Middlefield Banc Corp. Reports Financial Results for the 2014 Third Quarter

MIDDLEFIELD, Ohio--()--Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the three and nine months ended September 30, 2014.

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

  • Net interest income increased 1.1% to $5.9 million.
  • Noninterest income grew 22.5% to $1.0 million.
  • Net income up 2.8% to $1.9 million, or $0.93 per diluted share.
  • Tangible stockholders’ equity improved 4.3% from 2014 second quarter, and 16.6% from December 31, 2013.
  • Total net loans increased 12.1%.
  • Nonperforming assets declined to $13.1 million from $16.3 million.
  • Tier 1 capital ratio strengthened to 9.50% from 8.70%.

“We ended the 2014 third quarter with a record level of total assets primarily due to a significant increase in total loans outstanding,” stated Thomas G. Caldwell, President and Chief Executive Officer. “Since September 30, 2013, our loan portfolio has grown by 11.7%, which was influenced by strong, double-digit improvements across all loan categories. Our asset quality improved during the third quarter as nonperforming assets declined 19.7% over the same period last year. We are dedicated to conservatively managing risk, while continuing to support our communities and expand our loan portfolio.”

Net income for the 2014 third quarter was approximately $1.9 million, or $0.93 per diluted share, compared to net income for the 2013 third quarter of nearly $1.9 million, or $0.92 per diluted share. Net income for the nine months ended September 30, 2014 was $5.3 million, or $2.59 per diluted share, compared to net income for the nine months ended September 30, 2013 of $5.2 million, or $2.58 per diluted share.

Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2014 third quarter were 13.55% and 1.13%, respectively, compared with 13.66% and 1.12% for the 2013 third quarter. ROE and ROA were 12.74% and 1.06%, respectively, for the 2014 nine month period, compared with 12.74% and 1.05% for the same period last year.

Mr. Caldwell continued: “We began offering secondary mortgage products at the end of the third quarter, which should improve noninterest income and diversify our sources of income in future quarters. The roll out of our online and mobile banking applications continues and we expect to offer customers the ability to deposit checks from their mobile phones in the fourth quarter. Middlefield has a strong foundation to support its long-term growth objectives and I am pleased with the progress we have made executing our growth strategies. We continue to invest in ongoing programs that are focused on improving the products and services we offer our customers, enhancing the way our customers interact with the bank, growing our banking franchise, and creating shareholder value.”

Income Statement

Net interest income for the 2014 third quarter increased slightly to $5.9 million, compared to $5.8 million for the 2013 third quarter. For the 2014 nine month period, net interest income increased 4.3% to $17.8 million, compared to $17.0 million for the same period last year. The third quarter and nine month increases in net interest income were driven by a reduction in funding costs, primarily time deposits. The net interest margin for the 2014 third quarter was 3.99%, compared to 4.05% for the same period of 2013. Year-to-date, the net interest margin was 4.08%, compared to 4.03% for the same period last year.

Noninterest income was up 22.5% for the 2014 third quarter and 2.7% year-to-date. The improvement to noninterest income in the 2014 third quarter was primarily a result of investment gains. Noninterest expense for the 2014 third quarter was $4.4 million, an increase of approximately $0.3 million from the 2013 third quarter, primarily a result of higher operating expenses.

“Noninterest expenses have increased primarily due to higher employee, equipment, and data processing fees to support the company’s growth initiatives and compliance costs,” said Donald L. Stacy, Chief Financial Officer. “Programs to offset higher costs by leveraging the company’s IT infrastructure and reducing professional fees continue. We successfully lowered our costs of deposits 23.3% during the quarter and 24.9% year-to-date, as higher cost deposits mature. Noninterest bearing demand deposits have increased 29.4% year-over-year and represented 17.6% of total deposits at September 30, 2014 versus 14.1% at September 30, 2013, while the cost of interest bearing liabilities fell 24 basis points to 0.80% for the nine months ended September 30, 2014. We remain committed to managing expenses and controlling our cost of funds.”

Balance Sheet

Total assets at September 30, 2014 increased 5.1% to $680.3 million, from $647.1 million at December 31, 2013 and 1.8% from $668.3 million at June 30, 2014. Net loans at September 30, 2014 were $460.9 million, compared to $428.7 million at December 31, 2013 and $443.0 million at June 30, 2014. The increase in net loans was a result of double-digit growth across all loan categories.

Total deposits at September 30, 2014 increased 5.5% to $600.0 million from $568.8 million at December 31, 2013. The investment portfolio, which is entirely classified as available for sale, stood at $156.0 million at September 30, 2014, compared to $157.1 million at December 31, 2013.

Stockholders’ Equity and Dividends

Tangible stockholders’ equity increased 18.9% to $56.8.0 million for the 2014 third quarter, compared to $47.8 million at September 30, 2013. On a per share basis, tangible stockholders’ equity increased 17.6% to $27.74 at September 30, 2014 from $23.59 at September 30, 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 September 30, 2014, the company had a Tier 1 leverage ratio of 9.50%, up from 8.70% at September 30, 2013 and 9.31% at June 30, 2014.

