MFB Corp. Announces Second Quarter, Year to Date Earnings and Quarterly Dividend Declaration

Share Name	Share Symbol	Market	Type
Mfb Corp (MM)	NASDAQ:MFBC	NASDAQ	Common Stock

Mfb Corp (MM) (NASDAQ:MFBC)
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MFB Corp. (NASDAQ:MFBC), parent company of MFB Financial (the �Bank�), reported today its consolidated financial results on an unaudited basis of $1.9 million or $1.41 diluted earnings per share for the six months ended March 31, 2007 an increase from the net income of $418,000 or $0.30 diluted earnings per share, for the six months ended March 31, 2006. The change is predominantly due to the activity in the allowance for loan loss further discussed below. MFB Corp�s consolidated net income for the three months ended March 31, 2007 was $781,000, or $0.57 diluted earnings per share, compared to $815,000, or $0.59 diluted earnings per share, for the same period last year. Charles J. Viater, President and CEO, stated "Profitable loan growth and deposit pricing continue to be the focus in the current rate environment. The growth in core deposits has provided us the opportunity to pay down high cost borrowings to reduce the impact of margin compression." In addition, Mr. Viater announced today that the Board of Directors has declared a cash dividend of $0.165 per share of common stock for the quarter ended March 31, 2007. The dividend is payable on May 15, 2007 to holders of record on May 1, 2007. MFB Corp�s net interest income before provision for loan losses for the three month period ended March 31, 2007 was $3.3 million compared to $3.4 million for the same period last year. For the six month periods ended March 31, 2007 and 2006, net interest income was $6.4 million and $6.9 million, respectively. The decrease was due to an increase in interest expense on deposits, partially offset by an increase in interest income and reduced FHLB advance interest and other borrowings expense. Interest expense on deposits increased to $2.6 million for the quarter ended March 31, 2007 compared to $2.2 million for the same quarter in 2006, and increased to $5.1 million from $4.3 million for the comparable six month periods. Interest income increased to $7.3 million for the three months ended March 31, 2007 compared to $7.1 million for the three months ended March 31, 2006 and for the six months ended March 31, 2007 and March 31, 2006 was $14.4 million and $14.3 million, respectively. Interest expense on FHLB advances and other borrowings declined to $1.4 million for the March 2007 quarter compared to $1.5 million in March 2006, and to $2.9 million from $3.1 million for the respective six month periods. MFB Corp recorded a recovery of loan losses of $1.4 million for the six months ended March 31, 2007 compared to a provision expense of $1.9 for the same period last year. The recovery during the six months ended March 31, 2007 was predominantly related to the repayment of two commercial loans which previously had significant allowance for loan loss allocations. The percentage of non-performing assets to total loans decreased from 2.18% at September 30, 2006 to 1.68% at March 31, 2007. Noninterest income was $1.4 million for the quarter ending March 31, 2007 and $1.5 million for the quarter ended March 31, 2006, and $3.0 million for both of the respective six month periods. For the six months ended March 31, 2007, MFB recorded a gain on securities of $377,000 as a partial settlement on a WorldCom class action suit; an impairment of $20,000 was recorded for the valuation of mortgage servicing assets, while in the six month period ending March 31, 2006, a recovery of $166,000 was recorded for the valuation of mortgage servicing rights. Noninterest expense remained consistent at $4.0 million for the quarter ended March 31, 2007 and 2006. For the six month period ended March 31, 2007 noninterest expense increased to $8.2 million from $7.9 million at March 31, 2006. These increases were primarily from salaries and employee benefits. The Company�s total assets were $501.6 million as of March 31, 2007 compared to $496.1 million as of September 30, 2006. Cash and cash equivalents increased from $16.3 million at September 30, 2006 to $24.5 million at March 31, 2007. Loans receivable increased from $379.2 million at September 30, 2006 to $387.5 million at March 31, 2007. Mortgage loans decreased from $199.2 million at September 30, 2006 to $198.6 million at March 31, 2007. Commercial loans outstanding increased from $134.4 million at September 30, 2006 to $140.6 million at March 31, 2007. Consumer loans, including home equity and second mortgages, increased by $2.7 million during the six month period ending March 31, 2007. During the second quarter ended March 31, 2007, the Company completed secondary market mortgage loan sales totaling $4.2 million and the net gains realized on these loan sales were $93,000, including $52,000 related to recording mortgage servicing rights. During the quarter ended September 30, 2006, the Company completed secondary market mortgage loan sales totaling $2.3 million and the net gains realized on these loan