MBN announces third quarter results



    
                                                           Third Quarter 2009
                                          For the quarter ended July 31, 2009

    MESSAGE TO SHAREHOLDERS
    

    TORONTO, Sept. 11 /CNW/ - During the third quarter of 2009, Middlefield
Bancorp Limited ("MBN" or the "Company") generated net income of $0.5 million,
or $0.06 per share, compared with a net loss of $1.7 million, or $0.19 per
share in the comparable quarter last year. The Company realized gains of
approximately $0.7 million from its investments during the quarter and $2.4
million for the nine months ended July 31, 2009. In addition, MBN realized a
$0.4 million gain on the sale of certain oil and gas properties held by its
subsidiary, 2M Energy Corp. ("2M").
    As of September 11, 2009, MBN's balance sheet remains strong with no debt
and approximately $1.90 per share of cash, marketable securities and
receivables from brokers. Consolidated financial results are attached.

    
    FINANCIAL SUMMARY

    -------------------------------------------------------------------------
    For the periods ended July 31

    (all amounts in thousands,           Three Months          Nine Months
      except per share amounts)         2009      2008        2009     2008
    -------------------------------------------------------------------------
    Revenue (loss)                   $   600    $ (945)    $ 2,549  $(4,483)
    Gain on sale of assets               379         -         379        -
    Net income (loss)                    531    (1,727)      1,462   (7,089)
    Diluted earnings (loss) per share   0.06     (0.19)       0.16    (0.77)
    -------------------------------------------------------------------------

    MANAGEMENT'S DISCUSSION AND ANALYSIS
    July 31, 2009 and 2008 (unaudited)
    

    The following Management's Discussion and Analysis ("MD&A") is dated
September 11, 2009 and should be read in conjunction with the attached
unaudited interim consolidated financial statements that have been prepared by
management and approved by the board of directors. These statements have not
been reviewed by MBN's external auditors. Readers should also refer to the
MD&A in MBN's 2008 Annual Report. Additional information relating to MBN,
including MBN's annual information form, is available on SEDAR at
www.sedar.com.
    The reader should be aware that historical results are not necessarily
indicative of future performance. This MD&A contains forward-looking
statements, including statements regarding expected future events, financial
results, objectives and opportunities of MBN, government actions and industry
performance, which are subject to substantial risks and uncertainties.
Forward-looking statements include statements that are predictive in nature,
that depend upon or refer to future events, results, expectations and
performance, or that include words such as "expects", "anticipates",
"intends", "will" or negative versions thereof and other similar wording. MBN
cautions that actual events, results, expectations or performance will be
affected by a number of factors (many of which are beyond its control) and may
differ materially from those based upon the forward-looking statements in the
MD&A, including as a result of: general economic, political, market and
business factors and conditions; commodity price fluctuations; interest and
foreign exchange rate fluctuations; statutory and regulatory developments;
unexpected judicial or regulatory proceedings; and catastrophic events.
Readers are cautioned that the foregoing list of factors is not exhaustive and
to avoid placing undue reliance on forward-looking statements due to the
inherent uncertainty of such statements. Forward-looking statements are based
on the estimates and opinions of MBN's management at the time the statements
were made. MBN does not undertake, and specifically disclaims, any obligation
to update or revise any forward-looking statements, except as required by law.

