December 7, 2007
Contact: Charles J. Viater
President/CEO
MFB Corp. ANNOUNCES FOURTH QUARTER 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 $3.2 million, or $2.37 diluted earnings per share for the year ended
September 30, 2007, an increase from net income of $2.2 million or $1.56 diluted
earnings per share for the year ended September 30, 2006. MFB Corp's
consolidated net income for the three months ended September 30, 2007 was
$457,000 or $0.34 diluted earnings per share compared to $954,000 or $0.69
diluted earnings per share for the same period last year.
Charles J. Viater, President and CEO, stated "We are pleased to report the best
earnings in our 118 year history. The company benefited from the recovery of
significant loan loss provisions discussed later in this release. Interestingly,
this occurred during a turbulent time when many of our competitors are finding
it necessary to record significant additional provisions or losses related to
the subprime mortgage business. As stated previously, our Bank does not lend
or invest in the subprime loan market and our credit quality continues to
improve. As announced on October 19, 2007, we recently declared a 15.2%
increase in the dividend from one year ago to a record $0.19 per share."
MFB Corp's net interest income before provision for loan losses for the three
month period ended September 30, 2007 was $3.5 million compared to $3.2 million
for the same period last year. For the year ended September 30, 2007 and 2006,
net interest income before provision for loan losses was $13.4 million and $13.5
million, respectively. The decrease in net interest income was predominantly due
to an increase in deposit interest expense, offset in part by an increase in
interest income and a decrease in FHLB (Federal Home Loan Bank) advance interest
expense. Interest expense on deposits remained constant at $2.5 million for the
September 2007 and 2006 quarter ends, and increased to $10.1 million from $9.0
million for the comparable year end periods. Interest income was $7.5 million
for the three months ended September 30, 2007 compared to $7.1 million for the
three months ended September 30, 2006, and for the year ended September 30, 2007
and September 30, 2006 was $29.3 million and $28.6 million respectively.
MFB recorded a loan loss provision of $397,000 for the three months ended
September 30, 2007 compared to a negative provision for loan loss of $835,000
for the three months ended September 30, 2006. The provision for loan losses
decreased from $1.0 million of provision expense for the year ended
September 30, 2006 to $1.3 million of income (negative provision for loan
losses) for the year ended September 30, 2007. The negative provision for loan
losses for fiscal year 2007 was primarily related to the payments received on
one commercial loan which previously had been fully reserved for through the
allowance for loan loss. The provision for loan losses for fiscal year 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.
Noninterest income decreased from $6.3 million for the twelve months ended
September 30, 2006 to $5.9 million for the same period ended September 30, 2007.
The decrease was offset by a $402,000 gain on securities from a settlement of an
investment written down in fiscal year 2002. Two items primarily affected
noninterest income in the twelve months ending September 30, 2006, a gain of
$238,000 related to a called FHLB advance and a gain of $200,000 from a sale of
the Company's insurance subsidiary's property and casualty book of business. The
Bank continues to offer a variety of life and health insurance products to
customers in our market area.
Noninterest expense remained constant at $16.3 million for the twelve months
ended September 30, 2006 and September 30, 2007 and decreased from $4.2 million
for the quarter ending September 30, 2006 to $4.1 million for the quarter ending
September 30, 2007. Salaries and employee benefits were $7.9 million and $8.4
million at September 30, 2006 and 2007 respectively; occupancy and equipment
expenses decreased from $3.3 million at September 30, 2006 to $3.1 million at
September 30, 2007; and the loss on sale of fixed assets was $230,000 for the
twelve months ending September 30, 2006 predominantly due to the sale of a
branch building and real estate. Other expenses were unchanged at $1.6 million
for the twelve months ending September 30, 2006 and 2007.
MFB Corp.'s total assets were $510.4 million at September 30, 2007 compared to
$496.1 million at September 30, 2006. Cash and cash equivalents increased from
$16.3 million at September 30, 2006 to $23.5 million at September 30, 2007.
