Middleburg Financial Corporation Announces Second Quarter 2011 Results

02 Aug, 2011, 14:00 ET from Middleburg Financial Corporation

MIDDLEBURG, Va., Aug. 2, 2011 /PRNewswire/ -- Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.2 million for the quarter ending June 30, 2011 representing an increase of 66% over the same quarter in 2010.

"The positive trends experienced by the Company in the first quarter of 2011 have continued into the second quarter.  We achieved growth in both loans and deposits, an improved net interest margin, and a decline in our ratio of non performing assets to total assets during the quarter," commented Gary R. Shook, president and chief executive officer.  He continued, "While our year over year quarterly earnings growth of 66% is certainly gratifying, we still face uncertainty on the problem loan front as well as with the regulatory direction of the banking industry in general. We will continue to focus our efforts on increasing profitability and expanding offerings in our existing corporate footprint.  Additionally, we are pleased to have received approval from the regulators for a full service banking office in Richmond, Virginia.  The office will be shared with Middleburg Trust Company, a wholly owned subsidiary of the Company located in Richmond."

Second Quarter 2011 Highlights:

  • Net income of $1.2 million or $0.17 per diluted share, up 66% compared to second quarter of 2010;
  • Net interest margin of 3.78% compared to margin of 3.67% for second quarter of 2010;
  • Total revenue of $15.4 million, up 6.4%  compared to second quarter of 2010;
  • Loan growth of 2.4% during the quarter;
  • Total assets of $1.1 billion, an increase of 5.6% from March 31, 2011;
  • Deposits increased $43.0 million or 5.0% during the quarter;
  • Provision for loan losses for quarter decreased by 15.8% compared to second quarter of 2010; and
  • Capital ratios continue to be strong: Tangible Common Equity Ratio of 8.47%, Total Risk-Based Capital Ratio of 14.2%, Tier I Risk-Based Capital Ratio of 12.9%, and a Tier 1 Leverage Ratio of 9.1% at June 30, 2011.

Total Revenue

Total revenue was $15.4 million in the quarter ended June 30, 2011 compared to $14.0 million in the previous quarter and $14.5 million in the quarter ended June 30, 2010, representing an increase of 10.0% compared to the previous linked quarter and an increase of 6.4% compared to the calendar quarter ended June 30, 2010.    

Net interest income was $9.4 million during the three months ended June 30, 2011, which was 4.0% higher than the quarter ended March 31, 2011 and an increase of 11.4% compared to the quarter ended June 30, 2010. The average yield on earning assets was 4.86% for the quarter ended June 30, 2011 compared to 4.91% for the previous quarter and 5.22% for the quarter ended June 30, 2010, representing a decrease of 5 basis points from the previous quarter and a decrease of 36 basis points from the quarter ended June 30, 2010.   Average earning assets increased 3.5% compared to the previous quarter. Loan growth and an increase in investment securities drove the increase in earning assets during the second quarter. The decrease in yields on earning assets from the previous quarter reflected a 12 basis point decrease in yields for the loan portfolio partially offset by an increase of 28 basis points in the yield of the securities portfolio.      

The average cost of interest bearing liabilities was 1.26% for the quarter ended June 30, 2011, compared to 1.30% in the previous quarter, and 1.82% for the quarter ended June 30, 2010, representing a decrease of 4 basis points from the previous quarter and a decrease of 56 basis points from the quarter ended June 30, 2010.  Costs for wholesale borrowings decreased by 11 basis points during the quarter, while costs for retail deposits decreased by 3 basis points during the same period.  The decline in the cost of retail deposits was driven by a 2 basis point decline in the cost of interest checking deposits. The cost of time deposits decreased by 7 basis points during the quarter as maturing CD's re-priced at lower rates.  Cost of funds is calculated by dividing annualized total interest expense by the sum of average interest bearing liabilities and average demand deposits. Cost of funds was 1.11% for the quarter ended June 30, 2011 compared to 1.14% for the quarter ended March 31, 2011, a decrease of 3 basis points from the previous quarter

The net interest margin for the three months ended June 30, 2011 was 3.78%, compared to 3.80% for the previous quarter, and 3.67% for the quarter ended June 30, 2010, representing a decrease of 2 basis points from the previous quarter and in increase of 11 basis points compared to the quarter ended June 30, 2010.  

