UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

The Securities Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐ Preliminary Proxy Statement

 

☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☒ Definitive Proxy Statement

 

☐ Definitive Additional Materials

 

☐ Soliciting Material Pursuant to §240.14a-12

 

 

Middlefield Banc Corp.

(Name of Registrant as Specified in Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

☒ No fee required.

 

☐ Fee paid previously with preliminary materials.

 

☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

 

April 5, 2022

 

Dear Fellow Shareholders:

The 2022 Annual Meeting of Shareholders of Middlefield Banc Corp. will be held on Wednesday, May 11, 2022 at 1:00 p.m. Eastern Time. We have adopted a virtual format for our Annual Meeting. We will provide a live webcast of the Annual Meeting at www.meetnow.global/MYFZMTM where you will be able to vote electronically and submit questions during the meeting. There will be no physical location for the meeting.

The four items to be considered at the meeting are the election of directors, a non-binding “say-on-pay” vote concerning the company’s compensation programs, a non-binding vote on the ratification of the appointment of auditors, and a shareholder proposal if properly presented at the meeting.

Your vote on these matters is important, regardless of the number of shares you own, and all shareholders are encouraged to participate in the live webcast of the Annual Meeting. However, it is important that your shares be represented regardless of whether you plan to participate in the live webcast of the Annual Meeting. In order to ensure that your shares are represented, I urge you to execute and return the enclosed proxy, or that you submit your proxy by telephone or internet promptly.

If your shares are not registered in your own name, please follow the voting instructions from your bank, broker, trustee, nominee or other shareholder of record to vote your shares.

  Sincerely,
 
  William J. Skidmore
  Chairman of the Board

 

 

15985 East High Street, P.O. Box 35 · Middlefield, Ohio 44062 · 440/632-1666 · 888/801-1666 · 440/632-1700 (FAX) www.middlefieldbank.bank

 

 

Middlefield Banc Corp.

15985 East High Street

P.O. Box 35

Middlefield, Ohio 44062

(440) 632-1666

 

Notice of Annual Meeting of Shareholders

 

Notice is hereby given that, due to the public health impact of the coronavirus pandemic and to support the health and well-being of our shareholders, this year’s Annual Meeting will be held in a virtual meeting format only, on May 11, 2022 at 1:00 p.m., Eastern Time. You can virtually attend the live webcast of the Annual Meeting at www.meetnow.global/MYFZMTM. There is no physical location for the Annual Meeting.

 

A proxy and a proxy statement for the 2022 Annual Meeting of Shareholders are enclosed. The purpose of the Annual Meeting is to consider and act upon –

 

(1)election of three directors to serve until the 2025 Annual Meeting of Shareholders or until their successors are elected and qualified,

 

(2)a non-binding advisory proposal to approve the compensation of Middlefield Banc Corp.’s named executive officers,

 

(3)ratification of the appointment of S.R. Snodgrass, P.C. as independent auditor for the fiscal year ending December 31, 2022,

 

(4)a shareholder proposal if properly presented at the meeting, and

 

(5)to consider any other proposal that may properly come before the Annual Meeting.

 

The Board of Directors is not aware of any other business to be presented at the Annual Meeting. Any action may be taken on the foregoing proposals at the 2022 Annual Meeting on the date specified or on any date or dates to which the Annual Meeting is adjourned or postponed. The record date for determining shareholders of record entitled to vote at the meeting is March 17, 2022.

 

Your vote is important. We therefore urge you to vote promptly by using the internet, by telephone, or by signing, dating, and returning the enclosed proxy card in the postage-paid return envelope provided, regardless of whether you expect to participate in the live webcast of the Annual Meeting. If you vote by internet, or by telephone, you do not need to return the proxy card. Internet and telephone voting information is provided on the proxy card.

 

Shareholders whose shares are held in the name of a broker, bank or other holder of record must vote in the manner directed by such holder. Check your proxy card or the information forwarded by your broker, bank or other holder of record to see which options are available to you.

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held

on May 11, 2022. This Proxy Statement, the Chairman’s letter, and the Annual Report on Form 10-K are available at www.edocumentview.com/MBCN.

 

  Sincerely,
 
  William J. Skidmore
  Chairman of the Board

Middlefield, Ohio

April 5, 2022

 

Thank you for acting promptly

 

 

 

Middlefield Banc Corp.

15985 East High Street

P.O. Box 35

Middlefield, Ohio 44062

(440) 632-1666

 

Proxy Statement

 

Middlefield Banc Corp., an Ohio corporation, is furnishing this proxy statement to you on behalf of the board of directors to solicit your proxy for use at the 2022 Annual Meeting of Shareholders and during any adjournment or postponement thereof. The Annual Meeting will be held on Wednesday, May 11, 2022, at 1:00 p.m. Eastern Time. We have adopted a virtual format for our Annual Meeting. We will provide a live webcast of the Annual Meeting at www.meetnow.global/MYFZMTM where you will be able to vote electronically and submit questions during the meeting. The accompanying Notice of Meeting and this Proxy Statement are first being mailed to shareholders on or about April 5, 2022.

 

References in this proxy statement to "Middlefield," “we,” “us,” “Company,” and “our” mean Middlefield Banc Corp. alone or Middlefield Banc Corp. and its subsidiaries, depending on the context. The subsidiaries of Middlefield Banc Corp. are The Middlefield Banking Company and EMORECO, Inc.

 

General Information about the Annual Meeting

 

Purpose of the Meeting. At the Annual Meeting we will ask Middlefield shareholders (1) to elect three directors to serve until the 2025 Annual Meeting of Shareholders or until their successors are elected and qualified, (2) to act on a non-binding, advisory proposal to approve the named executive officer compensation disclosed in this proxy statement in accordance with rules of the Securities and Exchange Commission (the “SEC”), (3) to ratify the appointment of Middlefield’s independent auditor, and (4) to consider and vote upon, if properly presented at the Annual Meeting, a shareholder proposal. The non-binding proposal for approval of executive compensation is commonly known as a say-on-pay proposal.

 

How to Attend the Virtual Annual Meeting. The Annual Meeting will be a completely virtual meeting of shareholders, which will be conducted exclusively by webcast. No physical meeting will be held.

 

You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting www.meetnow.global/MYFZMTM . You also will be able to vote your shares online at the virtual Annual Meeting.

 

To participate in the Annual Meeting, you will need to review the information included on your proxy card or on the instructions that accompanied your proxy materials. If you hold your shares through an intermediary, such as a bank or broker, you must register in advance using the instructions below.

 

The virtual Annual Meeting will begin promptly at 1:00 p.m., Eastern Time, on May 11, 2022. We encourage you to access the meeting prior to the start time leaving ample time for check-in. Please follow the registration instructions as outlined in this proxy statement.

 

The virtual meeting platform is fully supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Please note that Internet Explorer is no longer supported. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the meeting. We encourage you to access the meeting prior to the start time. A link on the meeting page will provide further assistance should you need it.

 

You may submit questions during the Annual Meeting. If you wish to submit a question, you may do so by logging into the virtual meeting platform at www.meetnow.global/MYFZMTM , entering the 15 digit control number found on your proxy card, typing your question into the “Question” field, and clicking “Send”. Additional information regarding the ability of shareholders to ask questions during the Annual Meeting will be set forth in the meeting’s Rules of Conduct, which will be made available within the virtual Annual Meeting platform.

 

How to Register to Attend the Virtual Annual Meeting. If you are a registered shareholder (i.e., you hold shares as reflected by the records of our transfer agent), you do not need to register to attend the virtual Annual Meeting. Please follow the instructions on the proxy card that you received.

 

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If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the virtual Annual Meeting.

 

To register to attend the Annual Meeting online by webcast, you must submit proof of your proxy power (legal proxy) reflecting your Middlefield holdings along with your name and email address to Computershare.

 

Requests for registration should be directed to Computershare by forwarding the email you received from your bank or broker, or an image of your legal proxy, to legalproxy@computershare.com. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on May 6, 2022. You will receive a confirmation of your registration by email after your registration materials have been received.

 

Voting Procedures. If you were a shareholder of record at the close of business on March 17, 2022, you are entitled to vote at the Annual Meeting. As of March 17, 2022, there were 5,878,050 shares of Middlefield common stock outstanding.

 

The enclosed proxy is for use if you are unable to participate in the live webcast of the Annual Meeting or if you wish to have your shares voted by proxy even if you participate in the live webcast of the Annual Meeting. We will provide a live webcast of the Annual Meeting at www.meetnow.global/MYFZMTM where you will be able to vote electronically. Please vote your shares by (1) the internet, (2) telephone or (3) completing, signing, dating, and returning the enclosed proxy as soon as possible in the postage-paid envelope provided. If you hold your shares in the name of a bank or broker, the availability of internet and telephonic voting will depend on the voting processes of the bank or broker.

 

Proxies solicited hereby may only be used at the Annual Meeting and any adjournment thereof, and will not be used for any other meeting. Proxies solicited by the board will be voted in accordance with the directions given. If no instructions are given, proxies will be voted in favor of the proposals set forth in this proxy statement.

 

If your shares are registered directly in your name with our transfer agent, you are a “shareholder of record” or registered holder. If your shares are held through a bank, broker, nominee or other shareholder of record, you are considered the “beneficial owner” of those shares. If your shares are held by a bank, broker, depositary, trustee or some other nominee, that entity will provide separate voting instructions. If a beneficial owner provides specific voting instructions by mail, telephone, or internet, your nominee will vote your shares as you have directed.

 

If your shares are held in the name of a brokerage firm, your shares may be voted even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under applicable rules to vote shares for which their customers do not provide voting instructions on certain “routine” matters. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is referred to as a “broker non-vote.” The ratification of S.R. Snodgrass, P.C. as our registered independent public accounting firm is the only routine matter for which the brokerage firm that holds your shares may vote your shares without your instructions.

 

Revocation of Proxies. Shareholders who execute proxies retain the right to revoke them at any time before completion of the Annual Meeting, but revocation will not affect a vote previously taken. If your common stock is held in street name, you must follow the instructions of your broker, bank, or other nominee to revoke your proxy instructions. If you are a holder of record and wish to revoke your proxy instructions, you may revoke a proxy by –

 

•participating in the live webcast of the Annual Meeting at www.meetnow.global/MYFZMTM where you will be able to vote electronically (Simply attending the virtual Annual Meeting without voting will not revoke an earlier proxy),

 

•giving a subsequent proxy relating to the same shares,

 

•casting a later internet or telephone vote relating to the same shares, or

 

•filing with the Secretary at or before the Annual Meeting a written revocation notice bearing a later date than the proxy.

 

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A written notice revoking a proxy should be delivered to Ms. Julie E. Shaw, Secretary, Middlefield Banc Corp., 15985 East High Street, P.O. Box 35, Middlefield, Ohio 44062. Unless revoked, the shares represented by proxies will be voted at the Annual Meeting.

 

Expense of Soliciting Proxies. Middlefield will bear the cost of soliciting proxies. We will reimburse brokerage firms and other custodians, nominees, and fiduciaries for reasonable expenses incurred by them in sending proxy material to the beneficial owners of common stock. In addition to solicitation by mail, directors, officers, and employees of Middlefield and its subsidiaries may solicit proxies personally or by telephone, but they will receive no additional compensation for doing so.

 

Middlefield has also engaged Georgeson LLC, a proxy soliciting firm, to assist in the solicitation of proxies for a fee of $10,000 and reimbursement of reasonable out-of-pocket expenses. Middlefield will pay the standard charges and expenses of brokerage houses, voting trustees, banks, associations, and other custodians, nominees, and fiduciaries who are record holders of Middlefield common stock not beneficially owned by them for forwarding this proxy statement and other proxy solicitation materials to and obtaining proxies from the beneficial owners of Middlefield common stock.

 

Quorum and Vote Required. A quorum is necessary for the conduct of business at the Annual Meeting. When present in person or by proxy at the Annual Meeting, the holders of a majority of the shares of Middlefield common stock issued and outstanding and entitled to vote constitute a quorum.

 

Shareholders are entitled to one vote for each share held. Shareholders are not entitled to cumulate their votes in the election or removal of directors or otherwise. Our Regulations provide in Article III, section 2 that directors are elected by a plurality vote of votes cast, meaning the nominees receiving the greatest numbers of votes will be elected. Our Regulations provide in Article I, section 7 that a majority of votes cast is sufficient to constitute the act of shareholders, except as otherwise provided in the Regulations. We will consider the non-binding proposal to approve the compensation of Middlefield Banc Corp.’s named executive officers (“say-on-pay”) to be approved if the proposal receives the affirmative vote of a majority of the votes cast. We will consider the proposal to ratify the appointment of S.R. Snodgrass, P.C. as independent auditor to be approved if the proposal receives the affirmative vote of a majority of the votes cast. If properly presented at the Annual Meeting, we will consider the shareholder proposal to be approved if the shareholder proposal receives the affirmative vote of a majority of the votes cast.

 

Abstentions and Broker Non-Votes. Abstention may be specified on all proposals except the election of directors. Abstentions and broker non-votes will be counted for purposes of establishing that a quorum is present at the meeting. A broker non-vote arises when shares held by a broker nominee for a beneficial owner are not voted because the broker nominee does not receive voting instructions from the customer and lacks discretionary authority to vote the shares without instructions.

 

Brokers normally have authority to vote on routine matters, such as the ratification of independent registered public accounting firms, but not on non-routine matters such as the election of directors. Pursuant to applicable stock exchange rules, the proposal to ratify the appointment of Middlefield’s independent registered public accounting firm (Proposal 3) is a routine matter.

 

The election of directors, the advisory vote on executive compensation, and the shareholder proposal are not considered routine matters. We urge you to provide instructions to your broker or nominee so that your vote may be counted on these important matters. Brokers are not allowed to vote uninstructed shares in regard to the election of directors, the advisory approval of Middlefield’s executive compensation, and the shareholder proposal. You should direct the vote of your shares by following the instructions provided on the voting instructions card you receive from your broker or other nominee and return the voting instructions card to your broker or other nominee in a timely manner to ensure that your shares are voted on your behalf.

 

Board Recommendations. The board of directors recommends that you vote FOR election of the director nominees identified in this proxy statement, FOR the say-on-pay proposal, FOR ratification of the appointment of S.R. Snodgrass, P.C. as auditor for the fiscal year ending December 31, 2022, and AGAINST the shareholder proposal.

