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January 18, 2006 Contact: Charles J. Viater
President/CEO
MFB Corp. ANNOUNCES FIRST QUARTER EARNINGS AND
QUARTERLY DIVDEND DECLARATION
Mishawaka, Indiana - MFB Corp. (NASDAQ/MFBC), parent company of MFB Financial
(the "Bank"), reported today its consolidated financial results on an unaudited
basis of $1.2 million, or $0.84 diluted earnings per share for the three months
ended December 31, 2006 an increase from the net loss of $397,000 or $0.29
diluted loss per share, for the three months ended December 31, 2005.
Charles J. Viater, President and CEO, stated "The Bank benefited this quarter
from the recovery of loan losses and a partial settlement from the WorldCom
class action law suit. Despite the challenging rate environment, we remain
focused on the continued growth of loans and deposits."
In addition, Mr. Viater announced today that the Board of Directors has declared
a cash dividend of $0.165 per share of common stock for the quarter ended
December 31, 2006. The dividend is payable on February 13, 2007 to holders of
record on January 30, 2007.
MFB Corp's net interest income before provision for loan losses for the three
month period ended December 31, 2006 was $3.1 million compared to $3.5 million
for the same period last year. The decrease was primarily due to an increase in
interest expense on deposits partially offset by a reduction of FHLB advances
and other borrowings interest expense. Interest expense on deposits increased to
$2.6 million for the quarter ended December 2006 compared to $2.1 million for
the quarter ended December 2005, while expense for borrowings declined to $1.5
million from $1.6 million for the comparable periods. Total interest income
earned was $7.1 million for the quarter ended December 2006 and $7.2 million for
the same quarter in 2005.
MFB recorded a recovery of loan losses of $1.1 million for the quarter ended
December 31, 2006 compared to a provision of $2.1 for the same period last year.
The recovery during the quarter ended December 31, 2006 was predominantly
related to the repayment of two commercial loans which previously had
significant allowance for loan losses allocations. The provision during the
first quarter ended December 31, 2005 was primarily related to management's
assessment of a commercial loan (which is the larger of the two loans discussed
above) 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. During the
first quarter ended December 31, 2005, the Bank updated the analysis of the
value of this collateral, completed an assessment of the reliability and
adequacy of accounting systems and evaluated the most recent financial
performance of the business and determined that an additional charge to earnings
in the amount of $2.3 million ($1.4 million net of tax) for this loan was
necessary. The percentage of non-performing assets to total loans decreased from
2.18% at September 30, 2006 to 1.90% at December 31, 2006.
Noninterest income totaled $1.6 million for both quarters ending December 31,
2006 and 2005. In the quarter ended December 31, 2006, MFB recorded a gain on
securities of $361,000 as a partial settlement on a WorldCom class action suit;
an impairment of $49,000 was recorded for the valuation of mortgage servicing
assets in the current quarter while in the prior year period a recovery of
$167,000 was recorded for the valuation of mortgage servicing rights.
Noninterest expense increased to $4.2 million for the quarter ended December 31,
2006 from $3.9 million for the quarter ended December 31, 2005. The increase was
primarily from increased salaries and employee benefits as well as an increase
in marketing and business development expenses.
The Company's total assets were $501.9 million as of December 31, 2006 compared
to $496.1 million as of September 30, 2006. Cash and cash equivalents increased
from $16.3 million at September 30, 2006 to $21.7 million at December 31, 2006.
As of December 31, 2006 total securities available for sale were $53.0 million,
a decrease of $5.4 million from $58.4 million at September 30, 2006.
Loans receivable increased from $379.2 million at September 30, 2006 to $383.3
million at December 31, 2006. Mortgage loans increased by $900,000 from $199.2
million at September 30, 2006 to $200.1 million at December 31, 2006. Commercial
loans outstanding increased slightly from $134.4 million at September 30, 2006
to $134.9 million at December 31, 2006. Consumer loans, including home equity
and second mortgages, increased by $2.6 million during the three month period.
During the first quarter ended December 31, 2006, the Company completed
secondary market mortgage loan sales totaling $2.1 million and the net gains
realized on these loan sales were $51,000 including $26,000 related to recording
mortgage servicing rights. During the quarter ended September 30, 2006, the
Company completed secondary market mortgage loan sales totaling $2.3 million and
the net gains realized on these loan sales were $49,000 including $29,000
related to recording mortgage servicing rights.
The allowance for loan losses at December 31, 2006 was $5.7 million or 1.48% of
loans compared to $7.2 million or 1.91% of loans at September 30, 2006. For the
first quarter ended December 31, 2006, net charge-offs were $439,000 compared to
$37,000 net charge-offs for the quarter ended September 30, 2006.
