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Middlefield Banc Corp. Reports Fourth Quarter and Full Year 2007 Results

Middlefield Banc Corp. 2008 Press Releases

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Contact Info: James R. Heslop, 2nd
Middlefield Banc Corp.
Executive Vice President/Chief Operating Officer
440.632.1666 Ext. 3219
Date: January 24, 2008

MIDDLEFIELD, OHIO  Middlefield Banc Corp. (Pink Sheets:  MBCN) today reported financial results for the fourth quarter and full year of 2007.  Fourth quarter 2007 net income was $862,000, or $0.55 per diluted share, compared to $1,148,000, or $0.76 per diluted share, for the fourth quarter of 2006.  The corporationÕs return on average equity was 9.73% and its return on average assets was 0.80%.

For the full year ended December 31, 2007, the corporation posted net income of $3,375,000, compared to $3,884,000 for the full year ended December 31, 2006.  On a per share basis, full year 2007 earnings were $2.14 per diluted share, representing a decrease from the $2.56 per diluted share for the full year ended December 31, 2006.  The return on average equity for the full year ended December 31, 2007, was 10.06% and its return on average assets was 0.85%.  The figures for 2007, both for the quarter and year-to-date periods, included results of operations of Emerald Bank, a Dublin, Ohio-based affiliate that joined Middlefield on April 19, 2007.

The corporation's total assets at year-end 2007 were $434.8 million, an increase of 27.6% over the $340.9 million recorded at December 31, 2006.  Net loans at December 31, 2007, were $306.1 million, an increase of $59.8 million, or 24.3%, over the $246.3 million in net loans at December 31, 2006.  Total deposits at year-end 2007 were $362.9 million, which was $91.9 million, or 33.9%, higher than the deposit level of $271.1 million recorded at December 31, 2006.

"The year 2007 was one of mixed results," commented Thomas G. Caldwell, President and Chief Executive Officer of Middlefield Banc Corp.  "The level of growth, driven by some aggressive actions that we have undertaken, was unprecedented in the history of our company.  Conversely, and as we anticipated, the impact upon earnings was negative."

Caldwell continued, "However, we are pleased that we have continued to achieve strong profitability.  We have avoided many of the current challenges within the industry related to sub-prime lending and risky investment securities.  We expect that the impact on our earnings will continue through 2008, but fully believe that the long-term outlook is positive."

Middlefield Banc Corp. completed the acquisition of Emerald Bank, headquartered in Dublin, Ohio, on April 19, 2007.  Additionally, The Middlefield Banking Company experienced the full year results of the Newbury banking office, opened in December 2006, and the Cortland loan production office, opened in November 2006.  The Middlefield subsidiary also acquired the deposits associated with a Geauga County office of a competitor on August 1, 2007. 

Highlights for the fourth quarter and full year of 2007 include:

  • Net interest income for the fourth quarter of 2007 was $2,945,000, an increase of 7.9% from the $2,730,000 reported for the comparable quarter of 2006.  The net interest margin in the fourth quarter of 2007 was 3.12%, substantially below the 3.79% reported for the same period of 2006.  For the full year 2007, net interest income was $11,342,000, up 3.79% from the prior year's $10,927,000.  The net interest margin for 2007 was 3.25% compared to 2006's 3.79%.
      
  • Non-interest income increased $69,000 for the three-month period and $388,000 for the twelve-month period ending December 31, 2007, over the equal reporting periods of 2006.  The increases were primarily the result of an increase in deposit service charges related to an increase in accounts and increases in earnings on bank-owned life insurance and revenue from investment services.
      
  • Non-interest expense for the fourth quarter of 2007 was up 20.3% from that of the fourth quarter of 2006.  Total non-interest expense for the full year of 2007 was 20.4% higher than the level of 2006.  Those factors that primarily led to the increase were costs associated with the operation of additional offices, increased staffing levels related to those offices, and associated higher levels of equipment depreciation.  In addition to these items, the company recognized increased costs during the year to ensure compliance with the provisions of the Sarbanes-Oxley Act of 2002 and costs associated with the acquisition of Emerald Bank, and the assumption of the aforementioned branch deposits.
      
