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 June 30, 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 July 25, 2007 was 1,311,271.
MFB CORP. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2007 (Unaudited) and September 30, 2006 3
Consolidated Statements of Income (Unaudited)
Three and Nine Months Ended June 30, 2007 and 2006 4
Condensed Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Three and Nine Months Ended June 30, 2007 and 2006 5
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended June 30, 2007 and 2006 6
Notes to (Unaudited) Consolidated Financial Statements June 30, 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
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
------------------- -------------------
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
------------------- -------------------
Loans receivable 398,207 379,222
Less: allowance for loan losses (4,941) (7,230)
------------------- -------------------
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
------------------- -------------------
Total Assets $ 505,089 $ 496,072
=================== ===================
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
------------------- -------------------
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
------------------- -------------------
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
------------------- -------------------
Total Liabilities and Shareholders' equity $ 505,089 $ 496,072
=================== ===================
See accompanying notes to (unaudited) consolidated financial statements
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, June 30,
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
------------- -------------- --------------- ------------
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
============== =============== =============== =============
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
See accompanying notes to (unaudited) consolidated financial statements
MFB CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (UNAUDITED)
Three and Nine Months Ended June 30, 2007 and 2006
(in thousands)
Three Months Ended Nine Months Ended
2007 2006 2007 2006
------------ ------------- -------------- ------------
Balance at beginning of period $ 40,855 $ 38,303 $ 38,939 $ 38,673
Stock based compensation expense 7 15 28 44
Treasury stock purchased (273) (128) (575) (491)
Stock options exercised - issuance of treasury stock
- - 163 -
Tax benefit related to employee stock options
exercised - - 37 -
Cash dividends declared (217) (182) (653) (534)
Comprehensive income:
Net income 843 794 2,775 1,212
Other comprehensive income (loss), net of tax (224) (221) 277 (323)
------------ ------------- -------------- ------------
Total comprehensive income 619 573 3,052 889
------------ ------------- -------------- ------------
Balance at end of period $ 40,991 $ 38,581 $ 40,991 $ 38,581
============ ============== ============== ============
See accompanying notes to (unaudited) consolidated financial
statements
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended June 30, 2007 and 2006
(in thousands)
Nine Months Ended
June 30,
2007 2006
------------------ ------------------
Cash flows from operating activities
Net income $ 2,775 $ 1,212
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization, net of accretion 1,014 1,206
Provision for loan losses (1,654) 1,867
Net realized gains from sales of loans (239) (213)
Amortization of mortgage servicing rights 237 222
Amortization of intangible assets and purchase adjustments 291 259
Gain on call of FHLB Advance - (238)
Origination of loans held for sale (8,910) (9,281)
Impairment (recovery) of mortgage servicing rights 9 (163)
Proceeds from sales of loans held for sale 10,632 9,779
Net (gain) loss on sales of other assets 51 213
Equity in loss of investment in limited partnership 184 156
Stock-based compensation expense 28 44
Appreciation in cash surrender value of life insurance (203) (202)
Net change in accrued interest receivable 15 74
Net change in other assets (154) (438)
Net change in accrued expenses and other liabilities (493) (631)
------------------ ------------------
Net cash provided in operating activities 3,583 3,866
Cash flows from investing activities
Net change in loans receivable (20,603) 10,978
FHLB stock redemption 446 -
Proceeds from net cash received in settlement - 453
Proceeds from principal payments of mortgage-backed and related securities 5,970 8,865
Proceeds from maturities and calls of securities available for sale 10,841 8,500
Proceeds from maturities of investments 501 500
Sale of fixed assets - 1,986
Purchase of securities available for sale - (14,970)
Purchase of premises and equipment (290) (1,882)
Purchase of life insurance (37) -
------------------ ------------------
Net cash provided in investing activities (3,172) 14,430
Cash flows from financing activities
Purchase of treasury stock (575) (491)
Net change in deposits (7,138) (23,683)
Proceeds from FHLB advances and other borrowings 102,755 500
Repayment of FHLB advances and other borrowings (88,851) (23,590)
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 874 (355)
Cash dividends paid (653) (534)
------------------ ------------------
Net cash provided (used) in financing activities 6,612 (48,153)
------------------ ------------------
Net change in cash and cash equivalents 7,023 (29,857)
Cash and cash equivalents at beginning of period 16,289 54,209
------------------ ------------------
Cash and cash equivalents at end of period $ 23,312 $ 24,352
------------------ ------------------
Supplemental disclosures of cash flow information
Cash paid during the period for Interest $ 12,090 $ 11,782
Cash paid during the period for Income taxes 1,132 528
Supplemental schedule of noncash investing activities:
Other real estate owned to loans receivable 1,113 -
MFB CORP. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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
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 June 30, 2007 and September
30, 2006, the consolidated statements of income, the condensed
consolidated statements of changes in shareholders' equity for the three
and nine months ended June 30, 2007 and 2006 and the consolidated
statements of cash flows for the nine months ended June 30, 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 nine month periods ended June 30, 2007 and 2006
are presented below.
