Middlefield Banc Corp. Reports 2020 Full Year Financial Results

MIDDLEFIELD, Ohio, Jan. 26, 2021 (GLOBE NEWSWIRE) -- Middlefield Banc Corp. MBCN today reported financial results for the three and twelve months ended December 31, 2020.

2020 Financial Highlights (on a year-over-year basis unless noted):

• Net income decreased 34.3% to $8.3 million, as a result of a $9.0 million annual increase in the provision for loan losses
• Net interest income improved 4.8% to $43.4 million
• Total noninterest income was up 23.7% to $6.0 million
• Noninterest expense declined 0.8%
• Pre-tax, pre-provision for loan losses⁽¹⁾ income increased 21.0% to $19.6 million
• Allowance for loan losses increased 98.9% to $13.5 million
• Allowance for loan losses to nonperforming loans was 171.3%, compared to 76.2%
• Book value per share was up 5.1% to a record $22.54 per share
• Tangible book value⁽¹⁾ per share was up 6.0% to a record $19.91 per share
• Total loans increased 12.2% to $1.10 billion
• Middlefield remains well capitalized with an equity to assets ratio of 10.3% at December 31, 2020
  

Thomas G. Caldwell, President and Chief Executive Officer, stated: "Our strong asset quality, our focus on supporting our local communities, and the commitment and dedication of our team members helped us successfully navigate the unprecedented effects of the COVID-19 pandemic. Despite significant operating and economic challenges, pre-tax, pre-provision for loan losses⁽¹⁾ income increased 21.0% year-over-year, reflecting strong core earnings growth, higher noninterest income, and proactive expense management. In addition, we ended the year with record assets and a record book value per share, representing the seventh consecutive year of annual growth in book value."

"Unfortunately, the COVID-19 pandemic continues to have a severe impact on the economy. As a result, we are focused on supporting our communities, proactively controlling asset quality, and strengthening our balance sheet. I believe this conservative approach will allow us to continue to successfully navigate near-term economic uncertainty, while providing the Company with flexibility to pursue long-term growth opportunities."  

"On behalf of Middlefield's leadership team and Board of Directors, I would like to thank our customers, employees, communities, and shareholders for their support throughout this challenging period," concluded Mr. Caldwell.

Income Statement
For the 2020 full year, net interest income increased 4.8% to $43.4 million, compared to $41.4 million for the same period last year. The net interest margin for the 2020 twelve-month period was 3.54%, compared to 3.68% for the same period last year. Net interest income for the 2020 fourth quarter was $11.3 million, compared to $10.3 million for the 2019 fourth quarter. The 9.3% increase in net interest income for the 2020 fourth quarter was largely a result of a 45.8% decrease in total interest expense. The net interest margin for the 2020 fourth quarter was 3.49%, compared to 3.65% for the same period of 2019.

For the 2020 full year, noninterest income increased 23.7% to $6.0 million, compared to $4.8 million for the same period last year. Noninterest income for the 2020 fourth quarter was $1.6 million, compared to $1.3 million for the 2019 fourth quarter.

For the 2020 full year, noninterest expense decreased 0.8% to $29.8 million, compared to $30.0 million last year. For the 2020 fourth quarter, noninterest expense was $7.8 million, compared to $7.4 million for the same period last year.

Net income for the year ended December 31, 2020, was $8.3 million, or $1.30 per diluted share, compared to $12.7 million, or $1.95 per diluted share for the same period last year. The decline in net income for the year ended December 31, 2020, was primarily due to a $9.0 million increase in the provision for loan losses as a result of the COVID-19 crisis and the resolution of an isolated commercial loan that occurred in the 2020 third quarter. Net income for the 2020 fourth quarter, was $2.5 million, or $0.39 per diluted share, compared to $3.1 million, or $0.48 per diluted share for the same period last year. The 2020 fourth quarter provision for loan losses increased $1.6 million from the prior year period.

Core earnings measured by pre-tax, pre-provision for loan losses⁽¹⁾ income, increased 21.0% to $19.6 million for the year ended December 31, 2020, compared to $16.2 million for the year ended December 31, 2019. Pre-tax, pre-provision for loan losses⁽¹⁾ income for the 2020 fourth quarter increased 19.4% to $5.1 million, compared to $4.2 million for the same period last year.

