##### 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, 2010
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
 For the transition period from  to
 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 þ 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 filero
    
    Accelerated filero
    
    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, 2010: 1,569,486




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##### 



MIDDLEFIELD BANC CORP.   INDEX
 PageNumberPART I    FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheet (Unaudited) as of March 31, 2010 and December 31, 2009
    
    
    3Consolidated Statement of Income (Unaudited) for the Three Months ended March 31, 2010 and 2009
    
    
    4Consolidated Statement of Changes in Stockholders Equity (Unaudited) for the Three Months ended March 31, 2010
    
    
    5Consolidated Statement of Cash Flows (Unaudited) for the Three Months ended March 31, 2010 and 2009
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    25PART II    OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered sales of equity securities and use of proceeds
    
    
    26Item 3. Default Upon Senior Securities
    
    
    26Item 4. Reserved
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits and Reports on Form 8-K
    
    
    26SIGNATURES
    
    
    30Exhibit 31.1Exhibit 31.2Exhibit 32Exhibit 99
   2




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(Unaudited)March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCash and due from banks
    
    $
    13,039
    
    
    $
    12,909Federal funds sold
    
    
    28,492
    
    
    
    28,123Interest-bearing deposits in other institutions
    
    
    123
    
    
    
    121Cash and cash equivalents
    
    
    41,654
    
    
    
    41,153Investment securities available for sale
    
    
    164,852
    
    
    
    136,711Loans
    
    
    359,651
    
    
    
    353,597Less allowance for loan losses
    
    
    5,279
    
    
    
    4,937Net loans
    
    
    354,372
    
    
    
    348,660Premises and equipment
    
    
    8,408
    
    
    
    8,394Goodwill
    
    
    4,559
    
    
    
    4,559Bank-owned life insurance
    
    
    7,773
    
    
    
    7,706Accrued interest and other assets
    
    
    12,399
    
    
    
    11,475TOTAL ASSETS
    
    $
    594,017
    
    
    $
    558,658LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    44,082
    
    
    $
    44,387Interest-bearing demand
    
    
    41,959
    
    
    
    38,111Money market
    
    
    64,808
    
    
    
    56,451Savings
    
    
    120,544
    
    
    
    107,358Time
    
    
    250,885
    
    
    
    240,799Total deposits
    
    
    522,278
    
    
    
    487,106Short-term borrowings
    
    
    6,772
    
    
    
    6,800Other borrowings
    
    
    25,374
    
    
    
    25,865Accrued interest and other liabilities
    
    
    1,847
    
    
    
    2,180TOTAL LIABILITIES
    
    
    556,271
    
    
    
    521,951STOCKHOLDERS EQUITYCommon stock, no par value; 10,000,000 shares authorized,
1,759,016 and 1,754,112 shares issued
    
    
    28,035
    
    
    
    27,919Retained earnings
    
    
    15,197
    
    
    
    14,960Accumulated other comprehensive income
    
    
    1,248
    
    
    
    562Treasury stock, at cost; 189,530 shares in 2010 and 2009
    
    
    (6,734
    )
    
    
    (6,734
    )TOTAL STOCKHOLDERS EQUITY
    
    
    37,746
    
    
    
    36,707TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    594,017
    
    
    $
    558,658
   3




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Three Months EndedMarch 31,2010
    
    
    2009INTEREST INCOMEInterest and fees on loans
    
    $
    5,097
    
    
    $
    4,998Interest-bearing deposits in
other institutions
    
    
    4
    
    
    
    7Federal funds sold
    
    
    11
    
    
    
    4Investment securities:Taxable interest
    
    
    1,203
    
    
    
    853Tax-exempt interest
    
    
    592
    
    
    
    446Dividends on FHLB stock
    
    
    17
    
    
    
    16Total interest income
    
    
    6,924
    
    
    
    6,324INTEREST EXPENSEDeposits
    
    
    2,485
    
    
    
    2,716Short-term borrowings
    
    
    58
    
    
    
    6Other borrowings
    
    
    190
    
    
    
    257Trust preferred securities
    
    
    136
    
    
    
    132Total interest expense
    
    
    2,869
    
    
    
