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Middlefield Banc Corp. Reports Financial Results for the 2015 Third Quarter

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: October 22, 2015

Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the three and nine months ended September 30, 2015.

2015 Third Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • Net interest income increased 4.7% to $6.2 million.
  • Noninterest income grew 11.9% to $1.1 million. 
  • Net income up 3.3% to $2.0 million, or $0.96 per diluted share.
  • Tangible stockholders’ equity improved 10.1%, and 4.0% from 2015 second quarter.
  • Total net loans increased 9.4%.
  • Nonperforming assets declined to $10.9 million from $13.2 million. 
  • Tier 1 capital ratio strengthened to 9.66% from 9.50%. 

“We are proud of the strong profitability we were able to achieve in the 2015 third quarter, driven by increases in both interest and noninterest income, and controlled expenses,” stated Thomas G. Caldwell, President and Chief Executive Officer.  “Since the start of the year our loan portfolio has increased 8.4% primarily due to higher real estate loans reflecting the investments we have made in our advertising strategy, product lines, and associates.  This growth helped drive a 5.8% year-over-year increase in interest and fees generated on loans in the 2015 third quarter, despite a lower yield on earnings assets.  We did a good job managing expenses during the quarter, as our funding costs declined 4.0% year-over-year, while noninterest expenses declined 10.5% sequentially.  We remain committed to our growth oriented business plan, while proactively managing expenses.  We have strengthened our team of seasoned lenders and look forward to their growing contributions in the coming quarters.”

Net income for the 2015 third quarter was $2.0 million, or $0.96 per diluted share, compared to net income for the 2014 third quarter of $1.9 million, or $0.93 per diluted share.  Net income for the nine months ended September 30, 2015 was $5.1 million, or $2.47 per diluted share, compared to net income for the nine months ended September 30, 2014 of $5.3 million, or $2.59 per diluted share. 

Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2015 third quarter were 12.67% and 1.10%, respectively, compared with 13.55% and 1.13% for the 2014 third quarter.  ROE and ROA were 10.83% and 0.97%, respectively, for the 2015 nine month period, compared with 12.74% and 1.06% for the same period last year. 

Mr. Caldwell continued: “Over the past two years we have been communicating an investment strategy focused on building Middlefield’s brand within and around our communities.  Highlights of this plan include enhancements made in the way customers interact with the bank and an expansion into secondary mortgage products, which has improved noninterest income by 10.2% through the first nine-months of 2015.  The new loan production office in Mentor, Ohio increased our geographic footprint to Lake County and we expect this office to quickly contribute to higher loan growth, especially to commercial customers.  Finally, we have also made investments throughout the year to create value for our shareholders, which includes increasing our quarterly dividend payment and the recent repurchase of nearly 10% of Middlefield’s common stock outstanding.  As we enter the fourth quarter, our outlook is encouraging and is resulting from the strength in our core geographic markets, enhancements we have made to our product and service offerings, and growth in our financial results.”

Income Statement
Net interest income for the 2015 third quarter increased 4.7% to $6.2 million, compared to $5.9 million for the 2014 third quarter.  For the 2015 nine month period, net interest income increased 3.8% to $18.4 million, compared to nearly $17.8 million for the same period last year.  The net interest margin for the 2015 third quarter was 3.80%, compared to 3.99% for the same period of 2014.  Year-to-date, the net interest margin was 3.88%, compared to 4.08% for the same period last year. 

Noninterest income, compared to the same period last year, was up 11.9% for both the 2015 third quarter and year-to-date.  The improvement to noninterest income in the 2015 third quarter, as well as the nine month period was primarily a result of higher investment gains, earnings on bank-owned life insurance, and gains on sale of loans. 

Noninterest expense for the 2015 third quarter was $4.7 million, an increase of 6.5% from $4.4 million for the 2014 third quarter.  Year-to-date, noninterest expense increased 11.2% to $14.7 million, compared to $13.2 million for the same period last year. 

