##### 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 September 30, 2007
 Commission File Number 33-23094
 
 
 Middlefield Banc Corp.
 
 (Exact name of registrant as specified in its charter)
 Ohio
(State or other jurisdiction of incorporation 
or organization)
    
    34-1585111
(IRS Employer Identification No.)
 15985 East High Street, Middlefield, Ohio 44062-9263
(Address of principal executive offices)
 (440) 632-1666
(Registrants telephone number, including area code)
 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or 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 is an accelerated filer (as defined in Rule 12-b2 of the Act)
 YES o NO þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 YES o NO þ
 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 November 9, 2007: 1,624,389
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##### 



MIDDLEFIELD BANC CORP.
 INDEX
  
 PageNumberPART I   FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheet (Unaudited) as of September 30, 2007 and December 31, 2006Consolidated Statement of Income (Unaudited) for the Nine and Three Months ended September 30, 2007 and 2006Consolidated Statement of Changes in Stockholders' Equity (Unaudited) for the Nine Months ended September 30, 2007Consolidated Statement of Cash Flows (Unaudited) for the Nine and Three Months ended September 30, 2007 and 2006Notes to Unaudited Consolidated Financial StatementsItem 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures About Market RiskItem 4.
    
    Controls and ProceduresPART II   OTHER INFORMATIONItem 1.
    
    Legal ProceedingsItem 1A.
    
    Risk FactorsItem 2.
    
    Unregistered sales of equity securities and use of proceedsItem 3.
    
    Default Upon Senior SecuritiesItem 4.
    
    Submissions of Matters to a Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    Exhibits and Reports on Form 8 - KSIGNATURESEX-31EX-31.1EX-32EX-99
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September 30,
    
    
    December 31,2007
    
    
    2006ASSETSCash and due from banks
    
    $
    7,732,190
    
    
    $
    6,893,148Federal funds sold
    
    
    4,525,161
    
    
    
    6,200,000Interest-bearing deposits in other institutions
    
    
    564,831
    
    
    
    546,454Cash and cash equivalents
    
    
    12,822,182
    
    
    
    13,639,602Investment securities available for sale
    
    
    81,367,463
    
    
    
    63,048,135Investment securities held to maturity (estimated
market value of $120,545 and $134,306)
    
    
    119,899
    
    
    
    125,853Loans
    
    
    307,026,362
    
    
    
    249,190,534Less allowance for loan losses
    
    
    3,112,669
    
    
    
    2,848,887Net loans
    
    
    303,913,693
    
    
    
    246,341,647Premises and equipment
    
    
    6,996,275
    
    
    
    6,742,465Goodwill
    
    
    5,439,066
    
    
    
    123,175Bank-owned life insurance
    
    
    7,082,906
    
    
    
    6,872,743Accrued interest and other assets
    
    
    5,750,920
    
    
    
    3,958,084TOTAL ASSETS
    
    $
    423,492,404
    
    
    $
    340,851,704LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    42,109,757
    
    
    $
    41,002,573Interest-bearing demand
    
    
    20,294,998
    
    
    
    11,724,173Money market
    
    
    24,406,099
    
    
    
    14,738,767Savings
    
    
    79,468,128
    
    
    
    54,246,499Time
    
    
    186,471,126
    
    
    
    149,338,181Total deposits
    
    
    352,750,108
    
    
    
    271,050,193Short-term borrowings
    
    
    2,512,582
    
    
    
    1,609,738Other borrowings
    
    
    31,102,006
    
    
    
    36,112,738Accrued interest and other liabilities
    
    
    2,281,561
    
    
    
    1,615,101TOTAL LIABILITIES
    
    
    388,646,257
    
    
    
    310,387,770STOCKHOLDERS EQUITYCommon stock, no par value; 10,000,000 shares authorized,
1,624,389 and 1,519,887 shares issued
    
    
    23,632,830
    
    
    
    19,507,257Retained earnings
    
    
    16,137,862
    
    
    
    14,685,971Accumulated other comprehensive loss
    
    
    (632,343
    )
    
    
    (520,987
    )Treasury stock, at cost; 123,106 shares in 2007 and
95,080 shares in 2006
    
