2014

Middleburg Financial Corporation Announces Fourth Quarter 2011 Results

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



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