    RESULTS OF OPERATIONS

    MBN generated investment income of $0.6 million during the second quarter
of 2009, representing a significant increase over the investment loss of $0.9
million in the prior year comparable period. The investment income resulted
primarily from gains realized on the Company's investment portfolio. MBN also
realized a $0.4 million gain on the sale of certain oil and gas properties
held by 2M, which closed during MBN's third quarter. In addition to selling
its working interest in these properties, 2M also settled its related
liabilities.
    2M's production expenses in the third quarter of 2009 were minimal and
primarily reflect fixed expenses related to maintaining the Company's
remaining oil and gas properties. General and administrative expenses of $0.2
million in the third quarter of 2009 were down from $0.3 million in the
comparable quarter in 2008 since last year included expenses of the variable
interest entities ("VIEs") in which the Company invested and was the primary
beneficiary. Commencing in the third quarter of 2009 MBN no longer invests its
excess cash in VIEs where it is the primary beneficiary and as a result no
longer consolidates the revenue and expenses of those VIEs. Transaction costs,
which include brokerage commissions and fees, amounted to $82,000 in the third
quarter of 2009 compared to $51,000 in the comparable quarter last year. The
increase stemmed from increased trading activity during the third quarter of
2009.
    A foreign exchange loss of $0.2 million was recorded in the third quarter
of 2009 in respect of the Company's U.S. dollar positions as a result of the
weakening of the U.S. dollar against the Canadian dollar. Depreciation,
depletion and accretion ("DD&A") expenses in the third quarter of 2009 were
nominal and reflect accretion expenses in respect of the Company's asset
retirement obligations.
    There is no current income tax expense in 2009 since the Company will
utilize its loss carryforwards to shelter all current taxable income. As at
July 31, 2009 the Company had non-capital losses of $6.2 million available for
carryforward for tax purposes. A future income tax recovery of $42,000 was
recorded in the 2009 third quarter in respect of unrealized investment losses
that will be available as tax shelter in the future. The 2009 year-to-date
income tax expense of $116,000 primarily relates to investment gains realized
and represents the reversal of a future income tax asset in respect of
unrealized losses that was previously recorded and not an actual cash outlay. 
An income tax recovery was recorded in 2008 in respect of investment losses. 
Since the Company no longer invests in VIEs where MBN is the primary
beneficiary, the revenue and expenses in the third quarter of 2009 have not
been affected by a VIE consolidation. However, due to the Company's
consolidation of VIEs in the third quarter of 2008, revenue and expenses
increased by $0.5 million and $0.1 million respectively, in that quarter. 
These adjustments, which include consolidation eliminations, were offset by
the deduction of the non-controlling interest and thus, there was no impact on
the net income of the Company.
    MBN recorded net income of $0.5 million or $0.06 per diluted share in the
third quarter of 2009 compared to a net loss of $1.7 million or $0.19 per
share on a diluted basis in the prior year comparable quarter.

    
    -------------------------------------------------------------------------
                                2009                 2008               2007
                          Q3   Q2     Q1     Q4      Q3      Q2     Q1    Q4
    -------------------------------------------------------------------------
    Total Revenue (Loss) 600  674  1,275   (392)   (945) (5,860) 2,322   385
    Net Income (Loss):
      - Total            531  189    742 (1,775) (1,727) (6,147)   785  (343)
      - Per Common
         Share
        - Basic and
           Diluted      0.06 0.02   0.08  (0.20)  (0.19)  (0.67)  0.09 (0.04)
    -------------------------------------------------------------------------
    

