Middlefield Banc (MBCN) 8-K Results of Operations and Financial Condition

Exhibit 99

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:
Thomas G. Caldwell President/Chief Executive Officer Middlefield Banc Corp. (440)632-1666 Ext. 3200 tcaldwell@middlefieldbank.com	Andrew M. Berger Managing Director SM Berger & Company, Inc. (216)464-6400 andrew@smberger.com

Middlefield Banc Corp. Reports Record Earnings for

2018 Full Year and Fourth Quarter Financial Results

MIDDLEFIELD, OHIO, January 17, 2019 ◆◆◆◆ Middlefield Banc Corp. (NASDAQ: MBCN) today reported record financial results for the three and twelve months ended December 31, 2018.

2018 Financial Highlights (on a year-over-year basis unless noted):

• Net income increased 31.5% to a record $12.4 million

• Earnings per diluted share increased 23.5% to a record $3.83 per share

• For the 2018 fourth quarter, return on average equity was 10.52%, compared to 7.72% for the quarter ended December 31, 2017

• For the 2018 fourth quarter, return on average tangible common equity⁽¹⁾ was 12.17%, compared to 9.05% for the quarter ended December 31, 2017

• For the 2018 fourth quarter, return on average assets was 1.15%, compared to 0.86% for the quarter ended December 31, 2017

• Book value per share was up 6.2% to a record $39.54 per share

• Tangible book value⁽¹⁾ per share was up 7.7% to a record $34.16 per share

• Total net loans increased 7.5% to a record $984.7 million

• Total interest income improved 14.5% to $50.4 million

• Noninterest expense was up 4.6%

• Equity to assets remains strong at 10.28%

“Middlefield achieved multiple financial and operating records during 2018 including assets, deposits, net income and book value per share,” stated Thomas G. Caldwell, President and Chief Executive Officer. “In addition, I am pleased with the continued expansion of returns on average assets, equity, and tangible common equity. Our financial results demonstrate the continued success of our strategic growth plan and the business platform we have created.”

“As we start the new year, we remain focused on executing our growth initiatives, while continuing to maintain strong asset quality. I am encouraged by the prospects to improve our market share in Northeast Ohio, especially in Cuyahoga and Summit counties. In addition, as one of the few community banks in the Central Ohio market, we have a unique opportunity to provide a differentiated banking experience. Over the past two years, we have significantly increased our scale within the Central Ohio market. I am excited by the potential of both markets and expect the productivity of our new Powell and Sunbury locations to increase throughout the year. As you can see, we have a lot of opportunity and we are excited by our growth prospects in 2019 and beyond,” concluded Mr. Caldwell.

Income Statement

For the 2018 full year, net interest income increased 8.3% to $40.4 million, compared to $37.3 million for the same period last year. The net interest margin for the 2018 twelve-month period was 3.77%, compared to 3.82% for the same period last year. Net interest income for the 2018 fourth quarter was $10.5 million, compared to $9.8 million for the 2017 fourth quarter. The net interest margin for the 2018 fourth quarter was 3.76%, compared to 3.84% for the same period of 2017. The 6.7% increase in net interest income for the 2018 fourth quarter was largely a result of a 16.6% increase in interest and fees on loans.

For the 2018 full year, noninterest income was $3.7 million, compared to $4.9 million for the same period last year. Noninterest income for the 2018 fourth quarter was $977 thousand, compared to $918 thousand for the 2017 fourth quarter.

For the 2018 full year, noninterest expense increased 4.6% to $28.7 million, compared to $27.5 million last year. For the 2018 fourth quarter, noninterest expense was $7.2 million, compared to $6.2 million for the same period last year.

“Asset quality continues to improve and in 2018 Middlefield’s nonperforming assets declined 20.4%, while total loans increased 7.5%,” said Donald L. Stacy, Chief Financial Officer. “As a result, nonperforming loans to total loans were 1.07%, which is the lowest level in over six years. We continue to successfully drive deposit growth and ended the quarter with $1.02 billion in deposits. Over the past twelve months, Middlefield’s total deposits increased by $137.9 million or 15.7%. Ourloan-to-deposit ratio was 97.6% at December 31, 2018, compared to 105.1% at December 31, 2017.”

