Middleburg Financial Corporation Announces Fourth Quarter 2012 Results

Feb 01, 2013, 14:00 ET from Middleburg Financial Corporation

MIDDLEBURG, Va., Feb. 1, 2013 /PRNewswire/ -- Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.4 million or $0.20 per share for the fourth quarter of 2012.

"We are pleased to see the $1.5 million improvement in our net income compared to last year, representing a 31% increase for Middleburg Financial Corporation. Moreover, each of our three primary subsidiaries, Middleburg Bank, Middleburg Investment Group and Southern Trust Mortgage each contributed to the bottom line leading to the continued earnings improvements," commented Gary R. Shook, president and CEO of Middleburg Financial Corporation. " Our management team and employees remain focused upon improving both top line revenue as well as overall efficiency of the Company.  The trends we saw in 2012 are positive indicators of the success of these efforts."

Fourth Quarter 2012 Highlights:

  • Net income of $1.4 million or $0.20 per diluted share, compared to $1.1 million or $0.16 per diluted share for the fourth quarter of 2011, an increase of 27% when comparing calendar quarters;
  • Net interest margin of 3.42%, compared to 3.28% for the previous quarter and 3.67% for the fourth quarter of 2011;
  • Gain-on-sale fee income from mortgages increased 4% compared to the fourth quarter of 2011;
  • Total revenue of $17.5  million, a decrease of 1.7% compared to the fourth quarter of 2011;
  • Total assets of $1.2 billion, an increase of 3.7% over December 31, 2011;
  • Deposits increased by $52.0 million or 5.6% since December 31, 2011;
  • Loans held-for-investment increased by $38.1 million or 5.7% since December 31, 2011;
  • Non Accrual Loans declined 14.5% from the same period a year ago;
  • The ratio of Non Performing Assets to Total Assets was 3.05% as of December 31, 2012 compared to 3.27% on December 31, 2011;
  • Capital ratios continue to be strong: Tangible Common Equity Ratio of 8.8%, Total Risk-Based Capital Ratio of 15.4%, Tier 1 Risk-Based Capital Ratio of 14.1%, and a Tier 1 Leverage Ratio of 9.1% at December 31, 2012.

Total Revenue

Total revenue was $17.5 million in the quarter ended December 31, 2012, unchanged compared to the previous quarter and a decrease of $309,000 or 1.7% from the quarter ended December 31, 2011. Although the non interest income was lower compared to the previous quarter, this was offset by the higher net interest income. This balance between spread and fee income enables the Company to grow revenues in challenging low yield environments which have continued to pressure net interest income.

The net interest margin for the three months ended December 31, 2012 was 3.42%, compared to 3.28% for the previous quarter, and 3.67% for the quarter ended December 31, 2011, representing an increase of 14 basis points from the previous quarter and a decrease of 15 basis points compared to the quarter ended December 31, 2011.

Net interest income was $9.6 million during the three months ended December 31, 2012, which was 3.6% higher than the quarter ended September 30, 2012 and a decrease of 2.4% compared to the quarter ended December 31, 2011. The yield on average earning assets was 4.08% for the quarter ended December 31, 2012 compared to 4.03% for the previous quarter and 4.55% for the quarter ended December 31, 2011, representing an increase of 5 basis points from the previous quarter and a decrease of 47 basis points from the quarter ended December 31, 2011. Loan yields increased by 3 basis points while the yield for the securities portfolio decreased by 8 basis points from the previous quarter.  

The average annualized cost of interest bearing liabilities was 0.82% for the quarter ended December 31, 2012, compared to 0.93% in the previous quarter, and 1.07% for the quarter ended December 31, 2011, representing a decrease of 11 basis points from the previous quarter and a decrease of 25 basis points from the quarter ended December 31, 2011.  Annualized costs for interest bearing retail deposits decreased by 12 basis points from the previous quarter to 0.72% from 0.84% and decreased by 27 basis points from the same quarter last year.  The decline in the annualized cost of interest bearing retail deposits from both the previous quarter and the same quarter last year was due to reduced interest expenses broadly across deposit categories, including interest checking, savings and time deposits. Annualized costs for wholesale borrowings (excluding brokered deposits) decreased by 5 basis points to 1.47% from 1.52% from the previous quarter and increased by 8 basis points from the quarter ended December 31, 2011.  

