Middlefield Banc Corp. Reports Continued Strong Earnings and Asset Growth

Oct 29, 2010, 15:09 ET from Middlefield Banc Corp.

MIDDLEFIELD, Ohio, Oct. 29  /PRNewswire-FirstCall/ -- Middlefield Banc Corp. (Pink Sheets: MBCN), parent of The Middlefield Banking Company and Emerald Bank, today announced results for the quarter and nine months ended September 30, 2010.

  • Net income of $463,000, up 117.4% from the third quarter of 2009.
  • Total assets increased $78.4 million, or 14.0%, from December 31, 2009.
  • Net interest income in a year-to-year comparison grew $2.9 million or 27.8%.
  • Total deposits stood at $563.5 million, an increase of 15.7% for the nine month period.
  • Diluted earnings per common share for the quarter were $0.29.
  • Tangible book value per share at September 30, 2010 stood at $23.44.

The company reported that earnings for the third quarter ended September 30, 2010, were $463,000 compared to earnings of $213,000 for the same period in the prior year.  Earnings per diluted share for the 2010 quarter were $0.29, while those reported for the 2009 period were $0.14.

Net income for the nine months ended September 30, 2010 was $1.8 million, a $546,000, or 42.8% increase from the $1.3 million earned during the same period of 2009.  Year-to-date diluted earnings per share were $1.16 in 2010 compared to $0.83 in 2009.

During the 2010 third quarter, net interest income increased $830,000 from the third quarter of 2009.  The provision for loan losses in the third quarter of 2010 stood at $1.2 million, which was $120,000 less than the same period of 2009.  Total non-interest expense increased $703,000, while non-interest income during the third quarter of 2010 was $5,000 above that reported in the same period of 2009.    

Annualized returns on average equity ("ROE") and average assets ("ROA") for the 2010 third quarter were 4.54% and 0.29%, respectively, compared with 2.34% and 0.17% for the third quarter of 2009.  The nine month period ending September 30, 2010 saw ROE and ROA of 6.31% and 0.41%, respectively.  The comparable period 2009 results were 4.72% and 0.35%.

"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.  Our results demonstrate solid performance on many fronts, including continued core deposit growth, an expanded net interest margin, and additions to our capital base."

"Because of the uncertainty associated with the magnitude and timing of the economic recovery, we believe it prudent to continue to position our balance sheet to better absorb potential credit losses.  We have also taken the opportunity to add staff and processes to address problem credits.  These efforts have begun to bear fruit in the third quarter and should lead to a decline in non-performing assets in the near term."

"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, 2010, the provision for loan losses increased 33.8% to $2.4 million, which compares to the $1.8 million for the same period of 2009.  For the three month period ended September 30, 2010, the provision for loan losses was $1.2 million.  During the same period of 2009, the provision was $1.3 million.  "To address credit quality issues, we believe it only prudent to continue with a higher than historic level of loan loss provision," stated Donald L. Stacy, Chief Financial Officer of Middlefield Banc Corp. "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 through 2011."  

The following table summarizes asset quality and reserve coverage ratios.

Asset Quality History

(dollars in thousands)

9/30/2010

6/30/2010

3/31/2010

12/31/2009

9/30/2009

Nonperforming loans

$

20,983

$

20,053

$

18,143

$

16,285

$

14,368

Real estate owned

2,016

1,886

2,175

2,164

1,775

Nonperforming assets

$

22,999

$

21,939

$

20,318

$

18,450

$

16,143

Allowance for loan losses

$

5,971

$

5,834

$

5,279

$

4,937

$

4,422

Ratios:

Nonperforming loans to total loans

5.75%

5.50%

5.04%

4.61%

4.15%

Nonperforming assets to total

 assets

3.61%

3.61%

3.42%

3.30%

3.12%

Allowance for loan losses to total

 loans

1.63%

1.60%

1.47%

1.40%

1.28%

Allowance for loan losses to

 nonperforming loans

28.46%

29.09%

29.10%

30.31%

30.78%

The increased loan loss provision has significantly outpaced loan charge-offs. Net charge-offs for the third quarter of 2010 was 0.30% of average loans, while the ratio for the first nine months of 2010 was 0.37%.  The ratio of the allowance for loan losses to total loans stood at 1.63% at September 30, 2010, compared to the 1.40% reported at December 31, 2009, and 1.28% at September 30, 2009.  Based upon the evaluation of the allowance for loan losses, it is the belief of management that, as of September 30, 2010, the allowance for loan losses was adequate and reflects probable incurred losses within the portfolio.  

