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Middlefield Banc Corp. Reports Fourth Quarter and Full Year 2009 Results

Middlefield Banc Corp. 2010 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 25, 2010

MIDDLEFIELD, OHIO  Middlefield Banc Corp. (Pink Sheets:  MBCN), parent of The Middlefield Banking Company and Emerald Bank, today announced the following results for the period ended December 31, 2009.

  • Total assets increased $90.8 million, or 19.4%, from December 31, 2008
  • Net interest income in a year-to-year comparison grew $2.3 million or 19.1%
  • Total deposits stood at $487.1 million, an increase of 23.4% from year-end 2008
  • Net loans grew $30.6 million during the year, ending up 9.6%
  • Diluted earnings per common share for the year were $1.15.

The company reported that earnings for the fourth quarter ended December 31, 2009, were $504,000 compared to earnings of $390,000 for the same period in the prior year.  During the 2009 period, net interest income increased $898,000.  This was offset by a $332,000 higher provision for loan losses, and an increase in other total non-interest expense of $774,000.  Non-interest income during the fourth quarter of 2009 was $447,000 above that reported in the same period of 2008, during which an other-than-temporary impairment on securities of $379,000 was recorded. 

For the year, net income was $1,781,000, which was below the $2,615,000 reported for 2008.  An increase in net interest margin of $2,288,000 over 2008, was offset by an increase in the provision for loan losses of $1,735,000 and an increase in total non-interest expense of $2,289,000.

Annualized returns on average equity ("ROE") and average assets ("ROA") for the quarter were 5.42% and 0.37%, respectively, compared with 5.02% and 0.34% for the fourth quarter of 2008.  ROE and ROA were 4.90% and 0.36%, respectively, for the twelve-month period of 2009.  Comparable results for the 2008 twelve-month period were 7.91% and 0.58%, respectively.

"We are pleased to report positive earnings for the quarter and full year periods," stated Thomas G. Caldwell, President and Chief Executive Officer, "We have seen continued improvement in our net interest margin.  However, our focus remains keen on successfully resolving our asset quality issues.  Throughout the credit crisis, we have continued to maintain a well capitalized status.  Retaining the financial strength of our company is a fundamental key to our future."

"As we reported earlier, the credit quality issues at Emerald Bank, as well as prudent management, led us to greatly increase our allowance for loan losses during 2009.  We have also moved a good portion of Emerald Bank's nonperforming assets into a new credit resolution subsidiary of Middlefield Banc Corp.  These actions are permitting the new management team at Emerald Bank to maximize their effort to drive growth and profitability with that affiliate.  Meanwhile, our Middlefield affiliate has experienced one of the most profitable performances in the bank's 108 year history."

Asset Quality

The provision for loan losses for the three and twelve month periods ended December 31, 2009 increased 132% and 285% to $583,000 and $2,343,000 compared to the $251,000 and $608,000, respectively, for the comparable periods of 2008.  "The performance of our company is tied to the economy of the State of Ohio.  Our asset quality numbers reflect the continued environment of sustained economic weakness, including continued high unemployment, increased levels of under-employment, and lower real estate values," said Donald L. Stacy, Chief Financial Officer of Middlefield Banc Corp.  "In our northeastern Ohio markets, credit issues are tied to owner occupied residential properties.  In contrast, our central Ohio market is reporting delinquencies tied to non-owner occupied residential properties."

Stacy continued, "We believe that it is prudent, in light of these on-going economic issues and heightened regulatory scrutiny, to operate with higher levels of general loan loss reserves.  During 2010, we will continue to provide a higher than historic level of provision to address credit quality issues."

The following table summarizes asset quality and reserve coverage ratios as of the end of the last five quarters.
 

