14.	EMPLOYEE BENEFITS

Employee Retirement Plan

The Bank maintains section

401

(k) employee savings and investment plans for all full-time employees and officers of the Bank who are at least

years of age. The Bank’s contributions to the plans are discretionary, and were based on

50%

matching of voluntary contributions up to

of compensation for the years ended

December 31, 2019

and

2018.

Employee contributions are vested at all times, and MBC contributions are fully vested after

six

years beginning at the

second

year in

20%

increments. Special vesting provisions are in place for legacy Liberty employees with

or more years of service. Contributions for

2019

and

2018

to these plans amounted to

$319,000

and

$306,000,

respectively.

Executive Deferred Compensation Plan

The Company maintains executive deferred compensation plans to provide post-retirement payments to members of senior management. The plan agreements are noncontributory, defined contribution arrangements that provide supplemental retirement income benefits to several officers, with contributions made solely by the Bank. Accrued executive deferred compensation amounted to

$615,000

and

$504,000

as of

December 31, 2019

and

2018,

respectively. During

2019

and

2018,

the Company recognized nonqualified deferred compensation expense of

$85,000

and

$98,000,

respectively, to the plans.

Stock Option and Restricted Stock Plan

2007,

the Company adopted the

2007

Omnibus Equity Plan (the

“2007

Plan”) for granting incentive stock options, nonqualified stock options, and restricted stock to key officers and employees and nonemployee directors of the Company. A total of

320,000

shares of authorized and unissued or issued common stock were reserved for issuance under the

2007

Plan, which expired

ten

years from the date of board approval of the plan. Although the

2007

Plan expired in

2017,

there remain outstanding

14,500

shares in incentive stock options awards granted under the

2007

Plan. The per share exercise price of an option granted is

not

less than the fair value of a share of common stock on the date the option was granted.

2017,

the Company adopted the

2017

Omnibus Equity Plan (the

“2017

Plan”) for granting incentive stock options, nonqualified stock options, restricted stock and other equity awards to key officers and employees and nonemployee directors of the Company. The Company’s stockholders approved the

2017

Plan at the annual meeting of the stockholders held on

May 10, 2017.

A total of

448,000

shares of authorized and unissued or issued common stock are reserved for issuance under the

2017

Plan, which expires

ten

years from the date of board approval of the plan. The per share exercise price of an option granted will

not

be less than the fair value of a share of common stock on the date the option is granted. Remaining available shares that can be issued under the Plan were

386,188

December 31, 2019.

The following table presents share data related to the outstanding options:

	Shares			Weighted- average Exercise Price Per Share

Outstanding, January 1, 2019		14,900		$	8.78
Exercised		(400	)		8.78

Outstanding, December 31, 2019		14,500		$	8.78

Exercisable, December 31, 2019		14,500		$	8.78

The total intrinsic value of outstanding in-the-money exercisable stock options was

$251,068

and

$185,356

December 31, 2019

and

2018,

respectively.

options were granted for the years ended

December 31, 2019

and

2018.

The Company recognizes compensation expense in the amount of fair value of the options at the grant date and as an addition to stockholders’ equity.

For the years ended

December

31,

2019

and

2018,

the Company recorded

$265,000

and

$215,000,

respectively, of compensation cost related to vested stock options. As of

December 31, 2019,

there was

unrecognized compensation cost related to vested stock options.

For the years ended

December 31, 2019

and

2018,

400

and

24,600

options were exercised resulting in net proceeds to the participant of

and

$85,000,

respectively.

During

2019

and

2018,

the Compensation Committee of the Board of Directors of the Company granted awards of restricted stock for an aggregate amount of

29,130

and

22,702

shares, respectively, to certain employees of the Bank. The expense recognized as a result of these awards was

$184,000

and

$191,000

for the years ended

2019

and

2018,

respectively. The number of restricted stock shares earned or settled will depend on certain conditions and are also subject to service period-based vesting. The award recipient must maintain service with Middlefield Banc Corp. and affiliates until the

third

anniversary of the award to satisfy the service condition. The performance condition will be satisfied if the average total shareholder annual return on Middlefield Banc Corp. stock for the

three

subsequent years is at least

10.00%

for

2019

and

8.00%

for

2018.

The Company recognized restricted stock forfeitures in the period they occur.

The following table presents the activity during

2019

related to awards of restricted stock:

	Units			Weighted- average Grant Date Fair Value Per Unit
Nonvested at January 1, 2019		42,350		$	20.98
Granted		29,130			20.95
Vested		(10,440	)		16.56
Nonvested at December 31, 2019		61,040		$	21.72
Expected to vest at December 31, 2019		41,136		$	20.57

As of

December 31, 2019,

there was

$715,000

of total unrecognized compensation cost related to nonvested restricted shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of

1.83

years. The total fair value of shares vested during the years ended

December 31, 2019

and

2018

was

$265,000,

and

$205,000,

respectively.