The Company's net interest margin is not a measurement under accounting principles generally accepted in the United States, but it is a common measure used by the financial services industry to determine how profitably earning assets are funded. The Company's net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets.  Tax equivalent net interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The tax rate utilized is 34%. Details on the calculation of the net interest margin are included in the "Key Statistics" table.

Non-interest income increased by $1.1 million or 22.4% when comparing the quarter ended June 30, 2011 to the previous quarter, and declined by $33,000 or 0.5% compared to the calendar quarter ended June 30, 2010. The primary reason for the higher non-interest income in the second quarter of 2011 relative to the prior quarter was an increase in gain-on-sale revenues from the Company's mortgage operations.

Southern Trust Mortgage originated $153.0 million in mortgage loans during the quarter ended June 30, 2011 compared to $136.4 million originated during the previous quarter, an increase of 12.2%, and $194.0 million originated during the quarter ended June 30, 2010, a  decrease of 21.1% when comparing calendar quarters.  Gains on mortgage loan sales increased by 38.2% when comparing the quarter ended June 30, 2011 to the previous quarter.  Gains on mortgage loan sales increased by 2.4% when comparing the quarter ended June 30, 2011 to the quarter ended June 30, 2010.  The increase in gain-on-sale revenue in the second quarter of 2011 was driven by an increase in margins during the second quarter.

The revenues and expenses of Southern Trust Mortgage for the three month period ended June 30, 2011 is reflected in the Company's financial statements on a consolidated basis following generally accepted accounting principles in the United States.  The outstanding equity interest not held by the Company is reported on the Company's balance sheet as "Non-controlling interest in consolidated subsidiary" and the earnings or loss attributable to the non-controlling interest is reported on the Company's statement of income as "Net (income) / loss attributable to non-controlling interest."

Trust and investment advisory service fees earned by Middleburg Trust Company ("MTC") increased by 13.4% when comparing the quarter ended June 30, 2011 to the previous quarter, and increased by 12.3% compared to the quarter ended June 30, 2010.  Trust and investment advisory fees are based primarily upon the market value of the accounts under administration. Total consolidated assets under administration by MTC were at $1.4 billion at June 30, 2011, an increase of 16.7% relative to March 31, 2011 and an increase of 27.2% relative to June 30, 2010.  

Net securities gains were $87,000 during the quarter ended June 30, 2011 compared to net securities gains of $35,000 during the previous quarter and net securities losses of $37,000 during the quarter ended June 30, 2010.

Non-Interest Expense

Non-interest expense in the second quarter of 2011 increased by 5.9% compared to the previous quarter and increased by 5.6% compared to the quarter ended June 30, 2010.  

Salaries and employee benefit expenses increased by $497,000 or 6.8% when comparing the second quarter of 2011 to the previous quarter, primarily due to an increase in commission expenses for mortgage loan officers. Expenses related to Other Real Estate Owned (OREO) increased by $262,000 or 76.2% when comparing the second quarter of 2011 to the previous quarter. Advertising expenses increased by $129,000 or 82.6% during the quarter as a result of expenses for bank-wide campaigns related to CD's and loans and advertising at the mortgage company.  Other expenses, which include expenses such as supplies, travel and entertainment expenses fell by $338,000 or 19.8% when comparing the quarter ended June 30, 2011 to the previous quarter.  

The Company's efficiency ratio which is represented by the ratio of non-interest expense to the sum of tax equivalent net interest income and non-interest income, excluding securities gains and losses, was 82.79% for the second quarter of 2011, compared to an efficiency ratio of 84.96% in the quarter ending March 31, 2011.  

Asset Quality and Provision for Loan Losses

The provision for loan losses in the quarter ended June 30, 2011 was $1,087,000 compared to a $454,000 provision in the  previous quarter and a provision of $1,291,000 in the quarter ended June 30, 2010, representing an increase of 139.4% from the previous quarter and a decrease of 15.8% from the quarter ended June 30, 2010.

