News Column

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

July 22, 2014

MIDDLEFIELD, Ohio--(BUSINESS WIRE)-- Middlefield Banc Corp. (OTCQB: MBCN) today reported financial results for the three and six months ended June 30, 2014.

2014 Second Quarter Financial Highlights Include:

  • Net interest income increased 5.3% to $5.9 million from $5.6 million for the 2013 second quarter.
  • The net interest margin improved to 4.04%, compared to 3.88% for the same period of 2013.
  • Tangible stockholders’ equity improved 4.8% from 2014 first quarter, and 11.6% from December 31, 2013.
  • Total net loans increased 9.5% from the 2013 second quarter and 1.4% compared to the 2014 first quarter.
  • Nonperforming assets declined to $12.9 million from $15.2 million for the 2013 second quarter.
  • Tier 1 capital ratio strengthened to 9.31% from 8.49% at June 30, 2013.

    “We continue to report strong financial results despite higher operating and regulatory costs,” stated Thomas G. Caldwell, President and Chief Executive Officer. “Throughout 2014 we will be making investments in our business by enhancing our operations, products, and services, and adding senior managers to assist with our growth objectives. These activities may impact the level of profitability over the near term but will have a positive effect on our financial results and customer experience in the coming quarters. Our customers are already experiencing the benefits from the investments we have made in our new website, enhanced on-line banking services, and new mobile banking capabilities.”

    Net income for the 2014 second quarter was $1.6 million, or $0.79 per diluted share, compared to net income for the 2013 second quarter of $1.7 million, or $0.83 per diluted share. Net income for the six months ended June 30, 2014 was $3.4 million, or $1.65 per diluted share, compared to net income for the six months ended June 30, 2013 of $3.3 million, or $1.66 per diluted share.

    Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2014 second quarter were 11.58% and 0.96%, respectively, compared with 12.47% and 1.02% for the 2013 second quarter. ROE and ROA were 12.33% and 1.02%, respectively, for the 2014 six month period, compared with 12.32% and 1.02% for the same period last year.

    Mr. Caldwell continued: “As we enter the second half of 2014, we are well positioned to grow our banking franchise. By the end of the third quarter, we will enter the secondary mortgage market, which will enhance our product offerings and increase our noninterest income. While we are excited about our growth opportunities, we remain committed to delivering excellent customer service, increasing value to our shareholders, and managing the company under safe and sound banking principles.”

    Income Statement

    Net interest income for the 2014 second quarter increased 5.3% to $5.9 million, compared to $5.6 million for the 2013 second quarter. For the 2014 first half, net interest income increased 6.0% to $11.8 million, compared to $11.2 million for the same period last year. The second quarter and first half increases in net interest income were driven by a reduction in funding costs, primarily time deposits. The net interest margin for the 2014 second quarter was 4.04%, compared to 3.88% for the same period of 2013. Year-to-date, the net interest margin was 4.12%, compared to 3.90% for the same period last year.

    Noninterest income was up slightly for the 2014 second quarter and down year-to-date. The improvement in the 2014 second quarter was a result of investment securities gains and other income, partially offset by lower service charges on deposits and earnings on bank-owned life insurance.

    Noninterest expense for the 2014 second quarter was $4.6 million, an increase of approximately $0.7 million from the 2013 second quarter, primarily a result of higher operating expenses.

    “We are proactively investing in our future to diversify our sources of income and offset the impact of historically low interest rates and higher regulatory costs,” said Donald L. Stacy, Chief Financial Officer. “The result will be higher near-term expenses as our growth strategies take time to develop. We are working hard to offset a portion of these higher costs through prudent expense management and proactively controlling our cost of funds.”

    Balance Sheet

    Total assets at June 30, 2014 increased 3.3% to $668.3 million, from $647.1 million at December 31, 2013. Net loans at June 30, 2014 were approximately $443.0 million, compared to $428.7 million at December 31, 2013. The 3.3% year-to-date increase in net loans was a result of growth across all loan categories led by a 4.2% increase in residential mortgage loans.

    Total deposits at June 30, 2014 increased 3.5% to $588.8 million from $568.8 million at December 31, 2013. The investment portfolio, which is entirely classified as available for sale, stood at $165.5 million at June 30, 2014, compared to $157.1 million at December 31, 2013. The increase in investment securities available for sale is primarily a result of the growth in the Bank’s tax-free municipal securities portfolio of $8.0 million.

    Stockholders’ Equity and Dividends

    Tangible stockholders’ equity increased 13.8% to $54.6 million for the 2014 second quarter, compared to $48.0 million for the 2013 second quarter. On a per share basis, tangible stockholders’ equity increased 12.7% to $26.67 at June 30, 2014 from $23.66 at June 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 June 30, 2014, the company had a Tier 1 leverage ratio of 9.31%, up from 8.49% at June 30, 2013 and 9.15% at March 31, 2014.