    
    (4,292,202
    )
    
    
    (3,208,307
    )TOTAL STOCKHOLDERS EQUITY
    
    
    34,846,147
    
    
    
    30,463,934TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    423,492,404
    
    
    $
    340,851,704
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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST INCOMEInterest and fees on loans
    
    $
    5,604,206
    
    
    $
    4,393,937
    
    
    $
    15,449,822
    
    
    $
    12,598,616Interest-bearing deposits in
other institutions
    
    
    22,159
    
    
    
    4,546
    
    
    
    127,772
    
    
    
    11,939Federal funds sold
    
    
    122,029
    
    
    
    29,391
    
    
    
    383,464
    
    
    
    38,328Investment securities:Taxable interest
    
    
    323,806
    
    
    
    275,448
    
    
    
    844,454
    
    
    
    871,259Tax-exempt interest
    
    
    468,552
    
    
    
    251,777
    
    
    
    1,310,932
    
    
    
    745,368Dividends on FHLB stock
    
    
    32,426
    
    
    
    20,979
    
    
    
    84,193
    
    
    
    61,517Total interest income
    
    
    6,573,178
    
    
    
    4,976,078
    
    
    
    18,200,637
    
    
    
    14,327,027INTEREST EXPENSEDeposits
    
    
    3,176,508
    
    
    
    1,867,011
    
    
    
    8,360,623
    
    
    
    5,085,705Short-term borrowings
    
    
    35,750
    
    
    
    22,563
    
    
    
    75,420
    
    
    
    145,213Other borrowings
    
    
    453,853
    
    
    
    327,907
    
    
    
    1,368,738
    
    
    
    898,771Total interest expense
    
    
    3,666,111
    
    
    
    2,217,481
    
    
    
    9,804,781
    
    
    
    6,129,689NET INTEREST INCOME
    
    
    2,907,067
    
    
    
    2,758,597
    
    
    
    8,395,856
    
    
    
    8,197,338Provision for loan losses
    
    
    60,000
    
    
    
    90,000
    
    
    
    174,391
    
    
    
    240,000NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    2,847,067
    
    
    
    2,668,597
    
    
    
    8,221,465
    
    
    
    7,957,338NONINTEREST INCOMEService charges on deposit accounts
    
    
    494,456
    
    
    
    462,295
    
    
    
    1,427,458
    
    
    
    1,310,979Investment securities losses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,868
    )Earnings on bank-owned life insurance
    
    
    69,909
    
    
    
    64,431
    
    
    
    210,162
    
    
    
    177,603Other income
    
    
    89,445
    
    
    
    116,876
    
    
    
    286,061
    
    
    
    305,869Total noninterest income
    
    
    653,810
    
    
    
    643,602
    
    
    
    1,923,681
    
    
    
    1,788,583NONINTEREST EXPENSESalaries and employee benefits
    
    
    1,220,646
    
    
    
    1,010,312
    
    
    
    3,365,646
    
    
    
    2,840,361Occupancy expense
    
    
    184,078
    
    
    
    117,190
    
    
    
    551,586
    
    
    
    385,037Equipment expense
    
    
    139,197
    
    
    
    108,380
    
    
    
    393,411
    
    
    
    301,066Data processing costs
    
    
    186,213
    
    
    
    147,484
    
    
    
    498,932
    
    
    
    484,270Ohio state franchise tax
    
    
    109,673
    
    
    
    90,000
    
    
    
    313,873
    
    
    
    270,000Other expense
    
    
    577,126
    
    
    
    569,039
    
    
    
    1,888,020
    
    
    
    1,695,434Total noninterest expense
    
    
    2,416,933
    
    
    
    2,042,405
    
    
    
    7,011,468
    
    
    
    5,976,168Income before income taxes
    
    
    1,083,944
    
    
    
    1,269,794
    
    
    
    3,133,678
    
    
    
    3,769,753Income taxes
    
    
    223,000
    
    
    
    339,000
    
    
    
    621,128
    
    
    