Three Months Ended Nine Months Ended
June 30, June 30,
(in thousands except per share information)
2007 2006 2007 2006
--------- --------- ----------- ----------
Basic Earnings Per Common Share
Numerator
Net income $ 843 $ 794 $ 2,775 $ 1,212
========= ========== =========== ==========
Denominator
Weighted average common shares outstanding
for basic earnings per common share 1,316 1,342 1,319 1,350
========= ========== =========== ==========
Basic Earnings Per Common Share $0.64 $ 0.59 $ 2.10 $ 0.90
========= ========== =========== ==========
Diluted Earnings Per Common Share
Numerator
Net income $ 843 $ 794 $ 2,775 $ 1,212
========= ========== =========== ==========
Denominator
Weighted average common shares outstanding
for basic earnings per common share 1,316 1,342 1,319 1,350
Add: Dilutive effects of assumed exercises
of stock options 40 49 50 44
--------- --------- ----------- ---------
Weighed average common and dilutive
potential common shares outstanding 1,356 1,391 1,369 1,394
========= ========== =========== ===========
Diluted Earnings Per Common Share $ 0.62 $ 0.57 $ 2.03 $ 0.87
========= ========== =========== ===========
Stock options for 22,000 and 17,000 common shares for the three and nine
months ended June 30, 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 nine months ended June 30, 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:
June 30, 2007
(in thousands)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities
U.S. Government and federal agencies $ 6,499 $ - $ (13) $ 6,486
Municipal bonds 170 - - 170
Mortgage-backed 27,360 37 (630) 26,767
Corporate notes 4,971 1 (40) 4,932
------------ ----------- ----------- ----------
39,000 38 (683) 38,355
Marketable equity securities 3,052 548 - 3,600
------------ ----------- ----------- ----------
$ 42,052 $ 586 $ (683) $ 41,955
============ =========== =========== ===========
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 $593,000 at June 30, 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 June 30, 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
$548,000 at June 30, 2007.
NOTE 4 - LOANS RECEIVABLE
Loans receivable at June 30, 2007 and September 30, 2006 are summarized as
follows:
June 30, September 30,
2007 2006
------------------ -----------------
(in thousands)
Residential mortgage loans
Secured by one to four family residences $ 178,956 $ 174,397
Construction loans 17,378 22,232
Other 5,190 3,090
---------------- ---------------
201,524 199,719
Net deferred loan fees (477) (498)
Construction and other mortgage loans in process (undisbursed) (181) (27)
---------------- ---------------
Total residential mortgage loans 200,866 199,194
Commercial loans
Commercial real estate 90,382 84,653
Commercial 57,671 49,958
---------------- ---------------
148,053 134,611
Net deferred loan fees (193) (209)
Commercial and real estate loans in process - 12
---------------- ---------------
Total commercial loans 147,860 134,414
Consumer loans
Home equity and second mortgage 41,348 37,779
Other 8,050 7,776
---------------- ---------------
49,398 45,555
Home equity and other loans in process 83 59
---------------- ---------------
Total consumer loans 49,481 45,614
---------------- ---------------
Total loans receivable $ 398,207 $ 379,222
================ ===============
Activity in the allowance for loan losses is summarized as follows for the nine
months ended June 30, 2007 and 2006.
