425

MIDDLEFIELD BANC CORP.

Date: July 18, 2022

/s/ James R. Heslop, II

President and CEO

425 1 d545378d425.htm 425 425

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

July 18, 2022

(Date of Report: Date of earliest event reported)

Middlefield Banc Corp.

(Exact name of registrant as specified in its charter)

Ohio

(State or other jurisdiction of incorporation)

001-36613

(Commission File Number)

34-1585111

(I.R.S. Employer Identification Number)

15985 East High Street

Middlefield, Ohio 44062

(Address of principal executive offices, including zip code)

(440) 632-1666

(Registrant’s telephone number, including area code)

(not applicable)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☒	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, no par value

MBCN

The NASDAQ Stock Market, LLC

(NASDAQ Capital Market)

ITEM 2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following information is furnished under Item 2.02. On July 18, 2022, Middlefield Banc Corp. issued a press release announcing financial results for the three month and six month period ended June 30, 2022. A copy of the press release is attached hereto as Exhibit 99 and is incorporated herein by this reference.

The information contained or incorporated by reference in this current report on Form 8-K may contain forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure. All forward-looking statements included in this current report on Form 8-K are based on information available at the time of the report. Middlefield Banc Corp. assumes no obligation to update any forward-looking statement.

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS

(c)

Exhibits.

The following exhibits are furnished herewith:

EXHIBITS


99		July 18, 2022 press release of Middlefield Banc Corp.

104		Cover Page Interactive File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99

LOGO

15985 East High Street

P. O. Box 35

Middlefield, Ohio 44062

Phone: 440/632-1666 FAX: 440/632-1700

www.middlefieldbank.bank

PRESS RELEASE

Company Contact:

Investor and Media Contact:

James Heslop

President/Chief Executive Officer

Middlefield Banc Corp.

(440) 632-1666 Ext. 3219

JHeslop@middlefieldbank.com

Andrew M. Berger

Managing Director

SM Berger & Company, Inc.

(216) 464-6400

andrew@smberger.com

Middlefield Banc Corp. Reports 2022 First Half Financial Results

MIDDLEFIELD, OHIO, July 18, 2022◆◆◆◆ Middlefield Banc Corp. (NASDAQ: MBCN) reported financial results for the 2022 first half and second quarter ended June 30, 2022.

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

•

Returned $4.4 million of capital to shareholders through dividends and the repurchase of 95,364 shares at an average price of $25.39 per share

•

Net income was $7.9 million, or $1.35 per diluted share, compared to $8.6 million, or $1.35 per diluted share

•

First-half pre-tax income benefited from $1.2 million of accelerated net fees associated with the Paycheck Protection Program (“PPP”), compared to $1.9 million in the 2021 first half

•

Net income during the second quarter was negatively impacted by $579,000 of one-time expenses associated with the proposed Liberty Bancshares, Inc. merger

•

Net interest margin improved by 20 basis points to 3.91%, compared to 3.71%

•

Total loans were $978.0 million, compared to $981.7 million at December 31, 2021

•

Total loans increased by $27.8 million, or 6.1% annualized from December 31, 2021, without the impact of PPP loan forgiveness

•

Return on average assets was 1.21%, compared to 1.26%

•

Return on average equity was 11.49%, compared to 11.88%

•

Return on average tangible common equity⁽¹⁾ was 13.03%, compared to 13.41%

•

Strong asset quality with nonperforming loans to total loans of 0.48%, compared to 0.73%

•

Allowance for loan losses was 1.49% of total loans, compared to 1.34%

•

Merger with Liberty Bancshares, Inc. on schedule to close during the 2022 fourth quarter

“We are focused on profitably growing our business, supporting our communities, and creating value for our shareholders, and I am pleased with the progress we made during the second quarter,” stated James R. Heslop, II, President and Chief Executive Officer. “Profitability has remained strong despite lower year-over-year fees associated with the Paycheck Protection Program and $579,000 of one-time expenses associated with the proposed Liberty Bancshares, Inc. merger. Reflecting our profitable financial model, second-quarter net interest margin increased 30 basis points to 4.02%. I am also encouraged by the growth we experienced in our return on tangible common equity, demonstrating the additional benefits of our share repurchase program.”

Mr. Heslop continued, “We are working on growing our balance sheet while controlling risk in a very fluid business environment. During the second quarter, core loans increased at an annualized rate of 6.9% since the beginning of the year. We continue to work on completing the merger with Liberty Bancshares, Inc., which we expect to close during the 2022 fourth quarter. Once complete, we expect to benefit as a larger bank with total assets of approximately $1.80 billion, strong earnings accretion, and a robust footprint in two of Ohio’s largest and fastest-growing markets. We believe the merger will generate meaningful earnings per share accretion while having a minimal tangible book value dilution and manageable earn-back period.”