 

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Corporate Governance

 

Director Independence. A majority of Middlefield’s directors are independent, as the term independence is defined in Rule 5605(a)(2) of the NASDAQ Stock Market listing rules and as defined by Rule 10A-3(b)(1)(ii) of the SEC. The board has determined that all of the current directors other than Mr. Heslop are independent directors, including all directors serving on the Corporate Governance and Nominating Committee, the Audit Committee, and the Compensation Committee.

 

Leadership Structure of the Board. The office of Chairman of the Board and the office of President and Chief Executive Officer have traditionally been separate at Middlefield. Middlefield believes that separation of these two offices is consistent with the board’s responsibility for oversight of management and of Middlefield’s affairs generally. The time, effort, and energy that the President and Chief Executive Officer must devote to that position, as well as the commitment required to serve as Chairman of the Board, make it impractical for one person to serve in both roles. The board believes that an independent director serving as Middlefield’s Chairman of the Board is the appropriate leadership structure at this time, demonstrating Middlefield’s commitment to good corporate governance.

 

Risk Oversight. The board is actively involved in oversight of the risks that could affect Middlefield. The board's oversight is conducted primarily through committees, but the full board retains responsibility for general oversight of risks. Board committees exercising oversight of risks include (1) an Audit Committee that oversees financial reporting and legal and compliance risks, (2) a Compensation Committee that is responsible for risks relating to Middlefield’s employment policies and compensation and benefits systems, (3) a Corporate Governance and Nominating Committee that oversees risks relating to management and board succession planning and Middlefield’s ethics and business practices, and (4) other bank committees, such as the loan and asset/liability management committees, that are responsible for exercising oversight of the risks associated with the business of banking. The board satisfies its risk oversight responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within Middlefield and The Middlefield Banking Company.

 

The board recognizes that management succession planning is an ongoing part of its responsibilities. The full board is responsible for overseeing CEO succession planning and assesses both expected and emergency CEO succession at least annually. The board regularly works with its committees and members of management to evaluate potential successors to the CEO. The board discusses potential successors with the CEO and together with the CEO reviews any development plans recommended for such individuals. A similar process is also followed with regard to the other executive officers.

 

Code of Ethics. Our Code of Ethics requires that directors, executive officers, and employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner, and otherwise act with integrity and in Middlefield’s best interests. Directors, executive officers, and employees must report any conduct they believe in good faith to be an actual or apparent violation of the Code of Ethics. Middlefield’s Code of Ethics includes a Code of Ethics for Financial Professionals, which applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The goal of the Code of Ethics for Financial Professionals is to promote integrity in the preparation and reporting of financial information and to assure full, fair, accurate, timely, and understandable disclosure in SEC reports and other public communications. The Code of Ethics is available at www.middlefieldbank.bank.

 

Anti-Hedging Policy. Middlefield’s Insider Trading Policy prohibits hedging transactions involving Middlefield’s securities by directors, executive officers and employees of Middlefield or The Middlefield Banking Company. The anti-hedging policy: (i) requires that Middlefield securities purchased by a director, officer or employee in the open market must be held for a minimum of six months and preferably longer; (ii) prohibits direct and indirect short selling of Middlefield securities by directors, officers or employees; (iii) prohibits transactions by directors, officers or employees in puts, calls or other derivative transactions involving Middlefield’s securities, other than the exercise of options issued by Middlefield to its employees or directors; (iv) prohibits other forms of hedging or monetarization transactions by directors, officers or employees, such as zero-cost dollars and forward sales transactions, involving Middlefield’s securities; and (v) prohibits directors, officers or employees from holding Middlefield securities in a margin account or pledging Middlefield securities as collateral for a loan without first obtaining approval.

 

Shareholder Communications. A shareholder who wishes to communicate with the board or with individual directors concerning Middlefield’s financial statements, accounting practices, or internal controls should write to the chairman of the Audit Committee in care of Ms. Julie E. Shaw, Secretary, at Middlefield Banc Corp., 15985 East High Street, P.O. Box 35, Middlefield, Ohio 44062. If the shareholder's concern relates to Middlefield’s governance practices,

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business ethics, or corporate conduct, the concern should be submitted in writing to the chairman of the Corporate Governance and Nominating Committee in care of Ms. Julie E. Shaw, Secretary, at the preceding address. Other concerns may be submitted to any of the independent directors at that address.

 

Board Meetings and Committees. Middlefield’s board held twelve meetings in 2021. Each individual who served in 2021 as a director of Middlefield attended at least 75% of the sum of the total number of board meetings and the total number of meetings held by all committees on which he or she served during the tenure of his or her service. The board encourages directors to attend the annual meeting of shareholders. All of the incumbent directors and director nominees attended the 2021 Annual Meeting. Directors serving on the Audit Committee, the Corporate Governance and Nominating Committee, the Compensation Committee, and the Executive Committee are –

 

Audit Committee Compensation Committee Corporate Governance and
Nominating Committee

 

 

Executive Committee

Kevin A. DiGeronimo 1 Thomas W. Bevan 5 Thomas W. Bevan   Thomas G. Caldwell 8
Kenneth E. Jones 2 Kenneth E. Jones James J. McCaskey James R. Heslop, II
Darryl E. Mast Clayton W. Rose, III 3 William J. Skidmore Darryl E. Mast
Clayton W. Rose, III 3 Robert W. Toth4 6 Carolyn J. Turk7 James J. McCaskey
Robert W. Toth4 Carolyn J. Turk Michael C. Voinovich William J. Skidmore 7
Carolyn J. Turk Michael C. Voinovich   Michael C. Voinovich

 

1 Joined the Committee as of November 8, 2021

2 Mr. Jones became Committee Chairman on November 8, 2021

3 Ceased to be a Committee member after November 8, 2021, when Mr. Rose resigned from the board

4 Ceased to be a Committee member after May 12, 2021, when Mr. Toth’s director term ended

5 Mr. Bevan became Committee Chairman as of May 12, 2021

6 Ceased to be Committee Chairman on May 12, 2021

7 Committee Chairman.

8 Ceased to be a Committee member after March 31, 2022, when Mr. Caldwell resigned from the board

 

Audit Committee. The Audit Committee appoints Middlefield’s independent public auditor, reviews and approves the audit plan and fee estimate of the independent public auditor, appraises the effectiveness of the internal and external audit efforts, evaluates the adequacy and effectiveness of accounting policies and financial and accounting management, supervises the internal auditor, and reviews and approves the annual financial statements. The Audit Committee has the authority to engage separate legal counsel and other advisors, as necessary, to execute its duties. The Audit Committee met four times in 2021. A copy of the Audit Committee charter is available at www.middlefieldbank.bank. A copy of the charter is also available in print to shareholders upon request, addressed to Ms. Julie E. Shaw, Secretary, at Middlefield Banc Corp., 15985 East High Street, P.O. Box 35, Middlefield, Ohio 44062.

 

Middlefield believes that the directors serving on the Audit Committee do not have a relationship with Middlefield or its subsidiaries that would interfere with the exercise of independent judgment as directors. The board believes that all members of the Audit Committee satisfy the current independence requirements of the NASDAQ Stock Market and applicable rules and regulations of the SEC, and that Director Jones and Director Turk are audit committee financial experts, as that term is defined in SEC rules.

 

Audit Committee Report. The Audit Committee reviewed and discussed the audited financial statements for the year ended December 31, 2021 and discussed the audited financial statements with management. The Audit Committee has also discussed with S.R. Snodgrass, P.C., Middlefield’s independent auditor, the matters required to be discussed by PCAOB Auditing Standard No. 1301 (Communication with Audit Committees). The Audit Committee received the written disclosures and the letter from S.R. Snodgrass, P.C. required by PCAOB Rule 3526 (Communications with Audit Committees Concerning Independence), and discussed with S.R. Snodgrass, P.C. its independence. Based on this, the Audit Committee recommended to the board that the audited financial statements be included in Middlefield’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for filing with the SEC.

 

Submitted by the Audit Committee:

 

Kevin A. DiGeronimo, Kenneth E. Jones, Darryl E. Mast, and Carolyn J. Turk.

 

Compensation Committee. The Compensation Committee establishes the base salary of each executive officer other than the Chief Executive Officer and makes recommendations for the Chief Executive Officer’s compensation to the full board. The Middlefield Banking Company’s Compensation Committee establishes the

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executives’ award levels under the Annual Incentive Plan and administers the executive deferred compensation agreements entered into by The Middlefield Banking Company. Middlefield’s Compensation Committee is responsible for administration of other executive benefits and plans including the 2017 Omnibus Equity Plan. The Compensation Committee’s performance review of the Chief Executive Officer takes into account reports submitted by each director. Performance reviews of other executives are the primary responsibility of the Chief Executive Officer. The Compensation Committee met once in 2021. A copy of the Compensation Committee charter is available at www.middlefieldbank.bank. A copy of the charter is also available in print to shareholders upon request, addressed to Ms. Julie E. Shaw, Secretary, at Middlefield Banc Corp., 15985 East High Street, P.O. Box 35, Middlefield, Ohio 44062.

 

The Compensation Committee has sought input on both board and executive compensation issues from compensation consultants. The committee sometimes engages consultants to conduct periodic comprehensive total compensation studies or to advise about compensation practices generally. The Compensation Committee retains the right to hire, fire, and obtain advice and assistance from legal counsel or other experts or consultants, consistent with its charter. In 2021, the Compensation Committee reviewed director compensation with advice from Newcleus Compensation Advisors. In 2021, Newcleus Compensation Advisors reviewed Middlefield’s management compensation practices and provided surveys of management compensation practices for a peer group of financial institutions.

 

Total compensation for the named executive officers is comprised of base salaries, annual cash incentive awards, retirement plan contributions, equity awards and other benefits and perquisites. To determine compensation levels for the named executive officers, as well as other officers, the Compensation Committee reviews compensation survey data from independent sources to ensure that the total compensation program is competitive. In making determinations on the mix and amount of executive compensation, the Compensation Committee reviews all components of executive compensation for each executive. The Compensation Committee has no mandatory policy for the allocation among base salary, short-term performance-based cash bonuses, long-term incentives, and retirement benefits. The Compensation Committee considers Middlefield’s performance, industry comparative data, experience, tenure, and responsibilities in recommending compensation for each position. Executive and officer compensation is weighted toward Middlefield’s performance and achievement of annual and long-term objectives. In general, Middlefield attempts to target total compensation for named executive officers at market competitive levels of peer financial companies.

 

Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee recommends to the board the slate of director nominees to be proposed by the board for election by the shareholders, any director nominees to be elected by the board to fill interim director vacancies, and the directors to be selected for membership on and chairmanship of the committees of the board. In addition, the committee considers general corporate governance matters on behalf of the board and annually reviews with the board the requisite skills and criteria for new members. The committee also reviews the composition and function of the board as a whole. The committee met seven times in 2021.

 

To identify nominees, the committee relies on personal contacts as well as its knowledge of members of the local communities. Middlefield has not used an independent search firm to identify nominees. The committee does not have a policy for the consideration of diversity in the nomination process. The committee generally views and values diversity from the perspective of professional and life experiences, as well as geographic location, representative of the markets in which we do business. The committee recognizes that diversity in professional and life experiences may include consideration of gender, race or national origin, in identifying individuals who possess the qualifications that the committee believes are important to be represented on the board. In its deliberations, the committee takes into account all facets of a potential nominee’s background, including the following –

 

•personal qualities and characteristics,
•accomplishments and reputation in the business community,
•financial, regulatory, and business experience,
•current knowledge and contacts in the communities in which Middlefield does business,
•ability and willingness to commit adequate time to board and committee matters,
•fit of the individual’s skills with those of other directors and potential directors in building a board that is effective and responsive to Middlefield’s needs,
•independence, and
•any other factors the board deems relevant, including diversity of viewpoints, background, experience, and other demographics.

 

The committee also considers and reviews the director’s board and committee attendance and performance, length of board service, experience, skills, the contributions that the director brings to the board, and independence. The

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committee’s goal is to identify individuals who will enhance and add valuable perspective to the board’s deliberations and who will assist Middlefield in its efforts to capitalize on business opportunities in a challenging and highly competitive market.

 

A copy of the Corporate Governance and Nominating Committee charter is available at www.middlefieldbank.bank, along with a copy of our Corporate Governance Guidelines. The charter and guidelines are also available in print to shareholders upon request, addressed to Ms. Julie E. Shaw, Secretary, at Middlefield Banc Corp., 15985 East High Street, P.O. Box 35, Middlefield, Ohio 44062.

 

The committee will consider director nominees recommended by shareholders. A shareholder may submit a nomination for director by following the procedures specified in Article III, section 4, of Middlefield’s Regulations. These procedures require that the shareholder deliver to Middlefield’s Secretary a written notice stating the following:

 

(a)the name and address, as they appear on Middlefield’s books, of the shareholder giving the notice and of the beneficial owner, if any, on whose behalf the nomination is made, as well as the name and address of each person(s) nominated by the shareholder;
(b)a representation that the shareholder giving the notice is a holder of record of stock of Middlefield entitled to vote at the annual meeting and that the shareholder intends to appear in person or by proxy at the annual meeting to nominate the person(s) specified in the notice;
(c)the class and number of shares of stock of Middlefield owned beneficially and of record by the shareholder giving the notice and by the beneficial owner, if any, on whose behalf the nomination is made;
(d)a description of all arrangements or understandings between or among any of (A) the shareholder giving the notice, (B) the beneficial owner on whose behalf the notice is given, (C) each nominee, and (D) any other person(s) (naming such person(s)) pursuant to which the nomination or nominations are to be made by the shareholder giving the notice; and
(e)such other information regarding each nominee proposed by the shareholder giving the notice as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC.

 

The written consent of the nominee to serve as a director must also be provided by the shareholder making the nomination. The information must be provided to the Secretary at least 60 days before the date corresponding to the date on which Middlefield’s proxy materials were mailed to shareholders for the previous year’s annual meeting, and no more than 120 days before that date. A shareholder nomination should be submitted to the Secretary at Middlefield’s headquarters located at 15985 East High Street, Middlefield, Ohio 44062. A nomination made by a shareholder who does not comply with these procedures will be disregarded.

 

Middlefield’s Corporate Governance Guidelines provide that upon attaining age 75 a director may complete his or her term but may not stand for election to an additional term.

