Middlefield Banc Corp. Reports 2017 First Half Financial Results

MIDDLEFIELD, Ohio--()--Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the 2017 first half and second quarter ended June 30, 2017.

2017 First Half Financial Highlights versus 2016 First Half (unless noted):

  • Net income was up 35.0% to $4.6 million
  • Earnings per diluted share decreased 6.9% to $1.61 per share, as a result of a 44.6% increase in the average number of diluted shares outstanding
  • Total net loans increased 50.2% to $861.3 million
  • Organic total net loans increased 11.0%
  • Total interest income improved 43.0% to $21.1 million
  • Tier 1 capital ratio remains strong at 9.95%

“Middlefield’s 2017 second quarter and year-to-date financial results reflect the contribution of the Liberty Bank, N.A. acquisition, robust organic loan growth throughout our Central and Northeast Ohio markets, and stable asset quality,” stated Thomas G. Caldwell, President and Chief Executive Officer. “Year-to-date, total net loans increased 11.0% organically, and over the past three months were up 3.7% organically. In addition, we ended the second quarter with a robust pipeline of potential new loans. I am encouraged by recent loan growth and demand trends, which demonstrates Middlefield’s growing banking franchise and stable economic trends within our local geographies. While total net loans increased 50.2%, our asset quality remains strong as nonperforming loans to total loans has declined to 1.45% at June 30, 2017 from 1.64% for the same period last year. As a result of Middlefield’s strong year-to-date performance, we expect 2017 will be another good year for the Bank.”

Income Statement

For the 2017 first half, net interest income increased 42.4% to $18.0 million, compared to $12.7 million for the same period last year. Year-to-date, the net interest margin was 3.82%, compared to 3.82% for the same period last year. Net interest income for the 2017 second quarter was $9.3 million, compared to $6.3 million for the 2016 second quarter. The net interest margin for the 2017 second quarter was 3.80%, compared to 3.78% for the same period of 2016. The 46.3% increase in net interest income for the 2017 second quarter was largely a result of a 57.0% increase in interest and fees on loans.

For the 2017 first half, noninterest income was $2.5 million, compared to $2.1 million for the same period last year. Noninterest income for the 2017 second quarter was $1.0 million, compared to $1.2 million for the same period last year.

For the 2017 first half, noninterest expense increased 36.3% to $14.0 million, compared to $10.3 million for the same period last year. Operating costs in the 2017 second quarter increased 36.4% to $6.7 million from $4.9 million for the 2016 second quarter. During the 2017 second quarter, noninterest expense had approximately $307,000 of one-time merger costs associated with the Liberty merger, and year-to-date the company had one-time merger related costs of approximately $694,000.

Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2017 six-month period were 9.05% and 0.89%, respectively, compared with 10.62% and 0.92% for the same period last year. For the 2017 second quarter, ROE and ROA were 9.34% and 0.94%, respectively, compared with 11.78% and 1.03% for the 2016 second quarter.

“I am pleased with the successful $16.0 million private placement we completed in the second quarter. The proceeds from this offering were used to retire $12.0 million of higher-cost borrowings, which helped Middlefield reduce its funding costs,” said Donald L. Stacy, Chief Financial Officer. “Our net loans-to-assets ratio continues to increase and was 80.5% at June 30, 2017, up 400 basis points from year end, and increased 510 basis points from the same period a year ago. During the 2017 second quarter, the yield on earning assets increased to 4.45% from 4.37% for the same period a year ago, while our cost of interest-bearing liabilities increased to 0.83% from 0.77% for the same period a year ago. The net effect was a slight increase in the company’s net interest spread, as well as a slight increase in net interest margin, which was 3.80% in the second quarter. We continue to expect improving profitability as a result of the company’s growing loan portfolio, and achieving cost benefits from the Liberty merger.”

Balance Sheet

Total assets at June 30, 2017 increased 40.8% to approximately $1,070.0 million, from $760.1 million at June 30, 2016, and $787.8 million at December 31, 2016. Net loans at June 30, 2017 were $861.3 million, compared to $573.4 million at June 30, 2016, and $602.5 million at December 31, 2016. The 50.2% year-over-year improvement in total net loans was across all loan categories, and was a result of organic growth and the contribution of the Liberty merger. Specifically, commercial mortgage loans increased 64.5%, residential mortgage loans increased 22.6%, commercial and industrial loans increased 60.7%, real estate construction loans increased 121.8%, and consumer installment loans increased 343.5%.

Total deposits at June 30, 2017 increased 34.8% to $846.8 million from $628.0 million at June 30, 2016. 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 $105.0 million June 30, 2017, compared with $129.3 million at June 30, 2016.

