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Middlefield Banc Corp. Reports 2019 First Quarter Financial Results

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Middlefield Banc Corp. (NASDAQ:MBCN) today reported financial results
for the 2019 first quarter ended March 31, 2019.

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

  • Net income increased 15.6% to a first quarter record of $3.0 million
  • Earnings per diluted share increased 15.0% to a first quarter record
    of $0.92 per share
  • Return on average equity increased 63 basis points to 9.36%
  • Return on average tangible common equity(1) increased 57
    basis points to 10.80%
  • Total loans up 7.7% to a record $1.0 billion, and were up 5.1%
    (annualized) from the 2018 fourth quarter
  • Net interest income improved 3.5% to $10.3 million
  • Noninterest income up 41.2% to $1.1 million
  • Noninterest expenses up only 2.1%

"The solid start to 2019 demonstrates strong momentum in our business
and favorable economic trends throughout both our Central and Northeast
Ohio markets," stated Thomas G. Caldwell, President and Chief Executive
Officer. "We achieved record first quarter financial results including
loans, assets, and earnings and I am pleased with the 41.2% increase in
noninterest income during the quarter. Diversifying our income streams
is an important focus in 2019 and we expect further growth throughout
the year as we implement strategies to improve noninterest income."

Mr. Caldwell continued, "I am encouraged by our potential as we increase
our scale, leverage our fixed costs, and drive profitable growth in 2019
and beyond. Middlefield's Board of Directors recently approved a 150,000
share buyback, which reflects our optimism and dedication to return
value to shareholders."

Income Statement

Net interest income for the 2019 first quarter was $10.3 million,
compared to $9.9 million for the 2018 first quarter. The 3.5% increase
in net interest income for the 2019 first quarter was primarily a result
of a 13.2% increase in interest and fees on loans. The net interest
margin for the 2019 first quarter was 3.70%, compared to 3.82% for the
same period of 2018. The yield on earning assets increased 28 basis
points to 4.85% for the quarter ended March 31, 2019, from 4.57% for the
quarter ended March 31, 2018. The cost of interest-bearing liabilities
increased 49 basis points to 1.52% for the quarter ended March 31, 2019,
from 1.03% for the quarter ended March 31, 2018.

Noninterest income for the 2019 first quarter was $1.1 million, compared
to $0.8 million for the same period last year. The 41.2% increase in
noninterest income was primarily due to higher investment services and
recoveries on purchased student loans.

Noninterest expense for the 2019 first quarter was $7.5 million, a 2.1%
increase from the 2018 first quarter. Salaries and benefits expense
increased $145,000, or 3.6%, during the quarter ended March 31, 2019,
compared to the quarter ended March 31, 2018, primarily as a result of
increased staffing during the past twelve months, including executive
management and new branch personnel.

"Asset quality remains stable as a result of conservative underwriting
standards, balanced portfolio composition, and steady economic trends in
both of our Ohio markets," said Donald L. Stacy, Chief Financial
Officer. "Asset quality was negatively affected by one large credit of
$3.2 million in the Central Ohio market. The issue is isolated to this
particular borrower and it is not indicative of a trend in the market,
portfolio or an issue in underwriting. Aside from this issue, the asset
quality trends of the portfolio continue to improve and the bank has
provided sufficient dollars to cover any potential loss with this
credit. In addition, we remain focused on attracting new deposits, and
total deposits increased 10.1% over the prior year period and 9.6%
annualized over the past three months. Our loans to deposits ratio was
95.9% at March 31, 2019, compared to 97.9% at March 31, 2018. While our
deposit beta has increased over the past 12 months, we believe we are
reaching a period of stabilization in our net interest margin over the
coming quarters."

Balance Sheet

Total assets at March 31, 2019, increased 15.7% to a record $1.28
billion, compared to March 31, 2018. The Company adopted ASC 842 on
January 1, 2019. As a result, for the 2019 first quarter premises and
equipment, net, was $15.7 million, an increase of $2.7 million or 21.1%,
compared to the 2018 fourth quarter. Similarly, accrued interest
receivable and other assets was $13.3 million, an increase of $3.6
million or 37.0%, compared to the 2018 fourth quarter.

Net loans at March 31, 2019, increased 7.8% to $997.3 million, compared
to $924.8 million at March 31, 2018. The year-over-year improvement in
net loans was primarily a result of a 12.4% increase in commercial
mortgage loans, a 7.5% increase in residential mortgage loans, a 19.2%
increase in real estate construction loans, offset by a 12.7% decline in
consumer installment loans and a 14.1% decline in commercial and
industrial loans.