Mr. Heslop concluded, “Over the past several years, we have invested throughout our organization, expanded our digital banking capabilities, and assembled a strong team of motivated and experienced leaders. We expect 2022 to be another good year for Middlefield Banc Corp., and I am excited by the direction we are headed,” concluded Mr. Heslop.

Income Statement

Net interest income for the 2022 first half decreased 0.9% to $23.5 million, compared to $23.7 million for the same period last year. Year-to-date, the net interest margin was 3.91%, compared to 3.71% for the same period last year. Net interest income for the 2022 second quarter was $12.0 million, compared to $11.9 million for the 2021 second quarter. The 1.5% increase in net interest income for the 2022 second quarter was largely a result of a 26.9% reduction in total interest expense. The net interest margin for the 2022 second quarter was 4.02%, compared to 3.72% for the same period of 2021.

For the 2022 first half, noninterest income was $2.8 million, compared to $3.9 million for the same period last year. Noninterest income for the 2022 second quarter was $1.4 million, compared to $1.6 million for the same period last year.

For the 2022 first half, noninterest expense increased 3.6% to $16.8 million, compared to $16.2 million for the same period last year. Operating costs in the 2022 second quarter increased 8.1% to $8.5 million from $7.9 million for the 2021 second quarter. The Company incurred $579,000 of additional operating expenses during the 2022 second quarter associated with the proposed Liberty Bancshares, Inc. merger.

Net income for the 2022 first half ended June 30, 2022, was $7.9 million, or $1.35 per diluted share, compared to $8.6 million, or $1.35 per diluted share for the same period last year. Net income for the 2022 second quarter ended June 30, 2022, was $4.1 million, or $0.70 per diluted share, compared to $4.4 million, or $0.70 per diluted share for the same period last year.

Balance Sheet

Total assets at June 30, 2022, decreased 4.9% to $1.29 billion, compared to $1.36 billion at June 30, 2021. Net loans at June 30, 2022, decreased 7.5% to $963.4 million, compared to $1.04 billion at June 30, 2021. Since 2020, Middlefield has helped customers receive $211.1 million of forgiveness payments under the terms of the Paycheck Protection Program, including processing $16.3 million of forgiveness payments during the second quarter of 2022, and $32.7 million of forgiveness payments year-to-date. The balance of PPP loans outstanding at June 30, 2022, was $1.4 million.

Total deposits at June 30, 2022, were $1.15 billion, compared to $1.20 billion at June 30, 2021. The 4.0% decrease in deposits was primarily due to a decline in time-based and interest-bearing accounts, partially offset by increased noninterest-bearing accounts. The investment portfolio was $172.0 million at June 30, 2022, compared with $150.9 million at June 30, 2021.

Donald L. Stacy, Chief Financial Officer, stated, “We remain well-positioned to benefit from a rising interest rate environment. In addition, as economic uncertainty has increased, we are entering this period from a position of strength with a historically strong balance sheet and excellent asset quality. These trends allow us to navigate a changing economic cycle while simultaneously allocating capital to support our long-term growth strategies, dividend payment, and share repurchase program.”

Mr. Stacy continued, “We continue to allocate excess capital to our dividend and share repurchase programs. Year-to-date, we have repurchased 95,364 shares of our common stock at a total cost of $2.4 million. This includes 63,214 shares repurchased during the 2022 second quarter at an average price of $25.35 per share at June 30, 2022. With 292,187 shares remaining under our repurchase program, we will continue to focus on returning capital to shareholders through our share repurchase program.”

Stockholders’ Equity and Dividends

At June 30, 2022, stockholders’ equity was $128.2 million compared to $146.0 million at June 30, 2021. The 12.2% year-over-year decline in stockholders’ equity was primarily due to an increase in the unrealized loss on the available-for-sale investment portfolio during the three-month period and the Company’s stock repurchase program. On a per-share basis, shareholders’ equity at June 30, 2022, was $22.07 compared to $23.50 at June 30, 2021.

At June 30, 2022, tangible stockholders’ equity⁽¹⁾ was $111.9 million, compared to $129.4 million at June 30, 2021. On a per-share basis, tangible stockholders’ equity⁽¹⁾ was $19.26 at June 30, 2022, compared to $20.82 at June 30, 2021.

Through the 2022 first half, the Company declared cash dividends of $0.34 per share, compared to $0.32 per share for the same period last year.

