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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 2007
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ____________________ TO ____________________
Commission file number: 0-23374
MFB CORP.
(Exact name of registrant as specified in its charter)
Indiana 35-1907258
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
4100 Edison Lakes Parkway Suite 300
P.O. Box 528
Mishawaka, Indiana 46546
(Address of principal executive offices,
including Zip Code)
(574) 277-4200
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer __ Accelerated filer __
Non-accelerated filer X
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes __ No X
The number of shares of the registrant's common stock, without par value,
outstanding as of April 20, 2007 was 1,315,771.
MFB CORP. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2007 (Unaudited) and September 30, 2006 3
Consolidated Statements of Income (Unaudited)
Three and Six Months Ended March 31, 2007 and 2006 4
Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
Three and Six Months Ended March 31, 2007 and 2006 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended March 31, 2007 and 2006 6
Notes to (Unaudited) Consolidated Financial Statements March 31, 2007 7
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
General 12
Results of Operations
12
Balance Sheet Composition 13
Liquidity and Capital Resources 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 15
Item 4. Controls and Procedures 17
Part II. Other Information
Items 1-6 18
Signatures 19
Certifications 20
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
----------------- ------------------
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
----------------- ------------------
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
----------------- ------------------
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
----------------- ------------------
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
----------------- ------------------
Total Liabilities and Shareholders' equity $ 501,568 $ 496,072
================= ==================
See accompanying notes to (unaudited) consolidated financial statements
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 loan losses (228) (154) (1,356) 1,901
Net interest income after provision for
loan losses 3,577 3,568 7,765 4,970
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
See accompanying notes to (unaudited) consolidated financial statements
MFB CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (UNAUDITED)
Three and Six Months Ended March 31, 2007 and 2006
(in thousands)
Three Months Ended Six Months Ended
2007 2006 2007 2006
Balance at beginning of period $ 40,095 $ 37,811 $ 38,939 $ 38,673
Stock based compensation expense 7 15 21 29
Treasury stock purchased (171) (363) (303) (363)
Stock options exercised - issuance
of treasury stock 15 - 163 -
Tax benefit related to employee stock
options exercised - - 37 -
Cash dividends declared (218) (183) (435) (352)
Comprehensive income:
Net income 781 815 1,932 418
Other comprehensive income (loss), net
of tax 346 208 501 (102)
----------------- ----------------- ------------------ -----------------
----------------- ----------------- ------------------ -----------------
Total comprehensive income 1,127 1,023 2,433 316
----------------- ----------------- ------------------ -----------------
----------------- ----------------- ------------------ -----------------
Balance at end of period $ 40,855 $ 38,303 $ 40,855 $ 38,303
================= ================= ================== =================
See accompanying notes to (unaudited)
consolidated financial statements
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended March 31, 2007 and 2006
(in thousands)
Six Months Ended
March 31,
2007 2006
Cash flows from operating activities
Net income $ 1,932 $ 418
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization, net of accretion 703 950
Provision for loan losses (1,356) 1,901
Net realized gains from sales of loans (144) (171)
Amortization of mortgage servicing rights 166 147
Amortization of intangible assets and purchase adjustments 151 45
Origination of loans held for sale (5,626) (7,753)
Sale of other real estate owned property 1,113 -
Impairment (recovery) of mortgage servicing rights 20 (166)
Proceeds from sales of loans held for sale 6,364 7,823
Equity in loss of investment in limited partnership 122 92
Stock-based compensation 21 29
Appreciation in cash surrender value of life insurance (119) (108)
Net change in:
Accrued interest receivable 61 (53)
Other assets (254) (1,255)
Accrued expenses and other liabilities (301) (322)
------------- --------------
Net cash provided in operating activities 2,853 1,577
Cash flows from investing activities
Net change in loans receivable (9,536) 13,379
FHLB stock redemption 446 -
Proceeds from:
Net cash received in settlement - 453
Principal payments of mortgage-backed and related securities 4,372 6,476
Maturities and calls of securities available for sale 6,840 5,000
Purchase of:
Securities available for sale - (12,970)
Premises and equipment (251) (660)
------------- --------------
------------- --------------
Net cash provided in investing activities 1,871 11,678
Cash flows from financing activities
Purchase of treasury stock (303) (363)
Net change in deposits 7,805 (12,808)
