Middlefield Banc Corp. Reports Continued Strong Earnings

MIDDLEFIELD, Ohio, Oct. 31, 2011 /PRNewswire/ -- Middlefield Banc Corp. (OTCQB: MBCN), parent of The Middlefield Banking Company and Emerald Bank, today announced results for the quarter and nine months ended September 30, 2011.

  • Net income of $1,079,000, up 133% from the third quarter of 2010.
  • Total assets increased $28.5 million, or 4.5%, from December 31, 2010.
  • Net interest income in a year-to-year comparison grew $2.3 million or 17.1%.
  • Total deposits stood at $587.2 million, an increase of 3.9% for the nine month period.
  • Diluted earnings per common share for the quarter were $0.63.
  • Tangible book value per share at September 30, 2011 stood at $23.99.

The company reported that earnings for the third quarter ended September 30, 2011, were $1,079,000 compared to earnings of $463,000 for the same period in the prior year.  Fully diluted earnings per share for the 2011 quarter were $0.63, while those reported for the 2010 period were $0.29.

Net income for the nine months ended September 30, 2011 was $2,801,000, a $978,000, or 53.6% increase from the $1,823,000 earned during the same period of 2010.  Year-to-date diluted earnings per share were $1.69 in 2011 compared to $1.16 in 2010.

During the 2011 third quarter, net interest income increased $778,000 from the third quarter of 2010.  The provision for loan losses in the third quarter of 2011 stood at $920,000, which was $306,000 less than the same period of 2010.  Total non-interest expense increased $164,000, while non-interest income during the third quarter of 2011 was $9,000 below that reported in the same period of 2010.    

Annualized returns on average equity ("ROE") and average assets ("ROA") for the 2011 third quarter were 11.11% and 0.66%, respectively, compared with 4.54% and 0.29% for the third quarter of 2010.  The nine month period ending September 30, 2011 saw ROE and ROA of 9.82% and 0.59%, respectively.  The comparable period 2010 results were 6.31% and 0.41%.

"We are pleased to report continued strong financial results for the third quarter and year-to-date periods, especially in light of an economic environment that continues to be extremely challenging," stated Thomas G. Caldwell, President and Chief Executive Officer, "We have continued to enhance our profitability by following solid banking fundamentals."

"Obviously, we are pleased with the improvement in our net interest margin.  This has been achieved through managing our cost of funding, while properly pricing quality loans.  With the Fed's actions to hold short-term rates low into mid-2013, while also introducing Operation Twist, we are working to maintain a solid net interest margin so as to remain a strong community bank."

"Our focus remains on delivering excellent customer service, offering a dynamic suite of products, and maximizing value for our shareholders," Caldwell concluded.

Asset Quality

For the nine months ended September 30, 2011, the provision for loan losses increased 5.5% to $2,485,000, which compares to the $2,355,000 for the same period of 2010.  For the three month period ended September 30, 2011, the provision for loan losses was $920,000.  During the same period of 2010, the provision was $1,226,000.  Donald L. Stacy, Chief Financial Officer of Middlefield Banc Corp. stated "Our asset quality numbers are a reflection of the economic uncertainty that continues on a national scale.  This continued weakness remains a concern and warrants measures to provide for the sound operation of our company."

Stacy continued, "We are, however, finding that our problem credits have been properly identified as the increase in our non-performing assets has stabilized.  Expectations are that an improvement in our asset quality numbers will be seen as we move into 2012."  

The increased loan loss provision has significantly outpaced loan charge-offs.  Net charge-offs for the third quarter of 2011 were 0.10% of average loans, while the ratio for the first nine months of 2011 was 0.30%.  The ratio of the allowance for loan losses to total loans stood at 1.95% at September 30, 2011, compared to the 1.63% reported at September 30, 2010.  Based upon the evaluation of the allowance for loan losses, it is the belief of management that, as of September 30, 2011, the allowance for loan losses was adequate and reflects probable incurred losses within the portfolio.  

Net Interest Income

Net Interest Income totaled $15.5 million for the first nine months of 2011.  This represents an increase of 17.1 % from the $13.3 million reported for the comparable period of 2010.  The improvement in net interest income was primarily generated by an increase in both average earning assets and net interest margin.  Interest income on investment securities increased $0.2 million while the company experienced a decrease in interest expense on deposits of $1.4 million.  Continued action by the Federal Open Market Committee to hold interest rates at historic low levels has provided the company the opportunity to continue to lower funding costs.  The pricing environment for new loans remains highly competitive within the company's markets.  Interest earnings on loans did increase $0.5 million from the year ago period.  This increase in earnings on loans was achieved in spite of the level of non-performing loans.  

For the three month period ended September 30, 2011 compared to the same period of 2010, Middlefield's net interest income was up 16.9%, or $0.8 million.  The positive variance was based on an increase of $0.2 million from the loan portfolio, coupled with a decrease of $0.1 million from the investment portfolio and a decrease in deposit costs of $0.6 million.    

