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Middlefield Banc Corp. Reports Financial Results for the 2014 Second Quarter

Middlefield Banc Corp. 2014 Press Releases

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Company
Contact:
Thomas G. Caldwell
President/Chief Executive Officer
Middlefield Banc Corp.
440.632.1666 Ext. 3200
Investor and
Media Contact:
Andrew M. Berger Managing Director
SM Berger & Company, Inc.
(216) 464-6400
Date: July 22, 2014

MIDDLEFIELD, OHIO, July 22, 2014 Middlefield Banc Corp. (OTCQB: MBCN) today reported financial results for the three and six months ended June 30, 2014.

2014 Second Quarter Financial Highlights Include:

  • Net interest income increased 5.3% to $5.9 million from $5.6 million for the 2013 second quarter.
  • The net interest margin improved to 4.04%, compared to 3.88% for the same period of 2013. 
  • Tangible stockholders' equity improved 4.8% from 2014 first quarter, and 11.6% from December 31, 2013. 
  • Total net loans increased 9.5% from the 2013 second quarter and 1.4% compared to the 2014 first quarter.
  • Nonperforming assets declined to $12.9 million from $15.2 million for the 2013 second quarter. 
  • Tier 1 capital ratio strengthened to 9.31% from 8.49% at June 30, 2013. 

"We continue to report strong financial results despite higher operating and regulatory costs," stated Thomas G. Caldwell, President and Chief Executive Officer. "Throughout 2014 we will be making investments in our business by enhancing our operations, products, and services, and adding senior managers to assist with our growth objectives.  These activities may impact the level of profitability over the near term but will have a positive effect on our financial results and customer experience in the coming quarters.  Our customers are already experiencing the benefits from the investments we have made in our new website, enhanced on-line banking services, and new mobile banking capabilities." 

Net income for the 2014 second quarter was $1.6 million, or $0.79 per diluted share, compared to net income for the 2013 second quarter of $1.7 million, or $0.83 per diluted share.  Net income for the six months ended June 30, 2014 was $3.4 million, or $1.65 per diluted share, compared to net income for the six months ended June 30, 2013 of $3.3 million, or $1.66 per diluted share. 

Annualized returns on average equity ("ROE") and average assets ("ROA") for the 2014 second quarter were 11.58% and 0.96%, respectively, compared with 12.47% and 1.02% for the 2013 second quarter.  ROE and ROA were 12.33% and 1.02%, respectively, for the 2014 six month period, compared with 12.32% and 1.02% for the same period last year. 

Mr. Caldwell continued: "As we enter the second half of 2014, we are well positioned to grow our banking franchise.  By the end of the third quarter, we will enter the secondary mortgage market, which will enhance our product offerings and increase our noninterest income.  While we are excited about our growth opportunities, we remain committed to delivering excellent customer service, increasing value to our shareholders, and managing the company under safe and sound banking principles." 

Income Statement

Net interest income for the 2014 second quarter increased 5.3% to $5.9 million, compared to $5.6 million for the 2013 second quarter.  For the 2014 first half, net interest income increased 6.0% to $11.8 million, compared to $11.2 million for the same period last year.  The second quarter and first half increases in net interest income were driven by a reduction in funding costs, primarily time deposits.  The net interest margin for the 2014 second quarter was 4.04%, compared to 3.88% for the same period of 2013.  Year-to-date, the net interest margin was 4.12%, compared to 3.90% for the same period last year. 

Noninterest income was up slightly for the 2014 second quarter and down year-to-date.  The improvement in the 2014 second quarter was a result of investment securities gains and other income, partially offset by lower service charges on deposits and earnings on bank-owned life insurance. 

Noninterest expense for the 2014 second quarter was $4.6 million, an increase of approximately $0.7 million from the 2013 second quarter, primarily a result of higher operating expenses. 

"We are proactively investing in our future to diversify our sources of income and offset the impact of historically low interest rates and higher regulatory costs," said Donald L. Stacy, Chief Financial Officer.  "The result will be higher near-term expenses as our growth strategies take time to develop.  We are working hard to offset a portion of these higher costs through prudent expense management and proactively controlling our cost of funds." 

Balance Sheet

Total assets at June 30, 2014 increased 3.3% to $668.3 million, from $647.1 million at December 31, 2013.  Net loans at June 30, 2014 were approximately $443.0 million, compared to $428.7 million at December 31, 2013.  The 3.3% year-to-date increase in net loans was a result of growth across all loan categories led by a 4.2% increase in residential mortgage loans. 

Total deposits at June 30, 2014 increased 3.5% to $588.8 million from $568.8 million at December 31, 2013.  The investment portfolio, which is entirely classified as available for sale, stood at $165.5 million at June 30, 2014, compared to $157.1 million at December 31, 2013.  The increase in investment securities available for sale is primarily a result of the growth in the Bank's tax-free municipal securities portfolio of $8.0 million.  