June 30, June 30,
2007 2006
-------------- ---------------
(in thousands)
Balance at beginning of period $ 7,230 $ 6,388
Provision for loan losses (1,654) 1,867
Charge-offs (654) (156)
Recoveries 19 3
-------------- ---------------
Balance at end of period $ 4,941 $ 8,102
============== ===============
NOTE 4 - LOANS RECEIVABLE (continued)
Quarter Ended Year Ended
June 30, September 30,
Impaired loans were as follows: 2007 2006
----------------- -----------------
(in thousands)
Period end loans with no allocated allowance for loan losses $ 787 $ 873
Period end loans with allocated allowances for loan losses 2,977 6,052
----------------- -----------------
Total impaired loans $ 3,764 $ 6,925
================= =================
Amount of the allowance for loan losses allocated $ 2,088 $ 4,337
Average of impaired loans 4,067 8,270
Interest income recognized during impairment - 165
Cash-basis interest income recognized during impairment - 159
Impaired loans decreased during the quarter ended June 30, 2007 primarily due
to the activity of one commercial loan relationship. Principal payments of
approximately $386,000 were made on this impaired loan with a balance of
approximately $2.0 million at March 31, 2007. The remaining loan balance was
approximately $1.6 million at June 30, 2007 with an equivalent amount of
allowance for loan losses allocation. The Bank maintained the $1.6 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 ability
to seek alternative financing or pay down the loan.
Non-performing loans were as follows:
June 30, September 30,
2007 2006
------------------- ------------------
(in thousands)
Loans past due over 90 days still on accrual status $ 120 $ 619
Non-accrual loans 4,699 6,390
Restructured loans 408 -
------------------- ------------------
Total non-performing loans $ 5,227 $ 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. The flow of deposits 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 NINE MONTHS ENDED JUNE 30, 2007 AND 2006
The Company's consolidated net income for the three months ended June 30,
2007 was $843,000 or $0.62 diluted earnings per common share, compared to
net income of $794,000 or $0.57 diluted earnings per share, for the three
months ended June 30, 2006. MFB Corp.'s increase in earnings for the third
fiscal quarter from the prior comparable period was primarily attributable
to an increase in the negative provision for loan loss of $263,000 for the
three months ended June 30, 2007 in comparison to the three months ended June
30, 2006. The income for the three months ended June 30, 2006, included a gain
of $238,000 for the prepayment of debt with the FHLB. The Company's
consolidated net income for the nine months ended June 30, 2007 was $2.8
million or $2.03 diluted earnings per common share, compared to net income of
$1.2 million or $0.87 diluted earnings per share, for the nine months ended
June 30, 2006. The increase from the nine months ended June 30, 2006 to that
of June 30, 2007 was primarily attributable to a negative provision for
loan loss 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 came to $3.4
million for both three month periods ending June 30, 2007 and June 30, 2006.
For the comparable nine month periods, net interest income was $9.8 million
in 2007 and $10.3 million in 2006. 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 rose to $7.3 million 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.
The negative provision for loan losses was $1.7 million and $300,000 for the
respective nine and three months ended June 30, 2007 compared to a provision
expense of $1.9 million and a negative $35,000 for the same respective
periods last year. The negative provision during the nine months ended
June 30, 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 nine months ended June 30, 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. As a result of the updated analysis, the Bank also determined
that the loan be fully reserved for and placed on non-accrual. As a result of
loan payments continuing to be made, the loan loss allocation is being
reduced which has resulted in a negative provision for loan loss. The
percentage of non-performing assets to total loans at June 30, 2007 was 1.37%,
a decrease from 2.18% at September 30, 2006.
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 $4.5 million and $4.9
million for the respective nine month periods. 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 decreased to $4.0 million for the quarter ended June 30,
2007 from $4.3 million for the quarter ended June 30, 2006. These decreases
were primarily from occupancy and equipment and losses on the sale of fixed
assets. For the nine month period ended June 30, 2007 and 2006 noninterest
expense remained consistent at $12.2 million.
Income tax expense for the three months ended June 30, 2007 was approximately
$272,000 compared to approximately $193,000 for the same period last year
due to the change in income before income taxes. Income tax expense for the
nine months ended June 30, 2007 was approximately $949,000 compared to an
income tax benefit of approximately $106,000 for the same period last year due
to the change in income before income taxes.
BALANCE SHEET COMPOSITION
COMPARISON OF JUNE 30, 2007 TO SEPTEMBER 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. Borrowings from the FHLB provided an
increase of $18.2 million in cash, and payments and maturities of
investments contributed an additional $17.6 million. This influx of cash
was used to fund an increase in loans of $19.0 million, to pay off other
borrowings of $4.5 million, and to offset a decrease in deposits of $7.1
million.
