2014

Middleburg Financial Corporation Announces Fourth Quarter Results

MIDDLEBURG, Va., Feb. 3, 2011 /PRNewswire/ --

Fourth Quarter and Full Year 2010 Highlights:

  • Net income of $1.6 million for the quarter or $0.23 per diluted share;
  • Net loss of $2.7 million for the year or $0.39 per diluted share;
  • Net interest margin of 3.60% for the quarter and 3.61% for the year;
  • Total revenue of $16.9 million for the quarter, an increase of 14.3% compared to previous quarter;
  • Total assets grew by $128.1 million or 13.1% for the year;
  • Total loan growth of 0.6% in the fourth quarter; total loans increased by $15.0 million or 2.3% for the year;
  • Strong mortgage originations of $227.1 million in the fourth quarter and $782.6 million for the year;
  • Deposit growth was flat in the fourth quarter and increased by $84.6 million or 10.5% for the year;
  • Provision for loan losses for the quarter decreased by 32.0% from the quarter ended December 31, 2009; and
  • Capital ratios continue to be strong: Total Risk-Based Capital Ratio of 14.1%, Tier I Risk-Based Capital Ratio of 12.8%, and a Tier 1 Leverage Ratio of 9.0% at December 31, 2010.

Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.6 million for the quarter ending December 31, 2010 and a net loss of $2.7 million for the full year 2010.

"We are certainly gratified at posting our best quarterly net income for our shareholders since the third quarter of 2007.  In fact, our work in the third quarter of 2010 continues to yield positive returns," commented Gary R. Shook, President and CEO of Middleburg Financial Corporation.  "Our already strong capital ratios have strengthened, management's focus on greater corporate efficiency continues to show bottom line benefits, and sales of foreclosed properties at fair valuations are gaining momentum- trends we expect to see continuing as we enter the first quarter of 2011.  Additionally, the Corporation's 2011 focus on client centric revenue generation in all lines of business should allow for greater market penetration as we begin to move out of the current prolonged negative economic cycle."

Net Interest Income and Net Interest Margin

Net interest income was $9.0 million during the three months ended December 31, 2010; an increase of 13.2% compared to the quarter ended September 30, 2010 and an increase of 3.3% compared to the quarter ended December 31, 2009. Average earning assets increased by 2.3% during the quarter ended December 31, 2010. The average yield on earning assets was 4.78% for the quarter ended December 31, 2010 compared to 4.74% for the previous quarter and 6.46% for the quarter ended December 31, 2009, representing an increase of 4 basis points from the previous quarter and a decrease of 168 basis points from the quarter ended December 31, 2009.   The increase in yields on earning assets in the fourth quarter reflected an increase of 15 basis points in the yield of the securities portfolio and a 3 basis point decrease in yields for the loan portfolio.  The yield on average earning assets was 5.20% in 2010 compared to 6.06% in 2009, a decrease of 86 basis points.  The primary reasons for the decline in yields on earning assets during 2010 was loan repricing and prepayments which caused yields on loans to decrease by 111 basis points and yields on securities to decrease by 151 basis points.  

The average cost of interest bearing liabilities was 1.41% for the quarter ended December 31, 2010, compared to 1.73% in the previous quarter, and 2.16% for the quarter ended December 31, 2009, representing a decrease of 32 basis points from the previous quarter and a decrease of 75 basis points from the quarter ended December 31, 2009.  Costs for wholesale borrowings declined by 95 basis points during the quarter, while costs for retail deposits decreased by 30 basis points during the same period.  The decline in the cost of retail deposits was broad-based with a 5 basis point decline in the cost of interest checking deposits, a 1 basis point decline in the cost of savings deposits, and a 58 basis point decline in the cost of time deposits.  The average cost of interest bearing liabilities was 1.71% in 2010 compared to 2.43% in 2009, representing a decrease of 72 basis points.  The primary reasons for the decrease in the cost of interest bearing liabilities during the twelve month period were a 68 basis point decrease in the cost of interest bearing deposits and a 129 basis point decrease in the cost of long term wholesale borrowings.  Cost of funds was 1.21% for the quarter ended December 31, 2010 compared to 1.52% for the quarter ended September 30, 2010, a decrease of 31 basis points from the previous quarter.  Cost of funds was 1.50% for 2010 compared to 2.13% in 2009, representing a decrease of 63 basis points.

The net interest margin for the three months ended December 31, 2010 was 3.60%, compared to 3.27% for the previous quarter, and 3.83% for the quarter ended December 31, 2009, representing an increase of 33 basis points from the previous quarter and a decrease of 23 basis points compared to the quarter ended December 31, 2009.  The net interest margin was 3.61% in 2010 compared to 4.16% in 2009, representing a decrease of 56 basis points.