Mr. Stacy continues, “We improved operating leverage throughout the year despite the increased operating cost of our new Powell location. Looking ahead, we believe we can continue to generate an annual efficiency ratio in the low 60% range during 2019 as our new Powell and Sunbury locations mature and we focus on controlled growth, operating leverage and improved profitability.”

Balance Sheet

Total assets at December 31, 2018, increased 12.8% to $1.25 billion, from $1.11 billion at December 31, 2017. Net loans at December 31, 2018, were $984.7 million, compared to $916.0 million at December 31, 2017. The 7.5% year-over-year increase in total net loans was a result of a 20.7% increase in real estate construction loans, a 13.8% increase in commercial mortgage loans, and a 5.8% increase in residential mortgage loans, partially offset by a 17.3% decrease in commercial and industrial loans and a 10.5% decline in consumer installment loans.

Total deposits at December 31, 2018, were $1.02 billion, compared to $878.2 million at December 31, 2017. The 15.7% year-over-year increase in deposits was primarily a result of higher money market and time deposits. The investment portfolio, which is entirely classified as available for sale, was $98.3 million at December 31, 2018, compared with $95.3 million at December 31, 2017.

Stockholders’ Equity and Dividends

At December 31, 2018, stockholders’ equity increased 7.0% to $128.3 million, compared to $119.9 million at December 31, 2017. On a per share basis, shareholders’ equity at December 31, 2018, was $39.54 compared to $37.25 at the same period last year.

At December 31, 2018, tangible stockholders’ equity⁽¹⁾ increased 8.6% to $110.8 million, compared to $102.0 million at December 31, 2017. On a per share basis, tangible stockholders’ equity⁽¹⁾ was $34.16 at December 31, 2018, compared to $31.71 at December 31, 2017.

For the 2018 full year, the company declared cash dividends of $1.17 per share, compared to $1.08 per share for the same period last year. The dividend payout ratio for the 2018 twelve-month period was 30.4% compared to 35.5% for the same period last year.

At December 31, 2018, the company had an equity to assets leverage ratio of 10.28%, compared to 10.83% at December 31, 2017.

Asset Quality

The provision for loan losses for the 2018 fourth quarter was $210,000 versus $430,000 for the same period last year. Nonperforming assets at December 31, 2018, were $10.8 million, compared to $13.6 million at December 31, 2017. Net charge-offs for the 2018 fourth quarter were $276,000, or 0.11% of average loans, annualized, compared to $92,000, or 0.04% of average loans, annualized at December 31, 2017.

For the 2018 twelve-month period, net charge-offs were $602,000, or 0.06% of average loans, compared to $453,000, or 0.05% of average loans for the 2017 twelve-month period. The allowance for loan losses at December 31, 2018, stood at $7.4 million, or 0.75% of total loans, compared to $7.2 million or 0.78% of total loans at December 31, 2017.    

Middlefield Banc Corp., headquartered in Middlefield, Ohio, is the bank holding company of The Middlefield Banking Company with total assets of $1.25 billion at December 31, 2018. The bank operates 15 full-service banking centers and an LPL Financial^® brokerage office serving Beachwood, Chardon, Cortland, Dublin, Garrettsville, Mantua, Middlefield, Newbury, Orwell, Powell, Solon, Sunbury, Twinsburg, and Westerville. The Bank also operates a Loan Production Office in Mentor, Ohio.

Additional information is available atwww.middlefieldbank.bank.

⁽¹⁾  This press release 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). Anon-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 thesenon-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 ofnon-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.

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) changes in the securities markets; or (8) 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.

MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

(Dollar amounts in thousands)