Total liabilities increased by $4.8 million, from $457.1 million at September
30, 2006 to $461.9 million at December 31, 2006. The bank's noninterest-bearing
demand deposits increased $3.2 million, and time deposits increased $3.2
million; and were offset in part by a decrease in savings and NOW deposits of
$1.9 million. Advances from the FHLB increased slightly to $98.0 million at
December 31, 2006, from $97.1 million at September 30, 2006.
Total shareholders' equity increased by $1.2 million to $40.1 million at
December 31, 2006 compared to $38.9 million at September 30, 2006. The book
value of MFB Corp. stock also increased, from $29.48 at September 30, 2006 to
$30.29 at December 31, 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)
December 31, 2006 and September 30, 2006
(in thousands except share information)
December 31, September 30,
2006 2006
----------------- ------------------
----------------- ------------------
Assets
Cash and due from financial institutions $ 11,669 $ 13,318
Interest-bearing deposits in other financial institutions - short term 10,030 2,971
----------------- ------------------
Total cash and cash equivalents 21,699 16,289
Securities available for sale 52,958 58,383
FHLB Stock and other investments 10,415 10,939
Loans held for sale 675 -
Mortgage loans 200,122 199,194
Commercial loans 134,946 134,414
Consumer loans 48,214 45,614
----------------- ------------------
----------------- ------------------
Loans receivable 383,282 379,222
Less: allowance for loan losses (5,663) (7,230)
----------------- ------------------
Loans receivable, net 377,619 371,992
Premises and equipment, net 19,347 19,477
Mortgage servicing rights 2,241 2,366
Cash surrender value of life insurance 6,296 6,237
Goodwill 1,970 1,970
Other intangible assets 1,602 1,699
Other assets 7,114 6,720
----------------- ------------------
Total Assets $ 501,946 $ 496,072
================= ==================
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing demand deposits $ 33,222 $ 30,031
Savings, NOW and MMDA deposits 127,296 129,233
Time deposits 190,213 186,979
----------------- ------------------
Total deposits 350,731 346,243
FHLB advances 97,970 97,053
Loans from correspondent banks 4,500 4,500
Subordinated debentures 5,000 5,000
Accrued expenses and other liabilities 3,650 4,337
----------------- ------------------
Total liabilities 461,851 457,133
Shareholders' equity
Common stock, no par value: 5,000,000 shares authorized;
shares issued: 1,689,417 - 12/31/06 and 09/30/06;
shares outstanding: 1,323,771 - 12/31/06 and 1,320,844 - 09/30/06 12,466 12,421
Retained earnings - substantially restricted 36,413 35,479
Accumulated other comprehensive income (loss),
net of tax of ($96) - 12/31/06 and ($176) - 09/30/06 (341)
(186)
Treasury stock: 365,646 common shares - 12/31/06 and (8,598) (8,620)
368,573 common shares - 09/30/06, at cost
----------------- ------------------
Total shareholders' equity 40,095 38,939
----------------- ------------------
Total Liabilities and Shareholders' equity $ 501,946 $ 496,072
================= ==================
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended December 31, 2006 and 2005
(in thousands except per share information)
Three Months Ended
December 31,
2006 2005
------------------ -----------------
------------------ -----------------
Interest income
Loans receivable, including fees $ 6,307 $ 6,042
Securities - taxable 740 773
Other interest-bearing assets 65 350
------------------ -----------------
------------------ -----------------
Total interest income 7,112 7,165
Interest expense
Deposits 2,581 2,064
FHLB advances and other borrowings 1,471 1,644
------------------ -----------------
Total interest expense 4,052 3,708
------------------ -----------------
------------------ -----------------
Net interest income 3,060 3,457
Provision for (recovery of) loan losses (1,128) 2,055
------------------ -----------------
------------------ -----------------
Net interest income after provision for 4,188 1,402
(recovery of) loan losses
Noninterest income
Service charges on deposit accounts 851 865
Trust fee income 111 100
Insurance commissions 8 48
Net realized gains from sales of loans 51 85
Mortgage servicing asset recovery (impairment) (49) 167
Net gain (loss) on securities available for sale 361 -
Other income 288 290
------------------ -----------------
------------------ -----------------
Total noninterest income 1,621 1,555
Noninterest expense
Salaries and employee benefits 2,112 1,962
Occupancy and equipment expenses 801 796
Professional and consulting fees 218 162
Data processing expense 207 214
Other expense 878 777
------------------ -----------------
------------------ -----------------
Total noninterest expense 4,216 3,911
Income (loss) before income taxes 1,593 (954)
Income tax expense (benefit) 442 (557)
------------------ -----------------
------------------ -----------------
Net income (loss) $ 1,151 $ (397)
================== =================
================== =================
Basic earnings (loss) per common share $ 0.87 $ (0.29)
Diluted earnings (loss) per common share $ 0.84 $
(0.29)
Cash dividends declared $ 0.165 $ 0.135