Middlefield Banc Corp. Reports 2017 Full Year and Fourth Quarter Financial Results

MIDDLEFIELD, Ohio--()--Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the three and twelve months ended December 31, 2017.

“We continued to enhance our operating and financial platform during 2017, which will be the base of our long-term success going forward”

2017 Financial Highlights (on a year-over-year basis unless noted):

  • Net income increased 47.4% to $9.5 million
  • Earnings per diluted share increased 2.3% to $3.10 per share, which includes a 43.7% increase in the average number of diluted shares outstanding
  • Return on average tangible common equity was 10.15%, compared to 10.01%
  • Total loans increased 51.6% to $923.2 million
  • Nonperforming assets to total assets declined to 1.23% from 1.65%
  • Net interest income improved 44.7% to $37.3 million
  • Equity to assets was 10.83%, compared to 9.77%

“We continued to enhance our operating and financial platform during 2017, which will be the base of our long-term success going forward,” stated Thomas G. Caldwell, President and Chief Executive Officer. During the year, we successfully integrated the Liberty Bank N.A. merger, and significantly grew our loan portfolio, which included a $44.7 million increase during the past three months. We ended the year with record total assets and net income, despite one-time merger related expenses, and the write down in our deferred tax asset.”

“Middlefield’s community-oriented banking values and customer-centric approach is helping us differentiate the Bank within our Northeast and Central Ohio markets. To this end, I am pleased with the growth we are achieving in Central Ohio. In 12 months and ahead of schedule, Middlefield’s Sunbury location that was opened during the 2016 fourth quarter has become profitable. We expect Middlefield’s brand will continue to grow throughout Central Ohio, and we anticipate opening our fourth Central Ohio location in Powell during 2018.”

Mr. Caldwell concluded, “Our core Northeast Ohio and growing Central Ohio markets, both offer significant expansion opportunities and we believe we are well positioned to increase Middlefield’s market share throughout our footprint. Within the organization, we remain committed to providing our communities with a customer-centric, community-oriented banking approach. As we look to the new year, we are optimistic 2018 will be another good year for the Bank.”

Net income for the twelve months ended December 31, 2017, was $9.5 million, or $3.10 per diluted share, compared to net income for the twelve months ended December 31, 2016, of $6.4 million, or $3.03 per diluted share. Net income for the 2017 fourth quarter was $2.4 million, or $0.73 per diluted share, compared to net income for the 2016 fourth quarter of $1.7 million, or $0.73 per diluted share.

Annualized returns on average equity (“ROE”) and average assets (“ROA”) were 8.52% and 0.88%, respectively, for the 2017 twelve-month period, compared with 9.33% and 0.85% for the same period last year. ROE and ROA for the 2017 fourth quarter were 7.72% and 0.86%, respectively, compared with 9.02% and 0.85% for the 2016 fourth quarter.

Return on average tangible common equity(1) was 10.15% for the 2017 twelve-month period, compared with 10.01%. Return on average tangible common equity(1) for the 2017 fourth quarter was 9.05%, compared to 9.69% for the 2016 fourth quarter.

As a result of the Tax Cut and Jobs Act that was signed into law on December 22, 2017, during the 2017 fourth quarter, the Company had a write down to its deferred tax asset of $547 thousand. This one-time, non-cash item impacted 2017 fourth quarter and twelve-month earnings by $0.18 per diluted share. In addition, during the 2017 fourth quarter and twelve-month period, the Company incurred one-time merger related costs associated with the Liberty merger of $28 thousand, and $1.1 million, respectively.

Income Statement

Net interest income for the 2017 twelve-month period increased 44.7% to $37.3 million, compared to $25.8 million for the same period last year. The net interest margin for the 2017 twelve-month period was 3.82%, compared to 3.79% for the same period last year. Net interest income for the 2017 fourth quarter was $9.8 million, compared to $6.7 million for the 2016 fourth quarter. The net interest margin for the 2017 fourth quarter was 3.84%, compared to 3.84% for the same period of 2016. The 45.3% increase in net interest income for the 2017 fourth quarter was largely a result of a 56.2% increase in interest and fees on loans.

