##### 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 June 30, 2007
 Commission File Number 33-23094
 
 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)
 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 August 10, 2007: 1,617,771




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##### 



MIDDLEFIELD BANC CORP.
 INDEX
 PageNumberPART I    FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheet (Unaudited) as of
June 30, 2007 and December 31, 2006
    
    
    3Consolidated Statement of Income (Unaudited)
for the Six and Three Months ended June 30, 2007
and 2006
    
    
    4Consolidated Statement of Changes in Stockholders Equity (Unaudited)
for the Six Months ended June 30, 2007
    
    
    5Consolidated Statement of Cash Flows (Unaudited)
for the Six and Three Months ended June 30, 2007 and 2006
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18PART II    OTHER INFORMATION
    
    
    19Item 1. Legal Proceedings
    
    
    19Item 1A. Risk FactorsItem 2. Unregistered sales of equity securitiesand use of proceeds
    
    
    19Item 3. Default Upon Senior Securities
    
    
    20Item 4. Submissions of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits and Reports on Form 8 - K
    
    
    20SIGNATURES
    
    
    22EX-31EX-31.1EX-32EX-99
  2




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##### Table of Contents



June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCash and due from banks
    
    $
    7,590,873
    
    
    $
    6,893,148Federal funds sold
    
    
    4,299,341
    
    
    
    6,200,000Interest-bearing deposits in other institutions
    
    
    559,550
    
    
    
    546,454Cash and cash equivalents
    
    
    12,449,764
    
    
    
    13,639,602Investment securities available for sale
    
    
    71,874,997
    
    
    
    63,048,135Investment securities held to maturity (estimated
market value of $130,579 and $134,306)
    
    
    119,899
    
    
    
    125,853Loans
    
    
    302,528,037
    
    
    
    249,190,534Less allowance for loan losses
    
    
    3,283,975
    
    
    
    2,848,887Net loans
    
    
    299,244,062
    
    
    
    246,341,647Premises and equipment
    
    
    6,831,770
    
    
    
    6,742,465Goodwill
    
    
    3,224,264
    
    
    
    123,175Bank-owned life insurance
    
    
    7,012,996
    
    
    
    6,872,743Accrued interest and other assets
    
    
    5,649,867
    
    
    
    3,958,084TOTAL ASSETS
    
    $
    406,407,619
    
    
    $
    340,851,704LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    41,348,568
    
    
    $
    41,002,573Interest-bearing demand
    
    
    13,128,166
    
    
    
    11,724,173Money market
    
    
    27,511,193
    
    
    
    14,738,767Savings
    
    
    73,077,850
    
    
    
    54,246,499Time
    
    
    171,792,572
    
    
    
    149,338,181Total deposits
    
    
    326,858,349
    
    
    
    271,050,193Short-term borrowings
    
    
    5,768,056
    
    
    
    1,609,738Other borrowings
    
    
    37,225,371
    
    
    
    36,112,738Accrued interest and other liabilities
    
    
    2,084,045
    
    
    
    1,615,101TOTAL LIABILITIES
    
    
    371,935,821
    
    
    
    310,387,770STOCKHOLDERS EQUITYCommon stock, no par value; 10,000,000 shares authorized,
1,621,550 and 1,519,887 shares issued
    
    
    23,521,438
    
    
    
    19,507,257Retained earnings
    
    
    15,644,003
    
    
    
    14,685,971Accumulated other comprehensive loss
    
    
    (1,288,586
    )
    
    
    (520,987
    )Treasury stock, at cost; 100,080 shares in 2007 and
95,080 shares in 2006
    
    
    (3,405,057
    )
    
    
    (3,208,307
    )TOTAL STOCKHOLDERS EQUITY
    
    
    34,471,798
    
    
    
    30,463,934TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    406,407,619
    
    
    $
    340,851,704
  3




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST INCOMEInterest and fees on loans
    
    $
    5,315,387
    
    
    $
    4,219,061
    
    
    $
    9,845,616
    
    
    $
    8,204,679Interest-bearing deposits in
other institutions
    
    
    49,724
    
    
    
    4,272
    
    
    
    105,613
    
    
    
    7,393Federal funds sold
    
    
    130,200
    
    
    
    5,358
    
    
    
    261,435
    
    
    
    8,937Investment securities:Taxable interest
    
    
    254,534
    
    
    
