Middlefield Banc Corp.
Annual Report 2018

Plain-text annual report

2018 Summary Annual Report Total Assets (in thousands) Net Loans Outstanding (in thousands) $ 1 , 2 4 8 , 3 9 8 $ 1 , 1 0 6 , 3 3 6 $ 7 8 7 , 8 2 1 $ 7 3 5 , 1 3 9 $ 6 7 7 , 5 3 1 $ 9 8 4 , 6 8 1 $ 9 1 6 , 0 2 3 6 0 2 , 5 4 2 $ 5 2 7 , 3 2 5 $ 4 6 3 , 7 3 8 ’14 ’15 ’16 ’17 ’18 ’14 ’15 ’16 ’17 ’18 Basic Earnings Per Share: $3.85 +23.4% in 2018 (Represents percentage increase over 2017 Basic Earnings Per Share at $3.12) Net Income (in thousands) $ 7 , 1 8 0 $ 6 , 8 6 5 $ 6 , 4 1 6 $ 1 2 , 4 3 1 $ 9 , 4 5 5 Book Value Per Share $ 3 9 . 5 4 $ 3 7 . 2 5 $ 3 4 . 1 4 $ 3 3 . 1 9 $ 3 1 . 1 2 ’14 ’15 ’16 ’17 ’18 ’14 ’15 ’16 ’17 ’18 Total Assets (in thousands) Net Loans Outstanding (in thousands) CHAIRMAN’S LETTER TO SHAREHOLDERS: $ 1 , 2 4 8 , 3 9 8 $ 1 , 1 0 6 , 3 3 6 $ 7 8 7 , 8 2 1 $ 7 3 5 , 1 3 9 $ 6 7 7 , 5 3 1 $ 9 8 4 , 6 8 1 $ 9 1 6 , 0 2 3 6 0 2 , 5 4 2 $ 5 2 7 , 3 2 5 $ 4 6 3 , 7 3 8 ’14 ’15 ’16 ’17 ’18 ’14 ’15 ’16 ’17 ’18 Basic Earnings Per Share: $3.85 +23.4% in 2018 Net Income (in thousands) $ 7 , 1 8 0 $ 6 , 8 6 5 $ 6 , 4 1 6 $ 1 2 , 4 3 1 $ 9 , 4 5 5 Book Value Per Share $ 3 9 . 5 4 $ 3 7 . 2 5 $ 3 4 . 1 4 $ 3 3 . 1 9 $ 3 1 . 1 2 ’14 ’15 ’16 ’17 ’18 ’14 ’15 ’16 ’17 ’18 For 2018, Middlefield Banc Corp. continued to make progress executing its growth- oriented strategic plan and enhancing the Company’s brand throughout Northeast and Central Ohio. We achieved record financial results including record net income of $12.4 million, or $3.83 per diluted share and record book value of $39.54 per share. We also ended the year with record assets as a result of favorable loan growth, while maintaining strong asset quality. As a community focused bank, I am pleased with the Board’s decision to share the benefits of the Tax Cuts and Jobs Act with both our employees and shareholders. Early in 2018, Middlefield’s Board approved a one-time $1,000 bonus to all employees and a $0.05 per share special one-time cash dividend to our shareholders. The Board also approved a 3.7% increase in our regular quarterly cash dividend. Throughout the year, we provided over $50,000 in donations to organizations within our markets. Middlefield also increased its employee count by 7%. We expanded our footprint in Central Ohio and opened a new office in Powell. For the sixth consecutive year, Middlefield made American Banker’s list of the Top 200 publicly traded community banks. This annual list examined 663 publicly traded banks and thrifts with assets under $2 billion and selected the top 200 based on their three-year return on average equity (ROAE). I am also pleased to report that Middlefield was the only Ohio institution to be included in S&P Global Market Intelligence’s annual list ranking community banks with assets between $1 billion and $10 billion on several key financial characteristics including before tax ROATCE, NCOs/ average loans, efficiency ratio, adjusted Texas ratio, net interest margin, and loan growth. While our 2018 results and accolades are impressive, we continue to monitor and respond to the world around us. This includes investing in modern technologies that not only enhance the way our customers engage with the Bank but also protects customers and their accounts from online, digital and cyber threats. After a period of historically low interest rates, Middlefield and our customers have had to adjust to a rising rate environment. We also experienced increased competition for deposits. I am encouraged by 2018’s improvement in deposits and how the Company managed its cost of funds. As Middlefield’s size and scale increases, it is important to maintain an appropriate level of risk. The continued decline in nonperforming loans and nonperforming assets reflects Middlefield’s commitment to controlling risk. Over the years I have ended many of my annual report letters with: ‘Surround yourself with great people and you can do great things.’ In our modern, technologically focused world, we believe assembling a platform of experienced, knowledgeable, and ethical leaders is ever more important. We continue to enhance our leadership team and during the year added talented bankers throughout our organization. I am proud of the platform we have created, and I am confident we have the right people, infrastructure, and strategic plan in place to achieve many great things. On behalf of the Middlefield Banc Corp. Board of Directors and our employees, we thank you for your continued support. Carolyn J. Turk, C.P.A. Chairman, Board of Directors Middlefield Banc Corp. 2018 Summary Annual Report 1 DECADE OF PROGRESS (Dollar amounts in thousands, except per share data) 2009 2010 2011 Interest Income Interest Expense Net Interest Income Provision for Loan Loss Net Interest Income After Provision for Loan Losses Noninterest Income, Including Security Gains/Losses Noninterest Expense Income Before Income Taxes Income Taxes Net Income Total Assets Deposits Equity Capital Loans Outstanding, Net Allowance for Loan Losses Net Charge-offs Full Time Employees (Average Equivalents) Number of Offices Earnings Per Share Dividends Per Share Book Value Per Share Dividend Payout Ratio Cash Dividends Paid Return on Average Assets Return on Average Equity $ 26,051 $ 29,094 $ 29,727 11,783 14,268 2,578 11,690 2,668 12,650 1,708 10,945 18,149 3,580 14,569 2,623 14,763 2,429 (73) (88) 8,652 21,075 3,085 17,990 2,237 15,501 4,726 596 $ 1,781 $ 2,517 $ 4,130 $558,658 $632,197 $654,551 487,106 36,707 348,660 4,937 1,198 106 10 565,251 38,022 366,277 6,221 2,296 108 10 580,962 47,253 395,061 6,819 2,487 113 10 $ 1.15 1.04 $ 1.60 1.04 $ 2.45 1.04 23.46 90.28% 23.90 65.04% 26.81 42.71% $ 1,608 $ 1,637 $ 1,764 0.36% 4.90% 0.41% 6.44% 0.65% 10.24% 2 Middlefield Banc Corp. 2018 Summary Annual Report 2012 2013 2014 2015 2016 2017 2018 $ 28,746 $ 28,178 $ 27,874 $ 28,595 $ 29,994 $ 43,995 $ 50,357 6,447 22,299 2,168 20,131 3,451 15,639 7,943 1,662 5,250 22,928 196 22,732 3,145 16,870 9,007 1,979 4,070 23,804 370 23,434 3,588 17,850 9,172 1,992 3,820 24,775 315 24,460 4,044 20,077 8,427 1,562 4,190 25,804 570 25,234 3,959 20,872 8,321 1,905 6,647 37,348 1,045 36,303 4,859 27,485 13,677 4,222 9,909 40,448 840 39,608 3,728 28,743 14,593 2,162 $ 6,281 $ 7,028 $ 7,180 $ 6,865 $ 6,416 $ 9,455 $ 12,431 $670,288 $647,090 $677,531 $735,139 $787,821 $1,106,336 $1,248,398 593,335 55,437 400,654 7,779 1,208 120 10 568,836 53,473 428,679 7,046 929 125 10 $ 3.29 1.04 $ 3.48 1.04 27.83 31.87% 26.31 29.84% 586,112 63,867 463,738 6,846 570 139 10 $ 3.52 1.04 31.12 624,447 62,304 527,325 6,385 776 143 10 $ 3.41 1.07 33.19 29.54% 30.90% 629,934 76,960 602,542 6,598 357 139 11 878,194 1,016,067 119,863 916,023 7,190 453 190 14 128,290 984,681 7,428 602 200 15 $ 3.04 1.08 $ 3.12 1.08 $ 3.85 1.17 34.14 36.13% 37.25 35.52% 39.54 30.40% $ 2,002 $ 2,048 $ 2,121 $ 2,153 $ 2,318 $ 3,358 $ 3,779 0.95% 11.98% 1.06% 13.17% 1.07% 12.17% 0.97% 10.62% 0.85% 9.33% 0.88% 8.52% 1.09% 9.94% Middlefield Banc Corp. 2018 Summary Annual Report 3 TO OUR SHAREHOLDERS AND FRIENDS: Middlefield achieved multiple financial and operating records during 2018 including record assets, deposits, net income, and book value per share. These accomplishments are a direct result of the continued performance of our strategic plan, our commitment to community banking values, positive economic and demographic trends within our markets, and the daily contribution of our 187 associates. As we have discussed in the past, our values are defined by our desire to profitably serve our communities through the Company’s dedication to quality, safety and soundness, while maximizing value for our shareholders. We remain committed to these core values and they are the foundation of our future success. For 2018, total assets increased 12.8% to a record $1.25 billion, compared to $1.11 billion last year. This growth was primarily due to a 7.5% improvement in 4 Middlefield Banc Corp. 2018 Summary Annual Report the Company’s loan portfolio, as a result of growth in real estate construction loans, commercial mortgage loans, and residential mortgage loans. The Company’s growing asset base helped Middlefield increase total interest income for 2018 