Middleburg Financial Corporation Announces Fourth Quarter 2011 Results

Jan 31, 2012, 17:00 ET from Middleburg Financial Corporation

MIDDLEBURG, Va., Jan. 31, 2012 /PRNewswire/ -- Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.1 million for the quarter ending December 31, 2011 and $5.0 million in net income for the year 2011.

"We are certainly gratified by the forward progress of Middleburg Financial Corporation in 2011 on a number of fronts. Our net income of $5.0 million for the year demonstrates the continued positive benefit derived from the actions taken in 2010. But just as important, our ability to grow our capital, open a full service financial services office in Richmond and continue to invest in our future by hiring top quality talent, positions this company very well as we look toward the future," commented Gary R. Shook, president and chief executive officer of Middleburg Financial Corporation. He continued, "while we would have liked to see a net profit from each of our subsidiaries, we did see both the Bank and Middleburg Investment Group, post positive net income. While Southern Trust Mortgage did not post positive net income, substantial investments made during 2011, especially in the contiguous markets of Northern Virginia, position both the Bank and STM to benefit from the synergies that exist between the two entities as we move out of the current economic environment."

Fourth Quarter 2011 Highlights:

  • Net income of $1.1 million or $0.16 per diluted share;
  • Net interest margin of 3.67%, compared to 3.60% for the fourth quarter of 2010;
  • Total revenue of $17.8 million, up 5.3%  compared to the fourth quarter of 2010;
  • Loan growth of 1.8% for the year;
  • Total assets of $1.2 billion, an increase of 8.0% over December 31, 2010;
  • Deposits increased by $39.6 million or 4.4% during the year;
  • Provision for loan losses declined by 51.3% compared to fourth quarter of 2010; and
  • Capital ratios continue to be strong: Tangible Common Equity Ratio of 8.4%, Total Risk-Based Capital Ratio of 14.7%, Tier 1 Risk-Based Capital Ratio of 13.5%, and a Tier 1 Leverage Ratio of 8.8% at December 31, 2011.

Total Revenue

Total revenue was $17.8 million in the quarter ended December 31, 2011 compared to $17.2 million in the previous quarter and $16.9 million in the quarter ended December 31, 2010, representing an increase of 3.5% and 5.3%, respectively.    

Net interest income was $10.0 million during the three months ended December 31, 2011, which was 3.1% higher than the previous quarter and an increase of 10.5% compared to the quarter ended December 31, 2010. The yield on average earning assets was 4.55% for the quarter ended December 31, 2011 compared to 4.66% for the previous quarter and 4.78% for the quarter ended December 31, 2010, representing a decrease of 11 basis points from the previous quarter and a decrease of 23 basis points from the quarter ended December 31, 2010.  The decrease in the yield on earning assets from the previous quarter reflected a 20 basis point decrease in the yield on the loan portfolio and a decrease of 9 basis points in the yield on the securities portfolio.  Average earning assets increased 3.4% compared to the previous quarter. Loan growth and an increase in investment securities drove the increase in earning assets during the fourth quarter of 2011.

The average cost of interest bearing liabilities was 1.07% for the quarter ended December 31, 2011, compared to 1.21% in the previous quarter, and 1.41% for the quarter ended December 31, 2010, representing a decrease of 14 basis points from the previous quarter and a decrease of 34 basis points from the quarter ended December 31, 2010.  Costs for wholesale borrowings decreased by 10 basis points during the quarter, while costs for retail deposits decreased by 19 basis points during the same period.  The decline in the cost of retail deposits during the quarter ended December 31, 2011, compared to the previous quarter, was driven by reductions in interest expenses across the board: cost of time deposits declined 22 basis points, savings account interest expense declined 25 basis points, money market interest expense declined 26 basis points and interest checking costs decreased 18 basis points. 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 0.92% for the quarter ended December 31, 2011 compared to 1.06% for the quarter ended September 30, 2011, a decrease of 14 basis points from the previous quarter.

