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Middlefield Banc Corp. Reports 2016 First Half 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: July 20, 2016

Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the 2016 first-half and second quarter ended June 30, 2016.

2016 First Half Financial Highlights versus 2015 First Half:

  • Net income was up 8.9% to $3.4 million
  • Earnings per diluted share increased 14.0% to $1.73 per diluted share
  • Total net loans increased 17.8% to $573.4 million
  • Total interest income improved 4.6% to $14.8 million
  • Tangible stockholders’ equity improved 11.3 % to $32.47 per share
  • Tier 1 capital ratio remains strong at 8.99%

“The significant growth we experienced for the 2016 first half reflects an excellent second quarter of increased productivity from our new lenders, business managers and the recently opened Mentor LPO,” stated Thomas G. Caldwell, President and Chief Executive Officer. “These investments in our workforce and geographic expansion, helped us grow net loans at June 30, 2016 by 17.8% compared with the same period last year, which in turn allowed us to improve our efficiency ratio from 67.79% to 65.99%.

“I am pleased to report significant improvements in profitability for the 2016 first half as net income per diluted common share increased 14.0% to $1.73 and our tangible book value increased 11.3% to $32.47 per share. Net income for the 2016 second quarter increased 28.0% to a record $1.9 million, or $0.94 per diluted share, from $1.5 million, or $0.73 per diluted share for the 2015 second quarter. We are making progress executing the strategic plan we created last year as we grow our banking footprint, and increase our market share. We remain optimistic 2016 will experience asset and loan growth, and improved profitability.”

Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2016 six-month period were 10.62% and 0.92%, respectively, compared with 9.92% and 0.91% for the same period last year. For the 2016 second quarter returns on average equity (“ROE”) and average assets (“ROA”) were 11.78% and 1.03% respectively, compared with 9.54% and 0.85% for the 2015 second quarter.

Mr. Caldwell continued: “During the quarter, we began construction on a new branch in Sunbury, Ohio, which we expect to open in the 2016 third quarter. This will be our 11th full-service banking location and our third office in Central Ohio. We are excited to expand our presence in Central Ohio to Delaware County, which is 20 miles north of Columbus and is the fastest growing suburban county in the State of Ohio, and the 21st fastest in the U.S. As we grow our franchise, I am encouraged with our direction. Our two distinct Ohio markets have strong demographics and stable economies. We are working hard to grow Middlefield’s presence within our local communities, while providing our customers with a community bank that is safe, strong and committed.”

Income Statement

For the 2016 first half, net interest income increased 3.5% to $12.7 million, compared to $12.2 million for the same period last year. Year-to-date, the net interest margin was 3.82%, compared to 3.92% for the same period last year. Net interest income for the 2016 second quarter was $6.3 million, compared to $6.1 million for the 2015 second quarter. The net interest margin for the 2016 second quarter was 3.78%, compared to 3.83% for the same period of 2015. The 4.3% increase in net interest income for the 2016 second quarter was largely a result of an 8.1% increase in interest and fees on loans.

For the 2016 first half, noninterest income increased 18.4% to $2.1 million, compared to $1.8 million for the same period last year. Noninterest income for the 2016 second quarter was up 21.9% to $1.2 million primarily a result of gains on the sales of investment securities.

For the 2016 first half, noninterest expense increased 2.2% to $10.3 million, compared to $10.0 million for the same period last year. The increase in noninterest expenses were modest through the 2016 first half primarily because of a 5.8% reduction in 2016’s second quarter expenditures. Operating costs in the 2016 second quarter declined to $4.9 million from the 2015 second quarter’s $5.2 million and were down 7.9% from the 2016 first quarter.

“Our asset quality remains strong, as year-to-date net charge-offs have declined 62.1% from the same period last year,” said Donald L. Stacy, Chief Financial Officer. “The 22.0% year-over-year increase in second quarter nonperforming loans is mainly due to the 17.6% increase in our loan portfolio over this same time. Economic trends in our local communities remain stable and we continue to focus on managing risk and maintaining high quality lending practices. We had $21.1 million in cash and cash equivalents on our balance sheet at June 30, 2016 and net loans to total deposits of 91.3%. We were able to leverage the increase in noninterest expenses we experienced in the 2016 first quarter, and actually reduced operating costs sequentially and year-over-year. As a result, profitability increased significantly with strong improvements in ROA and ROE during the quarter. We expect stable profitability throughout the remainder of 2016 as we control expenses and grow our base of earning assets.”

Balance Sheet

Total assets at June 30, 2016 increased 7.7% to $760.1 million, from $705.5 million at June 30, 2015. Net loans at June 30, 2016 were $573.4 million, compared to $486.5 million at June 30, 2015. The 17.8% year-over-year increase in net loans was a result of loan growth in both residential and commercial mortgages, which increased 15.1% and 25.3%, respectively, as well as a 10.1% increase in commercial and industrial loans, partially offset by a 3.7% decline in real estate construction loans and a 17.5% decline in consumer installment loans.

