About Middlefield Banc

Middlefield Banc Corp. operates as the bank holding company for The Middlefield Banking Company (‘MBC’, or ‘the bank’) that engages a general commercial banking business in northeastern and central Ohio. MBC offers customers a broad range of banking services, including checking, savings, negotiable order of withdrawal (NOW) accounts, money market accounts, time deposits, commercial loans, real estate loans, a variety of consumer loans, safe deposit facilities, and travelers’ checks. MBC offers online banking and bill payment services to individuals and online cash management services to business customers through its website at www.middlefieldbank.bank. MBC offers services principally to small and medium-sized businesses, professionals, small business owners, and retail customers. MBC has developed a marketing program to attract and retain consumer accounts and to match banking services and facilities with the needs of customers. MBC’s loan products include operational and working capital loans, loans to finance capital purchases, term business loans, residential construction loans, selected guaranteed or subsidized loan programs for small businesses, professional loans, residential and mortgage loans, agricultural loans, and consumer installment loans to make home improvements and to purchase automobiles, boats, and other personal expenditures. Market Area MBC’s product offering is geared toward traditional banking business delivered to both consumers and businesses located in the Columbus metro area, Northeast Ohio, and Western Ohio. MBC’s Northeast Ohio branches are located in Ashtabula, Cuyahoga, Geauga, Portage, Summit, and Trumbull counties. The company’s Western Ohio branches are located in Hardin and Logan counties. Its Central Ohio branches are located in Delaware, Franklin, Madison, and Union counties. The company has a loan production office in Mentor located in Lake County. Lake County is contiguous to Ashtabula, Cuyahoga, and Geauga counties in its Northeast Ohio market. MBC’s market area in Northeast Ohio benefits from the area’s proximity to Cleveland in Cuyahoga County. MBC’s market area in Central Ohio benefits from the area’s proximity to Columbus in Franklin County. Lending The bank makes residential and commercial mortgages, home equity lines of credit, secured and unsecured consumer installment, commercial and industrial, and real estate construction loans for owner-occupied, non-owner occupied, multifamily, and income-producing properties. The bank offers specialized loans for business and commercial customers, including equipment and inventory financing, real estate construction loans, agricultural loans, and Small Business Administration loans for qualified businesses. A portion of the bank’s commercial loans is designated as real estate loans for regulatory reporting purposes because they are secured by mortgages on real property. Loans of that type may be made for purposes of financing commercial activities, such as accounts receivable, equipment purchases, and leasing. These loans are still secured by real estate to provide the bank with an extra security measure. Although these loans might be secured in whole or in part by real estate, they are treated in the discussions to follow as commercial and industrial loans. The bank’s consumer installment loans include secured and unsecured loans to individual borrowers for various purposes, including personal, home improvements, revolving credit lines, autos, boats, and recreational vehicles. Residential Real Estate Loans A significant portion of the bank’s lending consists of origination of residential loans secured by 1-4 family real estate located in Ashtabula, Cuyahoga, Delaware, Franklin, Geauga, Madison, Portage, Summit, and Trumbull counties. The bank offers residential real estate loans with terms of up to 30 years. The bank originates variable-rate and fixed-rate, single-family mortgage loans. Generally, fixed-rate mortgage loans are underwritten according to the Federal Home Loan Mortgage Corporation (Freddie Mac) guidelines. In some instances, these loans are sold to the agency. Home Equity Lines of Credit Home equity lines of credit comprise variable-rate home equity lines of credit, as well as closed-end home equity installment loans. The bank’s home equity credit policy generally allows for a loan of up to 85% of the combined loan-to-value ratio (CLTV) when the company has the first lien or the HELOC is in the first position, less the principal balance of the outstanding first mortgage loan. The bank’s home equity loans generally have terms of 20 years. Commercial and Commercial Real Estate Loans The company’s commercial and commercial real estate loan services include accounts receivable, inventory and working capital loans; renewable operating lines of credit; loans to finance capital equipment; term business loans; demand lines of credit; short-term notes; selected guaranteed or subsidized loan programs for small businesses; loans to professionals; commercial real estate loans; and agricultural loans. Commercial real estate loans include commercial properties occupied by the proprietor of the business conducted on the premises, non-owner occupied business properties, multifamily residential properties, income-producing properties, and agricultural properties and businesses that support these sectors. Construction and Other The bank originates several different types of loans that it categorizes as construction loans, including residential construction loans to borrowers who will occupy the premises upon completion of construction; residential construction