As filed with the Securities and Exchange Commission on January 29, 2007
Registration No. 333-                    

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Middlefield Banc Corp.

(Exact name of registrant as specified in its charter)

Ohio (State or other jurisdiction of incorporation or organization)		6022 (Primary Standard Industrial Classification Code Number)		34-1585111 (IRS Employer Identification No.)

15985 East High Street, Middlefield, Ohio 44062-9263
(440) 632-1666
(Address, including ZIP code, and telephone number, including area code, of registrant’s principal executive offices)

James R. Heslop II
Executive Vice President and Chief Operating Officer
Middlefield Banc Corp.
15985 East High Street, P.O. Box 35
Middlefield, Ohio 44062-9263
(440) 632-1666
(Name, address, including ZIP code, and telephone number, including area code, of agent for service)

Copies to:

Mr. Francis X. Grady		Mr. John C. Vorys
Grady & Associates		Vorys, Sater, Seymour and Pease LLP
20950 Center Ridge Road, Suite 100		52 East Gay Street
Rocky River, Ohio 44116-4307		Columbus, Ohio 43215
(440) 356-7255		(614) 464-6400

     Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this Registration Statement

     If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: o

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

Title of each class of

Proposed maximum

Proposed maximum

securities to be registered

Amount to be registered

offering price per share

aggregate offering price (1)

Amount of registration fee (1)

common stock, no par value

100,000

N/A

$1,553,301.00

$166.20

(1)		Calculated in accordance with Rule 457(f)(2) and (f)(3) based upon the December 31, 2006 $7.12 book value per share of the 732,689 shares of Emerald Bank common stock issued and outstanding on that date, which will be exchanged for a combination of cash and shares of Middlefield Banc Corp. common stock in the merger transaction, less the $3,663,445 estimated cash to be paid by Middlefield Banc Corp. in the merger transaction.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

SUBJECT TO COMPLETION, DATED                     , 2007

MIDDLEFIELD BANC CORP.		EMERALD BANK
PROSPECTUS		PROXY STATEMENT
for the issuance of up to [88,000] shares of Middlefield Banc Corp. common stock		for the Annual Meeting of Shareholders to be held on                                          , 2007 at                     :                    , Eastern Standard Time

     Middlefield Banc Corp. and Emerald Bank entered into an Agreement and Plan of Merger on November 15, 2006. The merger agreement provides for Middlefield’s acquisition of Emerald Bank. The acquisition will be accomplished by the merger of Emerald Bank into an interim subsidiary organized by Middlefield on December 11, 2006. We cannot complete the merger unless the holders of a majority of the issued and outstanding shares of Emerald Bank common stock adopt the merger agreement and approve the merger. At the annual meeting Emerald Bank shareholders will consider and vote upon adoption of the merger agreement and approval of the transactions contemplated thereby. The date, time, and place of the annual meeting are -

                    , 2007 at __:                     p.m., Eastern Standard Time
Emerald Bank
6215 Perimeter Drive
Dublin, Ohio 43017

     When the acquisition of Emerald Bank occurs, shareholders will receive aggregate merger consideration of $7,326,890, one half payable in cash and the other half in shares of Middlefield common stock. If a holder of options to acquire Emerald Bank common stock exercises those options before the merger occurs, the aggregate merger consideration will increase by the amount of cash paid to Emerald Bank by the option holder. Conversely, the aggregate merger consideration will decrease if Emerald Bank’s shareholders’ equity (after certain adjustments) is less than $5.3 million at the end of the month immediately before the month in which the merger occurs.

     Emerald Bank shareholders may elect to receive cash, Middlefield shares, or a combination of cash and Middlefield shares. The exact number of Middlefield shares to be received in exchange for each Emerald Bank share will be calculated according to a formula stated in the merger agreement and described in this prospectus/proxy statement. See “The Merger Agreement — Conversion of Emerald Bank shares and exchange ratio” beginning on page                     . Shareholders’ elections are subject to reallocation, however, because one half of the aggregate merger consideration is payable in cash and the other half in Middlefield shares. As a result, we cannot assure you that you will receive the form of consideration you elect to receive. The exchange ratio will be determined after the date of the annual meeting. Therefore, when the annual meeting occurs you will not know the precise value of the stock merger consideration that you may receive. We estimate that Middlefield may issue up to 88,000 shares of common stock to Emerald Bank shareholders as a result of the merger.

     Middlefield shares are not listed on any exchange but they are traded over the counter with the trading symbol “MBCN.” On                     , 2007 the reported closing price for Middlefield shares was $                     per share.

     Investment in Middlefield shares involves risks. For a discussion of these risks, see “Risk Factors” beginning on page                      of this prospectus/proxy statement.

     Regardless of whether you plan to attend the Emerald Bank annual meeting, please complete, sign, and return the enclosed proxy card in the enclosed postage-paid envelope. Not voting will have the same effect as voting against the merger agreement and the transactions contemplated thereby. We urge you to read this prospectus/proxy statement carefully. It contains a detailed description of the merger, the merger agreement, and related matters.

     Middlefield securities are not savings accounts, deposit accounts, or other obligations of a bank or savings association. Middlefield securities are not insured by the Federal Deposit Insurance Corporation, the Deposit Insurance Fund, or any other federal or state governmental agency. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of Middlefield common stock to be issued in the merger or determined whether this prospectus/proxy statement is truthful or complete. A representation to the contrary is a criminal offense.

     This prospectus/proxy statement is dated                     , 2007 and it is first being mailed to Emerald Bank shareholders on or about                     , 2007

Additional Information

     Middlefield is required to file business and financial information with the Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q, and Current Reports on Form 8-K. Middlefield is also required to file proxy or information statements with the SEC. You may obtain any of these documents without charge by writing or calling Middlefield at -

Middlefield Banc Corp.
15985 East High Street
P.O. Box 35
Middlefield, Ohio 44062
          Attention: Mr. Donald L. Stacy
          (440) 632-1666

     To ensure timely delivery of these other documents, your request should be made no later than five business days before the annual meeting of Emerald Bank shareholders. Accordingly, requests should be received by Middlefield no later than                     , 2007.

     You may also obtain these documents through the SEC’s website at www.sec.gov. See “Where You Can Find More Information” on page                     .

Emerald Bank
6215 Perimeter Drive
Dublin, Ohio 43017
(614) 793-4631

Notice of Annual Meeting of Shareholders
to be held on                     , 2007

To the Shareholders of Emerald Bank:

     Notice is hereby given that the annual meeting of Emerald Bank shareholders will be held on                     , 2007 at ___:___ p.m., Eastern Standard Time, at the main office of Emerald Bank, 6215 Perimeter Drive, Dublin, Ohio 43017. The meeting will be held for the purpose of considering and voting upon -

     1. A proposal to adopt the November 15, 2006 Agreement and Plan of Merger, as amended, providing for the acquisition of Emerald Bank by Middlefield Banc Corp. through the merger of Emerald Bank into EB Interim Bank, a wholly owned subsidiary of Middlefield Banc Corp., and approve the transactions contemplated thereby, as described in the attached prospectus/proxy statement,

     2. A proposal to elect one director for the term ending at the annual meeting in 2008,

     3. A proposal to elect three directors for the term ending at the annual meeting in 2009,

     4. A proposal to ratify the selection of Crowe Chizek and Company, LLC as independent auditor of Emerald Bank for the year ending December 31, 2007,

     5. A proposal to adjourn the annual meeting to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the Agreement and Plan of Merger and approve the merger, and

     6. Any other business that properly comes before the meeting or any adjournment or postponement of the meeting. The Board of Directors is not aware of any other business to be transacted at the meeting.

     Holders of record of Emerald Bank common stock at the close of business on                     , 2007 may vote on each matter presented at the meeting and any adjournment or postponement. Adoption of the merger agreement and approval of the merger requires the affirmative vote of at least a majority of the issued and outstanding shares of Emerald Bank common stock entitled to vote.

     The Board of Directors of Emerald Bank unanimously recommends that you vote “FOR” the merger agreement and the transactions contemplated thereby.

     Emerald Bank shareholders may dissent from the merger. If you wish to exercise dissenters’ rights, you must comply with the procedures specified in the Ohio General Corporation Law. See “Dissenters’ Rights” in the accompanying prospectus/proxy statement for additional information.

     Your vote is very important, regardless of the number of Emerald Bank common shares that you own. Please vote as soon as possible to make sure that your shares are represented at the meeting. To vote your shares, you may complete and return the enclosed proxy card. If you are a holder of record, you also may cast your vote in person at the meeting.

By Order of the Board of Directors,

Glenn E. Aidt
President and Chief Executive Officer

Dublin, Ohio
                    , 2007

TABLE OF CONTENTS

		page
Questions and Answers About the Merger			1
Summary			4
Risk Factors			9
Caution About Forward-Looking Statements			12
Comparative Common Stock Data			13
The Annual Meeting of Emerald Bank Shareholders			15
Purpose, time and place of the meeting			15
Record date; Emerald Bank common shares outstanding and entitled to vote			16
Votes required; quorum			16
Solicitation and revocation of proxies			16
Dissenters’ Rights			17
The Proposed Merger (Proposal One)			18
The merger			18
Background and reasons for the merger			18
Opinion of Emerald Bank’s financial advisor			20
Regulatory approvals required			27
Interests of Emerald Bank directors and officers in the merger			27
Directors, officers, and employees of Emerald Bank after the merger			28
Material federal income tax consequences			28
Accounting treatment			30
Resale of Middlefield shares			30
The Merger Agreement			30
Parties to the merger agreement			30
Effective time			31
Conversion of Emerald Bank shares and exchange ratio			31
Cash and stock elections			32
Surrender of certificates			33
Conditions to completion of the merger			34
Representations and warranties			35
Conduct of business pending the merger			36
Emerald Bank employees and employee benefits			38
Indemnification of Emerald Bank directors and officers and insurance			38
Expenses of the merger			39
Termination of the merger agreement			39
Description of Middlefield Common Stock and Comparison of Rights of Middlefield and Emerald Bank Shareholders			39
Authorized shares			39
Preemptive rights			39
Liquidation rights			39
Dividends			39
Number and election of directors; voting power			40
Classification of the board of directors and director terms			40
Nomination of directors			40
Board vacancies			41
Removal of directors			41

		page
Shareholder meetings			41
Special voting requirements			42
Amendment of articles of incorporation			43
Amendment of regulations			43
Corporate action without a shareholder meeting			43
Indemnification of directors and officers			44
Personal liability of directors			45
Changes in control			45
Information about Emerald Bank			47
Emerald Bank’s business			47
Selected financial data of Emerald Bank			47
Information about Middlefield Banc Corp			48
Middlefield’s business			48
Supervision and regulation			57
Properties			61
Legal proceedings			62
Selected financial data of Middlefield			62
Management’s discussion and analysis of financial condition and results of operations			64
Middlefield’s board and management			76
Election of Emerald Bank Directors (Proposals Two and Three)			89
Ratification of the Selection of Emerald Bank’s Auditor (Proposal Four)			90
Adjournment of the Meeting (Proposal Five)			90
Other Matters			90
Experts			90
Legal Matters			90
Where You Can Find More Information			90
Sources of Information			91
Financial Statements of Middlefield Banc Corp			F-1
Appendix A Agreement and Plan of Merger, as amended			A-1
Appendix B Fairness Opinion of Ryan Beck & Co., Inc			B-1
Appendix C Dissenters’ Rights under Ohio Revised Code section 1701.85			C-1
EX-5
EX-23.1
EX-23.2
EX-99.1
EX-99.2

Questions and Answers About the Merger

Q: What am I being asked to vote on? What is the proposed transaction?

A: You are being asked to approve a merger agreement providing for the acquisition of Emerald Bank by Middlefield Banc Corp. As a result of the merger, you may become a shareholder of Middlefield. The acquisition is structured as the merger of Emerald Bank into a subsidiary recently organized by Middlefield. The recently organized subsidiary will be the surviving entity in the merger, its name will be changed to Emerald Bank when the merger occurs, and it will continue to operate as a separate subsidiary of Middlefield after the merger.

Q: Why are Emerald Bank and Middlefield entering into this transaction?

A: Emerald Bank believes that the proposed acquisition will benefit its shareholders. Because it is a larger company, Middlefield can provide the capital and resources Emerald Bank needs to compete more effectively, including a broader array of products and services. From Middlefield’s perspective, the acquisition will give Middlefield the opportunity to extend its banking franchise into one of the most prosperous portions of the state. To review the reasons for the merger in more detail, see “The Proposed Merger (Proposal One) — Background and reasons for the merger” beginning on page                     .

Q: What does Emerald Bank’s board of directors recommend?

A: Emerald Bank’s board of directors unanimously recommends that you vote “FOR” approval of the merger. The board believes that the merger is in the best interests of Emerald Bank and its shareholders. To review the background and reasons for the merger in greater detail, see pages                      to                     .

Q: What vote is required to approve the merger agreement?

A: The merger will not be approved unless the holders of a majority of the issued and outstanding shares of Emerald Bank common stock vote in favor of it. Emerald Bank’s President and Chief Executive Officer and another director of Emerald Bank have agreed to vote their shares in favor of the merger at the annual meeting. These shareholders own approximately 36.5% of Emerald Bank’s outstanding shares. Middlefield’s shareholders will not be voting on the merger agreement. See “The Proposed Merger (Proposal One) — Interests of Emerald Bank directors and officers in the merger” on page                     .

Q: Is completion of the merger subject to any conditions besides shareholder approval?

A: Yes. Middlefield’s acquisition of Emerald Bank cannot be completed unless Middlefield obtains Federal Reserve Board approval under the Bank Holding Company Act of 1956, FDIC approval under the Federal Deposit Insurance Act, and approval of the Ohio Division of Financial Institutions under Ohio banking law. There also are other closing conditions that must be satisfied, which are summarized in this prospectus/proxy statement.

Q: When do you expect the merger to be completed?

A: We will try to complete the merger as soon as reasonably possible. Assuming a majority of Emerald Bank’s issued and outstanding shares vote in favor of the merger and assuming we obtain the necessary regulatory approvals, we expect to complete the merger by May 31, 2007.

Q: Are there risks I should consider in my decision about the merger agreement?

A: Yes. You should read this prospectus/proxy statement carefully, including the factors discussed in the section titled “Risk Factors,” which begins on page                     .

Q: What price has Middlefield agreed to pay?

A: Middlefield has agreed to pay a total of $7,326,890 to acquire Emerald Bank, with one half of the price payable in cash and the other half in Middlefield common stock. If any of the outstanding options to acquire Emerald Bank stock are exercised, the total purchase price will be increased by the amount of cash received by Emerald Bank from the individual who exercised his or her stock options. Conversely, if Emerald Bank’s shareholders’ equity at the end of the month immediately before the merger occurs is not $5.3 million or more, the total price to be paid by Middlefield will be reduced by the difference between $5.3 million and Emerald Bank’s actual shareholders’ equity at month end. On December 31, 2006 Emerald Bank’s shareholders’ equity was approximately $5.2 million. Although this figure is less than $5.3 million, the calculation of Emerald Bank’s shareholders’ equity at the end of the month immediately before the merger occurs will exclude the impact that expenses associated with the merger have had and will have on Emerald Bank’s shareholders’ equity.

Q: What will I be entitled to receive in the merger?