by 14.5% to a record $50.4 million. Asset quality continues to improve, driven by our prudent lending practices and stable local economies. At December 31, 2018, nonperforming loans declined 21.2%. This drove a 38-basis point reduction in nonperforming loans to total loans, which ended the year at 1.07% and is at the lowest level in over six years. In addition, nonperforming assets to total assets declined 36-basis points to 0.87% at December 31, 2018. Middlefield will not pursue aggressive growth or near- term profits by increasing the potential for long-term risk. As a result, profitability was impacted throughout 2018 by our decision to end our student loan program during the 2018 first quarter due to our former partner changing the structure of the program, which we believe increased our risk. This was the primary reason behind the $1.1 million or 23.3% reduction in noninterest income during 2018. We are focused on improving the level of noninterest income in a safe, sound and efficient manner during 2019 and beyond. Throughout 2018 we focused on driving deposit growth and during the year deposits increased 15.7% to $1.02 billion. Our success growing deposits helped reduce our loan-to-deposit ratio 750 basis points to 97.6% at December 31, 2018. Throughout 2018, the U.S. Federal Reserve increased rates four times which caused Middlefield’s cost of funds to rise 27 basis points. We successfully offset the majority of this increase and our net interest margin declined only 5 basis points to 3.77% at December 31, 2018. Despite the impacts from lower noninterest income and higher cost of funds, Middlefield achieved record net income as a result of record net interest income, strong asset quality, successful expense management, and the benefit of the Tax Cuts and Jobs Act. For 2018, net income increased 31.5% to a record $12.4 million, or $3.83 per diluted share. Our tangible book value(1) per share increased 7.7% to a record $34.16 per share. In addition, I am encouraged by the continued expansion of returns on average assets, equity, and tangible common equity we have been achieving. For the 2018 fourth quarter compared to the same period last year, our return on average equity increased 280 basis points to 10.52%, our return on average tangible common equity(1) increased 312 basis points to 12.17%, and our return on average assets increased 29 basis points to 1.15%. I am extremely optimistic about the direction we are headed and the opportunities we have in both of our compelling Ohio markets. This starts with our leadership team and over the past several years, Middlefield has attracted experienced and talented bankers that want to be part of a growing and successful community bank. I remain encouraged with the talented team we have assembled and our ability to attract proven leaders. Our consistent and stable growth across our Northeast Ohio and Central Ohio markets demonstrates that our community-oriented culture and talented associates are expanding our market share. In September 2018, we announced the opening of our 15th location in Powell, Ohio. Over the past two years we have added two new locations in Central Ohio, which has contributed to a 27% increase in deposits and 49% growth in loans in this region. Middlefield’s opportunity in Central Ohio is supported by the region’s compelling economic and demographic trends. In addition, at June 30, 2018, five of the 33 banks in Franklin and Delaware Counties controlled over 86% of total deposits, which createsa significant opportunity for Middlefield to attract customers looking for the community-oriented financial products and services we provide. 