    3,111NET INTEREST INCOME
    
    
    4,055
    
    
    
    3,213Provision for loan losses
    
    
    439
    
    
    
    154NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    3,616
    
    
    
    3,059NONINTEREST INCOMEService charges on deposit accounts
    
    
    415
    
    
    
    439Investment securities gains, net
    
    
    9
    
    
    
    Earnings on bank-owned life insurance
    
    
    67
    
    
    
    69Other income
    
    
    118
    
    
    
    116Total noninterest income
    
    
    609
    
    
    
    624NONINTEREST EXPENSESalaries and employee benefits
    
    
    1,511
    
    
    
    1,371Occupancy expense
    
    
    276
    
    
    
    255Equipment expense
    
    
    198
    
    
    
    123Data processing costs
    
    
    243
    
    
    
    249Ohio state franchise tax
    
    
    136
    
    
    
    123Federal deposit insurance expense
    
    
    202
    
    
    
    172Other expense
    
    
    992
    
    
    
    703Total noninterest expense
    
    
    3,558
    
    
    
    2,996Income before income taxes
    
    
    667
    
    
    
    687Income taxes
    
    
    22
    
    
    
    84NET INCOME
    
    $
    645
    
    
    $
    603EARNINGS PER SHAREBasic
    
    $
    0.41
    
    
    $
    0.39Diluted
    
    
    0.41
    
    
    
    0.39DIVIDENDS DECLARED PER SHARE
    
    $
    0.26
    
    
    $
    0.26
   4




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AccumulatedOther
    
    
    
    
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholders
    
    
    ComprehensiveStock
    
    
    Earnings
    
    
    Income
    
    
    Stock
    
    
    Equity
    
    
    IncomeBalance, December 31, 2009
    
    $
    27,919
    
    
    $
    14,960
    
    
    $
    562
    
    
    $
    (6,734
    )
    
    $
    36,707Net income
    
    
    
    
    
    
    645
    
    
    
    
    
    
    
    
    
    
    
    645
    
    
    $
    645Other comprehensive income:Unrealized gains on available
for sale
securities net of taxes of $353
    
    
    
    
    
    
    
    
    
    
    686
    
    
    
    
    
    
    
    686
    
    
    
    686Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,331Dividend reinvestment and purchase plan
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116Cash dividends ($0.26 per share)
    
    
    
    
    
    
    (408
    )
    
    
    
    
    
    
    
    
    
    
    (408
    )Balance, March 31, 2010
    
    $
    28,035
    
    
    $
    15,197
    
    
    $
    1,248
    
    
    $
    (6,734
    )
    
    $
    37,746
   5




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Three Months EndedMarch 31,2010
    
    
    2009OPERATING ACTIVITIESNet income
    
    $
    645
    
    
    $
    603Adjustments to reconcile net income to
net cash used for operating activities:Provision for loan losses
    
    
    439
    
    
    
    154Depreciation and amortization
    
    
    189
    
    
    
    144Amortization of premium and
discount on investment securities
    
    
    (59
    )
    
    
    (45
    )Amortization of deferred loan fees, net
    
    
    (3
    )
    
    
    (7
    )Investment securities (gains) losses, net
    
    
    (9
    )
    
    
    Earnings on bank-owned life insurance
    
    
    (67
    )
    
    
    (69
    )Deferred income taxes
    
    
    (227
    )
    
    
    274Expense related to stock options
    
    
    
    
    
    
    15Loss on other real estate owned
    
    
    44
    
    
    
    Increase in accrued interest receivable
    
    
    (681
    )
    
    
    (611
    )Increase (decrease) in accrued interest payable
    
    
    26
    
    
    
    (139
    )Decrease (increase) in prepaid federal deposit insurance
    
    
    186
    
    
    
    (4
    )Other, net
    
    
    (941
    )
    
    
    (638
    )Net cash used for operating activities
    
    
    (458
    )
    
    
    (323
    )INVESTING ACTIVITIESInvestment securities available for sale:Proceeds from repayments and maturities
    
    
    6,986
    
    
    
    3,935Purchases
    
    
    (37,913
    )
    
    
    (2,748
    )Proceeds from sale of securities
    
    
    3,893
    
    
    
