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Middlefield Banc Corp. Reports Full Year and Fourth Quarter 2013 Results

MIDDLEFIELD, Ohio, Feb. 3, 2014 /PRNewswire/ -- Middlefield Banc Corp. (OTCQB: MBCN), parent of The Middlefield Banking Company, today reported financial results for the fourth quarter and full year ended December 31, 2013.

For the year ended December 31, 2013, the company earned $7.0 million, representing an increase of 11.9% from the net income of $6.3 million for the year ended December 31, 2012.  Net Income for the fourth quarter was $1.8 million, which compares to the $1.3 million reported for the fourth quarter of 2012, an increase of 43.4%.  

Diluted earnings per share for the full year of 2013 were $3.47, which was 5.8% above the twelve month 2012 result of $3.28.  The company reported diluted earnings per share for the fourth quarter of 2013 at $0.90, while the same period of 2012 saw diluted earnings per share of $0.64

Annualized returns on average equity ("ROE") and average assets ("ROA") for 2013 were 13.17% and 1.06%, respectively, compared with 11.98% and 0.95% for 2012.  For the fourth quarter, ROE and ROA were 13.45% and 1.10%, respectively.  For the 2012 three-month period the results were 9.11% and 0.75%, respectively.

"For Middlefield Banc Corp., 2013 was a year highlighted by solid success.  Our net income in excess of $7.0 million was the highest level ever recorded in the company's history," stated Thomas G. Caldwell, President and Chief Executive Officer, "Our results were achieved despite significant expense impact driven by regulatory-related revenue burdens.  The success that we experienced during 2013 is a direct result of the efforts of the entire team at Middlefield Banc Corp." 

"The core of our company is strong.  We have maintained our net interest margin, improved asset quality and expanded our loan portfolio.  This was accomplished despite a continued sluggish economy, historically low interest rates, and increased regulatory costs, especially those associated with increased compliance regulations," continued Caldwell.  "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 2013 increased $0.5 million, or 8.6%, to $5.9 million compared to $5.4 million in the fourth quarter of 2012.  The net interest margin increased 18 basis points to 3.73% compared to the 3.55% reported for the year-ago quarter.  Net interest income for the year 2013 increased by $0.6 million, or 2.8%, to $22.9 million compared to the $22.3 million for the full year of 2012.  The net interest margin for 2013 stood at 3.85%, an 11 basis point increase from the 3.74% reported for 2012.

"During 2013, we took the opportunity to reposition our balance sheet by permitting a reduction in higher cost funding sources.  This effort afforded us the ability to maintain our levels of net interest margin.  Moving forward into 2014, we would anticipate continued pressure on margin levels.  This is something that we do not expect to improve within the foreseeable time horizon." stated Donald L. Stacy, Chief Financial Officer.  "We are committed to executing our plan of growing our base of quality client relationships.  We fully expect that this focus will continue to add value for our shareholders."

Non-Interest Income and Operating Expenses

Non-interest income was lower for both the three and twelve month periods.  Excluding the net effect of securities transactions, the company did experience an increase in all other non-interest income categories for both reporting periods.  The comparative increases on deposit service charges of $0.1 million and $0.2 million, for the respective three and twelve month periods, are primarily driven by service charges on a larger base of non-interest bearing deposit accounts, including increased usage of debit cards, with attendant fees.  Revenue from investment services resulted in a year-over-year increase of $0.2 million.  The company 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, and was not matched during 2013. 

Operating expenses increased by 30.1%, or $1.1 million for the quarter and $1.2 million, or 7.9% for 2013 over comparable periods of 2012.  The increases in salaries and employee benefits were driven by higher staffing levels in branch customer support positions, loan administration, and regulatory compliance management.  Increases in depreciation and real estate taxes of $0.2 million contributed to the increase in occupancy and equipment expenses.  During 2013, the company did have a full year of expense related to a new financial/administrative center.  The building was purchased by the company near the end of 2013, which is reflected in the increase in premises and equipment on the balance sheet.  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 2013 were tied to higher audit expense which was directly related to increased regulatory changes, and to the maintenance of other real estate owned properties.    

Balance Sheet

The company's total assets ended 2013 at $647.1 million, a decrease of 3.5% from the $670.3 million in total assets reported at December 31, 2012.  Net loans at December 31, 2013, were $428.7 million, up $28.0 million, or 7.0%, over the $400.7 million reported at December 31, 2012.  Total deposits at year-end 2013 were $568.8 million, or 4.1% below the deposit level of $593.3 million at December 31, 2012.  The investment portfolio, which is entirely classified as available for sale, stood at $157.1 million at December 31, 2013.  This figure represented a reduction in the portfolio of $37.3 million from the prior year-end.    