As of June 30, 2007 total securities available for sale were $42.0 million,
down $16.4 million from a balance of $58.4 million at September 30, 2006.
Securities portfolio activity during the nine month period included principal
payments on mortgage-backed and related securities of $6.0 million and
maturities and calls of securities available for sale of $10.8 million. The
Company did not purchase or sell securities during the nine month period.
Loans receivable increased from $379.2 million at September 30, 2006 to
$398.2 million at June 30, 2007. Mortgage loans increased slightly 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.
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.
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 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 balance of 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. The change is due primarily 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, and charge-offs for the nine month
period have amounted to $635,000. In management's opinion, the allowance for
loan losses is adequate to cover probable incurred losses at June 30, 2007.
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. Advances
owing to the FHLB rose by $18.2 million. As of June 30, 2007, the advances
had a weighted average interest rate of 5.31% and mature over the next five
years. A total of $39.0 million of the advances with a weighted average
interest rate of 5.43% mature over the next twelve months.
Total shareholders' equity increased by $2.1 million to $41.0 million at
June 30, 2007 compared to $38.9 million at September 30, 2006. The increase
was derived from net income of $2.8 million, and a reduction in unrealized
investment losses by $277,000, offset by dividend payouts of $653,000 and
treasury stock purchases of $575,000. MFB Corp's equity to assets ratio was
8.12% at June 30, 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 $31.26 at June 30, 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 $65.8 million as of June 30, 2007, down from $75.7
million at September 30, 2006. Cash and cash equivalents increased $7.1
million during the nine month period, while securities available for sale
declined by $16.4 million. Management believes the liquidity level as of June
30, 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 June 30, 2007, total FHLB
borrowings amounted to $115.3 million and were originally used primarily to
fund loan portfolio growth. The Bank had commitments to fund loan
originations with borrowers totaling $96.4 million at June 30, 2007, including
$80.3 million in available consumer and commercial lines and letters of
credit. Certificates of deposit scheduled to mature in one year or less
totaled $99.6 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 June 30,
2007 and September 30, 2006 are presented below:
Requirement to be
Well Capitalized Under
Requirement for Capital Prompt Corrective
Actual Adequacy Purposes Actual Provisions
------- ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of June 30, 2007
Total capital
(to risk weighted assets) $ 42,974 12.33% $ 27,880 8.00% $ 34,850 10.00%
Tier 1 (core) capital
(to risk weighted assets) 40,146 11.39 13,940 4.00 20,910 6.00
Tier 1 (core) capital
(to adjusted total assets) 40,146 8.04 19,978 4.00 24,973 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 June 30, 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 March 31, 2007, 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
March 31, 2007, data was not available from the OTS for the shift downward in
rates 300 basis points).
As illustrated in the March 31, 2007 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.
March 31, 2007
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 $ 41,927 $ (16,437) (28)% 8.53% (282) bp
+200 48,611 (9,754) (17) 9.72 (163) bp
+100 54,140 (4,225) (7) 10.66 (68) bp
0 58,365 - - 11.34 -
(100) 59,330 965 2 11.44 10 bp
(200) 59,090 725 1 11.33 (2) bp
(1) Expressed in basis points
Specifically, the March 31, 2007 table indicates that the Company's NPV was
$58.4 million or 11.34% 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 $9.8 million or 17% decrease in the Company's
NPV and would result in a 163 basis point decrease in the Company's NPV
ratio to 9.72%. Also, an immediate 200 basis point decrease in market interest
rates would result in a $0.7 million increase in the Company's NPV and a 2
basis point decrease in the Company's NPV ratio to 11.33%.
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 June 30, 2007, $188.1 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 June 30, 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
------- --------- ---------- --------------------- -----------------
April 1-30, 2007 3,500 $ 33.81 3,500 10,771
May 1-31, 2007 - $ - - 10,771
June 1-30, 2007 4,500 $ 34.27 4,500 6,271
-------------- ----------------------
Total 8,000 8,000
(1) 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
June 30, 2007.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders
None
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.
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: 07/25/2007 By /s/ Charles J. Viater
Charles J. Viater
President and Chief Executive Officer
Date:07/25/2007 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: 07/25/2007 /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: 07/25/2007 /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 July, 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.