2014

Middlefield Banc Corp. Reports Strong Second Quarter Earnings and Continued Asset Growth

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

  • Net income of $715,000, up 55.1% from the second quarter of 2009
  • Total assets increased $12.9 million, or 2.2%, from March 31, 2010
  • Net interest income in a year-to-year comparison grew $1.2 million or 36.0%.
  • Total deposits stood at $533.1 million, an increase of 2.1% for the quarter.
  • Net loans grew $4.5 million during the quarter, ending up 1.3%.
  • Diluted earnings per common share for the quarter were $0.45

The company reported that earnings for the second quarter ended June 30, 2010, were $715,000 compared to earnings of $461,000 for the same period in the prior year.  Earnings per diluted share for the 2010 quarter were $0.45, while those reported for the 2009 period were $0.30.

Net income for the six months ended June 30, 2010 was $1,360,000, a $296,000, or 27.8% increase from the $1,064,000 earned during the same period of 2009.  Year-to-date diluted earnings per share were $0.87 in 2010 compared to $0.69 in 2009.

During the 2010 second quarter, net interest income increased $1,215,000 from the second quarter of 2009.  This was offset by a $430,000 higher provision for loan losses, and an increase in other total non-interest expense of $525,000.  Non-interest income during the second quarter of 2010 was $49,000 above that reported in the same period of 2009.    

Annualized returns on average equity ("ROE") and average assets ("ROA") for the 2010 second quarter were 7.48% and 0.47%, respectively, compared with 5.22% and 0.39% for the second quarter of 2009.  The six month period ending June 30, 2010 saw ROE and ROA of 7.27% and 0.46%, respectively.  The comparable period 2009 results were 6.04% and 0.45%.

"In the second quarter, Middlefield Banc Corp. again delivered a strong financial performance in an economic environment that continues to be extremely challenging," stated Thomas G. Caldwell, President and Chief Executive Officer, "The results for the quarter continued to demonstrate solid performance on many fronts, including continued core deposit growth, an expanded net interest margin, and additions to our capital base."

"We continue to evaluate the level of loan loss reserve.  With uncertainty regarding the magnitude and timing of the economic recovery, we have chosen to position our balance sheet to better absorb potential credit losses.  While we have added staff and processes to address problem credits, we will continue to closely monitor progress at least into the middle of next year."

"Our focus remains sharply on sound, fundamental banking practices designed to deliver excellence in customer service.  By so doing, we will work to ensure an increase in value to our shareholders," Caldwell concluded.

Asset Quality

The provision for loan losses for the three month period ended June 30, 2010 increased 165% to $690,000 compared to the $260,000 for the comparable period of 2009.  "While there has been some stabilization within our markets, our credit quality continues to be negatively impacted by the economic downturn.  Sustainable economic activity within our markets is key for a return to more normal levels of nonperforming assets and our provision expense," said Donald L. Stacy, Chief Financial Officer of Middlefield Banc Corp.  "We continue to experience credit issues associated with owner-occupied residential properties in our northeastern Ohio markets, while our central Ohio market has seen delinquency tied to non-owner occupied residential properties."

Stacy continued, "We anticipate continuing to provide a higher than historic level of loan loss provision to address credit quality issues.  It is only prudent, in light of these on-going economic issues and heightened regulatory scrutiny, to operate with overall higher levels of general loan loss reserves."  

The following table summarizes asset quality and reserve coverage ratios.

Asset Quality History

(dollars in thousands)




06/30/2010



3/31/2010



12/31/2009



6/30/2009













Nonperforming loans

$

20,053


$

18,143


$

16,285


$

14,023

Real estate owned


1,886



2,175



2,164



1,967


Nonperforming assets

$

21,939


$

20,318


$

18,450


$

15,991


Allowance for loan losses

$

5,834


$

5,279


$

4,937


$

3,668


Ratios:












Nonperforming loans to total
 loans


5.50%



5.04%



4.61%



4.18%

Nonperforming assets to
 total assets


3.61%



3.42%



3.30%



3.33%

Allowance for loan losses to
 total loans


1.60%



1.47%



1.40%



1.09%

Allowance for loan losses to
 nonperforming loans


29.09%



29.10%



30.31%



26.16%



The increased loan loss provision, which has significantly outpaced loan charge-offs, has strengthened the allowance for loan losses.  The ratio of the allowance for loan losses to total loans increased to 1.60% of total loans at June 30, 2010, compared to the 1.40% reported at December 31, 2009, and 1.09% at June 30, 2009.  

Net Interest Income

Net Interest Income, the core of the company's earnings, totaled $8.64 million for the first six months of 2010.  This represents an increase of 31.2% from the $6.58 million reported for the comparable period of 2009.  The improvement in net interest income was primarily generated by an increase in interest income on investment securities of $1.10 million, coupled with a decrease in interest expense on deposits of $0.41 million.  With the monetary policy of the Federal Reserve calling for stable historically low rates, the company has been able to continue to hold deposit rates significantly lower than the prior year.  Despite modest growth in the loan portfolio, combined with the fact that the pricing environment for new loans remains highly competitive, interest earnings on loans did increase 5%, or $0.49 million, over the year earlier results.  This increase in earnings on loans was achieved in spite of an increase in the total of non-performing loans.

