##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20552
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 Commission File Number 000-32561
 
 Middlefield Banc Corp.
 (Exact name of registrant as specified in its charter)
 Ohio
    
    34-1585111(State or other jurisdiction of incorporation
    
    (IRS Employer Identification No.)or organization)
 15985 East High Street, Middlefield, Ohio 44062-9263
(Address of principal executive offices)
 (440) 632-1666
(Registrants telephone number, including area code)
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES þ NO o
 Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes o No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definition of large accelerated
filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filero
    
    Small reporting companyþ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). YESoNOþ
 State the number of shares outstanding of each of the issuers classes of common equity as of the
latest practicle date:
 Class: Common Stock, without par value
Outstanding at May 13, 2009: 1,541,247




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##### 



MIDDLEFIELD BANC CORP.
INDEX
 PageNumberPART I    FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheet (Unaudited) 
as of March 31, 2009 and December 31, 2008
    
    
    3Consolidated Statement of Income (Unaudited) for the Three Months ended March 31, 2009 and 2008
    
    
    4Consolidated Statement of Changes in Stockholders Equity (Unaudited) for the Three Months ended March 31, 2009
    
    
    5Consolidated Statement of Cash Flows (Unaudited) 
for the Three Months ended March 31, 2009 and 2008
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    20PART II    OTHER INFORMATION
    
    
    20Item 1. Legal Proceedings
    
    
    20Item 1A. Risk FactorsItem 2. Unregistered sales of equity securities and use of proceeds
    
    
    21Item 3. Default Upon Senior Securities
    
    
    21Item 4. Submissions of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits and Reports on Form 8 - K
    
    
    21SIGNATURES
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32Exhibit 99
   2




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March 31,
    
    
    December 312009
    
    
    2008ASSETSCash and due from banks
    
    $
    12,569,069
    
    
    $
    9,795,248Federal funds sold
    
    
    5,780,125
    
    
    
    7,548,000Interest-bearing deposits in other institutions
    
    
    118,694
    
    
    
    112,215Cash and cash equivalents
    
    
    18,467,888
    
    
    
    17,455,463Investment securities available for sale
    
    
    102,323,856
    
    
    
    104,270,366Loans
    
    
    326,688,314
    
    
    
    321,575,293Less allowance for loan losses
    
    
    3,620,618
    
    
    
    3,556,763Net loans
    
    
    323,067,696
    
    
    
    318,018,530Premises and equipment
    
    
    8,332,898
    
    
    
    8,448,915Goodwill
    
    
    4,558,687
    
    
    
    4,558,687Bank-owned life insurance
    
    
    7,509,264
    
    
    
    7,440,687Accrued interest and other assets
    
    
    9,113,608
    
    
    
    7,654,287TOTAL ASSETS
    
    $
    473,373,898
    
    
    $
    467,846,935LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    43,271,194
    
    
    $
    42,357,154Interest-bearing demand
    
    
    29,753,343
    
    
    
    26,404,660Money market
    
    
    31,058,973
    
    
    
    27,845,438Savings
    
    
    77,705,826
    
    
    
    68,968,844Time
    
    
    222,296,346
    
    
    
    229,243,506Total deposits
    
    
    404,085,682
    
    
    
    394,819,602Short-term borrowings
    
    
    1,532,609
    
    
    
    1,886,253Other borrowings
    
    
    30,889,915
    
    
    
    33,903,019Accrued interest and other liabilities
    
    
    2,007,485
    
    
    
    2,178,813TOTAL LIABILITIES
    
    
    438,515,691
    
    
    
    432,787,687STOCKHOLDERS EQUITYCommon stock, no par value; 10,000,000 shares authorized,
1,730,777 and 1,725,381 shares issued
    
    
    27,427,697
    
    
    
    27,301,403Retained earnings
    
    
    14,990,150
    
    
    
    14,786,353Accumulated other comprehensive loss
    
    
    (826,033
    )
    
    
    (294,901
    )Treasury stock, at cost; 189,530 shares in 2009 and 2008
    
    
    (6,733,607
    )
    
    
    (6,733,607
    )TOTAL STOCKHOLDERS EQUITY
    
    
    34,858,207
    
    
    
    35,059,248TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    473,373,898
    
    
    $
    467,846,935
   3




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Three Months EndedMarch 31,2009
    