During the 2014 third quarter, the company paid cash dividends of $0.26 per share, which equaled the amount paid in the 2013 third quarter. Year-to-date, the company has paid cash dividends of $0.78 per share.

Asset Quality

The provision for loan losses for the 2014 third quarter was less than $0.1 million, compared to approximately $0.2 million for the 2013 third quarter. Year-to-date, the provision for loan losses was $0.4 million, compared to $0.8 million for the same period last year. Net charge-offs for the 2014 nine months was $0.1 million, or 0.04% of average loans, annualized. The allowance for loan losses at September 30, 2014 stood at $7.3 million, or 1.56% of total loans, compared to $7.8 million or 1.87% of total loans at September 30, 2013.

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

        Asset Quality History
(dollars in thousands)
       
  9/30/2014     12/31/2013     9/30/2013     12/31/2012     12/31/2011
 
Nonperforming loans $ 10,438 $ 12,290 $ 13,608 $ 14,224 $ 24,546
Real estate owned 2,674 2,698 2,719 1,846 2,196
 
Nonperforming assets $ 13,112 $ 14,988 $ 16,327 $ 16,070 $ 26,742
 
Allowance for loan losses $ 7,288 $ 7,046 $ 7,821 $ 7,779 $ 6,819
 
Ratios:

Nonperforming loans to total loans

2.23% 2.82% 3.25% 3.48% 6.12%

Nonperforming assets to total assets

1.93% 2.32% 2.48% 2.40% 4.09%

Allowance for loan losses to total loans

1.56% 1.62% 1.87% 1.90% 1.70%

Allowance for loan losses to nonperforming loans

69.82% 57.33% 57.48% 54.69% 27.78%
 

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $680.3 million at September 30, 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.com.

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, 2014 and 2013 and December 31, 2013
 
Balance Sheet (period end)     September 30, December 31, September 30,
(Dollar amounts in thousands) 2014 2013 2013
(unaudited)
Assets
Cash and due from banks $ 21,486 $ 20,926 $ 21,124
Federal funds sold   7,816     5,267     11,069  
Cash and cash equivalents 29,302 26,193 32,193
Investment securities available for sale 156,021 157,143 180,771
Loans held for sale, lower of cost or market 201 - -
Loans 468,007 435,725 419,060
Less: allowance for loan and lease losses   7,288     7,046     7,821  
Net loans 460,920 428,679 411,239
Premises and equipment 9,916 9,828 8,555
Goodwill 4,559 4,559 4,559
Core deposit intangible 126 156 161
Bank-owned life insurance 9,022 8,816 8,745
Accrued interest receivable and other assets   10,396     11,716     11,918  
Total Assets $ 680,262   $ 647,090   $ 658,141  
 
September 30, December 31, September 30,
2014 2013 2013
Liabilities and Stockholders' Equity
Noninterest bearing demand deposits $ 105,788 $ 85,905 $ 81,760
Interest-bearing demand deposits 62,958 53,741 59,799
Money market accounts 76,157 77,473 77,118
Savings deposits 177,408 177,303 179,581
Time deposits   177,709     174,414     180,964  
Total Deposits 600,020 568,836 579,222
Short-term borrowings 5,131 10,809 10,575
Federal funds purchased - - 1,639
Other borrowings 11,105 11,609 12,261
Other liabilities   2,491     2,363     1,915  
Total Liabilities   618,747     593,617     605,612  
 
Common equity 35,455 34,979 34,833
Retained earnings 31,169 27,465 26,123
Accumulated other comprehensive income (loss) 1,625 (2,237 ) (1,693 )
Treasury stock   (6,734 )   (6,734 )   (6,734 )
Total Stockholders' Equity   61,515     53,473     52,529  
Total Liabilities and Stockholders' Equity $ 680,262   $ 647,090   $ 658,141  
 
 
 
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
September 30, 2014 and 2013
(Dollar amounts in thousands)
(unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2014     2013 2014     2013
INTEREST INCOME
Interest and fees on loans $ 5,646 $ 5,754 $ 16,915 $ 16,876
Interest-bearing deposits in other institutions 5 6 19 23
Federal funds sold 2 4 11 12
Investment securities
Taxable interest 441 610 1,476 1,909
Tax-exempt interest 798 782 2,336 2,259
Dividends on stock   19     18     62     56  
Total interest income   6,911     7,174     20,819     21,135  
INTEREST EXPENSE
Deposits 898 1,170 2,767 3,686
Short-term borrowings 38 41 111 140
Federal funds purchased - 1 - 1
Other borrowings 30 41 94 131
Trust preferred securities   33     75     93     156  
Total interest expense   999     1,328     3,065     4,114  
 