A: Your per share merger consideration will consist of cash, Middlefield common stock, or a combination of cash and Middlefield stock. You have the opportunity to elect cash, Middlefield common stock, or a combination of cash and stock. If there are at completion of the merger 732,689 shares of Emerald Bank outstanding, which is the number outstanding on the date of this prospectus/proxy statement, and if Emerald Bank’s adjusted shareholders’ equity remains at $5.3 million or more (after expenses

associated with the merger are added back to shareholders’ equity), each Emerald Bank shareholder will receive merger consideration of $10.00 for each Emerald Bank share, consisting of $10.00 in cash for each of your Emerald Bank shares if all of your shares are exchanged for cash, or Middlefield stock with a value of $10.00 if instead all of your shares are exchanged for Middlefield shares. The exact number of Middlefield shares you will receive in exchange for each of your Emerald Bank shares depends upon the average closing price of Middlefield stock over the period that ends three business days before the merger occurs and that consists of the 20 most recent trading days on which trades in Middlefield stock actually occur. Middlefield will not issue fractional shares or certificates or scrip for fractional shares. Instead, Middlefield will pay to each holder of Emerald Bank shares who would otherwise be entitled to a fractional share an amount in cash, without interest, equal to the value of the fractional share multiplied by the exchange ratio. The closing price reported for Middlefield stock on November 14, 2006, the last trading day before our public announcement of the merger, was $40.48. The closing price reported for Middlefield stock was $                      on                      , 2007, the most recent trading day before we completed this prospectus/proxy statement.

Q: How do I make an election for the merger consideration?

A: You have been provided with an election form allowing you to choose cash, Middlefield shares, or a combination of cash and Middlefield shares. The election form is separate from the proxy form. Please return the election form to Middlefield in the enclosed prepaid return envelope. The completed election form must be received by Middlefield on or before                     , 2007, the date of the annual meeting.

Q: Will I actually receive the form of merger consideration that I elect?

A: Not necessarily. One half of the aggregate merger consideration will be paid by Middlefield in cash and the other half in Middlefield shares. Depending on the results of all shareholders’ elections, Middlefield may have to reallocate the amount of stock or cash you receive to maintain the 50/50 allocation between cash and Middlefield shares. For example, if you elect to receive all cash consideration — depending on the elections made by other Emerald Bank shareholders — it is possible that you will receive a portion of the merger consideration in cash and a portion in Middlefield shares. The same possibility exists if you elect to receive all stock consideration. Please see “The Merger Agreement — Cash and stock elections,” beginning on page          .

Q: What if I fail to make an election specifying how I desire to receive the merger consideration?

A: If you do not submit a properly completed election form before 5:00 p.m., Eastern Standard Time, on                     , 2007, or if you return an election form stating no preference between cash and Middlefield shares, your Emerald Bank shares will be considered “non-election shares” and the merger consideration you receive will be subject to the allocation procedures stated in Article Two of the merger agreement.

Q: Why is my vote important?

A: If you do not submit your proxy by mail or vote in person at the annual meeting, it will be more difficult for Emerald Bank to obtain the necessary quorum. Additionally, your failure to vote in person or by proxy has the same effect as voting against the merger. This is because the merger cannot be completed unless the agreement is approved by the holders of a majority of all issued and outstanding Emerald Bank shares.

Q: What do I need to do now? How do I vote?

A: After you carefully read and consider the information contained in this prospectus/proxy statement, please complete, sign, date, and mail your proxy form in the enclosed return envelope as soon as possible. This will allow your shares to be represented at the annual meeting. You may also vote in person at the meeting.

Q: How will my proxy be voted?

A: If you sign, date, and mail your proxy form, your proxy will be voted in accordance with your proxy instructions. If you sign, date, and send in your proxy form but you do not indicate how you want to vote, your proxy will be voted FOR approval of the merger agreement.

Q: May I revoke my proxy and change my vote?

A: Yes. You may change your vote or revoke your proxy before the annual meeting by filing with the secretary of Emerald Bank a duly executed revocation of proxy, submitting a new proxy form with a later date, or voting in person at the meeting. Mere presence at the meeting will not, however, constitute revocation of your proxy.

Q: What if I oppose the merger? Do I have dissenters’ rights?

A: Yes. Shareholders who do not vote in favor of the merger agreement and who also comply with all of the procedures of the Ohio General Corporation Law will be entitled to receive payment in cash of the fair value of their common shares of Emerald Bank. A copy of the relevant sections of the Ohio General Corporation Law is attached as Appendix C to this document. The value received by a dissenting shareholder could be more or less than the merger consideration.

Q: What are the tax consequences of the merger to me?

A: In general, the exchange of your Emerald Bank shares for Middlefield shares in the merger will be tax-free for United States federal income tax purposes. However, if you receive a combination of cash and Middlefield shares in exchange for your Emerald Bank shares, you will recognize gain, but not loss, in an amount limited to the amount of cash you receive in the merger. Additionally, you will recognize gain or loss on any cash that you receive instead of fractional shares of Middlefield stock. If you exchange your Emerald Bank shares solely for cash, you will recognize gain or loss as if you had received such cash in redemption of your Emerald Bank shares, subject to the provisions and limitations of section 302 of the Internal Revenue Code of 1986, as amended. You should consult with your tax adviser about the specific federal, state, local, and foreign tax consequences of the merger to you. See “The Proposed Merger (Proposal One) — Material federal income tax consequences” beginning on page                     .

Q: Should I send in my stock certificates now?

A: Yes. You should complete the letter of transmittal included with the election form you received with this prospectus/proxy statement. Please send the election form, the letter of transmittal, and your share certificates to Middlefield in the envelope that has been provided to you.

Q: Who can answer my other questions?

A: If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this prospectus/proxy statement or the enclosed proxy form, please call Mr. Glenn E. Aidt, Emerald Bank’s President and CEO, at (614) 793-4631, or Mr. James R. Heslop II, Middlefield’s Executive Vice President and Chief Operating Officer, at (440) 632-1666.

Risk Factors

     In addition to the other information contained in this prospectus/proxy statement, including the information under the caption “Caution About Forward-Looking Statements” on page         , you should consider the following risk factors carefully in your voting decision about the merger.

Risks relating to the merger

     Because the market price of Middlefield common stock fluctuates, you cannot be certain of the precise value of the stock portion of the merger consideration. You may elect to receive shares of Middlefield common stock in the merger. It is also possible that you will receive Middlefield shares even if you elect to receive cash only. The number of shares you receive will depend on your election and on other shareholders’ elections. Changes in the market price of Middlefield common stock could result from a variety of factors, including general market and economic conditions, Middlefield’s future financial condition and operating results, changes in Middlefield’s business, operations, and prospects and regulatory considerations, factors that are not entirely within Middlefield’s control. The price of Middlefield common stock at completion of the merger could be different from its price on the date the merger agreement was signed, from its price on the date of this prospectus/proxy statement, from its price on the date of the annual meeting, and from the average closing-price figure that is used to determine the number of Middlefield shares you receive. You will not be entitled to receive additional cash or shares in the merger if the price of Middlefield common stock when the merger occurs is less than the average closing-price figure. Because the merger will be completed after the annual meeting, you will not know at the annual meeting what the market value of Middlefield common stock will be when the merger occurs. See “The Merger Agreement – Conversion of Emerald Bank shares and exchange ratio.”

     Middlefield common stock is traded over the counter in the Pink Sheets® with the trading symbol “MBCN.” Pink Sheets® is a centralized quotation service provided by Pink Sheets LLC, a privately owned company, which collects and publishes market maker quotes for over-the-counter securities. The maintenance of an active public trading market depends, however, upon the existence of willing buyers and sellers, which is beyond Middlefield’s control or the control of any market maker.

     You may receive a form of consideration different from the form of consideration you elect. Although you are able to elect the form of consideration you wish to receive in the merger, your election is subject to possible reallocation to ensure that one half of the merger consideration is payable in cash and the other half in the form of Middlefield shares. If you elect to receive cash in exchange for all of your Emerald Bank shares but the available cash is oversubscribed, you will receive a portion of the merger consideration in the form of Middlefield shares. Likewise, if you elect to receive Middlefield shares in exchange for all of your Emerald Bank shares but the available Middlefield shares are oversubscribed, you will receive a portion of the merger consideration in cash. If you elect to receive a combination of cash and Middlefield shares and either the available Middlefield shares or the available cash is oversubscribed, you will not receive the specific combination of cash and Middlefield shares you elect.

     Middlefield could experience difficulties managing growth and effectively integrating Emerald Bank. There are risks associated with assessing the values, strengths, weaknesses, and profitability of acquisition candidates, including adverse short-term effects of acquisitions on operating results, diversion of management’s attention, dependence on retaining key personnel, and risks associated with unanticipated problems. An acquisition’s success depends in part on the acquiror’s ability to integrate the operations of the acquired institution and achieve cost savings and operating efficiencies. Middlefield might not be able to achieve its strategic objectives in the merger. The costs or difficulties relating to the integration of Emerald Bank into the Middlefield organization may be greater than expected and the revenue gains or cost savings may be less than or take longer to realize than expected. Additionally, Emerald Bank could lose customers as a result of the merger. These factors could contribute to Middlefield not fully achieving the benefits it expects from the merger. This is Middlefield’s first acquisition of another institution. Without the experience integrating acquired companies that many other banking organizations have, Middlefield therefore faces a greater risk that acquisition costs will exceed projections and that the benefits will be less than projected or more difficult to attain.

     The termination fee could discourage other companies from trying to acquire Emerald Bank even if another acquisition would offer greater immediate value to Emerald Bank shareholders. In the merger agreement Emerald Bank has agreed to pay Middlefield a termination fee of $300,000 if Emerald Bank’s board of directors terminates the merger agreement and authorizes a competing acquisition by an entity other than Middlefield. The termination fee could have the effect of discouraging another company from trying to acquire Emerald Bank, even though a competing acquisition proposal might provide greater immediate value to Emerald Bank shareholders.

     The fairness opinion obtained by Emerald Bank from its financial advisor will not reflect changes in circumstances before the merger occurs. Emerald Bank’s financial advisor, Ryan Beck & Co., Inc., delivered a fairness opinion to Emerald Bank’s board of directors on November 15, 2006, which fairness opinion has been updated as of the date of this prospectus/proxy statement. The fairness opinion states that, as of the date of the opinion, the merger consideration set forth in the merger agreement

was fair from a financial point of view to Emerald Bank shareholders. The fairness opinion does not reflect changes that could occur or that may have occurred after the date of this prospectus/proxy statement, including changes in the operation and prospects of Middlefield or Emerald Bank, changes in general market and economic conditions, or other factors. Any such changes or other factors on which the fairness opinion is based could alter the relative value of Middlefield and Emerald Bank.

     Some directors and officers of Emerald Bank have potential conflicts of interest in the merger. Some of the directors and officers of Emerald Bank have interests in the merger that are different from or in addition to their interests as Emerald Bank shareholders. For example, Glenn E. Aidt, President and Chief Executive Officer of Emerald Bank, is entitled under the merger agreement to receive a cash retention bonus of $70,000 if he remains employed by Emerald Bank through the date the merger occurs. A retention bonus of $65,000 will be payable to Michael J. Hufford, Emerald Bank’s Senior Vice President and Chief Loan Officer. Additionally, Middlefield has agreed to maintain directors’ and officers’ liability insurance for the directors and officers of Emerald Bank for three years after the merger. See “The Proposed Merger (Proposal One) – Interests of Emerald Bank directors and officers in the merger” beginning on page                     of this prospectus/proxy statement.

     Emerald Bank shareholders will not control Middlefield’s future operations. Emerald Bank shareholders in the aggregate will own approximately 6% of the approximately 1.5 million Middlefield shares that will be outstanding after the merger. As a result, former Emerald Bank shareholders will not have a significant impact on the election of directors or on whether future proposals submitted to a vote of Middlefield shareholders are approved or rejected.

Risks relating to Middlefield’s business

     Changes in interest rates could have a material adverse effect on Middlefield’s financial condition and results of operations. Middlefield’s earnings depend substantially on interest rate spread, which is the difference between (x) the rates Middlefield earns on loans, investment securities, and other interest-earning assets and (y) the interest rates Middlefield pays on deposits and borrowings. These rates are highly sensitive to many factors beyond Middlefield’s control, including general economic conditions and the policies of various governmental and regulatory authorities. Although Middlefield attempts to manage the risks of operating in a changing interest rate environment, Middlefield cannot assure you that its efforts will effectively avoid undue interest-rate risk.

     Middlefield’s market is very competitive and Middlefield does not have the same financial and other resources that larger competitors have. This could affect Middlefield’s ability to compete for large commercial loan originations and its ability to offer products and services competitors provide to customers. Middlefield faces competition making loans and competition gathering deposits. Competition is based on interest rates and other credit and service charges, the quality of services rendered, the convenience of banking facilities, the range and type of products offered and, in the case of loans to larger commercial borrowers, lending limits, among other factors. Competition for loans comes principally from commercial banks, savings banks, savings and loan associations, credit unions, mortgage banking companies, insurance companies, and other financial service companies. The most direct competition for deposits has historically come from commercial banks, savings banks, and savings and loan associations, but competition for deposits also comes from non-depository institutions such as mutual funds, securities and brokerage firms, and insurance companies. Competition among financial institutions and other financial service organizations is increasing with the continuing consolidation of the financial services industry. The northeastern Ohio market in which Middlefield currently operates and the Columbus market in which Emerald Bank operates have a high concentration of financial institutions. Many of the competing financial institutions have significantly greater financial, staff, and other resources and higher lending limits. More geographically diversified than Middlefield, many of the competitors are therefore less vulnerable to adverse changes in the local economy. And many of these competitors offer services that Middlefield does not or cannot provide. For example, larger competitors’ greater resources offer advantages such as the ability to price services at lower, more attractive levels, and the ability to provide larger credit facilities than Middlefield can provide. Likewise, some of the competitors are not subject to the same kind and amount of regulatory restrictions and supervision to which Middlefield is subject. Because Middlefield is a community-banking organization of relatively modest size, it is on occasion unable to make commercial loans in amounts competitors can offer.

     The business of banking is changing rapidly with changes in technology, which poses financial and technological challenges to small and mid-sized institutions. With frequent introductions of new technology-driven products and services, the banking industry is undergoing rapid technological changes. In addition to enhancing customer service, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Financial institutions’ success is increasingly dependent upon use of technology to provide products and services that satisfy customer demands and to create additional operating efficiencies. Many of Middlefield’s competitors have substantially greater resources to invest in technological improvements, which could enable them to perform various banking functions at lower costs than Middlefield, or to provide products and services that Middlefield is not able to provide economically. Middlefield cannot assure you that it will be able to develop and implement new technology-driven products or services or that it will be able to successfully market the products or services to customers.

     Because of the demand for technology-driven products, banks rely increasingly on unaffiliated vendors to provide data processing services and other core banking functions. The use of technology-related products and services exposes banks to various risks, particularly transaction, strategic, reputation, and compliance risk. Middlefield cannot assure you that it will be able to successfully manage the risks associated with its dependence on technology.

     The banking industry is heavily regulated; the compliance burden to the industry is considerable; the principal beneficiary of federal and state regulation is the public at large and depositors, not stockholders. Middlefield and The Middlefield Banking Company – which currently is Middlefield’s sole subsidiary – are and will remain subject to extensive state and federal government supervision and regulation. Affecting many aspects of the banking business, including permissible activities, lending, investments, payment of dividends, the geographic locations in which services can be offered, and numerous other matters, state and federal supervision and regulation are intended principally to protect depositors, the public, and the deposit insurance fund administered by the FDIC. Protection of shareholders is not a goal of banking regulation.

     Applicable statutes, regulations, agency and court interpretations, and agency enforcement policies have undergone significant changes, some retroactively applied, and could change significantly again. Changes in applicable laws and regulatory policies could adversely affect the banking industry generally or Middlefield and its subsidiaries in particular. The burdens of federal and state banking regulation could place banks in general at a competitive disadvantage compared to less regulated competitors. Middlefield gives you no assurance that it will be able to adapt successfully to industry changes caused by governmental actions.

     Federal and state banking agencies require banks and bank holding companies to maintain capital. Failure to maintain adequate capital or to comply with applicable laws, regulations, and supervisory agreements could subject a bank or bank holding company to federal or state enforcement actions, including termination of deposit insurance, imposition of fines and civil penalties, and, in the most severe cases, appointment of a conservator or receiver for a depositary institution.