“Our asset quality remains strong, as we have grown assets and increased our loan portfolio,” said Donald L. Stacy, Chief Financial Officer.  “Nonperforming assets for the 2015 third quarter declined 17.0% to $10.9 million, from $13.2 million in the prior year period.  We are balancing loan growth with strict underwriting standards to manage risk.  As a result, our allowance for loan and lease losses continues to decline, and represented 1.24% of total loans as September 30, 2015.  From a capital perspective, Middlefield remains well capitalized as our Tier 1 capital to average asset ratio improved 16 basis points to 9.66% at the end of the 2015 third quarter.  At September 30, 2015, the bank had $23.3 million in cash and cash equivalents on our balance sheet, and our net loans to total deposits were 80.4%.  As a result of our excellent liquidity, capital position, and belief that our stock represents a compelling value, on October 5, 2015, we repurchased 196,635 shares, or 9.5% of Middlefield Banc Corp. common stock outstanding at $34.50 per share for a total cost of $6.8 million.” 

Balance Sheet
Total assets at September 30, 2015 increased 4.9% to a record $710.6 million, from $677.5 million at December 31, 2014.  Net loans at September 30, 2015 were $503.9 million, compared to $463.7 million at December 31, 2014.  The 8.7% year-to-date improvement in net loans was a result of loan growth in both residential and commercial mortgages, which have increased 14.4% and 18.3%, respectively year-to-date.  This was offset by a 12.5% reduction in commercial and industrial loans, and a 42.0% decline in construction loans. 

Total deposits at September 30, 2015 increased 6.9% to $626.5 million from $586.1 million at December 31, 2014.  The investment portfolio, which is entirely classified as available for sale, stood at $145.1 million at September 30, 2015, compared to $154.3 million at December 31, 2014. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased 10.1% to $62.6 million for the 2015 third quarter, compared to $56.8 million at September 30, 2014.  On a per share basis, tangible stockholders’ equity increased 9.0% to $30.23 at September 30, 2015 from $27.74 at September 30, 2014.  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 September 30, 2015, the company had a Tier 1 leverage ratio of 9.66% up from 9.50%, at September 30, 2014, and 9.56% at June 30, 2015. 

During the 2015 third quarter, the company paid a cash dividend of $0.27 per share, which is 3.8% higher than the amount paid in the 2014 third quarter.  Year-to-date, the company has paid cash dividends of $0.80 per share, which is a 2.6% increase over the same period last year. 

Asset Quality     
The provision for loan losses for the 2015 third quarter was $105,000 compared to $70,000 for the 2014 third quarter.  Year-to-date, the provision for loan losses was $210,000, compared to $370,000 for the same period last year.  Nonperforming assets at September 30, 2015 were $10.9 million, compared with $13.2 million for the same period last year.  Net charge-offs for the 2015 third quarter was $131,000, or 0.10% of average loans, annualized, compared to a reversal of $89,000 for the same period last year.  Year-to-date net charge-offs were $736,000, or 0.20% of average loans, annualized, compared to $128,000, or 0.04% of average loans, annualized for the same period last year.  The allowance for loan losses at September 30, 2015 was $6.3 million, or 1.24% of total loans, compared with $7.3 million, or 1.56% of total loans at September 30, 2014. 