    Increase in loans, net
    
    
    (6,298
    )
    
    
    (5,421
    )Purchase of Federal Home Loan Bank stock
    
    
    
    
    
    
    (14
    )Purchase of premises and equipment
    
    
    (165
    )
    
    
    (28
    )Proceeds from the sale of other real estate owned
    
    
    96
    
    
    
    Net cash used for investing activities
    
    
    (33,401
    )
    
    
    (4,276
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    35,171
    
    
    
    9,266Decrease in short-term borrowings, net
    
    
    (28
    )
    
    
    (354
    )Repayment of other borrowings
    
    
    (491
    )
    
    
    (3,013
    )Proceeds from dividend reinvestment & purchase plan
    
    
    116
    
    
    
    112Cash dividends
    
    
    (408
    )
    
    
    (399
    )Net cash provided by financing activities
    
    
    34,360
    
    
    
    5,612Increase in cash and cash equivalents
    
    
    501
    
    
    
    1,013CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
    
    
    41,153
    
    
    
    17,455CASH AND CASH EQUIVALENTS
AT END OF PERIOD
    
    $
    41,654
    
    
    $
    18,468SUPPLEMENTAL INFORMATIONCash paid during the year for:Interest on deposits and borrowings
    
    $
    2,843
    
    
    $
    3,250Income taxes
    
    
    400
    
    
    
    150Non-cash investing transactions:Transfers from loans to other real
estate owned
    
    $
    150
    
    
    $
    221
   6




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Accounting for Transfer of Financial Assets
 Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities
  Accounting for Own-Share Lending Arrangements in
Contemplation of Convertible Debt Issuance or Other Financing
 Equity (Topic 505): Accounting for Distributions
to Shareholders with Components of Stock and Cash  a consensus of the FASB Emerging Issues Task
Force
 Consolidation (Topic 810): Accounting and
reporting for Decreases in Ownership of a Subsidiary  a Scope Clarification
  7




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Accounting for Various Topics  Technical
Corrections to SEC Paragraphs
 Compensation  Stock Compensation (Topic 718):
Escrowed Share Arrangements and the Presumption of Compensation
 Fair Value Measurements and Disclosures
(Topic 820): Improving Disclosures about Fair Value Measurements
 Technical Corrections to Various Topics
 Derivatives and Hedging
 Compensation  Stock Compensation (Topic 718):
Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the
Market in Which the Underlying Equity Security Trades
    Weighted-
    
    
    
    
    
    
    Weighted-average
    
    
    
    
    
    
    averageExercise
    
    
    
    
    
    
    Exercise2010
    
    
    Price
    
    
    2009
    
    
    PriceOutstanding, January 1
    
    
    99,219
    
    
    $
    26.85
    
    
    
    110,465
    
    
    $
    27.21Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    (2,265
    )
    
    
    37.33Outstanding, March 31
    
    
    99,219
    
    
    $
    26.85
    
    
    
    108,200
    
    
    $
    27.00
  8




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For the Three Months EndedMarch 31,2010
    
    
    2009Weighted average common shares
outstanding
    
    
    1,754,984
    
    
    
    1,726,460Average treasury stock shares
    
    
    (189,530
    )
    
    
    (189,530
    )Weighted average common shares and
common stock equivalents used to
calculate basic earnings per share
    
    
    1,565,454
    
    
    
    1,536,930Additional common stock equivalents
(stock options) used to calculate
diluted earnings per share
    
    
    1,987
    
    
    
    1,604Weighted average common shares and
common stock equivalents used
to calculate diluted earnings per
share
    
    
    1,567,441
    
    
    
    1,538,534
     9




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For the Three Months EndedMarch 31,(Dollar amounts in thousands)
    
    2010
    
    
    2009Unrealized holding gains (losses) arising during
the period on securities held
    
    $
    692
    
    
    $
    (531
    )Reclassification adjustment for gains included in net
income
    
    
    (6
    )
    
    
    Net change in unrealized gains (losses) during the period
    
    
    686
    
    
    
    (531
    )Unrealized holding gains (losses), beginning of period
    
    
    562
    
    
    
    (295
    )Unrealized holding gains (losses), end of period
    
    
    1,248
    
    
    