The Allowance for Loan and Lease Losses (ALLL) at June 30, 2011 was $15.1 million representing 2.22% of total portfolio loans outstanding versus 2.20% at March 31, 2011 and 1.54% of total portfolio loans at June 30, 2010.

Loans that were delinquent for more than 90 days and still accruing were $3.2 million as of June 30, 2011 compared to $6.6 million as of March 31, 2011, representing a decrease of 50.8% during the quarter. The primary reason for the decrease in delinquent loans in the second quarter was because a large credit that was more than 90 days delinquent in the first quarter was moved to non-accrual status in the second quarter.

Non-accrual loans were $32.3 million at the end of the second quarter compared to $27.6 million as of March 31, 2011, representing an increase of 16.9% during the second quarter. The primary reason for the increase in non-accrual loans in the second quarter was because a large credit that was more than 90 days delinquent in the first quarter was moved to non-accrual status in the second quarter. Restructured loans were $112,000 at the end of the second quarter compared to $1.2 million as of March 31, 2011, representing a decrease of 91% during the quarter. The primary reason for the decrease in restructured loans in the second quarter was because certain loans that were classified as restructured as of March 31, 2011 were paid off in the second quarter. Other Real Estate Owned (OREO) was $6.2 million as of June 30, 2011 compared to $7.8 million as of March 31, 2011, representing a decrease of 20.5% during the second quarter. Non-performing assets were $41.9 million or 3.6% of total assets at June 30, 2011, compared to $43.3 million or 4.0% of total assets as of March 31, 2011.  

Total Consolidated Assets

Total assets at June 30, 2011 were $1.1 billion, an increase of $60.4 million or 5.5% compared to total assets at March 31, 2011.  

Growth in total portfolio loans was $15.8 million or 2.4% for the second quarter. The securities portfolio increased by $35.0 million or 13.5% in the second quarter relative to the previous quarter. Balances of mortgages held for sale increased by $14.3 million or 41.5% in the second quarter of 2011.  Cash balances and deposits at other banks decreased by 4.4% in the second quarter of 2011.  

Deposits and Other Borrowings

Total deposits increased by $43.0 million or 5.0% in the second quarter.  Brokered deposits, including CDARS program funds, were $92.8 million at June 30, 2011, unchanged from March 31, 2011. FHLB advances were $77.9 million at June 30, 2011, up $5.0 million from March 31, 2011, or an increase of 6.8%.    

Equity and Capital

Total shareholders' equity at June 30, 2011 was $102.7 million, compared to shareholders' equity of $98.4 million as of March 31, 2011. Retained earnings at June 30, 2011 were $39.3 million compared to $38.5 million at March 31, 2011. The book value of the Company's common stock at June 30, 2011 was $14.68 per share.

The Company's total risk-based capital ratio increased from 14.1% at December 31, 2010 to 14.2% at June 30, 2011, the Tier 1 risk-based capital ratio increased from 12.8% to 12.9% and the Tier 1 Leverage Ratio increased from 9.0% to 9.1% during the same period.  

Caution about Forward Looking Statements

Certain information contained in this discussion may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements relate to the Company's future operations and are generally identified by phrases such as "the Company expects," "the Company believes" or words of similar import.  Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010, and other filings with the Securities and Exchange Commission.  

About Middleburg Financial Corporation

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

MIDDLEBURG FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except for per share data)