Proceeds from FHLB advances 30,585 -
Repayment of FHLB advances (30,035) (15,950)
Repayment of other borrowings (4,500) -
Proceeds from exercise of stock options 163 -
Tax benefit from exercise of stock options 37 -
Net change in advances from borrowers for taxes and insurance 147 282
Cash dividends paid (435) (352)
------------- --------------
------------- --------------
Net cash provided (used) in financing activities 3,464 (29,191)
------------- --------------
------------- --------------
Net change in cash and cash equivalents 8,188 (15,936)
Cash and cash equivalents at beginning of period 16,289 54,209
------------- --------------
------------- --------------
Cash and cash equivalents at end of period $ 24,477 $ 38,273
------------- --------------
------------- --------------
Supplemental disclosures of cash flow information Cash paid during the period
for:
Interest $ 7,786 $ 7,035
Income taxes 1,002 507
Supplemental schedule of noncash investing activities:
Transfer from:
Loans receivable to loans held for sale $ $
531 -
Loans receivable to other real estate owned 65 -
MFB CORP. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2007
NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Nature of Operations: MFB Corp. is an Indiana unitary savings and loan holding
company organized in 1993, and parent company of its wholly owned federal
savings bank subsidiary, MFB Financial (the "Bank"). MFB Corp. and the Bank
(collectively referred to as the "Company") conduct business in Indiana from
their corporate office in Mishawaka and ten banking centers in St. Joseph and
Elkhart Counties and provide private client services to the Indianapolis market
through the Bank's office in Hamilton County. The Bank offers a variety of
lending, deposit and other financial services to its retail and business
customers. The Wealth Management Group of the Bank attracts high net worth
clients and offers trust, investment, insurance, broker advisory, retirement
plan and private banking services. The Bank's wholly-owned subsidiary, Mishawaka
Financial Services, Inc., offers a variety of life and health insurance products
to customers in the Bank's market area. The Bank's wholly-owned subsidiaries,
MFB Investments I, Inc., MFB Investments II, Inc. and MFB Investments, LP are
Nevada corporations and a Nevada limited partnership that manage the Bank's
investment portfolio.
Basis of Presentation: The accompanying unaudited consolidated financial
statements were prepared in accordance with instructions for Form 10-Q and,
therefore, do not include all disclosures required by accounting principles
generally accepted in the United States of America for a complete presentation
of the financial statements. In the opinion of management, the consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the consolidated balance sheets of MFB Corp. and its subsidiary
MFB Financial as of March 31, 2007 and September 30, 2006, the consolidated
statements of income, the condensed consolidated statements of changes in
shareholders' equity for the three and six months ended March 31, 2007 and 2006
and the consolidated statements of cash flows for the six months ended March 31,
2007 and 2006. All significant intercompany transactions and balances are
eliminated in consolidation.
Reclassifications: Items in the prior consolidated financial statements are
reclassified to conform with the current presentation.
NOTE 2 - EARNINGS PER COMMON SHARE
Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per common share shows the dilutive effect of additional potential
common shares issuable under stock options.
The computations of basic earnings per common share and diluted earnings per
common share for the three and six month periods ended March 31, 2007 and 2006
are presented below.
Three Months Ended Six Months Ended
March 31, March 31,
(in thousands except per share information)
2007 2006 2007 2006
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
Basic Earnings Per Common Share
Numerator
Net income $ 781 $ 815 $ 1,932 $ 418
=========== =========== ============= =============
Denominator
Weighted average common shares
outstanding for basic earnings per
common share 1,323 1,352 1,320 1,354
=========== =========== ============= =============
Basic Earnings Per Common Share $ 0.59 $ 0.60 $ 1.46 $ 0.31
=========== =========== ============= =============
Diluted Earnings Per Common Share
Numerator
Net income $ 781 $ 815 $ 1,932 $ 418
=========== =========== ============= =============
Denominator
Weighted average common shares
outstanding for basic earnings per
common share 1,323 1,352 1,320 1,354
Add: Dilutive effects of assumed exercises of
stock options 50 47 52 41
----------- ----------- ------------- -------------
Weighed average common and dilutive
potential common shares outstanding 1,373 1,399 1,372 1,395
=========== =========== ============= =============
Diluted Earnings Per Common Share $ 0.57 $ 0.59 $ 1.41 $ 0.30
=========== =========== ============= =============
Stock options for 17,000 common shares for the three and six months ended March
31, 2007 were not considered in computing diluted earnings per share because
they were antidilutive. Stock options for 24,000 common shares for the three and
six months ended March 31, 2006 were not considered in computing diluted
earnings per share because they were antidilutive.
