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Middlefield Banc Corp. Reports Full Year and Fourth Quarter 2013 Results

Middlefield Banc Corp. 2014 Press Releases

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Contact Info: James R. Heslop, 2nd
Middlefield Banc Corp.
Executive Vice President/Chief Operating Officer
440.632.1666 Ext. 3219
Date: February 3, 2014

MIDDLEFIELD, OHIO, Middlefield Banc Corp. (OTCQB: MBCN), parent of The Middlefield Banking Company, today reported financial results for the fourth quarter and full year ended December 31, 2013.

For the year ended December 31, 2013, the company earned $7.0 million, representing an increase of 11.9% from the net income of $6.3 million for the year ended December 31, 2012. Net Income for the fourth quarter was $1.8 million, which compares to the $1.3 million reported for the fourth quarter of 2012, an increase of 43.4%.

Diluted earnings per share for the full year of 2013 were $3.47, which was 5.8% above the twelve month 2012 result of $3.28. The company reported diluted earnings per share for the fourth quarter of 2013 at $0.90, while the same period of 2012 saw diluted earnings per share of $0.64.

Annualized returns on average equity ("ROE") and average assets ("ROA") for 2013 were 13.17% and 1.06%, respectively, compared with 11.98% and 0.95% for 2012. For the fourth quarter, ROE and ROA were 13.45% and 1.10%, respectively. For the 2012 three-month period the results were 9.11% and 0.75%, respectively.

"For Middlefield Banc Corp., 2013 was a year highlighted by solid success. Our net income in excess of $7.0 million was the highest level ever recorded in the company's history," stated Thomas G. Caldwell, President and Chief Executive Officer, "Our results were achieved despite significant expense impact driven by regulatory-related revenue burdens. The success that we experienced during 2013 is a direct result of the efforts of the entire team at Middlefield Banc Corp."

"The core of our company is strong. We have maintained our net interest margin, improved asset quality and expanded our loan portfolio. This was accomplished despite a continued sluggish economy, historically low interest rates, and increased regulatory costs, especially those associated with increased compliance regulations," continued Caldwell. "We will continue to remain focused on delivering excellent customer service, increasing value to our shareholders, and operating our company under safe and sound banking principles."

Net Interest Income

Net interest income for the fourth quarter of 2013 increased $0.5 million, or 8.6%, to $5.9 million compared to $5.4 million in the fourth quarter of 2012. The net interest margin increased 18 basis points to 3.73% compared to the 3.55% reported for the year-ago quarter. Net interest income for the year 2013 increased by $0.6 million, or 2.8%, to $22.9 million compared to the $22.3 million for the full year of 2012. The net interest margin for 2013 stood at 3.85%, an 11 basis point increase from the 3.74% reported for 2012.

"During 2013, we took the opportunity to reposition our balance sheet by permitting a reduction in higher cost funding sources. This effort afforded us the ability to maintain our levels of net interest margin. Moving forward into 2014, we would anticipate continued pressure on margin levels. This is something that we do not expect to improve within the foreseeable time horizon." stated Donald L. Stacy, Chief Financial Officer. "We are committed to executing our plan of growing our base of quality client relationships. We fully expect that this focus will continue to add value for our shareholders."

Non-Interest Income and Operating Expenses

Non-interest income was lower for both the three and twelve month periods. Excluding the net effect of securities transactions, the company did experience an increase in all other non-interest income categories for both reporting periods. The comparative increases on deposit service charges of $0.1 million and $0.2 million, for the respective three and twelve month periods, are primarily driven by service charges on a larger base of non-interest bearing deposit accounts, including increased usage of debit cards, with attendant fees. Revenue from investment services resulted in a year-over-year increase of $0.2 million. The company experienced a gain of $610,000 during 2012 related to the sale of certain investment securities. This gain was directly related to the re-positioning of the securities portfolio to a lower level of private label mortgage-backed securities, and was not matched during 2013.

