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Middlefield Banc Corp. Reports 2015 First 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: April 22, 2015

Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the 2015 first quarter ended March 31, 2015.

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

  • Net interest income increased 3.3% to $6.2 million.
  • Noninterest income grew 11.3% to $0.8 million. 
  • Noninterest expenses increased 13.8%.
  • Net income decreased 7.7% to $1.6 million, or $0.79 per diluted share.
  • Tangible stockholders’ equity improved 3.1% from the 2014 fourth quarter, and 17.4% from March 31, 2014. 
  • Total net loans increased 7.5%.
  • Nonperforming assets declined to $10.5 million from $13.4 million. 
  • Tier 1 capital ratio strengthened to 9.69% from 9.15%. 

“Overall, we are pleased with how 2015 has started,” stated Thomas G. Caldwell, President and Chief Executive Officer.  “Noninterest expenses were up in the first quarter and impacted our overall net income for the quarter.  We were able to partially offset the impact of the 13.8% increase in noninterest expenses through higher levels of both interest and noninterest income, and reducing our interest expenses by 14.5%.  We selectively added staff, improved our capabilities, and increased our advertising budget to support our growth objectives.” 

Net income for the 2015 first quarter was $1.6 million, or $0.79 per diluted share, compared to net income for the 2014 first quarter of $1.8 million, or $0.86 per diluted share.  Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2015 first quarter were 10.23% and 0.96%, respectively, compared with 13.10% and 1.08% for the 2014 first quarter. 

Mr. Caldwell continued: “During the 2015 first quarter the Board of Directors had a strategic planning session that included a comprehensive review of our company, our strategic direction, and our growth potential.  The meeting provided us further confidence in our position in the marketplace, the products and services we offer our customers, and the ways we can further grow our franchise.  We have a great platform for growth supported by two compelling operating geographies, a healthy balance sheet, strong capital levels, and an experienced and community-oriented management team.  As we start the year, we are optimistic we have the plan in place to support our long-term objectives and profitably grow our banking franchise.” 

Income Statement

Net interest income for the 2015 first quarter was approximately $6.2 million, compared to nearly $6.0 million for the 2014 first quarter.  The 3.3% increase in net interest income for the 2015 first quarter was a result of a reduction in funding costs, primarily through an 11.6% decline in deposit expenses.  The net interest margin for the 2015 first quarter was 4.02%, compared to 4.20% for the same period of 2014. 

Noninterest income for the 2015 first quarter was up 11.3% to $0.8 million, primarily a result of gains on the sales of investments and loans.  Noninterest expense for the 2015 first quarter was $4.8 million, an increase of approximately $0.6 million from the 2014 first quarter.  The higher noninterest expenses were primarily due to higher operating and advertising expenses to support the company’s growth objectives. 

“Our asset quality and liquidity continues to improve,” said Donald L. Stacy, Chief Financial Officer.  “Nonperforming assets of $10.5 million in the 2015 first quarter were at the lowest level since 2008 and we expect this amount will continue to decline.  We had $45.3 million in cash and cash equivalents on our balance sheet at March 31, 2015 and net loans to total deposits of 76.1%.  We have an active pipeline of potential loans, which we are working on closing in the coming quarters.  Our secondary mortgage program is developing, albeit at a slower rate than we initially thought.  With improving weather conditions and a focused advertising spend in our Central Ohio market to take advantage of seasonal housing trends, we believe we can improve our execution in this market.  We have incurred higher operating costs to support these initiatives, which may remain elevated over the near-term.  We continue to manage our costs of interest-bearing liabilities, which fell 11 basis points in the 2015 first quarter, compared to the prior year period, and helped offset the increase in operating expenses.” 

Balance Sheet

Total assets at March 31, 2015 increased 4.5% to a record $699.9 million, from $670.0 million at March 31, 2014.  Net loans at March 31, 2015 were $469.4 million, compared to $436.7 million at March 31, 2014.  The 7.5% year-over-year improvement in net loans was a result of loan growth in both residential and commercial mortgages, which increased 7.4% and 17.9%, respectively.  This was offset primarily by a 14.0% year-over-year reduction of commercial and industrial loans. 