    During the 2014 second quarter, the company paid cash dividends of $0.26 per share, which equaled the amount paid in the 2013 second quarter. Year-to-date, the company has paid cash dividends of $0.52 per share.

    Asset Quality

    The provision for loan losses for the 2014 second quarter was $0.1 million, compared to the $0.3 million for the 2013 second quarter. The provision for loan losses for the six months ended June 30, 2014 was $0.3 million, compared to $0.6 million for the same period last year. Net charge-offs for the 2014 six months was $0.2 million, or 0.10% of average loans, annualized. The allowance for loan losses at June 30, 2014 stood at $7.1 million, or 1.58% of total loans, compared to $7.7 million or 1.88% of total loans at June 30, 2013.

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

        Asset Quality History
    (dollars in thousands)
           
      6/30/2014     12/31/2013     6/30/2013     12/31/2012     12/31/2011
     
    Nonperforming loans $ 10,506 $ 12,290 $ 12,869 $ 14,224 $ 24,546
    Real estate owned 2,392 2,698 2,361 1,846 2,196
     
    Nonperforming assets $ 12,898 $ 14,988 $ 15,230 $ 16,070 $ 26,742
     
    Allowance for loan losses $ 7,129 $ 7,046 $ 7,749 $ 7,779 $ 6,819
     
    Ratios:

    Nonperforming loans to total loans

    2.33 % 2.82 % 3.12 % 3.48 % 6.12 %

    Nonperforming assets to total assets

    1.93 % 2.32 % 2.32 % 2.40 % 4.09 %

    Allowance for loan losses to total loans

    1.58 % 1.62 % 1.88 % 1.90 % 1.70 %

    Allowance for loan losses to nonperforming loans

    67.85 % 57.33 % 60.21 % 54.69 % 27.78 %
     


    Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $668.3 million at June 30, 2014. On January 20, 2014, the company consolidated its Emerald Bank subsidiary into the company’s lead bank, The Middlefield Banking Company. 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, 2014 and 2013 and December 31, 2013
     
    Balance Sheet (period end)June 30,December 31,June 30,
    (Dollar amounts in thousands) 201420132013
    (unaudited)
    Assets
    Cash and due from banks $ 19,821 $ 20,926 $ 22,052
    Federal funds sold   5,756     5,267     18,377  
    Cash and cash equivalents 25,577 26,193 40,429
    Investment securities available for sale 165,506 157,143 179,757
    Loans 450,119 435,725 412,399
    Less: allowance for loan and lease losses   7,129     7,046     7,749  
    Net loans 442,990 428,679 404,650
    Premises and equipment 9,927 9,828 8,583
    Goodwill 4,559 4,559 4,559
    Core deposit intangible 136 156 173
    Bank-owned life insurance 8,951 8,816 8,675
    Accrued interest receivable and other assets   10,623     11,716     10,966  
    Total Assets $ 668,269   $ 647,090   $ 657,792  
     
    June 30,December 31,June 30,
    201420132013
    Liabilities and Stockholders' Equity
    Noninterest bearing demand deposits $ 96,209 $ 85,905 $ 83,095
    Interest-bearing demand deposits 58,366 53,741 58,238
    Money market accounts 73,619 77,473 77,563
    Savings deposits 178,602 177,303 180,875
    Time deposits   181,997     174,414     185,648  
    Total Deposits 588,793 568,836 585,419
    Short-term borrowings 6,939 10,809 5,407
    Other borrowings 11,362 11,609 12,635
    Other liabilities   2,004     2,363     1,781  
    Total Liabilities   609,098     593,617     605,242  
     
    Common equity 35,266 34,979 34,694
    Retained earnings 29,780 27,465 24,780
    Accumulated other comprehensive income (loss) 859 (2,237 ) (190 )
    Treasury stock   (6,734 )   (6,734 )   (6,734 )
    Total Stockholders' Equity   59,171     53,473     52,550  
    Total Liabilities and Stockholders' Equity $ 668,269   $ 647,090   $ 657,792  
     
     
    MIDDLEFIELD BANC CORP.
    Consolidated Selected Financial Highlights
    June 30, 2014 and 2013
    (Dollar amounts in thousands)
    (unaudited)
     
        For the Three Months Ended   For the Six Months Ended
    June 30,   June 30,
    2014     20132014     2013
    INTEREST INCOME        
    Interest and fees on loans $ 5,575 $ 5,550 $ 11,269 $ 11,122
    Interest-bearing deposits in other institutions 9 9 14 17
    Federal funds sold 6 4 9 8
    Investment securities
    Taxable interest 526 625 1,035 1,299
    Tax-exempt interest 783 744 1,538 1,477
    Dividends on stock   20     15     43     38  
    Total interest income   6,919     6,947     13,908     13,961  
    INTEREST EXPENSE
    Deposits 929 1,219 1,869 2,516
    Short-term borrowings 38 47 73 99
    Other borrowings 32 44 64 90
    Trust preferred securities   34     47     60     81  
    Total interest expense   1,033     1,357     2,066     2,786  
     