sales were $49,000, including $29,000 related to recording mortgage servicing rights. The allowance for loan losses at March 31, 2007 was $5.4 million or 1.39% of loans compared to $7.2 million or 1.91% of loans at September 30, 2006 with the change due predominantly to the recovery of loan losses during the first quarter of 2007. For the second quarter ended March 31, 2007, net charge-offs were $56,000 compared to $37,000 net charge-offs for the quarter ended September 30, 2006. Total liabilities increased by $3.6 million, from $457.1 million at September 30, 2006 to $460.7 million at March 31, 2007. The Bank�s noninterest-bearing demand deposits increased $6.3 million, and savings and NOW deposits $4.2 million; time deposits decreased by $2.7 million. FHLB advances increased slightly to $97.5 million at March 31, 2007, from $97.1 million at September 30, 2006. Total shareholders' equity increased by $1.9 million to $40.9 million at March 31, 2007 compared to $38.9 million at September 30, 2006. The book value of MFB Corp. stock also increased, from $29.48 at September 30, 2006 to $30.97 at March 31, 2007 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. MFB CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2007 (UNAUDITED) and September 30, 2006 (in thousands except share information) � March 31, September 30, 2007� 2006� Assets Cash and due from financial institutions $ 15,570� $ 13,318� Interest-bearing deposits in other financial institutions � short term 8,907� 2,971� Total cash and cash equivalents 24,477� 16,289� � Securities available for sale 47,902� 58,383� FHLB Stock and other investments 10,371� 10,939� � Mortgage loans 198,556� 199,194� Commercial loans 140,584� 134,414� Consumer loans 48,311� 45,614� Loans receivable 387,451� 379,222� Less: allowance for loan losses (5,378) (7,230) Loans receivable, net 382,073� 371,992� � Premises and equipment, net 19,045� 19,477� Mortgage servicing rights 2,261� 2,366� Cash surrender value of life insurance 6,356� 6,237� Goodwill 1,970� 1,970� Other intangible assets 1,505� 1,699� Other assets 5,608� 6,720� Total Assets $ 501,568� $ 496,072� Liabilities and Shareholders� Equity Liabilities Deposits Noninterest-bearing demand deposits $ 36,336� $ 30,031� Savings, NOW and MMDA deposits 133,430� 129,233� Time deposits 184,282� 186,979� Total deposits 354,048� 346,243� FHLB advances 97,482� 97,053� Loans from correspondent banks -� 4,500� Subordinated debentures 5,000� 5,000� Accrued expenses and other liabilities 4,183� 4,337� Total liabilities 460,713� 457,133� Shareholders� equity Common stock, no par value: 5,000,000 shares authorized; shares issued: 1,689,417 � 03/31/07 and 9/30/06; shares outstanding: 1,319,271 � 03/31/07 and 1,320,844 � 09/30/06 � 12,477� � 12,421� Retained earnings � substantially restricted 36,975� 35,479� Accumulated other comprehensive income (loss), net of tax of $82 � 03/31/07 and ($175) � 09/30/06 159� (341) Treasury stock: 370,146 common shares � 03/31/07 and 368,573 common shares � 09/30/06, at cost (8,756) (8,620) Total shareholders� equity 40,855� 38,939� Total Liabilities and Shareholders� equity $ 501,568� $ 496,072� MFB CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three and Six Months Ended March 31, 2007 and 2006 (in thousands except per share information) � � Three Months EndedMarch 31, Six Months Ended March 31, 2007� 2006� 2007� 2006� Interest income Loans receivable, including fees $ 6,509� $ 6,027� $ 12,816� $ 12,069� Securities 690� 805� 1,430� 1,578� Other interest-bearing assets 138� 282� 203� 632� Total interest income 7,337� 7,114� 14,449� 14,279� Interest expense Deposits 2,567� 2,221� 5,148� 4,285� FHLB advances and other borrowings 1,421� 1,479� 2,892� 3,123� Total interest expense 3,988� 3,700� 8,040� 7,408� Net interest income 3,349� 3,414� 6,409� 6,871� Provision for (recovery of) loan losses (228) (154) (1,356) 1,901� Net interest income after provision for (recovery of) loan losses 3,577� 3,568� 7,765� 4,970� Noninterest income Service charges on deposit accounts 767� 796� 1,618� 1,661� Trust fee income 160� 126� 271� 226� Insurance commissions 15� 43� 23� 91� Net realized gains from sales of loans 93� 86� 144� 171� Mortgage servicing asset recovery (impairment) 29� (1) (20) 166� Net gain on securities available for sale 16� -� 377� -� Other income 344� 411� 632� 701� Total noninterest income 1,424� 1,461� 3,045� 3,016� Noninterest expense Salaries and employee benefits 2,016� 1,909� 4,128� 3,871� Occupancy and equipment expenses 802� 869� 1,603� 1,665� Professional and consulting fees 179� 205� 397� 367� Data processing expense 208� 211� 415� 425� Other expense 780� 762� 1,658� 1,539� Total noninterest expense 3,985� 3,956� 8,201� 7,867� � Income before income taxes 1,016� 1,073� 2,609� 119� Income tax expense (benefit) 235� 258� 677� (299) Net income $ 781� $ 815� $ 1,932� $ 418� Basic earnings per common share $ 0.59� $ 0.60� $ 1.46� $ 0.31� Diluted earnings per common share $ 0.57� $ 0.59� $ 1.41� $ 0.30� � Cash dividends declared $ 0.165� $ 0.135� $ 0.330� $ 0.260�

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MFBC Mfb Corp (MM)