
Part I – Financial Information This section presents the unaudited financial information for the company, including detailed financial statements and management's discussion and analysis Financial Statements (Unaudited) Unaudited financial statements for Q2 and 6M 2025 show increased assets, net income, and equity, driven by loan growth and net interest income Consolidated Balance Sheet Total assets grew to $1.92 billion by June 30, 2025, fueled by loan and deposit increases, with stockholders' equity also rising Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $72,846 | $55,792 | | Net loans | $1,559,590 | $1,497,167 | | Total Assets | $1,924,369 | $1,853,359 | | Liabilities & Equity | | | | Total deposits | $1,593,618 | $1,445,693 | | Federal Home Loan Bank advances | $89,000 | $172,400 | | Total Liabilities | $1,708,317 | $1,642,797 | | Total Stockholders' Equity | $216,052 | $210,562 | Consolidated Statement of Income Net income significantly increased for both Q2 and the first six months of 2025, driven by higher net interest income and a real estate gain Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $17,437 | $15,083 | $33,535 | $30,052 | | Provision for (Recovery of) Credit Losses | ($506) | $87 | ($411) | ($49) | | Noninterest Income | $3,078 | $1,760 | $5,022 | $3,556 | | Noninterest Expense | $13,651 | $11,902 | $25,844 | $23,867 | | Net Income | $6,157 | $4,164 | $10,987 | $8,331 | | Diluted EPS | $0.76 | $0.52 | $1.36 | $1.03 | Consolidated Statement of Comprehensive Income (Loss) Comprehensive income for Q2 and 6M 2025 was lower than net income due to unrealized losses on available-for-sale securities Comprehensive Income (Loss) Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $6,157 | $4,164 | $10,987 | $8,331 | | Other Comprehensive Loss (net of tax) | ($2,497) | ($1,338) | ($2,864) | ($3,378) | | Comprehensive Income (Loss) | $3,660 | $2,826 | $8,123 | $4,953 | Consolidated Statement of Changes in Stockholders' Equity Stockholders' equity increased by June 30, 2025, primarily due to net income, despite offsetting dividends and comprehensive losses - For the six months ended June 30, 2025, total stockholders' equity increased by $5.5 million, reflecting the balance of net income, dividends, stock grants, and other comprehensive losses22 Consolidated Statement of Cash Flows Cash and cash equivalents increased for the six months ended June 30, 2025, driven by operating and financing activities, offset by investing Summary of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $12,846 | $8,803 | | Net Cash used in Investing Activities | ($56,820) | ($17,942) | | Net Cash from Financing Activities | $61,028 | $561 | | Net Increase (Decrease) in Cash | $17,054 | ($8,578) | Notes to Unaudited Consolidated Financial Statements Notes detail accounting policies, loan portfolio growth to $1.58 billion, decreased nonperforming loans, and a settled cyber-attack lawsuit covered by insurance - The total loan portfolio grew to $1.58 billion as of June 30, 2025, up from $1.52 billion at the end of 202466 - The Allowance for Credit Losses (ACL) on loans decreased slightly to $22.3 million at June 30, 2025, from $22.4 million at December 31, 2024, driven by portfolio activity, updated assumptions, and the economic outlook72 - Nonperforming loans totaled $25.1 million as of June 30, 2025, a decrease from $30.0 million at December 31, 202487146 - A class action lawsuit related to an April 2023 cyber-attack was settled, with payments issued on May 15, 2025, and losses, including attorney fees and settlement costs, were within the coverage limits of the company's $3 million cyber risk insurance policy103 Management's Discussion and Analysis (MD&A) Management attributes strong H1 2025 performance to expanded net interest margin, asset growth, improved asset quality, and robust liquidity and capital Financial Condition Total assets grew to $1.92 billion in H1 2025, driven by loan and deposit increases, while FHLB advances decreased and equity rose Loan Portfolio Changes (in thousands) | Loan Category | June 30, 2025 | Dec 31, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Commercial and industrial | $257,519 | $229,034 | $28,485 | 12.44% | | Construction