    289,841
    
    
    
    520,648
    
    
    
    595,811Tax-exempt interest
    
    
    459,595
    
    
    
    248,440
    
    
    
    842,380
    
    
    
    493,591Dividends on FHLB stock
    
    
    26,272
    
    
    
    23,341
    
    
    
    51,767
    
    
    
    40,538Total interest income
    
    
    6,235,712
    
    
    
    4,790,313
    
    
    
    11,627,459
    
    
    
    9,350,949INTEREST EXPENSEDeposits
    
    
    2,869,444
    
    
    
    1,677,832
    
    
    
    5,184,115
    
    
    
    3,218,694Short-term borrowings
    
    
    20,455
    
    
    
    61,827
    
    
    
    39,670
    
    
    
    122,650Other borrowings
    
    
    469,473
    
    
    
    297,890
    
    
    
    914,885
    
    
    
    570,864Total interest expense
    
    
    3,359,372
    
    
    
    2,037,549
    
    
    
    6,138,670
    
    
    
    3,912,208NET INTEREST INCOME
    
    
    2,876,340
    
    
    
    2,752,764
    
    
    
    5,488,789
    
    
    
    5,438,741Provision for loan losses
    
    
    69,391
    
    
    
    75,000
    
    
    
    114,391
    
    
    
    150,000NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    2,806,949
    
    
    
    2,677,764
    
    
    
    5,374,398
    
    
    
    5,288,741NONINTEREST INCOMEService charges on deposit accounts
    
    
    481,055
    
    
    
    435,842
    
    
    
    933,002
    
    
    
    848,684Investment securities losses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,868
    )Earnings on bank-owned life insurance
    
    
    68,174
    
    
    
    59,950
    
    
    
    140,253
    
    
    
    113,172Other income
    
    
    99,014
    
    
    
    98,863
    
    
    
    196,616
    
    
    
    188,993Total noninterest income
    
    
    648,243
    
    
    
    594,655
    
    
    
    1,269,871
    
    
    
    1,144,981NONINTEREST EXPENSESalaries and employee benefits
    
    
    1,040,092
    
    
    
    835,105
    
    
    
    2,145,000
    
    
    
    1,830,049Occupancy expense
    
    
    198,278
    
    
    
    113,544
    
    
    
    367,508
    
    
    
    267,847Equipment expense
    
    
    132,423
    
    
    
    100,473
    
    
    
    254,214
    
    
    
    192,686Data processing costs
    
    
    161,471
    
    
    
    158,279
    
    
    
    312,719
    
    
    
    336,786Ohio state franchise tax
    
    
    108,200
    
    
    
    90,000
    
    
    
    204,200
    
    
    
    180,000Other expense
    
    
    680,369
    
    
    
    600,631
    
    
    
    1,310,894
    
    
    
    1,126,395Total noninterest expense
    
    
    2,320,833
    
    
    
    1,898,032
    
    
    
    4,594,535
    
    
    
    3,933,763Income before income taxes
    
    
    1,134,359
    
    
    
    1,374,387
    
    
    
    2,049,734
    
    
    
    2,499,959Income taxes
    
    
    235,128
    
    
    
    386,587
    
    
    
    398,128
    
    
    
    694,587NET INCOME
    
    $
    899,231
    
    
    $
    987,800
    
    
    $
    1,651,606
    
    
    $
    1,805,372EARNINGS PER SHAREBasic
    
    $
    0.60
    
    
    $
    0.70
    
    
    $
    1.13
    
    
    $
    1.28Diluted
    
    
    0.59
    
    
    
    0.69
    
    
    
    1.11
    
    
    
    1.26DIVIDENDS DECLARED PER SHARE
    
    $
    0.240
    
    
    $
    0.224
    
    
    $
    0.480
    
    
    $
    0.448
  4




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##### Table of Contents



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
    
    
    
    
    
    
    1,651,606
    
    
    
    
    
    
    
    
    
    
    
    1,651,606
    
    
    $
    1,651,606Other comprehensive income:Unrealized loss on available for sale
securities net of tax benefit of $395,390
    
    
    
    
    
    
    
    
    
    
    (767,599
    )
    
    
    
    
    
    
    (767,599
    )
    
    
    (767,599
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    884,007Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (196,750
    )
    