  • During the fourth quarter of 2007, the corporation increased the level of the provision for loan losses at both banking affiliates.  The overall level of non-performing loans and credit losses were higher than anticipated, reflecting general market conditions.
      
  • Stockholders' equity at December 31, 2007, was $35.0 million, or 8.1% of total assets.  This represents an increase of 15.0% from the December 31, 2006 figure.  Book value as of December 31, 2007 was $22.61 per share, which compares to $20.30 per share at December 31, 2006. 
      
  • During the fourth quarter of 2007, Middlefield Banc Corp. paid a five percent stock dividend, as well as a cash dividend of $0.245 per common share.  2007 represented the sixth consecutive year in which the company has paid a stock dividend.

"During 2007, we felt it prudent to increase our provision for loan losses.  This action was taken based upon the general economic conditions nationally and within our markets," commented Donald L. Stacy, Chief Financial Officer and Treasurer of Middlefield Banc Corp. 

Stacy continued, "The year is noteworthy for having positioned the corporation for continued growth.  To have completed a whole bank acquisition, converted its data system, acquired the deposits of another branch office, and absorbed costs associated with the start-up of two new offices have been quite taxing.  However, to have accomplished the same and still achieved the high level of profitability is, we believe, an indication of the strong management and staff of our organization.  Our focus during 2008 will be to control non-interest expenses and to position ourselves for continued growth."

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 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
(dollars in thousands, except per share amounts)
         
    (unaudited)      
  December 31,     December 31,
Consolidated Balance Sheets (period end)   2007     2006
  
Assets          
Cash and due from banks    $ 9,073     $ 6,893
Federal funds sold   8,632     6,200
Interest-bearing deposits in other institutions   110     546
   Cash and cash equivalents   17,815     13,640
Investment securities available for sale   85,968     63,048
Investment securities held to maturity (estimated   --     126
   market value of $0 and $134 )          
Loans:   309,446     249,191
Less:  reserve for loan losses   3,299     2,849
      Net loans   306,147     246,342
Premises and equipment   7,045     6,742
Goodwill   4,553     123
Bank-owned life insurance   7,153     6,873
Accrued interest receivable and other assets   6,095     3,958
Total Assets $ 434,776   $ 340,852
           
    December 31,     December 31,
    2007     2006
Liabilities          
Deposits:          
Non-interest bearing demand deposits $ 41,348   $ 41,003
Interest bearing demand deposits   19,566     11,724
Money market accounts   22,684     14,739
Savings deposits   76,894     54,246
Time deposits   202,426     149,338
   Total Deposits   362,918     271,050
Short-term borrowings   1,511     1,610
Other borrowings   32,395     36,113
Other liabilities   2,916     1,615
   Total Liabilities $ 399,740   $ 310,388
           
Stockholders' Equity          
Common stock, no par value, 10,000,000 shares          
authorized, 1,624,389 and 1,519,887 shares issued   26,650     19,507
Retained earnings   13,821     14,686
Net Unrealized gain (loss) on securities   (53)     (521)
Treasury stock, at cost; 123,106 shares in 2007 and          
   95,080 shares in 2006   (5,383)     (3,208)
   Total Stockholders' Equity   35,036     30,464
           
Total Liabilities and Stockholders' Equity $ 434,776   $ 340,852
MIDDLEFIELD BANC CORP.
Consolidated Statement of Income
December 31, 2007 and 2006
(unaudited, dollars in thousands, except per share amounts)
                       
