MIDDLEBURG FINANCIAL CORP. 
By MIDDLEBURG, Va., Oct. 28, 2011 /PRNewswire/ -- Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.4 million for the quarter ending September 30, 2011 and $3.8 million in net income for the nine-month year to date period.
"We are pleased with the momentum in earnings experienced during the first nine months of 2011," commented Gary R. Shook, president and chief executive officer of Middleburg Financial Corporation. "Non Performing Assets as a percentage of Total Assets is stabilizing while Revenue continues to expand with growing Net Interest Income and improved fee income from our mortgage and wealth management subsidiaries. Growth in commercial loans is weak due to soft demand from qualified borrowers while residential loan growth is strong in the face of historically low mortgage rates. Continuation of economic uncertainty and a weak employment picture will do little to improve the sluggishness in loan demand from small businesses. However, we are significantly stepping up calling programs targeted at all existing and potential clients at the Bank and at our other subsidiaries, in an effort to broaden customer outreach."
Third Quarter 2011 Highlights:
-- Net income of $1.4 million or $0.20 per diluted share;
-- Net interest margin of 3.64%, compared to 3.27% for the third quarter of
2010;
-- Total revenue of $17.2 million, up 11.7% compared to third quarter of
2010;
-- Loan growth of 2.5% since the beginning of 2011;
-- Total assets of $1.2 billion, an increase of 4.4% since the beginning of
the year;
-- Deposits increased by $19.4 million or 2.2% during the year;
-- Provision for loan losses declined by 88.8% compared to third quarter of
2010; and
-- Capital ratios continue to be strong: Tangible Common Equity Ratio of
8.63%, Total Risk-Based Capital Ratio of 14.1%, Tier I Risk-Based
Capital Ratio of 12.9%, and a Tier 1 Leverage Ratio of 9.0% at September
30, 2011.
Total Revenue
Total revenue was $17.2 million in the quarter ended September 30, 2011 compared to $15.4 million in the previous quarter and $14.9 million in the quarter ended September 30, 2010, representing an increase of 11.7% compared to the previous quarter and an increase of 16.2% compared to the quarter ended September 30, 2010.
Net interest income was $9.6 million during the three months ended September 30, 2011, which was 2.1% higher than the previous quarter and an increase of 21.5% compared to the quarter ended September 30, 2010. The yield on average earning assets was 4.66% for the quarter ended September 30, 2011 compared to 4.86% for the previous quarter and 4.74% for the quarter ended September 30, 2010, representing a decrease of 20 basis points from the previous quarter and a decrease of 8 basis points from the quarter ended September 30, 2010. Average earning assets increased 4.3% compared to the previous quarter. Loan growth and an increase in investment securities drove the increase in earning assets during the third quarter. The decrease in yields on earning assets from the previous quarter reflected a 13 basis point decrease in yields for the loan portfolio and a decrease of 25 basis points in the yield of the securities portfolio.
The average cost of interest bearing liabilities was 1.21% for the quarter ended September 30, 2011, compared to 1.26% in the previous quarter, and 1.73% for the quarter ended September 30, 2010, representing a decrease of 5 basis points from the previous quarter and a decrease of 52 basis points from the quarter ended September 30, 2010. Costs for wholesale borrowings increased by 1 basis point during the quarter, while costs for retail deposits decreased by 6 basis points during the same period. The decline in the cost of retail deposits during the quarter ended September 30, 2011, compared to the previous quarter, was driven by a 10 basis point decline in the cost of savings deposits. The cost of time deposits decreased by 9 basis points during the quarter ended September 30, 2011, compared to the previous quarter, as maturing CD's re-priced at lower rates. Cost of funds is calculated by dividing annualized total interest expense by the sum of average interest bearing liabilities and average demand deposits. Cost of funds was 1.05% for the quarter ended September 30, 2011 compared to 1.10% for the quarter ended June 30, 2011, a decrease of 5 basis points from the previous quarter.
The net interest margin for the three months ended September 30, 2011 was 3.64%, compared to 3.78% for the previous quarter, and 3.27% for the quarter ended September 30, 2010, representing a decrease of 14 basis points from the previous quarter and an increase of 37 basis points compared to the quarter ended September 30, 2010.
The Company's net interest margin is not a measurement under accounting principles generally accepted in the United States, but it is a common measure used by the financial services industry to determine how profitably earning assets are funded. The Company's net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent net interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The tax rate utilized is 34%. Details on the calculation of the net interest margin are included in the "Key Statistics" table.
