Middlefield Banc Corp.

01/24/2020 | Press release | Distributed by Public on 01/24/2020 07:15

Middlefield Banc Corp. Reports Record 2019 Full Year Earnings

MIDDLEFIELD, Ohio--(BUSINESS WIRE)-- Middlefield Banc Corp. (NASDAQ: MBCN) today reported record financial results for the twelve months ended December 31, 2019.

2019 Financial Highlights (on a year-over-year basis unless noted):

  • Net income increased 2.3% to a record $12.7 million
  • Earnings per diluted share increased 2.1% to a record $1.95 per share
  • Return on average common equity was 9.35%, compared to 9.94%
  • Return on average tangible common equity(1) was 10.72%, compared to 11.57%
  • Book value per share was up 8.5% to a record $21.45 per share
  • Tangible book value(1) per share was up 10.0% to a record $18.78 per share
  • Total net loans decreased 0.7% to $977.5 million
  • Net interest income improved 2.3% to $41.4 million
  • Total noninterest income was up 29.9% to $4.8 million
  • Noninterest expense was up only 4.5%
  • Equity to assets strengthened to 11.65%, compared to 10.28%
  • All per share data has been adjusted to reflect the November 8, 2019 two-for-one stock split

'Middlefield achieved record annual earnings, earnings per share, and book value for the year ended December 31, 2019, despite a more challenging banking landscape,' stated Thomas G. Caldwell, President and Chief Executive Officer. 'During the year, we were able to successfully offset macro related pressures related to a declining rate environment and significant competition for loans and deposits, as annual noninterest income increased nearly 30%, core asset quality improved, and noninterest expenses only increased 4.5%, compared to the prior year. We continue to invest in developing new products and services for our customers, and further expanded our footprint in Central Ohio with our new Plain City branch that opened during the 2019 fourth quarter.

'During 2019, the Company repurchased 98,832 shares of our common stock, increased our quarterly cash dividend by 7.1%, and completed a two-for-one stock split to improve our trading liquidity. These actions reflect management and the board's optimism for our future and commitment to creating value for all shareholders.

'As we look to 2020 and beyond, we expect market conditions will remain competitive. During this period, our strategy will remain focused on balancing loan growth with a conservative approach to risk. In addition, we will continue to pursue strategies aimed at diversifying sources of income, expanding our presence in Central Ohio, increasing our market share in our core Northeast Ohio markets, and investing in our platform to support our long-term growth opportunity,' concluded Mr. Caldwell.

Income Statement

For the 2019 full year, net interest income increased 2.3% to $41.4 million, compared to $40.4 million for the same period last year. The net interest margin for the 2019 twelve-month period was 3.68%, compared to 3.77% for the same period last year. Net interest income for the 2019 fourth quarter was $10.3 million, compared to $10.5 million for the 2018 fourth quarter. The net interest margin for the 2019 fourth quarter was 3.66%, compared to 3.76% for the same period of 2018.

For the 2019 full year, noninterest income increased 29.9% to $4.8 million, compared to $3.7 million for the same period last year. Noninterest income for the 2019 fourth quarter was $1.3 million, compared to $1.0 million for the 2018 fourth quarter.

For the 2019 full year, noninterest expense increased 4.5% to $30.0 million, compared to $28.7 million last year. For the 2019 fourth quarter, noninterest expense was $7.4 million, compared to $7.2 million for the same period last year.

'We have remained focused on managing risk and pricing on loans, while prudently controlling our funding costs on deposits,' said Donald L. Stacy, Chief Financial Officer. 'During the 2019 fourth quarter charge-offs were higher as a result of charging off $566,000 of acquired student loans during the quarter. We believe this was a one-time issue, and as our nonperforming assets at December 31, 2019 indicate, we expect charge-offs will return to more historical levels during the 2020 first quarter. Looking at our deposits, I am encouraged by the growth we experienced in core deposits during the fourth quarter, and we ended the quarter with a loan-to-deposit ratio of 96.4% at December 31, 2019 compared to 97.6% at December 31, 2018.'

Balance Sheet

Total assets at December 31, 2019, decreased 5.3% to $1.18 billion, from $1.25 billion at December 31, 2018. Net loans at December 31, 2019, were $977.5 million, compared to $984.7 million at December 31, 2018. The 0.7% year-over-year decrease in total net loans was a result of a 14.2% decline in consumer installment loans, and a 5.7% decline in commercial real estate loans, partially offset by an 11.5% increase in real estate construction loans, a 6.8% increase in commercial and industrial loans, and a 3.1% increase in residential real estate loans.