The net interest margin for the first nine months of 2011 was 3.69%, representing an increase from the 2010 same period result of 3.39%.  The yield on earning assets dropped 18 basis points, while the cost of interest-bearing liabilities experienced a decrease of 51 basis points.  

Non-Interest Income and Operating Expenses

Non-interest income decreased $9,000 for the three-month period of 2011 from the comparable 2010 period.  Lower service charges on deposit accounts are attributable to Federal regulatory changes to overdraft rules.  For the first nine months of 2011, deposit services charges were $22,000 below the same period of 2010.  This was offset by an increase in investment services income as well as the collection of rents on OREO properties.      

Non-interest expense of $3,906,000 for the third quarter of 2011 was 4.4%, or $164,000 higher than the third quarter of 2010.  Increases in salaries and employee benefits of $211,000 are primarily attributable to staff additions, as well as an increase in health insurance costs.  Cost associated with the administration and liquidation of delinquent loans, OREO properties and foreclosures were the primary contributors to higher 2011 non-interest expenses.      

For the nine month period of 2011, total operating costs were $775,000, or 7.0%, above those of the 2010 comparable period.  Contributing to the increase were salaries and employee benefits and increased other expenses.  The higher 2011 other expense figure is primarily attributable to  costs directly related to loan quality issues, including loan and other real estate owned expense in the company's non-bank subsidiary, EMORECO, Inc.        

Balance Sheet Growth

The company's total assets as of September 30, 2011 stood at $660.7 million, an increase of 4.5% over the $632.2 million in total assets reported at December 31, 2010.  Net loans at September 30, 2011, were $381.0 million, up $16.7 million, or 4.6%, over the $366.3 million reported at December 31, 2010.  Total deposits at the end of the third quarter 2011 were $587.2 million, or 3.9% greater than the deposit level of $565.3 million at December 31, 2010.  

The investment portfolio, which is entirely classified as available for sale, stood at $204.5 million at September 30, 2011.  This figure represented growth within that portfolio of $2.7 million from the prior year-end.  Stockholders' equity at September 30, 2011, was $46.7 million.  Book value per share as of September 30, 2011, was $26.59.

Dividends    

During the third quarter of both 2011 and 2010, Middlefield paid cash dividends of $0.26 per share.

Middlefield Banc Corp. headquartered in Middlefield, Ohio is a multi-bank holding company with total assets of $660.7 million.  The company's lead bank, The Middlefield Banking Company, operates full service banking centers and a UVEST Financial Services® brokerage office serving Chardon, Cortland, Garrettsville, Mantua, Middlefield, Newbury, and Orwell.  The company also serves the central Ohio market through its Emerald Bank subsidiary, with offices in Dublin and Westerville, Ohio.  Additional information is available at www.middlefieldbank.com and www.emeraldbank.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













(Dollar amounts in thousands)




























September 30, 2011 and 2010 and December 31, 2010














(unaudited)






(unaudited)






Balance Sheet (period end)


September 30,



December 31,



September 30,








2011



2010



2010




















Assets














Cash and due from banks

$

21,269


$

10,473


$

13,645






Federal funds sold


22,318



20,162



37,701






Interest-bearing deposits in other institutions


-



-



124






  Cash and cash equivalents


43,587



30,635



51,470






Investment securities available for sale


204,455



201,772



195,101






Loans:


388,558



372,498



365,219






Less:  reserve for loan losses


7,574



6,221



5,971






     Net loans


380,984



366,277



359,248






Premises and equipment


8,042



8,179



8,222






Goodwill


4,559



4,559



4,559






Bank-owned life insurance


8,188



7,979



7,911






Accrued interest receivable and other assets


10,864



12,796



10,578






Total Assets

$

660,679



632,197



637,089






















September 30,



December 31,


September 30,








2011



2010



2010






Liabilities and Stockholders' Equity














Non-interest bearing demand deposits

$

60,806


$

53,391


$

55,448






Interest bearing demand deposits


61,483



48,869



44,232






Money market accounts


76,851



71,105



71,097






Savings deposits


166,531



146,993



141,693






Time deposits


221,567



244,893



251,021






  Total Deposits


587,238



565,251



563,491






Short-term borrowings


6,908



7,632



7,762






Other borrowings


17,955



19,321



22,035






Other liabilities


1,915



1,971



2,111






  Total Liabilities


614,016



594,175



595,399




















Common equity


31,112



28,429



28,315






Retained earnings


17,335



15,840



15,558






Accumulated other comprehensive income


4,950



487



4,551






Treasury stock


(6,734)



(6,734)



(6,734)






  Total Stockholders' Equity


46,663



38,022



41,690




















Total Liabilities and Stockholders' Equity

$

660,679


$

632,197


$

637,089








Consolidated Selected Financial Highlights






September 30, 2011 and 2010






(Dollar amounts in thousands)






