UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) August 3, 2006
MFB Corp.
(Exact Name of Registrant as Specified in Its Charter)
Indiana 0-23374
(State or Other Jurisdiction of Incorporation) (Commission File Number)
35-1907258
(IRS Employer Identification No.)
4100 Edison Lakes Parkway, Suite 300,
P.O. Box 528, Mishawaka, Indiana 46546
(Address of Principal Executive Offices) (Zip Code)
(574) 277-4200
Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2. Results of Operations and Financial Condition.
MFB Corp., an Indiana corporation ("Registrant"), issued a press release which
was publicly disseminated on August 3, 2006 announcing its Third Quarter
Earnings. 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.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Description
99.1 Press Release issued August 3, 2006.
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 hereto duly authorized.
Date: August 3, 2006 MFB Corp.
By: /s/ Charles J. Viater
Charles J. Viater,
President and CEO
EXHIBIT 99.1
August 3, 2006
Contact: Charles J. Viater
President/CEO
MFB Corp. ANNOUNCES THIRD QUARTER EARNINGS
Mishawaka, Indiana - MFB Corp. (NASDAQ/MFBC), parent company of MFB Financial
(the "Bank"), reported today its consolidated financial results on an unaudited
basis of 794,000, or $0.57 diluted earnings per share for the three months ended
June 30, 2006 an increase from net income of $614,000, or $0.44 diluted earnings
per share, for the three months ended June 30, 2005. MFB Corp's consolidated net
income for the nine months ended June 30, 2006 was $1,212,000, or $0.87 diluted
earnings per share, compared to $1,300,000, or $0.94 diluted earnings per share,
for the same period last year.
Charles J. Viater, President and CEO, stated that "We are pleased with another
steady quarter of earnings as the interest rate environment continues to
pressure our net interest margin."
MFB Corp's net interest income before provision for loan losses for the three
month period ended June 30, 2006 was $3.4 million compared to $3.8 million for
the same period last year. For the nine-month periods ended June 30, 2006 and
2005, net interest income was $10.3 million and $10.8 million, respectively. The
decrease in net interest income was predominantly due to an increase in deposit
interest expense, offset in part by an increase in interest income. Interest
expense on deposits increased to $2.3 million for the June 2006 quarter compared
to $1.7 million for the June 2005 quarter, and increased to $6.6 million from
$4.9 million for the comparable nine month periods. Interest income was $7.2
million for the three months ended June 30, 2006 compared to $7.0 million for
the three months ended June 30, 2005, and for the nine months ended June 30,
2006 and June 30, 2005 was $21.5 million and $20.5 million respectively.
The provision for (recovery of) loan losses was ($35,000) for the quarter ended
June 30, 2006 compared to $361,000 for the same period last year. The recovery
during the quarter ended June 30, 2006 was predominantly related to a reduction
of commercial watch list loans. The provision for loan losses was $1,867,000 for
the nine months ended June 30, 2006 compared to $632,000 for the same period
last year. The increase during the nine months ended June 30, 2006 was primarily
related to management's first quarter assessment of a commercial loan to a
business experiencing difficulties with inventory management, trade accounts
receivable collections, financial reporting, and operating cash flow. This loan
is primarily secured by inventory and accounts receivable. After updating our
analysis of the value of this collateral, completing an assessment of the
reliability and adequacy of accounting systems and evaluating the recent
financial performance of the business, the Bank determined that an additional
charge to earnings in the amount of $2,324,000 ($1,411,000 net of tax) for this
loan was necessary during the first quarter ended December 31, 2005. The loan
has been placed on non-accrual status and is now fully reserved. No charge-off
has been recorded on this commercial loan because the Bank cannot reasonably
estimate at this time how much of the loan it will ultimately collect. The
percentage of non-performing assets to total loans increased from 1.38% at June
30, 2005 to 2.40% at June 30, 2006.
