April 25, 2008
Contact: Charles J. Viater
President/CEO
MFB Corp. ANNOUNCES SECOND 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 $389,000 or $0.28 diluted earnings per share for the six months ended
March 31, 2008, a decrease from the net income of $1.9 million or $1.41 diluted
earnings per share, for the six months ended March 31, 2007. MFB Corp's
consolidated net income for the three months ended March 31, 2008 was $47,000,
or $0.03 diluted earnings per share, compared to $781,000, or $0.57 diluted
earnings per share, for the same period last year.
Charles J. Viater, President and CEO, noted "The first half of this fiscal year
has seen a number of infrequent events that have reduced net earnings, the
details of which are described below. However, core earnings in the form of net
interest income and noninterest income have remained strong as we move closer to
the completion of our merger transaction that is expected to be consummated
early in our fiscal fourth quarter."
MFB Corp's net interest income before provision for loan losses for the three
month period ended March 31, 2008 was $3.2 million compared to $3.3 million for
the same period last year. For the six month periods ended March 31, 2008 and
2007, net interest income remained constant at $6.4 million. Interest expense on
deposits decreased to $2.4 million for the quarter ended March 31, 2008 compared
to $2.6 million for the same quarter in 2007, and decreased to $5.0 million from
$5.1 million for the comparable six month periods. Interest income decreased to
$7.1 million for the three months ended March 31, 2008 compared to $7.3 million
for the three months ended March 31, 2007, and for the six months ended March
31, 2008 and March 31, 2007 was $14.5 million and $14.4 million, respectively.
Interest expense on FHLB advances and other borrowings increased to $1.5 million
for the March 2008 quarter compared to $1.4 million in March 2007, and to $3.1
million from $2.9 million for the respective six month periods. The increase in
the cost of borrowed funds for the six months ended March 31, 2008 compared to
the same period last year was primarily the result of an increase in average
outstanding FHLB advances of $21.6 million.
The provision for loan losses was $64,000 for the quarter ended March 31, 2008
compared to a negative provision for loan losses of $228,000 for the same
quarter in 2007. For the six month periods ended March 31, 2008 and 2007, the
negative provision for loan losses was $30,000 and $1.4 million, respectively.
The negative provision for loan losses during the three and six month periods
ended March 31, 2007 was primarily related to the repayment of two commercial
loans which previously had a significant allowance for loan losses allocations.
The percentage of non-performing assets to total loans at March 31, 2008 was
2.66%, an increase from 1.29% at September 30, 2007.
Noninterest income was $888,000 for the quarter ended March 31, 2008 and $1.4
million for the quarter ended March 31, 2007. For the six month periods ended
March 31, 2008 and 2007, noninterest income was $2.3 million and $3.0 million,
respectively. This decrease was primarily due to other-than-temporary impairment
charges of preferred stocks of Fannie Mae and Freddie Mac of approximately $1.0
million, and impairment charges of $295,000 related to mortgage servicing rights
assets. Core noninterest income derived from the collection of deposit fees and
trust and brokerage fees for the six month period ended March 31, 2008 was $2.6
million compared to $2.0 million for the same period one year ago. This increase
for six month period ended March 31, 2008 was primarily attributable to the
result of the Company's new wealth management and private banking subsidiary,
Community Wealth Management Group, Inc.
Noninterest expense was $4.2 million for the quarter ending March, 31, 2008, an
increase from $4.0 for the same period last year. For the six month period ended
March 31, 2008 noninterest expense increased to $8.5 million from $8.2 million
at March 31, 2007. The increase was primarily due to acquisition expenses
incurred of approximately $218,000 and in increase in salaries and benefits of
$487,000. The increase was offset slightly by a decrease in marketing and
business development of $157,000.
The Company's total assets were $500.8 million as of March 31, 2008 compared to
$510.4 million as of September 30, 2007. Cash and cash equivalents increased
from $23.5 million at September 30, 2007 to $28.5 million at March 31, 2008.
Loans receivable decreased from $407.8 million at September 30, 2007 to $395.6
million at March 31, 2008. Mortgage loans decreased from $201.2 million at
September 30, 2007 to $190.0 million at March 31, 2008. Commercial loans
outstanding decreased from $153.9 million at September 30, 2007 to $153.6
million at March 31, 2008. Consumer loans, including home equity and second
mortgages, decreased by $488,000 during the six month period ending March 31,
2008.
During the quarter ended March 31, 2008, the Company completed secondary market
mortgage loan sales totaling $7.3 million and the net gains realized on these
loan sales were $137,000, including $81,000 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 balance of allowance for loan losses at March 31, 2008 was $4.9 million, or
1.24% of loans, compared to $5.3 million, or 1.30% of loans, at September 30,
2007. The change is due primarily to the negative provision for loan losses and
the amount of net charge-offs for the six months ended March 31, 2008. For the
fiscal second quarter ended March 31, 2008, net charge-offs were $90,000
compared to $40,000 net charge-offs for the quarter ended September 30, 2007.
