Middlefield Banc Corp. Reports 2015 Second Quarter Financial Results

MIDDLEFIELD, Ohio--()--Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the 2015 second quarter ended June 30, 2015.

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

  • Net interest income increased 3.2% to $6.1 million.
  • Noninterest income grew 12.3% to approximately $1.0 million.
  • Noninterest expenses increased 13.5%.
  • Net income decreased 6.6% to $1.5 million, or $0.73 per diluted share.
  • Tangible stockholders’ equity increased 10.4%.
  • Total net loans increased 9.8%.
  • Nonperforming assets declined to $10.1 million from $12.9 million.
  • Tier 1 capital ratio strengthened to 9.56% from 9.31%.
  • Quarterly dividend increased 3.8%.

“We ended the 2015 second quarter with assets over $700 million for the first time,” stated Thomas G. Caldwell, President and Chief Executive Officer. “We crossed the $600 million threshold in 2010 and this growth reflects our ability to provide our communities with the financial products and services they need. To this end, we remain committed to investing in our organization. These investments will temporarily impact our net income by increasing our noninterest expenses, but we believe will improve our competitiveness by enhancing our lending resources, information technology services, and back office and call-center support.”

Net income for the 2015 second quarter was $1.5 million, or $0.73 per diluted share, compared to net income for the 2014 second quarter of $1.6 million, or $0.79 per diluted share. Net income for the six months ended June 30, 2015 was $3.1 million, or $1.52 per diluted share, compared to net income for the six months ended June 30, 2014 of $3.4 million, or $1.65 per diluted share.

Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2015 second quarter were 9.54% and 0.85%, respectively, compared with 11.58% and 0.96% for the 2014 second quarter. ROE and ROA were 9.92% and 0.91%, respectively, for the 2015 six month period, compared with 12.33% and 1.02% for the same period last year.

Mr. Caldwell continued: “Business activities gained momentum as the second quarter progressed and we are starting the third quarter with a solid pipeline of potential loans. Our communities continue to show modest economic expansion and, with a strong market presence, we are well positioned to serve this growth. While our secondary mortgage program started off at a slower rate than we initially thought, we are beginning to see improvements. On May 11, 2015 the Board of Directors increased the quarterly cash dividend by 3.8% to $0.27 per share, reflecting management and the board’s commitment to return value to shareholders and their optimism about our current and future business trends.”

Income Statement

Net interest income for the 2015 second quarter was $6.1 million, compared to $5.9 million for the 2014 second quarter. The 3.2% increase in net interest income for the 2015 second quarter was a result of a reduction in funding costs, primarily due to a 5.9% decline in deposit expenses. For the 2015 first half, net interest income increased 3.3% to $12.2 million, compared to $11.8 million for the same period last year. The net interest margin for the 2015 second quarter was 3.83%, compared to 4.04% for the same period of 2014. Year-to-date, the net interest margin was 3.92%, compared to 4.12% for the same period last year.

Noninterest income for the 2015 second quarter increased 12.3% to $1.0 million, primarily a result of a $0.1 million gain on the sale of loans reported in the quarter. For the 2015 first half, noninterest income increased 11.8% to $1.8 million, compared to $1.6 million for the same period last year.

Noninterest expense for the 2015 second quarter was $5.2 million, an increase of $0.6 million from the 2014 second quarter. For the 2015 first half, noninterest expense increased 13.6% to $10.0 million, compared to $8.8 million for the same period last year.

“Our asset quality and liquidity continue to improve,” said Donald L. Stacy, Chief Financial Officer. “Nonperforming assets declined further from the prior quarter and the year-over-year period to $10.1 million. This was the lowest level recorded since 2008. At June 30, 2015, the bank had $22.7 million in cash and cash equivalents on our balance sheet and our net loans to total deposits were 78.0%. As budgeted, we continued to experience higher operating costs which impacted profitability in the second quarter and year-to-date as we add staff and invest in growth producing initiatives. The investments we made last year to improve the way customers interact with the bank are taking hold as mobile banking is experiencing a high rate of acceptance with our customers. We continued to manage our costs of interest-bearing liabilities, which declined five basis points in the 2015 second quarter compared with the prior year period, which helped offset some of the increase in operating expenses.”

Balance Sheet

Total assets at June 30, 2015 increased 4.1% to a record $705.5 million, from $677.5 million at December 31, 2014. Net loans at June 30, 2015 were $486.5 million, compared to $463.7 million at December 31, 2014. The 4.9% year-to-date improvement in net loans was a result of loan growth in both residential and commercial mortgages, which have increased 5.2% and 19.6%, respectively year-to-date. This was offset by a 9.6% reduction in commercial and industrial loans, and a 45.1% decline in construction loans.