    1,033,587NET INCOME
    
    $
    860,944
    
    
    $
    930,794
    
    
    $
    2,512,550
    
    
    $
    2,736,166EARNINGS PER SHAREBasic
    
    $
    0.57
    
    
    $
    0.65
    
    
    $
    1.70
    
    
    $
    1.92Diluted
    
    
    0.56
    
    
    
    0.64
    
    
    
    1.68
    
    
    
    1.90DIVIDENDS DECLARED PER SHARE
    
    $
    0.245
    
    
    $
    0.229
    
    
    $
    0.725
    
    
    $
    0.686
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AccumulatedOther
    
    
    
    
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholders'
    
    
    ComprehensiveStock
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    Equity
    
    
    IncomeBalance, December 31, 2006
    
    $
    19,507,257
    
    
    $
    14,685,971
    
    
    $
    (520,987
    )
    
    $
    (3,208,307
    )
    
    $
    30,463,934Net income
    
    
    
    
    
    
    2,512,550
    
    
    
    
    
    
    
    
    
    
    
    2,512,550
    
    
    $
    2,512,550Other comprehensive income:Unrealized loss on available for sale
securities net of tax benefit of $57,364
    
    
    
    
    
    
    
    
    
    
    (111,356
    )
    
    
    
    
    
    
    (111,356
    )
    
    
    (111,356
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,401,194Purchase of treasury stock (28,026 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,083,895
    )
    
    
    (1,083,895
    )Common stock issued (97,669 shares)
    
    
    3,859,252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,859,252Dividend reinvestment plan (6,833 shares)
    
    
    266,321
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    266,321Cash dividends ($0.725 per share)
    
    
    
    
    
    
    (1,060,659
    )
    
    
    
    
    
    
    
    
    
    
    (1,060,659
    )Balance, September 30, 2007
    
    $
    23,632,830
    
    
    $
    16,137,862
    
    
    $
    (632,343
    )
    
    $
    (4,292,202
    )
    
    $
    34,846,147
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Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    2,512,550
    
    
    $
    2,736,166Adjustments to reconcile net income to
net cash provided by operating activities:Provision for loan losses
    
    
    60,000
    
    
    
    240,000Investment securities losses, net
    
    
    
    
    
    
    5,868Depreciation and amortization
    
    
    378,749
    
    
    
    326,531Amortization of premium and discount on investment securities
    
    
    168,622
    
    
    
    178,373Amortization of deferred loan fees
    
    
    (49,492
    )
    
    
    (55,586
    )Earnings on bank-owned life insurance
    
    
    (210,163
    )
    
    
    (177,603
    )Increase in accrued interest receivable
    
    
    (827,231
    )
    
    
    (280,934
    )Increase in accrued interest payable
    
    
    410,189
    
    
    
    179,333Other, net
    
    
    (426,395
    )
    
    
    18,194Net cash provided by operating activities
    
    
    2,016,829
    
    
    
    3,170,342INVESTING ACTIVITIESInvestment securities available for sale:Proceeds from repayments and maturities
    
    
    5,402,909
    
    
    
    3,951,106Proceeds from sale of securities
    
    
    
    
    
    
    664,838Purchases
    
    
    (24,059,580
    )
    
    
    (1,619,234
    )Investment securities held to maturity:Proceeds from repayments and maturities
    
    
    5,954
    
    
    
    5,643Increase in loans, net
    
    
    (18,373,626
    )
    
    
    (10,773,262
    )Acquisition of subsidiary bank:
    
    
    (1,828,301
    )
    
    
    Purchase of Federal Home Loan Bank stock
    
    
    (56,100
    )
    
    
    (50,600
    )Purchase of bank-owned life insurance
    
    
    
    
    
    
    (1,000,000
    )Purchase of premises and equipment
    
    
    (396,347
    )
    
    
    (272,058
    )Deposit acquisition premium
    
    
    (2,120,612
    )
    
    
    Net cash used for investing activities
    
    
    (41,425,703
    )
    
    
    (9,093,567
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    28,361,018
    
    
    
    15,256,258Increase (decrease) in short-term borrowings, net
    
    
    902,844
    
    
    
    (5,401,356
    )Repayment of other borrowings
    
    
    (8,260,732
    )
    