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.

Asset Quality and Provision for Loan Losses

The provision for loan losses in the quarter ended December 31, 2010 was $655,000 compared to a $967,000 provision in the quarter ended December 31, 2009, representing a decrease of 32.3%.

The Allowance for Loan and Lease Losses (ALLL) at December 31, 2010 was $15.0 million representing 2.27% of total portfolio loans outstanding versus 2.42% at September 30, 2010 and 1.43% of total portfolio loans at December 31, 2009.

Loans that were delinquent for more than 90 days and still accruing were $909,000 as of December 31, 2010 compared to $388,000 as of September 30, 2010, representing an increase 134.3% during the fourth quarter. Non accrual loans were $29.4 million at the end of the fourth quarter compared to $29.9 million at the end of the third quarter, representing a decrease of 1.7% during the fourth quarter.  The balance of restructured loans was $404,000 at the end of the fourth quarter, unchanged from the previous quarter. Other Real Estate Owned (OREO) was $8.4 million as of December 31, 2010 compared to $8.1 million as of September 30, 2010, representing an increase of 3.7% during the fourth quarter.

Non-performing assets were $39.1 million or 3.5% of total assets at December 31, 2010 compared to $38.9 million or 3.5% of total assets as of September 30, 2010. Non-performing assets increased from $18.1 million or 1.9% of total assets at December 31, 2009 to $39.1 million or 3.5% of total assets as of December 31, 2010.  The increase was primarily due to the reclassification of two loan relationships to non-accrual status during the year.  

Non-Interest Income

Non-interest income increased by $1.1 million or 15.6% when comparing the quarter ended December 31, 2010 to the previous quarter, and increased by $5 million or 24.0% compared to the quarter ended December 31, 2009, primarily due to strong growth in revenues from the Company's mortgage operations.  The strong non-interest income, primarily driven by the Company's mortgage operations, has contributed to an increase in total revenues, defined as the sum of net interest income and non-interest income, in each linked quarter of 2010.

Total revenue was $16.9 million in the quarter ended December 31, 2010 compared to $14.9 million in the previous quarter and $14.5 million in the quarter ended December 31, 2009, representing an increase of 14.3% compared to the previous linked quarter and an increase of 17.5% compared to the calendar quarter ended December 31, 2009. This increase reflects the benefits of the Company's diversified business model whereby strong non-interest income is able to supplement net interest income in periods of declining net interest margins.

Southern Trust Mortgage, the Company's majority owned subsidiary, originated $227.7 million in mortgage loans during the quarter ended December 31, 2010 compared to $217.7 million originated during the previous quarter, an increase of 4.6%, and $204.3 million originated during the quarter ended December 31, 2009, an increase of 11.4% when comparing calendar quarters.  Mortgage loans originated for the twelve months ended December 31, 2010 was $782.6 million compared to $990.0 million for the twelve months ended December 31, 2009. Gains on mortgage loan sales increased by 7.6% when comparing the quarter ended December 31, 2010 to the previous quarter.  Gains on mortgage loan sales increased by 68.6% when comparing the quarter ended December 31, 2010 to the quarter ended December 31, 2009. Additionally, fees related to mortgage loan sales increased by 19.5% when comparing the quarter ended December 31, 2010 to the previous quarter, and increased by 77.0% compared to the quarter ended December 31, 2009.  

The revenues and expenses of Southern Trust Mortgage for the three and twelve month periods ended December 31, 2010 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") and Middleburg Investment Advisors ("MIA") increased by 3.8% when comparing the quarter ended December 31, 2010 to the previous quarter, and increased by 2.7% compared to the quarter ended December 31, 2009.  On January 3, 2011, MIA became a wholly owned subsidiary of MTC.      

Trust and investment advisory fees are based primarily upon the market value of the accounts under administration.  Total consolidated assets under administration by MTC and MIA were at $1.3 billion at December 31, 2010, an increase of 14.9% relative to December 31, 2009.  MTC's assets under administration were $932.4 million at December 31, 2010 versus $771.5 million at December 31, 2009 representing an increase of 20.9%.  MIA's assets under administration were $314.7 million at December 31, 2010 versus $313.5 million at December 31, 2009 representing an increase of 0.4%.

Net securities losses were $20,000 during the quarter ended December 31, 2010 compared to net securities losses of $438,000 during the quarter ended September 30, 2010.  The net securities losses during the quarter ended December 31, 2010 included $129,000 of other than temporary impairment losses related to one trust preferred security identified as impaired under generally accepted accounting principles.