Non-interest income increased by $1.6 million or 26.5% when comparing the quarter ended September 30, 2011 to the previous quarter and increased by $723,000 or 10.5% compared to the quarter ended September 30, 2010. The primary reason for the higher non-interest income in the third quarter of 2011 relative to the prior quarter was an increase in gain-on-sale revenues from the Company's mortgage operations.
Southern Trust Mortgage originated $180.4 million in mortgage loans during the quarter ended September 30, 2011 compared to $153.0 million originated during the previous quarter, an increase of 17.9%, and $217.6 million originated during the quarter ended September 30, 2010, a decrease of 17.1% when comparing calendar quarters. Gains on mortgage loan sales increased by 39.7% when comparing the quarter ended September 30, 2011 to the previous quarter. Gains on mortgage loan sales increased by 6.9% when comparing the quarter ended September 30, 2011 to the quarter ended September 30, 2010. The increase in gain-on-sale revenue in the third quarter of 2011 was driven by an increase in gain-on-sale margins during the third quarter.
The revenues and expenses of Southern Trust Mortgage for the three month period ended September 30, 2011 are reflected in the Company's financial statements on a consolidated basis following generally accepted accounting principles in the United States. The outstanding equity interest not held by the Company is reported on the Company's balance sheet as "Non-controlling interest in consolidated subsidiary" and the earnings or loss attributable to the non-controlling interest is reported on the Company's statement of income as "Net (income) / loss attributable to non-controlling interest."
Trust and investment advisory service fees earned by Middleburg Trust Company ("MTC") decreased by 2.0% when comparing the quarter ended September 30, 2011 to the previous quarter, and increased by 19.3% compared to the quarter ended September 30, 2010. Trust and investment advisory fees are based primarily upon the market value of the accounts under administration. Total consolidated assets under administration by MTC were at $1.2 billion at September 30, 2011, a decrease of 2.1% relative to June 30, 2011 and an increase of 20.0% relative to September 30, 2010.
Net securities gains were $141,000 during the quarter ended September 30, 2011 compared to net securities gains of $87,000 during the previous quarter and net securities gains of $288,000 during the quarter ended September 30, 2010.
Non-Interest Expense
Non-interest expense in the third quarter of 2011 increased by 8.7% compared to the previous quarter and decreased by 2.1% compared to the quarter ended September 30, 2010.
Salaries and employee benefit expenses increased by $895,000 or 11.4% when comparing the third quarter of 2011 to the previous quarter, primarily due to an increase in commission and recruiting expenses for mortgage loan officers. Expenses related to Other Real Estate Owned (OREO) increased by $83,000 or 13.7% when comparing the third quarter of 2011 to the previous quarter. Advertising expenses increased by $161,000 or 56.5% during the quarter as a result of expenses for bank-wide campaigns related to CD's and loans and advertising at the mortgage company. FDIC insurance premiums declined by $114,000 or 31.8% compared to the previous quarter. Other operating expenses, which include expenses such as supplies, travel and entertainment expenses, increased by $74,000 or 5.4% when comparing the quarter ended September 30, 2011 to the previous quarter.
The Company's efficiency ratio which is represented by the ratio of non-interest expense to the sum of tax equivalent net interest income and non-interest income, excluding securities gains and losses, was 80.89% for the third quarter of 2011, compared to an efficiency ratio of 82.79% in the quarter ending June 30, 2011.
Asset Quality and Provision for Loan Losses
The provision for loan losses in the quarter ended September 30, 2011 was $1,024,000 compared to a provision of $1,087,000 in the previous quarter and a provision of $9,130,000 in the quarter ended September 30, 2010, representing a decrease of 5.8% from the previous quarter and a decrease of 88.8% from the quarter ended September 30, 2010.
The Allowance for Loan and Lease Losses (ALLL) at September 30, 2011 was $15.1 million representing 2.24% of total portfolio loans outstanding versus 2.22% at June 30, 2011 and 2.42% of total portfolio loans at September 30, 2010.
Loans that were delinquent for more than 90 days and still accruing were $1.6 million as of September 30, 2011 compared to $3.2 million as of June 30, 2011, representing a decrease of 50% during the quarter.
Non-accrual loans were $30.5 million at the end of the third quarter compared to $32.3 million as of June 30, 2011, representing a decrease of 5.6% during the third quarter. Troubled debt restructurings were $404,000 at the end of the third quarter compared to $112,000 as of June 30, 2011. Other Real Estate Owned (OREO) was $6.1 million as of September 30, 2011 compared to $6.3 million as of June 30, 2011, representing a decrease of 3.2% during the third quarter. Non-performing assets were $38.5 million or 3.3% of total assets at September 30, 2011, compared to $41.9 million or 3.7% of total assets as of June 30, 2011.