 

Executive Committee. The Executive Committee is empowered to act in place of the full board, with certain exceptions, between meetings of the full board. The Executive Committee performs general control and supervision functions subject to the discretion of the full board of directors. The Executive Committee meets as needed and met eighteen times in 2021.

 

A copy of the Executive Committee charter is available at www.middlefieldbank.bank. A copy of the charter is also available in print to shareholders upon request, addressed to Ms. Julie E. Shaw, Secretary, at Middlefield Banc Corp., 15985 East High Street, P.O. Box 35, Middlefield, Ohio 44062.

 

Director Compensation

 

The following table shows the compensation paid to nonemployee directors of the Company for their service in 2021, including their service on our board, on the board of The Middlefield Banking Company, and on the board committees of Middlefield and The Middlefield Banking Company. The compensation of Messrs. Caldwell and Heslop as directors is included in the Summary Compensation Table.

Name

($)

Fees Earned or
Paid in Cash

 ($) Stock
Awards

($)

Option
Awards

($)

Non-Equity
Incentive Plan
Compensation

($)

Nonqualified
Deferred
Compensation
Earnings

($)

All Other
Compensation

($)

Total

Thomas W. Bevan 25,750 15,573  0 n/a n/a 0 41,323
Kevin A. DiGeronimo** 12,500 15,573 0 n/a n/a 0 28,073
Kenneth E. Jones 24,750 15,573  0 n/a n/a 2,700 43,023

 

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Name

($)

Fees Earned or
Paid in Cash

 ($) Stock
Awards

($)

Option
Awards

($)

Non-Equity
Incentive Plan
Compensation

($)

Nonqualified
Deferred
Compensation
Earnings

($)

All Other
Compensation

($)

Total

Darryl E. Mast 38,500 15,573 0 n/a n/a 0 54,073
James J. McCaskey 41,750 15,573 0 n/a n/a 0 57,323
Clayton W. Rose, III** 18,500 15,573 0 n/a n/a 3,000 37,073
William J. Skidmore 51,500 15,573 0 n/a n/a 0 67,073
Robert W. Toth** 12,250 7,785 0 n/a n/a 0 20,035
Carolyn J. Turk 32,500 15,573 0 n/a n/a 0 48,073
Michael C. Voinovich 37,750 15,573 0 n/a n/a 0 53,323

 

* On January 4, 2021, each non-employee director serving The Middlefield Banking Company received a stock grant of 346 shares at $22.50 per share. On July 1, 2021, non-employee directors of the Middlefield Banking Company received a stock grant of 330 shares at $23.60 per share. .

** Mr. DiGeronimo became a director on November 8, 2021. Clayton W. Rose, III attended four meetings in 2021 until his director service ended on November 8, 2021. Robert W. Toth attended four meetings in 2021 until his director service ended at the 2021 Annual Meeting of Shareholders on May 12, 2021.

 

Director Fees. In 2021, Middlefield directors received compensation of $750 for each board and committee meeting attended. Middlefield’s Chairman of the Board received additional annual compensation of $10,000. The Chairmen of Middlefield’s Audit Committee and Compensation Committee each receive additional annual compensation of $3,000 and the Chairmen of Middlefield’s Corporate Governance and Nominating Committee and Executive Committee each receive additional annual compensation of $2,000. For the period of time that Mr. Rose and Mr. Jones served as Chair of the Audit Committee in 2021 they received $2,250 and $750, respectively. For the period of time that Mr. Bevan and Mr. Toth served as Chair of the Compensation Committee in 2021, each received $1,500. Mrs. Turk received $1,000 for part-year service as Chair of the Corporate Governance & Nominating Committee. For 2021, The Middlefield Banking Company directors received compensation of approximately $1,800 per month, consisting of a monthly cash retainer of $500, and two grants of Middlefield stock with an approximate annual value of $15,600, with one half of the annual $15,600 amount payable on the first business day of January and the balance payable on the first business day of July. The Middlefield Banking Company directors also received $500 in committee fees for each meeting attended. The Chairmen of The Middlefield Banking Company’s Asset Liability Committee and Risk/Compliance Committee each received additional annual compensation of $2,000. The 2021 compensation of Director Jones and Director Rose included $3,000 and $2,700, respectively, for their service on our Central Ohio Regional Advisory Board. Directors of EMORECO, Inc. receive no compensation for board service.

 

Director Indemnification. At the 2001 annual meeting, shareholders approved the form and use of indemnification agreements for directors. The indemnification agreements allow directors to select the most favorable indemnification rights provided under (1) Middlefield’s Articles or Regulations in effect on the date of the indemnification agreement or on the date expenses are incurred, (2) state law in effect on the date of the indemnification agreement or on the date expenses are incurred, (3) any liability insurance policy in effect when a claim is made against the director or on the date expenses are incurred, and (4) any other indemnification arrangement otherwise available. The agreements cover all fees, expenses, judgments, fines, penalties, and settlement amounts paid in any matter relating to the director’s role as a Middlefield director, officer, employee, agent, or when serving as Middlefield’s representative with respect to another entity. Each indemnification agreement provides for the prompt advancement of all expenses incurred in connection with any proceeding subject to the director’s obligation to repay those advances if it is determined later that the director is not entitled to indemnification.

 

Voting Securities and Principal Holders

 

To the best of our knowledge, no person other than Ancora Advisors, LLC (“Ancora Advisors”) and affiliates owns beneficially more than 5% of our outstanding common stock. As of December 31, 2021, Ancora Advisors holds 364,636 shares according to a Form 13F filed with the SEC on February 14, 2022. The same Form 13F reports beneficial ownership of 93,793 shares by Ancora Family Wealth Advisors. Ancora Advisors’ Schedule 13D beneficial ownership report filed with the SEC on November 10, 2021, stated that owners and employees of Ancora Advisors owned 1,700 shares. Based on collective ownership of 460,129 shares, ownership of Ancora Advisors and affiliates constitutes 7.83% of the 5,878,050 shares outstanding on the March 17, 2022 record date. Ancora Advisors’ address is 6080 Parkland Boulevard, Suite 200, Cleveland, Ohio 44124.

 

The following table shows the beneficial ownership of Middlefield common stock on March 17, 2022 on the part of each director, each director nominee, each executive officer identified in the Summary Compensation Table, and all directors, nominees, and executive officers as a group. For purposes of the table, a person is considered to own

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beneficially any shares over which he or she exercises sole or shared voting or investment power or of which he or she has the right to acquire beneficial ownership within 60 days. Unless noted otherwise, voting power and investment power are exercised solely by the person named or they are shared with members of his or her household. The percentage figures are based on 5,878,050 shares outstanding, plus the number of shares each individual has the right to acquire within 60 days. The address of each of the persons listed is c/o Middlefield Banc Corp., 15985 East High Street, P.O. Box 35, Middlefield, Ohio 44062.

 

Directors, Director Nominees, and Named Executive Officers Shares Beneficially
Owned*		 Shares Acquirable
Within 60 Days by
Option Exercise		 Percent of Stock
Thomas W. Bevan, director  50,957 (1)   (10)
Thomas G. Caldwell, (director, President & CEO until March 31, 2022)  53,440 (2)    (10)
Kevin A. DiGeronimo  990         (10)
James R. Heslop, II, director, (President & CEO after March 31, 2022)  31,499 (3)   (10)
Kenneth E. Jones, director  9,748 (4)    (10)
Darryl E. Mast, director  36,882 (5)   (10)
James J. McCaskey, director  9,932 (6)    (10)
William J. Skidmore, director  20,357 (7)    (10)
Donald L. Stacy, CFO, SVP and Treasurer  14,284 (8)   (10)
Carolyn J. Turk, director  30,429   (10)
Michael C. Voinovich, director  31,200 (9)   (10)
other executive officers (5 people)  14,498         (10)
all directors, nominees, and executive officers as a group (16 people)  304,221         5.18%

 

(1)Includes 26,530 shares held jointly with spouse.
(2)Includes 539 shares held by Mr. Caldwell as custodian for his children and 31,627 shares held jointly with spouse.
(3)Includes 2,136 shares held in an IRA.
(4)Includes 2,154 shares held by Mr. Jones’ spouse.
(5)Includes 31,731 shares held by The Huntington Investment Company in two IRA accounts for Mr. Mast. The Huntington Investment Company also holds 1,222 shares in an individual account for Mr. Mast.
(6)Includes 4,738 shares held jointly with spouse and 1,372 shares held by spouse in spouse’s retirement account.
(7)Includes 1,624 shares held jointly with spouse.
(8)Includes 43 shares held as joint tenant with a son and 4,036 shares held in an IRA.
(9)Includes 8,994 shares held in three IRAs, 8,965 shares through his employer’s deferred compensation plan which holds Middlefield stock pursuant to Mr. Voinovich’s direction, and 11,409 shares held by Echo Health, Inc., Mr. Voinovich’s employer, over which Mr. Voinovich holds voting power.
(10)Does not exceed 1%.

 

 

Director Stock Ownership Guidelines. Middlefield’s Corporate Governance Guidelines include stock ownership guidelines for directors. Effective January 1, 2022 the guidelines provide that within four years after election a director should own Middlefield common stock equal in value to at least four times the director’s yearly base compensation for service as a director of The Middlefield Banking Company. Yearly base compensation refers to the sum of the monthly cash retainer payments that directors of The Middlefield Banking Company receive for director service to the bank and the equity grants a director of The Middlefield Banking Company receives for the year. As of December 31, 2021, all of the directors met the former stock ownership guidelines which required that within three years after election a director should own Middlefield common stock equal in value to at least two times the director’s yearly base compensation for service as a director of The Middlefield Banking Company, and three times yearly base compensation within six years.

 

While Middlefield encourages ownership of Middlefield stock by all executive officers, Middlefield has not adopted a stock ownership requirement for Middlefield’s named executive officers. As of December 31, 2021, ownership of Middlefield common stock equaled in value for Mr. Caldwell and Mr. Heslop more than two times their respective base salaries.

 

Delinquent Section 16(a) Reports. Section 16(a) of the Securities Exchange Act of 1934 requires that directors and executive officers file with the SEC initial reports of ownership and reports of changes in ownership. Based solely on review of the copies of such reports furnished to Middlefield and written representations to Middlefield, all section 16(a) filing requirements applicable to Middlefield’s executive officers and directors were complied with during the fiscal year ended December 31, 2021, except that former director Caldwell and President & Chief Executive Officer James Heslop each filed late one Form 4 relating to a stock award and Director Voinovich filed late one Form 4 relating to a stock purchase.

 

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Summary Compensation Table

 

The majority of the compensation of executive officers is paid by The Middlefield Banking Company, but compensation shown in the table is aggregate compensation paid by Middlefield and The Middlefield Banking Company. No compensation is paid by EMORECO, Inc.

Name and Principal
Position		 Year

Salary

($) (1)

 Bonus
($) (2)		 Stock
Awards
($)		 Option
Awards
($)		 Non-Equity
Incentive Plan
Compensation
($) (3)		 Nonqualified
Deferred
Compensation
Earnings ($)		 All Other
Compensation
($) (4)		 Total ($)

Thomas G. Caldwell

President and Chief
Executive Officer

until March 31, 2022

2021

2020

396,864

381,600

0

87,000

0 (5)

0 (6)

0

0

133,794

0

0

0

110,418

70,242

641,076

538,843

                   

James R. Heslop, II

Executive Vice
President and Chief
Operating Officer

until March 31, 2022

2021

2020

262,912

252,800

0

41,000

0 (5)

0 (6)

0

0

57,414

0

0

0

77,670

49,305

397,996

343,105

                   

Donald L. Stacy

Chief Financial
Officer and Treasurer

2021

2020

222,102

216,685

0

35,500

0 (5)

0 (6)

0

0

48,502

0

0

0

40,037

19,286

310,641

271,471

(1)       Includes salary deferred at the election of the executive under The Middlefield Banking Company’s 401(k) retirement plan.

(2)       For 2020, represents cash bonus payments made in March 2021 based on the compensation committee’s evaluation of individual and corporate performance achieved during the year.

(3)       No cash incentive payments under The Middlefield Banking Company’s Annual Incentive Plan were made to the executives based on 2020 financial performance and the executives’ performance. The 2021 cash incentive payments were made February 23, 2022, based on financial performance and the executives’ performance in 2021.

(4)       The figures in the All Other Compensation column are the sum of matching contributions under The Middlefield Banking Company’s 401(k) plan, contributions and interest earnings credited by The Middlefield Banking Company for each executive under the executive deferred compensation agreements, and directors’ fees paid to Messrs. Caldwell and Heslop. In 2021, the bank made contributions of $8,700 to the 401(k) plan account of Mr. Caldwell in 2021, $8,700 to the 401(k) plan account of Mr. Heslop, and $7,734 to the 401(k) plan account of Mr. Stacy. The 2021 contributions and interest earnings for the executive deferred compensation agreements were contributions of $55,561 and interest earnings of $15,584 for Mr. Caldwell, contributions of $36,808 and interest earnings of $1,589 for Mr. Heslop, and contributions of $31,094 and interest earnings of $1,209 for Mr. Stacy. Mr. Caldwell’s director fees were $30,573 in 2021 and $26,825 in 2020. Mr. Heslop’s director fees were $30,573 in 2021 and $26,825 in 2020.