For the 2017 full year, noninterest income increased 22.7% to $4.9 million, compared to $4.0 million for the same period last year. Noninterest income for the 2017 fourth quarter was up 2.0% to $918 thousand, compared to the fourth quarter of 2016.

Noninterest expense for the 2017 full year increased 31.7% to $27.5 million, compared to $20.9 million last year. For the 2017 fourth quarter, noninterest expense increased 25.4% to $6.2 million, compared to $5.0 million for the same period last year.

“Asset quality remains strong despite the significant increase in assets we have experienced as a result of year-over-year organic loan growth and the contribution of Liberty’s loan portfolio. At December 31, 2017, nonperforming assets to total assets declined to 1.23%, from 1.65% for the same period last year,” said Donald L. Stacy, Chief Financial Officer. “Economic activity within our local economies remains stable, while conservative underwriting practices, and proactive risk management continues to help improve loan quality. During 2017, Middlefield incurred $1.1 million of nonrecurring merger related expenses. As we enter 2018, we do not anticipate any additional costs associated with the Liberty merger. As a result, given our current cost structure and outlook, we believe profitability should improve throughout 2018.”

Balance Sheet

Total assets at December 31, 2017, increased 40.4% to $1.11 billion, from $787.8 million at December 31, 2016. Net loans at December 31, 2017, were $916.0 million, compared to $602.5 million at December 31, 2016. The 52.0% year-over-year increase in total net loans was across all loan categories, and was a result of organic growth and the contribution of the Liberty merger. Specifically, commercial mortgage loans increased 75.5%, residential mortgage loans increased 17.5%, commercial and industrial loans increased 67.2%, real estate construction loans increased 98.3%, and consumer installment loans increased 318.3%.

Total deposits at December 31, 2017, increased 39.4% to $878.2 million from $629.9 million at December 31, 2016. The company continued to proactively manage its cost of funds. The investment portfolio, which is entirely classified as available for sale, was $95.3 million at December 31, 2017, compared with $114.4 million at December 31, 2016.

Stockholders’ Equity, Dividends and Shares Outstanding

At December 31, 2017, stockholders’ equity was $119.9 million, an increase of 55.7% from $77.0 million at December 31, 2016. Tangible stockholders’ equity(1) at December 31, 2017 was $102.0 million, an increase of 41.0% from $72.4 million at December 31, 2016. On a per share basis, tangible stockholders’ equity was $31.71 at December 31, 2017, compared to $32.10 at December 31, 2016. The 1.2% decline in tangible book value per share reflects the increase in the number of shares outstanding as a result of the private placement of stock that closed in May 2017. For 2017, the company paid cash dividends of $1.08 per share. The dividend payout ratio for 2017 was 35.52%, compared to 36.18% last year.

At December 31, 2017, the company had an equity to assets leverage ratio of 10.83%, compared to 9.77% at December 31, 2016.

Asset Quality

The provision for loan losses was $430 thousand for the 2017 fourth quarter, compared to $255 thousand for the 2016 fourth quarter. Nonperforming assets at December 31, 2017, were $13.6 million, compared to $13.0 million at December 31, 2016. Net charge-offs for the 2017 fourth quarter were $92 thousand, or 0.04% of average loans, annualized, compared to a net recovery of $9 thousand, or (0.01)% of average loans, annualized for the same 2016 period. For 2017, net charge-offs were $453 thousand, or 0.05% of average loans compared to $357 thousand, or 0.06% of average loans for 2016. The allowance for loan losses at December 31, 2017, stood at $7.2 million, or 0.78% of total loans, compared to $6.6 million, or 1.08% of total loans at December 31, 2016.

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $1.11 billion at December 31, 2017. 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, Sunbury, Twinsburg, and Westerville. The Bank also operates a Loan Production Office in Mentor, Ohio. Additional information is available at www.middlefieldbank.bank.