Stockholders' Equity and Dividends

Tangible stockholders' equity increased 13.8% to $54.6 million for the 2014 second quarter, compared to $48.0 million for the 2013 second quarter.  On a per share basis, tangible stockholders' equity increased 12.7% to $26.67 at June 30, 2014 from $23.66 at June 30, 2013.  The increase is the result of a higher level of retained earnings and accumulated other comprehensive income, which was offset by cash dividends paid to shareholders. 

At June 30, 2014, the company had a Tier 1 leverage ratio of 9.31%, up from 8.49% at June 30, 2013 and 9.15% at March 31, 2014. 

During the 2014 second quarter, the company paid cash dividends of $0.26 per share, which equaled the amount paid in the 2013 second quarter.  Year-to-date, the company has paid cash dividends of $0.52 per share. 

Asset Quality

The provision for loan losses for the 2014 second quarter was $0.1 million, compared to the $0.3 million for the 2013 second quarter.  The provision for loan losses for the six months ended June 30, 2014 was $0.3 million, compared to $0.6 million for the same period last year.  Net charge-offs for the 2014 six months was $0.2 million, or 0.10% of average loans, annualized.  The allowance for loan losses at June 30, 2014 stood at $7.1 million, or 1.58% of total loans, compared to $7.7 million or 1.88% of total loans at June 30, 2013. 

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

    Asset Quality History
    (dollars in thousands)
                               
       6/30/14      12/31/13      6/30/13      12/31/12      12/31/11
                               
Nonperforming loans   $ 10,506   $ 12,290   $ 12,869   $ 14,224   $ 24,546
Real estate owned     2,392     2,698     2,361     1,846     2,196
                               
Nonperforming assets   $ 12,898   $ 14,988   $ 15,230   $ 16,070   $ 26,742
                               
Allowance for loan losses   $ 7,129   $ 7,046   $ 7,749   $ 7,779   $ 6,819
                               
Ratios:                              
Nonperforming loans to                              
  total loans     2.33%     2.82%     3.12%     3.48%     6.12%
Nonperforming assets to                              
  total assets     1.93% 2.32% 2.32%     2.40%     4.09%
Allowance for loan losses to                              
  total loans     1.58%     1.62%     1.88%     1.90%     1.70%
Allowance for loan losses to                              
  nonperforming loans     67.85%     57.33%     60.21%     54.69%     27.78%

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $668.3 million at June 30, 2014.  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 an LPL Financialยจ 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                    
                     
June 30, 2014 and 2013 and December 31, 2013                    
                     
Balance Sheet (period end)   June 30,     December 31,     June 30,      
(Dollar amounts in thousands)   2014     2013     2013      
(unaudited)                    
Assets                    
Cash and due from banks $ 19,821   $ 20,926   $ 22,052      
Federal funds sold    5,756     5,267     18,377      
   Cash and cash equivalents   25,577     26,193       40,429      
Investment securities available for sale   165,506     157,143     179,757      
Loans   450,119     435,725     412,399      
Less:  allowance for loan and lease losses   7,129     7,046     7,749      
      Net loans   442,990     428,679     404,650      
Premises and equipment   9,927     9,828     8,583      
Goodwill   4,559     4,559     4,559      
Core deposit intangible   136     156     173      
Bank-owned life insurance   8,951     8,816     8,675      
Accrued interest receivable and other assets   10,623     11,716     10,966      
Total Assets $ 668,269   $ 647,090     $ 657,792      
                       
    June 30,     December 31,     June 30,      
    2014     2013     2013      
Liabilities and Stockholders' Equity                      
Noninterest bearing demand deposits $ 96,209   $ 85,905   $ 83,095      
Interest-bearing demand deposits   58,366     53,741     58,238      
Money market accounts   73,619     77,473     77,563      
Savings deposits   178,602     177,303     180,875      
Time deposits   181,997     174,414     185,648      
   Total Deposits   588,793     568,836       585,419      
Short-term borrowings   6,939     10,809     5,407      
Other borrowings   11,362     11,609     12,635      
Other liabilities   2,004     2,363     1,781      
   Total Liabilities   609,098     593,617     605,242      
                       
Common equity   35,266     34,979     34,694      
Retained earnings   29,780     27,465     24,780      
Accumulated other comprehensive income (loss)    859     (2,237)     (190)      
Treasury stock   (6,734)     (6,734)     (6,734)      
   Total Stockholders' Equity   59,171     53,473     52,550      
Total Liabilities and Stockholders' Equity $ 668,269   $ $647,090   $ $657,792      
                     
                     
                     
MIDDLEFIELD BANC CORP.                    
Consolidated Selected Financial Highlights                    
June 30, 2014 and 2013                    
(Dollar amounts in thousands)                
(unaudited)          
    For the Three Months Ended     For the Six Months Ended
    June 30,     June 30,
    2014     2013     2014     2013
INTEREST INCOME                      
   Interest and fees on loans $ 5,575   $ 5,550   $ 11,269   $ 11,122
   Interest-bearing deposits in other institutions   9     9     14     17
   Federal funds sold   6     4     9     8
   Investment securities                      
      Taxable interest   526     625     1,035     1,299
      Tax-exempt interest   783     744     1,538     1,477
   Dividends on stock   20     15     43     38
      Total interest income   6,919     6,947     13,908     13,961
INTEREST EXPENSE                      
   Deposits   929     1,219     1,869     2,516
   Short-term borrowings   38     47     73     99
   Other borrowings   32     44     64     90
   Trust preferred securities   34     47     60     81
      Total interest expense   1,033     1,357     2,066     2,786
                       
