Middlefield Banc Corp. Reports 2021 Nine Month Financial Results

MIDDLEFIELD, Ohio, Oct. 18, 2021 (GLOBE NEWSWIRE) — Middlefield Banc Corp. (NASDAQ: MBCN) today reported financial results for the three and nine months ended September 30, 2021.

2021 Nine Month Financial Highlights (on a year-over-year basis unless noted):

• Net income of $13.8 million, or $2.19 per diluted share driven by record third quarter earnings of $5.2 million, or a record $0.85 per diluted share
• Net interest margin improved by 23 basis points to 3.79%, compared to 3.56%
• Total noninterest income was up 29.5% to $5.7 million
• Pre-tax, pre-provision⁽¹⁾ income increased 22.0% to $17.7 million
• Return on average assets increased to 1.34% from 0.61%
• Return on average equity increased to 12.58% from 5.48%
• Return on average tangible common equity⁽¹⁾ increased to 14.20% from 6.22%
• Efficiency ratio improved to 56.42%, compared to 58.59%
• Year-to-date net charge-offs declined 96.0% to $125,000
• Middlefield has repurchased 346,103 shares of stock year-to-date, including 165,058 shares repurchased during the 2021 third quarter

“As we celebrate our 120^th anniversary, I am extremely pleased with the strong financial results we are achieving,” stated Thomas G. Caldwell, President and Chief Executive Officer. “We continue generating strong profitability as higher net interest margin, favorable asset quality and stable noninterest income successfully offset challenging loan growth and higher noninterest expense.”

“We also continue to allocate capital to our share repurchase program. Year-to-date, we have repurchased 346,103 shares of our common stock at an average price of $23.47 per share, which includes 165,058 shares repurchased in the third quarter at an average price of $23.82 per share. Shares repurchased this year have been at an average price of 109.7% to tangible book value of $21.39 at September 30, 2021, which we believe is a tremendous value and offers a significant opportunity for our shareholders to increase their ownership in the Company,” continued Mr. Caldwell.

“While economic and interest rate uncertainty remains, we are focused on the items under our control. We are dedicated to supporting our communities, managing risk, and looking for new opportunities to drive interest and noninterest income. These are many of the same principles that have made Middlefield successful over the past 120 years and we are committed to continue creating sustainable value for our shareholders,” concluded Mr. Caldwell.

Income Statement
Net interest income for the nine-month period ended September 30, 2021, increased 13.0% to $36.3 million, compared to $32.1 million for the same period last year. Year-to-date, the net interest margin was 3.79%, compared to 3.56% for the same period last year. Net interest income for the 2021 third quarter was $12.5 million, compared to $11.4 million for the 2020 third quarter. The 10.0% increase in net interest income for the 2021 third quarter was largely a result of a 55.7% reduction in interest expense. The net interest margin for the 2021 third quarter was 3.91%, compared to 3.57% for the same period of 2020.

For the 2021 nine-month period, noninterest income increased 29.5% to $5.7 million, compared to $4.4 million for the same period last year. Noninterest income was $1.8 million for both the 2021 and 2020 third quarters.

For the 2021 nine months, noninterest expense increased 10.3% to $24.2 million, compared to $22.0 million for the same period last year. Operating costs in the 2021 third quarter increased 13.0% to $7.9 million from $7.0 million for the 2020 third quarter.

Net income for the 2021 nine-month period ended September 30, 2021, was a record $13.8 million, or a record $2.19 per diluted share, compared to $5.9 million, or $0.92 per diluted share for the same period last year. Net income for the 2021 third quarter ended September 30, 2021, was a quarterly record of $5.2 million, or $0.85 per diluted share, compared to $1.9 million, or $0.29 per diluted share for the same period last year.

Balance Sheet
Total assets at September 30, 2021, increased slightly to approximately $1.37 billion from $1.36 billion at September 30, 2020. Net loans at September 30, 2021, decreased 10.5% to $996.1 million, compared to $1.11 billion at September 30, 2020 as PPP forgiveness increased. Year-to-date, Middlefield has helped customers receive $129.5 million of forgiveness payments under the terms of the program, including processing $36.0 million of forgiveness payments during the third quarter of 2021. The balance of PPP loans outstanding at September 30, 2021, was $54.2 million.  

