 877 402 2,740 1,558
Data processing expense 181 108 633 596
Other non-interest expense 1,399 852 4,164 2,925
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Total non-interest expense 4,331 3,099 14,558 11,882
Income before taxes 110 1,593 2,025 3,071
Income tax expense (100) 485 236 671
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Net Income $ 210 $ 1,108 $ 1,789 $ 2,400
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Basic Earnings per common share $ 0.16 $ 0.87 $ 1.36 $ 1.87
Diluted Earnings per common share $ 0.15 $ 0.83 $ 1.30 $ 1.80