1) This letter includes disclosure of Middlefield Banc Corp.’s tangible book value per share and return on average tangible equity, 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. With 11 locations and strong market share in our core Northeast Ohio markets, we have exciting opportunities to expand our presence in Cuyahoga and Summit counties. Similar to our approach in Central Ohio, Cuyahoga and Summit counties are dominated by large national and regional banks. We believe our differentiated financial offerings based on a high level of personal service, quick decision process, and local presence provides an attractive alternative to big banking culture. As both of our Ohio markets benefit from a strong economic base, low unemployment, and compelling growth characteristics, we are optimistic in the long-term opportunities to increase our market share. Looking ahead, as our new Powell and Sunbury locations mature, and we focus on controlled growth, operating leverage and improved profitability, we believe we can continue to generate an annual efficiency ratio in the low 60% range during 2019. We are optimistic 2019 will be another year of solid performance for your company and we are excited by the opportunities Middlefield has to create value for our shareholders, employees, customers, and communities. On behalf of everyone at the Middlefield Banc Corp., I appreciate your continued support. We look forward to reporting on our progress throughout 2019 and we sincerely appreciate the dedication of our associates, the loyalty of our customers and the commitment and interest of our shareholders. Thank you. Sincerely, Thomas G. Caldwell Thomas G. Caldwell President and Chief Executive Officer Middlefield Banc Corp. 2018 Summary Annual Report 5 CONSOLIDATED BALANCE SHEET (Dollar amounts in thousands, except shares) ASSETS Cash and cash equivalents Equity securities, at fair value Investment securities available for sale, at fair value Loans held for sale Loans Less allowance for loan and lease losses Net loans Premises and equipment, net Goodwill Core deposit intangibles Bank-owned life insurance Accrued interest receivable and other assets TOTAL ASSETS LIABILITIES Deposits: Noninterest-bearing demand Interest-bearing demand Money market Savings Time Total deposits Short-term borrowings: Federal funds purchased and repurchase agreements Federal Home Loan Bank advances Total short-term borrowings Other borrowings Accrued interest payable and other liabilities TOTAL LIABILITIES STOCKHOLDERS’ EQUITY Common stock, no par value; 10,000,000 shares authorized, 3,630,497 and 3,603,881 shares issued; 3,244,332 and 3,217,716 shares outstanding Retained earnings Accumulated other comprehensive (loss) income Treasury stock, at cost; 386,165 shares TOTAL STOCKHOLDERS’ EQUITY TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY See accompanying notes to the consolidated financial statements. 6 Middlefield Banc Corp. 2018 Summary Annual Report 2018 2017 $ 107,933 616 98,322 597 992,109 7,428 984,681 13,003 15,071 2,397 16,080 9,698 $1,248,398 $ 178,386 117,128 196,685 222,954 300,914 1,016,067 398 90,000 90,398 8,803 4,840 1,120,108 85,925 56,037 (154) (13,518) 128,290 $1,248,398 $ 39,886 — 95,283 463 923,213 7,190 916,023 11,853 15,071 2,749 15,652 9,356 1,106,336 $ 164,424 112,004 150,277 208,502 242,987 878,194 4,707 70,000 74,707 29,065 4,507 986,473 84,859 47,431 1,091 (13,518) 119,863 $1,106,336 CONSOLIDATED STATEMENT OF INCOME (Dollar amounts in thousands, except per share data) INTEREST AND DIVIDEND INCOME Interest and fees on loans Interest-earning deposits in other institutions Federal funds sold Investment securities: Taxable interest Tax-exempt interest Dividends on stock Total interest and dividend income INTEREST EXPENSE Deposits Short-term borrowings Other borrowings Total interest expense NET INTEREST INCOME Provision for loan losses NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES NONINTEREST INCOME Service charges on deposit accounts Investment securities gains on sale, net Loss on equity securities Earnings on bank-owned life insurance Gain on sale of loans Other income Total noninterest income NONINTEREST EXPENSE Salaries and employee benefits Occupancy expense Equipment expense Data processing costs Ohio state franchise tax Federal deposit insurance expense Professional fees Advertising expense Software amortization expense Core deposit intangible amortization Merger expense Other expense Total noninterest expense Income before income taxes Income taxes NET INCOME EARNINGS PER SHARE Basic Diluted DIVIDENDS DECLARED PER SHARE See accompanying notes to the consolidated financial statements. 