Stockholders’ Equity and Dividends

At June 30, 2017, tangible stockholders’ equity was $98.8 million, an increase of 35.4% from $73.0 million at June 30, 2016. On a per-share basis, tangible stockholders’ equity decreased to $30.77 at June 30, 2017 from $32.47 at June 30, 2016. Through the first six months of 2017, the company declared cash dividends of $0.54 per share. The dividend payout ratio for the 2017 six-month period was 35.2% compared to 32.4% for the same period last year.

At June 30, 2017, the company had a Tier 1 leverage ratio of 9.95%, down from 10.23% at June 30, 2016.

Asset Quality

The provision for loan losses for the 2017 second quarter was $0.2 million versus $0.1 million for the same period last year. Nonperforming assets at June 30, 2017 were $13.2 million, compared to $10.6 million at June 30, 2016. Net charge-offs for the 2017 second quarter were $0.3 million, or 0.13% of average loans, annualized, compared to $0.1 million, or 0.07% of average loans, annualized for the same 2016 period. Year-to-date net charge-offs were $0.3 million, or 0.08% of average loans, annualized compared to $0.2 million, or 0.08% of average loans, annualized for the same period last year. The allowance for loan losses at June 30, 2017 stood at $6.6 million, or 0.76% of total loans, compared to $6.4 million or 1.10% of total loans at June 30, 2016. The decline in the allowance ratio is due to the acquisition of Liberty Bank, which increased total loans.

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

 
Asset Quality History
(dollars in thousands)
  6/30/2017   6/30/2016   12/31/2016   12/31/2015   12/31/2014
Nonperforming loans $ 12,581   $ 9,491   $ 7,075   $ 10,263   $ 9,048
Real estate owned $ 650 $ 1,142 $ 934 $ 1,412 $ 2,590
Nonperforming assets $ 13,231 $ 10,633 $ 8,009 $ 11,675 $ 11,638
Allowance for loan losses $ 6,605 $ 6,366 $ 6,598 $ 6,385 $ 6,846

Ratios:

Nonperforming loans to

total loans

1.45

%

1.64

%

1.16

%

1.92

%

1.92

%

Nonperforming assets to

total assets

1.24

%

1.40

%

1.02

%

1.59

%

1.72

%

Allowance for loan losses to

total loans

0.76

%

1.10

%

1.08

%

1.20

%

1.45

%

Allowance for loan losses to

nonperforming loans

52.50

%

67.07

%

93.26

%

62.21

%

75.66

%

 

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $1.1 billion at June 30, 2017. The bank operates 14 full-service banking centers and an LPL Financial® brokerage office serving Beachwood, Chardon, Cortland, Dublin, Garrettsville, Mantua, Middlefield, Newbury, Orwell, Solon, Sunbury, Twinsburg, 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, 2017 and 2016
(Dollar amounts in thousands)
(unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2017     2016 2017     2016
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $ 9,916 $ 6,317 $ 19,096 $ 12,490
Interest-bearing deposits in other institutions 92 15 141 27
Federal funds sold 1 5 4 9
Investment securities:
Taxable interest 223 290 441 630
Tax-exempt interest 630 750 1,267 1,540
Dividends on stock 40   28   152   57  

Total interest and dividend income

10,902   7,405   21,101   14,753  
INTEREST EXPENSE
Deposits 1,227 889 2,352 1,744
Short-term borrowings 273 115 450 235
Other borrowings 68 20 151 37
Trust preferred securities 57   42   114   75  
Total interest expense 1,625   1,066   3,067   2,091  
 
NET INTEREST INCOME 9,277 6,339 18,034 12,662
 
Provision for loan losses 170   105   335   210  

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

9,107   6,234   17,699   12,452  
NONINTEREST INCOME
Service charges on deposit accounts 449 491 918 938
Investment securities gains, net - 252 488 303
Earnings on bank-owned life insurance 98 97 207 196
Gains on sale of loans 231 106 465 193
Other income 211   227   422   452  
Total noninterest income 989   1,173   2,500   2,082  
NONINTEREST EXPENSE
Salaries and employee benefits 3,203 2,283 6,899 5,063
Occupancy expense 433 292 921 627
Equipment expense 266 210 547 479
Data processing costs 588 322 908 594
Ohio state franchise tax 186 162 372 262
Federal deposit insurance expense 135 132 203 264
Professional fees 423 218 796 510
(Gain) loss on other real estate owned (184 ) 56 (262 ) 68
Advertising expense 164 203 412 398
Other real estate expense 199 85 332 131
Directors fees 128 121 240 228
Core deposit intangible amortization 103 10 175 20
Appraiser fees 104 119 206 220
ATM fees 28 98 104 194
Merger expense 307 - 694 -
Other expense 621   604   1,424   1,195  
Total noninterest expense 6,704   4,915   13,971   10,253  
Income before income taxes 3,392 2,492 6,228 4,281
Income taxes 885   566   1,621   868  
NET INCOME $ 2,507   $ 1,926   $ 4,607   $ 3,413  
 
