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Middlefield Banc Corp. Reports Second 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: July 24, 2007

MIDDLEFIELD, OHIO    Middlefield Banc Corp. (Pink Sheets:  MBCN) today reported that net income for the second quarter of 2007 totaled $899,231, or 9.0 percent less than the $987,800 reported for the same period in 2006.  Diluted earnings per share for the second quarter of 2007 were $0.59, a 14.5% decrease from 2006's second quarter diluted earnings per share of $0.69.  These second quarter results include the operations of Emerald Bank of Dublin, Ohio, which became a subsidiary of Middlefield on April 19, 2007. 

Results from the first half of 2007 reflect a net income of $1,651,606; an 8.5% decrease compared to $1,805,372 for the first half of 2006.  Diluted earnings per share for the first half of 2007 were $1.11, or 11.2% less than diluted earnings per share of $1.26 for the first six months of 2006.  These figures include Emerald Bank's operations from April 19, 2007 through June 30, 2007.

Return on average equity for the three months ended June 30, 2007, was 10.55% compared to 14.07% for the same period in 2006.  Return on average assets was 0.91% for the three months ended June 30, 2007.  Return on average assets was 1.26% for the three months ended June 30, 2006.  For the six months ended June 30, 2007, the return on average equity and average assets were 10.21% and 0.89%, respectively.  The comparable period results from 2006 were 12.94% and 1.16%.

President and Chief Executive Officer Thomas G. Caldwell commented, "The second quarter 2007 results were mixed.  Like many other banks in the industry, and Ohio in particular, slower economic growth and competitive pressure have worked to reduce our net interest margin, which is the primary driver of our revenue."

Mr. Caldwell continued, "As we reported with our first quarter 2007 results, our net income has also been impacted by anticipated increases in non-interest expenses.  Our Newbury banking center and Cortland loan production office continue to be in the start-up phase.  Additionally, there was an increase in non-interest expense directly related to the acquisition of Emerald Bank.  While these results are disappointing in the short-term, we anticipate the longer term advantages to be gained from these actions, which have broadened the coverage of our market."

"During the early part of the third quarter, Emerald Bank will be unveiling its new interactive website (www.emeraldbank.com), which will offer a broad array of services not previously available to that customer base.  This will also include Internet banking and a bill payment feature.  Our anticipation is that these actions will be well received within the market," Caldwell concluded.

The company's total assets ended the second quarter of 2007 at $406.4 million, an increase of 19.2% over the $340.9 million in total assets reported at December 31, 2006.  Net loans at June 30, 2007, were $299.2 million, up $52.9 million, or 21.5%, over the $246.3 million reported at December 31, 2006.  Total deposits at June 30, 2007, were $326.9 million, or 20.6% greater than the deposit level of $271.1 million at December 31, 2006.

Highlights for the second quarter of 2007 include:

  • Net interest income was $2.88 million, an increase of 4.5% from the $2.75 million reported for the comparable period of 2006.  The net interest margin was 3.31% for the second quarter of 2007, down from the 3.88% reported for the same quarter of 2006.  The decline is primarily attributable to higher deposit costs and competitive pricing on lending opportunities associated with the current interest rate environment.  Deposit growth at the banks has primarily been in products such as time deposits and money market accounts, which generally carry higher interest costs than other deposit alternatives.  The Middlefield subsidiary offered a special money market promotion during the first quarter of 2007, which was tied to the grand opening of the Newbury banking office.  Emerald Bank found most of its deposit growth in its Prime Savings Account product, which is positioned at 300 basis points below the Prime Rate. 
  • Non-interest income increased $54,000 for the three-month period of 2007over the comparable 2006 period.  This increase of 9.1% 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.  Additionally, earnings on bank-owned life insurance were $27,000 higher during the second quarter of 2007 than the same period of 2006.
  • Non-interest expense for the second quarter of 2007 was 22.3%, or $423,000, higher than the second quarter of 2006.  Increases in salary and employee benefits of $205,000, occupancy expense of $85,000, and equipment expense of $32,000, were largely attributable to the opening of the Newbury banking office and the Cortland loan production office, as well as the acquisition of Emerald Bank.  Non-interest expenses directly attributable to Emerald Bank accounted for $205,000 of the increase in the aggregate.  Other associated expense items contributing to the increase were legal, printing, and transfer agent costs, as well as an increase of costs associated with compliance with Section 404 of the Sarbanes-Oxley Act. 
  • Total deposit growth for the first six months of 2007 was $55.8 million.  The acquisition of Emerald Bank accounted for $37.4 million of the change.  At the Middlefield banking subsidiary, deposit growth was fueled by promotional efforts directed to the bank's money market account.  Deposits in those accounts increased $11.6 million, while time deposits increased $11.0 million.  Net loans at June 30, 2007, stood at $299.2 million, reflecting an increase of $52.9 million for the first six months of 2007.  Increases were seen in all loan categories with the exception of installment loans.  Of the growth during the six-month period, 79.0%, or $41.8 million is the result of the Emerald Bank acquisition. 
  • Provision for loan losses was $114,000 for the 2007 six month period, which was in line with the company's plan.  While lower than the $150,000 provision during the first six months 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 June 30, 2007, the allowance for loan losses as a percentage of total loans was 1.09%, which was down from the 1.23% reported at June 30, 2006.  The ratio of non-performing loans to total loans stood at 1.16% at June 30, 2007.  This was an increase from the 0.82% reported as of June 30, 2006.  Loans classified as non-accrual at June 30, 2007, were $1.69 million, which was $0.1 million less than the total reported at June 30, 2006.  Loans past due 90 days and still accruing interest, as of June 30, 2007, were $1.8 million, or $1.7 million more than the prior year figure.  One commercial real estate credit, which was well secured and in the process of collection, accounted for $0.8 million of the increase.  The majority of the remaining increase in this category was in residential secured real estate loans. 
  • Stockholders' equity at June 30, 2007, was $34.5 million, or 8.48% of total assets.  Book value as of June 30, 2007 was $22.66.  This was an increase of $2.92 over the June 30, 2006 book value.
  • In the first six months of 2007, Middlefield paid a cash dividend of $0.48 per share.  This represents an increase of 7.1% over the cash dividend paid during the same period 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.
 

"Our earnings to this point in 2007 are reflective of the overall difficulties being experienced by most of the financial institutions within our market.  We also have experienced a higher level of non-interest expenses relative to the acquisition of Emerald Bank, " 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." 

"We are, however, also experiencing what is, for us, a higher than normal level of problem loans.  While being well secured, we are expending an increased level of effort to effect full collection.  Losses will be above recent historic levels, but should remain well within peer ranges." Stacy continued. 

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
                   
          June 30,   December 31
          2007   2006
          (unaudited)   (audited)
               
ASSETS          
  Cash and due from banks   $    7,590,873  $   6,893,148
  Federal funds sold       4,299,341     6,200,000
  Interest-bearing deposits in other institutions       559,550     546,454
      Cash and cash equivalents       12,449,764     13,639,602
  Investment securities available for sale       71,874,997     63,048,135
  Investment securities held to maturity (estimated          
    market value of $130,579 and $134,306)        119,899     125,853
  Loans       302,528,037     249,190,534
  Less allowance for loan losses       3,283,975     2,848,887
      Net loans       299,244,062     246,341,647
  Premises and equipment       6,910,163     6,742,465
  Goodwill       3,224,264     123,175
  Bank-owned life insurance       7,012,996     6,872,743
  Accrued interest and other assets       5,571,474     3,958,084
               
      TOTAL ASSETS   $   406,407,619  $   340,851,704
               
LIABILITIES          
  Deposits:          
    Noninterest-bearing demand   $   41,348,568  $   41,002,573
    Interest-bearing demand       13,128,166     11,724,173
    Money market       27,511,193     14,738,767
    Savings       73,077,850     54,246,499
    Time       171,792,572     149,338,181
      Total deposits       326,858,349     271,050,193
  Short-term borrowings       5,768,056     1,609,738
  Other borrowings       37,225,371     36,112,738
  Accrued interest and other liabilities       2,084,045     1,615,101
      TOTAL LIABILITIES       371,935,821     310,387,770
               
