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Middlefield Banc Corp. Reports 2016 Third Quarter Financial Results

Middlefield Banc Corp. 2016 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 27, 2016

Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the three and nine months ended September 30, 2016.

2016 Nine Month Financial Highlights (on a year-over-year basis unless noted):

  • Net income down 7.0% to $4.8 million
  • Earnings per diluted share decreased 6.9% to $2.30 per diluted share
  • Total loans increased 14.9% to $586.3 million
  • Nonperforming assets declined to $10.0 million from $10.9 million
  • Total interest income improved 4.3% to $22.2 million
  • Tangible stockholders’ equity improved 8.2% to $32.70 per share
  • Tier 1 capital ratio strengthened to 10.10% from 9.66%

“While it was a good quarter, driven by growth in loans and tangible book value, several one-time and extraordinary events impacted third quarter earnings per share including timing of certain corporate overhead expenses, increased costs associated with the Liberty acquisition, and higher average shares outstanding as a result of our June 2016 private placement,” stated Thomas G. Caldwell, President and Chief Executive Officer.  “Profitability in the fourth quarter should improve sequentially as certain corporate expenses that impacted the third quarter will not reappear in the quarter, however, we will still experience higher costs as we work towards closing the Liberty acquisition.  We look forward to completing the Liberty acquisition in the coming months, which we expect will immediately contribute to growth in both loans and earnings.” 

Net income for the 2016 third quarter was $1.3 million, or $0.60 per diluted share, compared to net income for the 2015 third quarter of $2.0 million, or $0.96 per diluted share. Net income for the nine months ended September 30, 2016 was $4.8 million, or $2.30 per diluted share, compared to net income for the nine months ended September 30, 2015 of $5.1 million, or $2.47 per diluted share.

Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2016 third quarter were 6.84% and 0.69%, respectively, compared with 12.67% and 1.10% for the 2015 third quarter.  ROE and ROA were 9.07% and 0.85%, respectively, for the 2016 nine-month period, compared with 10.83% and 0.97% for the same period last year.

Mr. Caldwell continued, “Productivity from our new lenders, business managers, and Mentor LPO continues at a robust pace and we ended the third quarter with a strong pipeline of loans, which we expect will reaccelerate loan growth in the fourth quarter.  Economic activity in both our Northeast and Central Ohio markets remains stable, and I am excited to strengthen our footprint in our Central Ohio region with the opening of our Sunbury branch earlier this month.  Both of our markets are benefiting from our community-oriented banking approach and we are excited to further extend our reach to Cuyahoga and Summit counties once the Liberty acquisition is completed.  On many fronts 2016 has been a transformative year, and we are excited about our near-term growth catalysts, and long-term opportunities that will create significant value for our shareholders.”

Income Statement

Net interest income for the 2016 third quarter was $6.4 million, compared to $6.2 million for the 2015 third quarter.  The net interest margin for the 2016 third quarter was 3.68%, compared to 3.80% for the same period of 2015.  The 3.3% increase in net interest income for the 2016 third quarter was largely a result of an 8.2% increase in interest and fees on loans.  For the 2016 nine months, net interest income increased 3.5% to $19.1 million, compared to $18.4 million for the same period last year.  Year-to-date, the net interest margin was 3.78%, compared to 3.88% for the same period last year.

Noninterest income for the 2016 third quarter was down 11.8% to $1.0 million resulting from a reduction of gains on the sales of investment securities.  For the 2016 nine months, noninterest income increased 6.7% to $3.1 million, compared to $2.9 million for the same period last year. 

For the 2016 third quarter, noninterest expense increased 21.3% to $5.7 million, compared to $4.7 million for the same period last year.  The increase in noninterest expenses was principally from high payroll expenses, state franchise tax, professional fees and other expenses discussed previously.  Year-to-date, noninterest expense increased 8.3% primarily due to higher expense and other operating costs in the 2016 third-quarter.