Unaudited

Unaudited

For the Six Months

For the Three Months

Ended June 30,

Ended June 30,

2011

2010

2011

2010

INTEREST INCOME

Interest and fees on loans

$          19,466

$         20,829

$          9,731

$      10,384

Interest and dividends on securities available for sale

Taxable

3,150

2,028

1,751

1,090

Tax-exempt

1,165

1,293

604

600

Dividends

72

43

36

22

Interest on deposits in banks and federal funds sold

60

63

33

28

   Total interest and dividend income

23,913

24,256

12,155

12,124

INTEREST EXPENSE

Interest on deposits

4,640

6,251

2,332

3,077

Interest on securities sold under agreements to

 repurchase

125

80

69

60

Interest on short-term borrowings

116

111

53

67

Interest on long-term debt

602

926

306

488

   Total interest expense

5,483

7,368

2,760

3,692

NET INTEREST INCOME

18,430

16,888

9,395

8,432

Provision for loan losses

1,541

2,220

1,087

1,291

NET INTEREST INCOME AFTER PROVISION

FOR LOAN LOSSES

16,889

14,668

8,308

7,141

NONINTEREST INCOME

Service charges on deposit accounts

1,015

909

526

468

Trust services income

1,850

1,690

983

875

Gains on loans held for sale

6,785

6,474

3,938

3,844

Gains (losses) on securities available for sale, net

122

469

87

(37)

Total other-than-temporary impairment losses

(17)

(300)

-

(98)

Portion of (gain) loss recognized in other

 comprehensive income

16

52

-

1

   Net impairment losses

(1)

(248)

-

(97)

Commissions on investment sales

365

311

185

167

Fees on mortgages held for sale

241

834

87

476

Other service charges, commissions and fees

249

256

134

143

Bank-owned life insurance

262

255

139

130

Other operating income (losses)

105

179

(55)

88

   Total noninterest income

10,993

11,129

6,024

6,057

NONINTEREST EXPENSE

Salaries and employees' benefits

15,129

14,381

7,813

7,457

Net occupancy and equipment expense

3,316

3,094

1,640

1,490

Advertising

441

428

285

248

Computer operations

708

668

343

340

Other real estate owned

950

505

606

295

Other taxes

402

397

205

201

Federal deposit insurance expense

765

1,153

358

352

Other operating expenses

3,478

3,583

1,703

1,883

   Total noninterest expense

25,189

24,209

12,953

12,266

Income before income taxes

2,693

1,588

1,379

932

Income tax expense

618

162

301

75

NET INCOME

2,075

1,426

1,078

857

Net (income) loss attributable to non-

 controlling interest

351

112

121

(133)

Net income attributable to Middleburg

 Financial Corporation

$            2,426

$           1,538

$          1,199

$           724

Earnings per share:

Basic

$             0.35

$             0.22

$           0.17

$          0.10

Diluted

$             0.35

$             0.22

$           0.17

$          0.10

Dividends per common share

$             0.10

$             0.20

$           0.05

$          0.10

MIDDLEBURG FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

(Unaudited)

June 30,

March 31,

December 31,

2011

2011

2010

ASSETS

Cash and due from banks

$

19,598

$

22,060

$

21,955

Interest-bearing deposits with other institutions

38,988

39,237

42,769

    Total cash and cash equivalents

58,586

61,297

64,724

Securities available for sale

293,393

258,412

252,042

Loans held for sale

48,689

34,407

59,361

Restricted securities, at cost

6,932

6,746

6,296

Loans receivable, net of allowance for loan losses of $15,073 at June 30,

 2011, $14,575 at March 31, 2011, and $14,967 at December 31, 2010

663,242

647,985

644,345

Premises and equipment, net

21,393

20,908

21,112

Goodwill and identified intangibles

6,286

6,317

6,360

Other real estate owned, net of valuation allowance of $1,006 at June 30,

 2011, $1,187 at March 31, 2011, and $1,486 at December 31, 2010

6,255

7,825

8,394

Prepaid federal deposit insurance

4,454

4,791

5,154

Accrued interest receivable and other assets

35,437

35,601

36,779

   TOTAL ASSETS

$

1,144,667

$

1,084,289

$

1,104,567

LIABILITIES

Deposits:

     Non-interest-bearing demand deposits

$

131,191

$

122,888

$

130,488

     Savings and interest-bearing demand deposits

460,518

448,065

436,718

     Time deposits

316,776

294,502

323,100

  Total deposits

908,485

865,455

890,306

Securities sold under agreements to repurchase

35,210

27,963

25,562

Short-term borrowings

5,692

4,244

13,320

Long-term debt

77,912

72,912

62,912

Subordinated notes

5,155

5,155

5,155

Accrued interest payable and other liabilities

7,405

7,353

7,319

Commitments and contingent liabilities

-

-

-

   TOTAL LIABILITIES

1,039,859

983,082

1,004,574

SHAREHOLDERS' EQUITY

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

7,000,824 issued; 6,996,932, 6,942,315, and 6,925,437 outstanding at

June 30, 2011, March 31, 2011, and December 31, 2010, respectively)