2018 $46,576 558 46 688 2,262 227 50,357 8,631 842 436 9,909 40,448 840 39,608 1,914 — (9) 428 231 1,164 3,728 15,749 1,933 969 1,806 823 550 1,482 921 605 352 — 3,553 28,743 14,593 2,162 $12,431 $3.85 3.83 $ 1.17 2017 $40,235 328 15 762 2,406 249 43,995 5,350 753 544 6,647 37,348 1,045 36,303 1,875 886 — 431 826 841 4,859 13,758 1,846 1,050 1,792 744 533 1,752 821 414 374 1,060 3,341 27,485 13,677 4,222 $ 9,455 $ 3.12 3.10 $ 1.08 Middlefield Banc Corp. 2018 Summary Annual Report 7 MIDDLEFIELD BANC CORP. BOARD OF DIRECTORS Carolyn J. Turk, C.P.A. 2004 Chairman, Board of Directors Middlefield Banc Corp. The Middlefield Banking Company Senior Internal Auditor Molded Fiber Glass Companies William J. Skidmore 2007 Northeast Ohio Senior District Manager Waste Management of Ohio, Inc. Darryl E. Mast 2013 Retired: Hattie Larlham Care Group and Hattie Larlham Foundation Thomas G. Caldwell 1997 President and Chief Executive Officer Middlefield Banc Corp. The Middlefield Banking Company Kenneth E. Jones 2008 Retired Financial Executive Clayton W. Rose, III, C.P.A. 2014 Retired: Executive Principal Rea & Associates, Inc. James R. Heslop, II 2001 Executive Vice President Chief Operating Officer Middlefield Banc Corp. The Middlefield Banking Company Robert W. Toth 2009 Retired: Gold Key Processing, Ltd Thomas Bevan 2017 Chief Executive Officer Bevan & Associates, LPA, Inc. James J. McCaskey 2004 President McCaskey Landscape and Design, LLC Eric W. Hummel 2011 President Hummel Construction William A. Valerian 2017 Retired: Chairman, President and Chief Executive Officer Liberty Bank N.A. Central Ohio Region Advisory Board: Jeffrey A. Gongwer; George J. Kontogiannis, AIA; Timothy C. Long; Michael J. Moran 8 Middlefield Banc Corp. 2018 Summary Annual Report COMMUNITY INVOLVEMENT The Middlefield Banking Company takes great pride in being a partner, advocate, and leader for the communities and people we serve. We are dedicated to strengthening and improving these communities through partnering with local charities and volunteering along with providing needed financial services and education. The Middlefield Banking Company expanded charitable partnerships into new geographic and services areas in 2018. Our partners are groups and organizations that serve the local communities where we do business. By supporting these local groups we can aid them in reaching their goals and growing services and programs. Our officers and employees are in leadership roles with more than 20 organizations ranging from non-profits, direct services, healthcare, and education. Below is a list of some of those organizations: • Ashtabula Community Foundation • Children’s Advocacy Center (Portage) • Children’s Hospital (Columbus) • Crossroads/Beacon Health (Cuyahoga) • Financial Empowerment (Portage & Trumbull) • Geauga Community Improvement Corporation • Geauga County Fair Housing • Geauga Growth Partnership • Hattie Larlham Center for Children with Disabilities • Junior Achievement (Mahoning, Trumbull, Ashtabula) • Next Step (Geauga & Portage) • Safer Futures (Portage) • United Way (Delaware, Geauga, Lake, Trumbull) In 2018, we also implemented our first Youth Philanthropy program offered to Warren G. Harding High School in Trumbull County. The premise of the program is to provide upper class high school students with an opportunity to form a mock community foundation board. The students will participate in the planning, budgeting, evaluations, and ultimately the funding decisions to award money to local nonprofits. There is also a scholarship opportunity attached to the program. Middlefield Banc Corp. 2018 Summary Annual Report 9 Middlefield Banc Corp. 2018 Summary Annual Report 9 Thomas G. Caldwell 1986 President and Chief Executive Officer James R. Heslop, II 1996 Executive Vice President Chief Operating Officer Donald L. Stacy 1999 Executive Vice President Chief Financial Officer Charles O. Moore 2016 President, Central Ohio Region Teresa M. Hetrick 1996 