
Part I Financial Statements (Unaudited) This section presents Middlefield Banc Corp.'s unaudited consolidated financial statements for Q1 2025, including the balance sheet, income statement, comprehensive income, equity changes, cash flows, and detailed notes Consolidated Balance Sheet As of March 31, 2025, total assets were $1.89 billion, a slight increase from $1.85 billion at year-end 2024, driven by loan and deposit growth Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $1,888,356 | $1,853,359 | $34,997 | 1.9% | | Net Loans | $1,527,948 | $1,497,167 | $30,781 | 2.1% | | Total Deposits | $1,539,725 | $1,445,693 | $94,032 | 6.5% | | Federal Home Loan Bank advances | $110,000 | $172,400 | ($62,400) | (36.2%) | | Total Liabilities | $1,674,563 | $1,642,797 | $31,766 | 1.9% | | Total Stockholders' Equity | $213,793 | $210,562 | $3,231 | 1.5% | Consolidated Statement of Income For the three months ended March 31, 2025, net income increased 15.9% to $4.83 million, driven by higher net interest income and lower interest expense Q1 2025 vs Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $16,098 | $14,969 | $1,129 | 7.5% | | Provision for (Recovery of) credit losses | $95 | ($136) | $231 | N/A | | Total Noninterest Income | $1,944 | $1,796 | $148 | 8.2% | | Total Noninterest Expense | $12,193 | $11,965 | $228 | 1.9% | | Net Income | $4,830 | $4,167 | $663 | 15.9% | | Basic EPS | $0.60 | $0.52 | $0.08 | 15.4% | Consolidated Statement of Comprehensive Income (Loss) Comprehensive income for Q1 2025 more than doubled to $4.46 million, primarily due to higher net income and a significantly smaller other comprehensive loss Comprehensive Income (Loss) (in thousands) | Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $4,830 | $4,167 | | Other comprehensive income (loss), net of tax | ($367) | ($2,040) | | Comprehensive income (loss) | $4,463 | $2,127 | Consolidated Statement of Changes in Stockholders' Equity Stockholders' equity increased to $213.8 million at March 31, 2025, driven by net income, partially offset by cash dividends and other comprehensive loss - Key drivers for the change in stockholders' equity in Q1 2025 were net income of $4.83 million, offset by cash dividends of $1.70 million ($0.21 per share) and an other comprehensive loss of $0.37 million22 - In Q1 2024, the company repurchased 43,858 common shares for $1.06 million, whereas no shares were repurchased in Q1 202522 Consolidated Statement of Cash Flows Cash and cash equivalents increased by $11.1 million in Q1 2025, primarily from financing activities, offsetting investing activities and supplemented by operations Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $8,018 | $5,440 | | Net cash provided by (used in) investing activities | ($26,824) | ($11,611) | | Net cash provided by (used in) financing activities | $29,884 | ($8,411) | | Increase (decrease) in cash and cash equivalents | $11,078 | ($14,582) | Notes to Unaudited Consolidated Financial Statements The notes provide detailed supplementary information on accounting policies, fair value measurements, loan portfolio, allowance for credit losses, and subsequent events - Note 5 details fair value measurements, classifying assets into Level 1, 2, and 3 hierarchies. As of March 31, 2025, the vast majority of recurring fair value assets ($158.4 million of $165.7 million) are Level II, valued using observable market data4648 - Note 7 provides an in-depth analysis of the loan portfolio and the Allowance for Credit Losses (ACL). The total ACL was $22.4 million as of March 31, 2025, a slight decrease from year-end 2024, with changes driven by portfolio activity and updated economic assumptions7071 - Note 11 discloses two significant subsequent events in April 2025: a real estate exchange with the City of Westerville resulting in a $1.2 million gain, and a plan to sell another property resulting in a recognized loss of $700,000107108 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial condition and results of operations for Q1 2025, highlighting increased EPS, expanded net interest margin, and improved asset quality - Financial highlights for Q1 2025 include a 17.6% YoY increase in diluted EPS to $0.60, a 12 basis point increase in annualized ROA to 1.04%, and a 5% increase in the quarterly dividend to $0.21 per share117 - Total assets grew by $35.0 million to $1.89 billion since year-end 2024, driven by a $30.7 million increase in total loans. This growth was funded by a $94.0 million increase in deposits126 - Net interest income rose 7.5% YoY to $16.1 million, with the net interest margin expanding 15 basis points to 3.69%. This was attributed to lower costs on certain deposits and borrowings, and higher loan balances155 Changes in Financial Condition Total assets increased