    (826
    )Net income
    
    
    645
    
    
    
    603Other comprehensive income, net of tax:Unrealized holding gains (losses) arising during the
period
    
    
    686
    
    
    
    (531
    )Comprehensive income
    
    $
    1,331
    
    
    $
    72
   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.
  10




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March 31, 2010(Dollar amounts in thousands)
    
    Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Recurring Basis:U.S. government agency securities
    
    $
    
    
    
    $
    19,041
    
    
    $
    
    
    
    $
    19,041Obligations of states and
political subdivisions
    
    
    
    
    
    
    68,215
    
    
    
    
    
    
    
    68,215Mortgage-backed securities
    
    
    
    
    
    
    76,706
    
    
    
    
    
    
    
    76,706Total debt securities
    
    
    
    
    
    
    163,962
    
    
    
    
    
    
    
    163,962Equity securities
    
    
    890
    
    
    
    
    
    
    
    
    
    
    
    890Total
    
    $
    890
    
    
    $
    163,962
    
    
    $
    
    
    
    $
    164,852
 December 31, 2009Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a Recurring Basis:U.S. government agency securities
    
    $
    
    
    
    $
    18,330
    
    
    $
    
    
    
    $
    18,330Obligations of states and political subdivisions
    
    
    
    
    
    
    56,720
    
    
    
    
    
    
    
    56,720Mortgage-backed securities
    
    
    
    
    
    
    60,742
    
    
    
    
    
    
    
    60,742Total debt securities
    
    
    
    
    
    
    135,792
    
    
    
    
    
    
    
    135,792Equity securities
    
    
    919
    
    
    
    
    
    
    
    
    
    
    
    919Total
    
    $
    919
    
    
    $
    135,792
    
    
    $
    
    
    
    $
    136,711
    11




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(Dollar amounts in thousands)March 31, 2010Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a
non-recurring Basis:Impaired loans
    
    $
    
    
    
    $
    4,627
    
    
    $
    2,136
    
    
    $
    6,763Other real estate owned
    
    
    
    
    
    
    2,175
    
    
    
    
    
    
    
    2,175
 December 31, 2009Level I
    
    
    Level II
    
    
    Level III
    
    
    TotalAssets Measured on a
non-recurring Basis:Impaired loans
    
    $
    
    
    
    $
    5,644
    
    
    $
    149
    
    
    $
    5,793Other real estate owned
    
    
    
    
    
    
    2,164
    
    
    
    
    
    
    
    2,164
  March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(Dollar amounts in thousands)
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    41,654
    
    
    $
    41,654
    
    
    $
    41,153
    
    
    $
    41,153Investment securities
Available for sale
    
    
    164,852
    
    
    
    164,852
    
    
    
    136,711
    
    
    
    136,711Net loans
    
    
    354,372
    
    
    
    337,156
    
    
    
    348,660
    
    
    
    332,401Bank-owned life insurance
    
    
    7,773
    
    
    
    7,773
    
    
    
    7,706
    
    
    
    7,706Federal Home Loan Bank
stock
    
    
    1,887
    
    
    
    1,887
    
    
    
    1,887
    
    
    
    1,887Accrued interest receivable
    
    
    2,093
    
    
    
    2,093
    
    
    
    1,411
    
    
    
    1,411Financial
liabilities:Deposits
    
    $
    522,278
    
    
    $
    526,737
    
    
    $
    487,106
    
    
    $
    491,436Short-term borrowings
    
    
    6,772
    
    
    
    6,772
    
    
    
    6,800
    
    
    
    68,003Other borrowings
    
    
    25,374
    
    
    
    27,955
    
    
    
    25,864
    
    
    
    27,356Accrued interest payable
    
    
    931
    
    
    
    931
    
    
    
    905
    
    
    
    905
   12




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Cash and Cash Equivalents, Federal Home Loan Bank Stock, Accrued Interest Receivable, Accrued
Interest Payable, and Short-Term Borrowings
  Bank-Owned Life Insurance
  Investment Securities Available for Sale
  Loans
  Deposits and Other Borrowed Funds
  Commitments to Extend Credit
   13