17,331

17,314

17,314

Capital surplus

43,150

43,105

43,058

Retained earnings

39,322

38,473

37,593

Accumulated other comprehensive income (loss)

2,908

(480)

(1,012)

   Total Middleburg Financial Corporation shareholders' equity

102,711

98,412

96,953

Non-controlling interest in consolidated subsidiary

2,097

2,795

3,040

   TOTAL SHAREHOLDERS' EQUITY

104,808

101,207

99,993

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,144,667

$

1,084,289

$

1,104,567

QUARTERLY SUMMARY INCOME STATEMENTS

MIDDLEBURG FINANCIAL CORPORATION

(Unaudited. Dollars in thousands except per share data)

For the Three Months Ended

Jun. 30, 2011

Mar. 31, 2011

Dec. 31, 2010

Sep. 30, 2010

Jun. 30, 2010

Interest and Dividend Income

 Interest and fees on loans

$            9,731

$            9,735

$            9,887

$           9,832

$          10,384

 Interest on securities available for sale

    Taxable

1,751

1,399

1,539

1,166

1,090

    Exempt from federal income taxes

604

561

600

621

600

    Dividends

36

36

30

32

22

 Interest on federal funds sold and other

33

27

32

36

28

     Total interest and dividend income

$          12,155

$          11,758

$          12,088

$         11,687

$          12,124

Interest Expense

 Interest on deposits

$            2,332

$            2,308

$            2,623

$           3,160

$            3,077

 Interest on securities sold under agreements to repurchase

69

56

61

63

60

 Interest on short-term borrowings

53

63

148

134

67

 Interest on long-term debt

306

296

246

372

488

     Total interest expense

$            2,760

$            2,723

$            3,078

$           3,729

$            3,692

     Net interest income

$            9,395

$            9,035

$            9,010

$           7,958

$            8,432

Provision for loan losses

1,087

454

655

9,130

1,291

     Net interest income (loss) after provision

      for loan losses

$            8,308

$            8,581

$            8,355

$         (1,172)

$            7,141

Other Income

Trust services income

$               983

$               867

$               838

$              807

$               875

Service charges on deposit accounts

526

489

488

487

468

Net gains (losses) on securities available for sale

87

35

109

288

(37)

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

-

(17)

(44)

(557)

(97)

  Portion of (gain) loss recognized in other comprehensive income

-

16

(85)

(169)

-

Net other-than-temporary impairment loss

-

(1)

(129)

(726)

(97)

Commissions on investment sales

185

180

169

142

167

Bank owned life insurance

139

123

112

136

130

Gain on loans held for sale

3,938

2,847

5,537

5,147

3,844

Fees on loans held for sale

87

154

570

477

476

Other service charges, commissions and fees

134

115

114

97

143

Other operating income (loss)

(55)

160

169

42

88

      Total other income

$            6,024

$            4,969

$            7,977

$           6,897

$            6,057

Other Expense

 Salaries and employee benefits

$            7,813

$            7,316

$            7,748

$           7,665

$            7,457

 Net occupancy expense of premises

1,640

1,676

1,598

1,557

1,490

 Other taxes

205

197

200

201

201

 Advertising

285

156

386

257

248

 Computer operations

343

365

316

340

340

 Other real estate owned

606

344

842

666

295

 Audits and examinations

156

126

219

96

162

 Legal fees

176

89

50

96

167

 FDIC insurance

358

407

386

368

352

 Other operating expenses

1,371

1,560

2,401

3,141

1,554

      Total other expense

$          12,953

$          12,236

$          14,146

$         14,387

$          12,266

      Income (loss) before income taxes

$            1,379

$            1,314

$            2,186

$         (8,662)