    
    (3,887,919
    )Proceeds from other borrowings
    
    
    
    
    
    
    6,000,000Purchase of Treasury Stock
    
    
    (1,083,895
    )
    
    
    (238,534
    )Common stock issued
    
    
    196,504
    
    
    
    294,518Proceeds from dividend reinvestment plan
    
    
    266,321
    
    
    
    232,490Cash dividends
    
    
    (1,060,659
    )
    
    
    (957,603
    )Net cash received from deposit acquisition
    
    
    19,270,054
    
    
    
    Net cash provided by financing activities
    
    
    38,591,455
    
    
    
    11,297,854Increase in cash and cash equivalents
    
    
    (817,420
    )
    
    
    5,374,629CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
    
    
    13,639,602
    
    
    
    5,821,164CASH AND CASH EQUIVALENTS
AT END OF PERIOD
    
    $
    12,822,182
    
    
    $
    11,195,794SUPPLEMENTAL INFORMATIONCash paid during the year for:Interest on deposits and borrowings
    
    $
    9,314,016
    
    
    $
    5,941,806Income taxes
    
    
    750,000
    
    
    
    1,025,000Summary of business acquisition:Fair value of tangible assets acquired
    
    $
    42,657,925
    
    
    $
    Fair value of core deposit intangible acquired
    
    
    103,781
    
    
    
    Fair value of liabilities assumed
    
    
    (38,408,610
    )
    
    
    Stock issued for the purchase of acquired
companys common stock
    
    
    (3,662,750
    )
    
    
    Cash paid in the acquisition
    
    
    (3,887,110
    )
    
    
    Goodwill recognized
    
    $
    (3,196,764
    )
    
    $
    
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Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115 Fair Value
Measurements
 Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes
 Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split-Dollar Life Insurance Arrangements
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Accounting for Collateral Assignment Split-Dollar Life Insurance Agreements
 Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards Share-Based Payment
       Weighted-
    
    
    
    
    
    
    Weighted-average
    
    
    
    
    
    
    averageExercise
    
    
    
    
    
    
    Exercise2007
    
    
    Price
    
    
    2006
    
    
    PriceOutstanding, January 1
    
    
    73,607
    
    
    $
    27.54
    
    
    
    78,020
    
    
    $
    26.79Granted
    
    
    9,864
    
    
    
    39.62
    
    
    
    
    
    
    
    Exercised
    
    
    (538
    )
    
    
    26.36
    
    
    
    (2,403
    )
    
    
    24.21Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, September 30
    
    
    82,933
    
    
    $
    28.99
    
    
    
    75,617
    
    
    $
    26.87
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For the Three
    
    
    For the NineMonths Ended
    
    
    Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Weighted average common shares
outstanding
    
    
    1,622,013
    
    
    
    1,518,325
    
    
    
    1,581,812
    
    
    
    1,513,803Average treasury stock shares
    
    
    (112,275
    )
    
    
    (94,323
    )
    
    
    (101,842
    )
    
    
    (92,034
    )Weighted average common shares and
common stock equivalents used to
calculate basic earnings per share
    
    
    1,509,738
    
    
    
    1,424,002
    
    
    
    1,479,970
    
    
    
    1,421,769Additional common stock equivalents
(stock options) used to calculate
diluted earnings per share
    
    
    18,541
    
    
    
    22,334
    
    
    
    20,337
    
    
    
    22,045Weighted average common shares and
common stock equivalents used
to calculate diluted earnings per share
    
    
    1,528,279
    
    
    
    1,446,336
    
    
    
    1,500,307
    
    
    
    1,443,814
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For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Unrealized holding gains (losses) arising during the period on securities held
    
    
    656,243
    
    
    
    773,007
    
    
    
    (111,356
    )
    
    
    214,703Reclassification adjustment for gains included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,873
    )Net change in unrealized gains (losses) during the period
    
    
    656,243
    
    
    
    773,007
    
    
    
    (111,356
    )
    
    
    210,830Unrealized holding losses, beginning of period
    
    
    (1,288,586
    )
    
    
    (1,239,265
    )
    
    
    (520,987
    )
    
