2014

Middleburg Financial Corporation Announces Second Quarter 2013 Results

MIDDLEBURG, Va., Aug. 2, 2013 /PRNewswire/ -- Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $2.1 million or $0.29 per diluted share for the second quarter of 2013.

"The second quarter showed the results of our priorities which are loan growth, problem assets reduction and expense control, commented Gary R. Shook, president and Chief Executive Officer of Middleburg Financial Corporation.  "All of those factors contributed to our best quarterly net income since 2006.  With that said, we understand that we still have more to do as we endeavor to achieve best in class performance.  We are pleased with the strength of our loan pipeline and the growth in our wealth management operations.  Mortgage lending rebounded from the first quarter, amid strong purchase loan originations." Mr. Shook continued, "We are pleased to see economic momentum beginning to return to our primary Loudoun and Northern Virginia markets coupled with loan and deposit growth in the Richmond marketplace.  Problem assets are still somewhat elevated; however, we are making progress in reducing levels of problem loans and OREO."

Second Quarter 2013 Highlights:

  • Net income of $2.1 million or $0.29 per diluted share, compared to $1.8 million or $0.25 per diluted share for the second quarter of 2012, an increase of 18.3% when comparing calendar quarters;
  • Net interest margin of 3.40%, compared to 3.45% for the previous quarter and 3.57% for the second quarter of 2012;
  • Total revenue of $16.4  million, an increase of 6.9% compared to the first quarter of 2013;
  • Total assets of $1.2 billion, unchanged compared to March 31, 2013;
  • Deposits decreased by $4.2 million or 0.4% since March 31, 2013;
  • Loans held-for-investment decreased by $7.6 million or 1.0% since March 31, 2013, primarily due to elevated levels of payoffs;
  • The ratio of Non Performing Assets to Total Assets was 2.80% as of June 30, 2013 compared to 2.77% at March 31, 2013 and 3.10% at June 30, 2012;
  • 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 14.2%, and a Tier 1 Leverage Ratio of 9.3% at June 30, 2013.

Total Revenue

Total revenue which is comprised of Net Interest Income (before a provision for loan losses) and Non Interest Income was $16.4 million in the quarter ended June 30, 2013, representing an increase of 6.9% compared to the previous quarter and a decrease of $408,000 or 2.4% from the quarter ended June 30, 2012.

Net interest income was $9.3 million during the three months ended June 30, 2013, which was 1.0% lower than the quarter ended March 31, 2013 and a decrease of 3.3% compared to the quarter ended June 30, 2012. The yield on average earning assets was 3.97% for the quarter ended June 30, 2013 compared to 4.08% for the previous quarter and 4.40% for the quarter ended June 30, 2012, representing a decrease of 11 basis points from the previous quarter and a decrease of 43 basis points from the quarter ended June 30, 2012. Loan yields decreased by 16 basis points while the yield for the securities portfolio decreased by 12 basis points from the previous quarter.  The primary reasons for the decline in loan yields were elevated levels of loan payoffs and lower yields on new loans.

The average annualized cost of interest bearing liabilities was 0.72% for the quarter ended June 30, 2013, compared to 0.78% in the previous quarter, and 1.00% for the quarter ended June 30, 2012, representing a decrease of 6 basis points from the previous quarter and a decrease of 28 basis points from the quarter ended June 30, 2012.  Annualized costs for interest bearing retail deposits decreased by 5 basis points from the previous quarter to 0.64% from 0.69% and decreased by 29 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. An annualized cost for wholesale borrowings (excluding brokered deposits) was 1.33%, a decrease of 14 basis points compared to the previous quarter and higher by 1 basis point compared to the quarter ended June 30, 2012.  

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 0.61% for the quarter ended June 30, 2013 compared to 0.66% for the quarter ended March 31, 2013, a decrease of 5 basis points.  Cost of funds decreased 25 basis points compared to the quarter ended June 30, 2012.

The net interest margin for the three months ended June 30, 2013 was 3.40%, compared to 3.45% for the previous quarter, and 3.57% for the quarter ended June 30, 2012, representing a decrease of 5 basis points from the previous quarter and a decrease of 17 basis points compared to the quarter ended June 30, 2012.