Total deposits at December 31, 2019, were $1.02 billion, compared to $1.02 billion at December 31, 2018. The 0.5% year-over-year increase in deposits was primarily a result of higher time deposits and interest-bearing deposits. The investment portfolio, which is entirely classified as available for sale, was $105.7 million at December 31, 2019, compared with $98.3 million at December 31, 2018.

Stockholders' Equity and Dividends

At December 31, 2019, stockholders' equity increased 7.4% to $137.8 million, compared to $128.3 million at December 31, 2018. On a per share basis, shareholders' equity at December 31, 2019, was a record $21.45 compared to $19.77 at the same period last year.

At December 31, 2019, tangible stockholders' equity(1) increased 8.9% to $120.6 million, compared to $110.8 million at December 31, 2018. On a per share basis, tangible stockholders' equity(1) was $18.78 at December 31, 2019, compared to $17.08 at December 31, 2018.

For the 2019 full year, the company declared cash dividends of $0.57 per share, compared to $0.59 per share for the same period last year. The dividend payout ratio for the 2019 twelve-month period was 28.99%. At December 31, 2019, the company had an equity to assets leverage ratio of 11.65%, compared to 10.28% at December 31, 2018.

Asset Quality

The provision for loan losses for the 2019 fourth quarter was $460,000 versus $210,000 for the same period last year. Nonperforming assets at December 31, 2019, were $8.8 million, compared to $7.8 million at December 31, 2018. Net charge-offs for the 2019 fourth quarter were $693,000, or 0.28% of average loans, annualized, compared to $276,000, or 0.11% of average loans, annualized at December 31, 2018.

The provision for loan losses for the year ended December 31, 2019 was $890,000 compared to $840,000 for the year ended December 31, 2018. For the 2019 twelve-month period, net charge-offs were $1.6 million, or 0.16% of average loans, compared to $602,000, or 0.06% of average loans for the 2018 twelve-month period. The allowance for loan losses at December 31, 2019, stood at $6.8 million, or 0.69% of total loans, compared to $7.4 million or 0.75% of total loans at December 31, 2018.

About Middlefield Banc Corp.

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is the bank holding company of The Middlefield Banking Company with total assets of $1.18 billion at December 31, 2019. The bank operates 16 full-service banking centers and an LPL Financial® brokerage office serving Beachwood, Chardon, Cortland, Dublin, Garrettsville, Mantua, Middlefield, Newbury, Orwell, Plain City, Powell, 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)

December 31,

September 30,

June 30,

March 31,

December 31,

Balance Sheets (period end)

2019

2019

2019

2019

2018

ASSETS
Cash and due from banks

$

35,113

$

118,956

$

133,372

$

121,045

$

107,933

Federal funds sold

-

1,069

2,010

-

-

Cash and cash equivalents

35,113

120,025

135,382

121,045

107,933

Equity securities, at fair value

710

628

660

674

616

Investment securities available for sale, at fair value

105,733

105,041

98,809

98,114

98,322

Loans held for sale

1,220

791

431

1,230

597

Loans

984,258

999,282

998,232

1,004,484

992,109

Less allowance for loan and lease losses

6,768

7,001

7,304

7,206

7,428

Net loans

977,490

992,281

990,928

997,278

984,681

Premises and equipment, net

17,874

17,182

16,788

15,741

13,003

Goodwill

15,071

15,071

15,071

15,071

15,071

Core deposit intangibles

2,056

2,141

2,227

2,312

2,397

Bank-owned life insurance

16,511

16,403

16,294

16,185

16,080

Accrued interest receivable and other assets

10,697

11,015

11,832

13,285

9,698

TOTAL ASSETS

$

1,182,475

$

1,280,578

$

1,288,422

$

1,280,935

$

1,248,398

December 31,

September 30,

June 30,

March 31,

December 31,

2019

2019

2019

2019

2018

LIABILITIES
Deposits:
Noninterest-bearing demand

$

191,370

$

199,235

$

198,817

$

194,298

$

203,410

Interest-bearing demand

107,844

107,033

94,266

107,246

92,104

Money market

160,826

155,419

152,885

178,668

196,685

Savings

192,003

182,005

194,505

184,662

222,954

Time

368,800

390,721

411,034

375,357

300,914

Total deposits

1,020,843

1,034,413

1,051,507

1,040,231

1,016,067

Short-term borrowings

5,075

92,000

85,000

91,000

90,398

Other borrowings

12,750

12,359

12,449

11,518

8,803

Accrued interest payable and other liabilities

6,032

5,893

5,206

6,487

4,840

TOTAL LIABILITIES

1,044,700

1,144,665

1,154,162

1,149,236

1,120,108

STOCKHOLDERS' EQUITY *
Common stock, no par value; 10,000,000 shares authorized, 7,294,792 shares issued, 6,423,630 shares outstanding as of December 31, 2019