Noninterest income increased to $1.8 million for the quarter ending June 30,
2006 from $1.3 million for the comparable period in 2005 and increased to $4.9
million from $3.1 million for the same nine-month periods. The increase for the
quarter ended June 30, 2006 compared to June 30, 2005 was the result of a gain
of $238,000 on the call of an FHLB advance, a gain of $200,000 on the sale of
the insurance property and casualty business, and was offset by a $180,000
reduction in net realized gains from sales of loans. The year to date increase
was primarily the result of the first quarter non-cash impairment charge to
earnings in December 2004 of $948,000 ($626,000 net of tax) resulting from a
decline in value of $2.0 million of Fannie Mae ("FNMA") and $2.0 million of
Freddie Mac ("FHLMC") floating rate preferred stock securities MFB holds. Other
increases over the prior nine-month period came from office space rental income,
which was up $362,000, a $249,000 positive adjustment from a mortgage servicing
asset recovery versus impairment charge, and the aforementioned gain on the call
of the FHLB advance and gain on the sale of the insurance book of business; net
gains on the sales of loans decreased by $410,000. The Bank's wholly-owned
subsidiary, Mishawaka Financial Services, Inc., continues to offer a variety of
life and health insurance products to customers in the Bank's market area.
Noninterest expense increased slightly to $4.3 million for the quarter ended
June 30, 2006 from $3.9 million for the quarter ended June 30, 2005. For the
nine months ended June 30, noninterest expense increased from $11.8 million last
year to $12.2 million for the same period this year. The increase for the
quarter and the nine months ended 2006 compared to 2005 was primarily related to
a loss on the sale of a branch building,an increase in occupancy and equipment
expenses related to successful leasing of the majority of the main office
building by four major tenants, and an increase in salaries and employee
benefits.
MFB Corp.'s total assets were $506.3 million at June 30, 2006 compared to $554.9
million at September 30, 2005. A decrease in cash and cash equivalents from
$54.2 million at September 30, 2005 to $24.4 million at June 30, 2006 was
predominantly due to the repayment of FHLB advances totaling $23.6 million
during the nine months ended June 30, 2006. Total loans at June 30, 2006 of
$379.1 million decreased from the $390.7 million at September 30, 2005.
Commercial loans decreased from $157.8 million at September 30, 2005 to $139.6
million at June 30, 2006, offset by mortgage loans increasing from $192.0
million at September 30, 2005 to $195.4 million at June 30, 2006 and consumer
loans, including home equity loans, increasing from $40.9 million at September
30, 2005 to $44.1 million at June 30, 2006. Investment securities available for
sale decreased from $63.6 million at September 30, 2005 to $60.4 million at June
30, 2006.
MFB Corp.'s allowance for loan losses at June 30, 2006 was $8.1 million or 2.14%
of loans compared to $6.4 million or 1.63% of loans at September 30, 2005. For
the third quarter ended June 30, 2006, net charge-offs were $51,000 compared to
$119,000 net charge-offs for the quarter ended June 30, 2005. Year to date net
charge-offs were $153,000 for the nine months ended June 30, 2006 and $263,000
for the nine months ended June 30, 2005. In management's opinion, the allowance
for loan losses is adequate to cover probable incurred losses at June 30, 2006.
Total liabilities decreased $48.5 million during the nine-month period, from
$516.2 million at September 30, 2005 to $467.7 million at June 30, 2006. The
decrease was predominantly due to a measured reduction in above-average cost
deposit products and the repayment of Federal Home Loan Bank (FHLB) Advances.
Total deposits declined by $23.8 million since September 30, 2005, from $374.4
million to $350.6 million; savings, NOW and MMDA deposits decreased $25.2
million, while certificates increased by $3.0 million. Advances from the FHLB
decreased $23.8 million, from $125.9 million at September to $102.1 million at
June 30. As of June 30, 2006, the advances had a weighted average interest rate
of 5.47% and mature over the next six years. A total of $9 million of the
advances with a weighted average interest rate of 6.37% mature over the next
twelve months.
Total shareholders' equity declined by $92,000 to $38.6 million from September
30, 2005 to June 30, 2006 due to dividend payouts of $534,000, purchases of
treasury stock of $491,000 and net unrealized losses on investments of $323,000;
these were offset in part by net earnings of $1.2 million. MFB Corp's equity to
assets ratio was 7.62% at June 30, compared to 6.97% at September 30. The book
value of MFB Corp. stock also increased, from $28.52 at prior year end to $28.79
at June 30, 2006.
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 and private client services to the
Indianapolis market through its office in Hamilton County. For more information,
go to www.mfbbank.com.