     Success in the banking industry requires disciplined management of lending risks. There are many risks in the business of lending, including risks associated with the duration over which loans may be repaid, risks resulting from changes in economic conditions, risks inherent in dealing with individual borrowers, and risks resulting from changes in the value of loan collateral. Middlefield maintains an allowance for loan losses based on historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality, among other things. Middlefield’s judgment about the adequacy of the loan loss allowance is based on assumptions that Middlefield believes are reasonable but that might nevertheless prove to be incorrect. Middlefield gives you no assurance that the allowance will be sufficient to absorb future charge-offs. Additions to the loan loss allowance could occur, which would decrease net income and capital.

     An economic downturn in our market area would adversely affect our loan portfolio and our growth prospects. The lending market of The Middlefield Banking Company currently is concentrated in northeastern Ohio, particularly Geauga, Portage, Ashtabula, and Trumbull Counties. Also a community-banking institution, Emerald Bank’s market is concentrated in the Columbus, Ohio area. A significant percentage of each bank’s loans is secured by real estate collateral, primarily residential mortgage loans. Commercial and industrial loans to small and medium-sized businesses also represent a significant percentage of The Middlefield Banking Company’s loan portfolio. The asset quality of a community-banking institution’s loan portfolio is largely dependent upon the economy and real estate markets in its local area. A downturn in the local economy would adversely affect operations and limit future growth potential.

     Middlefield common stock is very thinly traded, and it is therefore susceptible to wide price swings. Middlefield common stock is not traded or authorized for quotation on an exchange. However, the stock trades over the counter and bid prices for Middlefield common stock appear from time to time in the Pink Sheets®, a centralized quotation service provided by Pink Sheets LLC, a privately owned company, which collects and publishes market maker quotes for over-the-counter securities. Thinly traded, illiquid stocks such as Middlefield common stock are more susceptible to significant and sudden price changes than stocks that are widely followed by the investment community and actively traded on an exchange. The liquidity of common stock depends upon the presence in the marketplace of willing buyers and sellers. We cannot assure you that you will be able to find a buyer for your Middlefield shares.

     Middlefield currently does not intend to seek listing of its common stock on a securities exchange. But even if Middlefield were to successfully list its common stock on a securities exchange, Middlefield nevertheless could not assure you that an organized public market for the securities will develop or that there will be any private demand for the stock. Middlefield could also fail subsequently to satisfy the standards for continued exchange listing, such as standards having to do with the minimum number of public shareholders or the aggregate market value of publicly held shares. A stock that is not listed on a securities exchange might not be accepted as collateral for loans. If accepted as collateral, the stock’s value could nevertheless be substantially discounted. Therefore, Middlefield common stock should be considered a long-term investment and holders of Middlefield stock should be

prepared to bear the economic risk of an investment in the common stock for an indefinite period. Investors who need or desire to dispose of all or a part of their investments in common stock might not be able to do so except by private, direct negotiations with third parties.

     Government regulation could restrict our ability to pay cash dividends. Dividends from The Middlefield Banking Company currently are the only significant source of cash for Middlefield. Statutory and regulatory limits could prevent the bank from paying dividends or transferring funds to Middlefield. As of September 30, 2006 The Middlefield Banking Company could have declared dividends of approximately $6.5 million to Middlefield without having to obtain advance regulatory approval. Middlefield cannot assure you that subsidiaries’ profitability will continue to allow dividends payments to Middlefield. Although Middlefield has paid regular quarterly cash dividends, it therefore cannot assure you of regular cash dividends in the future.

     Middlefield could incur liabilities under federal and state environmental laws if we foreclose on commercial properties. A large percentage of the loans of The Middlefield Banking Company are secured by real estate. Although the vast majority of these loans are residential mortgage loans with little associated environmental risk, some are commercial loans secured by property on which manufacturing and other commercial enterprises are carried on. As of September 30, 2006 Middlefield’s bank subsidiary did not own any property acquired by foreclosure. However, the bank has in the past and could again acquire property by foreclosing on loans in default. Under federal and state environmental laws, the bank could face liability for some or all of the costs of removing hazardous substances, contaminants, or pollutants from properties acquired in this fashion. Although other persons might be primarily responsible for these costs, they might not be financially solvent or they might be unable to bear the full cost of clean up. Regardless of whether it forecloses on property, it is also possible that a lender exercising unusual influence over a borrower’s commercial activities could be required to bear a portion of the clean-up costs under federal or state environmental laws.

Caution About Forward-Looking Statements

     Some of the statements in this prospectus/proxy statement are not statements of historical fact but rather are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include but are not limited to statements specifically identified as forward-looking statements within this prospectus/proxy statement. In addition, statements in Middlefield’s future filings with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of Middlefield that are not statements of historical fact constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act. Examples of forward-looking statements include (x) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure, and other financial items, (y) statements of the plans and objectives of Middlefield or its board of directors and management, including those relating to products or services, and (z) statements of future economic performance. Words such as may, will, should, could, would, plan, potential, estimate, project, believe, intend, anticipate, expect, target, and similar expressions identify forward-looking statements but are not the exclusive means to identify forward-looking statements.

     The Private Securities Litigation Reform Act provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying the important factors that could cause actual results to differ materially from those discussed in the forward-looking statements. We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act.

     Forward-looking statements are subject to significant risks, assumptions, and uncertainties and could be affected by many factors, including but not limited to the matters discussed under the caption “Risk Factors” beginning on page          as well as -

	-		the strength of the United States economy in general and the strength of the local economies in which we conduct our operations; general economic conditions, either nationally or regionally, may be less favorable than we expect, resulting in a deterioration in the credit quality of our loan assets, among other things
	-		the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest-rate policies of the Federal Reserve Board
	-		inflation, interest rate, market, and monetary fluctuations
	-		the development and acceptance of new products and services of Middlefield and subsidiaries and the perceived overall value of these products and services by users, including the features, pricing, and quality compared to competitors’ products and services
	-		the willingness of users to substitute our products and services for those of competitors

	-		the impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities, and insurance)
	-		changes in consumer spending and saving habits

     Because of these and other uncertainties, Middlefield’s actual future results, performance, or achievements or industry results could be materially different from the results suggested by the forward-looking statements. Additionally, Middlefield’s future results of operations will not necessarily be similar to Middlefield’s historical results of operations. You should not place undue reliance on forward-looking statements, which are effective solely as of the dates on which they are made. Except as required under federal securities law, Middlefield undertakes no obligation to update its forward-looking statements to account for events and changing circumstances after the dates on which the forward-looking statements are made. Middlefield qualifies all of its forward-looking statements by these cautionary statements.

Comparative Common Stock Data

     The historical per share earnings (loss), dividends, and book value of Middlefield and Emerald Bank shown in the table to follow are derived from their audited financial statements as of and for the year ended December 31, 2005 and the unaudited financial statements for the nine months ended September 30, 2006. The pro forma comparative per share data for Middlefield common stock and Emerald Bank common stock give effect to the merger using the purchase method of accounting. You should read this information in conjunction with the historical financial information for Middlefield and for Emerald Bank included elsewhere in this prospectus/proxy statement, including Middlefield’s financial statements and related notes. The per share pro forma information assumes that (x) 366,345 shares of Emerald Bank common stock are converted into the right to receive cash consideration of $10.00 per share and (y) 366,344 shares are converted into Middlefield shares at the exchange ratio. Because there is no established trading market for Emerald Bank shares, there is no readily obtainable market price for Emerald Bank shares. The pro forma data are not necessarily indicative of actual results had the merger been completed at the beginning of the period indicated. The pro forma data are not necessarily indicative of future operations of the combined entity.

		As of and for the				As of and for the
		nine months ended				year ended
		September 30, 2006				December 31, 2005
Earnings per share: Basic
Middlefield historical		$	1.93			$	2.64
Emerald Bank historical			(0.59	)			(1.07	)
Pro forma combined			1.53				1.96
Equivalent pro forma for one share of Emerald Bank common stock (1)			0.38				0.48
Earnings per share: Diluted
Middlefield historical		$	1.90			$	2.60
Emerald Bank historical			(0.59	)			(1.07	)
Pro forma combined			1.51				1.93
Equivalent pro forma for one share of Emerald Bank common stock (1)			0.37				0.48
Cash dividends declared per share
Middlefield historical		$	0.68			$	0.87
Emerald Bank historical			0.00				0.00
Pro forma combined (2)			0.64				0.75
Equivalent pro forma for one share of Emerald Bank common stock (1) (2)			0.16				0.19
Book value per share
Middlefield historical		$	20.74			$	19.25
Emerald Bank historical			7.44				8.00
Pro forma combined			21.95				20.56
Equivalent pro forma for one share of Emerald Bank common stock (1)			5.42				5.08

     Neither Middlefield’s nor Emerald Bank’s common stock is listed on any exchange or quoted in the automated quotation system of a registered securities association. However, Middlefield shares are traded over the counter with the trading symbol “MBCN.” Price information for Middlefield common stock is available through the Pink Sheets®. There is no established public trading market for Emerald Bank shares. Middlefield common stock is held of record by approximately 932 shareholders. Emerald Bank common stock is held of record by approximately 100 shareholders.

     The table to follow shows quarterly cash dividends paid by Middlefield in 2006, 2005, and 2004. Emerald Bank has not paid dividends, and because it has not yet realized any net income it is not able to pay cash dividends. The table to follow also shows the range of high and low closing prices for Middlefield common stock quoted through the Pink Sheets® in each quarter of 2006, 2005, and 2004. Prices shown do not include retail mark-ups, mark-downs, or commissions. The figures presented are adjusted for stock dividends.

										Cash dividends
		High				Low				per share
Year ended December 31, 2004
first quarter		$	28.11			$	26.35			$	0.181
second quarter			28.94				27.43				0.181
third quarter			31.10				28.51				0.190
fourth quarter			33.33				30.91				0.200
Year ended December 31, 2005
first quarter		$	37.65			$	34.47			$	0.200
second quarter			40.82				34.47				0.200
third quarter			37.19				35.60				0.213
fourth quarter			39.05				35.83				0.224
Year ended December 31, 2006
first quarter		$	40.00			$	37.64			$	0.224
second quarter			40.48				39.05				0.224
third quarter			40.95				39.05				0.229
fourth quarter			42.25				39.76				0.240

     There were                      shares of Middlefield common stock issued and outstanding on                                         , 2007. Additionally, 146,507 shares of common stock were reserved for issuance on that date under Middlefield’s 1999 Stock Option Plan, which may be issued in the form of restricted stock or in the form of options to acquire common stock. The number of shares issuable under outstanding options that had not been exercised, the weighted-average exercise price of those options, and the number of shares remaining available for grant as of December 31, 2006 are -

Middlefield Equity Compensation Plan Information as of December 31, 2006

Number of securities

Number of

remaining available

securities to be

for future issuance

issued upon

Weighted-average

under equity

exercise of

exercise price of

compensation plans

outstanding

outstanding

(excluding

options

options

outstanding options)

Middlefield equity compensation plans approved by security holders

73,607

$

27.54

72,900

Middlefield equity compensation plans not approved by security holders

0

$

0.00

0

Total

73,607

72,900

     There were 732,689 shares of Emerald Bank common stock issued and outstanding on                     , 2007. Additionally, 39,075 shares of common stock were reserved for issuance on that date under Emerald Bank’s 2003 Stock Option Plan. The 2003 Stock Option Plan provides solely for the grant of options to acquire Emerald Bank common stock. The number of shares issuable under outstanding options that had not been exercised, the weighted-average exercise price of those options, and the number of shares remaining available for grant as of December 31, 2006 are -

Emerald Bank Equity Compensation Plan Information as of December 31, 2006

Number of

Number of securities

securities to be

remaining available for

issued upon

average exercise

future issuance under

exercise of

price of

equity compensation

outstanding

outstanding

plans (excluding

options

options

outstanding options) *

Emerald Bank equity compensation plans approved by security holders

39,075

$

10.00

0

Emerald Bank equity compensation plans not approved by security holders

0

$

0.00

0

Total

39,075

0

     Options that remain outstanding when the merger occurs will be replaced by options to acquire Middlefield common stock at the exchange ratio, the number acquirable being multiplied by the exchange ratio and the exercise price being divided by the exchange ratio. To illustrate, if the exchange ratio is 0.2471, the 39,075 options to acquire Emerald Bank common stock at $10.00 per share outstanding at December 31, 2006 will be replaced by options to acquire 9,655 Middlefield common stock at $40.47 per share.

The Annual Meeting of Emerald Bank Shareholders

Purpose, time and place of the meeting

     Emerald Bank’s board of directors is soliciting your proxy for use at the annual meeting of Emerald Bank shareholders to be held on                     , 2007 at ___:00 p.m., Eastern Standard Time, at the main office of Emerald Bank, 6215 Perimeter Drive, Dublin, Ohio 43017, including any adjournment or postponement of that meeting. At the meeting, Emerald Bank shareholders will consider and vote upon -

	1)		a proposal to adopt the Agreement and Plan of Merger, as amended, by and among Emerald Bank, Middlefield Banc Corp., and EB Interim Bank and to approve the merger of Emerald Bank into EB Interim Bank,
	2)		A proposal to elect one director for the term ending at the annual meeting in 2008,
	3)		A proposal to elect three directors for the term ending at the annual meeting in 2009,
	4)		A proposal to ratify the selection of Crowe Chizek and Company, LLC as independent auditor of Emerald Bank for the year ending December 31, 2007,
	5)		if adjournment is necessary for solicitation of additional proxies by the board of directors, a proposal to adjourn the meeting if there are insufficient votes when the meeting is held to adopt the Agreement and Plan of Merger, as amended, and approve the merger, and
	6)		any other business properly presented at the meeting or any adjournment or postponement. Emerald Bank’s board of directors knows of no other business to be presented at the meeting.

     Emerald Bank’s board of directors has unanimously approved the merger agreement and the merger and recommends that you vote FOR adoption of the merger agreement and approval of the merger. The board also recommends that you vote FOR election of the nominees identified herein, FOR ratification of the board’s selection of Crowe Chizek and Company, LLC to serve as Emerald Bank’s independent auditor, and FOR adjournment of the meeting, if action on the adjournment proposal is taken at the meeting.

Record date; Emerald Bank common shares outstanding and entitled to vote

     Emerald Bank’s board of directors fixed the close of business on                     , 2007 as the record date for determining the Emerald Bank shareholders entitled to vote at the annual meeting. You are entitled to vote at the meeting if you were a record holder of Emerald Bank shares at the close of business on the record date. At the close of business on                     , 2007 there were 732,689 Emerald Bank shares issued and outstanding and entitled to vote at the meeting. The Emerald Bank shares were held of record by approximately 100 shareholders.

     You may vote cumulatively in the election of directors if any shareholder follows the procedures specified in the Ohio General Corporation Law for invoking cumulative voting rights. When shares are voted cumulatively, you multiply the number of shares you own by the number of directors to be elected to determine the total number of votes you may cast. You may give any one or more of the nominees any portion of the total number of your votes. To invoke the right to vote cumulatively in the election of directors, according to Ohio General Corporation Law section 1701.55(C) you must give advance written notice of your desire that voting in the election of directors be cumulative. The notice must be given to Emerald Bank’s President, a Vice President, or Secretary at least 48 hours before the time fixed for holding the meeting to elect directors. If at the convening of the meeting an announcement of the cumulative voting notice is then made by the chairman of the meeting or by or on behalf of the shareholder giving the notice, every shareholder will have cumulative voting rights in the election of directors. Proxies solicited by the board of directors would also be voted cumulatively if that occurs. For all purposes other than election of directors, each share is entitled to one vote.

Votes required; quorum

     Because at least two thirds of Emerald Bank’s board of directors approved the merger agreement and the merger, the affirmative vote of the holders of a majority of the Emerald Bank shares outstanding and entitled to vote at the annual meeting is sufficient under Emerald Bank’s articles of incorporation and the Ohio General Corporation Law for adoption of the merger agreement and approval of the merger. Directors are elected by a plurality vote. Accordingly, nominees receiving the greatest number of votes will be elected. Votes that are withheld in the election of directors will therefore have no effect. The affirmative vote of the holders of a majority of the Emerald Bank shares represented in person or by proxy at the meeting is sufficient to adjourn the meeting. The proposal to adjourn the meeting will be presented if – when the meeting is held – there are insufficient votes to adopt the merger agreement and approve the merger.