    
    2008INTEREST INCOMEInterest and fees on loans
    
    $
    4,998,102
    
    
    $
    5,455,274Interest-bearing deposits in
other institutions
    
    
    7,235
    
    
    
    5,203Federal funds sold
    
    
    3,756
    
    
    
    79,304Investment securities:Taxable interest
    
    
    853,197
    
    
    
    565,079Tax-exempt interest
    
    
    446,324
    
    
    
    453,943Dividends on FHLB stock
    
    
    15,369
    
    
    
    29,400Total interest income
    
    
    6,323,983
    
    
    
    6,588,203INTEREST EXPENSEDeposits
    
    
    2,716,220
    
    
    
    3,333,980Short-term
borrowings
    
    
    5,663
    
    
    
    9,895Other borrowings
    
    
    388,655
    
    
    
    414,111Total interest expense
    
    
    3,110,539
    
    
    
    3,757,986NET INTEREST INCOME
    
    
    3,213,444
    
    
    
    2,830,217Provision for loan losses
    
    
    154,000
    
    
    
    75,000NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    3,059,444
    
    
    
    2,755,217NONINTEREST INCOMEService charges on deposit accounts
    
    
    438,913
    
    
    
    465,528Earnings on bank-owned life insurance
    
    
    68,577
    
    
    
    70,088Other income
    
    
    115,961
    
    
    
    101,835Total noninterest income
    
    
    623,451
    
    
    
    637,451NONINTEREST EXPENSESalaries and employee benefits
    
    
    1,370,580
    
    
    
    1,194,419Occupancy expense
    
    
    254,916
    
    
    
    231,183Equipment expense
    
    
    122,695
    
    
    
    146,110Data processing costs
    
    
    248,882
    
    
    
    209,280Ohio state franchise tax
    
    
    123,300
    
    
    
    117,000Other expense
    
    
    875,415
    
    
    
    617,680Total noninterest expense
    
    
    2,995,788
    
    
    
    2,515,672Income before income taxes
    
    
    687,107
    
    
    
    876,996Income taxes
    
    
    84,000
    
    
    
    140,000NET INCOME
    
    $
    603,107
    
    
    $
    736,996EARNINGS PER SHAREBasic
    
    $
    0.39
    
    
    $
    0.48Diluted
    
    
    0.39
    
    
    
    0.47DIVIDENDS DECLARED PER SHARE
    
    $
    0.260
    
    
    $
    0.250
   4




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##### Table of Contents



AccumulatedOther
    
    
    
    
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholders
    
    
    ComprehensiveStock
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    Equity
    
    
    IncomeBalance, December 31, 2008
    
    $
    27,301,403
    
    
    $
    14,786,353
    
    
    $
    (294,901
    )
    
    $
    (6,733,607
    )
    
    $
    35,059,248Net income
    
    
    
    
    
    
    603,107
    
    
    
    
    
    
    
    
    
    
    
    603,107
    
    
    $
    603,107Other comprehensive income:Unrealized loss on available for sale
securities net of tax benefit of $273,607
    
    
    
    
    
    
    
    
    
    
    (531,132
    )
    
    
    
    
    
    
    (531,132
    )
    
    
    (531,132
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    71,975Stock based compensation expense
recognized in earnings
    
    
    15,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,147Dividend reinvestment and purchase plan
    
    
    111,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,147Cash dividends ($0.26 per share)
    
    
    
    
    
    
    (399,310
    )
    
    
    
    
    
    
    
    
    
    
    (399,310
    )Balance, March 31, 2009
    
    $
    27,427,697
    
    
    $
    14,990,150
    
    
    $
    (826,033
    )
    
    $
    (6,733,607
    )
    
    $
    34,858,207
   5




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##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008OPERATING ACTIVITIESNet income
    
    $
    603,107
    
    
    $
    736,996Adjustments to reconcile net income to
net cash used for operating activities:Provision for loan losses
    
    
    154,000
    
    
    
    75,000Depreciation
    
    
    144,100
    
    
    
    126,213Amortization of premium and
discount on investment securities
    
    
    (45,286
    )
    
    
    49,451Amortization of deferred loan fees, net
    
    
    (6,579
    )
    
    
    (27,932
    )Earnings on bank-owned life insurance
    
    
    (68,577
    )
    
    
    (70,088
    )Compensation for stock option expense
    
    
    15,147
    
    
    