Balance Sheets (period end)	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
ASSETS
Cash and due from banks	$	107,933		$	81,951		$	42,451		$	33,258		$	39,886
Federal funds sold		—			—			28,795			—			—
Cash and cash equivalents		107,933			81,951			71,246			33,258			39,886
Equity securities, at fair value		616			671			656			643			—
Investment securities available for sale, at fair value		98,322			99,717			100,028			91,262			95,283
Loans held for sale		597			925			1,132			937			463
Loans		992,109			972,968			943,674			932,374			923,213
Less allowance for loan and lease losses		7,428			7,494			7,502			7,551			7,190
Net loans		984,681			965,474			936,172			924,823			916,023
Premises and equipment, net		13,003			13,002			12,978			12,225			11,853
Goodwill		15,071			15,071			15,071			15,071			15,071
Core deposit intangibles		2,397			2,484			2,571			2,658			2,749
Bank-owned life insurance		16,080			15,970			15,862			15,764			15,652
Other real estate owned		270			257			181			212			212
Accrued interest receivable and other assets		9,428			10,806			10,182			9,911			9,144
TOTAL ASSETS	$	1,248,398		$	1,206,328		$	1,166,079		$	1,106,764		$	1,106,336
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
LIABILITIES
Deposits:
Noninterest-bearing demand	$	178,386		$	177,833		$	180,073		$	166,869		$	164,424
Interest-bearing demand		117,128			124,089			119,834			123,993			112,004
Money market		196,685			191,261			137,572			149,359			150,277
Savings		222,954			224,704			204,408			221,851			208,502
Time		300,914			295,874			290,359			282,501			242,987
Total deposits		1,016,067			1,013,761			932,246			944,573			878,194
Short-term borrowings		90,398			55,304			87,833			18,671			74,707
Other borrowings		8,803			8,956			18,996			19,028			29,065
Accrued interest payable and other liabilities		4,840			4,074			4,288			4,340			4,507
TOTAL LIABILITIES		1,120,108			1,082,095			1,043,363			986,612			986,473
STOCKHOLDERS’ EQUITY
Common equity		85,925			85,687			85,544			85,116			84,859
Retained earnings		56,037			53,520			51,121			48,927			47,431
Accumulated other comprehensive (loss) income		(154	)		(1,456	)		(431	)		(373	)		1,091
Treasury stock		(13,518	)		(13,518	)		(13,518	)		(13,518	)		(13,518	)
TOTAL STOCKHOLDERS’ EQUITY		128,290			124,233			122,716			120,152			119,863
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,248,398		$	1,206,328		$	1,166,079		$	1,106,764		$	1,106,336

MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

(Dollar amounts in thousands)

	For the Three Months Ended											For the Twelve Months Ended
Statements of Income	December 31, 2018			September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017		December 31, 2018			December 31, 2017
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	12,467		$	11,821	$	11,234	$	11,054	$	10,696	$	46,576		$	40,235
Interest-earning deposits in other institutions		146			178		115		119		80		558			328
Federal funds sold		17			8		7		14		6		46			15
Investment securities:
Taxable interest		182			167		170		169		162		688			762
Tax-exempt interest		589			598		550		525		560		2,262			2,406
Dividends on stock		58			57		53		59		60		227			249
Total interest and dividend income		13,459			12,829		12,129		11,940		11,564		50,357			43,995
INTEREST EXPENSE
Deposits		2,828			2,178		1,973		1,640		1,530		8,631			5,350
Short-term borrowings		78			296		192		276		101		842			753
Other borrowings		92			104		118		122		131		436			544
Total interest expense		2,998			2,578		2,283		2,038		1,762		9,909			6,647
NET INTEREST INCOME		10,461			10,251		9,846		9,902		9,802		40,448			37,348
Provision for loan losses		210			210		210		210		430		840			1,045
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		10,251			10,041		9,636		9,692		9,372		39,608			36,303
NONINTEREST INCOME
Service charges on deposit accounts		498			491		472		453		478		1,914			1,875
Investment securities gains on sale, net		—			—		—		—		—		—			886
(Loss) gain on equity securities		(55	)		15		13		18		—		(9	)		—
Earnings on bank-owned life insurance		110			108		98		112		115		428			431
Gains on sale of loans		67			43		117		4		106		231			826
Other income		357			291		305		199		219		1,164			841
Total noninterest income		977			948		1,005		786		918		3,728			4,859
NONINTEREST EXPENSE
Salaries and employee benefits		4,065			3,839		3,866		3,979		3,134		15,749			13,758
Occupancy expense		465			460		472		536		449		1,933			1,846
Equipment expense		273			262		201		233		261		969			1,050
Data processing costs		446			481		402		477		416		1,806			1,792
Ohio state franchise tax		220			244		244		115		186		823			744
Federal deposit insurance expense		100			150		150		150		165		550			533
Professional fees		364			346		327		445		522		1,482			1,752
Advertising expense		227			236		230		228		161		921			821
Software amortization expense		145			155		155		150		134		605			414
Core deposit intangible amortization		87			87		87		91		98		352			374
Merger expense		—			—		—		—		28		—			1,060
Other expense		851			832		929		941		663		3,553			3,341
Total noninterest expense		7,243			7,092		7,063		7,345		6,217		28,743			27,485
Income before income taxes		3,985			3,897		3,578		3,133		4,073		14,593			13,677
Income taxes		560			593		481		528		1,687		2,162			4,222
NET INCOME	$	3,425		$	3,304	$	3,097	$	2,605	$	2,386	$	12,431		$	9,455

MIDDLEFIELD BANC CORP.

