Middleburg Financial Corporation Announces Third Quarter 2013 Results

Oct 30, 2013, 14:00 ET from Middleburg Financial Corporation

MIDDLEBURG, Va., Oct. 30, 2013 /PRNewswire/ -- Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.61 million or $0.23 per diluted share for the third quarter of 2013.

Gary R. Shook, president and CEO of Middleburg Financial Corporation noted, "The third quarter ushered in a decline in the refinance activity for Southern Trust Mortgage which, in turn, resulted in corporate earnings coming in slightly below the second quarter of 2013 and the third quarter of 2012.  While the mortgage business experienced declines due to an uptick in mortgage rates, overall loan growth, as well as our loan pipeline continued to strengthen in the third quarter.  Moreover, Middleburg Investment Group experienced success in growing revenues, contributing to improved bottom line earnings experienced throughout 2012, continuing into 2013.  Additionally, our ongoing commitment to improve efficiency throughout the Company continued to exhibit incremental improvements in limiting our overall expense growth.  Finally, we were pleased to experience another substantial decline in our non-performing assets."

Third Quarter 2013 Highlights:

  • Net income of $1.61 million or $0.23 per diluted share, compared to $1.71 million or $0.24 per diluted share for the third quarter of 2012, a decrease of 6.01% when comparing calendar quarters;
  • Net interest margin of 3.33%, compared to 3.40% for the previous quarter and 3.28% for the third quarter of 2012;
  • Total revenue of $15.45 million, a decrease of 5.93% compared to the second quarter of 2013 and 11.90% compared to the third quarter of 2012;
  • Total assets of $1.22 billion, unchanged compared to June 30, 2013;
  • Deposits decreased by $3.31 million or 0.34% since June 30, 2013;
  • Loans held-for-investment increased by $9.11 million or 1.29% since June 30, 2013;
  • The ratio of non-performing assets to total assets was 2.51% as of September 30, 2013 compared to 2.80% at June 30, 2013 and 3.22% at September 30, 2012;
  • Capital ratios continue to be strong: Tangible Common Equity Ratio of 8.81%, Total Risk-Based Capital Ratio of 15.83%, Tier 1 Risk-Based Capital Ratio of 14.58%, and a Tier 1 Leverage Ratio of 9.36% at September 30, 2013.

Total Revenue

Total revenue, which is comprised of Net Interest Income (before a provision for loan losses) and Non Interest Income, was $15.45 million in the quarter ended September 30, 2013, representing a decrease of  5.93% compared to the previous quarter and a decrease of $2.09 million or 11.90% from the quarter ended September 30, 2012.

Net interest income was $9.32 million during the three months ended September 30, 2013, which was relatively unchanged from the quarter ended June 30, 2013 and an increase of 1.12% compared to the quarter ended September 30, 2012. The yield on average earning assets was 3.89% for the quarter ended September 30, 2013 compared to 3.97% for the previous quarter and 4.03% for the quarter ended September 30, 2012.  Loan yields decreased by 18 basis point while the yield for the securities portfolio decreased by 4 basis points when comparing the quarter end September 30, 2013 to the same quarter of 2012, which represent the primary components of the change in the yield on average earning assets.   

The average annualized cost of interest bearing liabilities was 0.71% for the quarter ended September 30, 2013, compared to 0.72% in the previous quarter, and 0.93% for the quarter ended September 30, 2012, representing a decrease of 1 basis point from the previous quarter and a decrease of 22 basis points from the quarter ended September 30, 2012.  Annualized costs for interest bearing retail deposits decreased by 3 basis points from the previous quarter to 0.61% from 0.64% and decreased by 23 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.  The annualized cost for wholesale borrowings (excluding brokered deposits) was 1.33%, unchanged compared to the previous quarter and a decrease of 19 basis points compared to the quarter ended September 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 0.59% for the quarter ended September 30, 2013 compared to 0.61% for the quarter ended June 30, 2013, a decrease of 2 basis points. Cost of funds decreased  20 basis points compared to the quarter ended September 30, 2012.

The net interest margin for the three months ended September 30, 2013 was 3.33%, compared to 3.40% for the previous quarter, and 3.28% for the quarter ended September 30, 2012.  Management continues to reduce funding costs, where possible, to produce a stable net interest margin given the continued low interest rate environment. Management does not expect significant changes in the net interest margin for the remainder of 2013.  

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.