Loans receivable were $407.8 million at September 30, 2007, an increase of $28.6
million from $379.2 million as of September 30, 2006. Residential mortgage loans
increased $2.0 million from $199.2 million at September 30, 2006 to $201.2
million at September 30, 2007. Commercial loans outstanding increased by $19.5
million from $134.4 million at September 30, 2006 to $153.9 million at September
30, 2007. Consumer loan receivables, which include home equity term loans and
lines of credit, increased $7.0 million to $52.6 million. Investment securities
available for sale decreased from $58.4 million at September 30, 2006 to $33.4
million at September 30, 2007.
MFB Corp.'s allowance for loan losses at September 30, 2007 was $5.3 million or
1.30% of loans, comparable to the $7.2 million or 1.91% of loans at the end of
last year. The ratio of nonperforming loans to loans was 1.85% at September 30,
2006 compared to 1.25% at September 30, 2007. The change is primarily due to the
negative provision for loan losses for the year ended September 30,2007. Along
with the negative provision for loan losses, there was an evaluation of many
factors including current economic conditions, changes in the character and size
of the loan portfolio, current and past delinquency trends and historical and
estimated net charge-offs, that contributed to the Company's reducted allowance
for loan losses during the year ended September 30, 2007. In management's
opinion, the allowance for loan losses is adequate to cover probable incurred
losses as of September 30, 2007.
Total liabilities increased $12.3 million during the year, from $457.1 million
at September 30, 2006 to $469.4 million at September 30, 2007. The increase was
predominantly due to an increase in FHLB advances, offset by a decrease of total
deposits. Total deposits declined by $12.4 million since September 30, 2006,
from $346.2 million to $333.8 million in part due to the reduction of high cost
time deposits. Advances from the FHLB increased $27.2 million, from $97.1
million at September 30, 2006 to $124.3 million at September 30, 2007.
Total shareholders' equity increased from $38.9 million as of September 30, 2006
to $41.1 million as of September 30, 2007. The increases to equity resulted from
net income of $3.2 million and $216,000 generated from the exercise of stock
options, partially offset by cash dividend payments of $870,000 and purchase of
treasury stock of $576,000. The book value of MFB Corp. common stock, based on
the actual number of shares outstanding, increased from $29.48 at September 30,
2006 to $31.25 at September 30, 2007.
MFB Corp.'s wholly-owned federal savings bank subsidiary, MFB Financial
(the "Bank")conducts business in Indiana from its corporate and main office in
Mishawaka and eleven banking centers in St. Joseph, Elkhart and Hamilton
Counties. 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 in the
Bank's primary counties and Montgomery County, Indiana. 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 (UNAUDITED)
September 30, 2007 and September 30, 2006
(in thousands except share information)
September 30, September 30,
2007 2006
------------------------ -----------------------
------------------------ -----------------------
Assets
Cash and due from financial institutions $ 7,546 $ 6,726
Interest-bearing deposits in other financial institutions - short term 15,924 9,563
------------------------ -----------------------
Total cash and cash equivalents 23,470 16,289
Securities available for sale 33,409 58,383
Other investments 9,718 10,939
Loans held for sale 612 -
Mortgage loans 201,233 199,196
Commercial loans 153,945 134,412
Consumer loans 52,578 45,614
------------------------ -----------------------
------------------------ -----------------------
Loans receivable 407,756 379,222
Less: allowance for loan losses (5,298) (7,230)
------------------------ -----------------------
Loans receivable, net 402,458 371,992
Premises and equipment, net 18,506 19,477
Mortgage servicing rights 2,253 2,366
Cash surrender value of life insurance 10,565 6,237
Goodwill 1,970 1,970
Other intangible assets 1,922 1,699
Other assets 5,565 6,720
------------------------ -----------------------
Total Assets $ 510,448 $ 496,072
======================== =======================
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing demand deposits $ 39,043 $ 30,031
Savings, NOW and MMDA deposits 123,718 129,233
Time deposits 171,042 186,979
------------------------ -----------------------
Total deposits 333,803 346,243
