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Middlefield Banc Corp. Reports Record Earnings of $6.3 Million for 2012

Middlefield Banc Corp. 2013 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 28, 2013

MIDDLEFIELD, OHIO, Middlefield Banc Corp. (OTCQB:MBCN), parent of The Middlefield Banking Company and Emerald Bank, today reported financial results for the fourth quarter and full year ended December 31, 2012.

For the year ended December 31, 2012, the company earned $6,281,000, representing an increase of 52.1% from the net income of $4,130,000 for the year ended December 31, 2011.Net Income for the fourth quarter was $1,269,000, which compares to the $1,329,000 reported for the fourth quarter of 2011.

Earnings per diluted share for the full year of 2012 were $3.28, which was 33.9% above the twelve month 2011 result of $2.45.The company reported diluted earnings per share for the fourth quarter of 2012 at $0.64, while the same period of 2011 saw diluted earnings per share of $0.76.

Annualized returns on average equity ("ROE") and average assets ("ROA") for 2012 were 11.98% and 0.95%, respectively, compared with 10.24% and 0.65% for 2011.For the fourth quarter, ROE and ROA were 9.11% and 0.75%, respectively.For the comparable 2011 three-month period, the results were 12.33% and 0.81%, respectively.

"Our record results for 2012 reflect our commitment to maximizing shareholder value, while continuing our focus on true community banking.The $6.3 million of net income for the year is indicative of the financial strength of our company, which is a fundamental key to all we do," stated Thomas G. Caldwell, President and Chief Executive Officer, "Over the course of the past year, we continued our efforts to control costs, both in terms of interest expense as well as overhead.The success that we experienced during 2012 is a direct result of the efforts of the entire team at Middlefield Banc Corp."

"The core of our company is strong.We are confident of our abilities to address the three primary threats expected for the near-term, those three challenges being a continued sluggish economy, historically low interest rates, and increased regulatory costs, especially those associated with increased compliance regulations," continued Caldwell."Despite these challenges, we will continue to remain focused on delivering excellent customer service, increasing value to our shareholders, and operating our company under safe and sound banking principles."

Net Interest Income

Net interest income for the fourth quarter of 2012 decreased $90,000, or 1.6%, to $5,436,000 compared to $5,546,000 in the fourth quarter of 2011.The net interest margin decreased 18 basis points to 3.55% compared to the 3.73% reported for the year-ago quarter.Net interest income for the year 2012 increased by $1,224,000, or 5.8%, to $2,299,000 compared to the $21,075,000 for the full year of 2011.The net interest margin for 2012 stood at 3.74%, a 9 basis point increase from the 3.65% reported for 2011.

Non-Interest Income and Operating Expenses

Non-interest income was higher for both the three and twelve month periods.The comparative increases on deposit service charges of $169,000 and $253,000, for the respective three and twelve month periods, are primarily driven by service charges on a larger base of deposit accounts including increased usage of debit cards, with attendant fees.Revenue from investment services resulted in a year-over-year increase of $121,000.The company also experienced a gain of $610,000 during 2012 related to the sale of certain investment securities.This gain was directly related to the re-positioning of the securities portfolio to a lower level of private label mortgage-backed securities.For 2011, the company reported a loss on securities transactions of $173,000.

Operating expenses decreased by 2.7%, or $96,000 for the quarter while increasing $138,000, or 0.9% for 2012 over comparable periods of 2011.Although the company did experience a decrease in salaries and employee benefits, staffing levels were increased in branch customer support positions, loan administration, and regulatory compliance management.By re-negotiating health care contracts and increasing the amount of employment contribution toward premiums, the company was able to lower overall health insurance costs.Data processing costs were higher for both the three and twelve-month periods, which was the direct result of higher customer counts and increased product/service offerings.Other cost increases during 2012 were tied to higher audit expense which was directly tied to increased regulatory changes, the write-off of certain frontline teller software that is being upgraded and replaced, and to the maintenance of other real estate owned properties.In 2009, the company's subsidiary banks, as with all banks nationwide, prepaid three years of FDIC insurance premiums.In a final reconciliation of that prepayment, the company was able to record a partial return of the premium in 2012, which lead to a significantly lower expense for the year.

Balance Sheet

The company's total assets ended 2012 at $670.3 million, an increase of 2.4% over the $654.6 million in total assets reported at December 31, 2011.Net loans at December 31, 2012, were $400.7 million, up $5.6 million, or 1.4%, over the $395.1 million reported at December 31, 2011.Total deposits at year-end 2012 were $593.3 million, or 2.1% greater than the deposit level of $581.0 million at December 31, 2011.The investment portfolio, which is entirely classified as available for sale, stood at $194.5 million at December 31, 2012.This figure represented a modest increase in balances in that portfolio of $0.5 million from the prior year-end.