(1) This press release includes disclosure of Middlefield Banc Corp.’s tangible book value per share and return on average tangible equity, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Middlefield Banc Corp. believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Middlefield Banc Corp.’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.

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)
(2017 unaudited)
  December 31,   September 30,   June 30,   March 31,   December 31,
Balance Sheets (period end) 2017 2017 2017 2017 2016
ASSETS
Cash and due from banks $ 39,886 $ 47,731 $ 37,971 $ 61,364 $ 31,395
Federal funds sold -   1,200   1,600   1,000   1,100  
Cash and cash equivalents 39,886 48,931 39,571 62,364 32,495
Investment securities available for sale, at fair value 95,283 98,334 104,951 110,452 114,376
Loans held for sale 463 5,930 9,791 9,462 634
Loans 923,213 878,541 867,864 837,158 609,140
Less allowance for loan and lease losses 7,190   6,852   6,605   6,720   6,598  
Net loans 916,023 871,689 861,259 830,438 602,542
Premises and equipment, net 11,853 11,768 11,511 11,481 11,203
Goodwill 15,071 15,299 15,435 15,646 4,559
Core deposit intangibles 2,749 2,848 2,948 3,051 36
Bank-owned life insurance 15,652 15,542 15,432 15,334 13,540
Other real estate owned 212 557 650 1,634 934
Accrued interest and other assets 9,144   9,928   9,528   9,605   7,502  
TOTAL ASSETS $ 1,106,336   $ 1,080,826   $ 1,071,076   $ 1,069,467   $ 787,821  
 
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
LIABILITIES
Deposits:
Noninterest-bearing demand $ 192,438 $ 181,550 $ 172,199 $ 162,614 $ 133,630
Interest-bearing demand 83,990 91,184 87,084 94,605 59,560
Money market 150,277 161,101 160,858 162,843 74,940
Savings 208,502 212,371 181,259 183,845 172,370
Time 242,987   251,449   245,383   243,944   189,434  
Total deposits 878,194 897,655 846,783 847,851 629,934
Short-term borrowings 74,707 20,274 63,388 76,213 68,359
Other borrowings 29,065 39,273 39,346 39,388 9,437
Accrued interest and other liabilities 4,507   5,130   4,357   6,700   3,131  
TOTAL LIABILITIES 986,473   962,332   953,874   970,152   710,861  
STOCKHOLDERS' EQUITY
Common equity 84,859 84,722 84,587 69,123 47,943
Retained earnings 47,431 45,913 44,318 42,678 41,334
Accumulated other comprehensive income 1,091 1,377 1,815 1,032 1,201
Treasury stock (13,518 ) (13,518 ) (13,518 ) (13,518 ) (13,518 )
TOTAL STOCKHOLDERS' EQUITY 119,863   118,494   117,202   99,315   76,960  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,106,336   $ 1,080,826   $ 1,071,076   $ 1,069,467   $ 787,821  
 
             
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
(Dollar amounts in thousands)
(2017 unaudited)
For the Three Months Ended For the Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
Statements of Income 2017   2017   2017   2017   2016 2017 2016
 
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $ 10,696 $ 10,443 $ 9,916 $ 9,180 $ 6,849 $ 40,235 $ 25,798
Interest-bearing deposits in other institutions 80 107 92 49 11 328 53
Federal funds sold 6 5 1 3 4 15 20
Investment securities:
Taxable interest 162 159 223 218 241 762 1,106
Tax-exempt interest 560 579 630 637 686 2,406 2,913
Dividends on stock 60   37 40 112 30   249 104  
Total interest and dividend income 11,564   11,330 10,902 10,199 7,821   43,995 29,994  
INTEREST EXPENSE
Deposits 1,530 1,468 1,227 1,125 953 5,350 3,618
Short-term borrowings 101 202 273 177 34 753 322
Other borrowings 131   148 125 140 86   544 250  
Total interest expense 1,762   1,818 1,625 1,442 1,073   6,647 4,190  
 