NET INTEREST INCOME 5,912 5,846 17,754 17,021
 
Provision for loan losses 70 153 370 766

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

  5,842     5,693     17,384     16,255  
NONINTEREST INCOME
Service charges on deposits 489 510 1,399 1,468
Investment securities gains (losses), net 190 - 248 175
Earnings on bank-owned life insurance 71 66 206 209
Gain on sale of loans 20 - 20 -
Other income   220     232     689     643  
Total noninterest income   990     808     2,562     2,495  
NONINTEREST EXPENSE
Salaries and employee benefits 2,144 1,872 6,428 5,649
Occupancy expense 272 273 868 795
Equipment expense 296 228 710 603
Data processing costs 251 209 689 609
Ohio state franchise tax 93 164 269 467
Federal deposit insurance expense 132 135 361 353
Professional fees 189 316 814 883
Loss (gain) on sale of other real estate owned 49 (35 ) 119 (40 )
Advertising expense 120 113 367 336
Other real estate expense 91 128 256 324
Directors Fees 99 77 303 315
Other operating expense   649     635     2,028     1,770  
Total noninterest expense   4,385     4,115     13,212     12,064  
Income before income taxes 2,447 2,386 6,734 6,686
Provision for income taxes   529     521     1,442     1,479  
NET INCOME $ 1,918   $ 1,865   $ 5,292   $ 5,207  
 
 
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2014     2013 2014     2013
Per common share data    
Net income per common share - basic $ 0.94 $ 0.92 $ 2.60 $ 2.59
Net income per common share - diluted $ 0.93 $ 0.92 $ 2.59 $ 2.58
Dividends declared $ 0.26 $ 0.26 $ 0.78 $ 0.78
Book value per share(period end) $ 30.02 $ 25.92 $ 30.02 $ 25.92
Tangible book value per share (period end) $ 27.74 $ 23.59 $ 27.74 $ 23.59
Dividend payout ratio 27.58 % 27.99 % 30.01 % 30.13 %
Average shares outstanding - basic 2,044,124 2,022,490 2,038,972 2,013,217
Average shares outstanding -diluted 2,052,012 2,029,420 2,045,660 2,021,198
Period ending shares outstanding 2,048,807 2,026,569 2,048,807 2,026,569
 
Selected ratios    
Return on average assets 1.13 % 1.12 % 1.06 % 1.05 %
Return on average equity 13.55 % 13.66 % 12.74 % 12.74 %
Yield on earning assets 4.62 % 4.92 % 4.73 % 4.93 %
Cost of interest bearing liabilities 0.78 % 1.01 % 0.80 % 1.04 %
Net interest spread 3.84 % 3.91 % 3.94 % 3.89 %
Net interest margin 3.99 % 4.05 % 4.08 % 4.03 %
Efficiency (1) 59.96 % 58.31 % 61.40 % 57.31 %
Tier 1 capital ratio (holding company) 9.50 % 8.70 % 9.50 % 8.70 %
 

(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.

 

 
September 30, September 30,
2014 2013
 
Commercial and industrial $ 58,874 $ 50,265
Real estate - construction 29,287 25,487
Real estate - mortgage:
Residential 224,424 203,312
Commercial 149,488 135,760
Consumer installment   6,135     4,236  
$ 468,208   $ 419,060  
 
September 30, September 30,
Asset quality data     2014 2013
(Dollar amounts in thousands)
Non-accrual loans 8,826 $ 9,223
Troubled debt restructuring 1,587 3,621
90 day past due and accruing   25     764  
Non-performing loans 10,438 13,608
Other real estate owned   2,674     2,719  
Non-performing assets   13,112   $ 16,327  
 
 
Allowance for loan and lease losses $ 7,288 $ 7,821
Allowance for loan and lease losses/total loans 1.56 % 1.87 %
Net charge-offs:
Quarter-to-date (89 ) 81
Year-to-date 128 724
Net charge-offs to average loans, annualized
Quarter-to-date (0.08 %) 0.08 %
Year-to-date 0.04 % 0.23 %
Nonperforming loans/total loans 2.23 % 3.25 %
Allowance for loan and lease losses/nonperforming loans 69.82 % 57.48 %
 

Contacts

Company Contact:
Middlefield Banc Corp.
Thomas G. Caldwell, 440-632-1666 Ext. 3200
President/Chief Executive Officer
tcaldwell@middlefieldbank.com
or
Investor and Media Contact:
SM Berger & Company, Inc.
Andrew M. Berger, 216-464-6400
Managing Director
andrew@smberger.com

Contacts

Company Contact:
Middlefield Banc Corp.
Thomas G. Caldwell, 440-632-1666 Ext. 3200
President/Chief Executive Officer
tcaldwell@middlefieldbank.com
or
Investor and Media Contact:
SM Berger & Company, Inc.
Andrew M. Berger, 216-464-6400
Managing Director
andrew@smberger.com