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 0.69% for the quarter ended December 31, 2012 compared to 0.79% for the quarter ended September 30, 2012, a decrease of 10 basis points.  Cost of funds decreased 23 basis points compared to the quarter ended December 31, 2011.

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 decreased by $337,000 or 4.1% when comparing the quarter ended December 31, 2012 to the previous quarter and increased by $96,000 or 1.2% compared to the quarter ended December 31, 2011. Gains on mortgage loan sales decreased by 3.8% when comparing the quarter ended December 31, 2012 to the previous quarter and increased by 3.9% when compared to the quarter ended December 31, 2011.  Gains on mortgage loan sales included in the accompanying statements of income are presented net of originator commissions incurred to originate the loans.  

Southern Trust Mortgage closed $249.2 million in mortgage loans during the quarter ended December 31, 2012 compared to $251.2 million closed during the previous quarter, and $212.2 million closed during the quarter ended December 31, 2011, unchanged compared to the previous quarter and an increase of 17.4% when comparing the same calendar quarters. 

The revenues and expenses of Southern Trust Mortgage for the three month periods ended December 31, 2012 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 sheets as "Non-controlling interest in consolidated subsidiary" and the earnings or loss attributable to the non-controlling interest is reported on the Company's statements of income as "Net (income) / loss attributable to non-controlling interest."

Total revenue generated by our wealth management group, Middleburg Investment Group ("MIG") was $1.0 million for the quarter ended December 31, 2012 compared to $1.2 million in the previous quarter and $1.1 million in the quarter ended December 31, 2011. Middleburg Investment Group is comprised of Middleburg Trust Company, a wholly owned subsidiary of the Company and Middleburg Investment Services, which is a division of Middleburg Bank.  Fee income is based primarily upon the market value of the accounts under administration. Total consolidated assets under administration by MIG were at $1.5 billion at December 31, 2012, an increase of 8% relative to December 31, 2011.

Mr. Shook went on to say, " It is certainly worth noting the increase in the bottom line for Middleburg Investment Group looking at 2012 over 2011.  MIG provided $538,000 to the Company, which constitutes a 670% increase.  We attribute these changes to continued growth in assets under our care and the synergies available from greater efficiencies in the operating structure. With approximately $1.5 Billion now under our care we look to MIG for greater contributions to Middleburg Financial Corporation going forward."

Net securities losses were $7,000 during the quarter ended December 31, 2012 compared to gains of $164,000 during the previous quarter and gains of $197,000 during the quarter ended December 31, 2011.

Non-Interest Expense

Total non-interest expense in the fourth quarter of 2012 was unchanged compared to the previous quarter and decreased by $2.5 million or 15.3% compared to the quarter ended December 31, 2011.  

Salaries and employee benefit expenses increased by $1 million or 13.8% when comparing the fourth quarter of 2012 to the previous quarter. Salaries and employee benefits decreased by $1.7 million or 17.1% versus the fourth quarter of 2011.  The increase in salaries and employee benefit expenses were related to accrual of incentive compensation and staffing increases at the mortgage company.

Expenses related to Other Real Estate Owned ("OREO") decreased by $1.45 million when comparing the fourth quarter of 2012 to the previous quarter and decreased by $870,000 versus the quarter ended December 31, 2011.

Advertising expense was unchanged during the quarter and increased by $123,000 or 24.0% from the quarter ended December 31, 2011. Advertising expense for the full year 2012 was $2.0 million compared to $1.4 million during 2011, an increase of 45.4%. The increase in advertising expense was primarily related to our mortgage banking activities.

The Company's efficiency ratio was 76.5% for the fourth quarter of 2012, compared to an efficiency ratio of 83.6% for the fourth quarter of 2011.  The efficiency ratio is not a measurement under accounting principles generally accepted in the United States.  The Company calculates its efficiency ratio by dividing non interest expense (adjusted for amortization of intangibles, other real estate expenses, and non-recurring one-time charges) 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 in calculating tax equivalent amounts is 34%. The Company calculates and reviews this ratio as a means of evaluating operational efficiency.  Prior to March 31, 2012, the Company did not exclude amortization of intangibles and other real estate expenses from total non-interest expense.  The efficiency ratios for the periods ended December 31, 2011 and prior and included in tables in this release have been restated for consistent presentation.

