8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

July 15, 2008
(Date of Report: Date of earliest event reported)

Middlefield Banc Corp.

(Exact name of registrant as specified in its charter)

Ohio
(State or other jurisdiction of incorporation)

000-32561
(Commission File Number)

34-1585111
(I.R.S. Employer Identification Number)

15985 East High Street
Middlefield, Ohio 44062
(Address of principal executive offices, including zip code)

(440) 632-1666
(Registrant’s telephone number, including area code)

(not applicable)
(Former name or former address, if changed since last report)

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     The following information is furnished under Item 2.02. On July 15, 2008, Middlefield Banc Corp. issued a press release announcing financial results for the second quarter and six month period ended June 30, 2008. A copy of the press release is attached hereto as Exhibit 99 and is incorporated herein by this reference.

     The information contained or incorporated by reference in this current report on Form 8-K may contain forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure. All forward-looking statements included in this current report on Form 8-K are based on information available at the time of the report. Middlefield Banc Corp. assumes no obligation to update any forward-looking statement.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

     (c) Exhibits.

The following exhibits are furnished herewith:

EXHIBITS

99      July 15, 2008 press release of Middlefield Banc Corp.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MIDDLEFIELD BANC CORP.
Date: July 15, 2008	/s/ James R. Heslop, II ,
	Executive Vice President and COO

EX-99.1

EXHIBIT 99

15985 East High Street
P. O. Box 35
Middlefield, Ohio 44062
Phone: 440/632-1666 FAX: 440/632-1700
www.middlefieldbank.com

PRESS RELEASE

Contact:	James R. Heslop, 2nd
	Executive Vice President/Chief Operating Officer
	(440) 632-1666 Ext. 3219
	jheslop@middlefieldbank.com

Middlefield Banc Corp. Reports Second Quarter 2008 Earnings

MIDDLEFIELD, OHIO, July 15, 2008 ¨¨¨¨ Middlefield Banc Corp. (Pink Sheets: MBCN) today reported that net income for the second quarter of 2008 totaled $783,029, or 12.9% less than the $899,231 reported for the same period in 2007. Diluted earnings per share for the second quarter of 2008 were $0.51, an 8.9% decrease from 2007’s second quarter diluted earnings per share of $0.56.

Results from the first half of 2008 reflect a net income of $1,520,025, an 8.0% decrease compared to $1,651,606 for the first six months of 2007. Diluted earnings per share for the first half of 2008 were $0.98, or 7.5% less than diluted earnings per share of $1.06 for the first six months of 2007.

Return on average equity for the three months ended June 30, 2008, was 9.11% compared to 10.55% for the same period in 2007. Return on average assets was 0.70% for the three months ended June 30, 2008. Return on average assets was 0.91% for the three months ended June 30, 2007. For the six months ended June 30, 2008, the returns on average equity and average assets were 8.86% and 0.69%, respectively. The comparable period results from 2007 were 10.21% and 0.90%.

President and Chief Executive Officer Thomas G. Caldwell commented, “We are fully aware that there is difficulty in the current economic environment and that the possibility of a strong positive shift in the near term is not likely. These general conditions, on both a local and a national level, have had a negative impact upon our performance. Nevertheless, we believe that our financial results for the second quarter 2008 reflect the resiliency with which we have worked to address these issues.”

Mr. Caldwell continued, “Our balance sheet growth during the second quarter of 2008 was at a more moderate level. However, we are pleased to report that our net interest margin has leveled and is, in fact, higher than for the first quarter of this year. While we have never been a participant in the subprime lending arena, we have, nonetheless, felt the impact of the overall housing malaise. We continue to be very active in taking steps to address the issues confronting us and those within the industry as a whole. While we expect credit conditions to continue to deteriorate in the near term, our efforts to work closely with borrowers to address the difficulties that they are experiencing remain steadfast.”

“As we had reported earlier, our expansion into the Central Ohio market combined with that which we have undertaken in our northeastern Ohio markets has had a negative impact on our level of noninterest expense. During June, our full service banking office opened in Cortland, Ohio. Additional progress continues to be made as we work to close on our previously announced acquisition of a banking office in Westerville, Ohio. Along with our electronic banking products, we believe that expansion into these markets will have long-term positive effects on our delivery system.”