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 34.0%. 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 19.4% when comparing the quarter ended June 30, 2013 to the previous quarter and decreased by 1.3% compared to the quarter ended June 30, 2012. Gains on mortgage loan sales increased by 15.2% when comparing the quarter ended June 30, 2013 to the previous quarter and decreased by 11.7% when compared to the quarter ended June 30, 2012.  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 $209.8 million in mortgage loans during the quarter ended June 30, 2013 compared to $191.1 million closed during the previous quarter, and $233.5 million closed during the quarter ended June 30, 2012, an increase of 9.8% compared to the previous quarter and a decrease of 10.2% when comparing the same calendar quarters. 

The revenues and expenses of Southern Trust Mortgage 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 $1.2 million for the quarter ended June 30, 2013 compared to $1.0 million in the previous quarter and $1.1 million in the quarter ended June 30, 2012. 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 $1.5 billion at June 30, 2013 and June 30, 2012.

Net gains on securities available for sale were $326,000 during the quarter ended June 30, 2013 compared to gains of $47,000 during the previous quarter and gains of $148,000 during the quarter ended June 30, 2012.

Other operating income was $392,000 during the quarter ended June 30, 2013 compared to $263,000 during the previous quarter and $119,000 during the quarter ended June 30, 2012. The primary reason for the increase in other operating income during the second quarter was related to an adjustment to fair market value of certain mortgage loans. Other operating income includes credit card fees, data processing fees and other miscellaneous income during the reporting period.   

The following table presents dollar and percentage changes in components of non-interest income for the periods ended June 30, 2013 and June 30, 2012:

MIDDLEBURG FINANCIAL CORPORATION 

Non-Interest Income

(in thousands)






























For the three months ended


Dollar


Percent






6/30/2013


6/30/2012


Change


Change













Service charges on deposit accounts


$         574


$        538


$       36


6.7%

Trust services income



1,014


979


35


3.6%

Net gains on loans held for sale


4,483


5,075


(592)


-11.7%

Net gains on securities available for sale


326


148


178


120.3%

Net commissions on investment sales


110


125


(15)


-12.0%

Fees on mortgages held for sale


58


64


(6)


-9.4%

Bank-owned life insurance


123


123


-


0.0%

Other operating income



392


119


274


230.0%


    Total non-interest income


$      7,080


$     7,171


$      (91)


-1.3%













Non-Interest Expense

Total non-interest expense in the second quarter of 2013 was 5.9% lower compared to the previous quarter and decreased by $203,000 or 1.5% compared to the quarter ended June 30, 2012.  

Salaries and employee benefit expenses decreased by $107,000 or 1.4% when comparing the second quarter of 2013 to the previous quarter. Salaries and employee benefits increased by $186,000 or 2.5% versus the second quarter of 2012. 

Expenses related to Other Real Estate Owned ("OREO") decreased by $678,000 when comparing the second quarter of 2013 to the previous quarter and decreased by $732,000 versus the quarter ended June 30, 2012. The decrease in this expense relative to the previous quarter was primarily related to losses incurred on the sale of two large OREO properties during the first quarter of 2013 and fewer losses in the second quarter.

Advertising expense was higher by 62.3% compared to the previous quarter and decreased by $12,000 or 2.7% from the quarter ended June 30, 2012. The primary reason for higher advertising expenses during the quarter was new product and service promotions and expenses related to the bank's entrance into the Richmond market. Advertising expenses are cyclical and affected by spending on promotions.

Other operating expenses decreased by $181,000 or 7.8% from the previous quarter and increased by $268,000 or 14.3% compared to the quarter ended June 30, 2012. 

The following table presents dollar and percentage changes in components of non-interest expense for the periods ended June 30, 2013 and June 30, 2012:




























MIDDLEBURG FINANCIAL CORPORATION 


Non-Interest Expense


(in thousands)




















For the three months ended


Dollar


Percent







6/30/2013


6/30/2012


Change


Change















Salaries and employees' benefits


$      7,692


$     7,506


$      186


2.5%


Net occupancy and equipment expense


1,787


1,755


32


1.8%


Advertising




435


447


(12)


-2.7%


Computer operations



458


394


64


16.2%


Other real estate owned



142


874


(732)


-83.8%


Other taxes




187


205


(18)


-8.8%


Federal deposit insurance expense


270


261


9


3.4%


Other operating expenses


2,137


1,869


268


14.3%



    Total non-interest expense


$    13,108


$   13,311


$    (203)


-1.5%

The Company's efficiency ratio was 78.4% for the second quarter of 2013, compared to an efficiency ratio of 72.7% for the second quarter of 2012.  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. 