Asset Quality and Provision for Loan Losses

The provision for loan losses in the quarter ended December 31, 2012 was $1.3 million compared to a provision of $635,000 in the previous quarter and a provision of $319,000 in the quarter ended December 31, 2011. The increase in provision in the fourth quarter of 2012 was related to  the loan growth during the quarter and due to increased reserves for certain existing problem loans that had experienced further credit deterioration during the quarter.

The Allowance for Loan and Lease Losses (ALLL) was $14.3 million representing 2.02% of loans held for investment at December 31, 2012 and $14.6 million representing 2.18% of loans held for investment at December 31, 2011.  The decrease in the ALLL balance as a percentage of loans held for investment occurred primarily as a result of an increase in the balance of loans held for investment and the net result of loans charged off during the period versus the provision for loan losses during the period.  Loans held for investment increased approximately $38.1 million from December 31, 2011 to December 31, 2012.

Loans that were delinquent for more than 90 days and still accruing were $1.0 million as of December 31, 2012 compared to $860,000 as of September 30, 2012, and $1.2 million as of December 31, 2011, representing an increase of 21.4%. compared to the previous quarter and a 15.3% decrease compared to the quarter ended December 31, 2011.

Non-accrual loans were $21.7 million at the end of the fourth quarter compared to $22.7 million as of September 30, 2012 and $25.3 million at December 31, 2011, representing a decrease of 4.4% during the fourth quarter of 2012 and a decrease of 14.6% since December 31, 2011. Troubled debt restructurings that were performing as agreed were $5.1 million at the end of the fourth quarter, compared to $4.3 million for the quarter ended September 30, 2012, representing an increase of 19.3% during the quarter. Other Real Estate Owned (OREO) was $9.9 million as of December 31, 2012 compared to $11.9 million as of September 30, 2012, representing a decrease of 16.8% during the fourth quarter. Total non-performing assets were $37.8 million or 3.0% of total assets at December 31, 2012, compared to $39.8 million or 3.2% of total assets as of September 30, 2012 and $38.9 million or 3.3% of total assets.

The net loan charge-offs during the fourth quarter of 2012 were $911,000 compared to charge-offs of $1.7 million for the previous quarter and $820,000 in net loan charge-offs for the quarter ended December 31, 2011.

Total Consolidated Assets

Total assets at December 31, 2012 were $1.2 billion, unchanged from September 30, 2012 and an increase of 3.7% from December 31, 2011.

Total loans held for investment increased by $17.1 million or 2.5% in the fourth quarter of 2012 from the end of the third quarter.  Loans held for investment increased by $38.1 million or 5.7% from December 31, 2011.  The securities portfolio (excluding restricted stock) increased by $11.0 million or 3.6% in the fourth quarter relative to the previous quarter and increased by $11.2 million or 3.6% from December 31, 2011. Balances of mortgages held for sale decreased by $10.4 million or 11.2% at December 31, 2012 compared to the previous quarter end balance.   Cash balances and deposits at other banks decreased by 23.9% at the end of the fourth quarter of 2012 compared to the previous quarter end and increased by $3.1 million or 6.1% from the balances at December 31, 2011.   

Deposits and Other Borrowings

Total deposits decreased by $2.5 million or 0.3% from September 30, 2012 to December 31, 2012 and increased by $52.0 million or 5.6% from December 31, 2011.  Brokered deposits, including CDARS program funds, were $55.8 million at December 31, 2012, down 19.9% from September 30, 2012. FHLB advances were $77.9 million at December 31, 2012, lower by $5 million or 6.9% compared to September 30, 2012.   

Equity and Capital

Shareholders' equity attributable to Middleburg Financial Corporation shareholders at December  31, 2012 was $113.9 million, compared to $112.5 million as of September 30, 2012 and $105.9 million at December 31, 2011.  Retained earnings at December 31, 2012 were $46.2 million compared to $45.2 million at September 30, 2012 and $41.2 million at December 31, 2011. The book value of the Company's common stock at December 31, 2012 was $16.15 per share versus $15.96 per share at September 30, 2012.

