Middlefield Banc Corp. Reports 2018 First Quarter Financial Results

MIDDLEFIELD, Ohio--()--Middlefield Banc Corp. (NASDAQ:MBCN) today reported financial results for the 2018 first quarter ended March 31, 2018.

“The 2018 first quarter reflects our optimism toward both the near- and long-term outlook of the bank. Throughout the operation there was a high level of activity as we continued investments required to support Middlefield’s impressive growth that has occurred over the past several years”

2018 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • Net income increased 24.0% to $2.6 million
  • Earnings per diluted share increased 2.6% to $0.80 per share, which includes a 20.3% increase in the average number of diluted shares outstanding
  • Return on average equity was 8.73% for the quarter ended March 31, 2018, up from 7.72% for the quarter ended December 31, 2017
  • Return on average tangible common equity(1) was 10.23% for the quarter ended March 31, 2018, up from 9.05% for the quarter ended December 31, 2017
  • Total loans increased 11.4% to $932.4 million, and were up 1.0% from the 2017 fourth quarter
  • Net interest income improved 13.1% to $9.9 million
  • Noninterest expenses up only 1.0%
  • Equity to assets was 10.86%, compared to 9.29%

“The 2018 first quarter reflects our optimism toward both the near- and long-term outlook of the bank. Throughout the operation there was a high level of activity as we continued investments required to support Middlefield’s impressive growth that has occurred over the past several years,” stated Thomas G. Caldwell, President and Chief Executive Officer. “During the quarter, Middlefield invested in its team as we added seasoned commercial lenders to our Beachwood and Mentor markets. In addition, to achieve continued loan growth, we proactively increased our level of deposits, which grew 11.4% in the first quarter, compared with the same period a year ago.

“We are excited about breaking ground on our fourth branch in Central Ohio, which will be in Powell and is expected to open late summer 2018. As this and other investments begin to produce returns, we expect profitability and overall activity to increase as 2018 progresses.”

Net income for the 2018 first quarter was $2.6 million, or $0.80 per diluted share, compared to net income for the 2017 first quarter of $2.1 million, or $0.78 per diluted share.

Annualized returns on average equity (“ROE”) and average assets (“ROA”) were 8.73% and 0.94%, respectively, for the 2018 first quarter, compared with 8.73% and 0.84% for the same period last year.

Return on average tangible common equity(1) was 10.23% for the 2018 first quarter, compared with 10.49% for the 2017 first quarter.

Income Statement

Net interest income for the 2018 first quarter was $9.9 million, compared to nearly $8.8 million for the 2017 first quarter. The 13.1% increase in net interest income for the 2018 first quarter was primarily a result of a 20.4% increase in interest and fees on loans. The net interest margin for the 2018 first quarter was 3.82%, compared to 3.84% for the same period of 2017.

Noninterest income for the 2018 first quarter was $786,000, compared to $1.5 million for the same period last year. The 48.0% decline in noninterest income was primarily due to a reduction in investment securities gains and lower gains on the sale of loans primarily due to the company’s decision to stop selling student loans.

Noninterest expense for the 2018 first quarter was $7.3 million, an increase of approximately $78,000 from the 2017 first quarter. The one-time bonus payment made to all employees during the 2018 first quarter impacted noninterest expense by $190,000. Noninterest expense for the 2017 first quarter included $387,000 of additional operating expenses as a result of the Liberty acquisition that did not repeat in the 2018 first quarter.

“Asset quality remains strong despite the significant increase in assets resulting from year-over-year organic loan growth,” said Donald L. Stacy, Chief Financial Officer. “Over the past 12 months, we added nearly $96.7 million of new deposits, which, combined with higher rates on deposits, increased our deposit interest expense by $515,000. Loans to deposits was 98.7% at March 31, 2018 and March 31, 2017, respectively, and 105.1% at December 31, 2017. In addition, profitability during the 2018 first quarter was impacted by our decision to end our student loan program due to our former partner changing the structure of the program, which we believe increased our risk. As a result, gains on the sale of loans declined $230,000. Our net interest margin declined to 3.82% from 3.84% last year as a result of our cost of funds slightly outpacing the increase in the yield on earning assets. Nonperforming loans increased to $17.8 million, primarily due to one loan now classified as a troubled debt. We believe operating leverage will improve during 2018 as the investments made over the past three months start to produce returns.”

