2014

Middleburg Financial Corporation Announces Third Quarter 2011 Results

MIDDLEBURG, Va., Oct. 28, 2011 /PRNewswire/ -- Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.4 million for the quarter ending September 30, 2011 and $3.8 million in net income for the nine-month year to date period.

"We are pleased with the momentum in earnings experienced during the first nine months of 2011," commented Gary R. Shook, president and chief executive officer of Middleburg Financial Corporation.  "Non Performing Assets as a percentage of Total Assets is stabilizing while Revenue continues to expand with growing Net Interest Income and improved fee income from our mortgage and wealth management subsidiaries. Growth in commercial loans is weak due to soft demand from qualified borrowers while residential loan growth is strong in the face of historically low mortgage rates. Continuation of economic uncertainty and a weak employment picture will do little to improve the sluggishness in loan demand from small businesses. However, we are significantly stepping up calling programs targeted at all existing and potential clients at the Bank and at our other subsidiaries, in an effort to broaden customer outreach."

Third Quarter 2011 Highlights:

  • Net income of $1.4 million or $0.20 per diluted share;
  • Net interest margin of 3.64%, compared to 3.27% for the third quarter of 2010;
  • Total revenue of $17.2 million, up 11.7%  compared to third quarter of 2010;
  • Loan growth of 2.5% since the beginning of 2011;
  • Total assets of $1.2 billion, an increase of 4.4% since the beginning of the year;
  • Deposits increased by $19.4 million or 2.2% during the year;
  • Provision for loan losses declined by 88.8% compared to third quarter of 2010; and
  • Capital ratios continue to be strong: Tangible Common Equity Ratio of 8.63%, Total Risk-Based Capital Ratio of 14.1%, Tier I Risk-Based Capital Ratio of 12.9%, and a Tier 1 Leverage Ratio of 9.0% at September 30, 2011.

Total Revenue

Total revenue was $17.2 million in the quarter ended September 30, 2011 compared to $15.4 million in the previous quarter and $14.9 million in the quarter ended September 30, 2010, representing an increase of 11.7% compared to the previous quarter and an increase of 16.2% compared to the  quarter ended September 30, 2010.    

Net interest income was $9.6 million during the three months ended September 30, 2011, which was 2.1% higher than the previous quarter and an increase of 21.5% compared to the quarter ended September 30, 2010. The yield on average earning assets was 4.66% for the quarter ended September 30, 2011 compared to 4.86% for the previous quarter and 4.74% for the quarter ended September 30, 2010, representing a decrease of 20 basis points from the previous quarter and a decrease of 8 basis points from the quarter ended September 30, 2010.   Average earning assets increased 4.3% compared to the previous quarter. Loan growth and an increase in investment securities drove the increase in earning assets during the third quarter. The decrease in yields on earning assets from the previous quarter reflected a 13 basis point decrease in yields for the loan portfolio and a decrease of 25 basis points in the yield of the securities portfolio.  

The average cost of interest bearing liabilities was 1.21% for the quarter ended September 30, 2011, compared to 1.26% in the previous quarter, and 1.73% for the quarter ended September 30, 2010, representing a decrease of 5 basis points from the previous quarter and a decrease of 52 basis points from the quarter ended September 30, 2010.  Costs for wholesale borrowings increased by 1 basis point during the quarter, while costs for retail deposits decreased by 6 basis points during the same period.  The decline in the cost of retail deposits during the quarter ended September 30, 2011, compared to the previous quarter, was driven by a 10 basis point decline in the cost of savings deposits. The cost of time deposits decreased by 9 basis points during the quarter ended September 30, 2011, compared to the previous 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 1.05% for the quarter ended September 30, 2011 compared to 1.10% for the quarter ended June 30, 2011, a decrease of 5 basis points from the previous quarter.

The net interest margin for the three months ended September 30, 2011 was 3.64%, compared to 3.78% for the previous quarter, and 3.27% for the quarter ended September 30, 2010, representing a decrease of 14 basis points from the previous quarter and an increase of 37 basis points compared to the quarter ended September 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 $1.6 million or 26.5% when comparing the quarter ended September 30, 2011 to the previous quarter and increased by $723,000 or 10.5% compared to the quarter ended September 30, 2010. The primary reason for the higher non-interest income in the third 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 $180.4 million in mortgage loans during the quarter ended September 30, 2011 compared to $153.0 million originated during the previous quarter, an increase of 17.9%, and $217.6 million originated during the quarter ended September 30, 2010, a decrease of 17.1% when comparing calendar quarters.  Gains on mortgage loan sales increased by 39.7% when comparing the quarter ended September 30, 2011 to the previous quarter.  Gains on mortgage loan sales increased by 6.9% when comparing the quarter ended September 30, 2011 to the quarter ended September 30, 2010.  The increase in gain-on-sale revenue in the third quarter of 2011 was driven by an increase in gain-on-sale margins during the third quarter.