Non-Interest Expense

Non-interest expense in the fourth quarter of 2010 decreased by 1.7% compared to the previous quarter.  

Salaries and employee benefit expenses increased by $284,000 when comparing the fourth quarter of 2010 to the quarter ended September 30, 2010, primarily due to expenses related to the defined contribution plan. Expenses related to Other Real Estate Owned (OREO) increased by $176,000 when comparing the fourth quarter of 2010 to the previous quarter. Other expenses, which include expenses such as FDIC insurance premiums, supplies, travel and entertainment expenses fell by $941,000 when comparing the quarter ended December 31, 2010 to the previous quarter. Other expenses in the third quarter of 2010 were higher because of $1.4 million in write-downs in the carrying value of two branch properties.

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 81.42% for the fourth quarter of 2010, compared to an efficiency ratio of 83.48% in the quarter ending December 31, 2009. The efficiency ratio for the full year 2010 was 85.55% and reflects write-downs and restructuring charges in the third quarter of 2010.

Total Consolidated Assets

Total assets at December 31, 2010 were $1.1 billion, an increase of $128.8 million or 13.2% over December 31, 2009.

Growth in total portfolio loans was 0.6% for the fourth quarter. Total portfolio loans increased by $15.0 million or 2.3% in 2010 in a challenging lending environment characterized by weak borrower demand for new loans coupled with increased refinancing of existing credit relationships. The securities portfolio grew by $9.9 million in the fourth quarter, representing an increase of 4.0% compared to the previous quarter. The securities portfolio increased by $79.4 million or 44.3% for the entire year. Balances of mortgages held for resale declined by $18.1 million or 23.4% in the fourth quarter of 2010. Mortgages held for resale increased by $14.3 million or 31.8% for the entire year. Cash balances and deposits at other banks decreased by 6.2% in the fourth quarter of 2010.  

Deposits and Other Borrowings

Total deposits decreased by 0.7% in the fourth quarter.  Deposits increased by $84.7 million or 10.5% for the year.  Brokered deposits, including CDARS program funds, were $122.3 million at December 31, 2010, up $46.1 million or 60.1% from December 31, 2009. FHLB advances were $62.9 million at December 31, 2010, up $27.9 million from December 31, 2009, or an increase of 79.7%.    

Equity

Total shareholders' equity at December 31, 2010 was $100.1 million, compared to shareholders' equity of $103.4 million as of December 31, 2009. Retained earnings at December 31, 2010 were $37.8 million compared to $42.7 million at December 31, 2009. The book value of the Company's common stock at December 31, 2010 was $14.02 per share.  The Company's total risk-based capital ratio increased from 13.54% at September 30, 2010 to 14.10% at December 31, 2010 and the Tier 1 risk-based capital ratio increased from 12.29% to 12.84% during the same period.  The increases in the risk-based capital ratios were due primarily to a net increase in zero percent risk-weighted assets during the fourth quarter of 2010.

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, 2009, and other filings with the Securities and Exchange Commission.  

About Middleburg Financial Corporation

Middleburg Financial Corporation is headquartered in Middleburg, Virginia and has two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc. Middleburg Bank serves communities in Virginia with financial centers in Ashburn, Gainesville, Leesburg, Marshall, Middleburg, Purcellville, Reston, Warrenton and Williamsburg. Middleburg Investment Group owns Middleburg Trust Company, which is headquartered in Richmond, Virginia with offices in Middleburg, Alexandria and Williamsburg. Middleburg Financial Corporation is also the majority owner of Southern Trust Mortgage, which is based in Virginia Beach and provides mortgages through 17 offices in 11 states.

Middleburg Financial Corporation and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Data)










               Unaudited


             Unaudited


For the Twelve Months


For the Three Months


Ended December 31,


Ended December 31,


2010


2009


2010


2009

Interest and Dividend Income








 Interest and fees on loans

$       40,548


$      48,834


$      9,887


$    11,041

 Interest on securities available for sale








    Taxable

4,733


4,743


1,539


1,121

    Exempt from federal income taxes

2,514


2,944


600


696

    Dividends

105


88


30


24

 Interest on federal funds sold and other

131


137


32


42

     Total interest and dividend income

$       48,031


$      56,746


$    12,088


$    12,924

Interest Expense








 Interest on deposits

$       12,033


$      15,614


$      2,623


$      3,633

 Interest on securities sold under agreements to repurchase

205


40


61


8

 Interest on short-term borrowings

393


592


148


74

 Interest on long-term debt

1,544


2,836


246


495

     Total interest expense

$       14,175


$      19,082


$      3,078


$      4,210

     Net interest income

$       33,856


$      37,664


$      9,010


$      8,714

Provision for loan losses

12,005


4,551


655


967

     Net interest income after provision








      for loan losses

$       21,851


$      33,113


$      8,355


$      7,747

Other Income








Trust and investment advisory fee income

$         3,335


$        3,218


$         838


$         816

Service charges on deposit accounts

1,884


1,905


488


487

Net gains on securities available for sale

866


2,070


109


1,877

Total other-than-temporary impairment loss on securities

(901)