(5)       Messrs. Caldwell, Heslop, and Stacy received conditional stock awards on February 23, 2021. The number of shares awarded was 5,291 shares to Mr. Caldwell, 2,921 shares to Mr. Heslop, and 2,467 shares to Mr. Stacy. The award amount is a percentage of the award recipient’s salary, divided by the share price at the close of market on December 31, 2020. The closing price of the shares on December 31, 2020 was $22.50. The percentage of salary for purposes of calculating the award to Mr. Caldwell is 30% and for Messrs. Heslop and Stacy is 25%. To become vested in and entitled to the stock award, each executive is required to maintain continuous service with Middlefield until the third anniversary of the award. Mr. Caldwell forfeited his restricted stock award upon his resignation as President and Chief Executive Officer of Middlefield on March 31, 2022. The performance condition will be satisfied if the average annual return on Middlefield stock for the years 2021, 2022, and 2023 is at least 10.00%. For this purpose, annual return is the sum of annual dividends and the excess of the closing stock price on the final trading day of the year over the closing price on the final trading day of the preceding year, divided by the closing stock price on the final trading day of the preceding year. The three-year average of the annual returns for 2021, 2022, and 2023 will determine whether the 10.00% goal is satisfied. If the 10.00% goal is not satisfied but the average annual return is positive, the recipient will become the owner of and entitled to a portion of the conditional stock award, forfeiting the remainder. The portion that will be issued to the recipient is the percentage of the total award equal to the percentage achievement of the 10.00% goal. If the average annual return is negative, the entire award is forfeited, unless the Compensation Committee waives the performance condition. If average annual return exceeds 10.00%, the nominal amount of the conditional stock award will increase, up to a maximum of 125% of the nominal award, increasing based on the percentage excess of actual average return over the 10.00% goal. Accordingly, the maximum potential conditional stock award total is 3,651 shares for Mr. Heslop and 3,083 shares for Mr. Stacy. The terms of the conditional stock awards are set forth in the Form 8-K Current Report filed by Middlefield with the SEC on February 25, 2021.

(6)       Messrs. Caldwell, Heslop, and Stacy received conditional stock awards on February 25, 2020. The number of shares awarded was 4,387 shares to Mr. Caldwell, 2,422 shares to Mr. Heslop, and 2,076 shares to Mr. Stacy. The award amount is a percentage of the award recipient’s salary, divided by the share price at the close of market on December 31, 2019. The closing price of the shares on December 31, 2019 was $26.09. The percentage of salary for purposes of calculating the award to Mr. Caldwell is 30% and for Messrs. Heslop and Stacy is 25%. To become vested in and entitled to the stock award, each executive is required to maintain continuous service with Middlefield until the third anniversary of the award. Mr. Caldwell forfeited his restricted stock award upon his resignation as President and Chief Executive Officer of Middlefield on March 31, 2022. The performance condition will be satisfied if the average annual return on Middlefield stock for the years 2020, 2021, and 2022 is at least 10.00%. For this purpose, annual return is the sum of annual dividends and the excess of the closing stock price on the final trading day of the year over the closing price on the final trading day of the preceding year, divided by the closing stock price on the final trading day of the preceding year. The three-year average of the annual returns for 2020, 2021, and 2022 will determine whether the 10.00% goal is satisfied. If the 10.00% goal is not satisfied but the average annual return is positive, the recipient will become the owner of and entitled to a portion of the conditional stock award, forfeiting the remainder. The portion that will be issued to the recipient is the percentage of the total award equal to the percentage achievement of the 10.00% goal. If the average annual return is negative, the entire award is forfeited, unless the Compensation Committee waives the performance condition. If average annual return exceeds 10.00%, the nominal amount of the conditional stock award will increase, up to a maximum of 125% of the nominal award, increasing based on the percentage excess of actual average return over the 10.00% goal. Accordingly, the maximum potential conditional stock award total is 3,027 shares for Mr. Heslop and 2,595 shares for Mr. Stacy. The terms of the

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conditional stock awards are set forth in the Form 8-K Current Report filed by Middlefield with the SEC on February 26, 2020.

 

Perquisites and other personal benefits provided to each of the named executive officers in 2021 and 2020 had a value of less than $10,000. The value of insurance on the lives of the named executive officers is not included in the Summary Compensation Table because the executives have no interest in the policies. However, the executives are entitled to designate the beneficiary of death benefits payable by The Middlefield Banking Company under executive survivor income agreements. See the “Executive Survivor Income Agreements” section.

 

Annual Incentive Plan. In 2003, The Middlefield Banking Company established the Annual Incentive Plan, a short-term cash incentive plan that rewards employees with additional cash compensation if specific objectives are achieved. An employee’s potential cash incentive payment under the Annual Incentive Plan depends upon two factors: (x) the employee’s position, which establishes a maximum cash incentive award as a percent of base salary, and (y) the degree to which the performance targets, such as targeted net income, and individual performance targets, are achieved. Annual incentive payments under the plan for a particular year generally are based on objective financial performance criteria established by The Middlefield Banking Company board, with the Compensation Committee’s recommendation.

 

The bank-wide performance objectives that had to be achieved in 2021 in order for Messrs. Caldwell, Heslop, and Stacy to receive a cash incentive payment under the Annual Incentive Plan included a pre-tax, pre-provision earnings goal, an efficiency ratio goal, a goal for the Company’s return on assets (ROA), a goal for non-accrual loans and accruing loans 90 or more days past due, and a goal having to do with the regulatory and supervisory status of Middlefield and The Middlefield Banking Company. In future years, other financial performance measures could be taken into account, such as return on average equity (ROAE), return on average assets (ROAA), deposit growth, and net interest margin. The bank's Compensation Committee also considers individual performance goals.

 

The Annual Incentive Plan was amended and restated effective March 12, 2019. A copy of the plan is included as exhibit 10.22 to the Form 8-K Current Report that we filed with the SEC on March 12, 2019, which is available for viewing or download at www.sec.gov. All employees are eligible for awards under the Annual Incentive Plan. Employees who are not members of the senior management team received cash incentive payments for 2021 operating results consistent with the plan. The bank-wide performance objectives that had to be achieved in 2021 to receive a cash incentive payment under the plan included a net income goal, an efficiency ratio goal, a goal for loan growth, and a goal for deposit growth. The bank’s Compensation Committee also considers individual performance goals. As amended, the Annual Incentive Plan provides that the President and Chief Executive Officer is eligible for a cash bonus in an amount ranging from a minimum of 12% of his salary if actual performance is 90% of targeted performance goals established by the bank’s Compensation Committee, 24% of salary if actual performance is 100% of targeted performance goals, and a maximum of 36% of salary if actual performance is 110% or more of targeted performance goals. The President and Chief Executive Officer’s annual award under the plan is exclusively determined by the bank’s performance. Upon Mr. Caldwell’s retirement, the board appointed Mr. Heslop to serve as President and Chief Executive Officer of Middlefield and The Middlefield Banking Company effective April 1, 2022. Under the annual incentive plan, Mr. Stacy is eligible for cash bonuses in an amount ranging from a minimum of 12% of salary if actual performance is 90% of targeted performance goals, 18% of salary if actual performance is 100% of targeted performance goals, and a maximum of 24% of salary if actual performance is 110% or more of targeted performance goals. Mr. Stacy’s annual award under the plan is exclusively determined by the bank’s performance.

 

The Annual Incentive Plan has certain forfeiture and recoupment, or “clawback,” provisions that allow the board to rescind awards under the plan that have not yet been paid, and recover awards that have been paid, upon the occurrence of certain events. The Compensation Committee may rescind and not pay an incentive award to a participant in the Annual Incentive Plan if the Compensation Committee finds that the participant failed significantly to satisfy expectations, engaged in fraudulent or unethical conduct in the course of the participant’s employment or committed an intentional violation of bank policy. The Annual Incentive Plan also provides that a participant in the plan agrees to repay to The Middlefield Banking Company any award that is entirely or partially attributable to a financial reporting error. If an award is entirely attributable to a financial reporting error, the participant must promptly repay to The Middlefield Banking Company the entire amount of the award and if an award is partially attributable to a financial reporting error the participant must promptly repay to The Middlefield Banking Company the portion of the award that the Compensation Committee determines is attributable to the financial reporting error.

 

2017 Omnibus Equity Plan. The 2017 Omnibus Equity Plan approved by shareholders on May 10, 2017 authorizes the issuance of 448,000 shares of Middlefield common stock. Middlefield’s Compensation Committee administers the Omnibus Equity Plan. Shares of common stock issued under the Omnibus Equity Plan may be treasury shares, authorized and unissued shares not reserved for any other purpose, or a combination of treasury shares and authorized but unissued shares. Awards to employees may take the form of incentive stock options, or ISOs, that qualify

12 

 

for favored tax treatment under Internal Revenue Code section 422, stock options that do not qualify under section 422, referred to as NQSOs, stock appreciation rights, or SARs, restricted stock, restricted stock units, performance shares, which become fully vested if conditions imposed in the award agreement are satisfied, and other stock-based awards. In contrast to the kinds of awards that may be made to employees, non-employee directors are eligible for awards of NQSOs, restricted stock, restricted stock units and other stock-based awards. The terms of each award are stated in award agreements. Of the shares authorized for issuance under the Omnibus Equity Plan, up to one half, or 224,000 shares, may be reserved for issuance under incentive stock options. The aggregate number of shares underlying awards granted to an individual participant in a single year may not exceed 44,800.

 

Unless the participant’s award agreement provides otherwise, when a participant employee’s employment terminates or when a non-employee director participant’s service terminates, the portion of any award held by the participant that is not exercisable is forfeited and the portion of any restricted stock award or performance share award that is unvested and held in escrow is forfeited. All NQSOs, SARs, ISOs and other stock-based awards held by the participant that are exercisable are forfeited if not exercised before the earlier of the expiration date specified in the award agreement or 90 days after termination occurs. However, all of a participant’s outstanding awards are forfeited if the participant’s employment or director service terminates for cause or if in Middlefield’s judgment a basis for termination for cause exists, regardless of whether the awards are exercisable and regardless of whether the participant’s employment or director service actually terminates. However, shares of restricted stock or performance shares that have been released from escrow and distributed to the participant are not affected by a termination for cause.

 

If a change in control of Middlefield occurs, the Compensation Committee has broad authority and sole discretion to take actions it deems appropriate to preserve the value of participants’ awards. In general, a change in control means one or more of the following events occur –

 

•a change in the composition of Middlefield’s board of directors, after which the incumbent members of the board on the effective date of the 2017 Omnibus Equity Plan – including their successors whose election or nomination was approved by a vote of at least two-thirds of those incumbent directors and their successors – no longer represent a majority of the board,

 

•a person (other than persons such as subsidiaries or benefit plans) becomes a beneficial owner of Middlefield securities representing 25% or more of the combined voting power of all securities eligible to vote for the election of directors, excepting business combinations after which Middlefield’s shareholders own more than 50% of the resulting company and except for stock issuances approved by incumbent directors and their successors;

 

•a merger, consolidation, share exchange, or similar form of business combination transaction requiring approval of Middlefield’s shareholders, excepting business combinations after which Middlefield’s shareholders own more than 50% of the resulting company; or

 

•Middlefield’s shareholders approve a plan of complete liquidation or dissolution or sale of all or substantially all of Middlefield’s assets.

 

To align equity compensation practices with stockholder interests, in 2015 we implemented a change in our equity compensation practices, awarding restricted stock with vesting that is typically dependent not only on continued service over time but also on achieving an established average annual return on Middlefield stock.

 

Executive Deferred Compensation Agreements. The Middlefield Banking Company entered into executive variable benefit deferred compensation agreements with Messrs. Heslop and Stacy on July 9, 2018. Under the executive variable benefit deferred compensation agreements, the executives will receive an annual contribution ranging from 5% to 15% of their base salary. Contributions exceeding 5% of salary are conditional on achievement of performance goals involving (i) the bank’s net income for the plan year and (ii) the bank’s peer ranking for the plan year based on the top 50% of all FDIC-insured commercial banks having assets between $1 billion and $3 billion as reported on the Uniform Bank Performance Report (“UBPR”) available from the Federal Financial Institutions Examination Council’s website at www.ffiec.gov/UBPR.htm. The UBPR is an analytical tool created for bank supervisory, examination, and management purposes. In a concise format, the UBPR shows the impact of management decisions and economic conditions on a bank’s performance and balance-sheet composition. The executive variable benefit deferred compensation agreements do not supersede the May 8, 2008 amended executive deferred compensation agreements to which Messrs. Heslop and Stacy are parties.

 

The Middlefield Banking Company entered into executive deferred compensation agreements with Messrs.

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Caldwell, Heslop, and Stacy on December 28, 2006. Amended on May 9, 2008 for compliance with Internal Revenue Code section 409A, the executive deferred compensation agreements provide supplemental retirement income benefits. The arrangement is noncontributory, meaning contributions can be made solely by The Middlefield Banking Company. For each year the executive remains employed with The Middlefield Banking Company, until attaining age 65 the Middlefield Banking Company credits each executive with a contribution ranging from 5% to 15% of the executive’s base annual salary. Messrs. Heslop and Stacy’s contributions ended after the executives reached age 65 during the fourth quarter of 2018. Messrs. Heslop and Stacy’s payments began after the executives reached aged 65. In 2021, Messrs. Heslop and Stacy received monthly payments of $2,305.25 and $1,772.37, respectively, pursuant to their 2008 amended executive deferred compensation agreements. Contributions exceeding 5% of salary are conditional on achievement of performance goals involving: (x) The Middlefield Banking Company’s net income for the plan year and (y) The Middlefield Banking Company’s peer ranking for the plan year, based on the top 50% of all FDIC-insured commercial banks having assets between $1 billion and $3 billion as reported on the UBPR available from the Federal Financial Institutions Examination Council’s website at www.ffiec.gov/UBPR.htm.

 

Each of the two performance goals can account for a contribution of up to 7.5% of the executive’s base annual salary. The net income goal for each year is established by The Middlefield Banking Company’s Compensation Committee by March 31 of that year. The Compensation Committee’s decisions are not final unless approved by a majority of the independent directors of The Middlefield Banking Company.

 

Executive Survivor Income Agreements. The Middlefield Banking Company entered into executive survivor income agreements with executives in June 2003, including Messrs. Caldwell, Heslop, and Stacy. The agreements promise a specific cash benefit payable by The Middlefield Banking Company to an executive’s designated beneficiary at the executive’s death, provided the executive dies before attaining age 85. The benefit would be paid to the executive’s beneficiary if the executive dies in active service to The Middlefield Banking Company. The benefit also would be payable for death occurring after the executive’s termination of service if the executive terminated (x) because of disability, or (y) within 12 months after a change in control of Middlefield, or (z) after having attained age 55 with at least ten years of service to The Middlefield Banking Company or after having attained age 65.