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

Trust and investment advisory service fees earned by Middleburg Trust Company ("MTC") decreased by 2.0% when comparing the quarter ended September 30, 2011 to the previous quarter, and increased by 19.3% compared to the quarter ended September 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 $1.2 billion at September 30, 2011, a decrease of 2.1% relative to June 30, 2011 and an increase of 20.0% relative to September 30, 2010.  

Net securities gains were $141,000 during the quarter ended September 30, 2011 compared to net securities gains of $87,000 during the previous quarter and net securities gains of $288,000 during the quarter ended September 30, 2010.

Non-Interest Expense

Non-interest expense in the third quarter of 2011 increased by 8.7% compared to the previous quarter and decreased by 2.1% compared to the quarter ended September 30, 2010.  

Salaries and employee benefit expenses increased by $895,000 or 11.4% when comparing the third quarter of 2011 to the previous quarter, primarily due to an increase in commission and recruiting expenses for mortgage loan officers. Expenses related to Other Real Estate Owned (OREO) increased by $83,000 or 13.7% when comparing the third quarter of 2011 to the previous quarter. Advertising expenses increased by $161,000 or 56.5% during the quarter as a result of expenses for bank-wide campaigns related to CD's and loans and advertising at the mortgage company. FDIC insurance premiums declined by $114,000 or 31.8% compared to the previous quarter. Other operating expenses, which include expenses such as supplies, travel and entertainment expenses, increased by $74,000 or 5.4% when comparing the quarter ended September 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 80.89% for the third quarter of 2011, compared to an efficiency ratio of 82.79% in the quarter ending June 30, 2011.  

Asset Quality and Provision for Loan Losses

The provision for loan losses in the quarter ended September 30, 2011 was $1,024,000 compared to a provision of $1,087,000 in the previous quarter and a provision of $9,130,000 in the quarter ended September 30, 2010, representing a decrease of 5.8% from the previous quarter and a decrease of 88.8% from the quarter ended September 30, 2010.

The Allowance for Loan and Lease Losses (ALLL) at September 30, 2011 was $15.1 million representing 2.24% of total portfolio loans outstanding versus 2.22% at June 30, 2011 and 2.42% of total portfolio loans at September 30, 2010.

Loans that were delinquent for more than 90 days and still accruing were $1.6 million as of September 30, 2011 compared to $3.2 million as of June 30, 2011, representing a decrease of 50% during the quarter.  

Non-accrual loans were $30.5 million at the end of the third quarter compared to $32.3 million as of June 30, 2011, representing a decrease of 5.6% during the third quarter. Troubled debt restructurings were $404,000 at the end of the third quarter compared to $112,000 as of June 30, 2011. Other Real Estate Owned (OREO) was $6.1 million as of September 30, 2011 compared to $6.3 million as of June 30, 2011, representing a decrease of 3.2% during the third quarter. Non-performing assets were $38.5 million or 3.3% of total assets at September 30, 2011, compared to $41.9 million or 3.7% of total assets as of June 30, 2011.  

Total Consolidated Assets

Total assets at September 30, 2011 were $1.2 billion, an increase of $8.9 million or 0.8% compared to total assets at June 30, 2011.  

Total portfolio loans declined by $2.5 million or 0.37% for the third quarter. The securities portfolio increased by $9.9 million or 3.3% in the third quarter relative to the previous quarter. Balances of mortgages held for sale increased by $18.2 million or 37.4% in the third quarter of 2011.  Cash balances and deposits at other banks decreased by 29.4% in the third quarter of 2011.

Deposits and Other Borrowings

Total deposits were unchanged in the third quarter.  Brokered deposits, including CDARS program funds, were $91.9 million at September, 2011, down 1.0% from June 30, 2011. FHLB advances were $84.9 million at September 30, 2011, up $7.0 million from June 30, 2011, or an increase of 8.9%.    