The company’s total assets ended the second quarter of 2008 at $447.4 million, an increase of 3.0% over the $434.3 million in total assets reported at December 31, 2007. Net loans at June 30, 2008, were $315.9 million, up $9.8 million, or 3.2%, over the $306.1 million reported at December 31, 2007. Total deposits at June 30, 2008, were $374.1 million, or 3.1% greater than the deposit level of $362.9 million at December 31, 2007.

Highlights for the second quarter of 2008 include:

• Net interest income was $3.01 million, an increase of 4.6% from the $2.88 million reported for the comparable period of 2007. The net interest margin was 3.09% for the second quarter of 2008, down from the 3.31% reported for the same quarter of 2007. The decline in the net interest margin is primarily attributable to higher deposit costs and competitive pricing on lending opportunities associated with the current interest rate environment. Deposit growth at the banks has primarily been in products such as time deposits and money market accounts, which generally carry higher interest costs than other deposit alternatives. The company has also grown its investment portfolio, which, while conservative, has produced a lower earnings yield than could be found in loan growth.

• Non-interest income decreased $20,000 for the second three-month period of 2008 over the comparable 2007 period. This decrease of 3.1% was primarily the result of lower service charge revenue associated with deposit accounts. The primary factor was a decline in fees associated with the courtesy overdraft program, which was partially offset by expanded ATM/Debit card usage, and an increase in revenue from investment services. Additionally, earnings on bank-owned life insurance were $4,000 higher during the second quarter of 2008 than the same period of 2007.

• Non-interest expense for the second quarter of 2008 was 11.1%, or $258,000, higher than the second quarter of 2007. Increases in salary and employee benefits of $87,000 were largely attributable to increased staffing, including additions in

	anticipation of the opening of the Cortland banking office, the increase in cost of health insurance, as well as normal wage adjustments. Other expense items contributing to the overall increase were costs associated with compliance with Section 404 of the Sarbanes-Oxley Act, primarily centered in Audit and legal functions, higher fees associated with the increased level of ATM/Debit card usage, amortization of the core deposit intangible associated with acquisitions made by the company, and higher postage and FDIC premiums resulting from increased fee levels charged by those service providers. Data processing costs for the second quarter of 2008 were $27,000 above the level for the same period of 2007. This increase was a direct result of the growth of the company and the products/services offered.
•	Total deposit growth for the first six months of 2008 was $11.2 million. Time deposits increased $8.2 million, while money market accounts and interest bearing demand accounts grew $2.2 million and $3.9 million, respectively. Savings deposits decreased $4.9 million during the period. Net loans at June 30, 2008, stood at $315.9 million. This increase of $9.8 million was fueled by growth in the commercial and home equity loan portfolio segments. The investment portfolio, which is entirely classified as available for sale, stood at $93.8 million at June 30, 2008. This figure represented growth within that portfolio of $7.8 million during the period.
•	Provision for loan losses was $95,000 for the 2008-second quarter, which was in line with the company’s plan. The provision is maintained at a level to absorb management’s estimate of probable inherent credit losses within the bank’s loan portfolio. At June 30, 2008, the allowance for loan losses as a percentage of total loans was 1.08%, which was nearly equal to the 1.09% reported at June 30, 2007. The ratio of non-performing loans to total loans stood at 2.04% at June 30, 2008. This was an increase from the 1.21% reported as of June 30, 2007. Loans classified as non-accrual at June 30, 2008, were $3.97 million, which was up from the $1.69 million reported at June 30, 2007. Loans past due 90 days and still accruing interest, as of June 30, 2008, were $2.56 million, or $0.59 million more than the prior year figure. Additionally, the company held $0.91 million in other real estate owned at its Emerald Bank affiliate.
•	Stockholders’ equity at June 30, 2008, was $33.6 million, or 7.52% of total assets. Book value as of June 30, 2008 was $22.09 per share.
•	In the first six months of 2008, Middlefield paid a cash dividend of $0.51 per share. This represents an increase of 11.6% over the cash dividend paid during the same period of 2007. The 2007 cash dividend amount has been adjusted to reflect the 5% stock dividend paid by the company during the fourth quarter of 2007.