“Our asset quality remains strong and continues to improve as a result of stable local economic activity, conservative underwriting practices, and proactive risk management,” said Donald L. Stacy, Chief Financial Officer.  “Nonperforming assets have declined 14.2% since the end of last year, and 8.3% versus for the same period a year ago.  As a percent of total assets, nonperforming assets were 1.50% of total assets at September 30, 2016, versus 1.59% at December 31, 2015 and 1.75% at September 30, 2015.  From a capital perspective, Middlefield remains well capitalized as our Tier 1 capital to average asset ratio improved 44 basis points to 10.10% at the end of the 2016 third quarter. At September 30, 2016, the bank had $23.3 million in cash and cash equivalents on our balance sheet, and our net loans to total deposits were 90.7%.  During the quarter, we liquidated some of our investment portfolio to further support loan growth.  Net loans to total assets was 76.1% at September 30, 2016 compared to 70.9% at September 30, 2015.  Improving balance sheet productivity combined with strong asset quality should help drive interest income growth in the coming quarters.”

Balance Sheet

Total assets at September 30, 2016 increased 7.3% to $762.3 million, from $710.6 million at September 30, 2015.  Net loans at September 30, 2016 were $580.0 million, compared to $503.9 million at September 30, 2015.  The 15.1% year-over-year increase in net loans was primarily a result of growth in commercial mortgages and commercial and industrial loans of 40.9% and 11.7%, respectively.  This was partially offset by a 2.9% reduction in consumer installment loans, and a 0.5% reduction in residential mortgages.

Total deposits at September 30, 2016 increased 2.0% to $639.3 million from $626.5 million at September 30, 2015.  The company continued to proactively manage its cost of funds and control deposit growth.  The investment portfolio, which is entirely classified as available for sale, was $123.1 million at September 30, 2016, compared with $145.1 million at September 30, 2015.

Stockholders’ Equity and Dividends

At September 30, 2016 tangible stockholders’ equity was $73.6 million, an increase of 17.6% from $62.6 million at September 30, 2015.  On a per share basis, tangible stockholders’ equity increased 8.2% to $32.70 at September 30, 2016 from $30.23 at September 30, 2015.  At September 30, 2016, there was an increase of 8.8% more shares outstanding resulting from a private placement of a sale of stock at $33.00 per share.  Through the first nine months of 2016, the company paid cash dividends of $0.81 per share, which was an increase of 1.3% over the same period last year.  The dividend payout ratio for the 2016 nine-month period was 35.95% compared to 32.16% for the same period last year.

At September 30, 2016, the company had a Tier 1 leverage ratio of 10.10%, up from 9.66% at September 30, 2015. 

Asset Quality

The provision for loan losses was $0.1 million for both the 2016 and 2015 third quarters.  Nonperforming assets at September 30, 2016 were $10.0 million, compared to $10.9 million at September 30, 2015.  Net charge-offs for the 2016 third quarter were $0.1 million, or 0.09% of average loans, annualized, compared to $0.1 million, or 0.09% of average loans, annualized for the same 2015 period.  Year-to-date net charge-offs were $0.4 million, or 0.09% of average loans, annualized compared to $0.7 million, or 0.20% of average loans, annualized for the same period last year. The allowance for loan losses at September 30, 2016 stood at $6.3 million, or 1.08% of total loans, compared to $6.3 million or 1.24% of total loans at September 30, 2015. 