  For the
Three Months Ended
  For the
Twelve Months Ended
  December 31,   December 31,
    2007     2006     2007     2006
Interest Income                      
   Interest and fees on loans $ 5,613    $ 4,494    $ 21,063    $ 17,093
   Interest-bearing deposits in other institutions      28     8     156     20
   Federal funds sold   115     79     498     117
   Investment securities                      
      Taxable interest   421     272     1,266     1,143
      Tax-exempt interest   463     293     1,774     1,038
   Other dividend income   32     22     116     83
      Total interest income   6,672     5,168     24,873     19,495
Interest Expense                      
   Deposits   3,272     2,072     11,633     7,157
   Short term borrowings   18     22     628     167
   Other borrowings   302     328     735     1,227
   Trust preferred securities   135     16     535     16
      Total interest expense   3,727     2,438     13,531     8,567
Net Interest Income   2,945     2,730     11,342     10,927
Provision for loan losses   255     (180)     429     60
Net Interest Income After Provision                      
   For Loan Losses   2,690     2,910     10,912     10,867
Noninterest Income                      
   Service charges on deposits   528     489     1,955     1,800
   Investment securities gains (losses)   7     0     7     (6)
   Earnings on bank-owned life insurance   70     62     281     240
   Other income   103     88     572     393
      Total non-interest income   708     639     2,815     2,427
Noninterest Expense                      
   Salaries and employee benefits   1,092     835     4,458     3,675
   Occupancy expense   194     122     746     507
   Equipment expense   132     140     525     441
   Data processing costs   195     150     694     635
   Professional fees   88     70     423     334
   Ohio state franchise tax   111     90     425     360
   Advertising   59     83     316     332
   Postage and freight   54     59     209     190
   Other operating expense   435     413     1,760     1,465
      Total non-interest expense   2,361     1,962     9,556     7,938
Income before income taxes   1,037     1,586     4,172     5,356
Provision for income taxes   175     438     796     1,472
Net Income $ 862   $ 1,148   $ 3,375   $ 3,884
                         
Per common share data                        
Net income per common share - basic $ 0.55   $ 0.77   $ 2.17   $ 2.60
Net income per common share - diluted $ 0.55   $ 0.76   $ 2.14   $ 2.56
Dividends declared $ 0.245   $ 0.229   $ 0.935   $ 0.873
Book value per share(period end) $ 22.61   $ 20.30   $ 22.61   $ 20.30
Dividend payout ratio   37.34%     29.62%     40.97%     33.87%
Average shares outstanding - basic   1,561,771     1,496,935     1,555,597     1,493,654
Average shares outstanding -diluted   1,582,872     1,519,289     1,577,399     1,515,653
Period ending shares outstanding   1,549,801     1,498,414     1,549,801     1,498,414
                       
Selected ratios                        
Return on average assets   0.80%     1.39%     0.85%     1.22%
Return on average equity   9.73%     15.44%     10.06%     13.59%
Yield on earning assets   6.78%     6.62%     6.85%     6.62%
Cost of interest bearing liabilities   4.23%     3.44%     4.25%     3.44%
Net interest spread   2.55%     3.18%     2.60%     3.19%
Net interest margin   3.12%     3.79%     3.25%     3.79%
Efficiency (1)   61.97%     56.80%     64.75%     57.91%
Equity to assets at period end   8.06%     8.94%     8.06%     8.94%
                       
(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.
    December 31,     December 31,
Asset quality data      2007     2006
           
Non-accrual loans $ 3,744   $ 1,180
Restructured loans   1,917     209
Non-performing loans   5,661     1,389
Other real estate owned      
Non-performing assets $ 5,661   $ 1,389
           
           
Allowance for loan losses $ 3,299   $ 2,849
Allowance for loan losses/total loans   1.07%     1.14%
Net charge-offs:          
   Quarter-to-date $ 76   $ 20
   Year-to-date   423     52
Net charge-offs to average loans          
   Quarter-to-date   0.02%     0.01%
   Year-to-date   0.15%     0.02%
Non-performing loans/total loans   1.83%     0.56%
Allowance for loan losses/non-performing loans   58.28%     205.10%