The Company's total risk-based capital ratio continued to increase to 15.4% as of December 31, 2012 from 15.2% at September 30, 2012 and 14.7% at December 31, 2011.  The Tier 1 risk-based capital ratio also increased from 13.5% at December 31, 2011 to 14.1% at December 31, 2012 and the Tier 1 Leverage Ratio increased to 9.1% from 8.8% at 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, 2012

(1)

MFC

Regulatory

Excess

Minimum

MFC

over

Requirement

Ratios

Minimum

Tier 1 Leverage Ratio

4.0%

9.1%

5.1%

Tier 1 Risk-Based Capital Ratio

4.0%

14.1%

10.1%

Total Risk-Based Capital Ratio

8.0%

15.4%

7.4%

(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, 2011, 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,

2012

2012

2011

ASSETS

  Cash and due from banks

$

7,139

$

8,550

$

6,163

  Interest-bearing deposits with other institutions

47,276

62,973

45,107

                           Total cash and cash equivalents

54,415

71,523

51,270

  Securities available for sale

319,457

308,374

308,242

  Loans held for sale

82,114

92,501

92,514

  Restricted securities, at cost

6,990

6,765

7,117

  Loans receivable, net of allowance for loan losses   of $14,311 at Dec. 31, 2012, $13,941 at Sept. 30, 2012, and $14,623 at Dec.31, 2011

695,166

678,423

656,770

  Premises and equipment, net

20,587

20,618

21,306

  Goodwill and identified intangibles

6,017

6,060

6,189

  Other real estate owned, net of valuation allowance of $1,707 at Dec. 31, 2012, $3,138 at Sept. 30, 2012, and   $1,522 at Dec. 31, 2011

 

9,929

11,933

8,535

  Prepaid federal deposit insurance

3,015

3,266

3,993

  Accrued interest receivable and other assets

39,091

36,498

36,924

    TOTAL ASSETS

$

1,236,781

$

1,235,961

$

1,192,860

LIABILITIES

  Deposits:

               Non-interest-bearing demand deposits

$

167,137

$

176,522

$

143,398

               Savings and interest-bearing demand deposits

522,740

512,780

460,576

                Time deposits

292,023

295,145

325,895

                     Total deposits

981,900

984,447

929,869

Securities sold under agreements to repurchase

33,975

32,767

31,686

Short-term borrowings

11,873

17,657

28,331

FHLB borrowings

77,912

72,912

82,912

Subordinated notes

5,155

5,155

5,155

Accrued interest payable and other liabilities

8,844

7,590

6,894

Commitments and contingent liabilities

-

-

-

                             TOTAL LIABILITIES

1,119,659

1,120,528

1,084,847

SHAREHOLDERS' EQUITY

Common stock ($2.50 par value; 20,000,000 shares authorized, 7,052,554, 7,052,554 and 6,996,932 issued and outstanding at

Dec. 31, 2012, Sept.30, 2012, and December 31, 2011, respectively)

 

17,357

17,357

17,331

Capital surplus

43,869

43,746

43,498

Retained earnings

46,235

45,168

41,157

Accumulated other comprehensive income 

6,467

6,264

3,926

Total Middleburg Financial Corporation shareholders' equity

113,928

112,535

105,912

Non-controlling interest in consolidated subsidiary

3,194

2,898

2,101

TOTAL SHAREHOLDERS' EQUITY

117,122

115,433

108,013

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,236,781

$

1,235,961

$

1,192,860

MIDDLEBURG FINANCIAL CORPORATION 

Consolidated Statements of Income

(In thousands, except for per share data)

Unaudited 

Unaudited 

For the year

For the three months

ended December 31,

ended December 31,

2012

2011

2012

2011

INTEREST AND DIVIDEND INCOME

Interest and fees on loans

$          37,895

$         39,392

$          9,330

$      10,014

Interest and dividends on securities available for sale

Taxable 

6,408

6,627

1,432

1,750

Tax-exempt

2,403

2,363

604

606

Dividends

193

144

58

36

Interest on deposits in banks and federal funds sold

124

110

36

20

    Total interest and dividend income

47,023

48,636

11,460

12,426

INTEREST EXPENSE

Interest on deposits

6,916

8,867

1,449

1,940

Interest on securities sold under agreements to 

  repurchase

332

293

82

84

Interest on short-term borrowings

392

318

81

144

Interest on FHLB borrowings and other debt

1,184

1,213

295

299

    Total interest expense

8,824

10,691

1,907

2,467

NET INTEREST INCOME

38,199

37,945

9,553

9,959

Provision for loan losses

3,438

2,884

1,281

319

NET INTEREST INCOME AFTER PROVISION

FOR LOAN LOSSES

34,761

35,061

8,272

9,640

NONINTEREST INCOME

Service charges on deposit accounts

2,197

2,095

572

542

Trust services income

3,751

3,636

923

911

Gains on loans held for sale

21,014

17,992

5,926

5,706

Gains (losses) on securities available for sale, net

445

460

(7)