The net interest margin for the three months ended December 31, 2011 was 3.67%, compared to 3.64% for the previous quarter, and 3.60% for the quarter ended December 31, 2010, representing an increase of 3 basis points from the previous quarter and an increase of 7 basis points compared to the quarter ended December 31, 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 $296,000 or 3.9% when comparing the quarter ended December 31, 2011 to the previous quarter and decreased by $92,000 or 1.2% compared to the quarter ended December 30, 2010. The primary reasons for the higher non-interest income in the fourth quarter of 2011 relative to the prior quarter were higher gain-on-sale revenues from the Company's mortgage operations, higher commissions on investment sales, and increased gains from sales of securities during the quarter.

Southern Trust Mortgage originated $212.2 million in mortgage loans during the quarter ended December 31, 2011 compared to $180.4 million originated during the previous quarter, an increase of 17.6%, and $227.1 million originated during the quarter ended December 31, 2010, a decrease of 6.6% when comparing calendar quarters.  Gains on mortgage loan sales increased by 3.7% when comparing the quarter ended December 31, 2011 to the previous quarter.  Gains on mortgage loan sales increased by 3.0% when comparing the quarter ended December 31, 2011 to the quarter ended December 31, 2010.  

The revenues and expenses of Southern Trust Mortgage for the three month and twelve month periods ended December 31, 2010 and December 31, 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 operations as "Net (income) / loss attributable to non-controlling interest."

Trust and investment advisory service fees earned by Middleburg Trust Company ("MTC") decreased by 2.3% when comparing the quarter ended December 31, 2011 to the previous quarter, and increased by 8.7% compared to the quarter ended December 31, 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 December 31, 2011, an increase of 1.9% relative to September 30, 2011 and unchanged relative to December 31, 2010.  

Net securities gains were $197,000 during the quarter ended December 31, 2011 compared to net securities gains of $141,000 during the previous quarter and net securities gains of $109,000 during the quarter ended December 31, 2010.

Non-Interest Expense

Non-interest expense in the fourth quarter of 2011 increased by 15.9% compared to the previous quarter and by 15.1% compared to the quarter ended December 31, 2010.  

Salaries and employee benefit expenses increased by $1.3 million or 14.7% when comparing the fourth 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 $236,000 or 34.3% when comparing the fourth quarter of 2011 to the previous quarter. Advertising expenses increased by $66,000 or 14.8% during the quarter as a result of expenses for bank-wide campaigns related to business loans and advertising at the mortgage company. Other operating expenses, which include expenses such as supplies, travel and entertainment expenses, increased by $383,000 or 27.1% when comparing the quarter ended December 31, 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 90.4% for the fourth quarter of 2011, compared to an efficiency ratio of 80.9% in the quarter ending September 30, 2011 and 81.4% for the fourth quarter of 2010.

Asset Quality and Provision for Loan Losses

The provision for loan losses in the quarter ended December 31, 2011 was $319,000 compared to a provision of $1.0 million in the previous quarter and a provision of $655,000 in the quarter ended December 31, 2010, representing a decrease of 68.8% from the previous quarter and a decrease of 51.3% from the quarter ended December 31, 2010.

The Allowance for Loan and Lease Losses (ALLL) at December 31, 2011 was $14.6 million representing 2.18% of total portfolio loans outstanding versus 2.24% at September 30, 2011 and 2.27% of total portfolio loans at December 31, 2010.

Loans that were delinquent for more than 90 days and still accruing were $2.4 million as of December 31, 2011 compared to $1.6 million as of September 30, 2011, representing an increase of 50.0% during the quarter.  

Non-accrual loans were $25.4 million at the end of the fourth quarter compared to $30.5 million as of September 30, 2011, representing a decrease of 16.7% during the fourth quarter of 2011. Troubled debt restructurings that were performing as agreed were $3.8 million at the end of the fourth quarter compared to $404,000 as of September 30, 2011. Other Real Estate Owned (OREO) was $8.5 million as of December 31, 2011 compared to $6.1 million as of September 30, 2011, representing an increase of 39.3% during the fourth quarter. Non-performing assets were $40.1 million or 3.3% of total assets at December 31, 2011, compared to $38.5 million or 3.3% of total assets as of September 30, 2011.  