(2,224)


(44)


(1,512)

  Portion of (gain) loss recognized in other comprehensive income

(202)


1,152


(85)


-

Net other-than-temporary impairment loss

(1,103)


(1,072)


(129)


(1,512)

Commissions on investment sales

622


580


169


174

Bank owned life insurance

503


489


112


109

Gain on loans held for sale

17,158


11,860


5,537


3,283

Fees on loans held for sale

1,881


1,044


570


322

Other service charges, commissions and fees

467


507


114


107

Other operating income

390


311


169


76

      Total other income

$       26,003


$      20,912


$      7,977


$      5,739

Other Expense








 Salaries and employee benefits

$       29,794


$      28,042


$      7,748


$      6,187

 Net occupancy expense of premises

6,249


5,904


1,598


1,499

 Other taxes

798


587


200


150

 Advertising

1,071


760


386


211

 Computer operations

1,324


1,290


316


344

 Other real estate owned

2,013


3,819


842


1,656

 Audits and examinations

592


631


219


183

 Legal fees

451


481


50


131

 FDIC insurance

1,907


2,051


386


484

 Other operating expenses

8,543


5,297


2,401


1,262

      Total other expense

$       52,742


$      48,862


$    14,146


$    12,107









      Income (Loss) before income taxes

$       (4,888)


$        5,163


$      2,186


$      1,379

      Income tax expense / (benefit)

(2,562)


64


573


(5)

      Net income (loss)

$       (2,326)


$        5,099


$      1,613


$      1,384

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

(362)


(1,577)


(51)


(270)

      Net income (loss) attributable to Middleburg Financial Corporation

$       (2,688)


$        3,522


$      1,562


$      1,114

 Amortization of discount on preferred stock

-


429


-


378

 Dividend on preferred stock

-


987


-


253

      Net income (loss) available to common shareholders

$       (2,688)


$        2,106


$      1,562


$         483









Net income (loss) per common share, basic

$         (0.39)


$          0.37


$        0.23


$        0.07

Net income (loss) per common share, diluted

$         (0.39)


$          0.37


$        0.23


$        0.07

Dividends per common share

$           0.35


$          0.58


$        0.05


$        0.10



Middleburg Financial Corporation

Consolidated Balance Sheets

(In Thousands, Except for Share Data)



(Unaudited)


(Unaudited)


December 31,


September 30,


2010


2010

Assets:




Cash and due from banks

$         21,955


$          24,118

Interest-bearing deposits in banks

42,769


44,865

Securities available for sale, at fair value

252,042


242,056

Loans held for sale

59,361


77,452

Restricted securities, at cost

6,296


6,430

Loans, net of allowance for loan losses of $14,967 at

December 31, 2010




  and $15,870 at September 30, 2010

644,345


639,365

Premises and equipment, net

23,039


22,996

Goodwill and identified intangibles

6,360


6,403

Other real estate owned, net of valuation allowance of




  $1,486 at December 31, 2010 and $1,110 at

September 30, 2010

8,394


8,142

Prepaid federal deposit insurance

5,154


5,505

Accrued interest receivable and other assets

34,772


34,132





Total assets

$    1,104,487


$     1,111,464





Liabilities and Shareholders' Equity:




Liabilities:




  Deposits:




     Non-interest bearing demand deposits

$       130,488


$        124,724

     Savings and interest-bearing demand deposits

436,718


421,119

     Time deposits

323,100


351,097

Total deposits

$       890,306


$        896,940





  Securities sold under agreements to repurchase

25,562


25,416

  Short-term borrowings

13,320


21,875

  Long-term debt

62,912


52,912

  Subordinated notes

5,155


5,155

  Accrued interest and other liabilities

7,085


7,736

  Commitments and contingent liabilities

-


-

Total liabilities

$    1,004,340


$     1,010,034





Shareholders' Equity:




 Common stock, par value $2.50 share, authorized 20,000,000 shares




  issued and outstanding at December 31, 2010 - 6,925,437 shares




  issued and outstanding at September 30, 2010 - 6,915,687 shares

$         17,314


$          17,289

 Capital surplus

43,058


42,930

 Retained earnings

37,799


36,378

 Accumulated other comprehensive loss, net

(1,064)