    CAPITAL RE

SOURCES, LIQUIDITY AND CAPITAL EXPENDITURES Cash provided by operating activities, including changes in non-cash operating working capital, amounted to $2.3 million in the 2009 third quarter compared to cash used of $1.0 million in the comparable 2008 period. The increase in cash in the 2009 third quarter related primarily to a decrease in amounts held by brokers for trading activities, including margin deposits for investments sold short. The decrease in cash in the 2008 third quarter stemmed primarily from settling investment purchases. Cash provided by investing activities amounted to $3.3 million in the third quarter of 2009 compared to $4.2 million in the comparable quarter in 2008. The Company reduced its investments in the third quarter of 2009 thus increasing its cash reserves. Cash used in financing activities was nominal in the third quarter of 2009, however, in the comparable quarter in 2008 the Company's use of cash amounted to $9.3 million, primarily due to the payment of a $9.0 million dividend. FINANCIAL POSITION Short-term investments, which amounted to $5.0 million at April 30, 2009, were converted to cash during the third quarter of 2009. In anticipation of increasing oil and gas prices, MBN invested in oil and gas equities, increasing its marketable securities to $4.0 million at July 31, 2009 from $1.5 million at April 30, 2009. Deposits with brokers in respect of short positions amounted to $4.8 million at July 31, 2009 and the liability associated with covering the positions amounted to $3.4 million. These short positions, which are concentrated in the financial services sector, are up from April 30, 2009 when the deposit was $3.3 million and the liability was $2.6 million. Receivables and loans amounted to $0.7 million at July 31, 2009 compared to $4.3 million at April 30, 2009. The receivables, which reflect amounts related to trading activities, were largely collected during the third quarter of 2009. The entire loan receivable was also collected during the quarter. Income taxes recoverable decreased to a nominal amount at July 31, 2009 from $0.6 million at April 30, 2009 as a result of the receipt of these tax refunds. The July 31, 2009 payables amounted to $0.2 million compared to $0.3 million at April 30, 2009. The April payable included amounts owing in respect of directors' fees, which were paid during the third quarter of 2009. The July 31, 2009 current and long-term portions of asset retirement obligations ("ARO") decreased to $0.2 million, in aggregate, from $1.1 million at April 30, 2009. The liability associated with the Countess oil and gas properties was extinguished when 2M sold its working interests in these properties and paid $0.6 million to settle its outstanding liabilities. The ARO at July 31, 2009 reflects the estimated costs associated with the abandonment and reclamation of 2M's remaining oil and gas properties. Changes in respect of all other balance sheet items during the quarter ended July 31, 2009 were minimal. The total number of common shares outstanding at July 31, 2009 and September 11, 2009 was 9.0 million. CRITICAL ACCOUNTING ESTIMATES AND CHANGES IN ACCOUNTING POLICIES Critical accounting estimates have been disclosed in the MD&A of the Company in its October 31, 2008 Annual Report. Future Accounting Changes In June 2009, the Canadian Institute of Chartered Accountants ("CICA") issued amendments to CICA Handbook section 3862 "Financial Instruments - Disclosures" which further enhance the fair value disclosure requirements in respect of financial instruments. The amendments primarily require classifying financial instruments into specified categories based on the type of inputs used to determine the fair value of financial instruments. The Company is currently evaluating the impact of these new requirements on its financial statements, which will be effective for the Company on October 31, 2009. International Financial Reporting Standards ("IFRS") The Company has developed a conversion plan to meet the timetable published by the CICA for the changeover to IFRS. The Company will begin reporting its financial statements in accordance with IFRS on November 1, 2011. The key elements of the plan include the disclosures of the qualitative impact in the 2009, 2010 and 2011 financial statements, disclosures of the quantitative impact, if any, in the 2011 financial statements and the preparation of the 2012 financial statements in accordance with IFRS. The impact the conversion from Canadian generally accepted accounting principles ("GAAP") to IFRS will have on the Company's assets and liabilities, accounting policies, financial statements and other business arrangements continues to be evaluated by the Company in accordance with the IFRS conversion plan. The key elements of the plan and progress to date are outlined below: ------------------------------------------------------------------------- Progress To Key Activity Timing Date ------------------------------------------------------------------------- Financial Statement Preparation - Identify relevant Complete by the fourth Work in differences quarter of 2011. progress. between Canadian GAAP and IFRS to enable selection of IFRS 1 transition policies and continuing IFRS accounting policies. - Determine financial statement format including nature and extent of note disclosure. - Quantify effect, if any, on net assets. ------------------------------------------------------------------------- Resources Identify IFRS resources Complete by the fourth Resources have and develop accounting quarter of 2011. been staff and senior executive identified. knowledge of IFRS. ------------------------------------------------------------------------- Business Policy Assessment Evaluate impact, if any, Complete by the fourth All contracts on financial contracts. quarter of 2011. have been