Executive Vice President Deposit Services Eric P. Hollinger 2013 Executive Vice President Senior Lender Michael L. Allen 2018 Executive Vice President Chief Banking Officer John D. Lane 2018 Executive Vice President Chief Credit & Risk Officer Jay W. Valerian 2004 Senior Vice President Residential Lending 10 Middlefield Banc Corp. 2018 Summary Annual Report Matthew E. Bellin 2006 Senior Vice President Commercial Lending Team Leader Adam T. Cook 2006 Senior Vice President Loan Administration Felicia M. Hough 2009 Senior Vice President Branch Administration Courtney M. Erminio 2010 Senior Vice President Risk Officer Craig E. Reay 2011 Senior Vice President Credit Administration Robert J. Dawson 2015 Senior Vice President Commercial Lending Team Leader Carole L. Shaull 2015 Senior Vice President Human Resources J Todd Price 2016 Senior Vice President Commercial Lending Team Leader Shalini Singhal 2016 Senior Vice President Chief Information Officer Michael C. Ranttila 2017 Senior Vice President Finance Thomas R. Neikirk 1994 Vice President Commercial Lending Team Leader Alfred F. Thompson, Jr. 1996 Vice President Credit Administration David Kucera 2004 Vice President Controller Laura E. Neale 2010 Vice President Commercial Lender Richard R. Parkin 2011 Vice President Commercial Lender Lori A. Graham 2013 Vice President Compliance/CRA Officer Daniel B. Plant 2014 Vice President Mortgage Lending THE MIDDLEFIELD BANKING COMPANY OFFICERS John Solich 2015 Vice President Commercial Lender Robert Naegele 2017 Vice President Commercial Lender Ashley Rispinto 2017 Vice President Commercial Lender Stanley Gregorin, Jr. 2018 Vice President Commercial Lender Karen D. Branham 1983 Assistant Vice President Deposit Operations Manager Kathleen M. Vanek 1998 Assistant Vice President Mantua Branch Manager Marlin J. Moschell 2000 Assistant Vice President Orwell Lending Officer Kevin J. Mitchell 2007 Assistant Vice President Lender II Jean M. Carter 2009 Assistant Vice President Chardon Branch Manager Dale L. Moore 2009 Assistant Vice President Project Coordinator James C. Foster 2011 Assistant Vice President Orwell Branch Manager Stephen J. Lebold 2012 Assistant Vice President Westerville Branch Manager Lisabeth A. Muldowney 2012 Assistant Vice President Garrettsville Branch Manager Kristie Bond 2014 Assistant Vice President BSA/Security Officer Linda M. Zak 2014 Assistant Vice President Mortgage Loan Operations Rachel Gordon 2015 Assistant Vice President Financial Reporting Manager Tyler Henkle 2015 Assistant Vice President Commercial Lender Warren R. Cox, II 2016 Assistant Vice President Sunbury Branch Manager Thomas W. Parker 2016 Assistant Vice President Commercial Lender Lisa A. Sanborn 2000 Banking Officer E Banking Support Manager Brett A. Richey 2010 Banking Officer Special Assets Manager Michelle L. Bahleda 2014 Banking Officer Lender Christopher N. Pratt 2014 Banking Officer Support Center Manager Middlefield Banc Corp. 2018 Summary Annual Report 11 MENTOR LAKE CHARDON ASHTABULA ORWELL BEACHWOOD NEWBURY SOLON TWINSBURG GEAUGA MIDDLEFIELD CORTLAND MANTUA GARRETTSVILLE TRUMBULL PORTAGE THE MIDDLEFIELD BANKING COMPANY LOCATIONS CLEVELAND Administrative Offices 15200 Madison Road P.O. Box 35 Middlefield, Ohio 44062 888.801.1666 Beachwood 25201 Chagrin Boulevard Suite 120 Beachwood, Ohio 44122 216.359.5580 Chardon 348 Center Street P.O. Box 1078 Chardon, Ohio 44024 440.286.1222 Cortland 3450 Niles-Cortland Road Cortland, Ohio 44410 330.637.3208 Dublin 6215 Perimeter Drive Dublin, Ohio 43017 614.793.4631 12 Middlefield Banc Corp. 2018 Summary Annual Report 12 Middlefield Banc Corp. 2018 Summary Annual Report DELAWARE POWELL SUNBURY WESTERVILLE DUBLIN FRANKLIN COLUMBUS DELA AREWAREW DELAW DELAW FRANKLIN COLUMBUS Garrettsville 8058 State Street Garrettsville, Ohio 44231 330.527.2121 Lake County Loan Production Office 8373 Mentor Avenue Mentor, Ohio 44060 440.632.8140 CLEVELAND ASHT ASHT ASHTABULA ASHTABULA MENTOR PORT E PORTAG PORTAG LAKE TRUMBULL CHARDON ASHTABULA ORWELL BEACHWOOD NEWBURY SOLON MIDDLEFIELD TWINSBURG GEAUGA CORTLAND MANTUA GARRETTSVILLE TRUMBULL