14.	EMPLOYEE BENEFITS

Employee

Retirement Plan

The Bank maintains section

401

(k) employee savings and investment plans for all full-time employees and officers of the Bank who are at least

years of age. The Bank’s contributions to the plans are discretionary, and were based on

50%

matching of voluntary contributions up to

of compensation for the years ended

December 31, 2018

and

2017.

Employee contributions are vested at all times, and MBC contributions are fully vested after

six

years beginning at the

second

year in

20%

increments. Special vesting provisions are in place for legacy Liberty employees with

or more years of service. Contributions for

2018

and

2017

to these plans amounted to

$306,000

and

$258,000,

respectively.

Directors’ Retirement Plan

Until

2001,

MBC maintained a Directors’ Retirement Plan to provide postretirement payments over a

ten

-year period to members of the Board of Directors who had completed

five

or more years of service. The plan required payment of

25%

of the final average annual board fees paid to a director in the

three

years preceding the director’s retirement.

The following table illustrates the components of the projected payments for the Directors’ Retirement Plan for the years ended:

	Projected Payments

2019	$	11,000
2020		10,000
2021		2,000
Total	$	23,000

The retirement plan is available solely for nonemployee directors of MBC, but MBC has

not

entered into any additional retirement arrangements for nonemployee directors since

2001.

All director participants have retired.

Executive Deferred Compensation Plan

The Company maintains executive deferred compensation plans to provide post-retirement payments to members of senior management. The plan agreements are noncontributory, defined contribution arrangements that provide supplemental retirement income benefits to several officers, with contributions made solely by the Bank. Accrued executive deferred compensation amounted to

$504,000

and

$912,000

as of

December 31, 2018

and

2017,

respectively. During

2018

and

2017,

the Company contributed

$98,000

and

$110,000,

respectively, to the Plan.

Stock Option and Restricted Stock Plan

2007,

the Company adopted the

2007

Omnibus Equity Plan (the

“2007

Plan”) for granting incentive stock options, nonqualified stock options, and restricted stock to key officers and employees and nonemployee directors of the Company. A total of

160,000

shares of authorized and unissued or issued common stock were reserved for issuance under the

2007

Plan, which expired

ten

years from the date of board approval of the plan. Although the

2007

Plan expired in

2017,

there remain outstanding

7,450

shares in incentive stock options awards granted under the

2007

Plan. The per share exercise price of an option granted is

not

less than the fair value of a share of common stock on the date the option was granted.

2017,

the Company adopted the

2017

Omnibus Equity Plan (the

“2017

Plan”) for granting incentive stock options, nonqualified stock options, restricted stock and other equity awards to key officers and employees and nonemployee directors of the Company. The Company’s stockholders approved the

2017

Plan at the annual meeting of the stockholders held on

May 10, 2017.

A total of

224,000

shares of authorized and unissued or issued common stock are reserved for issuance under the

2017

Plan, which expires

ten

years from the date of board approval of the plan. The per share exercise price of an option granted will

not

be less than the fair value of a share of common stock on the date the option is granted. Remaining available shares that can be issued under the Plan were

201,708

December 31, 2018.

The following table presents share data related to the outstanding options:

	2018			Weighted-average Exercise Price Per Share

Outstanding, January 1		19,750		$	20.94
Exercised		(12,300	)		23.00

Outstanding, December 31		7,450		$	17.55

Exercisable, December 31		7,450		$	17.55

The total intrinsic value of outstanding in-the-money exercisable stock options was

$185,356

and

$538,000

December 31, 2018

and

2017,

respectively.

options were granted for the years ended

December 31, 2018

and

2017.

The Company recognizes compensation expense in the amount of fair value of the common stock at the grant date and as an addition to stockholders’ equity.

For the years ended

December

31,

2018

and

2017,

the Company recorded

$215,000

and

$0,

respectively, of compensation cost related to vested stock options. As of

December 31, 2018,

there was

unrecognized compensation cost related to unvested stock options.

For the years ended

December 31, 2018

and

2017,

12,300

and

8,237

options were exercised resulting in net proceeds to the participant of

$85,000

and

$95,000,

respectively.

During

2018

and

2017,

the Compensation Committee of the Board of Directors of the Company granted awards of restricted stock for an aggregate amount of

11,351

and

5,825

shares, respectively, to certain employees of the Bank. The expense recognized as a result of these awards was

$286,000

and

$196,000

for the years ended

2018

and

2017,

respectively. The number of restricted stock earned or settled will depend on certain conditions and are also subject to service period-based vesting. The award recipient must maintain service with Middlefield Banc Corp. and affiliates until the

third

anniversary of the award to satisfy the service condition. The performance condition will be satisfied if the average total shareholder annual return on Middlefield Banc Corp. stock for the

three

subsequent years is at least

8.00%.

The Company recognized restricted stock forfeitures in the period they occur.

The following table presents the activity during

2018

related to awards of restricted stock:

	Units			Weighted-average Grant Date Fair Value Per Share
Nonvested at January 1, 2018		14,601		$	35.14
Granted		11,351			47.89
Forfeited		(223	)		35.31
Vested		(3,905	)		33.61
Nonvested at December 31, 2018		21,824		$	42.05
Expected to vest at December 31, 2018		4,850		$	32.40

Compensation expense related to nonvested awards of restricted stock amounts to

$453,000

as of

December 31, 2018.