Middlefield Banc Corp. Reports First Quarter 2007 Earnings

Middlefield Banc Corp. 2007 Press Releases

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Contact Info: James R. Heslop, 2nd
Executive Vice President/Chief Operating Officer
440.632.1666 Ext. 3219
Date: April 26, 2007

MIDDLEFIELD, OHIO  Middlefield Banc Corp. (Pink Sheets:  MBCN) today announced first quarter 2007 net income of $752,000, a decline of 8.0% from the $818,000 reported for the first quarter of 2006.  Diluted earnings per share were $0.52, down 8.4% from first quarter 2006 earnings of $0.57 per share. 

"We had anticipated that earnings would be lower than last year in the first quarter," commented President and Chief Executive Officer Thomas G. Caldwell.  "The reduction in our net interest margin was the primary factor in the decline and was directly the result of strong pricing competition, higher deposit costs, and a general slowdown in economic activity."

Mr. Caldwell continued, "Our net income has also been impacted by anticipated increases in non-interest expenses.  The first three months of 2007 marked the first full quarter of operation for our Newbury banking center, as well as our Cortland loan production office.  Although having a negative earnings impact, we are pleased that these facilities have broadened the coverage of our market."

The company's total assets ended the first quarter of 2007 at $357.2 million, an increase of 14.3% over the $340.9 million in total assets reported at December 31, 2006.  Net loans at March 31, 2007, were $252.0 million, up $5.6 million, or 2.3%, over the $246.3 million reported at December 31, 2006.  Total deposits at March 31, 2007, were $287.5 million, or 6.1% greater than the deposit level of $271.1 million at December 31, 2006.

Annualized returns on average equity ("ROE") and average assets ("ROA") for the first quarter of 2007 were 9.98% and 0.87%, respectively.  The comparable results for the first quarter of 2006 were 11.79% and 1.05%.   

Highlights for the first quarter of 2007 include:

  • Net interest income was $2.61 million, a decrease of 2.8% from the $2.69 million reported for the comparable period of 2006.  The net interest margin was 3.46% for the first quarter of 2007, down from the 3.89% reported for the first quarter of 2006.  The decline is primarily attributable to higher deposit costs associated with the current interest rate environment.  Deposit growth at the bank has primarily been in products such as time deposits and money market accounts, which generally higher interest costs than other deposit alternatives.  The bank offered a special money market promotion during the first quarter of 2007, which was tied to the grand opening of the Newbury banking office.  
  • Non-interest income increased $72,000 for the three-month period of 2007 over the comparable 2006 period.  This increase of 13.1% was primarily the result of higher service charge revenue associated with an increase in the number of deposit accounts, expanded ATM/Debit card usage, and an increase in revenue from investment services.  Earnings on bank-owned life insurance was $19,000 higher during the first quarter of 2007 than the same period of 2006.
  • Non-interest expense for the first quarter of 2007 was 11.7%, or $238,000, higher than the first quarter of 2006.  Increases in salary and employee benefits of $110,000, occupancy expense of $15,000, and equipment expense of $30,000, were largely attributable to the opening of the Newbury banking office and the Cortland loan production office.  Other expense items contributing to the increase were franchise tax, certain maintenance contracts, and increased ATM costs.   
  • Total deposit growth for the first quarter of 2007 was $16.5 million.  With promotional efforts directed to the bank's money market account, deposits in those accounts increased $11.6 million, while time deposits increased $5.6 million and interest-bearing deposit accounts grew $1.5 million.  Offsetting this growth were declines in non-interest bearing deposits of $1.6 million and savings accounts of $0.6 million.  Net loans at March 31, 2007, stood at $252.0 million, reflecting an increase of $5.6 million for the quarter.  Increases were seen in all loan categories with the exception of installment loans.   
  • Provision for loan losses was $45,000 for the 2007 first quarter, which was in line with the company's plan.  While lower than the $75,000 provision during the first quarter of 2006, this amount was in keeping with the company's intention to reduce the unallocated portion of its loan loss reserve.  The provision is maintained at a level to absorb management's estimate of probable inherent credit losses within the bank's loan portfolio.  At March 31, 2007, the allowance for loan losses as a percentage of total loans was 1.09%, which was down from the 1.22% reported at March 31, 2006.  The ratio of non-performing loans to total loans stood at 0.67% at March 31, 2007.  This was a reduction of 23.0% from the March 31, 2006 ratio of 0.87%. 
  • Stockholders' equity at March 31, 2007, was $31.1 million, or 8.71% of total assets.  Book value as of March 31, 2007 was $21.76.  This was an increase of $2.16 over the March 31, 2006 book value.
  • In the first quarter of 2007, Middlefield paid a cash dividend of $0.24 per share.  This represents an increase of 7.1% over the cash dividend paid during the first quarter of 2006.  The 2006 cash dividend amount has been adjusted to reflect the 5% stock dividend paid by the company during the fourth quarter of 2006.

