April 19, 2007 Contact:Charles J. Viater
President/CEO
MFB Corp. ANNOUNCES SECOND QUARTER, YEAR TO DATE EARNINGS AND
QUARTERLY DIVIDEND 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 $1.9 million or $1.41 diluted earnings per share for the six months
ended March 31, 2007 an increase from the net income of $418,000 or $0.30
diluted earnings per share, for the six months ended March 31, 2006. The change
is predominantly due to the activity in the allowance for loan loss further
discussed below. MFB Corp's consolidated net income for the three months ended
March 31, 2007 was $781,000, or $0.57 diluted earnings per share, compared to
$815,000, or $0.59 diluted earnings per share, for the same period last year.
Charles J. Viater, President and CEO, stated "Profitable loan growth and deposit
pricing continue to be the focus in the current rate environment. The growth in
core deposits has provided us the opportunity to pay down high cost borrowings
to reduce the impact of margin compression."
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 March
31, 2007. The dividend is payable on May 15, 2007 to holders of record on May 1,
2007.
MFB Corp's net interest income before provision for loan losses for the three
month period ended March 31, 2007 was $3.3 million compared to $3.4 million for
the same period last year. For the six month periods ended March 31, 2007 and
2006, net interest income was $6.4 million and $6.9 million, respectively. The
decrease was due to an increase in interest expense on deposits, partially
offset by an increase in interest income and reduced FHLB advance interest and
other borrowings expense. Interest expense on deposits increased to $2.6 million
for the quarter ended March 31, 2007 compared to $2.2 million for the same
quarter in 2006, and increased to $5.1 million from $4.3 million for the
comparable six month periods. Interest income increased to $7.3 million for the
three months ended March 31, 2007 compared to $7.1 million for the three months
ended March 31, 2006 and for the six months ended March 31, 2007 and March 31,
2006 was $14.4 million and $14.3 million, respectively. Interest expense on FHLB
advances and other borrowings declined to $1.4 million for the March 2007
quarter compared to $1.5 million in March 2006, and to $2.9 million from $3.1
million for the respective six month periods.
MFB Corp recorded a recovery of loan losses of $1.4 million for the six months
ended March 31, 2007 compared to a provision expense of $1.9 for the same period
last year. The recovery during the six months ended March 31, 2007 was
predominantly related to the repayment of two commercial loans which previously
had significant allowance for loan loss allocations. The percentage of
non-performing assets to total loans decreased from 2.18% at September 30, 2006
to 1.68% at March 31, 2007.
Noninterest income was $1.4 million for the quarter ending March 31, 2007 and
$1.5 million for the quarter ended March 31, 2006, and $3.0 million for both of
the respective six month periods. For the six months ended March 31, 2007, MFB
recorded a gain on securities of $377,000 as a partial settlement on a WorldCom
class action suit; an impairment of $20,000 was recorded for the valuation of
mortgage servicing assets, while in the six month period ending March 31, 2006,
a recovery of $166,000 was recorded for the valuation of mortgage servicing
rights.
Noninterest expense remained consistent at $4.0 million for the quarter ended
March 31, 2007 and 2006. For the six month period ended March 31, 2007
noninterest expense increased to $8.2 million from $7.9 million at March 31,
2006. These increases were primarily from salaries and employee benefits.
The Company's total assets were $501.6 million as of March 31, 2007 compared to
$496.1 million as of September 30, 2006. Cash and cash equivalents increased
from $16.3 million at September 30, 2006 to $24.5 million at March 31, 2007.
Loans receivable increased from $379.2 million at September 30, 2006 to $387.5
million at March 31, 2007. Mortgage loans decreased from $199.2 million at
September 30, 2006 to $198.6 million at March 31, 2007. Commercial loans
outstanding increased from $134.4 million at September 30, 2006 to $140.6
million at March 31, 2007. Consumer loans, including home equity and second
mortgages, increased by $2.7 million during the six month period ending March
31, 2007.
During the second quarter ended March 31, 2007, the Company completed secondary
market mortgage loan sales totaling $4.2 million and the net gains realized on
these loan sales were $93,000, including $52,000 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 March 31, 2007 was $5.4 million or 1.39% of
loans compared to $7.2 million or 1.91% of loans at September 30, 2006 with the
change due predominantly to the recovery of loan losses during the first quarter
of 2007. For the second quarter ended March 31, 2007, net charge-offs were
$56,000 compared to $37,000 net charge-offs for the quarter ended September 30,
2006.
