Middlefield Banc Corp. Reports 2nd Quarter Earnings and Record Asset Levels

today reported second quarter 2005 net income of $917,000, or $0.71 per diluted share, compared to $909,000, or $0.70 per diluted share, for the second quarter of 2004. Returns on average equity and assets were 14.33% and 1.22%, respectively. For the six months ended June 30, 2005, net income was $1,631,000, or $1.27 per diluted share, compared to $1,594,000, or $1.23 per diluted share in the first half of 2004.

As of June 30, 2005, total assets equaled $303,969,000. This represents an increase of 8.37% from the year ago level and the first time that total assets have surpassed the $300 million mark.   

President and Chief Executive Officer Thomas G. Caldwell commented, "Although we are generally satisfied with the results of our second quarter, we also recognize that much work remains for 2005. Our credit quality remains strong and our net interest margin has reached a level of stability."

"Our earnings to this point in 2005 have met our expectations.  However, our growth has been slower than projected as we have continued to experience a very competitive interest rate environment. We will continue to work for increased efficiencies within our operations, while maintaining our personalized delivery of customer service. " 

Highlights for the second quarter and year-to-date periods of 2005 include:

• Net interest income was $2,646,000 for the second quarter of 2005, an increase of 6.80% from the comparable period in the prior year.  Net interest margin was 3.91% in the second quarter of 2005, relatively equal with the 3.90% recorded in the second quarter of 2004.  For the first half of 2005, net interest income was $5,214,000, up 6.56% from the prior year, while the net interest margin was 3.80% as opposed to 2004's 3.94%.  The lower margin in the first six months of 2005 reflects a flattened yield curve and the effects of narrower loan spreads.
• Net loans at June 30, 2005, stood at $220,809,000, an increase of $20,302,000, or 10.12% over the same point in 2004.  This increase is attributable to strong growth in the commercial and home equity portfolios. Total deposits at the mid-point of 2005 were $249,198,000.  Reflecting an increase of 5.58% from June 30, 2004, the growth was centered in demand deposit accounts and certificates of deposit. 
• Non-interest income increased $14,000 for the three-month period and $125,000 for the six-month period ending June 30, 2005, over the same periods of 2004.  Higher service charge revenue associated with an increase in the number of deposit accounts, as well as the introduction of an overdraft privilege program in 2004, were the primary drivers of the increases.
• Non-interest expense for the quarter was 9.69% higher than the second quarter of 2004 and totaled $1,846,000. The leading factors for this increase are higher salary and benefit costs, data processing fees, and state franchise taxes. 
• Provision for loan losses was $60,000 for the second quarter and $120,000 for the first six months of 2005.  Although higher than the $30,000 and $60,000 reported for the comparable periods of 2004, the levels were in keeping with the 2005 financial plan and are attributable to higher loan levels.  At June 30, 2005, the allowance for loan losses as a percentage of total loans was 1.20%, which was lower than the 1.28% recorded at June 30, 2004.
• Stockholders' equity at June 30, 2005, was $26,238,000, or 8.63% of total assets.  This represents an increase of 5.70% from the $24,822,000 reported as of December 31, 2004.  Book value per share at June 30, 2005, was $20.59. 
• During the second quarter of 2005, Middlefield paid a cash dividend of $0.22 per share.  Adjusted for the 5% stock dividend paid in December 2004, this cash dividend was 10% higher than that paid in the second quarter of 2004.

"We are pleased that our net interest margin has stabilized during the second quarter," noted Donald L. Stacy, Chief Financial Officer and Treasurer of Middlefield Banc Corp.  "The competitive pressures on interest rates, on both the loan and deposit sides of the balance sheet, are very strong within our market areas."

Stacy continued, "Our technology expenditures at the banking subsidiary during the first half of 2005 have provided us with some exciting new customer delivery alternatives.  During the third quarter we will be introducing e-mail delivery of checking statements as well as images of checks available with our on-line banking service." 

Commenting on the outlook for Middlefield Banc Corp., Chief Executive Officer Caldwell noted, "As we enter our next phase of growth, we believe that we are adopting the technological tools that will permit us to continue offering the high level of service for which we are known. Just as importantly, these moves will have a bottom line impact as we continue to properly reward our shareholders for their confidence in our company."

Middlefield Banc Corp. and The Middlefield Banking Company are headquartered in Middlefield, Ohio. The bank operates full service banking centers and a LPL Financial brokerage office serving Chardon, Garrettsville, Mantua, Middlefield, and Orwell, Ohio.