Net Interest Income

Net Interest Income totaled $13.3 million for the first nine months of 2010.  This represents an increase of 27.8% from the $10.4 million reported for the comparable period of 2009.  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 $1.6 million while the company experienced a decrease in interest expense on deposits of $527,000.  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 $641,000 from the year ago period.  This increase in earnings on loans was achieved in spite of the level on non-performing loans.  

For the three month period ended September 30, 2010 compared to the same period of 2009, Middlefield's net interest income was up 21.9%, or $830,000.  The positive variance was based on an increase of $541,000 from the investment portfolio and an increase of $149,000 from the loan portfolio coupled with a decrease in interest expense of $110,000.    

The net interest margin for the first nine months of 2010 was 3.39%, representing an increase from the 2009 same period result of 3.31%.  The yield on earning assets dropped 59 basis points, while the cost of interest-bearing liabilities experienced a decrease of 78 basis points.  

Non-Interest Income and Operating Expenses

Non-interest income increased $5,000 for the three-month period of 2010 from the comparable 2009 period.  A gain on investment securities and slightly increased earnings on bank-owned life insurance served to offset a decrease in service charges on deposit accounts.  The lower service charges on deposit accounts are attributable to Federal regulatory changes to overdraft rules.  For the first nine months of 2010, deposit services charges were $73,000 below the same period of 2009.  This was offset by an increase in investment services income as well as the collection of rents on OREO properties.      

Non-interest expense of $3.7 million for the third quarter of 2010 was 23.1%, or $703,000 higher than the third quarter of 2009.  Increases in salaries and employee benefits of $147,000 are primarily attributable to staff additions, as well as an increase in health insurance costs.  An increase in the FDIC deposit insurance assessment of $111,000, recognition of higher losses on other real estate owned of $408,000, and an increase of $213,000 related to delinquent loans, foreclosures, and maintaining OREO properties were the primary contributors to higher 2010 non-interest expenses.      

For the nine month period of 2010, total operating costs were $1.8 million above those of the 2009 comparable period.  Contributing to the increase were salaries and employee benefits (up $463,000), equipment expense related to an upgrade in the computer network in April 2010 (up $133,000), loss on sale of OREO (up $567,000), and increased other expenses (up $578,000).  The higher other expense figure includes $443,000 directly related to loan quality issues, of which $319,000 were in 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, 2010 stood at $637.1 million, an increase of 14.0% over the $558.7 million in total assets reported at December 31, 2009.  Net loans at September 30, 2010, were $359.2 million, up $10.6 million, or 3.0%, over the $348.7 million reported at December 31, 2009.  Total deposits at the end of the third quarter 2010 were $563.5 million, or 15.7% greater than the deposit level of $487.1 million at December 31, 2009.  

The investment portfolio, which is entirely classified as available for sale, stood at $195.1 million at September 30, 2010.  This figure represented growth within that portfolio of $58.4 million from the prior year-end.  Stockholders' equity at September 30, 2010, was $41.7 million.  Book value per share as of September 30, 2010, was $26.31.

Dividends    

During the third quarter of both 2010 and 2009, 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 $637.1 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

September 30, 2010 and 2009 and December 31, 2009

(unaudited)

(unaudited)

Balance Sheet (period end)

September 30,

December 31,

September 30,

(Dollar amounts in thousands)

2010

2009

2009

Assets

Cash and due from banks

$

13,645

$

12,909

$

11,143

Federal funds sold

37,701

28,123

19,534

Interest-bearing deposits in other institutions

124

121

121

  Cash and cash equivalents

51,470

41,153

30,798

Investment securities available for sale

195,101

136,711

116,880

Loans:

365,219

353,597

345,919

Less:  reserve for loan losses

5,971

4,937

4,422

     Net loans

359,248

348,660

341,497

Premises and equipment

8,222

8,394

8,257

Goodwill

4,559

4,559

4,559

Bank-owned life insurance

7,911

7,706

7,638

Accrued interest receivable and other assets

10,578

11,475

8,317

Total Assets

$

637,089

$

558,658

$

517,946

September 30,

December 31,

September 30,

2010

2009

2009

Liabilities and Stockholders' Equity

Non-interest bearing demand deposits

$

55,448

$

44,387

$

40,964

Interest bearing demand deposits

44,232

38,111

34,877

Money market accounts

71,097

56,451

42,079

Savings deposits

141,693

107,358

99,322

Time deposits

251,021

240,799

230,687

  Total Deposits

563,491

487,106

447,929

Short-term borrowings

7,762

6,800

1,668

Federal funds purchased

0

0

0

Other borrowings

22,035

25,865

28,772

Other liabilities

2,111

2,180

2,098

  Total Liabilities

595,399

521,951

480,467

Common equity

28,315

27,919

27,760

Retained earnings

15,558

14,960

14,861

Accumulated other comprehensive income

4,551

562

1,592

Treasury stock

(6,734)