Total deposits at June 30, 2016 increased 0.7% to $628.0 million from $623.5 million at June 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 $129.3 million June 30, 2016, compared with $157.6 million at June 30, 2015.

Stockholders’ Equity and Dividends

At June 30, 2016 tangible stockholders’ equity was $73.0 million an increase of 21.3% from $60.2 million at June 30, 2015. On a per share basis, tangible stockholders’ equity increased 11.3% to $32.47 at June 30, 2016 from $29.16 at June 30, 2015. Through the first six months of 2016, the company paid cash dividends of $0.54 per share, which was an increase of 1.9% over the same period last year. The dividend payout ratio for the 2016 six-month period was 32.4% compared to 34.7% for the same period last year.

At June 30, 2016, the company had a Tier 1 leverage ratio of 8.99%, down from 9.56% at June 30, 2015.

Asset Quality

The provision for loan losses for the 2016 second quarter was $0.1 million versus no provision for the same period last year. Nonperforming assets at June 30, 2016 were $10.6 million, compared to $10.1 million at June 30, 2015. Net charge-offs for the 2016 second quarter were $0.1 million, or 0.07% of average loans, annualized, compared to $0.1 million, or 0.08% of average loans, annualized for the same 2015 period. Year-to-date net charge-offs were $0.2 million, or 0.08% of average loans, annualized compared to $0.6 million, or 0.25% of average loans, annualized for the same period last year. The allowance for loan losses at June 30, 2016 stood at $6.4 million, or 1.10% of total loans, compared to $6.3 million or 1.29% of total loans at June 30, 2015.

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

Asset Quality History
(dollars in thousands)
6/30/2016 6/30/2015 12/31/2015 12/31/2014 12/31/2013
Nonperforming loans $9,491 $7,777 $10,263 $9,048 $12,290
Real estate owned $1,142 $2,308 $1,412 $2,590 $2,698
Nonperforming assets $10,633 $10,085 $11,675 $11,638 $14,988
Allowance for loan losses $6,366 $6,346 $6,385 $6,846 $7,046
Ratios:
Nonperforming loans to total loans 1.64% 1.58% 1.92% 1.92% 2.82%
Nonperforming assets to total assets 1.40% 1.43% 1.59% 1.72% 2.32%
Allowance for loan losses to total loans 1.10% 1.29% 1.20% 1.45% 1.62%
Allowance for loan losses to nonperforming loans 67.07% 81.60% 62.21% 75.66% 57.33%

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $760.1 million at June 30, 2016. 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
                 
June 30, 2016 and 2015 and December 31, 2015
                 
Balance Sheet (period end)     June 30,     December 31,     June 30,
(Dollar amounts in thousands)     2016     2015     2015
      (unaudited)           (unaudited)
Assets                
Cash and due from banks   $ 21,127  $  22,421  $  20,311
Federal funds sold      1,000 1,329 2,340
Cash and cash equivalents     22,127     23,750     22,651
Investment securities available for sale     129,295 146,520 157,577
Loans held for sale     496 1,107 398
Loans:     579,716 533,710 492,893
Less:  reserve for loan losses     6,366 6,385 6,346
Net loans     573,350     527,325     486,547
Premises and equipment     9,727 9,772 10,019
Goodwill     4,559 4,559 4,559
Core deposit intangible     56 76 96
Bank-owned life insurance     13,337 13,141 13,253
Other real estate owned     1,142 1,412 2,308
Accrued interest receivable and other assets     6,019 7,477 8,110
Total Assets   $  760,108      735,139      705,518
         
      June 30,   December 31,     June 30,
      2016 2015   2015
Liabilities and Stockholders' Equity          
Non-interest bearing demand deposits   $ 126,045  $  116,498  $  109,732
Interest bearing demand deposits     64,361 57,219 59,128
Money market accounts     81,596 78,856 73,425
Savings deposits     173,014 180,653 179,353
Time deposits     183,024 191,221 201,886
Total Deposits     628,040     624,447     623,524
Fed funds purchased     414 - -  
Short-term borrowings     41,841 35,825 4,517
Other borrowings     9,825 9,939 10,465
Other liabilities     2,407 2,624 2,200
Total Liabilities     682,527     672,835     640,706
     
Common equity     47,675 36,191 35,854
Retained earnings     39,545 37,236 34,570
Accumulated other comprehensive income     3,879 2,395 1,122
Treasury stock     (13,518) (13,518) (6,734)
Total Stockholders' Equity      77,581      62,304      64,812
     
Total Liabilities and Stockholders' Equity   $ 760,108  $  735,139  $  705,518
       
                 
                 
   
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
June 30, 2016 and 2015
(Dollar amounts in thousands)
(unaudited)
       