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

Asset Quality History
(dollars in thousands)
9/30/2016 9/30/2015 12/31/2015 12/31/2014 12/31/2013
Nonperforming loans $8,8121 $8,921 $10,263 $9,048 $12,290
Real estate owned $1,205 $2,006 $1,412 $2,590 $2,698
Nonperforming assets $10,0173 $10,927 $11,675 $11,638 $14,988
Allowance for loan losses $6,334 $6,320 $6,385 $6,846 $7,046
Ratios:
Nonperforming loans to total loans 1.50% 1.758% 1.92% 1.92% 2.82%
Nonperforming assets to total assets 1.31% 1.543% 1.59% 1.72% 2.32%
Allowance for loan losses to total loans 1.08% 1.24% 1.20% 1.45% 1.62%
Allowance for loan losses to nonperforming loans 71.88% 70.84% 62.21% 75.66% 57.33%

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $762.3 million at September 30, 2016.  The bank operates 11 full service banking centers and an LPL Financial® brokerage office serving Chardon, Cortland, Delaware, Dublin, Garrettsville, Mantua, Middlefield, Newbury, Orwell, Sunbury, 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, 2016 and 2015 and December 31, 2015
               
Balance Sheet (period end)       September 30,       December 31,       September 30,
(Dollar amounts in thousands)    2016     2015     2015
     (unaudited)           (unaudited)
Assets             
Cash and due from banks   $ 21,976 $ 22,421 $ 19,189
Federal funds sold     1,300 1,329 4,106
Cash and cash equivalents     23,276 23,750 23,295
Investment securities available for sale     123,054 146,520 145,146
Loans held for sale     880 1,107 620
Loans:    586,329 533,710 510,232
Less:reserve for loan losses     6,334 6,385 6,320
Net loans     579,995 527,325 503,912
Premises and equipment     9,921 9,772 9,892
Goodwill    4,559 4,559 4,559
Core deposit intangible     46 76 86
Bank-owned life insurance     13,438 13,141 13,354
Other real estate owned     1,205 1,412 2,006
Accrued interest receivable and other assets     5,884 7,477 7,727
Total Assets   $ 762,258 $ 735,139 $ 710,597
         
      September 30,   December 31,     September 30,
      2016 2015   2015
Liabilities and Stockholders' Equity          
Noninterest-bearing demand deposits   $ 136,320 $ 116,498 $ 117,038
Interest-bearing demand deposits     67,061 57,219 64,807
Money market accounts     77,774 78,856 77,811
Savings deposits     173,272 180,653 179,528
Time deposits     184,915 191,221 187,364
Total Deposits 639,342 624,447 626,548
Short-term borrowings     32,803 35,825 4,047
Other borrowings     9,713 9,939 10,300
Other liabilities     2,208 2,624 2,486
Total Liabilities     684,066 672,835 643,381
     
Common equity     47,812 36,191 36,039
Retained earnings     40,282 37,236 35,994
Accumulated other comprehensive income     3,616 2,395 1,917
Treasury stock     (13,518) (13,518) (6,734)
Total Stockholders' Equity     78,192 62,304 67,216
     
Total Liabilities and Stockholders' Equity   $ 762,258 $ 735,139 $ 710,597

 

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
September 30, 2016 and 2015
(Dollar amounts in thousands)
(unaudited)
    
       For the Three Months Ended For the Nine Months Ended
  September 30, September 30,
  2016   2015     2016   2015
INTEREST INCOME
Interest and fees on loans  $ 6,459     $ 5,971 $ 18,949     $ 17,656
Interest-bearing deposits in other institutions 15 6 42 26
Federal funds sold 7 4 16 12
Investment securities
Taxable interest 235 341 865 1,115
Tax-exempt interest 687 809 2,227 2,373
Dividends on stock 17 20 74 70
Total interest income 7,420 7,151 22,173 21,252
INTEREST EXPENSE
Deposits 921 876 2,665 2,581
Short term borrowings 47 30 282 100
Other borrowings 16 20 53 66
Trust preferred securities 42 33 117 85
Total interest expense 1,026 959 3,117 2,832
 