Operating expenses increased by 30.1%, or $1.1 million for the quarter and $1.2 million, or 7.9% for 2013 over comparable periods of 2012. The increases in salaries and employee benefits were driven by higher staffing levels in branch customer support positions, loan administration, and regulatory compliance management. Increases in depreciation and real estate taxes of $0.2 million contributed to the increase in occupancy and equipment expenses. During 2013, the company did have a full year of expense related to a new financial/administrative center. The building was purchased by the company near the end of 2013, which is reflected in the increase in premises and equipment on the balance sheet. Data processing costs were higher for both the three and twelve-month periods, which was the direct result of higher customer counts and increased product/service offerings. Other cost increases during 2013 were tied to higher audit expense which was directly related to increased regulatory changes, and to the maintenance of other real estate owned properties.

Balance Sheet

The company's total assets ended 2013 at $647.1 million, a decrease of 3.5% from the $670.3 million in total assets reported at December 31, 2012. Net loans at December 31, 2013, were $428.7 million, up $28.0 million, or 7.0%, over the $400.7 million reported at December 31, 2012. Total deposits at year-end 2013 were $568.8 million, or 4.1% below the deposit level of $593.3 million at December 31, 2012. The investment portfolio, which is entirely classified as available for sale, stood at $157.1 million at December 31, 2013. This figure represented a reduction in the portfolio of $37.3 million from the prior year-end.

Asset Quality

The provision for loan losses for the year 2013 was $0.2 million, compared to the $2.2 million posted for 2012. Net charge-offs for the full year 2013 were $0.9 million, or 0.22% of average loans. For 2012, net charge-offs totaled $1.2 million, which equaled 0.30% of average loans. At December 31, 2013, the allowance for loan losses was $7.0 million, representing 1.62% of total loans.

The following table provides a summary of asset quality and reserve coverage ratios.

Asset Quality History
(dollars in thousands)
 
  Dec. 31
2013
  Dec. 31
2012
  Dec. 31
2011
  Dec. 31
2010
  Dec. 31
2009
 
Nonperforming loans    $ 12,290    $ 14,224    $ 24,546    $ 19,986    $ 16,285
Real estate owned 2,698 1,846 2,196 2,302 2,164
 
Nonperforming assets $ 14,988 $ 16,070 $ 26,742 $ 22,288 $ 18,450
 
Allowance for loan losses $ 7,046 $ 7,779 $ 6,819 $ 6,221 $ 4,937
 
Ratios:
Nonperforming loans to total loans 2.82% 3.38% 6.12% 5.37% 4.61%
Nonperforming assets to total assets 2.32% 2.40% 4.09% 3.52% 3.30%
Allowance for loan losses to total loans 1.62% 1.90% 1.70% 1.67% 1.40%
Allowance for loan losses to nonperforming loans 57.33% 54.69% 27.78% 31.13% 30.31%

Shareholders' Equity

Tangible book value per share decreased from $25.44 per share at December 31, 2012 to $23.99 per share at December 31, 2013. The decrease is the result of a higher level of retained earnings offset by mark-to-market adjustments in investment securities and cash dividends paid to shareholders. During 2013, the company paid cash dividends of $1.04 per share, which equaled the amount paid in 2012.

"As we enter 2014, we see many exciting opportunities in which to build upon the success that we enjoyed in 2013. We are excited about our future potential in the dynamic central Ohio market. We fully believe that we are well positioned to enhance our earnings potential and grow our franchise through our strong team of community bankers and favorable markets," concluded Caldwell.

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a multi-bank holding company with total assets of $647.1 million. On January 20, 2014, the company consolidated its Emerald Bank subsidiary into the company's lead bank, The Middlefield Banking Company. The bank operates 10 full service banking centers and a LPL Financial®brokerage office serving Chardon, Cortland, Dublin, Garrettsville, Mantua, Middlefield, Newbury, Orwell, and Westerville. Additional information is available at www.middlefieldbank.bank.