$               932

      Income tax expense (benefit)

301

317

573

(3,297)

75

      Net income (loss)

$            1,078

$               997

$            1,613

$         (5,365)

$               857

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

121

230

(51)

(423)

(133)

      Net income (loss) attributable to Middleburg Financial Corporation

$            1,199

$            1,227

$            1,562

$         (5,788)

$               724

Net income (loss) per common share, basic

$              0.17

$              0.18

$              0.23

$           (0.83)

$              0.10

Net income (loss) per common share, diluted

$              0.17

$              0.18

$              0.23

$           (0.83)

$              0.10

Dividends per common share

$              0.05

$              0.05

$              0.05

0.10

$              0.10

MIDDLEBURG FINANCIAL CORPORATION

KEY STATISTICS

(Unaudited. Dollars in thousands except per share data)

For the Three Months Ended

Jun 30, 2011

Mar 31, 2011

Dec 31, 2010

Sep 30, 2010

Jun 30, 2010

Net income (loss)

$      1,199

$          1,227

$      1,562

$    (5,788)

$         724

Earnings (loss) per share, basic

$       0.17

$            0.18

$        0.23

$      (0.83)

$        0.10

Earnings (loss) per share, diluted

$       0.17

$            0.18

$        0.23

$      (0.83)

$        0.10

Dividend per share

$       0.05

$            0.05

$        0.05

$       0.10

$        0.10

Return on average total assets - Year to Date

0.45%

0.46%

-0.25%

-2.11%

0.28%

Return on average total equity - Year to Date

4.95%

5.11%

-2.71%

-22.03%

2.85%

Dividend payout ratio

29.41%

27.78%

22.21%

NA

100.00%

Non-interest  revenue to total revenue (1)

38.72%

35.02%

39.82%

38.56%

34.05%

Net interest margin (2)

3.78%

3.80%

3.60%

3.27%

3.67%

Yield on average earning assets

4.86%

4.91%

4.78%

4.74%

5.22%

Yield on average interest-bearing liabilities

1.26%

1.30%

1.41%

1.73%

1.82%

Net interest spread

3.60%

3.61%

3.37%

3.01%

3.40%

Non-interest income to average assets (3)

2.17%

1.82%

2.88%

2.69%

2.39%

Non-interest expense to average assets (3)

4.67%

4.53%

5.09%

5.29%

4.73%

Efficiency ratio - QTD (Tax Equiv)  (4)

82.79%

84.96%

81.42%

91.77%

81.78%

(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)

Jun 30, 2011

Mar 31, 2011

Dec 31, 2010

Sep 30, 2010

Jun 30, 2010

BALANCE SHEET RATIOS

Loans to deposits (Including HFS)

80.02%

80.53%

80.72%

81.69%

83.43%

Portfolio loans to deposits

74.66%

76.56%

74.05%

73.05%

76.16%

Average interest-earning assets to

   average-interest bearing liabilities

117.42%

117.58%

118.50%

117.22%

117.69%

PER SHARE DATA

Dividends

$               0.05

$                     0.05

$               0.05

$               0.10

$            0.10

Book value (MFC Shareholders)

$             14.68

$                   14.18

$             14.02

$             14.22

$          14.84

Tangible book value (3)

$             13.78

$                   13.27

$             13.10

$             13.29

$          13.91

SHARE PRICE DATA

Closing price

$             14.94

$                   17.75

$             14.26

$             14.08

$          13.91

Diluted earnings multiple  (1)

21.97

24.65

15.50

NA

34.78

Book value multiple(2)

1.02

1.25

1.02

0.99

0.94

COMMON STOCK DATA

Outstanding shares at end of period

6,996,932

6,942,315

6,925,437

6,915,687

6,914,687

Weighted average shares O/S Basic  - QTD

6,977,503

6,940,154

6,937,801

6,934,366

6,911,744

Weighted average shares O/S, diluted - QTD

6,980,331

6,943,189

6,938,359

6,934,366

6,924,338

CAPITAL RATIOS  

Capital to Assets - Common shareholders

8.97%

9.08%

8.79%

8.85%

9.67%

Capital to Assets - with Noncontrolling Interest

9.16%

9.33%

9.05%

9.13%

9.92%

Tangible common equity ratio (4)