assembled. ------------------------------------------------------------------------- Information Technology Identify and implement Complete by the fourth To be IT system changes that may quarter of 2011. commenced be required. ------------------------------------------------------------------------- Control Environment Establish control Complete by the fourth To be processes to prevent quarter of 2011. commenced. material errors from occurring during the implementation of IFRS. ------------------------------------------------------------------------- RISK MANAGEMENT The risks and risk management procedures of the Company have been disclosed in its MD&A in the October 31, 2008 Annual Report. These risks and risk management procedures remain unchanged at present. OUTLOOK With respect to portfolio investment plans, MBN will focus primarily on investing in equities in the Canadian resource sector in order to take advantage of our expertise in this area. We are particularly positive on the outlook for the oil and gas sector based upon near-term and long-term fundamentals. We are not as positive on the outlook for the financial services sector and do not anticipate investing in the near-term in this sector. In addition, we seek out strategic opportunities for long-term growth as well as short-term special situation investment opportunities. We will continue to manage our capital carefully with due regard to balancing risk and return. Middlefield Bancorp trades on the TSX under the symbol "MBN". MIDDLEFIELD BANCORP LIMITED CONSOLIDATED BALANCE SHEETS (UNAUDITED) July 31, October 31, (All amounts in thousands) 2009 2008 ------------------------------------------------------------------------- ASSETS Current assets Cash $ 11,454 $ 1,801 Short-term investments - 2,000 Marketable securities 3,997 10,358 Deposits with brokers 4,798 - Receivables and loans 679 2,234 Prepaid expenses 54 40 Income taxes recoverable 21 605 Future income tax assets 37 152 ------------------------------------------------------------------------- 21,040 17,190 Property, plant and equipment, net 16 16 ------------------------------------------------------------------------- $ 21,056 $ 17,206 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Payables and accruals $ 247 $ 200 Deferred revenue - 80 Asset retirement obligations (note 7) 1 415 Investments sold short 3,432 - ------------------------------------------------------------------------- 3,680 695 Asset retirement obligations (note 7) 166 720 ------------------------------------------------------------------------- 3,846 1,415 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Share capital (note 4) 11,952 11,995 Retained earnings 5,258 3,796 ------------------------------------------------------------------------- 17,210 15,791 ------------------------------------------------------------------------- $ 21,056 $ 17,206 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements. It is recommended that readers refer to the accompanying Management's Discussion and Analysis which provides additional information regarding these consolidated financial statements. Approved on behalf of the Board: (signed) (signed) Director: Murray J. Brasseur Director: George S. Dembroski MIDDLEFIELD BANCORP LIMITED CONSOLIDATED STATEMENTS OF INCOME (LOSS), COMPREHENSIVE INCOME (LOSS) AND RETAINED EARNINGS (UNAUDITED) Three Months Ended Nine Months Ended (All amounts in thousands, July 31 July 31 except per share amounts) 2009 2008 2009 2008 ------------------------------------------------------------------------- REVENUE Investment income (loss) (note 5) $ 600 $ (945) $ 2,549 $ (4,483) ------------------------------------------------------------------------- Gain on sale of assets (note 7) 379 - 379 - ------------------------------------------------------------------------- EXPENSES Production 9 10 38 33 General and administrative 177 291 725 1,018 Transaction costs 82 51 176 244 Foreign exchange loss 221 82 367 378 Depreciation, depletion and accretion 1 3 13 114 ------------------------------------------------------------------------- 490 437 1,319 1,787 ------------------------------------------------------------------------- Income (loss) before income taxes and non-controlling interest 489 (1,382) 1,609 (6,270) Income tax expense (recovery) (42) (103) 116 (762) ------------------------------------------------------------------------- Income (loss) before non-controlling interest 531 (1,279) 1,493 (5,508) Non-controlling interest - 448 31 1,581 ------------------------------------------------------------------------- Net income (loss) and comprehensive income (loss) 531 (1,727) 1,462 (7,089) Retained earnings, beginning of period 4,727 16,462 3,796 21,972 Repurchase of shares - (114) - (262) Dividends paid - (9,050) - (9,050) ------------------------------------------------------------------------- Retained earnings, end of period $ 5,258 $ 5,571 $ 5,258 $ 5,571 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted earnings (loss) per share (note 6) $ 0.06 $ (0.19) $ 0.16 $ (0.77) ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements. It is recommended that readers refer to the accompanying Management's Discussion and Analysis which provides additional information regarding these consolidated financial statements. MIDDLEFIELD BANCORP LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended Nine Months Ended July 31 July 31 (All amounts in thousands) 2009 2008 2009 2008 ------------------------------------------------------------------------- OPERATING Net income (loss) $ 531 $ (1,727) $ 1,462 $ (7,089) Items not involving cash: Gain on sale of assets (379) - (379) - Loss (gain) on sale of investments (706) 1,814 (2,352) 7,145 Unrealized loss on investments 207 43 166 12 Depreciation, depletion and accretion 1 3 13 114 Future income tax expense (benefit) (43) (55) 115 58 ------------------------------------------------------------------------- (389) 