Total deposits at September 30, 2021, were approximately $1.20 billion, compared to $1.19 billion at September 30, 2020. The 0.6% increase in deposits was primarily due to increases in interest-bearing, savings, and non-interest-bearing accounts, partially offset by decreased money market and time-based accounts. The investment portfolio, which is entirely classified as available for sale, was $163.1 million September 30, 2021, compared with $113.0 million at September 30, 2020.

Donald L. Stacy, Chief Financial Officer stated, “We ended the third quarter with one of the strongest balance sheets in our 120-year history. In addition, asset quality remains strong and is benefitting from stable economic trends within our Ohio markets, as well as our focus on prudently managing risk. The allowance for loan losses to total loans now stands at 1.41%, compared to 1.34% at June 30, 2021, and 1.01% at September 30, 2020. In addition, at September 30, 2021, we only had three loans in deferral status primarily within the hospitality industry representing a balance of $9.7 million,” concluded Mr. Stacy.

Stockholders’ Equity and Dividends
At September 30, 2021, shareholders’ equity increased 2.8% to $146.1 million compared to $142.1 million at September 30, 2020. On a per share basis, shareholders’ equity at September 30, 2021, was $24.13 compared to $22.27 at the same period last year.

Tangible stockholders’ equity⁽¹⁾ increased 3.5% to $129.5 million for the 2021 third quarter, compared to $125.2 million at September 30, 2020. On a per-share basis, tangible stockholders’ equity⁽¹⁾ was $21.39 at September 30, 2021, compared to $19.63 at September 30, 2020.

For the nine-month period ended September 30, 2021, the Company declared cash dividends of $0.48 per share totaling $3.0 million, compared to $0.45 per share or $2.9 million for the same period last year.

At September 30, 2021, the Company had an equity-to-assets leverage ratio of 10.69%, compared to 10.41% at September 30, 2020. The year-over-year increase in the Company’s equity-to-assets leverage ratio occurred even with the $8.1 million year-to-date investment in Middlefield’s share repurchase program.

Asset Quality
There was no provision for loan losses for the 2021 third quarter versus a $4.0 million provision for loan losses for the same period last year. The year-over-year decline in the provision for loan losses was partially due to strong asset quality and last year’s prudent build in the Company’s allowance for loan losses associated with the potential economic impacts caused by the COVID-19 pandemic. The provision for loan losses for the 2021 nine-month period was $900,000 versus $7.7 million for the same period last year.

Net recoveries of $34,000, or -0.01% of average loans, annualized, during the 2021 third quarter, compared to net charge-offs of $2.9 million, or 1.01% of average loans, annualized, at September 30, 2020. Year-to-date net charge-offs were $125,000, or 0.02% of average loans, annualized, compared to net charge-offs of $3.1 million, or 0.39% of average loans, annualized for the nine-months ended September 30, 2020.

Nonperforming assets at September 30, 2021, were $13.9 million, compared to $14.1 million at September 30, 2020. Nonperforming loans at September 30, 2021, were $6.8 million (excluding $9.7 million of loans currently on payment deferral), a 1.7% increase from the same period last year, but down 12.3% from the 2021 second quarter. The allowance for loan losses at September 30, 2021, stood at $14.2 million, or 1.41% of total loans, compared to $11.4 million, or 1.01% of total loans at September 30, 2020.

About Middlefield Banc Corp.
Middlefield Banc Corp., headquartered in Middlefield, Ohio, is the bank holding company of The Middlefield Banking Company with total assets of $1.37 billion at September 30, 2021. The bank operates 16 full-service banking centers and an LPL Financial® brokerage office serving Beachwood, Chardon, Cortland, Dublin, Garrettsville, Mantua, Middlefield, Newbury, Orwell, Plain City, Powell, Solon, Sunbury, Twinsburg, and Westerville. The Bank also operates a Loan Production Office in Mentor, Ohio.  

Additional information is available at www.middlefieldbank.bank

⁽¹⁾ This press release includes disclosure of Middlefield Banc Corp.’s tangible book value per share, return on average tangible equity, and pre-tax, pre-provision for loan losses income, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Middlefield Banc Corp. believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Middlefield Banc Corp.’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.

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) the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions; (8) changes in the securities markets; or (9) 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.