At June 30, 2022, the Company had an equity-to-assets ratio of 9.91%, compared to 10.74% at June 30, 2021.

Asset Quality

There was no provision for loan losses for the 2022 second quarter versus a $200,000 provision for loan losses for the same period last year. The year-over-year decline in the provision for loan losses was partially due to strong asset quality and the previous year’s prudent build in the Company’s allowance for loan losses associated with the potential economic impacts caused by the COVID-19 pandemic. There was no provision for loan losses for the 2022 first half versus $900,000 for the same period last year.

Net recoveries were $58,000, or 0.02% of average loans, annualized, during the 2022 second quarter, compared to net charge-offs of $122,000, or 0.05% of average loans, annualized, at June 30, 2021. Year-to-date net recoveries were $208,000, or 0.04% of average loans, annualized, compared to net charge-offs of $159,000, or 0.03% of average loans, annualized for the six-months ended June 30, 2021.

Nonperforming loans at June 30, 2022, were $4.7 million, compared to $7.8 million at June 30, 2021. Nonperforming assets at June 30, 2022, were $11.5 million, compared to $14.9 million at June 30, 2021. The allowance for loan losses at June 30, 2022, stood at $14.6 million, or 1.49% of total loans, compared to $14.2 million, or 1.34% of total loans at June 30, 2021.

ABOUT MIDDLEFIELD BANC CORP.

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is the bank holding company of The Middlefield Banking Company, with total assets of $1.29 billion at June 30, 2022. The Bank operates 16 full-service banking centers and an LPL Financial^® brokerage office serving Beachwood, Chardon, Cortland, Dublin, Garrettsville, Mantua, Middlefield, Newbury, Orwell, Plain City, Powell, Solon, Sunbury, Twinsburg, and Westerville. The Bank also operates a Loan Production Office in Mentor, Ohio.

Additional information is available at www.middlefieldbank.bank

⁽¹⁾

This press release includes disclosure of Middlefield Banc Corp.’s tangible book value per share, return on average tangible equity, and pre-tax, pre-provision for loan losses income, which are financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Middlefield Banc Corp. believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Middlefield Banc Corp.’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.

FORWARD-LOOKING STATEMENTS

This press release of Middlefield Banc Corp. and the reports Middlefield Banc Corp. files with the Securities and Exchange Commission often contain “forward-looking statements” relating to present or future trends or factors affecting the banking industry and, specifically, the financial operations, markets, and products of Middlefield Banc Corp. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause Middlefield Banc Corp.’s future results to differ materially from historical performance or projected performance. These factors include, but are not limited to: (1) a significant increase in competitive pressures among financial institutions; (2) changes in the interest rate environment that may reduce interest margins; (3) changes in prepayment speeds, charge-offs and loan loss provisions; (4) less favorable than expected general economic conditions; (5) legislative or regulatory changes that may adversely affect businesses in which Middlefield Banc Corp. is engaged; (6) technological issues which may adversely affect Middlefield Banc Corp.’s financial operations or customers; (7) the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions; (8) changes in the securities markets; (9) the Company’s failure to integrate Liberty Bancshares, Inc. and Liberty National Bank with Middlefield in accordance with expectations and deviations from performance expectations related to Liberty Bancshares, Inc. and Liberty National Bank; or (10) risk factors mentioned in the reports and registration statements Middlefield Banc Corp. files with the Securities and Exchange Commission. Middlefield Banc Corp. undertakes no obligation to release revisions to these forward-looking statements or to reflect events or circumstances after the date of this press release.

IMPORTANT ADDITIONAL INFORMATION

In connection with the proposed merger with Liberty Bancshares, Inc., (“Liberty”), the Company intends to file with the SEC a registration statement on Form S-4 to register the shares of the Company’s common stock that will be issued to Liberty shareholders in connection with the merger. The registration statement will include a joint proxy statement/prospectus and other relevant materials in connection with the proposed merger, which will be sent to the shareholders of Liberty and the Company seeking their approval of the proposed merger.

SHAREHOLDERS OF LIBERTY, COMPANY SHAREHOLDERS, AND OTHER INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT AND PROSPECTUS TO BE INCLUDED IN THE REGISTRATION STATEMENT ON FORM S-4, BECAUSE THE PROXY STATEMENT/PROSPECTUSES WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, LIBERTY, THE PROPOSED MERGER, THE PERSONS SOLICITING PROXIES WITH RESPECT TO THE PROPOSED MERGER, AND THEIR INTERESTS IN THE PROPOSED MERGER AND RELATED MATTERS.