(6,734)

(6,734)

  Total Stockholders' Equity

41,690

36,707

37,479

Total Liabilities and Stockholders' Equity

$

637,089

$

558,658

$

517,946

MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

September 30, 2010 and 2009

(Dollar amounts in thousands)

(unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

INTEREST INCOME

  Interest and fees on loans

$

5,325

$

5,176

$

15,721

$

15,080

  Interest-bearing deposits in other institutions

3

2

10

12

  Federal funds sold

15

4

38

11

  Investment securities

     Taxable interest

1,290

976

3,832

2,753

     Tax-exempt interest

702

475

1,941

1,375

  Dividends on stock

33

15

82

46

     Total interest income

7,368

6,648

21,624

19,277

INTEREST EXPENSE

  Deposits

2,391

2,501

7,249

7,776

  Short term borrowings

66

5

186

15

  Other borrowings

147

222

520

717

  Trust preferred securities

148

134

412

399

     Total interest expense

2,752

2,862

8,367

8,907

NET INTEREST INCOME

4,616

3,786

13,257

10,370

Provision for loan losses

1,226

1,346

2,355

1,760

NET INTEREST INCOME AFTER PROVISION

  FOR LOAN LOSSES

3,390

2,440

10,902

8,610

NONINTEREST INCOME

  Service charges on deposits

473

488

1,321

1,394

  Earnings on bank-owned life insurance

72

0

204

0

  Other income

132

68

419

197

  Net securities gains (losses)

18

134

45

359

     Total non-interest income

695

690

1,989

1,950

NONINTEREST EXPENSE

  Salaries and employee benefits

1,543

1,396

4,767

4,304

  Occupancy expense

224

215

717

691

  Equipment expense

156

152

558

425

  Data processing costs

160

224

575

692

  Ohio state franchise tax

134

123

404

370

  Federal deposit insurance expense

197

86

589

529

  Professional fees

110

159

490

444

  Loss on sale of other real estate owned

536

128

750

183

  Other operating expense

682

556

2,278

1,700

     Total non-interest expense

3,742

3,039

11,128

9,338

Income before income taxes

343

91

1,763

1,222

Provision for income taxes

(120)

(122)

(60)

(55)

NET INCOME

$

463

$

213

$

1,823

$

1,277

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

Per common share data

Net income per common share - basic

$

0.29

$

0.14

$

1.16

$

0.83

Net income per common share - diluted

$

0.29

$

0.14

$

1.16

$

0.83

Dividends declared

$

0.26

$

0.26

$

0.78

$

0.78

Book value per share(period end)

$

26.31

$

24.07

$

26.31

$

24.07

Tangible book value per share (period end)

$

23.44

$

21.15

$

23.44

$

21.15

Dividend payout ratio

88.55%

188.77%

67.22%

94.18%

Average shares outstanding - basic

1,578,832

1,551,056

1,571,762

1,543,577

Average shares outstanding -diluted

1,578,832

1,551,069

1,572,726

1,544,677

Period ending shares outstanding

1,584,281

1,556,774

1,584,281

1,556,774

Selected ratios

Return on average assets

0.29%

0.17%

0.41%

0.35%

Return on average equity

4.54%

2.34%

6.31%

4.72%

Yield on earning assets

5.26%

5.92%

5.38%

5.97%

Cost of interest bearing liabilities

2.08%

2.72%

2.19%

2.97%

Net interest spread

3.19%

3.20%

3.19%

3.00%

Net interest margin

3.39%

3.46%

3.39%

3.31%

Efficiency (1)

65.97%

64.39%

68.50%

71.68%

Equity to assets at period end

6.54%

7.24%

6.54%

7.24%

(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

2010

2009

(Dollar amounts in thousands)

Non-accrual loans

$

18,681

$

11,313

90 day past due and accruing

2,302

3,055

Non-performing loans

20,983

14,368

Other real estate owned

2,016

1,775

Non-performing assets

$

22,999

$

16,143

Allowance for loan losses

$

5,971

$

4,422

Allowance for loan losses/total loans

1.63%

1.28%

Net charge-offs:

  Quarter-to-date

$

1,089

$

592

  Year-to-date

1,321

895

Net charge-offs to average loans

  Quarter-to-date

0.30%

0.17%

  Year-to-date

0.37%

0.27%

Non-performing loans/total loans

5.75%

4.15%

Allowance for loan losses/non-performing loans

28.46%

30.78%

Contact:

James R. Heslop, 2nd

Executive Vice President/Chief Operating Officer

(440) 632-1666 Ext. 3219

jheslop@middlefieldbank.com

SOURCE Middlefield Banc Corp.



RELATED LINKS

http://www.middlefieldbank.com