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

MIDDLEBURG FINANCIAL CORPORATION

Non-Interest Income

(in thousands)

For the three months ended

September 30,

September 30,

Dollar

Percent

2013

2012

Change

Change

Service charges on deposit accounts

$

590

$

557

$

33

5.92

%

Trust service income

963

928

35

3.77

%

Gains on loans held for sale

4,162

6,161

(1,999)

(32.45)

%

Net gains on securities available for sale

23

164

(141)

(85.98)

%

Commissions on investment sales

159

117

42

35.90

%

Fees on mortgages held for sale

28

37

(9)

(24.32)

%

Bank owned life insurance

125

118

7

5.93

%

Other operating income

78

236

(158)

(66.95)

%

Total non-interest income

$

6,128

$

8,318

$

(2,190)

(26.33)

%

 

Non-interest income decreased by $952,000 or 13.45% when comparing the quarter ended September 30, 2013 to the previous quarter and decreased by 26.33% compared to the quarter ended September 30, 2012. The primary component of non-interest income is gains on mortgage loan sales, which decreased by 7.16% when comparing the quarter ended September 30, 2013 to the previous quarter and decreased by 32.45% when compared to the quarter ended September 30, 2012.  The decline in gains on mortgage loan sales was due to the decline in origination volume both in the purchase and refinance segments of the mortgage industry.  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 $189.48 million in mortgage loans during the quarter ended September 30, 2013 compared to $209.76 million closed during the previous quarter, and $251.10 million closed during the quarter ended September 30, 2012, a decrease of 9.67% compared to the previous quarter and a decrease of 24.56% when comparing the same calendar quarter of 2012.  Due to the decline in loan origination volume as of September 30, 2013, management has taken measures to reduce overhead in order to align expenses with the decline in loan originations and revenue from mortgage sales.  These measures include an approximate 10% reduction in headcount and planned reductions in salary expenses throughout the mortgage company.  

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 $1.12 million for the quarter ended September 30, 2013, unchanged from the previous quarter and an increase of 6.67% from $1.05 million for the quarter ended September 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 $1.50 billion at September 30, 2013 and $1.47 billion at September 30, 2012.

Net gains on securities available for sale were $23,000 during the quarter ended September 30, 2013 compared to gains of $326,000 during the previous quarter and gains of $164,000 during the quarter ended September 30, 2012.

Other operating income was $78,000 during the quarter ended September 30, 2013 compared to $392,000 during the previous quarter and $236,000 during the quarter ended September 30, 2012. The primary reason for the decrease in other operating income during the third quarter 2013 was due to a non-recurring loss recorded in other income related to the disposition of property held for a potential branch location.  Other operating income includes credit card fees, data processing fees and other miscellaneous income during the reporting period.  

Non-Interest Expense

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

MIDDLEBURG FINANCIAL CORPORATION

Non-Interest Expense

(in thousands)

For the three months ended

September 30,

September 30,

Dollar

Percent

2013

2012

Change

Change

Salaries and employee benefits

$

7,750

$

7,276

$

474

6.51

%

Net occupancy and equipment expense

1,820

1,732

88

5.08

%

Advertising

318

652

(334)

(51.23)

%

Computer operations

456

322

134

41.61

%

Other real estate owned

416

1,506

(1,090)

(72.38)

%

Other taxes

186

203

(17)

(8.37)

%

Federal deposit insurance expense

149

262

(113)

(43.13)

%

Other operating expenses

2,210

1,883

327

17.37

%

Total non-interest expense

$

13,305

$

13,836

$

(531)

(3.84)

%

 

Total non-interest expense in the third quarter of 2013 increased 1.50% compared to the previous quarter and decreased by $531,000 or 3.84% compared to the quarter ended September 30, 2012.  

Salaries and employee benefit expenses increased by $58,000 or 0.75% when comparing the third quarter of 2013 to the previous quarter. Salaries and employee benefits increased by $474,000 or 6.51% compared the third quarter of 2012.  The primary component of this increase was an increase in full-time equivalent employees from 363 as of September 30, 2012 to 386 as of September 30, 2013.    

Expenses related to Other Real Estate Owned ("OREO") increased by $274,000 when comparing the third quarter of 2013 to the previous quarter and decreased by $1.10 million compared to the quarter ended September 30, 2012. Changes in the level of OREO related expenses is determined by the volume of OREO properties recorded during the reporting periods, valuation allowances associated with the fair market value of the properties, the condition and maintenance of the properties and losses incurred on the sale of properties. 