Investors and security holders will be able to obtain free copies of the Registration Statement on Form S-4 (when available) and other documents filed by the Company with the SEC through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by the Company will be available free of charge on the Company’s website at www.middlefieldbank.bank or may be obtained from the Company by written request to Middlefield Banc Corp., 15985 East High Street P. O. Box 35 Middlefield, Ohio 44062, Attention: Investor Relations.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale is unlawful before registration or qualification of the securities under the securities laws of the jurisdiction. No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act.

The respective directors and executive officers of the Company and Liberty and other persons may be deemed to be participants in the solicitation of proxies from Liberty shareholders with respect to the proposed merger. Information regarding the directors of the Company is available in its proxy statement filed with the SEC on April 5, 2022 in connection with its 2022 Annual Meeting of Shareholders and information regarding the executive officers of the Company is available in its Form 10-K filed with the SEC on March 15, 2022. Information regarding the directors and executive officers of Liberty, which is a private company, and other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus to be included in the Form S-4 Registration Statement and other relevant materials to be filed with the SEC when they become available.

MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

(Dollar amounts in thousands, unaudited)


	June 30,			March 31,			December 31,			September 30,			June 30,
Balance Sheets (period end)	2022			2022			2021			2021			2021
ASSETS
Cash and due from banks	$	60,114		$	78,804		$	97,172		$	113,177		$	82,435
Federal funds sold		19,039			29,474			22,322			19,174			10,034

Cash and cash equivalents		79,153			108,278			119,494			132,351			92,469
Equity securities, at fair value		779			851			818			833			730
Investment securities available for sale, at fair value		171,958			175,216			170,199			163,057			150,850
Loans held for sale		—			9			1,051			676			790
Loans:
Commercial real estate:
Owner occupied		120,771			113,590			111,470			110,883			109,777
Non-owner occupied		288,334			293,745			283,618			310,222			304,324
Multifamily		29,152			29,385			31,189			30,762			34,926
Residential real estate		246,453			244,747			240,089			232,020			228,102
Commercial and industrial		137,398			131,683			148,812			163,052			200,558
Home equity lines of credit		111,730			106,300			104,355			105,450			107,685
Construction and other		35,988			50,152			54,148			49,378			62,229
Consumer installment		8,171			8,118			8,010			8,515			8,694

Total loans		977,997			977,720			981,691			1,010,282			1,056,295
Less allowance for loan and lease losses		14,550			14,492			14,342			14,234			14,200

Net loans		963,447			963,228			967,349			996,048			1,042,095
Premises and equipment, net		17,030			17,142			17,272			17,507			17,680
Goodwill		15,071			15,071			15,071			15,071			15,071
Core deposit intangibles		1,249			1,326			1,403			1,484			1,564
Bank-owned life insurance		17,274			17,166			17,060			16,954			16,846
Other real estate owned		6,792			6,992			6,992			7,090			7,090
Accrued interest receivable and other assets		20,624			18,019			14,297			14,794			15,033

TOTAL ASSETS	$	1,293,377		$	1,323,298		$	1,331,006		$	1,365,865		$	1,360,218


	June 30,			March 31,			December 31,			September 30,			June 30,
	2022			2022			2021			2021			2021
LIABILITIES
Deposits:
Noninterest-bearing demand	$	379,872		$	361,251		$	334,171		$	316,770		$	326,665
Interest-bearing demand		154,788			162,010			196,308			237,576			207,725
Money market		185,494			187,807			177,281			178,423			183,453
Savings		252,179			264,784			260,125			256,114			252,171
Time		174,833			191,320			198,725			211,674			225,271

Total deposits		1,147,166			1,167,172			1,166,610			1,200,557			1,195,285
Other borrowings		12,910			12,975			12,901			12,966			13,031
Accrued interest payable and other liabilities		5,081			5,507			6,160			6,287			5,858

TOTAL LIABILITIES		1,165,157			1,185,654			1,185,671			1,219,810			1,214,174

STOCKHOLDERS’ EQUITY
Common stock, no par value; 10,000,000 shares authorized, 7,347,526 shares issued, 5,810,351 shares outstanding as of June 30, 2022		87,562			87,562			87,131			87,131			87,131
Retained earnings		89,900			86,804			83,971			80,376			76,150
Accumulated other comprehensive (loss) income		(17,591	)		(6,674	)		3,462			3,610			3,893
Treasury stock, at cost; 1,537,175 shares as of June 30, 2022		(31,651	)		(30,048	)		(29,229	)		(25,062	)		(21,130	)

