MFBC Mfb Corp (MM)

MFB Corp. (NASDAQ:MFBC), parent company of MFB Financial (the "Bank"), reported today its consolidated financial results on an unaudited basis of $815,000, or $0.59 diluted earnings per share for the three months ended March 31, 2006 an increase from net income of $796,000, or $0.58 diluted earnings per share, for the three months ended March 31, 2005. MFB Corp's consolidated net income for the six months ended March 31, 2006 was $418,000, or $0.30 diluted earnings per share, compared to $686,000, or $0.50 diluted earnings per share, for the same period last year. Charles J. Viater, President and CEO, stated that "We are pleased with the strong results for the quarter as interest income and noninterest income have improved from the prior year and we have continued to monitor and control noninterest expense." In addition, Mr. Viater announced today that the Board of Directors has declared a cash dividend of $0.135 per share of common stock for the quarter ended March 31, 2006. The dividend is payable on May 16, 2006 to holders of record on May 2, 2006. MFB Corp.'s net interest income before provision for loan losses for the three month period ended March 31, 2006 totaled $3.4 million compared to $3.5 million for the same period last year. For the six month periods ended March 31, 2006 and 2005 net interest income was $6.9 million and $7.1 million, respectively. The decrease in net interest income was predominantly due to an increase in deposit interest expense offset by an increase in investment interest income and a decrease in FHLB advance interest expense. The provision for (recovery of) loan losses was ($154,000) for the quarter ended March 31, 2006 compared to ($29,000) for the same period last year. The provision for loan losses was $1,901,000 for the six months ended March 31, 2006 compared to $271,000 for the same period last year. The increase during the six months ended March 31, 2006 was primarily related to management's first quarter 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. After updating our analysis of the value of this collateral, completing an assessment of the reliability and adequacy of accounting systems and evaluating the recent financial performance of the business, the Bank determined that an additional charge to earnings in the amount of $2,324,000 ($1,411,000 net of tax) for this loan was necessary during the first quarter ended December 31, 2005. The loan has been placed on non-accrual status and is now fully reserved. No charge off has been recorded on this commercial loan because the Bank cannot reasonably estimate at this time how much of the loan it will ultimately recover. The percentage of non-performing loans to total loans increased from 0.65% at March 31, 2005 to 2.24% at March 31, 2006. Noninterest income remained consistent for the quarters ended March 31, 2005 and March 31, 2006 at $1.5 million. Year to date noninterest income increased from $1.8 million for the six months ended March 31, 2005 to $3.1 million for the six months ended March 31, 2006. The significant increase was primarily the result of the first quarter non-cash impairment charge to earnings in December 2004 of $948,000 ($626,000 net of tax) resulting from a decline in value of $2.0 million of Fannie Mae ("FNMA") and $2.0 million of Freddie Mac ("FHLMC") floating rate preferred stock securities MFB holds. The increase was also due to the increase in rental income for leasing of the Headquarters building located in Mishawaka, Indiana. Noninterest expense was held in check at $4.0 million for the quarter ended March 31, 2006 compared to $3.9 million for the quarter ended March 31, 2005. Year to date noninterest expense remained unchanged at $7.9 million for the six month periods ended March 31, 2006 and 2005. A reduction in professional and consulting fees, was offset by an increase in salaries and employee benefits, and occupancy and equipment expense. MFB Corp.'s total assets decreased from $554.9 million at September 30, 2005 to $525.3 million at March 31, 2006. A decrease in cash and cash equivalents from $54.2 million at September 30, 2005 to $38.3 million at March 31, 2006 was predominantly due to the payoff of FHLB advances totaling $15.0 million during the six months ended March 31, 2006. Total loans at March 31, 2006 of $377.0 million decreased from the $390.7 million at September 30, 2005. Commercial loans decreased from $157.8 million at September 30, 2005 to $142.6 million at March 31, 2006; mortgage loans decreased slightly from $192.0 million at September 30, 2005 to $191.6 million at March 31, 2006 and were offset by consumer loans, including home equity loans, increasing from $40.9 million at September 30, 2005 to $42.8 million at March 31, 2006. Investment securities available for sale increased from $63.6 million at September 30, 2005 to $64.7 million at March 31, 2006. MFB Corp.'s allowance for loan losses at March 31, 2006 was $8.2 million or 2.17% of loans compared to $6.4 million or 1.63% of loans at September 30, 2005. For the second quarter ended March 31, 2006, net charge offs were $95,000 compared to $131,000 net charge offs for the quarter ended March 31, 2005. Year to date net charge offs were $102,000 for the six months ended March 31, 2006 and $144,000 for the six months ended March 31, 2005. In management's