Middlefield Banc Corp. Reports Strong Earnings Increase for First Quarter

Middlefield Banc Corp. 2011 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: May 5, 2011

Middlefield Banc Corp. (OTCQB: MBCN), reported net income of $1.002 million for the quarter ended March 31, 2011, compared to $645,000 for the quarter ended March 31, 2010, an increase of 55.3%. On a per share basis, the Company's diluted earnings were $0.62 for the 2011 first quarter, as compared to $0.41 for the comparable period of 2010.

Annualized returns on average equity ("ROE") and average assets ("ROA") for the 2011 quarter were 10.50% and 0.63%, respectively, compared with 7.06% and 0.45% for the first quarter of 2010.

For the first quarter of 2011, net interest income increased $963,000, or 23.7% from the same period last year. The increase was nearly equally attributable to an increase in interest income and a decrease in interest expense. Comparing the first quarter of 2011 to the first quarter of 2010, interest income increased $435,000, or 6.3%. For the same period, interest expense decreased $528,000, a change of 18.4%. The net interest margin for the three months ended March 31, 2011 was 3.68%, compared to 3.29% for the same period of the prior year.

For the three months ended March 31, 2011, management provided $865,000 to the allowance for loan losses, an increase of $426,000 from the same period the prior year. The higher provision was related to a higher level of charge-offs and for an increase in the general allocation for loan losses. Net charge-offs for the 2011 first quarter were $401,000, or 0.11% of average loans. The allowance for loan losses at March 31, 2011 stood at $6.685 million, or 1.78% of total loans. At March 31, 2010, the allowance for loan losses was $5.279 million, representing 1.47% of total loans. Based on the evaluation of the adequacy of the allowance for loan losses, management believes that, at March 31, 2011, the allowance for loan losses was adequate and reflects probable losses in the loan portfolio.

Noninterest income for the first quarter of 2011 was $699,000. This was a modest increase of 14.8% from the comparable period of 2010. The primary factors in this increase were higher revenues from investment services and fees generated by increased debit card usage. Although deposit service charges increased year-over-year, the growth was tempered by rules eliminating certain automatic overdraft protection arrangements and the ability to charge fees for the payment of overdrafts for debit and ATM card transactions.

Noninterest expense for the first quarter of 2011 totaled $3.705 million, an increase of $147,000, or 4.13% from the same period last year. Salaries and benefits, the company's largest noninterest expense, contributed $179,000 to the increase. This increase is largely related to the growth of the company, including increased staffing levels in special assets/collections and credit analysis. Expenses related to the collection of delinquent loans and the management of Other Real Estate increased $40,000 from 2010's first quarter. The limited growth in non-interest expense reflects management's on-going efforts to control expenses.

"We are pleased to report strong year over year earnings for the first quarter of 2011," stated Thomas G. Caldwell, President and Chief Executive Officer, "We enjoyed positive growth in net interest income as we have continued to maintain our focus on managing our non-interest expenses."

"In a broad sense, we are cautiously optimistic that a transition to better economic times will begin in 2011. As we work through that interim period, our focus remains keen on delivering excellence in customer service, increasing value to our shareholders, and operating our company in accordance with safe and sound banking practices," Caldwell concluded.

Balance Sheet Growth

The company's total assets as of March 31, 2011 stood at $635.8 million, an increase of 0.6% over the $632.2 million in total assets reported at December 31, 2010. Net loans at March 31, 2011, were $369.8 million, up $3.6 million, or 1.0%, over the $366.3 million reported at December 31, 2010. Total deposits at the end of the first quarter 2011 were $568.6 million, or 0.6% greater than the deposit level of $566.3 million at December 31, 2010. Stockholders' equity at March 31, 2011, was $39.3 million. Book value per share as of March 31, 2011, was $23.86.

Dividends

During the first quarter of both 2011 and 2010, Middlefield paid cash dividends of $0.26 per share.

Middlefield Banc Corp. headquartered in Middlefield, Ohio is a multi-bank holding company with total assets of $635.8 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

March 31, 2011 and 2010 and December 31, 2010
 
Balance Sheet (period end) March 31,   

December 31,   

March 31,
(Dollar amounts in thousands) (unadudited) 2011

2010

2010
 
Assets
Cash and due from banks $   11,555 $   10,473 $   13,039
Federal funds sold   30,581   20,162   28,492
Interest-bearing deposits in other institutions       123
  Cash and cash equivalents   42,136     30,635       41,654
Investment securities available for sale   189,640   201,772   164,852
Loans:   376,529   372,498   359,651
Less:  reserve for loan losses   6,685   6,221   5,279
  Net loans    369,844     366,277     354,372
Premises and equipment   8,053   8,179   8,408
Goodwill   4,559   4,559   4,559
Bank-owned life insurance    8,052   7,979   7,773
Accrued interest receivable and other assets   13,553   12,796   12,399
Total Assets $   635,837 $   632,197   $   594,017
   