Total deposits at March 31, 2019, was $1.04 billion, compared to $944.6
million at March 31, 2018. The 10.1% increase in deposits was primarily
a result of higher time and money market deposits. The investment
portfolio, classified as available for sale, was $98.1 million at March
31, 2019, compared with $91.3 million at March 31, 2018.

Stockholders' Equity and Dividends

At the end of the 2019 first quarter, stockholders' equity increased
9.6% to $131.7 million compared to $120.2 million at March 31, 2018. On
a per share basis, shareholders' equity at March 31, 2019, was $40.44
compared to $37.28, an increase of 8.5%, over the same period last year.

Tangible stockholders' equity(1) increased 11.6% to $114.3
million for the 2019 first quarter, compared to $102.4 million at March
31, 2018. On a per-share basis, tangible stockholders' equity(1)
was $35.11 at March 31, 2019, compared to $31.78, an increase of 10.5%,
at March 31, 2018.

During the 2019 first quarter, the Company paid cash dividends of $0.28
per share, which represented a payout ratio of 30.2%.

At March 31, 2019, the Company had an equity to assets leverage ratio of
10.28%, compared to 10.86% at March 31, 2018.

Asset Quality

The provision for loan losses was $240,000 for the 2019 first quarter,
compared to $210,000 for the same period a year ago. Nonperforming
assets at March 31, 2019, were $10.6 million, compared to $9.0 million
at March 31, 2018. Net charge-offs were $462,000, or 0.19% of average
loans, annualized, during the 2019 first quarter, compared to net
recoveries of $151,000, or 0.06% of average loans, annualized, at March
31, 2018. The allowance for loan losses at March 31, 2019, stood at $7.2
million, or 0.72% of total loans, compared to $7.6 million or 0.81% of
total loans at March 31, 2018.

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is the bank
holding company of The Middlefield Banking Company with total assets of
$1.28 billion at March 31, 2019. The bank operates 15 full-service
banking centers and an LPL Financial® brokerage office serving
Beachwood, Chardon, Cortland, Dublin, Garrettsville, Mantua,
Middlefield, Newbury, Orwell, 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)
March 31, December 31, September 30, June 30, March 31,
Balance Sheets (period end) 2019 2018 2018 2018 2018
ASSETS
Cash and due from banks $ 121,045 $ 107,933 $ 81,951 $ 42,451 $ 33,258
Federal funds sold -   -   -   28,795   -  
Cash and cash equivalents 121,045 107,933 81,951 71,246 33,258
Equity securities, at fair value 674 616 671 656 643
Investment securities available for sale, at fair value 98,114 98,322 99,717 100,028 91,262
Loans held for sale 1,230 597 925 1,132 937
Loans 1,004,484 992,109 972,968 943,674 932,374
Less allowance for loan and lease losses 7,206   7,428   7,494   7,502   7,551  
Net loans 997,278 984,681 965,474 936,172 924,823
Premises and equipment, net 15,741 13,003 13,002 12,978 12,225
Goodwill 15,071 15,071 15,071 15,071 15,071
Core deposit intangibles 2,312 2,397 2,484 2,571 2,658
Bank-owned life insurance 16,185 16,080 15,970 15,862 15,764
Accrued interest receivable and other assets 13,285   9,698   11,063   10,363   10,123  
TOTAL ASSETS $ 1,280,935   $ 1,248,398   $ 1,206,328   $ 1,166,079   $ 1,106,764  
 
March 31, December 31, September 30, June 30, March 31,
2019 2018 2018 2018 2018
LIABILITIES
Deposits:
Noninterest-bearing demand $ 194,298 $ 203,410 $ 202,580 $ 205,192 $ 192,190
Interest-bearing demand 107,246 92,104 99,342 94,715 98,672
Money market 178,668 196,685 191,261 137,572 149,359
Savings 184,662 222,954 224,704 204,408 221,851
Time 375,357   300,914   295,874   290,359   282,501  
Total deposits 1,040,231 1,016,067 1,013,761 932,246 944,573
Short-term borrowings 91,000 90,398 55,304 87,833 18,671
Other borrowings 11,518 8,803 8,956 18,996 19,028
Accrued interest payable and other liabilities 6,487   4,840   4,074   4,288   4,340  
TOTAL LIABILITIES 1,149,236   1,120,108   1,082,095   1,043,363   986,612  
STOCKHOLDERS' EQUITY

Common stock, no par value; 10,000,000 shares authorized, 3,642,535

shares issued, 3,256,370 shares outstanding as of March 31, 2019

86,437 85,925 85,687 85,544 85,116
Retained earnings 58,139 56,037 53,520 51,121 48,927
Accumulated other comprehensive income (loss) 641 (154 ) (1,456 ) (431 ) (373 )
Treasury stock, at cost; 386,165 shares (13,518 ) (13,518 ) (13,518 ) (13,518 ) (13,518 )
TOTAL STOCKHOLDERS' EQUITY 131,699   128,290   124,233   122,716   120,152  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,280,935   $ 1,248,398   $ 1,206,328   $ 1,166,079   $ 1,106,764  
 