Consolidated Selected Financial Highlights

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

	For the Three Months Ended															For the Twelve Months Ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017
Per common share data
Net income per common share - basic	$	1.06		$	1.02		$	0.96		$	0.81		$	0.73		$	3.85		$	3.12
Net income per common share - diluted	$	1.05		$	1.02		$	0.96		$	0.80		$	0.73		$	3.83		$	3.10
Dividends declared per share	$	0.28		$	0.28		$	0.28		$	0.33		$	0.27		$	1.17		$	1.08
Book value per share (period end)	$	39.54		$	38.38		$	37.95		$	37.28		$	37.25		$	39.54		$	37.25
Tangible book value per share (period end) (2) (3)	$	34.16		$	32.96		$	32.49		$	31.78		$	31.71		$	34.16		$	31.71
Dividends declared	$	908		$	905		$	903		$	1,063		$	868		$	3,779		$	3,358
Dividend yield		2.62	%		2.36	%		2.21	%		2.69	%		2.24	%		2.76	%		2.24	%
Dividend payout ratio		26.51	%		27.39	%		29.16	%		40.81	%		36.38	%		30.40	%		35.52	%
Average shares outstanding - basic		3,239,180			3,234,393			3,225,726			3,220,262			3,215,300			3,229,954			3,028,950
Average shares outstanding - diluted		3,250,149			3,248,326			3,240,329			3,238,069			3,231,791			3,243,907			3,052,585
Period ending shares outstanding		3,244,332			3,236,689			3,233,678			3,222,984			3,217,716			3,244,332			3,217,716
Selected ratios
Return on average assets		1.15	%		1.13	%		1.11	%		0.94	%		0.86	%		1.09	%		0.88	%
Return on average equity		10.52	%		10.33	%		10.08	%		8.73	%		7.72	%		9.94	%		8.52	%
Return on average tangible common equity (2) (4)		12.17	%		12.00	%		11.77	%		10.23	%		9.05	%		11.57	%		10.15	%
Efficiency (1)		61.61	%		61.65	%		63.43	%		67.00	%		55.58	%		63.29	%		62.40	%
Equity to assets at period end		10.28	%		10.30	%		10.52	%		10.86	%		10.83	%		10.28	%		10.83	%

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

	For the Three Months Ended															For the Twelve Months Ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017
Yields
Interest-earning assets:
Loans receivable(2)		5.09	%		4.89	%		4.84	%		4.82	%		4.70	%		4.91	%		4.69	%
Investment securities(2)		3.73	%		3.67	%		3.68	%		3.61	%		4.12	%		3.67	%		4.22	%
Interest-earning deposits with other banks		2.08	%		1.95	%		1.72	%		1.85	%		1.42	%		1.90	%		1.26	%
Total interest-earning assets		4.82	%		4.65	%		4.61	%		4.57	%		4.51	%		4.68	%		4.48	%
Deposits:
Interest-bearing demand deposits		0.25	%		0.30	%		0.23	%		0.21	%		0.25	%		0.23	%		0.21	%
Money market deposits		1.56	%		0.99	%		0.87	%		0.82	%		0.75	%		1.11	%		0.62	%
Savings deposits		0.85	%		0.68	%		0.57	%		0.47	%		0.41	%		0.65	%		0.32	%
Certificates of deposit		1.99	%		1.84	%		1.79	%		1.65	%		1.51	%		1.83	%		1.46	%
Total interest-bearing deposits		1.34	%		1.11	%		1.03	%		0.91	%		0.84	%		1.11	%		0.76	%
Non-Deposit Funding:
Borrowings		3.54	%		2.30	%		2.59	%		1.67	%		1.14	%		2.20	%		1.35	%
Total interest-bearing liabilities		1.39	%		1.21	%		1.12	%		1.00	%		0.87	%		1.18	%		0.83	%
Cost of deposits		1.09	%		0.90	%		0.84	%		0.74	%		0.68	%		0.90	%		0.62	%
Cost of funds		1.14	%		0.99	%		0.92	%		0.83	%		0.72	%		0.97	%		0.70	%
Net interest margin(1)		3.76	%		3.72	%		3.76	%		3.82	%		3.84	%		3.77	%		3.82	%