    
    (196,750
    )Common stock issued
    
    
    3,838,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,838,276Dividend reinvestment plan
    
    
    175,905
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,905Cash dividends ($0.24 per share)
    
    
    
    
    
    
    (693,574
    )
    
    
    
    
    
    
    
    
    
    
    (693,574
    )Balance, June 30, 2007
    
    $
    23,521,438
    
    
    $
    15,644,003
    
    
    $
    (1,288,586
    )
    
    $
    (3,405,057
    )
    
    $
    34,471,79823,521,438
    
    
    
    15,644,003
    
    
    
    (1,288,586
    )
    
    
    (3,405,057
    )
    
    
    34,471,798
  5




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##### Table of Contents



Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    1,651,606
    
    
    $
    1,805,372Adjustments to reconcile net income to
net cash provided by operating activities:Provision for loan losses
    
    
    69,391
    
    
    
    150,000Investment securities losses, net
    
    
    
    
    
    
    5,868Depreciation and amortization
    
    
    245,020
    
    
    
    217,047Amortization of premium and
discount on investment securities
    
    
    114,514
    
    
    
    118,879Amortization of deferred loan fees
    
    
    (24,119
    )
    
    
    (38,569
    )Earnings on bank-owned life insurance
    
    
    (140,253
    )
    
    
    (113,172
    )Increase in accrued interest receivable
    
    
    (252,413
    )
    
    
    83,472Increase in accrued interest payable
    
    
    125,237
    
    
    
    67,380Other, net
    
    
    (380,472
    )
    
    
    (199,086
    )Net cash provided by operating activities
    
    
    1,408,511
    
    
    
    2,097,191INVESTING ACTIVITIESInvestment securities available for sale:Proceeds from repayments and maturities
    
    
    2,499,419
    
    
    
    2,990,431Proceeds from sale of securities
    
    
    
    
    
    
    664,838Purchases
    
    
    (12,603,824
    )
    
    
    (1,117,254
    )Investment securities held to maturity:Proceeds from repayments and maturities
    
    
    5,954
    
    
    
    5,643Increase in loans, net
    
    
    (13,738,759
    )
    
    
    (6,347,224
    )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
    
    
    (98,112
    )
    
    
    (119,723
    )Net cash used for investing activities
    
    
    (25,819,723
    )
    
    
    (4,973,889
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    21,739,314
    
    
    
    4,826,133Increase (decrease) in short-term borrowings, net
    
    
    4,158,319
    
    
    
    (3,748,267
    )Repayment of other borrowings
    
    
    (2,137,367
    )
    
    
    (1,987,727
    )Proceeds from other borrowings
    
    
    
    
    
    
    4,000,000Purchase of Treasury Stock
    
    
    (196,750
    )
    
    
    (205,845
    )Common stock issued
    
    
    175,526
    
    
    
    253,463Proceeds from dividend reinvestment plan
    
    
    175,905
    
    
    
    147,554Cash dividends
    
    
    (693,574
    )
    
    
    (633,313
    )Net cash provided by financing activities
    
    
    23,221,373
    
    
    
    2,651,998Increase in cash and cash equivalents
    
    
    (1,189,838
    )
    
    
    (224,700
    )CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
    
    
    13,639,602
    
    
    
    5,821,164CASH AND CASH EQUIVALENTS
AT END OF PERIOD
    
    $
    12,449,764
    
    
    $
    5,596,465SUPPLEMENTAL INFORMATIONCash paid during the year for:Interest on deposits and borrowings
    
    $
    4,399,898
    
    
    $
    3,844,828Income taxes
    
    
    450,000
    
    
    
    625,000Summary 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
    )
    
    $
    
  6




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##### Table of Contents



Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115 Fair Value
Measurements
 7




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##### Table of Contents



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
 Accounting for Collateral Assignment Split-Dollar Life Insurance Agreements
 Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards Share-Based Payment
      8




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##### Table of Contents



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, June 30
    
    
    82,933
    
    
    $
    28.99
    
    
    
    75,617
    
    
    $
    26.87
    For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Weighted average common shares
outstanding
    
    
    1,601,124
    
    
    
    1,509,554
    
    
    
    1,561,378
    
    
    
    1,511,504Average treasury stock shares
    
    
    (97,712
    )
    
    
    (91,058
    )
    
    
    (96,403
    )
    