Total Consolidated Assets
Total assets at September 30, 2011 were $1.2 billion, an increase of $8.9 million or 0.8% compared to total assets at June 30, 2011.
Total portfolio loans declined by $2.5 million or 0.37% for the third quarter. The securities portfolio increased by $9.9 million or 3.3% in the third quarter relative to the previous quarter. Balances of mortgages held for sale increased by $18.2 million or 37.4% in the third quarter of 2011. Cash balances and deposits at other banks decreased by 29.4% in the third quarter of 2011.
Deposits and Other Borrowings
Total deposits were unchanged in the third quarter. Brokered deposits, including CDARS program funds, were $91.9 million at September, 2011, down 1.0% from June 30, 2011. FHLB advances were $84.9 million at September 30, 2011, up $7.0 million from June 30, 2011, or an increase of 8.9%.
Equity and Capital
Total shareholders' equity at September 30, 2011 was $105.3 million, compared to shareholders' equity of $102.7 million as of June 30, 2011. Retained earnings at September 30, 2011 were $40.4 million compared to $39.3 million at June 30, 2011. The book value of the Company's common stock at September 30, 2011 was $15.04 per share.
The Company's total risk-based capital ratio was 14.1% at September 30, 2011 and December 31, 2010. The Tier 1 risk-based capital ratio increased from 12.8% to 12.9% from December 31, 2010 to September 30, 2011 and the Tier 1 Leverage Ratio remained at 9.0% as of both period ends.
Caution about Forward Looking Statements
Certain information contained in this discussion may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company's future operations and are generally identified by phrases such as "the Company expects," "the Company believes" or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010, and other filings with the Securities and Exchange Commission.
About Middleburg Financial Corporation
Middleburg Financial Corporation is headquartered in Middleburg, Virginia and has two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc. Middleburg Bank serves communities in Virginia with financial centers in Ashburn, Gainesville, Leesburg, Marshall, Middleburg, Purcellville, Reston, Warrenton and Williamsburg. Middleburg Investment Group owns Middleburg Trust Company, which is headquartered in Richmond, Virginia with offices in Middleburg, Alexandria and Williamsburg. Middleburg Financial Corporation is also the majority owner of Southern Trust Mortgage, which is based in Virginia Beach and provides mortgages through 17 offices in 11 states.
MIDDLEBURG FINANCIAL CORPORATION
Consolidated Statements of Operations
(In thousands, except for per share data)
Unaudited Unaudited
--------- ---------
For the Nine Months For the Three Months
Ended September 30, Ended September 30,
2011 2010 2011 2010
---- ---- ---- ----
INTEREST
AND
DIVIDEND
INCOME
Interest
and fees
on loans $29,378 $30,661 $9,912 $9,832
Interest
and
dividends
on
securities
available
for sale
Taxable 4,877 3,194 1,727 1,166
Tax-
exempt 1,757 1,914 592 621
Dividends 108 75 36 32
Interest
on
deposits
in banks
and
federal
funds
sold 90 99 30 36
--- --- --- ---
Total
interest
and
dividend
income 36,210 35,943 12,297 11,687
------ ------ ------ ------
INTEREST
EXPENSE
Interest
on
deposits 6,927 9,410 2,287 3,160
Interest
on
securities
sold
under
agreements
to
repurchase 209 144 84 63
Interest
on
short-
term
borrowings 174 245 58 134
Interest
on long-
term
debt 914 1,298 312 372
--- ----- --- ---
Total
interest
expense 8,224 11,097 2,741 3,729
----- ------ ----- -----
NET
INTEREST
INCOME 27,986 24,846 9,556 7,958
Provision
for loan
losses 2,565 11,350 1,024 9,130
----- ------ ----- -----
NET
INTEREST
INCOME
(LOSS)
AFTER
PROVISION
FOR LOAN
LOSSES 25,421 13,496 8,532 (1,172)
------ ------ ----- ------