Asset Quality

The provision for loan losses for the three month period ended December 31, 2012 was $975,000, compared to the $600,000 posted for the fourth quarter of 2011.Comparable figures for the full twelve month periods are $2,168,000 for 2012 and $3,085,000 for 2011.Net charge-offs for the full year 2012 were $1,208,000, or 0.30% of average loans.For 2011, net charge-offs totaled $2,487,000, which equaled 0.65% of average loans.At December 31, 2012, the allowance for loan losses was $7,779,000, representing 1.90% of total loans.

The following table provides a summary of asset quality and reserve coverage ratios.

Asset Quality History
(dollars in thousands)
12/31
2012
    9/30
2012
    12/31
2011
  12/31
2010
    12/31
2009
Nonperforming loans $ 14,224 $ 15,404 $ 24,546 $ 19,986 $ 16,285
Real estate owned 1,846 2,332 2,196 2,302 2,164
Nonperforming assets $ 16,070 $ 17,736 $ 26,742 $ 22,288 $ 18,450
Allowance for loan losses $ 7,779 $ 7,173 $ 6,819 $ 6,221 $ 4,937
Ratios:
Nonperforming loans to total loans 3.38% 3.76% 6.12% 5.37% 4.61%
Nonperforming assets to total assets 2.40% 2.67% 4.09% 3.52% 3.30%
Allowance for loan losses to total loans 1.90% 1.75% 1.70% 1.67% 1.40%
Allowance for loan losses to nonperforming loans 54.69% 46.57% 27.78% 31.13% 30.31%

Shareholders' Equity

Tangible book value per share increased from $24.23 per share at December 31, 2011 to $25.44 per share at December 31, 2012.The increase is the result of net income and mark-to-market adjustments in investment securities, offset by cash dividends paid to shareholders.During 2012, the company paid cash dividends of $1.04 per share, which equaled the amount paid in 2011.

"As we move into 2013, we see many exciting opportunities in which to build upon the success that we enjoyed in 2012.With the positive trends of the last year, we are well positioned to enhance our earnings potential and grow our franchise through our strong team of community bankers and favorable markets," concluded Caldwell.

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is a multi-bank holding company with total assets of $670.3 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.comand 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, 2012 and December 31, 2011
    (unaudited)      
Balance Sheet (period end)     December 31,     December 31,
(Dollar amounts in thousands)     2012     2011
             
Assets            
Cash and due from banks   $ 33,568   $ 15,730
Federal funds sold     11,778     18,660
Interest-bearing deposits in other institutions     0     0
Cash and cash equivalents     45,346 34,390
Investment securities available for sale     194,472     193,977
Loans:     408,433     401,880
Less: allowance for loan losses     7,779     6,819
Net loans     400,654   395,061
Premises and equipment     8,670     8,264
Goodwill     4,559     4,559
Bank-owned life insurance     8,536     8,257
Accrued interest receivable and other assets     8,051     10,043
Total Assets   $ 670,288 $ 654,551
             
      December 31,     December 31,
      2012     2011
Liabilities and Stockholders' Equity            
Non-interest bearing demand deposits   $ 75,912   $ 63,348
Interest-bearing demand deposits     63,915     55,853
Money market accounts     81,349     75,621
Savings deposits     175,406     167,207
Time deposits     196,753     218,933
Total Deposits 593,335 580,962
Short-term borrowings     6,538     7,392
Other borrowings     12,970     16,831
Other liabilities     2,008     2,113
Total Liabilities     614,851   607,298
             
Common equity     34,295     31,240
Retained earnings     22,485     18,206
Accumulated other comprehensive income     5,391     4,541
Treasury stock     (6,734)     (6,734)
Total Stockholders' Equity     55,437   47,253
             
Total Liabilities and Stockholders' Equity    $ 670,288   $ 654,551

 