Advertising expenses declined 26.90% compared to the previous quarter and declined $334,000 or 51.23% from the quarter ended September 30, 2012.  Advertising expenses are cyclical and are impacted by product offerings and promotions, new financial service center locations and community outreach.  The primary reason for lower advertising expenses during the three months ended September 30, 2013 was due to the increased advertising expenses in 2012 related to the Bank's entrance into the Richmond market. 

Computer operations expenses remained relatively unchanged when compared to the previous quarter and increased  41.61% from the quarter ended September 30, 2012.  The primary reason for the increase in expenses year over year was due to the higher costs related to computer maintenance, additional expenses related to a new anti-money laundering monitoring and tracking software, and continued increases in expenses related to our on-line banking products. 

Federal deposit insurance expenses decreased 44.81% compared to the previous quarter and decreased 43.13% from the quarter ended September 30, 2012.  The primary reason for decreased expenses in this category was related to the refund of the Bank's unused prepaid FDIC insurance premium.  This refund decreased related expenses proportionately.

Other operating expenses increased by $73,000 or 3.42% from the previous quarter and increased by $327,000 or 17.37% compared to the quarter ended September 30, 2012.  The increase in other operating expenses, when comparing the quarter end September 30, 2013 to September 30, 2012, was primarily related to an increase in recruiting expenses for senior level positions, an increase in the Bank's accrual for unfunded commitments, and normal client related losses.

The Company's efficiency ratio was 81.19% for the third quarter of 2013, compared to an efficiency ratio of 69.27% for the third 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 $3,000 in the third quarter compared to a provision of $184,000 for the previous quarter and a provision of $635,000 for the quarter ended September 30, 2012.  The Allowance for Loan and Lease Losses (ALLL) was $13.38 million representing 1.87% of loans held for investment at September 30, 2013 compared to $13.62 million representing 1.93% of loans held for investment at June 30, 2013.  

Loans that were delinquent for more than 90 days and still accruing interest were $636,000 as of September 30, 2013 compared to $829,000 as of June 30, 2013, and $860,000 as of September 30, 2012, representing a decrease of 23.28% compared to the previous quarter and a 26.05% decrease compared to the quarter ended September 30, 2012.

Non-accrual loans were $20.53 million at the end of the third quarter of 2013 compared to $20.38 million as of June 30, 2013 and $22.68 million at September 30, 2012, representing an increase of 0.73% during the third quarter of 2013 and a decrease of 9.51% since September 30, 2012. Troubled debt restructurings that were performing as agreed were $4.82 million at the end of the third quarter of 2013, compared to $5.37 million for the quarter ended June 30, 2013, representing a decrease of 10.18% during the quarter.  Other Real Estate Owned (OREO) was $4.53 million as of September 30, 2013 compared to $7.57 million as of June 30, 2013, representing a decrease of 40.16% during the third quarter of 2013. Total non-performing assets were $30.51 million or 2.51% of total assets at September 30, 2013, compared to $34.14 million or 2.80% of total assets as of June 30, 2013 and $39.78 million or 3.22% of total assets as of September 30, 2012.

Net loan charge-offs during the third quarter of 2013 were $237,000 compared to net loan charge-offs of $76,000 for the previous quarter and $1.66 million for the quarter ended September 30, 2012.

Total Consolidated Assets

Total assets at September 30, 2013 were $1.22 billion, lower by $21.45 million or 1.73% from December 31, 2012 and lower by $20.63 million or 1.67% compared to September 30, 2012.

Total loans held for investment increased by $9.11 million or 1.29% in the third quarter of 2013 compared to the previous quarter.  Loans held for investment increased by $23.74 million or 3.43% from September 30, 2012.  The securities portfolio (excluding restricted stock) increased by $8.25 million or 2.58% in the third quarter of 2013 relative to the previous quarter.  Balances of mortgages held for sale decreased by $23.47 million or 35.93% at September 30, 2013 compared to the previous quarter end balance.  Cash balances and deposits at other banks increased by 7.13% at the end of the third quarter of 2013 compared to the previous quarter.

Deposits and Other Borrowings

Total deposits decreased by $3.31 million or 0.34% from the previous quarter.  FHLB advances were $85.0 million at September 30, 2013, unchanged compared to the previous quarter.