Equity and Capital

Total shareholders' equity at September 30, 2011 was $105.3 million, compared to shareholders' equity of $102.7 million as of June 30, 2011. Retained earnings at September 30, 2011 were $40.4 million compared to $39.3 million at June 30, 2011. The book value of the Company's common stock at September 30, 2011 was $15.04 per share.

The Company's total risk-based capital ratio was 14.1% at September 30, 2011 and December 31, 2010.  The Tier 1 risk-based capital ratio increased from 12.8% to 12.9% from December 31, 2010 to September 30, 2011 and the Tier 1 Leverage Ratio remained at 9.0% as of both period ends.

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 Operations

(In thousands, except for per share data)




















Unaudited


Unaudited







For the Nine Months


For the Three Months







Ended September 30,


Ended September 30,







2011


2010


2011


2010

INTEREST AND DIVIDEND INCOME










Interest and fees on loans


$          29,378


$         30,661


$          9,912


$        9,832


Interest and dividends on securities available for sale











Taxable




4,877


3,194


1,727


1,166



Tax-exempt



1,757


1,914


592


621



Dividends




108


75


36


32


Interest on deposits in banks and federal funds sold


90


99


30


36



   Total interest and dividend income


36,210


35,943


12,297


11,687














INTEREST EXPENSE











Interest on deposits



6,927


9,410


2,287


3,160


Interest on securities sold under agreements to










 repurchase




209


144


84


63


Interest on short-term borrowings


174


245


58


134


Interest on long-term debt


914


1,298


312


372



   Total interest expense


8,224


11,097


2,741


3,729














NET INTEREST INCOME



27,986


24,846


9,556


7,958


Provision for loan losses


2,565


11,350


1,024


9,130














NET INTEREST INCOME (LOSS) AFTER PROVISION










FOR LOAN LOSSES



25,421


13,496


8,532


(1,172)














NONINTEREST INCOME











Service charges on deposit accounts


1,553


1,396


538


487


Trust services income



2,813


2,497


963


807


Gains on loans held for sale


12,286


11,621


5,501


5,147


Gains on securities available for sale, net


263


757


141


288


Total other-than-temporary impairment losses


(33)


(857)


(16)


(557)


Portion of (gain) loss recognized in other










 comprehensive income


11


(117)


(5)


(169)


   Net impairment losses


(22)


(974)


(21)


(726)


Commissions on investment sales


552


453


187


142


Fees on mortgages held for sale


325


1,311


84


477


Other service charges, commissions and fees


347


353


98


97


Bank-owned life insurance


385


391


123


136


Other operating income



111


221


6


42



   Total noninterest income


18,613


18,026


7,620


6,897














NONINTEREST EXPENSE










Salaries and employees' benefits


23,837


22,046


8,708


7,665


Net occupancy and equipment expense


5,016


4,651


1,700


1,557


Advertising




887


685


446


257


Computer operations



1,073


1,008


365


340


Other real estate owned



1,639


1,171


689


666


Other taxes




607


598


205


201


Federal deposit insurance expense


1,009


1,521


244


368


Other operating expenses


5,198


6,916


1,720


3,333



   Total noninterest expense


39,266


38,596


14,077


14,387














Income (loss) before income taxes


4,768


(7,074)


2,075


(8,662)

Income tax expense (benefit)


1,072


(3,135)


454


(3,297)















NET INCOME (LOSS)



3,696


(3,939)


1,621


(5,365)

Net (income) loss attributable to non-









 controlling interest



128


(311)


(223)


(423)


Net income (loss) attributable to Middleburg










 Financial Corporation



$            3,824


$          (4,250)


$          1,398


$       (5,788)














Earnings (loss) per share:











Basic




$             0.55


$           (0.61)


$           0.20


$        (0.83)


Diluted




$             0.55


$           (0.61)


$           0.20


$        (0.83)


Dividends per common share


$             0.15


$             0.30


$           0.05


$          0.10
















MIDDLEBURG FINANCIAL CORPORATION

Consolidated Balance Sheets

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










(Unaudited)


(Unaudited)