Balance Sheet
Total assets at December 31, 2020, increased 17.7% to $1.39 billion, from $1.18 billion at December 31, 2019. Net loans at December 31, 2020, were $1.09 billion, compared to $977.5 million at December 31, 2019. The 11.6% year-over-year increase in total net loans was primarily a result of PPP loans originated during the second and third quarters, as well as organic loan growth that occurred throughout the year.

Total deposits at December 31, 2020, were $1.23 billion, compared to $1.02 billion at December 31, 2019. The 20.0% year-over-year increase in deposits was primarily a result of higher interest-bearing deposits. The investment portfolio, which is entirely classified as available for sale, was $114.4 million at December 31, 2020, compared with $105.7 million at December 31, 2019.

Donald L. Stacy, Chief Financial Officer stated, "Throughout 2020, we focused on building our allowance for loan losses, which increased 98.9% over the prior year period to $13.5 million at December 31, 2020. In addition, our allowance for loan losses to nonperforming loans was 171.28% at December 31, 2020, compared to our allowance for loan losses to nonperforming loans of 76.22% at December 31, 2019. This is the highest our allowance for loan losses to nonperforming loans reserve has been in over 13 years. Over the near-term, we will continue to fund our allowance and increase our reserve which we believe is necessary to reserve for potential incurred losses in the portfolio associated with the COVID-19 crisis."  

"Overall asset quality remains strong. Loans in deferral status continue to improve and declined 88.6% from $214.8 million at June 30, 2020, to $24.5 million at December 31, 2020. No restaurant customers were seeking additional deferrals at year end, while most deferred loans were within the hospitality segment. Overall, the quality of our loan portfolio remains solid and does not appear to be significantly impacted by the current difficult economic environment. We continue to closely watch our loan portfolio, and we are doing everything we can to support all our customers and communities impacted by the COVID-19 crisis."

Stockholders' Equity and Dividends
At December 31, 2020, stockholders' equity increased 4.4% to $143.8 million, compared to $137.8 million at December 31, 2019. On a per share basis, shareholders' equity at December 31, 2020, was a record $22.54 compared to $21.45 at the same period last year.

At December 31, 2020, tangible stockholders' equity⁽¹⁾ increased 5.3% to $127.0 million, compared to $120.6 million at December 31, 2019. On a per share basis, tangible stockholders' equity⁽¹⁾ was $19.91 at December 31, 2020, compared to $18.78 at December 31, 2019.

For the 2020 full year, the Company declared cash dividends of $0.60 per share, compared to $0.57 per share for the same period last year.

At December 31, 2020, the Company had an equity to assets leverage ratio of 10.33%, compared to 11.65% at December 31, 2019.

Asset Quality
The provision for loan losses for the 2020 fourth quarter was $2.1 million versus $460,000 for the same period last year. The provision for loan losses for the year ended December 31, 2020 was $9.8 million compared to $890,000 for the year ended December 31, 2019.   Most of the increased provision for the year ended December 31, 2020, was the result of increases to the economic conditions qualitative factors and higher charge-offs that occurred during the 2020 third quarter.

Net charge-offs for the 2020 fourth quarter were $0, compared to $693,000, or 0.28% of average loans, for the same period last year. For the 2020 twelve-month period, net charge-offs were $3.1 million, or 0.29% of average loans, compared to $1.6 million, or 0.16% of average loans for the 2019 twelve-month period.

Nonperforming assets at December 31, 2020, were $15.2 million, compared to $9.0 million at December 31, 2019. The allowance for loan losses at December 31, 2020, stood at $13.5 million, or 1.22% of total loans, compared to $6.8 million, or 0.69% of total loans at December 31, 2019.

COVID-19 Update
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and as a qualified SBA lender, we were automatically authorized to originate PPP loans. As of December 31, 2020, we approved 1,414 applications for up to $143.8 million of loans under the PPP. At December 31, 2020, we have processed $28.9 million of PPP forgiveness.

As of December 31, 2020, we modified 11 loans aggregating $24.5 million consisting of the deferral of principal payments and the extension of the maturity date, compared to 362 loans aggregating $214.8 million at June 30, 2020.

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 $1.39 billion at December 31, 2020. 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, return on average tangible equity, and pre-tax, pre-provision for loan losses income, 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) the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions; (8) changes in the securities markets; or (9) 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.}