    
    (90,884
    )Weighted average common shares and
common stock equivalents used to
calculate basic earnings per share
    
    
    1,503,412
    
    
    
    1,418,496
    
    
    
    1,464,975
    
    
    
    1,420,620Additional common stock equivalents
(stock options) used to calculate
diluted earnings per share
    
    
    20,441
    
    
    
    23,365
    
    
    
    20,932
    
    
    
    22,953Weighted average common shares and
common stock equivalents used
to calculate diluted earnings per share
    
    
    1,523,853
    
    
    
    1,441,861
    
    
    
    1,485,907
    
    
    
    1,443,573
 9




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##### Table of Contents



For the Six Months
    
    
    For the Three MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Unrealized holding losses arising during
the period on securities held
    
    
    (767,599
    )
    
    
    (558,304
    )
    
    
    (795,803
    )
    
    
    (492,200
    )Reclassification adjustment for gains included
in net income
    
    
    
    
    
    
    (3,873
    )
    
    
    
    
    
    
    Net change in unrealized losses during the period
    
    
    (767,599
    )
    
    
    (562,177
    )
    
    
    (795,803
    )
    
    
    (492,200
    )Unrealized holding losses, beginning of period
    
    
    (520,987
    )
    
    
    (677,088
    )
    
    
    (492,783
    )
    
    
    (747,065
    )Unrealized holding losses, end of period
    
    
    (1,288,586
    )
    
    
    (1,239,265
    )
    
    
    (1,288,586
    )
    
    
    (1,239,265
    )Net income
    
    
    1,651,606
    
    
    
    1,805,372
    
    
    
    899,231
    
    
    
    987,800Other comprehensive income, net of tax:Unrealized holding losses arising during the
period
    
    
    (767,599
    )
    
    
    (562,177
    )
    
    
    (795,803
    )
    
    
    (492,200
    )Comprehensive income
    
    
    884,007
    
    
    
    1,243,195
    
    
    
    103,428
    
    
    
    495,600
 
    Six Months Ended2007
    
    
    2006Interest Income
    
    $
    12,466,880
    
    
    $
    10,050,949Interest Expense
    
    
    6,649,453
    
    
    
    4,288,208Net Interest Income
    
    
    5,817,427
    
    
    
    5,762,741Provision for loan losses
    
    
    160,493
    
    
    
    185,000Net Interest Income after provision for loan losses
    
    
    5,656,934
    
    
    
    5,577,741Non Interest Income
    
    
    1,297,319
    
    
    
    1,163,981Non Interest Expense
    
    
    5,607,760
    
    
    
    4,533,763Income before income taxes
    
    
    1,346,493
    
    
    
    2,207,959Provision for income taxes
    
    
    241,828
    
    
    
    694,587Net income including restructuring charges.
    
    
    1,104,665
    
    
    
    1,513,372Restructuring charges of $418,848, net of tax benefit of $142,408
    
    
    276,440
    
    
    
    Net income excluding restructuring charges
    
    $
    1,381,104
    
    
    $
    1,513,372Net loss per share including restructuring chargesBasic
    
    $
    0.75
    
    
    $
    1.00Diluted
    
    $
    0.74
    
    
    $
    0.99Net income per share excluding restructuring chargesBasic
    
    $
    0.94
    
    
    $
    1.00Diluted
    
    $
    0.93
    
    
    $
    0.99
  Six Months EndedJune 30,2007Compensation and benefits
    
    
    40,092Professional fees
    
    
    221,389Acceleration of contracts
    
    
    157,367418,848
   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.
 10




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##### Table of Contents



Investment securities.
 Loans receivable.
 Non-performing loans.
 Deposits.
 Borrowed funds.
 Stockholders equity.
 RESULTS OF OPERATIONS
 General.
 11




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##### Table of Contents



Net interest income.
   Interest income.
     Interest expense.
 12




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##### Table of Contents



Provision for loan losses.
 Non-interest income.
  Non-interest expense.
  13




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##### Table of Contents



Provision for income taxes.
 CRITICAL ACCOUNTING ESTIMATES
  Average Balance Sheet and Yield/Rate Analysis.
 Analysis of Changes in Net Interest Income.
 For the Three Months Ended June 30,2007
    
    
    2006(4)
    
    
    
    
    
    
    
    
    