Asset Quality and Provision for Loan Losses

The Company recorded a provision for loan losses of $184,000 in the second quarter compared to a negative provision of $188,000 for the previous quarter and a provision of $730,000 for the quarter ended June 30, 2012 The Allowance for Loan and Lease Losses (ALLL) was $13.6 million representing 1.93% of loans held for investment at June 30, 2013 compared to $13.5 million representing 1.89% of loans held for investment at March 31, 2013.   

Loans that were delinquent for more than 90 days and still accruing were $829,000 as of June 30, 2013 compared to $812,000 as of March 31, 2013, and $1.4 million as of June 30, 2012, representing an increase of 2.1% compared to the previous quarter and a 40.8% decrease compared to the quarter ended June 30, 2012.

Non-accrual loans were $20.4 million at the end of the second quarter of 2013 compared to $20.0 million as of March 31, 2013 and $18.8 million at June 30, 2012, representing an increase of 1.8% during the second quarter of 2013 and an increase of 8.4% since June 30, 2012. Troubled debt restructurings that were performing as agreed were $5.4 million at the end of the second quarter of 2013, compared to $4.9 million for the quarter ended March 31, 2013, representing an increase of 10.2% during the quarter. Other Real Estate Owned (OREO) was $7.6 million as of June 30, 2013 compared to $7.9 million as of March 31, 2013, representing a decrease of 4.2% during the second quarter of 2013. Total non-performing assets were $34.1 million or 2.80% of total assets at June 30, 2013, compared to $33.6 million or 2.77% of total assets as of March 31, 2013 and $37.8 million or 3.10% of total assets as of June 30, 2012.

The net loan charge-offs during the second quarter of 2013 were $76,000 compared to net charge-offs of $615,000 for the previous quarter and $622,000 in net loan charge-offs for the quarter ended June 30, 2012.

Total Consolidated Assets

Total assets at June 30, 2013 were $1.2 billion, lower by $19.6 million or 1.6% from December 31, 2012 and unchanged from June 30, 2012.

Total loans held for investment decreased by $7.6 million or 1.1% in the second quarter of 2013 compared to the previous quarter.  The primary reason for the weakness was elevated levels of payoffs of existing loans. Loans held for investment increased by $21.1 million or 3.1% from June 30, 2012.  The securities portfolio (excluding restricted stock) decreased by $11.5 million or 3.5% in the second quarter of 2013 relative to the previous quarter. Balances of mortgages held for sale increased by $16.6 million or 34.1% at June 30, 2013 compared to the previous quarter end balance.  Cash balances and deposits at other banks increased by 15.9% at the end of the second quarter of 2013 compared to the previous quarter.

Deposits and Other Borrowings

Total deposits decreased by $4.2 million or 0.4% from the previous quarter.  Brokered deposits, including CDARS program funds, were $74.4 million at June 30, 2013, up 3.4% from the previous quarter. FHLB advances were $85.0 million at June 30, 2013, unchanged compared to the previous quarter.   

Equity and Capital

Shareholders' equity attributable to Middleburg Financial Corporation shareholders at June 30, 2013 was $112.9 million, compared to $114.8 million as of March 31, 2013 and $109.9 million at June 30, 2012.  Retained earnings at June 30, 2013 were $48.9 million compared to $47.2 million at March 31, 2013 and $43.8 million at June 30, 2012. The book value of the Company's common stock at June 30, 2013 was $15.93 per share versus $16.28 per share at March 31, 2013. The decline in shareholders equity during the second quarter was primarily due to a decrease in accumulated other comprehensive income (AOCI) of $3.7 million resulting from unrealized losses in available for sale securities.

The Company's total risk-based capital ratio decreased to 15.4% as of June 30, 2013 from 15.6% at March 31, 2013 and remained unchanged from December 31, 2012.  The Tier 1 risk-based capital ratio decreased from 14.4% at March 31, 2013 to 14.2% at June 30, 2013 and increased from 14.1% at December 31, 2012.  The Tier 1 Leverage Ratio increased to 9.3% at June 30, 2013 from 9.1% at March 31, 2013 and December 31, 2012.   

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



June 30, 2013












(1)




MFC




Regulatory




Excess




Minimum


MFC


over




Requirement


Ratios


Minimum











Tier 1 Leverage Ratio

4.0%


9.3%


5.3%











Tier 1 Risk-Based Capital Ratio

4.0%


14.2%


10.2%











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, 2012, 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 offices in Virginia, Maryland, Georgia, North Carolina, and South Carolina.