Asset Quality

The provision for loan losses for the year 2013 was $0.2 million, compared to the $2.2 million posted for 2012.  Net charge-offs for the full year 2013 were $0.9 million, or 0.22% of average loans.  For 2012, net charge-offs totaled $1.2 million, which equaled 0.30% of average loans.  At December 31, 2013, the allowance for loan losses was $7.0 million, representing 1.62% of total loans.

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



Asset Quality History



















(dollars in thousands)




















12/31/2013



12/31/2012



12/31/2011



12/31/2010



12/31/2009

















Nonperforming loans


$

12,290


$

14,224


$

24,546


$

19,986


$

16,285

Real estate owned



2,698



1,846



2,196



2,302



2,164

















Nonperforming assets


$

14,988


$

16,070


$

26,742


$

22,288


$

18,450

















Allowance for loan losses


$

7,046


$

7,779


$

6,819


$

6,221


$

4,937

















Ratios:
















Nonperforming loans to
















  total loans



2.82%



3.38%



6.12%



5.37%



4.61%

Nonperforming assets to
















  total assets



2.32%



2.40%



4.09%



3.52%



3.30%

Allowance for loan losses to
















  total loans



1.62%



1.90%



1.70%



1.67%



1.40%

Allowance for loan losses to
















  nonperforming loans



57.33%



54.69%



27.78%



31.13%



30.31%

 

Shareholders' Equity

Tangible book value per share decreased from $25.44 per share at December 31, 2012 to $23.99 per share at December 31, 2013.  The decrease is the result of a higher level of retained earnings offset by mark-to-market adjustments in investment securities and cash dividends paid to shareholders.  During 2013, the company paid cash dividends of $1.04 per share, which equaled the amount paid in 2012. 

"As we enter 2014, we see many exciting opportunities in which to build upon the success that we enjoyed in 2013.  We are excited about our future potential in the dynamic central Ohio market.  We fully believe that 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 $647.1 million.  On January 20, 2014, the company consolidated its Emerald Bank subsidiary into the company's lead bank, The Middlefield Banking Company.  The bank operates 10 full service banking centers and a LPL Financial® brokerage office serving Chardon, Cortland, Dublin, Garrettsville, Mantua, Middlefield, Newbury, Orwell, and Westerville.  Additional 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






December 31, 2013 and December 31, 2012






(2013 unaudited)







Balance Sheet (period end)


December 31,



December 31,


(Dollar amounts in thousands)


2013



2012









Assets







Cash and due from banks

$

20,926


$

33,568


Federal funds sold


5,267



11,778


   Cash and cash equivalents


26,193



45,346


Investment securities available for sale


157,143



194,472


Loans:


435,725



408,433


Less:  allowance for loan losses


7,046



7,779


      Net loans


428,679



400,654


Premises and equipment


9,828



8,670


Goodwill


4,559



4,559


Core deposit intangibles


156



195


Bank-owned life insurance


8,816



8,536


Accrued interest receivable and other assets


11,716



7,856


Total Assets

$

647,090


$

670,288











December 31,



December 31,



2013



2012


Liabilities and Stockholders' Equity







Non-interest bearing demand deposits

$

85,905


$

75,912


Interest-bearing demand deposits


53,741



63,915


Money market accounts


77,473



81,349


Savings deposits


177,303



175,406


Time deposits


174,414



196,753


   Total Deposits


568,836



593,335


Short-term borrowings


10,809



6,538


Other borrowings


11,609



12,970


Other liabilities


2,363



2,008


   Total Liabilities


593,617



614,851









Common equity


34,979



34,295


Retained earnings


27,465



22,485


Accumulated other comprehensive income


(2,237)



5,391


Treasury stock


(6,734)



(6,734)


   Total Stockholders' Equity


53,473



55,437









Total Liabilities and Stockholders' Equity

$

647,090


$

670,288


 

 

MIDDLEFIELD BANC CORP.












Consolidated Selected Financial Highlights











December 31, 2013 and December 31, 2012











(Dollar amounts in thousands)










(2013 unaudited)







Income Statement

For the Three Months Ended


For the Twelve Months Ended


December 31,


December 31,



2013



2012



2013



2012

INTEREST INCOME












   Interest and fees on loans

$

5,620


$

5,430


$

22,496


$

22,418

   Interest-bearing deposits in other institutions

7



7



30



26

   Federal funds sold


3



7



15



20

   Investment securities












      Taxable interest


605



754



2,514



3,209

      Tax-exempt interest


785



727



3,044



2,976

   Dividends on stock


23



24



79



97

      Total interest income


7,043



6,949



28,178



28,746

INTEREST EXPENSE












   Deposits


1,023



1,379



4,709



5,728

   Short term borrowings


38



42



178



261

   Federal funds purchased


7



-



7



-

   Other borrowings


35



50



166



294

   Trust preferred securities


34



42



190



164

      Total interest expense


1,137



1,513



5,250



6,447

NET INTEREST INCOME


5,906



5,436



22,928



22,299

Provision for loan losses


(570)



