Middleburg Financial Corporation Announces Third Quarter 2011 Results

Oct 28, 2011, 10:30 ET from Middleburg Financial Corporation

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