February 8, 2008
Contact: Charles J. Viater
President/CEO
MFB Corp. ANNOUNCES FIRST 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 $342,000 or $0.26 diluted earnings per share for the three months ended
December 31, 2007, a decrease from $1.2 million or $0.84 diluted earnings per
share for the three months ended December 31, 2006.
Charles J. Viater, President and CEO, stated "We are pleased that our increase
in interest income outpaced the increase in interest expense during the quarter
and that we've seen growth in trust and brokerage income generated from the
acquisition that occurred at the end of September. Despite the one time events
discussed below that reduced net income for the quarter, core earnings remain
strong."
In addition, as announced on January 18, 2008, the Board of Directors has
declared a cash dividend of $0.190 per share of common stock for the quarter
ended December 31, 2007. The dividend is payable on February 12, 2008 to holders
of record on January 29, 2008.
MFB Corp's net interest income before provision for loan losses for the three
month period ended December 31, 2007 was $3.2 million compared to $3.1 million
for the same period last year. The increase was primarily due to an increase in
interest income on loans partially offset by an increase in interest expense on
FHLB advances. Interest expense on deposits decreased slightly to $2.5 million
for the quarter ended December 2007 compared to $2.6 million for the quarter
ended December 2006, while expense for borrowings increased to $1.7 million from
$1.5 million for the comparable periods. Total interest income earned was $7.4
million for the quarter ended December 2007 and $7.1 million for the same
quarter in 2006.
MFB recorded a negative provision for loan losses of $94,000 for the quarter
ended December 31, 2007 compared to a negative provision for loan losses of $1.1
for the same period last year. The negative provision for loan losses during the
three months ended December 31, 2007 was primarily related to the repayment of a
commercial loan which had previously been fully reserved and was offset slightly
by provision increases for nonaccrual loans. The negative provision during the
quarter ended December 31, 2006 was predominantly related to the repayment of
two commercial loans which previously had significant allowance for loan losses
allocations. The percentage of non-performing assets to total loans increased
from 1.29% at September 30, 2007 to 1.35% at December 31, 2007.
Noninterest income decreased from $1.6 million at quarter end December 31, 2006
to $1.4 million at December 31, 2007. This decrease in noninterest income was
primarily due to a $350,000 other-than-temporary impairment charge related to an
investment in preferred stock issued by the Federal National Mortgage
Association ("Fannie Mae"). Recent capital needs at Fannie Mae and Freddie Mac,
the Federal Home Loan Mortgage Corporation, resulted in new issuances of higher
yielding preferred stocks by these two companies, and coupled with continued
turmoil in the housing and credit markets, have resulted in significant swings
in the market value of these securities. The Fannie Mae security has
consistently held an unrealized loss position during the latter part of the
quarter ending December 31, 2007. Based upon the structure of the recently
issued securities and its impact on the Company's existing security, management
determined the impairment to be other-than-temporary. Due to the uncertainty of
future market conditions and how they might impact the financial performance of
Fannie Mae, management was unable to determine when or if this impairment will
be reversed. In contrast, the Freddie Mac security showed improvement during
management's review and the impairment was determined to be not
other-than-temporary. The decrease in noninterest income was partially offset by
an increase in trust and brokerage income in the amount of $338,000 as a result
of the Company's new wealth management and private banking subsidiary. In
addition, the Bank recorded a gain on securities of $68,000 from the proceeds of
converting Class B Common Shares in the sale of Mastercard stock. In the quarter
ended December 31, 2006, MFB recorded a gain on securities of $361,000 as a
partial settlement on a WorldCom class action suit.
Noninterest expense increased to $4.3 million for the quarter ended December 31,
2007 from $4.2 million for the quarter ended December 31, 2006. The increase was
primarily from increased salaries and employee benefits.
The Company's total assets were $513.8 million as of December 31, 2007 compared
to $510.4 million as of September 30, 2007. Cash and cash equivalents increased
from $23.5 million at September 30, 2007 to $31.4 million at December 31, 2007.
As of December 31, 2007 total securities available for sale were $31.2 million,
a decrease of $2.2 million from $33.4 million at September 30, 2007.
Loans receivable decreased from $407.8 million at September 30, 2007 to $404.9
million at December 31, 2007. Mortgage loans decreased by $2.7 million from
$201.2 million at September 30, 2007 to $198.5 million at December 31, 2007.
Commercial loans outstanding decreased slightly from $153.9 million at September
30, 2007 to $152.9 million at December 31, 2007. Consumer loans, including home
equity and second mortgages, increased by $912,000 during the three month
period.
During the first quarter ended December 31, 2007, the Company completed
secondary market mortgage loan sales totaling $5.5 million and the net gains
realized on these loan sales were $101,000 including $60,000 related to
recording mortgage servicing rights. During the quarter ended September 30,
2007, the Company completed secondary market mortgage loan sales totaling $3.8
million and the net gains realized on these loan sales were $66,000 including
$47,000 related to recording mortgage servicing rights.
The allowance for loan losses at December 31, 2007 was $4.9 million or 1.21% of
loans compared to $5.3 million or 1.30% of loans at September 30, 2007. For the
first quarter ended December 31, 2007, net charge-offs were $285,000 compared to
$40,000 net charge-offs for the quarter ended September 30, 2007.