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March 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(Dollar amounts in thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. government agency
securities
    
    $
    19,078
    
    
    $
    94
    
    
    $
    (131
    )
    
    $
    19,041Obligations of states and
political subdivisions:Taxable
    
    
    5,384
    
    
    
    10
    
    
    
    (101
    )
    
    
    5,293Tax-exempt
    
    
    62,044
    
    
    
    1,173
    
    
    
    (295
    )
    
    
    62,922Mortgage-backed securities
    
    
    75,513
    
    
    
    2,189
    
    
    
    (996
    )
    
    
    76,706Total debt securities
    
    
    162,019
    
    
    
    3,466
    
    
    
    (1,523
    )
    
    
    163,962Equity Securities
    
    
    944
    
    
    
    50
    
    
    
    (104
    )
    
    
    890Total
    
    $
    162,963
    
    
    $
    3,516
    
    
    $
    (1,627
    )
    
    $
    164,852
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. government agency
securities
    
    $
    18,657
    
    
    $
    38
    
    
    $
    (365
    )
    
    $
    18,330Obligations of states and
political subdivisions:Taxable
    
    
    3,451
    
    
    
    10
    
    
    
    (86
    )
    
    
    3,375Tax-exempt
    
    
    52,752
    
    
    
    943
    
    
    
    (349
    )
    
    
    53,346Mortgage-backed securities
    
    
    60,055
    
    
    
    1,817
    
    
    
    (1,130
    )
    
    
    60,742Total debt securities
    
    
    134,915
    
    
    
    2,807
    
    
    
    (1,930
    )
    
    
    135,792Equity Securities
    
    
    944
    
    
    
    80
    
    
    
    (105
    )
    
    
    919Total
    
    $
    135,859
    
    
    $
    2,887
    
    
    $
    (2,035
    )
    
    $
    136,711
  Amortized
    
    
    Fair(Dollar amounts in thousands)
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    2,061
    
    
    $
    2,084Due after one year through five years
    
    
    7,760
    
    
    
    8,111Due after five years through ten years
    
    
    23,223
    
    
    
    23,748Due after ten years
    
    
    128,975
    
    
    
    130,019Total
    
    $
    162,019
    
    
    $
    163,962
   14




---



##### Table of Contents



March 31, 2010Less than Twelve Months
    
    
    Twelve Months or Greater
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(Dollar amounts in thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. government
agency
securities
    
    $
    9,368
    
    
    $
    (131
    )
    
    $
    
    
    
    $
    
    
    
    $
    9,368
    
    
    $
    (131
    )Obligations of
states and
political
subdivisions
    
    
    20,517
    
    
    
    (289
    )
    
    
    1,430
    
    
    
    (107
    )
    
    
    21,947
    
    
    
    (396
    )Mortgage-backed securities
    
    
    4,822
    
    
    
    (339
    )
    
    
    3,835
    
    
    
    (657
    )
    
    
    8,657
    
    
    
    (996
    )Equity securities
    
    
    580
    
    
    
    (68
    )
    
    
    11
    
    
    
    (36
    )
    
    
    591
    
    
    
    (104
    )Total
    
    $
    35,287
    
    
    $
    (827
    )
    
    $
    5,276
    
    
    $
    (800
    )
    
    $
    40,563
    
    
    $
    (1,627
    )
 December 31, 2009Less than Twelve Months
    
    
    Twelve Months or Greater
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. government
agency
securities
    
    $
    17,134
    
    
    $
    (365
    )
    
    $
    
    
    
    $
    
    
    
    $
    17,134
    
    
    $
    (365
    )Obligations of
states and
political
subdivisions
    
    
    21,594
    
    
    
    (314
    )
    
    
    1,417
    
    
    
    (121
    )
    
    
    23,011
    
    
    
    (435
    )Mortgage-backed securities
    
    
    18,509
    
    
    
    (334
    )
    
    
    4,064
    
    
    
    (796
    )
    
    
    22,573
    
    
    
    (1,130
    )Equity securities
    
    
    580
    
    
    
    (68
    )
    
    
    8
    
    
    
    (37
    )
    
    
    588
    
    
    
    (105
    )Total
    
    $
    57,817
    
    
    $
    (1,082
    )
    
    $
    5,489
    
    
    $
    (953
    )
    
    $
    63,306
    
    
    $
    (2,035
    )
     15




---



##### Table of Contents




    
    The length of time and the extent to which the fair value has been less than the amortized cost basis.
    