    3,762Increase in accrued interest receivable
    
    
    (611,354
    )
    
    
    (442,313
    )Increase (decrease) in accrued interest payable
    
    
    (139,441
    )
    
    
    (40,545
    )Other, net
    
    
    (367,861
    )
    
    
    (533,826
    )Net cash used for operating activities
    
    
    (322,744
    )
    
    
    (123,283
    )INVESTING ACTIVITIESInvestment securities available for sale:Proceeds from repayments and maturities
    
    
    3,934,802
    
    
    
    5,565,823Purchases
    
    
    (2,747,751
    )
    
    
    (18,144,564
    )Increase in loans, net
    
    
    (5,420,867
    )
    
    
    (5,464,478
    )Purchase of Federal Home Loan Bank stock
    
    
    (14,100
    )
    
    
    (38,800
    )Purchase of premises and equipment
    
    
    (28,084
    )
    
    
    (452,880
    )Net cash used for investing activities
    
    
    (4,276,000
    )
    
    
    (18,534,899
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    9,266,080
    
    
    
    14,855,106Increase (decrease) in short-term borrowings, net
    
    
    (353,644
    )
    
    
    579,479Repayment of other borrowings
    
    
    (3,013,104
    )
    
    
    (972,154
    )Proceeds from other borrowings
    
    
    
    
    
    
    1,000,000Purchase of treasury stock
    
    
    
    
    
    
    (492,693
    )Proceeds from dividend reinvestment & purchase plan
    
    
    111,147
    
    
    
    194,716Cash dividends
    
    
    (399,310
    )
    
    
    (387,138
    )Net cash provided by financing activities
    
    
    5,611,169
    
    
    
    14,777,316Increase (decrease) in cash and cash equivalents
    
    
    1,012,425
    
    
    
    (3,880,866
    )CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
    
    
    17,455,463
    
    
    
    17,815,322CASH AND CASH EQUIVALENTS
AT END OF PERIOD
    
    $
    18,467,888
    
    
    $
    13,934,456SUPPLEMENTAL INFORMATIONCash paid during the year for:Interest on deposits and borrowings
    
    $
    3,249,980
    
    
    $
    3,798,531Income taxes
    
    
    150,000
    
    
    
    150,000
   6




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Business Combinations
 Fair Value Measurements Application
of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 Partial
Deferral of the Effective Date of Statement 157
 Non-controlling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 Disclosures about Derivative Instruments and Hedging
Activities Accounting for
Derivative Instruments and Hedging Activities
  7




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Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjusted Conversion Ratios Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjusted Conversion Ratios Application of Issue No. 98-5 to Certain Convertible
Instruments, Accounting for Certain Financial Instruments with Characteristics of
both Liability and Equity
 Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement
 Accounting for Transfers of Financial Assets
and Repurchase Financing Transactions
 Determination of the Useful Life of Intangible Assets , Goodwill and Other Intangible Assets
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies.
 Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly
  8




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Interim Disclosures about Fair Value
of Financial Instruments
 Recognition and Presentation of
Other-Than-Temporary Impairments
    Weighted-
    
    
    
    
    
    
    Weighted-average
    
    
    
    
    
    
    averageExercise
    
    
    
    
    
    
    Exercise2009
    
    
    Price
    
    
    2008
    
    
    PriceOutstanding, January 1
    
    
    110,465
    
    
    $
    27.21
    
    
    
    88,211
    
    
    $
    28.34Granted
    
    
    
    
    
    
    
    
    
    
    1,337
    
    
    
    36.25Exercised
    
    
    
    
    
    
    
    
    
    
    (175
    )
    
    
    23.70Forfeited
    
    
    (2,265
    )
    
    
    37.33
    
    
    
    
    
    
    
    Outstanding, March 31
    
    
    108,200
    
    
    $
    27.00
    
    
    
    89,373
    
    
    $
    28.47
    9




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For the ThreeMonths EndedMarch 31,2009
    
    
    2008Weighted average common shares
outstanding
    
    
    1,726,460
    
    
    
    1,702,587Average treasury stock shares
    
    
    (189,530
    )
    
    
    (154,544
    )Weighted average common shares and
common stock equivalents used to
calculate basic earnings per share
    
    
    1,536,930
    
    
    
    1,548,043Additional common stock equivalents
(stock options) used to calculate
diluted earnings per share
    