TOTAL STOCKHOLDERS’ EQUITY		128,220			137,644			145,335			146,055			146,044

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,293,377		$	1,323,298		$	1,331,006		$	1,365,865		$	1,360,218

MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

(Dollar amounts in thousands, unaudited)


	For the Three Months Ended												For the Six Months Ended
	June 30,			March 31,		December 31,			September 30,		June 30,		June 30,			June 30,
Statements of Income	2022			2022		2021			2021		2021		2022			2021
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	11,268		$	10,985	$	11,586		$	12,258	$	11,885	$	22,253		$	24,052
Interest-earning deposits in other institutions		74			24		30			30		12		98			30
Federal funds sold		46			3		1			1		1		49			1
Investment securities:
Taxable interest		442			443		438			461		410		885			780
Tax-exempt interest		955			784		732			673		602		1,739			1,160
Dividends on stock		33			24		23			24		26		57			55

Total interest and dividend income		12,818			12,263		12,810			13,447		12,936		25,081			26,078

INTEREST EXPENSE
Deposits		709			726		783			915		1,010		1,435			2,215
Other borrowings		81			69		67			69		71		150			146

Total interest expense		790			795		850			984		1,081		1,585			2,361

NET INTEREST INCOME		12,028			11,468		11,960			12,463		11,855		23,496			23,717
Provision for loan losses		—			—		(200	)		—		200		—			900

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		12,028			11,468		12,160			12,463		11,655		23,496			22,817

NONINTEREST INCOME
Service charges on deposit accounts		956			914		906			876		856		1,870			1,643
(Loss) gain on equity securities		(72	)		33		(14	)		102		40		(39	)		121
Earnings on bank-owned life insurance		108			106		106			108		106		214			332
Gains on sale of loans		18			3		118			309		221		21			813
Revenue from investment services		153			141		198			192		210		294			339
Other income		220			206		221			234		199		426			602

Total noninterest income		1,383			1,403		1,535			1,821		1,632		2,786			3,850

NONINTEREST EXPENSE
Salaries and employee benefits		3,785			4,386		4,088			4,488		4,321		8,171			8,575
Occupancy expense		583			505		542			425		517		1,088			1,081
Equipment expense		274			315		358			333		313		589			670
Data processing and information technology costs		822			682		660			736		698		1,665			1,484
Ohio state franchise tax		292			293		285			287		286		585			572
Federal deposit insurance expense		90			50		50			150		150		140			294
Professional fees		383			455		435			136		323		838			742
Net loss (gain) on other real estate owned		206			8		(66	)		9		22		214			68
Advertising expense		229			228		221			222		221		457			442
Software amortization expense		40			48		119			88		74		88			154
Core deposit intangible amortization		77			77		80			81		80		154			160
Merger-related costs		579			—		—			—		—		579			—
Other expense		1,175			1,219		1,059			951		889		2,233			1,969

Total noninterest expense		8,535			8,266		7,831			7,906		7,894		16,801			16,211

Income before income taxes		4,876			4,605		5,864			6,378		5,393		9,481			10,456
Income taxes		787			772		1,027			1,174		968		1,559			1,864

NET INCOME	$	4,089		$	3,833	$	4,837		$	5,204	$	4,425	$	7,922		$	8,592

PTPP ⁽¹⁾	$	4,876		$	4,605	$	5,664		$	6,378	$	5,593	$	9,481		$	11,356

(1)	The pre-tax pre-provision (PTPP) is the income before income taxes before provision for loan losses considerations, for reconciliation of non-GAAP measures.

MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

(Dollar amounts in thousands, except per share and share amounts, unaudited)