"Although our earnings results are not in line with what we have historically reported, they do exceed our plan for the first quarter of 2007," commented Donald L. Stacy, Chief Financial Officer and Treasurer of Middlefield Banc Corp.  "The continued nature of the yield curve, as well as market pricing, has worked to compress our net interest margin.  The additional overhead associated with our expansion is integral to our long-term growth efforts and is, we believe, within reasonable expectations."  

"Our anticipation is that these factors will continue to impact our earnings level as we move further into 2007," Stacy continued.  "We remain committed, however, to the short-term expense necessary to provide long-term reward for our shareholders."

Middlefield Banc Corp. is a financial holding company headquartered in Middlefield, Ohio.  Its subsidiary, The Middlefield Banking Company, operates full service banking centers and a LPL Financial¨ brokerage office serving Chardon, Garrettsville, Mantua, Middlefield, Newbury, and Orwell, as well as a loan production office in Cortland, Ohio.  On April 19, 2007, Middlefield Banc Corp. completed its acquisition of Emerald Bank, headquartered in Dublin, Ohio.  Further information is available at www.middlefieldbank.com

This announcement contains forward-looking statements that involve risk and uncertainties, including changes in general economic and financial market conditions and the Company's ability to execute its business plans.  Although management believes the expectations reflected in such statements are reasonable, actual results may differ materially. 

  

 
MIDDLEFIELD BANC CORP.
CONSOLIDATED BALANCE SHEET
           
      March 31,   December 31
      2007   2006
           
ASSETS        
  Cash and due from banks $       6,811,047  $       6,893,148
  Federal funds sold         8,200,000         6,200,000
  Interest-bearing deposits in other institutions           552,487           546,454
     Cash and cash equivalents       15,563,534       13,639,602
  Investment securities available for sale       70,619,693       63,048,135
  Investment securities held to maturity (estimated        
    market value of $127,663 and $134,306)           119,899           125,853
  Loans     254,776,398     249,190,534
  Less allowance for loan losses         2,787,810         2,848,887
        Net loans     251,988,588     246,341,647
  Premises and equipment         6,688,641         6,742,465
  Bank-owned life insurance         6,944,822         6,872,743
  Accrued interest and other assets         5,278,668         4,081,259
           
        TOTAL ASSETS $   357,203,845  $   340,851,704
           
LIABILITIES        
  Deposits:        
     Noninterest-bearing demand $     39,375,477  $     41,002,573
     Interest-bearing demand       13,241,825        11,724,173
     Money market       26,306,872       14,738,767
     Savings       53,622,139       54,246,499
     Time     154,979,513     149,338,181
        Total deposits     287,525,826     271,050,193
  Short-term borrowings         2,265,357         1,609,738
  Federal funds purchased                    -                      -  
  Other borrowings       34,793,179       36,112,738
  Accrued interest and other liabilities         1,499,115         1,615,101
        TOTAL LIABILITIES     326,083,477     310,387,770
           
STOCKHOLDERS' EQUITY        
  Common stock, no par value; 10,000,000 shares authorized,      
   1,525,324 and 1,519,887 shares issued       19,712,463       19,507,257
  Retained earnings       15,108,995       14,685,971
  Accumulated other comprehensive income          (492,783)          (520,987)
  Treasury stock, at cost;  95,080 shares in 2007 and in 2006     (3,208,307)       (3,208,307)
        TOTAL STOCKHOLDERS' EQUITY       31,120,368       30,463,934
           
        TOTAL LIABILITIES AND                
        STOCKHOLDERS' EQUITY $   357,203,845  $   340,851,704
           

  