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

Asset Quality History
(dollars in thousands)
    9/30/2015     9/30/2014     12/31/2014     12/31/2013     12/31/2012
Nonperforming loans    $ 8,921    $ 10,497    $ 9,048    $ 12,290    $ 14,224
Real estate owned    $ 2,006   $ 2,674   $ 2,590   $ 2,698   $ 1,846
Nonperforming assets    $ 10,927   $ 13,171   $ 11,638   $ 14,988   $ 16,070
Allowance for loan losses    $ 6,320   $ 7,288   $ 6,846   $ 7,046   $ 7,779
   
Ratios:
Nonperforming loans to total loans     1.75%     2.24%     1.92%     2.82%     3.48%
Nonperforming assets to total assets     1.54%     1.94%     1.72%     2.32%     2.40%
Allowance for loan losses to total loans     1.24%     1.56%     1.45%     1.62%     1.90%
Allowance for loan losses to nonperforming loans     70.84%     69.43%     75.66%     57.33%     54.69%

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $710.6 million at September 30, 2015.  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.  The Bank also operates a Loan Production Office in Mentor, Ohio.  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
                 
September 30, 2015 and 2014 and December 31, 2014
               
Balance Sheet (period end)     September 30,     December 31,     September 30,
(Dollar amounts in thousands)     2015     2014     2014
        (unaudited)               (unaudited)
Assets                
Cash and due from banks   $ 19,189   20,846   21,486
Federal funds sold      4,106     4,793     7,816
Cash and cash equivalents     23,295     25,639     29,302
Investment securities available for sale     145,146     154,334     156,021
Loans held for sale     620     438     201
Loans:     510,232     470,584     468,007
Less:  reserve for loan losses     6,320     6,846     7,288
Net loans     503,912     463,738     460,719
Premises and equipment     9,892     9,980     9,916
Goodwill     4,559     4,559     4,559
Core deposit intangible     86     116     126
Bank-owned life insurance     13,354     9,092     9,022
Other real estate owned     2,006     2,590     2,674
Accrued interest receivable and other assets     7,727     7,045     7,722
Total Assets   $ 710,597     677,531     680,262
                   
      September 30,     December 31,     September 30,
      2015     2014     2014
Liabilities and Stockholders' Equity                  
Non-interest bearing demand deposits   $ 117,038   105,512   105,788
Interest bearing demand deposits     64,807     56,377     62,958
Money market accounts     77,811     75,895     76,157
Savings deposits     179,528     178,470     177,408
Time deposits     187,364     169,858     177,709
Total Deposits 626,548     586,112     600,020
Short-term borrowings     4,047     14,808     5,131
Other borrowings     10,300     10,624     11,105
Other liabilities     2,486     2,120     2,491
Total Liabilities     643,381     613,664     618,747
                   
Common equity     36,039     35,529     35,455
Retained earnings     35,994     32,524     31,169
Accumulated other comprehensive income     1,917     2,548     1,625
Treasury stock     (6,734)     (6,734)     (6,734)
Total Stockholders' Equity     67,216     63,867     61,515
                   
Total Liabilities and Stockholders' Equity   $ 710,597   677,531   680,262

   

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
September 30, 2015 and 2014
(Dollar amounts in thousands)
(unaudited)
      For the Three Months Ended     For the Nine Months Ended
      September 30,     September 30,
        2015       2014       2015       2014
INTEREST INCOME                        
Interest and fees on loans   $ 5,971   $ 5,646   $ 17,656   $ 16,915
Interest-bearing deposits in other institutions     6     5     26     19
Federal funds sold     4     2     12     11
Investment securities                        
Taxable interest     341     441     1,115     1,476
Tax-exempt interest     809     798     2,373     2,336
Dividends on stock     20     19     70     62
Total interest income     7,151   6,911     21,252   20,819
INTEREST EXPENSE                        
Deposits     876     898     2,581     2,767
Short term borrowings     30     38     100     111
Other borrowings     20     30     66     94
Trust preferred securities     33     33     85     93
Total interest expense     959     999     2,832     3,065
                         
NET INTEREST INCOME     6,192     5,912     18,420     17,754
                         
Provision for loan losses     105     70     210     370
NET INTEREST INCOME AFTER PROVISION                        
FOR LOAN LOSSES     6,087     5,842     18,210     17,384
                           
