Microsoft Word 10.0.6612;
July 29, 2005
Contact: Charles J. Viater
President/CEO
MFB Corp. ANNOUNCES THIRD QUARTER EARNINGS
AND QUARTERLY DIVIDEND DECLARATION
Mishawaka, Indiana - MFB Corp. (NASDAQ/MFBC), parent company
of MFB Financial (the "Bank"), reported today consolidated net income on an
unaudited basis of $614,000, or $0.44 diluted earnings per share for the three
months ended June 30, 2005, compared to net income of $607,000, or $0.44 diluted
earnings per share for the three months ended June 30, 2004. MFB Corp's
consolidated net income for the nine months ended June 30, 2005 was $1.3
million, or $0.94 diluted earning per share, compared to $1.6 million, or $1.15
diluted earnings per share, for the same period last year.
Charles Viater, President and CEO, stated that "The Bank's
net interest margin continues to improve and non-interest revenues related to
our core business remain strong."
In addition, Mr. Viater announced today that the Board of
Directors has declared a cash dividend of $0.125 per share of common stock for
the quarter ended June 30, 2005. The dividend is payable on August 16, 2005 to
holders of record on August 2, 2005.
MFB Corp.'s net interest income before provision for loan
losses for the three month period ended June 30, 2005 totaled $3.8 million
compared to $2.8 million for the same period last year. For the nine month
periods ended June 30, 2005 and 2004 net interest income was $10.8 million and
$8.4 million, respectively. The increase in net interest income was due to an
increase in loan and investment interest income, offset by an increase in FHLB
advances and deposit interest expenses. These increases were primarily
attributable to the additional assets and liabilities acquired from Sobieski
Bank in August, 2004.
The provision for loan losses was $632,000 for the nine months
ended June 30, 2005 compared to $650,000 for the same period last year. For the
three months ended June 30, 2005 the provision for loan loss was $361,000
compared to $150,000 for the three months ended June 30, 2004. The increase for
the third quarter ended June 30, 2005 was primarily related to a loan to a
rapidly growing computer assembly and distribution company that is experiencing
cash flow difficulties. The management of the bank is actively assessing the
collateral quality of this borrower and believes the reserve established is
adequate to cover losses that might arise based on its current analysis. The
percentage of non-performing assets to loans was 1.38% at June 30, 2005, 1.07%
at September 30, 2004 and .97% at June 30, 2004.
Year to date noninterest income decreased from $4.4 million
for the nine months ended June 30, 2004 to $3.1 million for the nine months
ended June 30, 2005. The significant decrease is primarily the result of the
first quarter non-cash impairment charge through earnings of $948,000 ($626,000
net of tax) for the decline in the value of $2.0 million of Fannie Mae ("FNMA")
and $2.0 million of Freddie Mac ("FHLMC") floating rate preferred stock
securities MFB holds and the valuation of the Mortgage Servicing rights
resulting in an impairment of $86,000 year to date June 30, 2005 compared to a
recovery of $464,000 during the same period last year. A mortgage servicing
rights valuation recovery of $466,000 occurred in the quarter ended June 30,
2004 compared to a valuation impairment charge of $107,000 for the quarter ended
June 30, 2005. Total noninterest income totaled $1.8 million for the third
quarter last year compared to $1.3 million for the third quarter this year.
Noninterest expense increased from $10.2 million for the nine
months ended June 30, 2004 to $11.8 million for the same period in 2005.
Occupancy expenses related to the operation of three acquired branches, opening
another branch and new Corporate offices were the significant contributors to
this increase. Additional increases relating to the acquired branches include
the amortization of core deposit and customer relationship intangibles and
increased FDIC insurance premiums. Other areas of increase for the nine month
periods include salaries and employee benefits, data processing, charitable
contributions, and advertising expenses. Noninterest expense increased from $3.6
million for the third quarter last year to $3.9 million for the third quarter
this year. The third quarter fluctuations were impacted by the same year to date
items noted above offset by decreased consulting expenses for the quarter ending
June 30, 2005 compared to 2004. Income tax expense has decreased from last year
for the three month period ended June 30 due to decreased income before income
taxes.
MFB Corp.'s total assets have decreased to $526.5 million at
June 30, 2005 from $541.2 million at September 30, 2004. Total loans at June 30,
2005 of $403.5 million increased slightly from the $399.9 million at September
30, 2004. Commercial loans increased from $160.2 million at September 30, 2004
to $172.6 million at June 30, 2005; consumer loans, including home equity loans,
increased slightly from $39.0 million at September 30, 2004 to $39.1 million at
June 30, 2005 and were offset by mortgage loans decreasing from $200.7 million
at September 30, 2004 to $191.8 million at June 30, 2005. Investment securities
available for sale decreased from $66.0 million at September 30, 2004 to $50.7
million at June 30, 2005.
MFB Corp.'s allowance for loan losses at June 30, 2005 was
1.60% of loans compared to 1.52% at September 30, 2004. For the third quarter
ended June 30, 2005, net charge offs were $119,000 compared to $97,000 net
charge offs for the quarter ended June 30, 2004. In management's opinion, the
allowance for loan losses is adequate to cover probable incurred losses at June
30, 2005.