by $35.0 million to $1.89 billion at March 31, 2025, driven by loan and deposit growth, while short-term borrowings decreased Loan Portfolio Changes (Q1 2025 vs YE 2024, in thousands) | Loan Category | March 31, 2025 | Dec 31, 2024 | $ Change | | :--- | :--- | :--- | :--- | | Construction and other | $122,653 | $103,608 | $19,045 | | Commercial and industrial | $235,547 | $229,034 | $6,513 | | Home equity lines of credit | $147,154 | $143,379 | $3,775 | | Total Loans | $1,550,349 | $1,519,614 | $30,735 | Deposit Portfolio Changes (Q1 2025 vs YE 2024, in thousands) | Deposit Category | March 31, 2025 | Dec 31, 2024 | $ Change | | :--- | :--- | :--- | :--- | | Money market | $481,664 | $414,074 | $67,590 | | Time | $275,673 | $247,704 | $27,969 | | Interest-bearing demand | $222,953 | $208,291 | $14,662 | | Total Deposits | $1,539,725 | $1,445,693 | $94,032 | - The Allowance for Credit Losses (ACL) decreased slightly by $46,000 to $22.4 million. Nonperforming loans stood at $29.6 million, down from $30.0 million at year-end 2024142147 Results of Operations Net income for Q1 2025 increased 15.9% to $4.8 million, driven by a 7.5% rise in net interest income and a modest 1.9% increase in noninterest expense - Net interest income increased by $1.1 million YoY, driven by a $60.8 million increase in the average balance of loans and a decrease in the cost of FHLB advances155157 - Interest expense decreased by $268,000 YoY, mainly due to a $646,000 reduction in short-term borrowing expense as FHLB advances were paid down158 - Noninterest income increased by $148,000 YoY, largely due to a $633,000 tax-free benefit from a bank-owned life insurance death claim160 Liquidity and Regulatory Capital The company maintained a strong liquidity position of $785.2 million at March 31, 2025, exceeding uninsured deposits, and met all 'well-capitalized' regulatory capital requirements - Total net available liquidity was $785.2 million at March 31, 2025, covering 51.0% of total deposits171 - Uninsured deposit balances were approximately $486.4 million, or 31.6% of total deposits, at March 31, 2025149 Regulatory Capital Ratios as of March 31, 2025 | Ratio | Middlefield Banc Corp. | The Middlefield Banking Company | Well-Capitalized Requirement (Bank) | | :--- | :--- | :--- | :--- | | Tier 1 Leverage | 10.92% | 10.87% | 5.00% | | Common Equity Tier 1 | 11.61% | 11.92% | 6.50% | | Tier 1 Risk Based | 12.09% | 11.92% | 8.00% | | Total Risk Based | 13.35% | 13.17% | 10.00% | Quantitative and Qualitative Disclosures about Market Risk The company manages interest rate risk through simulation modeling, projecting NII and EVE impacts within policy limits, indicating a slightly liability-sensitive position Interest Rate Sensitivity Analysis (as of March 31, 2025) | Change in Rates | % Change in Net Interest Income (NII) | % Change in Economic Value of Equity (EVE) | | :--- | :--- | :--- | | +200bp | (2.60%) | (3.00%) | | -100bp | 1.30% | (0.20%) | - The company's policy limits for interest rate risk are a maximum 10% reduction in NII for a +/- 200bp gradual rate shift and a maximum 20% change in EVE for a +200bp immediate rate shock. The current simulations are well within these guidelines186187 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report192 - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting194 Part II Legal Proceedings A class action lawsuit related to the April 2023 cyber-attack has been settled, with final court approval granted on April 1, 2025, and losses covered by insurance - The class action lawsuit stemming from the April 2023 cyber-attack received final court approval for settlement on April 1, 2025100 - Losses related to the incident are within the coverage limits of the company's $3 million cyber risk insurance policy, which has a $50,000 deductible100 Risk Factors There have been no material updates or changes to the company's risk factors since the year ended December 31, 2024 - No material changes in risk factors have occurred since December 31, 2024196 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any common shares in Q1 2025, with 250,052 shares remaining available for repurchase under the board-authorized program - No common shares were repurchased in the first quarter of 2025197 - The company has authorization to repurchase an additional 250,052 shares under its existing program as of March 31, 2025197 Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by any director or officer during the first quarter of 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by any director or officer in Q1 2025199 Exhibits This section lists all exhibits filed with or incorporated by reference into the Form 10-Q report, including articles of incorporation, various agreements, and certifications