197

Total other-than-temporary impairment losses

(46)

(27)

-

6

Portion of loss recognized in other 

  comprehensive income

46

2

-

(9)

Net other than temporary impairment losses

-

(25)

-

(3)

Commissions on investment sales

518

755

129

203

Fees on mortgages held for sale

186

333

43

8

Other service charges, commissions and fees

541

452

150

105

Bank-owned life insurance

459

486

96

101

Other operating income

343

226

149

115

    Total noninterest income

29,454

26,410

7,981

7,885

NONINTEREST EXPENSE

Salaries and employees' benefits

30,417

33,821

8,278

9,984

Net occupancy and equipment expense

7,050

6,748

1,785

1,732

Advertising

2,034

1,399

635

512

Computer operations

1,572

1,501

471

428

Other real estate owned

2,721

2,564

55

925

Other taxes

813

812

202

205

Federal deposit insurance expense

1,050

1,260

269

251

Other operating expenses

8,602

7,354

2,103

2,244

    Total noninterest expense

54,259

55,459

13,798

16,281

Income before income taxes

9,956

6,012

2,455

1,244

Income tax expense

1,966

1,350

387

278

NET INCOME

7,990

4,662

2,068

966

Net (income) loss attributable to non-

  controlling interest

(1,504)

298

(647)

170

Net income attributable to Middleburg

  Financial Corporation

$            6,486

$           4,960

$          1,421

$        1,136

Earnings per share:

Basic

$             0.92

$             0.71

$           0.20

$          0.16

Diluted

$             0.92

$             0.71

$           0.20

$          0.16

Dividends per common share

$             0.20

$             0.20

$           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, 2012

Sep. 30, 2012

June 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Interest and Dividend Income

  Interest and fees on loans

$           9,330

$           9,189

$       9,594

$           9,782

$           9,839

  Interest and dividends on securities available for sale

     Taxable 

1,432

1,537

1,704

1,735

1,750

     Tax Exempt

604

596

596

607

606

     Dividends

58

46

45

44

36

  Interest on deposits in banks and federal funds sold

36

39

25

24

20

      Total interest and dividend income

$         11,460

$         11,407

$     11,964

$         12,192

$         12,251

Interest Expense

  Interest on deposits

$           1,449

$           1,728

$       1,846

$           1,893

$           1,940

  Interest on securities sold under agreements to repurchase

82

83

84

83

84

  Interest on short-term borrowings

81

74

89

148

144

  Interest on FHLB borrowings and other debt

295

305

287

297

299

      Total interest expense

$           1,907

$           2,190

$       2,306

$           2,421

$           2,467

      Net interest income

$           9,553

$           9,217

$       9,658

$           9,771

$           9,784

Provision for loan losses

1,281

635

730

792

319

      Net interest income after provision for loan losses

 

$           8,272

 

$           8,582

 

$       8,928

 

$          8,979

 

$          9,465

Non-Interest Income

 Trust services income

$              923

$              928

$          979

$              921

$              911

 Service charges on deposit accounts

572

557

538

530

542

 Net gains (losses) on securities available for sale (1)

(7)

164

148

140

197

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

-

-

(36)

(10)

6

   Portion of (gain) loss recognized in other comprehensive income

-

-

36

10

(9)

 Net other-than-temporary impairment loss

-

-

-

-

(3)

 Commissions on investment sales (1)

129

117

125

147

101

 Bank owned life insurance

96

118

123

122

101

 Gains on loans held for sale

5,926

6,161

5,075

3,852

4,469

 Fees on mortgages held for sale

43

37

64

42

8

 Other operating income

299

236

119

230

220

       Total non-interest income

$           7,981

$           8,318

$       7,171

$           5,984

$           6,546

Non-Interest Expense

  Salaries and employee benefits (2)