86,617

86,617

86,590

86,437

85,925

Retained earnings

65,063

62,886

60,517

58,139

56,037

Accumulated other comprehensive income (loss)

1,842

2,157

1,377

641

(154

)

Treasury stock, at cost; 871,162 shares as of December 31, 2019

(15,747

)

(15,747

)

(14,224

)

(13,518

)

(13,518

)

TOTAL STOCKHOLDERS' EQUITY

137,775

135,913

134,260

131,699

128,290

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,182,475

$

1,280,578

$

1,288,422

$

1,280,935

$

1,248,398

* All share and per share information has been adjusted for a two-for-one stock split completed on November 8, 2019
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
(Dollar amounts in thousands)

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

2019

2019

2019

2019

2018

2019

2018

INTEREST AND DIVIDEND INCOME
Interest and fees on loans

$

12,392

$

12,804

$

12,706

$

12,488

$

12,467

$

50,390

$

46,576

Interest-earning deposits in other institutions

124

193

169

187

146

673

558

Federal funds sold

22

24

25

7

17

78

46

Investment securities:
Taxable interest

197

206

214

179

182

796

688

Tax-exempt interest

661

613

553

565

589

2,392

2,262

Dividends on stock

40

45

53

58

58

196

227

Total interest and dividend income

13,436

13,885

13,720

13,484

13,459

54,525

50,357

INTEREST EXPENSE
Deposits

3,014

3,173

3,277

2,945

2,828

12,409

8,631

Short-term borrowings

34

42

79

213

78

368

842

Other borrowings

80

92

95

96

92

363

436

Total interest expense

3,128

3,307

3,451

3,254

2,998

13,140

9,909

NET INTEREST INCOME

10,308

10,578

10,269

10,230

10,461

41,385

40,448

Provision for loan losses

460

80

110

240

210

890

840

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

9,848

10,498

10,159

9,990

10,251

40,495

39,608

NONINTEREST INCOME
Service charges on deposit accounts

577

571

530

508

498

2,186

1,914

Investment securities gains on sale, net

-

4

190

-

-

194

-

Gain (loss) on equity securities

82

(32

)

(14

)

58

(55

)

94

(9

)

Earnings on bank-owned life insurance

108

109

109

105

110

431

428

Gains on sale of loans

148

128

98

59

67

433

231

Other income

390

325

386

402

357

1,503

1,164

Total noninterest income

1,305

1,105

1,299

1,132

977

4,841

3,728

NONINTEREST EXPENSE
Salaries and employee benefits

4,049

4,272

4,078

4,124

4,065

16,523

15,749

Occupancy expense

580

535

496

553

465

2,164

1,933

Equipment expense

270

244

291

235

273

1,040

969

Data processing costs

614

580

549

465

446

2,208

1,806

Ohio state franchise tax

262

262

261

259

220

1,044

823

Federal deposit insurance expense

-

-

100

130

100

230

550

Professional fees

448

401

403

431

364

1,683

1,482

Advertising expense

128

202

200

203

227

733

921

Software amortization expense

159

182

152

145

145

638

605

Core deposit intangible amortization

85

86

85

85

87

341

352

Other expense

783

909

867

870

851

3,429

3,553

Total noninterest expense

7,378

7,673

7,482

7,500

7,243

30,033

28,743

Income before income taxes

3,775

3,930

3,976

3,622

3,985

15,303

14,593

Income taxes

634

661

686

611

560

2,592

2,162

NET INCOME

$

3,141

$

3,269

$

3,290

$

3,011

$

3,425

$

12,711

$

12,431

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
(Dollar amounts in thousands, except per share and 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,