    Changes in the near term prospects of the underlying collateral of a security such as changes in
default rates, loss severity given default and significant changes in prepayment assumptions;
    
    The level of cash flows generated from the underlying collateral supporting the principal and
interest payments of the debt securities; and
    
    Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration
the latest information available about the overall financial condition of the issuer, credit ratings,
recent legislation and government actions affecting the issuers industry and actions taken by the
issuer to deal with the present economic climate.
    
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  CHANGES IN FINANCIAL CONDITION
 General.
 Cash on hand and due from banks.
 Investment securities.
  16




---



##### Table of Contents



Loans receivable.
 Allowance for Loan Losses and Asset Quality.
   Non-performing assets.
  17




---



##### Table of Contents



Nonperforming Assets and Allowance for Loan Losses.
 
 3/31/2010
    
    
    12/31/2009
    
    
    9/30/2009
    
    
    6/30/2009
    
    
    3/31/2009Nonperforming loans
    
    $
    18,143
    
    
    $
    16,285
    
    
    $
    14,368
    
    
    $
    14,023
    
    
    $
    13,370Real estate owned
    
    
    2,175
    
    
    
    2,164
    
    
    
    1,775
    
    
    
    1,967
    
    
    
    1,331Nonperforming assets
    
    $
    20,318
    
    
    $
    18,449
    
    
    $
    16,143
    
    
    $
    15,990
    
    
    $
    14,701Allowance for loan losses
    
    $
    5,279
    
    
    $
    4,937
    
    
    $
    4,422
    
    
    $
    3,668
    
    
    $
    3,621RatiosNonperforming loans to total loans
    
    
    5.04
    %
    
    
    4.61
    %
    
    
    4.15
    %
    
    
    4.18
    %
    
    
    4.16
    %Nonperforming assets to total
assets
    
    
    3.42
    %
    
    
    3.30
    %
    
    
    3.12
    %
    
    
    3.33
    %
    
    
    3.14
    %Allowance for loan losses to total
loans
    
    
    1.47
    %
    
    
    1.40
    %
    
    
    1.28
    %
    
    
    1.09
    %
    
    
    1.13
    %Allowance for loan losses to
nonperforming loans
    
    
    29.10
    %
    
    
    30.32
    %
    
    
    30.78
    %
    
    
    26.16
    %
    
    
    27.08
    %
  Deposits.
 Borrowed funds.
 Stockholders equity.
 RESULTS OF OPERATIONS
 General.
   18




---



##### Table of Contents



Net interest income.
  Interest income.
   Interest expense.
   19




---



##### Table of Contents



Provision for loan losses.
 Non-interest income.
 Non-interest expense.
 Provision for income taxes.
 CRITICAL ACCOUNTING ESTIMATES
   20




---



##### Table of Contents



Average Balance Sheet and Yield/Rate Analysis.
 For the Three Months Ended March 31,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(Dollar amounts in thousands)
    
    Balance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/Cost(Dollars in thousands)
    
    
    (Dollars in thousands)Interest-earning assets:Loans receivable
    
    $
    356,239
    
    
    $
    5,097
    
    
    
    5.80
    %
    
    $
    323,330
    
    
    $
    4,998
    
    
    
    6.27
    %Investments securities (3)
    
    
    151,807
    
    
    
    1,795
    
    
    
    5.61
    %
    
    
    104,973
    
    
    
    1,307
    
    
    
    5.95
    %Interest-bearing deposits with other banks
    
    
    30,020
    
    
    
    32
    
    
    
    0.43
    %
    
    
    6,805
    
    
    
    19
    
    
    
    1.13
    %Total interest-earning assets
    
    
    538,066
    
    
    
    6,924
    
    
    
    5.45
    %
    
    
    435,108
    
    
    
    6,324
    
    
    
    6.11
    %Noninterest-earning assets
    
    
    38,144
    
    
    
    
    
    
    