NOTE 3 - SECURITIES
The amortized cost and fair value of securities available for sale are as
follows:
March 31, 2007
--------------
(in thousands)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities
U.S. Government and federal agencies $ 9,997 $ 3 $ (25) $ 9,975
Municipal bonds 171 - - 171
Mortgage-backed 29,470 49 (397) 29,122
Corporate notes 4,971 1 (78) 4,894
----------------- ---------------- --------------- ---------------
44,609 53 (500) 44,162
Marketable equity securities 3,052 688 - 3,740
----------------- ---------------- --------------- ---------------
$ 47,661 $ 741 $ (500) $ 47,902
================= ================ =============== ===============
September 30, 2006
------------------
(in thousands)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities
U.S. Government and federal agencies $ 14,392 $ 2 $ (72) $ 14,322
Municipal bonds 337 1 - 338
Mortgage-backed 33,839 18 (662) 33,195
Corporate notes 7,246 2 (133) 7,115
----------------- ---------------- --------------- ---------------
55,814 23 (867) 54,970
Marketable equity securities 3,085 328 - 3,413
----------------- ---------------- --------------- ---------------
$ 58,899 $ 351 $ (867) $ 58,383
================= ================ =============== ===============
Management evaluates securities for other-than-temporary impairment at least on
a quarterly basis, and more frequently when economic or market concerns warrant
such evaluation. Consideration is given to (1) the length of time and the extent
to which the fair value has been less than cost, (2) the financial condition and
near-term prospects of the issuer, and (3) the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value.
The values of mortgage-backed securities have increased since September 30,
2006, resulting in net unrealized losses of $348,000 at March 31, 2007 compared
to net unrealized losses of $644,000 at September 30, 2006. Credit issues are
not considered to be a significant factor relative to the current unrealized
losses.
Included in marketable equity securities are government sponsored agency
preferred stocks of $3.1 million at both March 31, 2007 and September 30, 2006.
The Company recorded a non-cash impairment charge of $948,000 ($626,000 net of
tax) during the year ended September 30, 2005 for the decline in the value
determined to be other-than temporary. The value of these securities has
subsequently improved, resulting in an unrealized gain of $688,000 at March 31,
2007.
During the fiscal year ended September 30, 2002, a write down was recorded of
$895,000 on a $1.0 million WorldCom, Inc. corporate debt security. This security
was sold in October 2002 for $160,000. During the quarter ended March 31, 2007,
a payment of $16,000 was received from the funds recovered by the U.S.
Securities and Exchange Commission in its class action law suit against
WorldCom, Inc. During the quarter ended December 31, 2006, a separate payment of
$361,000 was received from the funds recovered in the federal securities class
action law suit brought on behalf of purchasers of WorldCom, Inc. Future
distributions may occur depending upon the resolution of disputed claims,
appeals from court determinations, and additional administrative expenses,
interest and taxes incurred by the settlement funds.
NOTE 4 - LOANS RECEIVABLE
Loans receivable at March 31, 2007 and September 30, 2006 are summarized as
follows:
March 31, September 30,
2007 2006
--------------------- ---------------------
(in thousands)
Residential mortgage loans
Secured by one to four family residences $ 178,109 $ 174,397
Construction loans 17,685 22,232
Other 3,458 3,090
--------------------- ---------------------
199,252 199,719
Net deferred loan fees (484) (498)
Construction and other mortgage loans in process (undisbursed) (212) (27)
--------------------- ---------------------
Total residential mortgage loans 198,556 199,194
Commercial loans
Commercial real estate
90,959 84,653
Commercial 49,838 49,958
--------------------- ---------------------
--------------------- ---------------------
140,797 134,611
Net deferred loan fees (213) (209)
Commercial and real estate loans in process - 12
--------------------- ---------------------
Total commercial loans 140,584 134,414
Consumer loans
Home equity and second mortgage
40,359 37,779
Other 7,891 7,776
--------------------- ---------------------
48,250 45,555
Home equity and other loans in process 61 59
--------------------- ---------------------
Total consumer loans 48,311 45,614
--------------------- ---------------------
Total loans receivable $ 387,451 $ 379,222
===================== =====================
Activity in the allowance for loan losses is summarized as follows for the six
months ended March 31, 2007 and 2006.
