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Middlefield Banc Corp. Reports 2014 Full Year and Fourth Quarter Financial Results

Middlefield Banc Corp. 2015 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: January 27, 2015

MIDDLEFIELD, OHIO, Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the fourth quarter and full year ended December 31, 2014.

2014 Fourth Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • Net interest income increased 2.4% to $6.1 million.
  • Noninterest income grew 57.8% to $1.0 million. 
  • Net income up 3.7% to $1.9 million, or $0.92 per diluted share.
  • Tangible stockholders' equity improved 4.2% from the 2014 third quarter, and 21.4% from December 31, 2013. 
  • Total net loans increased 8.2%.
  • Nonperforming assets declined to $11.6 million from $15.0 million. 
  • Tier 1 capital ratio strengthened to 9.45% from 8.24%. 

"I am pleased with the many operating and financial milestones we achieved in 2014," stated Thomas G. Caldwell, President and Chief Executive Officer. "Throughout the year we focused on strategies to improve our corporate infrastructure, expand our product offerings, enhance the ways customers interact with the bank, and increase our company's investor profile.  We accomplished these initiatives while growing our business to record levels.  We ended the year with record net loans outstanding, net income, and stockholders' equity.  As we work to further leverage the investments we made last year, I am optimistic favorable operating and financial momentum will continue in 2015."

Net income for the 2014 fourth quarter was approximately $1.9 million, or $0.92 per diluted share, compared to net income for the 2013 fourth quarter of $1.8 million, or $0.90 per diluted share.  Net income for the 2014 full year was $7.2 million, or $3.50 per diluted share, compared to net income for the year ended December 31, 2013 of $7.0 million, or $3.47 per diluted share. 

Annualized returns on average equity ("ROE") and average assets ("ROA") for the 2014 fourth quarter were 11.98% and 1.10%, respectively, compared with 13.45% and 1.10% for the 2013 fourth quarter.  ROE and ROA were 12.17% and 1.07%, respectively, for the 2014 full year, compared with 13.17% and 1.06% for the same period last year. 

Mr. Caldwell continued: "Our new secondary mortgage offering expanded significantly in the fourth quarter and contributed $125,000 to noninterest income, which helped drive a 57.8% year-over-year increase in total noninterest income in the fourth quarter.  We are optimistic growth in this product line will continue as we further expand this offering and our capabilities.  During 2014, we made it easier and more convenient for customers to interact with the bank by enhancing our online capabilities and completing the roll-out of our mobile banking platform.  As I have stated in previous news releases and shareholder letters, Middlefield has a strong foundation to support its long-term growth objectives and enhance shareholder value.  While we continue to focus on growing our banking franchise, we will remain dedicated to conservatively managing risk and performance." 

Income Statement

Net interest income for the 2014 fourth quarter increased slightly to $6.1 million, compared to $5.9 million for the 2013 fourth quarter.  For 2014, net interest income increased 3.8% to $23.8 million, compared to $22.9 million for 2013.  The fourth quarter and twelve month increases in net interest income were driven by a reduction in funding costs, primarily time deposits.  The net interest margin for the 2014 fourth quarter was 3.91%, compared to 3.73% for the same period of 2013.  For 2014, the net interest margin was 3.94%, compared to 3.85% for the same period last year. 

Noninterest income was up 57.8% for the 2014 fourth quarter and 14.1% for the 2014 twelve months.  The improvement to noninterest income in the 2014 fourth quarter was primarily a result of investment gains and gains on sale of loans as a result of the company's new secondary mortgage offering.  Noninterest expense for the 2014 fourth quarter was $4.6 million, a decrease of approximately $0.2 million from the 2013 fourth quarter, primarily a result of lower operating expenses. 

"Throughout 2014 we focused on prudent expense management and reducing our costs of funds, which can be seen in the seven basis point improvement we experienced in the net interest spread despite a 10 basis point reduction in the yield on earning assets.  While noninterest expenses increased during the year due to higher employee, equipment, and data processing fees, expenses were down in the fourth quarter as we were successful in offsetting these higher operating costs," said Donald L. Stacy, Chief Financial Officer.  "For 2014, noninterest bearing demand deposits increased 22.8% and represented 18.0% of total deposits at December 31, 2014 versus 15.1% at December 31, 2013.  The cost of interest bearing liabilities fell 18 basis points to 0.79% for 2014.  We expect that higher regulatory, compliance, and technology costs will continue, but we believe our commitment to efficient cost management, high quality loans, and income diversification will more than offset these pressures." 

Balance Sheet

Total assets at December 31, 2014 increased 4.7% to $677.5 million, from $647.1 million at December 31, 2013.  Net loans at December 31, 2014 were $463.8 million, compared to $428.7 million at December 31, 2013.  The year-over-year improvement in net loans was a result of growth across all loan categories.  Specifically, construction loans increased 18.3%, commercial and industrial loans increased 11.4%, consumer installment loans increased 10.5%, residential mortgages increased 8.4% and commercial mortgages increased 4.4%. 