The Company has an interest bearing product, known as Tredegar Institutional Select, that integrates the use of the cash within client accounts at Middleburg Trust Company for overnight funding at the Bank.  The overall balance of this product was $29.65 million at September 30, 2013, $28.96 million for the previous quarter, $54.58 million as of December 31, 2012 and $56.43 million as of September 30, 2012.  The primary reason for the declining balances is due to cash going back into the market as a result of a more favorable marketplace and increasing investor confidence.

Equity and Capital

Shareholders' equity attributable to Middleburg Financial Corporation shareholders at September 30, 2013 was $112.44 million, compared to $112.94 million as of June 30, 2013 and $112.54 million at September 30, 2012.  Retained earnings at September 30, 2013 were $50.06 million compared to $48.95 million at June 30, 2013 and $45.17 million at September 30, 2012. The book value of the Company's common stock at September 30, 2013 was $15.86 per share versus $15.93 per share at June 30, 2013. The decline in shareholders' equity during the third quarter was primarily due to a decrease in accumulated other comprehensive income (AOCI) of $1.77 million resulting from unrealized losses in available for sale securities and the increase of the Company's dividend from $0.05 per share as of June 30, 2013 to $0.07 per share as of September 30, 2013.

The Company's total risk-based capital ratio increased to 15.83% as of September 30, 2013 from 15.41% at June 30, 2013 and 15.35% from December 31, 2012.  The Tier 1 risk-based capital ratio increased from 14.15% at June 30, 2013 to 14.58% at September 30, 2013 and increased from 14.09% at December 31, 2012.  The Tier 1 Leverage Ratio increased to 9.36% at September 30, 2013 from 9.32% at June 30, 2013 and 9.10% at 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

September 30, 2013

(1)

Regulatory Minimum Requirement

MFC Ratios

MFC Excess over Minimum

Tier 1 Leverage Ratio

4.0%

9.36%

5.36%

Tier 1 Risk-Based Capital Ratio

4.0%

14.58%

10.58%

Total Risk-Based Capital Ratio

8.0%

15.83%

7.83%

(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)

September 30, 2013

June 30, 2013

December 31, 2012

ASSETS

Cash and due from banks

$

9,417

$

7,312

$

7,139

Interest-bearing deposits with other institutions

53,228

51,164

47,276

Total cash and cash equivalents

62,645

58,476

54,415

Securities available for sale, at fair value

328,378

320,132

319,457

Loans held for sale

41,855

65,322

82,114

Restricted securities, at cost

7,005

7,005

6,990

Loans receivable, net of allowance for loan losses of $13,382, $13,616 and $14,311 respectively

702,724

693,383

695,166

Premises and equipment, net

20,465

20,208

20,587

Goodwill and identified intangibles

5,889

5,932

6,017

Other real estate owned, net of valuation allowances of $603, $348 and $1,707, respectively

4,530

7,570

9,929

Prepaid federal deposit insurance

3,015

Bank owned life insurance

16,851

16,726

16,484

Accrued interest receivable and other assets

24,985

22,446

22,607

TOTAL ASSETS

$

1,215,327

$

1,217,200

$

1,236,781

LIABILITIES

Deposits:

Non-interest bearing demand deposits

$

190,680

$

174,459

$

167,137

Savings and interest bearing demand deposits

495,348

496,394

522,740

Time deposits

272,538

291,021

292,023

Total deposits

958,566

961,874

981,900

Securities sold under agreements to repurchase

35,005

35,783

33,975

Short-term borrowings

5,451

5,688

11,873

FHLB borrowings

85,000

85,000

77,912

Subordinated notes

5,155

5,155

5,155

Accrued interest payable and other liabilities

10,967

8,043

8,844

Commitments and contingent liabilities

TOTAL LIABILITIES

1,100,144

1,101,543

1,119,659

SHAREHOLDERS' EQUITY

Common stock ($2.50 par value; 20,000,000 shares authorized, 7,089,091, 7,089,598 and 7,052,554 issued and outstanding, respectively)

17,403

17,397

17,357

Capital surplus

44,139

44,000

43,869

Retained earnings

50,063

48,947

46,235

Accumulated other comprehensive income

833

2,600

6,467

Total Middleburg Financial Corporation shareholders' equity

112,438

112,944

113,928

Non-controlling interest in consolidated subsidiary

2,745

2,713

3,194

TOTAL SHAREHOLDERS' EQUITY

115,183

115,657

117,122

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,215,327

$

1,217,200

$

1,236,781

 