March 31, March 31,
2007 2006
--------------------- ---------------------
(in thousands)
Balance at beginning of period $ 7,230 $ 6,388
Provision for loan losses (1,356) 1,901
Charge-offs (510) (103)
Recoveries 14 2
--------------------- ---------------------
Balance at end of period $ 5,378 $ 8,188
===================== =====================
NOTE 4 - LOANS RECEIVABLE (continued)
Quarter Ended Year Ended
March 31, September 30,
Impaired loans were as follows: 2007 2006
--------------------- ----------------------
(in thousands)
Period end loans with no allocated allowance for loan losses $ 1,262 $ 873
Period end loans with allocated allowances for loan losses 3,461 6,052
--------------------- ----------------------
Total impaired loans $ 4,723 $ 6,925
===================== ======================
Amount of the allowance for loan losses allocated $ 2,572 $ 4,337
Average of impaired loans 4,457 8,270
Interest income recognized during impairment 2 165
Cash-basis interest income recognized during impairment - 159
Impaired loans decreased during the quarter ended March 31, 2007 primarily due
to the activity of one commercial loan customer. A payment was received from an
impaired loan with a balance of approximately $2.2 million at December 31, 2006.
This commercial loan and the largest loan relationship included in impaired
loans paid approximately $250,000 during the quarter ended March 31, 2007. The
loan balance was approximately $2.0 million at March 31, 2007 with an equivalent
amount of allowance for loan losses allocation. The Bank maintained the $2.0
million allowance for the loan losses allocation based upon the history of
unreliable and inconsistent financial reporting and cash flows of the customer's
business. The actual loss on this loan relationship may vary significantly from
the current estimate contingent upon the borrower's compliance with the terms of
the forbearance agreement.
Non-performing loans were as follows:
March 31, September 30,
2007 2006
---------------------- ---------------------
(in thousands)
Loans past due over 90 days still on accrual status $ 20 $ 619
Non-accrual loans 5,874 6,390
---------------------- ---------------------
Restructured loans 446 -
---------------------- ---------------------
---------------------- ---------------------
Total non-performing loans $ 6,340 $ 7,009
====================== =====================
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
The principal business of MFB Financial has historically consisted of attracting
deposits from the general public and the business community and making loans
secured by various types of collateral, including real estate and general
business assets. The Wealth Management Group of MFB attracts high net worth
clients and offers trust, investment, insurance, broker advisory, retirement
plan and private banking services. The Bank is significantly affected by
prevailing economic conditions, as well as government policies and regulations
concerning, among other things, monetary and fiscal affairs, housing and
financial institutions. Deposit flows are influenced by a number of factors,
including interest rates paid on competing investments, account maturities, fee
structures, and level of personal income and savings. Lending activities are
influenced by the demand for funds, the number and quality of lenders, and
regional economic cycles. Sources of funds for lending activities of the Bank
include deposits, borrowings, payments on loans, sales of loans and income
provided from operations.
The Company's earnings are primarily dependent upon the Bank's net interest
income, the difference between interest income and interest expense. Interest
income is a function of the balances of loans and investments outstanding during
a given period and the yield earned on such loans and investments. Interest
expense is a function of the amount of deposits and borrowings outstanding
during the same period and interest rates paid on such deposits and borrowings.
The Company's earnings are also affected by the Bank's provisions for loan
losses, service charges and fee income, gains from sales of loans, valuation and
fees related to mortgage loan servicing operations, income from subsidiaries'
activities, operating expenses and income taxes.
RESULTS OF OPERATIONS
COMPARISON OF THREE AND SIX MONTHS ENDED MARCH 31, 2007 AND 2006
The Company's consolidated net income for the three months ended March 31, 2007
was $781,000 or $0.57 diluted earnings per common share, compared to net income
of $815,000 or $0.59 diluted loss per share, for the three months ended March
31, 2006. MFB Corp.'s decrease in earnings for the second fiscal quarter from
the prior comparable period was primarily attributable to a decrease in net
interest income which is the difference between interest income and interest
expense. The Company's consolidated net income for the six months ended March
31, 2007 was $1.9 million or $1.41 diluted earnings per common share, compared
to net income of $418,000 or $0.30 diluted earnings per share, for the six
months ended March 31, 2006. The increase from the six month period ended March
31, 2006 to that of March 31, 2007 was primarily attributable to a negative
provision for loan losses partially offset by a decrease in net interest income
and an increase in noninterest expense.
