July 24, 2007 Contact: Charles J. Viater
President/CEO
MFB Corp. ANNOUNCES THIRD QUARTER, YEAR TO DATE 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 $2.8 million or $2.03 diluted earnings per share for the nine months
ended June 30, 2007 an increase from the net income of $1.2 million or $0.87
diluted earnings per share, for the nine months ended June 30, 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 June 30, 2007 was $843,000, or $0.62 diluted earnings per share,
compared to $794,000, or $0.57 diluted earnings per share, for the same period
last year.
Charles J. Viater, President and CEO, stated "We continue to focus on
profitable loan growth and cost conscious growth in deposits with an emphasis
on core deposits. This strategy has facilitated growth in the balance sheet
while easing margin compression."
In addition, as announced on July 20, 2007, the Board of Directors has
declared a cash dividend of $0.165 per share of common stock for the quarter
ended June 30, 2007. The dividend is payable on August 14, 2007 to holders of
record on July 31, 2007.
MFB Corp's net interest income before provision for loan losses for the
three month period ended June 30, 2007 and 2006 remained consistent at $3.4
million. For the nine month periods ended June 30, 2007 and 2006, net
interest income was $9.8 million and $10.3 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
$2.5 million for the quarter ended June 30, 2007 compared to $2.3 million for
the same quarter in 2006, and increased to $7.7 million from $6.6 million for
the comparable nine month periods. Interest income increased to $7.3
million for the three months ended June 30, 2007 compared to $7.2 million for
the three months ended June 30, 2006 and for the nine months ended June 30,
2007 and June 30, 2006 was $21.8 million and $21.5 million, respectively.
Interest expense on FHLB advances and other borrowings declined to $1.4
million for the June 2007 quarter compared to $1.5 million in June 2006, and to
$4.3 million from $4.6 million for the respective nine month periods.
MFB Corp recorded a negative provision for loan losses of $1.7 million for
the nine months ended June 30, 2007 compared to a provision expense of
$1.9 million for the same period last year. The negative provision for loan
loss during the nine months ended June 30, 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 1.37% at June 30,
2007.
Noninterest income was $1.4 million for the quarter ending June 30, 2007 and
$1.8 million for the quarter ended June 30, 2006, and for the nine months
ended June 30, 2007 and June 30, 2006 was $4.5 million and $4.9 million,
respectively. During the June, 2006 quarter, a call of an FHLB advance
resulted in a gain of $238,000 and the Company sold its insurance
business for a gain of $200,000. Subsequently, insurance commissions fell
from $129,000 for the nine months ended June 2006 to $21,000 for the June 2007
nine month period. Net loan servicing fees also declined, from $333,000
for the nine months ending June 2006 to $132,000 for the June 2007 period; this
was largely due to a sizeable recovery for the valuation of mortgage
servicing rights in 2006. For the nine months ended June 30, 2007, MFB
recorded a gain on securities of $393,000 as a partial settlement on a
WorldCom class action suit; also, trust fee income increased to $414,000 from
$321,000 in the comparable nine month periods.
Noninterest expense was $4.0 million for the quarter ended June 30, 2007 and
$4.3 million for the quarter ended June 30, 2006. For the nine month period
ended June 30, 2007 noninterest expense remained consistent at $12.2
million for June 30, 2007 and June 30, 2006.
The Company's total assets were $505.1 million as of June 30, 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 $23.3 million at June 30,
2007.
Loans receivable increased from $379.2 million at September 30, 2006 to
$398.2 million at June 30, 2007. Mortgage loans increased from $199.2
million at September 30, 2006 to $200.9 million at June 30, 2007. Commercial
loans outstanding increased from $134.4 million at September 30, 2006 to
$147.9 million at June 30, 2007. Consumer loans, including home equity
and second mortgages, increased by $3.9 million during the nine month period
ending June 30, 2007.
The balance of mortgage servicing rights at June 30, 2007 was $2.3 million
compared to $2.4 million at September 30, 2006. For the nine months ending June
30, 2007, the Company completed secondary market mortgage loan sales of $10.6
million and the net gains realized on these loan sales were $239,000, including
$131,000 related to recording mortgage servicing rights.
The allowance for loan losses at June 30, 2007 was $4.9 million or 1.24% 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 for
the nine months ended June 30, 2007. For the third quarter ended June 30, 2007,
net charge-offs were $139,000 compared to $37,000 net charge-offs for the
quarter ended September 30, 2006.
Total liabilities increased by $7.0 million, from $457.1 million at
September 30, 2006 to $464.1 million at June 30, 2007. The Bank's
noninterest-bearing demand deposits increased $8.1 million, and savings and NOW
deposits $2.4 million; time deposits decreased by $17.6 million. FHLB advances
increased by $18.2 million at June 30, 2007, from $97.1 million at September 30,
2006.
Total shareholders' equity increased by $2.1 million to $40.9 million at
June 30, 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 $31.26
at June 30, 2007.
MFB Corp.'s wholly owned federal savings bank subsidiary, MFB Financial
(the "Bank") conducts 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 has also recently added a New Buffalo mortgage loan
office located in Berrien County, Michigan. For more information, go to
www.mfbbank.com.