Total deposits at March 31, 2015 increased 3.8% to $617.1 million from $594.8 million at March 31, 2014.  The company continues to proactively manage its cost of funds and control deposit growth.  The investment portfolio, which is entirely classified as available for sale, stood at $151.2 million at March 31, 2015, compared to $155.9 million at March 31, 2014. 

Stockholders’ Equity and Dividends

Tangible stockholders’ equity increased 17.4% to $61.0 million for the 2015 first quarter, compared to $52.0 million at March 31, 2014.  On a per share basis, tangible stockholders’ equity increased 16.2% to $29.65 at March 31, 2015 from $25.52 at March 31, 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 March 31, 2015, the company had a Tier 1 leverage ratio of 9.69%, up from 9.15% at March 31, 2014. 

During the 2015 first quarter, the company paid cash dividends of $0.26 per share, which represents a dividend payout ratio of 32.80%. 

Asset Quality   

The provision for loan losses for the 2015 first quarter was $0.1 million, compared to $0.2 million for the 2014 first quarter.  Nonperforming assets at March 31, 2015 were $10.5 million, compared to $13.4 million at March 31, 2014.  Net charge-offs for the 2015 first quarter were $0.5 million, or 0.43% of average loans, annualized compared to $0.2 million, or 0.19% of average loans, annualized.  The allowance for loan losses at March 31, 2015 stood at $6.4 million, or 1.35% of total loans, compared to $7.0 million or 1.58% of total loans at March 31, 2014. 

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

      Asset Quality History
      (dollars in thousands)
                               
        3/31/2015      12/31/14      3/31/2014      12/31/2012      12/31/11
                               
Nonperforming loans   $ 8,262   $ 9,048   $ 10,741   $ 14,224   $ 24,546
Real estate owned     2,203     2,590     2,6568     1,846     2,196
                               
Nonperforming assets   $ 10,468   $ 11,638   $ 13,397   $ 16,070   $ 26,742
                               
Allowance for loan losses   $ 6,447   $ 6,8469   $ 7,015   $ 7,779   $ 6,819
                               
Ratios:                              
Nonperforming loans to                              
  total loans     1.74%     1.92%     2.42%     3.48%     6.12%
Nonperforming assets to                              
  total assets     1.50%     1.72% 2.00% 2.40%     4.09%
Allowance for loan losses to                              
  total loans     1.35%     1.45%     1.58%     1.90%     1.70%
Allowance for loan losses to                              
  nonperforming loans     78.03%     75.66%     65.31%     54.69%     27.78%

   

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $699.9 million at March 31, 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.  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
March 31, 2015 and 2014
(Dollar amounts in thousands)
(unaudited)
  For the Three Months Ended
  March 31,
        2015   2014
INTEREST INCOME            
Interest and fees on loans   $ 5,843   $ 5,694
Interest-bearing deposits in other institutions     8     5
Federal funds sold     3     3
Investment securities            
Taxable interest     395     509
Tax-exempt interest     759     755
Dividends on stock     27     23
Total interest income     7,035   6,989
INTEREST EXPENSE            
Deposits     831     940
Short term borrowings     37     35
Other borrowings     23     32
Trust preferred securities     (8)     26
Total interest expense     883     1,033
             
NET INTEREST INCOME     6,152     5,956
             
Provision for loan losses     105     180
NET INTEREST INCOME AFTER PROVISION            
FOR LOAN LOSSES     6,047     5,776
NONINTEREST INCOME            
Service charges on deposits     441     441
Investment securities gains (losses), net     24     (6)
Earnings on bank-owned life insurance     69     67
Gains on sale of loans     53     -
Other income     209     213
Total noninterest income     796     715
NONINTEREST EXPENSE            
Salaries and employee benefits     2,360     2,016
Occupancy expense     349     321
Equipment expense     216     220
Data processing costs     250     214
Ohio state franchise tax     75     83
Federal deposit insurance expense     112     132
Professional fees     319     287
Loss (gain) on sale of other real estate owned     88     (5)
Advertising expense     196     123
Other real estate expense     65     63
Directors Fees     118     86
Other operating expense     663     689
Total noninterest expense     4,811     4,229
Income before income taxes     2,032 2,262
Provision for income taxes     404     499
NET INCOME   $ 1,628   $ 1,763
       