Total Consolidated Assets

Total assets at December 31, 2011 were $1.2 billion, an increase of $39.4 million or 3.4% compared to total assets at September 30, 2011.  

Total portfolio loans declined by $4.4 million or 0.65% for the fourth quarter. The securities portfolio increased by $5.2 million or 1.7% in the fourth quarter relative to the previous quarter. Balances of mortgages held for sale increased by $25.6 million or 38.2% in the fourth quarter of 2011.   Cash balances and deposits at other banks increased by 24.0% in the fourth quarter of 2011.  

Deposits and Other Borrowings

Total deposits increased by $20.1 million or 2.2% in the fourth quarter.  Brokered deposits, including CDARS program funds, were $96.9 million at December 31, 2011, up 5.4% from September 30, 2011. FHLB advances were $82.9 million at December 31, 2011, up $5.0 million from September 30, 2011, or an increase of 6.4%.    

Equity and Capital

Total shareholders' equity at December 31, 2011 was $105.9 million, compared to shareholders' equity of $105.3 million as of September 30, 2011. Retained earnings at December 31, 2011 were $41.1 million compared to $40.4 million at September 30, 2011. The book value of the Company's common stock at December 31, 2011 was $15.13 per share.

The Company's total risk-based capital ratio increased to 14.7% at December 31, 2011 from 14.1% at December 31, 2010.  The Tier 1 risk-based capital ratio increased from 12.8% to 13.5% from December 31, 2010 to December 31, 2011 and the Tier 1 Leverage Ratio decreased from 9.0% to 8.8% from December 31, 2010 to December 31, 2011.  

As depicted in the following table, the Company's risk-based capital ratios remain well above regulatory minimum capital ratios:

MIDDLEBURG FINANCIAL CORPORATION

Risk-Based Capital Ratios

December 31, 2011

(1)

MFC

Regulatory

Excess

Minimum

MFC

over

Requirement

Ratios

Minimum

Tier 1 Leverage Ratio

4.0%

8.8%

4.8%

Tier 1 Risk-Based Capital Ratio

4.0%

13.5%

9.5%

Total Risk-Based Capital Ratio

8.0%

14.7%

6.7%

(1) Under the regulatory framework for prompt corrective action.

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,  Richmond, 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 Balance Sheets

(In thousands, except for share and per share data)

(Unaudited)

(Unaudited)

December 31,

September 30,

December 31,

2011

2011

2010

ASSETS

Cash and due from banks

$

6,163

$

5,334

$

21,955

Interest-bearing deposits with other institutions

45,107

36,024

42,769

    Total cash and cash equivalents

51,270

41,358

64,724

Securities available for sale

308,242

303,014

252,042

Loans held for sale

92,514

66,910

59,361

Restricted securities, at cost

7,117

7,227

6,296

Loans receivable, net of allowance for loan losses of $14,623 at Dec. 31,

 2011, $15,124 at Sept. 30, 2011, and $14,967 at December 31, 2010

656,770

660,689

644,345

Premises and equipment, net

21,306

21,464

21,112

Goodwill and identified intangibles

6,201

6,244

6,360

Other real estate owned, net of valuation allowance of $1,522 at Dec. 31,

 2011, $1,057 at Sept. 30, 2011, and $1,486 at December 31, 2010

8,535

6,096

8,394

Prepaid federal deposit insurance

3,993

4,227

5,154

Accrued interest receivable and other assets

36,912

36,427

36,779

   TOTAL ASSETS

$

1,192,860

$

1,153,656

$

1,104,567

LIABILITIES

Deposits:

     Non-interest-bearing demand deposits

$

143,398

$

145,393

$

130,488

     Savings and interest-bearing demand deposits

460,576

455,893

436,718

     Time deposits

325,895

308,410

323,100

  Total deposits

929,869

909,696

890,306

Securities sold under agreements to repurchase

31,686

31,286

25,562

Short-term borrowings

28,331

12,864

13,320

FHLB borrowings

82,912

77,912

62,912

Subordinated notes

5,155

5,155

5,155

Accrued interest payable and other liabilities

6,894

9,170

7,319

Commitments and contingent liabilities

-

-

-

   TOTAL LIABILITIES

1,084,847

1,046,083

1,004,574

SHAREHOLDERS' EQUITY

Common stock ($2.50 par value; 20,000,000 shares authorized,

 7,000,824 issued; 6,996,932, 6,996,932, and 6,925,437 outstanding at

 Dec. 31, 2011, Sept. 30, 2011, and December 31, 2010, respectively)

17,331

17,331

17,314

Capital surplus

43,498

43,274

43,058

Retained earnings

41,157

40,373

37,593

Accumulated other comprehensive income (loss)

3,926

4,327

(1,012)

   Total Middleburg Financial Corporation shareholders' equity

105,912

105,305

96,953

Non-controlling interest in consolidated subsidiary

2,101

2,268

3,040

   TOTAL SHAREHOLDERS' EQUITY

108,013

107,573

99,993

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,192,860

$

1,153,656

$

1,104,567

MIDDLEBURG FINANCIAL CORPORATION

Consolidated Statements of Operations

(In thousands, except for per share data)

Unaudited

Unaudited

For the Year

For the Three Months

Ended December 31,

Ended December 31,

2011

2010

2011

2010

INTEREST AND DIVIDEND INCOME

Interest and fees on loans

$          39,392

$         40,548

$        10,014

$        9,887

Interest and dividends on securities available for sale

Taxable

6,627

4,733

1,750

1,539

Tax-exempt

2,363

2,514

606

600

Dividends

144

105

36

30

Interest on deposits in banks and federal funds sold

110

131

20

32

   Total interest and dividend income

48,636

48,031

12,426

12,088

INTEREST EXPENSE

Interest on deposits

8,867

12,033

1,940

2,623

Interest on securities sold under agreements to

 repurchase

293

205

84

61

Interest on short-term borrowings

318

393

144

148

Interest on FHLB borrowings and other debt

1,213

1,544

299

246

   Total interest expense

10,691

14,175

2,467

3,078

NET INTEREST INCOME

37,945

33,856

9,959

9,010

Provision for loan losses

2,884

12,005

319

655

NET INTEREST INCOME AFTER PROVISION

FOR LOAN LOSSES

35,061

21,851

9,640

8,355

NONINTEREST INCOME

Service charges on deposit accounts

2,095

1,884

542

488

Trust services income

3,636

3,335

911

838

Gains on loans held for sale

17,992

17,158

5,706

5,537

Gains on securities available for sale, net

460

866

197

109

Total other-than-temporary impairment gains (losses)

(27)

(901)

6

(44)

Portion of (gain) loss recognized in other

 comprehensive income

2

(202)

(9)

(85)

Net other than temporary impairment losses

(25)

(1,103)

(3)

(129)

Commissions on investment sales

755

622

203

169

Fees on mortgages held for sale

333

1,881

8

570

Other service charges, commissions and fees

452

467

105

114

Bank-owned life insurance

486

503

101

112

Other operating income

226

390

115

169

   Total noninterest income

26,410

26,003

7,885

7,977

NONINTEREST EXPENSE

Salaries and employees' benefits

33,821

29,594

9,984

7,748

Net occupancy and equipment expense

6,748

6,249

1,732

1,598

Advertising

1,399

1,071

512

386

Computer operations

1,501

1,324

428

316

Other real estate owned

2,564

2,468

925

842

Other taxes

812

798

205

200

Federal deposit insurance expense

1,260

1,907

251

386

Other operating expenses

7,354

9,331

2,244

2,670

   Total noninterest expense

55,459

52,742

16,281

14,146

Income (loss) before income taxes

6,012

(4,888)

1,244

2,186

Income tax expense (benefit)

1,350

(2,562)

278

573

NET INCOME (LOSS)