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2007 (UNAUDITED) and September 30, 2006
(in thousands except share information)
June 30, September 30,
2007 2006
------------------------ ------------------------
------------------------ ------------------------
Assets
Cash and due from financial institutions $ 14,584 $ 13,318
Interest-bearing deposits in other financial institutions - short term 8,728 2,971
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Total cash and cash equivalents 23,312 16,289
Securities available for sale 41,955 58,383
FHLB Stock and other investments 9,808 10,939
Loans held for sale 225 -
Mortgage loans 200,866 199,194
Commercial loans 147,860 134,414
Consumer loans 49,481 45,614
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Loans receivable 398,207 379,222
Less: allowance for loan losses (4,941) (7,230)
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Loans receivable, net 393,266 371,992
Premises and equipment, net 18,728 19,477
Mortgage servicing rights 2,270 2,366
Cash surrender value of life insurance 6,477 6,237
Goodwill 1,970 1,970
Other intangible assets 1,409 1,699
Other assets 5,669 6,720
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Total Assets $ 505,089 $ 496,072
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Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing demand deposits $ 38,109 $ 30,031
Savings, NOW and MMDA deposits 131,604 129,233
Time deposits 169,392 186,979
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Total deposits 339,105 346,243
FHLB advances 115,275 97,053
Loans from correspondent banks - 4,500
Subordinated debentures 5,000 5,000
Accrued expenses and other liabilities 4,718 4,337
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Total liabilities 464,098 457,133
Shareholders' equity
Common stock, no par value: 5,000,000 shares authorized;
shares issued: 1,689,417 - 06/30/07 and 9/30/06;
shares outstanding: 1,311,271 - 06/30/07 and 1,320,844 - 09/30/06 12,484 12,421
Retained earnings - substantially restricted 37,601 35,479
Accumulated other comprehensive income (loss),
net of tax of $(33) - 06/30/07 and ($175) - 09/30/06 (64) (341)
Treasury stock: 378,146 common shares - 06/30/07 and (9,030) (8,620)
368,573 common shares - 09/30/06, at cost
------------------------ ------------------------
Total shareholders' equity 40,991 38,939
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Total Liabilities and Shareholders' equity $ 505,089 $ 496,072
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MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three and Nine Months Ended June 30, 2007 and 2006
(in thousands except per share information)
Three Months Ended Nine Months Ended
June 30, June30,
2007 2006 2007 2006
------------------------- ---------------------- ------------------------ -----------------------
------------------------- ---------------------- ------------------------ -----------------------
Interest income
Loans receivable, including fees $ 6,647 $ 6,143 $ 19,463 $ 18,212
Securities 613 840 2,043 2,418
Other interest-bearing assets 52 201 255 834
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Total interest income 7,312 7,184 21,761 21,464
Interest expense
Deposits 2,514 2,283 7,662 6,568
FHLB advances and other borrowings 1,374 1,509 4,266 4,633
------------------------- ---------------------- ------------------------ -----------------------
Total interest expense 3,888 3,792 11,928 11,201
------------------------- ---------------------- ------------------------ -----------------------
------------------------- ---------------------- ------------------------ -----------------------
Net interest income 3,424 3,392 9,833 10,263
Provision for loan losses (298) (35) (1,654) 1,867
------------------------- ---------------------- ------------------------ -----------------------
Net interest income after provision for
loan losses 3,722 3,427 11,487 8,396
Noninterest income
Service charges on deposit accounts 798 832 2,417 2,493
Trust fee income 142 94 414 321
Insurance commissions - 38 21 129
Net realized gains from sales of loans 96 41 239 213
Mortgage servicing asset recovery
(impairment) 28 (2) 9 163
Net gain on securities available for sale 16 - 393 -
Gain on call of FHLB advance - 238 - 238
Gain on sale of property and casualty
insurance business - 200 - 200
Other income 336 405 969 1,106
------------------------- ------------------------ ------------------------ -----------------------
------------------------- ------------------------ ------------------------ -----------------------
Total noninterest income 1,416 1,846 4,462 4,863
Noninterest expense
Salaries and employee benefits 2,023 2,003 6,151 5,875
Occupancy and equipment expenses 739 825 2,342 2,490
Professional and consulting fees 215 208 612 575
Data processing expense 210 201 625 626
Other expense 836 1,049 2,495 2,587
------------------------- ---------------------- ------------------------ -----------------------
------------------------- ---------------------- ------------------------ -----------------------
Total noninterest expense 4,023 4,286 12,225 12,153
Income before income taxes 1,115 987 3,724 1,106
Income tax expense (benefit) 272 193 949 (106)
------------------------- ---------------------- ------------------------ -----------------------
------------------------- ---------------------- ------------------------ -----------------------
Net income $ 843 $ 794 $ 2,775 $ 1,212
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Basic earnings per common share $ 0.64 $ 0.59 $ 2.10 $ 0.90
Diluted earnings per common share $ 0.62 $ 0.57 $ 2.03 $ 0.87
Cash dividends declared $ 0.165 $ 0.135 $ 0.495 $ 0.395