opinion, the allowance for loan losses is adequate to cover probable incurred losses at March 31, 2006. Total deposits decreased from $374.4 million at September 30, 2005 to $361.4 million at March 31, 2006. The decrease in deposits was predominantly due to a measured reduction in above-average cost deposit products. Federal Home Loan Bank advances decreased from $125.9 million as of September 30, 2005 to $109.6 million as of March 31, 2006. Total shareholders' equity decreased slightly from $38.7 million at September 30, 2005 to $38.3 million at March 31, 2006. The book value of MFB Corp.'s stock decreased two cents from $28.52 at September 30, 2005 to $28.50 at March 31, 2006. MFB Corp.'s wholly-owned bank subsidiary, MFB Financial, provides retail and business financial services to the Michiana area through its eleven banking centers in St. Joseph and Elkhart counties and private client services to the Indianapolis market through its office in Hamilton County. For more information, go to www.mfbbank.com. -0- *T MFB CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, 2006 and September 30, 2005 (in thousands except share information) March 31, September 30, 2006 2005 --------------- -------------- Assets Cash and due from financial institutions $8,217 $7,613 Interest-bearing deposits in other financial institutions - short term 30,056 46,596 --------------- -------------- Total cash and cash equivalents 38,273 54,209 Securities available for sale 64,669 63,575 Other investments 12,422 12,514 Loans held for sale 411 407 Mortgage loans 191,613 191,970 Commercial loans 142,556 157,804 Consumer loans 42,831 40,921 --------------- -------------- Loans receivable 377,000 390,695 Less: allowance for loan losses (8,188) (6,388) --------------- -------------- Loan receivable, net 368,812 384,307 Premises and equipment, net 20,132 20,336 Mortgage servicing rights 2,456 2,341 Cash surrender value of life insurance 6,071 5,964 Goodwill 1,970 2,423 Other intangible assets 1,916 2,134 Other assets 8,184 6,667 --------------- -------------- Total Assets $525,316 $554,877 =============== ============== Liabilities and Shareholders' Equity Liabilities Deposits Noninterest-bearing demand deposits $35,836 $36,876 Savings, NOW and MMDA deposits 136,245 153,864 Time deposits 189,358 183,624 --------------- -------------- Total deposits 361,439 374,364 FHLB advances 109,628 125,854 Loans from correspondent banks 6,500 6,500 Trust preferred securities 5,000 5,000 Accrued expenses and other liabilities 4,446 4,486 --------------- -------------- Total liabilities 487,013 516,204 Shareholders' equity Common stock, no par value, 5,000,000 shares authorized; shares issued: 1,689,417 - 03/31/06 and 09/30/05; shares outstanding: 1,344,060 - 03/31/06 and 1,355,860 - 09/30/05 12,377 12,376 Additional paid in capital 29 - Retained earnings - substantially restricted 34,092 34,027 Accumulated other comprehensive income (loss), net of tax of ($381) - 03/31/06 and ($175) - 09/30/05 (412) (310) Treasury stock, 345,357 common shares - 03/31/06 and 333,557 common shares - 09/30/05, at cost (7,783) (7,420) --------------- -------------- Total shareholders' equity 38,303 38,673 --------------- -------------- Total Liabilities and Shareholders' equity $525,316 $554,877 =============== ============== MFB CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three and Six Months Ended March 31, 2006 and 2005 (in thousands except per share information) Three Months Ended Six Months Ended March 31 March 31 2006 2005 2006 2005 -------- -------- -------- -------- Interest income Loans receivable, including fees $6,027 $6,022 $12,069 $12,112 Securities - taxable 805 641 1,578 1,327 Other interest-bearing assets 282 37 632 92 -------- -------- -------- -------- Total interest income 7,114 6,700 14,279 13,531 Interest expense Deposits 2,383 1,594 4,619 3,207 FHLB advances and other borrowings 1,317 1,619 2,789 3,274 -------- -------- -------- -------- Total interest expense 3,700 3,213 7,408 6,481 -------- -------- -------- -------- Net interest income 3,414 3,487 6,871 7,050 Provision for (recovery of) loan losses (154) (29) 1,901 271 -------- -------- -------- -------- Net interest income after provision for (recovery of) loan losses 3,568 3,516 4,970 6,779 Noninterest income Service charges on deposit accounts 779 757 1,628 1,586 Trust fee income 126 101 226 200 Insurance commissions 43 50 91 100 Net realized gains from sales of loans 86 179 171 401 Mortgage servicing asset recovery (impairment) (1) 163 165 25 Net gain (loss) on securities available for sale - - - (948) Other income 428 201 796 462 -------- -------- -------- -------- Total noninterest income 1,461 1,451 3,077 1,827 Noninterest expense Salaries and employee benefits 1,909 1,808 3,871 3,663 Occupancy and equipment 869 866 1,726 1,654 Professional and consulting fees 110 133 201 371 Data processing expense 211 198 425 395 Other expense 857 928 1,705 1,841 -------- -------- -------- -------- Total noninterest expense 3,956 3,933 7,928 7,924 Income before income taxes 1,073 1,034 119 681 Income tax expense (benefit) 258 238 (299) (5) -------- -------- -------- -------- Net income $815 $796 $418 $686 ======== ======== ======== ======== Basic earnings per common share $0.60 $0.59 $0.31 $0.51 Diluted earnings per common share $0.59 $0.58 $0.30 $0.50 *T