STOCKHOLDERS' EQUITY          
  Common stock, no par value; 10,000,000 shares authorized,          
   1,525,324 and 1,519,887 shares issued       23,521,438     19,507,257
  Retained earnings       15,644,003     14,685,971
  Accumulated other comprehensive income       (1,288,586)     (520,987)
  Treasury stock, at cost, 100,080 shares in 2007, and          
    95,080 shares in 2006       (3,405,057)     (3,208,307)
      TOTAL STOCKHOLDERS' EQUITY       34,471,798     30,463,934
               
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   406,407,619  $   340,851,704
               
MIDDLEFIELD BANC CORP.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
           
      Three Months Ended
      June 30,
      2007   2006
INTEREST INCOME          
  Interest and fees on loans     $   5,315,387     $   4,219,061
  Interest-bearing deposits in other institutions       49,724     4,272
  Federal funds sold       130,200     5,358
  Investment securities:          
     Taxable interest       254,534     289,841
     Tax-exempt interest       459,595     248,440
  Dividends on FHLB Stock       26,272     23,341
           Total interest income     6,235,712     4,790,313
           
INTEREST EXPENSE          
  Deposits       2,869,444     1,677,832
  Short term borrowings       20,455     61,827
  Other borrowings       469,473     297,890
           Total interest expense     3,359,372     2,037,549
           
NET INTEREST INCOME       2,876,340      2,752,764
           
Provision for loan losses       69,391     75,000
           
       
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     2,806,949      2,677,764
           
NONINTEREST INCOME          
  Service charges on deposit accounts     481,055     435,842
  Investment securities losses, net    -    -
  Earnings on bank-owned life insurance     68,174     59,950
  Other income       99,014     98,863
           Total noninterest income     648,243      594,655
           
NONINTEREST EXPENSE          
  Salaries and employee benefits       1,040,092     835,105
  Occupancy expense       198,278     113,544
  Equipment expense       132,423     100,473
  Data processing costs       163,452     158,279
  Ohio state franchise tax       155,343     90,000
  Other expense       631,245     600,631
           Total noninterest expense     2,320,833     1,898,032
           
Income before income taxes       1,134,359     1,374,387
Income taxes       235,128     386,587
           
NET INCOME   $   899,231 $   987,800
           
EARNINGS PER SHARE          
       Basic   $   0.60 $   0.70
       Diluted       0.59     0.69
           
DIVIDENDS DECLARED PER SHARE $ 0.240 $ 0.224
MIDDLEFIELD BANC CORP.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
           
      Six Months Ended
      June 30,
      2007   2006
INTEREST INCOME          
  Interest and fees on loans   $   9,845,616  $   8,204,679
   Interest-bearing deposits in other institutions       105,613      7,393
  Federal funds sold       261,435     8,937
  Investment securities:          
     Taxable interest       520,648     595,811
     Tax-exempt interest       842,380     493,591
  Dividends on FHLB Stock       51,767     40,538
           Total interest income     11,627,459 $  9,350,949
           
INTEREST EXPENSE          
  Deposits       5,184,115     3,218,694
  Short term borrowings       39,670     122,650
  Other borrowings       914,885     570,864
           Total interest expense     6,138,670     3,912,208
           
NET INTEREST INCOME       5,488,789      5,438,741
           
Provision for loan losses       114,391     150,000
           
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     5,374,398      5,288,741
           
NONINTEREST INCOME          
  Service charges on deposit accounts     933,002     848,741
  Investment securities losses, net     -        (5,868)
  Earnings on bank-owned life insurance     140,253     113,172
  Other income       196,616     188,993
           Total noninterest income     1,269,871     1,145,038
           
NONINTEREST EXPENSE          
  Salaries and employee benefits       2,145,000     994,944
  Occupancy expense       367,508     154,303
  Equipment expense       254,214     92,213
  Data processing costs       314,700     178,507
  Ohio state franchise tax       251,343     90,000
  Other expense       1,261,770     525,764
           Total noninterest expense     4,594,535      2,035,731
           