Total liabilities increased by $2.9 million, from $469.4 million at September
30, 2007 to $472.3 million at December 31, 2007. The Bank's time deposits
increased $4.5 million offset by a decrease in savings and NOW deposits of $1.8
million and a decrease in noninterest-bearing demand deposits of $373,000.
Advances from the FHLB increased to $127.1 million at December 31, 2007, from
$124.3 million at September 30, 2007.
Total shareholders' equity increased by $400,000 to $41.5 million at December
31, 2007 compared to $41.1 million at September 30, 2007. The book value of MFB
Corp. stock decreased, from $31.25 at September 30, 2007 to $31.10 at December
31, 2007.
MFB Corp.'s wholly owned federal savings bank subsidiary, MFB Financial (the
"Bank") conducts business from their corporate office and main office located in
Mishawaka, Indiana and the Bank's eleven banking centers in St. Joseph, Elkhart
and Hamilton Counties of Indiana, and also has a mortgage loan office located in
New Buffalo in Berrien County, Michigan. 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.
For more information, go to www.mfbbank.com.
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2007 (UNAUDITED) and September 30, 2007
(In thousands except share information)
<table>
<caption>
<s> <c> <c>
December 31, September 30,
2007 2007
----------------- ------------------
Assets
Cash and due from financial institutions $ 7,075 $ 7,546
Interest-earning deposits in other financial institutions - short term 24,352 15,924
------ ------
Total cash and cash equivalents 31,427 23,470
Securities available for sale 31,188 33,409
FHLB Stock and other investments 9,155 9,718
Loans held for sale - 612
Mortgage loans 198,484 201,233
Commercial loans 152,912 153,945
Consumer loans 53,490 52,578
------- -------
Loans receivable 404,886 407,756
Less: allowance for loan losses (4,919) (5,298)
------- -------
Loans receivable, net 399,967 402,458
Premises and equipment, net 19,131 18,506
Mortgage servicing rights, net 2,194 2,253
Cash surrender value of life insurance 10,662 10,565
Goodwill 1,970 1,970
Other intangible assets 1,823 1,922
Other assets 6,275 5,565
------- -------
Total assets $ 513,792 $ 510,448
------- -------
------- -------
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing demand deposits $ 38,670 $ 39,043
Savings, NOW and MMDA deposits 121,913 123,718
Time deposits 175,548 171,042
------- -------
Total deposits 336,131 333,803
Securities sold under agreements to repurchase 577 540
Federal Home Loan Bank advances 127,052 124,258
Subordinated debentures 5,000 5,000
Accrued expenses and other liabilities 3,553 5,790
------- -------
Total liabilities 472,313 469,391
Shareholders' equity
Common stock, 5,000,000 shares authorized; 12,533 12,500
shares issued: 1,689,417 - 12/31/07 and 9/30/07;
shares outstanding: 1,333,671 - 12/31/07 and 1,313,671 - 9/30/07
Retained earnings - substantially restricted 37,934 37,841
Accumulated other comprehensive income (loss),
net of tax of ($239) - 12/31/07 and ($159) - 9/30/07 (464) (308)
Treasury stock: 355,746 common shares - 12/31/07 and
375,746 common shares - 9/30/07, at cost (8,524) (8,976)
------- -------
Total shareholders' equity 41,479 41,057
------- -------
Total liabilities and shareholders' equity $ 513,792 $ 510,448
------- -------
------- -------
</table>
<page>
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended December 31, 2007 and 2006 (In
thousands except per share information and cash dividends)
<table>
<caption>
<s> <c> <c>
Three Months Ended
December 31,
2007 2006
Interest income
Loans receivable, including fees $ 6,772 $ 6,307
Securities - taxable 491 740
Other interest-earning assets 123 65
------ ------
Total interest income 7,386 7,112
Interest expense
Deposits 2,530 2,581
Securities sold under agreements to repurchase 5 -
FHLB advances and other borrowings 1,653 1,471
------ ------
Total interest expense 4,188 4,052
------ ------
Net interest income 3,198 3,060
Provision for loan losses (94) (1,128)
------ ------
Net interest income after provision for loan losses 3,292 4,188
Noninterest income
Service charges on deposit accounts 819 851
Trust and brokerage fee income 449 111
Insurance commissions 11 8
Net realized gains from sales of loans 101 51
Mortgage servicing asset (impairment) (58) (49)
Net gain (loss) on securities available for sale (282) 361
Earnings on life insurance 102 62
Other income 222 226
------ ------
Total noninterest income 1,364 1,621
Noninterest expense
Salaries and employee benefits 2,409 2,112
Occupancy and equipment expenses 805 801
Professional and consulting fees 217 218
Data processing expense 174 207
Business development and marketing 91 191
Supplies and communications 143 151
Amortization of intangibles 99 97
Other expense 360 439
------ ------
Total noninterest expense 4,298 4,216
Income before income taxes 358 1,593
Income tax expense 16 442
------ ------
Net income $ 342 $ 1,151
------ ------
------ ------
Basic earnings per common share $ 0.26 $ 0.87
Diluted earnings per common share $ 0.26 $ 0.84
Cash dividends declared $ 0.190 $ 0.165
</table>
<page>