PORTAGE Mantua 10519 Main Street P.O. Box 648 Mantua, Ohio 44255 330.274.0881 Middlefield Main 15985 East High Street P.O. Box 35 Middlefield, Ohio 44062 440.632.8115 Middlefield West 15545 West High Street P.O. Box 35 Middlefield, Ohio 44062 440.632.8113 DELAWARE SUNBURY POWELL WESTERVILLE DUBLIN FRANKLIN COLUMBUS Newbury 11110 Kinsman Road Suite 1 P.O. Box 208 Newbury, Ohio 44065 440.564.7000 Orwell 30 South Maple Street P.O. Box 66 Orwell, Ohio 44076 440.437.7200 Powell 10628 Sawmill Parkway Powell, Ohio, 43065 614.392.5702 Solon 6134 Kruse Drive Solon, Ohio 44139 440.542.3789 Sunbury 492 West Cherry Street Sunbury, Ohio 43074 740.913.0632 Twinsburg 2351 Edison Boulevard P.O. Box 560 Twinsburg, Ohio 44087 330.425.3033 Westerville 17 North State Street Westerville, Ohio 43081 614.890.7832 Middlefield Banc Corp. 2018 Summary Annual Report 13 Middlefield Banc Corp. 2018 Summary Annual Report 13 118 YEARS AND GROWING Our core values have endured for 118 years and have enabled the Bank to grow and help the communities we serve. 1900-1919 1920-1939 1940-1969 1970-1989 1920 Joe E. Johnson, President. 1929 The national stock market crashes and the Great Depression begins. 1933 The Bank closes its doors temporarily, as directed by President Franklin Roosevelt who declares a National “Bank Holiday” to stabilize the banking system. 1901 The Middlefield Banking Company opened its doors on September 16th with an authorized working capital of $25,000. Alfonso W. Belden, President. Certificates of Deposit feature 4% interest rate. Deposits are $14,208. 1902 J.J. Rose, President. Deposits are at $91,659. 1914 The First World War Begins. 1941 Attack on U.S. Naval Base at Pearl Harbor. United States enters the Second World War. 1943 Total assets break the million mark at $1,320,821. 1950 Total assets of $3.0 million 1963 Dale McClurg is President. First of several expansions begins. 1981 Robert E. Stewart is President. 1985 West Branch of Middlefield Bank opens. Total assets are $50 million. 1986 Joseph P. Robb is President. Garrettsville Branch of Middlefield Bank is opened. 1988 Formation of Middlefield Banc Corp. 14 Middlefield Banc Corp. 2018 Summary Annual Report 1990-1999 2000-2005 2006-2015 2016-present 2000 The Bank introduces EasyLine for telephone banking. 2001 Middlefield Banc Corp. becomes an SEC reporting company. Chardon Branch opens. Bank introduces EasyLink, its online banking system. 2003 Orwell Branch opens. 1993 Construction of Middlefield Village Center and new flagship branch. Bank assets total $100 million. 1994 First offering of MAC ATM cards. 1995 Thomas G. Caldwell is President. 1998 Mantua Branch Opens. Data Systems Conversion. $150 million in assets. 1999 Garrettsville Branch relocated to a newly constructed facility. 2016 Middlefield Bank opens a branch in Sunbury, Ohio, the third branch in central Ohio. 2017 Middlefield Banc Corp. purchases Liberty Bank N.A. and its offices in Beachwood, Solon, and Twinsburg. 2018 The Powell Branch opens in a newly constructed building in central Ohio. 2006 Newbury Branch opens 2007 Middlefield Banc Corp. acquires Emerald Bank and its Dublin, Ohio branch in central Ohio. 2008 Emerald Bank opens a second office in Westerville, Ohio. Cortland Branch opens. 2014 Emerald Bank is consolidated by The Middlefield Banking Company. Middlefield Bank now operates in two distinct Ohio markets. Middlefield Banc Corp. 2018 Summary Annual Report 15 OUR CORE VALUES CUSTOMER SERVICE: We will treat all customers in a manner that is both personal and caring. We will show genuine concern and respect for them as individuals. HONESTY AND INTEGRITY: It is imperative that our customers trust us to do business in an ethical manner. We will always honor our commitments, keep our promises, and do the right thing. EFFICIENCY: In order to be successful and to remain competitive, we must keep our costs at a reasonable level, strive to improve productivity, and continue to become more efficient in the way we conduct our business. TEAM FOCUS: Believing that our people are key to our success, we are dedicated to a well-educated and highly skilled workforce. We are one team sharing one focus. 