4,662

(2,326)

966

1,613

Net (income) loss attributable to non-

 controlling interest

298

(362)

170

(51)

Net income (loss) attributable to Middleburg

 Financial Corporation

$           4,960

$         (2,688)

$         1,136

$        1,562

Earnings (loss) per share:

Basic

$             0.71

$           (0.39)

$           0.16

$          0.23

Diluted

$             0.71

$           (0.39)

$           0.16

$          0.23

Dividends per common share

$             0.20

$            0.35

$           0.05

$          0.05

QUARTERLY SUMMARY STATEMENTS OF INCOME

MIDDLEBURG FINANCIAL CORPORATION

(Unaudited. Dollars in thousands except per share data)

For the Three Months Ended

Dec. 31, 2011

Sep. 30, 2011

Jun. 30, 2011

Mar. 31, 2011

Dec. 31, 2010

Interest and Dividend Income

 Interest and fees on loans

$         10,014

$        9,912

$           9,731

$          9,735

$            9,887

 Interest and dividends on securities available for sale

    Taxable

1,750

1,727

1,751

1,399

1,539

    Tax Exempt

606

592

604

561

600

    Dividends

36

36

36

36

30

 Interest on deposits in banks and federal funds sold

20

30

33

27

32

     Total interest and dividend income

$         12,426

$      12,297

$         12,155

$        11,758

$          12,088

Interest Expense

 Interest on deposits

$           1,940

$        2,287

$           2,332

$          2,308

$            2,623

 Interest on securities sold under agreements to repurchase

84

84

69

56

61

 Interest on short-term borrowings

144

58

53

63

148

 Interest on FHLB borrowings and other debt

299

312

306

296

246

     Total interest expense

$           2,467

$        2,741

$           2,760

$          2,723

$            3,078

     Net interest income

$           9,959

$        9,556

$           9,395

$          9,035

$            9,010

Provision for loan losses

319

1,024

1,087

454

655

     Net interest income after provision

      for loan losses

$           9,640

$        8,532

$           8,308

$          8,581

$            8,355

Non-Interest Income

Trust services income

$              911

$           932

$              926

$             867

$               838

Service charges on deposit accounts

542

538

526

489

488

Net gains on securities available for sale

197

141

87

35

109

Total other-than-temporary impairment gain (loss) on securities

6

(16)

-

(17)

(44)

  Portion of (gain) loss recognized in other comprehensive income

(9)

(5)

-

16

(85)

Net other-than-temporary impairment loss

(3)

(21)

-

(1)

(129)

Commissions on investment sales

203

187

185

180

169

Bank owned life insurance

101

123

139

123

112

Gains on loans held for sale

5,706

5,501

3,938

2,847

5,537

Fees on mortgages held for sale

8

84

87

154

570

Other operating income

220

104

79

209

283

      Total non-interest income

$           7,885

$        7,589

$           5,967

$          4,903

$            7,977

Non-Interest Expense

 Salaries and employee benefits

$           9,984

$        8,708

$           7,813

$          7,316

$            7,748

 Net occupancy and equipment expense

1,732

1,700

1,640

1,676

1,598

 Other taxes

205

205

205

197

200

 Advertising

512

446

285

156

386

 Computer operations

428

365

343

365

316

 Other real estate owned

925

689

606

344

842

 Audits and examinations

279

103

156

126

219

 Legal fees

168

172

176

89

50

 Federal deposit insurance expense

251

244

358

407

386

 Other operating expenses

1,797

1,414

1,314

1,494

2,401

      Total non-interest expense

$         16,281

$      14,046

$         12,896

$        12,170

$          14,146

      Income before income taxes

$           1,244

$        2,075

$           1,379

$          1,314

$            2,186

      Income tax expense

278

454

301

317

573

      Net income

$              966

$        1,621

$           1,078

$             997

$            1,613

Less:  Net (income) loss attributable to non-controlling interest

170

(223)

121

230

(51)

