Middlefield Banc Corp. Reports 2016 Full Year and Fourth Quarter Financial Results

MIDDLEFIELD, Ohio--()--Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the fourth quarter and full year ended December 31, 2016.

“During 2016 we had one-time expenses of $0.7 million associated with the acquisition of Liberty”

2016 Financial Highlights Include (on a year-over-year basis unless noted):

  • Net interest income increased 4.2% to $25.8 million.
  • Net income was $6.4 million, or $3.03 per diluted share.
  • Tangible stockholders’ equity per share improved 4.5% to $32.10.
  • Net loans increased 14.3% to 602.5 million.
  • Total assets increased 7.0% to a record $786.5 million.
  • Nonperforming loans to total loans decreased 76 basis points to 1.16%.
  • Equity to assets December 31, 2016 was 9.79%.

“By many accounts 2016 was a historic year. We expanded our presence in Central Ohio with the October opening of a new branch in Sunbury – one of the state’s fastest growing suburbs. In June, we announced the merger of Liberty Bank and I am extremely pleased we closed the transaction early this year. As a result of the Liberty merger, Middlefield today has over $1.0 billion in total assets and an $816 million loan portfolio, while extending our reach to customers in Cuyahoga and Summit Counties. These accomplishments are a result of the strategies we created two years ago to drive growth, and I am encouraged by our recent accomplishments. In addition, during 2016, we achieved another year of record assets and loans outstanding, which helped increase net interest income 4.2%.”

Net income for the 2016 fourth quarter was $1.7 million, or $0.73 per diluted share, compared to $1.8 million, or $0.92 per diluted share for the same period last year. Net income for the 2016 full year was $6.4 million, or $3.03 per diluted share, compared to net income for the year ended December 31, 2015 of $6.9 million, or $3.39 per diluted share.

Annualized returns on average equity (“ROE”) and average assets (“ROA”) for the 2016 fourth quarter were 9.02% and 0.85%, respectively, compared with 11.26% and 0.96% for the 2015 fourth quarter. ROE and ROA were 9.33% and 0.85%, respectively, for the 2016 full year, compared with 10.62% and 0.97% for the same period last year.

Mr. Caldwell continued: “As part of our strategic plan, we have made many investments aimed at increasing the size, scale and scope of our organization. I am encouraged by the success we have had executing our plan and the direction we are headed. While Middlefield’s size has increased, we remain focused on our community banking principles and offering customers exceptional service and customized financial products. In addition, we continue to invest in modern online, digital, and mobile banking programs to make it easier for customers to interact with the bank. We are excited to offer our community oriented services to Liberty’s customers, as well as new customers in Cuyahoga and Summit counties.”

Income Statement

Net interest income for the 2016 fourth quarter increased 6.2% to $6.7 million, compared to $6.4 million for the 2015 fourth quarter. For 2016, net interest income increased 4.2% to $25.8 million, compared to $24.8 million for 2015. The fourth quarter and twelve month increases in net interest income was primarily driven by an increase in interest and fees on loans. The net interest margin for the 2016 fourth quarter was 3.84%, compared to 3.89% for the same period of 2015. For 2016, the net interest margin was 3.79%, compared to 3.94% for the twelve months ended December 31, 2015.

Noninterest income declined 23.6% for the 2016 fourth quarter and was down 2.1% for the 2016 twelve months. The decline to noninterest income in the 2016 fourth quarter and full year was primarily a result of earnings on bank-owned life insurance.

Noninterest expense for the 2016 fourth quarter was $5.0 million, a decrease of 7.9% from $5.4 million for the 2015 fourth quarter, primarily a result of lower operating expenses and a $0.4 million gain on the sale of real estate. For the full year, noninterest expenses increased 4.0% to $20.9 million from $20.1 million in 2015.

“During 2016 we had one-time expenses of $0.7 million associated with the acquisition of Liberty,” said Donald L. Stacy, Chief Financial Officer. “We expect additional one-time expenses will occur in the first quarter as we integrate Liberty into our organization, but continue to expect the acquisition will be accretive to earnings in 2017. Our loan portfolio grew 14.3% in 2016, primarily due to significant growth in commercial and industrial loans, and both residential and commercial real estate loans, which helped increase interest income 4.9% in the year. Asset quality continued to improve during 2016 as nonperforming loans declined 31.1%, while charge-offs declined 54.0%. During 2017, we will remain focused on proactively managing asset quality, while improving profitability.”

Balance Sheet

Total assets at December 31, 2016 increased 7.0% to $786.5 million, from $735.1 million at December 31, 2015. Net loans at December 31, 2016 were $602.5 million, compared to $527.3 million at December 31, 2015. The 14.3% year-over-year improvement in net loans was a result of a 42.5% increase in commercial and industrial loans, a 16.5% increase in residential mortgages, a 7.7% increase in commercial mortgages, and a 7.1% increase in real estate construction loans, which were offset by a 7.8% reduction in consumer installment loans.