MIDDLEBURG FINANCIAL CORPORATION 

Consolidated Balance Sheets

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






















(Unaudited)


(Unaudited)


(Audited)









June 30,


March 31,


December 31,









2013


2013


2012

ASSETS












Cash and due from banks



$

7,312

$

6,697

$

7,139


Interest-bearing deposits with other institutions


51,164


43,753


47,276


     Total cash and cash equivalents



58,476


50,450


54,415


Securities available for sale




320,132


331,650


319,457


Loans held for sale





65,322


48,721


82,114


Restricted securities, at cost




7,005


7,005


6,990


Loans receivable, net of allowance for loan losses of $13,616 at June 30,












  2013, $13,508 at Mar. 31, 2013, and $14,311 at Dec.31, 2012






693,383


701,078


695,166


Premises and equipment, net




20,208


20,418


20,587


Goodwill and identified intangibles




5,932


5,975


6,017


Other real estate owned, net of valuation allowance of $348 at June 30,








  2013, $348 at Mar. 31, 2013, and $1,707 at Dec. 31, 2012


7,570


7,904


9,929


Prepaid federal deposit insurance




- -


2,768


3,015


Accrued interest receivable and other assets



39,172


37,787


39,091















    TOTAL ASSETS




$

1,217,200

$

1,213,756

$

1,236,781














LIABILITIES












Deposits:












      Non-interest-bearing demand deposits


$

174,459

$

163,611

$

167,137


      Savings and interest-bearing demand deposits


496,394


515,082


522,740


      Time deposits





291,021


287,383


292,023


        Total deposits





961,874


966,076


981,900


Securities sold under agreements to repurchase


35,783


31,880


33,975


Short-term borrowings





5,688


519


11,873


FHLB borrowings





85,000


85,000


77,912


Subordinated notes





5,155


5,155


5,155


Accrued interest payable and other liabilities



8,043


7,426


8,844


Commitments and contingent liabilities



-


-


-


    TOTAL LIABILITIES




1,101,543


1,096,056


1,119,659














SHAREHOLDERS' EQUITY













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








    7,089,598, 7,051,587 and 7,052,554 issued and outstanding at 








    June 30, 2013, Mar. 31, 2013, and December 31, 2012, respectively)


17,397


17,365


17,357


Capital surplus





44,000


43,946


43,869


Retained earnings





48,947


47,209


46,235


Accumulated other comprehensive income 



2,600


6,260


6,467


 

    Total Middleburg Financial Corporation shareholders' equity


112,944


114,780


113,928


Non-controlling interest in consolidated subsidiary


2,713


2,920


3,194















 TOTAL SHAREHOLDERS' EQUITY



115,657


117,700


117,122




























    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,217,200

$

1,213,756

$

1,236,781

 

 

MIDDLEBURG FINANCIAL CORPORATION 

Consolidated Statements of Income

(In thousands, except for per share data)

































Unaudited 


Unaudited 







For the three months


For the six months







ended June 30,


ended June 30,







2013


2012


2013


2012

INTEREST AND DIVIDEND INCOME










Interest and fees on loans


$         8,795


$             9,594


$          17,760


$         19,376


Interest and dividends on securities available for sale











Taxable 




1,468


1,704


2,999


3,439



Tax-exempt



646


596


1,276


1,203



Dividends




54


45


110


89


Interest on deposits in other banks


29


25


59


49



    Total interest and dividend income


10,992


11,964


22,204


24,156














INTEREST EXPENSE











Interest on deposits



1,253


1,846


2,626


3,739


Interest on securities sold under agreements to 










  repurchase




81


84


161


167


Interest on short-term borrowings


18


89


47


237


Interest on FHLB borrowings and other debt


299


287


594


584



    Total interest expense


1,651


2,306


3,428


4,727














NET INTEREST INCOME



9,341


9,658


18,776


19,429


Provision for (recovery of) loan losses


184


730


(4)


1,522














NET INTEREST INCOME AFTER PROVISION










FOR (RECOVERY OF) LOAN LOSSES


9,157


8,928


18,780


17,907














NONINTEREST INCOME











Service charges on deposit accounts


574


538


1,108


1,068


Trust services income



1,014


979


1,974


1,900


Net gains on loans held for sale


4,483


5,075


8,376


8,927


Net gains (losses) on securities available for sale


326


148


373


288


Total other-than-temporary impairment losses


-


(36)