Total deposits decreased from $357.9 million at September 30,
2004 to $349.7 million at June 30, 2005 and Federal Home Loan Bank advances
decreased from $133.4 million as of September 30, 2004 to $129.1 million as of
June 30, 2005.
Total shareholders' equity increased from $35.9 million at
September 30, 2004 to $37.6 million at June 30, 2005. The book value of MFB
Corp. stock increased from $27.02 at September 30, 2004 to $27.80 at June 30,
2005.
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 CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2005 and September 30, 2004
(in thousands except per share information)
(Unaudited)
June 30, September 30,
2005 2004
----------------- -----------------
----------------- -----------------
Assets
Cash and due from financial institutions $ 6,900 $ 9,524
Interest - bearing deposits in other financial institutions - short term 17,894 19,071
----------------- -----------------
Total cash and cash equivalents 24,794 28,595
Securities available for sale 50,689 66,021
Other Investments 12,574 12,628
Loans held for sale 1,886 1,034
Mortgage Loans 191,842 200,705
Commercial Loans 172,593 160,182
Consumer Loans 39,063 39,037
----------------- -----------------
----------------- -----------------
Loans receivable 403,498 399,924
Less: allowance for loan losses (6,442) (6,074)
----------------- -----------------
Loan receivable, net 397,056 393,850
Premises and equipment, net 19,853 19,384
Mortgage servicing rights 2,062 2,092
Cash surrender value of life insurance 5,877 5,707
Goodwill 2,423 2,423
Other intangible assets 2,274 2,693
Other assets 6,981 6,795
----------------- -----------------
Total assets $ 526,469 $ 541,222
================= =================
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing demand deposits $ 30,326 $ 31,658
Savings, NOW and MMDA deposits 131,075 136,099
Time deposits 188,323 190,136
----------------- -----------------
Total deposits 349,724 357,893
FHLB advances 129,055 133,443
Loans from correspondent banks 6,500 6,500
Accrued expenses and other liabilities 3,567 7,480
----------------- -----------------
Total liabilities 488,846 505,316
Shareholders' equity
Common stock, no par value, 5,000,000 shares authorized;
shares issued: 1,689,417 - 06/30/05 and 9/30/04;
shares outstanding: 1,353,460 - 06/30/05 and 1,329,060 - 9/30/04 12,371 12,486
Retained earnings - substantially restricted 33,000 32,195
Accumulated other comprehensive income (loss),
net of tax of ($148) - 06/30/05 and $38 - 9/30/04 (278) (792)
Treasury stock, 335,957 common shares - 06/30/05;
360,357 common shares - 9/30/04, at cost (7,470) (7,983)
----------------- -----------------
Total shareholders' equity 37,623 35,906
----------------- -----------------
Total Liabilities and Shareholders' equity $ 526,469 $ 541,222
================= =================
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months and Nine months ended June 30, 2005 and 2004
(in thousands except per share information)
Three Months Ended Nine Months Ended
June 30, June 30,
2005 2004 2005 2004
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Interest income
Loans receivable, including fees $ 6,314 $ 5,149 $ 18,426 $ 15,224
Securities - taxable 610 324 1,937 1,125
Other interest-bearing assets 53 32 145 129
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Total interest income 6,977 5,505 20,508 16,478
Interest expense
Deposits 1,693 1,333 4,900 4,004
FHLB advances and other borrowings 1,532 1,364 4,806 4,111
-------------- --------------
-------------- ------------- -------------- --------------
Total interest expense 3,225 2,697 9,706 8,115
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net interest income 3,752 2,808 10,802 8,363
Provision for loan losses 361 150 632 650
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net interest income after provision for 3,391 2,658 10,170 7,713
loan losses
Noninterest income
Service charges on deposit accounts 831 793 2,417 2,214
Trust fee income 100 148 300 405
Insurance commissions 53 60 153 152
Net realized gains from sales of loans 221 265 622 810
Mortgage servicing asset recovery (impairment) (107) 466 (86) 464
Net gain (loss) on securities available for sale - (109) (948) (109)
Other 178 137 644 493
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Total noninterest income 1,276 1,760 3,102 4,429
Noninterest expense
Salaries and employee benefits 1,953 1,749 5,617 5,147
Occupancy and equipment 645 642 2,298 1,863
Professional and consulting fees 153 242 524 586
Data processing expense 164 175 559 452
Other expense 970 765 2,811 2,179
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Total noninterest expense 3,885 3,573 11,809 10,227
Income before income taxes 782 845 1,463 1,915
Income tax expense 168 238 163 336
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net income $ $ 607 $ 1,300 $ 1,579
614
============== ============= ============== ==============
============== ============= ============== ==============
Basic earnings per common share $ 0.45 $ 0.46 $ 0.97 $ 1.20
Diluted earnings per common share $ 0.44 $ 0.44 $ 0.94 $ 1.15