This press release of Middlefield Banc Corp. and the reports Middlefield Banc Corp. files with the Securities and Exchange Commission often contain "forward-looking statements" relating to present or future trends or factors affecting the banking industry and, specifically, the financial operations, markets and products of Middlefield Banc Corp. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause Middlefield Banc Corp.'s future results to differ materially from historical performance or projected performance. These factors include, but are not limited to: (1) a significant increase in competitive pressures among financial institutions; (2) changes in the interest rate environment that may reduce interest margins; (3) changes in prepayment speeds, charge-offs and loan loss provisions; (4) less favorable than expected general economic conditions; (5) legislative or regulatory changes that may adversely affect businesses in which Middlefield Banc Corp. is engaged; (6) technological issues which may adversely affect Middlefield Banc Corp.'s financial operations or customers; (7) changes in the securities markets; or (8) risk factors mentioned in the reports and registration statements Middlefield Banc Corp. files with the Securities and Exchange Commission. Middlefield Banc Corp. undertakes no obligation to release revisions to these forward-looking statements or to reflect events or circumstances after the date of this press release.

   

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2013 and December 31, 2012
(2013 unaudited)
Balance Sheet (period end) December 31, December 31,
(Dollar amounts in thousands) 2013 2012
 
Assets
Cash and due from banks    $ 20,926    $ 33,568
Federal funds sold 5,267 11,778
Cash and cash equivalents 26,193 45,346
Investment securities available for sale 157,143 194,472
Loans: 435,725 408,433
Less: allowance for loan losses 7,046 7,779
Net loans 428,679 400,654
Premises and equipment 9,828 8,670
Goodwill 4,559 4,559
Core deposit intangibles 156 195
Bank-owned life insurance 8,816 8,536
Accrued interest receivable and other assets 11,716 7,856
Total Assets   $ 647,090 $ 670,288
 
December 31, December 31,
2013 2012
Liabilities and Stockholders' Equity
Non-interest bearing demand deposits   $ 85,905 $ 75,912
Interest-bearing demand deposits 53,741 63,915
Money market accounts 77,473 81,349
Savings deposits 177,303 175,406
Time deposits 174,414 196,753
Total deposits 568,836 593,335
Short-term borrowings 10,809 6,538
Other borrowings 11,609 12,970
Other liabilities 2,363 2,008
Total Liabilities 593,617 614,851
 
Common equity 34,979 34,295
Retained earnings 27,465 22,485
Accumulated other comprehensive income (2,237) 5,391
Treasury stock (6,734) (6,734)
Total Stockholders' Equity 53,473 55,437
 
Total Liabilities and Stockholders' Equity   $ 647,090 $ 670,288

   

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2013 and December 31, 2012
(Dollar amounts in thousands)
(2013 unaudited)
Income Statement For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
INTEREST INCOME
Interest and fees on loans    $ 5,620    $ 5,430    $ 22,496    $ 22,418
Interest-bearing deposits in other institutions     7 7 30 26
Federal funds sold 3 7 15 20
Investment securities
Taxable interest 605 754 2,514 3,209
Tax-exempt interest 785 727 3,044 2,976
Dividends on stock 23 24 79 97
Total interest income 7,043 6,949 28,178 28,746
INTEREST EXPENSE
Deposits 1,023 1,379 4,709 5,728
Short term borrowings 38 42 178 261
Federal funds purchased 7 - 7 -
Other borrowings 35 50 166 294
Trust preferred securities 34 42 190 164
Total interest expense 1,137 1,513 5,250 6,447
NET INTEREST INCOME 5,906 5,436 22,928 22,299
Provision for loan losses (570) 975 196 2,168
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,476 4,461 22,732 20,131
NONINTEREST INCOME
Service charges on deposits 488 382 1,956 1,765
Net securities gains (losses) (164) 162 11 610
Earnings on bank-owned life insurance 75 71 284 279
Other income 251 157 894 797
Total non-interest income 650 772 3,145 3,451
NONINTEREST EXPENSE
Salaries and employee benefits 2,109 1,872 7,758 7,127
Occupancy expense 436 256 1,231 959
Equipment expense 347 202 950 759
Data processing costs 245 198 854 772
Ohio state franchise tax 151 173 618 590
Federal deposit insurance expense 163 (264) 516 487
Professional fees 446 278 1,329 948
(Gain) Loss on sale of other real estate owned     58 20 18 258
Other operating expense 851 959 3,596 3,739
Total non-interest expense 4,806 3,694 16,870 15,639
Income before income taxes 2,320 1,539 9,007 7,943
Provision (benefit) for income taxes 500 270 1,979 1,662
NET INCOME   $ 1,820 $ 1,269 $ 7,028 $ 6,281