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 rose to $7.3 million 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.
The negative provision for loan losses was $1.4 million and approximately
$300,000 for the respective six and three months ended March 31, 2007 compared
to a provision expense of $1.9 million and $200,000 for the same respective
periods last year. The recoveries during the six months ended March 31, 2007
were predominantly related to the repayment of two commercial loans which
previously had a significant allowance for loan losses allocations. The
provision during the six months ended March 31, 2006 was primarily related to
management's 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. 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 1.68% 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 in the current six month period, 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.
Income tax expense for the three months ended March 31, 2007 was approximately
$235,000 compared to approximately $258,000 for the same period last year due to
the change in income before income taxes. Income tax expense for the six months
ended March 31, 2007 was approximately $677,000 compared to an income tax
benefit of approximately $299,000 for the same period last year due to the
change in income before income taxes.
BALANCE SHEET COMPOSITION
COMPARISON OF MARCH 31, 2007 TO SEPTEMBER 30, 2006
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. Financing activities provided an increase of
$3.5 million in cash, largely from an increase in deposits; investing activities
and operating activities contributed $1.9 million and $2.9 million to cash,
respectively, during the six month period.
As of March 31, 2007 total securities available for sale were $47.9 million, a
decline of $10.5 million from $58.4 million at September 30, 2006. The
securities portfolio activity during the six month period included principal
payments on mortgage-backed and related securities of $4.4 million and
maturities and calls of securities available for sale of $6.8 million. The
Company has made no purchases or sales of securities during the last six months.
Loans receivable increased from $379.2 million at September 30, 2006 to $387.5
million at March 31, 2007. Mortgage loans decreased by $600,000 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.
Diversification of the mix of loans on the balance sheet continues to be a focus
to improve profit margins, control margin volatility and to appeal to a broader
range of existing and potential customers.
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 loans sold this year were primarily
fixed rate mortgage loans with maturities of fifteen years or longer. The sale
of loan production serves as a source of additional liquidity and management
anticipates that the Company will continue to deliver fixed rate loans to the
secondary market to meet consumer demand, manage interest rate risk, and
diversify the asset mix of the Company.
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 negative provision for 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. In management's opinion, the allowance for loan losses
is adequate to cover probable incurred losses at March 31, 2007.
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. Advances from the FHLB were up
slightly to $97.5 million at March 31, 2007, from $97.1 million at September 30,
2006. As of March 31, 2007, the advances had a weighted average interest rate of
5.50% and mature over the next five years. A total of $27.0 million of the
advances with a weighted average interest rate of 5.78% mature over the next
twelve months.
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 increase was
derived from net income of $1.9 million, and a reduction in unrealized
investment losses by $500,000, offset by dividend payouts of $435,000 and
treasury stock purchases of $303,000. MFB Corp's equity to assets ratio was
8.15% at March 31, 2007 compared to 7.85% at September 30, 2006, and the book
value of MFB Corp. stock also increased, from $29.48 at September 30, 2006 to
$30.97 at March 31, 2007.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity relates primarily to the Company's ability to fund loan demand, meet
deposit customers' withdrawal requirements and provide for operating expenses.
Assets used to satisfy these needs consist of cash, deposits with other
financial institutions, overnight interest-bearing deposits in other financial
institutions and securities available for sale. These assets are commonly
referred to as liquid assets.
Liquid assets were $73.4 million as of March 31, 2007, down slightly from $75.7
million at September 30, 2006. Cash and cash equivalents increased $8.2 million
in the most recent quarter, while securities available for sale declined by
$10.5 million. Management believes the liquidity level as of March 31, 2007 is
sufficient to meet anticipated cash needs.
