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Middlefield Banc Corp. Reports First Quarter 2006 Earnings

Middlefield Banc Corp. 2006 Press Releases

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Contact Info: James R. Heslop, 2nd
Executive Vice President/Chief Operating Officer
440.632.1666 Ext. 3219
Date: April 20, 2006


Middlefield Banc Corp. (Pink Sheets:  MBCN) today reported net earnings for the three months ended March 31, 2006, of $818,000, or $0.60 per diluted share.  The first quarter of 2006 earnings represent a 14.5% increase over the $714,000, or $0.53 per diluted share, in net earnings that the company recorded for the quarter ended March 31, 2005.

The company's total assets ended the first quarter of 2006 at $312.6 million, an increase of 4.7% over the $298.6 million in total assets reported at March 31, 2005. Net loans at March 31, 2006, were $232.9 million, up $17.1 million, or 7.9%, over the $215.8 million reported at March 31, 2005. Total deposits at March 31, 2006, were $254.3 million, or 1.9% greater than the deposit level of $249.4 million at March 31, 2005.

Annualized returns on average equity ("ROE") and average assets ("ROA") for the first quarter of 2006 were 11.79% and 1.05%, respectively.  The comparable results for the first quarter of 2005 were 11.45% and 0.97%. 

In reviewing his company's performance, Middlefield Banc Corp. President and CEO Thomas G. Caldwell, commented, "To report another quarter of earnings growth is, in fact, a pleasure.  The increase in non-interest income coupled with the control exhibited in operating expenses worked to offset the continued margin compression that is being felt across the industry."

Caldwell continued, "While our balance sheet growth continues to be slower than plan, we recognize that pricing within the market remains at levels that we do not deem prudent for both loans and deposits.  We remain committed to our strategic focus of prudent growth of the balance sheet as we have undertaken initiatives to both increase the level of earning assets and grow core deposit relationships."

Highlights for the first quarter of 2006 include:

  • Net interest income was $2.69 million, an increase of 4.6% over the $2.57 million reported for the comparable period of 2005. The net interest margin was 3.89% for the first quarter of 2006 as well as the first quarter of 2005. Although the yield curve has begun to show some movement, it remained flat for most of the first quarter of 2006. This along with aggressive loan and deposit pricing within the company's market area were factors in the reported net interest margin.
  • Non-interest income increased $69,000 for the three-month period of 2006 over the comparable 2005 period. This increase of 14.4% was primarily the result of higher service charge revenue associated with an increase in the number of deposit accounts, expanded ATM/Debit card usage, and an increase in revenue from investment services. Offsetting the increases were a seasonal decline in statement service charges and a loss on the sale of securities as the company disposed of the remaining portions of several mortgage-backed securities from its investment portfolio.
  • Non-interest expense for the first quarter of 2006 was consistent with that of the first quarter of 2005. Non-interest expense for the 2006 period was $2.04 million, while the 2005 figure was $2.01 million, reflecting an increase of 1.1%. The leading factor in the increased expenses was data processing costs associated with an expanded base of products per customer, as well as the introduction during 2005 of the company's image based item processing system.  Also contributing were the cost of certain maintenance contracts, seasonal utility costs, and depreciation. 
  • Total deposit growth from the end of the first quarter of 2005 to the same point in 2006 was $4.83 million. The slower growth is directly the result of the competitive interest rate environment present within the company's market area.  The company also had a shift in the deposit composition as certificates of deposits and IRA accounts increased $13.9 million in the period-to-period comparison and savings accounts and money market accounts decreased $15.5 million during the same period. Net loans at March 31, 2006, stood at $232.9 million, reflecting an increase of $17.1 million from March 31, 2005. Increases in commercial loans were the predominant factor, while residential mortgages loans increased at levels lower than historically experienced by the company. 
  • Provision for loan losses was $75,000 for the 2006 first quarter and $60,000 for equal 2005 period. The level of provision was in keeping with the company's financial plan and is designed to accommodate the increased size of the loan portfolio and the larger level of commercial relationships. At March 31, 2006, the allowance for loan losses as a percentage of total loans was 1.22%, which was comparable to the 1.23% reported at March 31, 2005.
  • Stockholders' equity at March 31, 2006, was $27.9 million, or 8.92% of total assets. This represents an increase of 11.4% from the March 31, 2005 figure.  Book value as of March 31, 2006 was $20.65.  This was an increase of $1.88 over the March 31, 2005 book value.
  • In the first quarter of 2006, Middlefield paid a cash dividend of $0.235 per share.  This represents an increase of 12.2% over the cash dividend paid during the first quarter of 2005.  The 2005 cash dividend amount has been adjusted to reflect the 5% stock dividend paid by the company during the fourth quarter of 2005.

"Our two primary areas of focus are the net interest margin and asset quality," commented Donald L. Stacy, Chief Financial Officer and Treasurer of Middlefield Banc Corp. "We have continued our conservative posture on loan pricing, which has been reflected in our loan growth. This has also impacted our earnings as the investment alternatives have provided lower yields. On the liability side of the balance sheet, we have been faced with what we deem to be irrational pricing within our markets. While we have worked to control interest expense, we have also worked to maintain deposit balances."