    
    1,604
    
    
    
    20,337Weighted average common shares and
common stock equivalents used
to calculate diluted earnings per
share
    
    
    1,538,534
    
    
    
    1,568,380
     10




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For the Three MonthsEnded March 31,2009
    
    
    2008Unrealized holding gains (losses) arising during
the period on securities held
    
    $
    (531,132
    )
    
    $
    231,984Reclassification adjustment for gains included in net income
    
    
    
    
    
    
    Net change in unrealized gains (losses) during the period
    
    
    (531,132
    )
    
    
    231,984Unrealized holding losses, beginning of period
    
    
    (294,901
    )
    
    
    (52,969
    )Unrealized holding gain (losses), end of period
    
    
    (826,033
    )
    
    
    179,015Net income
    
    
    603,107
    
    
    
    736,996Other comprehensive income, net of tax:Unrealized holding gains (losses) arising during the period
    
    
    (531,132
    )
    
    
    231,984Comprehensive income
    
    $
    71,975
    
    
    $
    968,980
   Level I:
    
    Quoted prices are available in active markets for identical assets or liabilities as of the reported date.Level II:
    
    Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly
observable as of the reported date. The nature of these assets and liabilities includes items for which quoted
prices are available but traded less frequently and items that are fair-valued using other financial instruments,
the parameters of which can be directly observed.Level III:
    
    Assets and liabilities that have little to no pricing observe ability as of the reported date. These items do not
have two-way markets and are measured using managements best estimate of fair value, where the inputs into the
determination of fair value require significant management judgment or estimation.
  11




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March 31, 2009Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Recurring Basis:Investment securities available for sale
    
    $
    955,508
    
    
    $
    95,928,221
    
    
    $
    5,440,127
    
    
    $
    102,323,856
 December 31, 2008Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Recurring Basis:Investment securities available for sale
    
    $
    1,022,162
    
    
    $
    96,568,054
    
    
    $
    6,680,150
    
    
    $
    104,270,366
   Available-for-SaleSecuritiesBalance, December 31,2008
    
    $
    6,680,150Total gains or losses
(realized/unrealizes)Included in earnings
    
    
    Included in other comprehensive loss
    
    
    (1,240,023
    )Purchases, issuances, and settlements
    
    
    Transfers in and/or out of Level III
    
    
    Balance,
March 31, 2009
    
    $
    5,440,127The amount of total gains or losses for the period included in
earnings attributable to the change in unrealized gains or losses
relating to assets still held at the reporting date
    
    $
    
    12




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March 31, 2009Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a non-recurring Basis:Impaired loans
    
    $
    
    
    
    $
    2,490,020
    
    
    $
    1,892,826
    
    
    $
    4,382,847
 December 31, 2008Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a non-recurring Basis:Impaired loans
    
    $
    
    
    
    $
    1,194,594
    
    
    $
    1,027,366
    
    
    $
    2,221,960
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  CHANGES IN FINANCIAL CONDITION
 General.
 Cash and cash equivalents.
 Investment securities.
 Loans receivable.
  13




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Non-performing assets.
 Nonperforming Assets and Allowance for Loan Losses.
 
 3/31/2009
    
    
    12/31/2008
    
    
    9/30/2008
    
    
    6/30/2008
    
    
    3/31/2008Nonperforming loans
    
    $
    13,370
    
    
    $
    8,481
    
    
    $
    6,749
    
    
    $
    6,530
    
    
    $
    6,784Real estate owned
    
    
    1,331
    
    
    
    1,106
    
    
    
    1,108
    
    
    
    911
    
    
    
    Nonperforming assets
    
    $
    14,701
    
    
    $
    9,587
    
    
    $
    7,857
    
    
    $
    7,441
    
    
    $
    6,784Allowance for loan losses
    
    $
    3,621
    
    
    $
    3,557
    
    
    $
    3,614
    
    
    $
    3,435
    
    
    $
    3,351RatiosNonperforming loans to total loans
    
    
    4.09
    %
    
    
    2.64
    %
    
    
    2.11
    %
    
    
    2.04
    %
    
    
    2.15
    %Nonperforming assets to total
assets
    
    
    3.11
    %
    
    
    2.05
    %
    
    
    1.73
    %
    
    
    1.66
    %
    
    
    1.51
    %Allowance for loan losses to total
loans
    
    
    1.11
    %
    
    
    1.11
    %
    
    
    1.13
    %
    
    
    1.08
    %
    
    
    1.06
    %Allowance for loan losses to
nonperforming loans
    
    
    27.08
    %
    
    
    41.94
    %
    
    
    53.55
    %
    
    
    52.60
    %
    
    
    49.40
    %
  Deposits.
  14




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##### Table of Contents



Borrowed funds.
 Stockholders equity.
 RESULTS OF OPERATIONS
 General.
 Net interest income.
  Interest income.
 st
  Interest expense.
  15