    
    
    
    
    35,503Total assets
    
    $
    576,210
    
    
    
    
    
    
    
    
    
    
    $
    470,611Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    38,874
    
    
    
    95
    
    
    
    0.99
    %
    
    $
    27,722
    
    
    
    61
    
    
    
    0.89
    %Money market deposits
    
    
    60,491
    
    
    
    279
    
    
    
    1.87
    %
    
    
    28,796
    
    
    
    151
    
    
    
    2.12
    %Savings deposits
    
    
    113,593
    
    
    
    427
    
    
    
    1.53
    %
    
    
    71,406
    
    
    
    246
    
    
    
    1.40
    %Certificates of deposit
    
    
    247,559
    
    
    
    1,684
    
    
    
    2.76
    %
    
    
    226,107
    
    
    
    2,259
    
    
    
    4.05
    %Borrowings
    
    
    32,328
    
    
    
    384
    
    
    
    4.81
    %
    
    
    34,520
    
    
    
    394
    
    
    
    4.63
    %Total interest-bearing liabilities
    
    
    492,845
    
    
    
    2,869
    
    
    
    2.36
    %
    
    
    388,552
    
    
    
    3,111
    
    
    
    3.25
    %Noninterest-bearing liabilitiesOther liabilities
    
    
    46,306
    
    
    
    
    
    
    
    
    
    
    
    47,100Stockholders equity
    
    
    37,060
    
    
    
    
    
    
    
    
    
    
    
    34,959Total liabilities and stockholders equity
    
    $
    576,210
    
    
    
    
    
    
    
    
    
    
    $
    470,611Net interest income
    
    
    
    
    
    $
    4,055
    
    
    
    
    
    
    
    
    
    
    $
    3,213Interest rate spread (1)
    
    
    
    
    
    
    
    
    
    
    3.09
    %
    
    
    
    
    
    
    
    
    
    
    2.86
    %Net yield on interest-earning assets (2)
    
    
    
    
    
    
    
    
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    109.18
    %
    
    
    
    
    
    
    
    
    
    
    111.98
    %
 
 (1)
    
    Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing liabilities.(2)
    
    Net yield on interest-earning assets represents net interest income as a percentage of average
interest-earning assets.(3)
    
    Tax equivalent adjustments to interest income for tax-exempt securities was $305 and $234 for
2010 and 2009 respectively.  21




---



##### Table of Contents



Analysis of Changes in Net Interest Income.
 2010 versus 2009Increase (decrease) due to(Dollar amounts in thousands)
    
    Volume
    
    
    Rate
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable
    
    $
    509
    
    
    $
    (410
    )
    
    $
    99Investments securities
    
    
    687
    
    
    
    (199
    )
    
    
    488Interest-bearing deposits with
other banks
    
    
    65
    
    
    
    (52
    )
    
    
    13Total interest-earning assets
    
    
    1,261
    
    
    
    (661
    )
    
    
    600Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    25
    
    
    
    9
    
    
    
    34Money market deposits
    
    
    166
    
    
    
    (37
    )
    
    
    129Savings deposits
    
    
    145
    
    
    
    36
    
    
    
    181Certificates of deposit
    
    
    214
    
    
    
    (790
    )
    
    
    (576
    )Borrowings
    
    
    (25
    )
    
    
    15
    
    
    
    (10
    )Total interest-bearing liabilities
    
    
    525
    
    
    
    (767
    )
    
    
    (242
    )Net interest income
    
    $
    736
    
    
    $
    106
    
    
    $
    842
 LIQUIDITY
   INFLATION
    22




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##### Table of Contents



REGULATORY MATTERS
       Adequately
    
    
    
    
    
    
    
    
    
    
    December 31,Capital Ratio
    
    Capitalized
    
    
    Well Capitalized
    
    
    March 31, 2010
    
    
    2009Tier I Leverage
Capital
    
    
    4.00
    %
    
    
    5.00
    %(1)
    
    
    9.38
    %
    
    
    10.29
    %Risk-Based Capital:Tier I
    
    
    4.00
    
    
    
    6.00
    
    
    
    13.39
    
    
    
    13.63Total
    
    
    8.00
    
    
    
    10.00
    
    
    
    14.67
    
    
    
    14.91
 (1)
    
    9 percent required by the MOU. REGULATORY CAPITAL REQUIREMENTS
    23




---



##### Table of Contents



Middlefield Banc Corp.
    