  For the Three Months Ended For the Six Months Ended
  June 30, June 30,
  2016     2015 2016     2015
INTEREST INCOME    
Interest and fees on loans   $ 6,317 $ 5,842 $ 12,490 $ 11,685
Interest-bearing deposits in other institutions 15 12 27 20
Federal funds sold 5 5 9 8
Investment securities
Taxable interest 290 379 630 774
Tax-exempt interest 750 805 1,540 1,564
Dividends on stock 28 23 57 50
Total interest income 7,405   7,066 14,753   14,101
INTEREST EXPENSE
Deposits 889 874 1,744 1,705
Short term borrowings 115 33 235 70
Other borrowings 20 23 37 46
Trust preferred securities 42 60 75 52
Total interest expense 1,066 990 2,091 1,873
 
NET INTEREST INCOME 6,339 6,076 12,662 12,228
 
Provision for loan losses 105  -   210 105
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,234 6,076 12,452 12,123
NONINTEREST INCOME
Service charges on deposits 491 470 938  911
Investment securities gains, net 252 22 303  46
Earnings on bank-owned life insurance 97 92 196  161
Gains on sale of loans 106  120  193  173
Other income 227 258 452  467
Total noninterest income 1,173 962 2,082 1,758
NONINTEREST EXPENSE
Salaries and employee benefits 2,283 2,560 5,063  4,920
Occupancy expense 292 291 627  640
Equipment expense 210 241 479  457
Data processing costs 322 261 594  511
Ohio state franchise tax 162 75 262  150
Federal deposit insurance expense 132 120 264  232
Professional fees 218 277 510  596
Loss (gain) on sale of other real estate owned 56 (40) 68  48
Advertising expense 203 195 398  391
Other real estate expense 85 268 131  333
Directors Fees 121 127 228  245
Core deposit intangible amortization 10 10 20  20
Appraiser fees 119  -   220  -  
ATM fees 98 88 194  172
Other operating expense 604 744 1,195 1,313
Total noninterest expense 4,915 5,217 10,253 10,028
Income before income taxes 2,492     1,821 4,281     3,853
Provision for income taxes 566 316 868 720
NET INCOME   $ 1,926 $ 1,505 $ 3,413 $ 3,133
                     
  For the Three Months Ended   For the Six Months Ended
  June 30,   June 30,
  2016     2015   2016     2015
Per common share data      
Net income per common share - basic   $ 0.94 $ 0.73 $ 1.74 $ 1.52
Net income per common share - diluted   $ 0.94 $ 0.73 $ 1.73 $ 1.52
Dividends declared    $ 0.27  $ 0.27  $  0.54  $ 0.53
Book value per share (period end)   $ 34.53 $ 31.42 $ 34.53 $ 31.42
Tangible book value per share (period end)   $  32.47 $  29.16 $  32.47 $  29.16
Dividend payout ratio 31.00% 36.74%   32.35% 34.70%
Average shares outstanding - basic 2,051,137 2,058,986 1,964,657 2,056,338
Average shares outstanding - diluted 2,059,411 2,068,313 1,973,179 2,065,928
Period ending shares outstanding 2,246,904 2,062,649   2,246,904 2,062,649
   
Selected ratios  
Return on average assets 1.03% 0.85%   0.92% 0.91%
Return on average equity 11.78% 9.54%   10.62% 9.92%
Yield on earning assets 4.37% 4.41%   4.42% 4.48%
Cost of interest bearing liabilities 0.77% 0.75%   0.76% 0.72%
Net interest spread 3.60% 3.66%   3.66% 3.76%
Net interest margin 3.78% 3.83%   3.82% 3.92%
Efficiency 62.23% 70.00%   65.99% 67.79%
Tier 1 capital to average assets 8.99% 9.56% 8.99% 9.56%
               
                   
June 30,   June 30,          
2016   2015        
       
Commercial and industrial   $ 60,451  $ 54,927          
Real estate - construction 16,039     16,647          
Real estate - mortgage:                
     Residential 251,553 218,584          
     Commercial 247,176 197,284          
Consumer installment 4,497     5,451          
579,716 492,893        
               
      June 30,     June 30,          
Asset quality data 2016   2015        
(Dollar amounts in thousands)        
Non-accrual loans   $ 6,662  $ 5,780          
Troubled debt restructuring 2,829 1,997          
Nonperforming loans 9,491     7,777        
Other real estate owned 1,142 2,308        
Nonperforming assets   $  10,633  $  10,085          
               
             
Allowance for loan and lease losses   $ 6,366 $ 6,346          
Allowance for loan and lease losses/total loans     1.10%   1.29%          
Net charge-offs:                
   Quarter-to-date 96 101
   Year-to-date 229 605
Net charge-offs to average loans, annualized    
   Quarter-to-date 0.07% 0.08%
   Year-to-date 0.08% 0.25%
Nonperforming loans/total loans     1.64% 1.58%          
Allowance for loan and lease losses/nonperforming loans     67.07% 81.60%          
                 
Central Ohio Northeast Ohio