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##### Table of Contents



Provision for loan losses.
 Non-interest income.
 Non-interest expense.
 Provision for income taxes.
 CRITICAL ACCOUNTING ESTIMATES
   16




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Average Balance Sheet and Yield/Rate Analysis.
 For the Three Months Ended March 31,2009
    
    
    2008(4)
    
    
    
    
    
    
    
    
    
    
    (4)Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest (1)
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest (1)
    
    
    Yield/Cost(Dollars in thousands)
    
    
    (Dollars in thousands)Interest-earning assets:Loans receivable
    
    
    323,330
    
    
    $
    4,998
    
    
    
    6.27
    %
    
    
    311,236
    
    
    $
    5,455
    
    
    
    7.03
    %Investments securities (taxable equivalent)
    
    
    104,973
    
    
    
    1,307
    
    
    
    5.94
    %
    
    
    94,357
    
    
    
    1,024
    
    
    
    5.35
    %Interest-bearing deposits with other banks
    
    
    6,805
    
    
    
    19
    
    
    
    1.14
    %
    
    
    9,402
    
    
    
    109
    
    
    
    4.64
    %Total interest-earning assets
    
    
    435,108
    
    
    
    6,324
    
    
    
    6.11
    %
    
    
    414,994
    
    
    
    6,588
    
    
    
    6.59
    %Noninterest-earning assets
    
    
    35,503
    
    
    
    
    
    
    
    
    
    
    
    32,307Total assets
    
    $
    470,611
    
    
    
    
    
    
    
    
    
    
    $
    447,301Interest-bearing liabilities:Interest  bearing demand deposits
    
    
    27,722
    
    
    
    61
    
    
    
    0.89
    %
    
    $
    21,072
    
    
    
    74
    
    
    
    1.41
    %Money market deposits
    
    
    28,796
    
    
    
    151
    
    
    
    2.12
    %
    
    
    23,048
    
    
    
    205
    
    
    
    3.57
    %Savings deposits
    
    
    71,406
    
    
    
    246
    
    
    
    1.40
    %
    
    
    72,391
    
    
    
    443
    
    
    
    2.45
    %Certificates of deposit
    
    
    226,107
    
    
    
    2,259
    
    
    
    4.05
    %
    
    
    214,372
    
    
    
    2,612
    
    
    
    4.89
    %Borrowings
    
    
    34,520
    
    
    
    394
    
    
    
    4.63
    %
    
    
    34,475
    
    
    
    424
    
    
    
    4.93
    %Total interest-bearing liabilities
    
    
    388,552
    
    
    
    3,111
    
    
    
    3.25
    %
    
    
    365,357
    
    
    
    3,758
    
    
    
    4.13
    %Noninterest-bearing liabilitiesOther liabilities
    
    
    47,100
    
    
    
    
    
    
    
    
    
    
    
    46,839Stockholders equity
    
    
    34,959
    
    
    
    
    
    
    
    
    
    
    
    35,105Total liabilities and stockholders equity
    
    $
    470,611
    
    
    
    
    
    
    
    
    
    
    $
    447,301Net interest income
    
    
    
    
    
    $
    3,213
    
    
    
    
    
    
    
    
    
    
    $
    2,830Interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.86
    %
    
    
    
    
    
    
    
    
    
    
    2.47
    %Net yield on interest-earning assets (3)
    
    
    
    
    
    
    
    
    
    
    3.21
    %
    
    
    
    
    
    
    
    
    
    
    2.96
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    111.98
    %
    
    
    
    
    
    
    
    
    
    
    113.59
    %
 
 (1)
    
    Interest income and expense are for the period that banking operations were in effect.(2)
    
    Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.(3)
    
    Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets.(4)
    
    Average yields are computed using annualized interest income and expense for the periods. Analysis of Changes in Net Interest Income.
 2009 versus 2008Increase (decrease) due toVolume
    