Short-term borrowings or long-term debt, such as Federal Home Loan Bank
advances, are used to supplement other sources of funds such as deposits and to
assist in asset/liability management. As of March 31, 2007, total FHLB
borrowings amounted to $97.5 million and were originally used primarily to fund
loan portfolio growth. The Bank had commitments to fund loan originations with
borrowers totaling $95.3 million at March 31, 2007, including $81.0 million in
available consumer and commercial lines and letters of credit. Certificates of
deposit scheduled to mature in one year or less totaled $125.2 million. Based on
historical experience, management believes that a significant portion of
maturing deposits will remain with the Bank. The Bank anticipates that it will
continue to have sufficient cash flow and other cash resources to meet current
and anticipated loan funding commitments, deposit customer withdrawal
requirements and operating expenses.
The Bank is subject to various regulatory capital requirements administered by
federal banking agencies. Capital adequacy guidelines and prompt corrective
action regulations involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative
judgments by regulators about components, risk weightings, and other factors,
and the regulators can lower classifications in certain cases. Failure to meet
various capital requirements can initiate regulatory action that could have a
direct material effect on the financial statements.
The prompt corrective action regulations provide five classifications, including
"well-capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized," although these terms are
not used to represent overall financial condition. If not "well capitalized,"
regulatory approval is required to accept brokered deposits. If
"undercapitalized," capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required.
The Bank's actual capital and required capital amounts and ratios at March 31,
2007 and September 30, 2006 are presented below:
Actual Requirement for Capital Requirement to be
------
Well Capitalized Under
Prompt Corrective
Adequacy Purposes Actual Provisions
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of March 31, 2007
Total capital
(to risk weighted assets) $ 41,849 12.31% $ 27,203 8.00% $ 34,004 10.00%
Tier 1 (core) capital
(to risk weighted assets) 38,970 11.33 13,601 4.00 20,402 6.00
Tier 1 (core) capital
(to adjusted total assets) 38,970 7.87 19,819 4.00 24,774 5.00
As of September 30, 2006
Total capital
(to risk weighted assets) $ 43,221 12.96% $ 26,688 8.00% $ 33,360 10.00%
Tier 1 (core) capital
(to risk weighted assets) 40,859 12.10 13,344 4.00 20,016
6.00
Tier 1 (core) capital
(to adjusted total assets) 40,859 8.34 19,604 4.00 24,506 5.00
As of March 31, 2007, management is not aware of any current recommendations by
regulatory authorities which, if they were to be implemented, would have, or are
reasonably likely to have, a material adverse effect on the Company's liquidity,
capital resources or operations.
The foregoing discussion contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, which involve a number
of risks and uncertainties. A number of factors could cause results to differ
materially from the objectives and estimates expressed in such forward-looking
statements. These factors include, but are not limited to, changes in economic
conditions in the Company's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Company's
market area, changes in the position of banking regulators on the adequacy of
our allowance for loan losses, changes in the value of the Company's mortgage
servicing rights and securities available for sale, and competition, all or some
of which could cause actual results to differ materially from historical
earnings and those presently anticipated or projected. These factors should be
considered in evaluating any forward-looking statements, and undue reliance
should not be placed on such statements. MFB Corp. does not undertake and
specifically disclaims any obligation to update any forward-looking statements
to reflect occurrence of anticipated or unanticipated events or circumstances
after the date of such statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to interest rate risk to the extent that its
interest-bearing liabilities, primarily deposits and Federal Home Loan Bank
(FHLB) advances, reprice more rapidly or at different rates than its
interest-earning assets.
A key element of the Company's asset/liability plan is to protect net earnings
by managing the maturity or repricing mismatch between its interest-earning
assets and rate-sensitive liabilities. Historically, the Company has sought to
reduce exposure to its earnings through the use of adjustable rate loans and
through the sale of fixed rate loans in the secondary market, and by extending
funding maturities through the use of FHLB advances.
As part of its efforts to monitor and manage interest rate risk, the Company
uses the Net Portfolio Value ("NPV") methodology adopted by the Office of Thrift
Supervision (OTS) as part of its capital regulations. In essence, this approach
calculates the difference between the present value of expected cash flows from
assets and the present value of expected cash flows from liabilities, as well as
cash flows from off-balance-sheet contracts. Management and the Board of
Directors review the OTS measurements on a quarterly basis to determine whether
the Company's interest rate exposure is within the limits established by the
Board of Directors in the Company's interest rate risk policy. In Management's
opinion, there have been no significant shifts in position since December 31,
2006.