Total deposits at December 31, 2016 increased 0.9% to $629.9 million from $624.4 million at December 31, 2015. The investment portfolio, which is entirely classified as available for sale, stood at $114.4 million at December 31, 2016, compared to $146.5 million at December 31, 2015.

Stockholders’ Equity and Dividends

Tangible stockholders’ equity increased to $77.0 million at December 31, 2016, compared to $62.3 million at December 31, 2015. On a per share basis, tangible stockholders’ equity increased 4.5% to $32.10 at December 31, 2016 from $30.72 at December 31, 2015. At December 31, 2016, the company had equity to assets of 9.8%, compared to 8.5% at December 31, 2015.

During the 2016 fourth quarter, the company paid cash dividends of $0.27 per share, which was the same as the amount paid in the 2015 fourth quarter. For 2016, the company paid total dividends of $1.08 per share, which represents a dividend payout ratio of 36.2%, compared to dividends of $1.07 and a dividend payout ratio of 31.4% for the 2015 full year.

Asset Quality

The provision for loan losses for the 2016 fourth quarter was $0.3 million, compared $0.1 for the 2015 fourth quarter. For 2016, the provision for loan losses was $0.6 million, compared to $0.3 million for the same period last year. Net charge-offs for the 2016 twelve months were $0.4 million, or 0.06% of average loans, annualized. The allowance for loan losses at December 31, 2016 stood at $6.6 million, or 1.08% of total loans, compared to $6.4 million, or 1.20% of total loans at December 31, 2015.

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

Asset Quality History

(dollars in thousands)

  12/31/2016     12/31/2015     12/31/2014     12/31/2013     12/31/2012  
Nonperforming loans $ 7,075 $ 10,263 $ 9,048 $ 12,290 $ 14,224
Real estate owned $ 934 $ 1,412 $ 2,590 $ 2,698 $ 1,846

Nonperforming assets

$

8,009

$

11,675

$

11,638

$

14,988

$

16,070

Allowance for loan losses

$

6,598

$

6,385

$

6,846

$

7,046

$

7,779

Ratios:

Nonperforming loans to total loans

1.16

%

1.92

%

1.92

%

2.82

%

3.48

%

Nonperforming assets to total assets

1.02

%

1.59

%

1.72

%

2.32

%

2.40

%

Allowance for loan losses to total loans

1.08

%

1.20

%

1.45

%

1.62

%

1.90

%

Allowance for loan losses to nonperforming loans

93.26

%

62.21

%

75.66

%

57.33

%

54.69

%

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $786.5 million at December 31, 2016. 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, Summit, 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
 
December 31, 2016 and 2015
 
Balance Sheet (period end) December 31, December 31,
(Dollar amounts in thousands) 2016 2015
(2016 unaudited)
Assets
Cash and due from banks $ 31,395 $ 22,421
Federal funds sold 1,100   1,329  
Cash and cash equivalents 32,495 23,750
Investment securities available for sale 114,376 146,520
Loans held for sale 634 1,107
Loans: 609,140 533,710
Less: allowance for loan and lease losses 6,598   6,385  
Net loans 602,542 527,325
Premises and equipment, net 11,203 9,772
Goodwill 4,559 4,559
Core deposit intangibles 36 76
Bank-owned life insurance 13,628 13,141
Other real estate owned 934 1,412
Accrued interest receivable and other assets 6,054   7,477  
Total Assets $ 786,461   735,139  
 
December 31, December 31,
2016 2015
Liabilities and Stockholders' Equity
Noninterest bearing demand deposits $ 133,630 $ 116,498
Interest bearing demand deposits 59,560 57,219
Money market accounts 74,940 78,856
Savings deposits 172,370 180,653
Time deposits 189,434   191,221  
Total Deposits 629,934 624,447
Short-term borrowings 68,359 35,825
Other borrowings 9,437 9,939
Other liabilities 1,771   2,624  
Total Liabilities 709,501   672,835  
 
Common equity 47,943 36,191
Retained earnings 41,334 37,236
Accumulated other comprehensive income 1,201 2,395
Treasury stock (13,518 ) (13,518 )
Total Stockholders' Equity 76,960   62,304  
 