NONINTEREST
INCOME
Service
charges
on
deposit
accounts 1,553 1,396 538 487
Trust
services
income 2,813 2,497 963 807
Gains on
loans
held for
sale 12,286 11,621 5,501 5,147
Gains on
securities
available
for
sale,
net 263 757 141 288
Total
other-
than-
temporary
impairment
losses (33) (857) (16) (557)
Portion
of
(gain)
loss
recognized
in other
comprehensive
income 11 (117) (5) (169)
--- ---- --- ----
Net
impairment
losses (22) (974) (21) (726)
Commissions
on
investment
sales 552 453 187 142
Fees on
mortgages
held for
sale 325 1,311 84 477
Other
service
charges,
commissions
and fees 347 353 98 97
Bank-
owned
life
insurance 385 391 123 136
Other
operating
income 111 221 6 42
--- --- --- ---
Total
noninterest
income 18,613 18,026 7,620 6,897
------ ------ ----- -----
NONINTEREST
EXPENSE
Salaries
and
employees'
benefits 23,837 22,046 8,708 7,665
Net
occupancy
and
equipment
expense 5,016 4,651 1,700 1,557
Advertising 887 685 446 257
Computer
operations 1,073 1,008 365 340
Other
real
estate
owned 1,639 1,171 689 666
Other
taxes 607 598 205 201
Federal
deposit
insurance
expense 1,009 1,521 244 368
Other
operating
expenses 5,198 6,916 1,720 3,333
----- ----- ----- -----
Total
noninterest
expense 39,266 38,596 14,077 14,387
------ ------ ------ ------
Income
(loss)
before
income
taxes 4,768 (7,074) 2,075 (8,662)
Income
tax
expense
(benefit) 1,072 (3,135) 454 (3,297)
----- ------ --- ------
NET
INCOME
(LOSS) 3,696 (3,939) 1,621 (5,365)
Net
(income)
loss
attributable
to non-
controlling
interest 128 (311) (223) (423)
--- ---- ---- ----
Net
income
(loss)
attributable
to
Middleburg
Financial
Corporation $3,824 $(4,250) $1,398 $(5,788)
====== ======= ====== =======
Earnings
(loss)
per
share:
Basic $0.55 $(0.61) $0.20 $(0.83)
Diluted $0.55 $(0.61) $0.20 $(0.83)
Dividends
per
common
share $0.15 $0.30 $0.05 $0.10
MIDDLEBURG FINANCIAL CORPORATION
Consolidated Balance Sheets
(In thousands, except for share and per share data)
(Unaudited) (Unaudited)
September December
30, June 30, 31,
2011 2011 2010
---- ---- ----
ASSETS
Cash and due from
banks $5,334 $19,598 $21,955
Interest-bearing
deposits with other
institutions 36,024 38,988 42,769
------ ------ ------
Total cash and cash
equivalents 41,358 58,586 64,724
Securities available
for sale 303,014 293,393 252,042
Loans held for sale 66,910 48,689 59,361
Restricted
securities, at cost 7,227 6,932 6,296
Loans receivable, net
of allowance for
loan losses of
$15,124 at Sept. 30,
2011, $15,073 at June
30, 2011, and
$14,967 at Dec. 31,
2010 660,689 663,242 644,345
Premises and
equipment, net 21,464 21,393 21,112
Goodwill and
identified
intangibles 6,244 6,286 6,360
Other real estate
owned, net of
valuation allowance
of $1,057 at Sept.
30,
2011, $1,006 at June
30, 2011, and $1,486
at Dec. 31, 2010 6,096 6,255 8,394
Prepaid federal
deposit insurance 4,227 4,454 5,154
Accrued interest
receivable and other
assets 36,427 35,437 36,779
------ ------ ------
TOTAL ASSETS $1,153,656 $1,144,667 $1,104,567
LIABILITIES
Deposits:
Non-interest-
bearing demand
deposits $145,393 $131,191 $130,488
Savings and interest-
bearing demand
deposits 455,893 460,518 436,718
Time deposits 308,410 316,776 323,100
------- ------- -------
Total deposits 909,696 908,485 890,306
Securities sold under
agreements to
repurchase 31,286 35,210 25,562
Short-term
borrowings 12,864 5,692 13,320
Long-term debt 77,912 77,912 62,912
Subordinated notes 5,155 5,155 5,155
Accrued interest
payable and other
liabilities 9,170 7,405 7,319
Commitments and
contingent
liabilities - - -
--- --- ---
TOTAL LIABILITIES 1,046,083 1,039,859 1,004,574
--------- --------- ---------
SHAREHOLDERS' EQUITY
Common stock ($2.50
par value;
20,000,000 shares
authorized,
7,000,824 issued;
6,996,932,
6,992,932, and
6,925,437
outstanding at
Sept. 30, 2011, June
30, 2011, and Dec.