    
    (4)Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    AverageBalance
    
    
    (1)
    
    
    Yield/Cost
    
    
    Balance
    
    
    (1)
    
    
    Yield/Cost(Dollars in thousands)
    
    
    (Dollars in thousands)Interest-earning assets:Loans receivable
    
    
    289,093
    
    
    $
    5,315
    
    
    
    7.37
    %
    
    
    238,237
    
    
    $
    4,219
    
    
    
    7.10
    %Investments securities
    
    
    72,404
    
    
    
    715
    
    
    
    5.27
    %
    
    
    56,977
    
    
    
    538
    
    
    
    4.69
    %Interest-bearing deposits with other banks
    
    
    15,242
    
    
    
    206
    
    
    
    5.42
    %
    
    
    2,411
    
    
    
    33
    
    
    
    5.49
    %Total interest-earning assets
    
    
    376,739
    
    
    
    6,236
    
    
    
    6.89
    %
    
    
    297,625
    
    
    
    4,790
    
    
    
    6.63
    %Noninterest-earning assets
    
    
    18,036
    
    
    
    
    
    
    
    
    
    
    
    16,360Total assets
    
    $
    394,775
    
    
    
    
    
    
    
    
    
    
    $
    313,985Interest-bearing liabilities:Interest  bearing demand deposits
    
    $
    13,461
    
    
    
    105
    
    
    
    3.13
    %
    
    $
    11,035
    
    
    
    35
    
    
    
    1.27
    %Money market deposits
    
    
    27,572
    
    
    
    288
    
    
    
    4.19
    %
    
    
    12,494
    
    
    
    77
    
    
    
    2.47
    %Savings deposits
    
    
    68,552
    
    
    
    409
    
    
    
    2.39
    %
    
    
    58,969
    
    
    
    231
    
    
    
    1.57
    %Certificates of deposit
    
    
    168,287
    
    
    
    2,067
    
    
    
    4.93
    %
    
    
    131,253
    
    
    
    1,335
    
    
    
    4.08
    %Borrowings
    
    
    39,214
    
    
    
    491
    
    
    
    5.02
    %
    
    
    32,034
    
    
    
    360
    
    
    
    4.51
    %Total interest-bearing liabilities
    
    
    317,086
    
    
    
    3,360
    
    
    
    4.25
    %
    
    
    245,785
    
    
    
    2,038
    
    
    
    3.33
    %Noninterest-bearing liabilities
Other liabilities
    
    
    43,580
    
    
    
    
    
    
    
    
    
    
    
    40,105Stockholders equity
    
    
    34,109
    
    
    
    
    
    
    
    
    
    
    
    28,095Total liabilities and stockholders equity
    
    $
    394,775
    
    
    
    
    
    
    
    
    
    
    $
    313,985Net interest income
    
    
    
    
    
    $
    2,876
    
    
    
    
    
    
    
    
    
    
    $
    2,752Interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.64
    %
    
    
    
    
    
    
    
    
    
    
    3.30
    %Net yield on interest-earning assets (3)
    
    
    
    
    
    
    
    
    
    
    3.31
    %
    
    
    
    
    
    
    
    
    
    
    3.88
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    118.81
    %
    
    
    
    
    
    
    
    
    
    
    121.09
    %
 
 (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. 14




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##### Table of Contents



For the Six Months Ended June 30,2007
    
    
    2006(4)
    
    
    
    
    
    
    
    
    
    
    (4)Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    AverageBalance
    
    
    (1)
    
    
    Yield/Cost
    
    
    Balance
    
    
    (1)
    
    
    Yield/Cost(Dollars in thousands)
    
    
    (Dollars in thousands)Interest-earning assets:Loans receivable
    
    
    270,800
    
    
    $
    9,846
    
    
    
    7.33
    %
    
    
    235,986
    
    
    $
    8,205
    
    
    
    7.01
    %Investments securities
    
    
    68,974
    
    
    
    1,363
    
    
    
    5.25
    %
    
    
    57,666
    
    
    
    1,090
    
    
    
    4.70
    %Interest-bearing deposits with other banks
    
    
    15,644
    
    
    
    418
    
    
    
    5.39
    %
    
    
    2,372
    
    
    
    56
    
    
    
    4.76
    %Total interest-earning assets
    
    
    355,418
    
    
    