     As of the                     , 2007 record date, directors and executive officers of Emerald Bank and their respective affiliates beneficially owned an aggregate of                      Emerald Bank shares, excluding outstanding stock options, or approximately ___% of the Emerald Bank shares outstanding on the record date. As of the date of this prospectus/proxy statement, neither Middlefield nor any of its directors, executive officers, or affiliates beneficially owns any Emerald Bank shares.

     A quorum consisting of the holders of a majority of the outstanding Emerald Bank shares must be present in person or by proxy at the Emerald Bank annual meeting before any action – other than adjournment – can be taken. A properly executed proxy card marked abstain will not be voted on adoption of the merger agreement and approval of the merger but will count toward determining whether a quorum is present. Brokers who hold Emerald Bank shares in street name on behalf of beneficial owners cannot vote those Emerald Bank shares on the proposal to adopt the merger agreement and approve the merger without specific instructions from the beneficial owners. Adoption of the merger agreement and approval of the merger requires the affirmative vote of the holders of a majority of all Emerald Bank shares outstanding and entitled to vote at the meeting. Accordingly, if you abstain or if you do not instruct your broker how to vote this will have the same effect as a vote against adoption of the merger agreement and approval of the merger.

Solicitation and revocation of proxies

     A proxy card for use at the annual meeting accompanies each copy of this prospectus/proxy statement mailed to Emerald Bank shareholders. Emerald Bank’s board of directors is soliciting your proxy. Regardless of whether you attend the meeting, the board of directors urges you to sign, date, and return the enclosed proxy card. If you return your properly executed proxy card before the annual meeting and do not revoke it before it is used, your Emerald Bank shares represented by the proxy card will be voted at the meeting or, if appropriate, at any adjournment. Your Emerald Bank shares will be voted as you instruct on the proxy card. If you return a properly executed proxy card without voting instructions, however, your proxy card will be voted “FOR” adoption of the merger agreement and approval of the merger, FOR election of the nominees identified herein, FOR ratification of the board’s selection of Crowe Chizek and Company, LLC to serve as Emerald Bank’s independent auditor, and, if the adjournment proposal is presented at the meeting, “FOR” approval of adjournment to solicit additional proxies.

     If you have returned a properly executed proxy card, you may revoke it at any time before a vote is taken at the annual meeting by -

	-		filing a written notice of revocation with the Secretary of Emerald Bank at 6215 Perimeter Drive, Dublin, Ohio 43107,
	-		executing and returning another proxy card with a later date, or
	-		attending the meeting and giving notice of revocation in person. However, your attendance at the meeting will not constitute revocation of your proxy.

     If you are an Emerald Bank shareholder whose shares are not registered in your own name, you will need additional documentation from your record holder to vote your Emerald Bank shares in person at the annual meeting.

     We do not expect any matter other than adoption of the merger agreement and approval of the merger, election of directors, ratification of selection of the independent auditor, and if necessary approval of adjournment of the annual meeting, to be presented to shareholders for their consideration and vote at the Emerald Bank meeting. If any other matters are properly presented at the meeting, however, Emerald Bank shares represented by properly executed proxy cards will – to the extent permitted under applicable law – be voted in the discretion of the persons named in the proxy card in accordance with their best judgment.

     Middlefield has agreed to bear the costs of printing and mailing this prospectus/proxy statement, but Emerald Bank will bear all other costs of solicitation. Proxies may be solicited by mail and may also be solicited for no additional compensation by directors, officers, and employees of Emerald Bank. Emerald Bank will also pay the standard charges and expenses of brokerage houses, voting trustees, banks, associations, and other custodians, nominees, and fiduciaries who are record holders of Emerald Bank shares not beneficially owned by them for forwarding the proxy materials to and obtaining proxies from the beneficial owners of Emerald Bank shares entitled to vote at the annual meeting.

Dissenters’ Rights

     There are a number of steps you must take if you wish to exercise dissenters’ rights. For a complete description of the procedures for exercising dissenters’ rights, you should read the provisions of 1701.85 of the Ohio General Corporation Law, a copy of which is included as Appendix C to this prospectus/proxy statement. If you fail to abide by any one of the required procedures, you will forfeit your dissenters’ rights. If you are considering dissenting, you should consult your own legal advisor. To exercise dissenters’ rights -

	1)		you must be a holder of record of Emerald Bank shares on the                     , 2007 record date for the meeting
	2)		you must not vote in favor of adoption of the merger agreement and approval of the merger. If you vote by proxy but you wish to exercise dissenters’ rights, you should mark the box “Against” or the box “Abstain” on the form of proxy
	3)		no later than ten days after the meeting of Emerald Bank shareholders you must deliver to Emerald Bank a written demand for payment of the fair cash value of the Emerald Bank shares for which you seek relief as a dissenter. Your written demand should be sent to Emerald Bank, 6215 Perimeter Drive, Dublin, Ohio 43017, Attention: Mr. Glenn E. Aidt. Voting against adoption of the merger agreement and approval of the merger will not satisfy this requirement for a written demand
	4)		your written demand for payment must state (x) your name and address, (y) the number of shares of Emerald Bank common stock you hold, and (z) the amount you consider to be the fair cash value of your shares

     If you and Emerald Bank do not reach an agreement about the fair cash value of your Emerald Bank shares, you must file a complaint in the Court of Common Pleas of Franklin County, Ohio for a determination of the fair cash value of the shares within three months after you make your written demand for payment. The procedures specified in section 1701.85 of the Ohio General Corporation Law will be used to determine the fair cash value of your Emerald Bank shares. That section states that the term fair cash value means the amount that a willing seller under no compulsion to sell would be willing to accept and that a willing buyer under no compulsion to purchase would be willing to pay, or if less the amount demanded by the dissenting shareholder. Fair cash value is determined as of the day before the annual meeting, excluding any appreciation or depreciation in market value of your Emerald Bank common shares resulting from the merger. The fair cash value of your Emerald Bank shares may be greater than, the same as, or less than the estimated $10.00 per share consideration payable in the merger. The costs of the court proceeding, including reasonable compensation to appraisers, will be assessed as the court considers equitable in accordance with section 1701.85 of the Ohio General Corporation Law.

     If Emerald Bank sends you a request for the certificate or certificates representing your dissenting shares, you must deliver the certificate or certificates within 15 days after Emerald Bank sends the request to you. Emerald Bank may endorse the certificate or certificates with a legend stating that the shareholder has demanded the fair cash value of the shares represented by the certificate or certificates, promptly returning the endorsed certificate or certificates to you. If you fail to deliver the certificate or certificates

within 15 days after Emerald Bank sends you the request, your rights as a dissenting shareholder will terminate if Emerald Bank notifies you within 20 days after the 15-day period that Emerald Bank elects to terminate your rights as a dissenting shareholder.

     Your right to receive the fair cash value of your dissenting shares will terminate in any of the following cases -

	1)		if the merger does not occur
	2)		if your shares are voted in favor of adoption of the merger agreement and approval of the merger at the annual meeting of Emerald Bank shareholders
	3)		if you fail to deliver to Emerald Bank a written demand for payment of the fair cash value of your share within ten days after the meeting of Emerald Bank shareholders
	4)		if you and Emerald Bank do not reach agreement about the fair cash value of your dissenting shares, and you fail to file a complaint with the Franklin County, Ohio Court of Common Pleas for a determination of the fair cash value of your dissenting shares

     Because a proxy that does not contain voting instructions will be voted for adoption of the merger agreement and approval of the merger, if you wish to exercise dissenters’ rights you must either (x) not sign and return the proxy or (y) if you sign and return the proxy, vote against or abstain from voting on the proposal to adopt the merger agreement and approve the merger.

The Proposed Merger (Proposal One)

The merger

     After entering into the merger agreement, Middlefield organized a new subsidiary under Ohio commercial bank law. The new subsidiary’s purpose is to complete the merger with Emerald Bank. So that the surviving entity will be a commercial bank rather than a savings bank, the transaction is structured as the merger of Emerald Bank into Middlefield’s new subsidiary, which until the merger occurs will be known as EB Interim Bank. EB Interim Bank will be the surviving entity in the merger. Until the merger occurs the new interim subsidiary will conduct no business whatsoever and its activities will be confined to those necessary for completion of the merger. As the surviving entity in the merger, EB Interim Bank’s name will be changed to Emerald Bank when the merger occurs and it will thereafter operate as a separate subsidiary of Middlefield. Middlefield currently has no intention to merge the surviving entity into Middlefield’s existing subsidiary bank, The Middlefield Banking Company.

Background and reasons for the merger

     Background of the Merger; Emerald’s Reasons for the Merger; and Recommendation of the Emerald Board. In October 2003, Emerald Bank incorporated under Ohio law as a newly-formed state-chartered savings bank. Initially capitalized with $7.3 million in proceeds from a private placement of Emerald Bank common shares at $10.00 per share, Emerald Bank assembled a management team that worked diligently to accomplish the bank’s goals. A combination of an increase in competition in the Dublin market, a challenging interest rate environment and the increased cost of regulation made the accomplishment of Emerald Bank’s goals increasingly difficult. As a result, the board of directors and management became progressively concerned over their struggles in reaching their goals and objectives.

     In April 2006, the outside members of the Emerald Bank board of directors informally met with representatives of Ryan Beck and Co., Inc. (“Ryan Beck”), an investment banking firm, to discuss strategic alternatives for Emerald Bank, including a possible merger with another financial institution or a capital infusion. Although the directors decided at the time not to pursue a formal process to investigate potential merger partners or other options, they authorized Ryan Beck to canvas selected potential candidates on an informal basis with the idea that Emerald Bank would consider a possible merger with another financial institution or a capital infusion if the terms of the transaction would provide the Emerald Bank shareholders with a fair value for their shares.

     As the Emerald Bank management team continued working to meet the objectives and goals of the Emerald Bank business plan, Ryan Beck conducted informal conversations with multiple financial institutions to gauge the interest of possible acquirors. Institutions expressing a possible interest were required to sign a confidentiality agreement, upon the receipt of which Ryan Beck forwarded certain financial information on Emerald Bank.

     In early September 2006, Ryan Beck and the Emerald Bank board of directors received non-binding indications of interest from two financial institutions and one investor group. Middlefield proposed a transaction at $9.00 to $10.00 value per share, depending upon the results of a due diligence review of Emerald Bank. The other financial institution proposed a merger of equals on the basis of an exchange of Emerald Bank’s shares for the institution’s shares at an amount equal to Emerald Bank’s book value, then approximately $7.44. The investor group proposed a transaction in which the investor group would obtain control of Emerald Bank through the purchase of 300,000 newly issued Emerald Bank shares at $10.00 per share.

     On September 21, 2006, the Emerald Bank board met with Ryan Beck to discuss each of these indications of interests, and then on September 22, 2006 management of Emerald Bank made a presentation to the board of directors at a separate meeting regarding the possibility of remaining independent. While independence was a viable option, the board of directors initially decided not to focus on the indication of the other financial institution because the $7.44 per share value of the indication was substantially less than the value of the $9.00 to $10.00 per share value of the Middlefield indication. In addition, the board of directors rejected the investor group’s change of control indication on the basis of the execution risks inherent with a change of control involving a new investor group, and the lack of liquidity and lack of a dividend that would result from that transaction.

     The directors reviewed certain financial and other information about Middlefield, discussed the business and operating prospects for Middlefield over the next several years and compared such information to the operating prospects for Emerald Bank on a stand-alone basis. The directors agreed to invite Middlefield to conduct a due diligence review of the books and records of Emerald Bank but made it clear that Emerald Bank’s board would only be interested in an offer at $10.00 per share or higher. On September 26 and 27, 2006, Middlefield performed due diligence. On October 12, 2006, Middlefield submitted a final proposal to acquire Emerald Bank for $10.00 per share, the high end of its range, in accordance with the terms and subject to the conditions eventually set forth in the Agreement.

     The Emerald Bank board of directors met on October 13, 2006, to discuss the final proposal of Middlefield. Representatives of Ryan Beck discussed an overview of the transaction and the per share consideration, as well as analyses of Middlefield’s historical financial results, ability to finance the transaction, stock performance and peer group comparisons. Based on the Ryan Beck analyses and the directors’ continued assessment of opportunities to increase shareholder value, the board of directors of Emerald Bank concluded that the Middlefield proposal deserved further consideration and requested that Ryan Beck continue to negotiate additional terms with Middlefield Banc Corp.

     On October 16, 2006, representatives of Ryan Beck met with the Emerald Bank board of directors to discuss the results of their negotiations. After lengthy discussion of whether to proceed with negotiations with Middlefield, the directors concluded that Emerald Bank would proceed with the negotiation of a merger agreement with Middlefield because Middlefield’s proposal would immediately increase shareholder value to their initial investment and fill the start-up deficit. The directors also noted that Middlefield’s financial performance was far superior to Emerald Bank’s, and that the proposed transaction with Middlefield would result in far greater liquidity for Emerald Bank shares as well as the potential for dividend income.

     Subsequently, the directors each received a draft of the merger agreement and related documents. At a meeting on November 6, 2006, the directors reviewed in detail the terms and conditions of the draft with Emerald Bank’s counsel. Among the terms and conditions discussed were the stock/cash split in the Middlefield consideration, the structure of the merger, the representations, warranties and covenants of each of Middlefield and Emerald Bank and related matters.

     The directors further considered Middlefield’s requirement that shareholders’ equity be at least $5.3 million at closing and the dollar for dollar reduction in the aggregate consideration in the event the shareholders’ equity fell below $5.3 million. Representatives of Ryan Beck then discussed the potential financial effect on the value shareholders would receive as consideration if the shareholders’ equity was below $5.3 million and if the closing date occurred in the second half of 2007. After lengthy discussion of whether to proceed with the proposed transaction, the directors concluded that Emerald Bank would proceed with the negotiation of the merger agreement with Middlefield since the likely effect of any shortfall in shareholders’ equity on the consideration received per share by the shareholders would be very small.

     Between November 6 and November 14, 2006, Emerald Bank and Middlefield worked through final issues and completed the final draft of the merger agreement. At the same time, Ryan Beck and Emerald Bank management finished their due diligence review of Middlefield. On November 14, 2006, the Emerald Bank board of directors convened to consider the merger agreement, the due diligence and related matters. Counsel to the Emerald Bank board of directors summarized the terms of the merger agreement and the negotiation thereof since the last meeting of the board of directors, highlighting any provisions that had changed since the directors last reviewed the merger agreement.

     On November 15, 2006, the Emerald Bank board of directors met to consider the merger. Ryan Beck presented its opinion that the merger was fair to Emerald Bank shareholders as of such date from a financial point of view. The directors then concluded that the terms and conditions of the merger agreement were fair to, and in the best interests of, Emerald Bank shareholders and authorized the execution of the merger agreement by Emerald Bank.

     Middlefield’s reasons for the merger. Middlefield believes the merger will benefit Middlefield’s shareholders because it will enable Middlefield to establish a presence in Emerald Bank’s market and strengthen Middlefield’s competitive position. Emerald Bank’s market immediately northwest of Columbus, Ohio is one of the most prosperous in the state and is experiencing very rapid growth. Middlefield believes the acquisition of an existing banking franchise is preferable to more gradual expansion into that market by other methods, such as by establishment of branches or formation of a local bank subsidiary. Building upon

Emerald Bank’s community banking focus, Middlefield believes that it can improve upon Emerald Bank’s existing franchise because the surviving bank in the merger will be a commercial bank rather than a savings bank, without the restrictions imposed under Ohio savings bank law on loans not secured by real estate and with the resources and commitment to pursue commercial, commercial real estate, residential, consumer, and other lending opportunities more aggressively within Emerald Bank’s market.