         
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
(Dollar amounts in thousands)
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
Statements of Income 2019   2018   2018   2018 2018
 
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $ 12,510 $ 12,467 $ 11,821 $ 11,234 $ 11,054
Interest-earning deposits in other institutions 187 146 178 115 119
Federal funds sold 7 17 8 7 14
Investment securities:
Taxable interest 179 182 167 170 169
Tax-exempt interest 565 589 598 550 525
Dividends on stock 58 58   57 53 59
Total interest and dividend income 13,506 13,459   12,829 12,129 11,940
INTEREST EXPENSE
Deposits 2,945 2,828 2,178 1,973 1,640
Short-term borrowings 213 78 296 192 276
Other borrowings 96 92   104 118 122
Total interest expense 3,254 2,998   2,578 2,283 2,038
 
NET INTEREST INCOME 10,252 10,461 10,251 9,846 9,902
 
Provision for loan losses 240 210   210 210 210
 
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,012 10,251   10,041 9,636 9,692
NONINTEREST INCOME
Service charges on deposit accounts 508 498 491 472 453
Gain (loss) on equity securities 58 (55 ) 15 13 18
Earnings on bank-owned life insurance 105 110 108 98 112
Gains on sale of loans 37 67 43 117 4
Other income 402 357   291 305 199
Total noninterest income 1,110 977   948 1,005 786
 
NONINTEREST EXPENSE
Salaries and employee benefits 4,124 4,065 3,839 3,866 3,979
Occupancy expense 553 465 460 472 536
Equipment expense 235 273 262 201 233
Data processing costs 465 446 481 402 477
Ohio state franchise tax 259 220 244 244 115
Federal deposit insurance expense 130 100 150 150 150
Professional fees 431 364 346 327 445
Advertising expense 203 227 236 230 228
Software amortization expense 145 145 155 155 150
Core deposit intangible amortization 85 87 87 87 91
Other expense 870 851   832 929 941
Total noninterest expense 7,500 7,243   7,092 7,063 7,345
 
Income before income taxes 3,622 3,985 3,897 3,578 3,133
Income taxes 611 560   593 481 528
 
NET INCOME $ 3,011 $ 3,425   $ 3,304 $ 3,097 $ 2,605
 
             
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
(Dollar amounts in thousands, except per share and share amounts)
 
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2019 2018 2018 2018 2018
Per common share data
Net income per common share - basic $ 0.93 $ 1.06 $ 1.02 $ 0.96 $ 0.81
Net income per common share - diluted $ 0.92 $ 1.05 $ 1.02 $ 0.96 $ 0.80
Dividends declared per share $ 0.28 $ 0.28 $ 0.28 $ 0.28 $ 0.33
Book value per share (period end) $ 40.44 $ 39.54 $ 38.38 $ 37.95 $ 37.28
Tangible book value per share (period end) (2) (3) $ 35.11 $ 34.16 $ 32.96 $ 32.49 $ 31.78
Dividends declared $ 909 $ 908 $ 905 $ 903 $ 1,063
Dividend yield 2.76 % 2.62 % 2.36 % 2.21 % 2.69 %
Dividend payout ratio 30.19 % 26.51 % 27.39 % 29.16 % 40.81 %
Average shares outstanding - basic 3,249,139 3,239,180 3,234,393 3,225,726 3,220,262
Average shares outstanding - diluted 3,255,284 3,250,149 3,248,326 3,240,329 3,238,069
Period ending shares outstanding 3,256,370 3,244,332 3,236,689 3,233,678 3,222,984
 
Selected ratios
Return on average assets 1.01 % 1.15 % 1.13 % 1.11 % 0.94 %
Return on average equity 9.36 % 10.52 % 10.33 % 10.08 % 8.73 %
Return on average tangible common equity (2) (4) 10.80 % 12.17 % 12.00 % 11.77 % 10.23 %
Efficiency (1) 64.30 % 61.61 % 61.65 % 63.43 % 67.00 %
Equity to assets at period end 10.28 % 10.28 % 10.30 % 10.52 % 10.86 %
Noninterest expense to average assets 0.62 % 0.62 % 0.61 % 0.63 % 0.66 %
 