    
    Rate
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable
    
    
    212
    
    
    
    -669
    
    
    
    -457Investments securities
    
    
    142
    
    
    
    141
    
    
    
    283Interest-bearing deposits with other banks
    
    
    -30
    
    
    
    -60
    
    
    
    -90Total interest-earning assets
    
    
    324
    
    
    
    -588
    
    
    
    -264Interest-bearing liabilities:Interest  bearing demand deposits
    
    
    23
    
    
    
    -36
    
    
    
    -13Money market deposits
    
    
    51
    
    
    
    -105
    
    
    
    -54Savings deposits
    
    
    -6
    
    
    
    -191
    
    
    
    -197Certificates of deposit
    
    
    143
    
    
    
    -496
    
    
    
    -353Borrowings
    
    
    1
    
    
    
    -30
    
    
    
    -30Total interest-bearing liabilities
    
    
    212
    
    
    
    -859
    
    
    
    -647Net interest income
    
    $
    111
    
    
    $
    271
    
    
    $
    382
  17




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##### Table of Contents



LIQUIDITY
      REGULATORY MATTERS
  REGULATORY CAPITAL REQUIREMENTS
    18




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##### Table of Contents



Middlefield Banc Corp.
    
    
    The Middlefield Banking Co.
    
    
    Emerald BankMarch 31,
    
    
    March 31,
    
    
    March 31,2009
    
    
    2009
    
    
    2009Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Capital(to Risk-weighted Assets)Actual
    
    $
    43,424,752
    
    
    
    13.20
    
    
    $
    33,756,945
    
    
    
    11.93
    
    
    $
    7,615,060
    
    
    
    16.58For Capital Adequacy Purposes
    
    
    26,324,000
    
    
    
    8.00
    
    
    
    22,640,800
    
    
    
    8.00
    
    
    
    3,674,815
    
    
    
    8.00To Be Well Capitalized
    
    
    32,905,000
    
    
    
    10.00
    
    
    
    28,301,000
    
    
    
    10.00
    
    
    
    4,593,518
    
    
    
    10.00Tier I
Capital(to Risk-weighted Assets)Actual
    
    $
    39,799,083
    
    
    
    12.10
    
    
    $
    30,816,645
    
    
    
    10.89
    %
    
    $
    7,039,560
    
    
    
    15.32For Capital Adequacy Purposes
    
    
    13,162,000
    
    
    
    4.00
    
    
    
    11,320,400
    
    
    
    4.00
    
    
    
    1,837,407
    
    
    
    4.00To Be Well Capitalized
    
    
    19,743,000
    
    
    
    6.00
    
    
    
    16,980,600
    
    
    
    5.00
    
    
    
    2,756,111
    
    
    
    6.00Tier I Capital(to Average Assets)Actual
    
    $
    39,799,083
    
    
    
    8.51
    
    
    $
    30,816,645
    
    
    
    7.66
    
    
    $
    7,039,560
    
    
    
    11.79For Capital Adequacy Purposes
    
    
    18,717,922
    
    
    
    4.00
    
    
    
    16,097,072
    
    
    
    4.00
    
    
    
    2,387,641
    
    
    
    4.00To Be Well Capitalized
    
    
    23,397,402
    
    
    
    5.00
    
    
    
    20,121,340
    
    
    
    5.00
    
    
    
    2,984,551
    
    
    
    5.00
 
 Item 3 Quantitative and Qualitative Disclosures about Market Risk
 ASSET AND LIABILITY MANAGEMENT
    Net interest income simulation.
  19




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##### Table of Contents



Portfolio equity simulation.
  Increase
    
    
    Decrease200 Basis Points
    
    
    200 Basis PointsNet interest income  increase
(decrease)
    
    
    (3.60
    )%
    
    
    5.70
    %Portfolio equity  increase (decrease)
    
    
    (6.83
    )%
    
    
    (6.16
    )%
 
  Controls and Procedures Disclosure
   Changes in Internal Control over Financial Reporting
  
  
     20




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##### Table of Contents



Exhibit list for Middlefield Banc Corp.sForm 10-QQuarterly Report for the Period Ended March
31, 2009
 exhibitnumber
    
    description
    
    location3.1
    
    
    Second Amended and Restated Articles of Incorporation
of Middlefield Banc Corp., as amended
    
    Incorporated by
reference to
Exhibit 3.1 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Fiscal Year
Ended December 31,
2005, filed on
March 29, 20063.2
    
    
    Regulations of Middlefield Banc Corp.
    