MIDDLEFIELD BANC CORP.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
           
      Three Months Ended
      March 31,
      2007   2006
INTEREST INCOME          
     Interest and fees on loans   $      4,530,229  $      3,985,618
     Interest-bearing deposits in          
          other institutions               55,889               3,121
     Federal funds sold             131,235               3,579
     Investment securities:          
          Taxable interest             266,114           305,970
          Tax-exempt interest             382,785           245,151
      Dividends on FHLB stock               25,495             17,197
                   Total interest income          5,391,747         4,560,636
           
INTEREST EXPENSE          
     Deposits          2,314,671        1,540,862
     Short term borrowings             152,292             60,823
     Other borrowings             312,335           272,974
                   Total interest expense          2,779,298         1,874,659
           
NET INTEREST INCOME          2,612,449        2,685,977
           
Provision for loan losses               45,000             75,000
           
NET INTEREST INCOME AFTER          
   PROVISION FOR LOAN LOSSES        2,567,449        2,610,977
           
NONINTEREST INCOME          
     Service charges on deposit accounts           451,947           412,842
     Investment securities losses, net                     -               (5,868)
     Earnings on bank-owned life insurance             72,079             53,222
     Other income               97,602             90,130
                    Total noninterest income           621,628           550,326
           
NONINTEREST EXPENSE          
     Salaries and employee benefits          1,104,908           994,944
     Occupancy expense             169,230           154,303
     Equipment expense             121,791             92,213
     Data processing costs             151,248           178,507
     Ohio state franchise tax               96,000             90,000
     Other expense             630,525           525,764
                    Total noninterest expense        2,273,702        2,035,731
           
Income before income taxes             915,375        1,125,572
Income taxes             163,000           308,000
                   
NET INCOME   $         752,375  $         817,572
           
EARNINGS PER SHARE          
    Basic   $              0.53 $              0.58
    Diluted                  0.52                0.57
           
DIVIDENDS DECLARED PER SHARE $ 0.240 $ 0.224
                       

    

MIDDLEFIELD BANC CORP.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
               
For the Three Months Ended March 31,
    2007     2006   % Change
               
Per share (1)              
   Earnings per common share - Basic $ 0.53       $ 0.58       -8.40%
   Earnings per common share - Diluted    0.52     0.57   -8.39%
   Cash dividends paid   0.24     0.22   7.14%
   Book value (end of period)   21.76     19.60   10.99%
               
Shares Outstanding              
   Average - Basic   1,426,111     1,419,305   0.48%
   Average - Diluted   1,447,534     1,440,771   0.47%
   Actual (end of period)   1,430,244     1,422,729   0.53%
               
Key performance ratios              
   Return on average assets   0.87%     1.05%   -16.97%
   Return on average equity   9.98%     11.79%   -15.37%
   Net interest margin   3.46%     3.89%   -10.98%
   Yield on earning assets   6.89%     6.49%   6.25%
   Efficiency ratio   66.28%     61.34%   8.06%
   Net charge-offs to average loans              
      (actual for the period)   0.04%     0.01%   0.00%
   Net charge-offs to average loans              
      (annualized)   0.17%     0.05%   0.00%
   Total allowance for loan losses              
      to nonperforming loans   162.95%     140.40%   16.06%
   Nonperforming loans to              
      total loans   0.67%     0.87%   -23.02%
   Total allowance for loan losses              
      to total loans   1.09%     1.22%   -10.66%
   Equity to assets at period end   8.71%     8.92%   -2.37%
               
               
               
At period end (in 000s)              
   Total assets $ 357,204   $ 312,577   14.28%
   Total deposits   287,526     254,268   13.08%
   Net loans receivable   251,989     232,895   8.20%
   Securities   70,740     56,104   26.09%
   Shareholders equity   31,120     27,892   11.57%
               
               
               
(1)  Per share data has been restated to reflect the five percent stock dividend paid in 2006.
               
                       
MIDDLEFIELD BANC CORP.
SUPPLEMENTAL DETAIL
               
CHARGE-OFFS              
For the Three Months
Ended March 31,
    2007     2006    
   Loan charge-offs $ 113   $ 32    
   Recoveries on loans   7     4    
   Net loan charge-offs   106     28