 

MIDDLEBURG FINANCIAL CORPORATION

Consolidated Statements of Income

(In thousands, except for per share data)

(Unaudited)

(Unaudited)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2013

2012

2013

2012

INTEREST AND DIVIDEND INCOME

Interest and fees on loans

$

8,744

$

9,189

$

26,504

$

28,565

Interest and dividends on securities available for sale

Taxable

1,468

1,537

4,467

4,976

Tax-exempt

640

596

1,917

1,799

Dividends

59

46

169

135

Interest on deposits in banks and federal funds sold

43

39

101

88

Total interest and dividend income

10,954

11,407

33,158

35,563

INTEREST EXPENSE

Interest on deposits

1,190

1,728

3,817

5,467

Interest on securities sold under agreements to repurchase

82

83

243

250

Interest on short-term borrowings

74

311

Interest on FHLB borrowings and other debt

362

305

1,002

889

Total interest expense

1,634

2,190

5,062

6,917

NET INTEREST INCOME

9,320

9,217

28,096

28,646

Provision for (recovery of) loan losses

3

635

(1)

2,156

NET INTEREST INCOME AFTER PROVISION FOR (RECOVERY OF) LOAN LOSSES

9,317

8,582

28,097

26,490

NON-INTEREST INCOME

Service charges on deposit accounts

590

557

1,699

1,625

Trust services income

963

928

2,937

2,828

Gains on loans held for sale

4,162

6,161

12,538

15,088

Gains on securities available for sale, net

23

164

397

452

Total other-than-temporary impairment losses

(46)

Portion of loss recognized in other comprehensive income

46

Net impairment losses

Commissions on investment sales

159

117

363

389

Fees on mortgages held for sale

28

37

103

143

Bank owned life insurance

125

118

367

363

Other operating income

78

236

732

585

Total non-interest income

6,128

8,318

19,136

21,473

NON-INTEREST EXPENSE

Salaries and employee benefits

7,750

7,276

23,242

22,139

Net occupancy and equipment expense

1,820

1,732

5,412

5,265

Advertising

318

652

1,021

1,399

Computer operations

456

322

1,375

1,101

Other real estate owned

416

1,506

1,377

2,666

Other taxes

186

203

565

611

Federal deposit insurance expense

149

262

683

781

Other operating expenses

2,210

1,883

6,666

6,501

Total non-interest expense

13,305

13,836

40,341

40,463

Income before income taxes

2,140

3,064

6,892

7,500

Income tax expense

491

565

1,628

1,578

NET INCOME

1,649

2,499

5,264

5,922

Net income attributable to non-controlling interest

(38)

(785)

(233)

(856)

Net income attributable to Middleburg Financial Corporation

$

1,611

$

1,714

$

5,031

$

5,066

Earnings per share:

Basic

$

0.23

$

0.24

$

0.71

$

0.72

Diluted

$

0.23

$

0.24

$

0.71

$

0.72

Dividends per common share

$

0.07

$

0.05

$

0.17

$

0.15

 

MIDDLEBURG FINANCIAL CORPORATION

Quarterly Summary Statements of Income

(In thousands, except for per share data)

For the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2013

2013

2013

2012

2012

INTEREST AND DIVIDEND INCOME

Interest and fees on loans

$

8,744

$

8,795

$

8,965

$

9,330

$

9,189

Interest and dividends on securities available for sale

Taxable

1,468

1,468

1,531

1,432

1,537

Tax-exempt

640

646

630

604

596

Dividends

59

54

56

58

46

Interest on deposits in banks and federal funds sold

43

29

30

36

39

Total interest and dividend income

10,954

10,992

11,212

11,460

11,407

INTEREST EXPENSE

Interest on deposits

1,190

1,253

1,373

1,449

1,728

Interest on securities sold under agreements to repurchase

82

81

80

82

83

Interest on short-term borrowings

18

29

81

74

Interest on FHLB borrowings and other debt

362

299

295

295

305

Total interest expense

1,634

1,651

1,777

1,907

2,190

NET INTEREST INCOME

9,320

9,341

9,435

9,553

9,217

Provision for (recovery of) loan losses

3

184

(188)

