MBCN Middlefield Banc Corporation

2022 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

• Returned $1.8 million of capital to shareholders through dividends and the repurchase of 32,150 shares
• Net income was $3.8 million, or $0.65 per diluted share, compared to $4.2 million, or $0.65 per diluted share
• First-quarter pre-tax income benefited from $640,000 of accelerated net fees associated with the Paycheck Protection Program (“PPP”), compared to $800,000 in the 2021 first quarter
• Net interest margin improved by 7 basis points to 3.80%, compared to 3.73% 
• Total loans were $977.7 million, compared to $981.7 million at December 31, 2021
• Total loans increased by $12.5 million or 5.2% annualized from December 31, 2021, without the impact of PPP loan forgiveness
• Return on average assets was 1.17%, compared to 1.22%
• Return on average equity was 10.75%, compared to 11.64%
• Return on average tangible common equity(1) was 12.13%, compared to 13.16%
• Strong asset quality with nonperforming loans to total loans of 0.48%, compared to 0.81%
• Allowance for loan losses was 1.48% of total loans, compared to 1.28%

“Over the past two years, we have focused on supporting our communities while enhancing our asset quality, increasing our allowance for bad debts, managing expenses, and returning excess capital to shareholders through our growing dividend and active share repurchase programs,” stated James R. Heslop, II, President and Chief Executive Officer. “I am proud of our progress and the strong platform we have created. As a result, I believe we are well-positioned to grow our Bank across our Northeast and Central Ohio markets and I am encouraged by the 1.3% increase in total loans from December 31, 2021, when adjusted for the impact of PPP loan forgiveness.”

Mr. Heslop continued, “With strong capital levels, $108.3 million in cash and cash equivalents, and $175.2 million in investments, we continue to allocate excess capital to our dividend and share repurchase programs. Over the last 12 months, we have repurchased 495,131 shares of our common stock at a total cost of $12.0 million. This includes 32,150 shares repurchased during the 2022 first quarter at an average price of $25.47 per share, or 123.40% of our tangible book value of $20.64 at March 31, 2022. We will continue to focus on returning capital to shareholders throughout 2022.”

“While uncertainty has increased across the global economic environment, economic activity within our local Northeast and Central Ohio markets remains compelling. We believe the value we provide our communities supports our growth objectives and we expect 2022 to be another good year for The Middlefield Banking Company,” concluded Mr. Heslop.

Income StatementNet interest income for the 2022 first quarter was $11.5 million, compared to $11.9 million for the 2021 first quarter. The net interest margin for the 2022 first quarter was 3.80%, compared to 3.73% for the same period of 2021. For the 2022 first quarter, noninterest income decreased 36.7% to $1.4 million from $2.2 million for the same period of 2021. Noninterest expense was $8.3 million for both the 2022 and 2021 first quarters.

Balance SheetTotal assets at March 31, 2022, decreased 4.7% to $1.32 billion, compared to $1.39 billion at March 31, 2021. Net loans at March 31, 2022, decreased 11.6% to $963.2 million, compared to $1.09 billion at March 31, 2021. Since 2020, Middlefield has helped customers receive $194.9 million of forgiveness payments under the terms of the Paycheck Protection Program, including processing $16.4 million of forgiveness payments during the first quarter of 2022. The balance of PPP loans outstanding at March 31, 2022, was $17.7 million. 

Total deposits at March 31, 2022, were $1.17 billion, compared to $1.23 billion at March 31, 2021. The 4.8% decrease in deposits was primarily due to a decline in time-based and interest-bearing accounts, partially offset by increased noninterest-bearing and savings accounts. The investment portfolio was $175.2 million at March 31, 2022, compared with $123.2 million at March 31, 2021.

Donald L. Stacy, Chief Financial Officer, stated, “We continue to operate with one of the strongest balance sheets in our 120-year history, which provides us with significant flexibility to support our share repurchase programs and growth strategies. In addition, our asset quality is excellent, with nonperforming loans down 47.2% over the prior year, while our allowance for loan losses to nonperforming loans has increased from 157.65% at March 31, 2021, to 306.51% at March 31, 2022.”

Mr. Stacy continued, “I am pleased by the success we have had managing both our noninterest expense and cost of funds. During the first quarter, noninterest expense was flat compared to the same period last year. In addition, our cost of funds declined 14 basis points, helping produce a 7-basis point year-over-year improvement in our net interest margin. As a result, we are well-positioned to benefit from a rising interest rate environment, especially as the prime rate increases above 1.00%.”

Stockholders’ Equity and DividendsAt March 31, 2022, stockholders’ equity was $137.6 million compared to $144.7 million at March 31, 2021. The 4.9% year-over-year decline in stockholders’ equity was primarily due to an increase in the unrealized loss on the available-for-sale investment portfolio during the three-month period and the Company’s stock repurchase program. On a per-share basis, shareholders’ equity at March 31, 2022, was $23.43 compared to $22.80, an increase of 2.8%, over the same period last year.

At March 31, 2022, tangible stockholders’ equity(1) was $121.2 million for the 2022 first quarter, compared to $128.0 million at March 31, 2021. On a per-share basis, tangible stockholders’ equity(1) was $20.64 at March 31, 2022, compared to $20.17 at March 31, 2021, an increase of 2.3%.

For the 2022 first quarter, cash dividends declared per share increased 6.3% to $0.17 per share totaling $1.0 million, compared to $0.16 per share totaling $1.0 million, for the first quarter last year.

At March 31, 2022, the Company had an equity-to-assets leverage ratio of 10.40%, compared to 10.42% at March 31, 2021.

Asset QualityThere was no provision for loan losses for the 2022 first quarter versus a $700,000 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 previous year’s prudent build in the Company’s allowance for loan losses associated with the potential economic impacts caused by the COVID-19 pandemic.

Net recoveries were $150,000, or 0.06% of average loans, annualized, during the 2022 first quarter, compared to net charge-offs of $37,000, or 0.01% of average loans, annualized, at March 31, 2021.

Nonperforming loans at March 31, 2022, were $4.7 million, compared to $9.0 million at March 31, 2021. Nonperforming assets at March 31, 2022, were $11.7 million, compared to $16.3 million at March 31, 2021. The allowance for loan losses at March 31, 2022, stood at $14.5 million, or 1.48% of total loans, compared to $14.1 million, or 1.28% of total loans at March 31, 2021.

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 $1.32 billion at March 31, 2022. 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.