31, 2010,
respectively) 17,331 17,331 17,314
Capital surplus 43,274 43,150 43,058
Retained earnings 40,373 39,322 37,593
Accumulated other
comprehensive income
(loss) 4,327 2,908 (1,012)
----- ----- ------
Total Middleburg
Financial
Corporation
shareholders' equity 105,305 102,711 96,953
Non-controlling
interest in
consolidated
subsidiary 2,268 2,097 3,040
----- ----- -----
TOTAL SHAREHOLDERS'
EQUITY 107,573 104,808 99,993
------- ------- ------
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $1,153,656 $1,144,667 $1,104,567
QUARTERLY SUMMARY STATEMENTS OF OPERATIONS
MIDDLEBURG FINANCIAL CORPORATION
(Unaudited. Dollars in thousands except per share data)
For the Three Months Ended
--------------------------
Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30,
2011 2011 2011 2010 2010
--------- --------- --------- --------- ---------
Interest and Dividend Income
Interest and fees on loans $9,912 $9,731 $9,735 $9,887 $9,832
Interest on securities
available for sale
Taxable 1,727 1,751 1,399 1,539 1,166
Exempt from federal income
taxes 592 604 561 600 621
Dividends 36 36 36 30 32
Interest on federal funds
sold and other 30 33 27 32 36
--- --- --- --- ---
Total interest and dividend
income $12,297 $12,155 $11,758 $12,088 $11,687
------- ------- ------- ------- -------
Interest Expense
Interest on deposits $2,287 $2,332 $2,308 $2,623 $3,160
Interest on securities sold
under agreements to
repurchase 84 69 56 61 63
Interest on short-term
borrowings 58 53 63 148 134
Interest on long-term debt 312 306 296 246 372
--- --- --- --- ---
Total interest expense $2,741 $2,760 $2,723 $3,078 $3,729
------ ------ ------ ------ ------
Net interest income $9,556 $9,395 $9,035 $9,010 $7,958
Provision for loan losses 1,024 1,087 454 655 9,130
----- ----- --- --- -----
Net interest income (loss)
after provision
for loan losses $8,532 $8,308 $8,581 $8,355 $(1,172)
------ ------ ------ ------ -------
Other Income
Trust services income $963 $983 $867 $838 $807
Service charges on deposit
accounts 538 526 489 488 487
Net gains (losses) on
securities available for
sale 141 87 35 109 288
Total other-than-temporary
impairment gain (loss) on
securities (16) 6 (17) (44) (557)
Portion of (gain) loss
recognized in other
comprehensive income (5) (6) 16 (85) (169)
--- --- --- --- ----
Net other-than-temporary
impairment loss (21) - (1) (129) (726)
Commissions on investment
sales 187 185 180 169 142
Bank owned life insurance 123 139 123 112 136
Gain on loans held for sale 5,501 3,938 2,847 5,537 5,147
Fees on loans held for sale 84 87 154 570 477
Other service charges,
commissions and fees 98 134 115 114 97
Other operating income
(loss) 6 (55) 160 169 42
--- --- --- --- ---
Total other income $7,620 $6,024 $4,969 $7,977 $6,897
------ ------ ------ ------ ------
Other Expense
Salaries and employee
benefits $8,708 $7,813 $7,316 $7,748 $7,665
Net occupancy expense of
premises 1,700 1,640 1,676 1,598 1,557
Other taxes 205 205 197 200 201
Advertising 446 285 156 386 257
Computer operations 365 343 365 316 340
Other real estate owned 689 606 344 842 666
Audits and examinations 103 156 126 219 96
Legal fees 172 176 89 50 96
FDIC insurance 244 358 407 386 368
Other operating expenses 1,445 1,371 1,560 2,401 3,141
----- ----- ----- ----- -----
Total other expense $14,077 $12,953 $12,236 $14,146 $14,387
------- ------- ------- ------- -------
Income (loss) before income
taxes $2,075 $1,379 $1,314 $2,186 $(8,662)
Income tax expense (benefit) 454 301 317 573 (3,297)
Net income (loss) $1,621 $1,078 $997 $1,613 $(5,365)
Less: Net (income) loss
attributable to non-
controlling interest (223) 121 230 (51) (423)
Net income (loss)
attributable to Middleburg
Financial Corporation $1,398 $1,199 $1,227 $1,562 $(5,788)
====== ====== ====== ====== =======
Net income (loss) per common
share, basic $0.20 $0.17 $0.18 $0.23 $(0.83)
Net income (loss) per common
share, diluted $0.20 $0.17 $0.18 $0.23 $(0.83)
Dividends per common share $0.05 $0.05 $0.05 $0.05 0.10
MIDDLEBURG FINANCIAL CORPORATION
KEY STATISTICS
(Unaudited.