1,729

Total Middleburg Financial Corporation shareholders' equity

$         97,107


$          98,326





 Non-controlling interest in consolidated subsidiary

3,040


3,104

Total shareholders' equity

$       100,147


$        101,430





Total liabilities and shareholders' equity

$    1,104,487


$     1,111,464







Middleburg Financial Corporation

Consolidated Balance Sheets

(In Thousands, Except for Share Data)



(Unaudited)




December 31,


December 31,


2010


2009

Assets:




Cash and due from banks

$            21,955


$                18,365

Interest-bearing deposits in banks

42,769


24,845

Securities available for sale, at fair value

252,042


172,699

Loans held for sale

59,361


45,010

Restricted securities, at cost

6,296


6,225

Loans, net of allowance for loan losses of $14,967 in 2010




  and $9,185 in 2009

644,345


635,094

Premises and equipment, net

23,039


23,506

Goodwill and identified intangibles

6,360


6,531

Other real estate owned, net of valuation allowance of




  $1,486 in 2010 and $1,121 in 2009.

8,394


6,511

Prepaid federal deposit insurance

5,154


6,923

Accrued interest receivable and other assets

34,772


30,665





Total assets

$       1,104,487


$              976,374





Liabilities and Shareholders' Equity:




Liabilities:




  Deposits:




     Non-interest bearing demand deposits

$          130,488


$              106,459

     Savings and interest-bearing demand deposits

436,718


397,720

     Time deposits

323,100


301,469

Total deposits

$          890,306


$              805,648





  Securities sold under agreements to repurchase

25,562


17,199

  Short-term borrowings

13,320


3,538

  Long-term debt

62,912


35,000

  Subordinated notes

5,155


5,155

  Accrued interest and other liabilities

7,085


6,475

  Commitments and contingent liabilities

-


-

Total liabilities

$       1,004,340


$              873,015





Shareholders' Equity:




 Common stock, par value $2.50 share, authorized 20,000,000 shares




  issued and outstanding at December 31, 2010 - 6,925,437 shares




  issued and outstanding at December 31, 2009 - 6,909,293 shares

$            17,314


$                17,273

 Capital surplus

43,058


42,807

 Retained earnings

37,799


42,706

 Accumulated other comprehensive loss, net

(1,064)


(2,474)

Total Middleburg Financial Corporation shareholders' equity

$            97,107


$              100,312





 Non-controlling interest in consolidated subsidiary

3,040


3,047

Total shareholders' equity

$          100,147


$              103,359





Total liabilities and shareholders' equity

$       1,104,487


$              976,374







QUARTERLY SUMMARY INCOME STATEMENTS










MIDDLEBURG FINANCIAL CORPORATION










(Unaudited. Dollars in thousands except per share data)







For the Three Months Ended


Dec. 31, 2010


Sep. 30, 2010


Jun. 30, 2010


Mar. 31, 2010


Dec. 31, 2009

Interest and Dividend Income










 Interest and fees on loans

$            9,887


$            9,832


$         10,384


$          10,445


$          11,041

 Interest on securities available for sale










    Taxable

1,539


1,166


1,090


938


1,121

    Exempt from federal income taxes

600


621


600


693


696

    Dividends

30


32


22


21


24

 Interest on federal funds sold and other

32


36


28


35


42

     Total interest and dividend income

$          12,088


$          11,687


$         12,124


$          12,132


$          12,924

Interest Expense










 Interest on deposits

$            2,623


$            3,160


$           3,077


$            3,174


$            3,633

 Interest on securities sold under agreements to repurchase

61


63


60


20


8

 Interest on short-term borrowings

148


134


67


44


74

 Interest on long-term debt

246


372


488


438


495

     Total interest expense

$            3,078


$            3,729


$           3,692


$            3,676


$            4,210

     Net interest income

$            9,010


$            7,958


$           8,432


$            8,456


$            8,714

Provision for loan losses

655


9,130


1,291


929


967

     Net interest income after provision










      for loan losses

$            8,355


$          (1,172)


$           7,141


$            7,527


$            7,747

Other Income










Trust and investment advisory fee income

$               838


$               807


$              875


$               815


$               816

Service charges on deposit accounts

488


487


468


441


487

Net gains (losses) on securities available for sale

109


288


(37)


506


1,877

Total other-than-temporary impairment loss on securities

(44)


(557)


(97)


(151)


(1,512)

  Portion of (gain) loss recognized in other comprehensive income

(85)


(169)


-


-


-

Net other-than-temporary impairment loss

(129)


(726)


(97)


(151)


(1,512)