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, 2006 and September 30, 2005
(in thousands except share information)
June 30, September 30,
2006 2005
----------------- -----------------
----------------- -----------------
Assets
Cash and due from financial institutions $ 7,875 $ 7,613
Interest-bearing deposits in other financial institutions - short term 16,477 46,596
----------------- -----------------
Total cash and cash equivalents 24,352 54,209
Securities available for sale 60,431 63,575
Other investments 11,858 12,514
Loans held for sale 0 407
Mortgage loans 195,411 191,970
Commercial loans 139,646 157,804
Consumer loans 44,054 40,921
----------------- -----------------
----------------- -----------------
Loans receivable 379,111 390,695
Less: allowance for loan losses (8,102) (6,388)
----------------- -----------------
Loans receivable, net 371,009 384,307
Premises and equipment, net 18,902 20,336
Mortgage servicing rights 2,404 2,341
Cash surrender value of life insurance 6,165 5,964
Goodwill 1,970 2,423
Other intangible assets 1,808 2,134
Other assets 7,399 6,667
----------------- -----------------
Total Assets $ 506,298 $ 554,877
================= =================
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing demand deposits $ 35,264 $ 36,876
Savings, NOW and MMDA deposits 128,664 153,864
Time deposits 186,636 183,624
----------------- -----------------
Total deposits 350,564 374,364
FHLB advances 102,111 125,854
Loans from correspondent banks 6,500 6,500
Subordinated debentures 5,000 5,000
Accrued expenses and other liabilities 3,542 4,486
----------------- -----------------
Total liabilities 467,717 516,204
Shareholders' equity
Common stock, no par value: 5,000,000 shares authorized;
shares issued: 1,689,417 - 06/30/06 and 09/30/05;
shares outstanding: 1,339,781 - 06/30/06 and 1,355,860 - 09/30/05 12,376 12,376
Additional paid-in capital 44 -
Retained earnings - substantially restricted 34,705 34,027
Accumulated other comprehensive income (loss),
net of tax of ($500) - 06/30/06 and ($175) - 09/30/05 (633) (310)
Treasury stock: 349,636 common shares - 06/30/06 and (7,911) (7,420)
333,557 common shares - 09/30/05, at cost
----------------- -----------------
Total shareholders' equity 38,581 38,673
----------------- -----------------
Total Liabilities and Shareholders' equity $ 506,298 $ 554,877
================= =================
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three and Nine Months Ended June 30, 2006 and 2005
(in thousands except per share information)
Three Months Ended Nine Months Ended
June 30, June 30,
2006 2005 2006 2005
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Interest income
Loans receivable, including fees 6,143 $ 6,314 18,212 $ 18,426
Securities - taxable 840 610 2,418 1,937
Other interest-bearing assets 201 53 833 145
-------------- ------------- -------------- --------------
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Total interest income 7,184 6,977 21,463 20,508
Interest expense
Deposits 2,283 1,693 6,567 4,900
FHLB advances and other borrowings 1,509 1,532 4,633 4,806
-------------- --------------
-------------- ------------- -------------- --------------
Total interest expense 3,792 3,225 11,200 9,706
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net interest income 3,392 3,752 10,263 10,802
Provision for (recovery of) loan losses (35) 361 1,867 632
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net interest income after provision for 3,427 3,391 (8,)(396) 10,170
(recovery of) loan losses
Noninterest income
Service charges on deposit accounts 814 831 2,442 2,417
Trust fee income 94 100 321 300
Insurance commissions 38 53 129 153
Net realized gains from sales of loans 41 221 212 622
Mortgage servicing asset recovery (impairment) (1) (107) 163 (86)
Net gain (loss) on securities available for sale - - - (948)
Gain on call of FHLB advance 238 - 238 -
Gain on sale of property and casualty insurance 200 - 200 -
business
Other income 422 178 1,219 644
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Total noninterest income 1,846 1,276 4,924 3,102
Noninterest expense
Salaries and employee benefits 2,003 1,953 5,875 5,617
Occupancy and equipment 826 645 2,551 2,298
Professional and consulting fees 106 153 307 524
Data processing expense 201 164 626 559
Loss on sale of fixed assets 216 - 216 -
Other expense 934 970 2,639 2,811
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Total noninterest expense 4,286 3,885 12,214 11,809
Income before income taxes 987 782 1,106 1,463
Income tax expense (benefit) 193 168 (106) 163
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
Net income $ 794 $ 614 $ 1,212 $ 1,300
============== ============= ============== ==============
============== ============= ============== ==============
Basic earnings per common share $ 0.59 $ 0.45 $ 0.90 $ 0.97
Diluted earnings per common share $ 0.57 $ 0.44 $ 0.87 $ 0.94
Cash dividends declared $ 0.135 $ 0.125 $ 0.395 $ 0.370