      Net income attributable to Middleburg Financial Corporation

$           1,136

$        1,398

$           1,199

$          1,227

$            1,562

Net income per common share, basic

$             0.16

$          0.20

$             0.17

$            0.18

$              0.23

Net income per common share, diluted

$             0.16

$          0.20

$             0.17

$            0.18

$              0.23

Dividends per common share

$             0.05

$          0.05

$             0.05

$            0.05

$              0.05

MIDDLEBURG FINANCIAL CORPORATION

KEY STATISTICS

(Unaudited. Dollars in thousands except per share data)

For the Three Months Ended

Dec 31, 2011

Sep 30, 2011

Jun 30, 2011

Mar 31, 2011

Dec 31, 2010

Net income

$     1,136

$     1,398

$     1,199

$     1,227

$     1,562

Earnings per share, basic

$       0.16

$       0.20

$       0.17

$       0.18

$       0.23

Earnings per share, diluted

$       0.16

$       0.20

$       0.17

$       0.18

$       0.23

Dividend per share

$       0.05

$       0.05

$       0.05

$       0.05

$       0.05

Return on average total assets - Year to Date

0.44%

0.46%

0.45%

0.46%

-0.25%

Return on average total equity - Year to Date

4.87%

5.07%

4.95%

5.11%

-2.71%

Dividend payout ratio

30.80%

25.00%

29.41%

27.78%

22.21%

Non-interest revenue to total revenue (1)

43.57%

43.90%

38.72%

35.02%

9.82%

Net interest margin (2)

3.67%

3.64%

3.78%

3.80%

3.60%

Yield on average earning assets

4.55%

4.66%

4.86%

4.91%

4.78%

Yield on average interest-bearing liabilities

1.07%

1.21%

1.26%

1.30%

1.41%

Net interest spread

3.48%

3.45%

3.60%

3.61%

3.37%

Non-interest income to average assets (3)

2.69%

2.67%

2.17%

1.82%

2.88%

Non-interest expense to average assets (3)

5.54%

4.93%

4.67%

4.53%

5.09%

Efficiency ratio - QTD (Tax Equiv) (4)

90.39%

80.89%

82.79%

84.96%

81.42%

(1)

Excludes securities gains and losses including OTTI adjustments.

(2)

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 losses.

(3)

Ratios are computed by dividing annualized income and expense amounts by quarterly average assets.

(4)

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 is operating.  

MIDDLEBURG FINANCIAL CORPORATION

SELECTED FINANCIAL DATA BY QUARTER

(Unaudited. Dollars in thousands except per share data)

Dec 31, 2011

Sep 30, 2011

Jun 30, 2011

Mar 31, 2011

Dec 31, 2010

BALANCE SHEET RATIOS

Loans to deposits (Including HFS)

82.15%

81.65%

80.02%

80.53%

80.72%

Portfolio loans to deposits

72.20%

74.29%

74.66%

76.56%

74.05%

Average interest-earning assets to

   average-interest bearing liabilities

121.22%

119.85%

117.42%

117.58%

118.50%

PER SHARE DATA

Dividends

$               0.05

$               0.05

$               0.05

$                     0.05

$               0.05

Book value (MFC Shareholders)

$             15.13

$             15.04

$             14.68

$                   14.18

$             14.02

Tangible book value (3)

$             14.24

$             14.15

$             13.78

$                   13.27

$             13.10

SHARE PRICE DATA

Closing price

$             14.25

$             15.00

$             14.94

$                   17.75

$             14.26

Diluted earnings multiple  (1)

22.27

18.75

21.97

24.65

15.50

Book value multiple(2)

0.94

1.00

1.02

1.25

1.02

COMMON STOCK DATA

Outstanding shares at end of period

7,000,824

7,000,824

6,996,932

6,942,315

6,925,437

Weighted average shares O/S Basic  - QTD

6,996,932

6,996,932

6,977,503

6,940,154

6,937,801

Weighted average shares O/S, diluted - QTD

6,998,019

6,998,494

6,980,331

6,943,189

6,938,359

CAPITAL RATIOS  

Capital to Assets - Common shareholders

8.88%

9.13%

8.97%

9.08%

8.79%

Capital to Assets - with Noncontrolling Interest

9.05%

9.32%

9.16%

9.33%

9.05%

Tangible common equity ratio (4)