Commissions on investment sales

169


142


167


144


174

Bank owned life insurance

112


136


130


125


109

Gain on loans held for sale

5,537


5,147


3,844


2,630


3,283

Fees on loans held for sale

570


477


476


358


322

Other service charges, commissions and fees

114


97


143


113


107

Other operating income

169


42


88


91


76

      Total other income

$            7,977


$            6,897


$           6,057


$            5,072


$            5,739

Other Expense










 Salaries and employee benefits

$            7,748


$            7,464


$           7,457


$            6,924


$            6,187

 Net occupancy expense of premises

1,598


1,557


1,490


1,604


1,499

 Other taxes

200


201


201


196


150

 Advertising

386


257


248


180


211

 Computer operations

316


340


340


328


344

 Other real estate owned

842


666


295


210


1,656

 Audits and examinations

219


96


162


115


183

 Legal fees

50


96


167


139


131

 FDIC insurance

386


368


352


801


484

 Other operating expenses

2,401


3,342


1,554


1,446


1,262

      Total other expense

$          14,146


$          14,387


$         12,266


$          11,943


$          12,107











      Income (Loss) before income taxes

$            2,186


$          (8,662)


$              932


$               656


$            1,379

      Income tax expense / (benefit)

573


(3,297)


75


87


(5)

      Net income (loss)

$            1,613


$          (5,365)


$              857


$               569


$            1,384

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

(51)


(423)


(133)


245


(270)

      Net income attributable to Middleburg Financial Corporation

$            1,562


$          (5,788)


$              724


$               814


$            1,114

 Amortization of discount on preferred stock

-


-


-


-


378

 Dividend on preferred stock

-


-


-


-


253

      Net income (loss) available to common shareholders

$            1,562


$          (5,788)


$              724


$               814


$               483











Net income (loss) per common share, basic

$              0.23


$            (0.83)


$             0.10


$              0.12


$              0.07

Net income (loss) per common share, diluted

$              0.23


$            (0.83)


$             0.10


$              0.12


$              0.07

Dividends per common share

$              0.05


0.10


$             0.10


$              0.10


$              0.10













MIDDLEBURG FINANCIAL CORPORATION











KEY STATISTICS











(Unaudited. Dollars in thousands except per share data)


For the Three Months Ended




Dec 31, 2010


Sep 30, 2010


Jun 30, 2010


Mar 31, 2010


Dec 31, 2009














Net Income / (Loss)


$          1,562


$          (5,788)


$             724


$             814


$        1,115


Earnings per share, basic


$            0.23


$            (0.83)


$            0.10


$            0.12


$          0.07


Earnings per share, diluted


$            0.23


$            (0.83)


$            0.10


$            0.12


$          0.07


Dividend per share


$            0.05


$              0.10


$            0.10


$            0.10


$          0.10














Return on average total assets - Year to Date


-0.25%


-2.11%


0.28%


0.33%


0.35%


Return on average total equity - Year to Date


-2.71%


-22.03%


2.85%


3.25%


2.82%


Dividend payout ratio


22.21%


NA


100.00%


84.90%


142.86%


Non-Interest income as a percent of total revenue (1)


39.82%


38.56%


34.05%


28.00%


29.37%














Net interest margin (2)


3.60%


3.27%


3.67%


3.94%


3.83%


Yield on average earning assets (2)


4.78%


4.74%


5.22%


5.58%


5.61%


Yield on average interest-bearing liabilities


1.41%


1.73%


1.82%


1.93%


2.16%


Net interest spread


3.37%


3.01%


3.40%


3.65%


3.44%














Non-interest income to average assets (3)


2.88%


2.69%


2.39%


1.93%


2.10%


Non-interest expense to average assets (3)


5.09%


5.29%


4.73%


4.90%


4.74%














Efficiency ratio (4)


81.42%


91.77%


81.78%


87.85%


83.48%













(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.

(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.  The increase from the second quarter 2010 to the third quarter 2010 reflects the restructuring charges and write downs of Company property during the quarter as previously discussed in this release.




MIDDLEBURG FINANCIAL CORPORATION











SELECTED FINANCIAL DATA BY QUARTER











(Unaudited. Dollars in thousands except per share data)


Dec 31, 2010


Sep 30, 2010


Jun 30, 2010


Mar 31, 2010


Dec 31, 2009

BALANCE SHEET RATIOS












Net loans to deposits


72.37%


71.28%


74.99%


78.32%


78.83%


Average interest-earning assets to












   average-interest bearing liabilities


118.50%


117.22%


117.69%


117.51%


121.36%

PER SHARE DATA












Dividends


$            0.05


$            0.10


$          0.10


$            0.10


$          0.10


Book value


$          14.02


$          14.22


$        14.84


$          14.65


$        14.52


Tangible book value  (3)