September 30,


June 30,


December 31,



2011


2011


2010

ASSETS








Cash and due from banks

$

5,334

$

19,598

$

21,955


Interest-bearing deposits with other institutions


36,024


38,988


42,769


    Total cash and cash equivalents


41,358


58,586


64,724


Securities available for sale


303,014


293,393


252,042


Loans held for sale


66,910


48,689


59,361


Restricted securities, at cost


7,227


6,932


6,296


Loans receivable, net of allowance for loan losses of $15,124 at Sept. 30,








 2011, $15,073 at June 30, 2011, and $14,967 at Dec. 31, 2010


660,689


663,242


644,345


Premises and equipment, net


21,464


21,393


21,112


Goodwill and identified intangibles


6,244


6,286


6,360


Other real estate owned, net of valuation allowance of $1,057 at Sept. 30,








 2011, $1,006 at June 30, 2011, and $1,486 at Dec. 31, 2010


6,096


6,255


8,394


Prepaid federal deposit insurance


4,227


4,454


5,154


Accrued interest receivable and other assets


36,427


35,437


36,779











   TOTAL ASSETS

$

1,153,656

$

1,144,667

$

1,104,567










LIABILITIES








Deposits:








     Non-interest-bearing demand deposits

$

145,393

$

131,191

$

130,488


     Savings and interest-bearing demand deposits


455,893


460,518


436,718


     Time deposits


308,410


316,776


323,100



  Total deposits


909,696


908,485


890,306


Securities sold under agreements to repurchase


31,286


35,210


25,562


Short-term borrowings


12,864


5,692


13,320


Long-term debt


77,912


77,912


62,912


Subordinated notes


5,155


5,155


5,155


Accrued interest payable and other liabilities


9,170


7,405


7,319


Commitments and contingent liabilities


-


-


-



   TOTAL LIABILITIES


1,046,083


1,039,859


1,004,574










SHAREHOLDERS' EQUITY  








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









7,000,824 issued; 6,996,932, 6,992,932, and 6,925,437 outstanding at








Sept. 30, 2011, June 30, 2011, and Dec. 31, 2010, respectively)


17,331


17,331


17,314


Capital surplus


43,274


43,150


43,058


Retained earnings


40,373


39,322


37,593


Accumulated other comprehensive income (loss)


4,327


2,908


(1,012)



   Total Middleburg Financial Corporation shareholders' equity


105,305


102,711


96,953


Non-controlling interest in consolidated subsidiary


2,268


2,097


3,040












   TOTAL SHAREHOLDERS' EQUITY


107,573


104,808


99,993





















   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,153,656

$

1,144,667

$

1,104,567












QUARTERLY SUMMARY STATEMENTS OF OPERATIONS

MIDDLEBURG FINANCIAL CORPORATION

(Unaudited. Dollars in thousands except per share data)


For the Three Months Ended


Sep. 30, 2011


Jun. 30, 2011


Mar. 31, 2011


Dec. 31, 2010


Sep. 30, 2010

Interest and Dividend Income










  Interest and fees on loans

$            9,912


$                  9,731


$            9,735


$            9,887


$           9,832

  Interest on securities available for sale










     Taxable 

1,727


1,751


1,399


1,539


1,166

     Exempt from federal income taxes

592


604


561


600


621

     Dividends

36


36


36


30


32

  Interest on federal funds sold and other

30


33


27


32


36

      Total interest and dividend income

$          12,297


$                12,155


$          11,758


$          12,088


$         11,687

Interest Expense










  Interest on deposits

$            2,287


$                  2,332


$            2,308


$            2,623


$           3,160

  Interest on securities sold under agreements to repurchase

84


69


56


61


63

  Interest on short-term borrowings

58


53


63


148


134

  Interest on long-term debt

312


306


296


246


372

      Total interest expense

$            2,741


$                  2,760


$            2,723


$            3,078


$           3,729

      Net interest income

$            9,556


$                  9,395


$            9,035


$            9,010


$           7,958

Provision for loan losses

1,024


1,087


454


655


9,130

      Net interest income (loss) after provision










       for loan losses

$            8,532


$                  8,308


$            8,581


$            8,355


$         (1,172)

Other Income










 Trust services income

$               963


$                     983


$               867


$               838


$              807

 Service charges on deposit accounts

538


526


489


488


487

 Net gains (losses) on securities available for sale

141


87


35


109


288

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

(16)


6


(17)


(44)


(557)

   Portion of (gain) loss recognized in other comprehensive income

(5)


(6)


16


(85)


(169)

Net other-than-temporary impairment loss

(21)


-


(1)


(129)


(726)