 

The total death benefit payable to Mr. Heslop’s beneficiaries if he dies in active service to The Middlefield Banking Company is $368,970 and the benefit payable to Mr. Stacy’s beneficiaries is $222,619. For death after terminating active service with The Middlefield Banking Company, the death benefit for Mr. Caldwell’s beneficiaries is $471,741, $368,970 for Mr. Heslop’s beneficiaries, and $111,309 for Mr. Stacy’s beneficiaries. To assure itself of funds sufficient to pay the promised death benefits, The Middlefield Banking Company purchased insurance on the executives’ lives with a single premium payment. The Middlefield Banking Company owns the policies and is the sole beneficiary. Of the total premium paid for the insurance on the various executives’ lives, $495,873 is attributable to insurance purchased on the life of Mr. Caldwell, $447,351 is attributable to insurance on the life of Mr. Heslop, and $333,890 is attributable to insurance purchased on the life of Mr. Stacy. The premium amounts are not included in the Summary Compensation Table. The Middlefield Banking Company expects the policies’ death benefits to be sufficient to pay all benefits promised under the executive survivor income agreements.

 

Change-in-Control Agreements. Although Middlefield and its subsidiaries do not have written employment agreements with officers, Middlefield entered into change-in-control agreements with some of its executive officers, including Messrs. Caldwell, Heslop, and Stacy. Mr. Caldwell’s change-in-control agreement terminated upon Mr. Caldwell’s retirement, effective March 31, 2022. The change-in-control agreements provide that the executive is entitled to severance compensation if a change in control occurs during the term of the agreement. The severance compensation is payable in a single lump sum. For purposes of the change-in-control agreements, the term “change in control” is defined as it is defined in Internal Revenue Code section 409A and implementing rules. In the case of executives other than Messrs. Heslop and Stacy, the lump-sum severance benefit is payable immediately after involuntary termination without cause or voluntary termination with good reason occurring within 24 months after a change in control. The lump-sum benefit of Messrs. Heslop and Stacy is payable when a change in control occurs.

14 

 

The change-in-control agreements promise to each executive a lump-sum payment calculated as a multiple of the executive’s salary and the executive’s cash bonus and cash incentive compensation. The multiple of compensation payable under the change-in-control agreements is 2.5 times in the case of Messrs. Heslop and Stacy and two times compensation for other executives. The agreements also promise continued life, health, and disability insurance coverage for 24 months after employment termination and legal fee reimbursement if the change-in-control agreements are challenged after a change in control. The change-in-control agreements with Messrs. Heslop and Stacy are included in the Form 8-K Current Report filed by Middlefield with the SEC on March 12, 2019.

 

Retirement Plan. Middlefield does not maintain a defined benefit or actuarial plan providing retirement benefits for officers or employees based on actual or average final compensation. The Middlefield Banking Company maintains a section 401(k) employee savings and investment plan for substantially all employees and officers who have more than one year of service. The bank’s contribution to the plan is based on 50% matching of voluntary contributions, up to 6% of compensation. An eligible employee may contribute up to 15% of his or her salary. Employee contributions are vested at all times. Bank contributions are fully vested after six years, vesting in 20% annual increments beginning with the second year. Employees also have life insurance benefits under a group term life insurance program, paying benefits to an employee’s beneficiary if the employee dies while employed by The Middlefield Banking Company, up to the lesser of (x) twice the employee’s annual salary at the time of death or (y) $200,000.

 

Transactions with Related Parties. Middlefield directors and executive officers and their associates are customers of and enter into banking transactions with The Middlefield Banking Company in the ordinary course of business. Middlefield expects that these relationships and transactions will continue. The transactions with directors, executive officers, and their associates have not involved more than the normal risk of collectability and have not presented other unfavorable features. Loans and commitments to lend included in these transactions were made and will be made on substantially the same terms – including interest rates and collateral – as those prevailing at the time for comparable transactions with persons not affiliated with Middlefield.

 

Outstanding Equity Awards

 

The following table shows as of December 31, 2021 unvested and unearned stock awards and the number of shares acquirable, exercise prices, and expiration dates of all unexercised stock options held by the executives identified in the Summary Compensation Table.

 

   

Option Awards

 

Stock Awards

 
   

Number of Securities
Underlying Unexercised
Options

(#)

 

Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

 

Option
Exercise
Price

($)

 

Option
Expiration
Date

 

Number of
Shares or
Units of
Stock That
Have Not
Vested

(#)

 

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested

($)

 

Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units, or Other
Rights That Have
Not Vested

(#)(1)

 

Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units, or
Other Rights That
Have Not Vested

($)

 

Name

 
  

Exercisable

 

Unexercisable

 

 

Thomas G. Caldwell

        

 

 

      

 

5,396(2)

4,387(3)

5,291(4)

 

 

133,821 

108,798 

131,217 

 

James R. Heslop, II                

2,978(2)

2,422(3)

2,921(4)

 

73,854 

60,066 

72,441 

 

Donald L. Stacy        

 

 

 

 

    

 

2,490(2)

2,076(3)

2,467(4)

 

61,752 

51,485 

61,182 

(1)       Shares adjusted for the 2-for-1 stock split on November 8, 2019.

(2)       Messrs. Caldwell, Heslop, and Stacy received conditional stock awards on March 1, 2019. The number of shares awarded was 5,396 shares to Mr. Caldwell, 2,978 shares to Mr. Heslop, and 2,490 shares to Mr. Stacy. The award amount is a percentage of the award recipient’s salary, divided by the share price at the close of market on December 31, 2018. The closing price of the shares on December 31, 2018 was $21.215. The percentage of salary for purposes of calculating the award to Mr. Caldwell is 30% and for Messrs. Heslop and Stacy is 25%. To become vested in and entitled to the stock award, each executive is required to maintain continuous service with Middlefield until the third anniversary of the award. The performance condition will be satisfied if the average annual return on Middlefield stock for the years 2019, 2020, and 2021 is at least 10.00%. For this purpose, annual return is the sum of annual dividends and the excess of the closing stock price on the final trading day of the year

15 

 

over the closing price on the final trading day of the preceding year, divided by the closing stock price on the final trading day of the preceding year. The three-year average of the annual returns for 2019, 2020, and 2021 will determine whether the 10.00% goal is satisfied. If the 10.00% goal is not satisfied but the average annual return is positive, the recipient will become the owner of and entitled to a portion of the conditional stock award, forfeiting the remainder. The portion that will be issued to the recipient is the percentage of the total award equal to the percentage achievement of the 10.00% goal. If the average annual return is negative, the entire award is forfeited, unless the Compensation Committee waives the performance condition. If average annual return exceeds 10.00%, the nominal amount of the conditional stock award will increase, up to a maximum of 125% of the nominal award, increasing based on the percentage excess of actual average return over the 10.00% goal. Accordingly, the maximum potential conditional stock award total is 6,744 shares for Mr. Caldwell, 3,722 shares for Mr. Heslop, and 3,112 shares for Mr. Stacy. The terms of the awards and a copy of the form of conditional stock award agreement are included in the Form 8-K Current Report filed by Middlefield with the SEC on March 5, 2019. The closing stock price on December 31, 2019 was $26.09. The closing stock price on December 31, 2018 was $21.215 and dividends per share for 2019 were $.57. Based on this, the return for 2019 was 25.67%. The closing stock price on December 31, 2020 was $22.50 and dividends per share for 2020 were $0.60. Based on this, the return for 2020 was -11.46%. The closing stock price on December 31, 2021 was $24.80, and dividends per share for 2021 were $0.69. Based on this, the return for 2021 was 13.29% and the three-year average annual return for 2019, 2020 and 2021 was 9.16%, which did not meet the 10.00% goal. Because the average annual return for the years 2019, 2020 and 2021 is positive but less than the goal of 10.00%, Messrs. Caldwell, Heslop and Stacy are vested in a percentage of their respective stock awards equal to the percentage achievement of the 10.00% goal. The average annual return for the years 2019, 2020 and 2021 of 9.16% was 91.60% of the 10.00% goal. Messrs. Caldwell, Heslop and Stacy became fully vested in 4,945 shares, 2,730 shares and 2,283 shares, respectively, as of March 1, 2022.

(3)       Messrs. Caldwell, Heslop, and Stacy received conditional stock awards on February 25, 2020. The number of shares awarded was 4,387 shares to Mr. Caldwell, 2,422 shares to Mr. Heslop, and 2,076 shares to Mr. Stacy. The award amount is a percentage of the award recipient’s salary, divided by the share price at the close of market on December 31, 2019. The closing price of the shares on December 31, 2019 was $26.09. The percentage of salary for purposes of calculating the award to Mr. Caldwell is 30% and for Messrs. Heslop and Stacy is 25%. To become vested in and entitled to the stock award, each executive is required to maintain continuous service with Middlefield until the third anniversary of the award. Mr. Caldwell forfeited his restricted stock award upon his resignation as President and Chief Executive Officer of Middlefield on March 31, 2022. The performance condition will be satisfied if the average annual return on Middlefield stock for the years 2020, 2021, and 2022 is at least 10.00%. For this purpose, annual return is the sum of annual dividends and the excess of the closing stock price on the final trading day of the year over the closing price on the final trading day of the preceding year, divided by the closing stock price on the final trading day of the preceding year. The three-year average of the annual returns for 2020, 2021, and 2022 will determine whether the 10.00% goal is satisfied. If the 10.00% goal is not satisfied but the average annual return is positive, the recipient will become the owner of and entitled to a portion of the conditional stock award, forfeiting the remainder. The portion that will be issued to the recipient is the percentage of the total award equal to the percentage achievement of the 10.00% goal. If the average annual return is negative, the entire award is forfeited, unless the Compensation Committee waives the performance condition. If average annual return exceeds 10.00%, the nominal amount of the conditional stock award will increase, up to a maximum of 125% of the nominal award, increasing based on the percentage excess of actual average return over the 10.00% goal. Accordingly, the maximum potential conditional stock award total is 3,027 shares for Mr. Heslop and 2,595 shares for Mr. Stacy. The terms of the conditional stock awards are set forth in the Form 8-K Current Report filed by Middlefield with the SEC on February 26, 2020.

(4)        Messrs. Caldwell, Heslop, and Stacy received conditional stock awards on February 23, 2021. The number of shares awarded was 5,291 shares to Mr. Caldwell, 2,921 shares to Mr. Heslop, and 2,467 shares to Mr. Stacy. The award amount is a percentage of the award recipient’s salary, divided by the share price at the close of market on December 31, 2020. The closing price of the shares on December 31, 2020 was $22.50. The percentage of salary for purposes of calculating the award to Mr. Caldwell is 30% and for Messrs. Heslop and Stacy is 25%. To become vested in and entitled to the stock award, each executive is required to maintain continuous service with Middlefield until the third anniversary of the award. Mr. Caldwell forfeited his restricted stock award upon his resignation as President and Chief Executive Officer of Middlefield on March 31, 2022. The performance condition will be satisfied if the average annual return on Middlefield stock for the years 2021, 2022, and 2023 is at least 10.00%. For this purpose, annual return is the sum of annual dividends and the excess of the closing stock price on the final trading day of the year over the closing price on the final trading day of the preceding year, divided by the closing stock price on the final trading day of the preceding year. The three-year average of the annual returns for 2021, 2022, and 2023 will determine whether the 10.00% goal is satisfied. If the 10.00% goal is not satisfied but the average annual return is positive, the recipient will become the owner of and entitled to a portion of the conditional stock award, forfeiting the remainder. The portion that will be issued to the recipient is the percentage of the total award equal to the percentage achievement of the 10.00% goal. If the average annual return is negative, the entire award is forfeited, unless the Compensation Committee waives the performance condition. If average annual return exceeds 10.00%, the nominal amount of the conditional stock award will increase, up to a maximum of 125% of the nominal award, increasing based on the percentage excess of actual average return over the 10.00% goal. Accordingly, the maximum potential conditional stock award total is 3,651 shares for Mr. Heslop and 3,083 shares for Mr. Stacy. The terms of the conditional stock awards are set forth in the Form 8-K Current Report filed by Middlefield with the SEC on February 25, 2021.

 

Messrs. Caldwell, Heslop, and Stacy received conditional stock awards on May 22, 2018. The number of shares awarded was 4,480 shares to Mr. Caldwell, 2,404 shares to Mr. Heslop, and 2,030 shares to Mr. Stacy. To become vested in and entitled to the stock award, each executive was required to maintain continuous service with Middlefield until the third anniversary of the award. The performance condition would have been satisfied if the average annual return on Middlefield stock for the years 2018, 2019, and 2020 was at least 8.00%. The three-year average annual return for 2018, 2019 and 2020 was 1.55%, which did not meet the 8.00% goal. Because the average annual return for the years 2018, 2019 and 2020 was positive but less than the goal of 8.00%, Messrs. Caldwell, Heslop and Stacy became vested in a percentage of their respective stock awards equal to the percentage achievement of the 8.00% goal. The average annual return for the years 2018, 2019 and 2020 of 1.55% was 19.38% of the 8.00% goal. Messrs. Caldwell, Heslop and Stacy became fully vested in 868 shares, 466 shares and 393 shares, respectively, as of May 22, 2021.

16 

 

 

PROPOSAL oNE -- Election of three Directors FOR THE TERM EXPIRING IN 2025

 

According to Article III, section 2, of Middlefield’s Regulations, the board may consist of no fewer than five and no more than 25 directors, the precise number being fixed or changed from time to time within that range by the board or by majority vote of shareholders acting at an annual meeting. Article III, section 2(b) of Middlefield’s Regulations provides that if the number of directors (including vacancies) of Middlefield is six or more, the directors must be classified into at least two classes, as nearly equal in number as possible and consisting of no fewer than three directors in each class, designated Class I, Class II, and if there are nine or more directors, Class III. Our board currently consists of nine directors. Class I of Middlefield’s board consists of Directors Jones, McCaskey and Voinovich (term expiring at the 2023 Annual Meeting), Class II includes Directors Bevan, DiGeronimo, and Heslop (term expiring at the 2024 Annual Meeting), and Class III consists of Directors Mast, Skidmore, and Turk (term expiring at the 2022 Annual Meeting). Former CEO and President Thomas Caldwell resigned from his positions on the board and committees of Middlefield effective March 31, 2022.

 

In August 2021, the SEC adopted Nasdaq’s proposal to require listed companies to provide statistical information about their boards of directors, in the form of the table below.

 

Board Diversity Matrix (As of April 5, 2022)
Total Number of Directors 9
Gender Identity Female Male Non-binary Gender Undisclosed
Number of directors based on gender identity 1 8    
Demographic Background        
White 1 8    
         

 

Three Nominees for the term ending at the 2025 Annual Meeting (Proposal One). The Corporate Governance and Nominating Committee recommended Directors Mast, Skidmore and Turk for reelection to the board. The board accepted the Corporate Governance and Nominating Committee’s recommendation and nominated these three individuals to serve as directors for the term ending at the 2025 Annual Meeting of Shareholders or until their successors are elected and qualified.