    11,627
    
    
    
    6.84
    %
    
    
    296,024
    
    
    
    9,351
    
    
    
    6.54
    %Noninterest-earning assets
    
    
    16,405
    
    
    
    
    
    
    
    
    
    
    
    16,070Total assets
    
    $
    371,823
    
    
    
    
    
    
    
    
    
    
    $
    312,094Interest-bearing liabilities:Interest  bearing demand deposits
    
    $
    12,766
    
    
    
    174
    
    
    
    2.75
    %
    
    $
    10,663
    
    
    
    64
    
    
    
    1.21
    %Money market deposits
    
    
    25,286
    
    
    
    544
    
    
    
    4.34
    %
    
    
    12,888
    
    
    
    155
    
    
    
    2.43
    %Savings deposits
    
    
    60,742
    
    
    
    614
    
    
    
    2.04
    %
    
    
    60,500
    
    
    
    476
    
    
    
    1.59
    %Certificates of deposit
    
    
    160,278
    
    
    
    3,852
    
    
    
    4.85
    %
    
    
    128,943
    
    
    
    2,523
    
    
    
    3.95
    %Borrowings
    
    
    38,178
    
    
    
    955
    
    
    
    5.04
    %
    
    
    31,490
    
    
    
    694
    
    
    
    4.44
    %Total interest-bearing liabilities
    
    
    297,249
    
    
    
    6,139
    
    
    
    4.16
    %
    
    
    244,484
    
    
    
    3,912
    
    
    
    3.23
    %Noninterest-bearing liabilities
Other liabilities
    
    
    42,225
    
    
    
    
    
    
    
    
    
    
    
    39,702Stockholders equity
    
    
    32,349
    
    
    
    
    
    
    
    
    
    
    
    27,908Total liabilities and stockholders equity
    
    $
    371,823
    
    
    
    
    
    
    
    
    
    
    $
    312,094Net interest income
    
    
    
    
    
    $
    5,488
    
    
    
    
    
    
    
    
    
    
    $
    5,439Interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.68
    %
    
    
    
    
    
    
    
    
    
    
    3.32
    %Net yield on interest-earning assets (3)
    
    
    
    
    
    
    
    
    
    
    3.36
    %
    
    
    
    
    
    
    
    
    
    
    3.88
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    119.57
    %
    
    
    
    
    
    
    
    
    
    
    121.08
    %
 
 (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. Three Months ended,June 30,2007 versus 2006Increase (decrease) due toVolume
    
    
    Rate
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable
    
    
    901
    
    
    
    195
    
    
    
    1,096Investments securities
    
    
    180
    
    
    
    -3
    
    
    
    177Interest-bearing deposits with other banks
    
    
    176
    
    
    
    -3
    
    
    
    173Total interest-earning assets
    
    
    1,257
    
    
    
    189
    
    
    
    1,446Interest-bearing liabilities:Interest  bearing demand deposits
    
    
    8
    
    
    
    62
    
    
    
    70Money market deposits
    
    
    93
    
    
    
    118
    
    
    
    211Savings deposits
    
    
    38
    
    
    
    140
    
    
    
    178Certificates of deposit
    
    
    377
    
    
    
    355
    
    
    
    732Borrowings
    
    
    81
    
    
    
    50
    
    
    
    131Total interest-bearing liabilities
    
    
    596
    
    
    
    726
    
    
    
    1,322Net interest income
    
    $
    661
    
    
    
    ($537
    )
    
    $
    124
 15




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##### Table of Contents



Six Months ended,June 30,2007 versus 2006Increase (decrease) due toVolume
    
    
    Rate
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans receivable
    
    
    1,210
    
    
    
    431
    
    
    
    1,641Investments securities
    
    
    264
    
    
    
    9
    
    
    
    273Interest-bearing deposits with other banks
    
    
    313
    
    
    
    49
    
    
    
    362Total interest-earning assets
    
    
    1,787
    
    
    
    489
    
    
    
    2,276Interest-bearing liabilities:Interest  bearing demand deposits
    
    
    13
    
    
    
    97
    
    
    
    110Money market deposits
    
    
    149
    
    
    
    240
    
    
    
    389Savings deposits
    
    
    2
    
    
    
    136
    
    
    
    138Certificates of deposit
    
    
    613
    
    
    
    716
    
    
    
    1,329Borrowings
    
    
    147
    
    
    
    114
    
    
    
    261Total interest-bearing liabilities
    
    
    924
    
    
    
    1,303
    
    
    
    2,227Net interest income
    
    $
    863
    
    
    
    ($814
    )
    
    $
    49
 LIQUIDITY
   INFLATION
   16




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##### Table of Contents



REGULATORY MATTERS
  REGULATORY CAPITAL REQUIREMENTS
    Middlefield Banc Corp.
    