For the three month period ended June 30, 2010 compared to the same period of 2009, Middlefield's net interest income was up 36%, or $1.21 million.  The strong results were based in an increase of $0.61 million from the investment portfolio and an increase of $0.39 million from the loan portfolio coupled with a decrease in deposit costs of $0.19 million.    

The first half net interest margin of 3.39% represented an increase from the 2009 first half result of 3.23%.  The yield on earning assets dropped 57 basis points, while the cost of interest-bearing liabilities experienced a decrease of 86 basis points.  Similarly, for the second quarter of 2010, the net interest margin of 3.49% exceeded the 3.28% reported for the second quarter of 2009.

Non-Interest Income and Operating Expenses

Non-interest income increased $49,000 for the three-month period of 2010 from the comparable 2009 period.  Higher revenue from investment services, along with rents collected on Other Real Estate Owned (OREO) properties partially offset a decrease in service charges on deposit accounts.  The lower deposit service charges were fueled by Federal regulatory changes to overdraft rules.  For the first six months of 2010, deposit services charges were $58,000 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 $3.83 million for the second quarter of 2010 was 15.9%, or $525,000 higher than the second quarter of 2009.  Increases in salaries and employee benefits of $176,000 are primarily attributable to staff additions in accounting and special assets, as well as an increase in health insurance costs.  Equipment expense was $54,000 higher in the 2010 quarter than for the 2009 period.  The company's two affiliate banks migrated to a new core data processing provider in late April and incurred additional expense related to the change in data processing provider.  The company experienced a decrease in the FDIC deposit insurance assessment of $81,000.  During the second quarter of 2009, the FDIC imposed a special assessment which was of a one-time nature.  Other expenses were $377,000 higher in the 2010 period than in the same quarter of 2009.  Costs associated with maintaining OREO properties accounted for $180,000 of the increase, with costs involved with increased collection activities contributing another $125,000.    

For the six month period of 2010, total operating costs were $1.09 million above those of the 2009 comparable period.  Contributing to the increase were salaries and employee benefits (up $316,000), equipment expense (up $129,000), loss on sale of OREO (up $159,000), and increased other expenses (up $452,000).  The drivers of these increases were the same as noted above.  Contained within the increased level of other expenses were $220,000 of increased loan related expenses and $70,000 of increased OREO-related expenses.      

Balance Sheet Growth

The company's total assets as of June 30, 2010 stood at $606.9 million, an increase of 8.6% over the $558.7 million in total assets reported at December 31, 2009.  Net loans at June 30, 2010, were $358.9 million, up $10.3 million, or 2.9%, over the $348.7 million reported at December 31, 2009.  Total deposits at the end of the second quarter 2010 were $533.1 million, or 9.4% 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 $179.0 million at June 30, 2010.  This figure represented growth within that portfolio of $42.2 million from the prior year-end.  Stockholders' equity at June 30, 2010, was $39.6 million.  Book value per share as of June 30, 2010, was $25.10.

Dividends    

During the second 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 $606.9 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


June 30, 2010 and 2009 and December 31, 2009




(unaudited)






(unaudited)

Balance Sheet (period end)



June 30,



December 31,



June 30,

(Dollar amounts in thousands)



2010



2009



2009











Assets










Cash and due from banks


$

15,065


$

12,909


$

9,170

Federal funds sold



22,152



28,123



7,530

Interest-bearing deposits in other institutions



124



121



120

  Cash and cash equivalents



37,341



41,153



16,820

Investment securities available for sale



178,963



136,711



101,635

Loans:



364,762



353,597



335,513

Less:  reserve for loan losses



5,834



4,937



3,668

     Net loans



358,928



348,660



331,845

Premises and equipment



8,360



8,394



8,301

Goodwill



4,559



4,559



4,559

Bank-owned life insurance



7,839



7,706



7,569

Accrued interest receivable and other assets



10,949



11,475



8,990

Total Assets


$

606,939


$

558,658


$

479,719














June 30,



December 31,



June 30,




2010



2009



2009

Liabilities and Stockholders' Equity










Non-interest bearing demand deposits


$

51,118


$

44,387


$

41,512

Interest bearing demand deposits



40,055



38,111



30,733

Money market accounts



65,275



56,451



34,704

Savings deposits



131,818



107,358



87,206

Time deposits



244,829



240,799



216,345

  Total Deposits



533,095



487,106



410,500

Short-term borrowings



7,201



6,800



1,238

Other borrowings



25,040



25,865



30,105

Accrued interest and other liabilities



1,995



2,180



2,198

  Total Liabilities



567,331



521,951



444,041











Common equity



28,201



27,919



27,618

Retained earnings



15,504



14,960



15,050

Accumulated other comprehensive income



2,637



562



(256)