Balance Sheet

Total assets at March 31, 2018, increased 3.5% to $1.1 billion, compared to March 31, 2017. Net loans at March 31, 2018, increased 11.4% to $924.8 million, compared to $830.4 million at March 31, 2017. The year-over-year improvement in net loans was primarily a result of a 13.6% increase in commercial mortgage loans, a 5.4% increase in residential mortgage loans, an 8.8% increase in commercial and industrial loans, a 66.5% increase in real estate construction loans, partially offset by an 11.1% decline in consumer installment loans.

Total deposits at March 31, 2018, was $944.6 million, compared to $847.9 million at March 31, 2017. The 11.4% increase in deposits was a result of higher noninterest-bearing demand, savings, and time deposits, offset by lower money market deposits. During the first quarter, the company proactively grew deposits to reduce borrowings and support continued loan growth. The investment portfolio, classified as available for sale, was $91.3 million at March 31, 2018, compared with $110.5 million at March 31, 2017.

Stockholders’ Equity and Dividends

At the end of the 2018 first quarter, shareholders’ equity increased 21% to $120.2 million compared to $99.3 million at March 31, 2017. On a per share basis, shareholders’ equity at March 31, 2018, was $37.28 compared to $35.42 at the same period last year. Tangible stockholders’ equity(1) increased 27.0% to $102.4 million for the 2018 first quarter, compared to $80.6 million at March 31, 2017. On a per-share basis, tangible stockholders’ equity(1) was $31.78 at March 31, 2018, compared to $28.76 at March 31, 2017.

During the 2018 first quarter, the company paid cash dividends of $0.33 per share, which included a special one-time payment of $0.05 per share. This total dividend represented a payout ratio of 40.8%.

At March 31, 2018, the company had an equity to assets leverage ratio of 10.86%, compared to 9.29% at March 31, 2017.

Asset Quality

The provision for loan losses was $210,000 for the 2018 first quarter, compared to $165,000 for the same period a year ago. Nonperforming assets at March 31, 2018, were $18.0 million, compared to $13.7 million at March 31, 2017. The Company reported net recoveries of $151,000, or 0.06% of average loans, annualized during the 2018 first quarter, compared to net charge offs of $43,000, or 0.02% of average loans, annualized at March 31, 2017. The allowance for loan losses at March 31, 2018, stood at $7.6 million, or 0.81% of total loans, compared to $6.7 million or 0.80% of total loans at March 31, 2017.

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a bank holding company with total assets of $1.1 billion at March 31, 2018. 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)
(2018 unaudited)
 
March 31, December 31, September 30, June 30, March 31,
Balance Sheets (period end) 2018 2017 2017 2017 2017
ASSETS
Cash and due from banks $ 33,258 $ 39,886 $ 47,731 $ 37,971 $ 61,364
Federal funds sold -   -   1,200   1,600   1,000  
Cash and cash equivalents 33,258 39,886 48,931 39,571 62,364
Investment securities available for sale, at fair value 91,262 95,283 98,334 104,951 110,452
Equity securities 643 - - - -
Loans held for sale 937 463 5,930 9,791 9,462
Loans 932,374 923,213 878,541 867,864 837,158
Less allowance for loan and lease losses 7,551   7,190   6,852   6,605   6,720  
Net loans 924,823 916,023 871,689 861,259 830,438
Premises and equipment, net 12,225 11,853 11,768 11,511 11,481
Goodwill 15,071 15,071 15,299 15,435 15,646
Core deposit intangibles 2,658 2,749 2,848 2,948 3,051
Bank-owned life insurance 15,764 15,652 15,542 15,432 15,334
Other real estate owned 212 212 557 650 1,634
Accrued interest receivable and other assets 9,911   9,144   9,928   9,528   9,605  
TOTAL ASSETS $ 1,106,764   $ 1,106,336   $ 1,080,826   $ 1,071,076   $ 1,069,467  
 