Opinion of Emerald Bank’s financial advisor

     Ryan Beck acted as financial advisor to Emerald Bank in connection with its potential acquisition by Middlefield Banc Corp., pursuant to the merger agreement. Ryan Beck, as a customary part of its business, is continually engaged in the valuation of financial institutions in connection with mergers, acquisitions and other securities-related transactions. Emerald Bank selected Ryan Beck as its financial advisor based on Ryan Beck’s qualifications, expertise and reputation as a nationally recognized specialist in the financial services industry with extensive experience in advising banks and thrifts.

     On November 15, 2006, the Emerald Bank board held a meeting to evaluate the proposed merger with Middlefield. In its capacity as Emerald Bank’s financial advisor, Ryan Beck participated in the negotiations with respect to the pricing and other terms and conditions of the merger, but the decision as to whether to accept the Middlefield proposal and the pricing of the merger was made by the board of directors of Emerald Bank. At the November 15 meeting, Ryan Beck rendered an oral opinion to Emerald Bank’s board (the written opinion was delivered separately and dated as of November 15, 2006) and reconfirmed the opinion in writing as of the date of this prospectus/proxy statement, (a copy of which is attached as Appendix B), that based on and subject to the assumptions, factors, and limitations as set forth in the attached opinion and as described below, the consideration offered to Emerald Bank shareholders was fair as of the respective dates from a financial point of view. No limitations were imposed by the Emerald Bank board of directors upon Ryan Beck with respect to the investigations made or procedures followed by it in arriving at its opinion.

     The full text of Ryan Beck’s opinion, which sets forth assumptions made and matters considered, is attached as Appendix B to this prospectus/proxy statement. Shareholders of Emerald Bank are urged to read the attached Ryan Beck opinion in its entirety. The Ryan Beck opinion is directed only to the financial fairness of the consideration offered to Emerald Bank shareholders and does not constitute a recommendation to any shareholder as to how such shareholder should vote at the annual meeting. Ryan Beck has not considered, nor is it expressing any opinion herein with respect to, the price at which Middlefield’s common stock will trade following consummation of the merger. The summary of the Ryan Beck opinion set forth in this prospectus/proxy statement is qualified in its entirety by reference to the full text of the Ryan Beck opinion. In rendering its opinion, Ryan Beck does not admit that it is an expert within the meaning of the term “expert” as used within the Securities Act of 1933 and the rules and regulations promulgated thereunder, or that its opinion constitutes a report or valuation within the meaning of Section 11 of the Securities Act of 1933 and the rules and regulations promulgated thereunder.

     Material and Information Considered with Respect to the Proposed Merger. In connection with its opinion, Ryan Beck reviewed the following information:

	•		The merger agreement and related documents;
	•		Middlefield’s annual reports on Form 10-K, including audited financial statements, for the years ended December 31, 2005, 2004 and 2003;
	•		Middlefield’s quarterly reports on Form 10-Q for the quarters ended September 30, 2006, June 30, 2006 and March 31, 2006;
	•		Emerald Bank’s annual reports, including audited financial statements, for the years ended December 31, 2005 and 2004;
	•		Emerald Bank’s quarterly call reports for the periods ended September 30, 2006, June 30, 2006 and March 31, 2006;
	•		Certain other public and non-public information, primarily financial in nature, related to the respective businesses, earnings, assets and prospects of Emerald Bank and Middlefield provided to Ryan Beck by management of the respective companies or obtained by Ryan Beck from other sources;
	•		The publicly available financial data of commercial banking organizations which Ryan Beck deemed generally comparable to Emerald Bank and Middlefield;
	•		The historical stock prices and trading volumes of Middlefield’s common stock; and
	•		The terms of acquisitions of banking organizations which Ryan Beck deemed generally comparable in whole or in part to Emerald Bank.

     Additionally, Ryan Beck:

•

Conducted or reviewed such other studies, analyses, inquiries and examinations as it deemed appropriate;

	•		Analyzed the impact of the merger on Middlefield;
	•		Considered the future prospects of Emerald Bank in the event it remained independent; and
	•		Participated in meetings and telephone conferences with certain members of Emerald Bank’s and Middlefield’s senior management to discuss Emerald Bank’s and Middlefield’s past and current business operations, regulatory standing, financial condition, strategic plan and future prospects, including any potential operating efficiencies and synergies that may arise from the Merger.

     In connection with its review, Ryan Beck relied upon and assumed, without independent verification, the accuracy and completeness of the financial and other information regarding Emerald Bank and Middlefield that was publicly available or provided to Ryan Beck by Emerald Bank and Middlefield. Ryan Beck is not an expert in the evaluation of loan portfolios or the allowance for loan losses. Therefore, Ryan Beck has not assumed any responsibility for making an independent evaluation of the adequacy of the allowance for loan losses set forth in the consolidated balance sheets of Emerald Bank and Middlefield as of September 30, 2006, and Ryan Beck has assumed such allowances were adequate and complied fully with applicable law, regulatory policy, sound banking practice and policies of the Securities and Exchange Commission as of the date of such financial statements. Ryan Beck discussed certain operating forecasts and financial projections (and the assumptions and bases therefore) with the management of Emerald Bank and Middlefield. Ryan Beck assumed that such forecasts and projections reflected the best currently available estimates and judgments of management. Ryan Beck was not retained to nor did it make any independent evaluation or appraisal of the assets or liabilities of Emerald Bank or Middlefield nor did Ryan Beck review any loan files of Emerald Bank or Middlefield. Ryan Beck also assumed that the merger in all respects is, and will be, undertaken and consummated in compliance with all laws and regulations that are applicable to Emerald Bank and Middlefield.

     The preparation of a fairness opinion for a transaction such as the merger involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, Ryan Beck’s opinion is not readily conducive to summary description. In arriving at its opinion, Ryan Beck performed a variety of financial analyses. Ryan Beck believes that its analyses must be considered as a whole and that the consideration of portions of such analyses and the factors considered therein, or any one method of analysis, without considering all factors and analyses, could create an incomplete view of the analyses and the process underlying Ryan Beck’s opinion. No one method of analysis was assigned a greater significance than any other.

     The forecasts and projections utilized in the analysis were based on information provided by Emerald Bank and Middlefield management. Emerald Bank and Middlefield do not publicly disclose internal management projections of the type discussed with Ryan Beck in connection with the review of the merger. Such projections were not prepared with a view towards public disclosure. The public disclosure of such projections could be misleading since the projections were based on numerous variables and assumptions which are inherently uncertain, including without limitation, factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in such projections.

     In its analyses, Ryan Beck made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters, many of which are beyond the control of Emerald Bank or Middlefield. Any estimates contained in Ryan Beck’s analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than such estimates. Estimates of values of companies do not purport to be appraisals nor do they necessarily reflect the prices at which companies or their securities may actually be sold.

     Ryan Beck’s opinion was based solely upon the information available to it and the economic, market and other circumstances as they existed as of the date of the opinion. Events occurring after such date could materially affect the assumptions and conclusions contained in Ryan Beck’s opinion. Ryan Beck has not undertaken to reaffirm or revise its opinion or otherwise comment upon any events occurring after the date of its reconfirmed opinion. Ryan Beck did not and does not express any opinion as to the price or range of prices at which Middlefield’s common stock might trade subsequent to the merger.

     The following is a brief summary of the analyses and procedures performed by Ryan Beck in the course of arriving at its opinion. The summary does not purport to be a complete description, but is a brief summary of the material analyses and procedures performed by Ryan Beck in the course of arriving at its opinion.

     Analysis of Selected Publicly Traded Companies. Ryan Beck compared Emerald Bank’s financial data as of September 30, 2006, to a peer group of nine banking organizations in the Midwest with assets less than $200 million that had sustained losses for the last twelve months and for which public trading and pricing information was available. Ryan Beck deemed this group to be generally comparable to Emerald Bank.

     The results of the comparisons are reflected in the following table. The financial data and ratios shown in the table are as of or for the twelve months ended September 30, 2006 for Emerald Bank and as of the most recent twelve month period available for the peer group companies. The market valuation multiples are based on market prices as of November 10, 2006.

Capitalization		Emerald Bank				(1)				Peer Average				(1)				Peer Median				(1)
Total Assets (000s)		$	37,935							$	89,115							$	74,490
Total Deposits (000s)			28,752								64,357								56,174
Total Shareholders’ Equity (000s)			5,452								7,274								7,138
Total Equity / Assets			14.37				%				6.02				%				9.03				%
Tangible Equity / Tangible Assets			14.37								6.01								9.03
Tier 1 Capital / Risk-Adjusted Assets			23.08								11.75								11.01
Total Capital / Risk-Adjusted Assets			24.08								13.36								11.98
Total Borrowings / Total Assets			8.57								15.87								16.28
Asset Quality
Non-Performing Loans / Loans			1.28								2.45								0.32
Loan Loss Reserves / NPAs			68.56								195.58								179.82
Loan Loss Reserves / Loans			0.88								1.15								1.17
Non-Performing Assets / Assets			0.93								2.58								0.27
Non-Performing Assets + 90 Days Past Due / Assets			0.93								2.61								0.31
Non-Performing Assets / Equity			4.72								6.28								1.87
Loan & Deposit Composition
Total Loans / Toal Assets			72.87								76.54								79.88
Total Loans / Deposits			96.14								103.98								103.59
1-4 Family Loans / Total Loans			59.13								48.18								46.79
5+ Family Loans / Total Loans			7.04								2.60								1.11
Construction & Development Loans / Total Loans			10.37								8.54								4.58
Other Real Estate Loans / Total Loans			18.42								17.25								17.63
Real Estate Loans / Total Loans			94.96								76.57								77.39
Consumer Loans / Total Loans			2.19								10.88								5.44
Commercial Loans / Total Loans			2.02								11.94								11.21
Non-Interest Bearing Deposits / Total Deposits			1.14								9.79								7.49
Transaction Accounts / Total Deposits			52.82								42.83								42.83
Total CD’s / Total Deposits			47.18								57.17								57.17
Time Deposits > $100,000 / Total Deposits			19.30								20.44								20.44
Performance
Return on Average Assets			(2.37	)							(1.06	)							(0.56	)
Return on Average Equity			(10.55	)							(23.28	)							(4.62	)
Net Interest Margin			2.69								2.86								2.74
Yield / Cost Spread			1.72								2.47								2.17
Yield on Interest Earning Assets			6.04								6.38								6.47
Cost of Interest Bearing Liabilities			4.32								3.73								3.53
Non Interest Income / Average Assets			0.12								0.70								0.79
Non Interest Expense / average Assets			4.65								4.21								3.74
Salary Expense / Total Revenue			82.99								61.83								49.62
Occupancy & Equipment Expense / Average Assets			0.86								0.64								0.55
Efficiency Ratio			172.09								118.58								118.51
Growth Rates
Asset Growth			109.24								9.19								5.50
Loan Growth Rate			83.17								22.22								15.80
Deposit Growth Rate			164.82								16.48								10.21
EPS Growth Rate		NM								NM								NM
Market Statistics
Stock Price at November 10, 2006		NM
Price / LTM EPS		NA					x			NM					x			NM					x
Price / Book Value		NA					%				115.30				%				93.86				%
Price / Tangible Book Value		NA									115.31								93.86
Market Capitalization ($M)		NA								$	10.52							$	6.59
Dividend Yield		NA					%				0.44				%				0.00				%

     Ryan Beck noted that 94.96% of Emerald Bank’s loan portfolio is real estate oriented, significantly higher than the peer group median of 77.39%. Approximately 59.13% of Emerald Bank’s loans are 1-4 family loans, higher than the peer group median of 46.79%. Emerald Bank’s portfolio of construction & development loans at 10.37% was higher than the peer median of 4.58%. Emerald Bank’s commercial loans at 2.02% of total loans were significantly lower than the peer group median of 11.21%. Emerald Bank’s transaction account deposits equaled 52.82% of total deposits, higher than the peer group median of 42.83% but Emerald Bank’s non-interest bearing demand deposits were only 1.14% of total deposits, significantly lower than the peer group median of 7.49%. Emerald Bank’s jumbo deposits, or time deposits with balances greater than $100,000, represented 19.30% of total deposits, slightly lower than the peer median of 20.44%.

     Emerald Bank’s return on average assets of -2.37% was significantly less than the peer group median of -0.56% and Emerald Bank’s return on average equity of -10.55% was also less than the peer group median of -4.62%. Contributing to Emerald Bank’s performance was its net interest margin of 2.69%, which was lower than the peer group median of 2.74%. Emerald Bank’s efficiency ratio of 172.09% was significantly higher than the peer group median of 118.51%. Ryan Beck also noted that Emerald Bank’s non-interest income as a percentage of average assets at 0.12% was significantly lower than the peer group median of 0.79%.

     Additionally, Ryan Beck noted that Emerald Bank had non-performing loans as a percentage of total loans of 1.28%, which was significantly higher than the peer median of 0.32%. At 0.88%, Emerald Bank maintained a level of loan loss reserves as a percentage of total loans below the peer median of 1.17%. Emerald Bank’s capital ratios were significantly higher than the peer group medians as evidenced by its tangible equity to tangible assets ratio of 14.37% compared to 9.03% for the peer group.

     There was no recent trading activity in Emerald Bank’s stock. The peer group median was at 93.86% of book value and tangible book value. Price-to-earnings ratios were not meaningful for either Emerald Bank or for the peer group median. Emerald Bank does not pay a dividend, and the peer group median dividend yield was also zero.

     Ryan Beck also compared Middlefield’s financial data as of September 30, 2006, to a peer group of 16 banking organizations with assets between $150 million and $450 million, and with latest twelve months return on average assets greater than 1.00% and less than 1.50% located nationwide for which public trading and pricing information was available. Ryan Beck deemed this group to be generally comparable to Middlefield.

     The results of the comparisons are reflected in the following table. The financial data and ratios shown in the table are as of or for the twelve months ended September 30, 2006 for Middlefield and as of the most recent twelve month period available for the peer group companies. The market valuation multiples are based on market prices as of October 30, 2006.