“Our earnings to this point in 2008 are reflective of the overall difficulties being experienced by most of the financial institutions within our market. The actions taken by the Federal Reserve to dramatically lower interest rates by 325 basis points since September 2007 has worked to lower the yield on our loan portfolio as a significant percentage of that portfolio is tied to the Prime Interest Rate. Furthermore, we have found that our competition, after initially dropping deposit pricing, has now become

aggressive in their efforts to grow their balance sheets. This has the potential to have a negative impact on our net interest margin going forward as we work to attract new client relationships, “ commented Donald L. Stacy, Chief Financial Officer and Treasurer of Middlefield Banc Corp.

Stacy continued, “We are also experiencing what is, for us, a higher than normal level of problem loans. While being well secured, we are expending an increased level of effort to effect full collection. Losses will be above recent historic levels, but should remain well within peer ranges.”

Middlefield Banc Corp. is a financial holding company headquartered in Middlefield, Ohio. Its subsidiary, The Middlefield Banking Company, operates full service banking centers and a UVEST Financial Services^® brokerage office serving Chardon, Cortland, Garrettsville, Mantua, Middlefield, Newbury, and Orwell. Its Emerald Bank subsidiary, acquired in 2007, maintains a full service banking office in Dublin, Ohio. Further information is available at www.middlefieldbank.com and www.emeraldbank.com.

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.
Consolidated Selected Financial Highlights
June 30, 2008 and 2007 and December 31, 2007

	(unaudited)				(unaudited)
Balance Sheet (period end)	June 30,		December 31,		June 30,
	2008		2007		2007
Assets Cash and due from banks	$	9,502,382	$	9,072,972	$	7,590,873
Federal funds sold		790,062		8,631,963		4,299,341
Interest-bearing deposits in other institutions		110,387		110,387		559,550
Cash and cash equivalents		10,402,831		17,815,322		12,449,764
Investment securities available for sale		93,797,174		85,967,764		71,874,997
Investment securities held to maturity (estimated		0		0		119,899
market value of $130,579 at June 30, 2007) Loans:		319,350,603		309,445,922		302,528,037
Less: reserve for loan losses		3,434,993		3,299,276		3,283,975
Net loans		315,915,610		306,146,646		299,244,062
Premises and equipment		7,974,133		7,044,685		6,910,163
Goodwill		4,371,207		4,371,206		3,224,264
Bank-owned life insurance		7,295,844		7,153,381		7,012,996
Accrued interest receivable and other assets		7,597,413		5,774,052		5,571,474
Total Assets	$	447,354,212		434,273,056		406,407,619

	June 30,			December 31,			June 30,
	2008			2007			2007
Liabilities and Stockholders’ Equity
Non-interest bearing demand deposits	$	43,132,291		$	41,348,219		$	41,348,568
Interest bearing demand deposits		23,501,076			19,566,035			13,128,166
Money market accounts		24,849,884			22,684,041			27,511,193
Savings deposits		71,953,596			76,895,857			73,077,850
Time deposits		210,651,595			202,423,848			171,792,572
Total Deposits		374,088,442			362,918,000			326,858,349
Short-term borrowings		1,402,320			1,510,607			5,768,056
Federal funds purchased		4,310,000			0			0
Other borrowings		31,656,317			32,395,319			37,225,371
Other liabilities		2,262,658			2,487,746			2,084,045
Total Liabilities		413,719,737			399,311,672			371,935,821
Common equity		26,900,738			26,650,123			23,521,438
Retained earnings		14,594,769			13,746,956			15,644,003
Accumulated other comprehensive income		(1,127,425	)		(52,969	)		(1,288,586	)
Treasury stock		(6,733,607	)		(5,382,726	)		(3,405,057	)
Total Stockholders’ Equity		33,634,475			34,961,384			34,471,798
Total Liabilities and Stockholders’ Equity	$	447,354,212		$	434,273,056		$	406,407,619