    The Middlefield Banking Co.
    
    Emerald BankJune 30,
    
    June 30,
    
    June 30,2007
    
    2007
    
    2007Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal Capital(to Risk-weighted Assets)Actual
    
    $
    43,964,294
    
    
    
    16.37
    
    
    
    33,103,392
    
    
    
    14.19
    
    
    
    6,759,687
    
    
    
    19.11For Capital Adequacy Purposes
    
    
    21,487,120
    
    
    
    8.00
    
    
    
    18,658,000
    
    
    
    8.00
    
    
    
    2,829,120
    
    
    
    8.00To Be Well Capitalized
    
    
    26,858,900
    
    
    
    10.00
    
    
    
    23,322,500
    
    
    
    10.00
    
    
    
    3,536,400
    
    
    
    10.00Tier I Capital(to Risk-weighted Assets)Actual
    
    $
    40,680,319
    
    
    
    15.15
    
    
    
    30,280,224
    
    
    
    12.98
    
    
    
    6,317,455
    
    
    
    17.86For Capital Adequacy Purposes
    
    
    10,743,560
    
    
    
    4.00
    
    
    
    9,329,000
    
    
    
    4.00
    
    
    
    1,414,560
    
    
    
    4.00To Be Well Capitalized
    
    
    16,115,340
    
    
    
    6.00
    
    
    
    13,993,500
    
    
    
    6.00
    
    
    
    2,121,840
    
    
    
    6.00Tier I Capital(to Average Assets)Actual
    
    $
    40,680,319
    
    
    
    10.94
    
    
    
    30,280,224
    
    
    
    8.64
    
    
    
    6,317,455
    
    
    
    13.78For Capital Adequacy Purposes
    
    
    14,872,916
    
    
    
    4.00
    
    
    
    14,018,811
    
    
    
    4.00
    
    
    
    1,833,698
    
    
    
    4.00To Be Well Capitalized
    
    
    18,591,145
    
    
    
    5.00
    
    
    
    17,523,514
    
    
    
    5.00
    
    
    
    2,292,123
    
    
    
    5.00
 17




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##### Table of Contents



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)
    
    
    2.0
    %
    
    
    (5.9
    )%Portfolio equity  increase (decrease)
    
    
    (5.7
    )%
    
    
    2.7
    %
 Portfolio equity simulation.
  
  Controls and Procedures Disclosure
 18




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
  
   
    Total Number of
    
    Maximum Number ofTotal Number of
    
    
    
    
    
    Shares Purchased
    
    Shares that May YetShares
    
    Average Price Paid
    
    Part of Publicly
    
    Be Purchased UnderDate
    
    Purchased
    
    Per Share
    
    Announced Program
    
    the ProgramMay 14, 2007
    
    
    3,500
    
    
    $
    39.35
    
    
    
    3,500
    
    
    
    72,614May 11, 2007
    
    
    1,500
    
    
    $
    39.35
    
    
    
    1,500
    
    
    
    71,114
 19




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##### Table of Contents



Name
    
    Shares For
    
    Shares WithheldThomas G. Caldwell
    
    
    1,070,379
    
    
    
    6,901William J. Skidmore
    
    
    1,068,323
    
    
    
    8,957Carolyn J. Turk
    
    
    1,066,771
    
    
    
    10,509
  
   
  20




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##### Table of Contents



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, 200631
    
    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 herewith99
    
    Report of independent registered
public accounting firm.
    
    filed herewith
 21




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##### Table of Contents



SIGNATURES
  MIDDLEFIELD BANC CORP.Date: August 13, 2007
    
    By: /s/ Thomas G. CaldwellThomas G. CaldwellPresident and Chief Executive OfficerDate: August 13, 2007
    
    By: /s/ Donald L. StacyDonald L. StacyPrincipal Financial and Accounting Officer
 22