Securities sold under agreement to repurchase 540 -
FHLB advances 124,258 97,053
Other borrowings - 4,500
Subordinated debentures 5,000 5,000
Accrued expenses and other liabilities 5,790 4,337
------------------------ -----------------------
Total liabilities 469,391 457,133
Shareholders' equity
Common stock, no par value: 5,000,000 shares authorized;
shares issued: 1,689,417 - 09/30/07 and 09/30/06;
shares outstanding: 1,313,671 - 09/30/07 and 1,320,844 - 09/30/06 12,500 12,421
Retained earnings - substantially restricted 37,841 35,479
Accumulated other comprehensive income (loss),
net of tax of ($159) - 09/30/07 and ($176) - 09/30/06 (308) (341)
Treasury stock: 375,746 common shares - 09/30/07 and (8,976) (8,620)
368,573 common shares - 09/30/06, at cost
------------------------ -----------------------
Total shareholders' equity 41,057 38,939
------------------------ -----------------------
Total Liabilities and Shareholders' equity $ 510,448 $ 496,072
======================== =======================
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MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months and Year Ended September 30,2007 and 2006
(in thousands except per share information and cash dividends)
Three Months Ended Year Ended
September 30, September 30,
2007 2006 2007 2006
-------- -------- -------- --------
-------- -------- -------- --------
Interest income
Loans receivable, including fees ............ $ 6,898 6,262 $ 26,361 24,474
Securities - taxable ............................. 556 796 2,599 3,214
Other interest-earning assets .............................. 84 86 339 919
-------- -------- --------- --------
-------- -------- --------- --------
Total interest income .................. 7,538 7,144 29,299 28,607
Interest expense
Deposits ...................................... 2,482 2,453 10,144 9,020
Securities sold under agreement to repurchase 2 - 2 -
FHLB advances and other borrowings ............ 1,518 1,492 5,784 6,125
--------- --------
--------- -------- --------- --------
Total interest expense ................. 4,002 3,945 15,930 15,145
-------- -------- -------- --------
-------- -------- -------- --------
Net interest income .............................. 3,536 3,199 13,369 13,462
Provision for loan losses ............ 397 (835) (1,257) 1,032
-------- -------- -------- --------
-------- -------- -------- --------
Net interest income after provision for ........ 3,139 4,034 14,626 12,430
loan losses
Noninterest income
Service charges on deposit accounts ........ 849 824 3,265 3,318
Trust fee income ............................. 149 93 562 414
Insurance commissions ....................... 8 22 29 151
Net realized gains from sales of loans ...... 66 49 306 261
Mortgage servicing asset recovery .......... -- (2) 8 178
Net gain (loss) on securities available for sale . 8 -- 402 --
Gain on call of FHLB advance ................ -- -- -- 238
Gain on sale of property and casualty insurance
business -- -- -- 200
Earnings on life insurance .................. 93 72 296 237
Other income ................................ 228 352 1,011 1,276
-------- -------- -------- --------
-------- -------- -------- --------
Total noninterest income ........... 1,401 1,410 5,863 6,273
Noninterest expense
Salaries and employee benefits ............. 2,210 2,048 8,361 7,923
Occupancy and equipment .................... 761 826 3,104 3,316
Professional and consulting fees ............ 185 228 797 803
Data processing .......................... 168 212 793 838
(Gain)/Loss on sale of fixed assets ......... (3) 13 68 230
Business development and marketing .......... 129 123 591 466
Supplies and communications ................ 124 169 563 669
Amortization of intangibles ............ 97 109 387 435
Other expense ................................ 382 446 1,614 1,647
-------- -------- -------- --------
-------- -------- -------- --------
Total noninterest expense ............ 4,053 4,174 16,278 16,327
Income before income taxes ...................... 487 1,270 4,211 2,376
Income tax expense .............................. 30 316 979 210
-------- -------- -------- --------
-------- -------- -------- --------
Net income .................................... $ 457 $ 954 $ 3,232 $ 2,166
======== ======== ======== ========
======== ======== ======== ========
Basic earnings per common share .............. $ 0.35 $ 0.72 $ 2.45 $ 1.61
Diluted earnings per common share ........... $ 0.34 $ 0.69 $ 2.37 $ 1.56
Cash dividends declared .................... $ 0.165 $ 0.135 $ 0.660 $ 0.530