NONINTEREST INCOME                        
Service charges on deposits     471     489     1,382     1,399
Investment securities gains, net     211     190     257     248
Earnings on bank-owned life insurance     101     71     262     206
Gains on sale of loans     113     20     286     20
Other income     212     220     679     689
Total non-interest income     1,108     990     2,866     2,562
NONINTEREST EXPENSE                        
Salaries and employee benefits     2,285     2,144     7,205     6,428
Occupancy expense     305     272     945     868
Equipment expense     249     296     706     710
Data processing costs     287     251     798     689
Ohio state franchise tax     75     93     225     269
Federal deposit insurance expense     120     132     352     361
Professional fees     229     189     825     814
Loss on sale of other real estate owned     24     49     72     119
Advertising expense     195     120     586     367
Other real estate expense     116     91     449     256
Directors Fees     98     99     343     303
Other operating expense     686     649     2,191     2,028
Total non-interest expense     4,669     4,385     14,697     13,212
Income before income taxes     2,526 2,447     6,379 6,734
Provision for income taxes     544     529     1,264     1,442
NET INCOME   $ 1,982   $ 1,918   $ 5,115   $ 5,292
               
      For the Three Months Ended     For the Nine Months Ended
      September 30,     September 30,
      2015   2014     2015   2014
Per common share data                        
Net income per common share - basic   $ 0.96   $ 0.94   $ 2.49   $ 2.60
Net income per common share - diluted   $ 0.96   $ 0.93   $ 2.47   $ 2.59
Dividends declared   0.27   0.26   0.80   0.78
Book value per share (period end)   $ 32.48   $ 30.02   $ 32.48   $ 30.02
Tangible book value per share (period end)   $ 30.23   $ 27.74   $ 30.23   $ 27.74
Dividend payout ratio     28.15%     27.58%     32.16%     30.01%
Average shares outstanding - basic 2,064,054     2,044,124   2,058,938     2,038,972
Average shares outstanding - diluted 2,072,639     2,052,012   2,068,192     2,045,660
Period ending shares outstanding     2,069,510     2,048,807     2,069,510     2,048,807
         
Selected ratios                        
Return on average assets     1.10%     1.13%     0.97%     1.06%
Return on average equity     12.67%     13.55%     10.83%     12.74%
Yield on earning assets     4.35%     4.62%     4.44%     4.73%
Cost of interest bearing liabilities     0.71%     0.78%     0.72%     0.80%
Net interest spread     3.64%     3.84%     3.72%     3.94%
Net interest margin     3.80%     3.99%   3.88%     4.08%
Efficiency     60.51%     59.96%     65.30%     61.40%
Tier 1 capital to average assets 9.66% 9.50%   9.66% 9.50%
                       
                     
September 30,   September 30,          
2015   2014          
           
Commercial and industrial   $ 53,154   58,874          
Real estate - construction 17,576     29,287          
Real estate - mortgage:                
   Residential 260,291     224,223          
   Commercial 174,336     149,488          
Consumer installment 4,875     6,135          
510,232     468,007          
                     
      September 30,     September 30,          
Asset quality data     2015     2014          
(Dollar amounts in thousands)              
Non-accrual loans   $ 6,416   8,885          
Troubled debt restructuring     2,456     1,587          
90 day past due and accruing     49     25          
Nonperforming loans     8,921     10,497          
Other real estate owned     2,006     2,674          
Nonperforming assets   $ 10,927   13,171            
                     
                     
Allowance for loan and lease losses   $ 6,320   $ 7,288          
Allowance for loan and lease losses/total loans     1.24%   1.56%          
Net charge-offs:                    
Quarter-to-date     131     (89)          
Year-to-date     736     128          
Net charge-offs to average loans, annualized                    
Quarter-to-date     0.10%     (0.08%)          
Year-to-date     0.20%     0.04%          
Nonperforming loans/total loans     1.75%     2.24%          
Allowance for loan and lease losses/nonperforming loans     70.84%     69.43%          

  

  

  

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