-


(46)


Portion of loss recognized in other 










  comprehensive income


-


36


-


46


Net other than temporary impairment losses


-


-


-


-


Net commissions on investment sales


110


125


204


272


Fees on mortgages held for sale


58


64


75


106


Bank-owned life insurance


123


123


243


245


Other operating income



392


119


655


349



    Total noninterest income


7,080


7,171


13,008


13,155














NONINTEREST EXPENSE










Salaries and employees' benefits


7,692


7,506


15,492


14,863


Net occupancy and equipment expense


1,787


1,755


3,592


3,533


Advertising




435


447


703


747


Computer operations



458


394


919


779


Other real estate owned



142


874


961


1,160


Other taxes




187


205


379


408


Federal deposit insurance expense


270


261


535


519


Other operating expenses


2,137


1,869


4,455


4,616



    Total noninterest expense


13,108


13,311


27,036


26,625














Income before income taxes


3,129


2,788


4,752


4,437

Income tax expense



774


598


1,137


1,014















NET INCOME



2,355


2,190


3,615


3,423


Net (income) attributable to non-










  controlling interest



(262)


(421)


(195)


(72)


Net income attributable to Middleburg










  Financial Corporation



$         2,093


$             1,769


$            3,420


$           3,351














Earnings per share:











Basic




$           0.30


$               0.25


$             0.48


$             0.48


Diluted




$           0.29


$               0.25


$             0.48


$             0.48


Dividends per common share


$           0.05


$               0.05


$             0.10


$             0.10














See accompanying notes to the consolidated financial statements.




















 

 

QUARTERLY SUMMARY STATEMENTS OF INCOME





MIDDLEBURG FINANCIAL CORPORATION





(Unaudited. Dollars in thousands except per share data)











For the Three Months Ended


June 30, 2013


Mar. 31, 2013


Dec. 31, 2012


Sep. 30, 2012


June 30, 2012

Interest and Dividend Income










  Interest and fees on loans

$           8,795


$          8,965


$           9,330


$           9,189


$       9,594

  Interest and dividends on securities available for sale










     Taxable 

1,468


1,531


1,432


1,537


1,704

     Tax Exempt

646


630


604


596


596

     Dividends

54


56


58


46


45

  Interest on deposits in banks

29


30


36


39


25

      Total interest and dividend income

$         10,992


$        11,212


$         11,460


$         11,407


$     11,964

Interest Expense










  Interest on deposits

$           1,253


$          1,373


$           1,449


$           1,728


$       1,846

  Interest on securities sold under agreements to repurchase

81


80


82


83


84

  Interest on short-term borrowings

18


29


81


74


89

  Interest on FHLB borrowings and other debt

299


295


295


305


287

      Total interest expense

$           1,651


$          1,777


$           1,907


$           2,190


$       2,306

      Net interest income

$           9,341


$          9,435


$           9,553


$           9,217


$       9,658

Provision for loan losses

184


(188)


1,281


635


730

      Net interest income after provision










       for loan losses

$           9,157


$          9,623


$           8,272


$           8,582


$       8,928

Non-Interest Income










 Trust services income

$           1,014


$             960


$              923


$              928


$          979

 Service charges on deposit accounts

574


534


572


557


538

 Net gains (losses) on securities available for sale

326


47


(7)


164


148

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

-


-


-


-


(36)

   Portion of (gain) loss recognized in other comprehensive income

-


-


-


-


36

 Net other-than-temporary impairment loss

-


-


-


-


-

 Commissions on investment sales

110


94


129


117


125

 Bank owned life insurance

123


120


96


118


123

 Gains on loans held for sale

4,483


3,893


5,926


6,161


5,075

 Fees on mortgages held for sale

58


17


43


37


64

 Other operating income

392


263


299


236


119

       Total non-interest income

$           7,080


$          5,928


$           7,981


$           8,318


$       7,171

Non-Interest Expense










  Salaries and employee benefits

$           7,692


$          7,799


$           8,278


$           7,276


$       7,506

  Net occupancy and equipment expense

1,787


1,805


1,785


1,732


1,755

  Other taxes

187


192


202


203


205

  Advertising

435


268


635


652


447

  Computer operations

458


461


471


322


394

  Other real estate owned 

142


820


55


1,506


874

  Federal deposit insurance expense

270


265


269


262


261

  Other operating expenses

2,137


2,318


2,103


1,883


1,869

       Total non-interest expense

$         13,108


$        13,928


$         13,798


$         13,836


$     13,311











       Income before income taxes

$           3,129


$          1,623


$           2,455


$           3,064


$       2,788

       Income tax expense

774


363


387


565


598

       Net income

$           2,355


$          1,260


$           2,068


$           2,499


$       2,190

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

(262)