The Company's asset/liability management strategy dictates acceptable limits on
the amounts of change in NPV given certain changes in interest rates. The table
presented here, as of December 31, 2006, is an analysis of the Company's
interest rate risk as measured by changes in NPV for instantaneous and sustained
parallel shifts in the yield curve, in 100 basis point increments, up 300 basis
points and down 200 basis points (due to the low interest rate environment at
December 31, 2006, data was not available from the OTS for the shift downward in
rates 300 basis points).
As illustrated in the December 31, 2006 table below, the Company's interest rate
risk is sensitive to rising rates and positively impacted by declining rates.
The decline in NPV with a rate increase is due to the relative volume of
mortgage assets with fixed rate characteristics over the volume of liabilities
with fixed rate characteristics.
December 31, 2006
Change in
Interest Rates NPV as % of Portfolio
In Basis Net Portfolio Value Value of Assets
------------------------------------- ----------------------------
Points NPV
(Rate Shock) (1) $ Amount $ Change % Change Ratio Change (1)
- ----------- --- -------- -------- -------- ----- ---------
(Dollars in Thousands)
+300 $ 43,277 $ (17,505) (29)% 8.33% (301) bp
+200 50,324 (10,458) (17) 10.09 (175) bp
+100 56,299 (4,483) (7) 11.12 (73) bp
0 60,781 - - 11.84 -
(100) 62,129 1,347 2 12.01 16 bp
(200) 62,325 1,543 3 11.97 13 bp
(1) Expressed in basis points
Specifically, the December 31, 2006 table indicates that the Company's NPV was
$60.8 million or 11.84% of the market value of portfolio assets. Based upon the
assumptions utilized, an immediate 200 basis point increase in market interest
rates would result in a $10.5 million or 17% decrease in the Company's NPV and
would result in a 175 basis point decrease in the Company's NPV ratio to 10.09%.
Also, an immediate 200 basis point decrease in market interest rates would
result in a $1.5 million increase in the Company's NPV, and a 13 basis point
increase in the Company's NPV ratio to 11.97%.
In evaluating the Company's interest rate risk exposure to interest rate
movements, certain shortcomings inherent in the method of analysis presented in
the foregoing table must be considered. For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they may react
in different degrees to changes in market interest rates. Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in interest rates. Additionally, certain assets, such as
adjustable rate mortgages (ARM'S), have features which restrict changes in
interest rates on a short-term basis and over the life of the asset. Further, in
the event of a significant change in interest rates, prepayment and early
withdrawal levels would likely deviate significantly from those assumed above.
Finally, the ability of many borrowers to service their debt may decrease in the
event of an interest rate increase. The Company considers all of these factors
in monitoring its exposure to interest rate risk.
In addition to monitoring selected measures on NPV, management also monitors
effects on net interest income resulting from increases or decreases in rates.
This process is used in conjunction with NPV measures to identify excessive
interest rate risk. In managing its asset/liability mix, the Company, depending
on the relationship between long and short term interest rates, market
conditions and consumer preference, may place somewhat greater emphasis on
maximizing its net interest margin than on strictly matching the interest rate
sensitivity of its assets and liabilities. Management believes that the
increased net income which may result from an acceptable mismatch in the actual
maturity or repricing of its asset and liability portfolios can provide
sufficient returns to justify the increased exposure to sudden and unexpected
increases in interest rates which may result from such a mismatch. Management
believes that the Company's level of interest rate risk is acceptable under this
approach as well.
The Board of Directors and management of the Company believe that certain
factors afford the Company the ability to operate successfully despite its
exposure to interest rate risk. The Company manages its interest rate risk by
originating and selling the majority of its fixed rate one-to-four family real
estate loans. While the Company generally originates adjustable rate mortgage
loans for its own portfolio, fixed rate first mortgage loans may be retained in
the portfolio from time to time. The Company retains the servicing on the
majority of loans sold in the secondary market and, at March 31, 2007, $189.9
million in such loans were being serviced for others.
The Company's investment strategy is to maintain a diversified portfolio of high
quality investments that minimize interest rate and credit risks while striving
to maximize investment return and to provide liquidity necessary to meet funding
needs. The Company's investment portfolio primarily consists of US government
and federal agency obligations, mortgage-backed securities and corporate note
obligations. The Company's policy dictates all securities must satisfy the
investment grade requirements of the Office of Thrift Supervision at the time of
purchase.