1,281

635

NET INTEREST INCOME AFTER PROVISION FOR (RECOVERY OF) LOAN LOSSES

9,317

9,157

9,623

8,272

8,582

NON-INTEREST INCOME

Service charges on deposit accounts

590

574

534

572

557

Trust services income

963

1,014

960

923

928

Gains on loans held for sale

4,162

4,483

3,893

5,926

6,161

Gains on securities available for sale, net

23

326

47

(7)

164

Commissions on investment sales

159

110

94

129

117

Fees on mortgages held for sale

28

58

17

43

37

Bank owned life insurance

125

123

120

96

118

Other operating income

78

392

263

299

236

Total non-interest income

6,128

7,080

5,928

7,981

8,318

NON-INTEREST EXPENSE

Salaries and employee benefits

7,750

7,692

7,799

8,278

7,276

Net occupancy and equipment expense

1,820

1,787

1,805

1,785

1,732

Advertising

318

435

268

635

652

Computer operations

456

458

461

471

322

Other real estate owned

416

142

820

55

1,506

Other taxes

186

187

192

202

203

Federal deposit insurance expense

149

270

265

269

262

Other operating expenses

2,210

2,137

2,318

2,103

1,883

Total non-interest expense

13,305

13,108

13,928

13,798

13,836

Income before income taxes

2,140

3,129

1,623

2,455

3,064

Income tax expense

491

774

363

387

565

NET INCOME

1,649

2,355

1,260

2,068

2,499

Net (income) loss attributable to non-controlling interest

(38)

(262)

67

(647)

(785)

Net income attributable to Middleburg Financial Corporation

$

1,611

$

2,093

$

1,327

$

1,421

$

1,714

 

 

MIDDLEBURG FINANCIAL CORPORATION

Key Statistics

(Unaudited, Dollars in thousands, except for per share data)

For the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2013

2013

2013

2012

2012

Net Income

$

1,611

$

2,093

$

1,327

$

1,421

$

1,714

Earnings per share, basic

$

0.23

$

0.30

$

0.19

$

0.20

$

0.24

Earnings per share, diluted

$

0.23

$

0.29

$

0.19

$

0.20

$

0.24

Dividend per share

$

0.07

$

0.05

$

0.05

$

0.05

$

0.05

Return on average total assets - QTD

0.52

%

0.69

%

0.44

%

0.46

%

0.55

%

Return on average total equity - QTD

5.71

%

7.25

%

4.71

%

4.96

%

6.11

%

Dividend payout ratio

30.43

%

16.88

%

26.57

%

24.82

%

20.53

%

Non-interest revenue to total revenue (1)

39.58

%

41.96

%

38.40

%

45.54

%

46.94

%

Net interest margin (2)

3.33

%

3.40

%

3.45

%

3.42

%

3.28

%

Yield on average earning assets

3.89

%

3.97

%

4.08

%

4.08

%

4.03

%

Cost of average interest-bearing liabilities

0.71

%

0.72

%

0.78

%

0.82

%

0.93

%

Net interest spread

3.18

%

3.25

%

3.30

%

3.26

%

3.10

%

Non-interest income to average assets (3)

2.00

%

2.23

%

1.93

%

2.62

%

2.66

%

Non-interest expense to average assets (3)

4.33

%

4.34

%

4.57

%

4.53

%

4.52

%

Efficiency ratio - QTD (Tax Equiv) (4)

81.19

%

78.35

%

80.96

%

76.51

%

69.27

%

 

(1)

Excludes securities gains and losses.

(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.

(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 for per share data)

September 30,

June 30,

March 31,

December 31,

September 30,

2013

2013

2013

2012

2012

BALANCE SHEET RATIOS

Loans to deposits (including HFS)

79.07

%

80.29

%

79.01

%

80.62

%

79.73

%

Portfolio loans to deposits

74.71

%

73.50

%

73.97

%

72.26

%

70.33

%

Average interest-earning assets to average interest-      bearing liabilities

126.23

%

125.09

%

123.60

%

124.17

%

123.02

%

PER SHARE DATA

Dividends

$

0.07

$

0.05

$

0.05

$

0.05

$

0.05

Book value (MFC Shareholders)

15.86

15.93

16.28

16.15

15.96

Tangible book value (3)

15.03

15.09

15.41

15.30

15.10

SHARE PRICE DATA

Closing price

$

19.28

$

19.10

$

19.41

$

17.66

$

17.76

Diluted earnings multiple (1)