    NET INTEREST INCOME 5,886 5,590 11,842 11,175
     
    Provision for loan losses 120 300 300 613
    NET INTEREST INCOME AFTER PROVISION
    FOR LOAN LOSSES   5,766     5,290     11,542     10,562  
    NONINTEREST INCOME
    Service charges on deposits 469 511 910 958
    Investment securities gains (losses), net 64 (10 ) 58 175
    Earnings on bank-owned life insurance 68 75 135 143
    Other income   256     243     469     411  
    Total noninterest income   857     819     1,572     1,687  
    NONINTEREST EXPENSE
    Salaries and employee benefits 2,268 1,906 4,284 3,777
    Occupancy expense 275 248 596 522
    Equipment expense 194 186 414 375
    Data processing costs 224 187 438 400
    Ohio state franchise tax 93 149 176 303
    Federal deposit insurance expense 97 64 229 218
    Professional fees 338 291 625 567
    Loss (gain) on sale of other real estate owned 75 (13 ) 70 (5 )
    Advertising expense 124 111 247 223
    Other real estate expense 102 90 165 196
    Directors Fees 118 133 204 238
    Other operating expense   690     596     1,379     1,135  
    Total noninterest expense   4,598     3,948     8,827     7,949  
    Income before income taxes 2,025 2,161 4,287 4,300
    Provision for income taxes   414     476     913     958  
    NET INCOME $ 1,611   $ 1,685   $ 3,374   $ 3,342  
     
     
    For the Three Months EndedFor the Six Months Ended
    June 30,June 30,
    2014     20132014     2013
    Per common share data
    Net income per common share - basic $ 0.79 $ 0.84 $ 1.66 $ 1.66
    Net income per common share - diluted $ 0.79 $ 0.83 $ 1.65 $ 1.66
    Dividends declared $ 0.26 $ 0.26 $ 0.52 $ 0.52
    Book value per share (period end) $ 28.97 $ 26.00 $ 28.97 $ 26.00
    Tangible book value per share (period end) $ 26.67 $ 23.66 $ 26.67 $ 23.66
    Dividend payout ratio 32.90 % 31.28 % 31.39 % 31.33 %
    Average shares outstanding - basic 2,038,026 2,017,264 2,036,025 2,008,503
    Average shares outstanding - diluted 2,044,564 2,023,961 2,042,181 2,017,060
    Period ending shares outstanding 2,042,753 2,021,292 2,042,753 2,021,292
     
    Selected ratios
    Return on average assets 0.96 % 1.02 % 1.02 % 1.02 %
    Return on average equity 11.58 % 12.47 % 12.33 % 12.32 %
    Yield on earning assets 4.45 % 4.77 % 4.79 % 4.81 %
    Cost of interest-bearing liabilities 0.80 % 1.04 % 0.81 % 1.06 %
    Net interest spread 3.65 % 3.73 % 3.99 % 3.75 %
    Net interest margin 4.04 % 3.88 % 4.12 % 3.90 %
    Efficiency (1) 64.34 % 58.12 % 62.13 % 58.35 %
    Tier 1 capital ratio (holding company) 9.31 % 8.49 % 9.31 % 8.49 %
     


    (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.

           
    June 30,June 30,
    20142013
     
    Commercial and industrial $ 55,577 $ 49,898
    Real estate - construction 26,615 24,084
    Real estate - mortgage:
    Residential 219,229 199,250
    Commercial 142,505 135,006
    Consumer installment   6,193     4,161  
    $ 450,119   $ 412,399  
     
    June 30,June 30,
    Asset quality data20142013
    (Dollar amounts in thousands)
    Nonaccrual loans $ 8,646 $ 9,162
    Troubled debt restructuring 1,743 3,166
    90 day past due and accruing   117     541  
    Nonperforming loans 10,506 12,869
    Other real estate owned   2,392     2,361  
    Nonperforming assets $ 12,898   $ 15,230  
     
     
    Allowance for loan and lease losses $ 7,129 $ 7,749
    Allowance for loan and lease losses/total loans 1.58 % 1.88 %
    Net charge-offs:
    Quarter-to-date 6 283
    Year-to-date 217 643
    Net charge-offs to average loans, annualized
    Quarter-to-date 0.01 % 0.28 %
    Year-to-date 0.10 % 0.32 %
    Nonperforming loans/total loans 2.33 % 3.12 %
    Allowance for loan and lease losses/nonperforming loans 67.85 % 60.21 %
     





    Company Contact:

    Middlefield Banc Corp.

    Thomas G. Caldwell, President/Chief Executive Officer, 440-632-1666 Ext. 3200

    tcaldwell@middlefieldbank.com

    or

    Investor and Media Contact:

    SM Berger & Company, Inc.

    Andrew M. Berger, Managing Director, 216-464-6400

    andrew@smberger.com


    Source: Middlefield Banc Corp.


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