Middlefield Banc Corp. Reports First Quarter Net Income

MIDDLEFIELD, OHIO  Middlefield Banc Corp. (Pink Sheets:  MBCN) today reported first quarter net income of $685,000, or $0.56 per diluted share, compared to $653,000, or $0.53 per diluted share, in the first quarter of 2003. 

Middlefield Banc Corp.’s first quarter 2004 results reflect a return on average assets (ROA) of 1.02% and a return on average equity (ROE) of 11.46%.  The company’s first quarter 2004 operating revenue, consisting of net interest income on a taxable equivalent basis and non-interest income, totaled $4,195,000, representing an increase of 8.54% from $3,865,000 during the same period a year ago.

“Our first quarter results represent a strong start to the year,” said Thomas G. Caldwell, President and Chief Executive Officer of Middlefield Banc Corp.  “The performance of our organization during the first three months of this year were driven by solid revenue and loan growth, as well as excellent credit quality.”

Total assets at the end of the quarter were $273,509,000, which is an increase of 13.92% from March 31, 2003.  From the comparable year ago quarter-end, loans were up 12.62%, while deposits increased 17.35%.  Shareholders equity at March 31, 2004 was $24,340,000, an increase of 10.49% from the 2003 first quarter-end.

As of March 31, 2004, the allowance for loan losses totaled $2,545,000, or 1.26% of total loans and 334.43% of non-performing loans.  This compares to 1.33% and 297.44%, respectively, as of March 31, 2003.  Annualized net charge-offs were 0.01% of average loans as of March 31, 2004, compared with 0.04% as of March 31, 2003.  Non-performing loans as a percentage of total loans were 0.38% for both reporting periods.

Net interest income on a tax equivalent basis was $2,416,000 for the first quarter of 2004, an increase of 13.08% from $2,136,000 the same period a year ago.  The net interest margin for the quarter ended March 31, 2004, was 4.00% compared with 4.02% for the quarter ended March 31, 2003.  The continued pressure on the interest margin was the result of the continuation of the historically low interest rate environment.  This was further evidenced by a decline in the yield on earning assets to 6.15% for the first quarter of 2004 from the 6.58% recorded during the comparable year ago period.

Non-interest income was $396,000 for the first three months of 2004.  This is an increase of 43.18% from 2003’s $277,000.  This increase is attributable to the company’s purchase of bank owned life insurance at the end of March 2003, as well as increased fees on deposit accounts.

Non-interest expense for the 2004 first quarter was $1,781,000, up 30.44% from the $1,365,000 recorded in the first quarter of 2003.  $274,000 of this increase of $416,000 was in employee compensation and benefit expense.  This was the result of increased staffing, higher payroll and health insurance costs, and additional pay periods within the quarter.  Reflected within the increased staffing costs, as well as increased occupancy and other costs, is the operation of the bank’s Orwell office, which opened in April 2003.

During the first quarter, Middlefield Banc Corp. declared a quarterly cash dividend of $0.21 per share on its common stock.  The cash dividend was paid on March 15, 2004, to all Middlefield Banc Corp. common stock holders of record as of February 25, 2004.

The company has also announced that it has set Wednesday, May 12, 2004, as the date for its Annual Meeting of Shareholders.  The meeting will be held at 1:00 p.m. at Grandview Inn, 13404 Old State Road, Middlefield, Ohio, 44062.  The record date for determining shareholders entitled to vote at the annual meeting was March 24, 2004.

Middlefield Banc Corp. and The Middlefield Banking Company are headquartered in Middlefield, Ohio.  With assets in excess of $270 million, the bank operates full service banking centers and a LPL Financial brokerage office serving Chardon, Garrettsville, Mantua, Middlefield, and Orwell, Ohio.

 This announcement contains forward-looking statements that involve risk and uncertainties, including changes in general economic and financial market conditions and the Company’s ability to execute its business plans.  Although management believes the expectations reflected in such statements are reasonable, actual results may differ materially.