	For the Three Months Ended															For the Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2022			2022			2021			2021			2021			2022			2021
Per common share data
Net income per common share - basic	$	0.70		$	0.65		$	0.81		$	0.85		$	0.70		$	1.35		$	1.36
Net income per common share - diluted	$	0.70		$	0.65		$	0.81		$	0.85		$	0.70		$	1.35		$	1.35
Dividends declared per share	$	0.17		$	0.17		$	0.21		$	0.16		$	0.16		$	0.34		$	0.32
Book value per share (period end)	$	22.07		$	23.43		$	24.68		$	24.13		$	23.50		$	22.07		$	23.50
Tangible book value per share (period end) ^(2) (3)	$	19.26		$	20.64		$	21.88		$	21.39		$	20.82		$	19.26		$	20.82
Dividends declared	$	993		$	1,000		$	1,242		$	978		$	1,004		$	1,993		$	1,920
Dividend yield		2.71	%		2.78	%		3.37	%		2.66	%		2.72	%		2.72	%		2.73	%
Dividend payout ratio		24.28	%		26.09	%		25.68	%		18.79	%		22.69	%		25.16	%		22.35	%
Average shares outstanding - basic		5,851,422			5,879,025			5,951,838			6,136,648			6,297,071			5,865,147			6,331,356
Average shares outstanding - diluted		5,860,098			5,889,836			5,975,333			6,157,181			6,312,230			5,873,823			6,348,345
Period ending shares outstanding		5,810,351			5,873,565			5,888,737			6,054,083			6,215,511			5,810,351			6,215,511
Selected ratios
Return on average assets		1.25	%		1.17	%		1.41	%		1.51	%		1.30	%		1.21	%		1.26	%
Return on average equity		12.30	%		10.75	%		13.17	%		13.95	%		12.10	%		11.49	%		11.88	%
Return on average tangible common equity ^(2) (4)		14.02	%		12.13	%		14.85	%		15.71	%		13.65	%		13.03	%		13.41	%
Efficiency ⁽¹⁾		61.82	%		62.54	%		56.56	%		54.04	%		57.18	%		62.17	%		57.50	%
Equity to assets at period end		9.91	%		10.40	%		10.92	%		10.69	%		10.74	%		9.91	%		10.74	%
Noninterest expense to average assets		0.65	%		0.62	%		0.58	%		0.58	%		0.58	%		1.27	%		1.18	%

(1)	The efficiency ratio is calculated by dividing noninterest expense less amortization of intangibles by the sum of net interest income on a fully taxable equivalent basis plus noninterest income

(2)	See reconciliation of non-GAAP measures below

(3)	Calculated by dividing tangible common equity by shares outstanding

(4)	Calculated by dividing annualized net income for each period by average tangible common equity

MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

(Unaudited)


	For the Three Months Ended															For the Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
Yields	2022			2022			2021			2021			2021			2022			2021
Interest-earning assets:
Loans receivable ⁽²⁾		4.66	%		4.53	%		4.61	%		4.74	%		4.43	%		4.60	%		4.45	%
Investment securities ⁽²⁾		3.76	%		3.41	%		3.30	%		3.37	%		3.47	%		3.59	%		3.60	%
Interest-earning deposits with other banks		0.77	%		0.23	%		0.20	%		0.21	%		0.18	%		0.48	%		0.19	%
Total interest-earning assets		4.28	%		4.06	%		4.07	%		4.20	%		4.05	%		4.17	%		4.08	%
Deposits:
Interest-bearing demand deposits		0.15	%		0.14	%		0.12	%		0.12	%		0.12	%		0.15	%		0.14	%
Money market deposits		0.49	%		0.47	%		0.47	%		0.46	%		0.46	%		0.48	%		0.47	%
Savings deposits		0.06	%		0.06	%		0.06	%		0.06	%		0.06	%		0.06	%		0.07	%
Certificates of deposit		0.83	%		0.87	%		0.90	%		1.08	%		1.19	%		0.85	%		1.24	%
Total interest-bearing deposits		0.36	%		0.37	%		0.36	%		0.41	%		0.46	%		0.36	%		0.50	%
Non-Deposit Funding:
Borrowings		2.51	%		2.16	%		2.09	%		2.11	%		2.18	%		2.34	%		2.16	%
Total interest-bearing liabilities		0.39	%		0.39	%		0.37	%		0.42	%		0.47	%		0.39	%		0.50	%
Cost of deposits		0.24	%		0.25	%		0.26	%		0.30	%		0.34	%		0.25	%		0.37	%
Cost of funds		0.27	%		0.27	%		0.27	%		0.31	%		0.35	%		0.27	%		0.38	%
Net interest margin ⁽¹⁾		4.02	%		3.80	%		3.82	%		3.91	%		3.72	%		3.91	%		3.71	%

(1)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

(2)	Tax-equivalent adjustments to calculate the yield on tax-exempt securities and loans were determined using an effective tax rate of 21%.