    
    (677,088
    )Unrealized holding losses, end of period
    
    
    (632,343
    )
    
    
    (466,258
    )
    
    
    (632,343
    )
    
    
    (466,258
    )Net income
    
    
    860,944
    
    
    
    930,794
    
    
    
    2,512,550
    
    
    
    2,736,166Other comprehensive income, net of tax:Unrealized holding losses arising during the period
    
    
    656,243
    
    
    
    773,007
    
    
    
    (111,356
    )
    
    
    210,830Comprehensive income
    
    
    1,517,187
    
    
    
    1,703,801
    
    
    
    2,401,194
    
    
    
    2,946,996
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Nine Months Ended2007
    
    
    2006Interest Income
    
    $
    19,040,058
    
    
    $
    15,514,027Interest Expense
    
    
    10,315,564
    
    
    
    6,837,689Net Interest Income
    
    
    8,724,494
    
    
    
    8,676,338Provision for loan losses
    
    
    220,493
    
    
    
    314,000Net Interest Income after provision for loan losses
    
    
    8,504,001
    
    
    
    8,362,338Non Interest Income
    
    
    1,951,129
    
    
    
    1,848,583Non Interest Expense
    
    
    8,024,693
    
    
    
    6,872,168Income before income taxes
    
    
    2,430,437
    
    
    
    3,338,753Provision for income taxes
    
    
    464,828
    
    
    
    1,033,587Net income including restructuring charges.
    
    
    1,965,609
    
    
    
    2,305,166Restructuring charges of $418,848, net of tax benefit of $142,408
    
    
    276,440
    
    
    
    Net income excluding restructuring charges
    
    $
    2,242,048
    
    
    $
    2,305,166Net loss per share including restructuring chargesBasic
    
    $
    1.33
    
    
    $
    1.62Diluted
    
    $
    1.31
    
    
    $
    1.60Net income per share excluding restructuring chargesBasic
    
    $
    1.51
    
    
    $
    1.62Diluted
    
    $
    1.49
    
    
    $
    1.60
  Nine Months EndedSeptember 30,2007Compensation and benefits
    
    
    40,092Professional fees
    
    
    221,389Acceleration of contracts
    
    
    157,367418,848
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  CHANGES IN FINANCIAL CONDITION
 General.
 th
  Cash and cash equivalents.
 Investment securities.
 Loans receivable.
 Non-performing loans.
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Deposits.
 Borrowed funds.
 Stockholders equity.
 RESULTS OF OPERATIONS
 General.
  Net interest income.
  
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Interest income.
     Interest expense.
    14 of 26




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Provision for loan losses.
 Non-interest income.
  Non-interest expense.
  Provision for income taxes.
 CRITICAL ACCOUNTING ESTIMATES
  Average Balance Sheet and Yield/Rate Analysis.
 Analysis of Changes in Net Interest Income.
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For the Three Months Ended September 30,2007
    
    
    2006(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
    
    
    303,872
    
    
    $
    5,604
    
    
    
    7.32
    %
    
    
    242,809
    
    
    $
    4,394
    
    
    
    7.18
    %Investments securities
    
    
    77,861
    
    
    
    792
    
    
    
    5.26
    %
    
    
    55,946
    
    
    
    527
    
    
    
    4.66
    %Interest-bearing deposits with other banks
    
    
    15,187
    
    
    
    177
    
    
    
    4.62
    %
    
    
    4,759
    
    
    
    55
    
    
    
    4.59
    %Total interest-earning assets
    
    
    396,920
    
    
    
    6,573
    
    
    
    6.81
    %
    
    
    303,514
    
    
    
    4,976
    
    
    
    6.67
    %Noninterest-earning assets
    
    
    20,392
    
    
    
    
    
    
    
    
    
    
    
    16,055Total assets
    
    $
    417,312
    
    
    
    
    
    
    
    
    
    
    $
    319,569Interest-bearing liabilities:Interest  bearing demand deposits
    
    $
    17,025
    
    
    
    91
    
    
    
    2.12
    %
    
    $
    11,610
    
    
    
    36
    
    
    