Dollars
in
thousands
except
per
share
data) For the Three Months Ended
--------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2011 2011 2011 2010 2010
-------- -------- ------- -------- --------
Net
income
(loss) $1,398 $1,199 $1,227 $1,562 $(5,788)
Earnings
(loss)
per
share,
basic $0.20 $0.17 $0.18 $0.23 $(0.83)
Earnings
(loss)
per
share,
diluted $0.20 $0.17 $0.18 $0.23 $(0.83)
Dividend
per
share $0.05 $0.05 $0.05 $0.05 $0.10
Return
on
average
total
assets
-
Year
to
Date 0.46% 0.45% 0.46% -0.25% -2.11%
Return
on
average
total
equity
-
Year
to
Date 5.07% 4.95% 5.11% -2.71% -22.03%
Dividend
payout
ratio 25.00% 29.41% 27.78% 22.21% NA
Non-
interest
revenue
to
total
revenue
(1) 43.90% 38.72% 35.02% 39.82% 38.56%
Net
interest
margin
(2) 3.64% 3.78% 3.80% 3.60% 3.27%
Yield
on
average
earning
assets 4.66% 4.86% 4.91% 4.78% 4.74%
Yield
on
average
interest-
bearing
liabilities 1.21% 1.26% 1.30% 1.41% 1.73%
Net
interest
spread 3.45% 3.60% 3.61% 3.37% 3.01%
Non-
interest
income
to
average
assets
(3) 2.67% 2.17% 1.82% 2.88% 2.69%
Non-
interest
expense
to
average
assets
(3) 4.93% 4.67% 4.53% 5.09% 5.29%
Efficiency
ratio
-
QTD
(Tax
Equiv)
(4) 80.89% 82.79% 84.96% 81.42% 91.77%
Excludes securities gains and losses including OTTI
(1) adjustments.
The net interest margin is calculated by dividing tax
equivalent net interest income by total average earning
assets. Tax equivalent net interest income is calculated by
grossing up interest income for the amounts that are non
taxable (i.e., municipal income) then subtracting interest
expense. The tax rate utilized is 34%. The Company's net
interest margin is a common measure used by the financial
service industry to determine how profitably earning assets
are funded. Because the Company earns a fair amount of non
taxable interest income due to the mix of securities in its
investment security portfolio, net interest income for the
ratio is calculated on a tax equivalent basis as described
above. This calculation excludes net securities gains and
(2) losses.
Ratios are computed by dividing annualized income and expense
(3) amounts by quarterly average assets.
The efficiency ratio is not a measurement under accounting
principles generally accepted in the United States. It is
calculated by dividing non interest expense by the sum of tax
equivalent net interest income and non interest income
excluding gains and losses on the investment portfolio. The
tax rate utilized is 34%. The Company calculates this ratio in
order to evaluate its overhead structure or how effectively it
(4) is operating.
MIDDLEBURG FINANCIAL CORPORATION
SELECTED FINANCIAL DATA BY QUARTER
(Unaudited. Dollars in thousands Sep 30, Jun 30, Dec 31, Sep 30,
except per share data) 2011 2011 Mar 31, 2011 2010 2010
-------- -------- ------------ -------- --------
BALANCE SHEET RATIOS
Loans to deposits
(Including HFS) 81.65% 80.02% 80.53% 80.72% 81.69%
Portfolio loans to deposits 74.29% 74.66% 76.56% 74.05% 73.05%
Average interest-earning
assets to
average-interest bearing
liabilities 119.85% 117.42% 117.58% 118.50% 117.22%
PER SHARE DATA
Dividends $0.05 $0.05 $0.05 $0.05 $0.10
Book value (MFC
Shareholders) $15.04 $14.68 $14.18 $14.02 $14.22
Tangible book value (3) $14.15 $13.78 $13.27 $13.10 $13.29
SHARE PRICE DATA
Closing price $15.00 $14.94 $17.75 $14.26 $14.08
Diluted earnings multiple
(1) 18.75 21.97 24.65 15.50 NA
Book value multiple(2) 1.00 1.02 1.25 1.02 0.99
COMMON STOCK DATA
Outstanding shares at end
of period 7,000,824 6,996,932 6,942,315 6,925,437 6,915,687
Weighted average shares O/
S Basic -QTD 6,996,932 6,977,503 6,940,154 6,937,801 6,934,366
Weighted average shares O/
S, diluted -QTD 6,998,494 6,980,331 6,943,189 6,938,359 6,934,366
CAPITAL RATIOS
Capital to Assets -Common
shareholders 9.13% 8.97% 9.08% 8.79% 8.85%
Capital to Assets -with
Noncontrolling Interest 9.32% 9.16% 9.33% 9.05% 9.13%
Tangible common equity
ratio (4) 8.63% 8.47% 8.54% 8.26% 8.32%
Total risk based capital
ratio 14.12% 14.16% 14.52% 14.10% 13.54%
Tier 1 risk based capital
ratio 12.86% 12.90% 13.26% 12.84% 12.29%
Leverage ratio 8.96% 9.12% 9.38% 9.04% 9.08%
CREDIT QUALITY
Net charge-offs to average
loans 0.13% 0.08% 0.12% 0.22% 0.47%
Total non-performing loans
to total portfolio loans 4.80% 5.25% 5.36% 4.66% 4.69%
Total non-performing
assets to total assets 3.34% 3.66% 3.99% 3.54% 3.50%
Non-accrual loans to:
total loans 4.51% 4.76% 4.17% 4.46% 4.57%
total assets 2.64% 2.82% 2.55% 2.66% 2.69%
Allowance for loan losses
to:
total portfolio loans 2.24% 2.22% 2.20% 2.27% 2.42%
non-performing assets 39.24% 35.98% 33.65% 38.29% 40.84%
non-accrual loans 49.61% 46.67% 52.74% 50.93% 53.04%
NON-PERFORMING ASSETS:
Loans delinquent over 90
days and still accruing $1,561 $3,230 $6,593 $909 $388
Non-accrual loans 30,485 32,298 27,638 29,385 29,923
Restructured Loans 404 112 1,254 1,254 404
Other real estate owned and
repossessed assets 6,096 6,255 7,825 8,394 8,142
Total non-performing
assets $38,546 $41,895 $43,310 $39,942 $38,857
------- ------- ------- ------- -------
NET LOAN CHARGE-OFFS:
Loans charged off $1,017 $621 $933 $1,600 $3,351
Recoveries (44) (32) (87) (42) (16)
Net charge-offs $973 $589 $846 $1,558 $3,335
---- ---- ---- ------ ------
PROVISION FOR LOAN LOSSES $1,024 $1,087 $454 $655 $9,130
------ ------ ---- ---- ------
ALLOWANCE FOR LOAN LOSS
SUMMARY
Balance at the beginning of
period $15,073 $14,575 $14,967 $15,870 $10,075
Provision 1,024 1,087 454 655 9,130
Net charge-offs (973) (589) (846) (1,558) (3,335)
Balance at the end of
period $15,124 $15,073 $14,575 $14,967 $15,870
------- ------- ------- ------- -------
The diluted earnings multiple is calculated by dividing the
period's closing market price per share by the annualized
diluted earnings per share for the period. The diluted
earnings multiple is a measure of how much an investor may be
willing to pay for $1.00 of the Company's earnings. In
quarters where the Company incurs net losses, the diluted
(1) earnings multiple is not meaningful and is shown as "NA".
The book value multiple (or price to book ratio) is calculated
by dividing the period's closing market price per share by the
period's book value per share. The book value multiple is a
measure used to compare the Company's market value per share
(2) to its book value per share.
Tangible book value is not a measurement under accounting
principles generally accepted in the United States. It is
computed by subtracting identified intangible assets and
goodwill from total Middleburg Financial Corporation
shareholders' equity and then dividing the result by the
number of shares of common stock issued and outstanding at the
(3) end of the accounting period.
The tangible common equity ratio is not a measurement under
accounting principles generally accepted in the United States.
It is computed by subtracting identified intangible assets
and goodwill from total Middleburg Financial Corporation
shareholders' equity and total assets and then dividing the
adjusted shareholders' equity balance by the adjusted total
(4) asset balance.
MIDDLEBURG FINANCIAL CORPORATION
Average Balances, Income and Expenses, Yields and Rates
Three months ended September 30,
--------------------------------
2011 2010
---- ----
Average Income/ Yield/ Average Income/ Yield/
Rate Rate
Balance Expense (2) Balance Expense (3)
------- ------- ----- ------- ------- -----
(Dollars in thousands)
Assets :
Securities:
Taxable $242,906 $1,763 2.88% $172,955 $1,198 2.75%
Tax-
exempt
(1) 57,800 897 6.16% 60,101 941 6.21%
Total
securities $300,706 $2,660 3.51% $233,056 $2,139 3.64%
Total
loans
(3) $724,450 $9,912 5.43% $716,173 $9,832 5.45%
Interest bearing
deposits in
other
financial
institutions 48,355 30 0.25% 55,721 36 0.25%
------ --- ------ ---
Total
earning
assets $1,073,511 $12,602 4.66% $1,004,950 $12,007 4.74%
Less:
allowances
for
credit
losses (14,956) (10,156)
Total
nonearning
assets 84,315 93,947
------ ------
Total
assets $1,142,870 $1,088,741
========== ==========
Liabilities:
Interest-bearing
deposits:
Checking $305,761 $529 0.69% $280,585 $569 0.80%
Regular
savings 99,344 175 0.70% 79,348 173 0.86%
Money
market
savings 58,903 98 0.66% 55,190 101 0.73%
Time deposits:
$100,000 and over 137,483 593 1.71% 169,903 1,217 2.84%
Under
$100,000 169,087 892 2.09% 171,379 1,100 2.55%
------- --- ---- ------- ----- ----
Total
interest-
bearing
deposits $770,578 $2,287 1.18% $756,405 $3,160 1.66%
Short-
term
borrowings 5,576 58 4.13% 16,341 134 3.25%
Securities sold
under agreements
to
repurchase 36,241 84 0.92% 26,534 63 0.94%
Long-
term
debt 83,067 312 1.49% 58,067 372 2.54%
Federal
funds
purchased 239 - 0.00% - - -
--- --- --- ---
Total
interest-
bearing
liabilities $895,701 $2,741 1.21% $857,347 $3,729 1.73%
Non-interest
bearing
liabilities
Demand
deposits 133,365 117,110
Other
liabilities 7,376 7,080
Total
liabilities $1,036,442 $981,537
Non-
controlling
interest 2,189 2,947
Shareholders'
equity 104,239 104,257
Total liabilities
and shareholders'
equity $1,142,870 $1,088,741
========== ==========
Net interest
income $9,861 $8,278
====== ======
Interest rate
spread 3.45% 3.01%
Cost of Funds 1.06% 1.59%
Interest expense
as a percent of
average earning
assets 1.01% 1.47%
Net interest
margin 3.64% 3.27%
(1) Income and yields are reported on tax equivalent basis assuming a
federal tax rate of 34%.