$           8,278

$           7,276

$       7,506

$           7,357

$           8,470

  Net occupancy and equipment expense

1,785

1,732

1,755

1,778

1,732

  Other taxes

202

203

205

203

205

  Advertising

635

652

447

300

512

  Computer operations

471

322

394

385

428

  Other real estate owned 

55

1,506

874

286

925

  Federal deposit insurance expense

269

262

261

258

251

  Other operating expenses

2,103

1,883

1,869

2,747

2,244

       Total non-interest expense

$         13,798

$         13,836

$     13,311

$         13,314

$         14,767

       Income before income taxes

$           2,455

$           3,064

$       2,788

$           1,649

$           1,244

       Income tax expense

387

565

598

416

278

       Net income

$           2,068

$           2,499

$       2,190

$           1,233

$              966

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

(647)

(785)

(421)

349

170

       Net income attributable to Middleburg Financial Corporation

$           1,421

$           1,714

$       1,769

$           1,582

$           1,136

Net income per common share, basic

$             0.20

$             0.24

$         0.25

$             0.23

$             0.16

Net income per common share, diluted

$             0.20

$             0.24

$         0.25

$             0.23

$             0.16

Dividends per common share

$             0.05

$             0.05

$         0.05

$             0.05

$             0.05

(1)     As of March 31, 2012, amounts presented are net of commissions paid to generate these revenue sources.  Prior periods have been restated to conform to this presentation.

(2)     As of March 31, 2012, salaries and employee benefit expenses exclude commissions paid on mortgage loan originations and investment sales.  These commissions are netted against their respective revenue amounts in the statements of income.  Prior periods have been restated to reflect this presentation.

 

MIDDLEBURG FINANCIAL CORPORATION

KEY STATISTICS

(Unaudited. Dollars in thousands except per share data)

For the Three Months Ended

Dec 31, 2012

Sep 30, 2012

Jun 30, 2012

 Mar 31, 2012

Dec 31, 2011

Net income

$      1,421

$      1,714

$      1,769

$      1,582

$      1,136

Earnings per share, basic

$       0.20

$       0.24

$       0.25

$       0.23

$       0.16

Earnings per share, diluted

$       0.20

$       0.24

$       0.25

$       0.23

$       0.16

Dividend per share

$       0.05

$       0.05

$       0.05

$       0.05

$       0.05

Return on average total assets - Year to Date

0.54%

0.56%

0.57%

0.54%

0.44%

Return on average total equity - Year to Date

5.86%

6.18%

6.21%

5.95%

4.87%

Dividend payout ratio

24.82%

20.53%

19.87%

22.11%

30.80%

Non-interest  revenue to total revenue (1)

45.54%

46.94%

41.97%

36.47%

38.27%

Net interest margin (2)

3.42%

3.28%

3.57%

3.69%

3.67%

Yield on average earning assets

4.08%

4.03%

4.40%

4.56%

4.55%

Cost of average interest-bearing liabilities

0.82%

0.93%

1.00%

1.06%

1.07%

Net interest spread

3.26%

3.10%

3.40%

3.50%

3.48%

Non-interest income to average assets(3)

2.62%

2.66%

2.35%

1.93%

2.10%

Non-interest expense to average assets(3)

4.53%

4.52%

4.47%

4.50%

5.03%

Efficiency ratio - QTD (Tax Equiv)  (4)

76.51%

69.27%

72.68%

77.24%

83.64%

(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 non taxable interest income due to the mix in its investment and loan portfolios, 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. Excludes securities gains and losses including OTTI adjustments.

(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 (adjusted for amortization of intangibles, other real estate expenses, and non-recurring one-time charges) 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 in calculating tax equivalent amounts is 34%. The Company calculates and reviews this ratio as a means of evaluating operational efficiency.  Prior to March 31, 2012, the Company did not exclude amortization of intangibles and other real estate expenses from total non-interest expense.  The efficiency ratios for the periods ended December 31, 2011 and prior have been restated for consistency of presentation purposes.