NET INTEREST INCOME 6,394 6,192 19,056 18,420
 
Provision for loan losses 105 105 315 210
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,289 6,087 18,741 18,210
NONINTEREST INCOME
Service charges on deposits 505 471 1,443 1,382
Investment securities gains, net 0 211 303 257
Earnings on bank-owned life insurance 102 101 298 262
Gains on sale of loans 129 113 322 286
Other income 241 212 693 679
Total noninterest income 977 1,108 3,059 2,866
NONINTEREST EXPENSE
Salaries and employee benefits 2,677 2,285 7,740 7,205
Occupancy expense 306 305 933 945
Equipment expense 221 249 700 706
Data processing costs 334 287 928 798
Ohio state franchise tax 186 75 448 225
Federal deposit insurance expense 132 120 396 352
Professional fees 547 229 1,057 825
Loss (gain) on sale of other real estate owned (49) 24 19 72
Advertising expense 206 195 604 586
Other real estate expense 97 116 228 449
Directors Fees 102 98 330 343
Core deposit intangible amortization 10 10 30 30
Appraiser fees 114 97 334 327
ATM fees 102 89 296 295
Other operating expense 677 490 1,872 1,539
Total noninterest expense 5,662 4,669 15,915 14,697
Income before income taxes 1,604 2,526 5,885 6,379
Provision for income taxes 261 544 1,129 1,264
NET INCOME  $ 1,343 $ 1,982 $ 4,756 $ 5,115

 

     For the Three Months Ended   For the Nine Months Ended
  September 30,   September 30,
  2016       2015       2016       2015
Per common share data      
Net income per common share - basic  $ 0.60 $ 0.96 $ 2.31 $ 2.49
Net income per common share - diluted  $ 0.60 $ 0.96 $ 2.30 $ 2.47
Dividends declared  $ 0.27 $ 0.27 $ 0.81 $ 0.80
Book value per share(period end)  $ 34.74 $ 32.48 $ 34.74 $ 32.48
Tangible book value per share (period end)  $ 32.70 $ 30.23 $ 32.70 $ 30.23
Dividend payout ratio 45.12% 28.15%   35.95% 32.16%
Average shares outstanding - basic 2,247,587 2,064,054 2,059,656 2,058,938
Average shares outstanding -diluted 2,256,230 2,072,639 2,068,532 2,068,192
Period ending shares outstanding 2,250,665 2,069,510   2,250,665 2,069,510
   
Selected ratios  
Return on average assets 0.69% 1.10%   0.85% 0.97%
Return on average equity 6.84% 12.67%   9.07% 10.83%
Yield on earning assets 4.24% 4.35%   4.36% 4.44%
Cost of interest-bearing liabilities 0.74% 0.71%   0.75% 0.72%
Net interest spread 3.50% 3.64%   3.61% 3.72%
Net interest margin 3.68% 3.80%   3.78% 3.88%
Efficiency 73.29% 60.51%   68.42% 65.30%
Tier 1 capital to average assets 10.10% 9.66% 10.10% 9.66%

 

    September 30,   September 30,
    2016     2015
Commercial and industrial  $ 59,376 $ 53,154
Real estate - construction 17,633 17,576
Real estate - mortgage:  
Residential 258,952 260,291
Commercial 245,636 174,336
Consumer installment 4,732 4,875
  $ 586,329 $ 510,232
      
     September 30,     September 30,
Asset quality data 2016   2015
(Dollar amounts in thousands)
Non-accrual loans  $ 6,490 $ 6,416
Troubled debt restructuring 2,322 2,456
90 day past due and accruing - 49
Nonperforming loans 8,812 8,921
Other real estate owned 1,205 2,006
Nonperforming assets  $ 10,017 $ 10,927
      
    
Allowance for loan and lease losses  $ 6,334 $ 6,320
Allowance for loan and lease losses/total loans    1.08% 1.24%
Net charge-offs:   
Quarter-to-date 137 131
Year-to-date 366 736
Net charge-offs to average loans, annualized
Quarter-to-date 0.09% 0.10%
Year-to-date 0.09% 0.20%
Nonperforming loans/total loans    1.50% 1.75%
Allowance for loan and lease losses/nonperforming loans    71.88% 70.84%
Central Ohio Northeast Ohio