    
    The Middlefield Banking Co.
    
    
    Emerald BankMarch 31,
    
    
    March 31,
    
    
    March 31,2010
    
    
    2010
    
    
    2010(Dollar amounts in thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Capital(to Risk-weighted Assets)Actual
    
    $
    44,312
    
    
    
    11.49
    
    
    $
    35,399
    
    
    
    10.66
    
    
    $
    7,041
    
    
    
    14.67For Capital Adequacy Purposes
    
    
    30,858
    
    
    
    8.00
    
    
    
    26,554
    
    
    
    8.00
    
    
    
    3,839
    
    
    
    8.00To Be Well Capitalized
    
    
    38,573
    
    
    
    10.00
    
    
    
    33,193
    
    
    
    10.00
    
    
    
    4,799
    
    
    
    10.00Tier I Capital(to Risk-weighted Assets)Actual
    
    $
    39,485
    
    
    
    10.24
    
    
    $
    31,979
    
    
    
    9.63
    %
    
    $
    6,425
    
    
    
    13.39For Capital Adequacy Purposes
    
    
    15,429
    
    
    
    4.00
    
    
    
    13,277
    
    
    
    4.00
    
    
    
    1,920
    
    
    
    4.00To Be Well Capitalized
    
    
    23,144
    
    
    
    6.00
    
    
    
    19,916
    
    
    
    6.00
    
    
    
    2,879
    
    
    
    6.00Tier I Capital(to Average Assets)Actual
    
    $
    39,485
    
    
    
    6.94
    
    
    $
    31,979
    
    
    
    6.48
    
    
    $
    6,425
    
    
    
    9.38For Capital Adequacy Purposes
    
    
    22,762
    
    
    
    4.00
    
    
    
    19,746
    
    
    
    4.00
    
    
    
    2,741
    
    
    
    4.00To Be Well Capitalized
    
    
    28,453
    
    
    
    5.00
    
    
    
    24,683
    
    
    
    5.00
    
    
    
    3,427
    
    
    
    5.00
 
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
 ASSET AND LIABILITY MANAGEMENT
    Net interest income simulation.
  24




---



##### Table of Contents



Portfolio equity simulation.
  Increase
    
    
    Decrease200 Basis Points
    
    
    200 Basis PointsNet interest income  increase
(decrease)
    
    
    (1.55
    )%
    
    
    5.35
    %Portfolio equity  increase (decrease)
    
    
    (19.42
    )%
    
    
    (5.02
    )%
 
 Item 4.
    
    Controls and Procedures
 Controls and Procedures Disclosure
    Changes in Internal Control over Financial Reporting
   25




---



##### Table of Contents



Item 1.
    
    Legal Proceedings
  
 Item 1a.
    
    There are no material changes to the risk factors set forth in Part I, Item 1A, Risk
Factors, of the Companys Annual Report on Form 10-K for the year ended December 31, 2009. Please
refer to that section for disclosures regarding the risks and uncertainties related to the
Companys business.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults by the Company on its senior securities
  
 Item 4.
    
    Reserved
 
 Item 5.
    
    Other information
  
 Item 6.
    
    Exhibits
 Exhibit list for Middlefield Banc Corp.s Form 10-Q Quarterly Report for the Period Ended March
31, 2010
 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, 2006
  26




---



##### Table of Contents



exhibitnumber
    
    description
    
    location10.1.0
    *
    
    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, 200110.1.1
    *
    
    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
  27




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##### 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*
    
    Reserved10.17*
    
    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
  28




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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  29




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##### Table of Contents



SIGNATURES
  MIDDLEFIELD BANC CORP.Date: May 13, 2010
    
    By:
    
    /s/ Thomas G. Caldwell

Thomas G. CaldwellPresident and Chief Executive OfficerDate: May 13, 2010
    
    By:
    
    /s/ Donald L. Stacy

Donald L. StacyPrincipal Financial and Accounting Officer
 
  30