    1.23
    %Money market deposits
    
    
    26,090
    
    
    
    257
    
    
    
    3.91
    %
    
    
    13,994
    
    
    
    102
    
    
    
    2.89
    %Savings deposits
    
    
    77,539
    
    
    
    573
    
    
    
    2.93
    %
    
    
    56,487
    
    
    
    220
    
    
    
    1.55
    %Certificates of deposit
    
    
    180,867
    
    
    
    2,255
    
    
    
    4.95
    %
    
    
    138,004
    
    
    
    1,509
    
    
    
    4.34
    %Borrowings
    
    
    38,695
    
    
    
    490
    
    
    
    5.02
    %
    
    
    29,659
    
    
    
    350
    
    
    
    4.68
    %Total interest-bearing liabilities
    
    
    340,217
    
    
    
    3,666
    
    
    
    4.28
    %
    
    
    249,754
    
    
    
    2,217
    
    
    
    3.52
    %Noninterest-bearing liabilities
Other liabilities
    
    
    42,867
    
    
    
    
    
    
    
    
    
    
    
    41,063Stockholders equity
    
    
    34,228
    
    
    
    
    
    
    
    
    
    
    
    28,752Total liabilities and stockholders equity
    
    $
    417,312
    
    
    
    
    
    
    
    
    
    
    $
    319,569Net interest income
    
    
    
    
    
    $
    2,907
    
    
    
    
    
    
    
    
    
    
    $
    2,759Interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.54
    %
    
    
    
    
    
    
    
    
    
    
    3.15
    %Net yield on interest-earning assets (3)
    
    
    
    
    
    
    
    
    
    
    3.15
    %
    
    
    
    
    
    
    
    
    
    
    3.78
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    116.67
    %
    
    
    
    
    
    
    
    
    
    
    121.53
    %
 
 (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.
For the Nine Months Ended September 30, For the Nine Months Ended September 30,2007
    
    
    2006(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
    
    
    282,169
    
    
    $
    15,450
    
    
    
    7.32
    %
    
    
    238,285
    
    
    $
    12,598
    
    
    
    7.07
    %Investments securities
    
    
    71,969
    
    
    
    2,155
    
    
    
    5.26
    %
    
    
    57,086
    
    
    
    1,617
    
    
    
    4.69
    %Interest-bearing deposits with other banks
    
    
    14,730
    
    
    
    596
    
    
    
    5.41
    %
    
    
    3,207
    
    
    
    112
    
    
    
    4.67
    %Total interest-earning assets
    
    
    368,868
    
    
    
    18,201
    
    
    
    6.84
    %
    
    
    298,578
    
    
    
    14,327
    
    
    
    6.59
    %Noninterest-earning assets
    
    
    18,285
    
    
    
    
    
    
    
    
    
    
    
    16,028Total assets
    
    $
    387,153
    
    
    
    
    
    
    
    
    
    
    $
    314,606Interest-bearing liabilities:Interest  bearing demand deposits
    
    $
    14,201
    
    
    
    265
    
    
    
    2.49
    %
    
    $
    10,982
    
    
    
    100
    
    
    
    1.22
    %Money market deposits
    
    
    25,557
    
    
    
    801
    
    
    
    4.19
    %
    
    
    13,261
    
    
    
    257
    
    
    
    2.59
    %Savings deposits
    
    
    66,403
    
    
    
    1,187
    
    
    
    2.39
    %
    
    
    59,147
    
    
    
    696
    
    
    
    1.57
    %Certificates of deposit
    
    
    167,217
    
    
    
    6,108
    
    
    
    4.88
    %
    
    
    131,997
    
    
    
    4,033
    
    
    
    4.08
    %Borrowings
    
    
    38,352
    
    
    
    1,444
    
    
    
    5.03
    %
    
    
    30,873
    
    
    
    1,044
    
    
    
    4.52
    %Total interest-bearing liabilities
    
    
    311,730
    
    
    
    9,805
    
    
    
    4.20
    %
    
    
    246,260
    
    
    
    6,130
    
    
    
    3.33
    %Noninterest-bearing liabilitiesOther liabilities
    
    
    42,445
    
    
    