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2017     2016 2017     2016
Per common share data
Net income per common share - basic $ 0.84 $ 0.94 $ 1.62 $ 1.74
Net income per common share - diluted $ 0.83 $ 0.94 $ 1.61 $ 1.73
Dividends declared $ 0.27 $ 0.27 $ 0.54 $ 0.54
Book value per share (period end) $ 36.49 $ 34.53 $ 36.49 $ 34.53
Tangible book value per share (period end) $ 30.77 $ 32.47 $ 30.77 $ 32.47
Dividend payout ratio 34.58 % 31.00 % 35.23 % 32.35 %
Average shares outstanding - basic 3,000,451 2,051,137 2,841,019 1,964,657
Average shares outstanding - diluted 3,014,140 2,059,411 2,854,158 1,973,179
Period ending shares outstanding 3,211,748 2,246,904 3,211,748 2,246,904
 
Selected ratios
Return on average assets 0.94 % 1.03 % 0.89 % 0.92 %
Return on average equity 9.34 % 11.78 % 9.05 % 10.62 %
Yield on earning assets 4.45 % 4.37 % 4.45 % 4.42 %
Cost of interest-bearing liabilities 0.83 % 0.77 % 0.80 % 0.76 %
Net interest spread 3.62 % 3.60 % 3.64 % 3.66 %
Net interest margin 3.80 % 3.78 % 3.82 % 3.82 %
Efficiency 63.30 % 62.23 % 65.94 % 65.99 %
Tier 1 capital to average assets 9.95 % 10.23 % 9.95 % 10.23 %
 
 
June 30, June 30,
2017 2016
 
Commercial and industrial $ 97,160 $ 60,451
Real estate - construction 35,571 16,039
Real estate - mortgage:
Residential 308,519 251,553
Commercial 406,670 247,176
Consumer installment 19,944   4,497  
$ 867,864   $ 579,716  
 
June 30, June 30,
Asset quality data 2017 2016
(Dollar amounts in thousands)
Nonaccrual loans $ 10,213 $ 6,662
Troubled debt restructuring 2,169   2,829  
Nonperforming loans 12,581 9,491
Other real estate owned 650   1,142  
Nonperforming assets $ 13,231   $ 10,633  
 
 
Allowance for loan and lease losses $ 6,605 $ 6,366
Allowance for loan and lease losses/total loans 0.76 % 1.10 %
Net charge-offs:
Quarter-to-date 285 96
Year-to-date 328 229
Net charge-offs to average loans, annualized
Quarter-to-date 0.13 % 0.07 %
Year-to-date 0.08 % 0.08 %
Nonperforming loans/total loans 1.45 % 1.64 %
Allowance for loan and lease losses/nonperforming loans 52.50 % 67.07 %
     
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
 
June 30, 2017 and 2016 and December 31, 2016
 
Balance Sheet (period end) June 30, December 31, June 30,
(Dollar amounts in thousands) 2017 2016 2016
(unaudited) (unaudited)
ASSETS
Cash and due from banks $ 37,971 $ 31,395 $ 21,127
Federal funds sold 1,600   1,100   1,000  
Cash and cash equivalents 39,571 32,495 22,127
Investment securities available for sale, at fair value 104,951 114,376 129,295
Loans held for sale 9,791 634 496
Loans 867,864 609,140 579,716
Less allowance for loan and lease losses 6,605   6,598   6,366  
Net loans 861,259 602,542 573,350
Premises and equipment, net 11,511 11,203 9,727
Goodwill 15,435 4,559 4,559
Core deposit intangibles 2,948 36 56
Bank-owned life insurance 15,432 13,540 13,337
Other real estate owned 650 934 1,142
Accrued interest and other assets 9,528   7,502   6,019  
TOTAL ASSETS $ 1,071,076   $ 787,821   $ 760,108  
 
June 30, December 31, June 30,
2017 2016 2016
LIABILITIES
Deposits:
Noninterest-bearing demand $ 172,199 $ 133,630 $ 126,045
Interest-bearing demand 87,084 59,560 64,361
Money market 160,858 74,940 81,596
Savings 181,259 172,370 173,014
Time 245,383   189,434   183,024  
Total deposits 846,783 629,934 628,040
Fed funds purchased - - 414
Short-term borrowings 63,388 68,359 41,841
Other borrowings 39,346 9,437 9,825
Accrued interest and other liabilities 4,357   3,131   2,407  
TOTAL LIABILITIES 953,874   710,861   682,527  
 
STOCKHOLDERS' EQUITY
Common equity 84,587 47,943 47,675
Retained earnings 44,318 41,334 39,545
Accumulated other comprehensive income 1,815 1,201 3,879
Treasury stock (13,518 ) (13,518 ) (13,518 )
TOTAL STOCKHOLDERS' EQUITY 117,202   76,960   77,581  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,071,076   $ 787,821   $ 760,108  

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