		Middlefield
Capitalization		Banc Corp.				(1)				Peer Average				(1)				Peer Median				(1)
Total Assets (000s)		$	325,675							$	375,989							$	395,306
Total Deposits (000s)			264,706								302,656								307,069
Total Shareholders’ Equity (000s)			29,567								35,201								33,676
Total Equity / Assets			9.08				%				9.44				%				9.21				%
Tangible Equity / Tangible Assets			9.08								8.87								8.70
Tier 1 Capital / Risk-Adjusted Assets			12.84								13.72								15.23
Total Capital / Risk-Adjusted Assets			14.09								15.07								16.36
Total Borrowings / Total Assets			9.21								8.64								9.04
Asset Quality
Non-Performing Loans / Loans			0.69								0.39								0.27
Loan Loss Reserves / NPAs			179.99								358.42								271.29
Loan Loss Reserves / Loans			1.25								1.31								1.24
Non-Performing Assets / Assets			0.52								0.35								0.21
Non-Performing Assets + 90 Days Past Due / Assets			0.54								0.36								0.27
Loan & Deposit Composition
Total Loans / Toal Assets			75.18								71.06								74.79
Total Loans / Deposits			92.50								88.20								92.15
1-4 Family Loans / Total Loans			65.17								28.44								25.67
5+ Family Loans / Total Loans			0.00								1.56								1.30
Construction & Development Loans / Total Loans			1.48								20.62								19.16
Other Real Estate Loans / Total Loans			3.68								29.87								29.43
Real Estate Loans / Total Loans			70.33								80.48								81.53
Consumer Loans / Total Loans			2.27								3.41								3.33
Commercial Loans / Total Loans			27.11								14.75								13.96
Non-Interest Bearing Deposits / Total Deposits			15.68								16.20								15.53
Transaction Accounts / Total Deposits			47.73								54.75								56.23

		Middlefield
Capitalization		Banc Corp.				(1)				Peer Average				(1)				Peer Median				(1)
Total CD’s / Total Deposits			52.27								45.25								43.77
Time Deposits > $100,000 / Total Deposits			11.61								17.86								14.24
Performance
Return on Average Assets			1.22								1.18								1.12
Return on Average Equity			13.71								12.78								11.83
Net Interest Margin			3.75								4.31								4.25
Non Interest Income / Average Assets			0.75								0.99								0.86
Non Interest Expense / average Assets			2.44								3.10								3.06
Efficiency Ratio			57.62								60.84								63.08
Growth Rates
Asset Growth			6.67								14.92								9.81
Loan Growth Rate			8.41								17.25								14.73
Deposit Growth Rate			6.66								14.36								9.59
Revenue Growth Rate			5.44								18.85								15.58
EPS Growth Rate			10.24								22.58								17.84
Market Statistics
Stock Price at November 10, 2006		$	42.50
Price / LTM EPS			15.18				x				16.48				x				15.51				x
Price / 2006E EPS		NA									17.48								15.84
Price / 2007E EPS		NA									16.07								15.08
Price / Book Value			194.51				%				193.66				%				183.09				%
Price / Tangible Book Value			194.51								205.13								189.03
Market Capitalization ($M)		$	57.52							$	66.84							$	66.50
Dividend Yield			2.26				%				1.61				%				1.86				%

     Ryan Beck noted that 70.33% of Middlefield’s loan portfolio is real estate oriented, lower than the peer group median of 81.53%. Approximately 3.68% of Middlefield’s loans are commercial real estate loans, significantly lower than the peer group median of 29.43%. Middlefield’s portfolio of construction & development loans at 1.48% was significantly lower than the peer median of 19.16%. At 27.11% of total loans, Middlefield’s commercial loans were significantly higher than the peer median of 13.96%. Middlefield’s transaction account deposits equaled 47.73% of total deposits, lower than the peer group median of 56.23% while Middlefield’s non-interest bearing demand deposits were 15.68% of total deposits, versus the peer group median of 15.53%. Middlefield’s jumbo deposits, or time deposits with balances greater than $100,000, represented 11.61% of total deposits, less than the peer median of 14.24%.

     Middlefield’s return on average assets of 1.22% was greater than the peer group median of 1.12% and Middlefield’s return on average equity of 13.71% was higher than the peer group median of 11.83%. Middlefield’s net interest margin of 3.75% was lower than the peer group median of 4.25%, but Middlefield’s efficiency ratio of 57.62% was lower than the peer group median of 63.08%. Ryan Beck also noted that Middlefield’s non-interest income as a percentage of average assets at 0.75% was lower than the peer group median of 0.86%.

     Additionally, Ryan Beck noted that Middlefield had non-performing loans as a percentage of total loans of 0.69%, which was higher than the peer median of 0.27%. At 1.25%, Middlefield maintained a level of loan loss reserves as a percentage of total loans similar to the peer median of 1.24%. Middlefield’s capital ratios were similar to the peer group medians as evidenced by its tangible equity to tangible assets ratio of 9.08%, compared to a median of 8.70% for the peer group. Middlefield’s asset, loan and deposit growth rates over the past twelve months of 6.67%, 8.41 and 6.66%, respectively, were lower than the peer median growth rates of 9.81%, 14.73% and 9.59%, respectively. Over the same period, Middlefield’s revenue and earnings per share growth rates of 5.44% and 10.24%, respectively, were lower than the peer medians of 15.58% and 17.84, respectively.

     Based on its November 10, 2006 stock price, Middlefield’s stock traded at 15.18 times last twelve months earnings per share, slightly below the peer group median of 15.51 times. Middlefield’s price-to-book and price-to-tangible book value ratio of 194.51% was slightly higher than the respective peer group medians of 183.09% and 189.03%. Middlefield’s dividend yield of 2.26% was higher than the peer group median of 1.86%.

     Analysis of Selected Transactions. Ryan Beck compared the financial terms of the Merger with those of a group of 11 bank acquisitions announced since January 1, 2004, for which pricing data pertaining to the transactions was publicly available. The

criteria for this group were: seller is a commercial bank or thrift; seller has assets less than $200 million; seller had ROAA less than 0.00%; and seller was located in Ohio and contiguous states.

     The following table compares selected ratios of Emerald Bank with the average and median ratios of the sellers in the above peer group of announced transactions.

						Peer Group				Peer Group
		Emerald Bank				Average				Median
Total Assets (000s)		$	37,935			$	98,390			$	91,044
Tangible Equity / Tangible Assets			14.37	%			9.00	%			8.99	%
YTD Return on Average Assets			-2.08	%			-1.00	%			-1.09	%
YTD Return on Average Equity			-10.14	%			-13.26	%			-11.62	%
Non-Performing Assets / Assets			0.93	%			2.49	%			2.12	%
Efficiency Ratio			166.05	%			111.64	%			99.14	%

     Ryan Beck noted that Emerald Bank’s tangible equity as a percentage of tangible assets of 14.37% was significantly higher than the peer group median of 8.99%. Ryan Beck also noted that Emerald Bank’s return on average assets of -2.08% was significantly lower than the peer group median -1.09%, but Emerald Bank’s return on average equity of -10.14% was not significantly different than the peer median of -11.62%. Emerald Bank’s non-performing assets as a percentage of assets of 0.93% compared favorably to the peer median ratio of 2.12%.

     The median pricing ratios for the comparable transactions are illustrated in the following table:

Price / Book

Price / Tangible

Price / LTM

Core Deposit

Value

Book Value

Earnings

Premium

Peer Group Median

134.36

%

134.36

%

NM

4.09

%

     The imputed value of Emerald Bank based upon the median ratios of the comparable transactions can be seen in the table below:

		Price / Book				Price / Tangible				Price / LTM				Core Deposit
		Value				Book Value				Earnings				Premium				Average				Median
Imputed Value		$	10.00			$	10.00			NM				$	8.72			$	9.57			$	9.36

     The median pricing ratios for the comparable transactions adjusted for the change in the Nasdaq Bank Index between the date of announcement of the transaction and the date of the analysis are illustrated in the following table:

Price / Book

Price / Tangible

Price / LTM

Core Deposit

Value

Book Value

Earnings

Premium

Peer Group Median

145.91

%

145.91

%

NM

4.24

%

     The imputed value of Emerald Bank based upon the adjusted median ratios of the comparable transactions can be seen in the table below:

		Price / Book				Price / Tangible				Price / LTM				Core Deposit
		Value				Book Value				Earnings				Premium				Average				Median
Imputed Value		$	10.86			$	10.86			NM				$	8.77			$	10.16			$	9.81

     Assuming a transaction value of $10.00 per share based on the terms of the merger, Ryan Beck calculated the transaction value as a multiple of Emerald Bank’s September 30, 2006 stated book value per share ($7.44), tangible book value per share ($7.44), and tangible book premium over core deposits as follows:

Price to stated book value			134.39	%
Price to tangible book value			134.39	%
Multiple of last-twelve-months earnings per share		NM
Tangible book premium over core deposits			8.08	%

     Ryan Beck noted that the value of the consideration being offered to Emerald Bank’s shareholders of $10.00 per share was higher than the median imputed value of the comparable transactions prior to the market adjustment of $9.36 and higher than the median imputed value of the comparable transactions after the market adjustment of $9.81.

     No company used as a comparison in the above analyses is identical to Emerald Bank, Middlefield or the combined resulting company, and no other transaction is identical to the merger. Accordingly, an analysis of the results of the foregoing is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved, market areas in which the companies operate and other factors that could affect the trading values of the securities of the company or companies to which they are being compared.

     Discounted Dividend Analysis. Using a discounted dividend analysis, Ryan Beck estimated the present value of the future dividend stream that Emerald Bank could produce in perpetuity. As a basis for performing this analysis, Ryan Beck utilized 2007 to 2011 earnings per share estimates for Emerald Bank which were based on information provided by Emerald Bank management. These projections are based upon various factors and assumptions, many of which are beyond the control of Emerald Bank. These projections are, by their nature, forward-looking and may differ materially from the actual future values or actual future results for the reasons discussed above. Actual future values or results may be significantly more or less favorable than suggested by such projections. In producing a range of per share Emerald Bank values, Ryan Beck utilized the following assumptions: discount rates ranging from 13% to 15%, terminal price/earnings multiples ranging from 13x to 15x (which, when applied to terminal year estimated earnings, produces a value which approximates the net present value of the dividends in perpetuity, given certain assumptions regarding growth rates and discount rates) and earnings that include estimated savings in Emerald Bank’s non-interest expense equal to Emerald Bank management’s estimates of 40.0% in the first year following the merger with 40.0% thereafter. The discounted dividend analysis produced the range of net present values per share of Emerald Bank common stock illustrated in the chart below:

						Discount Rates
						13%				14%				15%
Terminal Year			13x			$	9.86			$	9.56			$	9.27
Multiple of			14x			$	10.28			$	9.97			$	9.67
Earnings			15x			$	10.69			$	10.37			$	10.06

     Ryan Beck noted that the transaction value of $10.00 per share was near the midpoint of the estimated values derived from the discounted dividend analysis.

     These analyses do not purport to be indicative of actual values or expected values or an appraisal range of the shares of Emerald Bank common stock. The discounted dividend analysis is a widely used valuation methodology, but Ryan Beck noted that it relies on numerous assumptions, including expense savings levels, dividend payout rates, terminal values and discount rates, the future values of which may be significantly more or less than such assumptions. Any variation from these assumptions would likely produce different results.

     Financial Impact Analysis: In order to measure the impact of the merger on the combined company’s operating results and financial position after the merger, Ryan Beck analyzed the pro forma effects of the merger for 2007. In performing this analysis, Ryan Beck utilized a pro forma summary balance sheet and income statement for Middlefield. For its analysis, Ryan Beck used Middlefield management’s estimates of earnings for 2006 and 2007, and used an 8.00% projected growth rate to estimate 2008 through 2011 earnings for Middlefield. Ryan Beck used Emerald Bank management’s estimates of Emerald Bank’s earnings for 2006, 2007 and 2008, and used a projected growth rate of 10% to estimate 2009 to 2011 earnings for Emerald Bank. In its analysis, Ryan Beck utilized after-tax cost savings assumptions of approximately 40.0% of Emerald Bank’s non-interest expense base for 2007 and 40.0% for 2008 through 2011. No assumptions were made regarding revenue enhancements following the completion of the transaction and no assumptions were made regarding mark-to-market purchase accounting adjustments.

     This analysis indicated that the merger would be slightly dilutive to Middlefield’s earnings in 2007 by approximately 0.50% and would be accretive to Middlefield’s 2008 estimated earnings per share by approximately 3.67%, before the effect of any stock repurchases. Ryan Beck also estimated that the transaction would be 4.97% accretive to Middlefield’s stated book value per share and would be 2.29% dilutive to Middlefield’s tangible book value per share. The transaction analysis indicated that, at closing, Middlefield’s tangible equity to tangible assets would be 9.09%, lower than the 9.65% projected in our analysis before the merger.

     Contribution Analysis: As a means to gauge the impact of Emerald Bank’s and Middlefield’s potential financial impact on the combined organization, Ryan Beck prepared a contribution analysis which analyzed the relative contributions each entity would make toward total assets, loans, deposits, common equity, tangible common equity and earnings. Ryan Beck analyzed the contribution of the last-twelve-months net income as well as the 2007 projected net income for each company as estimated by their respective management teams. For this analysis, Ryan Beck assumed a 100% stock transaction and a price of $10.00 per share for Emerald Bank stock and estimated that Emerald Bank shareholders would own 11.12% of the combined company on a pro forma basis. This figure is below Emerald Bank’s contribution of total equity and tangible equity of 15.57% but above the relative contributions of Emerald Bank for total assets at 10.43%, total loans at 10.14% and total deposits at 9.81%. The estimated Emerald Bank’s stock ownership also exceeds Emerald Bank’s projected 2007 net income contribution of 2.64% without accounting for synergies and 9.32% after accounting for synergies.

     In connection with Ryan Beck’s updated opinion dated as of the date of this prospectus/proxy statement and contained in Appendix B, Ryan Beck reviewed this prospectus/proxy statement and confirmed the appropriateness of its reliance on the analyses

used to render its November 15, 2006 written opinion by performing procedures to update certain of such analyses and by reviewing the assumptions and conclusions upon which the November 15, 2006 opinion was based.

     As of the date of this document, for its financial advisory services provided to Emerald Bank, Ryan Beck has been paid a fee of $50,000. Ryan Beck will be paid an additional fee at the time of closing of the merger such that the total fees paid to Ryan Beck will equal approximately $173,000. In addition, Emerald Bank has agreed to reimburse Ryan Beck for its reasonable out-of-pocket expenses, including the fees and disbursements of Ryan Beck’s legal counsel, which shall not exceed $10,000 without the prior consent of Emerald Bank. Emerald Bank has also agreed to indemnify Ryan Beck and certain related persons against certain liabilities, including liabilities under federal securities law, incurred in connection with its services.

     Prior to this transaction, Ryan Beck did not have an investment banking relationship with Emerald Bank. Ryan Beck has had no prior investment banking relationship with Middlefield. Ryan Beck has in the past solicited investment banking business from Middlefield and may solicit investment banking business from Middlefield in the future. Middlefield authorized Ryan Beck to solicit term sheets for a trust preferred securities offering, in part to fund this transaction, for which Ryan Beck received customary fees.

     Ryan Beck is not a market maker in the stock or other securities of Emerald Bank or Middlefield. In the ordinary course of its business as a broker dealer, however, Ryan Beck may actively trade securities of Emerald Bank or Middlefield for its own account and the account of its customers and, accordingly, may at any time hold long or short positions in such securities.

Regulatory approvals required

     Middlefield’s application to the Board of Governors of the Federal Reserve System seeks approval under the Bank Holding Company Act of 1956 of Middlefield’s acquisition of Emerald Bank. Middlefield, its subsidiary EB Interim Bank, and Emerald Bank have also submitted an application to the FDIC under the Federal Deposit Insurance Act and to the Ohio Division of Financial Institutions under Ohio banking law for approval of the merger of Emerald Bank into EB Interim Bank. None of these approvals had been obtained by the date of this prospectus/proxy statement. Nevertheless, Middlefield and Emerald Bank expect that all three required regulatory approvals will be obtained by the date of the Emerald Bank shareholders’ meeting or shortly thereafter. Assuming the necessary approvals are obtained, they will be subject to compliance by Middlefield, EB Interim Bank, and Emerald Bank with customary representations, commitments, and covenants. Additionally, the merger may not occur sooner than 15 days after the date of each approval, the minimum period required by statute to allow the United States Department of Justice to challenge the merger on antitrust grounds.

Interests of Emerald Bank directors and officers in the merger

     Some of the directors and officers of Emerald Bank have interests in the merger that are different from or in addition to their interests as shareholders of Emerald Bank.

     Retention Bonus. Provided they remain with Emerald Bank through the date the merger occurs, two officers of Emerald Bank and a member of the bank’s accounting staff will receive cash retention bonuses promptly after the merger occurs. The cash retention bonus payable to Mr. Glenn E. Aidt, President and Chief Executive Officer of Emerald Bank, is $70,000. Mr. Michael J. Hufford’s cash retention bonus is $65,000. Mr. Hufford is Emerald Bank’s Senior Vice President and Chief Loan Officer. Ms. Barbara Howard’s retention bonus is $10,000. Ms. Howard is a member of Emerald Bank’s accounting staff. Middlefield and Emerald Bank agreed that she should be entitled to a cash retention bonus because of the expanded responsibilities she assumed when Emerald Bank’s Chief Financial Officer – Mr. Bart Cera – resigned after the merger agreement was entered into.