    Incorporated by
reference to
Exhibit 3.2 of
Middlefield Banc
Corp.s
registration
statement on Form
10 filed on April
17, 20014.0
    
    
    Specimen stock certificate
    
    Incorporated by
reference to
Exhibit 4 of
Middlefield Banc
Corp.s
registration
statement on Form
10 filed on April
17, 20014.1
    
    
    Amended and Restated Trust Agreement, dated as of
December 21, 2006, between Middlefield Banc Corp., as
Depositor, Wilmington Trust Company, as Property
trustee, Wilmington Trust Company, as Delaware
Trustee, and Administrative Trustees
    
    Incorporated by
reference to
Exhibit 4.1 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on December
27, 20064.2
    
    
    Junior Subordinated Indenture, dated as of December
21, 2006, between Middlefield Banc Corp. and
Wilmington Trust Company
    
    Incorporated by
reference to
Exhibit 4.2 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on December
27, 20064.3
    
    
    Guarantee Agreement, dated as of December 21, 2006,
between Middlefield Banc Corp. and Wilmington Trust
Company
    
    Incorporated by
reference to
Exhibit 4.3 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on December
27, 200610.1.0
    *
    
    1999 Stock Option Plan of Middlefield Banc Corp.
    
    Incorporated by
reference to
Exhibit 10.1 of
Middlefield Banc
Corp.s
registration
statement on Form
10 filed on April
17, 2001
  21




---



##### Table of Contents



exhibitnumber
    
    description
    
    location10.1.1
    *
    
    2007 Omnibus Equity Plan
    
    Incorporated by
reference to
Middlefield Banc
Corp.s definitive
proxy statement for
the 2008 Annual
Meeting of
Shareholders,
Appendix A, filed
on April 7, 200810.2
    *
    
    Severance Agreement between Middlefield Banc Corp. and
Thomas G. Caldwell, dated January 7, 2008
    
    Incorporated by
reference to
Exhibit 10.2 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.3
    *

    
    Severance Agreement between Middlefield Banc Corp. and
James R. Heslop, II, dated January 7, 2008
    
    Incorporated by
reference to
Exhibit 10.3 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.4.0
    *
    
    Severance Agreement between Middlefield Banc Corp. and
Jay P. Giles, dated January 7, 2008
    
    Incorporated by
reference to
Exhibit 10.4 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.4.1
    *
    
    Severance Agreement between Middlefield Banc Corp. and
Teresa M. Hetrick, dated January 7, 2008
    
    Incorporated by
reference to
Exhibit 10.4.1 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.4.2
    *

    
    Severance Agreement between Middlefield Banc Corp. and
Jack L. Lester, dated January 7, 2008
    
    Incorporated by
reference to
Exhibit 10.4.2 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.4.3
    *

    
    Severance Agreement between Middlefield Banc Corp. and
Donald L. Stacy, dated January 7, 2008
    
    Incorporated by
reference to
Exhibit 10.4.3 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.4.4
    *
    
    Severance Agreement between Middlefield Banc Corp. and
Alfred F. Thompson Jr., dated January 7, 2008
    
    Incorporated by
reference to
Exhibit 10.4.4 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.5
    
    
    Federal Home Loan Bank of Cincinnati Agreement for
Advances and Security Agreement dated September 14,
2000
    
    Incorporated by
reference to
Exhibit 10.4 of
Middlefield Banc
Corp.s
registration
statement on Form
10 filed on April
17, 200110.6
    *
    
    Amended Director Retirement Agreement with Richard T.
Coyne
    
    Incorporated by
reference to
Exhibit 10.6 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.7

    *
    
    Amended Director Retirement Agreement with Frances H.
Frank
    
    Incorporated by
reference to
Exhibit 10.7 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.8
    *

    
    Amended Director Retirement Agreement with Thomas C.
Halstead
    
    Incorporated by
reference to
Exhibit 10.8 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.9
    *
    
    Director Retirement Agreement with George F. Hasman
    
    Incorporated by
reference to
Exhibit 10.9 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2001,
filed on March 28,
2002
  22