"Our level of non-performing loans remains relatively high in comparison to our historical levels," Stacy continued. "However, one large commercial credit, which is real estate secured, constitutes the bulk of the dollar total. Our senior credit personnel remain committed to resolving that and other issues within the most expedient timeframe. Our expectations are for only nominal losses, should there be any."

Middlefield Banc Corp. is a financial holding company headquartered in Middlefield, Ohio. Its subsidiary, The Middlefield Banking Company, operates six full service banking centers and a LPL Financial brokerage office serving Chardon, Garrettsville, Mantua, Middlefield, and Orwell, Ohio. The banking subsidiary has recently entered into a lease arrangement for a seventh banking office to be located in Newbury, Geauga County, Ohio.

This announcement contains forward-looking statements that involve risk and uncertainties, including changes in general economic and financial market conditions and the Company's ability to execute its business plans. Although management believes the expectations reflected in such statements are reasonable, actual results may differ materially.


Consolidated Selected Financial Highlights
March 31, 2006 and 2005
(unaudited, dollars in thousands)
Balance Sheet (period end)   March 31,     March 31,     Percent
    2006     2005     Change
Cash and cash equivalents $ 6,259    $ 4,386     42.7%
Federal funds sold   -     4,675     -
Available for sale securities   55,888     58,042     -3.7%
Held to maturity securities   216     221     -2.5%
Loans:   235,783     218,469     7.9%
Less:  reserve for loan losses   2,888     2,686     7.5%
  Net loans   232,895     215,784     7.9%
Premises and equipment   6,588     6,616     -0.4%
Bank-owned life insurance   6,686     5,474     22.1%
Accrued interest receivable and other assets   4,045     3,364     20.2%
Total Assets $ 312,577   $ 298,563     4.7%
    March 31,     March 31,     Percent
    2006     2005     Change
Liabilities and Stockholders' Equity                
Non-interest bearing demand deposits $ 39,562   $ 35,603     11.1%
Interest bearing demand deposits   11,344     8,898     27.5%
Money market accounts   13,069     17,095     -23.5%
Savings deposits   63,086     74,539     -15.4%
Certificates of deposit   127,206     113,307     12.3%
  Total Deposits   254,268     249,442     1.9%
Borrowed funds   29,352     23,213     26.4%
Other liabilities   1,065     864     23.3%
  Total Liabilities   284,685     273,519     4.1%
Common equity   31,664     28,438     11.3%
Net Unrealized gain (loss) on securities   (747)     (424)     76.4%
Treasury stock   (3,026)     (2,970)     1.9%
  Total Stockholders' Equity     27,892     25,044     11.4%
Total Liabilities and Stockholders' Equity 312,577   298,563     4.7%
Consolidated Selected Financial Highlights
March 31, 2006 and 2005
(unaudited, dollars in thousands, except per share amounts)
    For the Three Months Ended      
    March 31,     Percent
    2006     2005     Change
Statement of Income                
Interest Income    4,561   4,116     10.8%
Interest Expense   1,875     1,548     21.1%
  Net interest income   2,686     2,568     4.6%
Provision for loan losses   75     60     25.0%
  Net interest income after provision                
  for loan losses   2,611     2,508     4.1%
Non-interest income                
  Service charges on deposits   413     353     16.8%
  Other income   90     78     16.2%
  Earnings on bank-owned life insurance   53     50     6.3%
  Net securities gains (losses)     (6)     -     -
  Total non-interest income   550     481     14.4%
Non-interest expense                
  Salaries and employee benefits   995     1,016     -2.1%
  Net occupancy expense   154     135     14.4%
  Equipment expense   92     108     -14.9%
  Data processing costs   179     149     19.8%
  Ohio state franchise tax   90     90     0.0%
  Other operating expense   526     515     2.2%
  Total non-interest expense   2,036     2,013     1.1%
  Income before income taxes   1,126     976     15.3%
Provision for income taxes   308     262     17.6%
Net income $ 818   $ 714     14.5%
Per common share data                  
Net income per common share - basic $ 0.61   $ 0.53     15.1%
Net income per common share - diluted $ 0.60   $ 0.53     13.2%
Dividends declared $ 0.235   $ 0.210     12.2%
Book value (period end) $ 20.65   $ 18.77     10.0%
Average shares outstanding - basic   1,347,464     1,329,800      
Average shares outstanding -diluted   1,368,931     1,336,957      
Period ending shares outstanding   1,350,661     1,334,486      
Selected ratios                  
Return on average assets   1.05%     0.97%      
Return on average equity   11.79%     11.45%      
Yield on earning assets   6.49%     6.15%      
Cost of interest bearing liabilities   3.07%     2.70%      
Net interest spread   3.42%     3.45%      
Net interest margin   3.89%     3.89%      
Efficiency ratio   61.34%     64.70%      
Equity to assets at period end   8.92%     8.39%      
    March 31,     March 31,      
Asset quality data     2006     2005      
Allowance for loan losses $ 2,888   $ 2,686      
Allowance for loan losses/total loans   1.22%     1.23%      
Net charge-offs:                
  Quarter-to-date $ 28   $ (2)      
  Year-to-date   28     (2)      
Net charge-offs to average loans   0.01%     0.00%      
Non-performing loans/total loans   0.87%     0.96%      
Allowance for loan losses/non-performing loans   140.40%     127.72%      
Central Ohio Northeast Ohio