Asset Quality History
(dollars in thousands)
  12/31/2009      9/30/2009      6/30/2009      3/31/2009      12/31/2008
  
Nonperforming loans $ 16,285 $ 14,368 $ 14,023 $ 13,370 $ 8,481
Real estate owned   2,164   1,775   1,967   1,331   1,106
  
Nonperforming assets    $ 18,449 $ 16,143 $ 15,991 $ 14,701 $ 9,587
  
Allowance for loan losses $ 4,937 $ 4,422 $ 3,668 $ 3,621 $ 3,557
  
Ratios:
Nonperforming loans to total loans 4.61% 4.15% 4.18% 4.16% 2.64%
Nonperforming assets to total
Nonperforming assets to total assets 3.30% 3.12% 3.33% 3.14% 2.11%
  
Allowance for loan losses to total loans 1.40% 1.28% 1.09% 1.13% 1.11%
  
Allowance for loan losses to nonperforming loans 30.31% 30.78% 26.16% 27.08% 41.94%

 

The increased loan loss provision, which has significantly outpaced loan charge-offs, has substantially strengthened the allowance for loan losses.  The ratio of the allowance for loan losses to total loans increased to 1.40% of total loans at December 31, 2009 compared to the 1.28% reported at September 30, 2009 and 1.11% at December 31, 2008.

During the fourth quarter of 2009, the company created a new entity, EMORECO, Inc., which is designed to aid in troubled asset resolution.  During November 2009, EMORECO purchased $4.2 million of non-performing assets from Emerald Bank.

Net Interest Income

Net interest income for the fourth quarter of 2009 increased $898,000, or 30.0%, to $3,897,000 compared to $2,999,000 in the fourth quarter of 2008.  The net interest margin increased 29 basis points to 3.28% compared to the 2.99% reported for the year-ago quarter.  Net interest income for the year 2009 increased by $2,288,000, or 19.1%, to $14.268,000 compared to the $11,980,000 for the full year of 2008.  The net interest margin for 2009 stood at 3.30%, a 24 basis point increase from the 3.06% reported for 2008.

The improvement in net interest income reflects strong core deposit growth and the implementation of new pricing strategies.  Total deposits at December 31, 2009 stood at $487.1 million, representing an increase of 23.4% from the year-end 2008 figure.  Savings account deposits accounted for growth of $38.4 million, with Money Market deposits more than doubled to $56.5 million.

Non-Interest Income and Operating Expenses

Non-interest income was up for both the three and twelve month periods.  Service charges on deposit accounts decreased $40,500 for the three months of 2009 compared to 2008, and $17,000 for the twelve-month period.  Earnings on bank-owned life insurance were lower, reflective of the current interest rate environment.  During 2008, the company recognized a charge for other-than-temporary impairment on securities of $376,000.  A similar charge, in the amount of $88,000, was recognized in 2009.

Operating expenses increased by 27.9%, or $774,000 for the quarter and $2,289,000, or 21.6% for 2009 over comparable periods of 2008.  Expense increases in salaries and employee benefits, occupancy expense, and data processing costs are all directly related to the growth of the company.  The Middlefield Banking Company opened its Cortland office in June 2008, while Emerald Bank acquired an office in Westerville in November 2008.  Both of these actions, while expanding the company's footprint, contributed to the higher expense levels.  The premium for FDIC insurance increased 290% in the fourth quarter of 2009 over the same period of 2008 and 277% for the twelve-month period of 2009 over 2008.  Loss on other real estate of $432,000 contributed to the $591,000 increase in other operating expenses for the year.

Balance Sheet Growth

The company's total assets ended 2009 at $558.7 million, an increase of 19.4% over the $467.8 million in total assets reported at December 31, 2008.  Net loans at December 31, 2009, were $348.7 million, up $30.6 million, or 9.6%, over the $318.0 million reported at December 31, 2008.  Total deposits at year-end 2009, were $487.1 million, or 23.4% greater than the deposit level of $394.8 million at December 31, 2008. 