Total liabilities increased by $3.6 million, from $457.1 million at September
30, 2006 to $460.7 million at March 31, 2007. The Bank's noninterest-bearing
demand deposits increased $6.3 million, and savings and NOW deposits $4.2
million; time deposits decreased by $2.7 million. FHLB advances increased
slightly to $97.5 million at March 31, 2007, from $97.1 million at September 30,
2006.
Total shareholders' equity increased by $1.9 million to $40.9 million at March
31, 2007 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 $30.97 at March
31, 2007
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
March 31, 2007 (UNAUDITED) and September 30, 2006
(in thousands except share information)
March 31, September 30,
2007 2006
----------------- ------------------
----------------- ------------------
Assets
Cash and due from financial institutions $ 15,570 $ 13,318
Interest-bearing deposits in other financial institutions - short term 8,907 2,971
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Total cash and cash equivalents 24,477 16,289
Securities available for sale 47,902 58,383
FHLB Stock and other investments 10,371 10,939
Mortgage loans 198,556 199,194
Commercial loans 140,584 134,414
Consumer loans 48,311 45,614
----------------- ------------------
----------------- ------------------
Loans receivable 387,451 379,222
Less: allowance for loan losses (5,378) (7,230)
----------------- ------------------
Loans receivable, net 382,073 371,992
Premises and equipment, net 19,045 19,477
Mortgage servicing rights 2,261 2,366
Cash surrender value of life insurance 6,356 6,237
Goodwill 1,970 1,970
Other intangible assets 1,505 1,699
Other assets 5,608 6,720
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Total Assets $ 501,568 $ 496,072
================= ==================
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing demand deposits $ 36,336 $ 30,031
Savings, NOW and MMDA deposits 133,430 129,233
Time deposits 184,282 186,979
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Total deposits 354,048 346,243
FHLB advances 97,482 97,053
Loans from correspondent banks - 4,500
Subordinated debentures 5,000 5,000
Accrued expenses and other liabilities 4,183 4,337
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Total liabilities 460,713 457,133
Shareholders' equity
Common stock, no par value: 5,000,000 shares authorized;
shares issued: 1,689,417 - 03/31/07 and 9/30/06;
shares outstanding: 1,319,271 - 03/31/07 and 1,320,844 - 09/30/06 12,477 12,421
Retained earnings - substantially restricted 36,975 35,479
Accumulated other comprehensive income (loss),
net of tax of $82 - 03/31/07 and ($175) - 09/30/06 159 (341)
Treasury stock: 370,146 common shares - 03/31/07 and (8,756) (8,620)
368,573 common shares - 09/30/06, at cost
----------------- ------------------
Total shareholders' equity 40,855 38,939
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Total Liabilities and Shareholders' equity $ 501,568 $ 496,072
================= ==================
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three and Six Months Ended March 31, 2007
and 2006 (in thousands except per share
information)
Three Months Ended Six Months Ended
March 31, March 31,
2007 2006 2007 2006
Interest income
Loans receivable, including fees $ 6,509 $ 6,027 $ 12,816 $ 12,069
Securities 690 805 1,430 1,578
Other interest-bearing assets 138 282 203 632
Total interest income 7,337 7,114 14,449 14,279
Interest expense
Deposits 2,567 2,221 5,148 4,285
FHLB advances and other borrowings 1,421 1,479 2,892 3,123
Total interest expense 3,988 3,700 8,040 7,408
Net interest income 3,349 3,414 6,409 6,871
Provision for (recovery of) loan losses (228) (154) (1,356) 1,901
Net interest income after provision for 3,577 3,568 7,765 4,970
(recovery of) loan losses
Noninterest income
Service charges on deposit accounts 767 796 1,618 1,661
Trust fee income 160 126 271 226
Insurance commissions 15 43 23 91
Net realized gains from sales of loans 93 86 144 171
Mortgage servicing asset recovery (impairment) 29 (1) (20) 166
Net gain on securities available for sale 16 - 377 -
Other income 344 411 632 701
Total noninterest income 1,424 1,461 3,045 3,016
Noninterest expense
Salaries and employee benefits 2,016 1,909 4,128 3,871
Occupancy and equipment expenses 802 869 1,603 1,665
Professional and consulting fees 179 205 397 367
Data processing expense 208 211 415 425
Other expense 780 762 1,658 1,539
Total noninterest expense 3,985 3,956 8,201 7,867
Income before income taxes 1,016 1,073 2,609 119
Income tax expense (benefit) 235 258 677 (299)
Net income $ 781 $ 815 $ 1,932 $ 418
Basic earnings per common share $ 0.59 $ 0.60 $ 1.46 $ 0.31
Diluted earnings per common share $ 0.57 $ 0.59 $ 1.41 $ 0.30
Cash dividends declared $ 0.165 $ 0.135 $ 0.330 $ 0.260