Total deposits at June 30, 2015 increased 6.4% to $623.5 million from $586.1 million at December 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 $157.6 million at June 30, 2015, compared to $154.3 million at December 31, 2014.

Stockholders’ Equity and Dividends

Tangible stockholders’ equity increased to $60.2 million for the 2015 second quarter, compared to $54.5 million at June 30, 2014. On a per share basis, tangible stockholders’ equity increased to $29.16 at June 30, 2015 from $26.67 for the same period a year ago. 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. Through the first six months of 2015, the company paid cash dividends of $0.53 per share, which was an increase of 1.9% over the same period last year, and increased its payout ratio to 34.7% from 31.4% for the first half of 2014.

At June 30, 2015, the company had a Tier 1 leverage ratio of 9.56%, up from 9.31% at June 30, 2014.

Asset Quality

There was no provision necessary for loan losses for the 2015 second quarter compared with a $0.1 million expense for the 2014 second quarter. Nonperforming assets at June 30, 2015 were $10.1 million, compared to $12.9 million at June 30, 2014. Net charge-offs for the 2015 second quarter were $0.1 million, or 0.08% of average loans, annualized compared to less than $0.1 million, or 0.01% of average loans, annualized for the same period last year. Year-to-date net charge-offs were $0.6 million, or 0.25% of average loans, annualized compared to $0.2 million, or 0.1% of average loans, annualized for the same period last year. The allowance for loan losses at June 30, 2015 stood at $6.3 million, or 1.29% of total loans, compared to $7.1 million or 1.58% of total loans at June 30, 2014.

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

 
Asset Quality History
(dollars in thousands)
    6/30/2015       12/31/2014       6/30/2014       12/31/2013       12/31/2012  

Nonperforming loans

$ 7,777 $ 9,048 $ 10,506 $ 12,290 $ 14,224

Real estate owned

$ 2,308 $ 2,590 $ 2,392 $ 2,698 $ 1,846

Nonperforming assets

$

10,085

$

11,638

$

12,898

$

14,988

$

16,070

Allowance for loan losses

$

6,346

$

6,846

$

7,129

$

7,046

$

7,779

Ratios:

Nonperforming loans to total loans

1.58

%

1.92

%

2.33

%

2.82

%

3.48

%

Nonperforming assets to total assets

1.43

%

1.72

%

1.93

%

2.32

%

2.40

%

Allowance for loan losses to total loans

1.29

%

1.45

%

1.58

%

1.62

%

1.90

%

Allowance for loan losses to nonperforming loans

81.60

%

75.66

%

67.85

%

57.33

%

54.69

%

 

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $705.5 million at June 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. 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
June 30, 2015 and 2014
(Dollar amounts in thousands)
(unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2015     2014 2015     2014
INTEREST INCOME
Interest and fees on loans $ 5,842 $ 5,575 $ 11,685 $ 11,269
Interest-bearing deposits in other institutions 12 9 20 14
Federal funds sold 5 6 8 9
Investment securities
Taxable interest 379 526 774 1,035
Tax-exempt interest 805 783 1,564 1,538
Dividends on stock 23   20 50 43
Total interest income 7,066   6,919 14,101 13,908
INTEREST EXPENSE
Deposits 874 929 1,705 1,869
Short term borrowings 33 38 70 73
Other borrowings 23 32 46 64
Trust preferred securities 60   34 52 60
Total interest expense 990   1,033 1,873 2,066
 
NET INTEREST INCOME 6,076 5,886 12,228 11,842
 

Provision for loan losses

-

  120 105 300
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,076   5,766 12,123 11,542
NONINTEREST INCOME
Service charges on deposits 470 469 911 910
Investment securities gains, net 22 64 46 58
Earnings on bank-owned life insurance 92 68 161 135
Gains on sale of loans 120 - 173 -
Other income 258   256 467 469
Total non-interest income 962   857 1,758 1,572
NONINTEREST EXPENSE
Salaries and employee benefits 2,560 2,268 4,920 4,284
Occupancy expense 291 275 640 596
Equipment expense 241 194 457 414
Data processing costs 261 224 511 438
Ohio state franchise tax 75 93 150 176
Federal deposit insurance expense 120 97 232 229
Professional fees 277 338 596 625
Loss (gain) on sale of other real estate owned (40 ) 75 48 70
Advertising expense 195 124 391 247
Other real estate expense 268 102 333 165
Directors Fees 127 118 245 204
Other operating expense 842   690 1,505 1,379
Total noninterest expense 5,217   4,598 10,028 8,827
Income before income taxes 1,821 2,025 3,853 4,287
Provision for income taxes 316   414 720 913
NET INCOME $ 1,505   $ 1,611 $ 3,133 $ 3,374
 