 Commissions on investment sales

187


185


180


169


142

 Bank owned life insurance

123


139


123


112


136

 Gain on loans held for sale

5,501


3,938


2,847


5,537


5,147

 Fees on loans held for sale

84


87


154


570


477

 Other service charges, commissions and fees

98


134


115


114


97

 Other operating income (loss)

6


(55)


160


169


42

       Total other income

$            7,620


$                  6,024


$            4,969


$            7,977


$           6,897

Other Expense










  Salaries and employee benefits

$            8,708


$                  7,813


$            7,316


$            7,748


$           7,665

  Net occupancy expense of premises

1,700


1,640


1,676


1,598


1,557

  Other taxes

205


205


197


200


201

  Advertising

446


285


156


386


257

  Computer operations

365


343


365


316


340

  Other real estate owned

689


606


344


842


666

  Audits and examinations

103


156


126


219


96

  Legal fees

172


176


89


50


96

  FDIC insurance

244


358


407


386


368

  Other operating expenses

1,445


1,371


1,560


2,401


3,141

       Total other expense

$          14,077


$                12,953


$          12,236


$          14,146


$         14,387











       Income (loss) before income taxes

$            2,075


$                  1,379


$            1,314


$            2,186


$         (8,662)

       Income tax expense (benefit)

454


301


317


573


(3,297)

       Net income (loss)

$            1,621


$                  1,078


$               997


$            1,613


$         (5,365)

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

(223)


121


230


(51)


(423)

       Net income (loss) attributable to Middleburg Financial Corporation

$            1,398


$                  1,199


$            1,227


$            1,562


$         (5,788)











Net income (loss) per common share, basic

$              0.20


$                    0.17


$              0.18


$              0.23


$           (0.83)

Net income (loss) per common share, diluted

$              0.20


$                    0.17


$              0.18


$              0.23


$           (0.83)

Dividends per common share

$              0.05


$                    0.05


$              0.05


$              0.05


0.10



MIDDLEBURG FINANCIAL CORPORATION

KEY STATISTICS

(Unaudited. Dollars in thousands except per share data)


For the Three Months Ended





Sep 30, 2011


Jun 30, 2011


Mar 31, 2011


Dec 31, 2010


Sep 30, 2010
















Net income (loss)


$      1,398


$      1,199


$          1,227


$      1,562


$    (5,788)



Earnings (loss) per share, basic


$        0.20


$        0.17


$            0.18


$        0.23


$      (0.83)



Earnings (loss) per share, diluted


$        0.20


$        0.17


$            0.18


$        0.23


$      (0.83)



Dividend per share


$        0.05


$        0.05


$            0.05


$        0.05


$        0.10
















Return on average total assets - Year to Date


0.46%


0.45%


0.46%


-0.25%


-2.11%



Return on average total equity - Year to Date


5.07%


4.95%


5.11%


-2.71%


-22.03%



Dividend payout ratio


25.00%


29.41%


27.78%


22.21%


NA    



Non-interest  revenue to total revenue (1)


43.90%


38.72%


35.02%


39.82%


38.56%
















Net interest margin (2)


3.64%


3.78%


3.80%


3.60%


3.27%



Yield on average earning assets


4.66%


4.86%


4.91%


4.78%


4.74%



Yield on average interest-bearing liabilities


1.21%


1.26%


1.30%


1.41%


1.73%



Net interest spread


3.45%


3.60%


3.61%


3.37%


3.01%
















Non-interest income to average assets (3)


2.67%


2.17%


1.82%


2.88%


2.69%



Non-interest expense to average assets (3)


4.93%


4.67%


4.53%


5.09%


5.29%
















Efficiency ratio - QTD (Tax Equiv) (4)


80.89%


82.79%


84.96%


81.42%


91.77%




(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)

Sep 30, 2011


Jun 30, 2011


Mar 31, 2011


Dec 31, 2010


Sep 30, 2010

BALANCE SHEET RATIOS














Loans to deposits (Including HFS)




81.65%


80.02%


80.53%


80.72%


81.69%


Portfolio loans to deposits




74.29%


74.66%


76.56%


74.05%


73.05%


Average interest-earning assets to














    average-interest bearing liabilities




119.85%


117.42%


117.58%


118.50%


117.22%

PER SHARE DATA 














Dividends




$               0.05


$               0.05


$                     0.05


$               0.05


$               0.10


Book value (MFC Shareholders)




$             15.04


$             14.68


$                   14.18


$             14.02


$             14.22


Tangible book value (3)