 (unaudited)












Income Statement

For the Three Months Ended


For the Nine Months Ended




September 30,


September 30,





2011



2010



2011



2010



INTEREST INCOME














  Interest and fees on loans

$

5,555


$

5,325


$

16,255


$

15,721



  Interest-bearing deposits in other institutions

4



3



8



10



  Federal funds sold


0



15



13



38



  Investment securities














     Taxable interest


1,220



1,290



3,832



3,832



     Tax-exempt interest


724



702



2,124



1,941



  Dividends on stock


25



33



76



82



     Total interest income


7,528



7,368



22,308



21,624



INTEREST EXPENSE














  Deposits


1,836



2,391



5,877



7,249



  Short term borrowings


59



66



177



186



  Other borrowings


100



147



313



520



  Trust preferred securities


139



148



412



412



     Total interest expense


2,134



2,752



6,779



8,367



NET INTEREST INCOME


5,394



4,616



15,529



13,257

















Provision for loan losses


920



1,226



2,485



2,355



NET INTEREST INCOME AFTER PROVISION













  FOR LOAN LOSSES


4,474



3,390



13,044



10,902



NONINTEREST INCOME














  Service charges on deposits


455



473



1,299



1,321



  Net securities gains (losses)


6



18



(16)



45



  Earnings on bank-owned life insurance


70



72



209



204



  Other income


155



132



487



419



     Total non-interest income


686



695



1,979



1,989



NONINTEREST EXPENSE














  Salaries and employee benefits


1,754



1,543



5,388



4,767



  Occupancy expense


242



224



737



717



  Equipment expense


175



156



488



558



  Data processing costs


162



160



515



575



  Ohio state franchise tax


126



134



351



404



  Federal deposit insurance expense


176



197



673



589



  Professional fees


181



110



577



490



  Loss on sale of other real estate owned


195



536



498



750



  Other operating expense


895



682



2,676



2,278



     Total non-interest expense


3,906



3,742



11,903



11,128



Income before income taxes


1,254



343



3,120



1,763



Provision for income taxes


175



(120)



319



(60)



NET INCOME

$

1,079


$

463


$

2,801


$

1,823






For the Three Months Ended


For the Nine Months Ended



September 30,


September 30,




2011



2010



2011



2010


Per common share data













Net income per common share - basic

$

0.63


$

0.29


$

1.69


$

1.16


Net income per common share - diluted

$

0.63


$

0.29


$

1.69


$

1.16


Dividends declared

$

          0.26


$

0.26


$

0.78


$

0.78


Book value per share(period end)

$

26.59


$

26.31


$

26.59


$

26.31


Tangible book value per share (period end)

$

23.99


$

23.44


$

23.99


$

23.44


Dividend payout ratio


44.11%



88.55%



46.63%



67.22%


Average shares outstanding - basic


1,704,677



1,578,832



1,658,415



1,571,762


Average shares outstanding -diluted


1,704,677



1,578,832



1,658,415



1,572,726


Period ending shares outstanding


1,754,856



1,584,281



1,754,856



1,584,281















Selected ratios













Return on average assets


0.66%



0.29%



0.59%



0.41%


Return on average equity


11.11%



4.54%



9.82%



6.31%


Yield on earning assets


5.14%



5.26%



5.20%



5.38%


Cost of interest bearing liabilities


1.56%



2.08%



1.68%



2.19%


Net interest spread


3.58%



3.19%



3.52%



3.19%


Net interest margin


3.75%



3.39%



3.69%



3.39%


Efficiency (1)


60.53%



65.97%



63.99%



68.50%


Equity to assets at period end


7.12%



6.54%



7.12%



6.54%















(1)  The efficiency ratio is calculated by dividing non-interest expense less amortization of intangibles by the sum of net interest income

     on a fully taxable equivalent basis plus non-interest income.




























September 30,



September 30,








Asset quality data


2011



2010








(Dollar amounts in thousands)











Non-accrual loans

$

17,805


$

19,999








Troubled debt restructuring


4,337



603








90 day past due and accruing


583



381








Non-performing loans


22,725



20,983








Other real estate owned


2,173



2,016








Non-performing assets

$

24,898


$

22,999





















Allowance for loan losses

$

7,574


$

5,971








Allowance for loan losses/total loans


1.95%



1.63%








Net charge-offs:













  Quarter-to-date

$

373


$

1,089








  Year-to-date


1,132



1,321








Net charge-offs to average loans













  Quarter-to-date


0.10%



0.30%








  Year-to-date


0.30%



0.37%








Non-performing loans/total loans


5.85%



5.75%








Allowance for loan losses/non-performing loans

33.33%



28.46%










Contact:  

James R. Heslop, 2nd


Executive Vice President/Chief Operating Officer


(440) 632-1666 Ext. 3219    


jheslop@middlefieldbank.com



SOURCE Middlefield Banc Corp.



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