           
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
 
June 30, 2015 and 2014 and December 31, 2014
 
Balance Sheet (period end) June 30, December 31, June 30,
(Dollar amounts in thousands) 2015 2014 2014
(unaudited) (unaudited)
Assets
Cash and due from banks $ 20,311 $ 20,846 $ 19,821
Federal funds sold 2,340 4,793 5,756
Cash and cash equivalents 22,651 25,639 25,577
Investment securities available for sale 157,577 154,334 165,506
Loans held for sale 398 438 -
Loans: 492,893 470,584 450,119
Less: reserve for loan losses 6,346 6,846 7,129
Net loans 486,547 463,738 442,990
Premises and equipment 10,019 9,980 9,927
Goodwill 4,559 4,559 4,559
Core deposit intangible 96 116 136
Bank-owned life insurance 13,253 9,092 8,951
Other real estate owned 2,308 2,590 2,203
Accrued interest receivable and other assets 8,110 7,045 8,420
Total Assets $ 705,518 677,531 668,269
 
June 30, December 31, June 30,
2015 2014 2014
Liabilities and Stockholders' Equity
Noninterest bearing demand deposits $ 109,732 $ 105,512 $ 96,209
Interest-bearing demand deposits 59,128 56,377 58,366
Money market accounts 73,425 75,895 73,619
Savings deposits 179,353 178,470 178,602
Time deposits 201,886 169,858 181,997
Total Deposits 623,524 586,112 588,793
Short-term borrowings 4,517 14,808 6,939
Other borrowings 10,465 10,624 11,362
Other liabilities 2,200 2,120 2,004
Total Liabilities 640,706 613,664 609,098
 
Common equity 35,854 35,529 35,266
Retained earnings 34,570 32,524 29,780
Accumulated other comprehensive income 1,122 2,548 859
Treasury stock (6,734) (6,734) (6,734)
Total Stockholders' Equity 64,812 63,867 59,171
 
Total Liabilities and Stockholders' Equity $ 705,518 $ 677,531 $ 668,269
 
       
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2015         2014   2015       2014  
Per common share data    
Net income per common share - basic $ 0.73 $ 0.79 $ 1.52 $ 1.66
Net income per common share - diluted $ 0.73 $ 0.79 $ 1.52 $ 1.65
Dividends declared $ 0.27 $ 0.26 $ 0.53 $ 0.52
Book value per share (period end) $ 31.42 $ 28.97 $ 31.42 $ 28.97
Tangible book value per share (period end) $ 29.16 $ 26.67 $ 29.16 $ 26.67
Dividend payout ratio 36.74 % 32.90 % 34.70 % 31.39 %
Average shares outstanding - basic 2,058,986 2,038,026 2,056,338 2,036,025
Average shares outstanding - diluted 2,068,351 2,044,564 2,065,947 2,042,181
Period ending shares outstanding 2,062,649 2,042,753 2,062,649 2,042,753
 
Selected ratios
Return on average assets 0.85 % 0.96 % 0.91 % 1.02 %
Return on average equity 9.54 % 11.58 % 9.92 % 12.33 %
Yield on earning assets 4.41 % 4.45 % 4.48 % 4.79 %
Cost of interest bearing-liabilities 0.75 % 0.80 % 0.72 % 0.81 %
Net interest spread 3.66 % 3.65 % 3.76 % 3.99 %
Net interest margin 3.83 % 4.04 % 3.92 % 4.12 %
Efficiency 70.00 % 64.34 % 67.79 % 62.13 %
Tier 1 capital to average assets (a) 9.56 % 9.31 % 9.56 % 9.31 %
 
(a) June 30, 2015 is estimated
 
June 30, June 30,
2015   2014  
 
Commercial and industrial $ 54,927 $ 55,577
Real estate - construction 16,647 26,615
Real estate - mortgage:
Residential 239,492 219,229
Commercial 176,376 142,505
Consumer installment 5,451   6,193  
492,893   450,119  
 
June 30, June 30,
Asset quality data 2015   2014  
(Dollar amounts in thousands)
Non-accrual loans $ 5,780 $ 8,646
Troubled debt restructuring 1,997 1,743
90 day past due and accruing -   117  
Nonperforming loans 7,777 10,506
Other real estate owned 2,308   2,392  
Nonperforming assets $ 10,085   $ 12,898  
 
 
Allowance for loan and lease losses $ 6,346 $ 7,129
Allowance for loan and lease losses/total loans 1.29 % 1.58 %
Net charge-offs:
Quarter-to-date 101 6
Year-to-date 605 217
Net charge-offs to average loans, annualized
Quarter-to-date 0.08 % 0.01 %
Year-to-date 0.25 % 0.10 %
Nonperforming loans/total loans 1.58 % 2.33 %
Allowance for loan and lease losses/nonperforming loans 81.60 % 67.85 %
 

Contacts

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

Contacts

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