 

Nominee for the term
expiring in 2025

(Proposal One)

 

Age

 

 

 

Director
since

 

 

Current
term
expires

 

Biography

 

 

 

Darryl E. Mast 71 2013 2022

Darryl Mast retired in 2016 from The Hattie Larlham Care Group and Foundation, a nonprofit organization dedicated to improving the lives of children and adults with developmental and intellectual disabilities. He had been COO with responsibility for IT phone, facilities and fleet management, human resource management and business office support services having joined the organization in 2004. Mr. Mast began his career in banking in 1974. He was Senior Vice President of Second National Bank of Warren from 1986 to 2004 and an executive of Second Bancorp, Inc. with responsibility for 33 banking centers, consumer lending, call center, web site and online banking and private banking. Mr. Mast also served on the Asset/Liability, Second Bancorp Foundation and other committees. Mr. Mast has served on the Board of Trustees of the Warren Area Chamber of Commerce Economic Development Foundation, the Hattie Larlham Foundation, The Kent State University Trumbull Campus Advisory Board, and the Rotary Club of Warren. He served as President of the Board of Valley Consulting Services and as Chairman of the Wooster Area Chamber of Commerce. Mr. Mast attended Miami University, Oxford, Ohio, and the Graduate School of Banking at the University of Wisconsin. Mr. Mast’s banking experience, his demonstrated leadership ability, and his community involvement add important business and leadership experience to the board.

 

 

17 

 

Nominee for the term
expiring in 2025

(Proposal One)

 

Age

 

 

 

Director
since

 

 

Current
term
expires

 

Biography

 

 

 

William J. Skidmore 65 2007 2022

Until December 31, 2019, Mr. Skidmore was Northeast Ohio Senior District Manager of Waste Management. Mr. Skidmore held progressively responsible positions with Waste Management and a predecessor company since 1978. A New York Stock Exchange-listed company, Waste Management is North America’s leading provider of comprehensive waste management environmental services. Waste Management has been a serial acquirer of solid waste businesses, acquiring 86 solid waste businesses in 2016, 2017, and 2018. Waste Management executes its business with integral involvement from the field, and Mr. Skidmore was an important contributor to Waste Management’s serial acquisition record in Indiana, Michigan, and Ohio. Mr. Skidmore served as the first point of contact seeking to determine the interest of a solid waste business owner in selling, and Mr. Skidmore contributed his operational insight into Waste Management’s pro forma acquisition pricing for an accretive acquisition, and negotiated the final price with the selling owner on approximately a dozen Waste Management acquisitions of solid waste businesses.

 

Mr. Skidmore previously served on the Board of Directors of both First County Bank in Chardon, Ohio, and of Metropolitan National Bank in Youngstown, Ohio. He is a member and was the past President of the Chardon Rotary, a former President of the Chardon Chamber of Commerce, a past member of the Business Advisory Committee to Chardon Local Schools, a former member of the business advisory committee of Kent State University (Geauga), and a past representative to the board of the National Solid Waste Management Association in Washington, D.C. Mr. Skidmore earned a Bachelor’s Degree in Sales and Marketing from Bowling Green State University in 1978. Mr. Skidmore’s business management and banking experience in the Northeast Ohio market allow him to provide business and leadership expertise to the board.

 

Carolyn J. Turk 65 2004 2022

Ms. Turk is the Senior Internal Auditor of Molded Fiber Glass Companies and is a licensed CPA. Located in Ashtabula, Ohio, Molded Fiber Glass Companies is a manufacturer of reinforced fiber glass products with 12 entities in the U.S. and Mexico. Ms. Turk earned a B.S. in Accountancy from Youngstown State University in 1984. She has a long record of community service and currently serves on the Board of Country Neighbor Program, Inc. and as a Trustee of the Ashtabula Foundation. Ms. Turk’s business and accounting experience allow her to provide accounting and financial management expertise to the board.

           

Six continuing
directors

 

 

Age

 

 

 

Director
since

 

 

Current
term
expires

 

Biography

 

 

 

Kenneth E. Jones 73 2008 2023

A retired financial executive, Mr. Jones earned a B.S. in Nuclear Engineering from the University of Virginia in 1970 and an M.B.A. from the University of Virginia in 1972. He is also licensed in Ohio as a CPA (inactive). Mr. Jones is a former director of Applied Innovation, Inc. of Dublin, Ohio (NASDAQ), and served as Chairman of its Audit Committee. He has served as the elected fiscal officer of Jefferson Township, Franklin County, Ohio since May 2004. Mr. Jones’ financial and business experience and his service as a director of Middlefield since 2008 allow him to provide business and leadership expertise to the board.

 

James J. McCaskey 58 2004 2023

Mr. McCaskey is the President of McCaskey Landscape & Design, LLC, a design-build landscape development company. Previously, he was Vice President of Sales for the Pattie Group, also a design-build landscape development company, with which he had been employed for seventeen years. Mr. McCaskey is a past member of the Board of Directors and past President of the Ohio Landscape Association. Mr. McCaskey serves on the Advisory Board of Kent State University (Geauga), serves on the Geauga County Planning Commission since January 2019, and since January 2, 2014 serves as Munson Township Trustee. Mr. McCaskey earned a Bachelor’s Degree in Agricultural Production and a Bachelor’s Degree in Biology from Wilmington College in 1985. Mr. McCaskey’s extensive business management experience, community involvement, and service as a director of Middlefield since 2004 allow him to provide business and leadership expertise to the board.

18 

 

Six continuing
directors

 

 

Age

 

 

 

Director
since

 

 

Current
term
expires

 

Biography

 

 

 

Michael C. Voinovich 48 2020 2023

Mr. Voinovich is Executive Vice President and Chief Investment Officer of ECHO Health, Inc., headquartered in Westlake, Ohio. ECHO Health, Inc. provides innovative payment processing services to the healthcare and insurance industries. At ECHO Health, Inc., Mr. Voinovich is responsible for overseeing the company’s venture capital and corporate investment portfolios. Prior to joining ECHO Health, Inc. in January 2019, Mr. Voinovich was an investment banker for 19 years representing financial institutions and their holding companies. From 2013 until 2019, he was Managing Director and a Member of the Firm Commitment Committee of the Philadelphia-based investment banking firm of Boenning & Scattergood, Inc. Mr. Voinovich’s responsibilities included providing advice relating to debt and equity offerings, analyzing financial and accounting issues for banks engaged in merger and acquisition activities, assisting boards of directors in evaluating strategic alternatives to maximize shareholder value, and negotiating and executing transactions.

 

A graduate of John Carroll University with a B.S. in Business Administration, Mr. Voinovich has served as a member of the Board of Directors of Bank of George, Las Vegas, Nevada, since March 2015 and its holding company GBank Financial Holdings, Inc. (OTCQX: GBFH) since December 2017. Bank of George operates two full-service branches in Las Vegas and also conducts business through its Financial FinTech Division that enables cashless, mobile commerce solutions for the gaming, lottery and sports betting payments world. In August 2020, Mr. Voinovich became a director of Anchor Bancorporation, Inc. and its wholly owned subsidiary, Anchor State Bank, located in Anchor, Illinois. Since June 22, 2021, Mr. Voinovich has been Chair of Anchor Bancorporation and Anchor State Bank. Since November 2019, Mr. Voinovich has been a director of RSI Solutions, LLC, a highly specialized employment search firm focused on placing neurologists and neurosurgeons across the United States. Mr. Voinovich’s experience in the banking and financial services industry allows him to provide significant corporate finance and transactional expertise to the board.

         
Thomas W. Bevan 56 2017 2024

Mr. Bevan is a founding shareholder and CEO of Bevan & Associates, LPA, Inc. in Boston Heights, Ohio. Mr. Bevan has been licensed to practice law in the State of Ohio since 1991. He has also been admitted to practice before the U.S. District Court, Northern District of Ohio, and the United States Supreme Court. Mr. Bevan is a member of the Ohio State Bar Association, a member and Foundation Fellow of the Akron Bar Association, a member of the Ohio Association for Justice, and a member of the Public Justice Foundation. Mr. Bevan is also a principal of Liberty Capital, LLC, which is a commercial and residential real estate development and management company. Mr. Bevan was a member of the Board of Directors of Liberty Bank, N.A. from 2011 until 2017, and has been a Middlefield director since 2017. Mr. Bevan’s years of banking experience, his community contacts, his knowledge of the former Liberty Bank, N.A.’s customer base and market area as well as his knowledge of Middlefield allow him to provide business and leadership expertise to the board.

 

Kevin A. DiGeronimo 37 2021 2024

Mr. DiGeronimo has served as a director of The Middlefield Banking Company since January 2020 and is a director of Middlefield since November 8, 2021. Mr. DiGeronimo is Principal of DiGeronimo Companies and President of Independence Construction. Both businesses are headquartered in Independence, Ohio. DiGeronimo Companies is an Ohio trade name registration that encompasses various DiGeronimo family companies and enterprises that operate in several states. DiGeronimo Companies conducts commercial construction, real estate development, and asbestos and lead remediation among other businesses. Mr. DiGeronimo’s business management experience allows him to provide business and leadership expertise to the board.

 

James R. Heslop, II 68 2001 2024

Mr. Heslop became President and Chief Executive Officer of Middlefield and The Middlefield Banking Company effective April 1, 2022. Previously Executive Vice President and Chief Operating Officer of The Middlefield Banking Company since 1996, Mr. Heslop became Executive Vice President and Chief Operating Officer of Middlefield on October 30, 2000. He became a director of the bank in July 1999 and a director of Middlefield on November 19, 2001. From July 1993 until joining The Middlefield Banking Company in April 1996, Mr. Heslop was a Director, President, and Chief Executive Officer of First County Bank in Chardon, Ohio, an institution with total assets exceeding $40 million. First County Bank was an affiliate of F.N.B. Corporation, Pittsburgh, Pennsylvania. Mr. Heslop earned a B.S. in Business Administration from Wheeling College, an M.B.A. from Tiffin University, and is a graduate of the Graduate School of Banking at the University of Wisconsin-Madison. Mr. Heslop’s education, experience in the banking and financial services industry, and significant leadership positions with Middlefield and The Middlefield Banking Company allow him to provide business and leadership expertise to the board.

           

19 

 

Directors of The Middlefield Banking Company and EMORECO, Inc. are elected annually and do not serve staggered terms. The Middlefield Banking Company currently has ten directors. Jennifer Moeller began service as a director of The Middlefield Banking Company on December 13, 2021. The directors identified in the preceding table and Jennifer Moeller are expected to serve as directors of The Middlefield Banking Company for a term ending at the 2023 annual meeting.

 

The Board of Directors recommends voting “FOR” election of Darryl E. Mast, William J. Skidmore, and Carolyn J. Turk to the term expiring at the 2025 annual meeting.

 

Proposal TWO – ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

We are subject to section 14A of the Securities Exchange Act of 1934, which requires that we provide to our shareholders the opportunity to vote on the compensation of the executive officers named in the Summary Compensation Table. Commonly known as a say-on-pay vote, the shareholder vote required by section 14A is an advisory vote, which means that the vote is not binding on us, on our board of directors, or on the Compensation Committee. The say-on-pay vote is intended to be a vote on the executive officer compensation that is disclosed in this proxy statement in accordance with SEC disclosure rules.

 

The goals of our compensation arrangements are to provide fair and competitive compensation, to provide compensation that promotes the hiring and retention of the most talented personnel, to create incentives for and to reward superior performance, and to align the interests of our officers and employees with the interests of shareholders. The Compensation Committee and the board believe that Middlefield's compensation arrangements are designed to achieve these goals and that the compensation arrangements reward performance promoting our long-term prosperity. Our compensation arrangements are continually evolving and are and will remain subject to ongoing review and evaluation by the board and by the Compensation Committee. Accordingly, we ask our shareholders to vote on the following resolution at the 2022 Annual Meeting:

 

“RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed in Middlefield Banc Corp.'s Proxy Statement for the 2022 Annual Meeting in compliance with Item 402 of the Securities and Exchange Commission's Regulation S-K, including the compensation tables and narrative discussion, is hereby APPROVED.”

 

Approval of a majority of the votes cast will constitute approval of this proposal to approve the named executive officer compensation disclosed in this proxy statement. An abstention or broker non-vote is not counted as a vote cast, and as a result will have no effect on the vote to approve the proposal. A proxy that does not specify voting instructions will be voted in favor of this non-binding, advisory proposal. Although the results of the say-on-pay vote will not be binding on us, we expect to take the results into account in future compensation decisions.

 

The Board of Directors recommends that you vote “FOR” approval of the compensation of our named executive officers, as disclosed in this proxy statement.

 

Proposal THREE – Ratification of Appointment of Independent Auditor

 

Middlefield’s independent auditor for the year ended December 31, 2021 was S.R. Snodgrass, P.C. The Audit Committee selected S.R. Snodgrass, P.C. to be Middlefield’s independent auditor for the fiscal year ending December 31, 2022 as well. We expect one or more representatives of S.R. Snodgrass, P.C. to be present at the annual meeting. The representative of S.R. Snodgrass, P.C. will have the opportunity to make a statement if desired, and will be available to respond to appropriate questions.

 

It is proposed that our shareholders ratify the appointment by the Audit Committee of S.R. Snodgrass, P.C. as Middlefield’s independent registered public accounting firm for the year ending December 31, 2022. Approval by the shareholders of the appointment of our independent registered public accounting firm is not required by law, any applicable stock exchange regulation or by our organizational documents, but the Audit Committee is submitting this matter to shareholders for ratification as a corporate governance practice. Ultimately, the Audit Committee retains full discretion and will make all determinations with respect to the appointment of the independent registered public accounting firm.

 

20 

 

For services in fiscal years ended December 31, 2021 and December 31, 2020, we paid S.R. Snodgrass, P.C. as follows –

 

   2021   2020 
Audit Fees (1)  $161,912   $160,576 
Audit-Related Fees  $8,800   $8,516 
Tax Fees (2)  $13,550   $13,375 
All Other Fees  $0   $0 
   $184,262   $182,467 

 

(1)       Audit fees consist of fees for professional services rendered for the audit of Middlefield’s financial statements and review of financial statements included in Middlefield’s quarterly reports.