March 31, December 31, September 30, June 30, March 31,
2018   2017   2017   2017   2017  
LIABILITIES
Deposits:
Noninterest-bearing demand $ 194,203 $ 192,438 $ 181,550 $ 172,199 $ 162,614
Interest-bearing demand 96,659 83,990 91,184 87,084 94,605
Money market 149,359 150,277 161,101 160,858 162,843
Savings 221,851 208,502 212,371 181,259 183,845
Time 282,501   242,987   251,449   245,383   243,944  
Total deposits 944,573 878,194 897,655 846,783 847,851
Short-term borrowings 18,671 74,707 20,274 63,388 76,213
Other borrowings 19,028 29,065 39,273 39,346 39,388
Accrued interest payable and other liabilities 4,340   4,507   5,130   4,357   6,700  
TOTAL LIABILITIES 986,612   986,473   962,332   953,874   970,152  
STOCKHOLDERS' EQUITY
Common equity 85,116 84,859 84,722 84,587 69,123
Retained earnings 48,927 47,431 45,913 44,318 42,678
Accumulated other comprehensive (loss) income (373 ) 1,091 1,377 1,815 1,032
Treasury stock (13,518 ) (13,518 ) (13,518 ) (13,518 ) (13,518 )
TOTAL STOCKHOLDERS' EQUITY 120,152   119,863   118,494   117,202   99,315  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,106,764   $ 1,106,336   $ 1,080,826   $ 1,071,076   $ 1,069,467  
 
         
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
(Dollar amounts in thousands)
(2018 unaudited)
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
Statements of Income 2018 2017 2017 2017 2017
 
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $ 11,054 $ 10,696 $ 10,443 $ 9,916 $ 9,180
Interest-bearing deposits in other institutions 119 80 107 92 49
Federal funds sold 14 6 5 1 3
Investment securities:
Taxable interest 169 162 159 223 218
Tax-exempt interest 525 560 579 630 637
Dividends on stock 59   60   37 40 112
Total interest and dividend income 11,940   11,564   11,330 10,902 10,199
INTEREST EXPENSE
Deposits 1,640 1,530 1,468 1,227 1,125
Short-term borrowings 276 101 202 273 177
Other borrowings 122   131   148 125 140
Total interest expense 2,038   1,762   1,818 1,625 1,442
 
NET INTEREST INCOME 9,902 9,802 9,512 9,277 8,757
 
Provision for loan losses 210   430   280 170 165

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

9,692   9,372   9,232 9,107 8,592
NONINTEREST INCOME
Service charges on deposit accounts 453 478 479 449 469
Investment securities gain on sale, net - - 398 - 488
Equity securities, unrealized gain 18 - - - -
Earnings on bank-owned life insurance 112 115 109 98 109
Gains on sale of loans 4 106 255 231 234
Other income 199   219   200 211 211
Total noninterest income 786   918   1,441 989 1,511
 
NONINTEREST EXPENSE
Salaries and employee benefits 3,979 3,134 3,725 3,203 3,696
Occupancy expense 536 449 476 433 488
Equipment expense 233 261 242 266 281
Data processing costs 477 416 468 588 320
Ohio state franchise tax 115 186 186 186 186
Federal deposit insurance expense 150 165 165 135 68
Professional fees 445 522 434 423 373
Net (gain) loss on other real estate owned (1 ) (58 ) 18 15 55
Advertising expenses 228 161 248 164 248
Core deposit intangible amortization 91 98 101 103 72
Merger expense - 28 338 307 387
Other expense 1,092   855   896 881 1,093
Total noninterest expense 7,345   6,217   7,297 6,704 7,267
 
Income before income taxes 3,133 4,073 3,376 3,392 2,836
Income taxes 528   1,687   914 885 736
 
NET INCOME $ 2,605   $ 2,386   $ 2,462 $ 2,507 $ 2,100
 
       
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
(Dollar amounts in thousands, except per share amount)
 
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2018 2017 2017 2017 2017
Per common share data
Net income per common share - basic $ 0.81 $ 0.73 $ 0.77 $ 0.84 $ 0.78
Net income per common share - diluted $ 0.80 $ 0.73 $ 0.76 $ 0.83 $ 0.78
Dividends declared per share $ 0.33 $ 0.27 $ 0.27 $ 0.27 $ 0.27
Book value per share (period end) $ 37.28 $ 37.25 $ 36.86 $ 36.49 $ 35.42
Tangible book value per share (period end) (2) (3) $ 31.78 $ 31.71 $ 31.21 $ 30.77 $ 28.76
Dividends declared $ 1,063 $ 868 $ 867 $ 867 $ 756
Dividend yield 2.69% 2.24% 2.34% 2.14% 2.39%
Dividend payout ratio 40.81% 36.38% 35.22% 34.58% 36.00%
Average shares outstanding - basic 3,220,262 3,215,300 3,212,335 3,000,451 2,679,816
Average shares outstanding -diluted 3,238,069 3,231,791 3,223,753 3,014,140 2,692,015
Period ending shares outstanding 3,222,984 3,217,716 3,214,737 3,211,748 2,803,557
 