20.96

16.47

25.54

22.08

18.50

Book value multiple (2)

1.21

1.20

1.19

1.09

1.11

COMMON STOCK DATA

Outstanding shares at end of period

7,089,091

7,089,598

7,051,587

7,052,554

7,052,554

Weighted average shares O/S , basic - QTD

7,080,244

7,072,587

7,051,009

7,052,554

7,036,536

Weighted average shares O/S, diluted - QTD

7,118,208

7,102,670

7,082,354

7,069,603

7,051,860

CAPITAL RATIOS

Capital to assets - common shareholders

9.25

%

9.28

%

9.46

%

9.21

%

9.10

%

Capital to assets - w/non-controlling interest

9.48

%

9.50

%

9.70

%

9.47

%

9.34

%

Tangible common equity ratio (4)

8.81

%

8.83

%

9.01

%

8.77

%

8.66

%

Leverage ratio

9.36

%

9.32

%

9.11

%

9.10

%

8.92

%

Tier 1 risk based capital ratio

14.58

%

14.15

%

14.35

%

14.09

%

13.98

%

Total risk based capital ratio

15.83

%

15.41

%

15.60

%

15.35

%

15.23

%

CREDIT QUALITY

Net charge-offs to average total loans

0.03

%

0.01

%

0.08

%

0.12

%

0.22

%

Total non-performing loans to total portfolio loans

3.63

%

3.76

%

3.59

%

3.92

%

4.02

%

Total non-performing assets to total assets

2.51

%

2.80

%

2.77

%

3.05

%

3.22

%

Non-accrual loans to:

total portfolio loans

2.87

%

2.88

%

2.80

%

3.05

%

3.28

%

total assets

1.69

%

1.67

%

1.65

%

1.75

%

1.84

%

Allowance for loan losses to:

total portfolio loans

1.87

%

1.93

%

1.89

%

2.02

%

2.01

%

non-performing assets

43.86

%

39.88

%

40.22

%

37.89

%

35.05

%

non-accrual loans

65.20

%

66.82

%

67.48

%

66.06

%

61.46

%

NON-PERFORMING ASSETS

Loans delinquent 90+ days and still accruing

$

636

$

829

$

812

$

1,044

$

860

Non-accrual loans

20,525

20,376

20,019

21,664

22,683

Restructured loans (not in non-accrual)

4,820

5,366

4,854

5,132

4,302

OREO and repossessed assets

4,530

7,570

7,904

9,929

11,933

Total non-performing assets

$

30,511

$

34,141

$

33,589

$

37,769

$

39,778

ALLOWANCE FOR LOAN LOSS SUMMARY

Balance at the beginning of the period

$

13,616

$

13,508

$

14,311

$

13,941

$

14,969

Loans charged off - QTD

291

128

721

1,060

1,817

Recoveries - QTD

(54)

(52)

(106)

(149)

(154)

Net charge-off loans - QTD

237

76

615

911

1,663

Provision for (recovery of) loan losses

3

184

(188)

1,281

635

Balance at the end of the period

$

13,382

$

13,616

$

13,508

$

14,311

$

13,941

 

(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

For the Three Months Ended September 30,

2013

2012

Average Balance

Income/Expense

Yield/Rate (2)

Average Balance

Income/Expense

Yield/Rate (2)

ASSETS

Securities:

Taxable

$

266,197

$

1,527

2.28

%

$

264,234

$

1,583

2.38

%

Tax-exempt (1)

64,678

970

5.95

%

62,175

903

5.78

%

Total securities

$

330,875

$

2,497

2.99

%

$

326,409

$

2,486

3.03

%

Loans:

Taxable

$

748,145

$

8,738

4.63

%

$

760,442

$

9,189

4.81

%

Tax-exempt (1)

687

9

5.20

%

%

Total loans (3)

$

748,832

$

8,747

4.63

%

$

760,442

$

9,189

4.81

%

Interest-bearing deposits with other institutions

70,710

43

0.24

%

69,802

39

0.22

%

Total earning assets

$

1,150,417

$

11,287

3.89

%

$

1,156,653

$

11,714

4.03

%

Less:  allowance for loan losses

(13,555)

(15,202)

Total non-earning assets

81,287

84,082

Total assets

$

1,218,149

$

1,225,533

LIABILITIES

Interest-bearing deposits:

Checking

$

314,504

$

210

0.26

%

$

342,360

$

299

0.35

%

Regular savings

110,904

63

0.23

%

105,716

79

0.30

%

Money market savings

73,625

41

0.22

%

66,859

50

0.30

%

Time deposits:

$100,000 and over

136,730

388

1.13

%

144,566

535

1.47

%

Under $100,000

140,643

489

1.38

%

159,693

765

1.91

%

Total interest-bearing deposits

$

776,406

$

1,191

0.61

%

$

819,194

$

1,728

0.84

%

Short-term borrowings

7,217

59

3.24

%

6,531

74

4.51

%

Securities sold under agreements to repurchase

37,566

82

0.87

%

34,805

83

0.95

%

FHLB borrowings and subordinated debt

90,155

302

1.33

%

79,697

305

1.52

%

Total interest-bearing liabilities

$

911,344

$

1,634

0.71

%

$

940,227

$

2,190

0.93

%

Non-interest bearing liabilities

Demand deposits

183,539

164,261

Other liabilities

8,467

6,600

Total liabilities

$

1,103,350

$

1,111,088

Non-controlling interest

2,766

2,920

Shareholders' equity

112,033

111,525

Total liabilities and shareholders' equity

$

1,218,149

$

1,225,533

Net interest income

$

9,653

$

9,524

Interest rate spread

3.18

%

3.10

%

Cost of funds

0.59

%

0.79

%

Interest expense as a percent of average earning assets

0.56

%

0.75

%

Net interest margin

3.33

%

3.28

%

(1)

Income and yields are reported on a 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

For the Nine Months Ended September 30,

2013

2012

Average Balance

Income/Expense

Yield/Rate (2)

Average Balance

Income/Expense

Yield/Rate (2)

ASSETS

Securities:

Taxable

$

266,847

$

4,636

2.32

%

$

263,981

$

5,111

2.59

%

Tax-exempt (1)

67,097

2,904

5.79

%

61,867

2,726

5.89

%

Total securities

$

333,944

$

7,540

3.02

%

$

325,848

$

7,837

3.21

%

Loans:

Taxable

$

754,621

$

26,486

4.69

%

$

751,943

$

28,565

5.07

%

Tax-exempt (1)

687

27

5.25

%

%

Total loans (3)

$

755,308

$

26,513

4.69

%

$

751,943

$

28,565

5.07

%

Interest-bearing deposits with other institutions

58,042

101

0.23

%

54,772

88

0.21

%

Total earning assets

$

1,147,294

$

34,154

3.98

%

$

1,132,563

$

36,490

4.30

%

Less:  allowance for loan losses

(13,770)

(15,071)

Total non-earning assets

81,990

83,114

Total assets

$

1,215,514

$

1,200,606

LIABILITIES

Interest-bearing deposits:

Checking

$

322,344

$

656

0.27

%

$

318,841

$

1,017

0.43

%

Regular savings

110,132

185

0.22

%

105,816

290

0.37

%

Money market savings

75,798

131

0.23

%

60,373

156

0.35

%

Time deposits:

$100,000 and over

141,048

1,327

1.26

%

142,503

1,666

1.56

%

Under $100,000

142,070

1,518

1.43

%

173,559

2,338

1.80

%

Total interest-bearing deposits

$

791,392

$

3,817

0.64

%

$

801,092

$

5,467

0.91

%

Short-term borrowings

4,005

106

3.54

%

9,195

311

4.52

%

Securities sold under agreements to repurchase

35,303

243

0.92

%

33,736

250

0.99

%

FHLB borrowings and subordinated debt

87,274

896

1.37

%

84,965

889

1.40

%

Total interest-bearing liabilities

$

917,974

$

5,062

0.74

%

$

928,989

$

6,917

0.99

%

Non-interest bearing liabilities

Demand deposits

172,751

153,069

Other liabilities

7,691

6,557

Total liabilities

$

1,098,416

$

1,088,615

Non-controlling interest

2,882

2,504

Shareholders' equity

114,216

109,487

Total liabilities and shareholders' equity

$

1,215,514

$

1,200,606

Net interest income

$

29,092

$

29,573

Interest rate spread

3.24

%

3.31

%

Cost of funds

0.62

%

0.85

%

Interest expense as a percent of average earning assets

0.59

%

0.82

%

Net interest margin

3.39

%

3.49

%

(1)

Income and yields are reported on a 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



RELATED LINKS

http://www.middleburgbank.com