MIDDLEFIELD BANC CORP.
Consolidated Selected Financial Highlights
June 30, 2008 and 2007
(unaudited, dollars in thousands, except per share amounts)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
INTEREST INCOME
Interest and fees on loans	$	5,393,090		$	5,315,387		$	10,848,364		$	9,845,616
Interest-bearing deposits in other institutions		3,638			49,724			8,841			105,613
Federal funds sold		22,982			130,200			102,286			261,435
Investment securities Taxable interest		615,132			254,534			1,180,211			520,648
Tax-exempt interest		456,932			459,595			910,875			842,380
Dividends on FHLB Stock		29,612			26,272			59,012			51,767
Total interest income		6,521,386			6,235,712			13,109,589			11,627,459
INTEREST EXPENSE
Deposits		3,098,688			2,869,444			6,432,668			5,184,115
Short term borrowings		7,288			20,455			17,183			39,670
Other borrowings		407,874			469,473			821,985			914,885
Total interest expense		3,513,850			3,359,372			7,271,836			6,138,670
NET INTEREST INCOME		3,007,536			2,876,340			5,837,753			5,488,789
Provision for loan losses		95,000			69,391			170,000			114,391
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		2,912,536			2,806,949			5,667,753			5,374,398
NONINTEREST INCOME
Service charges on deposits		459,033			481,055			924,561			933,002
Earnings on bank-owned life insurance		72,374			68,174			142,462			140,253
Other income		97,060			99,014			198,895			196,616
Net securities gains (losses)		0			0			0			0
Total non-interest income		628,467			648,243			1,265,918			1,269,871
NONINTEREST EXPENSE
Salaries and employee benefits		1,126,754			1,040,092			2,321,173			2,145,000
Occupancy expense		209,403			198,278			440,586			367,508
Equipment expense		139,326			132,423			285,436			254,214
Data processing costs		188,785			161,471			398,065			312,719
Ohio state franchise tax		117,000			108,200			234,000			204,200
Other operating expense		797,706			680,369			1,415,386			1,310,894
Total non-interest expense		2,578,974			2,320,833			5,094,646			4,594,535
Income before income taxes		962,029			1,134,359			1,839,025			2,049,734
Provision for income taxes		179,000			235,128			319,000			398,128
NET INCOME	$	783,029		$	899,231		$	1,520,025		$	1,651,606
Per common share data
Net income per common share — basic	$	0.51		$	0.57		$	0.99		$	1.07
Net income per common share — diluted	$	0.51		$	0.56		$	0.98		$	1.06
Dividends declared	$	0.260		$	0.224		$	0.510		$	0.457
Book value per share(period end)	$	22.09		$	22.66		$	22.09		$	22.66
Tangible book value per share (period end)	$	19.22		$	20.54		$	19.22		$	20.54
Dividend payout ratio		36.41	%		40.50	%		44.22	%		41.99	%
Average shares outstanding — basic		1,530,255			1,583,468			1,539,149			1,543,044
Average shares outstanding -diluted		1,548,607			1,604,931			1,558,494			1,565,023
Period ending shares outstanding		1,522,390			1,521,470			1,522,390			1,521,470
Selected ratios
Return on average assets		0.70	%		0.91	%		0.68	%		0.89	%
Return on average equity		9.11	%		10.55	%		8.86	%		10.21	%
Yield on earning assets		6.45	%		6.89	%		6.52	%		6.84	%
Cost of interest bearing liabilities		3.80	%		4.25	%		3.96	%		4.16	%
Net interest spread		2.64	%		2.64	%		2.68	%		2.68	%
Net interest margin		3.09	%		3.31	%		3.03	%		3.36	%
Efficiency (1)		66.62	%		61.70	%		67.28	%		63.89	%
Equity to assets at period end		7.52	%		8.48	%		7.52	%		8.48	%

(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.

	June 30,			June 30,
Asset quality data	2008			2007
Non-accrual loans	$	3,971,595		$	1,690,646
90 day past due and accruing		2,558,056			1,966,754
Non-performing loans		6,529,651			3,657,400
Other real estate owned		910,966			—
Non-performing assets	$	7,440,617		$	3,657,400
Allowance for loan losses	$	3,434,993		$	3,283,975
Allowance for loan losses/total loans		1.08	%		1.09	%
Net charge-offs:
Quarter-to-date	$	11		$	10
Year-to-date		34			116
Net charge-offs to average loans
Quarter-to-date		0.00	%		0.00	%
Year-to-date		0.01	%		0.04	%
Non-performing loans/total loans		2.04	%		1.21	%
Allowance for loan losses/non-performing assets		46.17	%		89.79	%