67


(647)


(785)


(421)

       Net income attributable to Middleburg Financial Corporation

$           2,093


$          1,327


$           1,421


$           1,714


$       1,769











Net income per common share, basic

$             0.30


$            0.19


$             0.20


$             0.24


$         0.25

Net income per common share, diluted

$             0.29


$            0.19


$             0.20


$             0.24


$         0.25

Dividends per common share

$             0.05


$            0.05


$             0.05


$             0.05


$         0.05

 

 

MIDDLEBURG FINANCIAL CORPORATION






KEY STATISTICS






(Unaudited. Dollars in thousands except per share data)



















For the Three Months Ended



Jun. 30, 2013


 Mar. 31, 2013


Dec. 31, 2012


Sep. 30, 2012


Jun. 30, 2012












Net income


$     2,093


$     1,327


$     1,421


$     1,714


$     1,769

Earnings per share, basic


$       0.30


$       0.19


$       0.20


$       0.24


$       0.25

Earnings per share, diluted


$       0.29


$       0.19


$       0.20


$       0.24


$       0.25

Dividend per share


$       0.05


$       0.05


$       0.05


$       0.05


$       0.05












Return on average total assets - QTD


0.69%


0.44%


0.46%


0.55%


0.60%

Return on average total equity - QTD


7.25%


4.71%


4.96%


6.11%


6.50%

Dividend payout ratio


16.88%


26.57%


24.82%


20.53%


19.87%

Non-interest  revenue to total revenue (1)


41.96%


38.40%


45.54%


46.94%


41.97%












Net interest margin (2)


3.40%


3.45%


3.42%


3.28%


3.57%

Yield on average earning assets


3.97%


4.08%


4.08%


4.03%


4.40%

Cost of average interest-bearing liabilities


0.72%


0.78%


0.82%


0.93%


1.00%

Net interest spread


3.25%


3.30%


3.26%


3.10%


3.40%












Non-interest income to average assets(3)


2.23%


1.93%


2.62%


2.66%


2.35%

Non-interest expense to average assets(3)


4.34%


4.57%


4.53%


4.52%


4.47%












Efficiency ratio - QTD (Tax Equiv)  (4)


78.35%


80.96%


76.51%


69.27%


72.68%

(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. 

 

 

MIDDLEBURG FINANCIAL CORPORATION













SELECTED FINANCIAL DATA BY QUARTER













(Unaudited. Dollars in thousands except per share data)




Jun. 30, 2013


 Mar. 31, 2013


Dec. 31, 2012


Sep. 30, 2012


June 30, 2012

BALANCE SHEET RATIOS














Loans to deposits (Including HFS)




80.29%


79.01%


80.62%


79.73%


77.30%


Portfolio loans to deposits




73.50%


73.97%


72.26%


70.33%


70.33%


Average interest-earning assets to














    average-interest bearing liabilities




125.09%


123.60%


124.17%


123.02%


121.73%

PER SHARE DATA 














Dividends




$               0.05


$               0.05


$               0.05


$               0.05


$               0.05


Book value (MFC Shareholders)




$             15.93


$             16.28


$             16.15


$             15.96


$             15.57


Tangible book value (3)




$             15.09


$             15.41


$             15.30


$             15.10


$             14.71

SHARE PRICE DATA 














Closing price




$             19.10


$             19.41


$             17.66


$             17.76


$             17.00


Diluted earnings multiple  (1)




16.47


25.54


22.08


18.50


17.00


Book value multiple(2)