Total deposits at December 31, 2014 increased 3.0% to $586.1 million from $568.8 million at December 31, 2013.  The slower deposit growth is due to the company's decision to proactively manage its cost of funds.  The investment portfolio, which is entirely classified as available for sale, stood at $154.3 million at December 31, 2014, compared to $157.1 million at December 31, 2013. 

Stockholders' Equity and Dividends

Tangible stockholders' equity increased 21.4% to $59.2 million for the 2014 fourth quarter, compared to $48.8 million at December 31, 2013.  On a per share basis, tangible stockholders' equity increased 20.2% to $28.84 at December 31, 2014 from $23.99 at December 31, 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 December 31, 2014, the company had a Tier 1 leverage ratio of 9.46%, up from 8.24% at December 31, 2013. 

During the 2014 fourth quarter, the company paid cash dividends of $0.26 per share, which equaled the amount paid in the 2013 fourth quarter.  For 2014, the company paid cash dividends of $1.04 per share, which represents a dividend payout ratio of 29.54% for the full year. 

Asset Quality    

The provision for loan losses for the 2014 fourth quarter was $0, compared to a reversal of $0.6 million for the 2013 fourth quarter.  For 2014, the provision for loan losses was $0.4 million, compared to $0.2 million for the same period last year.  Net charge-offs for the 2014 twelve months were $0.6 million, or 0.13% of average loans, annualized.  The allowance for loan losses at December 31, 2014 stood at $6.8 million, or 1.45% of total loans, compared to $7.0 million or 1.62% of total loans at December 31, 2013. 

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

    Asset Quality History
    (dollars in thousands)
                               
      12/31/14     12/31/13     12/31/12     12/31/11     12/31/10
                               
Nonperforming loans   $ 9,049   $ 12,290   $ 14,224   $ 24,546   $ 19,986
Real estate owned     2,590     2,698     1,846     2,196     2,302
                               
Nonperforming assets   $ 11,639   $ 14,988   $ 16,070   $ 26,742   $ 22,288
                               
Allowance for loan losses   $ 6,846   $ 7,046   $ 7,779   $ 6,819   $ 6,221
                               
Ratios:                              
Nonperforming loans to                              
  total loans     1.92%     2.82%     3.48%     6.12%     5.37%
Nonperforming assets to                              
  total assets     1.72%     2.32%     2.40%     4.09%     3.52%
Allowance for loan losses to                              
  total loans     1.45%     1.62%     1.90%     1.70%     1.67%
Allowance for loan losses to                              
  nonperforming loans     75.66%     57.33%     54.69%     27.78%     31.13%

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $677.5 million at December 31, 2014.  The bank operates 10 full service banking centers and an 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, 2014 and 2013 
             
Balance Sheet (period end)       December 31,     December 31,
(Dollar amounts in thousands)     2014     2013
(2014 unaudited)            
Assets            
Cash and due from banks   $ 20,846    $ 20,926
Federal funds sold      4,793     5,267
Interest-bearing deposits in other institutions     -     -
   Cash and cash equivalents     25,639       26,193
Investment securities available for sale     154,334     157,143
Loans held for sale     438     -
Loans:     470,653     435,725
Less:  allowance for loan and lease losses     6,846     7,046
      Net loans     463,807       428,679
Premises and equipment, net     9,980     9,828
Goodwill     4,559     4,559
Core deposit intangibles     116     156
Bank-owned life insurance     9,092     8,816
Accrued interest receivable and other assets     9,566     11,716
Total Assets   $ 677,531    $ 647,090
             
      December 31,     December 31,
      2014     2013
Liabilities and Stockholders' Equity            
Noninterest bearing demand deposits   $ 105,512    $ 85,905
Interest bearing demand deposits     56,377     53,741
Money market accounts     75,895     77,473
Savings deposits     178,470     177,303
Time deposits     169,858     174,414
   Total Deposits     586,112       568,836
Short-term borrowings     14,808     10,809
Other borrowings     10,624     11,609
Other liabilities     2,120     2,363
   Total Liabilities     613,664       593,617
             
Common equity     35,529     34,979
Retained earnings     32,524     27,465
Accumulated other comprehensive income     2,548     (2,237)
Treasury stock     (6,734)     (6,734)
   Total Stockholders' Equity     63,867       53,473
             
Total Liabilities and Stockholders' Equity   $ 677,531    $ 647,090
             
             
             
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2014 and 2013 
(Dollar amounts in thousands)
(2014 unaudited)
           
  For the Three Months Ended     For the Year Ended
  December 31,     December 31,
      2014     2013     2014     2013
INTEREST INCOME                        
   Interest and fees on loans     $ 5,811   $ 5,620     $ 22,726   $ 22,496
   Interest-bearing deposits in other institutions     5     7     24     30
   Federal funds sold     3     3     14     15
   Investment securities                        
      Taxable interest     420     605     1,896     2,514
      Tax-exempt interest     791     785     3,127     3,044
   Dividends on stock     25     23     87     79
      Total interest income     7,055     7,043     27,874     28,178
                           