   

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2013 and December 31, 2012
(Dollar amounts in thousands)
(2013 unaudited)
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
Per common share data 2013 2012 2013 2012
Net income per common share - basic    $ 0.90    $ 0.64    $ 3.49    $ 3.29
Net income per common share - diluted   $ 0.90 $ 0.64 $ 3.47 $ 3.28
Dividends declared   $ 0.26 $ 0.26 $ 1.04 $ 1.04
Book value per share (period end)   $ 26.31 $ 27.83 $ 26.31 $ 27.83
Tangible book value per share (period end)   $ 23.99 $ 25.44 $ 23.99 $ 25.44
Dividend payout ratio 26.32% 40.98% 29.14% 31.87%
Average shares outstanding - basic 2,027,680 1,984,818 2,016,862 1,911,960
Average shares outstanding -diluted 2,032,611 1,991,354 2,024,040 1,916,932
Period ending shares outstanding 2,032,304 1,992,233 2,032,304 1,992,233
 
Selected ratios
Return on average assets 1.10% 0.75% 1.06% 0.95%
Return on average equity 13.45% 9.11% 13.17% 11.98%
Yield on earning assets 4.45% 4.48% 4.67% 4.75%
Cost of interest-bearing liabilities 0.83% 1.10% 0.97% 1.19%
Net interest spread 3.62% 3.38% 3.71% 3.56%
Net interest margin 3.73% 3.55% 3.85% 3.74%
Efficiency (1) 69.00% 56.12% 61.03% 57.36%
Equity to assets at period end 8.24% 8.34% 8.24% 8.34%
 

(1) The efficiency ratio is calculated by dividing non-interest expense less amortization of intangibles by the sum of net interest income on a fully taxable equivalent basis plus non-interest income.

   

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2013 and December 31, 2012

(Dollar amounts in thousands)

 
December 31, December 31,
Asset quality data 2013 2012
(Dollar amounts in thousands)
Non-accrual loans    $ 8,350    $ 11,376
Troubled debt restructuring 3,759 2,411
90 day past due and accruing 181 437
Nonperforming loans

12,290

14,224

Other real estate owned 2,698 1,846
Nonperforming assets   $ 14,988 $ 16,070
 
 
Allowance for loan losses   $ 7,046 $ 7,779
Allowance for loan losses/total loans 1.62% 1.90%
Net charge-offs:
Quarter-to-date   $ 205 $ 369
Year-to-date 929 1,208
Net charge-offs to average loans
Quarter-to-date 0.05% 0.09%
Year-to-date 0.22% 0.30%
Nonperforming loans/total loans 2.82% 3.38%
Allowance for loan losses/non-performing loans     57.33% 54.69%
Nonperforming assets/total assets 2.32% 2.40%
 
 
December 31, December 31,
Loans 2013 2012

(Dollar amounts in thousands)

Commercial and industrial   $ 54,498 $ 62,188
Real estate - construction 25,601 22,522
Real estate - mortgage
Residential 210,310 203,872
Commercial 141,171 115,734
Consumer installment 4,145 4,117
Total Loans   $ 435,725 $ 408,433
 
Central Ohio Northeast Ohio