Selected ratios
Return on average assets 0.94% 0.86% 0.90% 0.94% 0.84%
Return on average equity 8.73% 7.72% 8.12% 9.34% 8.73%
Return on average tangible common equity (2) (4) 10.23% 9.05% 9.57% 11.30% 10.49%
Yield on earning assets 4.57% 4.51% 4.52% 4.45% 4.45%
Cost of interest bearing liabilities 1.03% 0.89% 0.92% 0.83% 0.78%
Net interest spread 3.54% 3.62% 3.60% 3.62% 3.67%
Net interest margin 3.82% 3.84% 3.81% 3.80% 3.84%
Efficiency (1) 67.00% 55.58% 63.96% 63.30% 68.58%
Equity to assets at period end 10.86% 10.83% 10.96% 10.94% 9.29%
 

(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
March 31, December 31, September 30, June 30, March 31,
End of Period Loan Balances 2018 2017 2017 2017 2017
Commercial and industrial $ 99,809 $ 101,346 $ 99,314 $ 97,160 $ 91,777
Real estate - construction 48,687 47,017 40,760 35,571 29,238
Real estate - mortgage:
Residential 316,856 318,157 316,191 308,519 300,508
Commercial 448,766 437,947 403,135 406,670 395,102
Consumer installment 18,256 18,746 19,141 19,944 20,533
Total $ 932,374 $ 923,213 $ 878,541 $ 867,864 $ 837,158
 
March 31, December 31, September 30, June 30, March 31,
Asset quality data 2018 2017 2017 2017 2017
(Dollar amounts in thousands)
Non-accrual loans $ 8,747 $ 8,433 $ 8,525 $ 10,213 $ 6,545
Troubled debt restructuring 9,071 4,982 5,608 5,990 5,515
90 day past due and accruing - - 268 199 35
Non-performing loans 17,818 13,415 14,401 16,402 12,095
Other real estate owned 212 212 557 650 1,634
Non-performing assets $ 18,030 $ 13,627 $ 14,958 $ 17,052 $ 13,729
 
 
Allowance for loan losses $ 7,551 $ 7,190 $ 6,852 $ 6,605 $ 6,720
Allowance for loan losses/total loans 0.81% 0.78% 0.78% 0.76% 0.80%
Net charge-offs (recoveries):
Quarter-to-date $

(151

)

$ 92 $ 33 $ 285 $ 43
Net charge-offs to average loans, annualized
Quarter-to-date -0.06% 0.04% 0.02% 0.13% 0.02%
Nonperforming loans/total loans 1.91% 1.45% 1.64% 1.89% 1.44%
Allowance for loan losses/nonperforming loans 42.38% 53.60% 47.58% 40.27% 55.56%
Nonperforming assets/total assets 1.63% 1.23% 1.38% 1.59% 1.28%
 
Reconciliation of Common Stockholders' Equity to Tangible Common Equity For the Three Months Ended
(Dollar amounts in thousands) March 31, December 31, September 30, June 30, March 31,
(Average shares outstanding - diluted) 2018 2017 2017 2017 2017
 
Stockholders' Equity $ 120,152 $ 119,863 $ 118,494 $ 117,202 $ 99,315
Less Goodwill and other intangibles 17,729 17,820 18,147 18,383 18,697
Tangible Common Equity $ 102,423 $ 102,043 $ 100,347 $ 98,819 $ 80,618
 
Average Stockholders' Equity $ 121,001 $ 122,586 $ 120,310 $ 107,615 $ 97,585
Less Average Goodwill and other intangibles 17,773 17,987 18,251 18,633 16,402
Average Tangible Common Equity $ 103,228 $ 104,599 $ 102,059 $ 88,982 $ 81,183
 

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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Middlefield Banc Corp. Reports 2018 First Quarter Financial Results

Middlefield Banc Corp.