(2) All yields and rates have been annualized on a 365 day year.
(3) Total average loans include loans on non-accrual status.
MIDDLEBURG FINANCIAL CORPORATION
--------------------------------
Average Balances, Income and Expenses, Yields and Rates
-------------------------------------------------------
Nine Months Ended September 30
------------------------------
2011 2010
---- ----
Average Income/ Yield/ Average Income/ Yield/
Rate Rate
Balance Expense (2) Balance Expense (3)
------- ------- ----- ------- ------- -----
(Dollars in thousands)
Assets :
Securities:
Taxable $224,461 $4,985 2.97% $145,188 $3,269 3.01%
Tax-
exempt
(1) 55,739 2,662 6.39% 60,078 2,900 6.45%
------ ----- ---- ------ ----- ----
Total
securities $280,200 $7,647 3.65% $205,266 $6,169 4.02%
Total
loans (3) $706,995 $29,378 5.56% $701,446 $30,661 5.84%
Interest bearing
deposits in
other
financial
institutions 45,819 90 0.26% 49,194 99 0.27%
------ --- ------ ---
Total
earning
assets $1,033,014 $37,115 4.80% $955,906 $36,929 5.17%
Less:
allowances
for
credit
losses (14,816) (9,742)
Total
nonearning
assets 91,379 92,521
------ ------
Total
assets $1,109,577 $1,038,685
========== ==========
Liabilities:
Interest-bearing
deposits:
Checking $295,782 $1,506 0.68% $282,245 $1,748 0.83%
Regular
savings 95,224 567 0.80% 75,671 544 0.96%
Money
market
savings 59,266 293 0.66% 52,625 323 0.82%
Time deposits:
$100,000 and over 135,973 1,831 1.80% 163,380 3,508 2.87%
Under
$100,000 168,470 2,730 2.17% 153,284 3,287 2.87%
------- ----- ------- -----
Total
interest-
bearing
deposits $754,715 $6,927 1.23% $727,205 $9,410 1.73%
Short-
term
borrowings 5,687 174 4.07% 9,050 245 3.61%
Securities sold
under agreements
to
repurchase 32,859 209 0.85% 24,402 144 0.79%
Long-term
debt 79,844 914 1.53% 53,236 1,298 3.26%
Federal
Funds
Purchased 56 - 0.00% 15 - 0.00%
--- --- --- ---
Total
interest-
bearing
liabilities $873,161 $8,224 1.26% $813,908 $11,097 1.82%
Non-interest
bearing
liabilities
Demand
Deposits 125,979 112,721
Other
liabilities 7,081 6,657
----- -----
Total
liabilities $1,006,221 $933,286
Non-
controlling
interest 2,458 2,781
Shareholders'
equity 100,898 102,618
Total liabilities
and shareholders'
equity $1,109,577 $1,038,685
========== ==========
Net interest income $28,891 $25,832
======= =======
Interest rate
spread 3.54% 3.35%
Cost of Funds 1.10% 1.64%
Interest expense as
a percent of
average earning
assets 1.06% 1.55%
Net interest margin 3.74% 3.61%
(1) Income and yields are reported on tax equivalent basis assuming
a federal tax rate of 34%.
(2) All yields and rates have been annualized on a 365 day year.
(3) Total average loans include loans on non-accrual status.
SOURCE Middleburg Financial Corporation