78 (975) 240 Net change in non-cash operating working capital 2,696 (1,043) (2,706) 16,372 ------------------------------------------------------------------------- 2,307 (965) (3,681) 16,612 ------------------------------------------------------------------------- INVESTING Proceeds from sale of investments 71,128 103,243 145,221 384,372 Purchase of investments (67,272) (99,018) (131,242) (394,068) Asset retirement expenditures (601) (10) (602) (10) Purchase of property, plant and equipment - (1) - (42) ------------------------------------------------------------------------- 3,255 4,214 13,377 (9,748) ------------------------------------------------------------------------- FINANCING Issue of shares - 28 - 28 Repurchase of shares (20) (231) (43) (521) Dividends paid - (9,050) - (9,050) ------------------------------------------------------------------------- (20) (9,253) (43) (9,543) ------------------------------------------------------------------------- Net increase (decrease) in cash 5,542 (6,004) 9,653 (2,679) Cash, beginning of period 5,912 6,776 1,801 3,451 ------------------------------------------------------------------------- Cash, end of period $ 11,454 $ 772 $ 11,454 $ 772 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements. It is recommended that readers refer to the accompanying Management's Discussion and Analysis which provides additional information regarding these consolidated financial statements. MIDDLEFIELD BANCORP LIMITED NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES These unaudited interim consolidated financial statements include the accounts of Middlefield Bancorp Limited ("MBN"), its wholly owned subsidiary, 2M Energy Corp. ("2M") and all variable interest entities for which it is the primary beneficiary (collectively, the "Company"). The interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). They follow the same accounting policies and methods of application as the Company's consolidated financial statements for the year ended October 31, 2008. The Company's interim consolidated financial statements do not include all disclosures required by Canadian GAAP for annual financial statements and accordingly, should be read in conjunction with the consolidated financial statements for the year ended October 31, 2008 as set out on pages 8 to 20 of the Company's 2008 Annual Report. Future Accounting Changes In June 2009, the Canadian Institute of Chartered Accountants ("CICA") issued amendments to CICA Handbook section 3862 "Financial Instruments - Disclosures" which further enhance the fair value disclosure requirements in respect of financial instruments. The amendments primarily require classifying financial instruments into specified categories based on the type of inputs used to determine the fair value of financial instruments. The Company is currently evaluating the impact of these new requirements on its financial statements, which will be effective for the Company on October 31, 2009. International Financial Reporting Standards ("IFRS") The Company has developed a conversion plan to meet the timetable published by the CICA for the changeover to IFRS. The key elements of the plan include the disclosures of the qualitative impact in the 2009, 2010 and 2011 financial statements, disclosures of the quantitative impact, if any, in the 2011 financial statements and the preparation of the 2012 financial statements in accordance with IFRS. The impact the conversion from Canadian GAAP to IFRS will have on the Company's net assets, accounting policies, financial statements and other business arrangements is being evaluated by the Company. 2. CARRYING VALUE AND FAIR VALUE OF FINANCIAL INSTRUMENTS The following tables provide a comparison of carrying and fair values of the Company's financial instruments as at July 31, 2009 and October 31, 2008: (all amounts in thousands) Carrying Value ---------------------------------------- Financial instruments classified as ---------------------------------------- Loans and Other Total As at July 31, 2009 Held-for-trading receivables liabilities fair value ------------------------------------------------------------------------- Financial assets Cash $ 11,454 $ - $ - $ 11,454 Marketable securities 3,997 - - 3,997 Deposits with brokers - 4,798 - 4,798 Receivables and loans - 679 - 679 Financial liabilities Payables and accruals - - 247 247 Investments sold short 3,432 - - 3,432 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Carrying Value ---------------------------------------- Financial instruments classified as ---------------------------------------- As at Loans and Other Total October 31, 2008 Held-for-trading receivables liabilities fair value ------------------------------------------------------------------------- Financial assets Cash $ 1,801 $ - $ - $ 1,801 Short-term investments 2,000 - - 2,000 Marketable securities 10,358 - - 10,358 Receivables and loans - 2,234 - 2,234 Financial liabilities Payables and accruals - - 200 200 Deferred revenue - - 80 80 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 3. NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS The Company is exposed to the following risks as a result of holding financial instruments: price risk, interest rate risk, credit risk and foreign exchange rate risk. There have been no significant changes to foreign exchange rate risk since October 31, 2008. a. Price risk The Company is exposed to price risk through the following financial instruments: (all amounts in thousands) July 31, 2009 October 31, 2008 ------------------------------------------------------------------------- Marketable securities $ 3,997 $ 10,358 Investments sold short (3,432) - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Based on the above exposures, a 10% change in the prices of the Company's long and short positions would result in an annualized change of $743 (October 