The Company's cost of funds responds to changes in interest rates due to the
relatively short-term nature of its deposit portfolio. The Company offers a
range of maturities on its deposit products at competitive rates and monitors
the maturities on an ongoing basis.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The Company's chief
executive officer and chief financial officer, after evaluating the
effectiveness of the Company's disclosure controls and procedures (as defined in
Sections 13a-15(e) and 15d-15(e) of regulations promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the
most recent fiscal quarter covered by this quarterly report (the "Evaluation
Date"), have concluded that as of the Evaluation Date, the Company's disclosure
controls and procedures are effective in ensuring that information required to
be disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms
and are designed to ensure that information required to be disclosed in those
reports is accumulated and communicated to management as appropriate to allow
timely decisions regarding required disclosure.
(b) Changes in internal controls. There were no changes in the Company's
internal control over financial reporting identified in connection with the
Company's evaluation of controls that occurred during the Company's last fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table provides information about purchases by the company pursuant
to a previously announced buyback program with respect to its Common Stock
during the three months ended March 31, 2007:
Total Total Number of Approximate Number
Number Shares Purchased of Shares that May
of Shares Average as part of Publicly Yet be Purchased
Period Purchased Price Paid Announced Program (1) Under the Program
January 1-31, 2007 - $ - - 14,721
February 1-28, 2007 - $ - - 14,721
March 1-31, 2007 5,000 $ 34.13 5,000 9,721
Total 5,000 5,000
On February 2, 2006, the Company announced in a press release that the
board of directors had authorized a stock repurchase program to
purchase up to 5%, or approximately 67,000 shares of outstanding
stock.
(2) On February 23, 2007, the Company announced in a press release that
the board of directors had authorized a new stock repurchase program
to purchase up to 5%, or approximately 66,000 shares of outstanding
stock, but no shares were repurchased under this new program during
the quarter ended March 31, 2007.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on January 16, 2007.
(b) Each of the persons named in the proxy statement as a nominee
for
director was elected.
(c) The following are the voting results on each
matter which were submitted to the
shareholders:
1) Election of Directors For Against Abstain
-----------------------------------------
Christine A. Lauber 871,223 215,542 -
Edward C. Levy 839,798 246,967 -
Reginald H. Wagle 869,266 217,499 -
Item 5. Other Information.
None
Item 6. Exhibits.
31(1) Certification required by 17 C.F.R. ss. 240.13a-14(a). 31(2)
Certification required by 17 C.F.R. ss. 140.13a-14(a).
Certification pursuant to 18 U.S.C. ss. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2005.
10(1) Special Termination Agreement, dated January 16, 2007,
between MFB Financial and James P. Coleman III
is incorporated by reference to Exhibit 10 (1) of MFB's Form
8-K filed on January 22, 2007.
10(2) Employment Agreement, dated January 16, 2007, between MFB
Financial and Terry L. Clark is incorporated by reference to
Exhibit 10 (2) of MFB's Form 8-k filed on January 22, 2007.
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 thereunto duly authorized.
MFB CORP.
Date: 04/25/2007 By /s/ Charles J. Viater
Charles J. Viater
President and Chief Executive Officer
Date:04/25/2007 By /s/ Terry L. Clark
Terry L. Clark
Executive Vice President and
Chief Financial Officer
Exhibit 31
CERTIFICATION
I, Charles J. Viater, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MFB
Corp;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for,
the periods presented in this report.
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: 04/25/2007 /s/Charles J Viater
Charles J. Viater
Chief Executive Officer
Exhibit 31
CERTIFICATION
I, Terry L. Clark, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MFB
Corp;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for,
the periods presented in this report.
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: 04/25/2007 /s/ Terry L Clark
Terry L. Clark
Chief Financial Officer
Exhibit 32
CERTIFICATION
By signing below, each of the undersigned officers hereby certifies
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2005, that, to his knowledge, (i) this report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and (ii) the information contained in this report fairly
presents, in all material respects, the financial condition and results of
operations of MFB Corp.
Signed this 25 day of April, 2007.
/s/ Terry L. Clark /s/ Charles J. Viater
Terry L. Clark Charles J. Viater
Chief Financial Officer Chief Executive Officer
(Title) (Title)
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to MFB Corp. and will be retained by
MFB Corp. and furnished to the Securities and Exchange Commission or its staff
upon request.