2019

2019

2019

2019

2018

2019

2018

Per common share data (5)
Net income per common share - basic

$

0.48

$

0.51

$

0.51

$

0.46

$

0.53

$

1.96

$

1.92

Net income per common share - diluted

$

0.49

$

0.50

$

0.50

$

0.46

$

0.53

$

1.95

$

1.91

Dividends declared per share

$

0.15

$

0.14

$

0.14

$

0.14

$

0.14

$

0.57

$

0.59

Book value per share (period end)

$

21.45

$

21.16

$

20.70

$

20.22

$

19.77

$

21.45

$

19.77

Tangible book value per share (period end) (2) (3)

$

18.78

$

18.48

$

18.04

$

17.55

$

17.08

$

18.78

$

17.08

Dividends declared

$

964

$

900

$

912

$

909

$

908

$

3,685

$

3,779

Dividend yield

2.28

%

2.37

%

2.74

%

2.76

%

2.62

%

2.18

%

2.76

%

Dividend payout ratio

30.69

%

27.53

%

27.72

%

30.19

%

26.51

%

28.99

%

30.40

%

Average shares outstanding - basic

6,423,543

6,458,258

6,502,508

6,498,278

6,478,360

6,470,408

6,459,908

Average shares outstanding - diluted

6,455,387

6,479,066

6,514,946

6,510,568

6,500,298

6,502,806

6,487,814

Period ending shares outstanding

6,423,630

6,423,130

6,485,170

6,512,740

6,488,664

6,423,630

6,488,664

Selected ratios
Return on average assets

1.04

%

1.07

%

1.09

%

1.01

%

1.15

%

1.05

%

1.09

%

Return on average equity

8.87

%

9.41

%

9.79

%

9.36

%

10.52

%

9.35

%

9.94

%

Return on average tangible common equity (2) (4)

10.11

%

10.76

%

11.23

%

10.80

%

12.17

%

10.72

%

11.57

%

Efficiency (1)

61.75

%

63.93

%

63.03

%

64.30

%

61.60

%

63.25

%

63.29

%

Equity to assets at period end

11.65

%

10.61

%

10.42

%

10.28

%

10.28

%

11.65

%

10.28

%

Noninterest expense to average assets

0.61

%

0.64

%

0.62

%

0.62

%

0.62

%

2.49

%

2.51

%

(1) The efficiency ratio is calculated by dividing noninterest expense less amortization of intangibles by the sum of net interest income on a fully taxable equivalent basis plus noninterest 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
(5) All share and per share information has been adjusted for a two-for-one stock split completed on November 8, 2019
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights

For the Three Months Ended

For the Twelve Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

December 31,

2019

2019

2019

2019

2018

2019

2018

Yields
Interest-earning assets:
Loans receivable (2)

4.97

%

5.09

%

5.08

%

5.07

%

5.09

%

5.06

%

4.91

%

Investment securities (2)

3.94

%

3.80

%

3.79

%

3.80

%

3.73

%

3.77

%

3.67

%

Interest-earning deposits with other banks

1.65

%

2.31

%

2.21

%

2.26

%

2.08

%

2.11

%

1.90

%

Total interest-earning assets

4.75

%

4.86

%

4.86

%

4.85

%

4.82

%

4.83

%

4.68

%

Deposits:
Interest-bearing demand deposits

0.41

%

0.39

%

0.36

%

0.30

%

0.31

%

0.36

%

0.23

%

Money market deposits

1.41

%

1.43

%

1.40

%

1.58

%

1.56

%

1.46

%

1.11

%

Savings deposits

0.62

%

0.68

%

0.69

%

0.81

%

0.85

%

0.70

%

0.65

%

Certificates of deposit

2.18

%

2.18

%

2.35

%

2.15

%

1.99

%

2.22

%

1.83

%

Total interest-bearing deposits

1.43

%

1.48

%

1.56

%

1.46

%

1.38

%

1.48

%

1.11

%

Non-Deposit Funding:
Borrowings

2.52

%

3.03

%

2.70

%

2.57

%

3.54

%

2.63

%

2.20

%

Total interest-bearing liabilities

1.46

%

1.51

%

1.59

%

1.52

%

1.43

%

1.52

%

1.18

%

Cost of deposits

1.15

%

1.20

%

1.26

%

1.17

%

1.09

%

1.20

%

0.90

%

Cost of funds

1.17

%

1.23

%

1.29

%

1.24

%

1.14

%

1.23

%

0.97

%

Net interest margin (1)

3.66

%

3.72

%

3.65

%

3.70

%

3.76

%

3.68

%

3.77

%

(1) Net interest margin represents net interest income as a percentage of average interest-earning assets.
(2) Tax-equivalent adjustments to calculate the yield on tax-exempt securities and loans were determined using an effective tax rate of 21%.