(2)       Tax service fees include fees for calculation of quarterly estimated taxes and for preparation of corporate income tax and franchise tax returns.

 

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

 

Auditor Independence. The Audit Committee believes that the non-audit services provided by S.R. Snodgrass, P.C. are compatible with maintaining the auditor’s independence. To the best of Middlefield’s knowledge, none of the time devoted by S.R. Snodgrass, P.C. on its engagement to audit Middlefield’s financial statements for the year ended December 31, 2021 is attributable to work performed by persons other than full-time, permanent employees of S.R. Snodgrass, P.C.

 

The Board of Directors recommends a vote “FOR” ratification of the appointment of S.R. Snodgrass, P.C. as Middlefield’s independent auditor for the fiscal year ending December 31, 2022.

 

Proposal Four – SHAREHOLDER PROPOSAL

 

In accordance with the rules of the SEC, set forth below is a shareholder proposal, along with a supporting statement of the shareholder proponent. The shareholder proposal is required to be voted on at the Annual Meeting only if properly presented at the Annual Meeting. The shareholder proposal and the supporting statement are included exactly as submitted by the proponent. Middlefield takes no responsibility for the content of the proposal or the supporting statement. Middlefield’s management and the board of directors do not support the adoption of the resolution proposed below and ask shareholders to consider the board of directors’ response, which follows the proposal.

 

The Board of Directors recommends that you vote “AGAINST” the proposal.

 

Ancora Catalyst Fund LP, the beneficial owner of at least $25,000 in market value of Middlefield’s common stock, intends to submit the following proposal at the Annual Meeting. The address of Ancora Catalyst Fund, LP is 6060 Parkland Boulevard, Suite 200, Cleveland, Ohio 44124.

 

Shareholder Proposal

 

RESOLVED, that the shareholders hereby inform the Board of Directors of Middlefield Banc Corp. (“MBCN”) that the shareholders recommend that the Board of Directors immediately take the necessary steps to achieve a sale, merger, or other disposition of the Company on terms that will maximize shareholder value as expeditiously as possible.

 

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Supporting Statement

 

The pursuit of a sale, merger or other disposition of the Company is warranted in light of MBCN’s persistent long-term underperformance. As of October 27, 2021, MBCN has underperformed (on a 1, 3, and 5-year basis1) the SPDR S&P Regional Banking EFT (KRE) as measured by its Total Shareholder Return. MBCN’s relative underperformance can be attributed to the bank achieving lower returns compared to MBCN’s Midwest banking peers2 as evidenced by their last twelve months’ Return on Average Assets, Return on Average Equity, and Return on Average Tangible Common Equity of 1.2%, 11.1% and 12.7%, respectively, vs. the peer average of 1.5%, 13.3%, and 14.5%. The lower returns has resulted in MBCN to trade at a discounted valuation relative to their peers on both a forward earnings and tangible book value (“TBV”) multiple. MBCN’s forward earnings and TBV multiple are 8.8x and 1.1x compared to the peer average of 10.4x and 1.7x. Additionally, we believe MBCN trades at a significant discount to its private market value as evidenced by average transaction multiples in contiguous states over the past three years of 1.6x TBV and 20.5x earnings.

 

We estimate there are several interested buyers for MBCN since the Bank is a scarce asset with the second largest deposit market share in Geauga County and is one of only eight publicly traded banks with assets between $1 billion - $2 billion in Ohio. Additionally, given the execution risk of replacing MBCN’s long-term CEO, Tom Caldwell, and achieving the growth necessary to close MBCN’s valuation gap, we believe running a strategic alternatives process to explore the sale of MBCN at a significant premium is the best risk adjusted outcome for shareholders.

 

If you agree, please vote in favor of this proposal. 

_________________

1 Source: FactSet for TSR data as of 10/27/2021

2 Peer Group includes: BFC, BFIN, BWB, CIVB, CZWI, FMAO, FMNB, FSFG, HLAN, ICBK, LCNB, LEVL, MCBC, SBFG, WSBF

 

Board of Directors Response

 

The board of directors unanimously recommends a vote “AGAINST” the shareholder proposal for the reasons described herein:

·The shareholder proposal, if enacted, could potentially weaken the Company’s business.
·The shareholder’s selection of “comparable” companies paints an inaccurate picture; compared to appropriately selected peers, the Company’s operating performance has been consistently strong.
·The Company’s stock valuation has been depressed by the Company’s removal, along with dozens of community banks, from the Russell 3000 Index last spring.
·The Company has taken favorable governance actions by addressing CEO succession and strengthening the board with capital markets expertise.

 

The board of directors has reviewed the proposal in a manner consistent with the Company’s corporate governance processes and directors’ fiduciary duties. The board of directors believes the statements made by the shareholder in the proposal misrepresent the Company’s actual performance and the facts, as well as the shareholder’s own business model for acceptable bank investments reported to Institutional Shareholder Services (“ISS”). In addition, the board of directors believes the proposal is only for the near-term benefit of the shareholder and is not in the best long-term interest of all of the Company’s shareholders.

The board of directors has concluded that the adoption of the proposal would not achieve the stated purpose of the proposal – the maximization of shareholder value. The board of directors recognizes its fiduciary duties to the shareholders and is focused on shareholder value creation. In a letter to the Company’s Chairman dated August 8, 2019 that was filed as an exhibit to the shareholder’s Schedule 13D also filed on August 8, 2019, the shareholder commented favorably that “we applaud the Board for undertaking this process [of] “evaluat[ing] the Bank’s three-year strategic plan on a regular basis.” The board of directors will continue to carefully evaluate any indications of interest and proposals for strategic transactions that the Company receives consistent with the directors’ fiduciary duties and commitment to acting in the best interests of all of the Company’s shareholders. The board does not believe that running a sales process to sell the Company to the highest bidder is in the best interests of the Company and its shareholders at this time.

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The proper timing of a merger or sale is of critical importance in maximizing shareholder value. Compelling the Company to “immediately take the necessary steps to achieve a sale, merger, or other disposition of the Company” could adversely affect the value of any such transaction by creating the impression that the Company is under pressure to sell and that the board would accept a lower price as a result. Under such circumstances, potential purchasers may make lower offers than they otherwise would have if the Company were not forced to achieve a sale. Furthermore, the board believes that being forced to immediately seek a sale, merger, or other disposition, as contemplated by the proposal, would put the board in the worst possible bargaining position and restrict the board’s ability to rigorously examine other strategic alternatives that may ultimately prove to be in the best interests of shareholders.

The board of directors continually monitors developments in the business environment in which the Company operates, including the terms of mergers and acquisitions involving community banks in the Company’s market area. Acquisition premiums vary widely based on many complex factors, including geographic factors; interest rate cycles; general economic conditions; the number of buyers and sellers in the market at any given time; asset size, capital levels and profitability of the seller; and the business plans and financial condition of the buyers. Determining whether and when shareholder value can be maximized by the sale of a company requires more than looking at average prices in past transactions involving companies that may have no similarities to the Company. The board strongly believes that the board is in the most informed position to analyze all of the complex variables and decide whether remaining independent or pursuing a merger is in the best interest of the Company and its shareholders.

Although the proposal does not mandate a sale or merger, the adoption of the proposal could create the appearance that the Company must sell. This could be harmful to the Company and the value of the Company’s stock, whether or not the board of directors determines to pursue a sale. If the board of directors were to determine that it is in the best interests of the Company and the Company’s shareholders to pursue a sale, we would conduct the process with strict confidentiality to have the strongest bargaining position possible. If the proposal is approved, the Company would be in a weakened bargaining position that would not be conducive to maximizing shareholder value.

The board of directors believes that the adoption of this proposal is ill-advised and unwarranted based on the arguments put forth in the shareholder’s supporting statement. In the shareholder’s supporting statement, the shareholder makes a number of statements related to what the shareholder claims is the Company’s long run of poor operating results. The board of directors strongly disagrees with these assertions.

The board believes the peer group selected by the shareholder as the basis of comparison is not appropriate. From an operating perspective, all but one of the 15 selected peers were larger than the Company; five were more than twice as large. Several of the banks have significantly greater exposure to cyclical business lines such as mortgage and SBA lending, which have thrived, and therefore boosted returns, during the historically low interest rate environment brought on by the COVID-19 pandemic. With respect to valuation comparisons, eight of the 15 peers were included in the Russell 3000 Index, a circumstance that typically produces higher stock valuations on a relative basis, as discussed in more detail below. Two of the 15 were targets of pending mergers, with merger premiums reflected in their pricing. Indeed, the shareholder’s peer group appears to be hand-picked to support the shareholder’s argument rather than objectively selected to promote meaningful conclusions. The board takes care in identifying worthwhile peer samples using factors such as bank geography, size and capitalization. As of, and for the last twelve months (“LTM”) ended December 31, 2021, Middlefield’s capital strength and operating results compared very favorably to those of a variety of applicable peer groups. Specifically, as shown below, the Company exceeded – and in many cases, greatly exceeded – peer medians for tangible common equity/tangible assets (“TCE/TA”), core return on average assets (“ROAA”), core return on tangible common equity (“ROATCE”), efficiency ratio and net interest margin (“NIM”).

    Tang Common Equity/
Tang Assets (%)		 LTM Core ROAA (%) LTM Core ROATCE (%) LTM Efficiency Ratio (%) LTM Net Interest Margin
(%)
             
  Middlefield Banc Corp. 9.80 1.37 14.44 56.67 3.79
             
  Ohio Public Bank Median
(Less than $10 Billion)		 9.70 1.20 11.87 63.87 3.39
             
  Midwest Public Bank Median
($1 Billion – $4 Billion)		 9.07 1.20 14.24 63.87 3.31
             
  Nationwide Public Bank Median
 ($1 Billion – $2 Billion)		 8.75 1.06 11.73 63.92 3.21
             

 

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Source: S&P Capital IQ Pro

In fact, the shareholder’s statement conflicts with Ancora’s own business model for acceptable bank investments expressed by Ancora in public forums. The ISS report for the Wayne Savings Bancshares 2018 proxy contest to elect directors at the annual shareholder meeting, issued on Thursday, March 29, 2018, stated the following regarding Ancora: “[a]ccording to [Co-Portfolio Manager Brian] Hopkins . . . Ancora expects bank investments to yield ROE of at least 10%.” The board is aware that experienced bank investors utilize ROATCE and price/tangible book value as primary performance and valuation metrics. Based on Ancora’s own references to ROATCE and price/tangible book value, the board believes it is broadly appropriate and consistent with Ancora’s perspective to focus on these metrics. As the following table shows, over the last ten years, the Company has delivered an ROATCE figure in excess of Ancora’s stated 10% threshold nine times, with an average annual ROATCE of 11.7%. The board notes that results in 2020 fell short of that threshold in large part because the Company proactively increased its provision for loan losses in anticipation of possible adverse effects of the COVID-19 pandemic. In reality, credit losses did not materialize in a meaningful way and the Company’s asset quality position has remained very strong throughout the pandemic.

Source: S&P Capital IQ Pro

Additionally, over that same ten-year period, the Company has grown its tangible book value per share (on a split-adjusted basis) from $12.05 at December 31, 2011 to $21.88 at December 31, 2021, a compound annual growth rate of 6.2%, while also paying out a total of $5.62 per share in dividends.

 

Source: S&P Capital IQ Pro

Unfortunately, the Company’s stock performance has not been reflective of these results of late due to an external phenomenon that has impacted most publicly traded banks of a similar size. The Russell 3000 Index is comprised of the 3,000 largest qualifying companies, as measured by market capitalization, listed on U.S. exchanges.

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The Russell 3000 Index is subdivided into the Russell 1000 Index, which includes the largest 1,000 of the component companies, and the Russell 2000 Index, which includes the next largest 2,000 component companies. Importantly, inclusion in the Russell indices is determined by market value and does not consider operating or financial performance of component companies. There is no way for a company to “earn its way in.” Many investment funds will either mirror these indices or benchmark their performance against the indices. In either case, the result of being added to the Russell 3000 is a significant increase in institutional buying of a component company’s stock, which can have a positive impact on the price and performance of that stock. When a company is removed from the Russell 3000, the opposite effect occurs, with institutional sellers placing downward pressure on a company’s stock. The Russell indices are re-balanced annually, with the final composition being determined in May and the indices officially reconstituted in June. In anticipation of each year’s re-balancing, many market participants begin speculating on upcoming Russell 3000 additions and deletions several months in advance.

In 2020, the minimum market capitalization for inclusion in the Russell 3000 was $94.8 million. The Company, which had previously been added to the index (in 2017), removed (in 2018), and re-added (in 2019), remained in the index for a second consecutive year with a market cap of approximately $110.8 million as of May 7, 2020. However, following the broad stock market recovery after the COVID-19 shock in the spring of 2020, the threshold for inclusion in the Russell 3000 leapt to $257.1 million in 2021, driven largely by technology and other growth-oriented sectors that soared thanks to low interest rates and the shift to the work-from-home environment. A record number of financial institutions, 80 in total, were removed from the Russell 3000 in 2021, including the Company. The number of banks removed from the Russell 3000 was greater than that of any other investment sector. Notwithstanding continued strong operating performance, the group of banks removed from the Russell 3000 has seen its total shareholder return lag the broader universe of bank stocks since early 2021. Among a subset of 24 banks removed last year from the Russell 3000 with capital levels most comparable to the Company (tangible common equity between 9–11%) (the “Russell Deletion Peers”), the Company posted above-median performance on several key performance metrics during 2021, as shown in the following table.

 

    Tang Common Equity/
Tang Assets (%)		 LTM Core ROAA (%) LTM Core ROATCE (%) LTM Efficiency Ratio (%) LTM Net Interest Margin
(%)
             
  Middlefield Banc Corp. 9.80 1.37 14.44 56.67 3.79
             
  Russell Deletion Peers Bank Median 9.57 1.30 12.56 63.87 3.33

 

 

Source: S&P Capital IQ Pro

When it became apparent in early 2021 that the Russell 3000 threshold would be dramatically higher, the Company’s stock – and the stocks of similarly sized peers – began to lag against larger community banks. The following two-year chart shows the Company and an aggregated index of the Russell Deletion Peers trading very similarly to the S&P U.S. SmallCap Banks Index until January 2021 when a clear break occurred. From January 4, 2021, through May 7, 2021 (the day that the Russell additions and deletions were officially announced), the SmallCap Banks Index increased by 35.3%, while the Company increased only 3.4% and the Russell Deletion Peers increased by 7.5%. This emphasizes the impact of being removed from the Russell 3000. The impact is not permanent. The Company and its peers have gradually regained some of that lost ground since the 2021 Russell re-balancing. From May 7, 2021, through February 18, 2022, the SmallCap Banks Index has increased by just 4.0% while the Company and the Russell Deletion Peers have gained 12.4% and 11.9%, respectively.