Income before income taxes       2,049,734     4,398,048
Income taxes       398,128     308,000
           
NET INCOME     $    1,651,606     $   4,090,048
           
EARNINGS PER SHARE          
          Basic   $   1.13 $   0.58
          Diluted       1.11      0.57
           
DIVIDENDS DECLARED PER SHARE $ 0.480 $ 0.224
MIDDLEFIELD BANC CORP.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
             
    For the Three Months Ended June 30,
      2007     2006
               
Per share (1)            
  Earnings per common share - Basic $ 0.60   $ 0.70
  Earnings per common share - Diluted   0.59     0.69
  Cash dividends paid   0.24     0.22
  Book value (end of period)   22.66     19.74
             
Shares Outstanding          
  Average - Basic   1,503,412     1,418,496
  Average - Diluted   1,523,852     1,441,861
  Actual (end of period)   1,521,470     1,418,811
             
Key performance ratios          
  Return on average assets   0.91%     1.26%
  Return on average equity   10.55%     14.07%
  Net interest margin   3.31%     3.88%
  Yield on earning assets   6.89%     6.63%
  Efficiency ratio   65.85%     56.70%
  Net charge-offs to average loans          
  (actual for the period)   0.00%     0.00%
  Net charge-offs to average loans          
  (annualized)   0.01%     0.02%
  Total allowance for loan losses          
  to nonperforming loans   93.62%     149.83%
  Nonperforming loans to          
  total loans   1.16%     0.82%
  Total allowance for loan losses          
  to total loans   1.09%     1.23%
  Equity to assets at period end   8.48%     8.91%
             
             
             
At period end (in 000s)          
  Total assets $ 406,408   $ 315,149
  Total deposits   326,858     254,054
  Net loans receivable   299,244     231,214
  Securities     71,995     54,588
  Shareholders equity   34,472     28,094
             
             
             
(1)  Per share data has been restated to reflect the five percent stock dividend paid in 2006.
             
             
MIDDLEFIELD BANC CORP.
SUPPLEMENTAL DETAIL
             
         
    For the Three Months Ended June 30,
      2007     2006
 
Charge-offs (000s)
  Loan charge-offs $ 12     $ 12
  Recoveries on loans   2     2
  Net loan charge-offs   10     10
               
    As of June 30,
      2007     2006
Credit Quality (000s):          
  Non-accrual loans $ 1,691   $ 1,833
  Restructured loans   0     0
  90 day past due and accruing   1,817     138
  Non-performing loans   3,508     1,971
  Other real estate owned   0     0
  Total non-performing assets $ 3,508   $ 1,971
             
             
             
MIDDLEFIELD BANC CORP.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
             
    For the Six Months Ended June 30,
        2007       2006
             
Per share (1)          
  Earnings per common share - Basic $ 1.13   $ 1.27
  Earnings per common share - Diluted   1.11     1.25
  Cash dividends paid   0.48     0.45
  Book value (end of period)   22.66     19.74
             
Shares Outstanding          
  Average - Basic   1,464,975     1,420,620
  Average - Diluted   1,485,907     1,443,572
  Actual (end of period)   1,521,470     1,418,811
             
Key performance ratios          
  Return on average assets   0.89%     1.16%
  Return on average equity   10.21%     12.94%
  Net interest margin   3.36%     3.88%
  Yield on earning assets   6.84%     6.54%
  Efficiency ratio   67.98%     59.75%
  Net charge-offs to average loans          
  (actual for the period)   0.04%     0.02%
  Net charge-offs to average loans          
  (annualized)   0.09%     0.01%
  Total allowance for loan losses          
  to nonperforming loans   93.62%     149.83%
             
(1)  Per share data has been restated to reflect the five percent stock dividend paid in 2006.
             
             
MIDDLEFIELD BANC CORP.
SUPPLEMENTAL DETAIL
             
         
    For the Six Months Ended June 30,
      2007     2006
  
CHARGE-OFFS (000s)
  Loan charge-offs $ 125   $ 44
  Recoveries on loans   10     6
  Net loan charge-offs   116     38