INTEREST EXPENSE                        
   Deposits     866     1,023     3,633     4,709
   Short term borrowings     37     37     148     178
   Federal funds purchased     -     7     -     7
   Other borrowings     24     35     118     166
   Trust preferred securities     78     34     171     190
      Total interest expense     1,005     1,136     4,070     5,250
                         
NET INTEREST INCOME     6,050     5,907     23,804     22,928
                         
Provision for loan losses     0     -570     370     196
                           
NET INTEREST INCOME AFTER PROVISION                        
   FOR LOAN LOSSES     6,050     6,477     23,434     22,732
                           
NONINTEREST INCOME                        
   Service charges on deposits     477     488     1,876     1,956
   Net securities (losses) gains      0     -164     248     11
   Earnings on bank-owned life insurance     70     71     276     280
   Gains on sale of loans     217     -     237     -
   Other income     262     255     951     898
      Total non-interest income     1,026     650     3,588     3,145
                           
NONINTEREST EXPENSE                        
   Salaries and employee benefits     2,389     2,264     8,817     7,913
   Occupancy expense     240     436     1,108     1,231
   Equipment expense     253     347     963     950
   Data processing costs     228     245     917     854
   Ohio state franchise tax     73     151     342     618
   Federal deposit insurance expense     88     163     449     516
   Professional fees     272     291     1,086     1,174
   Loss on sale of other real estate owned     64     58     183     18
   Advertising expenses     121     109     488     445
   Other real estate expenses     131     86     387     410
   Directors Fees     100     88     403     403
   Other operating expense     679     568     2,707     2,338
      Total non-interest expense     4,638     4,806     17,850     16,870
Income before income taxes     2,438     2,321     9,172     9,007
Provision for income taxes     550     500     1,992     1,979
                           
NET INCOME   $ 1,888   $ 1,821   $ 7,180   $ 7,028
                         
                         
    For the Three Months Ended   For the Year Ended
    December 31,   December 31,
Per common share data   2014     2013     2014     2013
Net income per common share - basic $ 0.92   $ 0.90   $ 3.52   $ 3.49
Net income per common share - diluted $ 0.92   $ 0.90   $ 3.50   $ 3.47
Dividends declared  $ 0.26    $ 0.26   $ 1.04    $ 1.04
Book value per share(period end) $ 31.12   $ 26.31   $ 31.12   $ 26.31
Tangible book value per share (period end) $ 28.84   $ 23.99   $ 28.84   $ 23.99
Dividend payout ratio   28.23%     26.32%     29.54%     29.14%
Average shares outstanding - basic 2,049,536 2,027,680 2,041,635 2,016,862
Average shares outstanding - diluted 2,059,561 2,032,611 2,049,506 2,024,040
Period ending shares outstanding   2,052,495     2,032,304 2,052,495 2,032,304
             
Selected ratios                    
Return on average assets   1.10%     1.10%     1.07%   1.06%
Return on average equity   11.98%     13.45%     12.17%   13.17%
Yield on earning assets   4.52%     4.45%     4.57%     4.67%
Cost of interest bearing liabilities   0.79%     0.83%     0.79%     0.97%
Net interest spread   3.73%     3.62%     3.78%     3.71%
Net interest margin   3.91%     3.73%     3.94%     3.85%
Efficiency (1)   61.61%     69.00%     61.55%     61.03%
Equity to assets at period end   9.46%     8.24%     9.46%     8.24%
                     
(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.
               
                 
                 
December 31,   December 31,        
2014   2013        
         
Commercial and industrial $ 60,744    $  54,498        
Real estate - construction 30,296       25,601        
Real estate - mortgage:              
     Residential 227,621     210,310        
     Commercial 147,413     141,171        
Consumer installment 4,579       4,145        
Total Loans 470,653     435,725        
                 
                 
    December 31,     December 31,        
Asset quality data   2014     2013        
(Dollar amounts in thousands)            
Non-accrual loans $ 7,346    $  8,350        
Troubled debt restructuring   1,537     3,759        
90 day past due and accruing   165     181        
Non-performing loans   9,049       12,290        
Other real estate owned   2,590     2,698        
Non-performing assets $ 11,639    $  14,988        
                 
                 
Allowance for loan losses $ 6,846   $ 7,046        
Allowance for loan losses/total loans   1.45%     1.62%        
Net charge-offs:                
   Quarter-to-date $ 442   $ 205        
   Year-to-date   570     929        
Net charge-offs to average loans, annualized                  
   Quarter-to-date   0.38%     0.19%        
   Year-to-date   0.13%     0.22%        
Non-performing loans/total loans   1.92%     2.82%        
Allowance for loan losses/non-performing loans 75.66% 57.33%
Non-performing assets/total assets 1.72% 2.32%
                   
                   
Central Ohio Northeast Ohio