Total Liabilities and Stockholders' Equity $ 786,461   $ 735,139  
     
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2016 and 2015
(Dollar amounts in thousands)
(2016 unaudited)
For the Three Months Ended For the Year Ended
December 31, December 31,
2016   2015 2016   2015
INTEREST INCOME
Interest and fees on loans $ 6,849 $ 6,168 $ 25,798 $ 23,824
Interest-bearing deposits in other institutions 11 7 53 33
Federal funds sold 4 1 20 13
Investment securities
Taxable interest 241 352 1,106 1,467
Tax-exempt interest 686 787 2,913 3,160
Dividends on stock 30   28   104   98  
Total interest income 7,821   7,343   29,994   28,595  
INTEREST EXPENSE
Deposits 953 845 3,618 3,426
Short term borrowings 34 94 322 194
Other borrowings 21 17 68 83
Trust preferred securities 65   32   182   117  
Total interest expense 1,073   988   4,190   3,820  
 
NET INTEREST INCOME 6,748 6,355 25,804 24,775
 
Provision for loan losses 255   105   570   315  
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,493   6,250   25,234   24,460  
NONINTEREST INCOME
Service charges on deposits 497 492 1,940 1,874
Net securities gains

-

66 303 323
Earnings on bank-owned life insurance

106

 

362

403

624
Gains on sale of loans 97 43 419 329
Other income

200

  215  

894

  894  
Total non-interest income 900   1,178   3,959   4,044  
NONINTEREST EXPENSE
Salaries and employee benefits 2,509 2,546 10,249 9,751
Occupancy expense 319 308 1,252 1,253
Equipment expense 291 238 991 944
Data processing costs 407 273 1,335 1,071
Ohio state franchise tax 184 75 632 300
Federal deposit insurance expense 42 120 438 472
Professional fees 384 422 1,441 1,247
(Gain) loss on sale of other real estate owned (396 ) (120 ) (448 ) (48 )
Advertising expenses 130 135 734 721
Other real estate expenses 30 162 329 611
Directors fees 83 108 413 451
Core deposit intangible amortization 10 10 40 40
Appraiser fees 85

11

419

56

ATM fees 150 63 446 358
Other operating expense 729  

1,029

  2,601  

2,850

 
Total non-interest expense 4,957   5,380   20,872   20,077  
Income before income taxes 2,436 2,048 8,321 8,427
Provision for income taxes 776   298   1,905   1,562  
NET INCOME $ 1,660   $ 1,750   $ 6,416   $ 6,865  
 
Per common share data
Net income per common share - basic $ 0.74 $ 0.93 3.04 $ 3.41
Net income per common share - diluted $ 0.73 $ 0.92 3.03 $ 3.39
Dividends declared $ 0.27 $ 0.27 1.08 $ 1.07
Book value per share(period end) $ 34.14 $ 33.19 34.14 $ 33.19
Tangible book value per share (period end) $ 32.10 $ 30.72 32.10 $ 30.72
Dividend payout ratio 36.63 % 29.03 % 36.18 % 31.36 %
Average shares outstanding - basic 2,251,412 1,884,484 2,107,857 2,014,966
Average shares outstanding -diluted 2,264,712 1,893,345 2,119,214 2,024,120
Period ending shares outstanding 2,254,253 1,877,238 2,254,253 1,877,238
 
Selected ratios
Return on average assets 0.85 % 0.96 % 0.85 % 0.97 %
Return on average equity 9.02 % 11.26 % 9.33 % 10.62 %
Yield on earning assets 4.43 % 4.46 % 4.37 % 4.51 %
Cost of interest bearing liabilities 0.77 % 0.73 % 0.75 % 0.72 %
Net interest spread 3.66 % 3.74 % 3.61 % 3.78 %
Net interest margin 3.84 % 3.89 % 3.79 % 3.94 %
Efficiency (1) 62.54 % 67.77 % 66.63 % 65.81 %
Equity to assets at period end 9.79 % 8.48 % 9.79 % 8.48 %

(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.

     
December 31, December 31,
2016 2015
 
Commercial and industrial $ 60,630 $ 42,536
Real estate - construction 23,709 22,137
Real estate - mortgage:
Residential 270,830 232,478
Commercial 249,490 231,701
Consumer installment 4,481   4,858  
609,140 533,710
 
 
December 31, December 31,
Asset quality data 2016   2015  
(Dollar amounts in thousands)
Non-accrual loans $ 5,892 $ 7,545
Troubled debt restructuring 1,183 2,716
90 day past due and accruing -   2  
Nonperforming loans 7,075 10,263
Other real estate owned 934   1,412  
Nonperforming assets $ 8,009   $ 11,675  
 
 
Allowance for loan losses $ 6,598 $ 6,385
Allowance for loan losses/total loans 1.08 % 1.20 %
Net charge-offs (recoveries):
Quarter-to-date $ (9 ) $ 40
Year-to-date 357 776
Net charge-offs to average loans, annualized
Quarter-to-date -0.01 % 0.03 %
Year-to-date 0.06 % 0.16 %
Nonperforming loans/total loans 1.16 % 1.92 %
Allowance for loan losses/nonperforming loans 93.26 % 62.21 %
Nonperforming assets/total assets 1.02 % 1.59 %

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

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