8.40%

8.63%

8.47%

8.54%

8.26%

Total risk based capital ratio

14.72%

14.13%

14.16%

14.52%

14.10%

Tier 1 risk based capital ratio

13.46%

12.87%

12.90%

13.26%

12.84%

Leverage ratio

8.81%

8.97%

9.12%

9.38%

9.04%

CREDIT QUALITY

Net charge-offs to average loans

0.11%

0.13%

0.08%

0.12%

0.22%

Total non-performing loans to total portfolio loans

4.53%

4.80%

5.25%

5.36%

4.66%

Total non-performing assets to total assets

3.27%

3.34%

3.66%

3.99%

3.54%

Non-accrual loans to:

     total loans

3.78%

4.51%

4.76%

4.17%

4.46%

     total assets

2.12%

2.64%

2.82%

2.55%

2.66%

Allowance for loan losses to:

     total portfolio loans

2.18%

2.24%

2.22%

2.20%

2.27%

     non-performing assets

37.53%

39.24%

35.98%

33.65%

38.29%

     non-accrual loans

57.69%

49.61%

46.67%

52.74%

50.93%

NON-PERFORMING ASSETS:

   Loans delinquent over 90 days and still accruing

$             1,233

$             1,561

$             3,230

$                   6,593

$                909

   Non-accrual loans    

25,346

30,485

32,298

27,638

29,385

   Restructured Loans

3,853

404

112

1,254

1,254

   Other real estate owned and repossessed assets

8,535

6,096

6,255

7,825

8,394

Total non-performing assets

$           38,967

$           38,546

$           41,895

$                 43,310

$           39,942

NET LOAN CHARGE-OFFS:

   Loans charged off

$                893

$             1,017

$                621

$                      933

$             1,600

   Recoveries

(73)

(44)

(32)

(87)

(42)

Net charge-offs

$                820

$                973

$                589

$                      846

$             1,558

PROVISION FOR LOAN LOSSES

$                319

$             1,024

$             1,087

$                      454

$                655

ALLOWANCE FOR LOAN LOSS SUMMARY

Balance at the beginning of period

$           15,124

$           15,073

$           14,575

$                 14,967

$           15,870

Provision

319

1,024

1,087

454

655

Net charge-offs

(820)

(973)

(589)

(846)

(1,558)

Balance at the end of period

$           14,623

$           15,124

$           15,073

$                 14,575

$           14,967

(1)

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.

(2)

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 to its book value per share.

(3)

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 end of the accounting period.

(4)

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 asset balance.

MIDDLEBURG FINANCIAL CORPORATION

Average Balances, Income and Expenses, Yields and Rates

Three months ended December 31,

2011

2010

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate  (2)

Balance

Expense

Rate  (3)

(Dollars in thousands)

Assets :

Securities:

  Taxable

$    253,949

$         1,786

2.79%

$    201,278

$         1,569

3.09%

  Tax-exempt (1)

59,921

918

6.08%

58,396

910

6.18%

      Total securities

$    313,870

$         2,704

3.42%

$    259,674

$         2,479

3.79%

      Total loans (3)

759,962

10,014

5.23%

724,063

9,886

5.42%

Interest bearing deposits in

     other financial institutions

36,256

20

0.22%

44,715

32

0.28%

      Total earning assets

$ 1,110,088

$       12,738

4.55%

$ 1,028,452

$       12,397

4.78%

Less: allowances for credit losses

(15,007)

(15,207)

Total nonearning assets

79,471

97,522

Total assets

$ 1,174,552

$ 1,110,767

Liabilities:

Interest-bearing deposits:

   Checking

$    291,332

$            377

0.51%

$    286,407

$            544

0.75%

   Regular savings

101,178

116

0.45%

84,372

181

0.85%

   Money market savings

59,621

60

0.40%

57,661

105

0.72%

   Time deposits:

      $100,000 and over

138,170

588

1.69%

150,217

790

2.09%

      Under $100,000

185,710

799

1.71%

185,238

1,001

2.14%

      Total interest-bearing deposits

$    776,011

$         1,940

0.99%

$    763,895

$         2,621

1.36%

Short-term borrowings

20,042

144

2.85%

14,487

148

4.05%

Securities sold under agreements

   to repurchase

34,058

84

0.98%

28,018

62

0.88%

FHLB borrowings and other debt

85,621

299

1.39%

61,437

246

1.59%

Federal funds purchased

-

-

-

54

-

0.00%

   Total interest-bearing liabilities

$    915,732

$         2,467

1.07%

$    867,891

$         3,077

1.41%

Non-interest bearing liabilities

   Demand deposits

144,181

143,492

   Other liabilities

7,334

7,432

Total liabilities

$ 1,067,247

$ 1,018,815

Non-controlling interest

2,079

3,161

Shareholders' equity

105,226

88,791

Total liabilities and shareholders'

  equity

$ 1,174,552

$ 1,110,767

Net interest income

$       10,271

$         9,320

Interest rate spread

3.48%

3.37%

Cost of Funds

0.92%

1.21%

Interest expense as a percent of

   average earning assets

0.88%

1.19%

Net interest margin

3.67%

3.60%

(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

Twelve Months Ended December 31,

2011

2010

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate  (2)

Balance

Expense

Rate  (3)

(Dollars in thousands)

Assets :

Securities:

  Taxable

$    231,893

$         6,771

2.92%

$    159,326

$         4,838

3.04%

  Tax-exempt (1)

56,793

3,580

6.30%

59,654

3,810

6.39%

      Total securities

$    288,686

$       10,351

3.59%

$    218,980

$         8,648

3.95%

      Total loans (3)

720,633

39,392

5.47%

707,135

40,547

5.73%

Interest bearing deposits in

     other financial institutions

43,469

110

0.25%

47,836

131

0.27%

      Total earning assets

$ 1,052,788

$       49,853

4.74%

$    973,951

$       49,326

5.06%

Less: allowances for credit losses

(14,835)

(11,119)

Total nonearning assets

87,410

94,005

Total assets

$ 1,125,363

$ 1,056,837

Liabilities:

Interest-bearing deposits:

   Checking

$    294,660

$         1,883

0.64%

$    283,294

$         2,294

0.81%

   Regular savings

96,725

683

0.71%

77,864

725

0.93%

   Money market savings

59,356

353

0.59%

53,894

427

0.79%

   Time deposits:

      $100,000 and over

136,526

2,419

1.77%

160,063

4,298

2.69%

      Under $100,000

172,815

3,529

2.04%

161,338

4,289

2.66%

      Total interest-bearing deposits

$    760,082

$         8,867

1.17%

$    736,453

$       12,033

1.63%

Short-term borrowings

9,555

318

3.33%

10,419

393

3.77%

Securities sold under agreements

   to repurchase

33,162

293

0.88%

25,314

205

0.81%

FHLB borrowings and other debt

81,300

1,213

1.49%

55,303

1,544

2.79%

Federal Funds Purchased

42

-

0.00%

25

-

0.00%

   Total interest-bearing liabilities

$    884,141

$       10,691

1.21%

$    827,514

$       14,175

1.71%

Non-interest bearing liabilities

   Demand Deposits

130,565

120,475

   Other liabilities

6,628

6,850

Total liabilities

$ 1,021,334

$    954,839

Non-controlling interest

2,241

2,876

Shareholders' equity

101,788

99,122

Total liabilities and shareholders'

  equity

$ 1,125,363

$ 1,056,837

Net interest income

$       39,162

$       35,151

Interest rate spread

3.53%

3.51%

Cost of Funds

1.05%

1.50%

Interest expense as a percent of

   average earning assets

1.02%

1.46%

Net interest margin

3.72%

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



RELATED LINKS

http://www.middleburgbank.com