8.47%

8.54%

8.26%

8.32%

9.11%

Total risk based capital ratio

14.16%

14.52%

14.10%

13.54%

14.58%

Tier 1 risk based capital ratio

12.90%

13.26%

12.84%

12.29%

13.33%

Leverage ratio

9.11%

9.38%

9.04%

9.08%

10.58%

CREDIT QUALITY

Net charge-offs to average loans

0.08%

0.12%

0.22%

0.47%

0.15%

Total non-performing loans to total portfolio loans

5.26%

5.36%

4.66%

4.69%

2.81%

Total non-performing assets to total assets

3.66%

3.99%

3.54%

3.50%

2.64%

Non-accrual loans to:

     total loans

4.76%

4.17%

4.46%

4.57%

1.87%

     total assets

2.82%

2.55%

2.66%

2.69%

1.15%

Allowance for loan losses to:

     total portfolio loans

2.22%

2.20%

2.27%

2.42%

1.54%

     non-performing assets

35.97%

33.65%

38.29%

40.84%

35.98%

     non-accrual loans

46.67%

52.74%

50.93%

53.04%

82.51%

NON-PERFORMING ASSETS:

   Loans delinquent over 90 days and still accruing

$             3,242

$                   6,593

$                909

$                388

$          6,188

   Non-accrual loans    

32,298

27,638

29,385

29,923

12,211

   Restructured Loans

112

1,254

1,254

404

1,346

   Other real estate owned and repossessed assets

6,255

7,825

8,394

8,142

8,257

Total non-performing assets

$           41,907

$                 43,310

$           39,942

$           38,857

$        28,002

NET LOAN CHARGE-OFFS:

   Loans charged off

$                621

$                      933

$             1,600

$             3,351

$          1,142

   Recoveries

(32)

(87)

(42)

(16)

(56)

Net charge-offs

$                589

$                      846

$             1,558

$             3,335

$          1,086

PROVISION FOR LOAN LOSSES

$             1,087

$                      454

$                655

$             9,130

$          1,291

ALLOWANCE FOR LOAN LOSS SUMMARY

Balance at the beginning of period

$           14,575

$                 14,967

$           15,870

$           10,075

$          9,870

Provision

1,087

454

655

9,130

1,291

Net charge-offs

(589)

(846)

(1,558)

(3,335)

(1,086)

Balance at the end of period

$           15,073

$                 14,575

$           14,967

$           15,870

$        10,075

(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.

MIDDLEBURG FINANCIAL CORPORATION

Average Balances, Income and Expenses, Yields and Rates

Three months ended June 30,

2011

2010

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate  (2)

Balance

Expense

Rate  (3)

(Dollars in thousands)

Assets :

Securities:

  Taxable

$    225,332

$         1,787

3.18%

$    142,279

$         1,112

3.13%

  Tax-exempt (1)

55,400

915

6.62%

56,248

909

6.48%

      Total securities

$    280,732

$         2,702

3.86%

$    198,527

$         2,021

4.08%

Loans (3)

701,701

$         9,731

5.56%

709,042

$       10,384

5.87%

Interest bearing deposits in

     other financial institutions

47,222

32

0.27%

47,566

28

0.24%

      Total earning assets

$ 1,029,655

$       12,465

4.86%

$    955,135

$       12,433

5.22%

Less: allowances for credit losses

(14,672)

(9,956)

Total nonearning assets

94,479

92,346

Total assets

$ 1,109,462

$ 1,037,525

Liabilities:

Interest-bearing deposits:

   Checking

$    294,374

$            490

0.67%

$    286,485

$            579

0.81%

   Regular savings

96,570

205

0.85%

77,173

188

0.98%

   Money market savings

58,046

94

0.65%

51,683

107

0.83%

   Time deposits:

      $100,000 and over

139,718

633

1.82%

158,698

1,141

2.88%

      Under $100,000

167,780

910

2.17%

151,141

1,062

2.82%

      Total interest-bearing deposits

$    756,488

$         2,332

1.24%

$    725,180

$         3,077

1.70%

Short-term borrowings

5,840

53

3.64%

6,030

67

4.46%

Securities sold under agreements

   to repurchase

32,956

69

0.84%

24,977

61

0.98%

Long-term debt

81,638

306

1.50%

55,375

488

3.53%

Federal funds purchased

3

-

0.00%

35

-

0.00%

   Total interest-bearing liabilities

$    876,925

$         2,760

1.26%

$    811,597

$         3,692

1.82%

Non-interest bearing liabilities

   Demand deposits

122,380

114,953

   Other liabilities

7,863

6,328

Total liabilities

$ 1,007,168

$    932,878

Non-controlling interest

1,999

2,671

Shareholders' equity

100,295

101,976

Total liabilities and shareholders'

  equity

$ 1,109,462

$ 1,037,525

Net interest income

$         9,705

$         8,741

Interest rate spread

3.60%

3.40%

Cost of funds

1.11%

1.60%

Interest expense as a percent of

   average earning assets

1.07%

1.55%

Net interest margin

3.78%

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 365 day year.

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

MIDDLEBURG FINANCIAL CORPORATION

Average Balances, Income and Expenses, Yields and Rates

Six Months Ended June 30

2011

2010

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate  (2)

Balance

Expense

Rate  (3)

(Dollars in thousands)

Assets :

Securities:

  Taxable

$    215,085

$         3,222

3.02%

$    131,074

$         2,070

3.18%

  Tax-exempt (1)

54,691

1,765

6.51%

60,067

1,959

6.58%

      Total securities

$    269,776

$         4,987

3.73%

$    191,141

$         4,029

4.25%

Loans (3)

698,183

19,466

5.62%

694,025

20,829

6.05%

Interest bearing deposits in

     other financial institutions

44,619

60

0.27%

46,128

63

0.28%

      Total earning assets

$ 1,012,578

$       24,513

4.88%

$    931,294

$       24,921

5.40%

Less: allowances for credit losses

(14,710)

(9,532)

Total nonearning assets

94,830

91,554

Total assets

$ 1,092,698

$ 1,013,316

Liabilities:

Interest-bearing deposits:

   Checking

$    290,710

$            976

0.68%

$    283,089

$         1,180

0.84%

   Regular savings

93,129

392

0.85%

73,802

372

1.02%

   Money market savings

59,451

195

0.66%

51,321

222

0.87%

   Time deposits:

      $100,000 and over

135,205

1,238

1.85%

160,065

2,291

2.89%

      Under $100,000

168,156

1,838

2.20%

144,086

2,185

3.06%

      Total interest-bearing deposits

$    746,651

$         4,639

1.25%

$    712,363

$         6,250

1.77%

Short-term borrowings

5,789

117

4.08%

5,428

111

4.12%

Securities sold under agreements

   to repurchase

31,141

125

0.81%

23,319

81

0.70%

Long-term debt

78,205

602

1.55%

50,781

926

3.68%

Federal Funds Purchased

2

-

0.00%

23

-

0.00%

   Total interest-bearing liabilities

$    861,788

$         5,483

1.28%

$    791,914

$         7,368

1.88%

Non-interest bearing liabilities

   Demand Deposits

122,370

110,496

   Other liabilities

7,250

6,444

Total liabilities

$    991,408

$    908,854

Non-controlling interest

2,397

2,698

Shareholders' equity

98,893

101,764

Total liabilities and shareholders'

  equity

$ 1,092,698

$ 1,013,316

Net interest income

$       19,030

$       17,553

Interest rate spread

3.60%

3.52%

Cost of funds

1.12%

1.65%

Interest expense as a percent of

   average earning assets

1.09%

1.60%

Net interest margin

3.79%

3.80%

(1) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%.

(2) All yields and rates have been annualized on a 365 day year.

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

SOURCE Middleburg Financial Corporation



RELATED LINKS

http://www.middleburgbank.com