$          13.10


$          13.29


$        13.91


$          13.71


$        13.57

SHARE PRICE DATA












Closing price


$          14.26


$          14.08


$        13.91


$          15.06


$        14.59


Diluted earnings multiple (1)


15.50


NA


34.78


31.38


52.11


Book value multiple (2)


1.02


0.99


0.94


1.03


1.00

COMMON STOCK DATA












Outstanding shares at end of period


6,925,437


6,915,687


6,914,687


6,909,293


6,909,293


Weighted average shares O/S Basic  - QTD


6,937,801


6,934,366


6,911,744


6,909,293


5,635,687


Weighted average shares O/S, diluted - QTD


6,938,359


6,934,366


6,924,338


6,912,173


6,906,429

CAPITAL RATIOS  












Capital to Assets - Common shareholders


8.79%


8.85%


9.67%


9.94%


10.27%


Tangible common equity ratio (4)


8.26%


8.32%


9.11%


9.36%


9.67%


Total risk based capital ratio


13.91%


13.54%


14.58%


15.02%


15.06%


Tier 1 risk based capital ratio


12.84%


12.29%


13.33%


13.77%


13.86%


Leverage ratio


14.10%


9.08%


10.58%


10.71%


10.40%

CREDIT QUALITY












Net charge-offs to average loans


0.22%


0.47%


0.15%


0.04%


0.18%


Total non-performing loans to total loans


4.66%


4.69%


2.81%


2.00%


1.80%


Total non-performing assets to total assets


3.54%


3.50%


2.64%


1.88%


1.86%


Non-accrual loans to:












     total loans


4.46%


4.57%


1.87%


1.46%


1.34%


     total assets


2.66%


2.69%


1.15%


0.94%


0.88%


Allowance for loan losses to:












     total loans


2.27%


2.42%


1.54%


1.50%


1.43%


    non-performing assets


38.29%


40.84%


35.98%


51.43%


50.68%


    non-accrual loans


50.93%


53.04%


82.51%


102.67%


106.70%

NON-PERFORMING ASSETS:












   Loans delinquent over 90 days and still accruing


$             909


$             388


$        6,188


$          3,544


$           908


   Non-accrual loans    


29,385


29,923


12,211


9,613


8,608


   Restructured Loans


404


404


1,346


-


2,096


   Other real estate owned and repossessed assets


8,394


8,142


8,257


6,034


6,511


Total non-performing assets


$        39,092


$        38,857


$      28,002


$        19,191


$      18,123

NET LOAN CHARGE-OFFS:












   Loans charged off


$          1,600


$          3,351


$        1,142


$             291


$        1,057


   (Recoveries)


(42)


(16)


(56)


(47)


(48)


Net charge-offs


$          1,558


$          3,335


$        1,086


$             244


$        1,009

PROVISION FOR LOAN LOSSES


$             655


$          9,130


$        1,291


$             929


$           967

ALLOWANCE FOR LOAN LOSS SUMMARY












Balance at the beginning of period


$        15,870


$        10,075


$        9,870


$          9,185


$        9,227


Provision


655


9,130


1,291


929


967


Net charge-offs


(1,558)


(3,335)


(1,086)


(244)


(1,009)


Balance at the end of period


$        14,967


$        15,870


$      10,075


$          9,870


$        9,185













(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.   In quarters where the Company incurs net losses, the diluted earnings multiple is not meaningful and is shown as "NA".

(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.





Average Balances, Income and Expenses, Yields and Rates


Three  Months Ended December 31,




2010






2009




Average


Income/


Yield/


Average


Income/


Yield/


Balance


Expense


Rate  (2)


Balance


Expense


Rate  (2)


(Dollars in thousands)

Assets :












Securities:












  Taxable

$    201,278


$         1,570


3.09%


$    105,503


$         1,145


4.31%

  Tax-exempt (1)

58,396


910


6.18%


63,902


1,055


6.55%

      Total securities

$    259,674


$         2,480


3.79%


$    169,405


$         2,200


5.15%

Loans












  Taxable

$    724,063


$         9,886


5.42%


$    694,603


$       11,041


7.09%

      Total loans

$    724,063


$         9,886


5.42%


$    694,603


$       11,041


7.09%

Interest bearing deposits in












     other financial institutions

44,715


32


0.28%


75,089


42


0.22%

      Total earning assets

$ 1,028,452


$       12,398


4.78%


$    939,097


$       13,283


6.46%

Less: allowances for credit losses

(15,207)






(9,177)





Total nonearning assets

97,522






86,153





Total assets

$ 1,110,767






$ 1,016,073

















Liabilities:












Interest-bearing deposits:












   Checking

$    286,407


$            544


0.75%


$    270,939


$            666


0.98%

   Regular savings

84,372


181


0.85%


64,959


183


1.12%

   Money market savings

57,661


105


0.72%


50,796


137


1.07%

   Time deposits:












      $100,000 and over

150,217


791


2.09%


140,727


1,105


3.12%

      Under $100,000

185,238


1,001


2.14%


166,898


1,542


3.67%

      Total interest-bearing deposits

$    763,895


$         2,623


1.36%


$    694,319


$         3,633


2.08%













Short-term borrowings

14,487


148


4.05%


12,662


74


2.32%

Securities sold under agreements












   to repurchase

28,018


61


0.88%


20,259


8


0.16%

Long-term debt

61,437


246


1.59%


46,590


495


4.22%

Federal funds purchased

54


-


0.00%


-


-



   Total interest-bearing liabilities

$    867,891


$         3,078


1.41%


$    773,830


$         4,210


2.16%

Non-interest bearing liabilities












   Demand deposits

143,492






107,160





   Other liabilities

7,432






10,341





Total liabilities

$ 1,018,815






$    891,331





Non-controlling interest

3,161






3,020





Shareholders' equity

88,791






121,722





Total liabilities and shareholders'












  equity

$ 1,110,767






$ 1,016,073

















Net interest income



$         9,320






$         9,073















Interest rate spread





3.37%






3.44%

Interest expense as a percent of












   average earning assets





1.19%






1.78%

Net interest margin





3.60%






3.83%

Return on average assets





0.56%






0.44%

Return on average equity





6.98%






3.63%













(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.







Average Balances, Income and Expenses, Yields and Rates


Twelve Months Ended December 31,




2010






2009




Average


Income/


Yield/


Average


Income/


Yield/


Balance


Expense


Rate  (2)


Balance


Expense


Rate  (2)


(Dollars in thousands)

Assets :












Securities:












  Taxable

$    159,326


$         4,838


3.04%


$    105,765


$         4,830


4.57%

  Tax-exempt (1)

59,654


3,810


6.39%


64,305


4,461


6.94%

      Total securities

$    218,980


$         8,648


3.95%


$    170,070


$         9,291


5.46%

Loans












  Taxable

$    707,135


$       40,548


5.73%


$    710,745


$       48,834


6.87%

  Tax-exempt  (1)

-


-


0.00%


1


-


0.00%

      Total loans

$    707,135


$       40,548


5.73%


$    710,746


$       48,834


6.87%

Federal funds sold

-


-


0.00%


20,607


42


0.20%

Interest bearing deposits in












     other financial institutions

47,836


131


0.27%


38,485


95


0.25%

      Total earning assets

$    973,951


$       49,327


5.06%


$    939,908


$       58,262


6.20%

Less: allowances for credit losses

(11,119)






(9,160)





Total nonearning assets

94,005






83,698





Total assets

$ 1,056,837






$ 1,014,446

















Liabilities:












Interest-bearing deposits:












   Checking

$    283,294


$         2,294


0.81%


$    251,781


$         3,091


1.23%

   Regular savings

77,864


725


0.93%


57,669


738


1.28%

   Money market savings

53,894


427


0.79%


42,985


473


1.10%

   Time deposits:












      $100,000 and over

160,063


4,298


2.69%


135,149


4,342


3.21%

      Under $100,000

161,338


4,289


2.66%


188,623


6,969


3.69%

      Total interest-bearing deposits

$    736,453


$       12,033


1.63%


$    676,207


$       15,614


2.31%













Short-term borrowings

10,419


393


3.77%


19,425


592


3.05%

Securities sold under agreements












   to repurchase

25,314


205


0.81%


21,122


40


0.19%

Long-term debt

55,303


1,544


2.79%


69,407


2,836


4.08%

Federal funds purchased

25


-


0.00%


-


-


0.00%

   Total interest-bearing liabilities

$    827,514


$       14,175


1.71%


$    786,161


$       19,082


2.43%

Non-interest bearing liabilities












   Demand deposits

120,475






107,936





   Other liabilities

6,850






10,537





Total liabilities

$    954,839






$    904,634





Non-controlling interest

2,876






2,774





Shareholders' equity

99,122






107,038





Total liabilities and shareholders'












  equity

$ 1,056,837






$ 1,014,446

















Net interest income



$       35,152






$       39,180















Interest rate spread





3.35%






3.77%

Interest expense as a percent of












   average earning assets





1.46%






2.03%

Net interest margin





3.61%






4.17%

Return on average assets





-0.25%






0.35%

Return on average equity





-2.71%






3.21%













(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.




SOURCE Middleburg Financial Corporation



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