NET INTEREST INCOME 9,802 9,512 9,277 8,757 6,748 37,348 25,804
 
Provision for loan losses 430   280 170 165 255   1,045 570  
 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

9,372   9,232 9,107 8,592 6,493   36,303 25,234  
NONINTEREST INCOME
Service charges on deposit accounts 478 479 449 469 497 1,875 1,940
Investment securities gains, net - 398 - 488 - 886 303
Earnings on bank-owned life insurance 115 109 98 109 106 431 403
Gains on sale of loans 106 255 231 234 97 826 419
Other income 219   200 211 211 200   841 894  
Total noninterest income 918   1,441 989 1,511 900   4,859 3,959  
 
NONINTEREST EXPENSE
Salaries and employee benefits 3,134 3,725 3,203 3,696 2,509 13,758 10,249
Occupancy expense 449 476 433 488 319 1,846 1,252
Equipment expense 261 242 266 281 291 1,050 991
Data processing costs 416 468 588 320 407 1,792 1,335
Ohio state franchise tax 186 186 186 186 184 744 632
Federal deposit insurance expense 165 165 135 68 42 533 438
Professional fees 522 434 423 373 384 1,752 1,441
Net (gain) loss on other real estate owned (58 ) 18 15 55 (366 ) 30 (119 )
Advertising expenses 161 248 164 248 130 821 734
Core deposit intangible amortization 98 101 103 72 10 374 40
Merger expense 28 338 307 387 - 1,060 -
Other expense 855   896 881 1,093 1,047   3,725 3,879  
Total noninterest expense 6,217   7,297 6,704 7,267 4,957   27,485 20,872  
 
Income before income taxes 4,073 3,376 3,392 2,836 2,436 13,677 8,321
Income taxes 1,687   914 885 736 776   4,222 1,905  
 
NET INCOME $ 2,386   $ 2,462 $ 2,507 $ 2,100 $ 1,660   $ 9,455 $ 6,416  
 
 
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
(Dollar amounts in thousands, except per share amounts)
             
For the Three Months Ended For the Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2017 2017 2017 2017 2016 2017 2016
Per common share data
Net income per common share - basic $ 0.73 $ 0.77 $ 0.84 $ 0.78 $ 0.74 $ 3.12 $ 3.04
Net income per common share - diluted $ 0.73 $ 0.76 $ 0.83 $ 0.78 $ 0.73 $ 3.10 $ 3.03
Dividends declared per share $ 0.27 $ 0.27 $ 0.27 $ 0.27 $ 0.27 $ 1.08 $ 1.08
Book value per share (period end) $ 37.25 $ 36.86 $ 36.49 $ 35.42 $ 34.14 $ 37.25 $ 34.14
Tangible book value per share (period end) (2) (3) $ 31.71 $ 31.21 $ 30.77 $ 28.76 $ 32.10 $ 31.71 $ 32.10
Dividend payout ratio 36.38% 35.22% 34.58% 36.00% 36.63% 35.52% 36.18%
Dividends declared $ 868 $ 867 $ 867 $ 756 $ 608 $ 3,358 $ 2,318
Dividend yield 2.24% 2.34% 2.14% 2.39% 2.79% 2.24% 2.79%
Average shares outstanding - basic 3,215,300 3,212,335 3,000,451 2,679,816 2,251,412 3,028,950 2,107,857
Average shares outstanding - diluted 3,231,791 3,223,753 3,014,140 2,692,015 2,264,712 3,045,779 2,119,214
Period ending shares outstanding 3,217,716 3,214,737 3,211,748 2,803,557 2,254,253 3,217,716 2,254,253
 
