MFB Corp. Announces Second Quarter, Year to Date Earnings


MISHAWAKA, Ind., April 25, 2008 (PRIME NEWSWIRE) -- 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.



      

                       MFB CORP. AND SUBSIDIARIES  
                       CONSOLIDATED BALANCE SHEETS  
             March 31, 2008 (UNAUDITED) and September 30, 2007  
                  (in thousands except share information)


                                               March 31,     Sept. 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;
    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                12,724       12,500
   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
                                                =========    =========




                        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)


                                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

            

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