March 31, December 31, March 31,
2011 2010 2010
Liabilities and Stockholders' Equity
Non-interest bearing demand deposits $   52,831 $   53,391 $   44,082
Interest bearing demand deposits   54,371   48,869   41,959
Money market accounts   75,046   71,105   64,808
Savings deposits   155,945   146,993   120,544
Time deposits   230,411    244,893   250,885
  Total Deposits     568,604     565,251       522,278
Short-term borrowings   7,301   7,632   6,772
Federal funds purchased      
Other borrowings   18,956   19,321   25,374
Other liabilities   1,693   1,971   1,847
  Total Liabilities   596,554     594,175     556,271
  
Common equity   29,286   28,429   28,035
Retained earnings   16,418   15,840   15,197
Accumulated other comprehensive income   313   487   1,248
Treasury stock   (6,734)   (6,734)   (6,734)
  Total Stockholders' Equity   39,283     38,022     37,746
Total Liabilities and Stockholders' Equity $   635,837 $   632,197 $   594,017
  
  
MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
March 31, 2011 and 2010
(Dollar amounts in thousands) (unaudited)
  
For the Three Months Ended
March 31,  
2011     2010
INTEREST INCOME
  Interest and fees on loans $   5,301 $   5,097
  Interest-bearing deposits in other institutions   2   4
  Federal funds sold   9   11
  Investment securities
  Taxable interest   1,323   1,203
  Tax-exempt interest   698   592
  Dividends on stock   26   17
  Total interest income     7,359     6,924
INTEREST EXPENSE
  Deposits   2,037   2,485
  Short term borrowings   59   58
  Other borrowings   109   190
  Trust preferred securities   136   136
  Total interest expense   2,341   2,869
NET INTEREST INCOME   5,018   4,055
  
Provision for loan losses    865   439
NET INTEREST INCOME AFTER PROVISION
  FOR LOAN LOSSES   4,153   3,616
NONINTEREST INCOME
  Service charges on deposits   428    415
  Investment securities gains, net   15   9
  Earnings on bank-owned life insurance   73   67
  Other income   183    118
  Total non-interest income   699   609
NONINTEREST EXPENSE
  Salaries and employee benefits   1,690   1,511
  Occupancy expense    272   276
  Equipment expense   158   198
  Data processing costs   180   243
  Ohio state franchise tax   128    136
  Federal deposit insurance expense   225   202
  Professional fees   211   192
  Loss on sale of other real estate owned   (20)   121
  Other operating expense   861   679
  Total non-interest expense   3,705   3,558
Income before income taxes   1,147      667  
Provision for income taxes   145   22
NET INCOME $   1,002 $   645
    
Per common share data
Net income per common share - basic $ 0.62 $ 0.41
Net income per common share - diluted $ 0.62 $ 0.41
Dividends declared $ 0.26 $ 0.26
Book value per share(period end) $ 23.86 $ 24.05
Tangible book value per share (period end) $ 21.09 $ 21.15
Dividend payout ratio 40.92% 63.26%
Average shares outstanding - basic   1,621,889   1,565,454
Average shares outstanding -diluted   1,621,889   1,567,441
Period ending shares outstanding   1,646,609   1,569,486
  
Selected ratios
Return on average assets 0.63% 0.45%
Return on average equity 10.50% 7.06%
Yield on earning assets 5.28% 5.45%
Cost of interest bearing liabilities 1.77% 2.36%
Net interest spread 3.51% 3.09%
Net interest margin 3.68%   3.29%
Efficiency (1) 60.97% 71.60%
Equity to assets at period end 6.18% 6.35%
  
(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.
  
  
March 31,

March 31,
Asset quality data 2011

2010
(Dollar amounts in thousands)
Non-accrual loans $   19,017 $   18,140
Troubled debt restructuring   2,942  
90 day past due and accruing   55   3
Non-performing loans   22,014      18,143
Other real estate owned   2,248   2,175
Non-performing assets $   24,262 $   20,318
  
  
Allowance for loan losses $   6,685 $   5,279
Allowance for loan losses/total loans 1.78%   1.47%
Net charge-offs:
  Quarter-to-date $   401 $   97
  Year-to-date   401   97
Net charge-offs to average loans    
  Quarter-to-date 0.11% 0.03%
  Year-to-date 0.11% 0.03%
Non-performing loans/total loans 5.85% 5.04%
Allowance for loan losses/non-performing loans 30.37% 29.10%