The investment portfolio, which is entirely classified as available for sale, stood at $136.7 million at December 31, 2009.  This figure represented growth within that portfolio of $32.4 million during the year.  Stockholders' equity at December 31 2009 was $36.7 million, or 6.57% of total assets.  Book value per share as of December 31, 2009 was $23.46.

Dividends

During 2009, Middlefield paid cash dividends of $1.04 per share.  This represents only a slight increase over the $1.03 per share paid during 2008.

Middlefield Banc Corp. headquartered in Middlefield, Ohio is a multi-bank holding company with total assets of $558.7 million.  The company's lead bank, The Middlefield Banking Company, operates full service banking centers and a LPL Financial' brokerage office serving Chardon, Cortland, Garrettsville, Mantua, Middlefield, Newbury, and Orwell.  The company also serves the central Ohio market through its Emerald Bank subsidiary, with offices in Dublin and Westerville, Ohio.  Additional information is available at www.middlefieldbank.com and www.emeraldbank.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
December 31, 2009 and December 31, 2008
  
    (unaudited)      
Balance Sheet as of   December 31,     December 31,
       2009      2008
Assets          
Cash and due from banks $ 12,908,859   $ 9,795,248
Federal funds sold   28,122,892     7,548,000
Interest-bearing deposits in other institutions   120,885     112,215
   Cash and cash equivalents   41,152,636     17,455,463
Investment securities available for sale   136,711,100     104,270,366
Loans:   353,596,712     321,575,293
Less:  allowance for loan losses   4,936,575     3,556,763
   Net loans   348,660,137     318,018,530
Premises and equipment   8,394,369     8,448,915
Goodwill   4,558,687     4,558,687
Bank-owned life insurance   7,706,476     7,440,687
Accrued interest receivable and other assets   11,474,364     7,654,287
Total Assets $ 558,657,769     467,846,935
           
    December 31,     December 31,
    2009     2008
Liabilities and Stockholders' Equity          
Non-interest bearing demand deposits $ 44,386,654   $ 42,357,154
Interest bearing demand deposits   38,111,042     26,404,660
Money market accounts   56,451,504     27,845,438
Savings deposits   107,358,352     68,968,844
Time deposits   240,798,732     229,243,506
   Total Deposits   487,106,284     394,819,602
Short-term borrowings   1,099,555     1,886,253
Other borrowings   31,564,508     33,903,019
Other liabilities   2,180,150     2,178,813
   Total Liabilities   521,950,498     432,787,687
           
Common equity   27,919,228     27,301,403
Retained earnings   14,959,428     14,786,353
Accumulated other comprehensive income (loss)   562,222     (294,901)
Treasury stock   (6,733,607)     (6,733,607)
   Total Stockholders' Equity   36,707,271     35,059,248
           