16 Middlefield Banc Corp. 2018 Summary Annual Report COMMUNITY COMMITMENT: Actively participating and investing in our communities is at the foundation of our organization. It is important to provide leadership within our communities and to offer our time, talent, and dollars. PROACTIVE APPROACH: In order to be responsive to our customers’ needs, we approach banking in a proactive, flexible, and positive manner. We strive to be creative in solutions to problems, recognizing them as improvement opportunities. SHAREHOLDER COMMITMENT: Our shareholders have expressed their belief in us and it is our duty to be responsible stewards of their investments. Prudent and fiscally responsible management will provide both short-term and long-term value to our shareholders. SHAREHOLDER INFORMATION CORPORATE HEADQUARTERS Middlefield Banc Corp. 15985 East High Street P.O. Box 35 Middlefield, Ohio 44062 888.801.1666 • 440.632.1666 fax: 440.632.1700 FORM 10-K AND 10-Q AVAILABILITY A copy of Middlefield Banc Corp.’s Annual Report on Form 10-K and Quarterly Reports on 10-Q filed with the Securities and Exchange Commission will be furnished to any shareholder, free of charge, upon written or e-mail request to: Donald L. Stacy Senior Vice President, Treasurer and CFO Middlefield Banc Corp. P.O. Box 35 Middlefield, Ohio 44062 or dstacy@middlefieldbank.com MARKET MAKERS The symbol for Middlefield Banc Corp. common stock is MBCN and the CUSIP is 596304204. Sweney Cartwright & Co. 800.334.7481 www.swencart.com Boenning & Scattergood, Inc. 866.326.8113 www.boenninginc.com Keefe, Bruyette & Woods 800.342.5529 www.kbw.com NOTICE OF ANNUAL MEETING The Annual Meeting of Shareholders of Middlefield Banc Corp. will be held at 1:00 p.m. on Wednesday, May 15, 2019, at: Sun Valley Banquet and Party Center 10000 Edwards Lane Aurora, Ohio 44202 TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 59 Maiden Lane Plaza Level New York, New York 10038 800.937.5449 INDEPENDENT AUDITORS S.R. Snodgrass, P.C. 2009 Mackenzie Way, Suite 340 Cranberry Township, Pennsylvania 16066 724.934.0344 INTERNET INFORMATION Information on the Company and its subsidiary bank is available on the Internet at www.middlefieldbank.bank. DIVIDEND PAYMENT DATES Subject to action by the Board of Directors, Middlefield Banc Corp. will pay dividends in March, June, September, and December. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Shareholders may elect to reinvest their dividends in additional shares of Middlefield Banc Corp.’s common stock through the Company’s Dividend Reinvestment Plan. To arrange automatic purchase of shares with quarterly dividend proceeds, please call 888.801.1666. DIRECT DEPOSIT OF DIVIDENDS The direct deposit program, which is offered at no charge, provides for automatic deposit of quarterly dividends directly to a checking or savings account with The Middlefield Banking Company. For information regarding this program, please call 888.801.1666. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Middlefield Banc Corp. had approximately 1,035 shareholders of record as of February 11, 2019. Our common stock trades on the NASDAQ Capital Market under the ticker symbol MBCN. The following table shows the high and low bid prices of and cash dividends paid on the Company’s common stock during the periods indicated. The high and low bid prices are compiled from data available through NASDAQ. This information does not reflect retail mark-up, markdowns or commissions, and does not necessarily represent actual transactions. High Bid Low Bid Cash Dividends per share $51.25 $54.90 $52.35 $48.45 $46.00 $54.60 $50.75 $50.50 $46.25 $48.00 $46.10 $38.50 $38.40 $43.60 $42.10 $42.95 $ 0.33 $ 0.28 $ 0.28 $ 0.28 $ 0.27 $ 0.27 $ 0.27 $ 0.27 2018 First Quarter Second Quarter Third Quarter Fourth Quarter 2017 First Quarter Second Quarter Third Quarter Fourth Quarter Middlefield Banc Corp. 15985 East High Street, Middlefield, Ohio 44062 888.801.1666 • www.middlefieldbank.bank 

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