     Accelerated vesting of outstanding stock options. Under Emerald Bank’s 2003 Stock Option Plan there are outstanding options to acquire 39,075 shares of Emerald Bank’s common stock, each exercisable at the price of $10.00 per share. Each of those options has a June 1, 2004 effective date and becomes exercisable in equal thirds on the first three anniversaries of the effective date. Accordingly, the final third becomes exercisable on June 1, 2007, which could be slightly after the merger occurs. Middlefield and Emerald Bank have agreed that Emerald Bank may amend the 2003 Stock Option Plan so that vesting of the final third of the stock options is accelerated to the date the merger occurs.

     Indemnification and Insurance. To the fullest extent that Emerald Bank is permitted to indemnify and advance expenses of its directors and officers under Ohio law and Emerald Bank’s articles of incorporation and constitution, Middlefield has agreed in section 6.10 of the merger agreement to indemnify and advance the legal expenses of the directors and officers of Emerald Bank for actions or omissions occurring on or before the date the merger occurs, including acts or omissions associated with approval of the merger agreement and completion of the merger. Additionally, for three years after the merger occurs Middlefield must maintain directors’ and officers’ liability insurance reimbursing the current and former officers and directors of Emerald Bank for claims

against them arising from facts or events occurring before the merger is completed. However, Middlefield is not required to expend more than 150% of the amount expended by Emerald Bank to maintain or procure its current directors’ and officers’ liability policy.

Directors, officers, and employees of Emerald Bank after the merger

     The merger will have no effect on the composition of Middlefield’s board of directors, which will continue to consist of the individuals identified elsewhere in this prospectus/proxy statement. The executive officers of Middlefield will continue their service in those capacities as well. The board of directors of the surviving bank after the merger will consist of all six of the current directors of Emerald Bank along with two Middlefield designees. The Middlefield designees are currently expected to be Mr. Thomas G. Caldwell, Middlefield’s President and Chief Executive Officer, and Mr. Richard T. Coyne, who serves as a director both of Middlefield and The Middlefield Banking Company. We expect that Mr. Glenn E. Aidt – currently Emerald Bank’s President and Chief Executive Officer – will continue after the merger to serve in that role with the surviving bank and that Mr. Michael J. Hufford, Senior Vice President and Chief Loan Officer of Emerald Bank, will likewise continue in that role after the merger. The surviving bank’s Chief Financial Officer will be Mr. Donald L. Stacy, who after the merger will continue to serve in his current role as Middlefield’s Senior Vice President and Chief Financial Officer. Employees of Emerald Bank will continue to be employed by the surviving bank. See “The Merger Agreement – Emerald Bank employees and employee benefits” for a discussion of severance and other benefits payable or potentially payable to officers and employees of Emerald Bank after the merger.

Material federal income tax consequences

     O’Neill & O’Neill, Attorneys at Law, counsel to Middlefield, has rendered an opinion to the effect that the merger will constitute a reorganization within the meaning of sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended, which we refer to hereinafter as the Code. The opinion is based on the Code, applicable Treasury Department regulations, judicial authorities, and current administrative rulings and practices as in effect on the date of the opinion, all of which are subject to change, possibly with retroactive effect, and to differing interpretations. Opinions of counsel are not binding upon the Internal Revenue Service or the courts, either of which could take a contrary position. No rulings have been or will be sought from the IRS in connection with the merger. The opinion of O’Neill & O’Neill relied on certain assumptions that customarily are made with respect to transactions of this kind and on certain representations and covenants, including those contained in officers’ certificates of Middlefield and Emerald Bank, which representations and covenants O’Neill & O’Neill assumed to be true, correct, and complete. If any such assumption, representation, or covenant is inaccurate, the opinion could be adversely affected. In addition, the opinion assumes that any Emerald Bank shareholder that, as of the effective time of the merger, asserts dissenters’ rights will receive pursuant to statutory procedures an amount per such dissenting Emerald Bank common share that does not exceed the value of the consideration per Emerald Bank common share to be received pursuant to the merger. The opinion of O’Neill & O’Neill set forth as an exhibit to the registration statement of which this prospectus/proxy statement is a part, as well as the assumptions, representations, and covenants described above, support the following discussion of the anticipated Federal income tax consequences of the merger to the Emerald Bank shareholders.

     This description of anticipated Federal income tax consequences of the merger assumes that the merger will be consummated in accordance with the terms and provisions of the merger agreement. This description does not address, among other matters, the tax consequences to an Emerald Bank shareholder who holds Emerald Bank common shares other than as a capital asset for federal income tax purposes. The description also does not address all of the tax consequences that may be relevant to Emerald Bank shareholders in light of their particular tax circumstances, including without limitation shareholders that are: (1) persons who hold Emerald Bank common shares as part of a straddle, hedge, conversion, or other risk-reduction transaction, (2) broker-dealers, (3) shareholders who have a functional currency other than the U.S. dollar, (4) tax-exempt shareholders, (5) foreign persons, (6) insurance companies, (7) financial institutions, (8) persons that acquired Emerald Bank common shares pursuant to the exercise of compensatory stock options or otherwise as compensation, (9) tax-exempt entities, (10) retirement plans, (11) persons who receive Middlefield common shares other than in exchange for Emerald Bank common shares, or (12) pass-through entities and investors in those entities. In addition, this description does not address the tax consequences to the holders of options to acquire Emerald Bank common shares. Emerald Bank shareholders with special particular tax circumstances or who are subject to special tax treatment are strongly urged to consult with their tax advisors regarding their individual tax consequences. Furthermore, the discussion does not address any alternative minimum tax or any foreign, state, or local tax consequences of the merger.

     Reorganization Treatment. The merger will be a reorganization within the meaning of sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, and Middlefield, EB Interim Bank, and Emerald Bank each will be a party to the reorganization within the meaning of section 368(b) of the Code.

     No Gain or Loss. No gain or loss will be recognized by Middlefield, EB Interim Bank, or Emerald Bank as a result of the merger.

     Tax Basis. The tax basis of the assets of Emerald Bank in the hands of EB Interim Bank will be the same as the tax basis of such assets in the hands of Emerald Bank immediately prior to the merger.

     Holding Period. The holding period of the assets of Emerald Bank to be received by EB Interim Bank will include the period during which such assets were held by Emerald Bank.

     Tax Consequences to Emerald Bank Shareholders Who Receive Only Cash. An Emerald Bank shareholder who receives only cash in exchange for such shareholder’s Emerald Bank shares (as a result of such shareholder’s dissent to the merger or election to receive the cash consideration for all of such shareholder’s Emerald Bank shares) will recognize gain or loss as if such shareholder had received such cash as a distribution in redemption of such shareholder’s Emerald Bank shares, subject to the provisions and limitations of section 302 of the Code. The gain or loss will be long-term capital gain or loss if the Emerald Bank shares surrendered in the merger were held as capital assets for a period exceeding one year as of the time of the exchange.

     Tax Consequences to Emerald Bank Shareholders Who Receive Only Middlefield Shares, Except for Cash in Lieu of Fractional Shares. An Emerald Bank shareholder who receives only Middlefield shares in exchange for such shareholder’s Emerald Bank shares (not including any cash received in lieu of fractional Middlefield shares) will not recognize any gain or loss on the receipt of such Middlefield shares.

     Tax Consequences to Emerald Bank Shareholders Who Receive Cash (Other than Cash in Lieu of Fractional Shares) and Middlefield Shares. An Emerald Bank shareholder who receives cash (other than cash in lieu of fractional shares) and Middlefield shares in exchange for Emerald Bank shares will recognize gain, but not loss, in an amount not to exceed the amount of cash received (excluding cash received in lieu of fractional Middlefield shares). For this purpose, an Emerald Bank shareholder generally must calculate gain or loss separately for each identifiable block of Emerald Bank shares exchanged by the shareholder in the merger, and a loss realized on one block of Emerald Bank shares may not be used by the shareholder to offset a gain realized on another block of its Emerald Bank shares. An Emerald Bank shareholder will be permitted to elect which of the shareholder’s Emerald Bank shares are converted into and become Middlefield shares and which of the shareholder’s Emerald Bank shares are exchanged for cash (subject to reallocation pursuant to procedures specified in section 2.05 of the merger agreement). Shareholders should consult their tax advisors regarding the manner in which cash and Middlefield shares should be allocated among their Emerald Bank shares and the specific federal income tax consequences thereof.

     For purposes of determining the character of the gain recognized on account of the cash received by an Emerald Bank shareholder, such Emerald Bank shareholder will be treated as having received only Middlefield shares in exchange for such shareholder’s Emerald Bank shares, and as having immediately redeemed a portion of such Middlefield shares for the cash received (excluding cash received in lieu of fractional Middlefield shares). Unless the redemption is treated as a dividend under the principles of section 302(d) of the Code (to the extent of such shareholder’s ratable share of the undistributed earnings and profits of Emerald Bank), the gain will be capital gain if the Emerald Bank shares are held by such shareholder as a capital asset at the time of the merger.

     Cash in Lieu of Fractional Shares. An Emerald Bank shareholder who receives cash in lieu of fractional Middlefield shares will recognize gain or loss as if such fractional Middlefield shares were distributed as part of the merger and then redeemed by Middlefield, subject to the provisions and limitations of section 302 of the Code.

     Tax Basis. The aggregate tax basis of the Middlefield shares received by an Emerald Bank shareholder in the merger (including fractional shares, if any, deemed to be issued and redeemed by Middlefield) generally will be equal to the aggregate tax basis of the Emerald Bank shares surrendered in the merger, reduced by the amount of cash received by the shareholder in the merger (other than cash in lieu of fractional shares), and increased by the amount of gain recognized by the shareholder in the merger (including any portion of the gain that is treated as a dividend, but excluding any gain or loss resulting from the deemed issuance and redemption of fractional shares).

     Holding Period. The holding period of the Middlefield shares received by an Emerald Bank shareholder will include the holding period of the Emerald Bank shares surrendered in exchange therefor in the merger, provided that the Emerald Bank shares were held as a capital asset at the time of the merger.

     Reporting Requirements. Emerald Bank shareholders owning at least one percent (by vote or value) of the total outstanding Emerald Bank shares immediately before the merger are required to file a statement with their U.S. federal income tax returns setting forth their tax basis in the Emerald Bank shares exchanged in the merger, as well as the fair market value of the Middlefield shares and the amount of any cash received in the merger. In addition, all Emerald Bank shareholders will be required to retain permanent records relating to the amount, basis, and fair market value of all property transferred in the merger, and relevant facts regarding any liabilities assumed or extinguished as part of the merger.

     Backup Withholding. Under certain circumstances, cash payments made to an Emerald Bank shareholder pursuant to the merger may be subject to backup withholding at a rate of 28%. There is no withholding for a shareholder who provides the exchange agent with such shareholder’s correct U.S. federal taxpayer identification number and who certifies that no loss of exemption from backup withholding has occurred on IRS Form W-9 or its substitute. Certain categories of Emerald Bank shareholders, such as corporations and some foreign individuals, are not subject to backup withholding. In order for a foreign individual to qualify as an exempt recipient, such individual must generally provide the exchange agent with a completed IRS Form W-8BEN or its substitute. Any amounts withheld from an Emerald Bank shareholder under the backup withholding rules are not an additional tax. Rather, any such amounts will be allowed as a credit or refund against such shareholder’s U.S. federal income tax liability provided that the shareholder furnishes to the IRS all required information.

     The discussion of federal income taxes is included in this prospectus/proxy statement for general information only. Each Emerald Bank shareholder should consult his, her, or its own tax advisor regarding the specific tax consequences to the shareholder of the merger, including the application and effect of state, local, and foreign income and other tax laws.

Accounting treatment

     Middlefield will account for the merger using the purchase method of accounting. Accordingly, Middlefield will record at fair value the acquired assets and assumed liabilities, including deposit liabilities, of Emerald Bank. If the total purchase price exceeds the fair value of tangible and identifiable intangible assets acquired over the liabilities assumed, Middlefield will record goodwill for the excess.

Resale of Middlefield shares

     No restrictions on the sale or other transfer of the Middlefield shares issued in the merger will be imposed solely as a result of the merger, except for restrictions on the transfer of Middlefield shares issued to any Emerald Bank shareholder who is considered to be an affiliate of Emerald Bank for purposes of Rule 145 under the Securities Act of 1933.

     As defined in Rule 144 under the Securities Act of 1933, the term affiliate generally includes directors, executive officers, and shareholders beneficially owning 10% or more of a company’s outstanding shares. The Securities and Exchange Commission’s Rule 145 restricts the manner in which affiliates – and others with whom they might act in concert – may resell shares and also restricts the number of shares that affiliates may sell within any three-month period. Emerald Bank affiliates may resell the Middlefield shares they receive in the merger solely (x) in compliance with Rule 145 or another applicable exemption from the registration requirements of the Securities Act of 1933 or (y) by an effective registration statement under the Securities Act of 1933 covering the offer and sale of their Middlefield shares. The merger agreement requires Emerald Bank to cause persons who could be considered affiliates to enter into an agreement with Middlefield stating that these affiliates will not sell, transfer, or otherwise dispose of any Middlefield shares they acquire in the merger except in compliance with the Securities Act of 1933 and the rules and regulations under the Securities Act of 1933. Sales of Middlefield shares by Middlefield affiliates are subject to similar transfer restrictions.

The Merger Agreement

     This summary of the merger agreement is qualified in its entirety by reference to the complete copy of the merger agreement included as Appendix A, which is incorporated herein by reference. We encourage you to read the merger agreement carefully. The merger agreement – not this prospectus/proxy statement – is the legal document governing the merger.

     The merger agreement contains representations and warranties made by Emerald Bank and representations and warranties made by Middlefield. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules the parties delivered to each other when they signed the merger agreement. Additionally, some of the representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different from those generally applicable to shareholders, or may have been used for purposes of allocating risk between the respective parties rather than establishing matters as fact. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise and you should not rely on the representations and warranties for any other purpose.

Parties to the merger agreement

     Middlefield and Emerald Bank entered into the merger agreement on November 15, 2006. The agreement was amended on January 3, 2007 to make EB Interim Bank – the subsidiary formed by Middlefield in December 2006 for the purpose of completing the merger with Emerald Bank – a party to the agreement. As a result, references in this summary of the merger agreement to obligations of Middlefield and representations and warranties made by Middlefield apply also to the new interim subsidiary. As the

surviving entity in the merger, EB Interim Bank’s name will be changed to Emerald Bank when the merger occurs and it will thereafter operate as a separate subsidiary of Middlefield.

Effective time

     The merger will become effective when our certificate of merger is submitted by the Ohio Division of Financial Institutions to the Ohio Secretary of State for filing. This will not occur until we obtain all necessary Federal and state regulatory approvals, specifically (x) approval by the Federal Reserve Board under the Bank Holding Company Act of Middlefield’s acquisition and ownership of another subsidiary bank, (y) approval by the FDIC under the Federal Deposit Insurance Act of the merger between Emerald Bank and EB Interim Bank, and (z) approval by the Ohio Division of Financial Institutions of the bank merger. We had submitted applications for all three of those regulatory approvals by January 5, 2007. We must also obtain approval of Emerald Bank shareholders. We currently anticipate that all three regulatory approvals will be obtained by the date of the Emerald Bank shareholders’ meeting or shortly thereafter. Lastly, all of the conditions to completion of the merger that are stated in Article Seven of the merger agreement must be satisfied or waived. Assuming Emerald Bank shareholders approve the merger, we currently anticipate that the certificate of merger will be filed and that the merger transaction will therefore be completed by May 31, 2007.