31, 2008 - $1,036) in net income and comprehensive income, with all other factors held constant. b. Interest rate risk The Company is exposed to interest rate risk through the following financial instruments: (all amounts in thousands) July 31, 2009 October 31, 2008 ------------------------------------------------------------------------- Cash $ 11,454 $ 1,801 Short-term investments - 2,000 ------------------------------------------------------------------------- Total exposure $ 11,454 $ 3,801 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Based on the above exposures, a 1% change in interest rates would result in an annualized change of $115 (October 31, 2008 - $38) in net income and comprehensive income, with all other factors held constant. c. Credit risk The Company has credit risk attributable to its deposits with brokers, which arises because a lender of securities may go bankrupt and the Company may lose the collateral it has deposited with the lender. As at July 31, 2009 the Company had made cash collateral deposits amounting to $4,798 (October 31, 2008 - $nil) with an entity under common control with the managers of the Company in respect of short positions that the Company held. Management has assessed the credit risk attributable to these deposits as minimal. Receivables consist of $679 (October 31, 2008 - $871) from one counterparty which has a credit rating of AA per DBRS. 4. SHARE CAPITAL As at September 11, 2009 the Company had 8,967,448 common shares issued and outstanding and stock options outstanding for 165,000 common shares. 5. REVENUE FROM TRADING AND NON-TRADING FINANCIAL INSTRUMENTS Investment income (loss) includes both trading related revenue such as interest income, dividends and distributions, net gains (losses) on investments and changes in fair values as well as non-trading related interest income. Three Months Ended Nine Months Ended July 31 July 31 (all amounts in thousands) 2009 2008 2009 2008 ------------------------------------------------------------------------- Held-for-trading financial instruments Net gains (losses) on investments $ 706 $ (1,814) $ 2,352 $ (7,145) Unrealized losses on investments (207) (43) (166) (12) Interest income 6 538 118 2,236 Dividends and distributions 32 64 62 74 ------------------------------------------------------------------------- 537 (1,255) 2,366 (4,847) Financial instruments measured at amortized cost Interest income 63 310 183 364 ------------------------------------------------------------------------- $ 600 $ (945) $ 2,549 $ (4,483) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 6. EARNINGS (LOSS) PER SHARE Three Months Ended Nine Months Ended (all amounts in thousands) July 31 July 31 except per share amounts) 2009 2008 2009 2008 ------------------------------------------------------------------------- Net income (loss) and comprehensive income (loss) $ 531 $ (1,727) $ 1,462 $ (7,089) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average common shares outstanding for basic earnings (loss) per share 8,989 9,053 8,999 9,150 Add: Dilutive effect of stock options outstanding - - - 3 ------------------------------------------------------------------------- Weighted average common shares outstanding for diluted earnings (loss) per share 8,989 9,053 8,999 9,153 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted earnings (loss) per share $ 0.06 $ (0.19) $ 0.16 $ (0.77) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 7. SALE OF OIL AND GAS ASSETS (all amounts in thousands) On July 15, 2009 2M completed a transaction with the operator of its Countess oil and gas properties in Alberta, whereby 2M paid a total of $610 representing full and final payment of all liabilities, including asset retirement obligations, associated with the Countess properties. 2M also sold its entire working interest in the Countess area to the operator for a nominal amount. As a result, 2M recognized a gain of $379 representing the difference between the settlement amount of $610 and the carrying amount of 2M's Countess liabilities of $989. 8. RECLASSIFICATIONS Certain prior period balances have been reclassified to conform with the current period presentation. Corporate Information Middlefield Bancorp Limited is a Canadian merchant bank managed by Middlefield Group. The Company's principal objective is to create long term shareholder value through a twofold strategy of strategic investing in businesses with strong management and exceptional prospects for longer term earnings growth and special situation investing where there is excellent potential for significant capital appreciation. Our aim is to produce a steady stream of growing earnings from strategic investments supplemented by earnings from special situation activities. The Company's board of directors and management include experienced and successful individuals who have committed their own capital to the Company. Directors Legal Counsel Thomas I.A. Allen, Q.C.(2) Ogilvy Renault Counsel, Ogilvy Renault Auditors Murray J. Brasseur Deloitte & Touche LLP Chairman and Director Middlefield Bancorp Limited Banker Bank of Montreal George S. Dembroski(1),(2) Bank of Nova Scotia Corporate Director Stock Exchange Listing H. Roger Garland(1) Toronto Stock Exchange Corporate Director Symbol: MBN W. Garth Jestley Head Office President and Director One First Canadian Place Middlefield Bancorp Limited 58th Floor P.O. Box 192 Charles B. Young(1),(2) Toronto, Ontario Corporate Director M5X 1A6 Web Site: www.middlefield.com Email: invest@middlefield.com ------------------ (1) Audit Committee Member (2) Corporate Governance Committee Member

For further information:

For further information: visit our website at www.middlefield.com or
contact W. Garth Jestley at (416) 847-5346

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MIDDLEFIELD BANCORP LIMITED

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