Total Liabilities and Stockholders' Equity $ 558,657,769   $ 467,846,935
            
            
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2009 and December 31, 2008
                     
    (unaudited)     (unaudited)
Income Statement For the Three Months Ended   For the Year Ended
  December 31,   December 31,
       2009      2008      2009      2008
INTEREST INCOME                    
Interest and fees on loans $ 5,191,325   $ 5,152,742   $ 20,270,987 $ 21,426,372
Interest-bearing deposits in other institutions   2,761     1,678     14,561   12,468
Federal funds sold   9,580     10,637     20,557   135,104
Investment securities                    
Taxable interest   1,041,252     744,592     3,794,149   2,538,237
Tax-exempt interest   506,905     450,093     1,881,752   1,810,319
Dividends on FHLB Stock   21,964     26,786     68,575   115,313
Total interest income   6,773,787     6,386,528     26,050,581   26,037,812
INTEREST EXPENSE                    
Deposits   2,520,035     2,970,545     10,296,404   12,352,211
Short term borrowings   5,440     11,291     20,601   46,084
Other borrowings   216,396     271,491     932,109   1,120,491
Trust preferred securities   134,524     134,298     533,711   539,298
Total interest expense   2,876,395     3,387,625     11,782,825   14,058,084
NET INTEREST INCOME   3,897,392     2,998,903     14,267,756   11,979,728
Provision for loan losses   583,000     251,000     2,343,000   608,000
NET INTEREST INCOME AFTER PROVISION                    
FOR LOAN LOSSES   3,314,392     2,747,903     11,924,756   11,371,728
NONINTEREST INCOME                    
Service charges on deposits   510,818     470,270     1,905,130   1,888,059
Net securities gains (losses)   (14,323)     (378,557)        (14,323)   (344,049)
Earnings on bank-owned life insurance   68,744     69,507     265,788   287,305
Other income   152,910     110,371     511,685   395,191
Total non-interest income   718,149     271,591     2,668,280   2,226,506
NONINTEREST EXPENSE                    
Salaries and employee benefits   1,634,267     1,268,472     5,938,239   4,911,671
Occupancy expense   236,887     242,020     928,425   885,904
Equipment expense   83,700     103,270     508,875   539,040
Data processing costs   224,628     212,132     916,990   803,230
Ohio state franchise tax   123,300     117,000     493,200   468,000
FDIC assessment   178,060     45,692     707,328   187,866
Other operating expense   1,065,046     783,229     3,391,567   2,800,642
Total non-interest expense   3,545,888     2,771,815     12,884,624   10,596,352
Income before income taxes   486,653     247,679     1,708,412   3,001,882
Provision (benefit) for income taxes   (17,000)     (142,727)     (72,574)   387,003
NET INCOME $ 503,653   $ 390,406   $ 1,780,986 $ 2,614,879
                     
Per common share data                    
Net income per common share - basic $ 0.32   $ 0.26   $ 1.15 $ 1.72
Net income per common share - diluted $ 0.32   $ 0.25   $ 1.15 $ 1.69
Dividends declared $    0.26   $ 0.26   $    1.04 $ 1.03
Book value per share(period end) $ 23.46   $ 22.83   $ 23.46 $ 22.83
Tangible book value per share (period end) $ 20.55   $ 18.97   $ 20.55 $ 18.97
Dividend payout ratio   80.40%     102.04%     90.28%   60.25%
Average shares outstanding - basic   1,558,132     1,530,686     1,547,239   1,532,973
Average shares outstanding -diluted   1,558,132     1,533,292     1,547,979   1,546,413
Period ending shares outstanding   1,564,582     1,535,851     1,564,582   1,535,851
                     
Selected ratios                    
Return on average assets   0.37%     0.34%     0.36%   0.58%
Return on average equity   5.42%     5.02%     4.90%   7.91%
Yield on earning assets   5.56%     6.12%     5.85%   6.40%
Cost of interest bearing liabilities   2.50%     3.52%     2.84%   3.77%
Net interest spread   3.06%     2.60%     3.01%   2.63%
Net interest margin   3.28%     2.99%     3.30%   3.06%
Efficiency (1)   72.71%     80.96%     71.96%   71.50%
Equity to assets at period end   6.57%     7.49%     6.57%   7.49%
                     
(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   2009     2008          

       

         
Non-accrual loans $ 14,519,026    $ 6,254,748          
90 day past due and accruing   1,766,438     2,226,632          
Non-performing loans   16,285,463       8,481,380          
Other real estate owned   2,164,455     1,106,282          
Non-performing assets $ 18,449,918     $ 9,587,662          
   

   

         
         

         
Allowance for loan losses $ 4,936,575   $ 3,556,763          
Allowance for loan losses/total loans   1.40%     1.11%          
Net charge-offs:                    
Quarter-to-date $ 68,675   $ 308,513          
Year-to-date   963,188     350,513          
Net charge-offs to average loans                    
Quarter-to-date   0.02%     0.10%          
Year-to-date   0.29%     0.11%          
Non-performing loans/total loans   4.61%     2.64%          
Allowance for loan losses/non-performing loans   30.31%     41.94%          
Non-performing assets/total assets   3.30%     2.05%