Conversion of Emerald Bank shares and exchange ratio

     The aggregate purchase price to be paid by Middlefield is $7,326,890, or a per share price of $10.00. The aggregate purchase price may be adjusted, however. If any holders of options to acquire Emerald Bank shares exercise those options before the merger occurs, the aggregate purchase price will be increased by the amount of any funds Emerald Bank receives as payment of the option exercise price. Conversely, if Emerald Bank’s shareholders’ equity is not at least $5.3 million at the end of the month immediately before the merger occurs, the aggregate purchase price will be reduced by the difference between $5.3 million and the month-end shareholders’ equity. Calculated by Emerald Bank’s independent public accounting firm, the month-end shareholders’ equity will be determined in accordance with generally accepted accounting principles, except that Emerald Bank’s costs associated with the merger transaction will be added to the calculation of shareholders’ equity. Specified in merger agreement section 2.02(c)(i) through (vii), these costs associated with the merger include Emerald Bank’s legal fees (up to $180,000), investment banking fees (up to $175,000), fees for the retention of accounting personnel or services (up to $23,000), retention payments to three officers ($145,000 in total), the accounting charge associated with increasing Emerald Bank’s loan loss allowance for new loans, any costs incurred by Emerald Bank at the direction of Middlefield, and compensation expenses associated with accelerated vesting of options to acquire Emerald Bank shares.

     When the merger occurs, each outstanding Emerald Bank share – excluding those for which dissenters’ rights are properly exercised – will be converted into the right to receive either Middlefield common stock, cash, or a combination of Middlefield common stock and cash. One half of the Emerald Bank shares outstanding when the merger occurs will be exchanged for cash and the other half for Middlefield common stock. Assuming the aggregate purchase price is not adjusted because of stock option exercises or because Emerald Bank’s shareholders’ equity is less than $5.3 million at the end of the month immediately before the merger occurs, Emerald Bank shareholders will receive (x) approximately 88,000 Middlefield common shares in exchange for one half of Emerald Bank’s 732,689 shares outstanding, or one Middlefield share in exchange for approximately four Emerald Bank shares, and (y) cash in the amount of $3,663,445 for the other 366,345 shares outstanding, or $10.00 for each Emerald Bank share. If Emerald Bank’s shareholders’ equity at the end of the month immediately before the merger occurs is less than $5.3 million, the $7,326,890 aggregate merger consideration will be reduced dollar-for-dollar by the difference between the month-end shareholders’ equity figure and $5.3 million. If that occurs the per share cash consideration will be less than $10.00.

     The exact number of Middlefield common shares that will be received in exchange for each Emerald Bank share will depend upon the average closing price of Middlefield stock over the period that ends three business days before the merger occurs and that consists of the 20 most recent trading days on which trades in Middlefield stock actually occur. The precise length of the period over which the average closing price of Middlefield stock will be measured cannot be determined in advance because Middlefield stock historically has not traded each and every business day. The number of Middlefield shares that will be received in exchange for each Emerald Bank share will be based on a ratio – the exchange ratio – equal to the $10.00 per share cash consideration divided by the average closing price of Middlefield stock in the 20 trading-day period. If Emerald Bank’s shareholders’ equity at the end of the month immediately before the merger occurs is less than $5.3 million, the per share cash consideration will be less than $10.00, which would also yield a reduced exchange ratio.

     Middlefield will not issue fractional shares or certificates or scrip for fractional shares. Instead, Middlefield will pay to each holder of Emerald Bank shares who would otherwise be entitled to a fractional share an amount in cash, without interest, equal to the value of the fractional share multiplied by the exchange ratio. If options to acquire Emerald Bank shares remain outstanding when the merger occurs, those options will be exchanged for options to acquire Middlefield shares, the number of shares acquirable being multiplied by the exchange ratio and the exercise price being divided by the exchange ratio. On the date of this

prospectus/proxy statement there were outstanding options to acquire 39,075 Emerald Bank shares. The exercise price of all of these options is $10.00 per share.

     The following table illustrates the per share value of the consideration you will receive in the merger in exchange for each of your Emerald Bank shares, based on whether you elect to receive cash or Middlefield shares and based on various possible 20-day average closing prices for Middlefield shares. For purposes of this table, we assume that none of the options to acquire Emerald Bank shares will be exercised and that there will therefore be 732,689 Emerald Bank shares outstanding when the merger occurs, and we assume that none of the Emerald Bank shareholders will exercise dissenters’ rights.

		Cash Election								Stock Election
20 trading-day										Per share stock				Market value
average closing price		Per share cash								consideration				based upon the
for Middlefield stock		consideration					OR			exchange ratio				exchange ratio
$35.00		$	10.00								0.2857			$	10.00
$36.00		$	10.00								0.2778			$	10.00
$37.00		$	10.00								0.2703			$	10.00
$38.00		$	10.00								0.2632			$	10.00
$39.00		$	10.00								0.2564			$	10.00
$40.00		$	10.00								0.2500			$	10.00
$41.00		$	10.00								0.2439			$	10.00
$42.00		$	10.00								0.2381			$	10.00
$43.00		$	10.00								0.2326			$	10.00
$44.00		$	10.00								0.2273			$	10.00
$45.00		$	10.00								0.2222			$	10.00

     The closing price reported for Middlefield stock on November 14, 2006, the last trading day before we announced the merger, was $40.48. If $40.48 were the 20-day average closing price, the exchange ratio would be 0.2471 Middlefield shares for each Emerald Bank share. The closing price reported for Middlefield stock on                     , 2007, the most recent trading day when we completed this prospectus/proxy statement, was $          . If that price were the 20-day average closing price, the exchange ratio would be             Middlefield shares for each Emerald Bank share.

     When the merger occurs you will no longer have any rights as a holder of Emerald Bank shares. If you receive Middlefield shares in the merger you will upon proper surrender of your Emerald Bank share certificates have rights as a holder of Middlefield shares. For a comparison of the rights you have as a holder of Emerald Bank shares and the rights you would have as a holder of Middlefield shares, see “Description of Middlefield Common Stock and Comparison of Rights of Middlefield and Emerald Bank Shareholders,” beginning on page      .

Cash and stock elections

     In exchange for his or her Emerald Bank shares each shareholder may elect (x) all cash, (y) all Middlefield shares, or (z) a combination of cash and Middlefield common shares. But because one half of the Emerald Bank shares will be exchanged for cash and the other half for Middlefield shares, shareholders’ election rights are subject to reallocation procedures, which are described below.

     All-cash election. For each Emerald Bank common share owned – but subject to the reallocation procedures described below – a shareholder who makes the all-cash election will receive cash in an amount equal to the aggregate merger consideration divided by the number of shares outstanding when the merger occurs.

     All-stock election. For each Emerald Bank common share owned, a shareholder who makes the all-stock election will receive Middlefield shares based upon the exchange ratio, subject to the reallocation procedures described below and subject to the payment of cash instead of fractional Middlefield shares. Again, the precise exchange ratio will be determined when the merger occurs based upon the 20 trading-day average closing price of Middlefield stock in the period ending three days before the merger occurs.

     Combined cash and stock election. A shareholder who elects a combination of cash and Middlefield shares will receive (x) cash in an amount equal to the whole number of Emerald Bank shares the shareholder elects to exchange for cash multiplied by the per share cash consideration and (y) a number of Middlefield shares equal to the whole number of Emerald Bank shares the shareholder elects to exchange for Middlefield shares multiplied by the exchange ratio, subject in each case to the reallocation procedures described below and subject in the case of the stock consideration to payment of cash instead of fractional Middlefield shares.

     Non-electing shares. Emerald Bank shareholders who do not make an election between cash and stock and shareholders who do not make a valid election will have made or will be deemed to have made a “non-election.” To ensure that one half of Emerald Bank’s shares are exchanged for cash and the other half for Middlefield shares, Emerald Bank shareholders who make or who are deemed to have made a non-election will receive all cash, all Middlefield shares, or a combination of cash and Middlefield shares as determined by Middlefield, subject again to the payment of cash instead of fractional Middlefield shares.

     Election Form. An Election Form/Letter of Transmittal accompanies this prospectus/proxy statement. The Election Form/Letter of Transmittal allows each Emerald Bank shareholder to make the all-cash election, the all-stock election, or a combined cash and stock election. The Election Form/Letter of Transmittal also allows a shareholder to specify that he or she has no preference for cash or stock. Emerald Bank shareholders who wish to elect the type of merger consideration they will receive should carefully review and follow the instructions in the Election Form/Letter of Transmittal.

     The deadline for submitting an Election Form/Letter of Transmittal is the close of business on the date of the Emerald Bank shareholders’ meeting. An election will be considered to have been validly made by an Emerald Bank shareholder if Middlefield receives the shareholder’s Election Form/Letter of Transmittal properly completed and executed, accompanied by a certificate or certificates for the shareholder’s Emerald Bank shares duly endorsed in blank or otherwise in form acceptable for transfer on the books of Emerald Bank, or containing an appropriate guaranty of delivery from a member of a national securities exchange, a member of the National Association of Securities Dealers, or a commercial bank or trust company in the United States. The Election Form/Letter of Transmittal will specify that delivery of certificates will be effected and risk of loss and title to the certificates will not pass before proper delivery of the certificates to Middlefield.

     At any time before the election deadline a holder of Emerald Bank shares may withdraw his or her election and either (x) submit a new Election Form/Letter of Transmittal in accordance with the procedures described above or (y) withdraw the certificate or certificates representing the holder’s Emerald Bank shares by providing written notice to Middlefield by 5:00 p.m., Eastern Standard Time, on the business day before the election deadline. Elections will also be revoked if the merger agreement is terminated.

     Reallocations. The merger agreement requires that one half of Emerald Bank’s shares be exchanged for cash and the other half for Middlefield shares. If the elections by Emerald Bank shareholders result in an over-subscription for cash or for Middlefield shares, it will be necessary to reallocate the available cash and Middlefield shares among Emerald Bank shareholders to preserve the 50/50 allocation between cash and stock consideration. Accordingly, the amount of cash and the number of Middlefield shares you actually receive as merger consideration may be different from your election.

     If the total number of Emerald Bank shares for which valid cash elections are made plus all Emerald Bank shares for which dissenters’ rights are properly exercised exceeds one half of Emerald Bank’s outstanding shares when the merger occurs, the cash consideration will be considered to be oversubscribed. In that case all non-electing shares will converted into Middlefield shares and Middlefield will reallocate a sufficient number of Emerald Bank shares deposited for cash to Emerald Bank shares deposited for Middlefield shares. If a reallocation is necessary it will be carried out pro rata among all shareholders electing cash. Likewise, if the total number of Emerald Bank shares for which the stock election is made exceeds one half of Emerald Bank’s outstanding shares when the merger occurs, the Middlefield shares will be considered to be oversubscribed. In that case all non-electing shares will converted into the cash consideration and Middlefield will reallocate a sufficient number of Emerald Bank shares deposited for Middlefield shares to Emerald Bank shares deposited for cash shares. If a reallocation is necessary it will be carried out pro rata among all shareholders electing Middlefield shares. If neither cash consideration nor Middlefield shares are oversubscribed, non-electing shares will be allocated between cash consideration and Middlefield shares in Middlefield’s discretion.

     Because the federal income tax consequences of receiving Middlefield shares only, cash only, or a combination of cash and Middlefield shares will differ, Emerald Bank shareholders should read carefully the information under the heading “The Proposed Merger (Proposal One) – Material federal income tax consequences” and should consult their own tax advisors before making the cash and stock elections for a full understanding of the merger’s tax consequences to them.

Surrender of certificates

     Emerald Bank shareholders who submit a properly completed and executed Election Form/Letter of Transmittal to Middlefield, accompanied by their stock certificate(s) as provided in the instructions to the Election Form/Letter of Transmittal, will receive the cash and stock consideration promptly after the merger occurs. Middlefield is required by section 2.05(b) of the merger agreement to complete the allocation procedures for cash and stock elections and distribute the cash and stock consideration within five business days after the merger occurs.

     When the merger occurs each Emerald Bank share certificate will represent merely the right to receive a certificate for Middlefield shares, or a check in an amount equal to the sum of the cash to be paid to the holder as part of the merger consideration,

or both, plus (x) any cash to be paid instead of fractional Middlefield shares to which the holder might otherwise be entitled and (y) any cash dividends or distributions to which the holder might be entitled for the Middlefield shares issuable to him or to her.

     If your Emerald Bank share certificate(s) is lost, stolen, or destroyed, Middlefield will deliver the consideration properly payable under the merger agreement if you deliver to Middlefield an appropriate affidavit claiming that the certificate is lost, stolen, or destroyed and, if required by Middlefield, if you post a bond in an amount reasonably determined by Middlefield as indemnity against any claim that may be made against Middlefield for the missing certificate. If you own Emerald Bank shares but your ownership is not registered in the transfer records of Emerald Bank, you may nevertheless exchange your Emerald Bank shares for Middlefield shares if you provide Middlefield with the certificate representing your Emerald Bank shares along with all documents required by Middlefield to evidence and effect the transfer and to evidence that any applicable stock transfer taxes have been paid.

     For any Middlefield shares issuable to you as merger consideration you will also be entitled to receive any dividends or other distributions with a record date occurring on or after the date the merger occurs. But you will not be entitled to receive the dividends or other distributions payable on the Middlefield shares unless you follow the procedures specified in the Election Form/Letter of Transmittal for surrendering your Emerald Bank share certificate(s). You will not be entitled to any interest on Middlefield’s dividends or distributions if payment is delayed while Middlefield awaits proper surrender of your Emerald Bank share certificate(s).

Conditions to completion of the merger

     Mutual conditions. Under section 7.01 of the merger agreement it is a condition to each of Middlefield’s and Emerald Bank’s obligations to complete the merger that the agreement be adopted by the affirmative vote of Emerald Bank shareholders entitled to exercise a majority of the voting power of all Emerald Bank shares outstanding. We must also receive all required regulatory approvals and all applicable statutory waiting periods must have expired or been terminated, and no regulatory approval or statute, rule, or order may contain any condition, restriction, or requirement that Middlefield reasonably determines would have a material adverse effect on Middlefield. There must be no order or decision of a court preventing or delaying the merger and there must be no stop order issued or threatened by the Securities and Exchange Commission suspending effectiveness of the Form S-4 Registration Statement of which this prospectus/proxy statement forms a part. Additionally, Emerald Bank must receive an opinion from Ryan Beck stating that the merger consideration to be received by Emerald Bank shareholders in the merger is fair from a financial point of view. The opinion of Ryan Beck included as Appendix B to this prospectus/proxy statement satisfies this mutual closing condition. In addition to these mutual closing conditions stated in section 7.01, each of Emerald Bank on one hand and Middlefield on the other is also entitled to insist at completion of the merger upon satisfaction of individual other conditions specifically applicable to it, as described below.

		Conditions for the benefit of Emerald Bank						Conditions for the benefit of Middlefield
		Emerald Bank is not required to complete the merger unless						Middlefield is not required to complete the merger unless
1)		the representations and warranties of Middlefield contained in the merger agreement were true and correct in all material respects when the agreement was entered into on November 15, 2006 and remain true when the merger occurs			1	)		the representations and warranties of Emerald Bank contained in the merger agreement were true and correct in all material respects when the agreement was entered into on November 15, 2006 and remain true when the merger occurs
2)		each of Middlefield and EB Interim Bank performs in all material respects all of the covenants and obligations under the merger agreement required to be performed by them before the merger occurs			2	)		Emerald Bank performs in all material respects all of the covenants and obligations under the merger agreement required to be performed by it before the merger occurs
3)		there shall not have occurred any circumstance or event having a material adverse effect on Middlefield’s financial position, results of operations, or business or Middlefield’s ability to complete the merger between the November 15, 2006 date of the merger agreement and the date the merger occurs			3	)		there shall not have occurred any circumstance or event having a material adverse effect on Emerald Bank’s financial position, results of operations, or business or Emerald Bank’s ability to complete the merger between the November 15, 2006 date of the merger agreement and the date the merger occurs
4)		Middlefield shall have suffered no damage, destruction, or loss materially affecting its business or properties that is not covered by insurance			4	)		Emerald Bank shall have suffered no damage, destruction, or loss materially affecting its business or properties that is not covered by insurance
5)		there shall be no litigation or governmental proceeding instituted or threatened that would challenge, prevent, or delay the merger			5	)		there shall be no litigation or governmental proceeding instituted or threatened that would challenge, prevent, or delay the merger or that would impair Middlefield’s ability to exercise full rights of ownership of Emerald Bank