---



##### Table of Contents



exhibitnumber
    
    description
    
    location10.10
    *
    
    Director Retirement Agreement with Donald D. Hunter
    
    Incorporated by
reference to
Exhibit 10.10 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2001,
filed on March 28,
200210.11
    *
    
    Director Retirement Agreement with Martin S. Paul
    
    Incorporated by
reference to
Exhibit 10.11 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2001,
filed on March 28,
200210.12
    *
    
    Amended Director Retirement Agreement with Donald E.
Villers
    
    Incorporated by
reference to
Exhibit 10.12 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on January 9,
200810.13
    *
    
    Executive Survivor Income Agreement (aka DBO agreement
[death benefit only]) with Donald L. Stacy
    
    Incorporated by
reference to
Exhibit 10.14 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2003,
filed on March 30,
200410.14
    *
    
    DBO Agreement with Jay P. Giles
    
    Incorporated by
reference to
Exhibit 10.15 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2003,
filed on March 30,
200410.15
    *
    
    DBO Agreement with Alfred F. Thompson Jr.
    
    Incorporated by
reference to
Exhibit 10.16 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2003,
filed on March 30,
200410.16
    *
    
    DBO Agreement with Nancy C. Snow
    
    Incorporated by
reference to
Exhibit 10.17 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2003,
filed on March 30,
200410.17
    *
    
    DBO Agreement with Theresa M. Hetrick
    
    Incorporated by
reference to
Exhibit 10.18 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2003,
filed on March 30,
200410.18
    *

    
    DBO Agreement with Jack L. Lester
    
    Incorporated by
reference to
Exhibit 10.19 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2003,
filed on March 30,
200410.19
    *

    
    DBO Agreement with James R. Heslop, II
    
    Incorporated by
reference to
Exhibit 10.20 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2003,
filed on March 30,
200410.20
    *

    
    DBO Agreement with Thomas G. Caldwell
    
    Incorporated by
reference to
Exhibit 10.21 of
Middlefield Banc
Corp.s Annual
Report on Form 10-K
for the Year Ended
December 31, 2003,
filed on March 30,
200410.21
    *
    
    Form of Indemnification Agreement with directors of
Middlefield Banc Corp. and with executive officers of
Middlefield Banc Corp. and The Middlefield Banking
Company
    
    Incorporated by
reference to
Exhibit 99.1 of
Middlefield Banc
Corp.s
registration
statement on Form
10, Amendment No.
1, filed on June
14, 2001
  23




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##### Table of Contents



exhibitnumber
    
    description
    
    location10.22
    *
    
    Annual Incentive Plan Summary
    
    Incorporated by
reference to the
summary description
of the annual
incentive plan
included as Exhibit
10.22 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on December
16, 200510.23
    *
    
    Amended Executive Deferred Compensation Agreement with
Thomas G. Caldwell
    
    Incorporated by
reference to
Exhibit 10.23 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on May 9,
200810.24
    *

    
    Amended Executive Deferred Compensation Agreement with
James R. Heslop, II
    
    Incorporated by
reference to
Exhibit 10.24 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on May 9,
200810.25
    *

    
    Amended Executive Deferred Compensation Agreement with
Donald L. Stacy
    
    Incorporated by
reference to
Exhibit 10.25 of
Middlefield Banc
Corp.s Form 8-K
Current Report
filed on May 9,
200831.1
    
    
    Rule 13a-14(a) certification of Chief Executive Officer
    
    filed herewith31.2
    
    
    Rule 13a-14(a) certification of Chief Financial Officer
    
    filed herewith32
    
    
    Rule 13a-14(b) certification
    
    filed herewith99
    
    
    Report of independent registered public accounting firm
    
    filed herewith
 *
    
    management contract or compensatory plan or arrangement  24




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##### Table of Contents



SIGNATURES
  MIDDLEFIELD BANC CORP.Date: May 13, 2009
    By:

/s/ Thomas G. CaldwellThomas G. CaldwellPresident and Chief Executive OfficerDate: May 13, 2009
    By:

/s/ Donald L. StacyDonald L. StacyPrincipal Financial and Accounting Officer  25




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    
    Rule 13a-14(a) certification of Chief Executive Officer31.2
    
    
    Rule 13a-14(a) certification of Chief Financial Officer32
    
    
    Rule 13a-14(b) certification99
    
    
    Report of independent registered public accounting firm