    
    
    
    
    
    
    
    
    40,154Stockholders equity
    
    
    32,979
    
    
    
    
    
    
    
    
    
    
    
    28,192Total liabilities and stockholders equity
    
    $
    387,153
    
    
    
    
    
    
    
    
    
    
    $
    314,606Net interest income
    
    
    
    
    
    $
    8,396
    
    
    
    
    
    
    
    
    
    
    $
    8,197Interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.64
    %
    
    
    
    
    
    
    
    
    
    
    3.26
    %Net yield on interest-earning assets (3)
    
    
    
    
    
    
    
    
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    3.84
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    118.33
    %
    
    
    
    
    
    
    
    
    
    
    121.25
    %
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Three Months ended,September 30,2007 versus 2006Increase (decrease) due toVolume
    
    
    Rate
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable
    
    
    1,105
    
    
    
    105
    
    
    
    1,210Investments securities
    
    
    257
    
    
    
    8
    
    
    
    265Interest-bearing deposits with other banks
    
    
    121
    
    
    
    1
    
    
    
    122Total interest-earning assets
    
    
    1,483
    
    
    
    114
    
    
    
    1,597Interest-bearing liabilities:Interest  bearing demand deposits
    
    
    17
    
    
    
    38
    
    
    
    55Money market deposits
    
    
    88
    
    
    
    67
    
    
    
    155Savings deposits
    
    
    82
    
    
    
    271
    
    
    
    353Certificates of deposit
    
    
    469
    
    
    
    277
    
    
    
    746Borrowings
    
    
    107
    
    
    
    33
    
    
    
    140Total interest-bearing liabilities
    
    
    762
    
    
    
    687
    
    
    
    1,449Net interest income
    
    $
    721
    
    
    
    ($573
    )
    
    $
    148
 Nine Months ended,September 30,2007 versus 2006Increase (decrease) due toVolume
    
    
    Rate
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable
    
    
    2,320
    
    
    
    532
    
    
    
    2,852Investments securities
    
    
    522
    
    
    
    16
    
    
    
    538Interest-bearing deposits with other banks
    
    
    402
    
    
    
    82
    
    
    
    484Total interest-earning assets
    
    
    3,244
    
    
    
    630
    
    
    
    3,874Interest-bearing liabilities:Interest  bearing demand deposits
    
    
    29
    
    
    
    136
    
    
    
    165Money market deposits
    
    
    238
    
    
    
    306
    
    
    
    544Savings deposits
    
    
    85
    
    
    
    406
    
    
    
    491Certificates of deposit
    
    
    1,076
    
    
    
    999
    
    
    
    2,075Borrowings
    
    
    253
    
    
    
    147
    
    
    
    400Total interest-bearing liabilities
    
    
    1,682
    
    
    
    1,993
    
    
    
    3,675Net interest income
    
    $
    1,562
    
    
    
    ($1,363
    )
    
    $
    199
 LIQUIDITY
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REGULATORY MATTERS
  REGULATORY CAPITAL REQUIREMENTS
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Middlefield Banc Corp.
    
    
    The Middlefield Banking Co.
    
    
    Emerald BankSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2007
    
    
    2007Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Capital
(to Risk-weighted Assets)Actual
    
    $
    41,357,132
    
    
    
    14.27
    
    
    
    $31,216,765
    
    
    
    12.36
    
    
    $
    6,768,261
    
    
    
    18.18For Capital Adequacy Purposes
    
    
    23,188,480
    
    
    
    8.00
    
    
    
    20,210,320
    
    
    
    8.00
    
    
    
    2,978,160
    
    
    
    8.00To Be Well Capitalized
    
    
    28,985,600
    
    
    
    10.00
    
    
    
    25,262,900
    
    
    
    10.00
    
    
    
    3,722,700
    
    
    
    10.00Tier I Capital
(to Risk-weighted Assets)Actual
    
    $
    38,183,633
    
    
    
    13.17
    
    
    
    $28,564,902
    
    
    
    11.31
    
    
    $
    6,307,455
    
    
    
    16.94For Capital Adequacy Purposes
    
    
    11,594,240
    
    
    