975



196



2,168

NET INTEREST INCOME AFTER PROVISION











   FOR LOAN LOSSES


6,476



4,461



22,732



20,131

NONINTEREST INCOME












   Service charges on deposits


488



382



1,956



1,765

   Net securities gains (losses)


(164)



162



11



610

   Earnings on bank-owned life insurance


75



71



284



279

   Other income


251



157



894



797

      Total non-interest income


650



772



3,145



3,451

NONINTEREST EXPENSE












   Salaries and employee benefits


2,109



1,872



7,758



7,127

   Occupancy expense


436



256



1,231



959

   Equipment expense


347



202



950



759

   Data processing costs


245



198



854



772

   Ohio state franchise tax


151



173



618



590

   Federal deposit insurance expense


163



(264)



516



487

   Professional fees


446



278



1,329



948

   (Gain) Loss on sale of other real estate owned

58



20



18



258

   Other operating expense


851



959



3,596



3,739

      Total non-interest expense


4,806



3,694



16,870



15,639

Income before income taxes


2,320



1,539



9,007



7,943

Provision (benefit) for income taxes


500



270



1,979



1,662

NET INCOME

$

1,820


$

1,269


$

7,028


$

6,281

 

MIDDLEFIELD BANC CORP.













Consolidated Selected Financial Highlights












December 31, 2013 and December 31, 2012












(Dollar amounts in thousands)











(2013 unaudited)








For the Three Months Ended


For the Twelve Months Ended



December 31,


December 31,


Per common share data


2013



2012



2013



2012


Net income per common share - basic

$

0.90


$

0.64


$

3.49


$

3.29


Net income per common share - diluted

$

0.90


$

0.64


$

3.47


$

3.28


Dividends declared

$

0.26


$

0.26


$

1.04


$

1.04


Book value per share (period end)

$

26.31


$

27.83


$

26.31


$

27.83


Tangible book value per share (period end)

$

23.99


$

25.44


$

23.99


$

25.44


Dividend payout ratio


26.32%



40.98%



29.14%



31.87%


Average shares outstanding - basic


2,027,680



1,984,818



2,016,862



1,911,960


Average shares outstanding -diluted


2,032,611



1,991,354



2,024,040



1,916,932


Period ending shares outstanding


2,032,304



1,992,233



2,032,304



1,992,233















Selected ratios













Return on average assets


1.10%



0.75%



1.06%



0.95%


Return on average equity


13.45%



9.11%



13.17%



11.98%


Yield on earning assets


4.45%



4.48%



4.67%



4.75%


Cost of interest-bearing liabilities


0.83%



1.10%



0.97%



1.19%


Net interest spread


3.62%



3.38%



3.71%



3.56%


Net interest margin


3.73%



3.55%



3.85%



3.74%


Efficiency (1)


69.00%



56.12%



61.03%



57.36%


Equity to assets at period end


8.24%



8.34%



8.24%



8.34%















(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, 2013 and December 31, 2012






(Dollar amounts in thousands)














December 31,



December 31,


Asset quality data


2013



2012


(Dollar amounts in thousands)





Non-accrual loans

$

8,350


$

11,376


Troubled debt restructuring


3,759



2,411


90 day past due and accruing


181



437


Nonperforming loans


12,290



14,224


Other real estate owned


2,698



1,846


Nonperforming assets

$

14,988


$

16,070
















Allowance for loan losses

$

7,046


$

7,779


Allowance for loan losses/total loans


1.62%



1.90%


Net charge-offs:







   Quarter-to-date

$

205


$

369


   Year-to-date


929



1,208


Net charge-offs to average loans







   Quarter-to-date


0.05%



0.09%


   Year-to-date


0.22%



0.30%


Nonperforming loans/total loans


2.82%



3.38%


Allowance for loan losses/non-performing loans

57.33%



54.69%


Nonperforming assets/total assets


2.32%



2.40%


















December 31,



December 31,


Loans


2013



2012


(Dollar amounts in thousands)





Commercial and industrial

$

54,498


$

62,188


Real estate - construction


25,601



22,522


Real estate - mortgage







   Residential


210,310



203,872


   Commercial


141,171



115,734


Consumer installment


4,145



4,117


Total Loans

$

435,725


$

408,433









 

 

SOURCE Middlefield Banc Corp.

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