loans to builders; commercial construction loans, and real estate acquisition and development loans. The bank also offers residential construction-to-permanent loans with a twelve-month construction period followed by 30 years of permanent financing. Consumer Installment Loans The bank’s consumer installment loans include secured and unsecured loans to individual borrowers for various purposes, including personal, home improvement, revolving credit lines, automobiles, boats, and recreational vehicles. The bank does not do any indirect lending. Unsecured consumer loans carry significantly higher interest rates than secured loans. The bank maintains a higher loan loss allowance for consumer loans while maintaining strict credit guidelines when considering consumer loan applications. Mortgage Banking Activity The bank originates residential loans secured by first-lien mortgages on one-to-four family residential properties located within its market area for either portfolio or sale into the secondary market. In addition to interest earned on loans and income recognized on the sale of loans, the bank receives fees for servicing loans that it has sold. Investment Securities As of December 31, 2022, the company’s investment portfolio included subordinated debt, obligations of states and political subdivisions (taxable and tax-exempt), and mortgage-backed securities in government- sponsored entities. Deposits Deposit accounts are a significant source of funds for the bank. The bank offers many deposit products to attract commercial and regular consumer checking and savings customers, including standard and money market savings accounts, NOW accounts, a variety of fixed-maturity, fixed-rate certificates with maturities ranging from 3 to 60 months, and brokered deposits. These accounts earn interest at rates established by management based on liquidity, competitive market factors, and management’s desire to increase certain types or maturities. The bank also provides travelers’ checks, official checks, money orders, ATM services, and IRA accounts. Supervision and Regulation The company is a bank holding company within the meaning of the bank Holding Company Act of 1956. The company is subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System, acting primarily through the Federal Reserve Bank of Cleveland. The company must file annual reports and other information with the Federal Reserve. The bank subsidiary is an Ohio-chartered commercial bank. As a state-chartered, nonmember bank, the bank is primarily regulated by the Federal Deposit Insurance Corporation (FDIC) and by the Ohio Division of Financial Institutions. The company and the bank are subject to federal banking laws, and the company is also subject to Ohio bank law. These federal and state laws are intended to protect depositors, not stockholders. The bank is subject to detailed, complex, and sometimes overlapping federal and state statutes and regulations affecting routine banking operations. These statutes and regulations include but are not limited to state usury and consumer credit laws, the Truth in Lending Act and Regulation Z, the Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Truth in Savings Act, and the Community Reinvestment Act. The bank must comply with Federal Reserve Board regulations requiring depository institutions to maintain reserves against their transaction accounts (principally NOW and regular checking accounts). The Federal Reserve Board and the FDIC have extensive authority to prevent and remedy unsafe and unsound practices and violations of applicable laws and regulations by institutions and holding companies. The Deposit Insurance Fund of the FDIC insures deposits at insured depository institutions, such as the bank. Deposit accounts in the bank are insured by the FDIC generally up to a maximum of $250,000 based upon the ownership rights and capacities in which deposit accounts are maintained at the bank. Transactions between an insured bank, such as the bank, and any of its affiliates are governed by Sections 23A and 23B of the Federal Reserve Act and implementing regulations. These statutes are intended to protect banks from abuse in financial transactions with affiliates, preventing FDIC-insured deposits from being diverted to support the activities of unregulated entities engaged in nonbanking businesses. An affiliate of a bank includes any company or entity that controls or is under common control with the bank. Generally, section 23A and section 23B of the Federal Reserve Act. As a member of the FHLB of Cincinnati, MBC is required to maintain an investment in the capital stock of the FHLB of Cincinnati in an amount calculated by reference to the FHLB member bank’s amount of loans, and or advances, from the Federal Home Loan Bank (FHLB). The bank is subject to regular examination by the FDIC to ensure compliance with statutes and regulations applicable to the bank’s business, including consumer protection statutes and implementing regulations, some of which include the Equal Credit Opportunity Act; the Truth in Lending Act; Fair Housing Act; the Home Mortgage Disclosure Act; Real Estate Settlement Procedures Act; the Real Estate Settlement Procedures Act; and the Gramm-Leach-Bliley Act. As an Ohio-chartered bank, the bank is subject to regular examination by the Ohio Division of Financial Institutions. State banking regulation affects the internal organization of the bank, as well as its savings, lending, investment, and other activities. History Middlefield Banc Corp. was founded in 1901. The company was incorporated in 1988 under the Ohio General Corporation Law.