(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
 
               
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2019 2018 2018 2018 2018
Yields
Interest-earning assets:
Loans receivable (2) 5.07 % 5.09 % 4.89 % 4.84 % 4.82 %
Investment securities (2) 3.80 % 3.73 % 3.67 % 3.68 % 3.61 %
Interest-earning deposits with other banks 2.26 % 2.08 % 1.95 % 1.72 % 1.85 %
Total interest-earning assets 4.85 % 4.82 % 4.65 % 4.61 % 4.57 %
Deposits:
Interest-bearing demand deposits 0.30 % 0.31 % 0.30 % 0.28 % 0.28 %
Money market deposits 1.58 % 1.56 % 0.99 % 0.87 % 0.82 %
Savings deposits 0.81 % 0.85 % 0.68 % 0.57 % 0.47 %
Certificates of deposit 2.15 % 1.99 % 1.84 % 1.79 % 1.65 %
Total interest-bearing deposits 1.46 % 1.38 % 1.14 % 1.07 % 0.94 %
Non-Deposit Funding:
Borrowings 2.57 % 3.54 % 2.30 % 2.59 % 1.67 %
Total interest-bearing liabilities 1.52 % 1.43 % 1.23 % 1.16 % 1.03 %
Cost of deposits 1.17 % 1.09 % 0.89 % 0.84 % 0.74 %
Cost of funds 1.24 % 1.14 % 0.98 % 0.92 % 0.83 %
Net interest margin (1) 3.70 % 3.76 % 3.72 % 3.76 % 3.82 %
 
(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
March 31,   December 31,   September 30,   June 30,   March 31,
End of Period Loan Balances 2019 2018 2018 2018 2018
(Dollar amounts in thousands)
Commercial and industrial $ 85,756 $ 83,857 $ 93,144 $ 101,975 $ 99,809
Real estate - construction 58,019 56,731 48,901 45,647 48,687
Real estate - mortgage:
Residential 340,483 336,487 329,609 320,858 316,856
Commercial 504,289 498,247 483,675 457,050 448,766
Consumer installment 15,937   16,787   17,639   18,144   18,256  
Total $ 1,004,484   $ 992,109   $ 972,968   $ 943,674   $ 932,374  
 
March 31, December 31, September 30, June 30, March 31,
Asset quality data 2019 2018 2018 2018 2018
(Dollar amounts in thousands)
Non-accrual loans $ 10,472 $ 6,595 $ 7,288 $ 8,357 $ 8,747
90 day past due and accruing -   945   -   15   -  
Nonperforming loans (3) 10,472 7,540 7,288 8,372 8,747
Other real estate owned 126   270   257   181   212  
Non-performing assets $ 10,598   $ 7,810   $ 7,545   $ 8,553   $ 8,959  
 
Allowance for loan losses $ 7,206 $ 7,428 $ 7,494 $ 7,502 $ 7,551
Allowance for loan losses/total loans 0.72 % 0.75 % 0.77 % 0.79 % 0.81 %
Net charge-offs (recoveries):
Quarter-to-date $ 462 $ 276 $ 218 $ 259 $ (151 )
Net charge-offs to average loans, annualized:
Quarter-to-date 0.19 % 0.11 % 0.09 % 0.11 % -0.06 %
 
Nonperforming loans/total loans 1.04 % 0.76 % 0.75 % 0.89 % 0.94 %
Allowance for loan losses/nonperforming loans 68.81 % 98.51 % 102.83 % 89.61 % 86.33 %
Nonperforming assets/total assets 0.83 % 0.63 % 0.63 % 0.73 % 0.81 %
(3) Non-performing 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
(Dollar amounts in thousands) March 31, December 31, September 30, June 30, March 31,
  2019       2018     2018     2018     2018
 
Stockholders' Equity $ 131,699 $ 128,290 $ 124,233 $ 122,716 $ 120,152
Less Goodwill and other intangibles 17,383   17,468   17,555   17,642   17,729  
Tangible Common Equity $ 114,316   $ 110,822   $ 106,678   $ 105,074   $ 102,423  
 
Shares outstanding 3,256,370   3,244,332   3,236,689   3,233,678   3,222,984  
Tangible book value per share $ 35.11   $ 34.16   $ 32.96   $ 32.49   $ 31.78  
 
Reconciliation of Average Equity to Return on Average Tangible
Common Equity
  For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2019       2018     2018     2018     2018
 
Average Stockholders' Equity $ 130,450 $ 129,208 $ 126,865 $ 123,228 $ 121,001
Less Average Goodwill and other intangibles 17,422   17,510   17,597   17,683   17,773  
Average Tangible Common Equity $ 113,028   $ 111,698   $ 109,268   $ 105,545   $ 103,228  
 
Net income $ 3,011   $ 3,425   $ 3,304   $ 3,097   $ 2,605  
Return on average tangible common equity (annualized) 10.80 % 12.17 % 12.00 % 11.77 % 10.23 %
 

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