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

(2) Tax-equivalent adjustments to calculate the yield ontax-exempt securities and loans were determined using an effective tax rate of 21% for the periods ended in 2018 and 34% for the periods ended in 2017.

	For the Three Months Ended
End of Period Loan Balances	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
Commercial and industrial	$	83,857		$	93,144		$	101,975		$	99,809		$	101,346
Real estate - construction		56,731			48,901			45,647			48,687			47,017
Real estate - mortgage:
Residential		336,487			329,609			320,858			316,856			318,157
Commercial		498,247			483,675			457,050			448,766			437,947
Consumer installment		16,787			17,639			18,144			18,256			18,746
Total	$	992,109		$	972,968		$	943,674		$	932,374		$	923,213
Asset quality data	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
(Dollar amounts in thousands)
Nonaccrual loans	$	6,595		$	7,288		$	8,357		$	8,747		$	8,433
Troubled debt restructuring		3,031			3,241			3,051			9,071			4,982
90 day past due and accruing		945			—			15			—			—
Nonperforming loans		10,571			10,529			11,423			17,818			13,415
Other real estate owned		270			257			181			212			212
Nonperforming assets	$	10,841		$	10,786		$	11,604		$	18,030		$	13,627
Allowance for loan losses	$	7,428		$	7,494		$	7,502		$	7,551		$	7,190
Allowance for loan losses/total loans		0.75	%		0.77	%		0.79	%		0.81	%		0.78	%
Net charge-offs (recoveries):
Quarter-to-date	$	276		$	218		$	259		$	(151	)	$	92
Year-to-date		602			326			108			(151	)		453
Net charge-offs to average loans, annualized:
Quarter-to-date		0.11	%		0.09	%		0.11	%		-0.06	%		0.04	%
Year-to-date		0.06	%		0.05	%		0.02	%		-0.06	%		0.05	%
Nonperforming loans/total loans		1.07	%		1.08	%		1.21	%		1.91	%		1.45	%
Allowance for loan losses/nonperforming loans		70.27	%		71.17	%		65.67	%		42.38	%		53.60	%
Nonperforming assets/total assets		0.87	%		0.89	%		1.00	%		1.63	%		1.23	%

Reconciliation of Common Stockholders’ Equity to Tangible Common Equity	For the Three Months Ended										For the Twelve Months Ended
(Dollar amounts in thousands)	December 31, 2018		September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017		December 31, 2018		December 31, 2017
Stockholders’ Equity	$	128,290	$	124,233	$	122,716	$	120,152	$	119,863	$	128,290	$	119,863
Less Goodwill and other intangibles		17,468		17,555		17,642		17,729		17,820		17,468		17,820
Tangible Common Equity	$	110,822	$	106,678	$	105,074	$	102,423	$	102,043	$	110,822	$	102,043
Average Stockholders’ Equity	$	129,208	$	126,865	$	123,228	$	121,001	$	122,586	$	125,074	$	110,966
Less Average Goodwill and other intangibles		17,510		17,597		17,683		17,773		17,987		17,641		17,818
Average Tangible Common Equity	$	111,698	$	109,268	$	105,545	$	103,228	$	104,599	$	107,433	$	93,148

Reconciliation of Average Equity to Return on Average Tangible Common Equity	For the Three Months Ended
	December 31, 2018		September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017
Stockholders’ Equity	$	128,290	$	124,233	$	122,716	$	120,152	$	119,863
Less Goodwill and other intangibles		17,468		17,555		17,642		17,729		17,820
Tangible Common Equity	$	110,822	$	106,678	$	105,074	$	102,423	$	102,043
Shares outstanding		3,244,332		3,236,689		3,233,678		3,222,984		3,217,716
Tangible book value per share	$	34.16	$	32.96	$	32.49	$	31.78	$	31.71