Selected ratios
Return on average assets 0.86% 0.90% 0.94% 0.84% 0.85% 0.88% 0.85%
Return on average equity 7.72% 8.12% 9.34% 8.73% 9.02% 8.52% 9.33%
Return on average tangible common equity (2) (4) 9.05% 9.57% 11.30% 10.49% 9.69% 10.15% 10.01%
Yield on earning assets 4.51% 4.52% 4.45% 4.45% 4.43% 4.48% 4.37%
Cost of interest bearing liabilities 0.89% 0.92% 0.83% 0.78% 0.77% 0.86% 0.75%
Net interest spread 3.62% 3.60% 3.62% 3.67% 3.66% 3.63% 3.61%
Net interest margin 3.84% 3.81% 3.80% 3.84% 3.84% 3.82% 3.79%
Efficiency (1) 55.58% 63.96% 63.30% 68.58% 62.54% 62.40% 66.63%
Equity to assets at period end 10.83% 10.96% 10.94% 9.29% 9.77% 10.83% 9.77%
 

(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.

(2)

See reconciliation of non-GAAP measures below

(3)

Calculated by dividing tangible common equity by shares outstanding

(4)

Calculated by dividing annualized net income for each period by average tangible common equity

 
     
For the Three Months Ended
December 31,   September 30,   June 30,   March 31,   December 31,
End of Period Loan Balances 2017     2017     2017     2017     2016
Commercial and industrial $ 101,346 $ 99,314 $ 97,160 $ 91,777 $ 60,630
Real estate - construction 47,017 40,760 35,571 29,238 23,709
Real estate - mortgage:
Residential 318,157 316,191 308,519 300,508 270,830
Commercial 437,947 403,135 406,670 395,102 249,490
Consumer installment 18,746 19,141 19,944 20,533 4,481
Total $ 923,213 $ 878,541 $ 867,864 $ 837,158 $ 609,140
 
December 31, September 30, June 30, March 31, December 31,
Asset quality data 2017 2017 2017 2017 2016
(Dollar amounts in thousands)
Nonaccrual loans $ 8,433 $ 8,525 $ 10,213 $ 6,545 $ 5,892
Troubled debt restructuring 4,982 5,608 5,990 5,515 6,151
90 day past due and accruing - 268 199 35 -
Nonperforming loans 13,415 14,401 16,402 12,095 12,043
Other real estate owned 212 557 650 1,634 934
Nonperforming assets $ 13,627 $ 14,958 $ 17,052 $ 13,729 $ 12,977
 
 
Allowance for loan losses $ 7,190 $ 6,852 $ 6,605 $ 6,720 $ 6,598
Allowance for loan losses/total loans 0.78% 0.78% 0.76% 0.80% 1.08%
Net charge-offs (recoveries):
Quarter-to-date $ 92 $ 33 $ 285 $ 43 $ (9)
Year-to-date

$

453

$

361

$

328

$

43

$

357
Net charge-offs to average loans, annualized
Quarter-to-date 0.04% 0.02% 0.13% 0.02% -0.01%
Year-to-date 0.05% 0.06% 0.08% 0.02% 0.06%
Nonperforming loans/total loans 1.45% 1.64% 1.89% 1.44% 1.98%
Allowance for loan losses/nonperforming loans 53.60% 47.58% 40.27% 55.56% 54.79%
Nonperforming assets/total assets 1.23% 1.38% 1.59% 1.28% 1.65%
 
Reconciliation of Common Stockholders' Equity to Tangible Common Equity For the Three Months Ended For the Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2017     2017     2017     2017     2016 2017 2016
Stockholders' Equity $ 119,863 $ 118,494 $ 117,202 $ 99,315 $ 76,960 $ 119,863 $ 76,960
Less Goodwill and other intangibles 17,820 18,147 18,383 18,697 4,595 17,820 4,595
Tangible Common Equity $ 102,043 $ 100,347 $ 98,819 $ 80,618 $ 72,365 $ 102,043 $ 72,365
 
Average Stockholders' Equity

$

122,586

$

120,310

$

107,615

$

97,585

$

72,979

$

110,966

$

68,741
Less Average Goodwill and other intangibles 17,987 18,251 18,633 16,402 5,004 17,818 4,615
Average Tangible Common Equity $ 104,599 $ 102,059 $ 88,982 $ 81,183 $ 67,975 $ 93,148

$

64,126
 

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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