Middlefield Banc Corp.
Selected Consolidated Financial Information
			For the Three Months Ended March 31,
			2004			2003		% Change
Earnings (in 000s)
	Total interest income	$	3,799		$	3,588		5.88%
	Total interest expense		1,383			1,451		-4.69%
	Net interest income		2,416			2,136		13.08%
	Provision for loan losses		30			105		-71.43%
	Net interest income after
	provision for loan losses		2,386			2,031		17.45%
	Total noninterest income		396			277		43.18%
	Total noninterest expense		1,781			1,365		30.44%
	Income before income taxes		1,001			943		6.19%
	Federal Income Taxes		316			290		8.99%
	Net income		685			653		4.98%
Per share (1)
	Earnings per common share - Basic	$	0.56		$	0.53		5.66%
	Earnings per common share - Diluted		0.56			0.53		5.66%
	Cash Dividends Paid		257			231		11.26%
	Book value (end of period)		19.88			18.15		9.51%
Shares Outstanding
	Average - Basic		1,224,453			1,214,251
	Average - Diluted		1,231,269			1,216,402
	Actual (end of period)		2,455,722			2,430,653
			For the Three Months Ended March 31,
			2004			2003		% Change
Key performance ratios
	Return on average assets		1.02%			1.12%		-8.66%
	Return on average equity		11.46%			11.93%		-3.95%
	Net interest margin		4.00%			4.02%		-0.37%
	Yield on earning assets		6.15%			6.58%		-6.53%
	Efficiency ratio		63.33%			56.68%		11.73%
	Net charge-offs to average loans
	(actual for the period)		0.00%			0.01%		-65.75%
	Net charge-offs to average loans
	(annualized)		0.01%			0.04%		-65.75%
	Total allowance for loan losses
	to nonperforming loans		334.43%			297.44%		12.44%
	Nonperforming loans to
	total loans		0.38%			0.38%		---
	Total allowance for loan losses
	to total loans		1.26%			1.33%		-5.36%
	Equity to assets at period end		8.90%			9.18%		-3.01%
At period end (in 000s)
	Total assets	$	273,509		$	240,086		13.92%
	Total deposits		228,483			194,702		17.35%
	Net loans receivable		199,380			177,044		12.62%
	Securities		50,545			42,839		17.99%
	Shareholders equity		24,340			22,029		10.49%
	(1) Per share data has been restated to reflect the five percent stock dividend paid in 2003.

Middlefield Banc Corp.
Supplemental Detail
			As of March 31,
				2004			2003
BALANCE SHEET (in 000s)
ASSETS
	Cash and due from banks		$	3,434		$	5,983
	Federal funds sold			5,505			0
	Securities available for sale			49,233			38,050
	Held to maturity securities			1,312			4,788
	Total cash and securities			59,484			48,822
	Loans held for investment			201,925			179,433
	Loans held for sale			0			0
	Total loans			201,925			179,433
	Reserve for losses on loans			2,545			2,390
	Intangibles			0			0
	Other real estate owned			0			2
	Premises and equipment			6,707			6,720
	Other assets			7,938			7,499
	TOTAL ASSETS		$	273,509		$	240,086
			As of March 31,
				2004			2003
LIABILITIES
	Deposits		$	228,483		$	194,702
	Federal funds purchased			0			1,600
	Borrowed funds			19,728			20,972
	Other liabilities			958			783
	TOTAL LIABILITIES		$	249,169		$	218,058
EQUITY
	Common equity		$	25,667		$	23,417
	Net unrealized gain (loss) on securities			418			357
	Treasury stock			-1,745			-1,745
	TOTAL EQUITY		$	24,340		$	22,029
	TOTAL LIABILITIES & EQUITY		$	273,509		$	240,086
Supplemental Detail (continued)
INCOME STATEMENT
				For the Three Months
				Ended March 31,
				2004			2003
	Employee compensation and benefits expense		$	920		$	646
	Occupancy and equipment expense			239			179
	Other general, administrative and other expense			622			540
	Total noninterest expense		$	1,781		$	1,365
CHARGE-OFFS
				For the Three Months
				Ended March 31,
				2004			2003
	Loan charge-offs		$	12		$	18
	Recoveries on loans			6			2
	Net loan charge-offs			6			16