MIDDLEFIELD, OHIO, Middlefield Banc Corp. (OTCQB: MBCN), parent of The Middlefield Banking Company, today reported net income for the first quarter of 2014 of $1.76 million, or $0.86 per diluted share. This compares to net income of $1.66 million, or $0.82 per diluted share, for the first quarter of 2013.
"Our capability to produce consistent financial results clearly demonstrates the strength of our company," stated Thomas G. Caldwell, President and Chief Executive Officer. "Our performance in the first quarter was driven by an improved net interest margin, improved credit quality, and expansion of our loan portfolio."
"Moving forward into 2014," Caldwell continued, "we believe that we are well positioned to address the continued environment of historically low interest rates and the increased burden of regulatory costs. We remain focused on delivering excellence in customer service, increasing value to our shareholders, and operating our company in accordance with safe and sound banking practices."
First quarter highlights include:
- Total net loans increased 9.4% from the first quarter of 2013 and 1.9% compared to the fourth quarter of 2013.
- The net interest margin was 4.20% for the first quarter of 2014, compared to 3.92% for the same period of 2013. The yield on earning assets increased 2 basis points, while the cost of interest-bearing liabilities decreased 28 basis points from the year ago period.
- The provision for loan and leases losses for the first quarter of 2014 was $0.2 million compared to $0.3 million for the 2013 comparable period. The current quarter's charge was the result of lower historical charge-offs and improved credit metrics over the preceding 12 months.
- Nonperforming assets totaled $13.4 million at March 31, 2014. At the same point of 2013 nonperforming assets equaled $16.1 million.
Annualized return on average equity ("ROE") and average assets ("ROA") for the 2014 quarter were 13.10% and 1.08%, respectively. For the first quarter of 2013, ROE was 12.18%, with the ROA being 1.01%.
Net interest income for the first quarter of 2014 increased 6.6%, or $0.4 million, compared to the first quarter of 2013. This increase was driven by the increase in average net loans and a reduction in funding costs, primarily time deposits. This activity resulted in a net interest margin of 4.20% for the first quarter of 2014 compared to 3.92% for the first quarter of 2013.
Noninterest income decreased 17.6% to $0.7 million for the first quarter of 2014. This decrease was driven by a reduction in gains on investment securitie transactions of $0.2 million.
Noninterest expense was up $0.2 million, or 5.7%, from the year ago quarter. Salaries and benefits, the company's largest noninterest expense, was the leading factor in the increase and was directly related to the growth of the company. Higher levels of occupancy and equipment expense were, in part, offset by decreases in franchise tax, FDIC insurance premiums, and expenses related to other real estate owned. The non-GAAP efficiency ratio was 59.90% for the first quarter of 2014 compared to 58.57% for the first quarter of 2013.
"We have taken 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 do anticipate continued pressure on margin levels," 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."
The company's total assets ended the first quarter of 2014 at $670.0 million, an increase of 0.5% from the $667.0 million in total assets reported at March 31, 2013. Net loans at March 31, 2014, were $436.7 million, up $37.4 million, or 9.4%, over the $399.3 million reported at March 31, 2013. Total deposits at the end of the first quarter of 2014 were $594.8 million, or 0.6% above the deposit level of $591.5 million at March 31, 2013. The investment portfolio, which is entirely classified as available for sale, stood at $155.9 million at March 31, 2014. This figure represented a reduction in the portfolio of $34.7 million from the year ago quarter end.
The company experienced growth in all loan categories. Residential real estate loans increased $16.7 million year-over-year, with commercial real estate loans experiencing growth of $14.7 million. Noninterest-bearing deposits grew $15.6 million when compared to the end of the first quarter of 2013. During the same 12 month period, time deposits increased $1.8 million. These gains were offset by a decrease of $14.2 million, year-over-year, in all other interest-bearing deposit categories.
Tangible book value per share increased from $25.35 per share at March 31, 2013 to $25.52 per share at March 31, 2014. The increase is the result of a higher level of retained earnings offset by cash dividends paid to shareholders. During the 2014 first quarter, the company paid cash dividends of $0.26 per share, which equaled the amount paid in first quarter 2013. At March 31, 2014, the company had a Tier 1 leverage ratio of 9.15%. At the same point of 2013, the ratio stood at 8.22%.
The provision for loan losses for the 2014 first quarter was $0.2 million, compared to the $0.3 million posted for the 2013 period. Net charge-offs for the first quarter of 2014 were $0.2 million, or an annualized 0.19% of average loans. For the first three months of 2013, net charge-offs totaled $0.4 million, which equaled an annualized 0.36% of average loans. At March 31, 2014, the allowance for loan losses was $7.0 million, representing 1.58% of total loans.
The following table provides a summary of asset quality and reserve coverage ratios.
|Asset Quality History|
|(dollars in thousands)|
|Real estate owned||2,656||2,698||2,155||1,846||2,196|
|Allowance for loan losses||$||7,015||$||7,046||$||7,732||$||7,779||$||6,819|
|Nonperforming loans to total loans||2.42%||2.82%||3.41%||3.48%||6.12%|
|Nonperforming assets to total assets||2.00%||2.32%||2.41%||2.39%||4.09%|
|Allowance for loan losses to total loans||1.58%||1.62%||1.90%||1.90%||1.70%|
|Allowance for loan losses to nonperforming loans||65.31%||57.33%||55.63%||54.80%||27.78%|
Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $670.0 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.