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2012 and December 31, 2011
(Dollar amounts in thousands)
   (unaudited)   (unaudited)
Income Statement For the
Three Months Ended
  For the
Twelve Months Ended
  December 31, December 31,
      2012   2011     2012   2011
INTEREST INCOME                        
Interest and fees on loans   $ 5,430   $ 5,599   $ 22,418   $ 21,854
Interest-bearing deposits in other institutions     7     6     26     14
Federal funds sold     7     (1)     20     12
Investment securities                    
Taxable interest     754     1,030     3,209     4,862
Tax-exempt interest     727     759     2,976     2,883
Dividends on stock     24     26     97     102
Total interest income 6,949   7,419   28,746   29,727
INTEREST EXPENSE                        
Deposits     1,379     1,590     5,728     7,467
Short term borrowings     42     58     261     235
Other borrowings     50     87     294     400
Trust preferred securities     42     138     164     550
Total interest expense     1,513     1,873     6,447     8,652
NET INTEREST INCOME     5,436     5,546     22,299     21,075
Provision for loan losses     975     600     2,168     3,085
NET INTEREST INCOME AFTER PROVISION                        
FOR LOAN LOSSES     4,461     4,946     20,131     17,990
NONINTEREST INCOME                        
Service charges on deposits     382     213     1,765     1,512
Net securities gains (losses)     162     (157)     610     (173)
Earnings on bank-owned life insurance     71     69     279     278
Other income     157     133     797     620
Total non-interest income     772     258     3,451     2,237
NONINTEREST EXPENSE                        
Salaries and employee benefits     1,872     1,845     7,127     7,233
Occupancy expense     256     216     959     953
Equipment expense     202     68     759     556
Data processing costs     198     178     772     693
Ohio state franchise tax     173     110     590     461
Federal deposit insurance expense     (264)     293     487     966
Professional fees     278     223     948     800
(Gain) Loss on sale of other real estate owned     20     (1)     258     497
Other operating expense     959     666     3,739     3,342
Total non-interest expense     3,694     3,598     15,639     15,501
Income before income taxes     1,539 1,606 7,943 4,726
Provision (benefit) for income taxes     270     277     1,662     596
NET INCOME   $ 1,269   $ 1,329   $ 6,281   $ 4,130

  

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2012 and December 31, 2011
(Dollar amounts in thousands)
     (unaudited)   (unaudited)
    For the
Three Months Ended
  For the
Twelve Months Ended
    December 31, December 31,
Per common share data       2012   2011     2012   2011
Net income per
common share - basic
  $ 0.64   $ 0.76   $ 3.29   $ 2.45
Net income per
common share - diluted
  $ 0.64   $ 0.76   $ 3.28   $ 2.45
Dividends declared   $ 0.26   $ 0.26   $ 1.04   $ 1.04
Book value per share (period end)   $ 27.83   $ 26.81   $ 27.83   $ 26.81
Tangible book value per share (period end)   $ 25.44   $ 24.23   $ 25.44   $ 24.23
Dividend payout ratio     40.98%     34.46%     31.87%     42.71%
Average shares
outstanding - basic
    1,984,818     1,756,157     1,911,960     1,683,052
Average shares
outstanding - diluted
    1,991,354     1,756,157     1,916,932     1,683,052
Period ending shares outstanding     1,992,233     1,762,338     1,992,233     1,762,338
                         
Selected ratios                        
Return on average assets     0.75%     0.81%     0.95%     0.65%
Return on average equity     9.11%     12.33%     11.98%     10.24%
Yield on earning assets     4.48%     4.90%     4.75%     5.05%
Cost of interest-bearing liabilities     1.10%     1.34%     1.19%     1.58%
Net interest spread     3.38%     3.56%     3.56%     3.47%
Net interest margin     3.55%   3.73%     3.74%     3.65%
Efficiency (1)     56.27%     58.08%     57.36%     62.51%
Equity to assets at period end     8.34%     7.27%     8.34%     7.27%
                         
(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.

   

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
December 31, 2012 and December 31, 2011
(Dollar amounts in thousands)
             
      December 31,     December 31,
Asset quality data     2012       2011
(Dollar amounts in thousands)      
Non-accrual loans   $ 11,376   $ 16,804
Troubled debt restructuring     2,411     7,423
90 day past due and accruing     437     319
Nonperforming loans     14,224 24,546
Other real estate owned     1,846     2,196
Nonperforming assets   $ 16,070 $ 26,742
             
             
Allowance for loan losses   $ 7,779   $ 6,819
Allowance for loan losses/total loans     1.90%   1.70%
Net charge-offs:            
Quarter-to-date   $ 369   $ 1,355
Year-to-date     1,208     2,487
Net charge-offs to average loans        
Quarter-to-date     0.09%     0.34%
Year-to-date     0.30%     0.65%
Nonperforming loans/total loans     3.48%     6.11%
Allowance for loan losses/non-performing loans     54.69%     27.78%
Nonperforming assets/total assets     2.40%     4.09%
             
             
      December 31,     December 31,
Loans     2012     2011
(Dollar amounts in thousands)      
Commercial and industrial   $ 62,188   $ 59,185
Real estate - construction     22,522     21,545
Real estate - moretgage        
Residential     203,872     208,139
Commercial     115,734 108,502
Consumer installment     4,117     4,509
Total Loans   $ 408,433 $ 401,880