 

MIDDLEBURG FINANCIAL CORPORATION

SELECTED FINANCIAL DATA BY QUARTER

(Unaudited. Dollars in thousands except per share data)

Dec. 31, 2012

Sep. 30, 2012

June 30, 2012

 Mar. 31, 2012

Dec. 31, 2011

BALANCE SHEET RATIOS

Loans to deposits (Including HFS)

80.62%

79.73%

77.30%

80.21%

82.15%

Portfolio loans to deposits

72.26%

70.33%

70.33%

71.69%

72.20%

Average interest-earning assets to  average-interest bearing liabilities

 

124.17%

 

123.02%

 

121.73%

 

120.99%

121.22%

PER SHARE DATA 

Dividends

$               0.05

$               0.05

$               0.05

$               0.05

$               0.05

Book value (MFC Shareholders)

$             16.15

$             15.96

$             15.57

$             15.40

$             15.13

Tangible book value (3)

$             15.30

$             15.10

$             14.71

$             14.52

$             14.24

SHARE PRICE DATA 

Closing price

$             17.66

$             17.76

$             17.00

$             15.71

$             14.25

Diluted earnings multiple  (1)

22.08

18.50

17.00

17.08

22.27

Book value multiple(2)

1.09

1.11

1.09

1.02

0.94

COMMON STOCK DATA

Outstanding shares at end of period

7,052,554

7,052,554

7,052,554

7,005,315

6,996,932

Weighted average shares O/S Basic  - QTD

7,052,554

7,036,536

7,030,639

6,994,858

6,996,932

Weighted average shares O/S, diluted - QTD

7,070,072

7,051,860

7,042,111

7,000,169

6,998,019

CAPITAL RATIOS  

Capital to Assets - Common shareholders

9.21%

9.10%

9.02%

8.97%

8.88%

Capital to Assets - with Noncontrolling Interest

9.47%

9.34%

9.19%

9.11%

9.05%

Tangible common equity ratio (4)

8.77%

8.66%

8.56%

8.50%

8.40%

Leverage ratio

9.10%

8.92%

8.99%

8.89%

8.81%

Tier 1 risk based capital ratio

14.09%

13.98%

13.66%

13.57%

13.46%

Total risk based capital ratio

15.35%

15.23%

14.92%

14.83%

14.72%

CREDIT QUALITY

Net charge-offs to average total loans

0.12%

0.22%

0.08%

0.07%

0.11%

Total non-performing loans to total portfolio loans

3.92%

4.02%

3.57%

3.88%

4.53%

Total non-performing assets to total assets

3.05%

3.22%

3.10%

3.21%

3.27%

Non-accrual loans to:

      total portfolio loans

3.05%

3.28%

2.74%

3.26%

3.78%

      total assets

1.75%

1.84%

1.54%

1.85%

2.12%

Allowance for loan losses to:

      total portfolio loans

2.02%

2.01%

2.18%

2.18%

2.18%

      non-performing assets

37.89%

35.05%

39.56%

38.53%

37.53%

      non-accrual loans

66.06%

61.46%

79.61%

66.80%

57.69%

NON-PERFORMING ASSETS:

    Loans delinquent over 90 days and still accruing

$             1,044

$                860

$             1,372

$                167

$             1,233

    Non-accrual loans    

21,664

22,683

18,802

22,247

25,346

    Restructured loans (Not in non accrual)

5,132

4,302

4,334

4,056

3,853

    Other real estate owned and repossessed assets

9,929

11,933

13,335

12,095

8,535

Total non-performing assets 

$           37,769

$           39,778

$           37,843

$           38,565

$           38,967

NET LOAN CHARGE-OFFS:

    Loans charged off (QTD)

$             1,060

$             1,817

$                694

$                700

$                893

    Recoveries (QTD)

(149)

(154)

(72)

(146)

(73)

Net charge-offs  (QTD)

$                911

$             1,663

$                622

$                554

$                820

PROVISION FOR LOAN LOSSES 

$             1,281

$                635

$                730

$                792

$                319

ALLOWANCE FOR LOAN LOSS SUMMARY

Balance at the beginning of period

$           13,941

$           14,969

$           14,861

$           14,623

$           15,124

Provision

1,281

635

730

792

319

Net charge-offs

(911)

(1,663)

(622)

(554)

(820)

Balance at the end of period

$           14,311

$           13,941

$           14,969

$           14,861

$           14,623

(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,

2012

2011

 Average 

 Income/ 

Yield/

 Average 

 Income/ 

Yield/

 Balance 

 Expense 

Rate (2)