    4.00
    
    
    
    10,105,160
    
    
    
    4.00
    
    
    
    1,489,080
    
    
    
    4.00To Be Well Capitalized
    
    
    17,391,360
    
    
    
    6.00
    
    
    
    15,157,740
    
    
    
    6.00
    
    
    
    2,233,620
    
    
    
    6.00Tier I Capital
(to Average Assets)Actual
    
    $
    38,183,633
    
    
    
    9.59
    
    
    
    $28,564,902
    
    
    
    8.07
    
    
    $
    6,307,455
    
    
    
    14.68For Capital Adequacy Purposes
    
    
    15,930,281
    
    
    
    4.00
    
    
    
    14,156,233
    
    
    
    4.00
    
    
    
    1,719,178
    
    
    
    4.00To Be Well Capitalized
    
    
    19,912,851
    
    
    
    5.00
    
    
    
    17,695,292
    
    
    
    5.00
    
    
    
    2,148,973
    
    
    
    5.00
 
 Item 3 Quantitative and Qualitative Disclosures about Market Risk
 ASSET AND LIABILITY MANAGEMENT
    Net interest income simulation.
 Increase
    
    
    Decrease+200
    
    
    -200BP
    
    
    BPNet interest income  increase (decrease)
    
    
    5.2
    %
    
    
    (9.5
    )%Portfolio equity  increase (decrease)
    
    
    (4.5
    )%
    
    
    (7.0
    )%
 Portfolio equity simulation.
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Controls and Procedures Disclosure
   Changes in Internal Control over Financial Reporting
  
  
   
    Total Number of
    
    
    Maximum Number ofShares Purchased
    
    
    Shares that May YetTotal Number of
    
    
    Average Price Paid
    
    
    Part of Publicly
    
    
    Be Purchased UnderDate
    
    Shares Purchased
    
    
    Per Share
    
    
    Announced Program
    
    
    the ProgramAugust 1, 2007
    
    
    7,034
    
    
    
    38.65
    
    
    
    7,034
    
    
    
    64,080August 3, 2007
    
    
    1,810
    
    
    
    38.00
    
    
    
    1,810
    
    
    
    62,270August 10, 2007
    
    
    2,514
    
    
    
    38.00
    
    
    
    2,514
    
    
    
    59,756August 21, 2007
    
    
    11,668
    
    
    
    38.65
    
    
    
    11,668
    
    
    
    48,088
 
   
   
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exhibitnumber
    
    description
    
    location2
    
    Agreement and Plan of Merger among Middlefield Banc
Corp., EB Interim Bank, and Emerald Bank, dated as of
November 15, 2006, as amended by Amendment No. 1
    
    Incorporated by
reference to the
prospectus/proxy
statement, Appendix
A, contained in
Part I of Form S-4
Registration
Statement Amendment
No. 1 filed on
February 9, 2007.
Disclosure
schedules referred
to in the Agreement
and Plan of Merger
are omitted in
reliance on Item
601(b)(2) of
Regulation S-K.
Upon request of the
SEC, Middlefield
Banc Corp. will
furnish
supplementally to
the SEC a copy of
the disclosure
schedules3.1
    
    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 Ban Corp.
    
    Incorporated by
reference to
Exhibit 3.2 of
Middlefield Banc
Corp.s
registration
statement on Form
10 filed on April
17, 20014
    
    Specimen stock certificate
    
    Incorporated by
reference to
Exhibit 3.2 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, 200699
    
    Report of independent registered public accounting firm.
    
    filed herewith31
    
    Rule 13a-14(a) certification of Chief Executive Officer
    
    filed herewith31.1
    
    Rule 13a-14(a) certification of Chief Financial Officer
    
    filed herewith32
    
    Rule 13a-14(b) certification
    
    filed herewith
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SIGNATURES
  MIDDLEFIELD BANC CORP.Date: November 9, 2007
    By:
    /s/Thomas G. CaldwellThomas G. CaldwellPresident and Chief Executive Officer Date: November 9, 2007
    By:
    /s/Donald L. StacyDonald L. StacyPrincipal Financial and Accounting Officer 22 of 26