NET INTEREST INCOME   5,886     5,590     11,842     11,175
                       
Provision for loan losses   120     300     300     613
NET INTEREST INCOME AFTER PROVISION                      
   FOR LOAN LOSSES   5,766     5,290     11,542     10,562
NONINTEREST INCOME                      
   Service charges on deposits   469     511     910     958
   Investment securities gains (losses), net   64     (10)     58     175
   Earnings on bank-owned life insurance   68     75     135     143
   Other income   256     243     469     411
      Total noninterest income   857     819     1,572     1,687
NONINTEREST EXPENSE                      
   Salaries and employee benefits   2,268     1,906     4,284     3,777
   Occupancy expense   275     248     596     522
   Equipment expense   194     186     414     375
   Data processing costs   224     187     438     400
   Ohio state franchise tax   93     149     176     303
   Federal deposit insurance expense   97     64     229     218
   Professional fees   338     291     625     567
   Loss (gain) on sale of other real estate owned   75     (13)     70     (5)
   Advertising expense   124     111     247     223
   Other real estate expense   102     90     165     196
   Directors Fees   118     133     204     238
   Other operating expense   690     596     1,379     1,135
      Total noninterest expense   4,598     3,948     8,827     7,949
Income before income taxes   2,025     2,161     4,287     4,300
Provision for income taxes   414     476     913     958
NET INCOME $ 1,611   $ 1,685   $ 3,374   $ 3,342
                       
    For the Three Months Ended     For the Six Months Ended
    June 30,     June 30,
    2014     2013     2014     2013
Per common share data                      
Net income per common share - basic $ 0.79   $ 0.84   $ 1.66   $ 1.66
Net income per common share - diluted $ 0.79   $ 0.83   $ 1.65   $ 1.66
Dividends declared $ 0.26   $ 0.26   $ 0.52   $ 0.52
Book value per share (period end) $ 28.97   $ 26.00   $ 28.97   $ 26.00
Tangible book value per share (period end) $ 26.67   $ 23.66   $ 26.67   $ 23.66
Dividend payout ratio   32.90%     31.28%     31.39%     31.33%
Average shares outstanding - basic 2,038,026     2,017,264   2,036,025     2,008,503
Average shares outstanding - diluted 2,044,564     2,023,961   2,042,181     2,017,060
Period ending shares outstanding   2,042,753     2,021,292     2,042,753     2,021,292
       
Selected ratios                      
Return on average assets   0.96%     1.02%     1.02%     1.02%
Return on average equity   11.58%     12.47%     12.33%     12.32%
Yield on earning assets   4.45%     4.77%     4.79%     4.81%
Cost of interest-bearing liabilities   0.80%     1.04%     0.81%     1.06%
Net interest spread   3.65%     3.73%     3.99%     3.75%
Net interest margin   4.04%     3.88%     4.12%     3.90%
Efficiency (1)   64.34%     58.12%     62.13%     58.35%
Tier 1 capital ratio (holding company) 9.31% 8.49%   9.31% 8.49%
                     
(1) The efficiency ratio is calculated by dividing noninterest expense less amortization of intangibles by the sum of net interest income on a fully taxable equivalent basis plus noninterest income.
                   
                   
June 30,   June 30,          
2014   2013          
           
Commercial and industrial $ 55,577   $ 49,898          
Real estate - construction 26,615       24,084          
Real estate - mortgage:                  
     Residential 219,229     199,250          
     Commercial 142,505     135,006          
Consumer installment 6,193       4,161          
$ 450,119   $ 412,399          
                   
    June 30,     June 30,          
Asset quality data   2014     2013          
(Dollar amounts in thousands)              
Nonaccrual loans $ 8,646   $ 9,162          
Troubled debt restructuring   1,743     3,166          
90 day past due and accruing   117     541          
Nonperforming loans   10,506       12,869          
Other real estate owned   2,392     2,361          
Nonperforming assets $ 12,898   $ 15,230            
                   
                   
Allowance for loan and lease losses $ 7,129   $ 7,749          
Allowance for loan and lease losses/total loans   1.58%     1.88%          
Net charge-offs:                  
   Quarter-to-date   6     283          
   Year-to-date   217     643          
Net charge-offs to average loans, annualized                    
   Quarter-to-date   0.01%     0.28%          
   Year-to-date   0.10%     0.32%          
Nonperforming loans/total loans   2.33%     3.12%          
Allowance for loan and lease losses/nonperforming loans   67.85%     60.21%          
                     
                     
                     
                     
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