Total liabilities decreased by $11.6 million from $469.4 million at September
30, 2007 to $457.8 million at March 31, 2008. The Bank's noninterest-bearing
demand deposits decreased $9.8 million, while savings and NOW deposits increased
by $6.6 million and time deposits increased by $5.3 million. FHLB advances
decreased to $111.8 million at March 31, 2008, from $124.3 million at September
30, 2007.
Total shareholders' equity increased by $1.9 million to $43.0 million at March
31, 2008 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 $31.00 at March 31,
2008.
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.
<page>
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2008 (UNAUDITED) and September 30, 2007
(in thousands except share information)
<table>
<caption>
<s> <c> <c>
March 31, September 30,
2008 2007
----------------- ------------------
Assets
Cash and due from financial institutions $ 7,791 $ 7,546
Interest-earning deposits in other financial institutions - short term 20,714 15,924
Total cash and cash equivalents 28,505 23,470
Securities available for sale 29,412 33,409
FHLB Stock and other investments 9,097 9,718
Loans held for sale 461 612
Mortgage loans 189,950 201,233
Commercial loans 153,586 153,945
Consumer loans 52,090 52,578
Loans receivable 395,626 407,756
Less: allowance for loan losses (4,892) (5,298)
Loans receivable, net 390,734 402,458
Premises and equipment, net 19,151 18,506
Mortgage servicing rights, net 1,983 2,253
Cash surrender value of life insurance 10,774 10,565
Goodwill 1,970 1,970
Other intangible assets 1,724 1,922
Other assets 7,000 5,565
Total assets $ 500,811 $ 510,448
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing demand deposits $ 29,269 $ 39,043
Savings, NOW and MMDA deposits 130,348 123,718
Time deposits 176,365 171,042
Total deposits 335,982 333,803
Securities sold under agreements to repurchase 542 540
Federal Home Loan Bank advances 111,809 124,258
Subordinated debentures 5,000 5,000
Accrued expenses and other liabilities 4,445 5,790
Total liabilities 457,778 469,391
Shareholders' equity
Common stock, 5,000,000 shares authorized; 12,724 12,500
shares issued: 1,689,417 - 3/31/08 and 9/30/07;
shares outstanding: 1,388,381 - 3/31/08 and 1,313,671 - 9/30/07
Retained earnings - substantially restricted 37,717 37,841
Accumulated other comprehensive income (loss),
net of tax of ($58) - 3/31/08 and ($159) - 9/30/07 (113) (308)
Treasury stock: 301,036 common shares - 3/31/08 and
375,746 common shares - 9/30/07, at cost (7,295) (8,976)
Total shareholders' equity 43,033 41,057
Total liabilities and shareholders' equity $ 500,811 $ 510,448
</table>
<page>
MFB CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three and Six Months Ended March 31, 2008
and 2007 (in thousands except per share
information and cash dividends)
<table>
<caption>
<s> <c> <c>
Three Months Ended Six Months Ended
March 31, March 31,
2008 2007 2008 2007
Interest income
Loans receivable, including fees $ 6,471 $ 6,509 $ 13,243 $ 12,816
Securities - taxable 492 690 983 1,430
Other interest-earning assets 125 138 249 203
Total interest income 7,088 7,337 14,475 14,449
Interest expense
Deposits 2,446 2,567 4,975 5,148
Securities sold under agreements to repurchase 3 - 9 -
FHLB advances and other borrowings 1,479 1,421 3,132 2,892
Total interest expense 3,928 3,988 8,116 8,040
Net interest income 3,160 3,349 6,359 6,409
Provision for loan losses 64 (228) (30) (1,356)
Net interest income after provision for loan losses 3,096 3,577 6,389 7,765
Noninterest income
Service charges on deposit accounts 742 767 1,561 1,618
Trust and brokerage fee income 518 240 1,002 404
Insurance commissions 15 15 26 23
Net realized gains from sales of loans 137 93 237 144
Mortgage servicing asset (impairment) (237) 29 (295) (20)
Net gain (loss) on securities available for sale (608) 16 (890) 377
Earnings on life insurance 117 63 220 124
Other income 204 201 391 375
Total noninterest income 888 1,424 2,252 3,045
Noninterest expense
Salaries and employee benefits 2,206 2,016 4,615 4,128
Occupancy and equipment expenses 642 802 1,447 1,603
Professional and consulting fees 203 179 420 397
Data processing expense 173 208 347 415
Loss on sale of fixed assets 5 5 5 5
Business development and marketing 92 149 183 340
Supplies and communications 135 152 278 303
Amortization of intangibles 99 97 198 193
Other expense 653 377 1,013 817
Total noninterest expense 4,208 3,985 8,506 8,201
Income (loss) before income taxes (224) 1,016 135 2,609
Income tax expense (benefit) (271) 235 (254) 677
Net income $ 47 $ 781 $ 389 $ 1,932
Basic earnings per common share $ 0.03 $ 0.59 $ 0.29 $ 1.46
Diluted earnings per common share $ 0.03 $ 0.57 $ 0.28 $ 1.41
Cash dividends declared $ 0.190 $ 0.165 $ 0.380 $ 0.330
</table>