Middlefield Banc Corp. Reports Record 2019 Full Year Earnings

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

 

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