Treasury stock



(6,734)



(6,734)



(6,734)

  Total Stockholders' Equity



39,608



36,707



35,678











Total Liabilities and Stockholders' Equity


$

606,939


$

558,658


$

479,719



MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

June 30, 2010 and 2009

(Dollar amounts in thousands)



(unaudited)


(unaudited)


(unaudited)


(unaudited)



For the Three Months Ended


For the Six Months Ended



June 30,


 June 30,



2010


2009


2010


2009

INTEREST INCOME









  Interest and fees on loans

$

5,299

$

4,906

$

10,396

$

9,904

  Interest-bearing deposits in
    other institutions


3


3


7


10

  Federal funds sold


12


3


23


7

  Investment securities









     Taxable interest


1,339


924


2,542


1,777

     Tax-exempt interest


647


454


1,239


900

  Dividends on FHLB Stock


32


15


49


31

     Total interest income


7,332


6,305


14,256


12,629

INTEREST EXPENSE









  Deposits


2,373


2,559


4,858


5,275

  Short term borrowings


62


4


120


10

  Other borrowings


183


238


373


495

  Trust preferred securities


128


133


264


265

     Total interest expense


2,746


2,934


5,615


6,045










NET INTEREST INCOME


4,586


3,371


8,641


6,584










Provision for loan losses


690


260


1,129


414










NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES


3,896


3,111


7,512


6,170

NONINTEREST INCOME









  Service charges on deposits


433


467


848


906

  Earnings on bank-owned life
    insurance


65


60


132


129

  Other income


169


109


287


225

  Net securities gains (losses)


18


-


27


-

     Total non-interest income


685


636


1,294


1,260

NONINTEREST EXPENSE









  Salaries and employee
    benefits


1,713


1,537


3,224


2,908

  Occupancy expense


217


221


493


476

  Equipment expense


204


150


402


273

  Data processing costs


172


219


415


468

  Ohio state franchise tax


134


124


270


247

  FDIC assessment


190


271


392


443

  Professional fees


188


132


380


285

  Loss on sale of other real
    estate owned


39


55


214


55

  Other operating expense


971


594


1,596


1,144

     Total non-interest expense


3,828


3,303


7,386


6,299










Income before income taxes


753


444


1,420


1,131

Provision for income taxes


38


(17)


60


67

NET INCOME

$

715

$

461

$

1,360

$

1,064





(unaudited)


(unaudited)


(unaudited)


(unaudited)



For the Three Months Ended


For the Six Months Ended



June 30,


June 30,



2010


2009


2010


2009

Per common share data









Net income per common share -
 basic

$

0.46

$

0.30

$

0.87

$

0.69

Net income per common share -
 diluted

$

0.45

$

0.30

$

0.87

$

0.69

Dividends declared

$

0.26

$

0.26

$

0.52

$

0.52

Book value per share(period end)

$

25.10

$

23.02

$

25.10

$

23.02

Tangible book value per share
 (period end)

$

22.21

$

20.08

$

22.21

$

20.08

Dividend payout ratio


57.06%


86.97%


60.00%


75.20%

Average shares outstanding - basic


1,570,852


1,541,960


1,568,168


1,539,814

Average shares outstanding -
 diluted


1,572,084


1,543,538


1,569,742


1,541,405

Period ending shares outstanding


1,577,771


1,549,852


1,577,771


1,549,852










Selected ratios









Return on average assets


0.47%


0.39%


0.46%


0.45%

Return on average equity


7.48%


5.22%


7.27%


6.04%

Yield on earning assets


5.44%


5.96%


5.44%


6.01%

Cost of interest bearing liabilities


2.15%


2.97%


2.25%


3.11%

Net interest spread


3.29%


2.98%


3.19%


2.90%

Net interest margin


3.49%


3.28%


3.39%


3.23%

Efficiency (1)


68.30%


77.89%


69.86%


75.82%

Equity to assets at period end


6.53%


7.44%


6.53%


7.44%










(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.






June 30,



June 30,

Asset quality data



2010



2009

(Dollar amounts in thousands)







Non-accrual loans


$

19,817


$

12,703

90 days past due and accruing



236



1,320

Non-performing loans



20,053



14,023

Other real estate owned



1,886



1,967

Non-performing assets


$

21,939


$

15,990















Allowance for loan losses


$

5,834


$

3,668

Allowance for loan losses/total loans



1.60%



1.09%

Net charge-offs:







  Quarter-to-date


$

135


$

212

  Year-to-date



232



303

Net charge-offs to average loans







  Quarter-to-date



0.04%



0.06%

  Year-to-date



0.06%



0.09%

Non-performing loans/total loans



5.50%



4.18%

Allowance for loan losses/non-performing loans



29.09%



26.16%



Contact:

James R. Heslop, 2nd


Executive Vice President/Chief Operating Officer


(440) 632-1666 Ext. 3219    


jheslop@middlefieldbank.com



www.middlefieldbank.com

SOURCE Middlefield Banc Corp.



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