1.20


1.19


1.09


1.11


1.09















COMMON STOCK DATA














Outstanding shares at end of period




7,089,598


7,051,587


7,052,554


7,052,554


7,052,554


Weighted average shares O/S Basic  - QTD




7,072,587


7,051,009


7,052,554


7,036,536


7,030,639


Weighted average shares O/S, diluted - QTD




7,102,670


7,082,354


7,069,603


7,051,860


7,042,111

CAPITAL RATIOS  














Capital to Assets - Common shareholders




9.28%


9.46%


9.21%


9.10%


9.02%


Capital to Assets - with Noncontrolling Interest




9.50%


9.70%


9.47%


9.34%


9.19%


Tangible common equity ratio (4)




8.83%


9.01%


8.77%


8.66%


8.56%


Leverage ratio




9.32%


9.11%


9.10%


8.92%


8.99%


Tier 1 risk based capital ratio




14.15%


14.35%


14.09%


13.98%


13.66%


Total risk based capital ratio




15.41%


15.60%


15.35%


15.23%


14.92%

CREDIT QUALITY














Net charge-offs to average total loans




0.01%


0.08%


0.12%


0.22%


0.08%


Total non-performing loans to total portfolio loans




3.76%


3.59%


3.92%


4.02%


3.57%


Total non-performing assets to total assets




2.80%


2.77%


3.05%


3.22%


3.10%


Non-accrual loans to:














      total portfolio loans




2.88%


2.80%


3.05%


3.28%


2.74%


      total assets




1.67%


1.65%


1.75%


1.84%


1.54%


Allowance for loan losses to:














      total portfolio loans




1.93%


1.89%


2.02%


2.01%


2.18%


      non-performing assets




39.88%


40.22%


37.89%


35.05%


39.56%


      non-accrual loans




66.82%


67.48%


66.06%


61.46%


79.61%

NON-PERFORMING ASSETS:














    Loans delinquent over 90 days and still accruing




$                829


$                812


$             1,044


$                860


$             1,372


    Non-accrual loans    




20,376


20,019


21,664


22,683


18,802


    Restructured loans (Not in non accrual)




5,366


4,854


5,132


4,302


4,334


    Other real estate owned and repossessed assets




7,570


7,904


9,929


11,933


13,335


Total non-performing assets 




$           34,141


$           33,589


$           37,769


$           39,778


$           37,843

NET LOAN CHARGE-OFFS:














    Loans charged off (QTD)




$                128


$                721


$             1,060


$             1,817


$                694


    Recoveries (QTD)




(52)


(106)


(149)


(154)


(72)


Net charge-offs  (QTD)




$                  76


$                615


$                911


$             1,663


$                622

PROVISION FOR LOAN LOSSES 




$                184


$               (188)


$             1,281


$                635


$                730

ALLOWANCE FOR LOAN LOSS SUMMARY














Balance at the beginning of period




$           13,508


$           14,311


$           13,941


$           14,969


$           14,861


Provision




184


(188)


1,281


635


730


Net charge-offs




(76)


(615)


(911)


(1,663)


(622)


Balance at the end of period




$           13,616


$           13,508


$           14,311


$           13,941


$           14,969















(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 June 30, 




2013






2012




 Average 


 Income/ 


Yield/


 Average 


 Income/ 


Yield/


 Balance 


 Expense 


Rate  (2)


 Balance 


 Expense 


Rate  (2)


(Dollars in thousands)

Assets :












Securities:












   Taxable

$    268,369


$         1,523


2.28%


$    264,106


$         1,749


2.66%

   Tax-exempt (1)

69,390


978


5.65%


61,813


903


5.88%

       Total securities

$    337,759


$         2,501


2.97%


$    325,919


$         2,652


3.27%

Loans 












   Taxable

$    759,360


$         8,789


4.64%


$    749,834


$         9,616


5.16%

   Tax-exempt  (1)

687


9


5.25%


-


-


-

       Total loans (3)

$    760,047


$         8,798


4.64%


$    749,834


$         9,616


5.16%

Interest bearing deposits in












      other financial institutions

45,371


29


0.26%


48,025


25


0.21%

       Total earning assets

$ 1,143,177


$       11,328


3.97%


$ 1,123,778


$       12,293


4.40%

Less: allowances for credit losses

(13,550)






(15,138)





Total nonearning assets

79,748






83,781





Total assets

$ 1,209,375






$ 1,192,421

















Liabilities:












Interest-bearing deposits:












    Checking

$    319,704


$            210


0.26%


$    310,262


$            334


0.43%

    Regular savings

110,713


63


0.23%


106,725


96


0.36%

    Money market savings

75,733


43


0.23%


57,566


49


0.34%

    Time deposits:












       $100,000 and over

139,073


432


1.25%


140,233


560


1.61%

       Under $100,000

142,217


505


1.42%


180,961


807


1.79%

       Total interest-bearing deposits

$    787,440


$         1,253


0.64%


$    795,747


$         1,846


0.93%













Short-term borrowings

2,090


18


3.45%


7,687


89


4.60%

Securities sold under agreements












    to repurchase

34,204


81


0.95%


32,268


84


1.03%

FHLB borrowings and other debt

90,155


299


1.33%


87,463


287


1.32%

Federal funds purchased

-


-


-


3


-


0.00%

    Total interest-bearing liabilities

$    913,889


$         1,651


0.72%


$    923,168


$         2,305


1.00%

Non-interest bearing liabilities












    Demand deposits

169,894






150,689





    Other liabilities

6,917






6,822





Total liabilities

$ 1,090,700






$ 1,080,679





Non-controlling interest

2,835






2,231





Shareholders' equity

115,840






109,511





Total liabilities and shareholders'












   equity

$ 1,209,375






$ 1,192,421

















Net interest income



$         9,677






$         9,987















Interest rate spread





3.25%






3.40%

Cost of Funds





0.61%






0.86%

Interest expense as a percent of












    average earning assets





0.58%






0.82%

Net interest margin





3.40%






3.57%

























(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 for 2013 and a 366 day year for 2012.



(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, 




2013






2012




 Average 


 Income/ 


Yield/


 Average 


 Income/ 


Yield/


 Balance 


 Expense 


Rate  (2)


 Balance 


 Expense 


Rate  (2)


(Dollars in thousands)

Assets :












Securities:












   Taxable

$    267,177


$         3,109


2.35%


$    263,757


$         3,528


2.69%

   Tax-exempt (1)

68,327


1,933


5.70%


61,808


1,823


5.93%

       Total securities

$    335,504


$         5,042


3.03%


$    325,565


$         5,351


3.31%

Loans 












   Taxable

$    757,913


$       17,748


4.72%


$    747,647


$       19,547


5.26%

   Tax-exempt  (1)

687


18


5.28%


-


-


0.00%

       Total loans (3)

$    758,600


$       17,766


4.72%


$    747,647


$       19,547


5.26%

Interest bearing deposits in












      other financial institutions

51,603


59


0.23%


47,174


49


0.21%

       Total earning assets

$ 1,145,707


$       22,867


4.03%


$ 1,120,386


$       24,947


4.48%

Less: allowances for credit losses

(13,905)






(15,005)





Total nonearning assets

82,346






82,625





Total assets

$ 1,214,148






$ 1,188,006

















Liabilities:












Interest-bearing deposits:












    Checking

$    326,329


$            445


0.28%


$    306,953


$            717


0.47%

    Regular savings

109,740


123


0.23%


105,867


211


0.40%

    Money market savings

76,903


90


0.24%


57,095


106


0.37%

    Time deposits:












       $100,000 and over

143,242


939


1.32%


141,460


1,132


1.61%

       Under $100,000

142,795


1,029


1.45%


180,568


1,573


1.75%

       Total interest-bearing deposits

$    799,009


$         2,626


0.66%


$    791,943


$         3,739


0.95%













Short-term borrowings

2,372


47


4.00%


10,542


236


4.50%

Securities sold under agreements












    to repurchase

34,153


161


0.95%


33,196


167


1.01%

FHLB borrowings and other debt

85,810


594


1.40%


87,627


585


1.34%

Federal Funds Purchased

-


-


0.00%


2


-


0.00%

    Total interest-bearing liabilities

$    921,344


$         3,428


0.75%


$    923,310


$         4,727


1.03%

Non-interest bearing liabilities












    Demand Deposits

167,268






147,411





    Other liabilities

7,249






6,536





Total liabilities

$ 1,095,861






$ 1,077,257





Non-controlling interest

2,941






2,293





Shareholders' equity

115,346






108,456





Total liabilities and shareholders'












   equity

$ 1,214,148






$ 1,188,006

















Net interest income



$       19,439






$       20,220















Interest rate spread





3.28%






3.45%

Cost of Funds





0.64%






0.89%

Interest expense as a percent of












    average earning assets





0.60%






0.85%

Net interest margin





3.42%






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 for 2013 and a 366 day year for 2012.




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





















SOURCE Middleburg Financial Corporation



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