 

 

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
                 
March 31, 2015 and 2014 and December 31, 2014
               
Balance Sheet (period end)       March 31,       December 31,       March 31,
(Dollar amounts in thousands)     2015     2014     2014
      (unaudited)           (unaudited)
Assets                
Cash and due from banks   $ 32,727   $ 20,846   $ 28,663
Federal funds sold     12,535     4,793     14,147
Cash and cash equivalents     45,262   25,639 42,810
Investment securities available for sale     151,159     154,334     155,940
Loans held for sale     690     438     -
Loans:     475,818     470,584     443,729
Less: reserve for loan losses     6,447     6,846     7,015
Net loans     469,371   463,738   436,714
Premises and equipment     9,927     9,980     9,797
Goodwill     4,559     4,559     4,559
Core deposit intangible     106     116     146
Bank-owned life insurance     9,161     9,092     8,883
Accrued interest receivable and other assets     9,699     9,635     11,173
Total Assets   $ 699,934   677,531 670,022
                   
      March 31,     December 31,     March 31,
      2015     2014     2014
Liabilities and Stockholders' Equity                  
Noninterest-bearing demand deposits   $ 105,728   $ 105,512   $ 88,988
Interest-bearing demand deposits     64,460     56,377     60,673
Money market accounts     77,099     75,895     75,296
Savings deposits     179,850     178,470     179,805
Time deposits     190,006     169,858     190,004
Total Deposits 617,143   586,112 594,766
Short-term borrowings     4,913     14,808     5,320
Other borrowings     10,533     10,624     11,468
Other liabilities     1,661     2,120     1,774
Total Liabilities     634,250   613,664   613,328
                   
Common equity     35,706     35,529     35,115
Retained earnings     33,618     32,524     28,699
Accumulated other comprehensive income (loss)     3,094     2,548     (386)
Treasury stock     (6,734)     (6,734)     (6,734)
Total Stockholders' Equity     65,684   63,867   56,694
                   
Total Liabilities and Stockholders' Equity   $ 699,934   $ 677,531   $ 670,022

 

 

Per common share data            
Net income per common share - basic   $ 0.79   $ 0.87
Net income per common share - diluted   $ 0.79   $ 0.86
Dividends declared   $ 0.26   $ 0.26
Book value per share (period end)   $ 31.92   $ 27.83
Tangible book value per share (period end)   $ 29.65   $ 25.52
Dividend payout ratio     32.80%     30.01%
Average shares outstanding - basic 2,053,660     2,033,480
Average shares outstanding - diluted 2,062,867     2,039,515
Period ending shares outstanding     2,058,026     2,037,359
     
Selected ratios            
Return on average assets     0.96%     1.08%
Return on average equity     10.23%     13.10%
Yield on earning assets     4.56%     4.88%
Cost of interest-bearing liabilities     0.70%     0.81%
Net interest spread     3.86%     4.07%
Net interest margin     4.02%     4.20%
Efficiency (1)     65.56%     59.90%
Tier 1 capital ratio (holding company) 9.69% 9.15%
           
(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.
    March 31,     March 31,
2015   2014
 
Commercial and industrial   $ 48,916   $ 56,855
Real estate - construction 24,763   25,241
Real estate - mortgage:    
Residential 231,836     215,809
Commercial 165,680     140,543
Consumer installment 4,623   5,281
475,818     443,729
           
      March 31,     March 31,
Asset quality data     2015     2014
(Dollar amounts in thousands)    
Non-accrual loans   $ 6,329   $ 7,463
Troubled debt restructuring     1,767     2,035
90 day past due and accruing     166     1,243
Nonperforming loans     8,262   10,741
Other real estate owned     2,203     2,656
Nonperforming assets   $ 10,465   $ 13,397
           
           
Allowance for loan and lease losses   $ 6,447   $ 7,015
Allowance for loan and lease losses/total loans     1.35%   1.58%
Net charge-offs:          
Year-to-date     504     211
Net charge-offs to average loans, annualized        
Year-to-date     0.43%     0.19%
Nonperforming loans/total loans     1.74%     2.42%
Allowance for loan and lease losses/nonperforming loans     78.03%     65.31%
Central Ohio Northeast Ohio