For the Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

End of Period Loan Balances

2019

2019

2019

2019

2018

(Dollar amounts in thousands)
Commercial and industrial

$

89,527

$

85,861

$

85,520

$

85,756

$

83,857

Real estate - construction

63,246

57,564

54,619

58,019

56,731

Real estate - mortgage:
Residential

347,047

347,739

345,830

340,483

336,487

Commercial

470,027

492,914

496,300

504,289

498,247

Consumer installment

14,411

15,204

15,963

15,937

16,787

Total

$

984,258

$

999,282

$

998,232

$

1,004,484

$

992,109

December 31,

September 30,

June 30,

March 31,

December 31,

Asset quality data

2019

2019

2019

2019

2018

(Dollar amounts in thousands)
Nonaccrual loans

$

8,689

$

10,053

$

10,671

$

10,472

$

6,595

90 day past due and accruing

-

-

58

-

945

Nonperforming loans (3)

8,689

10,053

10,729

10,472

7,540

Other real estate owned

155

89

89

126

270

Nonperforming assets

$

8,844

$

10,142

$

10,818

$

10,598

$

7,810

Allowance for loan losses

$

6,768

$

7,001

$

7,304

$

7,206

$

7,428

Allowance for loan losses/total loans

0.69

%

0.70

%

0.73

%

0.72

%

0.75

%

Net charge-offs:
Quarter-to-date

$

693

$

383

$

12

$

462

$

276

Year-to-date

1,550

857

474

462

602

Net charge-offs to average loans, annualized:
Quarter-to-date

0.28

%

0.15

%

0.00

%

0.19

%

0.11

%

Year-to-date

0.16

%

0.11

%

0.10

%

0.19

%

0.06

%

Nonperforming loans/total loans

0.88

%

1.01

%

1.07

%

1.04

%

0.76

%

Allowance for loan losses/nonperforming loans

77.89

%

69.64

%

68.08

%

68.81

%

98.51

%

Nonperforming assets/total assets

0.75

%

0.79

%

0.84

%

0.83

%

0.63

%

(3) Nonperforming loans exclude troubled debt restructurings that are performing in accordance with their terms over a prescribed period of time
Reconciliation of Common Stockholders' Equity to Tangible Common Equity *

For the Three Months Ended

For the Twelve Months Ended

(Dollar amounts in thousands)

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

December 31,

2019

2019

2019

2019

2018

2019

2018

Stockholders' Equity

$

137,775

$

135,913

$

134,260

$

131,699

$

128,290

$

137,775

$

128,290

Less Goodwill and other intangibles

17,127

17,212

17,298

17,383

17,468

17,127

17,468

Tangible Common Equity

$

120,648

$

118,701

$

116,962

$

114,316

$

110,822

$

120,648

$

110,822

Shares outstanding

6,423,630

6,423,130

6,485,170

6,512,740

6,488,664

6,423,630

6,488,664

Tangible book value per share

$

18.78

$

18.48

$

18.04

$

17.55

$

17.08

$

18.78

$

17.08

Reconciliation of Average Equity to Return on Average 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,

2019

2019

2019

2019

2018

2019

2018

Average Stockholders' Equity

$

140,475

$

137,843

$

134,836

$

130,450

$

129,208

$

135,900

$

125,074

Less Average Goodwill and other intangibles

17,169

17,254

17,339

17,422

17,510

17,296

17,641

Average Tangible Common Equity

$

123,306

$

120,589

$

117,497

$

113,028

$

111,698

$

118,604

$

107,433

Net income

$

3,141

3,269

3,290

3,011

3,425

12,711

12,431

Return on average tangible common equity (annualized)

10.11

%

10.76

%

11.23

%

10.80

%

12.17

%

10.72

%

11.57

%

* All share and per share information has been adjusted for a two-for-one stock split completed on November 8, 2019

View source version on businesswire.com: https://www.businesswire.com/news/home/20200124005030/en/

Company Contact:
Thomas G. Caldwell
President/Chief Executive Officer
Middlefield Banc Corp.
(440) 632-1666 Ext. 3200
[email protected]

Investor and Media Contact:
Andrew M. Berger
Managing Director
SM Berger & Company, Inc.
(216) 464-6400
[email protected]

Source: Middlefield Banc Corp.