	For the Three Months Ended
Asset quality data	June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021
(Dollar amounts in thousands, unaudited)
Nonperforming loans ⁽¹⁾	$	4,670		$	4,728		$	4,859		$	6,806		$	7,760
Other real estate owned		6,792			6,992			6,992			7,090			7,090

Nonperforming assets	$	11,462		$	11,720		$	11,851		$	13,896		$	14,850

Allowance for loan losses	$	14,550		$	14,492		$	14,342		$	14,234		$	14,200
Allowance for loan losses/total loans		1.49	%		1.48	%		1.46	%		1.41	%		1.34	%
Net (recoveries) charge-offs:
Quarter-to-date	$	(58	)	$	(150	)	$	(308	)	$	(34	)	$	122
Year-to-date		(208	)		(150	)		(183	)		125			159
Net charge-offs to average loans, annualized:
Quarter-to-date		-0.02	%		-0.06	%		-0.12	%		-0.01	%		0.05	%
Year-to-date		-0.04	%		-0.06	%		-0.02	%		0.02	%		0.03	%
Nonperforming loans/total loans		0.48	%		0.48	%		0.49	%		0.67	%		0.73	%
Allowance for loan losses/nonperforming loans		311.56	%		306.51	%		295.16	%		209.14	%		182.99	%
Nonperforming assets/total assets		0.89	%		0.89	%		0.89	%		1.02	%		1.09	%

(1) Nonperforming loans exclude troubled debt restructurings that are performing in accordance with their terms over a prescribed period of time.

Reconciliation of Common Stockholders’ Equity to Tangible Common Equity	For the Three Months Ended
(Dollar amounts in thousands, unaudited)	June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021
Stockholders’ Equity	$	128,220		$	137,644		$	145,335		$	146,055		$	146,044
Less Goodwill and other intangibles		16,320			16,397			16,474			16,555			16,635

Tangible Common Equity	$	111,900		$	121,247		$	128,861		$	129,500		$	129,409

Shares outstanding		5,810,351			5,873,565			5,888,737			6,054,083			6,215,511

Tangible book value per share	$	19.26		$	20.64		$	21.88		$	21.39		$	20.82


Reconciliation of Average Equity to Return on Average Tangible Common Equity	For the Three Months Ended															For the Six Months Ended
	June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			June 30, 2022			June 30, 2021
Average Stockholders’ Equity	$	133,377		$	144,630		$	145,716		$	148,048		$	146,719		$	139,003		$	145,892
Less Average Goodwill and other intangibles		16,357			16,435			16,513			16,594			16,674			16,396			16,714

Average Tangible Common Equity	$	117,020		$	128,195		$	129,203		$	131,454		$	130,045		$	122,607		$	129,178

Net income	$	4,089		$	3,833		$	4,837		$	5,204		$	4,425		$	7,922		$	8,592

Return on average tangible common equity (annualized)		14.02	%		12.13	%		14.85	%		15.71	%		13.65	%		13.03	%		13.41	%


Reconciliation of Pre-Tax Pre-Provision Income (PTPP)	For the Three Months Ended															For the Six Months Ended
	June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			June 30, 2022			June 30, 2021
Net income	$	4,089		$	3,833		$	4,837		$	5,204		$	4,425		$	7,922		$	8,592
Add Income Taxes		787			772			1,027			1,174			968			1,559			1,864
Add Provision for loan losses		—			—			(200	)		—			200			—			900

PTPP	$	4,876		$	4,605		$	5,664		$	6,378		$	5,593		$	9,481		$	11,356

MIDDLEFIELD BANC CORP.

Average Balance Sheets

(Dollar amounts in thousands, unaudited)


	For the Three Months Ended
	June 30, 2022							June 30, 2021
	Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost
Interest-earning assets:
Loans receivable ⁽³⁾	$	970,820	$	11,268		4.66	%	$	1,078,866	$	11,885		4.43	%
Investment securities ⁽³⁾		176,138		1,397		3.76	%		135,338		1,012		3.47	%
Interest-earning deposits with other banks ⁽⁴⁾		79,924		153		0.77	%		85,245		39		0.18	%

Total interest-earning assets		1,226,882		12,818		4.28	%		1,299,449		12,936		4.05	%

Noninterest-earning assets		89,555							70,692

Total assets	$	1,316,437						$	1,370,141

Interest-bearing liabilities:
Interest-bearing demand deposits	$	159,779	$	59		0.15	%	$	207,080	$	64		0.12	%
Money market deposits		185,711		228		0.49	%		185,728		212		0.46	%
Savings deposits		260,226		40		0.06	%		253,612		38		0.06	%
Certificates of deposit		184,748		382		0.83	%		233,930		696		1.19	%
Short-term borrowings		—		—		0.00	%		227		—		0.00	%
Other borrowings		12,945		81		2.51	%		13,062		71		2.18	%

Total interest-bearing liabilities		803,409		790		0.39	%		893,639		1,081		0.49	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		375,013							323,590
Other liabilities		4,638							6,193
Stockholders’ equity		133,377							146,719

Total liabilities and stockholders’ equity	$	1,316,437						$	1,370,141

Net interest income			$	12,028						$	11,855

Interest rate spread ⁽¹⁾						3.89	%						3.56	%
Net interest margin ⁽²⁾						4.02	%						3.72	%
Ratio of average interest-earning assets to
average interest-bearing liabilities						152.71	%						145.41	%

(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 interest margin represents net interest income as a percentage of average interest-earning assets.