 Balance 

 Expense 

Rate (2)

(Dollars in thousands)

Assets :

Securities:

   Taxable

$    260,039

$         1,490

2.28%

$    253,949

$         1,786

2.79%

   Tax-exempt (1)

63,839

915

5.70%

59,921

918

6.08%

       Total securities

$    323,878

$         2,405

2.95%

$    313,870

$         2,704

3.42%

Loans:

   Taxable

$    767,248

$         9,325

4.84%

$    759,962

$       10,013

5.23%

   Tax-exempt  (1)

537

8

5.93%

-

-

-

       Total loans (3)

$    767,785

$         9,333

4.84%

$    759,962

$       10,013

5.23%

Interest bearing deposits in other financial institutions

 

56,262

 

36

 

0.25%

 

36,256

 

21

       Total earning assets

$ 1,147,925

$       11,774

4.08%

$ 1,110,088

$       12,738

4.55%

Less: allowances for credit losses

(14,112)

(15,007)

Total nonearning assets

84,132

79,471

Total assets

$ 1,217,945

$ 1,174,552

Liabilities:

Interest-bearing deposits:

    Checking

$    335,174

$            255

0.30%

$    291,332

$            377

0.51%

    Regular savings

105,625

60

0.23%

101,178

116

0.45%

    Money market savings

72,503

48

0.26%

59,621

60

0.40%

    Time deposits:

       $100,000 and over

147,214

533

1.44%

138,170

588

1.69%

Under $100,000      

142,305

553

1.55%

185,710

799

1.71%

       Total interest-bearing deposits

$    802,821

$         1,449

0.72%

$    776,011

$         1,940

0.99%

Short-term borrowings

7,326

81

4.40%

20,042

144

2.85%

Securities sold under agreements

    to repurchase

34,563

82

0.94%

34,058

84

0.98%

FHLB borrowings and other debt

79,752

295

1.47%

85,621

299

1.39%

    Total interest-bearing liabilities

$    924,462

$         1,907

0.82%

$    915,732

$         2,467

1.07%

Non-interest bearing liabilities

    Demand deposits

169,313

144,181

    Other liabilities

6,341

7,334

Total liabilities

$ 1,100,116

$ 1,067,247

Non-controlling interest

3,792

2,079

Shareholders' equity

114,037

105,226

Total liabilities and shareholders'

   equity

$ 1,217,945

$ 1,174,552

Net interest income

$         9,867

$       10,271

Interest rate spread

3.26%

3.48%

Cost of Funds

0.69%

0.92%

Interest expense as a percent of average earning assets

 

0.66%

 

0.88%

Net interest margin

3.42%

3.67%

(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 366 day year.

(3) Total average loans include loans on non-accrual status.

 

MIDDLEBURG FINANCIAL CORPORATION

Average Balances, Income and Expenses, Yields and Rates

 Year Ended December 31, 

2012

2011

 Average 

 Income/ 

Yield/

 Average 

 Income/ 

Yield/

 Balance 

 Expense 

Rate (2)

 Balance 

 Expense 

Rate (2)

(Dollars in thousands)

Assets :

Securities:

   Taxable

$    262,991

$         6,601

2.51%

$    231,893

$         6,771

2.92%

   Tax-exempt (1)

62,363

3,642

5.84%

56,793

3,580

6.30%

       Total securities

$    325,354

$       10,243

3.15%

$    288,686

$       10,351

3.59%

Loans:

   Taxable

$    755,790

$       37,890

5.01%

$    720,633

$       39,392

5.47%

   Tax-exempt  (1)

135

8

5.93%

-

-

0.00%

       Total loans (3)

$    755,925

$       37,898

5.01%

$    720,633

$       39,392

5.47%

Interest bearing deposits in

      other financial institutions

54,237

124

0.23%

43,469

110

0.25%

       Total earning assets

$ 1,135,516

$       48,265

4.25%

$ 1,052,788

$       49,853

4.74%

Less: allowances for credit losses

(14,830)

(14,835)

Total nonearning assets

84,279

87,410

Total assets

$ 1,204,965

$ 1,125,363

Liabilities:

Interest-bearing deposits:

    Checking

$    322,715

$         1,271

0.39%

$    294,660

$         1,883

0.64%

    Regular savings

105,768

350

0.33%

96,725

683

0.71%