$             14.15


$             13.78


$                   13.27


$             13.10


$             13.29

SHARE PRICE DATA 














Closing price




$             15.00


$             14.94


$                   17.75


$             14.26


$             14.08


Diluted earnings multiple  (1)




18.75


21.97


24.65


15.50


NA    


Book value multiple(2)




1.00


1.02


1.25


1.02


0.99















COMMON STOCK DATA














Outstanding shares at end of period




7,000,824


6,996,932


6,942,315


6,925,437


6,915,687


Weighted average shares O/S Basic  - QTD




6,996,932


6,977,503


6,940,154


6,937,801


6,934,366


Weighted average shares O/S, diluted - QTD




6,998,494


6,980,331


6,943,189


6,938,359


6,934,366

CAPITAL RATIOS  














Capital to Assets - Common shareholders




9.13%


8.97%


9.08%


8.79%


8.85%


Capital to Assets - with Noncontrolling Interest




9.32%


9.16%


9.33%


9.05%


9.13%


Tangible common equity ratio (4)




8.63%


8.47%


8.54%


8.26%


8.32%


Total risk based capital ratio




14.12%


14.16%


14.52%


14.10%


13.54%


Tier 1 risk based capital ratio




12.86%


12.90%


13.26%


12.84%


12.29%


Leverage ratio




8.96%


9.12%


9.38%


9.04%


9.08%

CREDIT QUALITY














Net charge-offs to average loans




0.13%


0.08%


0.12%


0.22%


0.47%


Total non-performing loans to total portfolio loans




4.80%


5.25%


5.36%


4.66%


4.69%


Total non-performing assets to total assets




3.34%


3.66%


3.99%


3.54%


3.50%


Non-accrual loans to:














      total loans




4.51%


4.76%


4.17%


4.46%


4.57%


      total assets




2.64%


2.82%


2.55%


2.66%


2.69%


Allowance for loan losses to:














      total portfolio loans




2.24%


2.22%


2.20%


2.27%


2.42%


      non-performing assets




39.24%


35.98%


33.65%


38.29%


40.84%


      non-accrual loans




49.61%


46.67%


52.74%


50.93%


53.04%

NON-PERFORMING ASSETS:














    Loans delinquent over 90 days and still accruing




$             1,561


$             3,230


$                   6,593


$                909


$                388


    Non-accrual loans    




30,485


32,298


27,638


29,385


29,923


    Restructured Loans




404


112


1,254


1,254


404


    Other real estate owned and repossessed assets




6,096


6,255


7,825


8,394


8,142


Total non-performing assets 




$           38,546


$           41,895


$                 43,310


$           39,942


$           38,857

NET LOAN CHARGE-OFFS:














    Loans charged off




$             1,017


$                621


$                      933


$             1,600


$             3,351


    Recoveries




(44)


(32)


(87)


(42)


(16)


Net charge-offs 




$                973


$                589


$                      846


$             1,558


$             3,335

PROVISION FOR LOAN LOSSES 




$             1,024


$             1,087


$                      454


$                655


$             9,130

ALLOWANCE FOR LOAN LOSS SUMMARY














Balance at the beginning of period




$           15,073


$           14,575


$                 14,967


$           15,870


$           10,075


Provision




1,024


1,087


454


655


9,130


Net charge-offs




(973)


(589)


(846)


(1,558)


(3,335)


Balance at the end of period




$           15,124


$           15,073


$                 14,575


$           14,967


$           15,870

















(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 September 30,




2011






2010




Average


Income/


Yield/


Average


Income/


Yield/


Balance


Expense


Rate  (2)


Balance


Expense


Rate  (3)


(Dollars in thousands)

Assets :












Securities:












  Taxable

$    242,906


$         1,763


2.88%


$    172,955


$         1,198


2.75%

  Tax-exempt (1)

57,800


897


6.16%


60,101


941


6.21%

      Total securities

$    300,706


$         2,660


3.51%


$    233,056


$         2,139


3.64%

      Total loans (3)

$    724,450


$         9,912


5.43%


$    716,173


$         9,832


5.45%

Interest bearing deposits in












     other financial institutions

48,355


30


0.25%


55,721


36


0.25%

      Total earning assets

$ 1,073,511


$       12,602


4.66%


$ 1,004,950


$       12,007


4.74%

Less: allowances for credit losses

(14,956)






(10,156)





Total nonearning assets

84,315






93,947





Total assets

$ 1,142,870






$ 1,088,741

















Liabilities:












Interest-bearing deposits:












   Checking

$    305,761


$            529


0.69%


$    280,585


$            569


0.80%

   Regular savings

99,344


175


0.70%


79,348


173


0.86%

   Money market savings

58,903


98


0.66%


55,190


101


0.73%

   Time deposits:












      $100,000 and over

137,483


593


1.71%


169,903


1,217


2.84%

      Under $100,000

169,087


892


2.09%


171,379


1,100


2.55%

      Total interest-bearing deposits

$    770,578


$         2,287


1.18%


$    756,405


$         3,160


1.66%













Short-term borrowings

5,576


58


4.13%


16,341


134


3.25%

Securities sold under agreements












   to repurchase

36,241


84


0.92%


26,534


63


0.94%

Long-term debt

83,067


312


1.49%


58,067


372


2.54%

Federal funds purchased

239


-


0.00%


-


-


-

   Total interest-bearing liabilities

$    895,701


$         2,741


1.21%


$    857,347


$         3,729


1.73%

Non-interest bearing liabilities












   Demand deposits

133,365






117,110





   Other liabilities

7,376






7,080





Total liabilities

$ 1,036,442






$    981,537





Non-controlling interest

2,189






2,947





Shareholders' equity

104,239






104,257





Total liabilities and shareholders'












  equity

$ 1,142,870






$ 1,088,741

















Net interest income



$         9,861






$         8,278















Interest rate spread





3.45%






3.01%

Cost of Funds





1.06%






1.59%

Interest expense as a percent of












   average earning assets





1.01%






1.47%

Net interest margin





3.64%






3.27%

























(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


Nine Months Ended September 30




2011






2010




Average


Income/


Yield/


Average


Income/


Yield/


Balance


Expense


Rate  (2)


Balance


Expense


Rate  (3)


(Dollars in thousands)

Assets :












Securities:












  Taxable

$    224,461


$         4,985


2.97%


$    145,188


$         3,269


3.01%

  Tax-exempt (1)

55,739


2,662


6.39%


60,078


2,900


6.45%

      Total securities

$    280,200


$         7,647


3.65%


$    205,266


$         6,169


4.02%

      Total loans (3)

$    706,995


$       29,378


5.56%


$    701,446


$       30,661


5.84%

Interest bearing deposits in












     other financial institutions

45,819


90


0.26%


49,194


99


0.27%

      Total earning assets

$ 1,033,014


$       37,115


4.80%


$    955,906


$       36,929


5.17%

Less: allowances for credit losses

(14,816)






(9,742)





Total nonearning assets

91,379






92,521





Total assets

$ 1,109,577






$ 1,038,685

















Liabilities:












Interest-bearing deposits:












   Checking

$    295,782


$         1,506


0.68%


$    282,245


$         1,748


0.83%

   Regular savings

95,224


567


0.80%


75,671


544


0.96%

   Money market savings

59,266


293


0.66%


52,625


323


0.82%

   Time deposits:












      $100,000 and over

135,973


1,831


1.80%


163,380


3,508


2.87%

      Under $100,000

168,470


2,730


2.17%


153,284


3,287


2.87%

      Total interest-bearing deposits

$    754,715


$         6,927


1.23%


$    727,205


$         9,410


1.73%













Short-term borrowings

5,687


174


4.07%


9,050


245


3.61%

Securities sold under agreements












   to repurchase

32,859


209


0.85%


24,402


144


0.79%

Long-term debt

79,844


914


1.53%


53,236


1,298


3.26%

Federal Funds Purchased

56


-


0.00%


15


-


0.00%

   Total interest-bearing liabilities

$    873,161


$         8,224


1.26%


$    813,908


$       11,097


1.82%

Non-interest bearing liabilities












   Demand Deposits

125,979






112,721





   Other liabilities

7,081






6,657





Total liabilities

$ 1,006,221






$    933,286





Non-controlling interest

2,458






2,781





Shareholders' equity

100,898






102,618





Total liabilities and shareholders'












  equity

$ 1,109,577






$ 1,038,685

















Net interest income



$       28,891






$       25,832















Interest rate spread





3.54%






3.35%

Cost of Funds





1.10%






1.64%

Interest expense as a percent of












   average earning assets





1.06%






1.55%

Net interest margin





3.74%






3.61%


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

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

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



SOURCE Middleburg Financial Corporation



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