(3)	Tax-equivalent adjustments to calculate the yield on tax-exempt securities and loans were $271 and $179 for the three months ended June 30, 2022 and 2021, respectively

(4)	Includes dividends received on restricted stock.


	For the Three Months Ended
	June 30,							March 31,
	2022							2022
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:
Loans receivable ⁽³⁾	$	970,820	$	11,268		4.66	%	$	983,853	$	10,985		4.53	%
Investment securities ⁽³⁾		176,138		1,397		3.76	%		170,829		1,227		3.41	%
Interest-earning deposits with other banks ⁽⁴⁾		79,924		153		0.77	%		91,690		51		0.23	%

Total interest-earning assets		1,226,882		12,818		4.28	%		1,246,372		12,263		4.06	%

Noninterest-earning assets		89,555							85,667

Total assets	$	1,316,437						$	1,332,039

Interest-bearing liabilities:
Interest-bearing demand deposits	$	159,779	$	59		0.15	%	$	170,353	$	60		0.14	%
Money market deposits		185,711		228		0.49	%		184,265		212		0.47	%
Savings deposits		260,226		40		0.06	%		260,162		38		0.06	%
Certificates of deposit		184,748		382		0.83	%		193,657		416		0.87	%
Short-term borrowings		—		—		0.00	%		—		—		0.00	%
Other borrowings		12,945		81		2.51	%		12,943		69		2.16	%

Total interest-bearing liabilities		803,409		790		0.39	%		821,380		795		0.39	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		375,013							359,656
Other liabilities		4,638							6,373
Stockholders’ equity		133,377							144,630

Total liabilities and stockholders’ equity	$	1,316,437						$	1,332,039

Net interest income			$	12,028						$	11,468

Interest rate spread ⁽¹⁾						3.89	%						3.67	%
Net interest margin ⁽²⁾						4.02	%						3.80	%
Ratio of average interest-earning assets to average interest-bearing liabilities						152.71	%						151.74	%

(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 interest margin represents net interest income as a percentage of average interest-earning assets.

(3)	Tax-equivalent adjustments to calculate the yield on tax-exempt securities and loans were $271 and $223 for the three months ended June 30, 2022, and March 31, 2022, respectively.

(4)	Includes dividends received on restricted stock.


	For the Six Months Ended
	June 30,							June 30,
	2022							2021
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:
Loans receivable ⁽³⁾	$	977,336	$	22,253		4.60	%	$	1,091,119	$	24,052		4.45	%
Investment securities ⁽³⁾		173,483		2,624		3.59	%		125,924		1,940		3.60	%
Interest-earning deposits with other banks ⁽⁴⁾		85,807		204		0.48	%		89,477		86		0.19	%

Total interest-earning assets		1,236,626		25,081		4.17	%		1,306,520		26,078		4.08	%

Noninterest-earning assets		87,382							70,850

Total assets	$	1,324,008						$	1,377,370

Interest-bearing liabilities:
Interest-bearing demand deposits	$	165,066	$	119		0.15	%	$	205,063	$	141		0.14	%
Money market deposits		184,988		440		0.48	%		190,502		441		0.47	%
Savings deposits		260,194		78		0.06	%		254,882		85		0.07	%
Certificates of deposit		189,203		798		0.85	%		251,711		1,548		1.24	%
Short-term borrowings		—		—		0.00	%		169		—		0.00	%
Other borrowings		12,944		150		2.34	%		13,660		146		2.16	%

Total interest-bearing liabilities		812,395		1,585		0.39	%		915,987		2,361		0.52	%

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		367,334							309,395
Other liabilities		5,276							6,096
Stockholders’ equity		139,003							145,892

Total liabilities and stockholders’ equity	$	1,324,008						$	1,377,370

Net interest income			$	23,496						$	23,717

Interest rate spread ⁽¹⁾						3.78	%						3.56	%
Net interest margin ⁽²⁾						3.91	%						3.71	%
Ratio of average interest-earning assets to average interest-bearing liabilities						152.22	%						142.64	%

(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 interest margin represents net interest income as a percentage of average interest-earning assets.

(3)	Tax-equivalent adjustments to calculate the yield on tax-exempt securities and loans were $494 and $347 for the six months ended June 30, 2022 and 2021, respectively.

(4)	Includes dividends received on restriced stock.