and other | $123,531 | $103,608 | $19,923 | 19.23% | | Home equity lines of credit | $156,297 | $143,379 | $12,918 | 9.01% | | Total loans | $1,581,925 | $1,519,614 | $62,311 | 4.10% | Deposit Portfolio Changes (in thousands) | Deposit Category | June 30, 2025 | Dec 31, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Time Deposits | $334,755 | $247,704 | $87,051 | 35.14% | | Money market | $466,935 | $414,074 | $52,861 | 12.77% | | Interest-bearing demand | $236,239 | $208,291 | $27,948 | 13.42% | | Total deposits | $1,593,618 | $1,445,693 | $147,925 | 10.23% | - The company does not have a concentration in commercial real estate lending as of June 30, 2025, based on regulatory guidance, with commercial real estate loans representing 277.3% of total risk-based capital, below the 300% threshold that would trigger heightened scrutiny135 Results of Operations Net income significantly increased for Q2 and H1 2025, driven by higher net interest income and noninterest income, despite increased noninterest expenses - Net interest margin for the six months ended June 30, 2025, increased by 26 basis points to 3.79% compared to the same period in 2024, attributed to higher loan balances and lower costs on borrowings157 - Noninterest income for the first six months of 2025 increased by $1.5 million (41.2%) year-over-year, primarily due to a $1.2 million gain on a real estate exchange and a $633,000 bank-owned life insurance death benefit167 - Noninterest expense for the first six months of 2025 rose by $2.0 million (8.3%) year-over-year, mainly due to an $847,000 increase in salaries and a $700,000 loss on a property recorded as held for sale169 Liquidity and Capital Resources The company maintains strong liquidity and capital, with substantial borrowing capacity and all regulatory capital ratios exceeding 'well-capitalized' standards - At June 30, 2025, the company had additional borrowing capacity of $389.7 million at the FHLB and $149.5 million at the Federal Reserve discount window185 Regulatory Capital Ratios (Middlefield Banc Corp.) | Ratio | As of June 30, 2025 | Well-Capitalized Minimum (Bank only) | | :--- | :--- | :--- | | Leverage | 11.03% | 5.00% | | Common Equity Tier 1 | 11.72% | 6.50% | | Tier 1 Risk Based | 12.20% | 8.00% | | Total Risk Based | 13.45% | 10.00% | Quantitative and Qualitative Disclosures about Market Risk The company manages interest rate risk, with simulations showing limited impact on net interest income from rate changes within tolerance limits Interest Rate Sensitivity Analysis (June 30, 2025) | Change in Rates | % Change in Net Interest Income (NII) | % Change in Economic Value of Equity (EVE) | | :--- | :--- | :--- | | +200bp | (1.80%) | (2.40%) | | -100bp | 0.90% | (0.60%) | Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective206 - No changes occurred in the Company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls208 Part II – Other Information This section provides additional disclosures including legal proceedings, risk factors, share repurchases, and other miscellaneous information Legal Proceedings A 2023 cyber-attack lawsuit was settled with costs covered by insurance, and no other legal proceedings are deemed material - A lawsuit related to a 2023 cyber-attack has been settled, and the costs associated with the lawsuit were paid by the insurance company in accordance with the policy103209 Risk Factors No material updates or changes to the company's risk factors have occurred since the December 31, 2024, Form 10-K report - No material updates or changes in risks faced by the Company have occurred since December 31, 2024210 Share Repurchases No common shares were repurchased during Q2 2025, with 250,052 shares remaining available under the authorized program - No shares were repurchased during the three months ended June 30, 2025, and the maximum number of shares that may yet be purchased under the program is 250,052211 Other Disclosures and Exhibits The company reported no defaults on senior securities, no new director/officer trading plans, and included a list of exhibits - The company reports no defaults on senior securities and no new Rule 10b5-1 trading plans adopted by directors or officers in the quarter213