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Source: S&P Capital IQ Pro

Despite the significant short-term underperformance around the Russell re-balancing, the Company’s longer-term total shareholder returns have still fared well compared to those of the SPDR S&P Regional Bank ETF (NYSE Arca: KRE) --- 42% for the Company versus 43% for KRE over the last five years ending February 18, 2022, and 269% for the Company versus 229% for KRE over the last ten years ending February 18, 2022. The board of directors believes that the shareholder is taking advantage of this structural disconnect between the Company’s operating performance and stock performance to imply that the Company is not achieving its potential. In truth, the Company has continued to post outstanding results while the factors weighing on its stock price have been entirely unrelated.

Adoption of the proposal could also create uncertainty with respect to the Company’s future, which would undermine the Company’s relationships with customers, employees and the communities that the bank serves. Often when a company is sold to a larger buyer, many employees lose their jobs. The uncertainty that would inevitably accompany the adoption of the proposal could prompt some of our employees to leave the Company in search of better job security. This uncertainty could have unintended consequences and could have an adverse impact on the Company’s ability to operate effectively, which may result in a decline in revenue due to the loss of high-quality employees and the customers that the employees serve. If the proposal were approved, it may be more difficult to attract new business if customers believe the Company may soon be gone. It is more difficult to motivate employees to develop new business if employees’ morale is diminished by the prospect of losing their jobs, and it becomes more challenging to retain experienced employees. These consequences could result in erosion of the Company’s value. As a result, potential acquirers might not bid as aggressively for the Company as they might otherwise in a transaction where the Company was not publicly pressured to seek an immediate sale.

The Company continues to focus on enhancing its governance capabilities with a recent director addition who brings valuable insights into the capital markets and capital allocation strategies. In 2020, Michael Voinovich was appointed to the board. Mr. Voinovich is Executive Vice President and Chief Investment Officer of ECHO Health, Inc. Until January 2019, Mr. Voinovich was an investment banker for 19 years representing financial institutions. Mr. Voinovich’s responsibilities included providing advice relating to debt and equity offerings, analyzing financial and accounting issues for banks engaged in merger and acquisition activities, assisting boards of directors in evaluating strategic alternatives to maximize shareholder value, and negotiating and executing transactions. During his investment banking career, Mr. Voinovich served as an adviser on well over one hundred mergers and capital raising transactions for community banks.

If shareholders return a validly executed proxy solicited by the board of directors, the shares represented by the proxy will be voted on this proposal in the manner specified by the shareholder. If shareholders do not specify the

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manner in which their shares represented by a validly executed proxy solicited by the board of directors are to be voted on this proposal, such shares will be voted “AGAINST” the proposal.

Board of Directors Recommendation

Based on the factors outlined, the Board of Directors unanimously recommends a vote “AGAINST” the shareholder proposal.

EXECUTIVE OFFICERS

 

There are no family relationships among any of Middlefield’s directors or executive officers. Executive officers who do not also serve as directors are –

 

Name

 

Age

 

Principal Occupation in the Last 5 Years

 

Michael L. Allen 60

Mr. Allen joined The Middlefield Banking Company in November, 2018 and serves as its Executive Vice President – Chief Banking Officer. Prior to joining The Middlefield Banking Company, Mr. Allen served since 2014 as President of the Mid-Ohio Valley Division for Premier Bank, a subsidiary of Premier Financial Bancorp, Huntington, West Virginia. Premier Financial Bancorp, Inc. is a $1.7 billion multi-bank holding company operating in Kentucky, Maryland, Ohio, Virginia, Washington, D.C., and West Virginia. Mr. Allen served as a Financial Consultant with AXA Advisors, LLC from 2002 through 2014 and was Chief Administrative Officer from 1987 through 2001 and a member of the Board of Directors from 1993 through 2001 of Traders Bank, Spencer, West Virginia. He also served as Treasurer and a director of Traders Bank’s holding company, Traders Bankshares, Inc., from 1990 through 2001. Mr. Allen is a CPA, a graduate of Glenville State College, Glenville, West Virginia, with a B.A. degree in Business Administration, and a graduate of the Consumer Bankers Association Graduate School of Retail Bank Management.

 

Courtney M. Erminio 40

Serving as Executive Vice President – Chief Risk Officer, Ms. Erminio joined The Middlefield Banking Company in June 2010. Prior thereto, she was on the internal audit staff of Crowe Horwath LLP. Ms. Erminio is a graduate of the University of Akron, holding a B.S. degree in Business Administration/Finance. Ms. Erminio is a Certified Internal Auditor (CIA) and a Certified Financial Services Auditor (CFSA).

 

Charles O. Moore 59

Mr. Moore joined The Middlefield Banking Company in January 2016 as President – Central Ohio Region. With over 25 years of banking experience. Mr. Moore served as Executive Vice President, Chief Risk and Consumer Lending Officer, of Delaware County Bank in Delaware, Ohio, from 2012 through 2015. He has also served as President of Regency Finance Company, a subsidiary of F.N.B. Corporation from 2008 through 2010, and as an executive with U.S. Bank and Banc One. He is a veteran of the U.S. Marine Corps and the U.S. Army National Guard. He is a graduate of Ohio Dominican College and the State University of New York at Albany. Mr. Moore was formerly the Deputy Superintendent of Consumer Finance and Consumer Affairs for the State of Ohio Division of Financial Institutions from 2011 through 2012. He is currently on the boards of the Ohio Dominican College Patriots and Finance Curriculum, the Central Ohio Symphony Orchestra, and the Ohio Police and Fire Pension Fund. Mr. Moore is a Zoning Board Commissioner for Genoa Township, Ohio.

 

Michael C. Ranttila 48

Mr. Ranttila joined The Middlefield Banking Company in October 2017 as Senior Vice President of Finance. Mr. Ranttila was appointed as CFO of The Middlefield Banking Company on November 19, 2019. Prior to joining The Middlefield Banking Company in 2017, Mr. Ranttila served as Financial Reporting Manager for Florida Community Bank from January 2017 through October 2017 with responsibility for SEC and bank regulatory reporting of this $10 billion bank subsidiary of an SEC-registered bank holding company. Mr. Ranttila served as Controller for DRB Capital from August 2016 through December 2016. Mr. Ranttila served as Controller for The Middlefield Banking Company from March 2011 through August 2016. Prior to joining The Middlefield Banking Company in 2011, Mr. Ranttila served as an auditor for Crowe LLP, from 2007 through 2011. Mr. Ranttila has a Bachelor’s degree in Accounting from Youngstown State University and an M.B.A. from The Ohio State University. Mr. Ranttila is a CPA.

 

Donald L. Stacy 68

Mr. Stacy joined The Middlefield Banking Company in August 1999. Mr. Stacy serves as Middlefield’s Senior Vice President, Chief Financial Officer and Treasurer. Mr. Stacy is Senior Executive Vice President and Treasurer of The Middlefield Banking Company and is a director, Vice President, and Treasurer of EMORECO, Inc. Mr. Stacy served as Chief Financial Officer of The Middlefield Banking Company until November 19, 2019. He previously served for 20 years with Security Dollar Bank and Security Financial Corp. in Niles, Ohio, where he was Senior Vice President and Treasurer.

 

Alfred F. Thompson, Jr. 62 Since February 14, 2022, Mr. Thompson is The Middlefield Banking Company’s Executive Vice President–Chief Credit Officer. Mr. Thompson has been with The Middlefield Banking Company since March 1996. He was promoted from loan officer to Assistant Vice President in 1997 and promoted again to Vice President/Loan Administration in 1998.  Mr. Thompson was Senior Vice President – Credit Administration from July 2019 until February 14, 2022.  Before joining The Middlefield Banking Company, Mr. Thompson served as Loan Officer in the Small Business Group of National City Bank, Northeast.

 

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Shareholder Proposals

 

Shareholders desiring to submit proposals for inclusion in Middlefield’s proxy materials for the 2023 annual meeting in accordance with Rule 14a-8 under the Securities Exchange Act of 1934 must submit the proposals to Middlefield at its executive offices no later than December 6, 2022. We will not include in our proxy statement or form of proxy for the 2023 annual meeting a shareholder proposal that is received after that date or that otherwise fails to meet requirements for shareholder proposals established by SEC regulations.

 

If a shareholder intends to present a proposal at the 2023 annual meeting without seeking to include the proposal in Middlefield’s proxy materials for that meeting, the shareholder must give advance notice to Middlefield. According to Article I, section 8, of Middlefield’s Regulations, the shareholder must give notice at least 60 days but no more than 120 days before the date in 2023 corresponding to the mailing date of this proxy statement for the 2022 annual meeting. This proxy statement is being mailed to shareholders on or about April 5, 2022. Accordingly, a shareholder who desires to present a proposal at the 2023 annual meeting without seeking to include the proposal in Middlefield’s proxy materials for that meeting should provide notice of the proposal to Middlefield no earlier than December 6, 2022 and no later than February 4, 2023. If the shareholder fails to do so, Middlefield’s management will be entitled to use its discretionary voting authority on that proposal, without any discussion of the matter in Middlefield’s proxy materials. Shareholders who desire to submit a proposal for the 2023 annual meeting without seeking to include the proposal in Middlefield’s proxy materials for that meeting should refer to Article I, section 8, of Middlefield’s Regulations for information concerning the procedures for submitting proposals, including information required to be provided by shareholders submitting proposals.

 

Other Matters

 

The persons named in the proxy will vote all properly submitted proxies. If a shareholder specifies a choice for a proposal to be acted upon, the proxy will be voted in accordance with his or her specifications. If no choice is specified, the proxy will be voted FOR election of the nominees identified herein, FOR approval of the executive compensation disclosed in this proxy statement, FOR ratification of Middlefield’s independent auditor, and AGAINST the shareholder proposal.

 

The proxy is solicited by Middlefield, conferring discretionary authority to vote on any matters properly presented at the annual meeting or any adjournments thereof. We are not aware of any business to be presented at the meeting other than the business described in this proxy statement. If any matter not set forth in the Notice of Annual Meeting of Shareholders is properly presented at the 2022 annual meeting, the persons named as proxies will vote thereon in accordance with their best judgment.

 

We mailed our 2021 Annual Report to persons who, as of the March 17, 2022 record date, were shareholders on that date. Additional copies may be obtained without charge by written request. We file periodic reports and other information with the SEC under the Securities Exchange Act of 1934. The SEC maintains an internet web site containing reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

 

The SEC has implemented rules regarding the delivery of proxy materials to households. This method of delivery, often referred to as “householding,” would permit Middlefield to send: (a) a single annual report and/or a single proxy statement or (b) a single notice of internet availability of proxy materials, as applicable, to any household at which two or more different registered shareholders reside if Middlefield reasonably believes such shareholders are members of the same family or otherwise share the same address or that one shareholder has multiple accounts. In each case, the registered shareholder(s) would be required to consent to the householding process in accordance with applicable SEC rules, and would be able at any time to request that Middlefield promptly deliver to such shareholder(s) a separate copy of the proxy materials subject to householding. The householding procedure is intended to reduce the volume of duplicate information shareholders receive and would reduce Middlefield’s expenses. Middlefield does not currently practice householding, but may institute householding in the future and will notify registered shareholders affected by householding at that time.

 

If you are the beneficial owner, but not the record holder, of Middlefield shares, your broker, bank or other nominee may only deliver one set of proxy materials and, as applicable, any other proxy materials that are delivered until such time as you or other shareholders sharing an address notify your nominee that you want to receive separate copies.

 

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We will furnish a copy of our Form 10-K Annual Report for the year ended December 31, 2021 without charge to shareholders upon written request to: Mr. Donald L. Stacy, Chief Financial Officer, Middlefield Banc Corp., 15985 East High Street, P.O. Box 35, Middlefield, Ohio 44062.

 

 

 

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Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Online Go to www.investorvote.com/MBCN or scan the QR code — login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. 2022 Annual Meeting Proxy Card q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals The Board of Directors recommends a vote FOR Proposal 1 1. Election of Directors: 01 - Darryl E. Mast 02 - William J. Skidmore 03 - Carolyn J. Turk for a term of three years for a term of three years for a term of three years Mark here to vote FOR all nominees Mark here to WITHHOLD vote from all nominees 01 02 03 For All EXCEPT - To withhold a vote for one or more nominees, mark the box to the left and the corresponding numbered box(es) to the right. The Board of Directors recommends a vote FOR Proposal 2 The Board of Directors recommends a vote AGAINST Proposal 4 2. To approve, on a non-binding advisory basis, the compensation of named executive officers, as disclosed in the proxy statement For Against Abstain 4. Shareholder proposal to recommend the Board implement steps to achieve a sale, merger, or other disposition of the Company For Against Abstain The Board of Directors recommends a vote FOR Proposal 3 For Against Abstain 3. To ratify the appointment of S.R. Snodgrass, P.C as independent auditor for the fiscal year ending December 31, 2022 B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. Please sign exactly as your name(s) appears on this proxy. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. The undersigned acknowledges receipt from Middlefield Banc Corp., before execution of this proxy, of the Notice of Annual Meeting, Proxy Statement, and 2021 Annual Report. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.

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03LLUF 1 U P X + The 2022 Annual Meeting of Shareholders of Middlefield Banc Corp. will be held on Wednesday, May 11, 2022 at 1:00 pm EDT, virtually via the internet at meetnow.global/MYFZMTM. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The material is available at: www.edocumentview.com/MBCN q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Middlefield Banc Corp. Notice of 2022 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — May 11, 2022 Courtney M. Erminio and Donald L. Stacy, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Middlefield Banc Corp. to be held on May 11, 2022 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR the election of the Board of Directors and FOR items 2 and 3 and AGAINST item 4. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side)

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